U.S. SECURTIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-QSB

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

               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
                                              ------------------


                         Commission File No. 000-23377
                                             ---------

                        INTERVEST BANCSHARES CORPORATION
       (Exact name of small business issuer as specified in its charter)


          Delaware                                            13-3699013
----------------------------                               ----------------
(State or other jurisdiction                               (I.R.S. employer
       of incorporation)                                  identification no.)


                        10 Rockefeller Plaza, Suite 1015
                         New York, New York 10020-1903
                    ----------------------------------------
                    (Address of principal executive offices)


                                 (212) 757-7300
                ------------------------------------------------
                (Issuer's telephone number, including area code)


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



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

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

Title of Each Class:                              Shares Outstanding:
--------------------                              -------------------

Class A Common Stock, $1.00                     2,184,515 Outstanding at
par value per share                             October 30, 1998

Class B Common Stock, $1.00                     300,000 Outstanding at
par value per share                             October 30, 1998

<PAGE>
<TABLE>
<CAPTION>


                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARY

                                  FORM 10-QSB
                               September 30, 1998

                               TABLE OF CONTENTS
                                                                                                            Page
<S>                                                                                                         <C>
        PART I. FINANCIAL INFORMATION

        Item 1. Financial Statements

                Condensed Consolidated Statements of Financial Condition as of
                          September 30, 1998 and December 31, 1997..................................         1

                Condensed Consolidated Statements of Income for the Quarters Ended
                          September 30, 1998 and 1997...............................................         2

                Condensed Consolidated Statements of Income for the Nine Months Ended
                          September 30, 1998 and 1997...............................................         3

                Condensed Consolidated Statements of Changes in Stockholders' Equity
                          for the Nine Months Ended September 30, 1998 and 1997.....................         4

                Condensed Consolidated Statements of Cash Flows
                          for the Nine Months Ended September 30, 1998 and 1997 ....................         5

                Notes to Condensed Consolidated Financial Statements ...............................         6


        Item 2. Management's Discussion and Analysis or Plan of Operation ..........................        11


        PART II. OTHER INFORMATION

        Item 1. Legal Proceedings...................................................................        18

        Item 2. Changes in Securities and Use of Proceeds...........................................        18

        Item 3. Defaults Upon Senior Securities.....................................................        18

        Item 4. Submission of Matters to a Vote of Security Holders.................................        18

        Item 5. Other Information...................................................................        18

        Item 6. Exhibits and Reports on Form 8-K ...................................................        18

        Signatures..................................................................................        19
</TABLE>


<PAGE>


PART I. FINANCIAL INFORMATION
-----------------------------

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

Intervest Bancshares Corporation and Subsidiary
 Condensed Consolidated Statements of Financial Condition

<TABLE>
<CAPTION>

                                                                                    (Unaudited)
                                                                                   September 30,  December 31,
($ in thousands, except par value)                                                      1998        1997        Change
----------------------------------                                                      ----        ----        ------
<S>                                                                                <C>          <C>          <C>       
ASSETS

Cash and due from banks                                                            $    1,856   $    1,738   $      118
Federal funds sold                                                                      7,492          162        7,330
Short-term investments                                                                  5,355        7,276       (1,921)
                                                                                   ----------   ----------   ----------
    Total cash and cash equivalents                                                    14,703        9,176        5,527
Interest-bearing deposits                                                                 199           99          100
Securities held to maturity, net (estimated fair value of
   $64,258 and $58,836, respectively)                                                  63,847       58,821        5,026
Federal Reserve Bank stock, at cost                                                       233          233         --
Loans receivable (net of allowance for loan losses of
   $1,532 and $1,173, respectively)                                                    98,310       75,652       22,658
Accrued interest receivable                                                             1,557        1,327          230
Premises and equipment, net                                                             4,975        4,877           98
Deferred income tax asset                                                                 496          485           11
Other assets                                                                              826           85          741
                                                                                   ----------   ----------   ----------
Total assets                                                                       $  185,146   $  150,755   $   34,391
                                                                                   ==========   ==========   ==========


LIABILITIES
Deposits:
Demand deposits                                                                    $    3,276   $    3,490   $     (214)
Savings and NOW deposits                                                               23,111       17,119        5,992
Money-market deposits                                                                  23,497       17,180        6,317
Time deposits                                                                         105,172       93,378       11,794
                                                                                   ----------   ----------   ----------
Total deposits                                                                        155,056      131,167       23,889
Convertible debentures                                                                  7,000         --          7,000
Accrued interest on convertible debentures                                                156         --            156
Mortgage escrow funds                                                                   2,458          590        1,868
Other liabilities                                                                       1,490        1,357          133
                                                                                   ----------   ----------   ----------
Total liabilities                                                                     166,160      133,114       33,046

Minority interest                                                                          23           21            2

STOCKHOLDERS' EQUITY

Preferred stock (300,000 shares authorized, none issued)                                 --           --           --
Class A common stock ($1.00 par value,  7,500,000 shares  authorized,               
    2,164,715 and 2,124,415 shares issued and outstanding, respectively)                2,165        2,124           41
Class B common stock ($1.00 par value, 700,000 shares authorized, 
    300,000 issued and outstanding)                                                       300          300         --
Additional paid-in-capital, common                                                     13,636       13,360          276
Retained earnings                                                                       2,862        1,836        1,026
                                                                                   ----------   ----------   ----------
Total stockholders' equity                                                             18,963       17,620        1,343
                                                                                   ----------   ----------   ----------
Total liabilities, minority interest and stockholders' equity                      $  185,146   $  150,755   $   34,391
                                                                                   ==========   ==========   ==========

See accompanying notes to condensed consolidated financial statements.
</TABLE>
                                      -1-
<PAGE>
<TABLE>
<CAPTION>

                Intervest Bancshares Corporation and Subsidiary
                  Condensed Consolidated Statements of Income
                                  (Unaudited)

                                                                      For the Quarter Ended
                                                                           September 30,
                                                                           -------------
($ in thousands, except per share data)                                    1998      1997      Change
---------------------------------------                                    ----      ----      ------
<S>                                                                      <C>       <C>       <C>    
INTEREST AND DIVIDEND INCOME
Loans receivable                                                         $ 2,279   $ 1,656   $   623
Securities                                                                 1,037       616       421
Other interest-earning assets                                                123        65        58
                                                                         -------   -------   -------
Total interest and dividend income                                         3,439     2,337     1,102

INTEREST EXPENSE
Deposits                                                                   2,042     1,480       562
Convertible debentures                                                       150      --         150
                                                                         -------   -------   -------
Total interest expense                                                     2,192     1,480       712

Net interest and dividend income                                           1,247       857       390

Provision for loan losses                                                    127        82        45
                                                                         -------   -------   -------
Net interest and dividend income after provision for loan losses           1,120       775       345
                                                                         -------   -------   -------

