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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(X)        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED June 30, 2009

or

(  )        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES
EXCHANGE ACT OF 1934

For The Transition Period From  to

Commission file number 000-23377

INTERVEST BANCSHARES CORPORATION

(Exact name of registrant as specified in its charter)



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

One Rockefeller Plaza, Suite 400

New York, New York
10020-2002

(Address of principal executive offices) (Zip Code)

(212)
218-2800

(Registrants telephone number, including area code)

Not
Applicable

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

Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days:

YES XX  NO .

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

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

Large Accelerated Filer    Accelerated
Filer    Non-accelerated Filer XX    Smaller Reporting Company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

YES  NO XX.

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

|                                                |  |                                          
|----------------------------------------------- |  | -----------------------------------------
|Title of Each Class:                            |  | Shares Outstanding:                      
|                                                | 
|Class A Common Stock, $1.00 par value per share |  | 7,690,812 outstanding as of July 30, 2009
|                                                | 
|Class B Common Stock, $1.00 par value per share |  | 580,000 outstanding as of July 30, 2009  









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##### Table of Contents

INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES

FORM 10-Q

June 30, 2009

TABLE OF CONTENTS



|                                                                                                                                 |  |      
|-------------------------------------------------------------------------------------------------------------------------------- |  | -----
|                                                                                                                                 |  | Page 
|PART I. FINANCIAL INFORMATION                                                                                                    |  |      
|Item 1. Financial Statements                                                                                                     |  |      
|Condensed Consolidated Balance Sheetsas of June 30, 2009 (Unaudited) and December 31,
2008                                       |  | 3    
|                                                                                                                                 | 
|Condensed Consolidated Statements of Earnings (Unaudited)for the Quarters and Six-Months Ended June 
30, 2009 and 2008           |  | 4    
|                                                                                                                                 | 
|Condensed Consolidated Statements of Changes in Stockholders Equity (Unaudited)for the Six-Months Ended June 30,
 2009 and 2008 |  | 5    
|                                                                                                                                 | 
|Condensed Consolidated Statements of Cash Flows (Unaudited)for the Six-Months Ended June 30, 2009 and 2008                       |  | 6    
|                                                                                                                                 | 
|Notes to Condensed Consolidated Financial Statements (Unaudited)                                                                 |  | 7    
|                                                                                                                                 | 
|Review by Independent Registered Public Accounting Firm                                                                          |  | 22   
|                                                                                                                                 | 
|Report of Independent Registered Public Accounting Firm                                                                          |  | 23   
|                                                                                                                                 | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                                    |  | 24   
|                                                                                                                                 | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                                               |  | 42   
|                                                                                                                                 | 
|Item 4. Controls and Procedures                                                                                                  |  | 43   
|                                                                                                                                 | 
|PART II. OTHER INFORMATION                                                                                                       |  |      
|                                                                                                                                 | 
|Item 1. Legal Proceedings                                                                                                        |  | 43   
|                                                                                                                                 | 
|Item 1A. Risk Factors                                                                                                            |  | 43   
|                                                                                                                                 | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                                              |  | 44   
|                                                                                                                                 | 
|Item 3. Defaults Upon Senior Securities                                                                                          |  | 44   
|                                                                                                                                 | 
|Item 4. Submission of Matters to a Vote of Security Holders                                                                      |  | 44   
|                                                                                                                                 | 
|Item 5. Other Information                                                                                                        |  | 44   
|                                                                                                                                 | 
|Item 6. Exhibits                                                                                                                 |  | 44   
|                                                                                                                                 | 
|Signatures                                                                                                                       |  | 45   
|                                                                                                                                 | 
|Certifications                                                                                                                   |  | 46-48

Private Securities Litigation Reform Act Safe Harbor Statement

The Company is making this statement in order to satisfy the Safe Harbor provision contained in the Private Securities Litigation Reform Act
of 1995. The statements contained in this report on Form 10-Q that are not statements of historical fact may include forward-looking statements that involve a number of risks and uncertainties. Such forward-looking statements are made based on
managements expectations concerning future events affecting the Company and are subject to uncertainties and factors relating to the Companys operations and economic environment, all of which are difficult to predict and many of which
are beyond the control of the Company, that could cause actual results of the Company to differ materially from those matters expressed in or implied by forward-looking statements. The Companys risk factors are disclosed in the Risk
Factors section of the Companys annual report on Form 10-K for the year ended December 31, 2008, where such factors are discussed on pages 24 through 29, and in Item 1A of Part II of this report on Form 10-Q.



2



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##### Table of Contents

PART 1. FINANCIAL INFORMATION - ITEM 1. Financial Statements

Intervest Bancshares Corporation and Subsidiaries

Condensed Consolidated Balance Sheets



|                                                                                                                           |  |                 |             |   |                     |   |          
|-------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ----------- | - | ------------------- | - | ---------
|($ in thousands, except par value)                                                                                         |  | At June 30,2009 |             |   | At December 31,2008
|                                                                                                                          
|ASSETS                                                                                                                     |  |                 | (Unaudited) |   |                     |   | (Audited)
|Cash and due from banks                                                                                                    |  | $               | 16,195      |   |                     | $ | 13,170   
|Federal funds sold, commercial paper and other short-term investments                                                      |  |                 | 7,246       |   |                     |   | 41,733   
|                                                                                                                           |  |                 |            
|Total cash and cash equivalents                                                                                            |  |                 | 23,441      |   |                     |   | 54,903   
|                                                                                                                           |  |                 |            
|Securities held to maturity, net (estimated fair value of $563,368 and $475,100, respectively)                             |  |                 | 566,722     |   |                     |   | 475,581  
|Federal Reserve Bank and Federal Home Loan Bank stock, at cost                                                             |  |                 | 9,929       |   |                     |   | 8,901    
|Loans receivable (net of allowance for loan losses of $32,054 and $28,524, respectively)                                   |  |                 | 1,714,033   |   |                     |   | 1,677,187
|Accrued interest receivable                                                                                                |  |                 | 11,778      |   |                     |   | 11,965   
|Loan fees receivable                                                                                                       |  |                 | 8,594       |   |                     |   | 8,590    
|Premises and equipment, net                                                                                                |  |                 | 5,161       |   |                     |   | 5,415    
|Foreclosed real estate (net of valuation allowance of $806 and $518, respectively)                                         |  |                 | 18,214      |   |                     |   | 9,081    
|Deferred income tax asset                                                                                                  |  |                 | 15,644      |   |                     |   | 13,503   
|Deferred debenture offering costs, net                                                                                     |  |                 | 1,459       |   |                     |   | 2,750    
|Other assets                                                                                                               |  |                 | 5,069       |   |                     |   | 3,957    
|                                                                                                                          
|Total assets                                                                                                               |  | $               | 2,380,044   |   |                     | $ | 2,271,833
|                                                                                                                          
|LIABILITIES                                                                                                                |  |                 |             |   |                     |   |          
|Deposits:                                                                                                                  |  |                 |             |   |                     |   |          
|Noninterest-bearing demand deposit accounts                                                                                |  | $               | 2,954       |   |                     | $ | 3,275    
|Interest-bearing deposit accounts:                                                                                         |  |                 |             |   |                     |   |          
|Checking (NOW) accounts                                                                                                    |  |                 | 5,919       |   |                     |   | 4,512    
|Savings accounts                                                                                                           |  |                 | 9,221       |   |                     |   | 8,262    
|Money market accounts                                                                                                      |  |                 | 426,931     |   |                     |   | 328,660  
|Certificate of deposit accounts                                                                                            |  |                 | 1,550,140   |   |                     |   | 1,519,426
|                                                                                                                           |  |                 |            
|Total deposit accounts                                                                                                     |  |                 | 1,995,165   |   |                     |   | 1,864,135
|                                                                                                                           |  |                 |            
|Borrowed Funds:                                                                                                            |  |                 |             |   |                     |   |          
|Federal Home Loan Bank advances                                                                                            |  |                 | 50,500      |   |                     |   | 50,500   
|Subordinated debentures                                                                                                    |  |                 | 10,000      |   |                     |   | 40,000   
|Subordinated debentures - capital securities                                                                               |  |                 | 56,702      |   |                     |   | 56,702   
|Accrued interest payable on all borrowed funds                                                                             |  |                 | 657         |   |                     |   | 2,180    
|Mortgage note payable                                                                                                      |  |                 | 176         |   |                     |   | 184      
|                                                                                                                           |  |                 |            
|Total borrowed funds                                                                                                       |  |                 | 118,035     |   |                     |   | 149,566  
|                                                                                                                           |  |                 |            
|Accrued interest payable on deposits                                                                                       |  |                 | 6,504       |   |                     |   | 6,868    
|Mortgage escrow funds payable                                                                                              |  |                 | 29,014      |   |                     |   | 24,028   
|Other liabilities                                                                                                          |  |                 | 18,189      |   |                     |   | 15,262   
|                                                                                                                          
|Total liabilities                                                                                                          |  |                 | 2,166,907   |   |                     |   | 2,059,859
|                                                                                                                          
|STOCKHOLDERS EQUITY                                                                                                       |  |                 |             |   |                     |   |          
|Preferred stock ($1.00 par value; 300,000 shares authorized; 25,000 issued and outstanding)                                |  |                 | 25          |   |                     |   | 25       
|Additional paid-in-capital, preferred                                                                                      |  |                 | 24,975      |   |                     |   | 24,975   
|Preferred stock discount                                                                                                   |  |                 | (1,727      | ) |                     |   | (1,920)  
|Class A common stock ($1.00 par value; 12,000,000 shares authorized; 8,095,151 shares issued; and 7,690,812
outstanding)   |  |                 | 8,095       |   |                     |   | 8,095    
|Class B common stock ($1.00 par value; 700,000 shares authorized; and 580,000 shares issued and outstanding,
respectively) |  |                 | 580         |   |                     |   | 580      
|Additional paid-in-capital, common                                                                                         |  |                 | 81,268      |   |                     |   | 81,157   
|Retained earnings                                                                                                          |  |                 | 109,921     |   |                     |   | 109,062  
|Treasury common stock (404,339 shares, at cost)                                                                            |  |                 | (10,000     | ) |                     |   | (10,000) 
|                                                                                                                          
|Total stockholders equity                                                                                                 |  |                 | 213,137     |   |                     |   | 211,974  
|                                                                                                                          
|Total liabilities and stockholders equity                                                                                 |  | $               | 2,380,044   |   |                     | $ | 2,271,833
|                                                                                                                          

See accompanying notes to condensed consolidated financial statements.



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Intervest Bancshares Corporation and Subsidiaries

Condensed Consolidated Statements of Earnings

(Unaudited)



|                                                                             |  |                       |        |                            |      |   |        |  |   |        |   |  |   |       
|---------------------------------------------------------------------------- |  | --------------------- | ------ | -------------------------- | ---- | - | ------ |  | - | ------ | - |  | - | ------
|                                                                             |  | Quarter EndedJune 30, |        | Six-Months Ended  June 30,
|                                                                             |  |                       |       
|($ in thousands, except per share data)                                      |  | 2009                  |        |                            | 2008 |   | 2009   |  |   | 2008  
|INTEREST AND DIVIDEND INCOME                                                 |  |                       |        |                            |      |   |        |  |   |        |   |  |   |       
|Loans receivable                                                             |  | $                     | 26,412 |                            |      | $ | 27,002 |  | $ | 52,696 |   |  | $ | 53,864
|Securities                                                                   |  |                       | 4,386  |                            |      |   | 4,629  |  |   | 8,773  |   |  |   | 9,332 
|Other interest-earning assets                                                |  |                       | 6      |                            |      |   | 145    |  |   | 14     |   |  |   | 368   
|Total interest and dividend income                                           |  |                       | 30,804 |                            |      |   | 31,776 |  |   | 61,483 |   |  |   | 63,564
|                                                                             |  |                       |        |                           
|INTEREST EXPENSE                                                             |  |                       |        |                            |      |   |        |  |   |        |   |  |   |       
|Deposits                                                                     |  |                       | 19,136 |                            |      |   | 20,361 |  |   | 38,757 |   |  |   | 40,763
|Subordinated debentures                                                      |  |                       | 261    |                            |      |   | 1,380  |  |   | 738    |   |  |   | 2,947 
|Subordinated debentures - capital securities                                 |  |                       | 721    |                            |      |   | 886    |  |   | 1,528  |   |  |   | 1,772 
|Other borrowed funds                                                         |  |                       | 489    |                            |      |   | 85     |  |   | 973    |   |  |   | 163   
|Total interest expense                                                       |  |                       | 20,607 |                            |      |   | 22,712 |  |   | 41,996 |   |  |   | 45,645
|Net interest and dividend income                                             |  |                       | 10,197 |                            |      |   | 9,064  |  |   | 19,487 |   |  |   | 17,919
|Provision for loan losses                                                    |  |                       | 2,686  |                            |      |   | 2,753  |  |   | 4,543  |   |  |   | 5,016 
|Net interest and dividend income after provision for loan losses             |  |                       | 7,511  |                            |      |   | 6,311  |  |   | 14,944 |   |  |   | 12,903
|NONINTEREST INCOME                                                           |  |                       |        |                            |      |   |        |  |   |        |   |  |   |       
|Income from the early repayment of mortgage loans                            |  |                       | 43     |                            |      |   | 557    |  |   | 120    |   |  |   | 691   
|Income from mortgage lending activities                                      |  |                       | 264    |                            |      |   | 463    |  |   | 559    |   |  |   | 734   
|Customer service fees                                                        |  |                       | 114    |                            |      |   | 112    |  |   | 220    |   |  |   | 226   
|(Loss) gain from early call of investment securities                         |  |                       | (21    | )                          |      |   | 7      |  |   | (106   | ) |  |   | 431   
|Impairment writedown  investment securities                                 |  |                       | (343   | )                          |      |   | -      |  |   | (663   | ) |  |   | -     
|Total noninterest income                                                     |  |                       | 57     |                            |      |   | 1,139  |  |   | 130    |   |  |   | 2,082 
|NONINTEREST EXPENSES                                                         |  |                       |        |                            |      |   |        |  |   |        |   |  |   |       
|Salaries and employee benefits                                               |  |                       | 1,536  |                            |      |   | 1,390  |  |   | 3,105  |   |  |   | 2,876 
|Occupancy and equipment, net                                                 |  |                       | 453    |                            |      |   | 428    |  |   | 987    |   |  |   | 869   
|FDIC and general insurance                                                   |  |                       | 2,260  |                            |      |   | 415    |  |   | 3,082  |   |  |   | 863   
|Professional fees and services                                               |  |                       | 403    |                            |      |   | 507    |  |   | 798    |   |  |   | 839   
|Data processing                                                              |  |                       | 275    |                            |      |   | 253    |  |   | 551    |   |  |   | 501   
|Director and committee fees                                                  |  |                       | 98     |                            |      |   | 88     |  |   | 193    |   |  |   | 168   
|Stationery, printing and supplies                                            |  |                       | 62     |                            |      |   | 57     |  |   | 109    |   |  |   | 105   
|Advertising and promotion                                                    |  |                       | 72     |                            |      |   | 61     |  |   | 115    |   |  |   | 114   
|Postage and delivery                                                         |  |                       | 27     |                            |      |   | 27     |  |   | 56     |   |  |   | 58    
|Real estate activities expense                                               |  |                       | 1,090  |                            |      |   | 714    |  |   | 2,009  |   |  |   | 927   
|Loss on the early extinguishment of debentures                               |  |                       | 126    |                            |      |   | 118    |  |   | 1,160  |   |  |   | 118   
|All other                                                                    |  |                       | 152    |                            |      |   | 139    |  |   | 328    |   |  |   | 277   
|Total noninterest expenses                                                   |  |                       | 6,554  |                            |      |   | 4,197  |  |   | 12,493 |   |  |   | 7,715 
|Earnings before income taxes                                                 |  |                       | 1,014  |                            |      |   | 3,253  |  |   | 2,581  |   |  |   | 7,270 
|Provision for income taxes                                                   |  |                       | 236    |                            |      |   | 1,392  |  |   | 908    |   |  |   | 3,128 
|                                                                             |  |                       |       
|Net earnings                                                                 |  |                       | 778    |                            |      |   | 1,861  |  |   | 1,673  |   |  |   | 4,142 
|Preferred dividend requirements and amortization of preferred stock
discount |  |                       | (409   | )                          |      |   | -      |  |   | (814   | ) |  |   | -     
|Net earnings available to common stockholders                                |  | $                     | 369    |                            |      | $ | 1,861  |  | $ | 859    |   |  | $ | 4,142 
|                                                                             |  |                       |        |                           
|Basic earnings per common share                                              |  | $                     | 0.04   |                            |      | $ | 0.22   |  | $ | 0.10   |   |  | $ | 0.50  
|Diluted earnings per common share                                            |  | $                     | 0.04   |                            |      | $ | 0.22   |  | $ | 0.10   |   |  | $ | 0.50  
|Cash dividends per common share                                              |  | $                     | -      |                            |      | $ | 0.25   |  | $ | -      |   |  | $ | 0.25  

See accompanying notes to condensed consolidated financial statements.



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Intervest Bancshares Corporation and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders Equity

(Unaudited)



|                                                                                           |  |                           |   |  |        |         |      |  |  |        |           |   |        |   |         
|------------------------------------------------------------------------------------------ |  | ------------------------- | - |  | ------ | ------- | ---- |  |  | ------ | --------- | - | ------ | - | --------
|                                                                                           |  | Six-Months Ended June 30,
|                                                                                           |  | 2009                      |   |  |        |         | 2008
|($ thousands)                                                                              |  | Shares                    |   |  | Amount |         |      |  |  | Shares |           |   | Amount
|                                                                                           |  |                           |   |  |       
|PREFERRED STOCK                                                                            |  |                           |   |  |        |         |      |  |  |        |           |   |        |   |         
|Balance at beginning and end of period                                                     |  | 25,000                    |   |  | $      | 25      |      |  |  |        | -         |   |        | $ | -       
|                                                                                           |  |                           |   |  |       
|ADDITIONAL PAID-IN-CAPITAL, PREFERRED                                                      |  |                           |   |  |        |         |      |  |  |        |           |   |        |   |         
|Balance at beginning and end of period                                                     |  |                           |   |  |        | 24,975  |      |  |  |        |           |   |        |   | -       
|                                                                                           |  |                           |   |  |       
|PREFERRED STOCK DISCOUNT                                                                   |  |                           |   |  |        |         |      |  |  |        |           |   |        |   |         
|Balance at beginning of period                                                             |  |                           |   |  |        | (1,920  | )    |  |  |        |           |   |        |   | -       
|Amortization of preferred stock discount                                                   |  |                           |   |  |        | 193     |      |  |  |        |           |   |        |   | -       
|Balance at end of period                                                                   |  |                           |   |  |        | (1,727  | )    |  |  |        |           |   |        |   | -       
|                                                                                           |  |                           |   |  |       
|CLASS A COMMON STOCK                                                                       |  |                           |   |  |        |         |      |  |  |        |           |   |        |   |         
|Balance at beginning and end of period                                                     |  | 8,095,151                 |   |  |        | 8,095   |      |  |  |        | 8,095,151 |   |        |   | 8,095   
|                                                                                           |  |                           |   |  |       
|CLASS B COMMON STOCK                                                                       |  |                           |   |  |        |         |      |  |  |        |           |   |        |   |         
|Balance at beginning of period                                                             |  | 580,000                   |   |  |        | 580     |      |  |  |        | 385,000   |   |        |   | 385     
|Issuance of shares upon the exercise of warrants                                           |  | -                         |   |  |        | -       |      |  |  |        | 195,000   |   |        |   | 195     
|Balance at end of period                                                                   |  | 580,000                   |   |  |        | 580     |      |  |  |        | 580,000   |   |        |   | 580     
|                                                                                           |  |                           |   |  |       
|ADDITIONAL PAID-IN-CAPITAL, COMMON                                                         |  |                           |   |  |        |         |      |  |  |        |           |   |        |   |         
|Balance at beginning of period                                                             |  |                           |   |  |        | 81,157  |      |  |  |        |           |   |        |   | 77,176  
|Issuance of shares upon the exercise of Class B warrants, inclusive of income tax benefits |  |                           |   |  |        | -       |      |  |  |        |           |   |        |   | 1,608   
|Compensation expense related to common stock options                                       |  |                           |   |  |        | 111     |      |  |  |        |           |   |        |   | 111     
|Balance at end of period                                                                   |  |                           |   |  |        | 81,268  |      |  |  |        |           |   |        |   | 78,895  
|                                                                                           |  |                           |   |  |       
|RETAINED EARNINGS                                                                          |  |                           |   |  |        |         |      |  |  |        |           |   |        |   |         
|Balance at beginning of period                                                             |  |                           |   |  |        | 109,062 |      |  |  |        |           |   |        |   | 103,905 
|Net earnings                                                                               |  |                           |   |  |        | 1,673   |      |  |  |        |           |   |        |   | 4,142   
|Cash dividends on common stock                                                             |  |                           |   |  |        | -       |      |  |  |        |           |   |        |   | (2,068) 
|Preferred stock dividend requirements and amortization of preferred stock
discount         |  |                           |   |  |        | (814    | )    |  |  |        |           |   |        |   | -       
|Balance at end of period                                                                   |  |                           |   |  |        | 109,921 |      |  |  |        |           |   |        |   | 105,979 
|                                                                                           |  |                           |   |  |       
|TREASURY COMMON STOCK                                                                      |  |                           |   |  |        |         |      |  |  |        |           |   |        |   |         
|Balance at beginning and end of period                                                     |  | (404,339                  | ) |  |        | (10,000 | )    |  |  |        | (404,339  | ) |        |   | (10,000)
|                                                                                           |  |                           |   |  |        |         |      |  |  |        |           |   |        |   |         
|Total stockholders equity at end of period                                                |  | 8,295,812                 |   |  | $      | 213,137 |      |  |  |        | 8,270,812 |   |        | $ | 183,549 
|                                                                                           |  |                           |   |  |       
|Preferred stockholders equity                                                             |  | 25,000                    |   |  | $      | 23,273  |      |  |  |        | -         |   |        | $ | -       
|Common stockholders equity                                                                |  | 8,270,812                 |   |  |        | 189,864 |      |  |  |        | 8,270,812 |   |        |   | 183,549 
|Total stockholders equity at end of period                                                |  | 8,295,812                 |   |  | $      | 213,137 |      |  |  |        | 8,270,812 |   |        | $ | 183,549 

