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

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q

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

               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006
                                              ------------------

                                       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         (IRS Employer Identification No.)
    of incorporation or organization)

                        ONE ROCKEFELLER PLAZA, SUITE 400
                         NEW YORK, NEW YORK 10020-2002
              ---------------------------------------------------
              (Address of principal executive offices) (Zip Code)

                                 (212) 218-2800
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

                                 NOT APPLICABLE
   --------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

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

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

Large  accelerated filer     Accelerated filer     Nonaccelerated filer X
                        ---                   ---                      ---

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

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

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

Class A Common Stock, $1.00 par value per share     7,470,490 outstanding as of October 31, 2006
-----------------------------------------------     --------------------------------------------

Class B Common Stock, $1.00 par value per share     385,000 outstanding as of October 31, 2006
-----------------------------------------------     ------------------------------------------
</TABLE>

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


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

                                       FORM 10-Q

                                  SEPTEMBER 30, 2006
                                   TABLE OF CONTENTS

<S>                                                                                    <C>
PART I. FINANCIAL INFORMATION                                                          Page
                                                                                       ----
ITEM 1.     FINANCIAL STATEMENTS

     Condensed Consolidated Balance Sheets
       as of September 30, 2006 (Unaudited) and December 31, 2005. . . . . . . . . .  .   3

     Condensed Consolidated Statements of Earnings (Unaudited)
       for the Quarters and Nine-Months Ended September 30, 2006 and 2005. . . . . .  .   4

     Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
       for the Nine-Months Ended September 30, 2006 and 2005 . . . . . . . . . . .. . .   5

     Condensed Consolidated Statements of Cash Flows (Unaudited)
       for the Nine-Months Ended September 30, 2006 and 2005. . . . . . . . . . . . . .   6

     Notes to Condensed Consolidated Financial Statements (Unaudited) . . . . . . . . .   7

     Review by Independent Registered Public Accounting Firm. . . . . . . . . . . . . .  19

     Report of Independent Registered Public Accounting Firm. . . . . . . . . . . . . .  20

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS .. . . . . . . .  . . . . . . . . . . . . . . . . .  21

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  . . . . . . . .  36

ITEM 4.     CONTROLS AND PROCEDURES . . . . . . . . . . ..  . . . . . . . . . . . . . .  36

PART II. OTHER INFORMATION

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

ITEM 1A.    RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  37

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

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

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

ITEM 5.     OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  37

ITEM 6.     EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  37

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . .  38

CERTIFICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . .  39
</TABLE>


            PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT

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


                                        2
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                       INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                                             CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                                                 SEPTEMBER 30,    DECEMBER 31,
($in thousands, except par value)                                                                    2006             2005
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                             <C>              <C>
ASSETS                                                                                              (Unaudited)       (Audited)
Cash and due from banks                                                                         $        10,924  $       11,595
Federal funds sold                                                                                       63,093          42,675
Commercial paper and other short-term investments                                                        28,984           2,446
                                                                                                -------------------------------
  Total cash and cash equivalents                                                                       103,001          56,716
Securities held to maturity, net (estimated fair value of $339,661 and $249,088, respectively)          340,783         251,508
Federal Reserve Bank and Federal Home Loan Bank stock, at cost                                            5,813           5,241
Loans receivable (net of allowance for loan losses of $17,038 and $15,181, respectively)              1,475,314       1,352,805
Accrued interest receivable                                                                               9,908           7,706
Loan fees receivable                                                                                     10,924          10,941
Premises and equipment, net                                                                               6,176           6,421
Deferred income tax asset                                                                                 8,402           6,988
Deferred debenture offering costs, net                                                                    5,964           5,610
Investments in unconsolidated subsidiaries                                                                2,166           1,856
Other assets                                                                                              1,655             631
===============================================================================================================================
TOTAL ASSETS                                                                                    $     1,970,106  $    1,706,423
===============================================================================================================================
LIABILITIES
Deposits:
  Noninterest-bearing demand deposit accounts                                                   $         4,134  $        9,188
  Interest-bearing deposit accounts:
    Checking (NOW) accounts                                                                               6,591           7,202
    Savings accounts                                                                                     11,876          17,351
    Money market accounts                                                                               231,450         223,075
    Certificate of deposit accounts                                                                   1,347,073       1,118,514
                                                                                                -------------------------------
Total deposit accounts                                                                                1,601,124       1,375,330
Borrowed Funds:
    Subordinated debentures                                                                              95,830          87,390
    Subordinated debentures - capital securities                                                         72,166          61,856
    Accrued interest payable on all borrowed funds                                                        5,865           6,250
    Mortgage note payable                                                                                   219             229
                                                                                                -------------------------------
Total borrowed funds                                                                                    174,080         155,725
Accrued interest payable on deposits                                                                      4,061           3,232
Mortgage escrow funds payable                                                                            28,537          20,302
Official checks outstanding                                                                               4,206          11,689
Other liabilities                                                                                         3,696           3,967
-------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES                                                                                     1,815,704       1,570,245
-------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock (300,000 shares authorized, none issued)                                                      -               -
Class A common stock ($1.00 par value, 12,000,000 shares authorized,
  7,470,490 and 7,438,058 shares issued and outstanding, respectively)                                    7,470           7,438
Class B common stock ($1.00 par value, 700,000 shares authorized,
  385,000 shares issued and outstanding)                                                                    385             385
Additional paid-in-capital, common                                                                       65,789          65,309
Retained earnings                                                                                        80,758          63,046
-------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY                                                                              154,402         136,178
===============================================================================================================================
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                      $     1,970,106  $    1,706,423
===============================================================================================================================
</TABLE>

See accompanying notes to condensed consolidated financial statements.


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

                                                                      QUARTER ENDED      NINE-MONTHS ENDED
                                                                         SEPTEMBER 30,     SEPTEMBER 30,
                                                                   ------------------------------------------
($in thousands, except per share data)                               2006       2005       2006       2005
-------------------------------------------------------------------------------------------------------------
<S>                                                                <C>        <C>        <C>        <C>
INTEREST AND DIVIDEND INCOME
Loans receivable                                                   $  28,829  $  23,569  $  83,963  $  63,180
Securities                                                             3,439      1,895      9,408      5,181
Other interest-earning assets                                            492        297      1,192        664
-------------------------------------------------------------------------------------------------------------
TOTAL INTEREST AND DIVIDEND INCOME                                    32,760     25,761     94,563     69,025
-------------------------------------------------------------------------------------------------------------

INTEREST EXPENSE
Deposits                                                              16,920     12,029     46,995     31,443
Subordinated debentures                                                1,987      1,973      5,712      6,036
Subordinated debentures - capital securities                           1,106      1,089      3,286      3,268
Other borrowed funds                                                     193         15        440        142
-------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE                                                20,206     15,106     56,433     40,889
-------------------------------------------------------------------------------------------------------------

NET INTEREST AND DIVIDEND INCOME                                      12,554     10,655     38,130     28,136
Provision for loan losses                                                907      1,803      1,857      3,288
-------------------------------------------------------------------------------------------------------------
NET INTEREST AND DIVIDEND INCOME AFTER PROVISION FOR LOAN LOSSES      11,647      8,852     36,273     24,848
-------------------------------------------------------------------------------------------------------------

NONINTEREST INCOME
Customer service fees                                                    102        105        361        260
Income from mortgage lending activities                                  326        304      1,115        754
Income from the early repayment of mortgage loans                        737      1,348      3,383      3,570
Commissions and fees                                                      50         56         50        115
Gain from early call of investment securities                              -          -          -          1
-------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST INCOME                                               1,215      1,813      4,909      4,700
-------------------------------------------------------------------------------------------------------------

NONINTEREST EXPENSES
Salaries and employee benefits                                         2,797      1,336      5,560      4,003
Occupancy and equipment, net                                             421        395      1,249      1,109
Data processing                                                          180        156        538        438
Professional fees and services                                           304        172        839        578
Stationery, printing and supplies                                         44         52        157        161
Postage and delivery                                                      36         31        110         96
FDIC and general insurance                                                96         82        278        238
Director and committee fees                                               89        141        311        394
Advertising and promotion                                                 78         52        229        149
All other                                                                157        149        459        523
-------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST EXPENSES                                             4,202      2,566      9,730      7,689
-------------------------------------------------------------------------------------------------------------
Earnings before income taxes                                           8,660      8,099     31,452     21,859
Provision for income taxes                                             3,776      3,533     13,740      9,522
=============================================================================================================
NET EARNINGS                                                       $   4,884  $   4,566  $  17,712  $  12,337
=============================================================================================================

BASIC EARNINGS PER SHARE                                           $    0.62  $    0.66  $    2.26  $    1.90
DILUTED EARNINGS PER SHARE                                         $    0.59  $    0.61  $    2.13  $    1.76
CASH DIVIDENDS PER SHARE                                           $       -  $       -  $       -  $       -
-------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to condensed consolidated financial statements.


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

                                                                  NINE-MONTHS ENDED
                                                                    SEPTEMBER 30,
                                                       ----------------------------------------
                                                              2006                 2005
                                                       ----------------------------------------
($thousands)                                            SHARES     AMOUNT    SHARES     AMOUNT
-----------------------------------------------------------------------------------------------
<S>                                                    <C>        <C>       <C>        <C>

CLASS A COMMON STOCK
Balance at beginning of period                         7,438,058  $  7,438  5,886,433  $  5,886
Issuance of shares upon the conversion of debentures      32,432        32     32,002        32
Issuance of shares in public offering                                       1,436,468     1,437
-----------------------------------------------------------------------------------------------
Balance at end of period                               7,470,490     7,470  7,354,903     7,355
-----------------------------------------------------------------------------------------------

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

ADDITIONAL PAID-IN-CAPITAL, COMMON
Balance at beginning of period                                      65,309               38,961
Issuance of shares upon the conversion of debentures                   480                  409
Issuance of shares in public offering                                    -               24,898
-----------------------------------------------------------------------------------------------
Balance at end of period                                            65,789               64,268
-----------------------------------------------------------------------------------------------

RETAINED EARNINGS
Balance at beginning of period                                      63,046               44,862
Net earnings for the period                                         17,712               12,337
-----------------------------------------------------------------------------------------------
Balance at end of period                                            80,758               57,199
-----------------------------------------------------------------------------------------------

===============================================================================================
TOTAL STOCKHOLDERS' EQUITY AT END OF PERIOD            7,855,490  $154,402  7,739,903  $129,207
===============================================================================================
</TABLE>

See accompanying notes to condensed consolidated financial statements.


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

                                                                                         NINE-MONTHS ENDED
                                                                                           SEPTEMBER 30,
                                                                                     -----------------------
($in thousands)                                                                          2006        2005
------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>         <C>
OPERATING ACTIVITIES
Net earnings                                                                          $  17,712   $  12,337
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization                                                               410         415
Provision for loan losses                                                                 1,857       3,288
Deferred income tax benefit                                                              (1,414)     (1,501)
Amortization of deferred debenture offering costs                                           861         890
Amortization of premiums (accretion) of discounts and deferred loan fees, net            (7,902)     (5,305)
Net decrease in accrued interest payable on debentures                                     (176)     (2,613)
Net decrease in official checks outstanding                                              (7,483)     (6,598)
Net decrease (increase) in loan fees receivable                                              17      (2,327)
Net change in all other assets and liabilities                                            4,070      10,256
------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                                 7,952       8,842
------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Maturities and calls of securities held to maturity                                      96,935      62,820
Purchases of securities held to maturity                                               (185,864)    (52,360)
Net increase in loans receivable                                                       (123,548)   (305,859)
Purchases of Federal Reserve Bank and Federal Home Loan Bank stock, net                    (572)     (1,026)
Purchases of premises and equipment, net                                                   (165)       (313)
Investment in unconsolidated subsidiaries                                                  (310)          -
------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES                                                  (213,524)   (296,738)
------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase in deposits                                                                225,794     308,437
Net increase in mortgage escrow funds payable                                             8,235      12,477
Net decrease in FHLB advances                                                                 -     (36,000)
Principal repayments of debentures and mortgage note payable                             (7,260)    (29,109)
Gross proceeds from debenture issuance costs                                             26,310      26,000
Debenture issuance costs                                                                 (1,222)     (1,820)
Gross proceeds from issuance of common stock                                                  -      28,370
Common stock issuance costs                                                                   -      (2,035)
------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                               251,857     306,320
------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents                                                46,285      18,424
Cash and cash equivalents at beginning of period                                         56,716      24,599
============================================================================================================
Cash and cash equivalents at end of period                                            $ 103,001   $  43,023
============================================================================================================

SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
  Interest                                                                            $  54,919   $  41,547
  Income taxes                                                                           16,252       9,860
Noncash activities:
  Conversion of debentures and accrued interest into Class A common stock                   512         441
------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to condensed consolidated financial statements.


                                        6
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 1 - PRINCIPLES OF CONSOLIDATION, BASIS OF PRESENTATION AND USE OF ESTIMATES

The  condensed  consolidated  financial  statements  of  Intervest  Bancshares
Corporation  and  Subsidiaries  in  this report have not been audited except for
information  derived from the 2005 audited consolidated financial statements and
notes  thereto.  The  condensed consolidated financial statements in this report
should  be  read  in  conjunction  with  the 2005 audited consolidated financial
statements  and  notes  thereto  included in the Company's Annual Report on Form
10-K  for  the  year  ended  December  31,  2005.

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

In  preparing  the  consolidated financial statements, management is required to
make  estimates  and  assumptions  that  affect  the reported amounts of assets,
liabilities  and  disclosure  of  contingent  liabilities  as of the date of the
consolidated  financial  statements,  and  revenues  and  expenses  during  the
reporting  periods.  Actual results could differ from those estimates. Estimates
that  are  particularly  susceptible  to  significant  change  relate  to  the
determination  of the allowance for loan losses and the estimated fair values of
financial  instruments.  In  the opinion of management, all material adjustments
necessary  for  a  fair  presentation  of  financial  condition  and  results of
operations  for  the  interim  periods  presented in this report have been made.
These  adjustments  are  of a normal recurring nature. The results of operations
for  the  interim  periods are not necessarily indicative of results that may be
expected  for  the  entire  year  or  any  other  interim  period.

NOTE  2  -  DESCRIPTION  OF  BUSINESS

The  offices  of  the Holding Company, Intervest Mortgage Corporation, Intervest
Securities  Corporation  and  the  Bank's  headquarters and full-service banking
office  are  located  on the entire fourth floor of One Rockefeller Plaza in New
York  City, New York, 10020-2002, and the main telephone number is 212-218-2800.
The  Holding  Company's  primary  business is the ownership and operation of its
subsidiaries.  It  does  not engage in any other substantial business activities
other  than  a  limited  amount  of  real estate mortgage lending, including the
participation  in  loans  originated by the Bank. From time to time, the Holding
Company  also  issues  debt  and  equity  securities  to raise funds for working
capital  purposes.

The  Company's  primary business segment is banking and real estate lending. The
Company's  lending  activities  are comprised almost entirely of originating for
its  loan  portfolio  mortgage  loans secured by commercial and multifamily real
estate  properties  (including  rental  and  cooperative/condominium  apartment
buildings,  office  buildings,  mixed-use  properties, shopping centers, hotels,
restaurants, industrial properties, parking lots/garages and vacant land). These
loans  have  an  average life of approximately three years. The Company tends to
lend in areas that are in the process of being revitalized, with a concentration
of  loans  on  properties  located in New York State and the State of Florida. A
significant  portion  of the residential properties are located in New York City
and  are  subject  to  rent control and rent stabilization laws, which limit the
ability  of  the  property  owners  to  increase  rents.

The  Bank  is  a nationally chartered, full-service commercial bank that has its
headquarters  and  full-service  banking office in Rockefeller Plaza in New York
City,  and  a  total  of  five  full-service banking offices in Pinellas County,
Florida - four in Clearwater and one in South Pasadena. The Bank expects to open
an  additional  branch  office in Clearwater Beach, Florida by November 1, 2006.
The  Bank  conducts  a personalized commercial and consumer banking business and
attracts  deposits  from  the areas served by its banking offices. The Bank also
provides  internet  banking  services  through  its  web  site:
www.intervestnatbank.com,  which  can attract deposit customers from outside its
primary  market  areas.  The  deposits,  together  with funds derived from other
sources,  are  mainly used to originate mortgage loans secured by commercial and
multifamily  real  estate  properties and to purchase investment securities. The
information  on  the aforementioned web site is not and should not be considered
part  of  this  report  and  is  not  incorporated  by  reference.


