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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

THE SECURITIES EXCHANGE ACT
OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007

or

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

THE SECURITIES EXCHANGE ACT
OF 1934

For The Transition Period From  to

Commission file number 000-23377

INTERVEST BANCSHARES CORPORATION

(Exact name of registrant as specified in its charter)



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



| |  |                                                     |  | 
| |  | --------------------------------------------------- |  | 
| |  | One Rockefeller Plaza, Suite 400                    |  | 
| |  | New York, New York 10020-2002                       |  | 
| |  | (Address of principal executive offices) (Zip Code) |  | 



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



| |  |                                                                                    |  | 
| |  | ---------------------------------------------------------------------------------- |  | 
| |  | Not Applicable                                                                     |  | 
| |  | (Former name, former address and former fiscal year, if changed since last report) |  | 

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

Indicate by check mark whether the registrant 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 XX    Nonaccelerated Filer

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

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



|                                                |  |                                             
|----------------------------------------------- |  | --------------------------------------------
|Title of Each Class:                            |  | Shares Outstanding:                         
|                                                | 
|Class A Common Stock, $1.00 par value per share |  | 7,697,112 outstanding as of October 25, 2007
|                                                | 
|Class B Common Stock, $1.00 par value per share |  | 385,000 outstanding as of October 25, 2007  

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##### Table of Contents

INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES

FORM 10-Q

September 30, 2007

TABLE OF
CONTENTS



|                                                                                              |  |                                                                                                                                        |  |     
|--------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                              |  |                                                                                                                                        |  | Page
|PART I. FINANCIAL INFORMATION                                                                 |  |                                                                                                                                       
|Item 1. Financial Statements Financial Statements                                             |  |                                                                                                                                       
|                                                                                              |  | Condensed Consolidated Balance Sheets as of September 30, 2007 (Unaudited) and December 31, 2006                                       |  | 3   
|                                                                                              |  |                                                                                                                                       
|                                                                                              |  | Condensed Consolidated Statements of Earnings (Unaudited) for the Quarters and Nine-Months Ended September 30, 2007 and 2006           |  | 4   
|                                                                                              |  |                                                                                                                                       
|                                                                                              |  | Condensed Consolidated Statements of Changes in Stockholders Equity (Unaudited) for the Nine-Months Ended September 30, 2007 and 2006 |  | 5   
|                                                                                              |  |                                                                                                                                       
|                                                                                              |  | Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine-Months Ended September 30, 2007 and 2006                      |  | 6   
|                                                                                              |  |                                                                                                                                       
|                                                                                              |  | Notes to Condensed Consolidated Financial Statements (Unaudited)                                                                       |  | 7   
|                                                                                              |  |                                                                                                                                       
|                                                                                              |  | Review by Independent Registered Public Accounting Firm                                                                                |  | 17  
|                                                                                              |  |                                                                                                                                       
|                                                                                              |  | Report of Independent Registered Public Accounting Firm                                                                                |  | 18  
|                                                                                              | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 19                                                                                                                                    
|                                                                                              | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |  | 35                                                                                                                                    
|                                                                                              | 
|Item 4. Controls and Procedures                                                               |  | 36                                                                                                                                    
|                                                                                              | 
|PART II. OTHER INFORMATION                                                                    |  |                                                                                                                                       
|                                                                                              | 
|Item 1. Legal Proceedings                                                                     |  | 36                                                                                                                                    
|                                                                                              | 
|Item 1A. Risk Factors                                                                         |  | 36                                                                                                                                    
|                                                                                              | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 36                                                                                                                                    
|                                                                                              | 
|Item 3. Defaults Upon Senior Securities                                                       |  | 36                                                                                                                                    
|                                                                                              | 
|Item 4. Submission of Matters to a Vote of Security Holders                                   |  | 36                                                                                                                                    
|                                                                                              | 
|Item 5. Other Information                                                                     |  | 36                                                                                                                                    
|                                                                                              | 
|Item 6. Exhibits                                                                              |  | 36                                                                                                                                    
|                                                                                              | 
|Signatures                                                                                    |  | 37                                                                                                                                    
|                                                                                              | 
|Certifications                                                                                |  | 38-40                                                                                                                                 

Private Securities Litigation Reform Act Safe Harbor Statement

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



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##### Table of Contents

PART 1. FINANCIAL INFORMATION ITEM 1. Financial Statements Intervest Bancshares Corporation and Subsidiaries Condensed Consolidated Balance Sheets  ($ in thousands, except par value)

September 30,2007


December 31,2006ASSETS

(Unaudited
)

(Audited
)Cash and due from banks

$         4,754


$         9,747Federal funds sold

9,340


13,662Commercial paper and other short-term investments

9,987


16,786Total cash and cash equivalents

24,081


40,195Securities held to maturity, net(estimated fair value of $347,590 and $402,871,
respectively)

347,001


404,015Federal Reserve Bank and Federal Home Loan Bank stock, at cost

6,351


6,938Loans receivable(net of allowance for loan losses of $20,925 and $17,833,
respectively)

1,607,462


1,472,820Accrued interest receivable

12,729


12,769Loan fees receivable

10,125


10,443Premises and equipment, net

5,985


6,379Deferred income tax asset

10,006


8,694Deferred debenture offering costs, net

4,334


5,158Investments in unconsolidated subsidiaries

1,702


1,702Other assets

3,886


2,640Total assets

$2,033,662


$1,971,753LIABILITIESDeposits:Noninterest-bearing demand deposit accounts

$         3,818


$         4,849Interest-bearing deposit accounts:Checking (NOW) accounts

4,817


12,934Savings accounts

9,175


10,684Money market accounts

221,874


224,673Certificate of deposit accounts

1,433,759


1,335,394Total deposit accounts

1,673,443


1,588,534Borrowed Funds:Federal Home Loan Bank advances

-


25,000Subordinated debentures

76,250


86,710Subordinated debentures - capital securities

56,702


56,702Accrued interest payable on all borrowed funds

3,091


4,282Mortgage note payable

204


215Total borrowed funds

136,247


172,909Accrued interest payable on deposits

4,659


4,259Mortgage escrow funds payable

31,584


19,747Official checks outstanding

6,905


13,178Other liabilities

3,642


3,080Total liabilities

1,856,480


1,801,707STOCKHOLDERS EQUITYPreferred stock(300,000 shares authorized; none issued and outstanding)

-


-Class A common stock($1.00 par value; 12,000,000 shares
authorized;8,095,151 shares issued; and 7,763,151 and 7,986,595 shares outstanding, respectively)

8,095


7,986Class B common stock($1.00 par value; 700,000 shares authorized;385,000 shares
issued and outstanding)

385


385Additional paid-in-capital, common

76,931


75,098Retained earnings

100,026


86,577Treasury stock (332,000 shares, at cost)

(8,255
)

-Total stockholders equity

177,182


170,046Total liabilities and stockholders equity

$2,033,662


$1,971,753 See accompanying notes to condensed consolidated financial statements.




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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Condensed Consolidated Statements of Earnings

(Unaudited)

|                                                                 |  |                            |  |              |                                 |  |           |  |              | 
|---------------------------------------------------------------- |  | -------------------------- |  | ------------ | ------------------------------- |  | --------- |  | ------------ | 
|                                                                 |  | Quarter EndedSeptember 30, |  |              | Nine-Months Ended September 30, | 
|($ in thousands, except per share data)                          |  | 2007                       |  | 2006         |                                 |  | 2007      |  | 2006         | 
|INTEREST AND DIVIDEND INCOME                                     |  |                            |  |              |                                 |  |           |  |              | 
|Loans receivable                                                 |  | $27,275                    |  | $28,829      |                                 |  | $83,915   |  | $83,963      | 
|Securities                                                       |  | 4,954                      |  | 3,439        |                                 |  | 15,134    |  | 9,408        | 
|Other interest-earning assets                                    |  | 155                        |  | 492          |                                 |  | 682       |  | 1,192        | 
|Total interest and dividend income                               |  | 32,384                     |  | 32,760       |                                 |  | 99,731    |  | 94,563       | 
|                                                                 |  |                            |  |             
|INTEREST EXPENSE                                                 |  |                            |  |              |                                 |  |           |  |              | 
|Deposits                                                         |  | 19,844                     |  | 16,920       |                                 |  | 58,380    |  | 46,995       | 
|Subordinated debentures                                          |  | 1,603                      |  | 1,987        |                                 |  | 5,067     |  | 5,712        | 
|Subordinated debentures - capital securities                     |  | 886                        |  | 1,106        |                                 |  | 2,658     |  | 3,286        | 
|Other borrowed funds                                             |  | 501                        |  | 193          |                                 |  | 913       |  | 440          | 
|Total interest expense                                           |  | 22,834                     |  | 20,206       |                                 |  | 67,018    |  | 56,433       | 
|                                                                 |  |                            |  |             
|Net interest and dividend income                                 |  | 9,550                      |  | 12,554       |                                 |  | 32,713    |  | 38,130       | 
|Provision for loan losses                                        |  | 1,523                      |  | 907          |                                 |  | 3,092     |  | 1,857        | 
|Net interest and dividend income after provision for loan losses |  | 8,027                      |  | 11,647       |                                 |  | 29,621    |  | 36,273       | 
|                                                                 |  |                            |  |             
|NONINTEREST INCOME                                               |  |                            |  |              |                                 |  |           |  |              | 
|Customer service fees                                            |  | 148                        |  | 102          |                                 |  | 304       |  | 361          | 
|Income from mortgage lending activities                          |  | 284                        |  | 326          |                                 |  | 943       |  | 1,115        | 
|Income from the early repayment of mortgage loans                |  | 3,231                      |  | 737          |                                 |  | 5,857     |  | 3,383        | 
|Commissions and fees                                             |  | -                          |  | 50           |                                 |  | -         |  | 50           | 
|Gain from early call of investment securities                    |  | 14                         |  | -            |                                 |  | 17        |  | -            | 
|Total noninterest income                                         |  | 3,677                      |  | 1,215        |                                 |  | 7,121     |  | 4,909        | 
|                                                                 |  |                            |  |             
|NONINTEREST EXPENSES                                             |  |                            |  |              |                                 |  |           |  |              | 
|Salaries and employee benefits                                   |  | 1,397                      |  | 2,797        |                                 |  | 4,063     |  | 5,560        | 
|Occupancy and equipment, net                                     |  | 458                        |  | 421          |                                 |  | 1,416     |  | 1,249        | 
|FDIC and general insurance                                       |  | 376                        |  | 96           |                                 |  | 910       |  | 278          | 
|Professional fees and services                                   |  | 371                        |  | 304          |                                 |  | 846       |  | 839          | 
|Data processing                                                  |  | 227                        |  | 180          |                                 |  | 642       |  | 538          | 
|Director and committee fees                                      |  | 93                         |  | 89           |                                 |  | 266       |  | 311          | 
|Stationery, printing and supplies                                |  | 39                         |  | 44           |                                 |  | 154       |  | 157          | 
|Advertising and promotion                                        |  | 71                         |  | 78           |                                 |  | 180       |  | 229          | 
|Postage and delivery                                             |  | 23                         |  | 36           |                                 |  | 93        |  | 110          | 
|Foreclosed real estate                                           |  | 11                         |  | -            |                                 |  | 64        |  | -            | 
|Loss on early extinguishment of debentures                       |  | 25                         |  | -            |                                 |  | 44        |  | -            | 
|All other                                                        |  | 125                        |  | 157          |                                 |  | 424       |  | 459          | 
|Total noninterest expenses                                       |  | 3,216                      |  | 4,202        |                                 |  | 9,102     |  | 9,730        | 
|Earnings before income taxes                                     |  | 8,488                      |  | 8,660        |                                 |  | 27,640    |  | 31,452       | 
|Provision for income taxes                                       |  | 3,647                      |  | 3,776        |                                 |  | 12,079    |  | 13,740       | 
|Net earnings                                                     |  | $  4,841                   |  | $  4,884     |                                 |  | $15,561   |  | $17,712      | 
|Basic earnings per share                                         |  | $    0.59                  |  | $    0.62    |                                 |  | $    1.87 |  | $    2.26    | 
|Diluted earnings per share                                       |  | $    0.58                  |  | $    0.59    |                                 |  | $    1.83 |  | $    2.13    | 
|Cash dividends per share                                         |  | $          -               |  | $          - |                                 |  | $    0.25 |  | $          - | 

See accompanying notes to condensed consolidated financial statements.



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Condensed Consolidated Statements of Changes in
Stockholders Equity

(Unaudited)



|                                                     |  |                                 |   |  |          |   |  |           |  |         
|---------------------------------------------------- |  | ------------------------------- | - |  | -------- | - |  | --------- |  | --------
|                                                     |  | Nine-Months Ended September 30,
|                                                     |  | 2007                            |   |  | 2006    
|($ thousands)                                        |  | Shares                          |   |  | Amount   |   |  | Shares    |  | Amount  
|                                                     |  |                                 |   | 
|CLASS A COMMON STOCK                                 |  |                                 |   |  |          |   |  |           |  |         
|Balance at beginning of period                       |  | 7,986,595                       |   |  | $  7,986 |   |  | 7,438,058 |  | $  7,438
|Issuance of shares upon the conversion of debentures |  | 108,556                         |   |  | 109      |   |  | 32,432    |  | 32      
|Balance at end of period                             |  | 8,095,151                       |   |  | 8,095    |   |  | 7,470,490 |  | 7,470   
|                                                     |  |                                 |   | 
|CLASS B COMMON STOCK                                 |  |                                 |   |  |          |   |  |           |  |         
|Balance at beginning and end of period               |  | 385,000                         |   |  | 385      |   |  | 385,000   |  | 385     
|                                                     |  |                                 |   | 
|ADDITIONAL PAID-IN-CAPITAL, COMMON                   |  |                                 |   |  |          |   |  |           |  |         
|Balance at beginning of period                       |  |                                 |   |  | 75,098   |   |  |           |  | 65,309  
|Issuance of shares upon the conversion of debentures |  |                                 |   |  | 1,833    |   |  |           |  | 480     
|Balance at end of period                             |  |                                 |   |  | 76,931   |   |  |           |  | 65,789  
|                                                     |  |                                 |   | 
|RETAINED EARNINGS                                    |  |                                 |   |  |          |   |  |           |  |         
|Balance at beginning of period                       |  |                                 |   |  | 86,577   |   |  |           |  | 63,046  
|Net earnings for the period                          |  |                                 |   |  | 15,561   |   |  |           |  | 17,712  
|Dividends on common stock                            |  |                                 |   |  | (2,112   | ) |  |           |  | -       
|Balance at end of period                             |  |                                 |   |  | 100,026  |   |  |           |  | 80,758  
|                                                     |  |                                 |   | 
|TREASURY STOCK                                       |  |                                 |   |  |          |   |  |           |  |         
|Balance at beginning of period                       |  | -                               |   |  | -        |   |  |           |  | -       
|Class A common stock repurchased                     |  | (332,000                        | ) |  | (8,255   | ) |  |           |  | -       
|Balance at end of period                             |  | (332,000                        | ) |  | (8,255   | ) |  |           |  | -       
|                                                     |  |                                 |   |  |          |   |  |           |  |         
|Total stockholders equity at end of
period          |  | 8,148,151                       |   |  | $177,182 |   |  | 7,855,490 |  | $154,402

See accompanying notes to condensed consolidated financial statements.



