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

                                    FORM 10-Q

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

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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
     of incorporation or organization)          Identification No.)

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

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

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

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

Indicate  by  check mark whether the registrant 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 XX
                       --                      --                             --

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

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

<TABLE>
<CAPTION>
Title of Each Class:                             Shares Outstanding:
-------------------                              ------------------
<S>                                              <C>
Class A Common Stock, $1.00 par value per share  7,468,098 outstanding as of July 31, 2006
-----------------------------------------------  -----------------------------------------

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


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

                                            FORM 10-Q
                                          JUNE 30, 2006
                                        TABLE OF CONTENTS


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

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

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

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

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

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

          Review by Independent Registered Public Accounting Firm. . . . . . . . . . . . .    18

          Report of Independent Registered Public Accounting Firm. . . . . . . . . . . . .    19

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

     ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. . . . . . . .    34

     ITEM 4.     CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . .    34

PART II. OTHER INFORMATION

     ITEM 1.     LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . .    34

     ITEM 1A.    RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    34

     ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS . . . . . . .    34

     ITEM 3.     DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . . . . . .    34

     ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . .    35

     ITEM 5.     OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .    35

     ITEM 6.     EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    35

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    36

CERTIFICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    37
</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>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
                                      INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                                            CONDENSED CONSOLIDATED BALANCE SHEETS


                                                                                                  JUNE 30,     DECEMBER 31,
($in thousands, except par value)                                                                   2006           2005
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                             <C>           <C>
ASSETS                                                                                           (Unaudited)       (Audited)
Cash and due from banks                                                                         $      8,802  $       11,595
Federal funds sold                                                                                     7,717          42,675
Commercial paper and other short-term investments                                                      3,021           2,446
                                                                                                ----------------------------
  Total cash and cash equivalents                                                                     19,540          56,716
Securities held to maturity, net (estimated fair value of $297,567 and $249,088, respectively)       300,779         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 $16,131 and $15,181, respectively)           1,423,305       1,352,805
Accrued interest receivable                                                                            8,869           7,706
Loan fees receivable                                                                                  11,595          10,941
Premises and equipment, net                                                                            6,272           6,421
Deferred income tax asset                                                                              7,319           6,988
Deferred debenture offering costs, net                                                                 5,110           5,610
Other assets                                                                                           3,070           2,487
============================================================================================================================
TOTAL ASSETS                                                                                    $  1,791,672  $    1,706,423
============================================================================================================================
LIABILITIES
Deposits:
  Noninterest-bearing demand deposit accounts                                                   $      7,279  $        9,188
  Interest-bearing deposit accounts:
    Checking (NOW) accounts                                                                            7,816           7,202
    Savings accounts                                                                                  13,559          17,351
    Money market accounts                                                                            231,628         223,075
    Certificate of deposit accounts                                                                1,190,673       1,118,514
                                                                                                ----------------------------
Total deposit accounts                                                                             1,450,955       1,375,330
Borrowed Funds:
    Subordinated debentures                                                                           82,390          87,390
    Subordinated debentures - capital securities                                                      61,856          61,856
    Accrued interest payable on all borrowed funds                                                     5,060           6,250
    Mortgage note payable                                                                                222             229
                                                                                                ----------------------------
Total borrowed funds                                                                                 149,528         155,725
Accrued interest payable on deposits                                                                   3,646           3,232
Mortgage escrow funds payable                                                                         23,444          20,302
Official checks outstanding                                                                           11,528          11,689
Other liabilities                                                                                      3,158           3,967
----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES                                                                                  1,642,259       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,
  7,463,905 and 7,438,058 shares issued and outstanding, respectively)                                 7,464           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                                                                    65,690          65,309
Retained earnings                                                                                     75,874          63,046
----------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY                                                                           149,413         136,178
============================================================================================================================
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                      $  1,791,672  $    1,706,423
============================================================================================================================
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>


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

                                                                         QUARTER ENDED           SIX-MONTHS ENDED
                                                                           JUNE 30,                  JUNE 30,
                                                                   ------------------------  ------------------------
($ in thousands, except per share data)                                2006         2005         2006         2005
-------------------------------------------------------------------------------------------  ------------------------
<S>                                                                <C>          <C>          <C>          <C>
INTEREST AND DIVIDEND INCOME
Loans receivable                                                   $    28,203  $    20,800  $    55,134  $    39,611
Securities                                                               3,222        1,723        5,969        3,286
Other interest-earning assets                                              312          173          700          367
-------------------------------------------------------------------------------------------  ------------------------
TOTAL INTEREST AND DIVIDEND INCOME                                      31,737       22,696       61,803       43,264
-------------------------------------------------------------------------------------------  ------------------------


INTEREST EXPENSE
Deposits                                                                15,516       10,375       30,075       19,414
Subordinated debentures                                                  1,817        2,003        3,725        4,063
Subordinated debentures - capital securities                             1,090        1,089        2,180        2,179
Other borrowed funds                                                       224           33          247          127
-------------------------------------------------------------------------------------------  ------------------------
TOTAL INTEREST EXPENSE                                                  18,647       13,500       36,227       25,783
-------------------------------------------------------------------------------------------  ------------------------


NET INTEREST AND DIVIDEND INCOME                                        13,090        9,196       25,576       17,481
Provision for loan losses                                                  589          452          950        1,485
-------------------------------------------------------------------------------------------  ------------------------
NET INTEREST AND DIVIDEND INCOME AFTER PROVISION FOR LOAN LOSSES        12,501        8,744       24,626       15,996
-------------------------------------------------------------------------------------------  ------------------------


NONINTEREST INCOME
Customer service fees                                                      100           79          259          155
Income from mortgage lending activities                                    540          301          789          450
Income from the early repayment of mortgage loans                          972        1,568        2,646        2,222
Commissions and fees                                                         -           59            -           59
Gain from early call of investment securities                                -            2            -            1
-------------------------------------------------------------------------------------------  ------------------------
TOTAL NONINTEREST INCOME                                                 1,612        2,009        3,694        2,887
-------------------------------------------------------------------------------------------  ------------------------


NONINTEREST EXPENSES
Salaries and employee benefits                                           1,304        1,382        2,763        2,667
Occupancy and equipment, net                                               425          357          828          714
Data processing                                                            180          146          358          282
Professional fees and services                                             310          267          535          406
Stationery, printing and supplies                                           60           55          113          109
Postage and delivery                                                        33           32           74           65
FDIC and general insurance                                                  94           77          182          156
Director and committee fees                                                100          131          222          253
Advertising and promotion                                                   79           50          151           97
All other                                                                  147          252          302          374
-------------------------------------------------------------------------------------------  ------------------------
TOTAL NONINTEREST EXPENSES                                               2,732        2,749        5,528        5,123
-------------------------------------------------------------------------------------------  ------------------------
Earnings before income taxes                                            11,381        8,004       22,792       13,760
Provision for income taxes                                               4,973        3,481        9,964        5,989
===========================================================================================  ========================
NET EARNINGS                                                       $     6,408  $     4,523  $    12,828  $     7,771
===========================================================================================  ========================


BASIC EARNINGS PER SHARE                                           $      0.82  $      0.72  $      1.64  $      1.24
DILUTED EARNINGS PER SHARE                                         $      0.77  $      0.67  $      1.54  $      1.15
CASH DIVIDENDS PER SHARE                                           $         -  $         -  $         -  $         -
-------------------------------------------------------------------------------------------  ------------------------
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>


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

                                                                  SIX-MONTHS ENDED
                                                                       JUNE 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      25,847        26      8,068        8
--------------------------------------------------------------------------  ------------------
Balance at end of period                               7,463,905     7,464  5,894,501    5,894
--------------------------------------------------------------------------  ------------------


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                   381                 102
--------------------------------------------------------------------------  ------------------
Balance at end of period                                            65,690              39,063
--------------------------------------------------------------------------  ------------------


RETAINED EARNINGS
Balance at beginning of period                                      63,046              44,862
Net earnings for the period                                         12,828               7,771
--------------------------------------------------------------------------  ------------------
Balance at end of period                                            75,874              52,633
--------------------------------------------------------------------------  ------------------

==========================================================================  ==================
TOTAL STOCKHOLDERS' EQUITY AT END OF PERIOD            7,848,905  $149,413  6,279,501  $97,975
==========================================================================  ==================
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>