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

NOTE  2  -  DESCRIPTION  OF  BUSINESS  -  CONTINUED

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

Intervest Securities Corporation is a broker/dealer and a member of the National
Association  of Securities Dealers (NASD) whose business activities to date have
not  been  material. Its only revenues have been derived from participating as a
selected  dealer  from time to time in offerings of debt securities of Intervest
Mortgage  Corporation  and  the  Holding  Company.  In October 2006, the limited
operations  of  Intervest  Securities  Corporation were discontinued and its net
assets  will  be distributed to the Holding Company during the fourth quarter of
2006.

Intervest  Statutory  Trust  I,  II,  III,  IV  and  V  issued in December 2001,
September  2003, March 2004, September 2004, and September 2006, trust preferred
securities of $15 million each for Trust I to IV and $10 million for Trust V for
a  total  of  $70 million. Each trust was formed for the sole purpose of issuing
and  administering  the  trust  preferred securities and they do not conduct any
trade  or  business.  For  a  further  discussion,  see  note  8  herein.

NOTE  3  -  SECURITIES

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

<TABLE>
<CAPTION>
                                          Gross        Gross   Estimated               Wtd-Avg
                        Amortized    Unrealized   Unrealized        Fair   Wtd-Avg   Remaining
($in thousands)              Cost         Gains       Losses       Value     Yield    Maturity
----------------------------------------------------------------------------------------------
<S>                     <C>         <C>          <C>          <C>         <C>        <C>
At September 30, 2006   $  340,783  $       119  $     1,241  $  339,661      4.53%  1.5 Years
At December 31, 2005    $  251,508  $        14  $     2,434  $  249,088      3.26%  1.1 Years
----------------------------------------------------------------------------------------------
</TABLE>

All  the  securities  at  September  30,  2006  and  December 31, 2005 were debt
obligations of U.S. government corporations or sponsored agencies (such as FHLB,
FNMA,  FHLMC or FFCB) and were held by the Bank. The securities 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.

At  September  30, 2006, the portfolio consisted of 197 securities, of which 156
had  an  unrealized  loss.  A  large portion of the unrealized losses were for a
continuous  period of more than 12 months. Management believes that the cause of
these unrealized losses is directly related to changes in market interest rates,
which  have  steadily  increased  since June 2004. In general, as interest rates
rise,  the  fair value of fixed rate securities will decrease; as interest rates
fall,  their  fair  value  will  increase.

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

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

<TABLE>
<CAPTION>
     ($in thousands)                          Amortized Cost   Estimated Fair Value   Average Yield
     ----------------------------------------------------------------------------------------------
<S>                                          <C>              <C>                    <C>
     At September 30, 2006:
     Due in one year or less                 $       118,884  $             118,220           3.77%
     Due after one year through five years           221,899                221,441           4.94%
     ----------------------------------------------------------------------------------------------
                                             $       340,783  $             339,661           4.53%
     ----------------------------------------------------------------------------------------------
     At December 31, 2005:
     Due in one year or less                 $       124,413  $             123,345           2.71%
     Due after one year through five years           127,095                125,743           3.79%
     ----------------------------------------------------------------------------------------------
                                             $       251,508  $             249,088           3.26%
     ----------------------------------------------------------------------------------------------
</TABLE>

There  were  no  securities  classified  as  available  for sale or any sales of
securities  during  the  reporting  periods.


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

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

<TABLE>
<CAPTION>
                                               At September 30, 2006    At December 31, 2005
                                              -----------------------  -----------------------
     ($in thousands)                          # of Loans    Amount     # of Loans    Amount
     -----------------------------------------------------------------------------------------
<S>                                           <C>         <C>          <C>         <C>
     Commercial real estate loans                    280  $  814,929          264  $  735,650
     Residential multifamily loans                   234     621,096          234     538,760
     Land development and other land loans            24      67,474           31     105,251
     Residential 1-4 family loans                      2          52            3         100
     Commercial business loans                        21         816           22       1,089
     Consumer loans                                   14         225           10         194
     -----------------------------------------------------------------------------------------
     Loans receivable                                575   1,504,592          564   1,381,044
     -----------------------------------------------------------------------------------------
     Deferred loan fees                                      (12,240)                 (13,058)
     -----------------------------------------------------------------------------------------
     Loans receivable, net of deferred fees                1,492,352                1,367,986
     -----------------------------------------------------------------------------------------
     Allowance for loan losses                               (17,038)                 (15,181)
     -----------------------------------------------------------------------------------------
     Loans receivable, net                                $1,475,314               $1,352,805
     -----------------------------------------------------------------------------------------
</TABLE>

At  September 30, 2006, there were three real estate loans totaling $7.7 million
on nonaccrual status, compared to two real estate loans totaling $0.7 million at
December  31,  2005. Nonaccrual loans are considered impaired under the criteria
of SFAS No. 114, but no valuation allowance was maintained at any time since the
Company  believes that the estimated fair value of the underlying collateral for
each  loan  exceeded its recorded investment in each loan. At September 30, 2006
and December 31, 2005, there were no other impaired loans. At September 30, 2006
and  December 31, 2005, there were $18.6 million and $2.6 million, respectively,
of  loans  ninety  days  past  due and still accruing interest because they were
deemed  by  management  to  be  well  secured  and in the process of collection.

Interest  income  that  was  not  recorded  on  nonaccrual  loans  under  their
contractual  terms amounted to $157,000 for the quarter ended September 30, 2006
and  $273,000  for the nine months ended September 30, 2006, compared to $19,000
and  $55,000,  respectively, for the same periods of 2005. The average principal
balance  of nonaccrual loans for the quarter and nine months ended September 30,
2006  and  2005 was $6.2 million and $3.8 million for the 2006 periods, and $0.8
million  and  $2.1  million  for  the  2005  periods,  respectively.

NOTE  5  -  ALLOWANCE  FOR  LOAN  LOSSES

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

<TABLE>
<CAPTION>
                                      Quarter Ended September 30,        Nine-Months Ended September 30,
                                  ------------------------------------  ----------------------------------
($in thousands)                         2006              2005                2006              2005
----------------------------------------------------------------------------------------------------------
<S>                               <C>               <C>                 <C>               <C>
Balance at beginning of period    $         16,131  $         12,591    $         15,181  $         11,106
Provision charged to operations                907             1,803               1,857             3,288
----------------------------------------------------------------------------------------------------------
Balance at end of period          $         17,038  $         14,394    $         17,038  $         14,394
----------------------------------------------------------------------------------------------------------
</TABLE>

NOTE  6  -  DEPOSITS

Scheduled  maturities  of  certificates  of  deposit  accounts  are  as follows:

<TABLE>
<CAPTION>
                                  At September 30, 2006     At December 31, 2005
                                ------------------------  ------------------------
                                              Wtd-Avg                   Wtd-Avg
     ($in thousands)              Amount    Stated Rate     Amount    Stated Rate
     -----------------------------------------------------------------------------
     <S>                        <C>         <C>           <C>         <C>
     Within one year            $  616,709         4.69%  $  381,968         3.77%
     Over one to two years         198,023         4.49      259,698         4.30
     Over two to three years       220,968         4.50      126,546         4.13
     Over three to four years      178,831         4.66      160,344         4.43
     Over four years               132,542         5.26      189,958         4.69
     -----------------------------------------------------------------------------
                                $1,347,073         4.68%  $1,118,514         4.18%
     -----------------------------------------------------------------------------
</TABLE>

Certificate  of  deposit accounts of $100,000 or more totaled $489.8 million and
$371.8  million  at  September  30, 2006 and December 31, 2005, respectively. At
September  30,  2006,  certificate  of  deposit  accounts of $100,000 or more by
remaining  maturity  were  as follows: $226.9 million due within one year; $68.0
million  due  over  one to two years; $78.6 million due over two to three years;
$59.5  million  due  over  three  to four years; and $56.8 million due over four
years.


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

NOTE  7  -  SUBORDINATED  DEBENTURES  AND  MORTGAGE  NOTE  PAYABLE
Subordinated  debentures  by  series  and  mortgage  note  payable  are  summarized  as  follows:


                                                                               At September 30,   At December 31,
($in thousands)                                                                      2006               2005
------------------------------------------------------------------------------------------------------------------
INTERVEST MORTGAGE CORPORATION:
<S>                                                                            <C>                <C>
Series 06/28/99 - interest at 9% fixed               - due July 1, 2006        $               -  $          2,000
Series 09/18/00 - interest at 9% fixed               - due January 1, 2008                 1,250             1,250
Series 08/01/01 - interest at 8% fixed               - due April 1, 2007                   2,750             2,750
Series 08/01/01 - interest at 8 1/2% fixed           - due April 1, 2009                   2,750             2,750
Series 01/17/02 - interest at 7 1/2% fixed           - due October 1, 2007                 2,250             2,250
Series 01/17/02 - interest at 7 3/4% fixed           - due October 1, 2009                 2,250             2,250
Series 08/05/02 - interest at 7 1/2% fixed           - due January 1, 2008                 3,000             3,000
Series 08/05/02 - interest at 7 3/4% fixed           - due January 1, 2010                 3,000             3,000
Series 01/21/03 - interest at 6 3/4% fixed           - due July 1, 2006                        -             1,500
Series 01/21/03 - interest at 7 % fixed              - due July 1, 2008                    3,000             3,000
Series 01/21/03 - interest at 7 1/4% fixed           - due July 1, 2010                    3,000             3,000
Series 07/25/03 - interest at 6 1/2% fixed           - due October 1, 2006                     -             2,500
Series 07/25/03 - interest at 6 3/4% fixed           - due October 1, 2008                 3,000             3,000
Series 07/25/03 - interest at 7 % fixed              - due October 1, 2010                 3,000             3,000
Series 11/28/03 - interest at 6 1/4% fixed           - due April 1, 2007                   2,000             2,000
Series 11/28/03 - interest at 6 1/2% fixed           - due April 1, 2009                   3,500             3,500
Series 11/28/03 - interest at 6 3/4% fixed           - due April 1, 2011                   4,500             4,500
Series 06/07/04 - interest at 6 1/4% fixed           - due January 1, 2008                 2,500             2,500
Series 06/07/04 - interest at 6 1/2% fixed           - due January 1, 2010                 4,000             4,000
Series 06/07/04 - interest at 6 3/4% fixed           - due January 1, 2012                 5,000             5,000
Series 03/21/05 - interest at 6 1/4% fixed           - due April 1, 2009                   3,000             3,000
Series 03/21/05 - interest at 6 1/2% fixed           - due April 1, 2011                   4,500             4,500
Series 03/21/05 - interest at 7% fixed               - due April 1, 2013                   6,500             6,500
Series 08/12/05 - interest at 6 1/4% fixed           - due October 1, 2009                 2,000             2,000
Series 08/12/05 - interest at 6 1/2% fixed           - due October 1, 2011                 4,000             4,000
Series 08/12/05 - interest at 7% fixed               - due October 1, 2013                 6,000             6,000
Series 06/12/06 - interest at 6 1/2% fixed           - due July 1, 2010                    2,000                 -
Series 06/12/06 - interest at 6 3/4% fixed           - due July 1, 2012                    4,000                 -
Series 06/12/06 - interest at 7% fixed               - due July 1, 2014                   10,000                 -
                                                                               -----------------------------------
                                                                                          92,750            82,750
INTERVEST BANCSHARES CORPORATION:
Series 05/14/98 - interest at 8% fixed                 - due July 1, 2008                  1,830             2,140
Series 12/15/00 - interest at 8 1/2% fixed             - due April 1, 2006                     -             1,250
Series 12/15/00 - interest at 9% fixed                 - due April 1, 2008                 1,250             1,250
                                                                               -----------------------------------
                                                                                           3,080             4,640
INTERVEST NATIONAL BANK:
Mortgage note payable (1) - interest at 7% fixed  - due February 1, 2017                     219               229
------------------------------------------------------------------------------------------------------------------
                                                                               $          96,049  $         87,619
------------------------------------------------------------------------------------------------------------------
</TABLE>

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

Scheduled  contractual  maturities  as  of  September  30, 2006 were as follows:

<TABLE>
<CAPTION>
     ($in thousands)                                       Principal   Accrued Interest
     -----------------------------------------------------------------------------------
<S>                                                        <C>         <C>
     For the period October 1, 2006 to December 31, 2006   $        4  $           1,358
     For the year ended December 31, 2007                       7,015                245
     For the year ended December 31, 2008                      15,846              2,425
     For the year ended December 31, 2009                      13,517                397
     For the year ended December 31, 2010                      15,019                331
     Thereafter                                                44,648                551
     -----------------------------------------------------------------------------------
                                                           $   96,049  $           5,307
     -----------------------------------------------------------------------------------
</TABLE>


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

NOTE  7  -  SUBORDINATED  DEBENTURES  AND  MORTGAGE  NOTE  PAYABLE,  CONTINUED

Intervest  Bancshares  Corporation  repaid the following debentures in the first
nine  months  of  2006:

-    Series 12/15/00 due 4/1/06 were repaid early on 3/1/06 for $1.25 million of
     principal  and  $18,000  of  accrued  interest.

Intervest Mortgage Corporation issued and repaid the following debentures in the
first  nine  months  of  2006:

-    Series  06/28/99 due 7/1/06 were repaid early on 5/1/06 for $2.0 million of
     principal  and  $1.6  million  of  accrued  interest;
-    Series  01/21/03 due 7/1/06 were repaid early on 5/1/06 for $1.5 million of
     principal  and  $8,000  of  accrued  interest;
-    Series 07/25/03 due 10/1/06 were repaid early on 9/1/06 for $2.5 million of
     principal  and  $27,000  of  accrued  interest;  and
-    Series  06/12/06  issued  in  July  for  $16.0 million of principal for net
     proceeds,  after  offering  costs,  of  $14.8  million.

Interest is paid quarterly on Intervest Mortgage Corporation's debentures except
for  the following: all of Series  9/18/00; $0.6 million of Series 8/01/01; $0.2
million  of  Series  1/17/02;  $1.1  million  of Series 8/05/02; $1.8 million of
Series  11/28/03; $1.9 million of Series 6/7/04; $1.9 million of Series 3/21/05;
$1.8  million of Series 8/12/05 and $2.3 million of Series 6/12/06, all of which
accrue  and  compound  interest quarterly, with such interest due and payable at
maturity.

The  holders  of  Intervest  Mortgage  Corporation's  Series 9/18/00 and 1/17/02
through  8/12/05  debentures  can  require  Intervest Mortgage Corporation, on a
first  come basis during a specified time, to repurchase the debentures for face
amount  plus  accrued  interest  once  each  year (beginning January 1, 2007 for
Series  11/28/03,  January  1,  2008 for Series 6/7/04, April 1, 2009 for Series
3/21/05  and  October  1, 2009 for Series 8/12/05). However, in no calendar year
can  the  required  purchases  be more than $100,000 in principal amount of each
maturity,  in  each  series  of  debentures,  on  a  non-cumulative  basis.

Intervest Mortgage Corporation's debentures may be redeemed at its option at any
time,  in  whole  or  in  part, for face value, except Series 8/12/05 and Series
6/12/06,  which would be at a premium of 1% if they were redeemed prior to April
1,  2007 and January 1, 2008, respectively. All the debentures are unsecured and
subordinate  to  all  present  and future senior indebtedness, as defined in the
indenture  related  to  each  debenture.

On  November  1,  2006,  Intervest  Mortgage  Corporation  repaid  early certain
debentures  scheduled  to  mature  at  various times through April 1, 2009 for a
total  of  $10.3  million ($9.0 million of principal and $1.3 million of accrued
interest).  Unamortized  offering costs associated with these debentures of $0.1
million  was  expensed  as  a  result  of  the  early  retirement.

The  Holding  Company's  Series  5/14/98 subordinated debentures are convertible
along  with  accrued  interest at the option of the holders at any time prior to
April  1,  2008  into  shares  of  its  Class  A  common  stock at the following
conversion  prices  per  share:  $16.00  in 2006; $18.00 in 2007 and $20.00 from
January  1,  2008  through  April  1,  2008.  In  the first nine months of 2006,
$519,000  of debentures ($310,000 of principal and $209,000 of accrued interest)
were  converted  into  shares  of  Class  A  common  stock  at $16.00 per share.

At September 30, 2006, interest accrued and compounded quarterly on $1.4 million
of  the  Holding  Company's  convertible debentures at the rate of 8% per annum,
while  $0.4  million of the convertible debentures pay interest quarterly at the
rate of 8% per annum. All accrued interest of $1.3 million is due and payable at
maturity  whether  by  acceleration,  redemption  or  otherwise. Any convertible
debenture  holder  may,  on  or before July 1 of each year, elect to be paid all
accrued  interest  and  to  thereafter  receive  regular  quarterly  payments of
interest.  The  Holding Company may redeem any of its debentures, in whole or in
part,  at  any  time  for  face  value.