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                                        |  |                                |   |  |            |  
|------------------------------------------------------------------------------------------------------- |  | ------------------------------ | - |  | ---------- | -
|                                                                                                        |  | Nine-Months EndedSeptember 30, |  
|                                                                                                        |  |                                |  
|($ in thousands)                                                                                        |  | 2007                           |   |  | 2006       |  
|                                                                                                        | 
|OPERATING ACTIVITIES                                                                                    |  |                                |   |  |            |  
|Net earnings                                                                                            |  | $  15,561                      |   |  | $  17,712  |  
|Adjustments to reconcile net earnings to net cash provided by operating activities:                     |  |                                |   |  |            |  
|Depreciation and amortization                                                                           |  | 465                            |   |  | 410        |  
|Provision for loan losses                                                                               |  | 3,092                          |   |  | 1,857      |  
|Deferred income tax benefit                                                                             |  | (1,312                         | ) |  | (1,414     | )
|Amortization of deferred debenture offering costs                                                       |  | 766                            |   |  | 861        |  
|Loss on the early extinguishment of debentures                                                          |  | 44                             |   |  | -          |  
|Amortization of premiums (accretion) of discounts and deferred loan fees, net                           |  | (5,697                         | ) |  | (7,902     | )
|Net decrease in accrued interest payable on debentures                                                  |  | (354                           | ) |  | (176       | )
|Net decrease in official checks outstanding                                                             |  | (6,273                         | ) |  | (7,483     | )
|Net decrease in loan fees receivable                                                                    |  | 318                            |   |  | 17         |  
|Net change in all other assets and liabilities                                                          |  | 4,624                          |   |  | 4,070      |  
|                                                                                                        | 
|Net cash provided by operating activities                                                               |  | 11,234                         |   |  | 7,952      |  
|                                                                                                        | 
|INVESTING ACTIVITIES                                                                                    |  |                                |   |  |            |  
|Maturities and calls of securities held to maturity                                                     |  | 131,788                        |   |  | 96,935     |  
|Purchases of securities held to maturity                                                                |  | (74,284                        | ) |  | (185,864   | )
|Net increase in loans receivable                                                                        |  | (137,406                       | ) |  | (123,548   | )
|Redemptions (purchases) of FRB and FHLB stock, net                                                      |  | 587                            |   |  | (572       | )
|Purchases of premises and equipment, net                                                                |  | (71                            | ) |  | (165       | )
|Investment in unconsolidated subsidiaries                                                               |  | -                              |   |  | (310       | )
|                                                                                                        | 
|Net cash used in investing activities                                                                   |  | (79,386                        | ) |  | (213,524   | )
|                                                                                                        | 
|FINANCING ACTIVITIES                                                                                    |  |                                |   |  |            |  
|Net increase in deposits                                                                                |  | 84,909                         |   |  | 225,794    |  
|Net increase in mortgage escrow funds payable                                                           |  | 11.837                         |   |  | 8,235      |  
|Net decrease in short-term FHLB advances                                                                |  | (25,000                        | ) |  | -          |  
|Principal repayments of debentures and mortgage note payable                                            |  | (9,341                         | ) |  | (7,260     | )
|Gross proceeds from issuance of debentures                                                              |  | -                              |   |  | 26,310     |  
|Debenture issuance costs                                                                                |  | -                              |   |  | (1,222     | )
|Class A common stock repurchased                                                                        |  | (8,255                         | ) |  | -          |  
|Cash dividends paid to common stockholders                                                              |  | (2,112                         | ) |  | -          |  
|                                                                                                        | 
|Net cash provided by financing activities                                                               |  | 52,038                         |   |  | 251,857    |  
|                                                                                                        | 
|Net (decrease) increase in cash and cash equivalents                                                    |  | (16,114                        | ) |  | 46,285     |  
|Cash and cash equivalents at beginning of period                                                        |  | 40,195                         |   |  | 56,716     |  
|                                                                                                        | 
|Cash and cash equivalents at end of period                                                              |  | $  24,081                      |   |  | $  103,001 |  
|                                                                                                        | 
|                                                                                                        |  |                               
|SUPPLEMENTAL DISCLOSURES                                                                                |  |                                |   |  |            |  
|Cash paid during the period for:                                                                        |  |                                |   |  |            |  
|Interest                                                                                                |  | $  66,217                      |   |  | $  54,919  |  
|Income taxes                                                                                            |  | 11,758                         |   |  | 16,252     |  
|Noncash activities:                                                                                     |  |                                |   |  |            |  
|Loans transferred to foreclosed real estate                                                             |  | 975                            |   |  | -          |  
|Conversion of debentures and related accrued interest and deferred costs into Class A common stock, net |  | 1,942                          |   |  | 512        |  
|                                                                                                        | 

See accompanying notes to condensed consolidated financial statements.



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements
(Unaudited)

---

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

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

All significant intercompany balances
and transactions have been eliminated in consolidation. The accounting and reporting policies of the Company conform to United States generally accepted accounting principles and to general practices within the banking industry. In preparing the
consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent liabilities as of the date of the consolidated financial statements, and
revenues and expenses during the reporting periods. Actual results could differ from those estimates. Estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses. In the opinion of
management, all material adjustments necessary for a fair presentation of financial condition and results of operations for the interim periods presented in this report have been made. These adjustments are of a normal recurring nature. The results
of operations for the interim periods are not necessarily indicative of results that may be expected for the entire year or any other interim period. Certain information and note disclosures normally included in financial statements prepared in
accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission.

Note 2 - Description of Business

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

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

The offices of the Holding Company, Intervest Mortgage Corporation and the
Banks headquarters and full-service banking office are located on the entire fourth floor of One Rockefeller Plaza in New York City, New York, 10020-2002 and the main telephone number is 212-218-2800.

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



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

---



Note 2 - Description of Business - Continued



The Bank is a nationally chartered, full-service commercial bank that has its headquarters and full-service banking
office in Rockefeller Plaza in New York City, and a total of six full-service banking offices in Pinellas County, Floridafive in Clearwater and one in South Pasadena. The Bank opened its sixth branch office in Florida in December 2006.

The Bank conducts a personalized commercial and consumer banking business and attracts deposits from the areas served by its banking offices. The Bank also
provides internet banking services through its web site: www.intervestnatbank.com, which can attract deposit customers from outside its primary market areas. The deposits, together with funds derived from other sources, are mainly used to originate
mortgage loans secured by commercial and multifamily real estate properties and to purchase investment securities. The information on the aforementioned web site is not and should not be considered part of this report and is not incorporated by
reference.

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

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

Note 3 - Securities

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



|                             |  |            |  |           |  |            |  |            |  |           |  |         |   |  |           
|---------------------------- |  | ---------- |  | --------- |  | ---------- |  | ---------- |  | --------- |  | ------- | - |  | ----------
|                             |  |            |  |           |  | Gross      |  | Gross      |  | Estimated |  |         |   |  | Wtd-Avg   
|                             |  | Number of  |  | Amortized |  | Unrealized |  | Unrealized |  | Fair      |  | Wtd-Avg |   |  | Remaining 
|($ in thousands)             |  | Securities |  | Cost      |  | Gains      |  | Losses     |  | Value     |  | Yield   |   |  | Maturity  
|At September 30, 2007        |  |            |  |           |  |            |  |            |  |           |  |         |   |  |           
|U.S. government agencies (1) |  | 207        |  | $339,969  |  | $710       |  | $51        |  | $340,628  |  | 5.22    | % |  | 2.1 Years 
|Corporate                    |  | 7          |  | 7,032     |  | 3          |  | 73         |  | 6,962     |  | 5.74    | % |  | 25.9 Years
|                             |  | 214        |  | $347,001  |  | $713       |  | $124       |  | $347,590  |  | 5.23    | % |  | 2.6 Years 
|At December 31, 2006         |  |            |  |           |  |            |  |            |  |           |  |         |   |  |           
|U.S. government agencies (1) |  | 221        |  | $398,005  |  | $120       |  | $1,218     |  | $396,907  |  | 4.87    | % |  | 1.9 Years 
|Corporate                    |  | 6          |  | 6,010     |  | -          |  | 46         |  | 5,964     |  | 5.62    | % |  | 26.5 Years
|                             |  | 227        |  | $404,015  |  | $120       |  | $1,264     |  | $402,871  |  | 4.88    | % |  | 2.3 Years 

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

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



|                         |  |                     |  |                         |  |                         |  |                      |  |                         |  |                      |  |                        
|------------------------ |  | ------------------- |  | ----------------------- |  | ----------------------- |  | -------------------- |  | ----------------------- |  | -------------------- |  | -----------------------
|                         |  |                     |  | Less Than Twelve Months |  | Twelve Months or Longer |  | Total               
|($ in thousands)         |  | Number ofSecurities |  | Estimated Fair Value    |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Gross Unrealized Losses
|At September 30, 2007    |  |                     |  |                         |  |                         |  |                      |  |                         |  |                      |  |                        
|U.S. government agencies |  | 25                  |  | $    9,380              |  | $    9                  |  | $  26,490            |  | $  42                   |  | $  35,870            |  | $     51               
|Corporate                |  | 6                   |  | 5,980                   |  | 73                      |  | -                    |  | -                       |  | 5,980                |  | 73                     
|                         |  | 31                  |  | $  15,360               |  | $  82                   |  | $  26,490            |  | $  42                   |  | $  41,850            |  | $   124                
|At December 31, 2006     |  |                     |  |                         |  |                         |  |                      |  |                         |  |                      |  |                        
|U.S. government agencies |  | 184                 |  | $227,971                |  | $597                    |  | $113,510             |  | $621                    |  | $341,481             |  | $1,218                 
|Corporate                |  | 6                   |  | 5,964                   |  | 46                      |  | -                    |  | -                       |  | 5,964                |  | 46                     
|                         |  | 190                 |  | $233,935                |  | $643                    |  | $113,510             |  | $621                    |  | $347,445             |  | $1,264                 

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



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

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Note 3 - Securities - Continued



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

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



|                                       |  |                |  |                      |  |              
|-------------------------------------- |  | -------------- |  | -------------------- |  | -------------
|($ in
thousands)                       |  | Amortized Cost |  | Estimated Fair Value |  | Average Yield
|Due in one year or less                |  | $118,063       |  | $118,188             |  | 5.04%        
|Due after one year through five years  |  | 198,489        |  | 198,970              |  | 5.29         
|Due after five years through ten years |  | 21,169         |  | 21,219               |  | 5.46         
|Due after ten years                    |  | 9,280          |  | 9,213                |  | 5.67         
|                                       |  | $347,001       |  | $347,590             |  | 5.23%        

Note 4 - Loans Receivable

Loans receivable are summarized as follows:



|                                       |  |                       |  |                      |  |            |  |           
|-------------------------------------- |  | --------------------- |  | -------------------- |  | ---------- |  | ----------
|                                       |  | At September 30, 2007 |  | At December 31, 2006
|($ in thousands)                       |  | # of Loans            |  | Amount               |  | # of Loans |  | Amount    
|Commercial real estate loans           |  | 308                   |  | $933,322             |  | 285        |  | $812,063  
|Residential multifamily loans          |  | 245                   |  | 670,144              |  | 228        |  | 634,753   
|Land development and other land loans  |  | 17                    |  | 34,182               |  | 23         |  | 54,917    
|Residential 1-4 family loans           |  | 2                     |  | 491                  |  | 1          |  | 355       
|Commercial business loans              |  | 19                    |  | 763                  |  | 21         |  | 745       
|Consumer loans                         |  | 12                    |  | 260                  |  | 12         |  | 218       
|Loans receivable                       |  | 603                   |  | 1,639,162            |  | 570        |  | 1,502,731 
|Deferred loan fees                     |  |                       |  | (10,775)             |  |            |  | (12,078)  
|Loans receivable, net of deferred fees |  |                       |  | 1,628,387            |  |            |  | 1,490,653 
|Allowance for loan losses              |  |                       |  | (20,925)             |  |            |  | (17,833)  
|Loans receivable, net                  |  |                       |  | $1,607,462           |  |            |  | $1,472,820

At September 30, 2007 and December 31, 2006, there were $74.5 million and $3.3 million of loans on a
nonaccrual status, respectively. These loans were considered impaired under the criteria of SFAS No.114. but no valuation allowance was maintained at any time since the Company believes that the estimated fair value of each of the underlying
properties exceeded the Companys recorded investment in each loan. At September 30, 2007 and December 31, 2006, there were no other loans classified as impaired or ninety days past due and still accruing interest.

Interest income that was not recorded on nonaccrual loans under their contractual terms amounted to $2.0 million for the quarter ended September 30, 2007 and $2.6
million for the nine-months ended September 30, 2007, compared to $157,000 and $273,000, respectively, for the same periods of 2006. The average principal balance of nonaccrual loans for the quarter and nine-months ended September 30, 2007
was $86.2 million and $38.8 million, respectively, and $6.2 million and $3.8 million for the quarter and nine-months ended September 30, 2006, respectively.

Note 5 - Allowance for Loan Losses

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



|                                |  |                            |  |                                |  |         |  |        
|------------------------------- |  | -------------------------- |  | ------------------------------ |  | ------- |  | -------
|                                |  | Quarter EndedSeptember 30, |  | Nine-Months EndedSeptember 30,
|($ in thousands)                |  | 2007                       |  | 2006                           |  | 2007    |  | 2006   
|Balance at beginning of period  |  | $19,402                    |  | $16,131                        |  | $17,833 |  | $15,181
|Provision charged to operations |  | 1,523                      |  | 907                            |  | 3,092   |  | 1,857  
|Balance at end of period        |  | $20,925                    |  | $17,038                        |  | $20,925 |  | $17,038



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

---



Note 6 - Deposits

Scheduled maturities of certificates of deposit accounts are as follows:



|                         |  |                       |  |                      |  |             |  |                    
|------------------------ |  | --------------------- |  | -------------------- |  | ----------- |  | -------------------
|                         |  | At September 30, 2007 |  | At December 31, 2006
|($ in thousands)         |  | Amount                |  | Wtd-Avg Stated Rate  |  | Amount      |  | Wtd-Avg Stated Rate
|                        
|Within one year          |  | $   522,617           |  | 4.86%                |  | $   630,454 |  | 4.77%              
|Over one to two years    |  | 312,345               |  | 4.69                 |  | 193,993     |  | 4.49               
|Over two to three years  |  | 232,022               |  | 4.77                 |  | 204,636     |  | 4.59               
|Over three to four years |  | 132,739               |  | 5.25                 |  | 178,767     |  | 4.71               
|Over four years          |  | 234,036               |  | 5.20                 |  | 127,544     |  | 5.36               
|                        
|                         |  | $1,433,759            |  | 4.90%                |  | $1,335,394  |  | 4.75%              
|                        

Certificate of deposit accounts of $100,000 or more totaled $596 million and $491 million at September 30,
2007 and December 31, 2006, respectively. At September 30, 2007, certificate of deposit accounts of $100,000 or more by remaining maturity were as follows: $183 million due within one year; $108 million due over one to two years; $86
million due over two to three years; $68 million due over three to four years; and $151 million due over four years.