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

                                                                                          SIX-MONTHS ENDED
                                                                                               JUNE 30,
                                                                                      --------------------------
($ in thousands)                                                                          2006          2005
----------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>           <C>
OPERATING ACTIVITIES
Net earnings                                                                          $    12,828   $     7,771
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization                                                                 275           257
Provision for loan losses                                                                     950         1,485
Deferred income tax benefit                                                                  (331)         (705)
Amortization of deferred debenture offering costs                                             563           586
Amortization of premiums (accretion) of discounts and deferred loan fees, net              (5,537)       (3,227)
Net decrease in accrued interest payable on debentures                                     (1,027)       (3,172)
Net decrease in official checks outstanding                                                  (161)       (2,368)
Net increase in loan fees receivable                                                         (654)       (1,193)
Net change in all other assets and liabilities                                              2,635         5,297
----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                                   9,541         4,731
----------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Maturities and calls of securities held to maturity                                        61,785        42,195
Purchases of securities held to maturity                                                 (110,859)      (25,523)
Net increase in loans receivable                                                          (70,886)     (159,333)
Purchases of Federal Reserve Bank and Federal Home Loan Bank stock, net                      (572)         (891)
Purchases of premises and equipment, net                                                     (126)         (189)
----------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES                                                    (120,658)     (143,741)
----------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase in deposits                                                                   75,625       223,634
Net increase in mortgage escrow funds payable                                               3,142         3,293
Net decrease in FHLB advances                                                                   -       (36,000)
Principal repayments of debentures and mortgage note payable                               (4,757)      (14,356)
Gross proceeds from debenture issuance costs                                                    -        14,000
Debenture issuance costs                                                                      (69)         (963)
----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                                  73,941       189,608
----------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents                                      (37,176)       50,598
Cash and cash equivalents at beginning of period                                           56,716        24,599
================================================================================================================
Cash and cash equivalents at end of period                                            $    19,540   $    75,197
================================================================================================================

SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
  Interest                                                                            $    36,277   $    27,699
  Income taxes                                                                             12,181         6,095
Noncash activities:
  Conversion of debentures and accrued interest into Class A common stock                     407           110
----------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>


                                        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 and IV are wholly owned subsidiaries of the
Holding  Company  that  are  unconsolidated  entities  as  required by Financial
Accounting  Standards  Board  (FASB)  Interpretation No. 46-R, "Consolidation of
Variable  Interest  Entities."  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 has received
regulatory  permission  to open an additional branch office in Clearwater Beach,
Florida,  which  is  expected  to  open  by  August 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 active
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.

Intervest  Statutory  Trust I, II, III and IV issued in December 2001, September
2003,  March  2004  and  September  2004,  $15  million,  respectively, of trust
preferred  securities  for a total of $60 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 June 30, 2006       $  300,779  $         -  $     3,212  $  297,567    4.12%  1.3 Years
At December 31, 2005   $  251,508  $        14  $     2,434  $  249,088    3.26%  1.1 Years
-------------------------------------------------------------------------------------------
</TABLE>

All  the securities at June 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  June 30, 2006, the portfolio consisted of 185 securities nearly all of which
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 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 June 30, 2006:
     Due in one year or less                 $       117,839  $             116,758           3.39%
     Due after one year through five years           182,940                180,809           4.59%
     ----------------------------------------------------------------------------------------------
                                             $       300,779  $             297,567           4.12%
     ----------------------------------------------------------------------------------------------

     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 June 30, 2006        At December 31, 2005
                                              ------------------------  ------------------------
     ($ in thousands)                         # of Loans     Amount     # of Loans     Amount
     -------------------------------------------------------------------------------------------
<S>                                           <C>         <C>           <C>         <C>
     Commercial real estate loans                    275  $   795,945          264  $   735,650
     Residential multifamily loans                   235      572,897          234      538,760
     Land development and other land loans            30       81,837           31      105,251
     Residential 1-4 family loans                      2           53            3          100
       Commercial business loans                      21          943           22        1,089
     Consumer loans                                   16          255           10          194
     -------------------------------------------------------------------------------------------
     Loans receivable                                579    1,451,930          564    1,381,044
     -------------------------------------------------------------------------------------------
     Deferred loan fees                                       (12,494)                  (13,058)
     -------------------------------------------------------------------------------------------
     Loans receivable, net of deferred fees                 1,439,436                 1,367,986
     -------------------------------------------------------------------------------------------
     Allowance for loan losses                                (16,131)                  (15,181)
     -------------------------------------------------------------------------------------------
     Loans receivable, net                                $ 1,423,305               $ 1,352,805
     -------------------------------------------------------------------------------------------
</TABLE>

At  June  30,  2006,  there were five real estate loans totaling $3.1 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 June 30, 2006 and
December  31,  2005,  there  were  no other impaired loans. At June 30, 2006 and
December  31,  2005,  there were $1.3 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 $66,000 for the quarter ended June 30, 2006 and
$117,000  for  the six-months ended June 30, 2006, compared to none and $36,000,
respectively,  for  the  same  periods of 2005. The average principal balance of
nonaccrual loans for the quarter and six-months ended June 30, 2006 and 2005 was
$2.4  million  and  $2.7 million for the 2006 periods, and $0.8 million and $2.7
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 June 30,       Six-Months Ended June 30,
                                  ----------------------------  ----------------------------
($ in thousands)                      2006           2005           2006           2005
--------------------------------------------------------------------------------------------
<S>                               <C>            <C>            <C>            <C>
Balance at beginning of period    $      15,542  $      12,139  $      15,181  $      11,106
Provision charged to operations             589            452            950          1,485
--------------------------------------------------------------------------------------------
Balance at end of period          $      16,131  $      12,591  $      16,131  $      12,591
--------------------------------------------------------------------------------------------
</TABLE>

NOTE 6 - DEPOSITS

Scheduled  maturities  of  certificates  of  deposit  accounts  are  as follows:

<TABLE>
<CAPTION>
                                    At June 30, 2006         At December 31, 2005
                                -------------------------  -------------------------
                                   Amount       Wtd-Avg                    Wtd-Avg
     ($ in thousands)                         Stated Rate     Amount     Stated Rate
     -------------------------------------------------------------------------------
<S>                             <C>          <C>           <C>          <C>
     Within one year            $   517,657         4.43%  $   381,968         3.77%
     Over one to two years          224,135         4.33       259,698         4.30
     Over two to three years        152,673         4.27       126,546         4.13
     Over three to four years       202,333         4.61       160,344         4.43
     Over four years                 93,875         4.82       189,958         4.69
     -------------------------------------------------------------------------------
                                $ 1,190,673         4.45%  $ 1,118,514         4.18%
     -------------------------------------------------------------------------------
</TABLE>

Certificate  of  deposit accounts of $100,000 or more totaled $412.9 million and
$371.8 million at June 30, 2006 and December 31, 2005, respectively. At June 30,
2006,  certificate of deposit accounts of $100,000 or more by remaining maturity
were  as follows: $190.7 million due within one year; $75.5 million due over one
to  two years; $45.7 million due over two to three years; $69.1 million due over
three  to  four  years;  and  $31.9  million  due  over  four  years.


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

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

<TABLE>
<CAPTION>
                                                                               At June 30,   At December 31,
($ in thousands)                                                                    2006            2005
-------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>           <C>
INTERVEST MORTGAGE CORPORATION:
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             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
                                                                               ------------------------------
                                                                                     79,250            82,750
INTERVEST BANCSHARES CORPORATION:
Series 05/14/98 - interest at 8% fixed           - due July 1, 2008                   1,890             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
                                                                               ------------------------------
                                                                                      3,140             4,640
INTERVEST NATIONAL BANK:
Mortgage note payable(1) - interest at 7% fixed  - due February 1, 2017                 222               229
-------------------------------------------------------------------------------------------------------------
                                                                               $     82,612  $         87,619
-------------------------------------------------------------------------------------------------------------
(1) The note cannot be prepaid except during the last year of its term.
</TABLE>


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

<TABLE>
<CAPTION>
     ($ in thousands)                                   Principal   Accrued Interest
     --------------------------------------------------------------------------------
<S>                                                     <C>         <C>

     For the period July 1, 2006 to December 31, 2006   $    2,507  $           1,228
     For the year ended December 31, 2007                    7,015                227
     For the year ended December 31, 2008                   15,906              2,348
     For the year ended December 31, 2009                   13,517                361
     For the year ended December 31, 2010                   13,019                298
     Thereafter                                             30,648                444
     --------------------------------------------------------------------------------
                                                        $   82,612  $           4,906
     --------------------------------------------------------------------------------
</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
half  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 repaid the following debentures in the first half
of  2006:

-    Series 6/28/99 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 1/21/03 due 7/1/06 were repaid early on 5/1/06 for $1.5 million of
     principal and $8,000 of accrued interest;

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 October 1, 2006 for
Series  7/25/03, 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 for Series 3/21/05, Series
8/12/05  and  Series  6/12/06,  which  would  be at a premium of 1% if they were
redeemed  prior  to  October  1,  2006,  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.

In  July 2006, Intervest Mortgage Corporation completed a public offering of $16
million  in aggregate principal amount of Series 6/12/06 debentures, maturing at
various  times  through July 1, 2014 and at fixed rates of interest ranging from
6.50%  to  7.00%.  Net  proceeds  after offering costs amounted to approximately
$14.7  million.

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. The Holding Company has the right to
establish  conversion  prices  that are less than those set forth above for such
periods  as  it may determine. In the first half of 2006, $413,000 of debentures
($250,000  of  principal  and  $163,000 of accrued interest) were converted into
shares  of  Class  A  common  stock  at  $16.00  per  share.

At  June  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
$0.5 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 June 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  $        59  $    15,464  $        59
Capital Securities  II - debentures due September 17, 2033        15,464           35       15,464           35
Capital Securities III - debentures due March 17, 2034            15,464           31       15,464           31
Capital Securities  IV - debentures due September 20, 2034        15,464           29       15,464           29
---------------------------------------------------------------------------------------------------------------
                                                             $    61,856  $       154  $    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 and IV. Each
Trust  was  formed  with  a  capital  contribution  of $464,000 from the Holding
Company  and  for  the  sole  purpose  of  issuing and administering the Capital
Securities.  The  proceeds  from the issuance of the Capital Securities together
with  the  capital  contribution for each Trust were used to acquire the Holding
Company's  Junior  Subordinated  Debentures  that  are due concurrently with the
Capital  Securities.  The  Capital  Securities,  net  of  the  Company's capital
contributions  totaling  $1.9  million,  qualify  as  regulatory  capital.