NONINTEREST INCOME
Customer service fees                                                         45        27        18
Other                                                                          7         1         6
                                                                         -------   -------   -------
Total noninterest income                                                      52        28        24
                                                                         -------   -------   -------

NONINTEREST EXPENSES
Salaries and employee benefits                                               266       221        45
Occupancy and equipment, net                                                  94       119       (25)
Professional fees                                                             43        37         6
Stationery and supplies                                                       22        20         2
Other                                                                         93        70        23
                                                                         -------   -------   -------
Total noninterest expenses                                                   518       467        51
                                                                         -------   -------   -------

Income before income taxes                                                   654       336       318

Income taxes                                                                 261       121       140
                                                                         -------   -------   -------
Net income                                                               $   393   $   215   $   178
                                                                         =======   =======   =======

Basic earnings per share                                                 $  0.16   $  0.13   $  0.03
Diluted earnings per share                                               $  0.13   $  0.11   $  0.02
                                                                         -------   -------   -------
</TABLE>

See accompanying notes to condensed consolidated financial statements.
                                      -2-
<PAGE>
<TABLE>
<CAPTION>

                Intervest Bancshares Corporation and Subsidiary
                  Condensed Consolidated Statements of Income
                                  (Unaudited)


                                                             For the Nine Months Ended
                                                                     September 30,
($ in thousands, except per share data)                              1998      1997     Change
---------------------------------------                              ----      ----     ------

<S>                                                                <C>       <C>       <C>    
INTEREST AND DIVIDEND INCOME
Loans receivable                                                   $ 6,078   $ 4,659   $ 1,419
Securities                                                           3,075     1,845     1,230
Other interest-earning assets                                          302       137       165
                                                                   -------   -------   -------
Total interest and dividend income                                   9,455     6,641     2,814
                                                                   -------   -------   -------

INTEREST EXPENSE
Deposits                                                             5,837     4,167     1,670
Convertible debentures and other borrowed funds                        168         1       167
                                                                   -------   -------   -------
Total interest expense                                               6,005     4,168     1,837
                                                                   -------   -------   -------

Net interest and dividend income                                     3,450     2,473       977

Provision for loan losses                                              357       266        91
                                                                   -------   -------   -------
Net interest and dividend income after provision for loan losses     3,093     2,207       886
                                                                   -------   -------   -------
NONINTEREST INCOME
Customer service fees                                                  134        83        51
Other                                                                   19        13         6
                                                                   -------   -------   -------
Total noninterest income                                               153        96        57
                                                                   -------   -------   -------

NONINTEREST EXPENSES
Salaries and employee benefits                                         782       659       123
Occupancy and equipment, net                                           250       310       (60)
Advertising and promotion                                               16        42       (26)
Professional fees                                                      164       105        59
Stationery and supplies                                                 81        61        20
Other                                                                  261       230        31
                                                                   -------   -------   -------
Total noninterest expenses                                           1,554     1,407       147
                                                                   -------   -------   -------

Income before income taxes                                           1,692       896       796

Income taxes                                                           666       334       332
                                                                   -------   -------   -------
Net income                                                         $ 1,026   $   562   $   464
                                                                   =======   =======   =======

Basic earnings per share                                           $  0.42   $  0.34   $  0.08
Diluted earnings per share                                         $  0.32   $  0.28   $  0.04
                                                                   -------   -------   -------
</TABLE>

See accompanying notes to condensed consolidated financial statements.
                                      -3-
<PAGE>
<TABLE>
<CAPTION>

                Intervest Bancshares Corporation and Subsidiary
      Condensed Consolidated Statements of Changes in Stockholders' Equity
                                  (Unaudited)


                                                                 For the Nine Months Ended
                                                                        September 30,
                                                                 -------------------------
($ in thousands)                                                       1998       1997
---------------                                                       ----       ----

<S>                                                                 <C>        <C>     
CLASS A COMMON STOCK
Balance at beginning of period                                      $  2,124   $    900
Effect of 1.5 for 1 stock split in September 1997                       --          450
Issuance of 40,300 shares upon exercise of warrants in 1998               41       --
                                                                    --------   --------
Balance at end of period                                               2,165      1,350
                                                                    --------   --------

CLASS B COMMON STOCK
Balance at beginning of period                                           300        200
Effect of 1.5 for 1 stock split in September 1997                       --          100
                                                                    --------   --------
Balance at end of period                                                 300        300
                                                                    --------   --------

ADDITIONAL PAID-IN-CAPITAL, COMMON
Balance at beginning of period                                        13,360      7,655
Effect of 1.5 for 1 stock split in September 1997                       --         (550)
Compensation related to issuance of stock warrants in 1998                36       --
Issuance of 40,300 shares upon exercise of stock warrants in 1998        240       --
                                                                    --------   --------
Balance at end of period                                              13,636      7,105
                                                                    --------   --------

RETAINED EARNINGS
Balance at beginning of period                                         1,836        992
Net income for the period                                              1,026        562
                                                                    --------   --------
Balance at end of period                                               2,862      1,554
                                                                    --------   --------

                                                                    --------   --------
Total stockholders' equity at end of period                         $ 18,963   $ 10,309
                                                                    ========   ========
</TABLE>

See accompanying notes to condensed consolidated financial statements.
                                      -4-
<PAGE>
<TABLE>
<CAPTION>

                Intervest Bancshares Corporation and Subsidiary
                 Condensed Consolidated Statements of Cash Flows
                                  (Unaudited)

                                                              For the Nine Months Ended
                                                                     September 30,
                                                              -------------------------
($ in thousands)                                                   1998         1997
----------------                                                   ----         ----
<S>                                                             <C>           <C>    
OPERATING ACTIVITIES
Net income                                                      $   1,026     $   562
Adjustments  to  reconcile   net  income  to
     net  cash  provided  by  operating
   activities:
Provision for loan losses                                             357         266
Depreciation and amortization                                         121         179
Provision for deferred income taxes                                   (11)         31
Accrued interest expense on debentures                                156        --
Compensation expense related to stock warrants                         36        --
Amortization of premiums, fees and discounts, net                     (71)         42
Increase in accrued interest receivable and other assets             (417)       (257)
Increase in other liabilities                                         122         654
                                                                ---------     -------
Net cash provided by operating activities                           1,319       1,477
                                                                ---------     -------
INVESTING ACTIVITIES
Increase in interest-earning deposits                                (100)        (98)
Principal repayments of securities held to maturity                32,826      17,118
Purchases of securities held to maturity                          (37,841)    (26,369)
Net increase in loans receivable                                  (22,947)    (13,281)
Purchases of Federal Reserve Bank Stock                              --           (29)
Purchases of premises and equipment, net                             (291)     (1,781)
Sales of foreclosed real estate                                      --           184
                                                                ---------     -------
Net cash used by investing activities                             (28,353)    (24,256)
                                                                ---------     -------
FINANCING ACTIVITIES
Net increase in demand, savings, NOW and money-market deposits     12,095      13,096
Net increase in time deposits                                      11,794      13,244
Net increase in mortgage escrow funds                               1,868       1,213
Proceeds from convertible debentures and other borrowed funds       7,683        --
Repayment of other borrowed funds                                  (1,160)       --
Proceeds from issuance of common stock                                281        --
                                                                ---------     -------
Net cash provided by financing activities                          32,561      27,553
                                                                ---------     -------
Net increase in cash and cash equivalents                           5,527       4,774
Cash and cash equivalents at beginning of period                    9,176       6,320
                                                                ---------     -------
Cash and cash equivalents at end of period                       $ 14,703    $ 11,094
                                                                ---------     -------
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest                                                         $  5,758    $  4,130
Income taxes                                                          510         525
Noncash financing activities:
Compensation related to stock warrants                                 36        --
Interest on convertible debentures                                    156        --
                                                                ---------     -------
</TABLE>