Note 7 - Subordinated Debentures
and Mortgage Note Payable

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

|                                                 |  |                        |  |                 |  |         | 
|------------------------------------------------ |  | ---------------------- |  | --------------- |  | ------- | 
|                                                 |  | At September 30,       |  | At December 31, | 
|($ in thousands)                                 |  | 2007                   |  | 2006            | 
|                                                 | 
|INTERVEST MORTGAGE CORPORATION:                  | 
|Series 01/17/02 - interest at 7 3/4% fixed       |  | - due October 1, 2009  |  | $  2,250        |  | $2,250  | 
|Series 08/05/02 - interest at 7 1/2% fixed       |  | - due January 1, 2008  |  | -               |  | 3,000   | 
|Series 08/05/02 - interest at 7 3/4% fixed       |  | - due January 1, 2010  |  | 3,000           |  | 3,000   | 
|Series 01/21/03 - interest at 7 % fixed          |  | - due July 1, 2008     |  | 3,000           |  | 3,000   | 
|Series 01/21/03 - interest at 7 1/4% fixed       |  | - due July 1, 2010     |  | 3,000           |  | 3,000   | 
|Series 07/25/03 -interest at 6 3/4% fixed        |  | - due October 1, 2008  |  | 3,000           |  | 3,000   | 
|Series 07/25/03 - interest at 7 % fixed          |  | - due October 1, 2010  |  | 3,000           |  | 3,000   | 
|Series 11/28/03 - interest at 6 1/4% fixed       |  | - due April 1, 2007    |  | -               |  | 2,000   | 
|Series 11/28/03 - interest at 6 1/2% fixed       |  | - due April 1, 2009    |  | 3,500           |  | 3,500   | 
|Series 11/28/03 - interest at 6 3/4% fixed       |  | - due April 1, 2011    |  | 4,500           |  | 4,500   | 
|Series 06/07/04 - interest at 6 1/4% fixed       |  | - due January 1, 2008  |  | -               |  | 2,500   | 
|Series 06/07/04 - interest at 6 1/2% fixed       |  | - due January 1, 2010  |  | 4,000           |  | 4,000   | 
|Series 06/07/04 - interest at 6 3/4% fixed       |  | - due January 1, 2012  |  | 5,000           |  | 5,000   | 
|Series 03/21/05 - interest at 6 1/4% fixed       |  | - due April 1, 2009    |  | 3,000           |  | 3,000   | 
|Series 03/21/05 - interest at 6 1/2% fixed       |  | - due April 1, 2011    |  | 4,500           |  | 4,500   | 
|Series 03/21/05 - interest at 7% fixed           |  | - due April 1, 2013    |  | 6,500           |  | 6,500   | 
|Series 08/12/05 - interest at 6 1/4% fixed       |  | - due October 1, 2009  |  | 2,000           |  | 2,000   | 
|Series 08/12/05 - interest at 6 1/2% fixed       |  | - due October 1, 2011  |  | 4,000           |  | 4,000   | 
|Series 08/12/05 - interest at 7% fixed           |  | - due October 1, 2013  |  | 6,000           |  | 6,000   | 
|Series 06/12/06 - interest at 6 1/2% fixed       |  | - due July 1, 2010     |  | 2,000           |  | 2,000   | 
|Series 06/12/06 - interest at 6 3/4% fixed       |  | - due July 1, 2012     |  | 4,000           |  | 4,000   | 
|Series 06/12/06 - interest at 7% fixed           |  | - due July 1, 2014     |  | 10,000          |  | 10,000  | 
|                                                 |  |                        |  |                 | 
|                                                 |  |                        |  | 76,250          |  | 83,750  | 
|INTERVEST BANCSHARES CORPORATION:                | 
|Series 05/14/98 - interest at 8% fixed           |  | - due July 1, 2008     |  | -               |  | 1,710   | 
|Series 12/15/00 - interest at 9% fixed           |  | - due April 1, 2008    |  | -               |  | 1,250   | 
|                                                 |  |                        |  |                 | 
|                                                 |  |                        |  | -               |  | 2,960   | 
|INTERVEST NATIONAL BANK:                         |  |                        |  |                 | 
|Mortgage note payable (1)  interest at 7% fixed |  | - due February 1, 2017 |  | 204             |  | 215     | 
|                                                 | 
|                                                 |  |                        |  | $76,454         |  | $86,925 | 
|                                                 | 

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



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

---

Note 7 - Subordinated Debentures and Mortgage Note Payable, Continued



Intervest Bancshares Corporation repaid the following debentures during the nine-months ended September 30,
2007:

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

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

Intervest Mortgage Corporation repaid the following debentures during the nine-months ended September 30, 2007:

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

·Series 08/05/02 due 01/01/08 were repaid early on 8/1/07 for $3,000,000 of principal and $263,000 of accrued interest.

·Series 06/07/04 due 01/01/08 were repaid early on 8/1/07 for $2,500,000 of principal and $108,000 of accrued interest.

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



|                                                       |  |             |  |                 
|------------------------------------------------------ |  | ----------- |  | ----------------
|($ in thousands)                                       |  | Principal   |  | Accrued Interest
|                                                      
|For the period September 30, 2007 to December 31, 2007 |  | $         4 |  | $1,144          
|For the year ended December 31, 2008                   |  | 6,016       |  | -               
|For the year ended December 31, 2009                   |  | 10,767      |  | 297             
|For the year ended December 31, 2010                   |  | 15,019      |  | 475             
|For the year ended December 31, 2011                   |  | 13,020      |  | 442             
|Thereafter                                             |  | 31,628      |  | 596             
|                                                      
|                                                       |  | $76,454     |  | $2,954          
|                                                      

Interest is paid quarterly on Intervest Mortgage Corporations debentures except for the following debentures,
which accrue and compound interest quarterly, with such interest due and payable at maturity: $0.1 million of Series 1/17/02; $0.6 million of Series 8/05/02; $1.3 million of Series 11/28/03; $1.4 million of Series 6/07/04; $1.9 million of Series
3/21/05; $1.8 million of Series 8/12/05; and $2.3 million of Series 6/12/06.

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

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

Note 8 - Short-Term Borrowings and Lines of Credit

The Bank has agreements with correspondent banks whereby it could borrow as of September 30, 2007 up to $28 million on an unsecured basis. In addition, as a member of the Federal Home Loan Bank of New York (FHLB) and the Federal
Reserve Bank of New York (FRB), the Bank can also borrow from these institutions on a secured basis. At September 30, 2007, the Bank had available collateral consisting of investment securities to support additional total borrowings of $329
million from the FHLB and FRB.

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



|                                                   |  |                            |  |                                |  |              |  |             
|-------------------------------------------------- |  | -------------------------- |  | ------------------------------ |  | ------------ |  | ------------
|                                                   |  | Quarter EndedSeptember 30, |  | Nine-Months EndedSeptember 30,
|                                                   |  |                           
|($ in thousands)                                   |  | 2007                       |  | 2006                           |  | 2007         |  | 2006        
|                                                  
|Balance at period end                              |  | $          -               |  | $          -                   |  | $          - |  | $          -
|Maximum amount outstanding at any month end        |  | $49,000                    |  | $46,200                        |  | $49,000      |  | $46,200     
|Average outstanding balance for the period         |  | $36,471                    |  | $13,526                        |  | $22,132      |  | $10,854     
|Weighted-average interest rate paid for the period |  | 5.41%                      |  | 5.54%                          |  | 5.45%        |  | 5.27%       
|Weighted-average interest rate at period end       |  | -%                         |  | -%                             |  | -%           |  | -%          
|                                                  



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

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Note 9 - Common Stock Warrants

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

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



|                                                        |  |                            |  |          |  |                         |  |      
|------------------------------------------------------- |  | -------------------------- |  | -------- |  | ----------------------- |  | -----
|                                                        |  | Exercise Price Per Warrant |  |          |  | Wtd.-Avg.Exercise Price
|                                                        |  | $6.67                      |  | $10.00   |  | Totals                  | 
|Outstanding at December 31, 2006 and September 30, 2007 |  | 145,000                    |  | 50,000   |  | 195,000                 |  | $7.52
|Remaining contractual term at September 30, 2007        |  | 4 Months                   |  | 4 Months |  | 4 Months                |  |      
|Intrinsic value (1)                                     |  | $2,622                     |  | $737     |  | $3,359                  |  |      

(1) Intrinsic value represents the value of the Holding Companys Class A common stock on
September 28, 2007 (closing price of $24.75) in excess of the exercise price multiplied by the number of warrants outstanding. There is no trading market for the Class B common stock. The Class B common stock can be converted into Class A
common stock at anytime on a share for share basis.

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

Note 10 - Stockholders Equity

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

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

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

On April 25, 2007, the Holding Companys board of directors authorized a share repurchase plan. Under the plan, the
Holding Company is authorized to purchase up to $10 million of its outstanding shares of Class A common stock over a six-month period. The repurchases will be made in the open market at prevailing prices or in privately negotiated transactions
in accordance with all applicable securities laws and regulations. The plan does not obligate the Holding Company to acquire any particular amount of the Class A common stock and the plan may be suspended or discontinued at any time. As of
September 30, 2007, a total of 332,000 shares of Class A common stock has been repurchased under this plan at an aggregate cost of $8.3 million, or $24.86 per share.



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

---



Note 11 - Income Taxes

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

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

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

Note 12 - Earnings Per Share (EPS)

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

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

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



|                                                                      |  |                            |  |                                |  |           |  |          
|--------------------------------------------------------------------- |  | -------------------------- |  | ------------------------------ |  | --------- |  | ---------
|                                                                      |  | Quarter EndedSeptember 30, |  | Nine-Months EndedSeptember 30,
|($ in thousands, except share and per share amounts)                  |  | 2007                       |  | 2006                           |  | 2007      |  | 2006     
|Basic Earnings Per Share:                                             |  |                            |  |                                |  |           |  |          
|Net earnings applicable to common stockholders                        |  | $4,841                     |  | $4,884                         |  | $15,561   |  | $17,712  
|Average number of common shares outstanding                           |  | 8,232,899                  |  | 7,852,537                      |  | 8,340,234 |  | 7,840,289
|Basic Earnings Per Share                                              |  | $0.59                      |  | $0.62                          |  | $1.87     |  | $2.26    
|Diluted Earnings Per Share:                                           |  |                            |  |                                |  |           |  |          
|Net earnings applicable to common stockholders                        |  | $4,841                     |  | $4,884                         |  | $15,561   |  | $17,712  
|Adjustment to net earnings from assumed conversion of debentures (1)  |  | -                          |  | 36                             |  | 44        |  | 113      
|Adjusted net earnings for diluted earnings per share computation      |  | $4,841                     |  | $4,920                         |  | $15,605   |  | $17,825  
|Average number of common shares outstanding:                          |  |                            |  |                                |  |           |  |          
|Common shares outstanding                                             |  | 8,232,899                  |  | 7,852,537                      |  | 8,340,234 |  | 7,840,289
|Potential dilutive shares resulting from exercise of warrants (2)     |  | 81,200                     |  | 335,170                        |  | 83,001    |  | 325,656  
|Potential dilutive shares resulting from conversion of debentures (3) |  | -                          |  | 197,163                        |  | 88,146    |  | 204,656  
|Total average number of common shares outstanding used for dilution   |  | 8,314,099                  |  | 8,384,870                      |  | 8,511,381 |  | 8,370,601
|Diluted Earnings Per Share                                            |  | $0.58                      |  | $0.59                          |  | $1.83     |  | $2.13    

|(1) | Represents interest expense on dilutive convertible debentures, net of taxes, that would not occur if they were assumed converted.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

|(2) | All outstanding warrants were considered for the EPS computations.
|--- | ------------------------------------------------------------------

|(3) | Convertible debentures (principal and accrued interest) outstanding at September 30, 2006 totaled $3.1 million. There were no convertible debentures outstanding during the
quarter ended September 30, 2007. The debentures were convertible into common stock at a price of $18.00 per share during 2007 and $16.00 per share during 2006, which result in additional common shares for fully diluted EPS calculations (based
on average balances outstanding during the applicable periods).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

---



Note 13 - Off-Balance Sheet Financial Instruments

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

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

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



|                          |  |                      |  |                    
|------------------------- |  | -------------------- |  | -------------------
|($ in thousands)          |  | At September 30,2007 |  | At December 31,2006
|Unfunded loan commitments |  | $89,670              |  | $107,848           
|Unused lines of credit    |  | 636                  |  | 939                
|Standby letters of credit |  | 110                  |  | 100                
|                         
|                          |  | $90,416              |  | $108,887           
|                         

Note 14 - Regulatory Capital

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

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

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

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

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



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

---

Note 14 - Regulatory Capital - Continued



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

|                                                                                                                      |  |                                                         |  |               |  |                     |  |                                   |  | 
|--------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------- |  | ------------- |  | ------------------- |  | --------------------------------- |  | 
|                                                                                                                      |  |                                                         |  | Actual Ratios |  | Minimum Requirement |  | To Be Considered Well Capitalized |  | 
|                                                                                                                      |  | Total capital to risk-weighted assets                   |  | 13.04%        |  | 8.00%               |  | 10.00%                            |  | 
|                                                                                                                      |  | Tier 1 capital to risk-weighted assets                  |  | 11.84%        |  | 4.00%               |  | 6.00%                             |  | 
|                                                                                                                      |  | Tier 1 capital to total average assets  leverage ratio |  | 10.10%        |  | 4.00%               |  | 5.00%                             |  | 
|At September 30, 2007, the actual capital of the Holding
Company (consolidated) on a percentage basis was as follows:
|                                                                                                                      |  |                                                         |  | ActualRatios  |  | MinimumRequirement  |  | To Be ConsideredWell Capitalized  |  | 
|                                                                                                                      |  | Total capital to risk-weighted assets                   |  | 14.48%        |  | 8.00%               |  | NA                                |  | 
|                                                                                                                      |  | Tier 1 capital to risk-weighted assets                  |  | 13.28%        |  | 4.00%               |  | NA                                |  | 
|                                                                                                                      |  | Tier 1 capital to total average assets  leverage ratio |  | 11.38%        |  | 4.00%               |  | NA                                |  | 

Note 15 - Contingencies

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

Note 16 - Recent Accounting Pronouncements

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

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

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

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

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



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

---

Note 16 - Recent Accounting Pronouncements - Continued



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

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

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



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##### Table of Contents

Intervest Bancshares Corporation and Subsidiaries

Review by Independent Registered Public Accounting Firm

Hacker, Johnson & Smith, P.A., P.C., the Companys independent registered public accounting firm, has made a limited
review of the financial data as of September 30, 2007 and for the three and nine-month periods ended September 30, 2007 and 2006 presented in this document, in accordance with the standards established by the Public Company Accounting
Oversight Board.

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



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##### Table of Contents

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Intervest Bancshares Corporation

New York, New York:

We have reviewed the accompanying condensed consolidated balance sheet of Intervest Bancshares Corporation and Subsidiaries (the Company) as of
September 30, 2007 and the related condensed consolidated statements of earnings for the three- and nine-month periods ended September 30, 2007 and 2006, and the related condensed consolidated statements of changes in stockholders
equity and cash flows for the nine-month periods ended September 30, 2007 and 2006. These interim financial statements are the responsibility of the Companys management.

