================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

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

                   For The Fiscal Year Ended DECEMBER 31, 2005
                                             -----------------

                        Commission File Number 000-23377
                                               ---------

                        INTERVEST BANCSHARES CORPORATION
                        --------------------------------
             (Exact name of registrant as specified in its charter)

            Delaware                                      13-3699013
----------------------------------            ----------------------------------
   (State or other jurisdiction                        (I.R.S. Employer
        of incorporation)                             Identification No.)

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

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

  Securities registered pursuant to Section 12(b) of the Securities Exchange Act
                                     of 1934

                                      None
                             ----------------------
                                (Title of class)

  Securities registered pursuant to Section 12(g) of the Securities Exchange Act
                                     of 1934

                 CLASS A COMMON STOCK, PAR VALUE $1.00 PER SHARE
               ---------------------------------------------------
                                (Title of class)

Indicate  by  check  mark  if the registrant is a well-known seasoned issuer, as
defined  in  Rule  405  of  the  Securities  Act:
Yes     No XX.
    --     --

Indicate  by  check  mark  if  the  registrant  is  not required to file reports
pursuant  to  Section  13  or  15(d)  of  the  Act:  Yes     No XX
                                                         --     --

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  preceding  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 if disclosure of delinquent filers pursuant to Item 405
of  Regulation  S-K  is  not contained herein, and will not be contained, to the
best  of  the  Registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in  Part  III  of this Form 10-K or any
amendments  to  this  Form  10-K.  [_]

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

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

The  aggregate  market  value  of  3,352,954  shares of the Registrant's Class A
common  stock  on  the close of business June 30, 2005, which excludes 2,541,547
shares  held  by affiliates as a group, was $61,023,763.  This value is based on
the  average  bid  and  asked  price of $18.20 per share on June 30, 2005 of the
Class  A  common stock on the NASDAQ. All of the Class B common stock is held by
affiliates.

On  the  close  of business on June 30, 2005, there were 5,894,501 shares of the
Registrant's Class A common stock and 385,000 shares of its Class B common stock
issued  and  outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
                       -----------------------------------

Portions  of the Proxy Statement for the 2006 Annual Meeting of Stockholders are
incorporated  by  reference  into  Part  III  of  this  Form  10-K.
================================================================================


<PAGE>
<TABLE>
<CAPTION>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                         2005 ANNUAL REPORT ON FORM 10-K

                                TABLE OF CONTENTS

PART I                                                                      PAGE
                                                                            ----
<S>                                                                         <C>
ITEM 1    Business . . . . . . . . . . . . . . . . . . . . . . . . . . . .     2

ITEM 1A   Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . .    22

ITEM 1B   Unresolved Staff Comments. . . . . . . . . . . . . . . . . . . .    26

ITEM 2    Properties . . . . . . . . . . . . . . . . . . . . . . . . . . .    27

ITEM 3    Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . .    27

ITEM 4    Submission of Matters to a Vote of Security Holders. . . . . . .    27

          Executive Officers and Other Key Employees . . . . . . . . . . .    27

PART II

ITEM 5    Market for Common Equity, Related Stockholder Matters and Issuer
            Purchases of Equity Securities . . . . . . . . . . . . . . . .    29

ITEM 6    Selected Consolidated Financial and Other Data . . . . . . . . .    30

ITEM 7    Management's Discussion and Analysis of Financial Condition
            and Results of Operations. . . . . . . . . . . . . . . . . . .    31

ITEM 7A   Quantitative and Qualitative Disclosures About Market Risk . . .    52

ITEM 8    Financial Statements and Supplementary Data. . . . . . . . . . .    52

ITEM 9    Changes In and Disagreements with Accountants on
            Accounting and Financial Disclosure. . . . . . . . . . . . . .    80

ITEM 9A   Controls and Procedures. . . . . . . . . . . . . . . . . . . . .    80

ITEM 9B   Other Information. . . . . . . . . . . . . . . . . . . . . . . .    80

PART III

ITEM 10   Directors and Executive Officers . . . . . . . . . . . . . . . .    80

ITEM 11   Executive Compensation . . . . . . . . . . . . . . . . . . . . .    80

ITEM 12   Security Ownership of Certain Beneficial Owners and Management
            and Related Stockholder Transactions . . . . . . . . . . . . .    80

ITEM 13   Certain Relationships and Related Transactions . . . . . . . . .    80

ITEM 14   Principal Accounting Fees and Services . . . . . . . . . . . . .    81

PART IV

ITEM 15   Exhibits and Financial Statements Schedules. . . . . . . . . . .    81

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    85
</TABLE>


                                        1
<PAGE>
                                     PART I
ITEM 1.   BUSINESS

GENERAL

Private Securities Litigation Reform Act Safe Harbor Statement
--------------------------------------------------------------

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

Business Overview
-----------------

The  Company's  primary business segment is banking and real estate lending. The
Company's  lending  activities  are comprised almost entirely of originating for
its  loan  portfolio  mortgage  loans secured by commercial and multifamily real
estate  properties  (including  rental  and  cooperative/condominium  apartment
buildings,  office  buildings,  mix-used  properties,  shopping centers, hotels,
restaurants, industrial properties, parking lots/garages and vacant land). These
loans  have  an  average life of approximately three years. The Company tends to
lend in areas that are in the process of being revitalized, with a concentration
of  loans  on  properties  located in New York State and the State of Florida. A
significant  portion  of the residential properties are located in New York City
and  are  subject  to  rent control and rent stabilization laws, which limit the
ability  of  the  property  owners  to increase rents. The Company's business is
affected  by  a  number  of  factors  that  are  discussed herein in the section
entitled  "Item  1A  Risk  Factors."

Intervest Bancshares Corporation
--------------------------------

Intervest  Bancshares  Corporation  (the  "Holding  Company")  is  a  registered
financial  holding  company  incorporated in 1993 under the laws of the State of
Delaware  and  its  Class A common stock is listed on the NASDAQ National Market
(Symbol:  IBCA).  The  Class A common stock began trading on the Nasdaq National
Market on June 27, 2005. Previously, the stock had traded on the Nasdaq SmallCap
Market.

The  Holding  Company  is  the  parent  company  of Intervest National Bank (the
"Bank"),  Intervest  Mortgage  Corporation and Intervest Securities Corporation,
hereafter referred to collectively as the "Company" on a consolidated basis. The
Holding  Company  owns  100%  of  the outstanding capital stock of each of these
entities.  The  Holding  Company also owns 100% of the outstanding capital stock
of  Intervest Statutory Trust I, II, III and IV, all of which are unconsolidated
entities  for  financial  statement purposes as required by Financial Accounting
Standards  Board  (FASB)  Interpretation  No.  46-R,  "Consolidation of Variable
Interest  Entities."

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

The  Holding  Company's  primary  business is the ownership and operation of its
subsidiaries.  It  does  not engage in any other substantial business activities
other  than  a  limited  amount  of  real estate mortgage lending, including the
participation  in  loans  originated by the Bank. From time to time, the Holding
Company  also  issues  debt  and  equity  securities  to raise funds for working
capital  purposes.  The Holding Company is subject to examination and regulation
by  the  Federal  Reserve  Board  (FRB).

At  December  31,  2005,  the Company had total assets of $1.7 billion, cash and
security  investments  of $313.5 million, net loans of $1.4 billion, deposits of
$1.4 billion, borrowed funds and related interest payable of $155.7 million, and
stockholders'  equity  of  $136.2  million,  compared  to  total  assets of $1.3
billion,  cash  and  security  investments  of $278.6 million, net loans of $1.0
billion, deposits of $993.9 million, borrowed funds and related interest payable
of  $202.7  million,  and  stockholders' equity of $90.1 million at December 31,
2004.


                                        2
<PAGE>
Intervest National Bank
-----------------------

The  Bank  is  a  nationally  chartered  bank  that  has  its  headquarters  and
full-service  banking  office  at  One Rockefeller Plaza, Suite 400, in New York
City,  and  a  total  of  five  full-service banking offices in Pinellas County,
Florida  -  four  in  Clearwater  and  one  in  South  Pasadena.

At  December  31,  2005,  the  Bank  had  total assets of $1.6 billion, cash and
security  investments  of $309.4 million, net loans of $1.3 billion, deposits of
$1.4  billion,  borrowed funds and related interest payable of $0.2 million, and
stockholder's  equity  of  $156.8  million,  compared  to  total  assets of $1.2
billion,  cash  and  security investments of $269.8 million, net loans of $900.8
million,  deposits  of $1.0 billion, borrowed funds and related interest payable
of  $36.3  million  and  stockholder's  equity of $111.3 million at December 31,
2004.

The  Bank  provides  a  variety  of personalized commercial and consumer banking
services  to  small  and  middle-market  businesses  and  individuals.  The Bank
attracts  deposits  from  the areas served by its banking offices. The Bank also
provides  internet banking through its web site: www.intervestnatbank.com, which
attracts  deposit  customers  from  within as well as 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  in  this  report.

The  Bank's  revenues are primarily derived from interest and fees received from
originating  loans,  and  from  interest  and dividends earned on securities and
other  short-term  investments.  The  principal  sources of funds for the Bank's
lending  activities  are  deposits,  repayment of loans, maturities and calls of
securities  and  cash  flow  generated  from  operations.  The  Bank's principal
expenses  are  interest  paid  on  deposits  and  operating  and  general  and
administrative  expenses.

The  Bank's  deposit flows and the rates paid thereon are influenced by interest
rates  on competing investments available to depositors and general market rates
of interest. The Bank's lending activities are affected by the interest rates it
charges  on  loans, customer demand for loans, the supply of money available for
lending  purposes, the rates offered by its competitors and the terms and credit
risks  associated  with  the  loans.  The  Bank  faces strong competition in the
attraction  of deposits and in the origination of loans. The Bank's deposits are
insured  by  the  Federal  Deposit  Insurance  Corporation  (FDIC) to the extent
permitted  by  law.

The Bank's operations are significantly influenced by general and local economic
conditions,  particularly  those  in the New York City metropolitan area and the
State of Florida where most of the properties that secure its mortgage loans are
concentrated,  and by related monetary and fiscal policies of banking regulatory
agencies,  including  the  FRB  and  FDIC.  The  Bank  is  also  subject  to the
supervision,  regulation and examination of the Office of the Comptroller of the
Currency  of  the  United  States  of  America  (OCC).

The  Bank  has  an  agreement  that  expires  in  2014 with Fidelity Information
Services,  a  division  of Fidelity National Financial, to provide the Bank with
its  core  data processing using the Kirchman Bankway software, a product of the
Kirchman  Corporation,  which is a division of Metavante Corporation. Management
believes that these entities will continue to be able to provide data processing
services  to  support  the  Bank's  current  and  future  needs.

Intervest Mortgage Corporation
------------------------------

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

At  December 31, 2005, Intervest Mortgage Corporation had total assets of $115.8
million,  cash  and  short-term investments of $27.9 million, net loans of $82.5
million,  debentures  and  related  interest  payable  of  $87.4  million,  and
stockholder's  equity  of  $26.6  million,  compared  to  total assets of $122.5
million,  cash  and short-term investments of $17.2 million, net loans of $100.5
million,  debentures  and  related  interest  payable  of  $97.1  million  and
stockholder's  equity  of  $23.5  million,  at  December  31,  2004.


                                        3
<PAGE>
Intervest  Mortgage  Corporation's  business  is significantly influenced by the
movement  of interest rates, general and local economic conditions, particularly
those  in  the New York City metropolitan area where most of the properties that
secure  its  mortgage  loans  are concentrated, and by the volume of origination
services  it  provides  to  the Bank, whose business is also affected by similar
factors.  Intervest  Mortgage  Corporation  receives a fee from the Bank for the
origination  services it provides to the Bank, the amount of which is eliminated
in  the Company's consolidated financial statements. As the Bank's mortgage loan
portfolio  has  grown,  service  fee  income  from  the  Bank  has  comprised an
increasing  percentage  of  Intervest  Mortgage  Corporation's  income.

Intervest Securities Corporation
--------------------------------

Intervest Securities Corporation is a broker/dealer and a member of the National
Association  of  Securities Dealers (NASD). The business activities of Intervest
Securities  Corporation have not, to date, been material. Its revenues have been
derived  from  participating as a selected dealer from time to time in offerings
of  debt  securities  of  the  Company,  primarily  those  of Intervest Mortgage
Corporation.  At  December  31, 2005, Intervest Securities Corporation had total
assets  of  $0.5  million and its stockholder's equity amounted to $0.5 million.

Intervest Statutory Trusts
--------------------------

Intervest  Statutory Trust I, II, III and IV were formed for the sole purpose of
issuing  and administering trust preferred securities. Intervest Statutory Trust
I,  II,  III  and  IV  issued  in  December 2001, September 2003, March 2004 and
September  2004, respectively, $15.0 million of trust preferred securities for a
total  of  $60.0  million.  The trusts do not conduct any trade or business. See
note  9  to  the consolidated financial statements included in this report for a
further  discussion  of  the  trusts.

BUSINESS STRATEGY

Management  is  committed  to  the  continued  growth of the Company through the
continued  origination  of  multifamily  residential  and commercial real estate
loans.  The  Company  expects  primarily  to  utilize  the  relationships it has
developed  both  with  its  borrowers and with the brokers with whom it has done
business  as  a  source  of  new loans.  Management believes that its ability to
rapidly  and efficiently process and close loans gives the Company a competitive
advantage.  While  the  Company's  primary  lending  activities have been in the
commercial  and  multifamily  real  estate  areas,  management will also explore
opportunities  to  diversify  revenues,  including  the  possible  sale  of
participations  in  the  Company's  loans  to third parties, while retaining the
servicing of such loans. Management will also evaluate the possibility of growth
and expansion through acquisitions both within and outside the Company's primary
market  areas.

MARKET AREA

The Bank's primary deposit gathering and lending markets are concentrated in the
communities  surrounding its offices. The Bank's primary market area for its New
York  office  is  considered to be the New York metropolitan area, consisting of
the  five boroughs of New York City and the areas surrounding New York City. The
primary  market  area of the Bank's Florida offices is considered to be Pinellas
County,  which  is  the  most  populous county in the Tampa Bay area of Florida.
Additionally,  the  area  has  many  seasonal  residents.  The Tampa Bay area is
located on the West Coast of Florida, midway up the Florida peninsula. The major
cities  in  the  area  are  Tampa  (Hillsborough  County) and St. Petersburg and
Clearwater (Pinellas County). Management believes that all of the Bank's offices
are  located  in areas serving small and mid-sized businesses and serving middle
and  upper income communities. The Bank's deposit-gathering market also includes
its  web  site on the internet: www.intervestnatbank.com, which attracts deposit
customers  from  both  within  and  outside  the  Bank's  primary  market areas.

Intervest  Mortgage Corporation's lending activities have also been concentrated
in  the  New York City metropolitan region. Both the Bank and Intervest Mortgage
Corporation  originate  loans  on properties in other states, including Alabama,
Connecticut,  Florida,  Georgia,  Indiana,  Kentucky,  Massachusetts,  Maryland,
Michigan,  New  Jersey,  North  Carolina,  Ohio,  Pennsylvania,  Virginia  and
Washington  D.C.