   See accompanying notes to condensed consolidated financial statements.
                                      -5-
<PAGE>

                Intervest Bancshares Corporation and Subsidiary
        Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1 - General

        The   consolidated   financial   statements   of  Intervest   Bancshares
Corporation  and  Subsidiary in this report have not been audited except for the
information  derived  from  the  audited  Consolidated  Statement  of  Financial
Condition as of December 31, 1997. The statements  should be read in conjunction
with the consolidated financial statements and related notes thereto included in
the Company's  Annual Report to  Stockholders  on Form 10-KSB for the year ended
December 31, 1997. The consolidated financial statements include the accounts of
Intervest  Bancshares   Corporation,   a  bank  holding  company  (the  "Holding
Company"), and its subsidiary,  Intervest Bank (the "Bank"). The Holding Company
and Intervest Bank are referred to as the "Company" on a consolidated basis. The
Holding  Company's  primary business  activity is the ownership of the Bank. All
intercompany accounts and transactions have been eliminated in consolidation. 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 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. In preparing the consolidated  financial statements,  management
is required to make estimates and assumptions  that affect the reported  amounts
of assets, liabilities,  revenues and expenses. Actual results could differ from
those  estimates.  Certain  reclassifications  have  been  made to prior  period
amounts to conform to the current periods' presentations.

Note 2 - Loan Impairment and Credit Losses

        No loans were  classified as nonaccrual or identified as being  impaired
during the 1998 and 1997  reporting  periods.  The table  below  summarizes  the
activity in the allowance for loan losses:

<TABLE>
<CAPTION>

                                                     For the            For the
                                                   Quarter Ended  Nine Months Ended
                                                   September 30,     September 30,
                                                   -------------  -----------------
($ in thousands)                                   1998     1997     1998     1997
----------------                                   ----     ----     ----     ----
<S>                                               <C>      <C>      <C>      <C>   
Balance at beginning of period                    $1,405   $  999   $1,173   $  811
Provision for loan losses charged to operations      127       82      357      266
Recoveries                                          --          3        2        7
                                                  ------   ------   ------   ------
Balance at end of period                          $1,532   $1,084   $1,532   $1,084
                                                  ======   ======   ======   ======
</TABLE>

        The Company  monitors its loan  portfolio to determine  the  appropriate
level  of the  allowance  for loan  losses  based on  various  factors  that are
discussed on pages 21 and 22 of the Company's 1997 Annual Report on Form 10-KSB.
The increase  reflected the growth in the loan portfolio as well as management's
intent to maintain the allowance at a level it believes to be adequate.

Note 3 - Convertible Debentures

        On June 26, 1998,  the Holding  Company sold  $7,000,000 of  Convertible
Subordinated  Debentures (the "Debentures").  The proceeds from the sale, net of
underwriting  discounts,  commissions and other fees,  amounted to approximately
$6,500,000. The proceeds are part of the Holding Company's capital funds and are
not  restricted  to their  usage.  The  Debentures  are due July 1, 2008 and are
convertible  at the  option of the  holders  at any time prior to April 1, 2008,
unless  previously  redeemed by the Holding Company,  into shares Class A common
stock at an initial  conversion  price of $11.50 per share through  December 31,
1998.  The table that follows on page 7 shows the  conversion  prices  beginning
January 1, 1999. 

                                      -6-
<PAGE>

                Intervest Bancshares Corporation and Subsidiary
        Notes to Condensed Consolidated Financial Statements (Unaudited)
        ----------------------------------------------------------------

                Period                               Conversion Price Per Share
                ------                               --------------------------
                From January 1, 1999 to June 30, 1999          $12.50
                From July 1, 1999 to June 30, 2000             $14.00
                From July 1, 2000 to June 30, 2001             $15.50
                From July 1, 2001 to June 30, 2002             $17.00
                From July 1, 2002 to June 30, 2003             $18.50
                From July 1, 2003 to June 30, 2004             $20.50
                From July 1, 2004 to June 30, 2005             $22.50
                From July 1, 2005 to June 30, 2006             $25.50
                From July 1, 2006 to June 30, 2007             $28.50
                From July 1, 2007 to April 1, 2008             $32.50


     The Holding Company has the right to establish conversion prices, which are
less than those set forth  above for such  periods as the  Holding  Company  may
determine.  The  conversion  prices  are also  subject to  adjustments  based on
certain conditions and circumstances. The Holding Company also has the option at
any time to call all or any part of the  Debentures  for  payment and redeem the
same at any  time  prior to  maturity  thereof.  The  redemption  price  for the
Debentures is (i) the face amount plus a 2% premium if the date of redemption is
prior to July 1, 1999,  (ii) the face  amount  plus a 1%  premium if  redemption
occurs on or after  July 1, 1999 and  prior to July 1,  2000,  or (iii) the face
amount if the date of redemption is on or after July 1, 2000. In all cases,  the
debenture  holder will also receive accrued  interest to the date of redemption.
Interest on the Debentures will accrue and compound each calendar quarter at 8%.
All accrued  interest is payable at the  maturity of the  Debentures  whether by
acceleration,   redemption  or  otherwise.  Subject  to  certain  procedures,  a
debenture  holder may, on or before July 1 of each year commencing July 1, 2003,
elect to be paid all accrued  interest  and to  thereafter  receive  payments of
interest quarterly. Once made, the election to receive interest is irrevocable.