NOTE 8 - SUBORDINATED DEBENTURES - CAPITAL SECURITIES

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

<TABLE>
<CAPTION>
                                                             At September 30, 2006  At December  31, 2005
                                                             ---------------------  ---------------------
                                                                          Accrued                Accrued
($in thousands)                                              Principal   Interest   Principal   Interest
---------------------------------------------------------------------------------------------------------
<S>                                                          <C>         <C>        <C>         <C>
Capital Securities   I -  debentures due December 18, 2031   $   15,464  $     441  $   15,464  $      59
---------------------------------------------------------------------------------------------------------
Capital Securities  II - debentures due September 17, 2033       15,464         38      15,464         35
Capital Securities III - debentures due March 17, 2034           15,464         33      15,464         31
Capital Securities IV - debentures due September 20, 2034        15,464         29      15,464         29
Capital Securities  V - debentures due December 15, 2036         10,310         17           -          -
---------------------------------------------------------------------------------------------------------
                                                             $   72,166  $     558  $   61,856  $     154
---------------------------------------------------------------------------------------------------------
</TABLE>


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

NOTE 8 - SUBORDINATED DEBENTURES - CAPITAL SECURITIES, CONTINUED

The  Capital  Securities  are  obligations of the Holding Company's wholly owned
statutory  business  trusts, Intervest Statutory Trust I, II, III IV and V. Each
Trust  was  formed with a capital contribution of $464,000 (except for Statutory
Trust  V  which  was  formed with $310,000) from the Holding Company and for the
sole  purpose  of issuing and administering the Capital Securities. The proceeds
from  the  issuance  of  the  Capital  Securities  together  with  the  capital
contribution  for  each  Trust were used to acquire the Holding Company's Junior
Subordinated  Debentures  that are due concurrently with the Capital Securities.
The Capital Securities, net of the Company's capital contributions totaling $2.2
million,  qualify  as  regulatory  capital.

The  sole  assets of the Trusts, the obligors on the Capital Securities, are the
Junior Subordinated Debentures. In addition, for each Trust, the Holding Company
has  guaranteed the payment of distributions on, payments on any redemptions of,
and  any  liquidation  distribution  with  respect  to  the  Capital Securities.
Issuance  costs  of  $0.5  million,  $0.4 million, $0.4 million and $0.2 million
associated  with  Capital  Securities I, II, III and IV, respectively, have been
capitalized  by the Holding Company and are being amortized over the life of the
securities  using  the  straight-line  method.  There  are  no  deferred  costs
associated  with  Capital  Securities  V.

Interest  payments  on the Junior Subordinated Debentures (and the corresponding
distributions  on  the  Capital  Securities)  are payable in arrears as follows:
Capital  Securities  I  -  semi-annually  at the fixed rate of 9.875% per annum;
Capital  Securities  II  -  quarterly at the fixed rate of 6.75% per annum until
September  17,  2008  and  thereafter  at  the rate of 2.95% over 3 month libor;
Capital  Securities  III  - quarterly at the fixed rate of 5.88% per annum until
March  17,  2009 and thereafter at the rate of 2.79% over 3 month libor; Capital
Securities  IV  - quarterly at the fixed rate of 6.20% per annum until September
20,  2009  and  thereafter  at the rate of 2.40% over 3 month libor; and Capital
Securities  V  -  quarterly at the fixed rate of 6.83% per annum until September
15,  2011  and  thereafter  at  the  rate  of  1.65%  over  3  month  libor.

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

All  of  the  Capital Securities are subject to mandatory redemption as follows:
(i)  in  whole,  but  not  in  part,  upon  repayment of the Junior Subordinated
Debentures  at stated maturity or earlier, at the option of the Holding Company,
within  90  days following the occurrence and continuation of certain changes in
the  tax or capital treatment of the Capital Securities, or a change in law such
that the Trust would be considered an investment company, contemporaneously with
the redemption by the Holding Company of the Junior Subordinated Debentures; and
(ii)  in  whole or in part at any time on or after December 18, 2006 for Capital
Securities  I,  September 17, 2008 for Capital Securities II, March 17, 2009 for
Capital  Securities  III,  September  20,  2009  for  Capital  Securities IV and
September  15, 2011 for Capital Securities V contemporaneously with the optional
redemption by the Holding Company of the Junior Subordinated Debentures in whole
or  in  part.  Any  redemption  would  be  subject  to the receipt of regulatory
approvals.

The  Holding  Company  intends  to  use  the  proceeds  from the sale of Capital
Securities V (that was completed in September 2006), together with $5 million of
available  cash  on hand, to redeem on December 18, 2006 Capital Securities I in
the principal amount of $15 million. The net effect of these actions will reduce
the  Company's  future  annual  interest  expense  by  $0.8  million.  Upon  the
redemption of Capital Securities I, $0.4 million of related unamortized issuance
costs  will  be  expensed  in  the  fourth  quarter  of  2006.


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

NOTE  9  -  SHORT-TERM  BORROWINGS  AND  LINES  OF  CREDIT

From time to time, the Bank may borrow funds on an overnight or short-term basis
to  manage  its  liquidity needs. At September 30, 2006, the Bank had agreements
with  correspondent  banks  whereby  it  could  borrow  up  to $16 million on an
unsecured  basis.

In  addition,  as  a member of the Federal Home Loan Bank of New York (FHLB) and
the  Federal Reserve Bank of New York (FRB), the Bank can also borrow from these
institutions  on  a secured basis. At September 30, 2006, the Bank had available
collateral  consisting  of  investment securities to support total borrowings of
$331  million  from  the  FHLB  and  FRB.  At  September 30, 2006, there were no
borrowings  outstanding  from  any  of  the  sources  noted  above.

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

<TABLE>
<CAPTION>
                                                      Quarter Ended     Nine-Months Ended
                                                       September 30,      September 30,
                                                     -------------------------------------
($in thousands)                                        2006     2005      2006      2005
------------------------------------------------------------------------------------------
<S>                                                  <C>       <C>      <C>       <C>
Balance at period end                                $     -   $    -   $     -   $     -
Maximum amount outstanding at any month end          $46,200   $3,000   $46,200   $17,000
Average outstanding balance for the period           $13,526   $1,108   $10,854   $ 6,234
Weighted-average interest rate paid for the period      5.54%    3.94%     5.27%     2.79%
Weighted-average interest rate at period end               -%       -%        -%        -%
------------------------------------------------------------------------------------------
</TABLE>

NOTE  10  -  COMMON  STOCK  WARRANTS

At September 30, 2006, there were 696,465 common stock warrants outstanding that
entitle  its  current  holder, the estate of the former Chairman of the Company,
Jerome  Dansker, to purchase one share of the Holding Company's Class A or Class
B  common stock as the case may be for each warrant. All warrants are vested and
currently  exercisable.

Data  concerning  common  stock  warrants  is  as  follows:

<TABLE>
<CAPTION>
                                                                  Exercise Price Per Warrant
                                                                  --------------------------     Wtd-Avg
Class A Common Stock Warrants:                                                     $    6.67  Exercise Price
-------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                            <C>
Outstanding at December 31, 2005 and September 30, 2006                              501,465  $          6.67
Remaining contractual life in years at September 30, 2006 (1)                            0.3
-------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                    Exercise Price Per Warrant
                                                               --------------------------------           Total          Wtd-Avg
Class B Common Stock Warrants:                                 $          6.67  $         10.00        Warrants   Exercise Price
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>              <C>              <C>             <C>
Outstanding at December 31, 2005 and September 30, 2006                145,000           50,000         195,000  $          7.52
Remaining contractual life in years at September 30, 2006 (1)              1.3              1.3             1.3
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  At September  30,  2006, the intrinsic value and weighted-average remaining
     contractual  life  for  all  warrants  was  $25.5  million  and  0.6 years,
     respectively.

There were no grants of warrants or options in the first nine months of 2006 and
no  compensation  expense recorded in any of the reporting periods in connection
with  the  Company's  outstanding  warrants.

NOTE  11  -  EARNINGS  PER  SHARE  (EPS)

Basic  and diluted EPS are calculated in accordance with SFAS No. 128, "Earnings
per  Share."  Basic  EPS  is  calculated  by  dividing  net  earnings  by  the
weighted-average  number  of  shares of common stock outstanding. Diluted EPS is
calculated  by  dividing adjusted net earnings by the weighted-average number of
shares  of  common  stock and dilutive potential common stock shares that may be
outstanding  in  the  future.

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


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

NOTE  11  -  EARNINGS  PER  SHARE  (EPS),  CONTINUED

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

<TABLE>
<CAPTION>
                                                                              Quarter Ended         Nine-Months Ended
                                                                              September 30,           September 30,
                                                                         ----------------------------------------------
($in thousands, except share and per share amounts)                         2006        2005        2006        2005
-----------------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share:
<S>                                                                      <C>         <C>         <C>         <C>
  Net earnings applicable to common stockholders                         $    4,884  $    4,566  $   17,712  $   12,337
  Average number of common shares outstanding                             7,852,537   6,967,473   7,840,289   6,508,297
-----------------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share                                                 $     0.62  $     0.66  $     2.26  $     1.90
-----------------------------------------------------------------------------------------------------------------------
Diluted Earnings Per Share:
  Net earnings applicable to common stockholders                         $    4,884  $    4,566  $   17,712  $   12,337
  Adjustment to net earnings from assumed conversion of debentures (1)           36          55         113         165
                                                                         ----------------------------------------------
  Adjusted net earnings for diluted earnings per share computation       $    4,920  $    4,621  $   17,825  $   12,502
                                                                         ----------------------------------------------
Average number of common shares outstanding:
  Common shares outstanding                                               7,852,537   6,967,473   7,840,289   6,508,297
  Potential dilutive shares resulting from exercise of warrants (2)         335,170     269,754     325,656     259,052
  Potential dilutive shares resulting from conversion of debentures (3)     197,163     335,664     204,656     339,191
                                                                         ----------------------------------------------
Total average number of common shares outstanding used for dilution       8,384,870   7,572,891   8,370,601   7,106,540
-----------------------------------------------------------------------------------------------------------------------
Diluted Earnings Per Share                                               $     0.59  $     0.61  $     2.13  $     1.76
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Represents  interest  expense  on  dilutive  convertible debentures, net of
     taxes,  that  would  not  occur  if  they  were  assumed  converted.
(2)  All outstanding  warrants  were  considered  for  the  EPS  computations.
(3)  Convertible  debentures  (principal  and  accrued  interest) outstanding at
     September  30,  2006  and  2005  totaling  $3.1  million  and $4.6 million,
     respectively,  were  convertible into common stock at a price of $16.00 per
     share  in  2006  and  $14.00  per  share in 2005 and resulted in additional
     common  shares  (based  on  average  balances  outstanding).

NOTE  12  -  OFF-BALANCE  SHEET  FINANCIAL  INSTRUMENTS

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

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

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

<TABLE>
<CAPTION>
                                 At September 30,   At December 31,
                                 -----------------  ----------------
     ($in thousands)                   2006               2005
     ---------------------------------------------------------------
<S>                              <C>                <C>
     Unfunded loan commitments   $          48,558  $        101,597
     Available lines of credit                 926               737
     Standby letters of credit                 100               100
     ---------------------------------------------------------------
                                 $          49,584  $        102,434
     ---------------------------------------------------------------
</TABLE>


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

NOTE  13  -  REGULATORY  CAPITAL

The Holding Company is subject to regulation, examination and supervision by the
FRB.  The Bank is also subject to regulation, examination and supervision by the
Federal  Deposit  Insurance Corporation (FDIC) and the Office of the Comptroller
of  the  Currency  of  the  United States of America (OCC). Intervest Securities
Corporation  is  subject  to regulation, examination and supervision by the U.S.
Securities  and  Exchange  Commission  (SEC)  and  the  National  Association of
Securities  Dealers  (NASD).

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

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

The  Federal  Reserve  on  March  1, 2005 issued a final rule that retains trust
preferred  securities in the Tier 1 capital of bank holding companies (BHC), but
with  stricter  quantitative  limits  and clearer qualitative standards. The new
rule provides a transition period for BHCs to meet the new, stricter limitations
within  regulatory  capital  by  allowing  the limits on restricted core capital
elements  to  become fully effective as of March 31, 2009. Until March 31, 2009,
BHCs  generally  must  comply  with  the  current  Tier  1 capital limits. As of
September  30,  2006  and  December  31,  2005,  assuming  the Company no longer
included  its  trust  preferred  securities in Tier 1 Capital, the Company would
still  exceed  the well capitalized threshold under the regulatory framework for
prompt  corrective  action.

Management  believes,  as  of September 30, 2006 and December 31, 2005, that the
Company  and  the  Bank  met all capital adequacy requirements to which they are
subject.  As of September 30, 2006, the most recent notification from the Bank's
regulators  categorized  the  Bank  as  a well-capitalized institution under the
regulatory framework for prompt corrective action, which requires minimum Tier 1
leverage  and  Tier  1  and  total  risk-based capital ratios of 5%, 6% and 10%,
respectively.  Management  is  not  aware  of  any  current conditions or events
outstanding  that  would  change  the  designation  from  well  capitalized.

At  September 30, 2006, the actual capital of the Bank on a percentage basis was
as  follows:

<TABLE>
<CAPTION>
                                                              Actual   Minimum       To Be Considered
                                                              Ratios   Requirement   Well Capitalized
                                                              -------  ------------  -----------------
<S>                                                           <C>      <C>           <C>
     Total capital to risk-weighted assets                     12.41%         8.00%             10.00%
     Tier 1 capital to risk-weighted assets                    11.31%         4.00%              6.00%
     Tier 1 capital to total average assets - leverage ratio    9.84%         4.00%              5.00%
</TABLE>

At  September  30,  2006,  the actual capital of the Company (consolidated) on a
percentage  basis  was  as  follows:

<TABLE>
<CAPTION>
                                                              Actual   Minimum       To Be Considered
                                                              Ratios   Requirement   Well Capitalized
                                                              -------  ------------  ----------------
<S>                                                           <C>      <C>           <C>
     Total capital to risk-weighted assets                     14.88%         8.00%                NA
     Tier 1 capital to risk-weighted assets                    12.69%         4.00%                NA
     Tier 1 capital to total average assets - leverage ratio   11.08%         4.00%                NA
</TABLE>

Intervest  Securities  Corporation  is  subject to the SEC's Uniform Net Capital
Rule  [15c3-1  (a)  (2)  (vi)],  which  requires  the maintenance of minimum net
capital of $5,000. At September 30, 2006, Intervest Securities Corporation's net
capital  was  $0.5  million.


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

NOTE  14  -  CONTINGENCIES

The Company is party to a class action lawsuit that was filed in conjuntion with
the  Company's  2006  proxy  statement  issued  in advance of the Company's 2006
annual  meeting  of shareholders. The lawsuit was filed in the Court of Chancery
of  the State of Delaware, individually and as a class action on behalf of Class
A  stockholders.  The  action challenged the proposed amendment and extension of
warrants held by the Company's former Chairman, Jerome Dansker, which was one of
the  items  on  the  agenda  for  the  annual  meeting.

Although  the  Company denied any wrongdoing or liability, it determined that it
was  in the best interests of the Company and its stockholders to reach a prompt
and  amicable  settlement with respect to the action. In that regard, on May 15,
2006,  the Company entered into a Memorandum of Understanding with the plaintiff
in  the  matter.  The  Memorandum provided, among other things, that: (i) if the
amendments  were  approved  by  the stockholders, the authority conferred on the
directors  by  the amendments would not provide for an extension of the terms of
the  warrants  for more than 2 years; (ii) in determining incentive compensation
of  the  chairman,  the  Company's  Compensation  Committee  would  take  into
consideration  any  extension  of  the  term  of the warrants, the value of such
extension  and  any related expense to the Company; and (iii) the Company agreed
to  and  did  send  to its stockholders a supplement to its proxy statement. The
proposed  amendments  were  approved by the Company's stockholders at the Annual
Meeting  of  the  Company  held  on  May  25,  2006.

The  parties  have  agreed  to  a Stipulation of Settlement and dismissal of the
action  consistent  with  the Memorandum. Such settlement remains subject to the
approval  by  the  Court  of  Chancery  before  which  a  motion for approval is
currently pending. By the terms of the Stipulation of Settlement, the Company is
required to pay the fees and out of pocket expenses of plaintiffs counsel in the
class  action  lawsuit,  not  to  exceed $150,000 in the aggregate. The proposed
settlement will not have a material effect on the Company's business, results of
operations,  financial  position  or  liquidity.