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)                                                                    |  | 2009                     |          |   | 2008
|                                                                                   
|OPERATING ACTIVITIES                                                                |  |                          |          |   |      |   |          
|Net earnings                                                                        |  | $                        | 1,673    |   |      | $ | 4,142    
|Adjustments to reconcile net earnings to net cash provided by operating activities: |  |                          |          |   |      |   |          
|Depreciation and amortization                                                       |  |                          | 264      |   |      |   | 279      
|Provision for loan losses                                                           |  |                          | 4,543    |   |      |   | 5,016    
|Deferred income tax benefit                                                         |  |                          | (2,141   | ) |      |   | (2,042)  
|Amortization of deferred debenture offering costs                                   |  |                          | 118      |   |      |   | 447      
|Compensation expense related to common stock options                                |  |                          | 111      |   |      |   | 111      
|Amortization of premiums (accretion) of discounts and deferred loan fees, net       |  |                          | (1,567   | ) |      |   | (3,152)  
|Impairment writedown  investment securities                                        |  |                          | 663      |   |      |   | -        
|Net loss on early extinguishments of debentures                                     |  |                          | 1,160    |   |      |   | 118      
|Net write downs of foreclosed real estate                                           |  |                          | 288      |   |      |   | -        
|Net decrease in accrued interest payable on borrowed funds                          |  |                          | (1,517   | ) |      |   | (122)    
|Net increase (decrease) in official checks outstanding                              |  |                          | 1,342    |   |      |   | (4,212)  
|Net (increase) decrease in loan fees receivable                                     |  |                          | (4       | ) |      |   | 35       
|Net change in all other assets and liabilities                                      |  |                          | 2,273    |   |      |   | 1,548    
|                                                                                   
|Net cash provided by operating activities                                           |  |                          | 7,206    |   |      |   | 2,168    
|                                                                                   
|INVESTING ACTIVITIES                                                                |  |                          |          |   |      |   |          
|Maturities and calls of securities held to maturity                                 |  |                          | 369,198  |   |      |   | 260,073  
|Purchases of securities held to maturity                                            |  |                          | (461,454 | ) |      |   | (346,426)
|Net increase in loans receivable                                                    |  |                          | (50,889  | ) |      |   | (115,723)
|Purchases of Federal Reserve Bank and Federal Home Loan Bank stock, net             |  |                          | (1,028   | ) |      |   | (2,077)  
|Purchases of premises and equipment, net                                            |  |                          | (10      | ) |      |   | (23)     
|                                                                                   
|Net cash used by investing activities                                               |  |                          | (144,183 | ) |      |   | (204,176)
|                                                                                   
|FINANCING ACTIVITIES                                                                |  |                          |          |   |      |   |          
|Net increase in deposits                                                            |  |                          | 131,030  |   |      |   | 150,509  
|Net increase in mortgage escrow funds payable                                       |  |                          | 4,986    |   |      |   | 3,662    
|Net increase in Federal Home Loan Bank advances                                     |  |                          | -        |   |      |   | 40,000   
|Principal repayments of debentures and mortgage note payable                        |  |                          | (30,008  | ) |      |   | (8,258)  
|Cash dividends paid to preferred stockholder                                        |  |                          | (493     | ) |      |   | -        
|Cash dividends paid to common stockholders                                          |  |                          | -        |   |      |   | (2,068)  
|Cash received from issuance of common stock upon exercise of stock warrants         |  |                          | -        |   |      |   | 1,467    
|Excess tax benefit from exercise of stock warrants recorded to paid in capital      |  |                          | -        |   |      |   | 336      
|                                                                                   
|Net cash provided by financing activities                                           |  |                          | 105,515  |   |      |   | 185,648  
|                                                                                   
|Net decrease in cash and cash equivalents                                           |  |                          | (31,462  | ) |      |   | (16,360) 
|Cash and cash equivalents at beginning of period                                    |  |                          | 54,903   |   |      |   | 33,086   
|                                                                                   
|Cash and cash equivalents at end of period                                          |  | $                        | 23,441   |   |      | $ | 16,726   
|                                                                                   
|                                                                                    |  |                         
|SUPPLEMENTAL DISCLOSURES                                                            |  |                          |          |   |      |   |          
|Cash paid during the period for:                                                    |  |                          |          |   |      |   |          
|Interest                                                                            |  | $                        | 43,765   |   |      | $ | 45,442   
|Income taxes                                                                        |  |                          | 2,713    |   |      |   | 4,425    
|Noncash activities:                                                                 |  |                          |          |   |      |   |          
|Loans transferred to foreclosed real estate                                         |  |                          | 9,421    |   |      |   | 7,272    
|Preferred dividend requirements and amortization of preferred stock discount        |  |                          | 814      |   |      |   | -        
|                                                                                   

See accompanying notes to condensed consolidated financial statements.



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)



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

The condensed consolidated financial statements of Intervest Bancshares Corporation and Subsidiaries (the
Company) in this report on Form 10-Q have not been audited except for information derived from the Companys 2008 audited consolidated financial statements and notes thereto and should be read in conjunction with the Companys
2008 Form 10-K. Certain information and note disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles (GAAP) have been condensed or omitted in this report on Form 10-Q
pursuant to the rules and regulations of the Securities and Exchange Commission. The accounting and reporting policies of the Company conform to GAAP and general practices within the banking industry and are consistent with those described in note 1
to the consolidated financial statements included in the Companys 2008 Form 10-K, as updated by the information contained in this Form 10-Q. In preparing the consolidated financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent liabilities as of the date of the consolidated financial statements, and revenues and expenses during the reporting periods. Actual results could differ
from those estimates. Estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, the valuation allowance for real estate losses and the other than temporary impairment of security
investments. In the opinion of management, all material adjustments necessary for a fair presentation of financial condition and results of operations for the interim periods presented in this report have been made. These adjustments are of a normal
recurring nature. All significant intercompany balances and transactions have been eliminated in consolidation. The results of operations for the interim periods are not necessarily indicative of results that may be expected for the entire year or
any other interim period. Management has evaluated all significant events and transactions that occurred after June 30, 2009 through the date of filing of this report on Form 10-Q for potential recognition or disclosure in these condensed
consolidated financial statements.

Note 2 - Description of Business

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

IBCs principal business is the ownership and operation of
its subsidiaries and, from time to time, it also engages in a limited amount of real estate mortgage lending, including the purchase of participations in loans originated by INB. IBC also issues debt and equity securities to raise funds for working
capital purposes as needed. IBC also has four wholly owned subsidiaries, Intervest Statutory Trust II, III, IV and V, that are unconsolidated entities as required by Financial Accounting Standards Board (FASB) Interpretation 46-R,
Consolidation of Variable Interest Entities. These entities are statutory business trusts that were formed for the sole purpose of issuing and administering trust preferred securities and lending the proceeds to IBC. They do not conduct
any trade or business. As discussed in note 10 to the consolidated financial statements in the Companys 2008 10-K, on December 23, 2008, pursuant to the U.S. Treasurys Capital Purchase Program, IBC sold to the U.S. Treasury 25,000
shares of its Fixed Rate Cumulative Perpetual Preferred Stock along with a ten year warrant to purchase at any time up to 691,882 shares of IBCs Class A common stock for $5.42 per share, for a total cash investment of $25 million from the
Treasury. The preferred stock carries a 5% annual cumulative preferred dividend rate, payable quarterly, which increases to 9% after five years. Both IBC and INB maintained capital ratios in excess of well-capitalized levels prior to and after this
investment.

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



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 2 - Description of Business - Continued



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

IMCs business has focused on the origination of first and junior mortgage loans secured by commercial and multifamily real estate, and it has also
provided loan origination services to INB, its affiliate, through an intercompany service agreement. IMC has funded its loan originations through the issuance of subordinated debentures in public offerings. Since early 2007, competitive market
conditions and lower pricing for new loans have decreased IMCs loan originations significantly from its historical levels, and only one loan was originated in 2008 and none so far in 2009. As a result, IMC has been applying the proceeds from
loan repayments to redeem its outstanding debentures, in many cases prior to contractual maturity. IMC will have repaid all of its remaining outstanding debentures by August 1, 2009. At June 30, 2009, IMC had total assets of $43 million,
cash and short-term investments of $11 million, loans, net of deferred fees, of $29 million, debentures and related interest payable of $10 million, and stockholders equity of $31 million. IMC has traditionally provided loan origination
services to INB and has received fee income in connection with those services, which is eliminated in the consolidated financial statements. In light of the significant reduction in IMCs business activities, effective January 1, 2009, the
employees of IMC were transferred to and became employees of INB. They continue to perform loan origination services for INB consistent with past practice. Certain personnel of INB will administer the ongoing operations of IMC, including any
origination services that it may require, and IMC will reimburse INB for the cost of such services on a monthly basis. Management intends to combine IMC into INB, whereby INB would acquire all of the remaining net assets of IMC, including its
outstanding loan portfolio, by the end of 2009. Any such transaction would be subject to regulatory approval and would result in a $31 million net increase to INBs capital. Upon the redemption of IMCs remaining issued and
outstanding debentures as noted above, effective August 1, 2009, IMC will no longer be required to file its own separate reports on Forms 10-K, 10-Q and 8-K with the Securities and Exchange Commission.

The Companys lending activities are comprised almost entirely of the origination for its loan portfolio of mortgage loans secured by commercial and
multifamily real estate (including rental and cooperative/condominium apartment buildings, office buildings, mixed-use properties, shopping centers, hotels, restaurants, industrial/warehouse properties, parking lots/garages, mobile home parks,
self-storage facilities and vacant land). Loans in the portfolio had an average life of approximately 4 years at June 30, 2009.

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

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



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 2 - Description of Business - Continued



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

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

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

The Company has and continues to be negatively impacted by the downturn in the economy and lower commercial real estate value. As described in more detail elsewhere in this report, the Companys total
nonperforming assets at June 30, 2009 amounted to $148.0 million, or 6.22% of total assets, compared to $117.7 million, or 5.18%, at December 31, 2008. At June 30, 2009, nonperforming assets were comprised of $129.8 million of
nonaccrual loans, or 37 loans, and $18.2 million (net of a $0.8 million valuation allowance) of real estate acquired through foreclosure, or 6 properties. At June 30, 2009, the Company also had $76.2 million of accruing restructured loans on
which the Company has granted certain concessions to provide payment relief generally consisting of the deferral of principal and or a partial reduction in interest payments for a period of time. At June 30, 2009 and December 31, 2008, a
SFAS No. 114 specific valuation allowance (included as part of the overall allowance for loan losses) in the aggregate amount of $13.5 million and $8.2 million, respectively, was maintained on nonaccrual and restructured loans, all of which are
considered impaired loans.

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



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 3 - Securities

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



|                             |  |                     |  |                |  |                        |  |                         |  |                      |  |              |  |                           
|---------------------------- |  | ------------------- |  | -------------- |  | ---------------------- |  | ----------------------- |  | -------------------- |  | ------------ |  | --------------------------
|($ in thousands)             |  | Number ofSecurities |  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Wtd-AvgYield |  | Wtd-Avg Remaining Maturity
|At June 30, 2009             |  |                     |  |                |  |                        |  |                         |  |                      |  |              |  |                           
|U.S. government agencies (1) |  | 344                 |  | 559,355        |  | $2,466                 |  | $2,423                  |  | $559,398             |  | 2.94%        |  | 4.4 Years                 
|Corporate (2)                |  | 8                   |  | 7,367          |  | -                      |  | 3,397                   |  | 3,970                |  | 2.96%        |  | 24.1 Years                
|                             |  | 352                 |  | $566,722       |  | $2,466                 |  | $5,820                  |  | $563,368             |  | 2.94%        |  | 4.7 Years                 
|At December 31, 2008         |  |                     |  |                |  |                        |  |                         |  |                      |  |              |  |                           
|U.S. government agencies (1) |  | 305                 |  | $467,550       |  | $3,288                 |  | $   365                 |  | $470,473             |  | 3.77%        |  | 3.9 Years                 
|Corporate (2)                |  | 8                   |  | 8,031          |  | -                      |  | 3,404                   |  | 4,627                |  | 5.32%        |  | 24.6 Years                
|                             |  | 313                 |  | $475,581       |  | $3,288                 |  | $3,769                  |  | $475,100             |  | 3.80%        |  | 4.2 Years                 

(1) Consist of debt obligations of U.S. Government Sponsored Agencies: FHLB, FNMA, FHLMC or FFCB.

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

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



|                         |                    |     |                      |                         |                         |                         |                      |          |                         |          |                      |           |                         |        
|------------------------ | ------------------ | --- | -------------------- | ----------------------- | ----------------------- | ----------------------- | -------------------- | -------- | ----------------------- | -------- | -------------------- | --------- | ----------------------- | -------
|($ in thousands)         |                    |     |                      | Less Than Twelve Months |                         | Twelve Months or Longer |                      | Total   
|                         | NumberofSecurities |     | Estimated Fair Value |                         | Gross Unrealized Losses |                         | Estimated Fair Value |          | Gross Unrealized Losses |          | Estimated Fair Value |           | Gross Unrealized Losses
|At June 30, 2009         |                    |     |                      |                         |                         |                         |                      |          |                         |          |                      |           |                         |        
|U.S. government agencies |                    | 153 |                      | $231,701                |                         | $2,333                  |                      | $  9,947 |                         | $     90 |                      | $241,648  |                         | $2,423 
|Corporate                |                    | 8   |                      | -                       |                         | -                       |                      | 3,970    |                         | 3,397    |                      | 3,970     |                         | 3,397  
|                         |                    | 161 |                      | $231,701                |                         | $2,333                  |                      | $13,917  |                         | $3,487   |                      | $245,618  |                         | $5,820 
|At December 31, 2008     |                    |     |                      |                         |                         |                         |                      |          |                         |          |                      |           |                         |        
|U.S. government agencies |                    | 33  |                      | $  49,116               |                         | $   354                 |                      | $  4,033 |                         | $     11 |                      | $  53,149 |                         | $   365
|Corporate                |                    | 8   |                      | -                       |                         | -                       |                      | 4,627    |                         | 3,404    |                      | 4,627     |                         | 3,404  
|                         |                    | 41  |                      | $  49,116               |                         | $   354                 |                      | $  8,660 |                         | $3,415   |                      | $  57,776 |                         | $3,769 

Management believes that the cause of unrealized gains and losses on the U.S. government agency
securities is directly related to changes in market interest rates, which has been consistent with its experience. In general, as interest rates rise, the estimated fair value of fixed rate securities will decrease; as interest rates fall, their
value will increase. Nearly all of the securities in the 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.

Management views all the gross unrealized losses related to the U.S. government agency portfolio to be temporary for the reasons
noted above. INB, which holds the portfolio, has the ability and intent to hold all of the investments for a period of time sufficient for the estimated fair value of the securities to recover, which may be at time of maturity. Historically, INB has
always recovered the cost of its investments in U.S government agency securities upon maturity. The estimated fair values disclosed on U.S government agency securities are obtained from third-party brokers, who provide INB quoted prices derived from
active markets for identical or similar securities.

INB owns corporate securities consisting of variable-rate pooled trust preferred
securities backed by obligations of companies in the banking industry that are classified as held to maturity. In addition to the impact of interest rates, the estimated fair value of these securities have been and continue to be depressed due to
the unusual credit conditions that the financial industry has faced since the middle of 2008 and a weakening economy, which has severely reduced the demand for these securities and rendered their trading market inactive. In the first half of 2009,
other than temporary impairment charges aggregating to $0.7 million were recorded on these securities which is detailed in the table that follows. INB concluded that it was probable that there had been an adverse change in the estimated future cash
flows for certain securities such that an other-than-temporary impairment had occurred in accordance with generally accepted accounting principles.



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 3 - Securities, Continued



The other than temporary impairment conclusion was based on an increase in the amount of deferred or
defaulted interest payments by the underlying issuing banks such that it is no longer probable that INB would recover its full investment in the applicable security over time as derived from an expected cash flow analysis prepared by a third party
broker utilizing the guidance of EITF 99-20. The aggregate of defaults and deferrals on each of the remaining trust preferred securities was not at a level to reach the same conclusion. There can be no assurance that there will not be further write
downs in the future on trust preferred securities INB owns as conditions change. There were no securities classified as available for sale or sales of securities during the reporting periods in this report.

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



|                       |  |              |  |           |       |                |   |              |  |                         |       |                 |   |                         |  |                        |         |                  |       |         |        |              |    |  |     |  |      
|---------------------- |  | ------------ |  | --------- | ----- | -------------- | - | ------------ |  | ----------------------- | ----- | --------------- | - | ----------------------- |  | ---------------------- | ------- | ---------------- | ----- | ------- | ------ | ------------ | -- |  | --- |  | -----
|(Dollars in thousands)
|Cusip # (4)            |  | CreditRating |  | CostBasis |       | Write Downs(1) |   | AdjustedCost |  | EstimatedFair Value (2) |       | Unrealized Loss |   | % ofCollateralDefaulted |  | % ofCollateralDeferred |         | # ofBanks inPool |       | OTII(3) |        | DiscountRate
|74041PAEO              |  | CC           |  | $         | 998   |                | $ | (576)        |  | $                       | 422   |                 | $ | 121                     |  | $                      | (301)   |                  | 7.00% |         | 34.20% |              | 39 |  | Yes |  | 6.78%
|74040XAD6              |  | CC           |  |           | 1,017 |                |   | -            |  |                         | 1,017 |                 |   | 509                     |  |                        | (508)   |                  | 6.10% |         | 13.00% |              | 54 |  | No  |  | 5.22%
|74040XAE4              |  | CC           |  |           | 994   |                |   | -            |  |                         | 994   |                 |   | 510                     |  |                        | (484)   |                  | 6.10% |         | 13.00% |              | 54 |  | No  |  | 5.22%
|74040XAE4              |  | CC           |  |           | 995   |                |   | -            |  |                         | 995   |                 |   | 509                     |  |                        | (486)   |                  | 6.10% |         | 13.00% |              | 54 |  | No  |  | 5.22%
|74040YAF9              |  | CC           |  |           | 981   |                |   | (34)         |  |                         | 947   |                 |   | 445                     |  |                        | (502)   |                  | 2.90% |         | 21.80% |              | 58 |  | Yes |  | 5.12%
|74040YAE2              |  | CC           |  |           | 1,000 |                |   | (53)         |  |                         | 947   |                 |   | 445                     |  |                        | (502)   |                  | 2.90% |         | 21.80% |              | 58 |  | Yes |  | 5.12%
|74041UAE9              |  | CC           |  |           | 1,022 |                |   | -            |  |                         | 1,022 |                 |   | 716                     |  |                        | (306)   |                  | 1.00% |         | 9.70%  |              | 64 |  | No  |  | 5.03%
|74041UAE9              |  | CC           |  |           | 1,023 |                |   | -            |  |                         | 1,023 |                 |   | 715                     |  |                        | (308)   |                  | 1.00% |         | 9.70%  |              | 64 |  | No  |  | 5.03%
|                       |  |              |  | $         | 8,030 |                | $ | (663)        |  | $                       | 7,367 |                 | $ | 3,970                   |  | $                      | (3,397) |                  |       |         |        |              |    |  |     |  |      

(1) Writedowns are derived from the difference between the book value of the security and the
projected present value of the securitys cash flows as indicated per an analysis performed under the guidance of EITF 99-20.