Note 4 - Earnings Per Share (EPS) and Common Stock Warrants

     Basic EPS is  calculated  by  dividing  net income by the  weighted-average
number of shares of common  stock  outstanding.  Diluted  EPS is  calculated  by
dividing net income 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  outstanding  dilutive  common stock
warrants  (which are computed  using the  treasury  stock  method).  Diluted EPS
considers the potential  dilution that could occur if the Company's  outstanding
stock warrants were converted into common stock that then shared in the earnings
of the Company.  The  Debentures  outstanding  were  antidilutive  (using the if
converted  method) for the 1998 periods  when  considered  with other  potential
dilutive  common  stock and  accordingly,  were  excluded  from the  Diluted EPS
computations.  Prior to the public stock offering in November 1997, there was no
public  market for the  Company's  common  stock.  For  purposes of  calculating
Diluted EPS for the 1997 periods,  the $10 stock offering price is assumed to be
the market price.

                                      -7-
<PAGE>


                Intervest Bancshares Corporation and Subsidiary
        Notes to Condensed Consolidated Financial Statements (Unaudited)
        ----------------------------------------------------------------

Net income applicable to common stock and the weighted-average  number of shares
used for basic and diluted  earnings per share  computations  are  summarized as
follows:
<TABLE>
<CAPTION>

                                                              For the Quarter Ended    For the Nine Months Ended
                                                                  September 30,              September 30,
                                                                  -------------              -------------
                                                                1998          1997         1998        1997
<S>                                                          <C>          <C>          <C>          <C>       
Basic earnings per share:
 Net income applicable to common stockholders                $  393,000   $  215,000   $1,026,000   $  562,000
 Average number of common shares outstanding                  2,463,107    1,650,000    2,448,241    1,650,000
                                                             ----------   ----------   ----------   ----------
Basic earnings per share amount                              $     0.16   $     0.13   $     0.42   $     0.34
                                                             ----------   ----------   ----------   ----------
Diluted earnings per share:
 Net income applicable to common stockholders                $  393,000   $  215,000   $1,026,000   $  562,000
 Average number of common shares outstanding:
 Common shares outstanding                                    2,463,107    1,650,000    2,448,241    1,650,000
 Potential dilutive shares from conversion of warrants          487,711      355,615      737,825      355,615
                                                             ----------   ----------   ----------   ----------
 Total average number of common shares used                   2,950,818    2,005,615    3,186,066    2,005,615
                                                             ----------   ----------   ----------   ----------
Diluted earnings per share amount                            $     0.13   $     0.11   $     0.32   $     0.28
                                                             ==========   ==========   ==========   ==========
</TABLE>

         On March  16,  1998,  the Board of  Directors  of the  Holding  Company
authorized the grant of stock  warrants to directors of the Holding  Company and
officers,  directors  and  employees  of  Intervest  Bank to purchase a total of
122,000 shares of Class A common stock at an initial purchase price per share of
$14.00  through  December  31, 1999 (which  represented  the market price of the
common  stock on the grant  date).  The  purchase  price per share  increases to
$15.00 from  January 1, 2000 through  December 31, 2000,  $16.00 from January 1,
2001  through  December  31,  2001 and  $17.00  from  January  1,  2002  through
expiration.  The grant was  approved by the  Company's  shareholders  on May 27,
1998.  The  warrants  vest  immediately  and expire on December  31,  2002.  The
warrants  were not  included  in the  computations  of Diluted  EPS for the 1998
periods because the warrants' exercise price was greater than the average market
price of the common shares.

        On April 27, 1998,  the Board of  Directors of the Holding  Company also
authorized  the  issuance  of stock  warrants  to the  Chairman  of the Board to
purchase a total of 50,000  shares of Class B common  stock,  exercisable  on or
before  January 31, 2008, at a price of $10.00 per share.  The issuance of these
stock warrants was also approved by the Company's  shareholders on May 27, 1998.
The warrants vest as follows:  7,100  immediately;  7,100 on each anniversary of
the grant date for five  years;  and 7,400 on the sixth  anniversary  date.  The
warrants become fully vested earlier upon certain conditions. The exercise price
of the warrants  was below the market price of the common  shares at the date of
grant. Therefore, in accordance with APB No. 25, "Accounting for Stock Issued to
Employees,"  approximately $20,000, net of taxes, was charged to earnings in the
first nine months of 1998 in connection with the issuance of these warrants.

                                      -8-
<PAGE>





                Intervest Bancshares Corporation and Subsidiary
        Notes to Condensed Consolidated Financial Statements (Unaudited)
        ----------------------------------------------------------------

Note 5 - Regulatory Capital

        The  Holding  Company's  subsidiary,  Intervest  Bank,  is  required  to
maintain certain minimum  regulatory  capital  requirements.  The following is a
summary  at  September  30,  1998 of the  regulatory  capital  requirements  and
Intervest Bank's actual capital on a percentage basis:
<TABLE>
<CAPTION>

                                                           Ratios of   Minimum     To Be Considered
                                                            the Bank  Requirement  Well Capitalized
                                                            --------  -----------  ----------------
<S>                                                          <C>         <C>         <C>   
Total capital to risk-weighted assets                        10.46%      8.00%       10.00%
Tier 1 capital to risk-weighted assets                        9.21%      4.00%        6.00%
Tier 1 capital to total average assets - leverage ratio       6.00%      4.00%        5.00%
</TABLE>

Note 6  - Proposed Bank

     On July 10, 1998, an application for a national bank charter was filed with
the Office of the Comptroller of the Currency and the FDIC by Intervest National
Bank, In  Organization.  The proposed bank will be a wholly owned  subsidiary of
the Holding Company,  with a principal office in the borough of Manhattan in New
York City. The proposed bank will have an initial  capital of $9,000,000,  which
will be provided by the Holding Company.

Note 7 - Recent Accounting Pronouncements

Reporting Comprehensive Income

        On  January  1,  1998,  the  Company  adopted   Statement  of  Financial
Accounting  Standards (SFAS) No. 130,  "Reporting  Comprehensive  Income," which
establishes standards for reporting  comprehensive income.  Comprehensive income
is defined by the standard as the change in equity of an  enterprise  except for
those  changes  resulting  from  stockholder  transactions.  All  components  of
comprehensive  income are required to be reported in a new  financial  statement
that is displayed with equal prominence as existing  financial  statements.  The
Company has no items of comprehensive income,  therefore such a statement is not
presented.

Employers' Disclosures about Pensions and Other Postretirement Benefits

        In February 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 132,  "Employers'  Disclosures about Pensions and Other  Postretirement
Benefits  - an  amendment  of SFAS No. 87, 88 and 106." The  statement  revises,
deletes or adds  certain  disclosures  with  regard to such  plans.  It does not
change the measurement or recognition of those plans. The statement is effective
for fiscal years  beginning after December 15, 1997. This standard has no impact
to the Company's  financial statement  disclosures,  since the Company currently
does not provide these benefits.