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  15  -  CONTRACTUAL  DEATH  BENEFIT  PAYMENTS

The  Holding  Company  and  its  wholly  owned  subsidiary,  Intervest  Mortgage
Corporation,  are contractually obligated to pay death benefits to the spouse of
each  company's  former  Chairman,  Jerome Dansker, pursuant to the terms of the
employment  agreements  between  Jerome  Dansker  and  those  two companies. The
employment  agreements require the payment to his spouse of an amount called the
"Distribution  Amount"  during  a  period  called  the  "Distribution Term." The
Distribution  Amount,  in  the case of the Holding Company is 25% of the amounts
that  would  have  been  paid monthly to Jerome Dansker as salary by the Holding
Company  and  the Distribution Term is the balance of the term of the agreement,
or  through  June  30,  2014.  In the case of Interevst Mortage Corproation, the
Distribution  Amount  is 50% of the amounts that would have been paid monthly to
Jerome  Dansker as salary by Intervest Mortgage Corporation and the Distribution
Term  is  likewise  through  June  30,  2014.

As  a  result of the death of the former Chairman in August 2006, a consolidated
death benefit expense of $1.5 million was recorded in the third quarter of 2006.
The  liability  is  included  in the condensed consolidated balance sheet in the
line  item  "other  liabilities" and the expense is included in the statement of
earnings  in  the  line  item  "salaries  and  employee  benefits."  The expense
represents  the  estimated  net present value of the total monthly death benefit
payments  of  $1.9  million  that  are  payable  to the former Chairman's spouse
through  June  30,  2014.  The  difference between the net present value and the
total  payments  will  be recorded as interest expense in future periods through
June  30,  2014.  In the event of the death of the spouse of the former Chairman
prior to the June 30, 2014, any remaining payments will be paid in a lump sum to
the  spouse's  estate.


                                       16
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------

NOTE  16  -  RECENT  ACCOUNTING  PRONOUNCEMENTS

SHARE-BASED  COMPENSATION.  On  January  1,  2006,  the Company adopted SFAS No.
123-R "Share-Based Payment"  which replaces the existing SFAS 123 and supersedes
APB  No.  25. SFAS 123-R requires companies to recognize in the income statement
the  grant-date  fair value of stock options and other equity-based compensation
issued  to  employees  and  directors, but expresses no preference for a type of
valuation  model.  SFAS  123-R  did  not impact any of the Company's outstanding
warrants  at  January 1, 2006 since all were vested and issued prior to this new
standard.  The  Company  has  not  issued  any new stock warrants and/or options
during  2006.  The  Company  will  be required to recognize expense on new stock
warrants/options  granted,  or modified, which may have a material impact on the
Company's  statement  of  earnings.

CONCENTRATION  OF  CREDIT  RISKS.  On  January  1,  2006,  the  Company  adopted
Statement of Position ("SOP") 94-6-1, "Terms of Loan Products That May Give Rise
to  a  Concentration  of Credit Risk." The SOP addresses the circumstances under
which the terms of loan products give rise to a concentration of credit risk and
related  disclosures and accounting considerations, and is intended to emphasize
the  requirement  to assess the adequacy of disclosures for all lending products
and  the  effect  of changes in market or economic conditions on the adequacy of
those  disclosures.  The  adoption  of  this  SOP  did  not impact the Company's
financial  statements.

IMPAIRMENT.  On January 1, 2006, the Company adopted FASB Staff Position ("FSP")
115-1,  "The  Meaning  of Other-Than-Temporary Impairment and Its Application to
Certain Investments," which supersedes Emerging Issues Task Force Issue ("EITF")
03-1  and  related amendments to EITF 03-1. The guidance in FSP 115-1 outlines a
three-step  model  for  identifying  investment impairments regarding impairment
measurement,  other-than-temporary  impairment  evaluation  and  recognition  of
other-than-temporary  impairment  losses  and  subsequent  accounting.  It  also
carries  forward  the disclosure requirements of EITF 03-1. The adoption of this
FSP  did  not  impact  the  Company's  financial  statements.

ACCOUNTING  CHANGES  AND  ERROR  CORRECTIONS.  On  January  1, 2006, the Company
adopted  SFAS No. 154 "Accounting Changes and Error Corrections." This statement
requires  entities  that  voluntarily  make  a change in accounting principle to
apply that change retrospectively to prior periods' financial statements, unless
this  would  be  impracticable.  SFAS  No.  154  supersedes  APB Opinion No. 20,
Accounting  Changes,  which  previously  required that most voluntary changes in
accounting  principle  be  recognized  by  including in the current period's net
income  the  cumulative effect of changing to the new accounting principle. SFAS
No.  154  also  makes  a  distinction  between "retrospective application" of an
accounting  principle  and  the "restatement" of financial statements to reflect
the  correction  of  an error. Another significant change in practice under SFAS
No.  154  will  be  that  if  an  entity  changes  its  method  of depreciation,
amortization, or depletion for long-lived, non-financial assets, the change must
be  accounted  for as a change in accounting estimate. Under APB Opinion No. 20,
such  a change would have been reported as a change in accounting principle. The
adoption  of  this  statement did not impact the Company's financial statements.

ACCOUNTING  FOR  PENSION PLANS. In September 2006, the FASB issued SFAS No. 158,
"Employers  Accounting  for  Defined  Benefit  Pension  and Other Postretirement
Plans." SFAS 158 requires recognition in the consolidated statement of financial
condition of the over or underfunded status of postretirement plans, measured as
the  difference  between  the  fair  value  of  the  plan assets and the benefit
obligation.  For  pension plans, the benefit obligation is the projected benefit
obligation,  for  other  postretirement  plans,  the  benefit  obligation is the
accumulated  postretirement obligation. SFAS 158 is effective for the Company on
January  1,  2007. Currently, the Company does not offer any plans covered under
this  statement and therefore the adoption of this statement will have no impact
on  the  Company's  financial  statements.

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


                                       17
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------

NOTE  16  -  RECENT  ACCOUNTING  PRONOUNCEMENTS,  CONTINUED

ACCOUNTING  FOR  SERVICING  OF  FINANCIAL ASSETS. In March 2006, the FASB issued
SFAS  No.  156,  "Accounting for Servicing of Financial Assets." SFAS 156 amends
SFAS  140  with  respect  to  the accounting for separately-recognized servicing
assets  and  liabilities.  SFAS 156 requires all separately-recognized servicing
assets  and  liabilities  to  be  initially  measured at fair value, and permits
companies  to  elect, on a class-by-class basis, to account for servicing assets
and  liabilities on either a lower of cost or market value basis or a fair value
basis.  SFAS 156 is effective for the Company on January 1, 2007. The Company is
currently  evaluating the provisions of SFAS 156 and its potential effect on its
financial  statements.

FSP FIN 46(R)-6. In April 2006, the FASB issued FASB Staff Position FIN 46(R)-6,
"Determining  the  Variability  to Be Considered in Applying FASB Interpretation
No.  46(R)." FSP FIN 46(R)-6 addresses how variability should be considered when
applying  FIN  46(R). Variability affects the determination of whether an entity
is  a  VIE,  which interests are variable interests, and which party, if any, is
the  primary  beneficiary  of  the  VIE required to consolidate. FSP FIN 46(R)-6
clarifies  that  the  design  of  the  entity  also  should  be  considered when
identifying  which interests are variable interests. The Company adopted FSP FIN
46(R)-6  effective  September  1,  2006.  FSP  FIN  46(R)-6  must  be  applied
prospectively  to  all entities in which the Company first becomes involved with
as  of the date of adoption.  The adoption of FSP FIN 46(R)-6 is not expected to
have  a  material  effect  on  the  Company's  financial  statements.

ACCOUNTING  FOR  UNCERTAINTY IN INCOME TAXES. In June 2006, the FASB issued FASB
Interpretation  No.  48,  "Accounting  for  Uncertainty  in  Income  Taxes-an
interpretation  of  FASB Statement No. 109." FIN 48 clarifies the accounting for
income  taxes  by  prescribing  the  minimum  recognition  threshold  that a tax
position  must  meet  to  be recognized in the financial statements. FIN 48 also
provides  guidance  on  measurement, derecognition, classification, interest and
penalties, accounting in interim periods, disclosure and transition. The Company
must adopt FIN 48 on January 1 2007.  The Company is currently evaluating FIN 48
and  its  potential  effect  on  its  financial  statements.

ACCOUNTING  FOR CERTAIN HYBRID FINANCIAL INSTRUMENTS. In February 2006, the FASB
issued  SFAS  No.  155,  "Accounting  for Certain Hybrid Financial Instruments",
which  amends  SFAS  No.  133, Accounting for Derivative Instruments and Hedging
Activities,  and  SFAS  No.  140,  Accounting  for  Transfers  and  Servicing of
Financial  Assets  and  Extinguishments  of  Liabilities.  This  statement  also
resolves  issues  addressed in SFAS 133 Implementation Issue No. D1, Application
of  Statement  133 to Beneficial Interests in Securitized Financial Assets. SFAS
155  eliminates  the  exemption  from  applying  SFAS  No.  133  to interests in
securitized  financial  assets  so  that  similar  instruments are accounted for
similarly  regardless  of  the  form  of the instruments. SFAS 155 also allows a
preparer  to elect fair value measurement at acquisition, at issuance, or when a
previously  recognized  financial  instrument is subject to a remeasurement (new
basis)  event,  on  an  instrument-by-instrument  basis,  in  case  in  which  a
derivative  would otherwise have to be bifurcated. SFAS No. 155 is effective for
all  financial  instruments acquired or issued by the Company after December 31,
2006.  The  Company  does  not  expect  the adoption SFAS 155 to have a material
effect  on  its  financial  statements.

ACCOUNTING FOR MISSTATEMENTS. In September 2006, the SEC issued Staff Accounting
Bulletin  No.  108  ("SAB  108"),  "Considering  the  Effects  of  Prior  Year
Misstatements  When  Quantifying  Misstatements  in  Current  Year  Financial
Statements",  providing guidance on quantifying financial statement misstatement
and  implementation  (e.g.,  restatement  or  cumulative  effect  to  assets,
liabilities and retained earnings) when first applying this guidance. SAB 108 is
effective  for  the  Company  in 2007. The Company does not believe the guidance
provided  by  SAB  108  will  have  a material effect on the Company's financial
statements.


                                       18
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES

             REVIEW BY INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     Hacker,  Johnson  & Smith, P.A., P.C., the Company's independent registered
public  accounting  firm,  has made a limited review of the financial data as of
September 30, 2006 and for the three- and nine-month periods ended September 30,
2006  and  2005  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.


                                       19
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board  of  Directors  and  Stockholders
Intervest  Bancshares  Corporation
New  York,  New  York:

We  have  reviewed  the  accompanying  condensed  consolidated  balance sheet of
Intervest  Bancshares  Corporation  and  Subsidiaries  (the  "Company")  as  of
September 30, 2006 and the related condensed consolidated statements of earnings
for the three- and nine-month periods ended September 30, 2006 and 2005, and the
related condensed consolidated statements of changes in stockholders' equity and
cash  flows  for the nine-month periods ended September 30, 2006 and 2005. 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,  2005, 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 3, 2006, 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, 2005 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
November 2, 2006


                                       20
<PAGE>
On October 31, 2006 a loan
with  a  principal balance of $13.4 million secured by a multifamily real estate
property located in Long Island, New York and a loan with a principal balance of
$2.3  million  secured by a commercial real estate property located in Brooklyn,
New  York  were placed on nonaccrual status and foreclosure proceedingshave been
commenced.  Management  believes  that  these  loans  are  well  secured.
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF  OPERATIONS

                                    OVERVIEW
                                    --------

The  following  management's  discussion  of  financial condition and results of
operations  of  Intervest Bancshares Corporation and Subsidiaries should be read
in  conjunction with the accompanying quarterly condensed consolidated financial
statements  in  this  report on Form 10-Q as well as the entire Annual Report on
Form  10-K  for  the  year  ended  December  31,  2005.

Intervest  Bancshares  Corporation  has  three  wholly  owned  consolidated
subsidiaries  -  Intervest  National  Bank,  Intervest  Mortgage Corporation and
Intervest  Securities  Corporation  (hereafter  referred  to collectively as the
"Company"  on  a  consolidated  basis).  Intervest  Bancshares  Corporation  and
Intervest National Bank may be referred to individually as the "Holding Company"
and  the  "Bank,"  respectively.  Intervest Bancshares Corporation also has five
wholly  owned  unconsolidated subsidiaries, Intervest Statutory Trust I, II, III
IV  and  V.  In  October  2006,  the  limited operations of Intervest Securities
Corporation  were  discontinued  and  its  net assets will be distributed to the
Holding  Company  during  the  fourth  quarter  of 2006. For a discussion of the
Company's  business,  see  note  2  to  the  condensed  consolidated  financial
statements  in  this  report.

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

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

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

The  Company's  loan portfolio is concentrated (99.9%) in mortgage loans secured
by  commercial  and  multifamily  real  estate  properties (including rental and
cooperative/condominium  apartment  buildings,  office  buildings,  mixed-use
properties,  shopping  centers,  hotels,  restaurants,  industrial  properties,
parking  lots/garages  and  vacant  land).  These  loans have an average life of
approximately  three  years.  The Company tends to lend in areas that are in the
process  of  being  revitalized,  with  a  concentration  of loans on properties
located in New York State and the State of Florida. A significant portion of the
residential  properties  are  located  in  New York City and are subject to rent
control  and  rent  stabilization  laws, which limit the ability of the property
owners  to  increase  rents.

All  loans  are  subject to the risk of default, otherwise known as credit risk,
which  represents the possibility of the Company not recovering amounts due from
its  borrowers.  A borrower's ability to make payments due under a mortgage loan
is  dependent upon the risks associated with real estate investments in general,
including  the  following: general or local economic conditions in the areas the
properties  are  located,  neighborhood  values, interest rates, real estate tax
rates,  operating expenses of the mortgaged properties, supply of and demand for
rental


                                       21
<PAGE>
units,  supply  of  and  demand  for  properties, ability to obtain and maintain
adequate  occupancy  of  the  properties,  zoning  laws,  governmental  rules,
regulations  and  fiscal  policies.  Additionally,  terrorist  acts  and  armed
conflicts,  such  as  the  war  on  terrorism,  and  natural  disasters, such as
hurricanes,  may  have  an  adverse  impact  on  economic  conditions.  Economic
conditions  affect  the  market value of the mortgaged properties underlying the
Company's  loans as well as the levels of rent and occupancy of income-producing
properties.

                          CRITICAL ACCOUNTING POLICIES
                          ----------------------------

The  Company believes that currently its only accounting policy that is critical
to  the  presentation  of  its  financial  statements and requires estimates and
judgment on the part of management relates to the determination of the Company's
allowance  for  loan  losses.  The  allowance  for  loan  losses  is  a critical
accounting  estimate  because  it is highly susceptible to change from period to
period  requiring  management  to make assumptions about future loan chargeoffs.
The  impact  of  a  sudden  large  chargeoff  could  deplete  the  allowance and
potentially require increased provisions to replenish the allowance, which could
negatively affect the Company's earnings and financial position. A more detailed
discussion  of  the factors and estimates used in computing the allowance can be
found under the caption "Critical Accounting Policies" on pages 32 and 33 of the
Company's  Annual  Report  on  Form  10-K  for the year ended December 31, 2005.

  COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2006 AND DECEMBER 31, 2005
  -----------------------------------------------------------------------------

OVERVIEW
--------

Total assets at September 30, 2006 increased to $1.97 billion, from $1.71 billon
at December 31, 2005. Total liabilities at September 30, 2006 increased to $1.82
billion,  from  $1.57  billion  at  December  31, 2005, and stockholders' equity
increased  to  $154.4  million  at  September  30,  2006, from $136.2 million at
December  31, 2005. Book value per common share increased to $19.66 at September
30,  2006,  from  $17.41  at  December  31,  2005.