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

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

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

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

NOTE 9 - SHORT-TERM BORROWINGS AND LINES OF CREDIT

From time to time, the Bank may borrow funds on an overnight or short-term basis
to  manage  its  liquidity needs. At June 30, 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  June  30, 2006, the Bank had available
collateral  consisting  of  investment securities to support total borrowings of
$292  million  from the FHLB and FRB. At June 30, 2006, there were no borrowings
outstanding  from  any  of  the  sources  noted  above.


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

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

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

<TABLE>
<CAPTION>
                                                         Quarter Ended June 30,         Six-Months Ended June 30,
                                                     --------------------------------------------------------------
($ in thousands)                                          2006            2005            2006            2005
-------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>             <C>             <C>
Balance at period end                                $           -   $           -   $           -   $           -
Maximum amount outstanding at any month end          $      42,000   $       6,000   $      42,000   $      17,000
Average outstanding balance for the period           $      17,382   $       3,824   $       9,496   $       8,840
Weighted-average interest rate paid for the period            5.08%           3.04%           5.08%           2.71%
Weighted-average interest rate at period end                     -%              -%              -%              -%
-------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE 10 - COMMON STOCK WARRANTS

At  June  30,  2006,  there  were 696,465 common stock warrants outstanding that
entitle  its  holder,  the Chairman of the Board of the Company, 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 June 30, 2006                            501,465  $          6.67
Remaining contractual life in years at June 30, 2006 (1)                          0.6
------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                Exercise Price Per Warrant
                                                          --------------------------------     Total          Wtd-Avg
Class B Common Stock Warrants:                                      $6.67           $10.00  Warrants   Exercise Price
---------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>              <C>              <C>       <C>
---------------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 2005 and June 30, 2006                145,000           50,000   195,000  $          7.52
Remaining contractual life in years at June 30, 2006 (1)              1.6              1.6       1.6
---------------------------------------------------------------------------------------------------------------------
<FN>
(1)     At  June  30,  2006, the intrinsic value and weighted-average remaining contractual life for all warrants was
        $23.4  million  and  0.9  years,  respectively.
</TABLE>

Effective  January  1,  2006,  the  Company adopted SFAS No. 123-R, "Share-Based
Payment"  which replaces 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. There were
no  grants  of  warrants  or  options  in  the  first  six-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           Six-Months Ended
                                                                                 June 30,                  June 30,
                                                                         --------------------------------------------------
($ in thousands, except share and per share amounts)                        2006         2005         2006         2005
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>          <C>          <C>          <C>
Basic Earnings Per Share:
  Net earnings applicable to common stockholders                         $     6,408  $     4,523  $    12,828  $     7,771
  Average number of common shares outstanding                              7,842,288    6,275,954    7,834,063    6,274,904
---------------------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share                                                 $      0.82  $      0.72  $      1.64  $      1.24
---------------------------------------------------------------------------------------------------------------------------
Diluted Earnings Per Share:
  Net earnings applicable to common stockholders                         $     6,408  $     4,523  $    12,828  $     7,771
  Adjustment to net earnings from assumed conversion of debentures (1)            37           55           77          110
                                                                         --------------------------------------------------
  Adjusted net earnings for diluted earnings per share computation       $     6,445  $     4,578  $    12,905  $     7,881
                                                                         --------------------------------------------------
Average number of common shares outstanding:
  Common shares outstanding                                                7,842,288    6,275,954    7,834,063    6,274,904
  Potential dilutive shares resulting from exercise of warrants (2)          327,963      249,763      319,658      252,509
  Potential dilutive shares resulting from conversion of debentures (3)      202,716      344,575      207,696      343,390
                                                                         --------------------------------------------------
Total average number of common shares outstanding used for dilution        8,372,967    6,870,292    8,361,417    6,870,803
---------------------------------------------------------------------------------------------------------------------------
Diluted Earnings Per Share                                               $      0.77  $      0.67  $      1.54  $      1.15
---------------------------------------------------------------------------------------------------------------------------
(1)  Represents  interest  expense  on  dilutive  convertible debentures, net of
     taxes,  that  would  not  occur  if  they  were  assumed  converted.
(2)  All  outstanding  warrants  were  considered  for  the  EPS  computations.
(3)  Convertible debentures (principal and accrued interest) outstanding at June
     30,  2006  and  2005  totaling $3.2 million and $4.8 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).
</TABLE>

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 June 30,   At December 31,
          ($ in thousands)                2006            2005
          ----------------------------------------------------------
<S>                                   <C>           <C>
          Unfunded loan commitments   $    131,562  $        101,597
          Available lines of credit            906               737
          Standby letters of credit            100               100
          ----------------------------------------------------------
                                      $    132,568  $        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 June
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 June 30, 2006 and December 31, 2005, that the Company
and the Bank met all capital adequacy requirements to which they are subject. As
of  June  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  June  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                     12.76%         8.00%             10.00%
     Tier 1 capital to risk-weighted assets                    11.66%         4.00%              6.00%
     Tier 1 capital to total average assets - leverage ratio    9.91%         4.00%              5.00%
</TABLE>

At  June  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                     14.62%         8.00%                NA
     Tier 1 capital to risk-weighted assets                    12.91%         4.00%                NA
     Tier 1 capital to total average assets - leverage ratio   11.07%         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  June  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

After  the  mailing  of  the  Company's 2006 proxy statement for its 2006 annual
meeting  of  shareholders,  a  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  Chairman,  which was one of the items on the
agenda  for  the  annual  meeting.

Although  the  Company denies any wrongdoing or liability, it determined that it
is  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 provides, among other things, that: (i) if the
amendments  are  approved  by  the  stockholders, the authority conferred on the
directors  will  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 will take into consideration any extension
of  the term of the warrants, the value of the extension and any related expense
to  the  Company;  and  (iii)  the  Company  agreed  to  send its shareholders a
supplement  to its proxy statement. The proposed amendments were approved by the
Company's  shareholders  at  the  Annual  Meeting of the Company held on May 25,
2006.  The  parties have agreed to move forward with a Stipulation of Settlement
and  dismissal of the action upon the terms of the Memorandum, although any such
settlement  is  subject  to  the approval by the Court of Chancery. 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 - RECENT ACCOUNTING PRONOUNCEMENTS

SHARE-BASED  COMPENSATION.  In  December  2004,  the  FASB  issued  SFAS No. 123
(Revised  2004), "Share-Based Payment" (SFAS 123-R), 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 is effective for interim
and  annual  reporting periods beginning on January 1, 2006. SFAS 123-R does not
impact  any of the Company's outstanding warrants at June 30, 2006, all of which
are  vested  and  were  issued  prior  to this new standard. The Company has not
issued  any  new  stock warrants and/or options to employees or directors in the
first  six-months  of 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.

ACCOUNTING CHANGES AND ERROR CORRECTIONS.  In May 2005, the FASB issued SFAS No.
154 "Accounting Changes and Error Corrections." This statement requires entities
that  voluntarily  make  a  change  in accounting principle to apply that change
retrospectively  to  prior  periods'  financial statements, unless this would be
impracticable.  SFAS  No. 154 supersedes APB Opinion No. 20, Accounting Changes,
which previously required that most voluntary changes in accounting principle be
recognized by including in the current period's net income the cumulative effect
of  changing  to  the  new  accounting  principle.  SFAS  No.  154  also makes a
distinction  between  "retrospective application" of an accounting principle and
the "restatement" of financial statements to reflect the correction of an error.
Another  significant  change  in  practice under SFAS No. 154 will be that if an
entity  changes  its  method  of  depreciation,  amortization,  or depletion for
long-lived,  non-financial  assets, the change must be accounted for as a change
in  accounting estimate. Under APB Opinion No. 20, such a change would have been
reported as a change in accounting principle. SFAS No. 154 applies to accounting
changes  and  error  corrections  that  are made in fiscal years beginning after
December  15,  2005.  The Statement does not change the transition provisions of
any existing accounting pronouncements, including those that are in a transition
phase as of the effective date of this Statement. The adoption of this statement
on  January  1,  2006  did  not  impact  the  Company's  financial  statements.


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

NOTE 15 - RECENT ACCOUNTING PRONOUNCEMENTS, CONTINUED

ACCOUNTING FOR LOAN COMMITMENTS.  In March 2005, the SEC issued Staff Accounting
Bulletin  No.  105,  "Application  of Accounting Principles to Loan Commitments"
(SAB  105).  SAB  105 provides recognition guidance for entities that issue loan
commitments  related  to  the  origination  of fixed- and variable-rate mortgage
loans  that  will  be  held  for  sale  that are required to be accounted for as
derivative instruments. Currently, loan commitments that the Company enters into
would  not  be  required to be accounted for as derivative instruments under SAB
105.