(2)
Obtained from Moodys pricing service, which uses a complex valuation model that factors in numerous assumptions and data, including anticipated discounts related to illiquid trading markets, credit and interest rate risk, which under SFAS 157
would be considered Level 3 inputs. INB believes that the actual values that would be realized in an orderly market under normal credit conditions between a willing buyer and seller would very likely be much higher than those disclosed above. INB
has the intent and the ability to retain these trust preferred securities until maturity and currently has no intention of selling them.

(3) In determining whether there is OTTI, INB relies on a cash flow analysis as prescribed under EITF 99-20 and prepared by a third party broker, FTN Financial, to determine whether conditions are such that the projected cash flows are
insufficient to recover INBs principal investment. The basic methodology of EITF 99-20 is to compare the present value of the cash flows that are derived from assumptions made with respect to deferrals, defaults and prepayments from quarter to
quarter. A decline in the present value versus that for the previous quarter is considered to be an adverse change as described in EITF 99-20. EITF 99-20 prescribes using a discount rate equal to the current yield used to accrete
the beneficial interest. Other assumptions utilized in the model: prepayments of 1% annually and 100% at maturity and defaults of 75 bps applied annually with a 15% recovery with a 2 year lag.

(4) In July 2009, cusip 74041PAE0 was placed on cash basis accounting as 100% of the contractual interest payments on this security have been deferred.
Cusip 74040YAF9 and 74040YAE2 have partially deferred interest payments. Cash flows for the interest payments are being redirected to a more senior class of bonds to pay down the principal balance on the more senior class faster. This occurs when
deferral and default activity reduces the performing collateral to a level where a predetermined coverage test fails. If no additional deferrals or defaults occur, such test will eventually be met again through the redirection of cash flow and cash
interest payments would resume on INBs bonds.

INB evaluates all of its security investments for other-than-temporary impairment at
least quarterly or more frequently when conditions warrant such evaluation. Impairment is assessed at the individual security level. INB considers an investment security to be impaired if, after a review of available evidence, the full collection of
contractual principal and interest over the life of the security is no longer probable. INBs impairment evaluation process considers all available evidence, including factors such as the expected cash flows of the security, severity, length of
time and anticipated recovery period of the cash shortfalls, recent events specific to the issuer, including investment downgrades by rating agencies and current and anticipated economic and regulatory conditions of its industry, and the
issuers financial condition, capital strength and near-term prospects. The assessment for and the amount of impairment requires considerable judgment by INB. INB also considers its intent and ability to retain the security for a period of time
sufficient to allow for a recovery in fair value, or until maturity. Among the factors that are considered in determining the INBs intent and ability to retain the security is a review of its capital adequacy, interest rate risk position and
liquidity. If it is deemed that an other-than-temporary impairment has occurred, the security is written down to a new cost basis and the resulting loss is charged to earnings as a component of non-interest income.



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Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 3 - Securities, Continued



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



|                                       |  |                |  |                      |  |               |  
|-------------------------------------- |  | -------------- |  | -------------------- |  | ------------- | -
|($ in thousands)                       |  | Amortized Cost |  | Estimated Fair Value |  | Average Yield |  
|Due in one year or less                |  | $13,006        |  | $13,195              |  | 2.63          | %
|Due after one year through five years  |  | 398,865        |  | 399,758              |  | 2.59          |  
|Due after five years through ten years |  | 130,130        |  | 129,326              |  | 3.82          |  
|Due after ten years                    |  | 24,721         |  | 21,089               |  | 4.19          |  
|                                       |  | $566,722       |  | $563,368             |  | 2.94          | %

Note 4 - Loans Receivable

Major classifications of loans receivable are summarized as follows:



|                                       |  |                  |  |                      |           |            |     |        |   |          
|-------------------------------------- |  | ---------------- |  | -------------------- | --------- | ---------- | --- | ------ | - | ---------
|                                       |  | At June 30, 2009 |  | At December 31, 2008
|($ in thousands)                       |  | # of Loans       |  | Amount               |           | # of Loans |     | Amount
|Commercial real estate loans           |  | 399              |  | $                    | 1,128,051 |            | 383 |        | $ | 1,081,865
|Residential multifamily loans          |  | 238              |  |                      | 588,927   |            | 231 |        |   | 599,721  
|Land development and other land loans  |  | 16               |  |                      | 36,334    |            | 15  |        |   | 31,430   
|Residential 1-4 family loans           |  | 2                |  |                      | 452       |            | 2   |        |   | 464      
|Commercial business loans              |  | 18               |  |                      | 719       |            | 18  |        |   | 684      
|Consumer loans                         |  | 23               |  |                      | 509       |            | 21  |        |   | 373      
|Loans receivable                       |  | 696              |  |                      | 1,754,992 |            | 670 |        |   | 1,714,537
|Deferred loan fees                     |  |                  |  |                      | (8,905)   |            |     |        |   | (8,826)  
|Loans receivable, net of deferred fees |  |                  |  |                      | 1,746,087 |            |     |        |   | 1,705,711
|Allowance for loan losses              |  |                  |  |                      | (32,054)  |            |     |        |   | (28,524) 
|Loans receivable, net                  |  |                  |  | $                    | 1,714,033 |            |     |        | $ | 1,677,187

At June 30, 2009 and December 31, 2008, there were $129.8 million and $108.6 million of
loans on a nonaccrual status, respectively, and considered impaired under the criteria of SFAS 114. At June 30, 2009 and December 31, 2008, a SFAS 114 specific valuation allowance (included as part of the overall allowance for loan losses)
in the amount of $11.9 million and $8.2 million, respectively, was maintained on these impaired loans.

At June 30, 2009, there were
also $76.2 million of accruing loans on which the Company has granted certain concessions to provide payment relief generally consisting of the deferral of principal and or a partial reduction in interest payments for a period of time. These loans
are considered troubled debt restructurings (TDRs) and impaired. An additional SFAS 114 valuation allowance of $1.6 million was maintained on these loans at June 30, 2009. At June 30, 2009 and December 31, 2008, $6.4 million and $2.0
million of loans, respectively, were classified as ninety days past due and still accruing interest.

Selected information related to
impaired loans is summarized as follows:



|                                                                                  |  |                        |  |                          |  |         |  |        
|--------------------------------------------------------------------------------- |  | ---------------------- |  | ------------------------ |  | ------- |  | -------
|                                                                                  |  | Quarter Ended June 30, |  | Six-Months
EndedJune 30,
|($ in thousands)                                                                  |  | 2009                   |  | 2008                     |  | 2009    |  | 2008   
|Interest income that was not recorded on nonaccrual loans under contractual terms |  | $2,587                 |  | $2,625                   |  | $4,849  |  | $4,819 
|Average principal balance of nonaccrual loans                                     |  | 123,930                |  | 123,103                  |  | 119,171 |  | 109,462
|Average principal balance of restructured loans                                   |  | 72,434                 |  | -                        |  | 46,066  |  | -      

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

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



|                                             |  |                       |   |                          |         |  |         |   |  |        
|-------------------------------------------- |  | --------------------- | - | ------------------------ | ------- |  | ------- | - |  | -------
|                                             |  | Quarter
EndedJune 30, |   | Six-Months
EndedJune 30,
|($ in thousands)                             |  | 2009                  |   |                          | 2008    |  | 2009    |   |  | 2008   
|Balance at beginning of period               |  | $30,371               |   |                          | $23,856 |  | $28,524 |   |  | $21,593
|Provision for loan losses charged to expense |  | 2,686                 |   |                          | 2,753   |  | 4,543   |   |  | 5,016  
|Loan recoveries                              |  | 1,329                 |   |                          | -       |  | 1,329   |   |  | -      
|Loan chargeoffs                              |  | (2,332                | ) |                          | -       |  | (2,342  | ) |  | -      
|Balance at end of period                     |  | $32,054               |   |                          | $26,609 |  | $32,054 |   |  | $26,609



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Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





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



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



|                                                                        |  |                       |     |                          |   |      |  |      |     |  |   |  
|----------------------------------------------------------------------- |  | --------------------- | --- | ------------------------ | - | ---- |  | ---- | --- |  | - | -
|                                                                        |  | Quarter EndedJune 30, |     | Six-Months EndedJune 30,
|($ in thousands)                                                        |  | 2009                  |     | 2008                     |   | 2009 |  | 2008
|Balance at beginning of period                                          |  | $                     | 666 |                          | $ | -    |  | $    | 518 |  | $ | -
|Write downs of carrying value charged to real estate activities expense |  |                       | 140 |                          |   | -    |  |      | 288 |  |   | -
|Balance at end of period                                                |  | $                     | 806 |                          | $ | -    |  | $    | 806 |  | $ | -

Note 6 - Deposits

Scheduled maturities of certificates of deposit accounts are as follows:



|                         |  |                  |           |                      |       |        |   |                     |  |      
|------------------------ |  | ---------------- | --------- | -------------------- | ----- | ------ | - | ------------------- |  | -----
|                         |  | At June 30, 2009 |           | At December 31, 2008
|($ in thousands)         |  | Amount           |           | Wtd-Avg Stated Rate  |       | Amount |   | Wtd-Avg Stated Rate
|Within one year          |  | $                | 639,842   |                      | 3.89% |        | $ | 571,085             |  | 4.27%
|Over one to two years    |  |                  | 265,717   |                      | 4.22  |        |   | 333,041             |  | 4.62 
|Over two to three years  |  |                  | 192,848   |                      | 4.94  |        |   | 171,647             |  | 5.08 
|Over three to four years |  |                  | 173,209   |                      | 4.76  |        |   | 168,814             |  | 5.09 
|Over four years          |  |                  | 278,524   |                      | 4.90  |        |   | 274,839             |  | 5.05 
|                         |  | $                | 1,550,140 |                      | 4.36% |        | $ | 1,519,426           |  | 4.67%

Certificate of deposit accounts (CDs) of $100,000 or more totaled $693 million and $663 million at
June 30, 2009 and December 31, 2008, respectively, and included brokered CDs of $173 million at each date. At June 30, 2009, CDs of $100,000 or more by remaining maturity were as follows: $243 million due within one year; $102 million
due over one to two years; $90 million due over two to three years; $93 million due over three to four years; and $165 million due over four years.

Note
7 - Subordinated Debentures and Mortgage Note Payable

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



|                                                                   |  |     |  |                  |  |                      
|------------------------------------------------------------------ |  | --- |  | ---------------- |  | ---------------------
|($ in thousands)                                                   |  |     |  | At June 30, 2009 |  | At December 31,  2008
|Series 03/21/05 - interest at 6.50% fixed - due April 1, 2011      |  | (1) |  | $         -      |  | $  4,500             
|Series 08/12/05 - interest at 6.50% fixed - due October 1, 2011    |  | (1) |  | -                |  | 4,000                
|Series 06/07/04 - interest at 6.75% fixed - due January 1, 2012    |  | (1) |  | -                |  | 5,000                
|Series 06/12/06 - interest at 6.75% fixed - due July 1, 2012       |  | (1) |  | -                |  | 4,000                
|Series 03/21/05- interest at 7.00% fixed - due April 1, 2013       |  | (1) |  | -                |  | 6,500                
|Series 08/12/05 - interest at 7.00% fixed - due October 1, 2013    |  | (1) |  | -                |  | 6,000                
|Series 06/12/06 - interest at 7.00% fixed - due July 1, 2014       |  | (2) |  | 10,000           |  | 10,000               
|                                                                   |  |     |  | 10,000           |  | 40,000               
|Mortgage note payable- interest at 7% fixed - due February 1, 2017 |  | (3) |  | 176              |  | 184                  
|                                                                   |  |     |  | $10,176          |  | $40,184              

(1) These debentures were repaid at various times during the six-months ended June 30, 2009
with cash on hand prior to their stated maturity for an aggregate of $30 million of principal and $1.1 million of related accrued interest payable. A loss aggregating $1.2 million from the early extinguishment of debentures was recorded in the first
half of 2009, which represents the expensing of remaining related unamortized issuance costs associated with each debenture.

(2) These
debentures will be repaid by August 1, 2009. A loss of $0.5 million from the early extinguishment of debentures will be recorded in the third quarter of 2009 in connection with these retirements.

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



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Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 8 - FHLB Advances and Lines of Credit



At June 30, 2009, INB had agreements with correspondent banks whereby it could borrow up to $28
million on an unsecured basis. In addition, as a member of the Federal Home Loan Bank of New York (FHLB) and the Federal Reserve Bank of New York (FRB), INB can also borrow from these institutions on a secured basis. At June 30, 2009, INB had
available collateral consisting of investment securities to support additional total borrowings of approximately $488 million from the FHLB and FRB if needed.

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



|                                                   |  |                                     |  |                                        |  |         |  |        
|-------------------------------------------------- |  | ----------------------------------- |  | -------------------------------------- |  | ------- |  | -------
|                                                   |  | At or for the Quarter EndedJune 30, |  | At or for the Six-Months EndedJune 30,
|($ in thousands)                                   |  | 2009                                |  | 2008                                   |  | 2009    |  | 2008   
|Balance at period end                              |  | $50,500                             |  | $40,000                                |  | $50,500 |  | $40,000
|Maximum amount outstanding at any month end        |  | $59,500                             |  | $40,000                                |  | $59,500 |  | $40,000
|Average outstanding balance for the period         |  | $50,995                             |  | $14,237                                |  | $50,749 |  | $11,545
|Weighted-average interest rate paid for the period |  | 3.82%                               |  | 2.28%                                  |  | 3.84%   |  | 2.72%  
|Weighted-average interest rate at period end       |  | 3.81%                               |  | 2.31%                                  |  | 3.81%   |  | 2.31%  

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



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

Note 9 - Common Stock Options and Warrant

IBC has a shareholder-approved Long Term Incentive Plan (the Plan) under which stock options and other forms of incentive compensation may be awarded from time to time to officers,
employees and directors of IBC and its subsidiaries. The maximum number of shares of Class A common stock that may be awarded under the Plan is 750,000. As of June 30, 2009, 486,170 shares of Class A common stock remain available for
awards under this plan. There were no grants of options or warrants during the reporting periods in this report.

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



|                                              |  |                                   |  |         |  |                          |  |         |  |      
|--------------------------------------------- |  | --------------------------------- |  | ------- |  | ------------------------ |  | ------- |  | -----
|                                              |  | Exercise Price Per Warrant/Option |  |         |  | Wtd.-Avg. Exercise Price
|                                              |  | $5.42                             |  | $7.50   |  | $17.10                   |  | Total   | 
|Outstanding at December 31, 2008              |  | 691,882                           |  | 135,590 |  | 132,040                  |  | 959,512 |  | $7.32
|Forfeited                                     |  | -                                 |  | -       |  | (400)                    |  | (400)   |  | 17.10
|Expired (1)                                   |  | -                                 |  | (1,200) |  | (2,200)                  |  | (3,400) |  | 13.71
|Outstanding at June 30, 2009 (2)              |  | 691,882                           |  | 134,390 |  | 129,440                  |  | 955,712 |  | 7.29 
|Wtd-avg contractual remaining term (in years) |  | 9.5                               |  | 9.5     |  | 8.5                      |  | 9.3     |  |      
|Intrinsic value at June 30, 2009 (3)          |  | -                                 |  | -       |  | -                        |  | -       |  |      

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

(2) The $5.42 warrant, held by the U.S. Treasury, expires on December 23, 2018 and is 100% exercisable. The
$7.50 options held by officers, employees and directors expire on December 11, 2018 and are 100% vested and exercisable. The $17.10 options held by officers, employees and directors expire on December 13, 2017 and 88,760 of those options
are vested and exercisable; and the remaining 40,680 options vest and become exercisable on December 13, 2009.

(3) Intrinsic value is
zero since the closing market price of the Class A common stock on June 30, 2009 of $3.50 was below the exercise price of all the options and warrant.

Compensation expense recorded in connection with stock options outstanding with a corresponding increase to paid in capital is as follows: For the quarter ended June 30, 2009 and 2008, $54,000 and $53,000,
respectively, and for the six-months ended June 30, 2009 and 2008, $111,000 and $111,000, respectively. At June 30, 2009, there was $101,000 of unrecognized compensation expense related to the $17.10 outstanding stock options granted in
2007 that is expected to be recognized over the remainder of 2009.



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Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 10 - Earnings Per Common Share



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



|                                                                           |  |                        |  |                           |  |           |  |          
|-------------------------------------------------------------------------- |  | ---------------------- |  | ------------------------- |  | --------- |  | ---------
|                                                                           |  | Quarter Ended June 30, |  | Six-Months Ended June 30,
|($ in thousands, except share and per share amounts)                       |  | 2009                   |  | 2008                      |  | 2009      |  | 2008     
|Basic Earnings Per Common Share:                                           |  |                        |  |                           |  |           |  |          
|Net earnings applicable to common stockholders                             |  | $369                   |  | $1,861                    |  | $859      |  | $4,142   
|Weighted-Average number of common shares outstanding                       |  | 8,270,812              |  | 8,270,812                 |  | 8,270,812 |  | 8,247,241
|Basic Earnings Per Common Share                                            |  | $0.04                  |  | $0.22                     |  | $0.10     |  | $0.50    
|Diluted Earnings Per Common Share:                                         |  |                        |  |                           |  |           |  |          
|Net earnings applicable to common stockholders                             |  | $369                   |  | $1,861                    |  | $859      |  | $4,142   
|Weighted-Average number of common shares outstanding:                      |  |                        |  |                           |  |           |  |          
|Common shares outstanding                                                  |  | 8,270,812              |  | 8,270,812                 |  | 8,270,812 |  | 8,247,241
|Potential dilutive shares resulting from exercise of warrants /options (1) |  | -                      |  | -                         |  | -         |  | 4,348    
|Total average number of common shares outstanding used for dilution        |  | 8,270,812              |  | 8,270,812                 |  | 8,270,812 |  | 8,251,589
|Diluted Earnings Per Common Share                                          |  | $0.04                  |  | $0.22                     |  | $0.10     |  | $0.50    

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

Note 11 - Off-Balance Sheet Financial
Instruments

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the
financing needs of its customers. These instruments are in the form of commitments to extend credit, unused lines of credit and standby letters of credit, and may involve, to varying degrees, elements of credit and interest rate risk in excess of
the amounts recognized in the consolidated financial statements. The Companys maximum exposure to credit risk is represented by the contractual amount of those instruments.

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

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



|                          |  |                 |  |                    
|------------------------- |  | --------------- |  | -------------------
|($ in thousands)          |  | At June 30,2009 |  | At December 31,2008
|Unfunded loan commitments |  | $59,303         |  | $38,637            
|Available lines of credit |  | 870             |  | 915                
|                          |  | $60,173         |  | $39,552            

Note 12 - Regulatory Capital

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

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



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Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)



Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company and INB must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory
accounting practices. These capital amounts are also subject to qualitative judgment by the regulators about components, risk weighting and other factors. Quantitative measures established by the regulations to ensure capital adequacy require the
Company, on a consolidated basis, and INB on a stand alone basis, to maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to average assets, as defined by the regulations.

The Federal Reserve allows trust preferred securities to be included in the Tier 1 capital of bank holding companies but with stricter limitations on the
use of such securities that are currently scheduled to become effective on March 31, 2011. These new limits were scheduled to take effect on March 31, 2009. As a result of delaying implementation of the new limits and until the new
effective date in 2011, all bank holding companies may continue to include cumulative perpetual preferred stock and trust preferred securities in Tier 1 capital up to 25 percent of total core capital elements.

As of June 30, 2009, assuming IBC had excluded all of its eligible trust preferred securities (which totaled $55 million) from Tier 1 capital and
included the entire amount in Tier 2 capital, the Company would still have exceeded its minimum capital requirement threshold under the regulatory framework for prompt corrective action.

At June 30, 2009, INB maintained its capital at levels to be classified as a well-capitalized institution under the regulatory framework for prompt corrective action, which requires minimum
Tier 1 leverage and Tier 1 and total risk-based capital ratios of 5%, 6% and 10%, respectively. In April 2009, INB agreed with the OCC, its primary regulator, to maintain minimum capital ratios at specified levels higher than those otherwise
required by applicable regulations as follows: Tier 1 capital to total average assets (leverage ratio) - 9%; Tier 1 capital to risk-weighted assets - 10%; and total capital to risk-weighted assets - 12%.