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

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

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



|                                       
|---------------------------------------
|/s/ Hacker, Johnson & Smith, P.A., P.C.
|HACKER, JOHNSON & SMITH, P.A.,P.C.     
|Tampa, Florida                         
|October 26, 2007                       



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##### Table of Contents

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

Overview

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

Intervest Bancshares Corporation is a registered financial holding company referred to by itself in this report as the
Holding Company. At September 30, 2007, its wholly owned consolidated subsidiaries consisted of Intervest National Bank (the Bank) and Intervest Mortgage Corporation. All the entities are referred to collectively as the
Company on a consolidated basis. The Holding Company also had four wholly owned unconsolidated subsidiaries, Intervest Statutory Trust II, III, IV and V, which were formed in connection with the issuance of trust preferred securities.
For a discussion of the Companys business, see note 2 to the condensed consolidated financial statements in this report.

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

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

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

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

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



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##### Table of Contents

Critical Accounting Policies

The Company believes that currently its only accounting policy that is critical to the presentation of its financial statements and requires estimates and judgment on the part of management relates to the
determination of the Companys allowance for loan losses. The allowance for loan losses is a critical accounting estimate because it is highly susceptible to change from period to period requiring management to make assumptions about future
loan chargeoffs. The impact of a sudden large chargeoff could deplete the allowance and potentially require increased provisions to replenish the allowance, which could negatively affect the Companys earnings and financial position.

A more detailed discussion of the factors and estimates used in computing the allowance can be found under the caption Critical Accounting
Policies on pages 34 and 35 of the Companys annual report on Form 10-K for the year ended December 31, 2006.

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

Overview

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



|                                            |  |                |         |   |                         |   |           |                          |  |   |                            |   |  |              |          |   |  |   |           |  
|------------------------------------------- |  | -------------- | ------- | - | ----------------------- | - | --------- | ------------------------ |  | - | -------------------------- | - |  | ------------ | -------- | - |  | - | --------- | -
|($ in thousands)                            |  | HoldingCompany |         |   | Intervest National Bank |   |           | Intervest Mortgage Corp. |  |   | Inter- Company Amounts (1) |   |  | Consolidated |         
|Cash and cash equivalents                   |  | $              | 1,798   |   |                         | $ | 12,904    |                          |  | $ | 15,994                     |   |  | $            | (6,615   | ) |  | $ | 24,081    |  
|Security investments                        |  |                | -       |   |                         |   | 353,352   |                          |  |   | -                          |   |  |              | -        |   |  |   | 353,352   |  
|Loans receivable, net of deferred fees      |  |                | 3,633   |   |                         |   | 1,532,987 |                          |  |   | 91,767                     |   |  |              | -        |   |  |   | 1,628,387 |  
|Allowance for loan losses                   |  |                | (85     | ) |                         |   | (19,635   | )                        |  |   | (1,205                     | ) |  |              | -        |   |  |   | (20,925   | )
|Investment in consolidated subsidiaries     |  |                | 225,137 |   |                         |   | -         |                          |  |   | -                          |   |  |              | (225,137 | ) |  |   | -         |  
|All other assets                            |  |                | 3,612   |   |                         |   | 39,752    |                          |  |   | 5,510                      |   |  |              | (107     | ) |  |   | 48,767    |  
|Total assets                                |  | $              | 234,095 |   |                         | $ | 1,919,360 |                          |  | $ | 112,066                    |   |  | $            | (231,859 | ) |  | $ | 2,033,662 |  
|Deposits                                    |  | $              | -       |   |                         | $ | 1,680,066 |                          |  | $ | -                          |   |  | $            | (6,623   | ) |  | $ | 1,673,443 |  
|Borrowed funds and related interest payable |  |                | 56,839  |   |                         |   | 204       |                          |  |   | 79,204                     |   |  |              | -        |   |  |   | 136,247   |  
|All other liabilities                       |  |                | 74      |   |                         |   | 44,544    |                          |  |   | 2,271                      |   |  |              | (99      | ) |  |   | 46,790    |  
|Total liabilities                           |  |                | 56,913  |   |                         |   | 1,724,814 |                          |  |   | 81,475                     |   |  |              | (6,722   | ) |  |   | 1,856,480 |  
|Stockholders equity                        |  |                | 177,182 |   |                         |   | 194,546   |                          |  |   | 30,591                     |   |  |              | (225,137 | ) |  |   | 177,182   |  
|Total liabilities and stockholders
equity  |  | $              | 234,095 |   |                         | $ | 1,919,360 |                          |  | $ | 112,066                    |   |  | $            | (231,859 | ) |  | $ | 2,033,662 |  

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

A comparison of selected balance sheet information follows:



|                                                               |  |                       |               |  |                      |   |  |   |               |  |                  |  
|-------------------------------------------------------------- |  | --------------------- | ------------- |  | -------------------- | - |  | - | ------------- |  | ---------------- | -
|                                                               |  | At September 30, 2007 |               |  | At December 31, 2006 |  
|($ in thousands)                                               |  |                       | CarryingValue |  | % ofTotal Assets     |   |  |   | CarryingValue |  | % ofTotal Assets |  
|Cash and cash equivalents                                      |  | $                     | 24,081        |  | 1.2                  | % |  | $ | 40,195        |  | 2.0              | %
|Security investments                                           |  |                       | 353,352       |  | 17.4                 |   |  |   | 410,953       |  | 20.9             |  
|Loans receivable, net of deferred fees and loan loss allowance |  |                       | 1,607,462     |  | 79.0                 |   |  |   | 1,472,820     |  | 74.7             |  
|All other assets                                               |  |                       | 48,767        |  | 2.4                  |   |  |   | 47,785        |  | 2.4              |  
|Total assets                                                   |  | $                     | 2,033,662     |  | 100.0                | % |  | $ | 1,971,753     |  | 100.0            | %
|Deposits                                                       |  | $                     | 1,673,443     |  | 82.3                 | % |  | $ | 1,588,534     |  | 80.6             | %
|Borrowed funds and related interest payable                    |  |                       | 136,247       |  | 6.7                  |   |  |   | 172,909       |  | 8.8              |  
|All other liabilities                                          |  |                       | 46,790        |  | 2.3                  |   |  |   | 40,264        |  | 2.0              |  
|Total liabilities                                              |  |                       | 1,856,480     |  | 91.3                 |   |  |   | 1,801,707     |  | 91.4             |  
|Stockholders equity                                           |  |                       | 177,182       |  | 8.7                  |   |  |   | 170,046       |  | 8.6              |  
|Total liabilities and stockholders
equity                     |  | $                     | 2,033,662     |  | 100.0                | % |  | $ | 1,971,753     |  | 100.0            | %



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##### Table of Contents

Cash and Cash Equivalents

Cash and cash equivalents decreased to $24 million at September 30, 2007, from $40 million at December 31, 2006. The level of cash and cash equivalents fluctuates based on various factors, including
liquidity needs, loan demand, deposit flows, calls of securities, repayments of borrowed funds and alternative investment opportunities.

Security
Investments

Securities are classified as held to maturity and are carried at amortized cost when management has the intent and ability to hold them
to maturity. Such investments, which are held by the Bank, decreased to $347 million at September 30, 2007, from $404 million at December 31, 2006.

The decrease reflected maturities and calls during the period exceeding new purchases. The Bank has used the proceeds from the security repayments to partially fund new loans. The Bank continues to invest mainly in short-term (up to 5 year
maturities) U.S. government agency debt obligations to emphasize safety and liquidity. The Company does not own or invest in collateralized debt obligations or collateralized mortgage obligations. At September 30, 2007, the held-to-maturity
portfolio consisted of debt obligations of the Federal Home Loan Bank, Federal Farm Credit Bank, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation totaling $340 million and corporate securities (trust preferred notes)
of $7 million. At September 30, 2007, the entire portfolio had a weighted-average yield of 5.23% and a weighted-average remaining maturity of 2.6 years, compared to 4.88% and 2.3 years, respectively, at December 31, 2006. Nearly all of the
securities have fixed rates of interest or have predetermined scheduled rate increases, and many have call features that allow the issuer to call the security before its stated maturity without penalty.

At September 30, 2007 and December 31, 2006, the held-to-maturity portfolios estimated fair value was $347.6 million and $402.9 million, respectively. At
September 30, 2007, the held-to-maturity portfolio had a net unrealized gain of $0.6 million, compared to a net unrealized loss of $1.1 million at December 31, 2006. Management believes that the cause of unrealized losses and gains in the
portfolio is directly related to changes in market interest rates, which is consistent with its experience. In general, as interest rates rise, the fair value of fixed-rate securities will decrease; as interest rates fall, their fair value will
increase. Management views any unrealized losses to be temporary based on the impact of changes in interest rates, the very short maturities of the investments and their high credit quality. In addition, the Bank has the ability and intent to hold
securities that have unrealized losses for a period of time sufficient for the fair value of the securities to recover, which may be at maturity. Historically, the Bank has always recovered the cost of its investment securities upon maturity.

In order for the Bank to be a member of the Federal Reserve Bank (FRB) and the Federal Home Loan Bank of New York (FHLB), the Bank maintains an investment
in their capital stock, which amounted to $3.6 million and $2.7 million, respectively, at September 30, 2007. The FRB stock has historically paid a dividend of 6%, while the FHLB stock dividend fluctuates quarterly and most recently was 7.5%.
The total investment, which amounted to $6.3 million at September 30, 2007, compared to $6.9 million at December 31, 2006, fluctuates based on the Banks capital level for the FRB stock and the Banks loans and borrowings for the
FHLB stock.

Loans Receivable, Net of Deferred Fees

Loans receivable, net of deferred fees, increased to $1.63 billion at September 30, 2007, from $1.49 billion at December 31, 2006. The growth reflected new loan originations exceeding principal repayments.

Loan originations and repayments by quarter are summarized in the following table:



|                         |  |                       |         |             |   |             |  |   |              |  |             |   |             |  |             |         |  |   |         |  |   |        
|------------------------ |  | --------------------- | ------- | ----------- | - | ----------- |  | - | ------------ |  | ----------- | - | ----------- |  | ----------- | ------- |  | - | ------- |  | - | -------
|                         |  | For the Quarter Ended
|($ in thousands)         |  | Sep 30,2007           |         | Jun 30,2007 |   | Mar 31,2007 |  |   | Dec 31, 2006 |  | Sep 30,2006 |   | Jun 30,2006 |  | Mar 31,2006
|Originations:            |  |                       |         |             |   |             |  |   |              |  |             |   |             |  |             |         |  |   |         |  |   |        
|Intervest National Bank  |  | $                     | 140,137 |             | $ | 146,499     |  | $ | 138,687      |  |             | $ | 105,941     |  | $           | 142,016 |  | $ | 124,355 |  | $ | 115,640
|Intervest Mortgage Corp  |  |                       | 16,650  |             |   | 18,355      |  |   | 6,450        |  |             |   | 5,033       |  |             | 5,400   |  |   | 22,229  |  |   | 27,860 
|                         |  | $                     | 156,787 |             | $ | 164,854     |  | $ | 145,137      |  |             | $ | 110,974     |  | $           | 147,416 |  | $ | 146,584 |  | $ | 143,500
|Principal Repayments:    |  |                       |         |             |   |             |  |   |              |  |             |   |             |  |             |         |  |   |         |  |   |        
|Intervest National Bank  |  | $                     | 140,155 |             | $ | 83,015      |  | $ | 78,302       |  |             | $ | 96,374      |  | $           | 83,526  |  | $ | 87,668  |  | $ | 93,000 
|Intervest Mortgage Corp. |  |                       | 6,759   |             |   | 12,459      |  |   | 7,714        |  |             |   | 16,391      |  |             | 11,172  |  |   | 21,187  |  |   | 17,208 
|Holding Company (1)      |  |                       | 41      |             |   | 1,830       |  |   | 72           |  |             |   | 70          |  |             | 57      |  |   | 62      |  |   | 73     
|                         |  | $                     | 146,955 |             | $ | 97,304      |  | $ | 86,088       |  |             | $ | 112,835     |  | $           | 94,755  |  | $ | 108,917 |  | $ | 110,281

(1) Excludes the repurchase by the Bank of the Holding Companys participations in loans originated by the
Bank.



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Nearly all (99.9%) of the Companys loan portfolio is concentrated in mortgage loans secured by commercial and
multifamily real estate properties (including rental and cooperative/condominium apartment buildings, office buildings, mixed-use properties, shopping centers, hotels, restaurants, industrial properties, parking lots/garages and vacant land). At
September 30, 2007, such loans consisted of 570 loans with an aggregate principal balance of $1.64 billion and an average principal size of $2.9 million. Loans with principal balances of more than $10 million aggregated to 20 loans or $285
million, with the largest loan amounting to $20.8 million. Loans with principal balances of $5 million to $10 million aggregated to 77 loans or $520 million.

Total nonaccrual loans increased to $74.5 million at September 30, 2007, from $3.3 million at December 31, 2006 and are summarized for the Bank and Intervest Mortgage Corporation (IMC) as follows:



|                 |  |                       |  |                      |  |        |  |                   |  |                   |  |  |      
|---------------- |  | --------------------- |  | -------------------- |  | ------ |  | ----------------- |  | ----------------- |  |  | -----
|($ in thousands) |  | At September 30, 2007 |  | At December 31, 2006 |  |        | 
|Property Type    |  | City                  |  | State                |  | Lender |  | Principal Balance |  | Principal Balance |  |  | Notes
|Multifamily      |  | Jersey City           |  | New Jersey           |  | Bank   |  | $          -      |  | $     975         |  |  | (1)  
|Retail store     |  | South Amboy           |  | New Jersey           |  | Bank   |  | 2,220             |  | -                 |  |  | (2)  
|Retail store     |  | Little Silver         |  | New Jersey           |  | Bank   |  | 739               |  | -                 |  |  | (2)  
|Retail store     |  | Neptune               |  | New Jersey           |  | Bank   |  | 2,439             |  | -                 |  |  | (2)  
|Retail store     |  | Avenel                |  | New Jersey           |  | Bank   |  | 3,064             |  | -                 |  |  | (2)  
|Multifamily      |  | Long Island           |  | New York             |  | Bank   |  | 11,316            |  | -                 |  |  | (3)  
|Hotel            |  | St. Augustine         |  | Florida              |  | Bank   |  | 9,053             |  | -                 |  |  | (4)  
|Multifamily      |  | New York              |  | New York             |  | Bank   |  | 3,864             |  | -                 |  |  | (5)  
|Undeveloped land |  | Carabelle             |  | Florida              |  | Bank   |  | 3,441             |  | -                 |  |  | (7)  
|Undeveloped land |  | Fort Myers            |  | Florida              |  | Bank   |  | 3,330             |  | -                 |  |  | (8)  
|Multifamily      |  | Hollywood             |  | Florida              |  | Bank   |  | 4,065             |  | -                 |  |  | (8)  
|Office building  |  | Sunny Isles           |  | Florida              |  | Bank   |  | 4,284             |  | -                 |  |  | (8)  
|                 |  |                       |  |                      |  |        |  | $47,815           |  | $    975          |  |  |      
|Office building  |  | Brooklyn              |  | New York             |  | IMC    |  | 2,299             |  | 2,299             |  |  | (6)  
|Hotel            |  | St. Augustine         |  | Florida              |  | IMC    |  | 6,034             |  | -                 |  |  | (4)  
|Multifamily      |  | New York              |  | New York             |  | IMC    |  | 4,387             |  | -                 |  |  | (5)  
|Multifamily      |  | New York              |  | New York             |  | IMC    |  | 4,119             |  | -                 |  |  | (5)  
|Multifamily      |  | New York              |  | New York             |  | IMC    |  | 4,178             |  | -                 |  |  | (5)  
|Multifamily      |  | New York              |  | New York             |  | IMC    |  | 4,445             |  | -                 |  |  | (5)  
|Multifamily      |  | New York              |  | New York             |  | IMC    |  | 1,249             |  | -                 |  |  | (5)  
|                 |  |                       |  |                      |  |        |  | $26,711           |  | 2,299             |  |  |      
|                 |  |                       |  |                      |  |        |  | $74,526           |  | $3,274            |  |  |      