CONCENTRATION  OF  CREDIT RISKS.  In December 2005, the FASB issued Statement of
Position  ("SOP")  94-6-1,  "Terms  of  Loan  Products  That  May Give Rise to a
Concentration  of Credit Risk." This statement addresses the circumstances under
which the terms of loan products give rise to a concentration of credit risk and
related  disclosures  and accounting considerations. It 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.  SOP  94-6-1 is effective for all periods after December 19,
2005.  The  adoption of this SOP on January 1, 2006 did not impact the Company's
financial  statements.

IMPAIRMENT. In November 2005, the FASB issued Staff Position ("FSP") 115-1, "The
Meaning  of  Other-Than-Temporary  Impairment  and  Its  Application  to Certain
Investments,"  which  superseded  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. The FSP also
carries forward the disclosure requirements of EITF 03-1. FSP 115-1 is effective
for  periods  beginning  after  December  15,  2005. The adoption of this FSP on
January  1,  2006  did  not  impact  the  Company's  financial  statements.


                                       17
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES

             REVIEW BY INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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


                                       18
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We  have  reviewed  the  accompanying  condensed  consolidated  balance sheet of
Intervest Bancshares Corporation and Subsidiaries (the "Company") as of June 30,
2006  and  the  related  condensed  consolidated  statements of earnings for the
three-  and  six-month  periods  ended  June  30, 2006 and 2005, and the related
condensed  consolidated  statements  of changes in stockholders' equity and cash
flows  for  the  six-month  periods  ended June 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
July 21, 2006


                                       19
<PAGE>
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 four
wholly  owned  unconsolidated subsidiaries, Intervest Statutory Trust I, II, III
and  IV,  which  were  formed in connection with the issuance of trust preferred
securities.  For  a  discussion  of  the  Company's  business, see note 2 to the
condensed  consolidated  financial  statements  in  this  report.

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

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). 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  units,  supply  of  and  demand  for  properties,  ability to obtain and
maintain  adequate  occupancy  of  the  properties,


                                       20
<PAGE>
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 JUNE 30, 2006 AND DECEMBER 31, 2005
    ------------------------------------------------------------------------

OVERVIEW
--------

Total  assets  at June 30, 2006 increased to $1.79 billion, from $1.71 billon at
December  31,  2005.  Total  liabilities  at  June  30,  2006 increased to $1.64
billion,  from  $1.57  billion  at  December  31, 2005, and stockholders' equity
increased  to  $149.4  million at June 30, 2006, from $136.2 million at December
31, 2005. Book value per common share increased to $19.04 at June 30, 2006, from
$17.41  at  December  31,  2005.

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

<TABLE>
<CAPTION>
                                                 Intervest    Intervest    Intervest      Inter-
                                                 National     Mortgage    Securities     Company
($ in thousands)               Holding Company      Bank         Corp.        Corp.     Amounts (1)    Consolidated
-------------------------------------------------------------------------------------------------------------------
<S>                          <C>                <C>          <C>          <C>          <C>           <C>

Cash and cash equivalents    $          6,397   $   14,672   $   13,819   $       506  $   (15,854)  $      19,540
Security investments                        -      306,592            -             -            -         306,592
Loans receivable, net of
  deferred fees                         9,196    1,336,283       93,957             -            -       1,439,436
Allowance for loan losses                 (85)     (15,740)        (306)            -            -         (16,131)
Investment in consolidated
  subsidiaries                        195,758            -            -             -     (195,758)              -
All other assets                        4,734       31,764        5,591             6          140          42,235
-------------------------------------------------------------------------------------------------------------------
Total assets                 $        216,000   $1,673,571   $  113,061   $       512  $  (211,472)  $   1,791,672
-------------------------------------------------------------------------------------------------------------------
Deposits                     $              -   $1,466,833   $        -   $         -  $   (15,878)      1,450,955
Borrowed funds and related
  interest payable                     66,469          222       82,837             -            -         149,528
All other liabilities                     118       39,831        1,655             8          164          41,776
-------------------------------------------------------------------------------------------------------------------
Total liabilities                      66,587    1,506,886       84,492             8      (15,714)      1,642,259
-------------------------------------------------------------------------------------------------------------------
Stockholders' equity                  149,413      166,685       28,569           504     (195,758)        149,413
-------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity         $        216,000   $1,673,571   $  113,061   $       512  $  (211,472)  $   1,791,672
-------------------------------------------------------------------------------------------------------------------
<FN>
(1)  All  significant  intercompany  balances and transactions are eliminated in
     consolidation.  Such  amounts  arise  largely  from  intercompany  deposit
     accounts  and  investments  in  subsidiaries.
</TABLE>

<TABLE>
<CAPTION>
A  comparison  of  selected  balance  sheet  information  follows:

                                                                       At June 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                                        $      19,540           1.1%  $      56,716           3.3%
Security investments                                                   306,592          17.1         256,749          15.0
Loans receivable, net of deferred fees and loan loss allowance       1,423,305          79.4       1,352,805          79.3
All other assets                                                        42,235           2.4          40,153           2.4
---------------------------------------------------------------------------------------------------------------------------
Total assets                                                     $   1,791,672         100.0%  $   1,706,423         100.0%
---------------------------------------------------------------------------------------------------------------------------
Deposits                                                         $   1,450,955          81.0%  $   1,375,330          80.6%
Borrowed funds and related interest payable                            149,528           8.4         155,725           9.1
All other liabilities                                                   41,776           2.3          39,190           2.3
---------------------------------------------------------------------------------------------------------------------------
Total liabilities                                                    1,642,259          91.7       1,570,245          92.0
---------------------------------------------------------------------------------------------------------------------------
Stockholders' equity                                                   149,413           8.3         136,178           8.0
---------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity                       $   1,791,672         100.0%  $   1,706,423         100.0%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       21
<PAGE>
CASH AND CASH EQUIVALENTS
-------------------------

Cash  and  cash  equivalents  decreased  to $19.5 million at June 30, 2006, from
$56.7  million  at  December  31, 2005. The decrease reflected the investment of
funds  into  loans  and  securities.

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 $300.8 million
at  June  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 88% at June 30,
2006.

At  June  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 4.12% and a weighted-average remaining maturity of 1.3
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  June  30,  2006  and  December  31,  2005,  the held-to-maturity portfolio's
estimated  fair  value  was  $297.6 million and $249.1 million, respectively. At
June  30,  2006,  the  held-to-maturity portfolio had unrealized losses totaling
$3.2  million.  Management believes that the cause of these unrealized losses is
directly  related  to  changes  in  market  interest  rates, which have steadily
increased  since  June  30,  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 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  June 30, 2006. The FRB stock currently pays a dividend of 6%,
while  the FHLB stock dividend fluctuates and most recently was 5.25%. The total
investment,  which  amounted  to $5.8 million at June 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  $1.42  billion at June 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  $146.6  million and $290.1 million in the second quarter and first half
of 2006, compared to $173.1 million and $324.6 million in the second quarter and
first  half  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 June 30, 2006, such loans
consisted  of 540 loans with an aggregate principal balance of $1.45 billion and
an average principal size of $2.7 million. Loans with principal balances of $5.0
million  or more aggregated to 74 loans or $684.9 million, with the largest loan
amounting  to  $20.5  million.

At  June  30,  2006,  there were five real estate loans (one collateralized by a
multifamily  property,  one by a commercial property, one by vacant land and two
by  cash  proceeds)  totaling $3.1 million on nonaccrual status, compared to two
loans  totaling  $0.7  million  at December 31, 2005. With respect to two of the
loans totaling $0.7 million, the borrower declared bankruptcy and the Bankruptcy
Trustee  sold  the  properties collateralizing the loans. The resulting proceeds
serve as collateral and are sufficient to provide for repayment of the Company's
recorded  investment.  The  Company  is  taking appropriate action to obtain the
proceeds  from  the  Bankruptcy  Trustee.  With


                                       22
<PAGE>
respect  to  the  remaining  loans,  foreclosure actions have been commenced for
non-payment. 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 June
30,  2006  and  December  31,  2005,  there  were  no  other  impaired  loans.

At  June  30,  2006, the Bank held four real estate loans totaling approximately
$8.6  million,  each  of  which are collateralized by real estate located in New
Jersey.  The  borrowing  entities  owning  the  properties  are  controlled 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 June 30, 2006, three of these loans totaling $7.8 million were on accruing
status and the remaining loan of $0.8 million was on nonaccrual status. 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 the loans.

At  June  30,  2006  and  December  31,  2005,  there were $1.3 million and $2.6
million,  respectively,  of  loans  ninety  days  past  due  and  still accruing
interest.  These  loans  were deemed by management to be well secured and in the
process  of collection. The amount at June 30, 2006 represented one loan that is
past  its  maturity  date,  but  with  the agreement of management, the borrower
continues  to  make  monthly  payments  of  interest  and  principal. Based upon
discussions  with  the borrower, it is anticipated that this loan will be repaid
in  full  or  refinanced  in  the  near  term.

At  June  30,  2006,  the  allowance  for loan losses amounted to $16.1 million,
compared  to $15.2 million at December 31, 2005. The allowance represented 1.12%
of  total loans, net of deferred fees, outstanding at June 30, 2006, compared to
1.11%  at December 31, 2005. The increase in the allowance was due to provisions
aggregating  $1.0  million  during  the  period resulting largely from growth in
loans outstanding, which amounted to $70.9 million from December 31, 2005. For a
further discussion of the criteria the Company uses to determine the adequacy of
the  allowance, see the section entitled "Critical Accounting Policies" included
in  this  report.