Selected  balance  sheet  information  as  of  September  30,  2006  follows:

<TABLE>
<CAPTION>
                                                          Intervest    Intervest    Intervest      Inter-
                                               Holding    National     Mortgage    Securities     Company
($in thousands)                                Company      Bank         Corp.        Corp.     Amounts (1)    Consolidated
----------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>        <C>          <C>          <C>          <C>           <C>
Cash and cash equivalents                     $ 17,548   $   72,441   $   33,632   $       512  $   (21,132)  $     103,001
Security investments                                 -      346,596            -             -            -         346,596
Loans receivable, net of deferred fees           9,142    1,394,911       88,299             -            -       1,492,352
Allowance for loan losses                          (85)     (16,655)        (298)            -            -         (17,038)
Investment in consolidated subsidiaries        200,142            -            -             -     (200,142)              -
All other assets                                 4,977       33,382        6,903             4          (71)         45,195
----------------------------------------------------------------------------------------------------------------------------
Total assets                                  $231,724   $1,830,675   $  128,536   $       516  $  (221,345)  $   1,970,106
----------------------------------------------------------------------------------------------------------------------------
Deposits                                      $      -   $1,622,264   $        -   $         -  $   (21,140)      1,601,124
Borrowed funds and related interest payable     77,131          219       96,730             -            -         174,080
All other liabilities                              191       37,578        2,784            10          (63)         40,500
----------------------------------------------------------------------------------------------------------------------------
Total liabilities                               77,322    1,660,061       99,514            10      (21,203)      1,815,704
----------------------------------------------------------------------------------------------------------------------------
Stockholders' equity                           154,402      170,614       29,022           506     (200,142)        154,402
----------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity    $231,724   $1,830,675   $  128,536   $       516  $  (221,345)  $   1,970,106
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)  All significant  intercompany  balances  and transactions are eliminated in
     consolidation.  Such  amounts  arise  largely  from  intercompany  deposit
     accounts  and  investments  in  subsidiaries.

A  comparison  of  selected  balance  sheet  information  follows:

<TABLE>
<CAPTION>
                                                                    At September 30, 2006      At December 31, 2005
                                                                 ---------------------------  -------------------------
                                                                  Carrying       % of          Carrying       % of
($in thousands)                                                    Value     Total Assets       Value     Total Assets
-----------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>         <C>              <C>         <C>
Cash and cash equivalents                                        $  103,001           5.2%    $   56,716           3.3%
Security investments                                                346,596          17.6        256,749          15.0
Loans receivable, net of deferred fees and loan loss allowance    1,475,314          74.9      1,352,805          79.3
All other assets                                                     45,195           2.3         40,153           2.4
-----------------------------------------------------------------------------------------------------------------------
Total assets                                                     $1,970,106         100.0%    $1,706,423         100.0%
-----------------------------------------------------------------------------------------------------------------------
Deposits                                                         $1,601,124          81.3%    $1,375,330          80.6%
Borrowed funds and related interest payable                         174,080           8.8        155,725           9.1
All other liabilities                                                40,500           2.1         39,190           2.3
-----------------------------------------------------------------------------------------------------------------------
Total liabilities                                                 1,815,704          92.2      1,570,245          92.0
-----------------------------------------------------------------------------------------------------------------------
Stockholders' equity                                                154,402           7.8        136,178           8.0
-----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity                       $1,970,106         100.0%    $1,706,423         100.0%
-----------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       22
<PAGE>
CASH  AND  CASH  EQUIVALENTS
----------------------------

Cash  and  cash  equivalents  increased to $103.0 million at September 30, 2006,
from  $56.7 million at December 31, 2005, reflecting the temporary investment of
deposit  inflows  during September 2006. A portion of these funds is expected to
fund  new  loans  and  to  redeem  prior  to  their scheduled maturities certain
debentures  outstanding  during  the  fourth  quarter  of  2006.

SECURITY  INVESTMENTS
---------------------

Securities,  which  the  Company has the intent and ability to hold to maturity,
are  classified  as  held  to maturity and carried at amortized cost. Currently,
only the Bank holds such security investments, which increased to $340.8 million
at  September  30,  2006, from $251.5 million at December 31, 2005. The increase
reflected  new  purchases  exceeding maturities and calls during the period. The
Bank continues to invest in short-term (up to 5 year maturities) U.S. government
agency  debt  obligations  to  emphasize  liquidity  and to currently target its
loan-to-deposit ratio at approximately 85%. This ratio stood at 84% at September
30,  2006.

At  September  30,  2006, the held-to-maturity portfolio consisted of short-term
debt  obligations  of  the  Federal  Home  Loan  Bank, Federal Farm Credit Bank,
Federal National Mortgage Association and Federal Home Loan Mortgage Corporation
with a weighted-average yield of 4.53% and a weighted-average remaining maturity
of  1.5  years,  compared  to 3.26% and 1.1 years, respectively, at December 31,
2005.  The  securities  are  fixed  rate  or  have  predetermined scheduled rate
increases,  and  many  have  call  features  that  allow  the issuer to call the
security  before  its  stated  maturity  without  penalty.

At  September  30,  2006 and December 31, 2005, the held-to-maturity portfolio's
estimated  fair  value  was  $339.7 million and $249.1 million, respectively. At
September  30,  2006,  the  held-to-maturity portfolio had net unrealized losses
totaling $1.1 million, compared to $2.4 million at December 31, 2005. Management
believes  that  the  cause  of  these  unrealized  losses is directly related to
changes  in  market interest rates. In general, as interest rates rise, the fair
value of fixed-rate securities will decrease; as interest rates fall, their fair
value  will  increase.  Management views the unrealized losses noted above to be
temporary  based  on  the  impact  of  changes in interest rates, the very short
maturities  of  the  investments and their high credit quality. In addition, the
Bank  has  the  ability  and intent to hold its investments for a period of time
sufficient  for  the  fair value of the securities to recover. To date, the Bank
has  always  recovered  the  cost  of  its  investment securities upon maturity.

In  order  for the Bank to be a member of the Federal Reserve Bank (FRB) and the
Federal  Home  Loan Bank of New York (FHLB), the Bank maintains an investment in
their  capital  stock,  which  amounted  to  $3.4  million  and  $2.4  million,
respectively,  at September 30, 2006. The FRB stock currently pays a dividend of
6%,  while  the  FHLB stock dividend fluctuates and most recently was 5.75%. The
total investment, which amounted to $5.8 million at September 30, 2006, compared
to  $5.2  million  at  December 31, 2005, fluctuates based on the Bank's capital
level  for the FRB stock and the Bank's loans and borrowings for the FHLB stock.

LOANS  RECEIVABLE,  NET  OF  DEFERRED  FEES  AND  ALLOWANCE  FOR  LOAN  LOSSES
------------------------------------------------------------------------------

Loans  receivable, net of deferred fees and allowance for loan losses, increased
to  $1.48 billion at September 30, 2006 from $1.35 billion at December 31, 2005.
The  growth  reflected  new mortgage loan originations secured by commercial and
multifamily  real  estate  exceeding principal repayments. New loan originations
totaled $147 million and $437 million in the third quarter and first nine months
of  2006,  compared  to  $221  million and $545 million in the third quarter and
first  nine  months  of  2005,  respectively.

Nearly  all  (99.9%) of the Company's loan portfolio is concentrated in mortgage
loans  secured  by  commercial and multifamily real estate properties (including
rental  and  cooperative/condominium  apartment  buildings,  office  buildings,
mixed-use  properties,  shopping  centers,  hotels,  restaurants,  industrial
properties,  parking  lots/garages and vacant land). At September 30, 2006, such
loans  consisted  of  538  loans  with  an  aggregate principal balance of $1.50
billion  and  an  average  principal  size of $2.8 million. Loans with principal
balances  of $5.0 million or more aggregated to 81 loans or $736.2 million, with
the  largest  loan  amounting  to  $20.5  million.

Nonaccrual  loans  at September 30, 2006 totaled $7.7 million and were comprised
of three real estate loans (one collateralized by a multifamily property and two
by  commercial  properties),  compared  to two loans totaling $0.7 million on at
December  31,  2005.  In  September  2006,  the  Company received full principal
repayment  of  the  loans


23
<PAGE>
on  nonaccrual status at December 31, 2005. With respect to the nonaccrual loans
at  September  30, 2006, foreclosure actions have been commenced for nonpayment.
Nonaccrual loans are considered impaired under the criteria of SFAS No. 114, but
no  valuation  allowance  was  maintained at any time since the Company believes
that  the estimated fair value of the underlying properties collateralizing each
loan  exceeded  its  recorded investment in each loan. At September 30, 2006 and
December  31,  2005, there  were no other impaired loans. On October 31, 2006, a
loan  with  a  principal  balance of $13.4 million secured by a multifamily real
estate  property  located in  Long Island, New York, and a loan with a principal
balance  of $2.3 million secured by a commercial real estate property located in
Brooklyn,  New York were placed on nonaccrual status and foreclosure proceedings
have  been  commenced.  Management  believes  that these loans are well secured.

Loans ninety days past due and still accruing interest at September 30, 2006 and
December  31,  2005  totaled $18.6 million and $2.6 million, respectively. These
commercial  and  multifamily  real  estate loans were deemed by management to be
well  secured and in the process of collection. The amount at September 30, 2006
represented  six  loans;  of  which  five  ($16.2  million) have matured and the
borrowers  continue  to  make  monthly  payments  of  interest and principal. In
October  2006,  $11.9  million of these loans were renewed and extended and $3.7
million was repaid in full. The remaining loan of $3.0 million is expected to be
revewed  and  extended  in  November.

At  September  30,  2006, the Bank was closely monitoring four real estate loans
totaling  $8.5  million, each of which are collateralized by real estate located
in  New  Jersey.  Each  loan  is  guaranteed  by  a  principal  who is currently
experiencing  legal  and  financial  difficulties and for whom a court-appointed
fiscal  agent  has  been appointed to administer his assets. As of September 30,
2006,  three of these loans totaling $7.7 million were on accruing status as the
Bank  is receiving payments of principal and interest, and the remaining loan of
$0.8  million  was  on  nonaccrual  status  and included in the nonaccrual loans
reported  above.  All  four  of  these  loans  were originated within the Bank's
underwriting  guidelines. Although the Bank believes that all the loans are well
collateralized,  there  can  be no assurance that loan chargeoffs or significant
expenses  will  not  be  incurred  by  the  Bank  with  respect  to the ultimate
collection  of  these  loans.

The  allowance  for loan losses amounted to $17.0 million at September 30, 2006,
compared  to $15.2 million at December 31, 2005. The allowance represented 1.14%
of  total  loans,  net  of  deferred  fees,  outstanding  at September 30, 2006,
compared to 1.11% at December 31, 2005. The increase in the allowance was due to
provisions  aggregating  $1.8  million  during the period resulting largely from
growth  in loans outstanding, which amounted to $123.5 million from December 31,
2005.

ALL  OTHER  ASSETS
------------------

All  other  assets  increased to $45.2 million at September 30, 2006, from $40.2
million  at  December 31, 2005, primarily due to an increase in accrued interest
receivable, which fluctuates based on the amount of loans, investments and other
interest-earning  assets  outstanding  and  the  timing  of  interest  payments
received.

DEPOSITS
--------

Deposits increased to $1.60 billion at September 30, 2006, from $1.38 billion at
December  31,  2005,  reflecting an increase of $228.6 million in certificate of
deposit  accounts,  partially  offset by a net decrease in checking, savings and
money  market  accounts  totaling  $2.8  million.

At  September  30,  2006, certificate of deposit accounts totaled $1.35 billion,
and  checking,  savings and money market accounts aggregated $254.1 million. The
same  categories  of  deposit accounts totaled $1.12 billion and $256.8 million,
respectively,  at December 31, 2005. Certificate of deposit accounts represented
84%  of  total  deposits  at September 30, 2006, compared to 81% at December 31,
2005.  At  September  30,  2006  and  December  31, 2005, certificate of deposit
accounts  included  $55.7  million  and $40.5 million, respectively, of brokered
deposits.

BORROWED  FUNDS  AND  RELATED  INTEREST  PAYABLE
------------------------------------------------

At  September 30, 2006, borrowed funds and related interest payable increased to
$174.1  million,  from  $155.7  million  at  December 31, 2005. The increase was
primarily  due  to  issuance  of  $26.3  million of additional debentures ($10.3
million  were  issued  by  the Holding Company to its newly created wholly owned
unconsolidated  subsidiary,  Intervest  Statutory Trust V and $16.0 million were
issued  by  Intervest  Mortgage  Corporation.  The new debentures were partially
offset  by  principal repayments of $7.3 million and a $0.4 million net decrease
in  related interest payable. In the fourth quarter of 2006, the Company expects
to  retire  prior  to  their stated maturity certain debentures. See the section
entitled  "Liquidity  and  Capital  Resources"  in  this  report  for  a further
discussion.


                                       24
<PAGE>
ALL  OTHER  LIABILITIES
-----------------------

All  other  liabilities  increased  to $40.5 million at September 30, 2006, from
$39.2  million  at December 31, 2005. The increase was due to the recording of a
$1.5  million  liability  associated with death benefit payments as discussed in
note  15  to  the  condensed  consolidated  financial statements included in the
report.

STOCKHOLDERS'  EQUITY
---------------------

Stockholders'  equity  increased  to  $154.4  million  at  September 30, 2006 as
follows:

<TABLE>
<CAPTION>
     ($in thousands)                                                      Amount    Shares    Per Share
     ---------------------------------------------------------------------------------------------------
<S>                                                                      <C>       <C>        <C>
     Stockholders' equity at December 31, 2005                           $136,178  7,823,058  $    17.41
     Net earnings for the period                                           17,712          -           -
     Convertible debentures converted at election of debenture holders        512     32,432       15.79
     ---------------------------------------------------------------------------------------------------
     Stockholders' equity at September 30, 2006                          $154,402  7,855,490  $    19.66
     ---------------------------------------------------------------------------------------------------
</TABLE>


                                       25
<PAGE>
   COMPARISON OF RESULTS OF OPERATIONS FOR THE QUARTERS ENDED SEPTEMBER 30, 2006
   -----------------------------------------------------------------------------
                                    AND 2005
                                    --------

OVERVIEW
--------

Consolidated  net  earnings  for  the  third  quarter  of 2006 increased by $0.3
million,  or 7%, to $4.9 million, or $0.59 per diluted share, from $4.6 million,
or $0.61 per diluted share, in the third quarter of 2005. The earnings per share
calculation for the 2006 period included a greater number of average outstanding
shares resulting primarily from a public offering of 1.4 million shares of Class
A  common  stock  during  the  third  quarter  of  2005.

The  increase in earnings was due to a $1.9 million increase in net interest and
dividend  income  and  a $0.9 million decrease in the provision for loan losses,
partially  offset  by  a  $1.6  million increase in noninterest expenses, a $0.6
million  decrease  in  noninterest  income  and  a  $0.3 million increase in the
provision  for income taxes. Noninterest expenses for the 2006 period included a
one-time  charge  of  $1.5  million  resulting  from  the  Company's contractual
obligation  to  provide  death  benefit  payments to the spouse of the Company's
former  Chairman  and founder, Jerome Dansker, who passed away in August of this
year.  This  charge  represents  the  estimated  net present value of the future
contractual  payments  that  total  $1.9  million.

The  Company's  efficiency  ratio,  which is a measure of its ability to control
expenses  as a percentage of its revenues, continued to be favorable and was 20%
(exclusive of the one-time charge) in the third quarter of 2006, compared to 21%
in  the third quarter of 2005. The Company's return on average assets and equity
was 1.05% and 12.90%, respectively, in the 2006 third quarter, compared to 1.17%
and  16.32%  in  the  2005  third  quarter.

Selected  information  regarding  results of operations for the third quarter of
2006  follows:

<TABLE>
<CAPTION>
                                             Intervest    Intervest    Intervest                 Inter-
                                             National     Mortgage    Securities    Holding     Company
($in thousands)                                Bank         Corp.        Corp.      Company   Amounts (2)   Consolidated
-------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>          <C>          <C>          <C>        <C>           <C>
Interest and dividend income                $   29,870   $    2,871   $         6  $    204   $      (191)  $      32,760
Interest expense                                17,304        1,889             -     1,204          (191)         20,206
                                            -----------------------------------------------------------------------------
Net interest and dividend income                12,566          982             6    (1,000)            -          12,554
Provision for loan losses                          915           (8)            -         -             -             907
Noninterest income                               1,016        1,454            50       113        (1,418)          1,215
Noninterest expenses                             3,759        1,602            52       207        (1,418)          4,202
                                            -----------------------------------------------------------------------------
Earnings before taxes                            8,908          842             4    (1,094)            -           8,660
Provision for income taxes                       3,890          389             2      (505)            -           3,776
-------------------------------------------------------------------------------------------------------------------------
Net earnings                                $    5,018   $      453   $         2  $   (589)  $         -   $       4,884
-------------------------------------------------------------------------------------------------------------------------
Intercompany dividends (1)                      (1,089)           -             -     1,089             -               -
-------------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany dividends   $    3,929   $      453   $         2  $    500   $         -   $       4,884
-------------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany dividends
  for the same period of 2005               $    3,114   $      895   $        13  $    544   $         -   $       4,566
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)  Dividends  to  the Holding Company from the Bank provide funds for the debt
     service  on  the  subordinated  debentures-capital  securities,  which  is
     included  in  the  Holding  Company's  interest  expense.
(2)  All significant  intercompany  balances  and transactions are eliminated in
     consolidation.  Such  amounts  arise from intercompany deposit accounts and
     management  and  service  agreements.