|(1) | Transferred to foreclosed real estate upon acquisition of the collateral property in April 2007. The property was transferred at the carrying value of the loan ($975,000). The Bank
believes that the estimated fair value of the property less estimated selling costs is greater than carrying value. The property is actively being marketed for sale.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Placed on nonaccrual status in March 2007. One principal guarantees each of the four loans, which total $8.5 million. Foreclosure proceedings concerning these loans are in progress
but have temporarily been stayed by reason of a bankruptcy filing.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Placed on nonaccrual status in June 2007. Foreclosure proceedings are pending. A receiver has been appointed and has taken control of the property and the rents.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Placed on nonaccrual status in July 2007. Both amounts represent one loan totaling $15.1 million originated by the Bank that matured on April 1, 2007. Intervest Mortgage
Corporation owns a participation in this loan. The loan is secured by a waterfront hotel, restaurant and marina resort. Foreclosure proceedings concerning this loan are in progress but have temporarily been stayed by reason of a bankruptcy filing.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Placed on nonaccrual status in August 2007. All six loans totaling $22.2 million are to borrowers with common principals. The principals are experiencing legal difficulties in
connection with activities alleged by independent third parties to be fraudulent with respect to the placing of unauthorized and unrecorded mortgages on these and other properties. On July 30, 2007, the independent third parties filed an
involuntary bankruptcy proceeding against the principals. A Trustee has been appointed and has taken control of the properties and the rents. The Trustee has appointed the firm of Massey Knackel Realty Services to market the properties for sale.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Placed on nonaccrual status in October 2006. Foreclosure proceedings are pending.
|--- | ---------------------------------------------------------------------------------

|(7) | Placed on nonaccrual status in August 2007. In October, the loan was brought current by the borrower and was returned to accruing status.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------

|(8) | Placed on nonaccrual status in September 2007. Foreclosure proceedings are pending.
|--- | -----------------------------------------------------------------------------------



22



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##### Table of Contents

All loans on nonaccrual status are considered impaired under the criteria of SFAS No.114 Accounting by Creditors
for Impairment of a Loanan amendment of FASB Statements No. 5 and 15. A specific valuation allowance in accordance with SFAS No. 114 was not maintained at any time since management believes that the estimated fair value of each
of the underlying properties exceeded the Companys recorded investment in each nonaccrual loan. At September 30, 2007 and December 31, 2006, there were no other loans classified as impaired or ninety days past due and still accruing
interest.

Estimates of fair value of the collateral properties is determined based on a variety of information, including available appraisals and the
knowledge and experience of the Companys two senior lending officers (the Chairman and President of the Florida Division of the Bank) related to values of properties in the Companys market areas. The existing appraisals for the
properties collateralizing the nonaccrual loans indicated loan-to-value ratios ranging from 44% to 77%. The need for updated appraisals is made on a case-by-case basis and no updated appraisals were deemed necessary for the properties in question as
of September 30, 2007. In addition to existing appraisals, the Company also took into consideration the type, location and occupancy of the property and current economic conditions in the area.

Although the Company presently believes that the estimated fair value of each property that collateralizes each nonaccrual loan to be in excess of its recorded investment
in each nonaccrual loan, there can be no assurance that the Company will not incur loan chargeoffs or significant expenses with respect to the ultimate collection of these loans.

Allowance For Loan Losses

The allowance for loan losses amounted to $20.9 million at September 30, 2007,
compared to $17.8 million at December 31, 2006. The allowance represented 1.29% of total loans (net of deferred fees) outstanding at September 30, 2007 and 1.20% at December 31, 2006. The increase in the allowance was due to
provisions totaling $3.1 million during the period, of which $1.4 million was attributable to credit downgrades of existing loans and $1.7 million from net loan growth of $136 million from December 31, 2006. There were no loan charge offs
during the period.

Whenever the Company experiences payment problems with a loan, an internal review of that loan is performed by either or both of the
Companys two senior lending officers to re-evaluate the internal credit rating that is assigned to the loan. This credit rating directly affects the computation of the allowance for loan losses. The estimated loss factors that the Company
applies to its loans to calculate the allowance for loan losses increase as a loans credit rating decreases. Nonaccrual and/or problem loans are normally downgraded based on known facts and circumstances at the time of review, which in turn
impacts the level of the allowance for loan losses. The review includes the physical inspection of such properties generally conducted every six months and the monitoring of impositions and insurance premiums to preserve the Companys security
interest in the properties. Additionally, the Company engages independent third parties to perform quarterly loan portfolio reviews, which include all loans on nonaccrual status.

A detailed discussion of the factors and estimates used in computing the allowance can be found under the caption Critical Accounting Policies on pages 34 and 35 of the Companys annual report on Form
10-K for the year ended December 31, 2006.

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



|                                |  |                         |  |                          |  |                 |  |              | 
|------------------------------- |  | ----------------------- |  | ------------------------ |  | --------------- |  | ------------ | 
|($ in thousands)                |  | Intervest National Bank |  | Intervest Mortgage Corp. |  | Holding Company |  | Consolidated | 
|Balance at December 31, 2006    |  | $17,486                 |  | $   262                  |  | $85             |  | $17,833      | 
|Provision charged to operations |  | 2,149                   |  | 943                      |  | -               |  | 3,092        | 
|Balance at September 30, 2007   |  | $19,635                 |  | $1,205                   |  | $85             |  | $20,925      | 

All Other Assets

All other assets increased to $48.8 million at September 30, 2007, from $47.8 million at December 31, 2006. The increase was due to the following: a $1.5 million increase in deferred issuance costs from brokered deposits, $1.0
million increase in foreclosed real estate and $1.3 million increase in deferred tax assets, partially offset primarily by a $1.4 million decrease in prepaid income taxes and a $0.8 million decrease in deferred debenture offering costs.



23



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##### Table of Contents

Deferred issuance costs from brokered deposits increased due to new deposits. These costs are being amortized to interest
expense over the life of the deposit. Foreclosed real estate represented the carrying value of a nonaccrual loan that was transferred to foreclosed real estate. The property is a multifamily property located in Jersey City, New Jersey, that was
acquired in April by the Bank. The property is being actively marketed for sale. The Bank believes as of September 30, 2007, that the estimated fair value of the property less estimated selling costs exceeded its carrying value. Prepaid income
taxes decreased due to the application of a 2006 overpayment of estimated income taxes against 2007 income taxes payable. The increase in deferred tax assets was due to the deferred tax benefit associated with the provision for loan losses. The
decease in deferred debenture offering costs was due normal amortization expense.

Deposits

Deposits increased to $1.67 billion at September 30, 2007, from $1.59 billion at December 31, 2006, reflecting an increase in certificate of deposit accounts of
$98 million, partially offset by a net decrease in checking, savings and money market accounts totaling $13 million.

At September 30, 2007,
certificate of deposit accounts totaled $1.43 billion, and checking, savings and money market accounts aggregated $240 million. The same categories of deposit accounts totaled $1.34 billion and $253 million, respectively, at December 31, 2006.
Certificate of deposit accounts represented 86% of total consolidated deposits at September 30, 2007, compared to 84% at December 31, 2006. At September 30, 2007 and December 31, 2006, certificate of deposit accounts included
$155 million and $56 million, respectively, of brokered deposits.

Borrowed Funds and Related Interest Payable

Borrowed funds and related interest payable at September 30, 2007 decreased to $136 million, from $173 million at December 31, 2006. The reduction was due to a
$25 million decrease in short-term FHLBNY advances outstanding and a $12 million decrease in outstanding debentures and related interest payable resulting from cash repayments and the conversion of certain debentures into the Holding Companys
Class A common stock, as more fully described in note 7 to the condensed consolidated financial statements included in this report.

All Other
Liabilities

All other liabilities increased to $46.8 million at September 30, 2007, from $40.3 million at December 31, 2006, primarily
due to an increase of $11.8 million in mortgage escrow funds payable and a $0.4 million increase in accrued interest payable on deposits, partially offset by a $6.3 million decrease in official checks outstanding. Mortgage escrow funds payable
represent advance payments made to the Company by borrowers for property taxes and insurance that are remitted by the Company to third parties. The increase reflected growth in the loan portfolio as well as the timing of tax remittances by the
Company. Official checks outstanding vary and fluctuate based on banking activity.

Stockholders Equity

Stockholders equity increased to $177.2 million at September 30, 2007 as follows:



|                                           |  |          |   |  |               |   |  |                |  |              |   |  |                  |  
|------------------------------------------ |  | -------- | - |  | ------------- | - |  | -------------- |  | ------------ | - |  | ---------------- | -
|($ in thousands)                           |  | Amount   |   |  | Class AShares |   |  | Class B Shares |  | Total Shares |   |  | Amount Per Share |  
|Stockholders equity at December 31, 2006  |  | $170,046 |   |  | 7,986,595     |   |  | 385,000        |  | 8,371,595    |   |  | $20.31           |  
|Net earnings for the period                |  | 15,561   |   |  | -             |   |  | -              |  | -            |   |  | -                |  
|Convertible debentures converted (1)       |  | 1,942    |   |  | 108,556       |   |  | -              |  | 108,556      |   |  | 17.89            |  
|Repurchase of Class A common stock (2)     |  | (8,255   | ) |  | (332,000      | ) |  | -              |  | (332,000     | ) |  | (24.86           | )
|Cash common stock dividend paid (3)        |  | (2,112   | ) |  | -             |   |  | -              |  | -            |   |  | -                |  
|Stockholders equity at September 30, 2007 |  | $177,182 |   |  | 7,763,151     |   |  | 385,000        |  | 8,148,151    |   |  | $21.75           |  



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

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

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



24



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##### Table of Contents

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

Overview

Consolidated net earnings for the
third quarter of 2007 (Q3-07) amounted to $4.8 million, or $0.58 per diluted share, compared to $4.9 million, or $0.59 per diluted share, for the third quarter of 2006 (Q3-06). The decrease in net earnings was due a $3.0
million decrease in net interest and dividend income and a $0.6 million increase in the provision for loan losses, nearly all of which was offset by a $2.5 million increase in noninterest income and $1.0 million decrease in noninterest expenses. The
Companys return on average assets and equity decreased to 0.95% and 10.96%, respectively, in Q3-07, from 1.05% and 12.90%, respectively, in Q3-06.

Selected information regarding results of operations for Q3-07 follows:



|                                                                       |  |                        |   |  |                          |   |  |                                |  |                 |   |  |                           |   |  |              | 
|---------------------------------------------------------------------- |  | ---------------------- | - |  | ------------------------ | - |  | ------------------------------ |  | --------------- | - |  | ------------------------- | - |  | ------------ | 
|($ in thousands)                                                       |  | IntervestNational Bank |   |  | Intervest Mortgage Corp. |   |  | Intervest Securities Corp. (2) |  | Holding Company |   |  | Inter-Company Amounts (3) |   |  | Consolidated | 
|Interest and dividend income                                           |  | $30,964                |   |  | $1,420                   |   |  | $    -                         |  | $    97         |   |  | $    (97                  | ) |  | $32,384      | 
|Interest expense                                                       |  | 20,442                 |   |  | 1,603                    |   |  | -                              |  | 886             |   |  | (97                       | ) |  | 22,834       | 
|Net interest and dividend income (expense)                             |  | 10,522                 |   |  | (183                     | ) |  | -                              |  | (789            | ) |  | -                         |   |  | 9,550        | 
|Provision for loan losses                                              |  | 604                    |   |  | 919                      |   |  | -                              |  | -               |   |  | -                         |   |  | 1,523        | 
|Noninterest income                                                     |  | 3,528                  |   |  | 1,035                    |   |  | -                              |  | 113             |   |  | (999                      | ) |  | 3,677        | 
|Noninterest expenses                                                   |  | 3,299                  |   |  | 766                      |   |  | -                              |  | 150             |   |  | (999                      | ) |  | 3,216        | 
|Earnings (loss) before taxes                                           |  | 10,147                 |   |  | (833                     | ) |  | -                              |  | (826            | ) |  | -                         |   |  | 8,488        | 
|Provision (benefit) for income taxes                                   |  | 4,409                  |   |  | (382                     | ) |  | -                              |  | (380            | ) |  | -                         |   |  | 3,647        | 
|Net earnings (loss)                                                    |  | $  5,738               |   |  | $ (451                   | ) |  | $    -                         |  | $  (446         | ) |  | $        -                |   |  | $  4,841     | 
|Intercompany dividends (1)                                             |  | (885                   | ) |  | -                        |   |  | -                              |  | 885             |   |  | -                         |   |  | -            | 
|Net earnings after intercompany dividends                              |  | $  4,853               |   |  | $ (451                   | ) |  | $    -                         |  | $   439         |   |  | $        -                |   |  | $  4,841     | 
|Net earnings after intercompany dividends  for the same period of
2006 |  | $  3,929               |   |  | $  453                   |   |  | $   2                          |  | $   500         |   |  | $        -                |   |  | $  4,884     | 

|(1) | Dividends to the Holding Company from the Bank provide funds for the debt service on the subordinated debentures-capital securities, which is included in the Holding Companys
interest expense.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The limited operations of Intervest Securities Corporation were discontinued in the fourth quarter of 2006 as discussed in note 1 to the condensed consolidated financial statements
in this report.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

Net Interest and Dividend Income

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

Net interest and dividend income decreased by $3.0 million to $9.6 million in Q3-07, from $12.6 million in
Q3-06 due to a lower net interest margin, which more than offset growth in the Companys interest-earning assets. The Companys net interest margin (excluding prepayment income) decreased to 1.88% in Q3-07, from 2.71% in Q3-06. The margin
was adversely affected by the following: an increase in nonaccrual loans; a higher cost of deposits and repayments of higher yielding loans coupled with lower competitive pricing for new loans.

Total average interest-earning assets increased $180 million in Q3-07 from Q3-06 due to growth in loans of $143 million and a $37 million net increase in security and
other short-term investments. The total growth was funded by the following: a $148 million increase in interest-bearing deposits; a $25 million increase in stockholders equity (largely due to retained earnings and the exercise of common stock
warrants and conversion of debentures into common stock); and an $8 million increase in noninterest-bearing liabilities.

The yield on interest-earning
assets decreased 70 basis points to 6.36% in Q3-07 due to an increase in nonaccrual loans (which resulted in a higher level of foregone interest income from nonaccrual loans of $2.0 million in Q3-07, compared to $0.2 million in Q3-06) and repayments
of higher yielding loans coupled with new loan originations with lower competitive pricing. These factors were partially offset by higher yields earned on security and other short-term investments. The cost of funds increased by 18 basis points to
5.00% in Q3-07 due to higher rates paid on deposit accounts, partially offset by a decrease in the cost of borrowed funds resulting from the early repayment of certain debentures with higher rates of interest.