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

All other assets increased to $42.2 million at June 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  $1.45  billion  at June 30, 2006, from $1.38 billion at
December  31,  2005,  reflecting increases in certificate of deposit accounts of
$72.2  million  and  an  increase in checking, savings and money market accounts
totaling  $3.4  million.

At  June  30,  2006,  certificate of deposit accounts totaled $1.19 billion, and
checking,  savings and money market accounts aggregated $260.3 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
82% of total deposits at June 30, 2006 and 81% at December 31, 2005. At June 30,
2006  and  December  31,  2005,  certificate  of deposit accounts included $48.3
million  and  $40.5  million,  respectively,  of  brokered  deposits.

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

At  June  30,  2006,  borrowed  funds  and related interest payable decreased to
$149.5  million  from  $155.7  million  at  December  31, 2005. The decrease was
primarily  due  to $4.8 million of principal repayments of debentures and a $1.2
million  decrease  in  related  interest  payable  due to repayments of interest
partially  offset  by  new  accruals.

ALL OTHER LIABILITIES
---------------------

All  other  Liabilities  increased to $41.8 million at June 30, 2006, from $39.2
million  at  December 31, 2005. The increase was primarily due to a higher level
of  mortgage  escrow funds payable (which represent advance payments made to the
Company  by  borrowers for property taxes and insurance that are remitted by the
Company  to  third  parties),  partially  offset  by  a decrease in income taxes
payable.


                                       23
<PAGE>
STOCKHOLDERS' EQUITY
--------------------

Stockholders'  equity  increased  to $149.4 million at June 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                                           12,828          -           -
     Convertible debentures converted at election of debenture holders        407     25,847       15.75
     ---------------------------------------------------------------------------------------------------
     Stockholders' equity at June 30, 2006                               $149,413  7,848,905  $    19.04
     ---------------------------------------------------------------------------------------------------
</TABLE>


  COMPARISON OF RESULTS OF OPERATIONS FOR THE QUARTERS ENDED JUNE 30, 2006 AND
  ----------------------------------------------------------------------------
                                      2005
                                      ----

OVERVIEW
--------

Consolidated  net  earnings  for  the  second  quarter of 2006 increased by $1.9
million, or 42%, to $6.4 million, or $0.77 per diluted share, from $4.5 million,
or  $0.67  per  diluted  share,  in the second quarter of 2005. The earnings per
share  calculation  for the 2006 period included a greater number of outstanding
shares resulting primarily from a public offering of 1.4 million shares of Class
A  common  stock  in  the  third  quarter  of  2005.

The  $1.9 million increase in earnings was due to a $3.9 million increase in net
interest  and  dividend  income,  partially offset by a $0.4 million decrease in
noninterest income, a $0.1 million increase in the provision for loan losses and
$1.5  million  increase  in  income  tax  expense.

The  Company's  efficiency  ratio,  which is a measure of its ability to control
expenses  as a percentage of its revenues, improved to 19% in the second quarter
of 2006, from 25% in the second quarter of 2005. The Company's return on average
assets  and  equity  was  1.42%  and  17.66%,  respectively,  in the 2006 second
quarter, compared to 1.26% and 19.01%, respectively, in the 2005 second quarter.

Selected  information  regarding results of operations for the second 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                $   28,769   $    2,923  $         6   $    181   $     (142)  $      31,737
Interest expense                                15,882        1,717            -      1,190         (142)         18,647
                                            ----------------------------------------------------------------------------
Net interest and dividend income                12,887        1,206            6     (1,009)           -          13,090
Provision for loan losses                          565           24            -          -            -             589
Noninterest income                               1,339        1,646            -        114       (1,487)          1,612
Noninterest expenses                             3,289          738            8        184       (1,487)          2,732
                                            ----------------------------------------------------------------------------
Earnings before taxes                           10,372        2,090           (2)    (1,079)           -          11,381
Provision for income taxes                       4,507          966           (1)      (499)           -           4,973
------------------------------------------------------------------------------------------------------------------------
Net earnings                                $    5,865   $    1,124  $        (1)  $   (580)  $        -   $       6,408
------------------------------------------------------------------------------------------------------------------------
Intercompany dividends(1)                       (1,089)           -            -      1,089            -               -
------------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany dividends   $    4,776   $    1,124  $        (1)  $    509   $        -   $       6,408
------------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany dividends
  for the same period of 2005               $    3,316   $      714  $        13   $    480   $        -   $       4,523
------------------------------------------------------------------------------------------------------------------------
(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.
</TABLE>

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  $13.1 million in the second
quarter  of  2006,  from  $9.2  million  in  the  second  quarter  of  2005. The
improvement  was  attributable  to  a  $359  million  increase  in  average
interest-earning assets resulting from continued growth in loans of $295 million
and  a  higher  level  of  security  and  short-term investments aggregating $64
million.  The  growth  in  average  assets was funded largely by $298 million of
additional interest-bearing deposits and a $50 million increase in stockholders'
equity.

The  Company's  net  interest margin increased to 2.94% in the second quarter of
2006, from 2.59% in the second quarter of 2005. The higher margin was due to the
Company's  yield  on  interest-earning  assets  increasing  at  a  faster


                                       24
<PAGE>
pace  than  its cost of funds and an increase in its net interest-earning assets
of  $56  million  resulting  largely from the $26.3 million of proceeds from the
issuance  of  common  stock  in the third quarter of 2005 and increased retained
earnings.  In  a  rising  rate environment, the yield on interest-earning assets
increased  75 basis points to 7.14% in the 2006 quarter due to rate increases on
existing  variable-rate  loans  indexed  to the prime rate, higher yields on new
mortgage  loans  originated  and  higher  yields  earned  on  security and other
short-term  investments. The cost of funds increased by 50 basis points to 4.65%
in  the  2006  quarter  primarily  due to higher rates paid on deposit accounts.

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

<TABLE>
<CAPTION>
                                                   ------------------------------------------------------------------
                                                                             Quarter Ended
                                                   ------------------------------------------------------------------
                                                             June 30, 2006                      June 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)                                        $1,435,306   $   28,203    7.88%  $1,140,156   $   20,800    7.32%
  Securities                                          322,628        3,222    4.01      260,383        1,723    2.65
  Other interest-earning assets                        25,882          312    4.84       23,799          173    2.92
---------------------------------------------------------------------------------------------------------------------
Total interest-earning assets                       1,783,816   $   31,737    7.14%   1,424,338   $   22,696    6.39%
---------------------------------------------------------------------------------------------------------------------
Noninterest-earning assets                             15,865                            14,900
---------------------------------------------------------------------------------------------------------------------
Total assets                                       $1,799,681                        $1,439,238
---------------------------------------------------------------------------------------------------------------------


LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
  Interest checking deposits                       $    9,071   $       43    1.90%  $   10,968   $       42    1.54%
  Savings deposits                                     14,600          107    2.94       21,794          139    2.56
  Money market deposits                               243,698        2,484    4.09      191,078        1,308    2.75
  Certificates of deposit                           1,172,287       12,882    4.41      917,943        8,886    3.88
---------------------------------------------------------------------------------------------------------------------
Total deposit accounts                              1,439,656       15,516    4.32    1,141,783       10,375    3.64
---------------------------------------------------------------------------------------------------------------------
  FHLB advances and Fed funds purchased                17,382          220    5.08        3,824           29    3.04
  Debentures and related interest payable              88,095        1,817    8.27       95,784        2,003    8.39
  Debentures - capital securities                      61,856        1,090    7.07       61,856        1,089    7.06
  Mortgage note payable                                   225            4    7.13          238            4    7.00
---------------------------------------------------------------------------------------------------------------------
Total borrowed funds                                  167,558        3,131    7.49      161,702        3,125    7.75
---------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities                  1,607,214   $   18,647    4.65%   1,303,485   $   13,500    4.15%
---------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits                            5,722                             5,734
Noninterest-bearing liabilities                        41,614                            34,865
Stockholders' equity                                  145,131                            95,154
---------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity         $1,799,681                        $1,439,238
---------------------------------------------------------------------------------------------------------------------
Net interest and dividend income/spread                         $   13,090    2.49%               $    9,196    2.24%
---------------------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin                 $  176,602                 2.94%  $  120,853                 2.59%
---------------------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
  to total interest-bearing liabilities                  1.11                              1.09
---------------------------------------------------------------------------------------------------------------------
OTHER RATIOS:
  Return on average assets (2)                           1.42%                             1.26%
  Return on average equity  (2)                         17.66%                            19.01%
  Noninterest expense to average assets (2)              0.61%                             0.76%
  Efficiency ratio (3)                                     19%                               25%
  Average stockholders' equity to average assets         8.06%                             6.61%
---------------------------------------------------------------------------------------------------------------------
<FN>
(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.
</TABLE>