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

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



|                                                        |  |              |  |                                                                          |  |                                                     |  |                                          
|------------------------------------------------------- |  | ------------ |  | ------------------------------------------------------------------------ |  | --------------------------------------------------- |  | -----------------------------------------
|                                                        |  | ActualRatios |  | Minimum RequirementUnder RegulatoryFramework for PromptCorrective Action |  | MinimumRequirement to beConsidered Well Capitalized |  | MinimumRequirementUnder Agreementwith OCC
|Consolidated at June 30, 2009                           |  |              |  |                                                                          |  |                                                     |  |                                          
|Total capital to risk-weighted assets                   |  | 15.11%       |  | 8.00%                                                                    |  | NA                                                  |  | NA                                       
|Tier 1 capital to risk-weighted assets                  |  | 13.85%       |  | 4.00%                                                                    |  | NA                                                  |  | NA                                       
|Tier 1 capital to total average assets  leverage ratio |  | 11.36%       |  | 4.00%                                                                    |  | NA                                                  |  | NA                                       
|                                                        |  |              |  |                                                                         
|Intervest National Bank at June 30, 2009                |  |              |  |                                                                          |  |                                                     |  |                                          
|Total capital to risk-weighted assets                   |  | 13.33%       |  | 8.00%                                                                    |  | 10.00%                                              |  | 12.00%                                   
|Tier 1 capital to risk-weighted assets                  |  | 12.08%       |  | 4.00%                                                                    |  | 6.00%                                               |  | 10.00%                                   
|Tier 1 capital to total average assets  leverage ratio |  | 9.94%        |  | 4.00%                                                                    |  | 5.00%                                               |  | 9.00%                                    

Note 13 - Contingencies

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

Note 14 - Fair Value Measurements

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



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Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)



Note 14 - Fair Value Measurements, Continued

From time to time, however, the Company may be required to record at fair value other assets or liabilities on a non-recurring basis, such as impaired
loans, impaired investment securities and foreclosed real estate. These non-recurring fair value adjustments involve the application of lower-of-cost-or-market accounting or write-downs of individual assets. In accordance with SFAS 157, the Company
groups its assets and liabilities at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value, as follows:

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

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

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

The Company bases its fair values on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. SFAS 157 requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. In instances where the determination of the fair value
measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value
measurement in its entirety. The Companys assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

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

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

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

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



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 14 - Fair Value Measurements, Continued



The following table provides the level of valuation assumptions used to determine the carrying value
of assets measured at fair value at June 30, 2009.



|                        |  |                                     |  |                  |  |            |  |          |  |                                |  |                               
|----------------------- |  | ----------------------------------- |  | ---------------- |  | ---------- |  | -------- |  | ------------------------------ |  | ------------------------------
|                        |  | Net carrying value at June 30, 2009 |  | Total Losses (3)
|($ in thousands)        |  | Total                               |  | Level 1          |  | Level 2    |  | Level 3  |  | Six-Months Ended June 30, 2009 |  | Six-Months Ended June 30, 2008
|Impaired loans (1)      |  | $205,994                            |  | $        -       |  | $        - |  | $205,994 |  | $6,289                         |  | $2,458                        
|Impaired securities (2) |  | 2,316                               |  | -                |  | -          |  | 2,316    |  | 663                            |  | -                             
|Foreclosed real estate  |  | 18,214                              |  | -                |  | -          |  | 18,214   |  | 288                            |  | -                             

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

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

(3) The loss for impaired loans represents the change during the period in the specific valuation allowance recorded in accordance with SFAS 114. The loss for foreclosed
real estate represents write downs in carrying values subsequent to foreclosure, plus losses from the sale of foreclosed properties if any during the period that are charged to real estate activities expense. The loss on investment securities
represents an other than temporary impairment charge recorded as a component of noninterest income.

The table that follows
presents information for assets measured at fair value on a nonrecurring basis classified within Level 3 of the valuation hierarchy of SFAS 157 for the six-months ended June 30, 2009.



|                                                       |  |                    |   |  |               |   |  |                       |  
|------------------------------------------------------ |  | ------------------ | - |  | ------------- | - |  | --------------------- | -
|(Dollars in thousands)                                 |  | ImpairedSecurities |   |  | ImpairedLoans |   |  | ForeclosedReal Estate |  
|Balance at December 31, 2008                           |  | $        -         |   |  | $108,610      |   |  | $9,081                |  
|Net new impaired securities and loans                  |  | 2,979              |   |  | 109,218       |   |  | -                     |  
|Other than temporary impairment writedowns             |  | (663               | ) |  | -             |   |  | -                     |  
|Principal repayments                                   |  | -                  |   |  | (71           | ) |  | -                     |  
|Loan chargeoffs                                        |  | -                  |   |  | (2,342        | ) |  | -                     |  
|Loans transferred to foreclosed real estate            |  | -                  |   |  | (9,421        | ) |  | 9,421                 |  
|Writedowns of carrying value subsequent to foreclosure |  | -                  |   |  | -             |   |  | (288                  | )
|Balance at June 30, 2009                               |  | $2,316             |   |  | $205,994      |   |  | $18,214               |  

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



|                                                   |  |                  |           |                      |   |                |  |            |           |  |   |          
|-------------------------------------------------- |  | ---------------- | --------- | -------------------- | - | -------------- |  | ---------- | --------- |  | - | ---------
|                                                   |  | At June 30, 2009 |           | At December 31, 2008
|($ in thousands)                                   |  | Carrying Value   |           | Fair Value           |   | Carrying Value |  | Fair Value
|Financial Assets:                                  |  |                  |           |                      |   |                |  |            |           |  |   |          
|Cash and cash equivalents                          |  | $                | 23,441    |                      | $ | 23,441         |  | $          | 54,903    |  | $ | 54,903   
|Securities held to maturity, net                   |  |                  | 566,722   |                      |   | 563,368        |  |            | 475,581   |  |   | 475,100  
|FRB and FHLB stock                                 |  |                  | 9,929     |                      |   | 9,929          |  |            | 8,901     |  |   | 8,901    
|Loans receivable, net of allowance for loan losses |  |                  | 1,714,033 |                      |   | 1,740,984      |  |            | 1,677,187 |  |   | 1,710,506
|Loan fees receivable                               |  |                  | 8,594     |                      |   | 6,742          |  |            | 8,590     |  |   | 6,768    
|Accrued interest receivable                        |  |                  | 11,778    |                      |   | 11,778         |  |            | 11,965    |  |   | 11,965   
|Financial Liabilities:                             |  |                  |           |                      |   |                |  |            |           |  |   |          
|Deposits                                           |  |                  | 1,995,165 |                      |   | 2,043,260      |  |            | 1,864,135 |  |   | 1,900,143
|Borrowed funds plus accrued interest payable       |  |                  | 118,035   |                      |   | 117,039        |  |            | 149,566   |  |   | 152,684  
|Accrued interest payable on deposits               |  |                  | 6,504     |                      |   | 6,504          |  |            | 6,868     |  |   | 6,868    
|Off-Balance Sheet Instruments:                     |  |                  |           |                      |   |                |  |            |           |  |   |          
|Commitments to lend                                |  |                  | 366       |                      |   | 366            |  |            | 416       |  |   | 416      

Discussion regarding the assumptions used to compute the fair values of financial instruments can
be found in note 21 to the consolidated financial statements included in the Companys annual report on Form 10-K for the year ended December 31, 2008.

Note 15 - Recent Accounting Pronouncements

SFAS 141(R) - Business Combinations. On January 1, 2009, the
Company adopted SFAS 141(R), which requires, among other things, the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition date fair value
as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the
business combination. The adoption of this statement had no effect on the Companys financial statements.



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)



Note 15 - Recent Accounting Pronouncements, Continued

SFAS 160 - Noncontrolling Interest in Consolidated Financial Statements.On January 1, 2009, the Company adopted
SFAS 160 whose objective is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the
noncontrolling interest in a subsidiary and for deconsolidation of a subsidiary. The adoption of this statement had no effect on the Companys financial statements.

SFAS 161 - Disclosures about Derivative Instruments and Hedging Activities, an amendment of SFAS 133.On January 1, 2009, the Company adopted SFAS 161, which, among other things, provides for
enhanced disclosures about how and why an entity uses derivatives and how and where those derivatives and related hedged items are reported in the entitys financial statements. The Company currently does not engage in trading or hedging
activities, nor does it invest in interest rate derivatives or enter into interest rate swaps. The adoption of SFAS 161 had no impact on the Companys financial statements.

SFAS 165 - Subsequent Events.On January 1, 2009, the Company adopted SFAS 165, which establishes general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or available to be issued. SFAS 165 defines (i) the period after the balance sheet date during which a reporting entitys management should evaluate events or transactions
that may occur for potential recognition or disclosure in the financial statements (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and
(iii) the disclosures an entity should make about events or transactions that occurred after the balance sheet date. SFAS 165 became effective for the Companys financial statements for periods ending after June 15, 2009. The adoption
of SFAS 165 had no impact on the Companys financial statements.

SFAS 166 - Accounting for Transfers of Financial Assets, an
Amendment of FASB Statement No. 140.SFAS 166 amends SFAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, to enhance reporting about transfers of financial assets,
including securitizations, and where companies have continuing exposure to the risks related to transferred financial assets. SFAS 166 eliminates the concept of a qualifying special-purpose entity and changes the requirements for
derecognizing financial assets. SFAS 166 also requires additional disclosures about all continuing involvements with transferred financial assets including information about gains and losses resulting from transfers during the period. SFAS 166 will
be effective January 1, 2010 and is not expected to have a significant impact on the Companys financial statements.

SFAS
167 - Amendments to FASB Interpretation No. 46(R).SFAS 167 amends FIN 46 (Revised December 2003), Consolidation of Variable Interest Entities, to change how a company determines when an entity that is insufficiently
capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entitys purpose and design and a
companys ability to direct the activities of the entity that most significantly impact the entitys economic performance. SFAS 167 requires additional disclosures about the reporting entitys involvement with variable-interest
entities and any significant changes in risk exposure due to that involvement as well as its affect on the entitys financial statements. SFAS 167 will be effective January 1, 2010 and is not expected to have a significant impact on the
Companys financial statements.

SFAS 168 - The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles, a Replacement of FASB Statement No. 162.SFAS 168 replaces SFAS 162, The Hierarchy of Generally Accepted Accounting Principles and establishes the FASB Accounting Standards Codification (the
Codification) as the source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with generally accepted accounting principles.
Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative guidance for SEC registrants. All guidance contained in the Codification carries an equal level of authority. All
non-grandfathered, non-SEC accounting literature not included in the Codification is superseded and deemed non-authoritative. SFAS 168 will be effective for the Companys financial statements for periods ending after September 15, 2009 and
is not expected have a significant impact on the Companys financial statements.



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)



Note 15 - Recent Accounting Pronouncements, Continued

EITF 99-20 - Impairment. In January 2009, the FASB issued Staff Position (FSP) EITF 99-20-1, Amendments to the Impairment of
Guidance of EITF Issue No. 99-20 (FSP EITF 99-20-1). FSP EITF 99-20-1 amends the impairment guidance in EITF Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That
Continue to Be Held by a Transferor in Securitized Financial Assets, to achieve more consistent determinations of whether an other-than-temporary impairment has occurred. FSP EITF 99-20-1 is effective for interim and annual reporting periods ending
after December 15, 2008, and shall be applied prospectively. Retrospective application to a prior interim or annual reporting period is not permitted. The adoption of FSP EITF 99-20-1 had no impact on the Companys consolidated financial
statements.

Fair Value Measurements and Impairments of Securities. On April 9, 2009, the FASB issued three FSPs intended to
provide additional application guidance and enhance disclosures regarding fair value measurements and impairments of securities. FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly, provides guidelines for making fair value measurements more consistent with the principles presented in FASB Statement No. 157, Fair Value Measurements. FSP FAS
107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, enhances consistency in financial reporting by increasing the frequency of fair value disclosures. FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments, provides additional guidance designed to create greater clarity and consistency in accounting for and presenting impairment losses on securities.

FSP FAS 157-4 relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales. It reaffirms the need to use judgment to ascertain
if a formerly active market has become inactive and in determining fair values when markets have become inactive.

FSP FAS 107-1 and APB
28-1 relate to fair value disclosures for any financial instruments that are not currently reflected on the balance sheet of companies at fair value. Prior to issuing this FSP, fair values for these assets and liabilities were only disclosed once a
year. The FSP now requires these disclosures on a quarterly basis, providing qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value.

FSP FAS 115-2 and FAS 124-2 on other-than-temporary impairments are intended to bring greater consistency to the timing of impairment recognition, and
provide greater clarity to investors about the credit and noncredit components of impaired debt securities that are not expected to be sold. The measure of impairment in comprehensive income remains fair value. The FSP also requires increased and
timelier disclosures sought by investors regarding expected cash flows, credit losses, and an aging of securities with unrealized losses.

The FSPs are effective for interim and annual periods ending after June 15, 2009, but entities may early adopt the FSPs for the interim and annual periods ending after March 15, 2009. The adoption of the FSPs as of June 30,
2009 had no impact on the Companys financial statements.

Note 16 - Recent Regulatory Developments

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



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)





Note 16 - Recent Regulatory Developments, Continued



INB has also agreed with the OCC to maintain minimum capital ratios at specified levels higher than
those otherwise required by applicable regulations as follows: Tier 1 capital to total average assets (leverage ratio) - 9%; Tier 1 capital to risk-weighted assets - 10%; and total capital to risk-weighted assets - 12%. At June 30, 2009,
INBs capital ratios were in excess of these levels and were 9.94%, 12.08% and 13.33%, respectively.

Regulatory Core Capital.In March 2009, the Federal Reserve Board announced the adoption of a final rule that delays until March 31, 2011, the effective date of new limits on the inclusion of trust preferred securities and other restricted core capital elements
in Tier 1 capital of all bank holding companies (BHCs). This action was taken in light of continued stress in financial markets and the efforts of BHCs to increase their overall capital levels. These new limits were scheduled to take effect on
March 31, 2009, pursuant to a final rule adopted by the Board on March 10, 2005. The delay will further the Boards efforts, as well as the efforts of the other Federal banking agencies and the U.S. Department of the Treasury, to
respond to the current financial markets. Until the new effective date in 2011, all BHCs may include cumulative perpetual preferred stock and trust preferred securities in tier 1 capital up to 25 percent of total core capital elements.

FDIC Insurance Premiums. On February 27, 2009, the FDIC adopted a final rule that: (1) modified the risk-based assessment system and
sets initial base assessment rates beginning April 1, 2009, at 12 to 45 basis points; (2) extended the period of the Restoration Plan for the Deposit Insurance Fund to seven years; and (3) adopted an interim rule to impose an
emergency special insurance assessment on June 30, 2009 to be collected on September 30, 2009, and (4) allows the FDIC to impose possible additional special assessments thereafter to maintain public confidence in the Deposit Insurance
Fund (DIF).

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

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

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

Emergency Special Assessment: In May 2009, the FDIC issued a final rule which levied a special assessment applicable to all
insured depository institutions totaling 5 basis points of each institutions total assets less Tier 1 capital as of June 30, 2009, not to exceed 10 basis points of domestic deposits. The special assessment is part of the FDICs
efforts to rebuild the DIF. The final rule also allows the FDIC to impose additional special assessments of 5 basis points for the third and fourth quarters of 2009, if the FDIC estimates that the DIF reserve ratio will fall to a level that would
adversely affect public confidence in federal deposit insurance or to a level that would be close to or below zero. Any additional special assessment would also be capped at 10 basis points of domestic deposits. INB cannot provide any assurance as
to the ultimate amount or timing of any such special assessments, should such special assessments occur, as such special assessments depend upon a variety of factors which are beyond INBs control.

The changes to deposit insurance premiums discussed above have significantly increased FDIC insurance expense for all insured depository institutions.
INBs FDIC insurance expense for the second quarter of 2009, including the additional special assessment, amounted to $2.3 million, compared to $0.4 million in the second quarter of 2008, a 444% increase. For the first six-months of 2009, FDIC
insurance expense amounted to $3.1 million, compared to $0.9 million in the same period of 2008.



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Intervest Bancshares Corporation and Subsidiaries

Review by Independent Registered Public Accounting Firm

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

The report of Hacker, Johnson & Smith, P.A., P.C. furnished pursuant to Article 10 of Regulation S-X is included 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, 2009 and the related
condensed consolidated statements of earnings for the three- and six-month periods ended June 30, 2009 and 2008, and the related condensed consolidated statements of changes in stockholders equity and cash flows for the six-month periods
ended June 30, 2009 and 2008. These interim financial statements are the responsibility of the Companys management.

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

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

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

/s/ Hacker, Johnson & Smith,
P.A., P.C.

HACKER, JOHNSON & SMITH, P.A., P.C.

Tampa, Florida

July 24, 2009



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##### Table of Contents

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

Overview

Managements discussion of financial condition and results of operations of Intervest Bancshares Corporation and Subsidiaries that follows should be read in conjunction with the accompanying quarterly condensed consolidated financial
statements in this report on Form 10-Q as well as the entire annual report on Form 10-K for the year ended December 31, 2008.

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

Critical Accounting Policies

As of June 30, 2009, the Company considers its critical accounting policies to be
those that relate to the determination of: the allowance for loan losses; the valuation allowance for real estate losses and the other than temporary impairment charge of its security investments. These three items are considered critical accounting
estimates because each is highly susceptible to change from period to period and require management to make numerous assumptions about a variety of information that directly affect the calculation of the amounts reported in the consolidated
financials statements. For example, the impact of a large unexpected chargeoff could deplete the allowance for loan losses and potentially require increased provisions to replenish the allowance, which could negatively affect the Companys
earnings and financial condition.

A more detailed discussion of the factors and estimates used in computing the above items can be found as
follows: for the allowance for loan losses - under the caption Critical Accounting Policies on pages 36 to 39 of the Companys annual report on Form 10-K for the year ended December 31, 2008; for the valuation allowance for
real estate losses  note 14 to the condensed consolidated financial statements in this report; and for the other than temporary impairment charge of security investments  note 3 to the condensed consolidated financial statements in this
report.

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

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



|                                            |  |                |  |              |  |              |  |                  |  |             
|------------------------------------------- |  | -------------- |  | ------------ |  | ------------ |  | ---------------- |  | ------------
|($ in thousands)                            |  | IBC            |  | INB          |  | IMC          |  | Eliminations (1) |  | Consolidated
|Cash and cash equivalents                   |  | $    6,318     |  | $     20,402 |  | $  10,776    |  | $  (14,055)      |  | $     23,441
|Security investments                        |  | -              |  | 576,651      |  | -            |  | -                |  | 576,651     
|Loans receivable, net of deferred fees      |  | -              |  | 1,717,553    |  | 28,534       |  | -                |  | 1,746,087   
|Allowance for loan losses                   |  | -              |  | (31,404)     |  | (650)        |  | -                |  | (32,054)    
|Foreclosed real estate                      |  | -              |  | 15,887       |  | 2,327        |  | -                |  | 18,214      
|Investments in consolidated subsidiaries    |  | 260,645        |  | -            |  | -            |  | (260,645)        |  | -           
|All other assets                            |  | 3,251          |  | 42,901       |  | 1,743        |  | (190)            |  | 47,705      
|Total assets                                |  | $270,214       |  | $2,341,990   |  | $42,730      |  | $(274,890)       |  | $2,380,044  
|Deposits                                    |  | $            - |  | $2,009,221   |  | $          - |  | $  (14,056)      |  | $1,995,165  
|Borrowed funds and related interest payable |  | 56,805         |  | 50,768       |  | 10,462       |  | -                |  | 118,035     
|All other liabilities                       |  | 272            |  | 52,349       |  | 1,275        |  | (189)            |  | 53,707      
|Total liabilities                           |  | 57,077         |  | 2,112,338    |  | 11,737       |  | (14,245)         |  | 2,166,907   
|Stockholders equity                        |  | 213,137        |  | 229,652      |  | 30,993       |  | (260,645)        |  | 213,137     
|Total liabilities and stockholders equity  |  | $270,214       |  | $2,341,990   |  | $42,730      |  | $(274,890)       |  | $2,380,044  



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



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##### Table of Contents

A comparison of selected consolidated balance sheet information follows:



|                                                               |  |                  |  |                  |  |                      |  |               |  |                 
|-------------------------------------------------------------- |  | ---------------- |  | ---------------- |  | -------------------- |  | ------------- |  | ----------------
|                                                               |  | At June 30, 2009 |  |                  |  | At December 31, 2008
|($ in thousands)                                               |  | CarryingValue    |  | % ofTotal Assets |  |                      |  | CarryingValue |  | % ofTotal Assets
|Cash and cash equivalents                                      |  | $     23,441     |  | 1.0%             |  |                      |  | $     54,903  |  | 2.4%            
|Security investments                                           |  | 576,651          |  | 24.2             |  |                      |  | 484,482       |  | 21.4            
|Loans receivable, net of deferred fees and loan loss allowance |  | 1,714,033        |  | 72.0             |  |                      |  | 1,677,187     |  | 73.8            
|Foreclosed real estate                                         |  | 18,214           |  | 0.8              |  |                      |  | 9,081         |  | 0.4             
|All other assets                                               |  | 47,705           |  | 2.0              |  |                      |  | 46,180        |  | 2.0             
|Total assets                                                   |  | $2,380,044       |  | 100.0%           |  |                      |  | $2,271,833    |  | 100.0%          
|Deposits                                                       |  | $1,995,165       |  | 83.8%            |  |                      |  | $1,864,135    |  | 82.1%           
|Borrowed funds and related interest payable                    |  | 118,035          |  | 5.0              |  |                      |  | 149,566       |  | 6.6             
|All other liabilities                                          |  | 53,707           |  | 2.2              |  |                      |  | 46,158        |  | 2.0             
|Total liabilities                                              |  | 2,166,907        |  | 91.0             |  |                      |  | 2,059,859     |  | 90.7            
|Stockholders equity                                           |  | 213,137          |  | 9.0              |  |                      |  | 211,974       |  | 9.3             
|Total liabilities and stockholders equity                     |  | $2,380,044       |  | 100.0%           |  |                      |  | $2,271,833    |  | 100.0%          

Cash and Cash Equivalents

Cash and cash equivalents include interest-bearing and noninterest-bearing cash balances with banks, and other short-term investments that have original maturities of three months or less. Cash
and cash equivalents decreased to $23 million at June 30, 2009 from $55 million at December 31, 2008. The level of cash and cash equivalents fluctuates based on various factors, including liquidity needs, loan demand, deposit flows, calls
of securities, repayments of borrowed funds and alternative investment opportunities.