NET  INTEREST  AND  DIVIDEND  INCOME
------------------------------------

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

Net interest and dividend income increased to $12.6 million in the third quarter
of  2006,  from  $10.7 million in the third quarter of 2005. The improvement was
attributable  to  a  $298  million  increase  in average interest-earning assets
resulting  from  continued  growth  in  loans  of $240 million and a $58 million
increase  in security and short-term investments. This growth was funded by $240
million  of  additional  interest-bearing  deposits,  $18  million of additional
borrowed  funds  and  a  $40  million  increase  in  stockholders'  equity.

The  Company's  net  interest  margin  decreased  slightly to 2.71% in the third
quarter of 2006, from 2.74% in the third quarter of 2005. The lower margin was a
function  of  the  Company's  cost of funds increasing at a faster pace than its
yield  on  interest-earning  assets, the impact of which was mostly offset by an
increase  in  the  Company's  net


                                       26
<PAGE>
interest-earning  assets  of $40 million resulting largely from $26.3 million of
proceeds  from the issuance of common stock during the third quarter of 2005 and
increased  retained  earnings.

In  a rising rate environment, the yield on interest-earning assets increased 43
basis  points  to 7.06% in the 2006 quarter. The increase was a function of rate
increases  on existing variable-rate loans indexed to the prime rate (the impact
of which was largely offset by lower yields on new loans originated as well as a
higher  level  of interest not recorded from nonaccrual loans) and higher yields
earned on security and other short-term investments. The cost of funds increased
by  56  basis  points  to  4.82% in the 2006 quarter due to higher rates paid on
deposit  accounts.

The  following  table  provides  information on: average assets, liabilities and
stockholders'  equity;  yields earned on interest-earning assets; and rates paid
on  interest-bearing liabilities for the periods indicated. The yields and rates
shown  are  based  on a computation of income/expense (including any related fee
income  or  expense)  for  each  period  divided  by  average  interest-earning
assets/interest-bearing  liabilities  during  each  period. Average balances are
derived  from  daily  balances.  Net interest margin is computed by dividing net
interest  and  dividend  income  by the average of total interest-earning assets
during  each  period.

<TABLE>
<CAPTION>
                                                   --------------------------------------------------------------------
                                                                              Quarter Ended
                                                   --------------------------------------------------------------------
                                                           September 30, 2006                September 30, 2005
                                                   ---------------------------------  ---------------------------------
                                                     Average     Interest    Yield/     Average     Interest    Yield/
($in thousands)                                      Balance    Inc./Exp.   Rate (2)    Balance    Inc./Exp.   Rate (2)
-----------------------------------------------------------------------------------------------------------------------
<S>                                                <C>          <C>         <C>       <C>          <C>         <C>
ASSETS
Interest-earning assets:
  Loans (1)                                        $1,485,882   $   28,829     7.70%  $1,246,341   $   23,569     7.50%
  Securities                                          316,214        3,439     4.31      260,272        1,895     2.89
  Other interest-earning assets                        37,600          492     5.19       35,441          297     3.32
-----------------------------------------------------------------------------------------------------------------------
Total interest-earning assets                       1,839,696   $   32,760     7.06%   1,542,054   $   25,761     6.63%
-----------------------------------------------------------------------------------------------------------------------
Noninterest-earning assets                             19,115                             14,715
-----------------------------------------------------------------------------------------------------------------------
Total assets                                       $1,858,811                         $1,556,769
-----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
  Interest checking deposits                       $    6,574   $       29     1.75%  $    9,855   $       36     1.45%
  Savings deposits                                     12,741           95     2.96       23,597          153     2.57
  Money market deposits                               230,458        2,509     4.32      201,607        1,576     3.10
  Certificates of deposit                           1,239,826       14,287     4.57    1,014,414       10,264     4.01
-----------------------------------------------------------------------------------------------------------------------
Total deposit accounts                              1,489,599       16,920     4.51    1,249,473       12,029     3.82
-----------------------------------------------------------------------------------------------------------------------
  FHLB advances and Fed funds purchased                13,526          189     5.54        1,108           11     3.94
  Debentures and related interest payable              97,396        1,987     8.09       93,283        1,973     8.39
  Debentures - capital securities                      62,977        1,106     6.97       61,856        1,089     6.98
  Mortgage note payable                                   221            4     7.18          235            4     7.01
-----------------------------------------------------------------------------------------------------------------------
Total borrowed funds                                  174,120        3,286     7.49      156,482        3,077     7.80
-----------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities                  1,663,719   $   20,206     4.82%   1,405,955   $   15,106     4.26%
-----------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits                            4,816                              5,910
Noninterest-bearing liabilities                        38,795                             32,971
Stockholders' equity                                  151,481                            111,933
-----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity         $1,858,811                         $1,556,769
-----------------------------------------------------------------------------------------------------------------------
Net interest and dividend income/spread                         $   12,554     2.24%               $   10,655     2.37%
-----------------------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin                 $  175,977                  2.71%  $  136,099                  2.74%
-----------------------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
  to total interest-bearing liabilities                  1.11                               1.10
-----------------------------------------------------------------------------------------------------------------------
OTHER RATIOS:
  Return on average assets (2)                           1.05%                              1.17%
  Return on average equity  (2)                         12.90%                             16.32%
  Noninterest expense to average assets (2)              0.90%                              0.66%
  Efficiency ratio (3)                                     31%                                21%
  Average stockholders' equity to average assets         8.15%                              7.19%
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Includes  nonaccrual  loans.
(2)  Annualized.
(3)  Defined  as  noninterest expenses (excluding the provision for loan losses)
     as  a  percentage  of  net  interest  and  dividend income plus noninterest
     income. Noninterest expenses for the 2006 period included a one-time charge
     of  $1.5  million.


                                       27
<PAGE>
The  following  table  provides  information  regarding  changes in interest and
dividend  income  and  interest  expense.  For each category of interest-earning
assets  and  interest-bearing  liabilities,  information  is provided on changes
attributable to (1) changes in rate (change in rate multiplied by prior volume),
(2)  changes  in  volume  (change  in  volume  multiplied by prior rate) and (3)
changes  in  rate-volume  (change  in  rate  multiplied  by  change  in volume).

<TABLE>
<CAPTION>
                                                       For the Quarter Ended September 30, 2006 vs 2005
                                                 -----------------------------------------------------------
                                                            Increase (Decrease) Due To Change In:
                                                 -----------------------------------------------------------
     ($in thousands)                                  Rate          Volume       Rate/Volume       Total
     -------------------------------------------------------------------------------------------------------
<S>                                               <C>            <C>            <C>            <C>
     Interest-earning assets:
       Loans                                      $        623   $      4,491   $        146   $      5,260
       Securities                                          924            404            216          1,544
       Other interest-earning assets                       166             18             11            195
     -------------------------------------------------------------------------------------------------------
     Total interest-earning assets                       1,713          4,913            373          6,999
     -------------------------------------------------------------------------------------------------------
     Interest-bearing liabilities:
       Interest checking deposits                            7            (12)            (2)            (7)
       Savings deposits                                     23            (70)           (11)           (58)
       Money market deposits                               615            224             94            933
       Certificates of deposit                           1,420          2,260            343          4,023
     -------------------------------------------------------------------------------------------------------
     Total deposit accounts                              2,065          2,402            424          4,891
     -------------------------------------------------------------------------------------------------------
       FHLB advances and Fed funds purchased                 4            122             52            178
       Debentures and accrued interest payable             (70)            86             (2)            14
       Debentures - capital securities                      (2)            20             (1)            17
       Mortgage note payable                                 -              -              -              -
     -------------------------------------------------------------------------------------------------------
     Total borrowed funds                                  (68)           228             49            209
     -------------------------------------------------------------------------------------------------------
     Total interest-bearing liabilities                  1,997          2,630            473          5,100
     -------------------------------------------------------------------------------------------------------
     Net change in interest and dividend income   $       (284)  $      2,283   $       (100)  $      1,899
     -------------------------------------------------------------------------------------------------------
</TABLE>

PROVISION  FOR  LOAN  LOSSES
----------------------------

The  provision  for loan losses decreased by $0.9 million to $0.9 million in the
third  quarter  of  2006,  from  $1.8  million in the third quarter of 2005. The
decrease was primarily due to a decrease in the rate of net loan growth over the
prior  year  period,  partially  offset  by $0.2 million of additional provision
associated  with  various  credit  downgrades  in  the  2006 period. Total loans
outstanding grew by $52.7 million in the 2006 period, compared to $146.5 million
in  the  2005  period.

NONINTEREST  INCOME
-------------------

Noninterest  income  decreased  by  $0.6  million  to  $1.2 million in the third
quarter  of  2006,  from  $1.8  million  in the third quarter of 2005. The lower
income  was  due  to a decrease in income from the prepayment of mortgage loans.

NONINTEREST  EXPENSES
---------------------

Noninterest  expenses  increased  by  $1.6  million to $4.2 million in the third
quarter  of  2006,  from $2.6 million in the third quarter of 2005. The increase
was  nearly  all  due  to  a  one-time charge of $1.5 million resulting from the
contractual  obligation  to  provide death benefit payments to the spouse of the
Company's  former  Chairman and founder, Jerome Dansker (as discussed in note 15
to  the  condensed  consolidated  financial statements included in this report).

Excluding  the  one-time  charge,  increases  in  payroll  costs of $0.1 million
(resulting  from  additional  employees,  salary  increases and a higher cost of
employee  benefits)  and all other operating expenses of $0.2 million associated
with  the  Company's growth in total assets were largely offset by a decrease of
$0.2 million in executive bonuses. The Company had 75 employees at September 30,
2006,  compared  to  68  at  September  30,  2005.

PROVISION  FOR  INCOME  TAXES
-----------------------------

The  provision for income taxes increased by $0.3 million to $3.8 million in the
third  quarter of 2006, from $3.5 million in the third quarter of 2005 due to an
increase in pre-tax income. The Company's effective tax rate (inclusive of state
and  local  taxes)  amounted  to  43.6%  in the 2006 period and the 2005 period.


                                       28
<PAGE>
          COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE-MONTHS ENDED
          -------------------------------------------------------------
                          SEPTEMBER 30, 2006 AND 2005
                          ---------------------------

OVERVIEW
--------

Consolidated  net  earnings  for the first nine months of 2006 increased by $5.4
million,  or  44%,  to  $17.7  million,  or  $2.13 per diluted share, from $12.3
million,  or  $1.76  per  diluted  share,  in the first nine months of 2005. The
earnings  per  share  calculation for the 2006 period included a greater average
number  of  outstanding shares resulting primarily from a public offering of 1.4
million  shares  of  Class  A  common  stock  during  the third quarter of 2005.

The $5.4 million increase in earnings was due to a $10.0 million increase in net
interest  and dividend income, a $1.4 million decrease in the provision for loan
losses  and  a  $0.2  million  increase  in noninterest income. These items were
partially  offset  by a $2.0 million increase in noninterest expenses and a $4.2
million increase in the provision for income taxes. Noninterest expenses for the
2006  period included a one-time charge of $1.5 million (as discussed in note 15
to  the  condensed  consolidated  financial statements included in this report).

The  Company's  efficiency  ratio,  which is a measure of its ability to control
expenses  as  a  percentage  of  its  revenues,  improved  to 19% (excluding the
one-time  charge)  in  the first nine months of 2006, from 23% in the first nine
months  of 2005. The Company's return on average assets and equity was 1.31% and
16.28%  for  the  first  nine  months  of  2006,  compared  to 1.13% and 16.53%,
respectively,  in  the  first  nine  months  of  2005.

Selected  information  regarding results of operations for the first nine months
of  2006  follows:

<TABLE>
<CAPTION>
                                             Intervest   Intervest    Intervest                 Inter-
                                             National     Mortgage   Securities    Holding     Company
($in thousands)                                Bank        Corp.        Corp.      Company   Amounts (2)   Consolidated
------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>          <C>         <C>          <C>        <C>           <C>
Interest and dividend income                $   86,095   $    8,479  $        17  $    583   $      (611)  $      94,563
Interest expense                                48,046        5,388            -     3,610          (611)         56,433
                                            ----------------------------------------------------------------------------
Net interest and dividend income                38,049        3,091           17    (3,027)            -          38,130
Provision for loan losses                        1,809           48            -         -             -           1,857
Noninterest income                               4,288        4,539           50       346        (4,314)          4,909
Noninterest expenses                            10,329        3,109           65       541        (4,314)          9,730
                                            ----------------------------------------------------------------------------
Earnings before taxes                           30,199        4,473            2    (3,222)            -          31,452
Provision for income taxes                      13,160        2,067            1    (1,488)            -          13,740
------------------------------------------------------------------------------------------------------------------------
Net earnings                                $   17,039   $    2,406  $         1  $ (1,734)  $         -   $      17,712
------------------------------------------------------------------------------------------------------------------------
Intercompany dividends (1)                      (3,267)           -            -     3,267             -               -
------------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany dividends   $   13,772   $    2,406  $         1  $  1,533   $         -   $      17,712
------------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany dividends
  for the same period of 2005               $    8,523   $    2,234  $        24  $  1,556   $         -   $      12,337
------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Dividends  to  the Holding Company from the Bank provide funds for the debt
     service  on  the  subordinated  debentures-capital  securities,  which  is
     included  in  the  Holding  Company's  interest  expense.
(2)  All significant  intercompany  balances  and transactions are eliminated in
     consolidation.  Such  amounts  arise from intercompany deposit accounts and
     management  and  service  agreements.

NET  INTEREST  AND  DIVIDEND  INCOME
------------------------------------

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

Net  interest  and  dividend income increased to $38.1 million in the first nine
months  of  2006,  from  $28.1  million  in  the  first nine months of 2005. The
improvement  was  attributable  to  a  $342  million  increase  in  average
interest-earning assets resulting from continued growth in loans of $285 million
and  a  higher  level  of  security  and  short-term investments aggregating $57
million.  The  growth in average assets was funded by $290 million of additional
interest-bearing  deposits  and  a $46 million increase in stockholders' equity.

The Company's net interest margin increased to 2.85% in the first nine months of
2006,  from  2.61%  in  the  first  nine months of 2005. The higher margin was a
function  of  the  Company's  yield  on  interest-earning assets increasing at a
faster  pace  than  its  cost  of  funds and an increase in net interest-earning
assets of $51 million, resulting largely from $26.3 million of proceeds from the
issuance  of  common  stock  during  the  third  quarter  of


                                       29
<PAGE>
2005 and increased retained earnings. In a rising rate environment, the yield on
interest-earning  assets  increased 69 basis points to 7.08% in the 2006 period.
The  increase  was  a function of rate increases on existing variable-rate loans
indexed  to  the  prime  rate (the impact of which was partially offset by lower
yields  on  new  loans  originated  as  well  as  a higher level of interest not
recorded  from  nonaccrual loans) and higher yields earned on security and other
short-term  investments. The cost of funds increased by 54 basis points to 4.68%
in  the  2006  period  due  to  higher  rates  paid  on  deposit  accounts.

The  following  table  provides  information on: average assets, liabilities and
stockholders'  equity;  yields earned on interest-earning assets; and rates paid
on  interest-bearing liabilities for the periods indicated. The yields and rates
shown  are  based  on a computation of income/expense (including any related fee
income  or  expense)  for  each  period  divided  by  average  interest-earning
assets/interest-bearing  liabilities  during  each  period. Average balances are
derived  from  daily  balances.  Net interest margin is computed by dividing net
interest  and  dividend  income  by the average of total interest-earning assets
during  each  period.