                                       25
<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 June 30, 2006 vs 2005
                                             ------------------------------------------------------------------
                                                           Increase (Decrease) Due To Change In:
                                             ------------------------------------------------------------------
<S>                                          <C>              <C>              <C>              <C>
($ in thousands)                                   Rate           Volume         Rate/Volume         Total
---------------------------------------------------------------------------------------------------------------
Interest-earning assets:
  Loans                                      $        1,596   $        5,401   $          406   $        7,403
  Securities                                            885              412              202            1,499
  Other interest-earning assets                         114               15               10              139
---------------------------------------------------------------------------------------------------------------
Total interest-earning assets                         2,595            5,828              618            9,041
---------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
  Interest checking deposits                             10               (7)              (2)               1
  Savings deposits                                       21              (46)              (7)             (32)
  Money market deposits                                 640              362              174            1,176
  Certificates of deposit                             1,216            2,467              313            3,996
---------------------------------------------------------------------------------------------------------------
Total deposit accounts                                1,887            2,776              478            5,141
---------------------------------------------------------------------------------------------------------------
  FHLB advances and Fed funds purchased                  20              103               68              191
  Debentures and accrued interest payable               (29)            (161)               4             (186)
  Debentures - capital securities                         2                -               (1)               1
  Mortgage note payable                                   -                -                -                -
---------------------------------------------------------------------------------------------------------------
Total borrowed funds                                     (7)             (58)              71                6
---------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities                    1,880            2,718              549            5,147
---------------------------------------------------------------------------------------------------------------
Net change in interest and dividend income   $          715   $        3,110   $           69   $        3,894
---------------------------------------------------------------------------------------------------------------
</TABLE>

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

The  provision  for loan losses increased by $0.1 million to $0.6 million in the
second  quarter  of  2006,  from $0.5 million in the second quarter of 2005. The
slight  increase  was  due  to  the  favorable  impact  of $0.3 million from the
satisfaction  of a $3.9 million nonaccrual loan in April 2005 that did not recur
and  $0.1  million  of  additional  provision  associated  with  various  credit
downgrades  in  the  2006  period.  These increases of $0.4 million were largely
offset  by  a  $0.3  million  reduction  in  the 2006 provision resulting from a
decrease  in the rate of net loan growth over the prior year period. Total loans
outstanding  grew by $37.7 million in the 2006 period, compared to $79.4 million
in  the  2005  period.

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

Noninterest  income  decreased  by  $0.4  million  to $1.6 million in the second
quarter  of  2006,  from  $2.0  million in the second quarter of 2005. The lower
income  was  primarily  due  to  a  $0.6  million  decrease  in  income from the
prepayment  of  mortgage  loans  (all  of  which  was  associated with the early
satisfaction  of  a  nonaccrual  loan in April 2005), partially offset by a $0.2
million  increase  in  fees  earned  from  expired  loan  commitments.

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

Noninterest  expenses  remained  unchanged  totaling  $2.7 million in the second
quarter  of 2006 and 2005, as additional payroll costs of $0.2 million and other
operating expenses of $0.2 million associated with the Company's growth in staff
and  total assets were largely offset by a decrease of $0.3 million in executive
bonuses and a nonrecurring Nasdaq National Market entry fee of $0.1 million paid
in  the  2005 period. The Company had 76 employees at June 30, 2006, compared to
68  at  June  30,  2005.

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

The  provision for income taxes increased by $1.5 million to $5.0 million in the
second  quarter  of 2006, from $3.5 million in the second 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 43.7% in the 2006 period, compared to 43.5%
in  the  2005  period.


                                       26
<PAGE>
  COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX-MONTHS ENDED JUNE 30, 2006 AND
  ------------------------------------------------------------------------------
                                      2005
                                      ----

OVERVIEW
--------

Consolidated  net earnings for the first half of 2006 increased by $5.0 million,
or  64%,  to  $12.8  million,  or $1.54 per diluted share, from $7.8 million, or
$1.15  per  diluted  share,  in  the  first half of 2005. The earnings per share
calculation  for the 2006 period included a greater number of outstanding shares
resulting  primarily  from  a  public  offering of 1.4 million shares of Class A
common  stock  in  the  third  quarter  of  2005.

The  $5.0 million increase in earnings was due to a $8.1 million increase in net
interest  and dividend income, a $0.8 million increase in noninterest income and
a  $0.5 million decrease in the provision for loan losses, partially offset by a
$4.0  million  increase  in  income  tax  expense and a $0.4 million increase in
noninterest  expenses.

The  Company's  efficiency  ratio,  which is a measure of its ability to control
expenses  as  a percentage of its revenues, improved to 19% in the first half of
2006, from 25% in the first half of 2005. The Company's return on average assets
and  equity  also increased to 1.45% and 18.09%, respectively, in the 2006 first
half,  from  1.10%  and  16.68%  in  the  2005  first  half.

Selected  information regarding results of operations for the first half 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                $   56,225   $    5,608  $        11   $    379   $     (420)  $      61,803
Interest expense                                30,742        3,499            -      2,406         (420)         36,227
                                            ----------------------------------------------------------------------------
Net interest and dividend income                25,483        2,109           11     (2,027)           -          25,576
Provision for loan losses                          894           56            -          -            -             950
Noninterest income                               3,272        3,085            -        233       (2,896)          3,694
Noninterest expenses                             6,570        1,507           13        334       (2,896)          5,528
                                            ----------------------------------------------------------------------------
Earnings before taxes                           21,291        3,631           (2)    (2,128)           -          22,792
Provision for income taxes                       9,270        1,678           (1)      (983)           -           9,964
------------------------------------------------------------------------------------------------------------------------
Net earnings                                $   12,021   $    1,953  $        (1)  $ (1,145)  $        -   $      12,828
------------------------------------------------------------------------------------------------------------------------
Intercompany dividends(1)                       (2,178)           -            -      2,178            -               -
------------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany dividends   $    9,843   $    1,953  $        (1)  $  1,033   $        -   $      12,828
------------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany dividends
  for the same period of 2005               $    5,408   $    1,339  $        11   $  1,013   $        -   $       7,771
------------------------------------------------------------------------------------------------------------------------
<FN>
(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.
</TABLE>

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 $25.6 million in the first half of
2006,  from  $17.5  million  in  the  first  half  of  2005. The improvement was
attributable  to  a  $365  million  increase  in average interest-earning assets
resulting  from  continued growth in loans of $308 million and a higher level of
security  and  short-term  investments  aggregating  $57  million. The growth in
average  assets  was  funded  by  $315  million  of  additional interest-bearing
deposits  and  a  $49  million  increase  in  stockholders'  equity.

The  Company's net interest margin increased to 2.93% in the first half of 2006,
from  2.53%  in  the  first  half of 2005. The higher margin was due to the same
factors  discussed  in  the  comparison of the quarterly periods on page 24. The
yield  on interest-earning assets increased 83 basis points to 7.09% in the 2006
first  half  due  rate  increases on existing variable-rate loans indexed to the
prime  rate,  higher  yields  on new mortgage loans originated and higher yields
earned on security and other short-term investments. The cost of funds increased
by  53  basis points to 4.60% in the 2006 first half due to higher rates paid on
deposit  accounts.


                                       27
<PAGE>
The  following  table  provides  information on: average assets, liabilities and
stockholders'  equity;  yields earned on interest-earning assets; and rates paid
on  interest-bearing liabilities for the periods indicated. The yields and rates
shown  are  based  on a computation of income/expense (including any related fee
income  or  expense)  for  each  period  divided  by  average  interest-earning
assets/interest-bearing  liabilities  during  each  period. Average balances are
derived  from  daily  balances.  Net interest margin is computed by dividing net
interest  and  dividend  income  by the average of total interest-earning assets
during  each  period.

<TABLE>
<CAPTION>
                                                   ------------------------------------------------------------------
                                                                           Six-Months Ended
                                                   ------------------------------------------------------------------
                                                              June 30, 2006                   June 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)                                        $1,414,189   $   55,134    7.86%  $1,106,197   $   39,611    7.22%
  Securities                                          313,396        5,969    3.84      259,217        3,286    2.56
  Other interest-earning assets                        31,000          700    4.55       28,092          367    2.63
---------------------------------------------------------------------------------------------------------------------
Total interest-earning assets                       1,758,585   $   61,803    7.09%   1,393,506   $   43,264    6.26%
---------------------------------------------------------------------------------------------------------------------
Noninterest-earning assets                             15,761                            15,026
---------------------------------------------------------------------------------------------------------------------
Total assets                                       $1,774,346                        $1,408,532
---------------------------------------------------------------------------------------------------------------------


LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
  Interest checking deposits                       $    8,803   $       82    1.88%  $   12,198   $       94    1.55%
  Savings deposits                                     15,590          228    2.95       23,521          252    2.16
  Money market deposits                               240,553        4,777    4.00      192,718        2,367    2.48
  Certificates of deposit                           1,160,143       24,988    4.34      881,191       16,701    3.82
---------------------------------------------------------------------------------------------------------------------
Total deposit accounts                              1,425,089       30,075    4.26    1,109,628       19,414    3.53
---------------------------------------------------------------------------------------------------------------------
  FHLB advances and Fed Funds purchased                 9,496          239    5.08        8,840          119    2.71
  Debentures and related interest payable              90,179        3,725    8.33       97,481        4,063    8.41
  Debentures - capital securities                      61,856        2,180    7.11       61,856        2,179    7.10
  Mortgage note payable                                   226            8    7.14          239            8    6.98
---------------------------------------------------------------------------------------------------------------------
Total borrowed funds                                  161,757        6,152    7.67      168,416        6,369    7.63
---------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities                  1,586,846   $   36,227    4.60%   1,278,044   $   25,783    4.07%
---------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits                            6,111                             5,959
Noninterest-bearing liabilities                        39,590                            31,362
Stockholders' equity                                  141,799                            93,167
---------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity         $1,774,346                        $1,408,532
---------------------------------------------------------------------------------------------------------------------
Net interest and dividend income/spread                         $   25,576    2.49%               $   17,481    2.19%
---------------------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin                 $  171,739                 2.93%  $  115,462                 2.53%
---------------------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
  to total interest-bearing liabilities                  1.11                              1.09
---------------------------------------------------------------------------------------------------------------------
OTHER RATIOS:
  Return on average assets (2)                           1.45%                             1.10%
  Return on average equity  (2)                         18.09%                            16.68%
  Noninterest expense to average assets (2)              0.62%                             0.73%
  Efficiency ratio (3)                                     19%                               25%
  Average stockholders' equity to average assets         7.99%                             6.61%
---------------------------------------------------------------------------------------------------------------------
(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.
</TABLE>

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).