                                      -9-
<PAGE>

                 Intervest Bancshares Corporation and Subsidiary
        Notes to Condensed Consolidated Financial Statements (Unaudited)
        ----------------------------------------------------------------

Accounting for Derivative Instruments and Hedging Activities

        In June 1998, the FASB issued SFAS No. 133,  "Accounting  for Derivative
Instruments and Hedging  Activities." The statement  establishes  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments  embedded  in  other  contracts,  and  for  hedging  activities.  It
requires,  among other things,  that an entity  recognizes  all  derivatives  as
either  assets or  liabilities  in the  statement  of  financial  condition  and
measures  those  instruments  at fair value.  The statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. Since the Company
does not currently use derivative financial  instruments,  the standard will not
have any impact to the Company's financial statements when adopted.

Accounting for Start-Up Costs

        In April  1998,  the AICPA  issued  Statement  of  Position  (SOP) 98-5,
"Reporting  on the Costs of Start-Up  Activities,"  which is  effective  for all
nongovermental  entities,  except as  provided  for  therein,  for fiscal  years
beginning  after  December 15, 1998.  The SOP requires  that all start-up  costs
(except  for those that are  capitalizable  under  other  GAAP) be  expensed  as
incurred.

        At  September  30,  1998,  the Holding  Company had $177,000 of deferred
costs  associated  with  organizing  the proposed  bank.  Upon  adoption of this
statement,  it is anticipated that a significant portion of these deferred costs
will be expensed.  In addition,  the Holding Company expects additional start-up
costs to be incurred in the fourth quarter of 1998 in connection with organizing
the proposed bank.

Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use

        In March 1998, the AICPA issued SOP 98-1,  "Accounting  for the Costs of
Computer  Software  Developed or Obtained for Internal  Use," which is effective
for all  nongovermental  entities for fiscal years  beginning after December 15,
1998. The SOP, among other things,  provides  guidance as to when and what types
of costs should be  capitalized  as it relates to  internal-use  software.  Upon
adoption,  the Company  expects that this SOP will not have a material impact on
its financial statements.

                                      -10-
<PAGE>

       ITEM 2. Management's Discussion and Analysis or Plan of Operation

                                    Overview
                                    --------

        Intervest  Bancshares  Corporation and Subsidiary (the "Company") earned
$393,000 for the third  quarter of 1998, an increase of 83% from $215,000 in the
third  quarter  of 1997.  On a diluted  per share  basis,  net income was $0.13,
compared  to $0.11 in the third  quarter of 1997.  For the first nine  months of
1998,  net income also  increased 83% to $1,026,000 or $0.32 per diluted  share,
from  $562,000,  or $0.28 per diluted share,  for the same period of 1997.  (The
computations  of net  income  per share for the 1998  periods  included a higher
amount of common shares,  due to the public  offering of Class A common stock in
November  1997 and an  increase  in  common  stock  warrants  outstanding.)  The
increase in net income for both periods of 1998 over the  corresponding  periods
of 1997, was primarily due to higher net interest and dividend income  resulting
from growth in interest-earning assets.

        The  following  table  shows  selected  ratios  at the end of or for the
period indicated:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------

                                                                  For the Quarter Ended          For the Nine Months Ended
                                                             September 30,      September 30,   September 30, September 30,
                                                             -------------      -------------   ---------------------------
                                                                  1998             1997            1998          1997
                                                                  ----             ----            ----          ----
<S>                                                              <C>               <C>            <C>            <C>  
Stockholders' equity to total assets                             10.24%            7.70%          10.24%         7.70%
Average stockholders' equity to total assets                     10.13%            7.61%           9.87%         7.47%
Return on average assets                                          0.87%            0.70%           0.81%         0.64%
Return on average equity                                          8.39%            8.43%           7.49%         7.49%
Average interest-earning assets to
    interest-bearing liabilities                                  1.11x            1.08x           1.11x         1.08x
Net interest margin                                               2.88%            2.95%           2.84%         2.96%
Noninterest expense to average assets                             1.14%            1.52%           1.22%         1.60%

----------------------------------------------------------------------------------------------------------------------------
</TABLE>

        In  June,  the  Holding  Company  completed  the sale of  $7,000,000  of
Convertible  Subordinated  Debentures  (the  "Debentures")  for net  proceeds of
approximately  $6,500,000.   The  Debentures  are  due  July  1,  2008  and  are
convertible at the option of the holders at any time prior to April 1, 2008 into
shares of Class A common  stock at an  initial  conversion  price of $11.50  per
share through  December 31, 1998. The conversion  price per share increases over
the life of the  Debentures.  The Holding Company can also redeem the Debentures
plus  accrued  interest  at any time prior to  maturity  at  various  redemption
prices.  Interest on the debentures accrues and compounds  quarterly at 8%, with
all accrued  interest  payable at maturity.  For  additional  information on the
Debentures,  see note 3 to the condensed  consolidated  financial  statements on
page 6 of this report.

         In July, an application  for a national bank charter was filed with the
OCC and FDIC by Intervest National Bank, In Organization. The proposed bank will
be a wholly owned subsidiary of the Holding Company,  with a principal office in
the borough of Manhattan in New York City.  The proposed  bank will have initial
capital of $9,000,000, which will be provided by the Holding Company.

Comparison of Financial Condition at September 30, 1998 and December 31, 1997
-----------------------------------------------------------------------------

        Overview.  Total assets at September 30, 1998 increased to $185,146,000,
from  $150,755,000  at December 31, 1997.  The increase was  primarily  due to a
higher level of loans receivable,  securities held to maturity and cash and cash
equivalents. Total liabilities increased from $133,135,000 at December 31, 1997,
to  $166,183,000  at  September  30,  1998,  reflecting  an  increase in deposit
liabilities and the borrowing of funds through the sale of the Debentures.
                                      -11-
<PAGE>

        The Company's balance sheet was comprised of the following:

<TABLE>
<CAPTION>
                                             At September 30, 1998      At December 31, 1997
                                             ---------------------      --------------------
                                             Carrying     % of         Carrying       % of
($ in thousands)                               Value   Total Assets      Value    Total Assets
----------------                               -----   ------------      -----    ------------
<S>                                          <C>            <C>        <C>            <C> 
Cash and cash equivalents                    $ 14,703       7.9%       $  9,176       6.1%
Securities held to maturity                    63,847      34.5          58,821      39.0
Loans receivable, net                          98,310      53.1          75,652      50.2
All other assets                                8,286       4.5           7,106       4.7
                                             --------     -----        --------     ----- 
Total assets                                 $185,146     100.0%       $150,755     100.0%
                                             --------     -----        --------     ----- 
Deposits                                     $155,056      83.7%       $131,167      87.0%
Convertible debentures                          7,000       3.8            --         --
All other liabilities                           4,127       2.3           1,968       1.3
                                             --------     -----        --------     ----- 
Total liabilities                             166,183      89.8         133,135      88.3
                                             --------     -----        --------     ----- 
Stockholders' equity                           18,963      10.2          17,620      11.7
                                             --------     -----        --------     ----- 
Total liabilities and stockholders' equity   $185,146     100.0%       $150,755     100.0%
                                             ========     =====        ========     ===== 
</TABLE>


        Cash and Cash Equivalents. Cash and cash equivalents increased primarily
due to the  short-term  investment of a portion of the proceeds from the sale of
the Debentures.