<TABLE>
<CAPTION>
                                                   --------------------------------------------------------------------
                                                                            Nine-Months Ended
                                                   --------------------------------------------------------------------
                                                             September 30, 2006          September 30, 2005
                                                   ---------------------------------  ---------------------------------
                                                     Average     Interest    Yield/     Average     Interest    Yield/
($in thousands)                                      Balance    Inc./Exp.   Rate (2)    Balance    Inc./Exp.   Rate (2)
-----------------------------------------------------------------------------------------------------------------------
<S>                                                <C>          <C>         <C>       <C>          <C>         <C>
ASSETS
Interest-earning assets:
  Loans (1)                                        $1,438,349   $   83,963     7.80%  $1,153,425   $   63,180     7.32%
  Securities                                          314,346        9,408     4.00      259,572        5,181     2.67
  Other interest-earning assets                        33,224        1,192     4.80       30,569          664     2.90
-----------------------------------------------------------------------------------------------------------------------
Total interest-earning assets                       1,785,919   $   94,563     7.08%   1,443,566   $   69,025     6.39%
-----------------------------------------------------------------------------------------------------------------------
Noninterest-earning assets                             16,891                             14,921
-----------------------------------------------------------------------------------------------------------------------
Total assets                                       $1,802,810                         $1,458,487
-----------------------------------------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
  Interest checking deposits                       $    8,052   $      111     1.84%  $   11,408   $      130     1.52%
  Savings deposits                                     14,630          323     2.95       23,547          405     2.30
  Money market deposits                               237,151        7,286     4.11      195,714        3,943     2.69
  Certificates of deposit                           1,186,996       39,275     4.42      926,087       26,965     3.89
-----------------------------------------------------------------------------------------------------------------------
Total deposit accounts                              1,446,829       46,995     4.34    1,156,756       31,443     3.63
-----------------------------------------------------------------------------------------------------------------------
  FHLB advances and Fed Funds purchased                10,854          428     5.27        6,234          130     2.79
  Debentures and related interest payable              92,611        5,712     8.25       96,066        6,036     8.40
  Debentures - capital securities                      62,233        3,286     7.06       61,856        3,268     7.06
  Mortgage note payable                                   224           12     7.16          238           12     7.00
-----------------------------------------------------------------------------------------------------------------------
Total borrowed funds                                  165,922        9,438     7.61      164,394        9,446     7.68
-----------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities                  1,612,751   $   56,433     4.68%   1,321,150   $   40,889     4.14%
-----------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits                            5,675                              5,942
Noninterest-bearing liabilities                        39,322                             31,904
Stockholders' equity                                  145,062                             99,491
-----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity         $1,802,810                         $1,458,487
-----------------------------------------------------------------------------------------------------------------------
Net interest and dividend income/spread                         $   38,130     2.40%               $   28,136     2.25%
-----------------------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin                 $  173,168                  2.85%  $  122,416                  2.61%
-----------------------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
  to total interest-bearing liabilities                  1.11                               1.09
-----------------------------------------------------------------------------------------------------------------------
OTHER RATIOS:
  Return on average assets (2)                           1.31%                              1.13%
  Return on average equity  (2)                         16.28%                             16.53%
  Noninterest expense to average assets (2)              0.72%                              0.70%
  Efficiency ratio (3)                                     23%                                23%
  Average stockholders' equity to average assets         8.05%                              6.82%
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Includes  nonaccrual  loans.
(2)  Annualized.
(3)  Defined  as  noninterest expenses (excluding the provision for loan losses)
     as  a  percentage  of  net  interest  and  dividend income plus noninterest
     income. Noninterest expenses for the 2006 period included a one-time charge
     of  $1.5  million.


                                       30
<PAGE>
The  following  table  provides  information  regarding  changes in interest and
dividend  income  and  interest  expense.  For each category of interest-earning
assets  and  interest-bearing  liabilities,  information  is provided on changes
attributable to (1) changes in rate (change in rate multiplied by prior volume),
(2)  changes  in  volume  (change  in  volume  multiplied by prior rate) and (3)
changes  in  rate-volume  (change  in  rate  multiplied  by  change  in volume).

<TABLE>
<CAPTION>
                                                     For the Nine-Months Ended September 30, 2006 vs 2005
                                                  ----------------------------------------------------------
                                                            Increase (Decrease) Due To Change In:
                                                  ----------------------------------------------------------
     ($in thousands)                                  Rate          Volume       Rate/Volume       Total
     -------------------------------------------------------------------------------------------------------
<S>                                               <C>            <C>            <C>            <C>
     Interest-earning assets:
       Loans                                      $      4,152   $     15,642   $        989   $     20,783
       Securities                                        2,589          1,097            541          4,227
       Other interest-earning assets                       436             58             34            528
     -------------------------------------------------------------------------------------------------------
     Total interest-earning assets                       7,177         16,797          1,564         25,538
     -------------------------------------------------------------------------------------------------------
     Interest-bearing liabilities:
       Interest checking deposits                           27            (38)            (8)           (19)
       Savings deposits                                    115           (154)           (43)           (82)
       Money market deposits                             2,084            836            423          3,343
       Certificates of deposit                           3,681          7,612          1,017         12,310
     -------------------------------------------------------------------------------------------------------
     Total deposit accounts                              5,907          8,256          1,389         15,552
     -------------------------------------------------------------------------------------------------------
       FHLB advances and Fed Funds purchased               116             97             85            298
       Debentures and accrued interest payable            (108)          (218)             2           (324)
       Debentures - capital securities                       -             20             (2)            18
       Mortgage note payable                                 1             (1)             -              -
     -------------------------------------------------------------------------------------------------------
     Total borrowed funds                                    9           (102)            85             (8)
     -------------------------------------------------------------------------------------------------------
     Total interest-bearing liabilities                  5,916          8,154          1,474         15,544
     -------------------------------------------------------------------------------------------------------
     Net change in interest and dividend income   $      1,261   $      8,643   $         90   $      9,994
     -------------------------------------------------------------------------------------------------------
</TABLE>

PROVISION  FOR  LOAN  LOSSES
----------------------------

The  provision  for loan losses decreased by $1.4 million to $1.9 million in the
first  nine  months of 2006, from $3.3 million in the first nine months of 2005.
The  lower  provision  was  primarily  due to a decrease in the rate of net loan
growth  over  the  prior  year  period,  partially  offset  by  $0.5  million of
additional  provision  associated  with  various  credit  downgrades in the 2006
period.  Total  loans  outstanding  grew  by  $123.5 million in the 2006 period,
compared to $305.9 million in the 2005 period. The provision for the 2005 period
was  also  favorably  impacted  by  $0.3 million from the satisfaction of a $3.9
million  nonaccrual  loan  in  April  2005.

NONINTEREST  INCOME
-------------------

Noninterest  income  increased by $0.2 million to $4.9 million in the first nine
months  of  2006, from $4.7 million in the first nine months of 2005. The higher
income  was primarily due to a $0.3 million increase in fees earned from expired
loan  commitments  and  a $0.1 million increase in banking fee income, partially
offset  by  a  $0.2  million  decrease in income from the prepayment of mortgage
loans. Income from the prepayment of mortgage loans for the 2005 period included
$0.6  million  from  the satisfaction of a $3.9 million nonaccrual loan in April
2005.

NONINTEREST  EXPENSES
---------------------

Noninterest expenses increased by $2.0 million to $9.7 million in the first nine
months  of 2006, from $7.7 million in the first nine months of 2005. Noninterest
expenses  increased  due  to  the  following:  a one-time charge of $1.5 million
associated with death benefits (as discussed in the section entitled "Comparison
of  Results  of  Operations for the Quarters Ended September 30, 2006 and 2005")
and  increases  in  professional  fees  of  $0.3 million and all other operating
expenses  of  $0.3  million  associated  with  to  the Company's growth in total
assets. Payroll costs, exclusive of the one-time charge, remained unchanged as a
$0.5  million increase resulting from additional employees, salary increases and
a  higher  cost  of  employee  benefits was offset by a $0.5 million decrease in
executive  bonuses. The Company had 75 employees at September 30, 2006, compared
to  68  at  September  30,  2005.


                                       31
<PAGE>
PROVISION  FOR  INCOME  TAXES
-----------------------------

The provision for income taxes increased by $4.2 million to $13.7 million in the
first  nine  months  of 2006, from $9.5 million in the first nine months of 2005
due  to  an  increase  in  pre-tax  income.  The  Company's  effective  tax rate
(inclusive  of  state  and  local  taxes)  amounted to 43.7% in the 2006 period,
compared  to  43.6%  in  the  2005  period.

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

The Company is party to financial instruments with off-balance sheet risk in the
normal  course  of  business to meet the financing needs of its customers. For a
further  discussion of these financial instruments, see note 12 to the condensed
consolidated  financial  statements  included  in  this  report.

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

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

The Bank's lending business is dependent on its continuing ability to generate a
positive  interest rate spread between the rates offered on its deposits and the
yields  earned on its loans. The Bank needs to pay competitive interest rates to
attract  and  retain  deposits  to  fund its loan originations. The Bank has and
expects  to  continue to rely heavily on certificates of deposit (time deposits)
as  its  main  source  of  funds.  Total consolidated deposits amounted to $1.60
billion  at  September  30,  2006  and  time  deposits represented 84%, or $1.35
billion, of those deposits, up from 81% at December 31, 2005. Additionally, time
deposits  of  $100,000  or more at September 30, 2006 totaled $489.8 million and
included  $55.7  million  of  brokered  deposits.  Brokered deposits are sold by
investment  firms, which are paid a fee by the Bank for placing the deposit. The
Bank  must  maintain  its  status  as  a  well-capitalized  insured  depository
institution  in  order  to  solicit  and accept, renew or roll over any brokered
deposit without restriction. Time deposits are the only deposit accounts offered
by  the  Bank  that  have  stated  maturity  dates. These deposits are generally
considered  to  be  rate  sensitive and have a higher cost than deposits with no
stated  maturities,  such  as  checking,  savings  and money market accounts. At
September  30,  2006,  the  Bank had $616.7 million of time deposits maturing by
September  30,  2007.  The  Bank  expects  that  a  substantial portion of these
deposits  will  be  renewed and stay with the Bank. The Bank has in the past and
may  continue  in  the  future to rely on capital contributions from the Holding
Company to increase its capital to support its asset growth. The Holding Company
made  a total of $32.5 million of capital contributions to the Bank during 2005.
No  contributions  of  capital  were  made  in the first nine months of 2006. At
September  30,  2006,  the Bank had excess capital to support an additional $364
million  of  growth  and  still  maintain  a  well-capitalized  designation.

The  Bank,  from  time  to  time, may borrow funds on an overnight or short-term
basis  to  manage  its  liquidity  needs.   The  Bank  has  agreements  with
correspondent  banks  whereby  it could borrow up to $16 million on an unsecured
basis  at September 30, 2006. As a member of the FHLB and FRB, the Bank can also
borrow  from  these institutions on a secured basis. In the first nine months of
2006,  the  Bank  borrowed a total of $166.2 million of short-term FHLB advances
and  overnight  borrowings from correspondent banks, all of which was repaid. At
September  30,  2006 and December 31, 2005, there were no outstanding borrowings
from  any  of  the  aforementioned  sources. At September 30, 2006, the Bank had
available  collateral  consisting  of  investment  securities  to  support total
borrowings  of  $331  million  from  the  FHLB  and  FRB.

Intervest  Mortgage  Corporation  has  and  expects  to  continue to rely on the
issuance of its subordinated debentures in registered, best efforts offerings to
the  public  as a source of funds to support its loan originations. In addition,
as  the Bank's mortgage loan portfolio has grown, service fee income received by
Intervest  Mortgage  Corporation  from  the  Bank  has  comprised  an increasing
percentage  of  Intervest  Mortgage  Corporation's  cash  flow.  The  Bank has a
servicing  agreement  with  Intervest  Mortgage  Corporation, which is described
under  the caption "Liquidity and Capital Resources" on page 46 of the Company's
Annual  Report  on Form 10-K. In addition, from time to time, Intervest Mortgage
Corporation  has  also  received capital contributions from the Holding Company.
There  have  been  no  capital  contributions  since  August  2004.


                                       32
<PAGE>
Intervest Mortgage Corporation's lending business is dependent on its ability to
sell  its debentures with interest rates that result in a positive interest rate
spread, which is the difference between yields earned on its loans and the rates
paid  on  its  debentures.  As  detailed in note 7 to the condensed consolidated
financial  statements  included in this report, at September 30, 2006, Intervest
Mortgage  Corporation  had  $92.8 million of subordinated debentures outstanding
with  fixed  interest  rates  that  range  from  6.25%  to  9.00%  per annum and
maturities  that  range  from  April  1, 2007 to July 1, 2014. In the first nine
months  of  2006, Intervest Mortgage Corporation repaid various debentures for a
total  of  $7.6  million  ($6.0 million of principal and $1.6 million of related
accrued  interest  payable) and issued new debentures totaling $16.0 million for
net  proceeds,  after  offering  costs, of $14.8 million. At September 30, 2006,
Intervest  Mortgage  Corporation  had  $8.6  million  of  debentures and related
accrued interest payable maturing by September 30, 2007, which is expected to be
repaid  from  cash  flow  generated  from maturities of existing mortgage loans,
ongoing  operations  and  cash  on hand. On November 1, 2006, Intervest Mortgage
Corporation repaid early certain debentures scheduled to mature at various times
through  April  1,  2009 for a total of $10.3 million ($9.0 million of principal
and  $1.3  million  of  accrued interest). Unamortized offering costs associated
with  these  debentures  of  $0.1  million was expensed as a result of the early
retirement.

The  Holding  Company's  sources  of funds and capital to date have been derived
from  the  following: interest income from a limited portfolio of mortgage loans
and  short-term investments; monthly dividends from the Bank to service interest
expense  on  trust  preferred securities; monthly management fees from Intervest
Mortgage  Corporation and the Bank for providing these subsidiaries with certain
administrative  services;  the  issuance  of  its  common  stock  through public
offerings;  exercise  of  outstanding  common  stock  warrants and conversion of
outstanding  convertible  debentures; the issuance of trust preferred securities
through  its  wholly  owned  business  trusts;  and the direct issuance of other
subordinated  debentures  to  the  public.

In  the first nine months of 2006, the Holding Company repaid various debentures
totaling  $1.3  million  of  principal  and related accrued interest payable. At
September  30, 2006, the Holding Company did not have any debentures maturing by
September  30, 2007. In the third quarter of 2005, the Holding Company completed
a public offering of 1,436,468 shares of its Class A common stock for $19.75 per
share.  The  issuance  of  these  shares,  after  underwriting  commissions  and
expenses,  resulted in $26.3 million of additional capital which was invested in
the  Bank  as  a  capital  contribution.

From 2001 to 2004, the Holding Company, through its wholly owned business trusts
Intervest  Statutory  Trust  I,  II,  III  and IV, issued at various times trust
preferred securities for a total of $60 million at both fixed and variable rates
of  interest  that  mature  in  2031  or  later.  The  total proceeds from these
securities  have  been  invested  in  the  Bank at various times through capital
contributions.  In  September  2006, the Holding Company issued additional trust
preferred  securities  in  the  amount  of  $10.0  million  through  its  newly
established  wholly  owned  business  trust Intervest Statutory Trust V. The new
securities  mature  in  30  years and bear interest at a fixed rate of 6.83% per
annum for the first five years and thereafter at a floating rate of 1.65% over 3
month  LIBOR.  The  Holding Company intends to use the proceeds from this recent
sale, together with $5 million of available cash, to redeem on December 18, 2006
other  trust  preferred  securities  in the principal amount of $15 million that
bear  interest  at  a  fixed rate of 9.88%. The net effect of these actions will
reduce  future  annual  interest expense by $0.8 million. Upon the redemption of
these  securities,  $0.4  million  of related unamortized issuance costs will be
written  off  as  a noncash expense in the fourth quarter of 2006. At such time,
the  Company  will  have  $55 million of trust preferred securities outstanding,
compared  to  $70 million at September 30, 2006. The Holding Company is required
to  make  interest  payments  on  the  principal  of  all  the  trust-preferred
securities,  which  amounted  to $5.0 million annually as of September 30, 2006.
The  Bank  provides  funds  to Holding Company in the form of dividends for this
purpose.  At September 30, 2006, $51.5 million of the trust preferred securities
qualified  as  regulatory  Tier  1 capital and the remainder qualified as Tier 2
capital  in  the  Holding  Company's  computation  of  regulatory  capital.

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

At  September  30,  2006,  the  Company's  commitments  to lend aggregated $49.6
million.  Although  there  is  no  certainty,  management  anticipates  that the
majority  of  these  loan commitments will be funded over the next 12 months. If
all  these  commitments  were  to  close, they would be funded by the sources of
funds  described  above. The Company considers its current liquidity and sources
of  funds  sufficient  to  satisfy  its  outstanding lending commitments and its


                                       33
<PAGE>
maturing  liabilities.  Management  is  not  aware  of any trends, known demand,
commitments  or  uncertainties  which  are expected to have a material impact on
future  operating  results,  liquidity  or  capital  resources.