                                        4
<PAGE>
The  properties securing the Company's mortgage loans may be located in sections
of  the  cities  in its market area that are being revitalized or redeveloped. A
large  number  of  the  loans  in  New York are secured by properties located in
Manhattan,  Brooklyn  and  the Bronx. A large number of the loans in Florida are
secured  by  properties  located  in  Clearwater, Tampa, Fort Lauderdale, Miami,
Orlando  and  St.  Petersburg.

COMPETITION

In  one or more aspects of its business, the Bank competes with other commercial
banks,  savings  and loan associations, credit unions, finance companies, mutual
funds,  insurance  companies,  brokerage  and  investment banking companies, and
other  financial  intermediaries.  Most  of these competitors, some of which are
affiliated  with  large  financial holding companies, have substantially greater
financial  and  marketing  resources  and lending limits, and may offer services
that  the  Bank  does  not  currently  provide.  In addition, many of the Bank's
nonbank  competitors  are  not subject to the same extensive federal regulations
that govern financial holding companies and federally insured banks. Competition
among  financial  institutions  is  based upon interest rates offered on deposit
accounts,  interest rates charged on loans and other credit and service charges,
the  quality  and  scope  of  the  services rendered, the convenience of banking
facilities  and,  in the case of loans to commercial borrowers, relative lending
limits.  An  increase  in  the  general  availability  of  funds  may  increase
competition  in  the  origination  of  mortgage  loans and may reduce the yields
available  therefrom.

In  making  its  mortgage  investments,  Intervest  Mortgage  Corporation  also
experiences significant competition from banks, insurance companies, savings and
loan  associations,  mortgage  bankers,  pension  funds,  real estate investment
trusts,  limited  partnerships  and  other  lenders and investors. Most of these
competitors  also  have significantly greater financial and marketing resources.

In  addition,  certain  entities  owned  or  controlled by the principals of the
Company  are  engaged  in  limited  real  estate  lending  activities  involving
properties that are similar to those underlying the Company's mortgage loans and
in  that  regard,  are  also  competing  with  the  Company.

LENDING ACTIVITIES

General
-------

The volume of the Company's loan originations is dependent on the interest rates
it  charges  on  loans, customer demand for loans, the supply of money available
for  lending  purposes,  the  rates offered by its competitors and the terms and
credit  risks  associated  with  the  loans.  The  Company's  lending activities
emphasize  the  origination  of  first  and  second  mortgage  loans  secured by
commercial  and  multifamily  real  estate  properties.  The  Company's  senior
management  team  has  substantial experience in commercial and multifamily real
estate  lending.  To  a  very limited extent, the Bank also offers single-family
residential  mortgage  loans,  commercial loans and consumer loans. To date such
lending  has  not  been emphasized by the Bank and its current portfolio of such
loans  is  insignificant.  The  Bank  does  not  expect to become active in such
lending.

The  Bank's  lending  activities  are conducted pursuant to written policies and
defined  lending  limits.  In originating loans, the Bank places emphasis on the
borrower's  ability  to  generate  cash flow to support its debt obligations and
other cash related expenses. Generally, all loans originated by the Bank must be
reviewed and approved by the Bank's Loan Committee, which is currently comprised
of  four  members  of  the Board of Directors, three of which are also executive
officers  and major stockholders of the Holding Company. As a national bank, the
Bank  may  not  make  a  loan  or  extend credit to a single or related group of
borrowers  in  excess  of  15%  of  the  Bank's  unimpaired capital and surplus.
Additional amounts may be loaned, not in excess of 10% of unimpaired capital and
surplus, if such loans or extensions of credit are secured by readily-marketable
collateral.

Intervest Mortgage Corporation is not a bank and is therefore not subject to the
same  degree  of  regulation  as  applies  to  the Bank. It does not have formal
policies  regarding  the  percentage  of  its assets that may be invested in any
single  or  type  of  mortgage  loan,  the  geographic  location  of  properties
collateralizing  those  mortgages  or  limits  to  amounts  to any one borrower,
loan-to-value  ratios  and debt service coverage ratios. It also does not have a
loan  committee  or  a  formal  loan  approval  process.  With  respect to loans
originated  by  Intervest  Mortgage  Corporation,


                                        5
<PAGE>
all underwriting and lending decisions are made by the executive officers of the
Holding  Company. Its real estate mortgage loans consist of first mortgage loans
and  junior  mortgage  loans.  Junior mortgages normally have greater risks than
first  mortgages.  Like  the Bank, Intervest Mortgage Corporation also considers
the  borrower's  experience  in  owning  or  managing similar properties and its
lending experience with the borrower when originating loans. The Holding Company
has  also,  from  time  to  time,  made  a  limited  amount  of  mortgage loans.

At December 31, 2005, nearly all 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,  mix-used  properties,  shopping  centers,  hotels,  restaurants,
industrial  properties,  parking  lots/garages and vacant land). At December 31,
2005,  such  loans consisted of 529 loans with an aggregate principal balance of
$1.4 billion and an average principal size of $2.6 million. Loans with principal
balances  of $5.0 million or more aggregated to 69 loans or $639.3 million, with
the  largest  loan  amounting  to  $20.0  million.

The  following  table  sets  forth  information  regarding  the  Company's  loan
portfolio:

<TABLE>
<CAPTION>
                                                                    At December 31,
                                                                    ---------------
($ in thousands)                                 2005         2004        2003       2002       2001
-------------------------------------------------------------------------------------------------------
<S>                                           <C>          <C>          <C>        <C>        <C>

Commercial real estate loans                  $  735,650   $  601,512   $344,071   $275,096   $183,167
Residential multifamily loans                    538,760      403,613    310,650    214,515    182,569
Land development and other land loans            105,251       19,198     20,526      1,890      2,485
Residential 1-4 family loans                         100          984      1,628      1,953      2,404
Commercial business loans                          1,089        1,215      1,662      1,608      1,363
Consumer loans                                       194          221        319        240        286
                                              ---------------------------------------------------------
Loans receivable                               1,381,044    1,026,743    678,856    495,302    372,274
Deferred loan fees                               (13,058)     (11,347)    (7,731)    (5,390)    (3,748)
                                              ---------------------------------------------------------
Loans receivable, net of deferred fees         1,367,986    1,015,396    671,125    489,912    368,526
Allowance for loan losses                        (15,181)     (11,106)    (6,580)    (4,611)    (3,380)
-------------------------------------------------------------------------------------------------------
Loans receivable, net (1)                     $1,352,805   $1,004,290   $664,545   $485,301   $365,146
-------------------------------------------------------------------------------------------------------
Loans included above that were
  on a nonaccrual status at year end (2)      $      750   $    4,607   $  8,474   $      -   $  1,243
-------------------------------------------------------------------------------------------------------
Accruing loans included above which are
  contractually past due 90 days or more (2)  $    2,649   $        -   $      -   $      -   $      -
Interest income not recorded on loans that
  were on nonaccrual status during the year   $       75   $      236   $    339   $     29   $     51
-------------------------------------------------------------------------------------------------------

<FN>
(1)  During  the periods presented, there were no "troubled debt restructurings" as defined in SFAS No.
     15,  or known information about possible credit problems of borrowers which would cause management
     to  have  serious  doubts  as  to  the  ability  of such borrowers to comply with the present loan
     repayment  terms.

(2)  Represents multifamily and commercial real estate loans.
</TABLE>

The following table sets forth the scheduled contractual principal repayments of
the  loan  portfolio  by  type:

<TABLE>
<CAPTION>
                                                           At December 31, 2005
                                                           --------------------
                                        Due Within     Due Over One        Due Over
($ in thousands)                         One Year    to Five Years (1)   Five Years (1)     Total
----------------------------------------------------------------------------------------------------
<S>                                     <C>          <C>                 <C>              <C>
Commercial real estate loans            $   224,666  $          405,113  $       105,871  $  735,650
Residential multifamily loans               127,440             363,981           47,339     538,760
Land development and other land loans        66,773              36,418            2,060     105,251
Residential 1-4 family loans                      -                   -              100         100
Commercial business loans                       773                 316                -       1,089
Consumer loans                                   97                  77               20         194
----------------------------------------------------------------------------------------------------
Total                                   $   419,749  $          805,905  $       155,390  $1,381,044
----------------------------------------------------------------------------------------------------

<FN>
(1)  At  December  31,  2005,  $654 million of loans with adjustable rates and $307 million of loans
     with  fixed  rates  were  due  after  one  year.
</TABLE>


                                        6
<PAGE>
The  following  table  sets  forth the types of properties securing the mortgage
loan  portfolio  at  December  31,  2005:

<TABLE>
<CAPTION>
           ($ in thousands)                             Amount
          -----------------------------------------------------
<S>                                                  <C>
          Commercial Real Estate:
            Retail stores                            $  266,965
            Office buildings                            198,326
            Industrial/warehouse                        134,817
            Hotels                                       80,665
            Mobile home parks                            26,173
            Parking lots/garages                          8,367
            Other                                        20,337
          Residential Multifamily (5 or more units)     536,624
          Residential All Other                           2,236
          Vacant Land                                   105,251
          -----------------------------------------------------
          Total                                      $1,379,761
          -----------------------------------------------------
</TABLE>

The following table sets forth the scheduled contractual principal repayments of
the  loan  portfolio  in  the  aggregate:

<TABLE>
<CAPTION>
                                                At December 31,
                                                ---------------
($ in thousands)               2005        2004       2003      2002      2001
--------------------------------------------------------------------------------
<S>                         <C>         <C>         <C>       <C>       <C>
Within one year             $  419,749  $  227,889  $133,137  $103,398  $ 85,447
Over one to five years         805,905     645,050   430,783   305,013   221,435
Over five years                155,390     153,804   114,936    86,891    65,392
--------------------------------------------------------------------------------
                            $1,381,044  $1,026,743  $678,856  $495,302  $372,274
--------------------------------------------------------------------------------
</TABLE>

The  following  table sets forth the activity in the Company's loan portfolio in
the  aggregate:

<TABLE>
<CAPTION>
                                                             For the Year Ended December 31,
                                                             -------------------------------
($ in thousands)                                 2005         2004         2003        2002       2001
---------------------------------------------------------------------------------------------------------
<S>                                           <C>          <C>          <C>         <C>         <C>
Loans receivable, net, at beginning of year   $1,004,290   $  664,545   $ 485,301   $ 365,146   $263,558
  Loans originated                               706,672      626,252     378,630     233,689    195,754
  Principal repayments                          (352,371)    (278,365)   (195,076)   (110,661)   (91,785)
  Recoveries                                           -            -           -        (107)         -
  Chargeoffs                                           -            -           -         150          -
  Increase in deferred loan fees                  (1,711)      (3,616)     (2,341)     (1,642)    (1,769)
  Provision for loan losses                       (4,075)      (4,526)     (1,969)     (1,274)      (612)
---------------------------------------------------------------------------------------------------------
Loans receivable, net, at end of year         $1,352,805   $1,004,290   $ 664,545   $ 485,301   $365,146
---------------------------------------------------------------------------------------------------------
</TABLE>

The following table sets forth the geographic distribution of the loan portfolio
at  December  31  as  follows:

<TABLE>
<CAPTION>
                                   2005                2004              2003              2002              2001
                           ------------------  ------------------  ----------------  ----------------  ----------------
                                        % of                % of              % of              % of              % of
($ in thousands)             Amount    Total     Amount    Total    Amount   Total    Amount   Total    Amount   Total
-----------------------------------------------------------------------------------------------------------------------
<S>                        <C>         <C>     <C>         <C>     <C>       <C>     <C>       <C>     <C>       <C>
New York                   $  896,746     65%  $  729,301     71%  $435,790     64%  $278,280     56%  $192,256     52%
Florida                       323,764     24      198,823     19    189,802     28    184,257     37    145,660     39
Connecticut & New Jersey       84,373      6       51,186      5     39,681      6     21,991      5     24,875      7
All Other                      76,161      5       47,433      5     13,583      2     10,774      2      9,483      2
-----------------------------------------------------------------------------------------------------------------------
                           $1,381,044    100%  $1,026,743    100%  $678,856    100%  $495,302    100%  $372,274    100%
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

Real  Estate  Mortgage  Lending
-------------------------------

Commercial  and  multifamily real estate lending is generally considered to have
more credit risk than 1-4 family residential lending because these loans tend to
involve  larger  loan  balances  to  single  borrowers  and  their  repayment is
typically  dependent upon the successful operation of the underlying real estate
for  income-producing  properties.  In  addition,  loans on substantially vacant
properties  and  vacant  land  typically  have  limited or no income streams and
depend  upon  other  sources  of  cash  flow  from  the  borrower for repayment.

Mortgage  loans  on  commercial and multifamily properties typically provide for
periodic  payments  of  interest  and principal during the term of the mortgage,
with  the  remaining  principal  balance  and  any  accrued  interest due at the
maturity  date.  The  majority  of  the mortgage loans originated by the Company
provide for balloon payments at maturity, which means that a substantial part or
the  entire  original  principal  amount  is  due  in  one  lump  sum


                                        7
<PAGE>
payment  at  maturity. If the net revenue from the property is not sufficient to
make all debt service payments due on the mortgage or, if at maturity or the due
date  of any balloon payment, the owner of the property fails to raise the funds
(by  refinancing,  sale  or otherwise) to make the lump sum payment, the Company
could  sustain  a  loss  on  its  investment  in  the  mortgage  loan.

The  Company's  mortgage  loans  on  commercial  and  multifamily  real  estate
properties  are normally originated for terms of no more than 10 years, with the
entire  portfolio  having  an average life of approximately three years. Many of
the  loans  have  variable  interest  rates that are based on the prime rate. In
addition,  the  floating-rate  loans  have  a  "floor," or minimum rate, that is
determined  in  relation  to prevailing market rates on the date of origination.
This floor only adjusts upwards in the event of increases in the loan's interest
rate.  This  feature  reduces  the  effect  on interest income of a falling rate
environment  because  the  interest  rates  on such loans do not reset downward.
However,  the Company may nonetheless experience loan prepayments, the amount of
which  cannot  be  predicted,  and  reinvestment risk of the resulting proceeds.

As  part  of  the  Bank's  written policies for real estate loans, loan-to-value
ratios  (the  ratio  that the original principal amount of the loan bears to the
lower of the purchase price or appraised value of the property securing the loan
at the time of origination) on new loans originated by the Bank typically do not
exceed  80%. Debt service coverage ratios (the ratio of the net operating income
generated by the property securing the loan to the required debt service) on new
loans  typically are not less than 1.2 times. However, the Bank has increasingly
originated  and expects to continue to originate mortgage loans on substantially
vacant  properties  and  vacant  land for which there is limited or no cash flow
being  generated  by  the  operation  of  the  underlying  real  estate.

While  the  Company may require guarantees from the principals of its borrowers,
loans  are  often  made  on a limited recourse basis. The Company does have some
nonrecourse  loans  in  its  loan  portfolio.  Under  the  terms  of nonrecourse
mortgages,  the  owner  of  the property subject to the mortgage has no personal
obligation  to  pay  the mortgage note which the mortgage secures. Therefore, in
the  event  of  a  default,  the  Company's ability to recover its investment is
solely  dependent  upon  the  value  of  the  mortgaged  property. The Company's
mortgage  loans  are  also  not  insured or guaranteed by governmental agencies.