25



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##### Table of Contents

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

|                                                                             |  |                    |  |                   |  |                    |  |  |  |                |  |                   |  |               
|---------------------------------------------------------------------------- |  | ------------------ |  | ----------------- |  | ------------------ |  |  |  | -------------- |  | ----------------- |  | --------------
|                                                                             |  | Quarter Ended     
|                                                                             |  | September 30, 2007 |  |                   |  | September 30, 2006
|($ in thousands)                                                             |  | AverageBalance     |  | InterestInc./Exp. |  | Yield/Rate (2)     |  |  |  | AverageBalance |  | InterestInc./Exp. |  | Yield/Rate (2)
|Assets                                                                       |  |                    |  |                   |  |                    |  |  |  |                |  |                   |  |               
|Interest-earning assets:                                                     |  |                    |  |                   |  |                    |  |  |  |                |  |                   |  |               
|Loans (1)                                                                    |  | $1,629,037         |  | $27,275           |  | 6.64%              |  |  |  | $1,485,882     |  | $28,829           |  | 7.70%         
|Securities                                                                   |  | 378,495            |  | 4,954             |  | 5.19               |  |  |  | 316,214        |  | 3,439             |  | 4.31          
|Other interest-earning assets                                                |  | 12,408             |  | 155               |  | 4.96               |  |  |  | 37,600         |  | 492               |  | 5.19          
|Total interest-earning assets                                                |  | 2,019,940          |  | $32,384           |  | 6.36%              |  |  |  | 1,839,696      |  | $32,760           |  | 7.06%         
|Noninterest-earning assets                                                   |  | 19,444             |  |                   |  |                    |  |  |  | 19,115         |  |                   |  |               
|Total assets                                                                 |  | $2,039,384         |  |                   |  |                    |  |  |  | $1,858,811     |  |                   |  |               
|Liabilities and Stockholders Equity                                         |  |                    |  |                   |  |                    |  |  |  |                |  |                   |  |               
|Interest-bearing liabilities:                                                |  |                    |  |                   |  |                    |  |  |  |                |  |                   |  |               
|Interest checking deposits                                                   |  | $       5,681      |  | $       25        |  | 1.75%              |  |  |  | $       6,574  |  | $       29        |  | 1.75%         
|Savings deposits                                                             |  | 9,080              |  | 67                |  | 2.93               |  |  |  | 12,741         |  | 95                |  | 2.96          
|Money market deposits                                                        |  | 229,912            |  | 2,527             |  | 4.36               |  |  |  | 230,458        |  | 2,509             |  | 4.32          
|Certificates of deposit                                                      |  | 1,392,938          |  | 17,225            |  | 4.91               |  |  |  | 1,239,826      |  | 14,287            |  | 4.57          
|Total deposit accounts                                                       |  | 1,637,611          |  | 19,844            |  | 4.81               |  |  |  | 1,489,599      |  | 16,920            |  | 4.51          
|FHLB advances and Fed funds purchased                                        |  | 36,471             |  | 498               |  | 5.42               |  |  |  | 13,526         |  | 189               |  | 5.54          
|Debentures and related interest payable                                      |  | 80,293             |  | 1,603             |  | 7.92               |  |  |  | 97,396         |  | 1,987             |  | 8.09          
|Debentures - capital securities                                              |  | 56,702             |  | 886               |  | 6.20               |  |  |  | 62,977         |  | 1,106             |  | 6.97          
|Mortgage note payable                                                        |  | 207                |  | 3                 |  | 5.75               |  |  |  | 221            |  | 4                 |  | 7.18          
|Total borrowed funds                                                         |  | 173,673            |  | 2,990             |  | 6.83               |  |  |  | 174,120        |  | 3,286             |  | 7.49          
|Total interest-bearing liabilities                                           |  | 1,811,284          |  | $22,834           |  | 5.00%              |  |  |  | 1,663,719      |  | $20,206           |  | 4.82%         
|Noninterest-bearing deposits                                                 |  | 4,330              |  |                   |  |                    |  |  |  | 4,816          |  |                   |  |               
|Noninterest-bearing liabilities                                              |  | 47,038             |  |                   |  |                    |  |  |  | 38,795         |  |                   |  |               
|Stockholders equity                                                         |  | 176,732            |  |                   |  |                    |  |  |  | 151,481        |  |                   |  |               
|Total liabilities and stockholders equity                                   |  | $2,039,384         |  |                   |  |                    |  |  |  | $1,858,811     |  |                   |  |               
|Net interest and dividend income/spread                                      |  |                    |  | $  9,550          |  | 1.36%              |  |  |  |                |  | $12,554           |  | 2.24%         
|Net interest-earning assets/margin (3)                                       |  | $   208,656        |  |                   |  | 1.88%              |  |  |  | $   175,977    |  |                   |  | 2.71%         
|Ratio of total interest-earning assets to total interest-bearing
liabilities |  | 1.12               |  |                   |  |                    |  |  |  | 1.11           |  |                   |  |               
|Other Ratios:                                                                |  |                    |  |                   |  |                    |  |  |  |                |  |                   |  |               
|Return on average assets (2)                                                 |  | 0.95%              |  |                   |  |                    |  |  |  | 1.05%          |  |                   |  |               
|Return on average equity (2)                                                 |  | 10.96%             |  |                   |  |                    |  |  |  | 12.90%         |  |                   |  |               
|Noninterest expense to average assets (2)                                    |  | 0.63%              |  |                   |  |                    |  |  |  | 0.90%          |  |                   |  |               
|Efficiency ratio (4)                                                         |  | 24%                |  |                   |  |                    |  |  |  | 31%            |  |                   |  |               
|Average stockholders equity to average assets                               |  | 8.67%              |  |                   |  |                    |  |  |  | 8.15%          |  |                   |  |               

|(1) | Includes average nonaccrual loans of $86.2 million in the 2007 period and $6.2 million in the 2006 period. Interest not accrued on such loans totaled $2.0 million in the 2007 period
and $0.2 million in the 2006 period.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(3) | Net interest margin is reported exclusive of income from loan prepayments, which is included as a component of noninterest income. Inclusive of income from loan prepayments, the
margin would compute to 2.51% and 2.87% for the 2007 period and 2006 period, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Defined as noninterest expenses (excluding the provision for loan losses) as a percentage of net interest and dividend income plus noninterest income. Noninterest expenses for the
2006 period included a one-time charge of $1.5 million.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



26



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##### Table of Contents

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



|                                           |  |                                                  |  |        |  |             |  |         
|------------------------------------------ |  | ------------------------------------------------ |  | ------ |  | ----------- |  | --------
|                                           |  | For the Quarter Ended September 30, 2007 vs 2006
|                                           |  | Increase (Decrease) Due To Change In:           
|($ in thousands)                           |  | Rate                                             |  | Volume |  | Rate/Volume |  | Total   
|Interest-earning assets:                   |  |                                                  |  |        |  |             |  |         
|Loans                                      |  | $(3,938)                                         |  | $2,756 |  | $(372)      |  | $(1,554)
|Securities                                 |  | 696                                              |  | 671    |  | 148         |  | 1,515   
|Other interest-earning assets              |  | (22)                                             |  | (327)  |  | 12          |  | (337)   
|Total interest-earning assets              |  | (3,264)                                          |  | 3,100  |  | (212)       |  | (376)   
|Interest-bearing liabilities:              |  |                                                  |  |        |  |             |  |         
|Interest checking deposits                 |  | -                                                |  | (4)    |  | -           |  | (4)     
|Savings deposits                           |  | (1)                                              |  | (27)   |  | -           |  | (28)    
|Money market deposits                      |  | 23                                               |  | (6)    |  | 1           |  | 18      
|Certificates of deposit                    |  | 1,054                                            |  | 1,749  |  | 135         |  | 2,938   
|Total deposit accounts                     |  | 1,076                                            |  | 1,712  |  | 136         |  | 2,924   
|FHLB advances and Fed funds purchased      |  | (4)                                              |  | 318    |  | (5)         |  | 309     
|Debentures and accrued interest payable    |  | (41)                                             |  | (346)  |  | 3           |  | (384)   
|Debentures - capital securities            |  | (121)                                            |  | (109)  |  | 10          |  | (220)   
|Mortgage note payable                      |  | (1)                                              |  | -      |  | -           |  | (1)     
|Total borrowed funds                       |  | (167)                                            |  | (137)  |  | 8           |  | (296)   
|Total interest-bearing liabilities         |  | 909                                              |  | 1,575  |  | 144         |  | 2,628   
|Net change in interest and dividend income |  | $(4,173)                                         |  | $1,525 |  | $(356)      |  | $(3,004)

Provision for Loan Losses

The provision for loan losses increased by $0.6 million to $1.5 million in Q3-07, from $0.9 million in Q3-06. The increase was due to additional provision of $1.2 million resulting from credit downgrades on various
loans, partially offset by a $0.6 million reduction resulting from a decline in the rate of net loan growth from the prior year period. Total loans outstanding grew by $9.8 million in Q3-07, compared to $52.7 million in Q3-06.

Noninterest Income

Noninterest income increased by $2.5
million to $3.7 million in Q3-07, from $1.2 million in Q3-06. The increase was due to a higher level of income from loan prepayments, which included $2.5 million from the early payoff of one loan in Q3-07.

Noninterest Expenses

Noninterest expenses decreased by $1.0
million to $3.2 million in Q3-07, from $4.2 million in Q3-07. The decrease was due to a one-time charge of $1.5 million recorded in the 2006 period in connection with contractual death benefits payable to the Companys former Chairman,
partially offset primarily by a $0.3 million increase in FDIC insurance premiums in Q3-07 resulting from a higher rate structure imposed by the FDIC on all insured financial institutions. The new rates for nearly all institutions vary between five
and seven cents for every $100 of domestic deposits. The Company had 70 employees at September 30, 2007, compared to 75 at September 30, 2006.

The Companys efficiency ratio, which is a measure of its ability to control expenses as a percentage of its revenues, continued to be favorable and was 24% for Q3-07, compared to 20% (excluding the one-time charge related to the death
benefits) in Q3-06. The ratio for the 2007 period was adversely affected by the increase in FDIC insurance premium rates and a higher level of nonaccrual loans.

Provision for Income Taxes

The provision for income taxes decreased by $0.2 million to $3.6 million in Q3-07, from $3.8 million in
Q3-06 due to a decrease in pre-tax income. The Companys effective tax rate (inclusive of state and local taxes) amounted to 43.0% in Q3-07 and 43.6% in Q3-06.



27



---

##### Table of Contents

Comparison of Results of Operations for the Nine-Months Ended September 30, 2007 and 2006

Overview

Consolidated net earnings for
the nine-months ended September 30, 2007 (9mths-07) decreased by $2.1 million to $15.6 million, or $1.83 per diluted share, from $17.7 million, or $2.13 per diluted share, for the nine-months ended September 30, 2006
(9mths-06).

The decrease in net earnings was due to a $5.4 million decrease in net interest and dividend income and a $1.2 million increase in
the provision for loan losses, partially offset by a $2.2 million increase in noninterest income, a $1.7 million decrease in the provision for income taxes and a $0.6 million decrease in noninterest expenses. The Companys return on average
assets and equity decreased to 1.02% and 11.83%, respectively, for the 2007 period, from 1.31% and 16.28%, respectively, for the 2006 period.

Selected
information regarding results of operations for 9mths-07 follows:



|                                                                      |  |                       |  |                        |  |                              |  |                |  |                          |  |             
|--------------------------------------------------------------------- |  | --------------------- |  | ---------------------- |  | ---------------------------- |  | -------------- |  | ------------------------ |  | ------------
|($ in thousands)                                                      |  | IntervestNationalBank |  | IntervestMortgageCorp. |  | IntervestSecuritiesCorp. (2) |  | HoldingCompany |  | Inter-CompanyAmounts (3) |  | Consolidated
|Interest and dividend income                                          |  | $93,702               |  | $6,050                 |  | $-                           |  | $453           |  | $(474)                   |  | $99,731     
|Interest expense                                                      |  | 59,767                |  | 4,964                  |  | -                            |  | 2,761          |  | (474)                    |  | 67,018      
|Net interest and dividend income (expense)                            |  | 33,935                |  | 1,086                  |  | -                            |  | (2,308)        |  | -                        |  | 32,713      
|Provision for loan losses                                             |  | 2,149                 |  | 943                    |  | -                            |  | -              |  | -                        |  | 3,092       
|Noninterest income                                                    |  | 6,378                 |  | 3,686                  |  | -                            |  | 356            |  | (3,299)                  |  | 7,121       
|Noninterest expenses                                                  |  | 9,669                 |  | 2,255                  |  | -                            |  | 477            |  | (3,299)                  |  | 9,102       
|Earnings (loss) before taxes                                          |  | 28,495                |  | 1,574                  |  | -                            |  | (2,429)        |  | -                        |  | 27,640      
|Provision (benefit) for income taxes                                  |  | 12,470                |  | 725                    |  | -                            |  | (1,116)        |  | -                        |  | 12,079      
|Net earnings (loss)                                                   |  | $16,025               |  | $   849                |  | $-                           |  | $(1,313)       |  | $     -                  |  | $15,561     
|Intercompany dividends (1)                                            |  | (2,655)               |  | -                      |  | -                            |  | 2,655          |  | -                        |  | -           
|Net earnings after intercompany dividends                             |  | $13,370               |  | $   849                |  | $-                           |  | $ 1,342        |  | $     -                  |  | $15,561     
|Net earnings after intercompany dividends for the same
period of 2006 |  | $13,772               |  | $2,406                 |  | $1                           |  | $ 1,533        |  | $     -                  |  | $17,712     

|(1) | Dividends to the Holding Company from the Bank provide funds for the debt service on the subordinated debentures-capital securities, which is included in the Holding Companys
interest expense.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The limited operations of Intervest Securities Corporation were discontinued in the fourth quarter of 2006 as discussed in note 1 to the condensed consolidated financial statements
in this report.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

Net Interest and Dividend Income

Net interest and dividend income decreased by $5.4 million to $32.7 million in 9mths-07, from $38.1 million in 9mths-06 due to a lower net interest margin, which more than offset growth in the Companys interest-earning assets. The net
interest margin (excluding prepayment income) decreased to 2.18% in the 2007 period, from 2.85% in the 2006 period. The margin was adversely affected by the following: an increase in nonaccrual loans; a higher cost of deposits and repayments of
higher yielding loans coupled with lower competitive pricing for new loans.

Total average interest-earning assets increased by $220 million in 9mths-07
from 9mths-06 due to growth in loans of $152 million and a $68 million net increase in security and short-term investments. The growth in average earning assets was funded by the following: a $190 million increase in interest-bearing deposits and a
$30 million increase in stockholders equity (largely due to retained earnings and the exercise of common stock warrants and conversion of debentures into common stock).

The yield on interest-earning assets decreased 43 basis points to 6.65% in 9mths-07, due to an increase in nonaccrual loans (which resulted in a higher level of foregone interest income from nonaccrual loans of $2.6
million in 9mths-07, compared to $0.3 million in 9mths-06) and repayments of higher yielding loans coupled with new loan originations with lower competitive pricing. These factors were partially offset by higher yields earned on security and other
short-term investments. The cost of funds increased by 30 basis points to 4.98% in 9mths-07 due to higher rates paid on deposit accounts, partially offset by a decrease in the cost of borrowed funds resulting from the early repayment of certain
debentures with higher rates of interest.