                               REGULATORY CAPITAL
                               ------------------

The  Bank  is  subject  to  various regulatory capital requirements. The Federal
Deposit Insurance Corporation (FDIC) and other bank regulatory agencies use five
capital  categories ranging from well capitalized to critically undercapitalized
to  determine  various  matters,  including  prompt  corrective  action and each
institution's  FDIC  deposit  insurance  premiums.  These  categories  involve
quantitative  measures  of  a  bank's  assets,  liabilities,  and  certain
off-balance-sheet items as calculated under regulatory accounting practices. The
capital amounts and classifications are also subject to qualitative judgments by
the  regulators about components, risk weightings, and other factors. Failure to
meet  minimum  capital  requirements can initiate certain mandatory and possibly
additional  discretionary  actions  by the regulators that, if undertaken, could
have  a  direct  material  effect  on  the  Company's  consolidated  financial
statements.

The  Bank is required to maintain regulatory defined minimum Tier 1 leverage and
Tier  1and  total  risk-based  capital  ratio  levels of at least 4%, 4% and 8%,
respectively.  At  September 30, 2006 and December 31, 2005, management believes
the  Bank  met  its  capital  adequacy  requirements  and  is a well-capitalized
institution as defined in the regulations, which require minimum Tier 1 leverage
and  Tier  1  and  total  risk-based  ratios  of  5%,  6% and 10%, respectively.
Management is not aware of any conditions or events that would change the Bank's
designation  as  a  well-capitalized  institution.

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

<TABLE>
<CAPTION>
                                               At September 30,    At December 31,
                                              ------------------  -----------------
     ($in thousands)                                 2006               2005
     ------------------------------------------------------------------------------
<S>                                           <C>                 <C>
     Tier 1 Capital                           $         170,614   $        156,842
     Tier 2 Capital                                      16,655             14,846
     ------------------------------------------------------------------------------
     Total risk-based capital                 $         187,269   $        171,688
     ------------------------------------------------------------------------------
     Net risk-weighted assets                 $       1,509,152   $      1,362,728
     Average assets for regulatory purposes   $       1,734,296   $      1,562,779
     ------------------------------------------------------------------------------
     Tier 1 capital to average assets                      9.84%             10.04%
     Tier 1 capital to risk-weighted assets               11.31%             11.51%
     Total capital to risk-weighted assets                12.41%             12.60%
     ------------------------------------------------------------------------------
</TABLE>

The  Holding  Company  on  a consolidated basis is subject to minimum regulatory
capital  requirements  administered by the FRB. These guidelines require a ratio
of  Tier 1 or Core Capital, as defined in the guidelines, to total risk-weighted
assets of at least 4% and a ratio of total capital to risk-weighted assets of at
least  8%.  The  guidelines  also  require a ratio of Tier 1 capital to adjusted
total average assets of not less than 3%. At September 30, 2006 and December 31,
2005,  management  believes  that  the  Holding Company met its capital adequacy
requirements.

Information  regarding  the  Company's  (consolidated)  regulatory  capital  and
related  ratios  is  summarized  below:

<TABLE>
<CAPTION>
                                               At September 30,    At December 31,
                                              ------------------  -----------------
     ($in thousands)                                 2006               2005
     ------------------------------------------------------------------------------
<S>                                           <C>                 <C>
     Tier 1 Capital (1)                       $         205,869   $        181,571
     Tier 2 Capital (1)                                  35,571             29,788
     ------------------------------------------------------------------------------
     Total risk-based capital                 $         241,440   $        211,359
     ------------------------------------------------------------------------------
     Net risk-weighted assets                 $       1,622,332   $      1,466,027
     Average assets for regulatory purposes   $       1,858.811   $      1,673,832
     ------------------------------------------------------------------------------
     Tier 1 capital to average assets                     11.08%             10.85%
     Tier 1 capital to risk-weighted assets               12.69%             12.39%
     Total capital to risk-weighted assets                14.88%             14.42%
     ------------------------------------------------------------------------------
</TABLE>

     (1)  At  September  30,  2006 and December 31, 2005, there were $70 million
          and  $60  million,  respectively,  of  qualifying  capital  securities
          outstanding  (representing  at  September 30, 2006 total debentures of
          $72.2  million  issued  to  Statutory Trust I, II, III IV and V by the
          Holding Company less the Holding Company's investments in those trusts
          aggregating  $2.2  million).  At  September  30, 2006 and December 31,
          2005,  $51.5  million  and  $45.4  million  of  those  securities,
          respectively,  was  included  in  Tier  1  Capital,  and the remaining
          portion  was  included  in  Tier  2  Capital.

The  Federal  Reserve  on  March  1, 2005 issued a final rule that retains trust
preferred  securities  in  the Tier 1 capital of bank holding companies but with
stricter  quantitative  limits  and  clearer qualitative standards. The new rule
provides  a  transition  period  for  bank  holding  companies  to meet the new,
stricter  limitations  within  regulatory  capital  by  allowing  the  limits on
restricted core capital elements to become fully effective as of March 31, 2009.


                                       34
<PAGE>
For  a  further discussion of these changes, see page 49 of the Company's Annual
Report  on  Form  10-K for the year ended December 31, 2005. As of September 30,
2006  and  December  31, 2005, assuming the Company no longer included its trust
preferred  securities in Tier 1 Capital, the Company would still exceed the well
capitalized  threshold  under  the  regulatory  framework  for prompt corrective
action.

Intervest  Securities  Corporation  is  subject  to  the Securities and Exchange
Commission's  (SEC)  Uniform  Net  Capital  Rule  [15c3-1  (a)  (2) (vi)], which
requires the maintenance of minimum net capital of $5,000. At September 30, 2006
and  December  31, 2005, Intervest Securities Corporation's net capital was $0.5
million.

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

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

The  Company  uses  "gap  analysis,"  which  measures  the  difference  between
interest-earning  assets and interest-bearing liabilities that mature or reprice
within  a  given  time  period,  to monitor its interest rate sensitivity. For a
further  discussion  of  gap  analysis,  including  the  factors that effect its
computation and results, see page 50 of the Company's Annual Report on Form 10-K
for  the  year  ended  December  31,  2005.

The  Company's  one-year  positive  interest  rate  sensitivity gap decreased to
$273.6  million,  or  13.9%  of total assets, at September 30, 2006, from $498.7
million,  or  29.2%  at  December  31,  2005.  The  decrease in the positive gap
primarily  reflects  an  increase  in  loans  and security investments with over
one-year maturities, funded by increases in time deposits with terms of one year
or  less.

For  purposes  of  computing the gap, all deposits with no stated maturities are
treated  as  readily accessible accounts. However, if such deposits were treated
differently, the one-year gap would then change. The behavior of core depositors
may  not  necessarily  result  in the immediate withdrawal of funds in the event
deposit  rates  offered  by  the Bank did not change as quickly and uniformly as
changes  in  general  market rates. For example, if only 25% of deposits with no
stated  maturity  were  assumed to be readily accessible, the one-year gap would
have  been  a positive 23.4% at September 30, 2006, compared to a positive 40.1%
at  December  31,  2005.

The  table  that follows summarizes interest-earning assets and interest-bearing
liabilities  as  of  September 30, 2006, that are scheduled to mature or reprice
within  the  periods  shown.

<TABLE>
<CAPTION>
                                                  0-3       4-12   Over 1-4      Over 4
                                                  ---       ----   --------      ------
($in thousands)                                Months     Months      Years       Years       Total
----------------------------------------------------------------------------------------------------
<S>                                         <C>        <C>        <C>         <C>        <C>
Loans (1)                                   $554,057   $312,711   $ 420,264   $209,888   $1,496,920
Securities held to maturity (2)               58,725    127,133     149,191      5,734      340,783
Short-term investments                        92,077          -           -          -       92,077
FRB and FHLB stock                             2,374          -           -      3,439        5,813
----------------------------------------------------------------------------------------------------
Total rate-sensitive assets                 $707,233   $439,844   $ 569,455   $219,061   $1,935,593
----------------------------------------------------------------------------------------------------
Deposit accounts (3):
  Interest checking deposits                $  6,591   $      -   $       -   $      -   $    6,591
  Savings deposits                            11,876          -           -          -       11,876
  Money market deposits                      231,450          -           -          -      231,450
  Certificates of deposit                    125,553    491,155     597,822    132,543    1,347,073
----------------------------------------------------------------------------------------------------
  Total deposits                             375,470    491,155     597,822    132,543    1,596,990
----------------------------------------------------------------------------------------------------
Debentures and mortgage note payable (1)           -      4,750      89,972     73,493      168,215
Accrued interest on all borrowed funds (1)     1,916        179       3,219        551        5,865
----------------------------------------------------------------------------------------------------
Total borrowed funds                           1,916      4,929      93,191     74,044      174,080
----------------------------------------------------------------------------------------------------
Total rate-sensitive liabilities            $377,386   $496,084   $ 691,013   $206,587   $1,771,070
----------------------------------------------------------------------------------------------------
GAP (repricing differences)                 $329,847   $(56,240)  $(121,558)  $ 12,474   $  164,523
----------------------------------------------------------------------------------------------------
Cumulative GAP                              $329,847   $273,607   $ 152,049   $164,523   $  164,523
----------------------------------------------------------------------------------------------------
Cumulative GAP to total assets                  16.7%      13.9%        7.7%       8.4%         8.4%
----------------------------------------------------------------------------------------------------
</TABLE>

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


                                       35
<PAGE>
                           SARBANES OXLEY ACT OF 2002
                           --------------------------

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

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

In  this  regard,  the  Company  is  continuing  its  process of documenting and
evaluating  its  internal  controls over financial reporting in order to satisfy
these  requirements.  The process includes the involvement of internal resources
and outside consultants. This process is designed to (i) assess and document the
adequacy  of  internal  controls  over  financial  reporting, (ii) take steps to
improve  control  processes, where appropriate, and (iii) verify through testing
that controls are functioning as documented. To date, the Company has identified
certain  deficiencies  in the design and operating effectiveness of its internal
controls over financial reporting, and it believes that they have been corrected
or  are  in  the  process  of  being  corrected.  Although  this  process is not
completed,  management  is  not  aware  of  any  "significant  deficiencies"  or
"material  weaknesses"  in  the  Company's  internal  controls  over  financial
reporting,  as  defined  in  applicable  SEC  rules  and  regulations.

ITEM  3.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

Market  risk  is  the  risk  of  loss  from adverse changes in market prices and
interest  rates.  The  Company  has  not  engaged in and accordingly has no risk
related  to trading accounts, commodities, foreign exchange, hedging activities,
interest  rate  derivatives  or  interest  rate swaps. The Company's market risk
arises  primarily  from  interest  rate  risk  inherent  in  its  lending  and
deposit-taking  activities,  and the issuance of its debentures. The measurement
of market risk associated with financial instruments is meaningful only when all
related and offsetting on-and off-balance sheet transactions are aggregated, and
the  resulting net positions are identified. Disclosures about the fair value of
financial  instruments  as of December 31, 2005, which reflect changes in market
prices  and  rates,  can  be  found  in  note  20  to the consolidated financial
statements  included  in  the  Company's Annual Report on Form 10-K for the year
ended December 31, 2005. Management believes that there have been no significant
changes  in  the  Company's  market  risk  exposure  since  December  31,  2005.

Management  actively  monitors  and  manages  the  Company's  interest rate risk
exposure.  The  primary  objective  in  managing interest rate risk is to limit,
within  its  established  guidelines,  the adverse impact of changes in interest
rates  on  the  Company's  net  interest  income  and  capital.  For  a  further
discussion, see the section entitled "Asset and Liability Management" under Item
2  of  this  report.

ITEM  4.  CONTROLS  AND  PROCEDURES

The  Company's  management  evaluated,  with  the participation of its Principal
Executive  and Financial Officers, the effectiveness of the Company's disclosure
controls  and  procedures  (as  defined in Rule 13a-15(e) or 15d-15(e) under the
Securities  Exchange  Act  of  1934) as of the end of the period covered by this
report. Based on such evaluation, the Principal Executive and Financial Officers
have  concluded  that  the  Company's  disclosure  controls  and  procedures are
designed  to ensure that information required to be disclosed in the reports the
Company  files  or  furnishes  under  the  Securities  Exchange  Act  of 1934 is
recorded,  processed,  summarized and reported within the time periods specified
in  the  SEC's  rules and regulations, and are operating in an effective manner.
The  Company made no significant changes in its internal controls over financial
reporting  or  in  other  factors that could significantly affect these controls
subsequent  to  September  30,  2006.


                                       36
<PAGE>
PART II. OTHER INFORMATION

ITEM  1.  LEGAL  PROCEEDINGS

The information set forth under Note 14 contained in the "Notes to Condensed
Consolidated Financial Statements" of this Quarterly Report on Form 10-Q is
incorporated by reference in answer to this Item.

ITEM  1A.  RISK  FACTORS

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

This  Item  1A  requires  disclosure  of  any material changes from risk factors
previously  disclosed  in  the  Company's most recent Form 10-K. A discussion of
material  changes  to  one  factor  follows:

WE  DEPEND  ON  OUR  EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES TO IMPLEMENT OUR
BUSINESS  STRATEGY  AND  OUR  BUSINESS  MAY  SUFFER  IF  WE LOSE THEIR SERVICES.

Our  success is largely dependent on the business expertise and relationships of
a  small  number  of  our  executive  officers  and  other key employees. Jerome
Dansker,  our founding chairman and chief executive officer who was instrumental
to  our  success,  passed  away  in  August 2006. Consistent with our succession
planning,  his  duties were assumed by his son, Lowell S. Dansker. On August 17,
2006,  Lowell  S. Dansker, age 55, was elected our new Chairman of the Board and
Chief  Executive  Officer  and  John  J.  Arvonio, age 43, was elected our Chief
Financial  Officer.  Mr. Lowell S. Dansker previously served as Vice Chairman of
the  Board since October 2003 and as President and Treasurer since 1993. He will
continue  to serve as President of the Company. Mr. Arvonio has served as Senior
Vice  President,  Chief  Financial  Officer  and Secretary of Intervest National
Bank,  our  wholly-owned  subsidiary  since  September  2000  and  as  our Chief
Accounting  Officer  since  December  2005.  He  will continue to serve in those
capacities.  If  the  services  of  any  of  our executive officers or other key
employees were to become unavailable for any reason, the growth, performance and
operation  of  our  company  and  its  subsidiaries  might be adversely affected
because  of their skills and knowledge of the markets in which we operate, years
of  real  estate  lending  experience  and  the  difficulty  of promptly finding
qualified  replacement  personnel. As a result, our ability to successfully grow
our  business  will  depend,  in  part,  on  our  ability  to attract and retain
additional  qualified  officers  and  employees.

Other  than  the  changes to the risk factor discussed above, there have been no
material  changes to the Company's remaining risk factors disclosed in the "Risk
Factors"  section of the Company's Annual Report on Form 10-K for the year ended
December  31,  2005,  where  such  factors are discussed on pages 22 through 26.
``
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)     Not  Applicable
(b)     Not  Applicable
(c)     Not  Applicable
(d)     Not  Applicable

ITEM  5.  OTHER  INFORMATION
        Not  Applicable

ITEM  6.  EXHIBITS

The following exhibits are filed as part of this report.
4.0   Letter Agreement  between the Company and Jean Dansker dated as of October
      4,  2006, incorporated  by  reference  to the Company's Form 8-K, File No.
      000-23377,  filed  on October 6, 2006, wherein such document is identified
      as Exhibit  99.1.

4.1   Form of Indenture  between  the  Company,  as Issuer, and Wilmington Trust
      Company, as  Trustee,  dated  as  of  September  21,  2006.


                                       37
<PAGE>
31.0  Certification  of  the principal executive officer pursuant to Section 302
      of  The  Sarbanes-Oxley  Act  of  2002.

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

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

                                   SIGNATURES

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

                                        INTERVEST BANCSHARES CORPORATION
                                        ----------------------------------
                                        (Registrant)


Date:  November 2, 2006                 By:  /s/ Lowell S. Dansker
                                        -------------------------------
                                        LOWELL S. DANSKER, CHAIRMAN AND
                                        EXECUTIVE VICE PRESIDENT
                                        (PRINCIPAL EXECUTIVE OFFICER)

Date:  November 2, 2006                 By:  /s/ John J. Arvonio
                                         -----------------------------
                                        JOHN J. ARVONIO, CHIEF FINANCIAL AND
                                        ACCOUNTING OFFICER
                                        (PRINCIPAL FINANCIAL OFFICER)