Intervest Mortgage Corporation's loan portfolio includes junior mortgages, which
at  December  31,  2005   amounted  to  36  junior  mortgages, which constituted
approximately  34%,  or  $28.2 million, of the aggregate principal amount of its
loan  portfolio.  Junior  mortgages are subordinate in right of repayment to the
senior  mortgage  on  the  property. As a result, in the event of a default on a
senior  mortgage  secured by the property, the holder of the senior mortgage may
independently  commence  foreclosure  proceedings.  In  such  an event, a junior
mortgage  holder must often cure the default in order to prevent foreclosure. If
there  is a foreclosure on the senior mortgage, the owner of the junior mortgage
is  only  entitled  to  share  in  liquidation proceeds after all amounts due to
senior  lienholders  have  been  fully  paid.  Actual  proceeds  available  for
distribution  upon  foreclosure may not be sufficient to pay all sums due on the
senior  mortgage,  other senior liens and the junior mortgage, and the costs and
fees  associated  with the foreclosure proceedings. At December 31, 2005, nearly
all  of  the  junior  mortgages  held  by Intervest Mortgage Corporation were on
properties  where  the  Bank  holds  the  senior  mortgage.

Loan  Solicitation  and  Processing
-----------------------------------

The  Company's  loan  originations  are  derived  primarily  from referrals from
mortgage  brokers  and existing customers and borrowers and, to a lesser extent,
from  direct  solicitation  by its officers, advertising in newspapers and trade
journals,  and  walk-in  customers.  The mortgage brokers receive a fee from the
borrower  upon  the  funding of the loans by the Company. Historically, mortgage
brokers  have  been  the  source  of  substantially  all  of  the  multi-family
residential  and  commercial  real  estate  loans  originated  by  the  Company.

The  underwriting  procedures  for  the  Company normally require the following:
physical  inspections  of  the  properties  being considered for mortgage loans;
mortgage title insurance; fire and casualty insurance and environmental surveys.
In addition, the Bank requires an appraisal of the property securing the loan to
determine  the  property's  adequacy  as  collateral  performed  by an appraiser
approved  by the Bank. Intervest Mortgage Corporation does not have an appraisal
requirement  and  often  appraisals  are  not  obtained.  Analyses  are  also


                                        8
<PAGE>
performed  for  relevant real property and financial factors, which may include:
the  condition  and use of the subject property; the property's income-producing
capacity;  and  the  quality,  experience and creditworthiness of the property's
owner.  For  commercial  and  consumer loans, upon receipt of a loan application
from  a  prospective  borrower,  a  credit  report  and  other verifications are
obtained  to  substantiate  specific  information  relating  to  the applicant's
employment  income  and  credit  standing.

The  Bank  has a servicing agreement with Intervest Mortgage Corporation whereby
Intervest  Mortgage Corporation provides the Bank with mortgage loan origination
services  for  a  monthly  fee  that  is  based on loan origination volumes. The
services  include: the identification of potential properties and borrowers; the
inspection of properties constituting collateral for such loans; the negotiation
of  the  terms  and  conditions  of  such  loans  in  accordance with the Bank's
underwriting  standards;  and coordinating the preparation of commitment letters
and  the  loan closing process. The services are performed by Intervest Mortgage
Corporation's personnel and the related expenses are borne by Intervest Mortgage
Corporation.  The  agreement  renews  each January 1 unless terminated by either
party.  The  Bank paid $5.1 million, $4.3 million and $2.3 million in 2005, 2004
and  2003,  respectively,  to  Intervest Mortgage Corporation in connection with
this  servicing  agreement,  all  of  which  is  eliminated  in  the  Company's
consolidated  financial  statements.  As a result of this agreement, origination
services  for  the  entire  Company  are  furnished  by  the  same  staff.

Loan  Origination,  Loan  Fees and Prepayment Income From the Early Repayment of
--------------------------------------------------------------------------------
Loans.
------

The  Company  normally  charges  loan  origination fees on the mortgage loans it
originates based on a percentage of the principal amount of the loan. These fees
are  normally  comprised of a fee that is received from the borrower at the time
the  loan  is  originated and another similar fee that is contractually due when
the  loan  is  repaid.  The  total  fees, net of related direct loan origination
costs,  are  deferred  and amortized over the contractual life of the loan as an
adjustment  to  the  loan's  yield.  At December 31, 2005, the Company had $13.1
million of net unearned loan fees and $10.9 million of loan fees receivable. The
Company  also  earns  other  fee  income  from  the  servicing  of  its  loans.

Many  of  the Company's mortgage loans include provisions relating to prepayment
and others prohibit prepayment of indebtedness entirely. When a mortgage loan is
repaid  prior  to  maturity,  the Company may recognize prepayment income, which
consists  of  the recognition of unearned fees associated with such loans at the
time  of  payoff  and  the receipt of additional prepayment fees and interest in
certain  cases.  The  amount  and  timing  of,  as  well  as  income  from  loan
prepayments,  if  any,  cannot  be  predicted  and  can fluctuate significantly.
Normally,  the  number  of  instances  of  prepayment of mortgage loans tends to
increase during periods of declining interest rates and tends to decrease during
periods  of increasing interest rates. The Company earned prepayment income from
the  early  repayment of loans of $5.1 million in 2005, $3.5 million in 2004 and
$2.3  million  in  2003.

Temporary  Investments  in  Loans  and  Loan  Participations
------------------------------------------------------------

From  time  to  time, Intervest Mortgage Corporation may originate a real estate
mortgage  loan  in  its own name and temporarily hold such loan in its portfolio
for  a  short period, subsequently transferring the loan to the Bank at cost. In
addition,  from  time  to  time,  the  Holding  Company  or  Intervest  Mortgage
Corporation  may  purchase  a  participation  in  a  real  estate  mortgage loan
originated  by  the Bank. All participations are purchased at face value and the
interest  of  the  participant in the collateral securing the loan is pari passu
with  the  Bank.  The  above  transactions  are  undertaken  to provide the Bank
additional  flexibility  in  originating  loans.

REAL  ESTATE  INVESTING  ACTIVITIES

The  Company  may  purchase  equity  interests  in real property or acquire such
equity interests pursuant to a foreclosure of a mortgage in the normal course of
business,  as  a  result  of  which  the Company may acquire and retain title to
properties  either  directly  or  through  a  subsidiary. Except for any pending
foreclosures, no such transactions are presently pending. The Company would also
consider the expansion of its business through investments in or acquisitions of
other companies engaged in real estate or mortgage business activities. Although
the  Company  has  not previously made acquisitions of real property (other than
purchases  in  connection with the operation of the bank's offices or properties
acquired  through foreclosure), senior management has had substantial experience
in  the  acquisition  and  management  of  properties.


                                        9
<PAGE>
ASSET QUALITY

The  Company considers asset quality to be of primary importance to its business
and  has  procedures in place designed to mitigate the risks associated with its
lending  activities.  After  a  loan is originated, various steps are undertaken
(such  as  a  physical inspection of the subject property on an annual basis and
periodic  reviews  of  loan files in order to monitor loan documentation and the
value  of  the  property  securing  the  loan)  with  the  objective  of quickly
identifying,  evaluating  and  initiating  corrective  actions if necessary. The
Company  also  engages  in  the constant monitoring of the payment status of its
outstanding loans and pursues a timely follow-up on any delinquencies, including
initiating  collection  procedures  when  necessary.  Late  fees are assessed on
delinquent  loan  payments.

All  loans  are  subject to the risk of default, otherwise known as credit risk,
which  represents the possibility of the Company not recovering amounts due from
its  borrowers.  A borrower's ability to make payments due under a mortgage loan
is  dependent upon the risks associated with real estate investments in general,
including  the  following: general or local economic conditions in the areas the
properties  are  located,  neighborhood  values, interest rates, real estate tax
rates,  operating expenses of the mortgaged properties, supply of and demand for
rental  units,  supply  of  and  demand  for  properties,  ability to obtain and
maintain  adequate occupancy of the properties, zoning laws, governmental rules,
regulations  and  fiscal  policies.  Additionally,  terrorist  acts  and  armed
conflicts,  such  as  the  war  on  terrorism,  and  natural  disasters, such as
hurricanes,  may  have  an  adverse  impact  on  economic  conditions.  Economic
conditions  affect  the  market value of the mortgaged properties underlying the
Company's  loans as well as the levels of rent and occupancy of income-producing
properties.

Loan  concentrations  are  defined  as  amounts  loaned to a number of borrowers
engaged  in  similar  activities  or  on  properties  located  in  a  particular
geographic area. The Company's loan portfolio has historically been concentrated
in commercial real estate and multifamily mortgage loans (including land loans),
which  represented  99.9%  of the total loan portfolio at December 31, 2005. The
properties  underlying the Company's mortgage loans are also concentrated in two
states,  New York and Florida, or 65% and 24%, respectively, of the total dollar
amount  of loans outstanding at December 31, 2005. Many of the properties in New
York State are located in New York City and are subject to rent control and rent
stabilization  laws,  which limit the ability of the property owners to increase
rents.  As  such,  these properties, are not affected by the general movement of
real estate values in the same manner as other income-producing properties. Many
of  the  properties  securing the Company's loans are located in sections of the
cities  in  its  market  areas  that  are  being  revitalized  or  redeveloped.

Loans are placed on nonaccrual status when principal or interest becomes 90 days
or  more  past  due  unless  the  loan  is  well  secured  and in the process of
collection.  At  December  31,  2005, $0.7 million of loans were on a nonaccrual
status,  compared  to  $4.6  million  at  December  31,  2004.  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 the underlying properties exceeded its recorded investment. At December
31, 2005 and 2004, there were no other impaired loans. With respect to two loans
on  nonaccual  status at December 31, 2005, the borrower declared bankruptcy and
the  Bankruptcy  Trustee  has sold the properties collateralizing the loans. The
proceeds  of  the  sale are sufficient to provide for repayment of the Company's
recorded  investment  and the Company is taking appropriate action to obtain the
proceeds  from  the  Bankruptcy  Trustee.

At  December 31, 2005, there were $2.6 million of loans ninety days past due and
still  accruing interest since they were deemed by management to be well secured
and  in  the  process  of  collection.  During  January 2006, one of those loans
amounting  to  $1.1  million was repaid in full. Based upon discussions with the
remaining  borrowers,  it is anticipated that the remaining loans will be repaid
in  full  or refinanced in the near term. There were no loans classified as such
at  December  31,  2004.  At  December  31,  2005, the allowance for loan losses
amounted  to  $15.2  million,  compared  to  $11.1 million at December 31, 2004.

In the last five years, the Company has experienced only one loan chargeoff from
its  lending  activities  amounting to $150,000 that was related to a commercial
real  estate  property  located in Florida that was acquired by the Bank through
foreclosure.  There  can be no assurance however, that a downturn in real estate
values  and  local  economic  conditions, as well as other factors such as those
discussed above, would not have an adverse impact on the Company's asset quality
and  future  level  of  nonperforming  assets,  chargeoffs  and  profitability.


                                       10
<PAGE>
The  following  table  sets  forth  information  regarding  the  activity in the
allowance  for  loan  losses:

<TABLE>
<CAPTION>
                                                                   At December 31,
                                                                   ---------------
($ in thousands)                                 2005         2004        2003       2002       2001
-------------------------------------------------------------------------------------------------------
<S>                                           <C>          <C>          <C>        <C>        <C>
Allowance at beginning of year (1)            $   11,106   $    6,580   $  4,611   $  3,380   $  2,768
Provision charged to operations                    4,075        4,526      1,969      1,274        612

Chargeoffs - commercial real estate loan (2)           -            -          -       (150)         -
Recoveries - commercial real estate loan (3)           -            -          -        107          -
                                              ---------------------------------------------------------
Net chargeoffs                                         -            -          -        (43)         -
-------------------------------------------------------------------------------------------------------
Allowance at end of year (1)                  $   15,181   $   11,106   $  6,580   $  4,611   $  3,380
-------------------------------------------------------------------------------------------------------
Total loans, net of deferred fees             $1,367,986   $1,015,396   $671,125   $489,912   $368,526
Average loans outstanding during the year     $1,206,089   $  867,724   $585,556   $439,241   $315,148
Ratio of allowance to net loans receivable          1.11%        1.09%      0.98%      0.94%      0.92%
Ratio of net chargeoffs to average loans               -            -          -          -          -
-------------------------------------------------------------------------------------------------------

<FN>
(1)  Nearly  all  the  allowance  for  loan  losses  is  allocated  to  real  estate  loans.
(2)  The  amount  for  2002  represents  a  chargeoff  taken  in  connection  with  the  transfer  of a
     nonperforming  loan  to  foreclosed  real  estate.
(3)  The  amount  for  2002  represents  proceeds received from the sale of collateral from a loan that
     was  charged  off  prior  to  1997.
</TABLE>

INVESTMENT ACTIVITIES

The  Company invests in securities after satisfying its liquidity objectives and
lending  commitments. The Company's investment policy is designed to provide and
maintain  liquidity, without incurring undue interest rate risk and credit risk.
As  a  result, the Company has historically purchased securities that are issued
directly  by  the  U.S.  government  or one of its agencies that have adjustable
rates  or that have fixed rates with short- to intermediate-maturity terms. Such
securities  have  a  significantly  lower  credit  risk  than the Company's loan
portfolio  as  well  as  lower  yields.  The  Company's  goal  is  to maintain a
securities  portfolio  with  a  short weighted-average life (one to five years),
which  allows for the resulting cash flows to either be reinvested in securities
at current market interest rates, used to fund loan growth or pay off short-term
borrowings  as  needed.  Securities  as  to which the Company has the intent and
ability  to  hold  to maturity are classified as held to maturity and carried at
amortized  cost.

The  table that follows depicts the amortized cost (carrying value), contractual
maturities  and  weighted-average  yields  regarding  the  Bank's  portfolio  of
securities  held  to maturity. The table excludes FHLB and FRB stock investments
required  by  the  Bank  in  order  to  be  a  member  of  the  FHLB  and  FRB.

<TABLE>
<CAPTION>
                                    Due                  Due                   Due
                                    ---                  ---                   ---
                                 One Year         After One Year to    After Five Years to
                                 --------         -----------------    -------------------
                                  or Less             Five Years             Ten Years              Total
                                  -------             ----------             ---------              -----
                           Carrying      Avg.    Carrying      Avg.    Carrying      Avg.    Carrying      Avg.
($in thousands)              Value      Yield      Value      Yield      Value      Yield      Value      Yield
-----------------------------------------------------------------------------------------------------------------
<S>                        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
At December 31, 2005:
---------------------
U.S. government agencies   $ 124,413      2.71%  $ 127,095      3.79%  $       -       -  %  $ 251,508      3.26%
At December 31, 2004:
---------------------
U.S. government agencies   $  84,586      1.81%  $ 164,302      2.59%  $       -       -  %  $ 248,888      2.33%
At December 31, 2003:
---------------------
U.S. government agencies   $  70,026      1.68%  $  82,797      1.81%  $       -       -  %  $ 152,823      1.75%
At December 31, 2002:
---------------------
U.S. government agencies   $  75,566      2.52%  $  70,128      2.25%  $       -       -  %  $ 145,694      2.39%
At December 31, 2001:
---------------------
U.S. government agencies   $  79,411      2.85%  $  19,746      3.02%  $       -       -  %  $  99,157      2.89%
-----------------------------------------------------------------------------------------------------------------
</TABLE>

From  time  to time, a securities available-for-sale portfolio may be maintained
by  the Bank for securities that are held for indefinite periods of time for use
by management as part of its asset/liability management strategy, or that may be
sold in response to changes in interest rates or other factors. These securities
are  classified  as  available for sale and are carried at estimated fair value.
The Bank has not had any securities classified as available for sale since 2002.
The  Company  does  not  engage  in  trading  activities.