28



---

##### Table of Contents

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



|                                                                             |  |                    |  |                   |  |                    |  |  |  |                |  |                   |  |               
|---------------------------------------------------------------------------- |  | ------------------ |  | ----------------- |  | ------------------ |  |  |  | -------------- |  | ----------------- |  | --------------
|                                                                             |  | Nine-Months Ended 
|                                                                             |  | September 30, 2007 |  |                   |  | September 30, 2006
|($ in thousands)                                                             |  | AverageBalance     |  | InterestInc./Exp. |  | Yield/Rate (2)     |  |  |  | AverageBalance |  | InterestInc./Exp. |  | Yield/Rate (2)
|Assets                                                                       |  |                    |  |                   |  |                    |  |  |  |                |  |                   |  |               
|Interest-earning assets:                                                     |  |                    |  |                   |  |                    |  |  |  |                |  |                   |  |               
|Loans (1)                                                                    |  | $1,590,114         |  | $83,915           |  | 7.06%              |  |  |  | $1,438,349     |  | $83,963           |  | 7.80%         
|Securities                                                                   |  | 397,908            |  | 15,134            |  | 5.09               |  |  |  | 314,346        |  | 9,408             |  | 4.00          
|Other interest-earning assets                                                |  | 17,734             |  | 682               |  | 5.14               |  |  |  | 33,224         |  | 1,192             |  | 4.80          
|Total interest-earning assets                                                |  | 2,005,756          |  | $99,731           |  | 6.65%              |  |  |  | 1,785,919      |  | $94,563           |  | 7.08%         
|Noninterest-earning assets                                                   |  | 19,179             |  |                   |  |                    |  |  |  | 16,891         |  |                   |  |               
|Total assets                                                                 |  | $2,024,935         |  |                   |  |                    |  |  |  | $1,802,810     |  |                   |  |               
|Liabilities and Stockholders Equity                                         |  |                    |  |                   |  |                    |  |  |  |                |  |                   |  |               
|Interest-bearing liabilities:                                                |  |                    |  |                   |  |                    |  |  |  |                |  |                   |  |               
|Interest checking deposits                                                   |  | $       7,900      |  | $     112         |  | 1.90%              |  |  |  | $       8,052  |  | $     111         |  | 1.84%         
|Savings deposits                                                             |  | 9,590              |  | 211               |  | 2.94               |  |  |  | 14,630         |  | 323               |  | 2.95          
|Money market deposits                                                        |  | 227,303            |  | 7,401             |  | 4.35               |  |  |  | 237,151        |  | 7,286             |  | 4.11          
|Certificates of deposit                                                      |  | 1,391,789          |  | 50,656            |  | 4.87               |  |  |  | 1,186,996      |  | 39,275            |  | 4.42          
|Total deposit accounts                                                       |  | 1,636,582          |  | 58,380            |  | 4.77               |  |  |  | 1,446,829      |  | 46,995            |  | 4.34          
|FHLB advances and Fed funds purchased                                        |  | 22,132             |  | 902               |  | 5.45               |  |  |  | 10,854         |  | 428               |  | 5.27          
|Debentures and related interest payable                                      |  | 84,463             |  | 5,067             |  | 8.02               |  |  |  | 92,611         |  | 5,712             |  | 8.25          
|Debentures - capital securities                                              |  | 56,702             |  | 2,658             |  | 6.27               |  |  |  | 62,233         |  | 3,286             |  | 7.06          
|Mortgage note payable                                                        |  | 210                |  | 11                |  | 7.00               |  |  |  | 224            |  | 12                |  | 7.16          
|Total borrowed funds                                                         |  | 163,507            |  | 8,638             |  | 7.06               |  |  |  | 165,922        |  | 9,438             |  | 7.61          
|Total interest-bearing liabilities                                           |  | 1,800,089          |  | $67,018           |  | 4.98%              |  |  |  | 1,612,751      |  | $56,433           |  | 4.68%         
|Noninterest-bearing deposits                                                 |  | 4,289              |  |                   |  |                    |  |  |  | 5,675          |  |                   |  |               
|Noninterest-bearing liabilities                                              |  | 45,122             |  |                   |  |                    |  |  |  | 39,322         |  |                   |  |               
|Stockholders equity                                                         |  | 175,435            |  |                   |  |                    |  |  |  | 145,062        |  |                   |  |               
|Total liabilities and stockholders
equity                                   |  | $2,024,935         |  |                   |  |                    |  |  |  | $1,802,810     |  |                   |  |               
|Net interest and dividend income/spread                                      |  |                    |  | $32,713           |  | 1.67%              |  |  |  |                |  | $38,130           |  | 2.40%         
|Net interest-earning assets/margin (3)                                       |  | $   205,667        |  |                   |  | 2.18%              |  |  |  | $   173,168    |  |                   |  | 2.85%         
|Ratio of total interest-earning assets to total interest-bearing
liabilities |  | 1.11               |  |                   |  |                    |  |  |  | 1.11           |  |                   |  |               
|Other Ratios:                                                                |  |                    |  |                   |  |                    |  |  |  |                |  |                   |  |               
|Return on average assets (2)                                                 |  | 1.02%              |  |                   |  |                    |  |  |  | 1.31%          |  |                   |  |               
|Return on average equity (2)                                                 |  | 11.83%             |  |                   |  |                    |  |  |  | 16.28%         |  |                   |  |               
|Noninterest expense to average assets (2)                                    |  | 0.60%              |  |                   |  |                    |  |  |  | 0.72%          |  |                   |  |               
|Efficiency ratio (4)                                                         |  | 23%                |  |                   |  |                    |  |  |  | 23%            |  |                   |  |               
|Average stockholders equity to average assets                               |  | 8.66%              |  |                   |  |                    |  |  |  | 8.05%          |  |                   |  |               

|(1) | Includes average nonaccrual loans of $38.8 million in the 2007 period and $3.8 million in the 2006 period. Interest not recorded on such loans totaled $2.6 million in the 2007
period and $0.3 million in the 2006 period.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(3) | Net interest margin is reported exclusive of income from loan prepayments, which is included as a component of noninterest income. Inclusive of income from loan prepayments, the
margin would compute to 2.57% and 3.11% for the 2007 period and 2006 period, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Defined as noninterest expenses (excluding the provision for loan losses) as a percentage of net interest and dividend income plus noninterest income. Noninterest expenses for the
2006 period included a one-time charge of $1.5 million.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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).



29



---

##### Table of Contents

|                                           |  |                                                      |  |        |  |             |  |         
|------------------------------------------ |  | ---------------------------------------------------- |  | ------ |  | ----------- |  | --------
|                                           |  | For the Nine-Months Ended September 30, 2007 vs 2006
|                                           |  | Increase (Decrease) Due To Change In:               
|($ in thousands)                           |  | Rate                                                 |  | Volume |  | Rate/Volume |  | Total   
|Interest-earning assets:                   |  |                                                      |  |        |  |             |  |         
|Loans                                      |  | $(7,983)                                             |  | $8,878 |  | $(943)      |  | (48)    
|Securities                                 |  | 2,570                                                |  | 2,507  |  | 649         |  | 5,726   
|Other interest-earning assets              |  | 85                                                   |  | (558)  |  | (37)        |  | (510)   
|Total interest-earning assets              |  | (5,328)                                              |  | 10,827 |  | (331)       |  | 5,168   
|Interest-bearing liabilities:              |  |                                                      |  |        |  |             |  |         
|Interest checking deposits                 |  | 4                                                    |  | (2)    |  | (1)         |  | 1       
|Savings deposits                           |  | (1)                                                  |  | (112)  |  | 1           |  | (112)   
|Money market deposits                      |  | 427                                                  |  | (304)  |  | (8)         |  | 115     
|Certificates of deposit                    |  | 4,006                                                |  | 6,789  |  | 586         |  | 11,381  
|Total deposit accounts                     |  | 4,436                                                |  | 6,371  |  | 578         |  | 11,385  
|FHLB advances and Fed funds purchased      |  | 15                                                   |  | 446    |  | 13          |  | 474     
|Debentures and accrued interest payable    |  | (160)                                                |  | (504)  |  | 19          |  | (645)   
|Debentures - capital securities            |  | (369)                                                |  | (293)  |  | 34          |  | (628)   
|Mortgage note payable                      |  | -                                                    |  | (1)    |  | -           |  | (1)     
|Total borrowed funds                       |  | (514)                                                |  | (352)  |  | 66          |  | (800)   
|Total interest-bearing liabilities         |  | 3,922                                                |  | 6,019  |  | 644         |  | 10,585  
|Net change in interest and dividend income |  | $(9,250)                                             |  | $4,808 |  | $(975)      |  | $(5,417)

Provision for Loan Losses

The provision for loan losses increased by $1.2 million to $3.1 million in 9mths-07, from $1.9 million in 9mths-06. The increase was comprised of $0.9 million resulting from credit downgrades on various loans and $0.3
million from an increase in the rate of net loan growth from the prior year period. Total loans outstanding grew by $136.4 million in the 2007 period, compared to $123.5 million in the 2006 period.

Noninterest Income

Noninterest income increased by $2.2
million to $7.1 million in 9mths-07, from $4.9 million in 9mths-06. The increase was due to a higher level of income from loan prepayments, which included $2.5 million from the early payoff of one loan in the 2007 period, partially offset by a
decrease of $0.3 million in fees earned from expired loan commitments.

Noninterest Expenses

Noninterest expenses decreased by $0.6 million to $9.1 million in 9mths-07, from $9.7 million in 9mths-06. The decrease was due to a one-time charge of $1.5 million
recorded in the 2006 period in connection with contractual death benefits payable to the Companys former Chairman, partially offset by the following increases in the 9mths-07 period: $0.6 million in FDIC insurance premiums (resulting from a
higher rate structure imposed by the FDIC on all insured financial institutions), $0.2 million in occupancy and equipment expenses (largely associated with the opening of a new branch in Florida), $0.1 million in foreclosed real estate expenses and
$0.1 million in data processing expenses (resulting from the growth in the Banks total assets). The Company had 70 employees at September 30, 2007, compared to 75 at September 30, 2006.

The Companys efficiency ratio, which is a measure of its ability to control expenses as a percentage of its revenues, continued to be favorable and was 23% for
9mths-07, compared to 19% (excluding the one-time charge related to the death benefits) for 9mths-06. The increase in FDIC insurance premium rates and a higher level of nonaccrual loans adversely affected the ratio for the 2007 period.

Provision for Income Taxes

The provision for income taxes
decreased by $1.7 million to $12.0 million in 9mths-07 from $13.7 million in 9mths-06, due to a decrease in pre-tax income. The Companys effective tax rate (inclusive of state and local taxes) was 43.7% in both periods.

Off-Balance Sheet and Other Financing Arrangements

The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. For a further discussion of these financial instruments, see note 13 to the condensed
consolidated financial statements included in this report.



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Liquidity and Capital Resources

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

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

The Bank relies heavily on certificates of deposit (time deposits) as its main source of funds. Total consolidated deposits amounted to $1.67
billion at September 30, 2007 and time deposits represented 86% or $1.43 billion of those deposits, up from 84% at December 31, 2006. Additionally, time deposits of $100,000 or more at September 30, 2007 totaled $596 million and
included $155 million of brokered deposits, up from $491 million and $56 million for the same categories, respectively, at December 31, 2006. The Banks brokered deposits are sold by investment firms, which are paid a fee by the Bank for
placing the deposit. The Bank must maintain its status as a well-capitalized insured depository institution in order to solicit and accept, renew or roll over any brokered deposit without restriction. Time deposits are the only deposit accounts
offered by the Bank that have stated maturity dates. These deposits are generally considered to be rate sensitive and have a higher cost than deposits with no stated maturities, such as checking, savings and money market accounts. At
September 30, 2007, the Bank had $523 million of time deposits maturing by September 30, 2008. The Bank expects that a substantial portion of these deposits will be renewed and stay with the Bank.

The Banks loan-to-deposit ratio was 88% at September 30, 2007. During the first nine months of 2007, the Bank has utilized a higher level of FHLB advances as
well as funds from maturing investment securities to partially fund the growth in its loan portfolio, which has caused this ratio to increase from 84% at December 31, 2006. The Banks goal is to target its loan-to-deposit ratio at
approximately 85%.

The Bank borrows funds on an overnight or short-term basis to manage its liquidity needs. At September 30, 2007, the Bank had
agreements with correspondent banks whereby it could borrow up to $28 million on an unsecured basis. As a member of the FHLB of New York and FRB of New York, the Bank can also borrow from these institutions on a secured basis. During the first nine
months of 2007, the Banks average outstanding short-term borrowings totaled $22 million, compared to $11 million for the same period of 2006. At September 30, 2007, there were no borrowings outstanding, compared to $25 million at
December 31, 2006. At September 30, 2007, the Bank had available collateral consisting of investment securities to support additional total borrowings of $329 million from the FHLB and FRB.

The Bank invests mainly in short-term (up to 5 year maturities) U.S. government agency debt obligations to emphasize safety and liquidity. All of the Banks security
investments are classified as held to maturity, and nearly all of the securities have fixed rates of interest or have predetermined scheduled rate increases, and many have call features that allow the issuer to call the security at par before its
stated maturity without penalty. At September 30, 2007, the entire portfolio had a weighted-average remaining maturity of 2.6 years, and a total of $118 million of the securities mature by September 30, 2008. The Bank expects to reinvest
the proceeds from these maturities into new securities in order achieve its targeted loan-to-deposit ratio.

The Bank had cash and short-term investments of
$13 million at September 30, 2007 and $285 million of its loan portfolio (excluding nonaccrual loans) matures by September 30, 2008. The Bank expects to extend or refinance a portion of these maturing loans. At September 30, 2007, the
Bank had new commitments to lend of $87 million, most of which are anticipated to be funded over the next 12 months from the sources of funds described above. The Bank continues to experience increased competitive market conditions and lower pricing
in originating loans, which encompass both interest rates and fees charged on new loans.

The Bank has in the past and may continue in the future to rely on
capital contributions from the Holding Company to increase its capital to support its asset growth. No cash contributions have been made to the Bank since 2005. At September 30, 2007, the Bank had excess regulatory capital to support an
additional $499 million of asset growth and still maintain a well-capitalized designation by the FDIC.



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Intervest Mortgage Corporation. Intervest Mortgage Corporations lending business is dependent on its
ability to generate a positive interest rate spread between the yields earned on its loans and the rates paid on its debentures.

Intervest Mortgage
Corporation relies on the issuance of its subordinated debentures in registered, best efforts offerings to the public as its primary source of funds to support its loan originations. Intervest Mortgage Corporation needs to pay competitive interest
rates to sell its debentures and also incurs underwriting commissions and other fees when debentures are sold. In addition to funds from sales of debentures, as the Banks mortgage loan portfolio has grown, service fee income received by
Intervest Mortgage Corporation from the Bank has comprised a larger percentage of Intervest Mortgage Corporations earnings and resulting cash inflows. The Bank has a servicing agreement with Intervest Mortgage Corporation that is described in
the Companys annual report on Form 10-K for the year ended December 31, 2006 in Item. 1 Business, under the caption Loan Solicitation and Processing. The Bank paid a total of $3.1 million in the first nine months
of 2007 to Intervest Mortgage Corporation pursuant to the agreement. From time to time, Intervest Mortgage Corporation has also received cash capital contributions from the Holding Company. No contributions have been made since 2002.