                                       28
<PAGE>
<TABLE>
<CAPTION>
                                                       For the Six-Months Ended June 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                                      $        3,540   $       11,119   $          864   $       15,523
  Securities                                          1,659              693              331            2,683
  Other interest-earning assets                         270               38               25              333
---------------------------------------------------------------------------------------------------------------
Total interest-earning assets                         5,469           11,850            1,220           18,539
---------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
  Interest checking deposits                             20              (26)              (6)             (12)
  Savings deposits                                       93              (86)             (31)             (24)
  Money market deposits                               1,465              593              352            2,410
  Certificates of deposit                             2,291            5,328              668            8,287
---------------------------------------------------------------------------------------------------------------
Total deposit accounts                                3,869            5,809              983           10,661
---------------------------------------------------------------------------------------------------------------
  FHLB advances and Fed Funds purchased                 105                9                6              120
  Debentures and accrued interest payable               (39)            (307)               8             (338)
  Debentures - capital securities                         3                -               (2)               1
  Mortgage note payable                                   -                -                -                -
---------------------------------------------------------------------------------------------------------------
Total borrowed funds                                     69             (298)              12             (217)
---------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities                    3,938            5,511              995           10,444
---------------------------------------------------------------------------------------------------------------
Net change in interest and dividend income   $        1,531   $        6,339   $          225   $        8,095
---------------------------------------------------------------------------------------------------------------
</TABLE>

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

The  provision  for loan losses decreased by $0.5 million to $1.0 million in the
first  half  of  2006,  from  $1.5  million in the first half of 2005. The lower
provision  was  primarily  due to a decrease in the rate of net loan growth over
the prior year period. Total loans outstanding grew by $70.9 million in the 2006
period,  compared  to  $159.3  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 $0.8 million to $3.7 million in the first half
of  2006,  from  $2.9  million  in the first half of 2005. The higher income was
primarily  due  to  a  $0.4  million  increase  in income from the prepayment of
mortgage  loans  and  a  $0.3  million increase in fees earned from expired loan
commitments.

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

Noninterest expenses increased by $0.4 million to $5.5 million in the first half
of  2006, from $5.1 million in the first half of 2005. Noninterest expenses were
higher  primarily  due  to  increases in payroll costs of $0.4 million and other
operating expenses of $0.4 million associated with the Company's growth in staff
and  total  assets,  partially offset by a decrease of $0.3 million in executive
bonuses and a nonrecurring Nasdaq National Market entry fee of $0.1 million paid
in  the  2005 period. The Company had 76 employees at June 30, 2006, compared to
68  at  June  30,  2005.

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

The provision for income taxes increased by $4.0 million to $10.0 million in the
first  half  of  2006,  from  $6.0  million  in the first half 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 43.5%
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;


                                       29
<PAGE>
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 time 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 $1.45
billion at June 30, 2006 and time deposits represented 82%, or $1.19 billion, of
those deposits. Additionally, time deposits of $100,000 or more at June 30, 2006
totaled $412.9 million and included $48.3 million of brokered deposits. Brokered
deposits  are  sold  by  an investment firm, which is paid a fee by the Bank for
placing  the  deposit.  The  Bank must maintain its status as a well-capitalized
insured  depository  institution  in  order to solicit and accept, renew or roll
over  any  brokered  deposit  without  restriction.  Time  deposits are the only
deposit  accounts  offered  by  the  Bank that have stated maturity dates. These
deposits  are  generally  considered to be rate sensitive and have a higher cost
than  deposits  with  no  stated maturities, such as checking, savings and money
market  accounts. At June 30, 2006, the Bank had $517.7 million of time deposits
maturing  by June 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 half of 2006. At June 30,
2006,  the  Bank  had  excess  capital  to support an additional $394 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  June  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 half of 2006,
the  Bank  borrowed  a  total  of  $79.2 million of short-term FHLB advances and
overnight  borrowings from correspondent banks, all of which was repaid. At June
30, 2006 and December 31, 2005, there were no outstanding borrowings from any of
the  aforementioned sources. At June 30, 2006, the Bank had available collateral
consisting  of investment securities to support total borrowings of $292 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  of 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.

Intervest Mortgage Corporation's lending business is dependent on its continuing
ability  to  sell  its  debentures  with  interest  rates that would result in a
positive  interest rate spread, which is the difference between yields earned on
its  loans  and  the  rates paid on its debentures. As detailed in note 7 to the
condensed consolidated financial statements included in this report, at June 30,
2006,  $79.3  million  in  aggregate  principal  amount  of  Intervest  Mortgage
Corporation's subordinated debentures were outstanding with fixed interest rates
that  range from 6.25% to 9.00% per annum and maturities that range from October
1,  2006  to  October  1,  2013.  In  the first half of 2006, Intervest Mortgage
Corporation  repaid various debentures for a total of $5.2 million ($3.5 million
of  principal and $1.7 million of related accrued interest payable). At June 30,
2006,  Intervest Mortgage Corporation had $8.6 million of debentures and related
accrued  interest  payable  maturing  by  June 30, 2007, which is expected to be
repaid  from  cash  flow  generated  from maturities of existing mortgage loans,
ongoing  operations and cash on hand. Intervest Mortgage Corporation completed a
public  offering of $16.0 million in aggregate principal amount of debentures in
July  2006.

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


                                       30
<PAGE>
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  half  of  2006,  the  Holding  Company repaid various debentures
totaling $1.3 million of principal and related accrued interest payable. At June
30,  2006,  the Holding Company did not have any debentures maturing by June 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.

The  Holding  Company,  through  its  wholly  owned  business  trusts  Intervest
Statutory  Trust  I,  II,  III  and IV, issued in December 2001, September 2003,
March  2004  and September 2004, $15.0 million, respectively, of 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.
The  Holding  Company  is required to make interest payments on the principal of
those  securities,  which  currently  amount  to $4.4 million annually. The Bank
provides  funds to Holding Company in the form of dividends for this purpose. At
June  30,  2006,  49.8  million  of  the trust preferred securities qualified as
regulatory  Tier  1 capital and the remainder qualified as Tier 2 capital in the
Holding  Company's  computation  of  regulatory  capital.

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

At  June  30, 2006, the Company's commitments to lend aggregated $132.6 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 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  June  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 June 30,    At December 31,
     ($ in thousands)                             2006             2005
     -------------------------------------------------------------------------
<S>                                           <C>            <C>
     Tier 1 Capital                           $    166,685   $        156,842
     Tier 2 Capital                                 15,740             14,846
     -------------------------------------------------------------------------
     Total risk-based capital                 $    182,425   $        171,688
     -------------------------------------------------------------------------
     Net risk-weighted assets                 $  1,430,060   $      1,362,728
     Average assets for regulatory purposes   $  1,681,655   $      1,562,779
     -------------------------------------------------------------------------
     Tier 1 capital to average assets                 9.91%             10.04%
     Tier 1 capital to risk-weighted assets          11.66%             11.51%
     Total capital to risk-weighted assets           12.76%             12.60%
     -------------------------------------------------------------------------
</TABLE>


                                       31
<PAGE>
The  Holding  Company  on  a consolidated basis is subject to minimum regulatory
capital  requirements  administered by the FRB. These guidelines require a ratio
of  Tier 1 or Core Capital, as defined in the guidelines, to total risk-weighted
assets of at least 4% and a ratio of total capital to risk-weighted assets of at
least  8%.  The  guidelines  also  require a ratio of Tier 1 capital to adjusted
total  average  assets  of  not  less than 3%. At June 30, 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 June 30,    At December 31,
     ($ in thousands)                             2006             2005
     -------------------------------------------------------------------------
<S>                                           <C>            <C>
     Tier 1 Capital (1)                       $    199,217   $        181,571
     Tier 2 Capital(1)                              26,327             29,788
     -------------------------------------------------------------------------
     Total risk-based capital                 $    225,544   $        211,359
     -------------------------------------------------------------------------
     Net risk-weighted assets                 $  1,542,806   $      1,466,027
     Average assets for regulatory purposes   $  1,799,681   $      1,673,832
     -------------------------------------------------------------------------
     Tier 1 capital to average assets                11.07%             10.85%
     Tier 1 capital to risk-weighted assets          12.91%             12.39%
     Total capital to risk-weighted assets           14.62%             14.42%
     -------------------------------------------------------------------------

     (1)  There  are  $60 million of qualifying capital securities outstanding (total
     debentures  of  $61.9 million issued to Statutory Trust I, II, III and IV by the
     Holding  Company  less  the  Holding  Company's  investments  in  those  trusts
     aggregating $1.9 million). At June 30, 2006 and December 31, 2005, $49.8 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.
</TABLE>

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.
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 June 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 June 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
$351.3 million, or 19.6% of total assets, at June 30, 2006, from $498.7 million,
or  29.2%  at  December  31,  2005.  The  decrease in the positive gap primarily
reflects  an increase in the purchase of security investments with over one-year
maturities,  funded  by  increases  in  money-market  deposit  accounts and time
deposits  with  terms  of  less  than  one  year.