Security Investments

Security investments consist of securities held to maturity and Federal Reserve Bank (FRB) and Federal Home Loan Bank of New York (FHLB) stock. Securities
are classified as held to maturity and are carried at amortized cost when management has the intent and ability to hold them to maturity. Such investments, all of which are held by INB, increased to $567 million at June 30, 2009, from $476
million at December 31, 2008. The increase reflected $461 million of new purchases exceeding a total of $369 million of calls and maturities of securities during the period. INB invests in U.S. government agency debt obligations to emphasize
safety and liquidity. The Company does not own or invest in any collateralized debt obligations, collateralized mortgage obligations, or any preferred or common stock of the Federal National Mortgage Association or Federal Home Loan Mortgage
Corporation.

At June 30, 2009, securities held to maturity consisted of investment grade rated debt obligations of the Federal Home
Loan Bank, Federal Farm Credit Bank, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation totaling $559.3 million and noninvestment grade rated corporate securities (consisting of variable-rate pooled trust preferred
securities backed by obligations of companies in the banking industry) totaling $7.4 million. As discussed in more detail in note 3 to the condensed consolidated financial statements in this report, in the first half of 2009, INB recorded impairment
charges aggregating to $0.7 million on three trust preferred securities, representing a 22% reduction in their aggregate cost basis of $3.0 million.

At June 30, 2009, the entire securities held to maturity portfolio had a weighted-average yield of 2.94% and a weighted-average remaining maturity of 4.7 years, compared to 3.80% and 4.2 years, respectively, at December 31, 2008.
Nearly all of the securities in the portfolio have fixed rates of interest or have predetermined rate increases, and many have call features that allow the issuer to call the security before its stated maturity without penalty. In the first half of
2009, $360 million of agency securities with a weighted average yield of approximately 3.72% were called by the issuers and the resulting proceeds were invested into new securities yielding approximately 100 basis points less. As a result of these
calls, the overall average yield on the portfolio decreased from December 31, 2008. At June 30, 2009 and December 31, 2008, the held-to-maturity portfolios estimated fair value was $563 million and $475 million, respectively. At
June 30, 2009, the portfolio had a net unrealized loss of $3.4 million, compared to a net unrealized loss of $0.5 million at December 31, 2008. See note 3 to the condensed consolidated financial statements in this report for a discussion
regarding unrealized losses.

In order for INB to be a member of the FRB and FHLB, INB maintains an investment in the capital stock of each
entity, which amounted to $4.4 million and $5.5 million, respectively, at June 30, 2009.



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

Loans receivable, net of deferred fees, amounted to $1.75 billion at June 30, 2009, a $40 million increase from $1.71 billion at December 31,
2008. The increase was due to $129 million of new loan originations secured primarily by commercial real estate exceeding the aggregate of $77 million of principal repayments, $9.4 million of loans transferred to foreclosed real estate and $2.3
million of loan chargeoffs. Nearly all of the new loans have fixed interest rates and a weighted-average yield and term of 6.57% and 5.3 years, respectively. These terms have been largely a function of the high demand by borrowers for longer-term,
fixed-rate product that has been driven by the historically low interest rate environment. The Company expects this trend for longer-term, fixed-rate product will continue for the foreseeable future and most of its new loan originations for 2009
will have similar terms. Fixed-rate loans constituted approximately 71% of the consolidated loan portfolio at June 30, 2009.

The
consolidated loan portfolio is concentrated in mortgage loans secured by commercial and multifamily real estate properties (including rental and cooperative/condominium apartment buildings, office buildings, mixed-use properties, shopping centers,
hotels, restaurants, industrial/warehouse properties, parking lots/garages, mobile home parks, self storage facilities and vacant land). The Company does not own or originate construction/development loans or condominium conversion loans. At
June 30, 2009, such loans consisted of 653 loans with an aggregate principal balance of $1.75 billion and an average loan size of $2.7 million. Loans with principal balances of more than $10 million consisted of 21 loans or $287 million, with
the largest loan being $20.4 million. Loans with principal balances of $5 million to $10 million consisted of 51 loans and aggregated to $379 million.

Nonaccrual and Restructured (Impaired) Loans

Nonaccrual loans increased to $129.8 million (37 loans) at
June 30, 2009, from $108.6 million (26 loans) at December 31, 2008. At June 30, 2009, there were three loans totaling $6.4 million classified as ninety days past due and still accruing interest, compared to one loan for $2.0 million
at December 31, 2008. At June 30, 2009, there also were $76.2 million of accruing loans on which INB has granted certain concessions to provide payment relief to the borrower generally consisting of the deferral of principal and or a
partial reduction in interest payments for a period of time. These loans are considered troubled debt restructurings (TDRs).

Nonaccrual
loans and TDRs are considered impaired under the criteria of SFAS 114 Accounting by Creditors for Impairment of a Loanan amendment of FASB Statements 5 and 15. At June 30, 2009 and December 31, 2008, nonaccrual loans had
a SFAS 114 specific valuation allowance (included as part of the overall allowance for loan losses) in the aggregate amount of $11.9 million and $8.2 million, respectively. Estimated loan-to-value ratios, net of specific valuation allowances, on
nonaccrual loans ranged from 51% to 100% at June 30, 2009. At June 30, 2009, there was an additional SFAS 114 specific valuation allowance of $1.6 million maintained for TDRs.

In addition to the above, at June 30, 2009 there were $13.8 million of loans held by INB for which there were concerns regarding the ability of the borrowers to meet existing repayment
terms. Such potential problem loans are normally classified as substandard for regulatory purposes and reflect the distinct possibility, but not the probability, that INB will not be able to collect all amounts due according to the contractual terms
of the loan. Potential problem loans may never become delinquent, nonaccrual or impaired. Potential problem loans are considered in the determination of the overall adequacy of the allowance for loan losses.

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



26



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Nonaccrual loans are detailed in the table that follows:



|                       |  |                               |  |               |  |        |  |                  |  |              |  |              |  |      
|---------------------- |  | ----------------------------- |  | ------------- |  | ------ |  | ---------------- |  | ------------ |  | ------------ |  | -----
|(Dollars in thousands) |  | Principal Balance Outstanding |  |              
|Property Type          |  | City                          |  | State         |  | Lender |  | Month Nonaccrual |  | Jun 30, 2009 |  | Dec 31, 2008 |  | Notes
|Retail                 |  | Flushing                      |  | New York      |  | INB    |  | Aug 2008         |  | $13,060      |  | $13,060      |  | (7)  
|Multifamily            |  | Long Island                   |  | New York      |  | INB    |  | Jun 2007         |  | 11,316       |  | 11,316       |  | (2)  
|Undeveloped Land       |  | Long Island City              |  | New York      |  | INB    |  | Mar 2008         |  | 11,001       |  | 11,001       |  | (7)  
|Multifamily            |  | Melbourne                     |  | Florida       |  | INB    |  | Jun 2009         |  | 10,822       |  | -            |  | (7)  
|Mixed Use              |  | New York                      |  | New York      |  | INB    |  | Nov 2008         |  | 7,905        |  | 7,905        |  | (7)  
|Hotel                  |  | St. Augustine                 |  | Florida       |  | INB    |  | Jun 2007         |  | 7,800        |  | 9,053        |  | (3)  
|Multifamily            |  | Tampa                         |  | Florida       |  | INB    |  | Oct 2008         |  | 7,475        |  | 7,475        |  | (7)  
|Hotel                  |  | Clearwater                    |  | Florida       |  | INB    |  | Nov 2008         |  | 6,954        |  | 6,954        |  | (6)  
|Hotel                  |  | Orlando                       |  | Florida       |  | INB    |  | Aug 2008         |  | -            |  | 5,939        |  | (9)  
|Office Building        |  | Staten Island                 |  | New York      |  | INB    |  | May 2008         |  | 5,762        |  | 5,762        |  | (5)  
|Warehouse              |  | New York                      |  | New York      |  | INB    |  | Feb 2009         |  | 4,456        |  | -            |  | (7)  
|Undeveloped Land       |  | Perryville                    |  | Maryland      |  | INB    |  | May 2008         |  | 4,024        |  | 4,024        |  | (7)  
|Hotel                  |  | Brooklyn                      |  | New York      |  | INB    |  | Jun 2009         |  | 3,091        |  | -            |  | (7)  
|Retail                 |  | Avenel                        |  | New Jersey    |  | INB    |  | Mar 2007         |  | 3,064        |  | 3,064        |  | (1)  
|Hotel                  |  | Clearwater                    |  | Florida       |  | INB    |  | Nov 2008         |  | -            |  | 2,977        |  | (8)  
|Office Building        |  | East Orange                   |  | New Jersey    |  | INB    |  | Mar 2009         |  | 2,869        |  | -            |  | (7)  
|Office Building        |  | Yonkers                       |  | New York      |  | INB    |  | Nov 2008         |  | 2,644        |  | 2,644        |  | (7)  
|Office Building        |  | Hollywood                     |  | Florida       |  | INB    |  | May 2009         |  | 1,967        |  | -            |  | (7)  
|Warehouse              |  | Brooklyn                      |  | New York      |  | INB    |  | Feb 2009         |  | 1,893        |  | -            |  | (11) 
|Undeveloped Land       |  | Carabelle                     |  | Florida       |  | INB    |  | Aug 2008         |  | 1,569        |  | 1,569        |  | (7)  
|Retail                 |  | New Windsor                   |  | New York      |  | INB    |  | April 2009       |  | 1,515        |  | -            |  | (7)  
|Mixed Use              |  | Cedarhurst                    |  | New York      |  | INB    |  | Mar 2009         |  | 1,468        |  | -            |  | (7)  
|Office Building        |  | Miami                         |  | Florida       |  | INB    |  | Apr 2009         |  | 1,414        |  | -            |  | (10) 
|Hotel                  |  | Lakewood                      |  | New Jersey    |  | INB    |  | Jun 2008         |  | 1,390        |  | 1,390        |  | (7)  
|Retail                 |  | South Amboy                   |  | New Jersey    |  | INB    |  | Mar 2007         |  | 1,339        |  | 1,339        |  | (1)  
|Multifamily            |  | Springfield                   |  | Massachusetts |  | INB    |  | Dec 2008         |  | 1,272        |  | 1,272        |  | (7)  
|Office building        |  | Oakland Park                  |  | Florida       |  | INB    |  | May 2009         |  | 1,179        |  | -            |  | (7)  
|Undeveloped land       |  | Hollywood                     |  | Florida       |  | INB    |  | Apr 2008         |  | -            |  | 830          |  | (4)  
|Multifamily            |  | Brooklyn                      |  | New York      |  | INB    |  | Aug 2008         |  | 786          |  | 786          |  | (7)  
|Retail                 |  | West Babylon                  |  | New York      |  | INB    |  | April 2009       |  | 784          |  | -            |  | (7)  
|Retail                 |  | Little Silver                 |  | New Jersey    |  | INB    |  | Mar 2007         |  | 739          |  | 739          |  | (1)  
|Multifamily            |  | East Orange                   |  | New Jersey    |  | INB    |  | June 2009        |  | 711          |  | -            |  | (7)  
|Undeveloped Land       |  | Long Island City              |  | New York      |  | INB    |  | Dec 2008         |  | 697          |  | 697          |  | (7)  
|Office Building        |  | Waterbury                     |  | Connecticut   |  | INB    |  | Jan 2009         |  | 641          |  | -            |  | (7)  
|Retail                 |  | Neptune                       |  | New Jersey    |  | INB    |  | Mar 2007         |  | 512          |  | 512          |  | (1)  
|Mixed Use              |  | New York                      |  | New York      |  | INB    |  | Jan 2009         |  | 198          |  | -            |  | (7)  
|Multifamily            |  | Tampa                         |  | Florida       |  | INB    |  | Sep 2008         |  | 10           |  | 10           |  | (7)  
|                       |  |                               |  |               |  |        |  |                  |  | 122,327      |  | 100,318      |  |      
|Hotel                  |  | St. Augustine                 |  | Florida       |  | IMC    |  | Jul 2007         |  | 5,199        |  | 6,034        |  | (3)  
|Hotel                  |  | Howell                        |  | New Jersey    |  | IMC    |  | Dec 2007         |  | 1,659        |  | 1,659        |  | (7)  
|Office Building        |  | Staten Island                 |  | New York      |  | IMC    |  | May 2008         |  | 389          |  | 389          |  | (5)  
|Office Building        |  | Yonkers                       |  | New York      |  | IMC    |  | Dec 2008         |  | 210          |  | 210          |  | (7)  
|                       |  |                               |  |               |  |        |  |                  |  | 7,457        |  | 8,292        |  |      
|                       |  |                               |  |               |  |        |  |                  |  | $129,784     |  | $108,610     |  |      



|(1) | The completion of foreclosure proceedings, which involve multiple properties, have been delayed by reason of a bankruptcy filing.
|--- | ---------------------------------------------------------------------------------------------------------------------------------

|(2) | A contract of sale and stipulation of settlement has been signed by the owner, a buyer and INB. The sales price has a minimum of $11.5 million to a maximum of
$12 million depending on when the closing occurs. A receiver is controlling the property and the rents. Currently, the rents are not sufficient to cover the operating costs of the property and INB is funding the shortfall as necessary, including
paying real estate taxes directly.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Both amounts represent one loan ($15.1 million) originated by INB and IMC owns a participation. The loan is secured by a waterfront hotel, restaurant and marina
resort. In April 2009, INB and the debtor reached a multi-faceted settlement agreement whereby the loans principal balance was reduced (charged off) to a principal amount of $13 million, the debtor paid outstanding real estate taxes, and the
debtor agreed to make a principal payment to INB of $0.1 million to reduce the loan further to $12.9 million. INB will finance a portion of the unpaid real estate taxes being paid by the debtor and the advance of these funds will be collateralized
by the existing property and additional collateral from the debtor. Loan payments are scheduled to begin on October 1, 2009. The loan will remain on nonaccrual status until a satisfactory payment history has been achieved under the restructured
terms. Further modification to the settlement agreement may be required.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Title to property was acquired in January 2009. A loan chargeoff of $10,000 was recorded upon transfer to foreclosed real estate.
|--- | ---------------------------------------------------------------------------------------------------------------------------------



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|(5) | Borrower and INB have agreed to the deferral of contractual loan payments through June 2010 to give the borrower time to lease vacant space at the property. The
borrower will continue to make monthly escrow payments as required under INBs first mortgage loan. IMC holds a second mortgage on this property.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | The hotel has 148 suites and is operational but revenues are currently insufficient to service the loan. INB agreed to allow an existing borrower of INB,
experienced in hotel management, to assume the loan under modified terms. The loan will be maintained on nonaccrual status and be accounted for on a cash basis until such time the normal payments resume.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Foreclosure proceedings are in progress.
|--- | ----------------------------------------

|(8) | Title to property was acquired in April 2009 and a loan chargeoff of $307,000 was recorded upon transfer to foreclosed real estate.
|--- | -----------------------------------------------------------------------------------------------------------------------------------

|(9) | Title to property was acquired in April 2009 and loan was transferred to foreclosed real estate.
|--- | ------------------------------------------------------------------------------------------------

|(10) | Borrower and INB have agreed to interest only payments. Loan is on nonaccrual status until satisfactory payment history is established.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------

|(11) | Borrower and INB have agreed to modified loan payments. Loan is on nonaccrual status until satisfactory payment history is established.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------

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



|                 |  |         |  |              |  |         |  |         |  |           |  |           |  |          
|---------------- |  | ------- |  | ------------ |  | ------- |  | ------- |  | --------- |  | --------- |  | ---------
|($ in thousands) |  |         |  |              |  |         |  |         |  |           |  |           |  |          
|Property Type    |  | NY      |  | FL           |  | NJ      |  | CT      |  | MA        |  | MD        |  | Totals   
|Retail           |  | $15,359 |  | $          - |  | $5,654  |  | $     - |  | $       - |  | $       - |  | $  21,013
|Hotel            |  | 3,091   |  | 19,953       |  | 3,049   |  | -       |  | -         |  | -         |  | 26,093   
|Office Building  |  | 9,004   |  | 4,559        |  | 2,869   |  | 641     |  | -         |  | -         |  | 17,073   
|Warehouse        |  | 6,349   |  | -            |  | -       |  | -       |  | -         |  | -         |  | 6,349    
|Mixed Use        |  | 9,572   |  | -            |  | -       |  | -       |  | -         |  | -         |  | 9,572    
|Mulitifamily     |  | 12,102  |  | 18,308       |  | 711     |  | -       |  | 1,272     |  | -         |  | 32,393   
|Undeveloped Land |  | 11,698  |  | 1,569        |  | -       |  | -       |  | -         |  | 4,024     |  | 17,291   
|                 |  | $67,175 |  | $44,389      |  | $12,283 |  | $641    |  | $1,272    |  | $4,024    |  | $129,784 

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



|                                            |  |                    
|------------------------------------------- |  | -------------------
|(Dollars in thousands)                      |  | Nonaccrual    Loans
|Balance at December 31, 2008                |  | $108,610           
|New nonaccrual loans                        |  | 33,007             
|Principal reductions                        |  | (70)               
|Loan chargeoffs                             |  | (2,342)            
|Loans transferred to foreclosed real estate |  | (9,421)            
|Balance at June 30, 2009                    |  | $129,784           

Allowance For Loan Losses

The allowance for loan losses increased to $32.0 million at June 30, 2009, from $28.5 million at December 31, 2008. The allowance represented 1.84% of total loans (net of deferred fees)
outstanding at June 30, 2009 compared to 1.67% at December 31, 2008. The increase in the allowance was due to $4.5 million of loan loss provisions and a $1.3 million partial recovery of a previous chargeoff, partially offset by $2.3
million of new chargeoffs. The loan loss provision of $4.5 million was attributable to the following: $4.1 million resulted from downgrades of internal risk ratings on nonaccrual loans as well as lower estimates of real estate values on certain
collateral properties and $0.4 million resulted from net loan growth of $40 million. At June 30, 2009 and December 31, 2008, in accordance with SFAS 114, the allowance for loan losses included a specific valuation allowance in the
aggregate amount of $13.5 million and $8.2 million, respectively, for nonaccrual and restructured loans, all of which are considered impaired loans.

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



|                                                      |  |         |  |        |  |       |  |             
|----------------------------------------------------- |  | ------- |  | ------ |  | ----- |  | ------------
|($ in thousands)                                      |  | INB     |  | IMC    |  | IBC   |  | Consolidated
|Balance at December 31, 2008                          |  | $27,506 |  | $  988 |  | $  30 |  | $28,524     
|Recoveries                                            |  | 1,329   |  | -      |  | -     |  | 1,329       
|Chargeoffs                                            |  | (1,507) |  | (835)  |  | -     |  | (2,342)     
|Provision (credit) for loan losses charged to expense |  | 4,076   |  | 497    |  | (30)  |  | 4,543       
|Balance at June 30, 2009                              |  | $31,404 |  | $  650 |  | $  -  |  | $32,054     

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



|                                              |  |          |  |          |  |     |  |             
|--------------------------------------------- |  | -------- |  | -------- |  | --- |  | ------------
|($ in thousands)                              |  | INB      |  | IMC      |  | IBC |  | Consolidated
|Nonaccrual loans                              |  | $122,327 |  | $  7,457 |  | -   |  | $129,784    
|Real estate acquired through foreclosure      |  | 15,887   |  | 2,327    |  | -   |  | 18,214      
|Total nonperforming assets                    |  | $138,214 |  | $9,784   |  | -   |  | $147,998    
|Nonperforming assets to total assets          |  | 5.90%    |  | 22.90%   |  | -   |  | 6.22%       
|Nonaccrual loans to total gross loans         |  | 7.09%    |  | 26.04%   |  | -   |  | 7.40%       
|Allowance for loan losses to total net loans  |  | 1.83%    |  | 2.28%    |  | -   |  | 1.84%       
|Allowance for loan losses to nonaccrual loans |  | 25.67%   |  | 8.72%    |  | -   |  | 24.70%      



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There can be no assurance that the Company will not incur additional significant loan loss provisions,
loan chargeoffs or expenses in connection with the ultimate collection of its nonaccrual loans. The Company may also incur significant expenses in carrying and disposing of properties acquired through foreclosure. For the six-months ended
June 30, 2009, full year 2008 and full year 2007, the Company has incurred a total of $2.3 million, $5.4 million and $0.7 million, respectively, in various expenses and costs associated with nonaccrual loans/foreclosed real estate. These
amounts do not include interest income that has not been recorded or loan chargeoffs.