        Securities Held to Maturity.  Securities held to maturity  increased due
to  purchases  of  U.S.  government  agency  securities,   partially  offset  by
maturities of U.S. treasury obligations.

         Loans Receivable. Loans receivable increased due to new originations of
commercial real estate loans,  partially  offset by principal  repayments on the
loan portfolio. At September 30, 1998 and December 31, 1997, the Company did not
have any loans on a nonaccrual status or classified as impaired.

        Allowance for Loan Losses.  The Company  monitors its loan  portfolio to
determine  the  appropriate  level of the  allowance  for loan  losses  based on
various  factors  that are  discussed on pages 21 and 22 of the  Company's  1997
Annual Report on Form 10-KSB.  At September 30, 1998, the allowance  amounted to
$1,532,000,  compared to $1,173,000 at year-end 1997. The increase reflected the
growth in the loan  portfolio  as well as  management's  intent to maintain  the
allowance at a level it believes to be adequate.

        All Other  Assets.  All other assets  increased  largely due to deferred
costs related the sale of the Debentures  ($532,000)  and  organizing  Intervest
National  Bank  ($177,000),  and an  increase  in  accrued  interest  receivable
($230,000).

     In  April  1998,  the  AICPA  issued  Statement  of  Position  (SOP)  98-5,
"Reporting  on the Costs of Start-Up  Activities,"  which is  effective  for the
Company's  1999 financial  statements.  The SOP requires that all start-up costs
(except  for  those  that  are  capitalizable  under  other  generally  accepted
accounting principles) be expensed as incurred. Previously,  start-up costs were
generally  capitalized and amortized over a period of time. Upon adoption of the
SOP,  it is  anticipated  that  a  significant  portion  of the  deferred  costs
associated with organizing the proposed bank will be expensed. In addition,  the
Holding Company expects  additional  start-up costs to be incurred in the fourth
quarter of 1998 in connection with organizing the proposed bank.

                                      -12-
<PAGE>

        Deposits.  Deposit liabilities  increased due to net deposit inflows and
growth in deposit accounts. At September 30, 1998, time deposit accounts totaled
$105,172,000  and  demand  deposits,  savings,  NOW  and  money-market  accounts
aggregated   $49,884,000.   This  compared  to  deposits  of   $93,378,000   and
$37,789,000,  respectively,  at December 31, 1997. Time deposits represented 68%
of total deposits at September 30, 1998, compared to 71% at year-end 1997.

        All Other Liabilities.  All other liabilities increased largely due to a
higher level of mortgage  escrow  funds,  which  represent  advance  payments by
borrowers for taxes and insurance.

        Stockholders'  Equity  and  Regulatory  Capital.   Stockholders'  equity
increased  primarily as a result of net income of $1,026,000 for the nine months
ended  September  30, 1998 and $281,000 of proceeds  from the issuance of 40,300
shares of Class A common  stock upon the exercise of stock  warrants.  Intervest
Bank's Tier 1 leverage  capital ratio was 6.00% at September 30, 1998,  compared
to 6.53% at  December  31,  1997.  The Bank's  total  risk-based  capital  ratio
amounted to 10.46% at September 30, 1998,  compared to 11.46% at year-end  1997.
The decline in these ratios reflected the growth in the Bank's assets.


                        Liquidity and Capital Resources
                        -------------------------------

        The Company's primary source of cash for the nine months ended September
30,  1998 was from the  maturity  of  securities  totaling  $32,826,000  and net
deposit inflows of $23,889,000. In addition, the Holding Company sold $7,000,000
of  Convertible  Subordinated  Debentures on June 26, 1998 for proceeds,  net of
underwriting  costs and other fees, of approximately  $6,500,000.  Cash flow was
used  primarily for net loan  originations  of  $22,947,000  and the purchase of
securities  totaling   $37,841,000.   At  September  30,  1998,  cash  and  cash
equivalents totaled $14,703,000, compared to $9,176,000 at December 31, 1997.

                           Interest Rate Sensitivity
                           -------------------------

        Interest  rate risk arises from  differences  in the repricing of assets
and liabilities within a given time period. The Company's principal objective of
its  asset/liability  management strategy is to minimize its exposure to changes
in  interest  rates by  matching  the  maturity  and  repricing  horizons of its
interest-earning assets and interest-bearing  liabilities. The Company uses "gap
analysis" to monitor its interest rate sensitivity.  For a further discussion of
interest  rate  risk  and  gap  analysis,  including  the  assumptions  used  in
developing  the gap  analysis,  see the  Company's  1997  Annual  Report on Form
10-KSB,  pages 16 and 17. At September 30, 1998, the Company's one-year negative
interest-rate  sensitivity  gap was  $56,153,000,  compared  to  $42,489,000  at
December 31, 1997.

                              Year 2000 Compliance
                              --------------------

         The  Company's  operations  are, by their  nature,  dependent  upon its
internal computer systems as well as those of other third-party  companies.  The
Company is conducting a review of its computer  systems to identify systems that
could be affected by the "Year 2000" issue and has an ongoing  program  designed
to ensure that its operational  and financial  systems will continue to function
properly on and after the year 2000, free of software failures due to processing
errors arising from calculations using the year 2000 date.

                                      -13-
<PAGE>

         The Year 2000  issue is the  result of  computer  programs,  which were
written using two digits rather than four digits to define the applicable  year.
As a result,  such  programs  may  recognize  a date using "00" as the year 1900
instead  of  the  year  2000,   which  could   result  in  system   failures  or
miscalculations.

        The Company  primarily  uses  personal  computer  based  systems,  which
operate using industry  standard  software  systems that have been developed and
are supported by third-party software companies.  Currently, the Company's costs
to resolve  Year 2000  issues are not  expected  to be  material.  The Year 2000
issue,  however,  creates risk for the Company from  unforeseen  problems in its
computer  processing  and from the computer  processing  problems of other third
parties with which the Company  conducts  financial  transactions.  As a result,
incomplete or untimely resolution of such Year 2000 problems may have an adverse
impact on the operations of the Company.

        The  Federal  banking   regulators  have  issued  safety  and  soundness
guidelines  to  be  followed  by  insured  depository   institutions  to  assure
resolution  of any Year 2000  problems.  Any  institution's  failure  to address
appropriately the Year 2000 problem could result in supervisory action.

        As part of its plan, the Company is monitoring the Year 2000  compliance
of its vendors and requiring them to represent  that their products  provided to
the Company are, or will be, year 2000  compliant.  In addition the Company will
be  participating  in the testing of systems  during  1999.  Management  is also
developing  appropriate  contingency  plans to deal  with  problems  as they may
arise. There can be no assurance,  however,  that the systems of other companies
on which the  Company's  systems rely will also be converted  timely or that any
such failure to convert by another  company would not have an adverse  effect on
the Company's systems.