For  purposes  of  computing the gap, all deposits with no stated maturities are
treated  as  readily accessible accounts. However, if such deposits were treated
differently, the one-year gap would then change. The behavior of core depositors
may  not  necessarily  result  in the immediate withdrawal of funds in the event
deposit  rates  offered  by  the Bank did not change as quickly and uniformly as
changes  in  general  market rates. For example, if only 25% of deposits with no
stated  maturity  were  assumed to be readily accessible, the one-year gap would
have  been  a  positive  30.2% at June 30, 2006, compared to a positive 40.1% at
December  31,  2005.


                                       32
<PAGE>
The  table  that follows summarizes interest-earning assets and interest-bearing
liabilities  as of June 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)                                  $576,204   $356,528   $ 377,158   $138,964   $1,448,854
Securities held to maturity (2)              67,070    117,803     115,906          -      300,779
Short-term investments                       10,738          -           -          -       10,738
FRB and FHLB stock                            2,374          -           -      3,439        5,813
---------------------------------------------------------------------------------------------------
Total rate-sensitive assets                $656,386   $474,331   $ 493,064   $142,403   $1,766,184
---------------------------------------------------------------------------------------------------
Deposit accounts (3):
  Interest checking deposits               $  7,816   $      -   $       -   $      -   $    7,816
  Savings deposits                           13,559          -           -          -       13,559
  Money market deposits                     231,628          -           -          -      231,628
  Certificates of deposit                    99,857    417,800     579,141     93,875    1,190,673
---------------------------------------------------------------------------------------------------
  Total deposits                            352,860    417,800     579,141     93,875    1,443,676
---------------------------------------------------------------------------------------------------
Debentures and mortgage note payable (1)          -      7,250      85,032     52,186      144,468
Accrued interest on all borrowed funds(1)     1,323        225       3,068        444        5,060
---------------------------------------------------------------------------------------------------
Total borrowed funds                          1,323      7,475      88,100     52,630      149,528
---------------------------------------------------------------------------------------------------
Total rate-sensitive liabilities           $354,183   $425,275   $ 667,241   $146,505   $1,593,204
---------------------------------------------------------------------------------------------------
GAP (repricing differences)                $302,203   $ 49,056   $(174,177)  $ (4,102)  $  172,980
---------------------------------------------------------------------------------------------------
Cumulative GAP                             $302,203   $351,259   $ 177,082   $172,980   $  172,980
---------------------------------------------------------------------------------------------------
Cumulative GAP to total assets                 16.9%      19.6%        9.9%       9.7%         9.7%
---------------------------------------------------------------------------------------------------
</TABLE>

Significant  assumptions  used  in  preparing  the  preceding  gap table follow:
(1)  Floating-rate  loans  and  debentures payable are included in the period in
which  their  interest  rates  are  next  scheduled to adjust rather than in the
period  in  which  they  mature.  Fixed-rate  loans  and  debentures payable are
scheduled,  including  repayments,  according  to  their contractual maturities.
Deferred  loan  fees,  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.

                           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 in the 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 the
retention  of  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.


                                       33
<PAGE>
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  June  30,  2006.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth under Note 14contained 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; dependence
on  a  limited  number  of  key  personnel; and voting control held by a limited
number  of  stockholders  who  are  also  executive  officers  and  directors.

This  Item  1A  requires  disclosure  of  any material changes from risk factors
previously  disclosed in the Company's most recent Form 10-K. There have been no
material  changes  to the Company's risk factors disclosed in the "Risk Factors"
section  of the Company's Annual Report on Form 10-K for the year ended December
31,  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


                                       34
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a)  An  Annual  Meeting  of  Stockholders  was  held  on  May  25,  2006.
(b)  Pursuant  to  the  Company's charter and bylaws, one-third of the directors
     are  elected  by  the  holders  of  Class A common stock and two-thirds are
     elected  by  holders of Class B common stock. On all other matters, Class A
     and  Class B common stockholders generally vote together as a single class.
     Each  of the persons named in the Proxy Statement dated April 15, 2006 as a
     nominee  for  director was elected for a one-year term expiring on the date
     of  the  next  annual  meeting  (see Item 4-c). Additionally, as more fully
     described  in  the  Proxy Statement, three proposals were voted upon at the
     annual  meeting,  one  regarding  a  proposed  amendment  to  the Company's
     Restated  Certificate of Incorporation to increase the authorized chares of
     Class  A  Common  Stock  to  12 million from 9.5 million, one regarding the
     approval  of  the  2006  Long  Term  Incentive Plan and the other regarding
     proposed  amendments  to  warrants  held  by  the  Chairman.  The Company's
     shareholders  approved  each  of  the  proposals.  (see  Item  4-c).
(c)  The  table  below summarizes voting results on the matters submitted to the
     Company's  common  stockholders:

<TABLE>
<CAPTION>
                                                             AGAINST OR
                                                     FOR      WITHHELD   ABSTAINED
     -----------------------------------------------------------------------------
<S>                                               <C>        <C>         <C>
     ELECTION OF DIRECTORS - CLASS A
     -------------------------------
     Michael A. Callen. . . . . . . . . . . . . . 6,775,678     360,323          -
     Wayne F. Holly . . . . . . . . . . . . . . . 5,922,700   1,213,301          -
     Lawton Swan, III . . . . . . . . . . . . . . 6,817,878     318,123          -

     ELECTION OF DIRECTORS  - CLASS B
     --------------------------------
     Jerome Dansker . . . . . . . . . . . . . . .   385,000           -          -
     Lowell S. Dansker. . . . . . . . . . . . . .   385,000           -          -
     Paul DeRosa. . . . . . . . . . . . . . . . .   385,000           -          -
     Stephen A. Helman. . . . . . . . . . . . . .   385,000           -          -
     Thomas E. Willett. . . . . . . . . . . . . .   385,000           -          -
     David J. Willmott. . . . . . . . . . . . . .   385,000           -          -
     Wesley T. Wood . . . . . . . . . . . . . . .   385,000           -          -

     TO CONSIDER AND APPROVE AN AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF
     -----------------------------------------------------------------------------
     INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF CLASS A COMMON
     ---------------------------------------------------------------------------
     STOCK FROM 9,500,000 TO 12,000,000:
     -----------------------------------

          Class A shareholders. . . . . . . . . . 7,025,278     101,945      8,778
          Class B shareholders. . . . . . . . . .   385,000           -          -

     TO CONSIDER AND APPROVE THE 2006 LONG TERM INCENTIVE PLAN (1):
     --------------------------------------------------------------

          Class A shareholders. . . . . . . . . . 3,939,141   1,305,869     11,767
          Class B shareholders. . . . . . . . . .   385,000           -          -

     TO CONSIDER AND APPROVE AMENDMENTS TO OUTSTANDING COMMON STOCK WARRANTS HELD
     ----------------------------------------------------------------------------
     BY THE CHAIRMAN (1):
     --------------------

          Class A shareholders. . . . . . . . . . 5,010,643     226,294     19,840
          Class B shareholders. . . . . . . . . .   385,000           -          -
     -----------------------------------------------------------------------------
     (1)  Total broker non-votes for these proposals were 1,879,224 shares.
</TABLE>


(d)  Not  Applicable

ITEM 5. OTHER INFORMATION

     Not Applicable

ITEM 6. EXHIBITS

The following exhibits are filed as part of this report.

<TABLE>
<CAPTION>
<S>   <C>
3.0   Restated Certificate of Incorporation

4.0   Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New York, as
      Trustee, dated as of July 1, 2006, incorporated by reference to Intervest Mortgage Corporation's
      Registration Statement on Form S-11, File No. 333-132403, filed on March 14, 2006, wherein such
      document is identified as Exhibit 4.1.

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.
</TABLE>


                                       35
<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
                                               --------------------------------
                                                (Registrant)


Date: July 31, 2006                            By:    /s/ Jerome Dansker
                                               -----------------------------
                                               Jerome Dansker, Chairman and
                                               Executive Vice President
                                               (Principal  Executive  Officer)


Date: July 31, 2006                            By:    /s/ Lowell S. Dansker
                                               ---------------------------------
                                               Lowell S. Dansker, Vice Chairman,
                                               President and Treasurer
                                               (Principal Financial Officer)


                                       36