                                       11
<PAGE>
The  Company  also  invests  in  various  money  market  instruments  (including
overnight  and  term  federal  funds,  short-term  bank  commercial  paper  and
certificate  of  deposits)  to  temporarily  invest  funds  resulting  from
deposit-gathering  activities,  normal  cash  flow  from operations and sales of
debentures.  Cash  and  short-term  investments at December 31, 2005 amounted to
$56.7  million  compared  to  $24.6  million  at  December  31,  2004.

SOURCES OF FUNDS

The  Bank's  primary  sources of funds consist of the following: retail deposits
obtained  through  its branch offices and through the mail, principal repayments
from  loans; maturities and calls of securities; and cash generated by operating
activities.  In  addition,  the  Bank  has from time to time borrowed funds on a
short-term  basis  from  the  FHLB  and  the  federal funds market to manage its
liquidity  needs.  The  Bank  has  also  received capital contributions from the
Holding  Company.

The Bank's deposit accounts are solicited from individuals, small businesses and
professional  firms  located  throughout the Bank's primary market areas through
the  offering  of a variety of deposit services. The Bank also uses its web site
on the internet: www.intervestnatbank.com to attract deposit customers from both
within  and outside its primary market areas. The Bank believes it does not have
a  concentration of deposits from any one source and that a large portion of its
depositors  are  residents  in  the  Bank's  primary  market  areas.

The  Bank has and expects to continue to rely heavily on certificates of deposit
(time deposits) as a source of funds. Total deposits amounted to $1.4 billion at
December  31,  2005 and time deposits represented 81%, or $1.1 billion, of those
deposits.  Additionally,  time deposits of $100,000 or more at December 31, 2005
totaled $371.8 million and included $40.5 million of brokered deposits. The Bank
began  accepting  brokered deposits as another source of funds beginning in June
2005.  Brokered  deposits are sold by an investment firm, which is paid a fee by
the  Bank  for  placing  the  deposit.  The  Bank  must  maintain  its status as
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.  The  Bank  needs  to pay competitive interest rates to
attract  and  retain  time  deposits  to  fund  its  loan  originations.

The  Bank's  deposit  services  include  the  following: certificates of deposit
(including  denominations  of  $100,000 or more); individual retirement accounts
(IRAs);  checking  and  other  demand  deposit  accounts;  negotiable  order  of
withdrawal (NOW) accounts; savings accounts; and money market accounts. Interest
rates  offered  by  the  Bank  on deposit accounts are normally competitive with
those  in the principal market areas of the Bank. In addition, the determination
of  rates  and terms on deposit accounts takes into account the Bank's liquidity
requirements, loan demand, growth goals, capital levels and federal regulations.
Maturity  terms,  service  fees and withdrawal penalties on deposit products are
reviewed  and  established  by  the  Bank  on  a  periodic  basis.

The  Bank  offers  internet banking services, ATM services with access to local,
state  and  national  networks,  wire  transfers,  direct deposit of payroll and
social  security  checks and automated drafts for various accounts. In addition,
the  Bank  offers  safe  deposit  boxes  to  its  customers in Florida. The Bank
periodically  reviews  the  scope of the banking products and services it offers
consistent  with  market  opportunities  and  its  available  resources.

The following table sets forth the distribution of deposit accounts by type:

<TABLE>
<CAPTION>
                                                                   At December 31,
                                                                   ---------------
                                  2005               2004               2003               2002              2001
                          -------------------  -----------------  -----------------  -----------------  -----------------
                                       % of               % of               % of               % of               % of
($ in thousands)            Amount     Total    Amount    Total    Amount    Total    Amount    Total    Amount    Total
-------------------------------------------------------------------------------------------------------------------------
<S>                       <C>         <C>      <C>       <C>      <C>       <C>      <C>       <C>      <C>       <C>
Demand                    $    9,188     0.7%  $  6,142     0.6%  $  6,210     0.9%  $  5,924     1.2%  $  5,550     1.5%
Interest checking              7,202     0.5     15,051     1.5      9,146     1.4     10,584     2.1     10,204     2.8
Savings                       17,351     1.3     27,359     2.8     30,784     4.6     30,174     6.0     24,624     6.8
Money Markets                223,075    16.2    200,549    20.2    162,214    24.0    134,293    26.5     80,594    22.2
Certificates of deposit    1,118,514    81.3    744,771    74.9    467,159    69.1    324,983    64.2    241,465    66.7
-------------------------------------------------------------------------------------------------------------------------
                          $1,375,330   100.0%  $993,872   100.0%  $675,513   100.0%  $505,958   100.0%  $362,437   100.0%
-------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       12
<PAGE>
At  December  31, 2005, 2004, 2003, 2002 and 2001, individual retirement account
deposits  totaled  $163.2  million, $113.3 million, $74.2 million, $53.3 million
and  $28.2  million  respectively,  nearly  all  of  which  were certificates of
deposit.

The following table sets forth total deposits by office:

<TABLE>
<CAPTION>
                                                At December 31,
                                                ---------------
($ in thousands)                 2005       2004      2003      2002      2001
--------------------------------------------------------------------------------
<S>                           <C>         <C>       <C>       <C>       <C>
New York Main Office          $  712,181  $497,717  $347,088  $233,312  $132,107
Florida Offices                  663,149   496,155   328,425   272,646   230,330
--------------------------------------------------------------------------------
                              $1,375,330  $993,872  $675,513  $505,958  $362,437
--------------------------------------------------------------------------------
</TABLE>

The following table sets forth certificate of deposits by maturity:

<TABLE>
<CAPTION>
                                                                   At December 31,
                                                                   ---------------
                                   2005               2004               2003               2002              2001
                           -------------------  -----------------  -----------------  -----------------  -----------------
                                        Wtd-               Wtd-               Wtd-               Wtd-               Wtd-
                                        Avg                Avg                Avg                Avg                Avg
                                       Stated             Stated             Stated             Stated             Stated
($ in thousands)             Amount     Rate     Amount    Rate     Amount    Rate     Amount    Rate     Amount    Rate
--------------------------------------------------------------------------------------------------------------------------
<S>                        <C>         <C>      <C>       <C>      <C>       <C>      <C>       <C>      <C>       <C>
Within one year            $  381,968    3.77%  $269,553    2.84%  $182,693    2.75%  $122,890    3.51%  $144,739    5.00%
Over one to two years         259,698    4.30    119,780    3.43     90,936    3.64     57,895    4.18     45,512    4.95
Over two to three years       126,546    4.13    134,409    4.48     30,094    4.43     31,281    5.53     14,954    5.82
Over three to four years      160,344    4.43     75,317    4.06     89,085    4.83     17,730    5.32     16,903    6.84
Over four years               189,958    4.69    145,712    4.48     74,351    4.20     95,187    4.92     19,357    5.61
--------------------------------------------------------------------------------------------------------------------------
                           $1,118,514    4.18%  $744,771    3.68%  $467,159    3.66%  $324,983    4.33%  $241,465    5.22%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

The following table sets forth the maturities of certificates of deposit in
denominations of $100,000 or more:

<TABLE>
<CAPTION>
                                                        At December 31,
                                                        ---------------
($ in thousands)                        2005       2004       2003       2002      2001
-----------------------------------------------------------------------------------------
<S>                                   <C>        <C>        <C>        <C>       <C>
Due within three months or less       $ 30,165   $ 15,761   $  7,514   $ 7,508   $10,332
Due over three months to six months     25,109     24,450      7,446     6,122     4,483
Due over six months to one year         65,077     40,351     31,459    13,033    18,401
Due over one year                      251,403    135,314     76,644    46,209    20,529
-----------------------------------------------------------------------------------------
Total                                 $371,754   $215,876   $123,063   $72,872   $53,745
-----------------------------------------------------------------------------------------
As a percentage of total deposits         27.0%      21.7%      18.2%     14.4%     14.8%
-----------------------------------------------------------------------------------------
</TABLE>

The following table sets forth net deposit flows:

<TABLE>
<CAPTION>
                                                For the Year Ended December 31,
                                                -------------------------------
($ in thousands)                          2005      2004      2003      2002     2001
---------------------------------------------------------------------------------------
<S>                                     <C>       <C>       <C>       <C>       <C>
Net increase before interest credited   $338,053  $292,667  $151,138  $126,230  $45,078
Net interest credited                     43,405    25,692    18,417    17,291   17,118
---------------------------------------------------------------------------------------
Net deposit increase                    $381,458  $318,359  $169,555  $143,521  $62,196
---------------------------------------------------------------------------------------
</TABLE>

From time to time, the Bank may borrow funds on an overnight or short-term basis
to  manage  its  liquidity  needs. At December 31, 2005, the Bank had agreements
with  correspondent  banks  whereby  it  could  borrow  up  to $16 million on an
unsecured  basis.  In  addition, as a member of the FHLB and FRB, the Bank could
also  borrow  from  these institutions on a secured basis. At December 31, 2005,
the Bank had available collateral consisting of investment securities to support
total  borrowings  of  $243 million from the FHLB and FRB. At December 31, 2005,
there  were  no  outstanding  borrowings  from  any  of  these  sources.

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

<TABLE>
<CAPTION>
                                                        For the Year Ended December 31,
                                                        -------------------------------
($ in thousands)                                        2005         2004         2003
------------------------------------------------------------------------------------------
<S>                                                  <C>          <C>          <C>
Balance at period end                                $        -   $   36,000   $        -
Maximum amount outstanding at any month end          $   17,000   $   36,000   $        -
Average outstanding balance for the period           $    4,871   $    1,914   $        -
Weighted-average interest rate paid for the period         2.85%        2.08%           -%
Weighted-average interest rate at period end                  -%        2.56%           -%
------------------------------------------------------------------------------------------
</TABLE>


                                       13
<PAGE>
Intervest  Mortgage  Corporation's  principal  sources  of  funds  for investing
consist  of  borrowings  (through the issuance of its debentures to the public),
mortgage  repayments  and  cash  flow  generated  from operations, including fee
income  received  from  the Bank for loan origination services performed for the
Bank.  From  time  to  time, it has also received capital contributions from the
Holding  Company.

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

The  following  table summarizes debentures and related accrued interest payable
outstanding:

<TABLE>
<CAPTION>
                                                                                  At December  31,
                                                                                  ----------------
($ in thousands)                                                    2005      2004      2003      2002      2001
------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>       <C>       <C>       <C>       <C>
Intervest Mortgage Corporation:
Subordinated debentures                                           $82,750   $88,850   $87,350   $74,000   $63,000
Accrued interest payable - debentures                               4,699     8,219    12,052    10,751     9,113
------------------------------------------------------------------------------------------------------------------
                                                                  $87,449   $97,069   $99,402   $84,751   $72,113
------------------------------------------------------------------------------------------------------------------
Weighted average interest rate paid for the year                     8.30%     7.94%     7.75%     8.09%     9.92%
------------------------------------------------------------------------------------------------------------------
Holding Company:
Subordinated debentures                                           $ 2,500   $ 2,500   $ 2,500   $ 3,500   $ 3,500
Subordinated debentures - convertible into Class A common stock     2,140     3,080     4,840     6,930     6,930
Subordinated debentures - trust preferred securities               61,856    61,856    30,928    15,464    15,464
Accrued interest payable - debentures                               1,551     1,914     2,461     3,123     2,367
------------------------------------------------------------------------------------------------------------------
                                                                  $68,047   $69,350   $40,729   $29,017   $28,261
------------------------------------------------------------------------------------------------------------------
Weighted average interest rate paid for the year                     7.25%     7.61%     9.13%     9.46%     8.93%
------------------------------------------------------------------------------------------------------------------
</TABLE>

EMPLOYEES

At  December  31,  2005, the Company employed 69 full-time equivalent employees,
compared to 64 at December 31, 2004. The Company provides various benefit plans,
including  group life, health and a 401(k) Plan. None of the Company's employees
are  covered  by  a  collective  bargaining  agreement  and the Company believes
employee  relations  are  good.

FEDERAL AND STATE TAXATION

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 Company
also files a franchise tax return in Delaware. The Bank files a state income tax
return  in  Florida.  All  the  returns  are  filed  on  a  calendar year basis.

Consolidated  returns have the effect of eliminating intercompany distributions,
including dividends, from the computation of consolidated taxable income for the
taxable  year in which the distributions occur. In accordance with an income tax
sharing  agreement,  income  tax  charges or credits are for financial reporting
purposes  allocated  among the Holding Company and its subsidiaries on the basis
of  their  respective  taxable  income  or  taxable loss that is included in the
consolidated  income  tax  return.

Banks  and  bank holding companies are subject to federal and state income taxes
in  essentially the same manner as other corporations. Florida taxes banks under
the  same  provisions  as  other corporations, while New York State and New York
City  taxable  income  is  calculated  under applicable sections of the Internal
Revenue  Code of 1986, as amended (the "Code"), with some modifications required
by  state  law.

Although  the Bank's federal income tax liability is determined under provisions
of  the  Code, which is applicable to all taxpayers, Sections 581 through 597 of
the  Code apply specifically to financial institutions. The two primary areas in
which  the  treatment  of  financial  institutions differs from the treatment of
other  corporations under the Code are in the areas of bond gains and losses and
bad  debt  deductions.  Bond  gains  and  losses  generated  from  the


                                       14
<PAGE>
sale  or  exchange  of portfolio instruments are generally treated for financial
institutions as ordinary gains and losses as opposed to capital gains and losses
for  other  corporations, as the Code considers bond portfolios held by banks to
be  inventory  in  a  trade  or  business  rather than capital assets. Banks are
allowed  a  statutory  method for calculating a reserve for bad debt deductions.
Based  on  its  asset  size,  a bank is permitted to maintain a bad debt reserve
calculated  on  an experience method, based on chargeoffs and recoveries for the
current  and  preceding  five  years, or a "grandfathered" base year reserve, if
larger.  Commencing in 2002, due to its asset size, the Bank no longer qualified
for this method and began using the direct write-off method in computing its bad
debt  deduction  for  tax  purposes.

As  a Delaware corporation not earning income in Delaware, the Company is exempt
from Delaware corporate income tax but is required to file an annual report with
and  pay an annual franchise tax to the State of Delaware. The tax is imposed as
a  percentage  of  the  capital  base  of  the  Company and is reported in other
expenses  on  the  Company's  consolidated  statement  of  earnings.