Real Estate Acquired Through Foreclosure

Real estate acquired through foreclosure is detailed as follows:



|                 |  |                  |  |          |  |          |  |          |  |                        |  |                
|---------------- |  | ---------------- |  | -------- |  | -------- |  | -------- |  | ---------------------- |  | ---------------
|                 |  |                  |  |          |  |          |  |          |  | Net carrying value (1)
|($ in thousands) |  |                  |  |          |  |          |  |          |  | At June 30,            |  | At December 31,
|Property Type    |  | City             |  | State    |  | Owned By |  | Acquired |  | 2009                   |  | 2008           
|Undeveloped land |  | North Fort Myers |  | Florida  |  | INB      |  | May 2008 |  | $2,645                 |  | $2,933         
|Undeveloped land |  | Hollywood        |  | Florida  |  | INB      |  | Feb 2008 |  | 3,821                  |  | 3,821          
|Office building  |  | Brooklyn         |  | New York |  | IMC      |  | Sep 2008 |  | 2,327                  |  | 2,327          
|Undeveloped land |  | Hollywood        |  | Florida  |  | INB      |  | Jan 2009 |  | 809                    |  | -              
|Hotel            |  | Clearwater       |  | Florida  |  | INB      |  | Apr 2009 |  | 2,688                  |  | -              
|Hotel            |  | Orlando          |  | Florida  |  | INB      |  | Apr 2009 |  | 5,924                  |  | -              
|                 |  |                  |  |          |  |          |  |          |  | $18,214                |  | $9,081         

(1) Net carrying value is reported net of any valuation allowance that has been recorded due to
decreases in the estimated fair value of the property subsequent to the date of foreclosure. The total valuation allowance amounted to $0.8 million and $0.5 million at June 30, 2009 and December 31, 2008, respectively.

All the above properties are available for sale. A number of these properties are being actively marketed with local brokers and through the internet,
which has prompted significant investor interest in several properties but no contracts of sale have been signed. No assurance can be given as to the timing of any sale of these properties.

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

The following table summarizes the change in foreclosed real estate for the six-months end June 30, 2009:



|                                                                                                  |  |   |                  |   |  |                    
|------------------------------------------------------------------------------------------------- |  | - | ---------------- | - |  | -------------------
|                                                                                                  |  |   | Total Properties
|(Dollars in thousands)                                                                            |  |   | DollarAmount     |   |  | Number ofProperties
|Balance at December 31, 2008                                                                      |  | $ | 9,081            |   |  | 3                  
|Transfers from loan portfolio at the lower of cost or estimated fair value less selling costs (1) |  |   | 9,421            |   |  | 3                  
|Writedowns to carrying values subsequent to foreclosure                                           |  |   | (288             | ) |  | -                  
|Balance at June 30, 2009                                                                          |  | $ | 18,214           |   |  | 6                  

|(1) | At the time of transfer, loan chargeoffs of $317,000 were taken and charged to the allowance for loan losses.
|--- | -------------------------------------------------------------------------------------------------------------

All Other Assets

All other assets at
June 30, 2009 as denoted in the table on page 25 increased slightly to $48 million from $46 million at December 31, 2008.

Deposits

Deposits increased to $1.99 billion at June 30, 2009, from $1.86 billion at December 31, 2008, reflecting an increase of $98
million in money market accounts and a $31 million increase in certificate of deposit accounts. At June 30, 2009, certificate of deposit accounts totaled $1.55 billion, and checking, savings and money market accounts aggregated to $445 million.
The same categories of deposit accounts totaled $1.52 billion and $345 million, respectively, at December 31, 2008. Certificate of deposit accounts represented 78% of total consolidated deposits at June 30, 2009, compared to 82% at
December 31, 2008. At June 30, 2009 and December 31, 2008, certificate of deposit accounts included $173 million of brokered deposits.



29



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##### Table of Contents

Borrowed Funds and Related Interest Payable

Borrowed funds and related interest payable decreased to $118 million at June 30, 2009, from $150 million at December 31, 2008, due to the early repayment of $30 million of debentures
by IMC. The repayments are detailed in note 7 to the condensed consolidated financial statements in this report.

All Other Liabilities

All other liabilities at June 30, 2009 as denoted in the table on page 25 increased to $54 million from $46 million at
December 31, 2008, primarily due to a $5.0 million increase in mortgage escrow funds payable.

Stockholders Equity

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



|                                                        |  |        |         |                |           |                |         |              |           |                  |   |      
|------------------------------------------------------- |  | ------ | ------- | -------------- | --------- | -------------- | ------- | ------------ | --------- | ---------------- | - | -----
|                                                        |  |        |         | Outstanding    |           |               
|($ in thousands, except per share amounts)              |  | Amount |         | Class A Shares |           | Class B Shares |         | Total Shares |           | Amount Per Share
|Common stockholders equity at December 31, 2008        |  | $      | 188,894 |                | 7,690,812 |                | 580,000 |              | 8,270,812 |                  | $ | 22.84
|Net earnings available to common stockholders           |  |        | 859     |                | -         |                | -       |              | -         |                  |   | 0.10 
|Compensation from stock options                         |  |        | 111     |                | -         |                | -       |              | -         |                  |   | 0.01 
|Common stockholders equity at June 30, 2009            |  | $      | 189,864 |                | 7,690,812 |                | 580,000 |              | 8,270,812 |                  | $ | 22.96
|Preferred stockholders equity at December 31, 2008 (1) |  | $      | 23,080  |                |           |                |         |              |           |                  |   |      
|Amortization of preferred stock discount                |  |        | 193     |                |           |                |         |              |           |                  |   |      
|Preferred stockholders equity at June 30, 2009         |  | $      | 23,273  |                |           |                |         |              |           |                  |   |      
|Total stockholders equity at June 30, 2009             |  | $      | 213,137 |                |           |                |         |              |           |                  |   |      



|(1) | On December 23, 2008, IBC sold to the United States Department of the Treasury 25,000 shares of IBCs Fixed Rate Cumulative Perpetual Preferred Stock,
Series A, with a liquidation preference of $1,000 per share, along with a ten year warrant to purchase at any time up to 691,882 shares of IBCs Class A common stock for $5.42 per share, for a total cash investment of $25 million from the
Treasury. The total investment was allocated between preferred and common equity as described in more detail in note 10 to the consolidated financial statements in the Companys Annual Report on Form 10-K for the year ended December 31,
2008.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



30



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##### Table of Contents

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

Overview

Consolidated
net earnings for the second quarter of 2009 (Q2-09) decreased by $1.5 million, or 80%, to $0.4 million, or $0.04 per diluted share, from $1.9 million, or $0.22 per diluted share, in the second quarter of 2008 (Q2-08). The
decrease in consolidated net earnings was due to the following: a $2.3 million increase in noninterest expenses, a $1.1 million decrease in noninterest income, and $0.4 million of dividend requirements related to outstanding preferred stock held by
the U.S. Treasury under the TARP program. The aggregate of these items was partially offset by a $1.2 million decrease in the provision for income tax expense and a $1.1 million increase in net interest and dividend income.

Selected information regarding results of operations by entity follows:



|                                                           |  |     |        |   |     |   |      |     |  |   |          |   |  |              |      |   |         |   |        |   |  |   |       
|---------------------------------------------------------- |  | --- | ------ | - | --- | - | ---- | --- |  | - | -------- | - |  | ------------ | ---- | - | ------- | - | ------ | - |  | - | ------
|                                                           |  |     |        |   |     |   |      |     |  |   |          |   |  | Consolidated
|($ in thousands)                                           |  | INB |        |   | IMC |   |      | IBC |  |   | Elim (1) |   |  | Q2-2009      |      |   | Q2-2008
|Interest and dividend income                               |  | $   | 30,151 |   |     | $ | 636  |     |  | $ | 40       |   |  | $            | (23  | ) |         | $ | 30,804 |   |  | $ | 31,776
|Interest expense                                           |  |     | 19,648 |   |     |   | 261  |     |  |   | 721      |   |  |              | (23  | ) |         |   | 20,607 |   |  |   | 22,712
|Net interest and dividend income (expense)                 |  |     | 10,503 |   |     |   | 375  |     |  |   | (681     | ) |  |              | -    |   |         |   | 10,197 |   |  |   | 9,064 
|Provision (credit) for loan losses                         |  |     | 2,431  |   |     |   | 285  |     |  |   | (30      | ) |  |              | -    |   |         |   | 2,686  |   |  |   | 2,753 
|Noninterest income                                         |  |     | 45     |   |     |   | (9   | )   |  |   | 134      |   |  |              | (113 | ) |         |   | 57     |   |  |   | 1,139 
|Noninterest expenses                                       |  |     | 6,137  |   |     |   | 346  |     |  |   | 184      |   |  |              | (113 | ) |         |   | 6,554  |   |  |   | 4,197 
|Earnings (loss) before taxes                               |  |     | 1,980  |   |     |   | (265 | )   |  |   | (701     | ) |  |              | -    |   |         |   | 1,014  |   |  |   | 3,253 
|Provision (credit) for income taxes                        |  |     | 680    |   |     |   | (122 | )   |  |   | (322     | ) |  |              | -    |   |         |   | 236    |   |  |   | 1,392 
|Net earnings (loss) before preferred dividend requirements |  |     | 1,300  |   |     |   | (143 | )   |  |   | (379     | ) |  |              | -    |   |         |   | 778    |   |  |   | 1,861 
|Preferred dividend requirements (2)                        |  |     | -      |   |     |   | -    |     |  |   | (409     | ) |  |              | -    |   |         |   | (409   | ) |  |   | -     
|Net earnings (loss) available to common stockholders       |  |     | 1,300  |   |     |   | (143 | )   |  |   | (788     | ) |  |              | -    |   |         |   | 369    |   |  |   | 1,861 
|Intercompany dividends (3)                                 |  |     | (1,041 | ) |     |   | -    |     |  |   | 1,041    |   |  |              | -    |   |         |   | -      |   |  |   | -     
|Net earnings (loss) after intercompany dividends           |  | $   | 259    |   |     | $ | (143 | )   |  | $ | 253      |   |  | $            | -    |   |         | $ | 369    |   |  | $ | 1,861 
|Net earnings (loss) after intercompany dividends for Q2-08 |  | $   | 1,482  |   |     | $ | (39  | )   |  | $ | 418      |   |  | $            | -    |   |         | $ | 1,861  |   |  |   |       

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

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

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

Net Interest and Dividend
Income

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

As detailed in the table that follows, net interest and dividend income increased by $1.1 million to $10.2 million in Q2-09, from $9.1 million in Q2-08, primarily reflecting $23 million of growth in the Companys
net interest earning assets and an improved net interest margin. Total average interest-earning assets increased by $173 million in Q2-09 from Q2-08, due to growth of $38 million in loans and $135 million in total security and other short-term
investments. Asset growth was funded by a $170 million increase in interest-bearing deposits and a $29 million increase in stockholders equity (largely due from the participation in TARP as described on page 7), partially offset by a $20
million decrease in borrowed funds.

The Companys net interest margin (excluding prepayment income from loans) increased to 1.75% in
Q2-09, from 1.69% in Q2-08. The improvement was due to lower deposit and borrowing costs which was largely offset by $360 million of calls in the first half of 2009 of higher yielding U.S. government agency security investments (coupled with the
reinvestment of those proceeds into the same types of securities with lower market rates of approximately 100 basis points) and lower yields earned on overnight investments. The Companys cost of funds decreased to 3.95% in Q2-09 from 4.70% in
Q2-08, while the yield on its interest-earning assets decreased to 5.30% in Q2-09 from 5.92% in Q2-08. New securities purchased in the first half of 2009 totaled $461 million (with a weighted average term and yield of 4.9 years and 2.72%,
respectively), compared to calls and maturities totaling $369 million (with a weighted average yield of 3.72% for the same period). The historically low interest rate environment resulted in the call of a large number of investment securities that
were purchased in 2007 and 2008.



31



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##### Table of Contents

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



|                                                                             |  |                       |  |                   |  |                |  |                |  |                   |  |               
|---------------------------------------------------------------------------- |  | --------------------- |  | ----------------- |  | -------------- |  | -------------- |  | ----------------- |  | --------------
|                                                                             |  | For the Quarter Ended
|                                                                             |  | June 30, 2009         |  | June 30, 2008    
|($ in thousands)                                                             |  | AverageBalance        |  | InterestInc./Exp. |  | Yield/Rate (2) |  | AverageBalance |  | InterestInc./Exp. |  | Yield/Rate (2)
|Interest-earning assets:                                                     |  |                       |  |                   |  |                |  |                |  |                   |  |               
|Loans (1)                                                                    |  | $1,739,859            |  | $26,412           |  | 6.09%          |  | $1,701,949     |  | $27,002           |  | 6.38%         
|Securities                                                                   |  | 575,281               |  | 4,386             |  | 3.06           |  | 428,601        |  | 4,629             |  | 4.34          
|Other interest-earning assets                                                |  | 16,320                |  | 6                 |  | 0.15           |  | 28,201         |  | 145               |  | 2.07          
|Total interest-earning assets                                                |  | 2,331,460             |  | $30,804           |  | 5.30%          |  | 2,158,751      |  | $31,776           |  | 5.92%         
|Noninterest-earning assets                                                   |  | 28,464                |  |                   |  |                |  | 20,580         |  |                   |  |               
|Total assets                                                                 |  | $2,359,924            |  |                   |  |                |  | $2,179,331     |  |                   |  |               
|Interest-bearing liabilities:                                                |  |                       |  |                   |  |                |  |                |  |                   |  |               
|Interest checking deposits                                                   |  | $       5,788         |  | $       24        |  | 1.66%          |  | $       5,945  |  | $       27        |  | 1.83%         
|Savings deposits                                                             |  | 9,191                 |  | 42                |  | 1.83           |  | 8,185          |  | 60                |  | 2.95          
|Money market deposits                                                        |  | 430,167               |  | 2,107             |  | 1.96           |  | 311,826        |  | 2,643             |  | 3.41          
|Certificates of deposit                                                      |  | 1,527,099             |  | 16,963            |  | 4.46           |  | 1,476,499      |  | 17,631            |  | 4.80          
|Total deposit accounts                                                       |  | 1,972,245             |  | 19,136            |  | 3.89           |  | 1,802,455      |  | 20,361            |  | 4.54          
|FHLB advances                                                                |  | 50,995                |  | 486               |  | 3.82           |  | 14,237         |  | 81                |  | 2.29          
|Debentures and related interest payable                                      |  | 13,107                |  | 261               |  | 7.99           |  | 70,249         |  | 1,380             |  | 7.90          
|Debentures - capital securities                                              |  | 56,702                |  | 721               |  | 5.10           |  | 56,702         |  | 886               |  | 6.28          
|Mortgage note payable                                                        |  | 178                   |  | 3                 |  | 6.76           |  | 195            |  | 4                 |  | 8.25          
|Total borrowed funds                                                         |  | 120,982               |  | 1,471             |  | 4.88           |  | 141,383        |  | 2,351             |  | 6.69          
|Total interest-bearing liabilities                                           |  | 2,093,227             |  | $20,607           |  | 3.95%          |  | 1,943,838      |  | $22,712           |  | 4.70%         
|Noninterest-bearing deposits                                                 |  | 3,126                 |  |                   |  |                |  | 4,128          |  |                   |  |               
|Noninterest-bearing liabilities                                              |  | 50,838                |  |                   |  |                |  | 47,180         |  |                   |  |               
|Preferred stockholders equity                                               |  | 23,240                |  |                   |  |                |  |               |  |                   |  |               
|Common stockholders equity                                                  |  | 189,493               |  |                   |  |                |  | 184,185        |  |                   |  |               
|Total liabilities and stockholders equity                                   |  | $2,359,924            |  |                   |  |                |  | $2,179,331     |  |                   |  |               
|Net interest and dividend income/spread                                      |  |                       |  | $  10,197         |  | 1.35%          |  |                |  | $  9,064          |  | 1.22%         
|Net interest-earning assets/margin (3)                                       |  | $   238,233           |  |                   |  | 1.75%          |  | $   214,913    |  |                   |  | 1.69%         
|Ratio of total interest-earning assets to total interest-bearing liabilities |  | 1.11                  |  |                   |  |                |  | 1.11           |  |                   |  |               
|Other Ratios:                                                                |  |                       |  |                   |  |                |  |                |  |                   |  |               
|Return on average assets (2)                                                 |  | 0.13%                 |  |                   |  |                |  | 0.34%          |  |                   |  |               
|Return on average common equity (2)                                          |  | 1.64%                 |  |                   |  |                |  | 4.04%          |  |                   |  |               
|Noninterest expense to average assets (2)                                    |  | 1.11%                 |  |                   |  |                |  | 0.77%          |  |                   |  |               
|Efficiency ratio (4)                                                         |  | 53%                   |  |                   |  |                |  | 34%            |  |                   |  |               
|Average stockholders equity to average assets                               |  | 9.01%                 |  |                   |  |                |  | 8.45%          |  |                   |  |               



|(1) | Includes average nonaccrual loans of $123.9 million in the 2009 period and $123.1 million in the 2008 period. Interest not accrued on such loans and excluded
from the table above totaled $2.59 million in the 2009 period and $2.63 million in the 2008 period.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|(3) | Net interest margin is reported exclusive of income from loan prepayments, which is included as a component of noninterest income. Inclusive of income from loan
prepayments, the margin would compute to 1.76% and 1.79% for the 2009 and 2008 period, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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##### Table of Contents

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



|                                           |  |                                              |  |         |  |             |  |         
|------------------------------------------ |  | -------------------------------------------- |  | ------- |  | ----------- |  | --------
|                                           |  | For the Quarter Ended June 30, 2009 vs. 2008
|                                           |  | Increase (Decrease) Due To Change In:       
|($ in thousands)                           |  | Rate                                         |  | Volume  |  | Rate/Volume |  | Total   
|Interest-earning assets:                   |  |                                              |  |         |  |             |  |         
|Loans                                      |  | $(1,234)                                     |  | $   605 |  | $      39   |  | $  (590)
|Securities                                 |  | (1,372)                                      |  | 1,591   |  | (462)       |  | (243)   
|Other interest-earning assets              |  | (135)                                        |  | (61)    |  | 57          |  | (139)   
|Total interest-earning assets              |  | (2,741)                                      |  | 2,135   |  | (366)       |  | (972)   
|Interest-bearing liabilities:              |  |                                              |  |         |  |             |  |         
|Interest checking deposits                 |  | (3)                                          |  | (1)     |  | 1           |  | (3)     
|Savings deposits                           |  | (23)                                         |  | 7       |  | (2)         |  | (18)    
|Money market deposits                      |  | (1,130)                                      |  | 1,009   |  | (415)       |  | (536)   
|Certificates of deposit                    |  | (1,255)                                      |  | 607     |  | (20)        |  | (668)   
|Total deposit accounts                     |  | (2,411)                                      |  | 1,622   |  | (436)       |  | (1,225) 
|FHLB advances                              |  | 54                                           |  | 210     |  | 141         |  | 405     
|Debentures and accrued interest payable    |  | 16                                           |  | (1,129) |  | (6)         |  | (1,119) 
|Debentures - capital securities            |  | (167)                                        |  | -       |  | 2           |  | (165)   
|Mortgage note payable                      |  | (1)                                          |  | -       |  | -           |  | (1)     
|Total borrowed funds                       |  | (98)                                         |  | (919)   |  | 137         |  | (880)   
|Total interest-bearing liabilities         |  | (2,509)                                      |  | 703     |  | (299)       |  | (2,105) 
|Net change in interest and dividend income |  | $   (232)                                    |  | $1,432  |  | $   (67)    |  | $  1,133

Provision for Loan Losses

The provision for loan losses amounted to $2.7 million in Q2-09, compared to $2.8 million in Q2-08. The decrease was due to $0.1 million of less provision attributable to a decrease in net loan
growth from the prior year period. Gross loans outstanding increased by $37.6 million in Q2-09, compared to a $45.9 million increase in Q2-08. The Company continues to be negatively impacted by the downturn in the economy and lower commercial real
estate values as approximately $2.4 million of the provision for loan losses in each period was associated with credit downgrades and lower estimated real estate values on certain properties collateralizing nonaccrual loans.