Intervest Mortgage Corporation, as of September 30, 2007, had $76.3 million of debentures outstanding with fixed interest rates that range from 6.25% to 7.75% and
maturities that range from July 1, 2008 to July 1, 2014. In the first nine months of 2007, Intervest Mortgage Corporation repaid from cash on hand $7.5 million of its debentures prior to their stated maturity, including $0.5 million of
related accrued interest payable, and did not issue any new debentures. At September 30, 2007, Intervest Mortgage Corporation had $6.0 million of debentures and $1.1 million of accrued interest payable maturing by December 31, 2008.

Intervest Mortgage Corporation, as of September 30, 2007, had a total of $16 million in cash and short-term investments, compared to $3.2 million of
commitments to lend. In addition, $32 million of its mortgage loans (excluding nonaccrual loans) are scheduled to mature by December 31, 2008, although some portion is expected to be extended or refinanced by Intervest Mortgage Corporation. As
a result, both cash and short-term investments as well as the proceeds from the repayment of maturing mortgages will be available for investment in new mortgage loans. The Company continues to experience increased competitive market conditions and
lower pricing in originating new loans, which have made it more difficult for Intervest Mortgage Corporation to identify suitable mortgage investment opportunities. The level of outstanding loan commitments has always fluctuated with market
conditions and is unpredictable.

Intervest Mortgage Corporation in the third quarter of 2007 experienced a significant increase in nonaccrual loans. At
September 30, 2007, 29% of its mortgage loan portfolio ($27 million) was on nonaccrual status, which has adversely affected its net interest income and cash flows derived therefrom, and has placed a greater reliance on cash flows generated form
Intervest Mortgage Corporations intercompany services provided to the Bank. If this level of nonaccrual loans were to continue or increase for an extended period of time, Intervest Mortgage Corporations ability to issue new debentures,
originate new loans and meet its operating cash flow requirements could be adversely affected.

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

In the first half of 2007, the Holding Company repaid early $2.3 million (principal and accrued interest) of debentures from cash on hand. In addition, a
total of $2.0 million (principal and accrued interest) of debentures were converted (at the option of the debenture holders) into 108,556 shares of Class A common stock at $18 per share. At September 30, 2007, the Holding Company had no
debentures outstanding and $1.8 million in cash and short-term investments.

The Holding Company, through its wholly owned business trusts, has issued at
various times since 2001 approximately $72 million of trust preferred securities, of which $56.7 million were outstanding as of September 30, 2007. The outstanding securities have fixed rates of interest for a five-year period and thereafter
variable rates and contractually mature at various time through 2036. The resulting proceeds have been invested in the Bank at various times through capital contributions. The Holding Company is required to make interest payments that currently
total $3.5 million annually on the outstanding trust preferred securities. The Bank provides the



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funds in the form of dividends to the Holding Company for this debt service. At September 30, 2007, $55 million of
the trust preferred securities (representing outstanding debentures net of the Holding Companys common stock investments in the trusts) qualified and was included as regulatory Tier 1 capital.

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

On April 25, 2007, the Holding Companys board of directors authorized a share repurchase plan. Under the plan, the Holding Company is authorized to purchase up
to $10 million of its outstanding shares of Class A common stock over a six-month period. The plan does not obligate the Holding Company to acquire any particular amount of the Class A common stock and the plan may be suspended or
discontinued at any time. The repurchases to date have been made in the open market at prevailing prices. Through September 30, 2007, a total of 332,000 shares of Class A common stock has been repurchased using cash on hand at an aggregate
cost of $8.3 million, or $24.86 per share, inclusive of broker commissions. The Holding Company expects to fund additional stock repurchases through cash on hand. In the third quarter of 2007, the Bank repurchased a total of $3.6 million of the
Holding Companys participations in loans that were originated by the Bank. The resulting proceeds were used to partially fund share repurchases.

Other. Additional information concerning securities held to maturity, short-term borrowings, outstanding time deposits and debentures, including interest rates and maturity dates, can be found in notes 3, 6, 7 and 8 of the
notes to the condensed consolidated financial statements included in this report. Additional information regarding trust preferred securities can be found in note 9 to the consolidated financial statements included in the Companys annual
report on Form 10-K for the year ended December 31, 2006. The Holding Company, the Bank and Intervest Mortgage Corporation consider their current liquidity and sources of funds sufficient to satisfy their outstanding lending commitments and
maturing liabilities. Management is not aware of any trends, known demand, commitments or uncertainties other than those discussed above that are expected to have a material impact on future operating results, liquidity or capital resources of each
entity.

Regulatory Capital

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

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



|                                       |  |                      |  |                    
|-------------------------------------- |  | -------------------- |  | -------------------
|($ in thousands)                       |  | At September 30,2007 |  | At December 31,2006
|Tier 1 Capital                         |  | $   194,546          |  | $   181,176        
|Tier 2 Capital                         |  | 19,635               |  | 17,486             
|Total risk-based capital               |  | $   214,181          |  | $   198,662        
|Net risk-weighted assets               |  | $1,643,107           |  | $1,526,791         
|Average assets for regulatory purposes |  | $1,925,993           |  | $1,841,231         
|Tier 1 capital to average assets       |  | 10.10%               |  | 9.84%              
|Tier 1 capital to risk-weighted assets |  | 11.84%               |  | 11.87%             
|Total capital to risk-weighted assets  |  | 13.04%               |  | 13.01%             

The Bank is required to maintain regulatory defined minimum Tier 1 leverage and Tier 1 and total risk-based capital
ratio levels of at least 4%, 4% and 8%, respectively. At September 30, 2007 and December 31, 2006, management believes the Bank met its capital adequacy requirements and is a well-capitalized institution as defined in the regulations,
which require minimum Tier 1 leverage and Tier 1 and total risk-based ratios of 5%, 6% and 10%, respectively. Management is not aware of any conditions or events that would change the Banks designation as a well-capitalized institution.



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The Holding Company on a consolidated basis is subject to minimum regulatory capital requirements administered by the
FRB. These guidelines require a ratio of Tier 1 or Core Capital, as defined in the guidelines, to total risk-weighted assets of at least 4% and a ratio of total capital to risk-weighted assets of at least 8%. The guidelines also require a ratio of
Tier 1 capital to adjusted total average assets of not less than 3%. At September 30, 2007 and December 31, 2006, management believes that the Holding Company met its capital adequacy requirements.

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



|                                       |  |                      |  |                    
|-------------------------------------- |  | -------------------- |  | -------------------
|($ in thousands)                       |  | At September 30,2007 |  | At December 31,2006
|Tier 1 Capital (1)                     |  | $   232,182          |  | $   225,046        
|Tier 2 Capital (1)                     |  | 20,925               |  | 17,833             
|Total risk-based capital               |  | $   253,107          |  | $   242,879        
|Net risk-weighted assets               |  | $1,748,051           |  | $1,624,713         
|Average assets for regulatory purposes |  | $2,039,384           |  | $1,969,533         
|Tier 1 capital to average assets       |  | 11.38%               |  | 11.43%             
|Tier 1 capital to risk-weighted assets |  | 13.28%               |  | 13.85%             
|Total capital to risk-weighted assets  |  | 14.48%               |  | 14.95%             

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

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

Asset and Liability Management

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

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

The Companys one-year
interest rate sensitivity gap amounted to a negative $35 million, or -1.7% of total assets, at September 30, 2007, compared to a positive sensitivity gap of $109 million, or 5.5% of total assets at December 31, 2006. The change in the gap
primarily reflects the runoff of loans with a repricing or remaining maturity of less than one year being replaced with new fixed rate loans with maturities of greater than one year, and a higher level of nonaccrual loans. Consistent with the
competitive lending environment, a greater percentage of new loans were originated on a fixed rate basis.

For purposes of computing the gap, all deposits
with no stated maturities are treated as readily accessible accounts. However, if such deposits were treated differently, the one-year gap would then change. Depositors may not necessarily immediately withdraw funds in the event deposit rates
offered by the Bank did not change as quickly and uniformly as changes in general market rates. For example, if only 25% of deposits with no stated maturity were assumed to be readily accessible, the one-year gap would have been a positive 7% at
September 30, 2007, compared to a positive 15% at December 31, 2006.

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



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|                                                                      |  |            |         |   |             |   |         |                |  |   |              |   |  |       |         |   |  |   |           |  
|--------------------------------------------------------------------- |  | ---------- | ------- | - | ----------- | - | ------- | -------------- |  | - | ------------ | - |  | ----- | ------- | - |  | - | --------- | -
|($ in thousands)                                                      |  | 0-3 Months |         |   | 4-12 Months |   |         | Over 1-4 Years |  |   | Over 4 Years |   |  | Total |        
|Loans (1)                                                             |  | $          | 302,635 |   |             | $ | 262,527 |                |  | $ | 637,817      |   |  | $     | 361,657 |   |  | $ | 1,564,636 |  
|Securities held to maturity (2)                                       |  |            | 43,249  |   |             |   | 112,303 |                |  |   | 140,079      |   |  |       | 51,370  |   |  |   | 347,001   |  
|Short-term investments                                                |  |            | 19,327  |   |             |   | -       |                |  |   | -            |   |  |       | -       |   |  |   | 19,327    |  
|FRB and FHLB stock                                                    |  |            | 2,725   |   |             |   | -       |                |  |   | -            |   |  |       | 3,626   |   |  |   | 6,351     |  
|Total rate-sensitive assets                                           |  | $          | 367,936 |   |             | $ | 374,830 |                |  | $ | 777,896      |   |  | $     | 416,653 |   |  | $ | 1,937,315 |  
|Deposit accounts (3):                                                 |  |            |         |   |             |   |         |                |  |   |              |   |  |       |         |   |  |   |           |  
|Interest checking deposits                                            |  | $          | 4,817   |   |             | $ | -       |                |  | $ | -            |   |  | $     | -       |   |  | $ | 4,817     |  
|Savings deposits                                                      |  |            | 9,175   |   |             |   | -       |                |  |   | -            |   |  |       | -       |   |  |   | 9,175     |  
|Money market deposits                                                 |  |            | 221,874 |   |             |   | -       |                |  |   | -            |   |  |       | -       |   |  |   | 221,874   |  
|Certificates of deposit                                               |  |            | 142,604 |   |             |   | 380,013 |                |  |   | 677,106      |   |  |       | 234,036 |   |  |   | 1,433,759 |  
|Total deposits                                                        |  |            | 378,470 |   |             |   | 380,013 |                |  |   | 677,106      |   |  |       | 234,036 |   |  |   | 1,669,625 |  
|Borrowed funds (1)                                                    |  |            | -       |   |             |   | 18,464  |                |  |   | 78,988       |   |  |       | 35,704  |   |  |   | 133,156   |  
|Accrued interest on all borrowed funds (1)                            |  |            | 1,281   |   |             |   | -       |                |  |   | 1,114        |   |  |       | 696     |   |  |   | 3,091     |  
|Total borrowed funds                                                  |  |            | 1,281   |   |             |   | 18,464  |                |  |   | 80,102       |   |  |       | 36,400  |   |  |   | 136,247   |  
|Total rate-sensitive liabilities                                      |  | $          | 379,751 |   |             | $ | 398,477 |                |  | $ | 757,208      |   |  | $     | 270,436 |   |  | $ | 1,805,872 |  
|GAP (repricing differences)                                           |  | $          | (11,815 | ) |             | $ | (23,647 | )              |  | $ | 20,688       |   |  | $     | 146,217 |   |  | $ | 131,443   |  
|Cumulative GAP                                                        |  | $          | (11,815 | ) |             | $ | (35,462 | )              |  | $ | (14,774      | ) |  | $     | 131,443 |   |  | $ | 131,443   |  
|Cumulative GAP to total assets                                        |  |            | -0.6    | % |             |   | -1.7    | %              |  |   | -0.7         | % |  |       | 6.5     | % |  |   | 6.5       | %
|Significant assumptions used in preparing the gap table above follow: | 

(1) Floating-rate loans and debentures payable are included in the period in which their interest
rates are next scheduled to adjust rather than in the period in which they mature. Fixed-rate loans and debentures payable are scheduled, including repayments, according to their contractual maturities. Deferred loan fees, nonaccrual loans and the
effect of possible loan prepayments are excluded from the analysis.

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

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

Recent Accounting Pronouncements

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

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

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

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

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



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ITEM 4. Controls and Procedures

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

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

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

Not Applicable

ITEM 1A. Risk Factors

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

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

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

Issuer Purchases of Equity Securities

|                                                                                                                                                                                                                                                                                                           |  |                               |  |                           |       |                                                                     |         |                                                                            |   |          
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- |  | ------------------------- | ----- | ------------------------------------------------------------------- | ------- | -------------------------------------------------------------------------- | - | ---------
|Period                                                                                                                                                                                                                                                                                                     |  | TotalNumberof SharesPurchased |  | AveragePricePaid PerShare |       | Total Number of SharesPurchased as Part of aPublicly Announced Plan |         | Remaining Dollar Value ofShares that May Be PurchasedUnder the Program
(1)
|July 1 to July 31, 2007                                                                                                                                                                                                                                                                                    |  | 82,500                        |  | $                         | 25.83 |                                                                     | 82,500  |                                                                            | $ | 4,993,040
|August 1 to August 31, 2007                                                                                                                                                                                                                                                                                |  | 112,900                       |  | $                         | 23.84 |                                                                     | 112,900 |                                                                            | $ | 2,301,546
|September 1 to September 30, 2007                                                                                                                                                                                                                                                                          |  | 21,400                        |  | $                         | 26.00 |                                                                     | 21,400  |                                                                            | $ | 1,745,052
|Total                                                                                                                                                                                                                                                                                                      |  | 216,800                       |  | $                         | 24.81 |                                                                     | 216,800 |                                                                            |   |          
|(1)  On April 30, 2007, the Company announced that its board of directors had authorized a share
repurchase plan effective April 25, 2007 providing for the purchase of up to $10,000,000 of its outstanding shares of Class A common stock over a six-month period. The plan expires on October 25, 2007.

ITEM 3. Defaults Upon Senior Securities

Not Applicable

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

Not Applicable

ITEM 5. Other Information

Not Applicable

ITEM 6. Exhibits

The following exhibits are filed as part of this report.

|     |  |                                                                                                                           
|---- |  | --------------------------------------------------------------------------------------------------------------------------
|31.0 |  | Certification of the principal executive officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.               
|31.1 |  | Certification of the principal financial officer pursuant to Section 302 of The
Sarbanes-Oxley Act of 2002.               
|32.0 |  | Certification of the principal executive and financial officers pursuant to
Section 906 of The Sarbanes-Oxley Act of 2002.



36



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##### Table of Contents

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: October 26, 2007 |  | By:    /s/ Lowell S. Dansker                            
|                       |  | Lowell S. Dansker, Chairman and Executive Vice President
|                       |  | (Principal Executive Officer)                           
|                       | 
|                       |  | By:    /s/ John J. Arvonio                              
|Date: October 26, 2007 |  | John J. Arvonio, Chief Financial and Accounting Officer 
|                       |  | (Principal Financial Officer)                           



37