INVESTMENT IN SUBSIDIARIES

The  following  table  provides  information  regarding  the  Holding  Company's
subsidiaries:

<TABLE>
<CAPTION>
                                                 At December 31, 2005
($ in thousands)                        ------------------------------------    Subsidiaries
                                         Voting                   Equity in     Earnings (loss) for the
                                          % of        Total      Underlying     Year Ended December 31,
Subsidiary                                Stock     Investment   Net Assets        2005         2004          2003
-------------------------------------  -----------  -----------  -----------    -----------  -----------  ------------
<S>                                    <C>          <C>          <C>            <C>          <C>          <C>
Intervest National Bank                       100%  $   156,842  $   156,842    $    17,355  $    10,865  $     8,667
Intervest Mortgage Corporation                100%  $    26,616  $    26,616    $     3,089  $     2,354  $     1,759
Intervest Securities Corporation              100%  $       505  $       505    $        24  $        22  $        (6)
Intervest Statutory Trust I,II,III,IV         100%  $     1,856  $     1,856    $         -  $         -  $         -
</TABLE>

SUPERVISION  AND  REGULATION

The  supervision and regulation of bank or financial holding companies and their
subsidiaries is intended primarily for the protection of depositors, the deposit
insurance  funds of the FDIC, and the banking system as a whole, and not for the
protection  of  the bank or financial holding company stockholders or creditors.
The  banking  agencies  have  broad  enforcement  power over banks and financial
holding  companies,  including  the  power to impose substantial fines and other
penalties  for  violations  of  laws  and  regulations.

To  the extent that the following information describes statutory and regulatory
provisions,  it  is  qualified  in  its  entirety by reference to the particular
statutory  and  regulatory  provisions.  Any  change  in  the  applicable law or
regulation  may  have  a  material  effect  on the business and prospects of the
Holding  Company  and  its  subsidiaries.

Bank  Holding  Company  Regulation-  Intervest  Bancshares  Corporation
-----------------------------------------------------------------------

The  Holding Company is a bank holding company that has elected to be treated as
a  financial  holding  company  under  the Gramm-Leach Bliley Financial Services
Modernization  Act  of  1999,  referred to as the Modernization Act. The Holding
Company  is  subject  to supervision, regulation and examination by the Board of
Governors  of  the  Federal  Reserve  System,  referred  to  as  the  FRB.  The
Modernization Act, the Bank Holding Company Act of 1956, as amended, referred to
as the BHCA, and other federal laws subject financial and bank holding companies
to  particular restrictions on the types of activities in which they may engage,
and  to  a  broad  range  of  supervisory requirements and activities, including
regulatory  enforcement  actions  for  violations  of  laws  and  regulations.

Scope  of  Permissible  Activities.  Under  the  BHCA,  a  bank  holding company
generally  may  not,  subject  to  certain  exceptions, engage in, or acquire or
control, directly or indirectly, voting securities or assets of any company that
is  engaged  in  activities other than those of banking, managing or controlling
banks  or  certain  activities  that the FRB determines to be closely related to
banking,  managing  and  controlling banks as to the proper incident thereto. In
approving  acquisitions or the addition of activities, the FRB considers whether
the  acquisition  or  the  additional  activities  can reasonably be expected to
produce  benefits  to  the  public,  such  as  greater  convenience,  increased
competition and gains in efficiency, that outweigh such possible adverse effects
as  undue concentration of resources, decreased or unfair competition, conflicts
of  interest  or  unsound  banking  practices.


                                       15
<PAGE>
However,  the  Modernization  Act  permits  bank  holding  companies  to  become
financial  holding  companies  and  thereby  engage in, or acquire shares of any
company  engaged  in,  activities  that are financial in nature or incidental to
financial  activities.  "Financial  in  nature"  activities include, among other
matters,  securities  underwriting, dealings in or making a market in securities
and  insurance  underwriting  and  agency  activities.

A  bank  holding  company  may  become  a  financial  holding  company under the
Modernization  Act  if  each  of the depository institutions controlled by it is
"well-capitalized,"  is and remains well managed and has at least a satisfactory
rating  under  the  Community  Reinvestment  Act.  In  addition,  a bank holding
company must have an effective election filed with the FRB to become a financial
holding  company.  A bank holding company that falls out of compliance with some
of  these  requirements  may  be  required  to  cease  engaging  in  some of its
activities.

The  FRB  serves as the "umbrella" regulator for financial holding companies and
has  the power to examine new activities, regulate and supervise activities that
are  financial  in  nature  or  determined  to  be  incidental to such financial
activities.  Accordingly,  activities  of  subsidiaries  of  a financial holding
company  are  regulated  by  the  agency or authorities with the most experience
regulating  that  activity  as  it  is conducted in a financial holding company.

Source  of  Strength  for  Subsidiaries.  Under the Regulation Y, a bank holding
company  must  serve  as  a  source of financial and managerial strength for its
subsidiary  banks  and  must  not conduct its operations in an unsafe or unsound
manner.  If  the  FRB  believes  that  an  activity of a bank holding company or
control  of  a  nonbank  subsidiary  constitutes a serious risk to the financial
safety,  soundness or stability of a subsidiary bank or the bank holding company
and  is  inconsistent with sound banking practices, the FRB may require that the
bank  holding  company  terminate  the  activity or terminate its control of the
subsidiary  engaging  in  that  activity.

Mergers  and  Acquisitions  by  Bank  Holding  Companies.  Subject  to  certain
exceptions,  the  BHCA  requires  every bank holding company to obtain the prior
approval  of  the  FRB  before the bank holding company may merge or consolidate
with  another  bank  holding  company,  acquire  all or substantially all of the
assets  of  any bank, or, direct or indirect, ownership or control of any voting
securities  of  any  bank or bank holding company, if after such acquisition the
bank  holding company would control, directly or indirectly, more than 5% of the
voting  securities  of  such  bank  or  bank  holding company. In approving bank
acquisitions  by  bank  holding  companies,  the FRB is required to consider the
financial  and  managerial  resources  and  future prospects of the bank holding
company and the banks concerned, the convenience and needs of the communities to
be  served,  and  various  competitive  factors.

Anti-Tying  Restrictions.  Subject to certain exceptions, a bank holding company
and  its subsidiaries are prohibited from engaging in certain tying arrangements
in  connection  with  any  extension  of  credit,  lease  or sale of property or
furnishing  of  services.

Capital  Adequacy.  The  FRB has promulgated capital adequacy guidelines for all
bank  holding  companies with consolidated assets in excess of $150 million. The
FRB's  capital  adequacy  guidelines  are  based  upon  a  risk-based  capital
determination,  whereby  a bank holding company's capital adequacy is determined
by assigning different categories of assets and off-balance sheet items to broad
risk  categories.

The  guidelines  divide  the  qualifying total capital of a bank holding company
into Tier I capital elements (core capital elements) and Tier 2 capital elements
(supplementary  capital elements). Tier I capital consists primarily of, subject
to  certain  limitations, common stock, noncumulative perpetual preferred stock,
minority  interests  in consolidated subsidiaries and qualifying trust preferred
securities;  goodwill  and  certain  other  intangibles are excluded from Tier I
capital.  Tier  2  capital  may  consist  of, subject to certain limitations, an
amount  equal to the allowance for loan and lease losses, limited other types of
preferred  stock  not included in Tier I capital, hybrid capital instruments and
term  subordinated  debt.  The  Tier I capital must comprise at least 50% of the
qualifying  total  capital  categories.

Every  bank holding company has to achieve and maintain a minimum Tier I capital
ratio  of  at  least  4%  and  a  minimum  total capital ratio of at least 8% of
weighted-risk  assets.  In  addition,  bank  holding  companies  are required to
maintain  a minimum ratio of Tier 1 capital to average total consolidated assets
(leverage  capital  ratio)  of  at  least  3%  for strong banks and bank holding
companies  and  a  minimum  leverage  ratio  of  at  least 4% for all other bank


                                       16
<PAGE>
holding companies. As of December 31, 2005, the Holding Company's Tier I capital
ratio  and  total capital were 12.39% and 14.42%, respectively, and its leverage
capital  ratio  was  10.85%.

Dividends.  As  a  holding company that does not, as an entity, currently engage
in  separate  business  activities  of  a material nature, the Holding Company's
ability  to  pay  cash  dividends depends upon the cash dividends and management
fees  received  from  Intervest  National Bank and management fees received from
Intervest Mortgage Corporation. The Holding Company must first pay its operating
and interest expenses from funds it receives from its subsidiaries. As a result,
stockholders  may  receive  cash  dividends from the Holding Company only to the
extent  that  funds  are available after payment of the aforementioned expenses.
In addition, the FRB generally prohibits a bank holding company from paying cash
dividends  except  out  of its net income, provided that the prospective rate of
earnings  retention  appears  consistent with the bank holding company's capital
needs,  asset  quality  and  overall  financial  condition.

Control  Acquisitions.  The  Bank  Control  Act  prohibits  a person or group of
persons  from  acquiring  "control" of a bank holding company unless the FRB has
been  notified  and  has  not  objected  to  the transaction. Under a rebuttable
presumption established by the FRB, the acquisition of 10% or more of a class of
voting  securities  of  a  bank  holding  company  with  a  class  of securities
registered  under  Section  12 of the Exchange Act, such as us, would, under the
circumstances set forth in the presumption, constitute acquisition of control of
such  company.

In  addition,  any  entity  is required to obtain the approval of the FRB before
acquiring  25% (5% in the case of an acquirer that is a bank holding company) or
more  of  our  outstanding  voting  securities.

Enforcement  Authority.  The  FRB  may impose civil or criminal penalties or may
institute  a  cease-and-desist  proceeding,  in  accordance  with  the Financial
Institutions  Supervisory  Act  of  1966,  as  amended,  for  the  violation  of
applicable  laws  and  regulations.

The  Holding  Company  is  also  under  the  jurisdiction  of the Securities and
Exchange  Commission  (SEC) and various state securities commissions for matters
related  to  the  offering and sale of its securities, and is subject to the SEC
rules and regulations relating to periodic reporting, reporting to shareholders,
proxy  solicitation  and  insider  trading.

Bank  Regulation  -  Intervest  National  Bank
----------------------------------------------

Intervest  National  Bank  is  a  nationally  chartered banking association, the
deposits of which are insured up to applicable limits by the Bank Insurance Fund
of  the  FDIC.  The Bank is subject to the examination by the OCC, as the Bank's
primary regulator, and, by virtue of the insurance of the Bank's deposits, it is
also subject to the supervision and regulation of the FDIC.  Because the Bank is
a  member of the Federal Reserve System, it is subject to regulation pursuant to
the  Federal  Reserve  Act.  In  addition, because the FRB regulates the Holding
Company,  as  described  above,  the  FRB  also has supervisory authority, which
directly  affects  the  Bank.

Transactions  with  Affiliates.  Under  Section  23A of the Federal Reserve Act,
subject  to  certain  exemptions,  the  Bank may engage in a transaction with an
affiliate,  including,  but not limited to, a loan or extension of credit to the
affiliate, a purchase of or an investment in securities issued by the affiliate,
a purchase of assets from the affiliate or the issuance of a guarantee or letter
of  credit  on  behalf  of  an  affiliate,  only  if the aggregate amount of the
transactions  with  one  affiliate or with all affiliates does not exceed 10% or
20%,  respectively,  of  the  capital stock and surplus of the Bank. The Bank is
also generally prohibited from purchasing a low-quality asset from an affiliate.
Any  transaction  between  the  Bank  and  an  affiliate  must  be  on terms and
conditions  that are consistent with safe and sound banking practices. Each loan
or  extension of credit to, or guarantee, acceptance, or letter of credit issued
on  behalf  of,  an  affiliate  by  the  Bank must be secured at the time of the
transaction  by  certain  collateral, as specified in Section 23A of the Federal
Reserve  Act.

Under  Section  23B  of  the  Federal  Reserve  Act,  the  Bank  can  engage  in
transactions  with  affiliates  only on terms and under circumstances, including
credit  standards,  that are substantially the same, or at least as favorable to
the  Bank,  as  those  prevailing  at  the time for comparable transactions with
nonaffiliated companies, or, in the absence of comparable transactions, on terms
and under circumstances, including credit standards, that in good faith would be
offered  to  nonaffiliated  companies.  The term "affiliate" with respect to the
Bank  includes  any company that controls the Bank and any other company that is
controlled  by  the  company  that


                                       17
<PAGE>
controls the Bank (i.e., the term affiliate includes the Holding Company and its
subsidiaries).

Loans  to  Insiders.  Under  Regulation O, the Bank is prohibited from extending
credit  to  its  executive officers, directors, principal shareholders and their
related  interests, collectively referred to as "insiders," unless the extension
of  credit  is  made  on  substantially  the  same  terms and in accordance with
underwriting procedures that are not less stringent than those prevailing at the
time for comparable transactions with unrelated persons.  Regulation O also sets
limits  on the amount of the loan extended to insiders and stipulates what types
of loans should be reported to and/or approved by the Bank's board of directors.

Reserve  Requirements. Pursuant to Regulation D, the Bank must hold a percentage
of certain types of deposits as reserves in the form of vault cash, as a deposit
in  a  Federal  Reserve  Bank  or  as  a  deposit in a pass-through account at a
correspondent institution.  For net transaction accounts in 2006, the first $7.8
million  will  be  exempt from reserve requirements.  A 3% reserve ratio will be
assessed on net transaction accounts over $7.8 million up to and including $48.3
million, and a 10% reserve ratio will be assessed on net transaction accounts in
excess  of  $48.3  million.

Dividends. All dividends paid by the Bank are paid to the Holding Company as the
sole  shareholder of the Bank. The general dividend policy of the Bank is to pay
dividends  at  levels  consistent  with  maintaining  liquidity  and  preserving
applicable  capital  ratios  and  debt servicing obligations. Under the National
Bank  Act  and  the  OCC  regulations, the Bank's board of directors may declare
dividends  to  be  paid out of the Bank's undivided profits.  However, until the
capital  surplus  equals  or exceeds the capital stock of the Bank, no dividends
can  be  declared unless, in the case of a quarterly or semiannual dividend, the
Bank  transfers  10% of its net income for the preceding two quarters to capital
surplus,  and  in  the case of an annual dividend, the Bank transfers 10% of its
net  income for the preceding four quarters to capital surplus.  In addition, no
dividends  may  be  paid  without  the OCC's approval if the total amount of all
dividends, including the proposed dividend, declared by the Bank in any calendar
year  exceeds  the total of the Bank's retained net income of that year to date,
combined  with  its  retained  net income of the preceding two years.  Also, the
Bank  may  not  declare  or pay any dividends if, after making the dividend, the
Bank  will be "undercapitalized" and no cash dividend may be paid by the Bank if
it  is  in  default  of  any  deposit  insurance  assessment  due  to  the FDIC.

Capital  Adequacy.  In  general, the capital adequacy regulations which apply to
national  banks,  such as the bank, are similar to the FRB guidelines, which are
discussed  above, promulgated with respect to bank holding companies.  Under the
OCC regulations and guidelines, all banks must maintain a minimum ratio of total
capital  (after deductions) to risk-weighted assets of 8%, total assets leverage
ratio  (i.e., Tier 1 capital in an amount equal to at least 3% of adjusted total
assets) and Tier 1 leverage ratio.  For all but the most highly rated banks, the
minimum  Tier  1 leverage ratio is 4%.  The Bank's Tier 1 leverage capital ratio
at  December  31,  2005  was  10.04%.

Prompt  Corrective Action. Banks are subject to restrictions on their activities
depending  on  their  level  of  capital.  The  OCC  "prompt  corrective action"
regulations  divide  banks  into  five  different categories, depending on their
level  of  capital:  (i) a well-capitalized bank; (ii) an adequately capitalized
bank;  (iii)  an  undercapitalized  bank;  (iv) a significantly undercapitalized
bank;  and  (v)  a  critically  undercapitalized  bank.