Noninterest Income

Noninterest income
decreased by $1.0 million to $0.1 million in Q2-09, from $1.1 million in Q2-08. The decrease was due to a $0.3 million impairment charge on trust preferred security investments (as discussed in note 3 to the condensed consolidated financial
statements in this report) as well as a $0.5 million decrease in income from early repayment of loans. The Company attributes the decrease in its volume of loan prepayments and prepayment income derived therefrom to the effects of the crisis in the
credit markets, which has reduced funding sources available for both new real estate lending and refinancing of existing loans.

Noninterest Expenses

Noninterest expenses increased by $2.3 million to $6.5 million in Q2-09, from $4.2 million in Q2-08. The increase was primarily due
to a $1.8 million increase in FDIC insurance premiums due to higher rates imposed on all FDIC insured depository institutions and a special assessment in June 2009 (as discussed in note 16 to the condensed consolidated financial statements in this
report) and a $0.4 million increase in expenses associated with nonperforming assets. Such expenses are comprised of real estate taxes, insurance, utilities and other charges required to protect the Companys interest in real estate acquired
through foreclosure and/or various properties collateralizing the Companys nonaccrual loans (all of which are categorized as real estate activities expense in the condensed consolidated statements of earnings), as well as certain
professional fees (legal costs) incurred in the Companys collection efforts with such assets (which are included as part of the line item professional fees and services expense). Primarily as a result of the negative effects of
nonperforming assets on operating results, the Companys efficiency ratio, which is a measure of its ability to control expenses as a percentage of its revenues, increased to 53% in Q2-09 from 34% in Q2-08. The Company had 73 employees at
June 30, 2009, compared to 71 employees at June 30, 2008.



33



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##### Table of Contents

Provision for Income Taxes

The provision for income taxes decreased by $1.2 million to $0.2 million in Q2-09, from $1.4 million in Q2-08 due to a decrease in pre-tax income and a $0.2 million refund of prior year income taxes paid resulting
from the completion of an audit of 2005 Florida income tax return. The Companys effective income tax rate (inclusive of state and local taxes) was 23.3% in Q2-09, compared 42.8% in Q2-08. The lower rate was due to the tax refund.



34



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##### Table of Contents

Comparison of Results of Operations for the Six-Months Ended June 30, 2009 and 2008

Overview

Consolidated net
earnings for the six-months ended June 30, 2009 (6mths-09) decreased by $3.3 million, or 79%, to $0.8 million, or $0.10 per diluted share, from $4.1 million, or $0.50 per diluted share, in the first six-months of 2008
(6mths-08). The decrease in consolidated net earnings was due to a $4.8 million increase in noninterest expenses, a $1.9 million decrease in noninterest income and $0.8 million of dividend requirements related to outstanding preferred
stock held by the U.S. Treasury under the TARP program. The aggregate of these items was partially offset by a $2.2 million decrease in the provision for income taxes, a $1.5 million increase in net interest and dividend income and a $0.5 million
decrease in the provision for loan losses.

Selected information regarding results of operations by entity follows:



|                                                           |  |          |  |            |  |          |  |           |  |              |  |         
|---------------------------------------------------------- |  | -------- |  | ---------- |  | -------- |  | --------- |  | ------------ |  | --------
|                                                           |  |          |  |            |  |          |  |           |  | Consolidated
|($ in thousands)                                           |  | INB      |  | IMC        |  | IBC      |  | Elim (1)  |  | 6mths-09     |  | 6mths-08
|Interest and dividend income                               |  | $60,081  |  | $   1,373  |  | $    105 |  | $  (76)   |  | $61,483      |  | $63,564 
|Interest expense                                           |  | 39,806   |  | 738        |  | 1,528    |  | (76)      |  | 41,996       |  | 45,645  
|Net interest and dividend income (expense)                 |  | 20,275   |  | 635        |  | (1,423)  |  | -         |  | 19,487       |  | 17,919  
|Provision (credit) for loan losses                         |  | 4,076    |  | 497        |  | (30)     |  | -         |  | 4,543        |  | 5,016   
|Noninterest income                                         |  | 121      |  | (12)       |  | 246      |  | (225)     |  | 130          |  | 2,082   
|Noninterest expenses                                       |  | 10,823   |  | 1,560      |  | 335      |  | (225)     |  | 12,493       |  | 7,715   
|Earnings (loss) before taxes                               |  | 5,497    |  | (1,434)    |  | (1,482)  |  | -         |  | 2,581        |  | 7,270   
|Provision (credit) for income taxes                        |  | 2,248    |  | (659)      |  | (681)    |  | -         |  | 908          |  | 3,128   
|Net earnings (loss) before preferred dividend requirements |  | 3,249    |  | (775)      |  | (801)    |  | -         |  | 1,673        |  | 4,142   
|Preferred dividend requirements (2)                        |  | -        |  | -          |  | (814)    |  | -         |  | (814)        |  | -       
|Net earnings (loss) available to common stockholders       |  | 3,249    |  | (775)      |  | (1,615)  |  | -         |  | 859          |  | 4,142   
|Intercompany dividends (3)                                 |  | (2,118)  |  | -          |  | 2,118    |  | -         |  | -            |  | -       
|Net earnings (loss) after intercompany dividends           |  | $  1,131 |  | $   (775)  |  | $    503 |  | $       - |  | $     859    |  | $  4,142
|Net earnings (loss) after intercompany dividends- 6mths-08 |  | $  3,329 |  | $     (31) |  | $    844 |  | $       - |  | $  4,142     |  |         

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

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

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

Net Interest and Dividend
Income

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

As detailed in the table that follows, net interest and dividend income increased by $1.5 million to $19.4 million in 6mths-09, from $17.9 million in 6mths-08. The increase was due to $25 million of growth in the
Companys net interest earning assets. Total average interest-earning assets increased by $176 million in 6mths-09 from 6mths-08, due to growth of $52 million in loans and $124 million in total security and other short-term investments. Asset
growth was funded by a $168 million increase in interest-bearing deposits and a $29 million increase in stockholders equity, partially offset by a $17 million decrease in borrowed funds.

The Companys net interest margin (excluding prepayment income from loans) remained relatively unchanged at 1.71% in 6mths-09 as compared to 1.70% in 6mths-08. This was due to lower deposit
and borrowing costs that were offset by calls of higher yielding U.S. government agency security investments (coupled with the reinvestment of those proceeds into the same types of securities with lower market rates) as well as the repayment of
higher yielding loans (coupled with the origination of new fixed-rate loans with lower yields). The Companys yield on interest-earning assets decreased to 5.40% in 6mths-09 from 6.04% in 6mths-08, while the Companys cost of funds
decreased to 4.12% in 6mths-09 from 4.82% in 6mths-08. As noted in the Comparison of Results of Operations for the Quarters Ended June 30, 2009 and 2008, the historically low interest rate environment has resulted in the call of a
large number of investment securities that were purchased in 2007 and 2008.



35



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##### Table of Contents

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



|                                                                             |  |                          |  |                   |  |                |  |  |  |                |  |                   |  |               
|---------------------------------------------------------------------------- |  | ------------------------ |  | ----------------- |  | -------------- |  |  |  | -------------- |  | ----------------- |  | --------------
|                                                                             |  | For the Six-Months Ended
|                                                                             |  | June 30, 2009            |  |                   |  | June 30, 2008 
|($ in thousands)                                                             |  | AverageBalance           |  | InterestInc./Exp. |  | Yield/Rate (2) |  |  |  | AverageBalance |  | InterestInc./Exp. |  | Yield/Rate (2)
|Interest-earning assets:                                                     |  |                          |  |                   |  |                |  |  |  |                |  |                   |  |               
|Loans (1)                                                                    |  | $1,726,844               |  | $52,696           |  | 6.15%          |  |  |  | $1,674,302     |  | $53,864           |  | 6.47%         
|Securities                                                                   |  | 550,628                  |  | 8,773             |  | 3.21           |  |  |  | 414,872        |  | 9,332             |  | 4.52          
|Other interest-earning assets                                                |  | 16,764                   |  | 14                |  | 0.17           |  |  |  | 28,704         |  | 368               |  | 2.58          
|Total interest-earning assets                                                |  | 2,294,236                |  | $61,483           |  | 5.40%          |  |  |  | 2,117,878      |  | $63,564           |  | 6.04%         
|Noninterest-earning assets                                                   |  | 26,556                   |  |                   |  |                |  |  |  | 19,613         |  |                   |  |               
|Total assets                                                                 |  | $2,320,792               |  |                   |  |                |  |  |  | $2,137,491     |  |                   |  |               
|Interest-bearing liabilities:                                                |  |                          |  |                   |  |                |  |  |  |                |  |                   |  |               
|Interest checking deposits                                                   |  | $       5,226            |  | $       45        |  | 1.74%          |  |  |  | $       5,768  |  | $       51        |  | 1.78%         
|Savings deposits                                                             |  | 8,879                    |  | 98                |  | 2.23           |  |  |  | 8,288          |  | 122               |  | 2.96          
|Money market deposits                                                        |  | 403,388                  |  | 4,612             |  | 2.31           |  |  |  | 282,417        |  | 5,190             |  | 3.70          
|Certificates of deposit                                                      |  | 1,513,246                |  | 34,002            |  | 4.53           |  |  |  | 1,466,070      |  | 35,400            |  | 4.86          
|Total deposit accounts                                                       |  | 1,930,739                |  | 38,757            |  | 4.05           |  |  |  | 1,762,543      |  | 40,763            |  | 4.65          
|FHLB advances                                                                |  | 50,749                   |  | 967               |  | 3.84           |  |  |  | 11,545         |  | 156               |  | 2.72          
|Debentures and related interest payable                                      |  | 18,561                   |  | 738               |  | 8.02           |  |  |  | 74,481         |  | 2,947             |  | 7.96          
|Debentures - capital securities                                              |  | 56,702                   |  | 1,528             |  | 5.43           |  |  |  | 56,702         |  | 1,772             |  | 6.28          
|Mortgage note payable                                                        |  | 180                      |  | 6                 |  | 6.72           |  |  |  | 197            |  | 7                 |  | 7.15          
|Total borrowed funds                                                         |  | 126,192                  |  | 3,239             |  | 5.18           |  |  |  | 142,925        |  | 4,882             |  | 6.87          
|Total interest-bearing liabilities                                           |  | 2,056,931                |  | $41,996           |  | 4.12%          |  |  |  | 1,905,468      |  | $45,645           |  | 4.82%         
|Noninterest-bearing deposits                                                 |  | 3,078                    |  |                   |  |                |  |  |  | 4,240          |  |                   |  |               
|Noninterest-bearing liabilities                                              |  | 48,335                   |  |                   |  |                |  |  |  | 44,695         |  |                   |  |               
|Preferred stockholders equity                                               |  | 23,193                   |  |                   |  |                |  |  |  | -              |  |                   |  |               
|Common stockholders equity                                                  |  | 189,255                  |  |                   |  |                |  |  |  | 183,088        |  |                   |  |               
|Total liabilities and stockholders equity                                   |  | $2,320,792               |  |                   |  |                |  |  |  | $2,137,491     |  |                   |  |               
|Net interest and dividend income/spread                                      |  |                          |  | $  19,487         |  | 1.28%          |  |  |  |                |  | $17,919           |  | 1.22%         
|Net interest-earning assets/margin (3)                                       |  | $   237,305              |  |                   |  | 1.71%          |  |  |  | $   212,410    |  |                   |  | 1.70%         
|Ratio of total interest-earning assets to total interest-bearing liabilities |  | 1.11                     |  |                   |  |                |  |  |  | 1.11           |  |                   |  |               
|Other Ratios:                                                                |  |                          |  |                   |  |                |  |  |  |                |  |                   |  |               
|Return on average assets (2)                                                 |  | 0.14%                    |  |                   |  |                |  |  |  | 0.39%          |  |                   |  |               
|Return on average common equity (2)                                          |  | 1.77%                    |  |                   |  |                |  |  |  | 4.52%          |  |                   |  |               
|Noninterest expense to average assets (2)                                    |  | 1.08%                    |  |                   |  |                |  |  |  | 0.72%          |  |                   |  |               
|Efficiency ratio (4)                                                         |  | 53%                      |  |                   |  |                |  |  |  | 39%            |  |                   |  |               
|Average stockholders equity to average assets                               |  | 9.15%                    |  |                   |  |                |  |  |  | 8.57%          |  |                   |  |               



|(1) | Includes average nonaccrual loans of $119.2 million in the 2009 period and $109.5 million in the 2008 period. Interest not accrued on such loans and excluded
from the table above totaled $4.8 million in the 2009 period and $4.8 million in the 2008 period.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|(3) | Net interest margin is reported exclusive of income from loan prepayments, which is included as a component of noninterest income. Inclusive of income from loan
prepayments, the margin would compute to 1.72% and 1.77% for the 2009 period and 2008 period, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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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, 2009 vs. 2008
|                                           |  | Increase (Decrease) Due To Change In:          
|($ in thousands)                           |  | Rate                                            |  | Volume  |  | Rate/Volume |  | Total     
|Interest-earning assets:                   |  |                                                 |  |         |  |             |  |           
|Loans                                      |  | $(2,679)                                        |  | $1,700  |  | $  (189)    |  | $  (1,168)
|Securities                                 |  | (2,717)                                         |  | 3,068   |  | (910)       |  | (559)     
|Other interest-earning assets              |  | (346)                                           |  | (154)   |  | 146         |  | (354)     
|Total interest-earning assets              |  | (5,742)                                         |  | 4,614   |  | (953)       |  | (2,081)   
|Interest-bearing liabilities:              |  |                                                 |  |         |  |             |  |           
|Interest checking deposits                 |  | (1)                                             |  | (5)     |  | -           |  | (6)       
|Savings deposits                           |  | (30)                                            |  | 9       |  | (3)         |  | (24)      
|Money market deposits                      |  | (1,963)                                         |  | 2,238   |  | (853)       |  | (578)     
|Certificates of deposit                    |  | (2,419)                                         |  | 1,146   |  | (125)       |  | (1,398)   
|Total deposit accounts                     |  | (4,413)                                         |  | 3,388   |  | (981)       |  | (2,006)   
|FHLB advances                              |  | 65                                              |  | 533     |  | 213         |  | 811       
|Debentures and accrued interest payable    |  | 22                                              |  | (2,226) |  | (5)         |  | (2,209)   
|Debentures - capital securities            |  | (241)                                           |  | -       |  | (3)         |  | (244)     
|Mortgage note payable                      |  | -                                               |  | (1)     |  | -           |  | (1)       
|Total borrowed funds                       |  | (154)                                           |  | (1,694) |  | 205         |  | (1,643)   
|Total interest-bearing liabilities         |  | (4,567)                                         |  | 1,694   |  | (776)       |  | (3,649)   
|Net change in interest and dividend income |  | $(1,175)                                        |  | $2,920  |  | $  (177)    |  | $  1,568  

Provision for Loan Losses

The provision for loan losses decreased by $0.5 million to $4.5 million in 6mths-09, from $5.0 million in 6mths-08. The decrease was due to $0.7 million of less provision attributable to a
decrease in net loan growth from the prior year period, partially offset by $0.2 million of additional provision associated with credit downgrades and lower estimated real estate values on certain properties collateralizing nonaccrual loans. Total
loans outstanding grew by $40 million in the 2009 period, compared to $108 million in the 2008 period.

Noninterest Income

Noninterest income decreased by $1.9 million to $0.2 million in 6mths-09, from $2.1 million in 6mths-08. The decrease was due to $0.7 million of
impairment charges on trust preferred security investments (see note 3 to the condensed consolidated financial statements in this report), a $0.5 million decrease in income from early repayment of loans and a $0.5 million decrease in income from
calls of investment securities (such income consists of the immediate recognition of any remaining unamortized premium or discount at time the security is called).

Noninterest Expenses

Noninterest expenses increased by $4.8 million to $12.5 million in 6mths-09, from $7.7 million
in 6mths-08. The increase was primarily due to a $2.2 million increase in FDIC insurance premiums, a $1.1 million increase in expenses associated with nonperforming assets and a $1.0 million increase in losses from the early extinguishment of
debentures. These losses represent unamortized issuance costs that were expensed in connection with the repayment of debentures prior to their stated maturity as detailed in note 7 to the condensed consolidated financial statements in this report.
The reasons for the change in FDIC insurance premiums and expenses associated with nonperforming assets are the same as those described in the Comparison of Results of Operations for the Quarters Ended June 30, 2009 and 2008.

Provision for Income Taxes

The
provision for income taxes decreased by $2.2 million to $0.9 million in 6mths-09, from $3.1 million in 6mths-08, due to a decrease in pre-tax income and a $0.2 million refund of prior year income taxes paid as noted in the Comparison of
Results of Operations for the Quarters Ended June 30, 2009 and 2008. The Companys effective income tax rate (inclusive of state and local taxes) was to 35.2% in the 2009 period, compared 43.0% in the 2008 period. The lower rate was
due to the tax refund.



37



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##### Table of Contents

Off-Balance Sheet and Other Financing Arrangements

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.
For a further discussion of these financial instruments, see note 11 to the condensed consolidated financial statements included in this report.

Liquidity and Capital Resources

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

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

INB relies heavily on certificates of deposit
(time deposits) as its main source of funds. Consolidated deposits amounted to $1.99 billion at June 30, 2009 and time deposits represented 78% or $1.55 billion of those deposits, down from 82% at December 31, 2008, which reflects a 30%
increase in money market deposit accounts to $427 million at June 30, 2009. Time deposits of $100,000 or more at June 30, 2009 totaled $693 million, compared to $663 million at December 31, 2008, and included $173 million of brokered
deposits at each date. Brokered deposits had a weighted average remaining term and stated interest rate of 3.4 years and 5.07%, respectively, at June 30, 2009 and $21.5 million of those deposits mature by June 30, 2010. INBs brokered
deposits are sold by investment firms, which are paid a fee by INB for placing the deposit. INB must maintain its status as a well-capitalized insured depository institution in order to solicit and accept, renew or roll over any brokered deposit
without restriction. Additionally, INB has agreed with the OCC not to have its total brokered deposits exceed 10% of INBs total deposits without obtaining permission from the OCC. Time deposits are the only deposit accounts offered by INB that
have stated maturity dates. These deposits are generally considered to be rate sensitive and have a higher cost than deposits with no stated maturities, such as checking, savings and money market accounts. At June 30, 2009, $640 million, or
41%, of INBs total time deposits mature by June 30, 2010. INB expects to retain or replace a significant portion of such deposits based on its competitive pricing and historical experience.

INB also borrows funds on an overnight or short-term basis to manage its liquidity needs. At June 30, 2009, INB had agreements with correspondent
banks whereby it could borrow up to $28 million on an unsecured basis. As a member of the FHLB of New York and FRB of New York, INB can also borrow from these institutions on a secured basis. At June 30, 2009, INB had $51 million of FHLB
advances outstanding, which mature at various times beginning in March 2010 through September 2013, of which $10 million will mature by June 30, 2010. At June 30, 2009, INB had available collateral consisting of investment securities to
support additional total secured borrowings of $488 million if needed. INB expects to have the flexibility to either repay or rollover its outstanding borrowings as they mature. The disruption in the credit markets that began in 2008 has not
affected INBs access to ordinary course borrowings.

INB invests in U.S. government agency debt obligations to emphasize safety and
liquidity. All of INBs security investments are classified as held to maturity, and nearly all of the securities have fixed rates of interest or have predetermined scheduled rate increases, and many have call features that allow the issuer to
call the security at par before its stated maturity without penalty. At June 30, 2009, the securities held to maturity portfolio had a weighted-average remaining maturity of 4.7 years, and $13 million, or 2%, of the portfolio matures by
June 30, 2010. INB expects to reinvest the proceeds from these maturities as well as any calls into new securities. INBs loan-to-deposit ratio was 82% at June 30, 2009 compared to 85% at December 31, 2008. INBs goal is to
target its loan-to-deposit ratio at approximately 85%.

INB had cash and short-term investments of $20 million at June 30, 2009 and
$237 million of its loan portfolio (excluding nonaccrual loans) matures by June 30, 2010. INB expects to extend or refinance a portion of these maturing loans. At June 30, 2009, INB had commitments to lend of $60 million, most of which are
anticipated to be funded over the next 12 months from the sources of funds described above.