           Comparison of Results of Operations for the Quarters Ended
           ----------------------------------------------------------
                           September 30, 1998 and 1997
                           ---------------------------

        Overview. Net income for the third quarter of 1998 increased to $393,000
or $0.13 per diluted share,  from $215,000,  or $0.11 per diluted share, for the
same quarter of 1997. Higher net income was primarily due to a $390,000 increase
in net interest and dividend  income,  partially offset by increases of $140,000
in the provision for income taxes,  $51,000 in noninterest  expenses and $45,000
in the provision for loan losses.

        Net Interest and Dividend  Income.  Net interest and dividend  income is
the  Company's  largest  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.

                                      -14-
<PAGE>

        The table below sets forth  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 annualized  income/expense  for each
period divided by average interest-earning  assets/interest-bearing  liabilities
during each period.  Certain yields and rates shown are adjusted for related fee
income or  expense.  Average  balances  are  derived  from daily  balances.  Net
interest  margin is computed by dividing  annualized  net  interest and dividend
income by the average of total interest-earning assets during each period.

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------
                                                                  For the Quarter Ended
                                             ---------------------------------------------------------------
                                                    September 30, 1998             September 30, 1997
                                                    ------------------             ------------------
                                             Average     Interest    Yield/   Average   Interest      Yield/
($ in thousands)                             Balance     Inc./Exp.    Rate    Balance   Inc./Exp.      Rate
------------------------------------------------------------------------------------------------------------
<S>                                          <C>        <C>            <C>  <C>         <C>             <C>  
               Assets
Interest-earning assets:
Loans                                        $ 97,782   $  2,279       9.32%$ 71,700    $  1,656        9.24%
Securities                                     66,464      1,037       6.24   39,897         616        6.18
Other interest-earning assets                   9,214        123       5.34    4,774          65        5.45
------------------------------------------------------------------------------------------------------------
Total interest-earning assets                 173,460   $  3,439       7.93% 116,371    $  2,337        8.03%
------------------------------------------------------------------------------------------------------------
Noninterest-earning assets                      7,952                          6,559
------------------------------------------------------------------------------------------------------------
Total assets                                 $181,412                       $122,930
------------------------------------------------------------------------------------------------------------

     Liabilities and Stockholders' Equity
Interest-bearing liabilities:
  Demand, money market and NOW deposits      $ 29,292   $    343       4.68%  $20,373    $    226       4.44%
  Savings deposits                             16,842        207       4.92     6,279          86       5.48
  Time deposits                               103,123      1,492       5.79    80,905       1,168       5.77
                                              -------      -----       ----    ------      ------       ----
  Total deposits accounts                     149,257      2,042       5.47   107,557       1,480       5.50
                                              -------      -----       ----   -------   ---------       ----
  Convertible debentures                        7,062        150       8.50      --          --          --
------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities            156,319   $  2,192       5.61%  107,557    $  1,480       5.50%
------------------------------------------------------------------------------------------------------------
Noninterest-bearing liabilities                 6,346                           5,175
Stockholders' equity                           18,747                          10,198
------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity   $181,412                        $122,930
------------------------------------------------------------------------------------------------------------
Net interest and dividend income/spread                 $  1,247       2.32%             $    857       2.53%
------------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin           $ 17,141                  2.88% $  8,814                   2.95%
------------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
to total interest-bearing liabilities            1.11x                           1.08x
------------------------------------------------------------------------------------------------------------

</TABLE>

        Net interest and dividend  income  increased to  $1,247,000 in the third
quarter of 1998,  from $857,000 in the 1997 third quarter.  The increase was due
to growth in interest-earning  assets,  partially offset by a decline in the net
interest margin from 2.95% to 2.88%.

         The  decline  in the margin was a  function  of a lower  interest  rate
spread caused by a decline in the yield on the Company's  earning  assets and an
increase in its cost of funds.  The yield on earning assets declined by 10 basis
points due to the  investment of a large  portion of funds from deposit  inflow,
the sale of the  Debentures  and the public stock offering in November 1997 into
securities and  short-term  investments.  Securities and short-term  investments
have  lower  yields  than  the  Company's  loans.  The  Company's  cost of funds
increased by 11 basis points due to sale of the Debentures,  partially offset by
a decline in the cost of deposits.

                                      -15-
<PAGE>

         The effect of the decrease in the interest rate spread  described above
was largely offset by an increase of $8,327,000 in net interest-earning  assets.
The increase in net interest-earning assets was largely due to the investment of
the proceeds  from the issuance of common stock as well as the  reinvestment  of
earnings generated from operations.

        The following table sets forth information regarding changes in interest
and  dividend  income  and  interest  expense  of the  Company  for the  periods
indicated.  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, 1998 vs. 1997
                                              -------------------------------------------------
                                                 Increase (Decrease) Due to Change in:
                                                 -------------------------------------
($ in thousands)                                     Rate     Volume  Rate/Volume  Total
-----------------------------------------------------------------------------------------------
<S>                                                 <C>       <C>      <C>       <C>   
Interest-earning assets:
Loans                                               $   14    $  602   $    7    $  623
Securities                                               6       410        5       421
Other interest-earning assets                           (1)       60       (1)       58
-----------------------------------------------------------------------------------------------
Total interest-earning assets                           19     1,072       11     1,102
-----------------------------------------------------------------------------------------------
Interest-bearing liabilities:
  Demand, money market and NOW deposits                 15        97        5       117
  Savings deposits                                      (9)      145      (15)      121
  Time deposits                                          4       320       --       324
                                                    ------    ------   ------    ------
  Total deposits accounts                               10       562      (10)      562
  Convertible debentures                                --        --      150       150
-----------------------------------------------------------------------------------------------
Total interest-bearing liabilities                      10       562      140       712
-----------------------------------------------------------------------------------------------
Net change in interest and dividend income          $    9    $  510   $ (129)   $  390
-----------------------------------------------------------------------------------------------
</TABLE>


        Provision  for Loan Losses.  The  provision  for loan losses is based on
management's  ongoing  assessment  of the  adequacy  of the  allowance  for loan
losses.  The  provision  amounted  to  $127,000  in the third  quarter  of 1998,
compared to $82,000 in the third  quarter of 1997,  reflecting a higher level of
outstanding loans as well as management's  intent to maintain the allowance at a
level it believes to be adequate.

        Noninterest  Expenses.  Total noninterest expenses increased to $518,000
in the third quarter of 1998,  from  $467,000 in the third quarter of 1997.  The
increase  over last year's period was largely due to an increase in salaries and
employee  benefits,  resulting  primarily from the Company's growth and need for
increased staff.