Under  these  regulations, a bank is deemed to be "well-capitalized" if it has a
total risk-based capital ratio of 10% or more, a Tier 1 risk-based capital ratio
of 6% or more and a leverage ratio of 5% or more, and if the bank is not subject
to  an order or capital directive to meet and maintain a specific capital level.
A  bank  is  deemed  to be "adequately capitalized" if it has a total risk-based
capital ratio of 8% or more, a Tier 1 risk-based capital ratio of 4% or more and
a  leverage  ratio  of 4% or more (unless the bank is rated 1 in its most recent
examination,  in which instance it must maintain a leverage ratio of 3% or more)
and does not meet the definition of a well-capitalized bank. A bank is deemed to
be  "undercapitalized"  if  it has a total risk-based capital ratio of less than
8%,  a  Tier  1 risk-based capital ratio of less than 4%, or a leverage ratio of
less  than  4%  or  3%  or  less  than 3%, as applicable. A bank is deemed to be
"significantly  undercapitalized"  if it has a total risk-based capital ratio of
less  than  6%,  a Tier 1 risk-based capital ratio of less than 3% or a leverage
ratio  of  less than 3%. A bank is deemed to be "critically undercapitalized" if
it  has a ratio of tangible equity to total assets that is equal to or less than
2%.  In  addition,  the


                                       18
<PAGE>
OCC  may  reclassify  a  well-capitalized bank as adequately capitalized and may
require  an  adequately  capitalized  or an undercapitalized bank to comply with
certain  supervisory  actions,  except  that  the  OCC  may  not  reclassify  a
significantly  undercapitalized  bank  as a critically undercapitalized bank, if
the  OCC  has determined that the bank is in unsafe or unsound condition or that
the  bank  has  not  corrected  a  less-than-satisfactory  rating for any of the
categories  of asset quality, management, earnings or liquidity. At December 31,
2005,  the  Bank  met  the  definition  of  a  well-capitalized  institution.

If  a  bank is classified as undercapitalized, significantly undercapitalized or
critically undercapitalized, it is required to submit a capital restoration plan
to  the  OCC  and becomes subject to certain requirements restricting the bank's
payment  of  capital  distributions,  management fees and compensation of senior
executive  officers of the bank, requiring that the OCC monitor the condition of
the  bank, restricting the growth of the bank's assets, requiring prior approval
of  certain  expansion  proposals  and  restricting  the activities of the bank.

Deposit  Insurance Assessments. The Bank's deposits are insured up to applicable
limits  through the Bank Insurance Fund of the FDIC (the "BIF"). The Bank, along
with other depository institutions, must pay a semiannual assessment, determined
in  accordance  with  the FDIC regulations, to maintain the reserve ratio of the
deposit  insurance  fund at the designated reserve ratio. The FDIC established a
risk-based  assessment  system  to  calculate  the  depository  institution's
assessment.  The  FDIC determines the assessment rate on the basis of the bank's
assessment  risk classification composed of capital factors and supervisory risk
factors.  Depository  institutions  are  assigned  to one of the following three
capital  groups  in  connection  with  their  capital  factors:  group  1  -
well-capitalized,  group  2  -  adequately  capitalized  and  group  3  -
undercapitalized.  Depository  institutions  are  also  divided  into  three
supervisory  subgroups:  (i)  subgroup  A,  which  consists of financially sound
institutions  with  only a few minor weaknesses, (ii) subgroup B, which consists
of  institutions  that  demonstrate  weaknesses  which,  if not corrected, could
result  in  significant  deterioration  of the institution and increased risk of
loss to the insurance fund, and (iii) subgroup C, which consists of institutions
that  pose  a  substantial  probability  of  loss  to  the insurance fund unless
effective  corrective  action  is  taken.  Under the FDIC's risk-based insurance
system, BIF-insured institutions are currently assessed premiums of between zero
and  $0.27  per  $100  of  eligible  deposits,  depending upon the institution's
capital  position  and  other supervisory factors. Legislation also provides for
assessments  against  BIF  insured institutions that will be used to pay certain
financing  corporation  ("FICO")  obligations.  In addition to any BIF insurance
assessments,  BIF-insured  banks  are  expected  to  make  payments for the FICO
obligations  currently  equal  to  an  estimated  $0.0134  per  $100 of eligible
deposits  each  year.  The  assessment  is  determined  quarterly.

Community  Reinvestment.  Under the Community Reinvestment Act of 1977, referred
to as the CRA, and regulations promulgated under the CRA, the bank should have a
record  of  helping to meet the credit needs of its local communities, including
low-  and  moderate-income  neighborhoods,  consistent  with  the safe and sound
operations  of  the  bank,  and  the  FDIC will take such record into account in
considering  certain  bank's  applications.  The  FDIC  applies  the  lending,
investment and service tests to assess the bank's CRA performance and assigns to
a  bank  a  rating  of  "outstanding,"  "satisfactory,"  "needs  to improve," or
"substantial  noncompliance"  on the basis of the bank's performance under these
tests.  All  banks  are  required  to  publicly  disclose  their CRA performance
ratings.

Enforcement  Authority.  The  FDIC and other federal banking agencies have broad
enforcement  powers,  including,  but  not  limited  to,  the power to terminate
deposit  insurance,  impose  substantial  fines  and  other  civil  and criminal
penalties.

Regulation  of  Lending  Activity.  In  addition  to  the  laws  and regulations
discussed  above,  the  Bank  is  also  subject  to  certain  consumer  laws and
regulations,  including,  but not limited to, the Truth in Lending Act, the Real
Estate  Settlement Procedures Act, the Equal Credit Opportunity Act of 1974, and
their  associated  Regulations  Z,  X  and  B,  respectively.

Monetary Policy and Economic Control. Commercial banking is affected not only by
general  economic  conditions,  but  also  by  the monetary policies of the FRB.
Changes in the discount rate on member bank borrowing, availability of borrowing
at  the  "discount window," open market operations, the imposition of changes in
reserve


                                       19
<PAGE>
requirements  against  member banks' deposits and assets of foreign branches and
the imposition of and changes in reserve requirements against certain borrowings
by  banks  and  their  affiliates are some of the instruments of monetary policy
available  to  the FRB. These monetary policies are used in varying combinations
to  influence  overall  growth  and distributions of bank loans, investments and
deposits,  and  this  use  may affect interest rates charged on loans or paid on
deposits.  The  monetary policies of the FRB, which have a significant effect on
the  operating  results  of commercial banks, are influenced by various factors,
including  inflation,  unemployment,  short-term  and  long-term  changes in the
international  trade  balance  and  in  the fiscal policies of the United States
Government.  Future  monetary  policies  and  the effect of such policies on the
future  business  and  earnings  of  the  Company  cannot  be  predicted.

Other  Regulation  -  Mortgage  Lending
---------------------------------------

Investment  in  mortgages  on  real  properties  presently  may  be  affected by
government regulation in several ways.  Residential properties may be subject to
rent  control  and  rent  stabilization laws. As a consequence, the owner of the
property  may  be restricted in its ability to raise the rents on apartments. If
real  estate  taxes,  fuel  costs and maintenance of and repairs to the property
were  to  increase substantially, and such increases are not offset by increases
in  rental income, the ability of the owner of the property to make the payments
due  on  the  mortgage  as  and  when  they are due might be adversely affected.

Laws  and  regulations  relating  to  asbestos  have  been  adopted  in  many
jurisdictions,  including New York City, which require that whenever any work is
undertaken  in  a property in an area in which asbestos is present, the asbestos
must  be  removed  or  encapsulated in accordance with such applicable local and
federal laws and regulations.  The cost of asbestos removal or encapsulation may
be  substantial,  and  if there were not sufficient cash flow from the property,
after debt service on mortgages, to fund the required work, and the owner of the
property  fails  to fund such work from other sources, the value of the property
could  be adversely affected, with consequent impairment of the security for the
mortgage.

Laws  regulating  the  storage,  disposal  and  clean  up  of hazardous or toxic
substances  at  real  property have been adopted at the federal, state and local
levels.  Such  laws  may  impose  a  lien  on  the real property superior to any
mortgages  on  the  property.  In  the  event  such  a  lien were imposed on any
property  which  serves  as  security  for  a mortgage owned by the Company, the
security  for  such  mortgage  could  be  impaired.

The  lending  business  of  the  Company  is regulated by federal, state and, in
certain  cases,  local  laws,  including,  but  not limited to, the Equal Credit
Opportunity  Act  of 1974 and Regulation B. The Equal Credit Opportunity Act and
Regulation  B  prohibit  creditors from discriminating against applicants on the
basis  of  race,  color,  religion, national origin, sex, age or marital status.
Regulation  B  also  restricts  creditors  from  obtaining  certain  types  of
information  from  loan applicants. Among other things, it also requires lenders
to  advise  applicants  of  the  reasons  for  any  credit  denial. Equal Credit
Opportunity  Act  violations  can  also  result  in  fines,  penalties and other
remedies.

The  Company  is  also  subject  to various other federal, state and local laws,
rules  and  regulations governing, among other things, the licensing of mortgage
lenders  and  servicers.  The  Company  must comply with procedures mandated for
mortgage  lenders  and  servicers,  and  must  provide  disclosures  to  certain
borrowers. Failure to comply with these laws, as well as with the laws described
above,  may result in civil and criminal liability, termination or suspension of
licenses,  rights  of  rescission  for  mortgage  loans,  lawsuits  and/or
administrative  enforcement  actions.

NonBank  Subsidiaries
---------------------

All  of the Company's subsidiaries, including Intervest Mortgage Corporation and
Intervest  Securities  Corporation,  as  subsidiaries  of a holding company, are
subject  to  regulation  by  the  FRB.  Intervest  Securities  Corporation, as a
registered  broker-dealer  and  member  firm  of  the  NASD,  is also subject to
regulation  by both the SEC and the NASD. It is also subject, in connection with
its  activities  in various states, to the supervision and regulation by various
state  securities  regulators.

Interstate  Banking  and  Other  Recent  Legislation
----------------------------------------------------

The  Riegle-Neal  Interstate  Banking  and  Branching  Efficiency  Act  of  1994
facilitates  the interstate expansion and consolidation of banking organizations
by  permitting  bank  holding  companies  that  are  adequately  capitalized and


                                       20
<PAGE>
managed  to acquire banks located in states outside their home states regardless
of whether such acquisitions are authorized under the law of the host state. The
Act  also  permits  interstate  mergers  of banks, with some limitations and the
establishment  of  new branches on an interstate basis provided that such action
is  authorized  by the law of the host state. The Gramm-Leach-Bliley Act of 1999
permits  banks,  securities  firms  and insurance companies to affiliate under a
common holding company structure. In addition to allowing new forms of financial
services  combinations,  this Act clarifies how financial services conglomerates
will  be  regulated  by  the  different  federal  and  state  regulators.  The
Gramm-Leach-Bliley  Act amended the BHCA and expanded the permissible activities
of  certain  qualifying  bank  holding  companies,  known  as  financial holding
companies.  In addition to engaging in banking and activities closely related to
banking,  as  determined  by  the  FRB by regulation or order, financial holding
companies may engage in activities that are financial in nature or incidental to
financial  activities  that are complementary to a financial activity and do not
pose  a  substantial risk to the safety and soundness of depository institutions
or  the  financial  system  generally.  Under  the  Gramm-Leach-Bliley  Act, all
financial  institutions,  including  the  Company and the Bank, were required to
develop  privacy  policies, restrict the sharing of nonpublic customer data with
nonaffiliated  parties  at  the customer's request, and establish procedures and
practices  to  protect  customer  data  from  unauthorized  access.

Under  the International Money Laundering Abatement and Anti-Terrorism Financing
Act  of  2001  (adopted  as  Title  III  of  the USA PATRIOT Act), all financial
institutions  are  subject  to  additional  requirements  to  collect  customer
information,  monitor  transactions  and  report certain information to U.S. law
enforcement  agencies  concerning  customers and their transactions. In general,
accounts  maintained  by or on behalf of "non-United States persons," as defined
in  the  Act, are subject to particular scrutiny.  Correspondent accounts for or
on  behalf  of  foreign banks with profiles that raise money-laundering concerns
are  subject  to  even  greater  scrutiny,  and correspondent accounts for or on
behalf  of  foreign  banks  with  no physical presence in any country are barred
altogether.  Additional  requirements  are  imposed  by  this  Act  on financial
institutions,  all  with  a  view  towards encouraging information sharing among
financial  institutions,  regulators  and  law  enforcement  agencies. Financial
institutions  are  also  required  to adopt and implement "anti-money-laundering
programs."

The  Sarbanes-Oxley  Act  of  2002  implements  legislative  reforms intended to
address  corporate  and  accounting  fraud.  In  addition  to establishing a new
accounting oversight board to enforce auditing, quality control and independence
standards,  the  bill  restricts  auditing and consulting services by accounting
firms.  To  ensure auditor independence, any nonaudit services being provided to
an  audit  client  will  require pre-approval by a company's audit committee. In
addition,  audit  partners must be rotated. The Act requires chief executive and
chief  financial  officers,  or  their equivalent, to certify to the accuracy of
reports  filed  with  the  SEC,  subject  to  civil  and  criminal penalties. In
addition,  under  the  Act, legal counsel will be required to report evidence of
material  violation  of  the  securities laws or a breach of fiduciary duty by a
company  to  its  chief  executive  officer  and,  if  such  officer  does  not
appropriately  respond,  to  report  such evidence to the audit committee of the
board  or  the  board itself. Executives are also prohibited from trading during
retirement  plan "blackout" periods, and loans to executives are restricted. The
Act  accelerates  the  time  frame  for  disclosures  by  public  companies, and
directors  and executive officers must also provide information for most changes
in  ownership  of company securities within two business days of the change. The
Act  also  prohibits  any  officer  or  director or any other person under their
direction  from  taking any action to fraudulently induce, coerce, manipulate or
mislead any independent public or certified accountant engaged in the audit of a
company's  financial  statements  for  the  purpose  of  rendering the financial
statement's  materially  misleading.  The Act also required the SEC to prescribe
rules requiring the inclusion of an internal report and assessment by management
in  the  annual  report  to  shareholders.

Additional legislative and regulatory proposals have been made and others can be
expected.  These  include  proposals  designed  to improve the overall financial
stability  of the United States banking system, and to provide for other changes
in  the  bank  regulatory  structure,  including  proposals to reduce regulatory
burdens  on  banking  organizations  and  to  expand  the nature of products and
services  banks  and  bank  holding  companies may offer.  It is not possible to
predict  whether  or  in  what form these proposals may be adopted in the future
and,  if  adopted,  what  their  effect  will  be  on  the  Company.


                                       21
<PAGE>
ITEM 1A.  RISK FACTORS

References  in  this  section  to  "we," "us," "our," the "holding company," and
"Intervest"  refer  to  Intervest  Bancshares  Corporation  and its consolidated
subsidiaries,  unless  otherwise  specified.  References  to  the "bank" and our
"mortgage  lending  subsidiary"  refer  to our principal operating subsidiaries,
Intervest  National  Bank  and  Intervest  Mortgage  Corporation,  respectively.

The  following  risk  factors  contain  important  information  about us and our
business  and  should  be  read  in  their  entirety.  Additional  risks  and
uncertainties  not  known  to us or that we now believe to be not material could
also  impair  our  business.  If  any of the following risks actually occur, our
business,  results  of  operations  and  financial  condition  could  suffer
significantly.  As  a result, the market price of our common stock could decline
and  you  could  lose  all  of  your  investment.