38



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##### Table of Contents

In April 2009, INB agreed with the OCC, its primary regulator, to maintain minimum capital ratios at
specified levels higher than those otherwise required by applicable regulations as follows: Tier 1 capital to total average assets (leverage ratio) - 9%; Tier 1 capital to risk-weighted assets - 10%; and total capital to risk-weighted assets - 12%.
At June 30, 2009, INBs actual capital ratios exceeded these specified percentages and it had excess regulatory capital to support an additional $231 million of asset growth and still be in compliance with this new threshold. See the
section entitled Regulatory Capital and notes 12 and 16 to the condensed consolidated financial statements in this report for a further discussion of regulatory capital.

Intervest Mortgage Corporation.Since early 2008, IMC has been applying the proceeds received from its maturing loans to the repayment of its outstanding debentures, which have a
higher cost than INBs sources of funds. In the first half of 2009, IMC sold $20 million of its performing loans to INB at cost to provide additional funds on hand for the early repayment of debentures. In the first half of 2009, IMC repaid $30
million of its outstanding debentures. At June 30, 2009, IMC had cash and short-term investments of $10.8 million and $10.5 million of debentures and related accrued interest payable outstanding. IMC will have repaid its remaining outstanding
debentures by August 1, 2009. Management intends to combine IMC into INB, whereby INB would acquire all of the remaining net assets of IMC, including its outstanding loan portfolio, by the end of 2009. Any such transaction would be subject to
regulatory approval and would result in a $31 million net increase to INBs capital. Upon the redemption of IMCs remaining issued and outstanding debentures as noted above, effective August 1, 2009, IMC will no
longer be required to file its own separate reports on Forms 10-K, 10-Q and 8-K with the Securities and Exchange Commission.

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

As more fully described in note 10 to the consolidated financial statements in the Companys annual report on Form 10-K for the year ended December 31, 2008, on December 23, 2008, IBC sold to the U.S.
Treasury 25,000 shares of its 5% Fixed Rate Cumulative Perpetual Preferred Stock, Series A, along with a ten year warrant to purchase at any time up to 691,882 shares of IBCs Class A common stock for $5.42 per share, for a total cash
investment of $25 million from the Treasury. The $25 million of proceeds was invested by IBC into INB as a capital contribution. IBC, through its wholly owned business trusts, also has $56.7 million of trust preferred securities outstanding at
June 30, 2009 and $55.0 million (representing outstanding debentures net of IBCs common stock investments in the trusts) qualified for and was included in regulatory Tier 1 capital. The proceeds from these securities have also been
invested in INB at various times through capital contributions. The securities have fixed rates of interest for the initial five-year period and thereafter variable rates and contractually mature at various times through 2036.

INB provides funds to IBC for the cash dividend requirements on the preferred stock and for the debt service on trust preferred securities in the form of
cash dividends paid to IBC, which totaled $4.2 million annually as of June 30, 2009. If INB is unable to pay cash dividends to IBC, IBC may not be able to service its debt, pay its other obligations, or pay cash dividends on its outstanding
common or preferred stock. At June 30, 2009, IBC had $6.3 million in cash and short-term investments.

Other.Additional
information concerning securities held to maturity, FHLB advances, 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 on Form 10-K for the year ended
December 31, 2008. IBC, INB and IMC each consider their current liquidity and sources of funds sufficient to satisfy their outstanding lending commitments, if any, and maturing liabilities.

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



39



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##### Table of Contents

Regulatory Capital

INB is subject to various regulatory capital requirements. As discussed on page 20 of the Companys annual report on Form 10-K for the year ended December 31, 2008, the Federal Deposit
Insurance Corporation (FDIC) and other bank regulatory agencies use five capital categories ranging from well capitalized to critically undercapitalized to determine various matters, including prompt corrective action and each institutions
FDIC deposit insurance premiums. These categories involve quantitative measures of a banks assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classifications
are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Failure to meet minimum capital requirements can result in certain mandatory and discretionary actions by the regulators that, if
undertaken, could have a direct material effect on INBs and the Companys financial statements.

Regulations require banks to
maintain regulatory defined minimum Tier 1 leverage and Tier 1 and total risk-based capital ratio levels of at least 4%, 4% and 8%, respectively. At June 30, 2009, INB maintained its capital at levels to be classified as a well-capitalized
institution under the regulatory framework for prompt corrective action, which requires minimum Tier 1 leverage and Tier 1 and total risk-based capital ratios of 5%, 6% and 10%, respectively. In April 2009, INB agreed with the OCC, its primary
regulator, to maintain minimum capital ratios at specified levels higher than those otherwise required by applicable regulations as follows: Tier 1 capital to total average assets (leverage ratio) - 9%; Tier 1 capital to risk-weighted assets - 10%;
and total capital to risk-weighted assets - 12%. INB met its capital adequacy requirements as of June 30, 2009 and December 31, 2008. As of the date of filing of this report on Form 10-Q, management is not aware of any conditions or events
that would have changed INBs or IBCs compliance with each of its regulatory capital requirements.

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



|                                       |  |                 |  |                      
|-------------------------------------- |  | --------------- |  | ---------------------
|($ in thousands)                       |  | At June 30,2009 |  | At December 31,  2008
|Tier 1 Capital                         |  | $229,652        |  | $228,435             
|Tier 2 Capital                         |  | 23,860          |  | 22,674               
|Total risk-based capital               |  | $253,512        |  | $251,109             
|Net risk-weighted assets               |  | $1,901,242      |  | $1,809,079           
|Average assets for regulatory purposes |  | $2,311,501      |  | $2,116,762           
|Tier 1 capital to average assets       |  | 9.94%           |  | 10.79%               
|Tier 1 capital to risk-weighted assets |  | 12.08%          |  | 12.63%               
|Total capital to risk-weighted assets  |  | 13.33%          |  | 13.88%               

IBC on a consolidated basis is subject to minimum regulatory capital requirements administered by
the FRB. These guidelines require a ratio of Tier 1 or Core Capital, as defined in the guidelines, to total risk-weighted assets of at least 4% and a ratio of total capital to risk-weighted assets of at least 8%. The guidelines also require a ratio
of Tier 1 capital to adjusted total average assets of not less than 3%. At June 30, 2009 and December 31, 2008, IBC met its capital adequacy requirements.

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



|                                       |  |                 |  |                      
|-------------------------------------- |  | --------------- |  | ---------------------
|($ in thousands)                       |  | At June 30,2009 |  | At December 31,  2008
|Tier 1 Capital (1)                     |  | $268,137        |  | $266,974             
|Tier 2 Capital                         |  | 24,292          |  | 23,455               
|Total risk-based capital               |  | $292,429        |  | $290,429             
|Net risk-weighted assets               |  | $1,935,594      |  | $1,871,343           
|Average assets for regulatory purposes |  | $2,359,924      |  | $2,186,753           
|Tier 1 capital to average assets       |  | 11.36%          |  | 12.21%               
|Tier 1 capital to risk-weighted assets |  | 13.85%          |  | 14.27%               
|Total capital to risk-weighted assets  |  | 15.11%          |  | 15.52%               

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

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



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

Asset and Liability Management

The Companys interest rate risk arises from differences in the repricing of its assets and its liabilities within a given time period. The primary objective of the Companys asset/liability management strategy is to limit, within
established guidelines, the adverse effect of changes in interest rates on its net interest income and capital. The Company has never engaged in trading or hedging activities, nor invested in interest rate derivatives or entered into interest rate
swaps. The Company uses gap analysis, which measures the difference between interest-earning assets and interest-bearing liabilities that mature or reprice within a given time period, to monitor its interest rate sensitivity. For a
discussion of gap analysis, including the factors that affect its computation and results, see pages 55 to 57 of the Companys annual report on Form 10-K for the year ended December 31, 2008.

At June 30, 2009, the Companys interest-bearing liabilities that are scheduled to mature or reprice within one-year exceeded its
interest-earning assets that are scheduled to mature or reprice within one-year. This one-year interest rate sensitivity gap amounted to a negative $659 million, or (27.7)% of total assets, at June 30, 2009, compared to a negative gap of $425
million, or (18.7)% of total assets at December 31, 2008. As a result of the negative one-year gap, the Company continues to be liability-sensitive, indicating that its interest-bearing liabilities would generally reprice with
changes in interest rates more rapidly than its interest-earning assets.

The change in the one-year gap from December 31, 2008 was
primarily due to the following: the continued runoff of accruing loans with a repricing or remaining maturity of less than one year being replaced with new fixed rate loans with maturities averaging 5.3 years, an increase in nonaccrual loans and
purchases of security investments with maturities averaging 4.9 years. The new loans and securities have been funded through an increase in money market accounts and certificate of deposit accounts. INBs deposit flows and deposit rates offered
are monitored daily and adjusted as needed. Beginning in the fourth quarter of 2008, INB has emphasized the attraction of longer-term deposits by being very competitive with the rates offered on these products and less so on the rates offered for
shorter-term deposits. Notwithstanding this strategy, INB has still experienced a significant inflow of money market deposit accounts. There can be no assurance that the behavior of depositors will match the expectations of management. INBs
objective is to maintain its deposit rates at levels that will promote a stable deposit base and at the same time adjust to its cash flow needs.

INB, whose assets represent 98% of consolidated assets, performs internal analyses by preparing interest rate shock scenarios (representing the effects of specific interest rate changes on its net interest income and capital) to its basic
one-year gap model as a quantitative tool to measure the amount of INBs interest rate risk associated with changing market interest rates. Based on the June 30, 2009 negative one-year gap adjusted for various assumptions, if market rates
were assumed to immediately increase by either 100, 200 or 300 basis points, INBs annualized net interest income would be reduced in each scenario from current levels by an estimated 13%, 26% and 39%, respectively. It should be noted that for
purposes of computing the one-year interest rate sensitivity gap, all of INBs deposits with no stated maturities are treated as readily accessible accounts (as noted in footnote 3 to the GAP table follows), which contributes significantly to
the liability sensitive position reported per the one-year gap. However, if such deposits were treated differently, the one-year gap would then change. Depositors may not necessarily immediately withdraw funds in the event deposit rates offered by
INB did not change as quickly and uniformly as changes in general market rates. For example, if only 25% of deposits with no stated maturity were assumed to be readily accessible, the one-year interest rate sensitivity gap would have computed to be
a negative 14% at June 30, 2009, compared to a negative 7% at December 31, 2008, which would have resulted in a significantly lower level of perceived interest rate sensitivity when using gap analysis for such measure. INB continues to
explore the use of interest rate swaps or caps as another tool to manage its interest rate risk.



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



|                                         |  |            |           |             |   |                |  |              |           |       |   |         |  |   |          
|---------------------------------------- |  | ---------- | --------- | ----------- | - | -------------- |  | ------------ | --------- | ----- | - | ------- |  | - | ---------
|($ in thousands)                         |  | 0-3 Months |           | 4-12 Months |   | Over 1-4 Years |  | Over 4 Years |           | Total
|Loans (1)                                |  | $          | 199,758   |             | $ | 198,037        |  | $            | 869,057   |       | $ | 358,356 |  | $ | 1,625,208
|Securities held to maturity (2)          |  |            | 14,088    |             |   | 64,987         |  |              | 304,282   |       |   | 183,365 |  |   | 566,722  
|Short-term investments                   |  |            | 7,246     |             |   | -              |  |              | -         |       |   | -       |  |   | 7,246    
|FRB and FHLB stock                       |  |            | 5,531     |             |   | -              |  |              | -         |       |   | 4,398   |  |   | 9,929    
|Total rate-sensitive assets              |  | $          | 226,623   |             | $ | 263,024        |  | $            | 1,173,339 |       | $ | 546,119 |  | $ | 2,209,105
|Deposit accounts (3) :                   |  |            |           |             |   |                |  |              |           |       |   |         |  |   |          
|Interest checking deposits               |  | $          | 5,919     |             | $ | -              |  | $            | -         |       | $ | -       |  | $ | 5,919    
|Savings deposits                         |  |            | 9,221     |             |   | -              |  |              | -         |       |   | -       |  |   | 9,221    
|Money market deposits                    |  |            | 426,931   |             |   | -              |  |              | -         |       |   | -       |  |   | 426,931  
|Certificates of deposit                  |  |            | 196,308   |             |   | 443,534        |  |              | 631,774   |       |   | 278,524 |  |   | 1,550,140
|Total deposits                           |  |            | 638,379   |             |   | 443,534        |  |              | 631,774   |       |   | 278,524 |  |   | 1,992,211
|FHLB advances                            |  |            | -         |             |   | 10,000         |  |              | 36,500    |       |   | 4,000   |  |   | 50,500   
|Debentures and mortgage note payable (1) |  |            | 56,392    |             |   | -              |  |              | 10,310    |       |   | 176     |  |   | 66,878   
|Accrued interest on all borrowed funds   |  |            | 657       |             |   | -              |  |              | -         |       |   | -       |  |   | 657      
|Total borrowed funds                     |  |            | 57,049    |             |   | 10,000         |  |              | 46,810    |       |   | 4,176   |  |   | 118,035  
|Total rate-sensitive liabilities         |  | $          | 695,428   |             | $ | 453,534        |  | $            | 678,584   |       | $ | 282,700 |  | $ | 2,110,246
|GAP (repricing differences)              |  | $          | (468,805) |             | $ | (190,510)      |  | $            | 494,755   |       | $ | 263,419 |  | $ | 98,859   
|Cumulative GAP                           |  | $          | (468,805) |             | $ | (659,315)      |  | $            | (164,560) |       | $ | 98,859  |  | $ | 98,859   
|Cumulative GAP to total assets           |  |            | (19.7)%   |             |   | (27.7)%        |  |              | (6.9)%    |       |   | 4.2%    |  |   | 4.2%     

Significant assumptions used in preparing the gap table above follow:



|(1) | Adjustable-rate loans and debentures payable are included in the period in which their interest rates are next scheduled to adjust rather than in the period in
which they mature. Fixed-rate loans, debentures payable and FHLB advances are scheduled, including repayments, according to their contractual maturities. Certain debentures that have been identified to be repaid prior to their contractual maturity
are scheduled according to the repayment date. Deferred loan fees and the effect of possible loan prepayments are excluded from the analysis. Nonaccrual loans of $129.8 million and foreclosed real estate of $18.2 million are also excluded from the
table although some portion is expected to return to an interest-earning status in the near term.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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

Recent Regulatory Developments

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

Recent Accounting Pronouncements

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

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss from adverse changes in market prices and interest rates. The Companys market risk arises primarily from interest rate risk inherent in its lending,
deposit-taking and borrowing activities. The Company has not engaged in and accordingly has no present risk related to trading accounts, commodities, interest rate hedges or foreign exchange. The measurement of market risk associated with financial
instruments is meaningful only when all related and offsetting on-and off-balance sheet transactions are aggregated, and the resulting net positions are identified. Disclosures about the fair value of financial instruments as of June 30, 2009
and December 31, 2008, which reflect changes in market prices and rates, can be found in note 14 to the condensed consolidated financial statements included in this report.



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Management actively monitors and manages the Companys interest rate risk exposure. The primary
objective in managing interest rate risk is to limit, within established guidelines, the adverse impact of changes in interest rates on the Companys net interest income and capital. To this regard, INB, whose assets represent 98% of total
consolidated assets, performs internal analyses by preparing interest rate shock scenarios (representing the effects of specific interest rate changes on its net interest income and capital) to its basic one-year gap model as a quantitative tool to
measure the amount of interest rate risk associated with changing market interest rates. INB also engages an outside consultant to prepare quarterly reports using an earnings simulation model to quantify the effects of various interest rate
scenarios on its projected net interest income and net income over projected periods. These computations rely on various assumptions regarding balance sheet growth and composition, and the pricing and repricing and maturity characteristics of the
balance sheet. For a further discussion of GAP analysis, see the section entitled Asset and Liability Management of this report.

ITEM 4. Controls and Procedures

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

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

Not Applicable

ITEM 1A. Risk Factors

References in this section to we, us, and our refer to IBC and its consolidated subsidiaries, unless otherwise specified. References to INB refer to our subsidiary, Intervest National Bank.
This item requires disclosure of any new or material changes to our risk factors disclosed in our Form 10-K for the year ended December 31, 2008, where such factors are discussed on pages 24 through 29. The following also needs to be
considered.

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

On April 7, 2009, Intervest National Bank (INB) entered into a
Memorandum of Understanding (MOU) with the Comptroller of the Currency (OCC), which requires INB to (1) appoint a Compliance Committee to monitor and coordinate INBs adherence to the MOU and to submit progress
reports to the OCC; (2) develop and implement a Strategic Plan in accordance with guidelines set forth in the MOU; (3) review and revise INBs Contingency Funding Plan to address matters outlined in the MOU; (4) develop and
implement a written program to improve credit risk management processes that are consistent across INBs two primary markets; (5) develop and implement a three-year capital program in accordance with guidelines set out in the MOU; and
(6) review and revise INBs interest rate risk policy and procedures to address matters set forth in the MOU. Management has commenced the steps necessary to satisfy the conditions of the MOU and is committed to addressing and resolving
any and all issues presented therein, including interest rate and liquidity risk and capital adequacy. INB has also agreed with the OCC to maintain minimum capital ratios at specified levels higher than those otherwise required by applicable
regulations as follows: Tier 1 capital to total average assets (leverage ratio) - 9%; Tier 1 capital to risk-weighted assets - 10%; and total capital to risk-weighted assets - 12%. At June 30, 2009, INBs actual capital ratios were in
excess of these levels at 9.94%, 12.08% and 13.33%, respectively. Based on this new threshold established by the OCC, INBs available asset growth as of June 30, 2009 is $231 million. As a result of the above, our operations, lending
activities and capital levels are now subject to heightened regulatory oversight, over and above the extensive regulation which normally applies to us under existing regulations, which will increase our expenses and may negatively impact our ability
to grow our business. In addition, failure by INB to comply with these heightened requirements could lead to additional regulatory actions, more expenses and other restrictions.



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##### Table of Contents

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

Not Applicable

ITEM 3. Defaults Upon Senior Securities

Not Applicable

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

|(a) | An Annual Meeting of Stockholders was held on May 20, 2009.
|--- | -----------------------------------------------------------

|(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 8, 2009 as a nominee for director was elected for a one-year term expiring on the date of the next annual meeting. Additionally, the Companys
stockholders approved a non-binding advisory proposal on the compensation of executives disclosed in the proxy statement and ratified the appointment of Hacker, Johnson & Smith, P.A., P.C., as the Companys independent registered
public accounting firm for the year ended December 31, 2009 (see Item 4-c).



|(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                                                                                                                         |  | 7,050,858 |  | 100,506           |  |          
|Wayne F. Holly                                                                                                                            |  | 6,543,389 |  | 607,975           |  |          
|Lawton Swan, III                                                                                                                          |  | 7,050,654 |  | 100,710           |  |          
|Election of Directors - Class B                                                                                                           |  |           |  |                   |  |          
|Lowell S. Dansker                                                                                                                         |  | 580,000   |  | -                 |  |          
|Paul DeRosa                                                                                                                               |  | 580,000   |  | -                 |  |          
|Stephen A. Helman                                                                                                                         |  | 580,000   |  | -                 |  |          
|Thomas E. Willett                                                                                                                         |  | 580,000   |  | -                 |  |          
|David J. Willmott                                                                                                                         |  | 580,000   |  | -                 |  |          
|Wesley T. Wood                                                                                                                            |  | 580,000   |  | -                 |  |          
|                                                                                                                                          |  | For       |  | Against           |  | Abstained
|To approve a non-binding advisory proposal on the compensation of executives disclosed in the proxy statement                             |  |           |  |                   |  |          
|Class A shareholders (1)                                                                                                                  |  | 6,739,735 |  | 196,243           |  | 215,286  
|Class B shareholders                                                                                                                      |  | 580,000   |  | -                 |  | -        
|To ratify the appointment of Hacker, Johnson & Smith, P.A., P.C., as the Companys independent registered public accounting
firm for 2009 |  |           |  |                   |  |          
|Class A shareholders (2)                                                                                                                  |  | 7,119,756 |  | 23,770            |  | 7,838    
|Class B shareholders                                                                                                                      |  | 580,000   |  | -                 |  | -        

(1) Broker nonvotes were 48,419. (2) Broker nonvotes were 48,417.



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

ITEM 5. Other Information

Not Applicable

ITEM 6. Exhibits

The following exhibits
are filed as part of this report.



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



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



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



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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: July 30, 2009 |  | By:    /s/ Lowell S. Dansker                            
|                    |  | Lowell S. Dansker, Chairman and Executive Vice President
|                    |  | (Principal Executive Officer)                           
|                    | 
|Date: July 30, 2009 |  | By:    /s/ John J. Arvonio                              
|                    |  | John J. Arvonio, Chief Financial and Accounting Officer 
|                    |  | (Principal Financial Officer)                           



45