        Provision for Income Taxes.  The provision for income taxes increased to
$261,000 in the third  quarter of 1998,  from  $121,000 in the third  quarter of
1997,  due  to  higher  pre-tax  earnings.  The  Company's  effective  tax  rate
(inclusive  of state and local taxes)  amounted to 39.9% in the third quarter of
1998,  compared to 36.0% in the same quarter of 1997. The higher rate was due to
an increase in pre-tax earnings  generated by the Holding  Company,  which has a
higher tax rate than its subsidiary in Florida .

                                      -16-
<PAGE>


         Comparison of Results of Operations for the Nine Months Ended
         -------------------------------------------------------------
                          September 30, 1998 and 1997
                          ---------------------------

        Overview.  Net income  for the nine  months  ended  September  30,  1998
increased to $1,026,000, or $0.32 per diluted share, from $562,000, or $0.28 per
diluted share, for the same period of 1997.  Higher net income was primarily due
to a $977,000 increase in net interest and dividend income,  partially offset by
increases of $332,000 in the provision for income taxes, $147,000 in noninterest
expenses  and  $91,000 in the  provision  for loan  losses.  The reasons for the
changes in the provision for loan losses and income taxes as well as noninterest
expenses are  essentially  the same as those  discussed in the comparison of the
quarters ended September 30, 1998 and 1997.

        Net  Interest  and  Dividend  Income.  The table that follows sets forth
information similar to the table on page 15 for the nine-month periods.

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------
                                                                  For the Nine Months Ended
                                                                  -------------------------
                                                   September 30, 1998                   September 30, 1997
                                                   ------------------                   ------------------
                                             Average    Interest      Yield/     Average     Interest    Yield/
($ in thousands)                             Balance    Inc./Exp.      Rate      Balance     Inc./Exp.    Rate
----------------------------------------------------------------------------------------------------------------
<S>                                          <C>        <C>            <C>      <C>         <C>           <C>  
          Assets
Interest-earning assets:
Loans                                        $ 87,762   $  6,078       9.23%    $ 67,573    $  4,659      9.19%
Securities                                     66,577      3,075       6.16       40,184       1,845      6.12
Other interest-earning assets                   7,642        302       5.27        3,537         137      5.16
----------------------------------------------------------------------------------------------------------------
Total interest-earning assets                 161,981   $  9,455       7.78%     111,294    $  6,641      7.96%
----------------------------------------------------------------------------------------------------------------
Noninterest-earning assets                      7,678                              6,147
----------------------------------------------------------------------------------------------------------------
Total assets                                 $169,659                           $117,441
----------------------------------------------------------------------------------------------------------------

Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Demand, money market and NOW deposits        $ 26,323   $    913       4.62%    $ 17,177    $    574      4.46%
Savings deposits                               15,703        572       4.86        8,269         302      4.87
Time deposits                                 101,193      4,352       5.73       77,338       3,291      5.67
                                              ----------------------------------------------------------------
Total deposits accounts                       143,219      5,837       5.43      102,784       4,167      5.41
                                              ----------------------------------------------------------------
Convertible debentures and other
    borrowed funds                              2,645        168       8.47           18           1      5.80
----------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities            145,864   $  6,005       5.49%     102,802    $  4,168      5.41%
----------------------------------------------------------------------------------------------------------------
Noninterest-bearing liabilities                 5,527                              4,630
Stockholders' equity                           18,268                             10,009
----------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity   $169,659                           $117,441
----------------------------------------------------------------------------------------------------------------
Net interest and dividend income/spread                 $  3,450       2.29%                $  2,473      2.55%
----------------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin           $ 16,117                  2.84%    $  8,492                  2.96%
----------------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
to total interest-bearing liabilities            1.11x                              1.08x
----------------------------------------------------------------------------------------------------------------

</TABLE>

        Net  interest  and  dividend  income  increased  to  $3,450,000  in  the
nine-month  period ended  September 30, 1998, from $2,473,000 in the same period
of 1997. The increase was due to a higher level of net interest-earning  assets,
partially offset by a decline in the net interest margin.  The reasons for these
changes are  essentially  the same as those  discussed in the  comparison of the
quarters ended September 30, 1998 and 1997.

                                      -17-
<PAGE>

        The table that  follows sets forth  information  similar to the table on
page 16 for the nine-month periods.
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------
                                        For the Nine Months Ended September 30, 1998 vs. 1997
                                        -----------------------------------------------------
                                           Increase (Decrease) Due to Change in:
                                           -------------------------------------
<S>                                                 <C>       <C>      <C>       <C>   
($ in thousands)                                    Rate    Volume  Rate/Volume Total
Interest-earning assets:
  Loans                                             $   20    $1,393   $    6    $1,419
  Securities                                            12     1,210        8     1,230
  Other interest-earning assets                          3       159        3       165
-----------------------------------------------------------------------------------------------
Total interest-earning assets                           35     2,762       17     2,814
-----------------------------------------------------------------------------------------------
Interest-bearing liabilities:
Demand, money market and NOW deposits                   21       306       12       339
Savings deposits                                        (1)      272       (1)      270
Time deposits                                           35     1,014       12     1,061
                                                    -------------------------------------------
Total deposits accounts                                 55     1,592       23     1,670
Convertible debentures and other borrowed funds         --       114       53       167
-----------------------------------------------------------------------------------------------
Total interest-bearing liabilities                      55     1,706       76     1,837
-----------------------------------------------------------------------------------------------
Net change in interest and dividend income          $  (20)   $1,056   $  (59)   $  977
-----------------------------------------------------------------------------------------------
</TABLE>


PART II. OTHER INFORMATION

ITEM 1.  Legal Proceedings
        Not Applicable

ITEM 2.  Changes in Securities and Use of Proceeds
(a)     Not Applicable
(b)     Not Applicable
(c)     Not Applicable
(d)     Not Applicable

ITEM 3.  Defaults Upon Senior Securities
        Not Applicable

ITEM 4.  Submission of Matters to a Vote of Security Holders
        Not Applicable

ITEM 5.  Other Information
        Not Applicable

ITEM 6.  Exhibits and Reports on Form 8-K

(a)     Exhibit Index  (numbered in accordance  with Item 601 of Regulation S-B)
        27- Financial Data Schedule (For SEC Purposes only)

(b)     No Reports on Form 8-K were filed during the quarter ended September 30,
        1998.

                                      -18-
<PAGE>





                                   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 AND SUBSIDIARY



Date:  November 9, 1998       By:    /s/ Lowell S. Dansker
                                     -------------------------------------------
                                     Lowell S. Dansker, President and Treasurer
                                     (Chief Financial Officer)


Date:  November 9, 1998       By:    /s/ Lawrence G. Bergman
                                     -------------------------------------------
                                     Lawrence G. Bergman,  Vice President
                                     and Secretary

                                      -19-