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

Our  success is largely dependent on the business expertise and relationships of
a  small  number of our executive officers and other key employees. Our chairman
and  chief  executive  officer,  who  has  been  and remains instrumental to our
success, is 87 years of age. If the services of any of our executive officers or
other  key  employees  were  to  become  unavailable for any reason, the growth,
performance and operation of our company and its subsidiaries might be adversely
affected  because  of  their  skills  and  knowledge  of the markets in which we
operate,  years of real estate lending experience and the difficulty of promptly
finding  qualified  replacement  personnel.  As  a  result,  our  ability  to
successfully  grow  our business will depend, in part, on our ability to attract
and  retain  additional  qualified  officers  and  employees.

OUR  LOANS  ARE  HIGHLY  CONCENTRATED  IN COMMERCIAL REAL ESTATE AND MULTIFAMILY
MORTGAGE  LOANS,  INCREASING  THE  RISK  ASSOCIATED  WITH  OUR  LOAN  PORTFOLIO.

Nearly  all (99.9%) of our loan portfolio is comprised of commercial real estate
and  multifamily  mortgage  loans,  including  loans  on  substantially  vacant
properties  and  vacant  land.  This concentration increases the risk associated
with  our  loan  portfolio.  Commercial  real  estate  and multifamily loans are
generally  considered riskier than many other kinds of loans, like single family
residential  real  estate  loans,  since these loans tend to involve larger loan
balances  to single borrowers and repayment of loans secured by income-producing
property  is typically dependent upon the successful operation of the underlying
real  estate.  Additionally,  loans  on vacant land typically do not have income
streams  and  depend  upon  other  sources  of  cash  flow from the borrower for
repayment.  Our  average  real estate loan size was $2.6 million at December 31,
2005  and  we expect that it will continue to increase in the future. Regardless
of  the  underwriting criteria we utilize, losses may be experienced as a result
of various factors beyond our control, including, among other things, changes in
market  and  economic  conditions affecting the value of our loan collateral and
problems  affecting  the  credit  and  business  of  our  borrowers.

AN  ECONOMIC DOWNTURN IN NEW YORK OR FLORIDA COULD HINDER OUR ABILITY TO OPERATE
PROFITABLY  AND  HAVE  AN  ADVERSE  IMPACT  ON  OUR  OPERATIONS.

The  properties  collateralizing  our mortgage loans are heavily concentrated in
New  York  City  and Florida, our two primary lending market areas. Accordingly,
our  business  and  operations  are  vulnerable to downturns in the economies of
those  geographic  areas.  At  December  31,  2005,  mortgages  representing
approximately  65%  and 24% of the principal balance of our total loan portfolio
were  on properties located in New York State and Florida, respectively. A large
number  of the loans in New York are secured by properties located in Manhattan,
Brooklyn  and  the  Bronx. A large number of the loans in Florida are secured by
properties located in Clearwater, Tampa, Fort Lauderdale, Miami, Orlando and St.
Petersburg.  The  concentration  of our loans in these areas subjects us to risk
that  a  downturn  in  the economy or recession in those areas could result in a
decrease  in  loan originations and increases in delinquencies and foreclosures,
which  would more greatly affect us than if our lending were more geographically
diversified. Many of the properties located in the New York City area underlying
our  mortgage  loans  are  subject  to rent control and rent stabilization laws,
which  limit the ability of property owners to increase rents, which may in turn
limit the borrowers' ability to repay those mortgage loans. In addition, since a
large  portion of our portfolio is secured by properties located in Florida, the
occurrence  of  a  natural  disaster,  such  as  a


                                       22
<PAGE>
hurricane,  could  result  in  a  decline in loan originations, a decline in the
value  or  destruction  of  mortgaged  properties and an increase in the risk of
delinquencies,  foreclosures or loss on loans originated by us in that state. We
may  suffer  losses  if  there  is  a  decline  in  the  value of the properties
underlying  our  mortgage  loans  which  would  have  an  adverse  impact on our
operations.

OUR  HISTORICAL  LEVELS OF BALANCE SHEET GROWTH AND FINANCIAL PERFORMANCE TRENDS
MAY  NOT  CONTINUE  IF  OUR  GROWTH  STRATEGY  IS  NOT  SUCCESSFUL.

A  key  component  of our business strategy has been and will continue to be our
growth,  including  the attraction of additional deposits and the origination of
additional  loans.  Our ability to sustain continued growth depends upon several
factors  outside  of our control, including economic conditions generally and in
our  market areas in particular, as well as interest rate trends. We can provide
no  assurance that we will continue to be successful in increasing the volume of
our  loans  and  deposits  at  acceptable risk and asset quality levels and upon
acceptable  terms,  while managing the costs and implementation risks associated
with this growth strategy. There can be no assurance that further expansion will
be profitable or that we will continue to be able to sustain our historical rate
of  growth,  either  through  internal  growth or through other expansion of our
banking  markets. In addition, we have relied historically on a relatively small
number  of  key executives in relation to the size of our company, and there can
be no assurance that we will be able to manage anticipated future growth without
additional  management  staff.  Our  growth  strategy  may also limit short-term
increases  in our profitability, as we dedicate resources to the building of our
infrastructure.

OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS WILL SUFFER IF WE DO
NOT  CONTINUALLY IDENTIFY AND INVEST IN MORTGAGE LOANS OR OTHER INSTRUMENTS WITH
RATES  OF  RETURN  ABOVE  OUR  COST  OF  FUNDS.

Our  profitability  depends  primarily  on the generation of net interest income
which  is dependent on the interest rate spread, which is the difference between
yields  earned  on  our  interest-earning  assets  and  the  rates  paid  on our
interest-bearing  liabilities.  As a result, our success, in large part, depends
on  our  ability  to  invest  a substantial percentage of our assets in mortgage
loans with rates of return that exceed our cost of funds. We may also experience
lower  rates  of  return  from  the  investment of our assets, including but not
limited  to  proceeds  from  the  prepayment  of loans, in liquid assets such as
government  securities  and overnight funds, which would have a material adverse
effect  on  our  business, financial condition or results of operations. Our net
interest  margin  has ranged from a low of 2.34% for 2000 to a high of 2.90% for
2003,  and  was  2.70%  for  the  year  ended  December  31,  2005.

CHANGES  IN  INTEREST  RATES  COULD  ADVERSELY  IMPACT  OUR  EARNINGS.

Like many financial institutions, we are subject to the risk of  fluctuations in
interest  rates.  A  significant  change in interest rates could have a material
adverse  effect  on  our  net  income.  Fluctuations  in  interest rates are not
predictable  or  controllable  and,  therefore, there can be no assurance of our
ability to maintain a consistent positive interest rate spread between the yield
earned on our interest-earning assets and the rates paid on our interest-bearing
liabilities.  There  can be no assurances that a sudden and substantial increase
in  interest rates may not adversely impact our earnings, to the extent that the
interest  rates borne by assets and liabilities do not change at the same speed,
to  the  same extent, or on the same basis. For a further discussion on interest
rate  risk,  see  the sections entitled "Asset and Liability Management" in this
report  on  Form  10-K.

IF  THE  PROPERTIES  UNDERLYING  MANY  OF  OUR MORTGAGE LOANS LOSE VALUE, WE MAY
SUFFER  LOAN  LOSSES.

Our  ability  to recover our investment in mortgage loans is solely or primarily
dependent  on  the  market value of the properties underlying our mortgage loans
because  many of our mortgages that we have originated, or will originate in the
future,  are  nonrecourse  or  limited  recourse. Under the terms of nonrecourse
mortgages,  the  owner  of  the property subject to the mortgage has no personal
obligation  to  repay  the  mortgage  note  which  the mortgage secures. In some
circumstances,  we  may  have limited recourse against the owner with respect to
liabilities  related  to  tenant  security  deposits,  proceeds  from  insurance
policies,  losses  arising under environmental laws and/or losses resulting from
waste  or  acts  of  malfeasance.  In  addition,  our  losses in connection with
delinquent and foreclosed loans may be more pronounced because most of our loans
do  not require repayment of a substantial part of the original principal amount
until maturity, and if borrowers default on their balloon payments or if we have
a  junior


                                       23
<PAGE>
lien  position, it may have a material adverse effect on our business, financial
condition  and  results  of  operations.  Additionally, since we tend to lend in
areas  that  are  in  the  process of being revitalized, properties securing our
loans  in  these  revitalizing  neighborhoods  may  be  more  susceptible  to
fluctuations  in property values than in more established areas. In the event we
are  required  to  foreclose on a property securing one of our mortgage loans or
otherwise  pursue  our remedies in order to protect our investment, there can be
no  assurance  that  we  will  recover funds in an amount equal to our projected
return  on our investment or in an amount sufficient to prevent a loss to us due
to  prevailing  economic  conditions,  real  estate  values  and  other  factors
associated with the ownership of real property. As a result, the market value of
the  real  estate or other collateral underlying our loans may not, at any given
time,  be  sufficient  to satisfy the outstanding principal amount of the loans.

WE  MAY  HAVE  HIGHER  LOAN  LOSSES  THAN WE HAVE ALLOWED FOR, IN WHICH CASE OUR
RESULTS  OF  OPERATIONS  AND  FINANCIAL  CONDITION  WILL  BE ADVERSELY AFFECTED.

We  maintain  an  allowance  for  loan losses in order to mitigate the effect of
possible  losses  inherent  in  our  loan portfolio. There is a risk that we may
experience  losses  which could exceed the allowance for loan losses we have set
aside.  In  determining  the size of the allowance, our management makes various
assumptions  and judgments about the collectibility of our loan portfolio, which
are  discussed  in  the section "Critical Accounting Policies" in this report on
Form  10-K.  If  our  assumptions and judgments prove to be incorrect or federal
regulators  require  us  to  increase our provision for loan losses or recognize
loan  chargeoffs,  we may have to increase our allowance for loan losses or loan
chargeoffs  which  could  have  an  adverse  effect on our operating results and
financial  condition.  There  can  be  no assurances that our allowance for loan
losses  will  be  adequate  to protect us against loan losses that we may incur.

WE  ARE  A  HIGHLY LEVERAGED COMPANY AND OUR INDEBTEDNESS COULD ADVERSELY AFFECT
OUR  FINANCIAL  CONDITION  AND  PREVENT  US  FROM CONTINUING TO GROW OUR BALANCE
SHEET.

At  December  31,  2005,  our borrowed funds (exclusive of deposits) and related
interest  payable  was  approximately $155.7 million. This level of indebtedness
could  make it difficult for us to satisfy all of our obligations to the holders
of  our  debt and could limit our ability to obtain additional debt financing to
fund  our  working  capital requirements. In addition, the indentures underlying
the subordinated debentures of our mortgage lending subsidiary contain financial
and  other  restrictive covenants that may limit its ability to incur additional
indebtedness.  Our  mortgage  lending  subsidiary has and expects to continue to
rely  on the issuance of its subordinated debentures in registered, best efforts
offerings  to  the public as a source of funds to support its loan originations.
The  inability  to  incur  additional  indebtedness  could  adversely affect our
business  and  financial  condition  by,  among  other  things,  limiting  our
flexibility in planning for, or reacting to, changes in our industry; placing us
at a competitive disadvantage with respect to our competitors who may operate on
a  less  leveraged  basis.  As  a  result,  this  may make us more vulnerable to
changes  in economic conditions and require us to dedicate a substantial portion
of  our  cash  flow  from operations to the repayment of our indebtedness, which
would reduce the funds available for other purposes which, in turn, could have a
negative  impact  on  our  profitability  and  our  stock  price.

WE  OPERATE  IN  A  HIGHLY  REGULATED  INDUSTRY  AND  GOVERNMENT  REGULATIONS
SIGNIFICANTLY  AFFECT  OUR  BUSINESS.

The  banking industry is extensively regulated. Banking regulations are intended
primarily  to  protect  depositors, consumers and the Bank Insurance Fund of the
Federal  Deposit  Insurance Corporation, referred to in this report as the FDIC,
and  not stockholders. We are subject to regulation and supervision by the Board
of  Governors  of the Federal Reserve System, or Federal Reserve Board, referred
to  in  this  report  as  the  FRB,  and  the  bank is subject to regulation and
supervision  by  the  Office  of the Comptroller of the Currency, referred to in
this  report  as  the OCC. Regulatory requirements affect our lending practices,
capital  structure,  investment  practices, dividend policy and growth. The bank
regulatory  agencies have broad authority to prevent or remedy unsafe or unsound
practices  or  violations  of  law.  We  are  subject  to  regulatory  capital
requirements,  and  a  failure to meet minimum capital requirements or to comply
with  other  regulations  could  result  in  actions  by  regulators  that could
adversely  affect our ability to pay dividends or otherwise adversely impact our
operations.  In  addition,  changes in law, regulations and regulatory practices
affecting  the banking industry may limit the manner in which we may conduct our
business.


                                       24
<PAGE>
WE  DEPEND  ON BROKERS AND OTHER SOURCES FOR OUR MORTGAGE LENDING ACTIVITIES AND
ANY  REDUCTION  IN  REFERRALS  COULD  LIMIT  OUR  ABILITY  TO  GROW.

We  rely  significantly  on  referrals  from  mortgage  brokers  for  our  loan
originations. Our ability to maintain our history of growth may depend, in part,
on  our ability to continue to attract referrals from mortgage brokers. If those
referrals  were  to  decline  or  did  not  continue  to expand, there can be no
assurances  that other sources of loan originations would be available to assure
our  ability  to  maintain  a  level  of  growth  consistent with our historical
performance.

SINCE  WE  ENGAGE  IN COLLATERAL-BASED LENDING AND MAY BE FORCED TO FORECLOSE ON
THE COLLATERAL PROPERTY AND OWN THE UNDERLYING REAL ESTATE, WE MAY BE SUBJECT TO
THE  INCREASED  COSTS ASSOCIATED WITH THE OWNERSHIP OF REAL PROPERTY WHICH COULD
ADVERSELY  AFFECT  OUR  OPERATING  RESULTS.

Since  we  are  primarily a collateral-based lender, we may have to foreclose on
the  collateral  property  to  protect our investment and may thereafter own and
operate such property, in which case we are exposed to the risks inherent in the
ownership  of real estate. The amount that we, as a mortgagee, may realize after
a  default, is dependent upon factors outside of our control, including, but not
limited  to: general or local economic conditions; neighborhood values; interest
rates;  real  estate  tax rates; operating expenses of the mortgaged properties;
supply  of  and  demand  for  rental  units or properties; ability to obtain and
maintain  adequate occupancy of the properties; zoning laws; governmental rules,
regulations  and  fiscal  policies;  and  acts  of  God.  Certain  expenditures
associated  with the ownership of real estate, principally real estate taxes and
maintenance  costs,  may  adversely  affect  the  income  from  the real estate.
Therefore,  the  cost  of operating a real property may exceed the rental income
earned  from such property, and we may have to advance funds in order to protect
our  investment or we may be required to dispose of the real property at a loss.
The  foregoing  expenditures  and  costs  could  adversely  affect our operating
results,  resulting  in  reduced  levels  of  profitability.

THE  EMPLOYMENT  AGREEMENTS  OF CERTAIN OF OUR EXECUTIVE OFFICERS PERMIT THEM TO
ENGAGE  IN  ACTIVITIES  THAT  MAY  BE  CONSIDERED  TO  BE  COMPETING  WITH  OUR
SUBSIDIARIES,  WHICH  MAY  HAVE  AN  ADVERSE  EFFECT  ON  THE  BUSINESS  OF  OUR
SUBSIDIARIES.

The  long-term  employment agreements between us or our subsidiaries and certain
of our executive officers expressly permit them to engage in outside activities,
including  activities  competitive  with  our  subsidiaries.  This  may  have an
adverse  effect  on  the  business  and financial condition of our subsidiaries.

IF  WE  FAIL  TO MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROL OVER FINANCIAL
REPORTING,  WE  MAY  NOT  BE  ABLE TO ACCURATELY REPORT OUR FINANCIAL RESULTS OR
PREVENT  FRAUD.

The  requirements  of  Section  404 of the Sarbanes Oxley Act and Securities and
Exchange Commission rules and regulations require an annual management report on
the Company's internal controls over financial reporting, including, among other
matters,  management's assessment of the effectiveness of the Company's internal
control  over  financial  reporting,  and an attestation report by the Company's
independent  registered  public  accounting  firm  addressing these assessments.
Beginning  with  the  Company's  annual  report for the year ending December 31,
2006,  the  Company will have to include in its annual report on Form 10-K filed
with the Securities and Exchange Commission a report of management regarding the
Company's  internal  controls  over  financial  reporting in accordance with the
above  requirements. In this regard, the Company has begun a process to document
and  evaluate  its internal control over financial reporting in order to satisfy
these  requirements.  The  process includes dedicating internal resources toward
the  adoption  of  a  detailed  work plan and will also involve the retention of
outside  consultants.  This  process  is designed to (i) assess and document the
adequacy  of  internal  control  over  financial  reporting,  (ii) take steps to
improve  control  processes, where appropriate, and (iii) verify through testing
that controls are functioning as documented. To date, the Company has identified
certain  deficiencies  in the design and operating effectiveness of its internal
control  over financial reporting, and it believes that they have been corrected
or  are  in  the  process  of  being  corrected.  Although  this  process is not
completed,  management  is  not  aware  of  any  "significant  deficiencies"  or
"material  weaknesses"  in  the  Company's  internal  controls  over  financial
reporting, as defined in applicable Securities and Exchange Commission rules and
regulations.  If we fail to identify and correct any significant deficiencies in
the  design  or  operating  effectiveness of our internal control over financial
reporting  we  may  not be able to report our financial results with the desired
degree of accuracy or to prevent fraud.


                                       25
<PAGE>
ENVIRONMENTAL LIABILITY ASSOCIATED WITH COMMERCIAL LENDING COULD HAVE AN ADVERSE
EFFECT  ON  OUR  BUSINESS,  FINANCIAL  CONDITION  AND  RESULTS  OF  OPERATIONS.

In  the  course of our business, we may acquire, through foreclosure, properties
securing  loans  that  are in default. There is a risk that hazardous substances
could  be  discovered  on those properties. In this event, we may be required to
remove the substances from and remediate the properties at our cost and expense.
The  cost of removal and environmental remediation could be substantial.  We may
not  have  adequate  remedies  against  the  owners  of  the properties or other
responsible  parties  and  could  find  it  difficult  or impossible to sell the
affected  properties. These events could have an adverse effect on our business,
financial  condition  and  operating  results.

WE FACE STRONG COMPETITION IN OUR MARKET AREAS, WHICH MAY LIMIT OUR GROWTH AND
PROFITABILITY.

Our  market  areas,  which  primarily  consist of the New York City area and the
Tampa  Bay  area  of Florida, are very competitive, and the level of competition
facing us may increase further, which may limit our growth and profitability. We
experience  competition in both lending and attracting deposits from other banks
and  nonbanks  located  within  and  outside our market areas, some of which are
significantly  larger institutions or institutions with greater resources, lower
cost  of  funds  or  a more established market presence. Nonbank competitors for
deposits  and deposit-type accounts include savings associations, credit unions,
securities  firms,  money  market funds, life insurance companies and the mutual
funds  industry.  For  loans, we encounter competition from other banks, savings
associations,  finance  companies,  mortgage  bankers  and  brokers,  insurance
companies,  credit  card  companies, credit unions, pension funds and securities
firms.

TERRORIST  ACTS  AND  ARMED  CONFLICTS  MAY  ADVERSELY  AFFECT  OUR  BUSINESS.

Terrorist acts as well as the war on terrorism may have an adverse impact on our
results  of  operations  and  on  the  economy  in general. Since the properties
underlying  a  high  concentration of our mortgage loans are located in New York
City,  we  may be more vulnerable to the adverse impact of such occurrences than
other  institutions.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

None


                                       26
<PAGE>
ITEM 2.   PROPERTIES

The  office  of  the  Holding  Company  and  the  offices  of Intervest Mortgage
Corporation,  Intervest  Securities  Corporation and the Bank's headquarters and
full-service  banking  office  are  located in leased premises (of approximately
21,500  sq. ft.) on the entire fourth floor of One Rockefeller Plaza in New York
City,  New  York, 10020. The Bank occupies approximately one-half of this space.
The  lease,  which  expires in March 2014, contains operating escalation clauses
related to real estate taxes and operating costs based upon various criteria and
is  accounted  for  as  an  operating  lease.

The  Bank's  principal  office  in  Florida  is  located  at  625  Court Street,
Clearwater,  Florida,  33756.  In  addition, the Bank operates four other branch
offices;  three of which are in Clearwater, Florida, at 1875 Belcher Road North,
2175  Nursery  Road  and  2575  Ulmerton Road, and one is at 6750 Gulfport Blvd,
South Pasadena, Florida. With the exception of the Belcher Road office, which is
leased through June 2007, the Bank owns all its offices in Florida.  The Belcher
Road  office  lease contains operating escalation clauses related to real estate
taxes and operating costs based upon various criteria and is accounted for as an
operating  lease.

The  Bank's  office  at  625  Court  Street  consists  of  a  two-story building
containing  approximately  22,000  sq.  ft.  The  Bank occupies the ground floor
(approximately  8,500  sq.  ft.) and leases the 2nd floor to a single commercial
tenant.  The branch office at 1875 Belcher Road is a two-story building in which
the  Bank  leases  approximately  5,100  sq. ft. on the ground floor. The branch
office  at  2175  Nursery  Road is a one-story building containing approximately
2,700 sq. ft., which is entirely occupied by the Bank. The branch office at 2575
Ulmerton  Road is a three-story building containing approximately 17,000 sq. ft.
The  Bank occupies the ground floor (approximately 2,500 sq. ft.) and leases the
upper  floors to various commercial tenants.  The branch office at 6750 Gulfport
Blvd.  is  a one-story building containing approximately 2,800 sq. ft., which is
entirely  occupied  by the Bank. In addition, each of the Bank's Florida offices
include  drive-through  teller  facilities and Automated Teller Machines (ATMs).
The  Bank  also  owns a two-story building located on property contiguous to its
Court  Street  office in Florida. The building contains approximately 12,000 sq.
ft. and is leased to commercial tenants. The Bank also owns property across from
its  Court Street branch office in Florida. which consists of an office building
that  contains  approximately  1,400  sq.ft.  that  is  leased to one commercial
tenant.  This  property provides additional parking for the Court Street branch.

ITEM 3.   LEGAL PROCEEDINGS

The  Company  is  periodically  a  party  to  or  otherwise  involved  in  legal
proceedings  arising  in  the  normal  course  of  business, such as foreclosure
proceedings. 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 Company's results of operations or financial condition.

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

No  matter  was  submitted  during  the  fourth quarter of the fiscal year ended
December  31,  2005,  to  a vote of security holders of the Company, through the
solicitation  of  proxies  or  otherwise.

EXECUTIVE  OFFICERS  AND  OTHER  KEY  EMPLOYEES

JOHN  J.  ARVONIO,  age  43,  serves  as  Chief  Accounting Officer of Intervest
Bancshares Corporation and as Senior Vice President, Chief Financial Officer and
Secretary  of Intervest National Bank. Mr. Arvonio has served in such capacities
since December 2005 and September 2000, respectively. Prior to that, Mr. Arvonio
served  as  Vice  President, Controller and Secretary of Intervest National Bank
from  April  1999  to  August  2000  and  as an employee of Intervest Bancshares
Corporation  from  April  1998  to  March  1999.  Mr.  Arvonio  has  also been a
registered  representative  of  Intervest  Securities Corporation since December
2003.  Mr.  Arvonio  received  a Bachelor of Business Administration degree from
Iona  College and is a certified public accountant. Mr. Arvonio has more than 16
years of banking experience. Prior to joining the Company, Mr. Arvonio served as
Second Vice President Accounting Policy, and Technical Advisor to the Controller
for  The  Greater  New  York  Savings Bank from 1992 to 1997. Prior to that, Mr.
Arvonio  was  a  Manager  of  Financial Reporting for the Leasing and Investment
Banking  Divisions of Citibank from 1989 to 1992, and a Senior Auditor for Ernst
&  Young  from  1985  to  1989.


                                       27
<PAGE>
LAWRENCE  G. BERGMAN, age 61, serves as a Director, Vice President and Secretary
of  Intervest  Bancshares  Corporation  and  has served in such capacities since
incorporation  in  1993. Mr. Bergman received a Bachelor of Science degree and a
Master  of  Engineering (Electrical) degree from Cornell University and a Master
of  Science in Engineering and a Ph.D. degree from The Johns Hopkins University.
Mr.  Bergman  also  serves  as  a Director and a member of the Loan Committee of
Intervest  National  Bank,  Director,  Vice President and Secretary of Intervest
Mortgage  Corporation,  and  Director, Vice President and Secretary of Intervest
Securities Corporation. Mr. Bergman also serves as an Administrator of Intervest
Statutory  Trust  I,  II,  III  and  IV.

JEROME  DANSKER,  age 87, serves as Chairman of the Board of Directors and Chief
Executive  Officer  of  Intervest  Bancshares Corporation and has served in such
capacities  since  1996  and  2004,  respectively, and has been a director since
incorporation  in  1993.  Mr. Dansker received a Bachelor of Science degree from
the  New  York  University  School  of Commerce, Accounts and Finance, and a Law
degree  from  the  New York University School of Law. Mr. Dansker also serves as
Chairman  of  the  Board  of  Directors and Loan Committee of Intervest National
Bank,  Chairman  of  the  Board  of  Directors  and  Executive Vice President of
Intervest  Mortgage  Corporation,  and  Chairman  of  the  Board of Directors of
Intervest Securities Corporation. Mr. Dansker also serves as an Administrator of
Intervest  Statutory  Trust  I,  II,  III  and  IV.

LOWELL  S.  DANSKER,  age 55, serves as Vice Chairman of the Board of Directors,
President  and  Treasurer  of Intervest Bancshares Corporation and has served in
such  capacities,  except for Vice Chairman, since incorporation in 1993. He has
served  as  Vice Chairman since October 2003. Mr. Dansker received a Bachelor of
Science in Business Administration from Babson College and a Law degree from the
University  of Akron School of Law. Mr. Dansker also serves as: Vice Chairman of
the  Board  of  Directors,  Chief  Executive  Officer  and  a member of the Loan
Committee  of  Intervest National Bank; Vice Chairman of the Board of Directors,
President  and Treasurer of Intervest Mortgage Corporation; Vice Chairman of the
Board  of  Directors  and  Chief  Executive  Officer and Registered Principal of
Intervest Securities Corporation; and as an Administrator of Intervest Statutory
Trust  I,  II,  III  and  IV.

STEPHEN  A.  HELMAN,  age  66,  serves  as a Director, and as Vice President and
Assistant  Secretary  of  the  Company  and  has served in such capacities since
December  2003 and February 2006 respectively. Mr. Helman received a Bachelor of
Arts  degree  from  the  University  of Rochester and a law degree from Columbia
University.  Mr.  Helman has been an attorney practicing for more than 25 years.
Mr.  Helman is also a Vice President and Director of Intervest National Bank and
a  Vice  President,  Assistant  Secretary  and  Director  of  Intervest Mortgage
Corporation.

JOHN  H.  HOFFMANN, age 54, serves as Vice President and Controller of Intervest
Mortgage  Corporation  and  has  served in such capacities since August 2002 and
October  2002,  respectively.  Mr.  Hoffmann  received  a  Bachelor  of Business
Administration  degree  from  Susquehanna  University  and is a certified public
accountant.  Mr. Hoffmann has more than 21 years of banking experience. Prior to
joining  the  Company, Mr. Hoffmann served as Accounting Manager for Smart World
Technologies,  an  Internet  service  provider,  from  1998  to 2000 and as Vice
President of Mortgage Accounting for The Greater New York Savings Bank from 1987
to  1997.

KEITH  A.  OLSEN,  age  52, serves as a Director and as President of the Florida
Division of Intervest National Bank and has served in such capacities since July
2001.  Prior  to  that,  Mr. Olsen was the President of Intervest Bank from 1994
until it merged into Intervest National Bank in July 2001. Mr. Olsen also served
as Senior Vice President of Intervest Bank from 1991 to 2001. Mr. Olsen received
an  Associates  degree from St. Petersburg Junior College and a Bachelors degree
in  Business  Administration  and  Finance  from  the  University  of  Florida,
Gainesville.  He  is  also  a  graduate  of the Florida School of Banking of the
University  of  Florida, Gainesville, the National School of Real Estate Finance
of  Ohio  State  University  and  the Graduate School of Banking of the South of
Louisiana State University. Mr. Olsen has been in banking for more than 30 years
and  has  served  as  a  senior  bank  officer  for  more  than  20  years.

RAYMOND  C. SULLIVAN, age 59, serves as a Director and as President of Intervest
National Bank and has served in such capacities since April 1999. Prior to that,
Mr. Sullivan was an employee of Intervest Bancshares Corporation from March 1998
to  March 1999. Mr. Sullivan received a Bachelor of Arts degree from St. Francis
College, a Master of Business Administration degree from Fordham University, and
a  Master of Science degree from City College of New York. Mr. Sullivan also has
a  Certificate  in  Advanced  Graduate  Study  in  Accounting  from  Pace


                                       28
<PAGE>
University  and  is a graduate of the National School of Finance and Management.
Mr.  Sullivan has more than 28 years of banking experience. Prior to joining the
Company,  Mr.  Sullivan was the Operations Manager of the New York Agency Office
of  Banco  Mercantile,  C.A.  from  1994  to  1997;  a Senior Associate at LoBue
Associates,  Inc.  from  1992  to  1993;  and  Executive  Vice  President, Chief
Operations  Officer  and a director of Central Federal Savings Bank from 1985 to
1992.

                                     PART II

ITEM 5.   MARKET  FOR  COMMON  EQUITY,  RELATED  STOCKHOLDER  MATTERS AND ISSUER
          PURCHASES OF EQUITY SECURITIES

MARKET FOR SECURITIES

The  Holding  Company's Class A common stock is listed for trading on the NASDAQ
National  Market  under  the  symbol  "IBCA."  Until  June 27, 2005, the Holding
Company's Class A common stock traded on the NASDAQ SmallCap Market. There is no
public-trading  market  for  the  Holding  Company's  Class  B  common stock. At
December  31, 2005, there were 7,438,058 and 385,000 shares of Class A and Class
B  common  stock  outstanding,  respectively.  At  December 31, 2005, there were
approximately  2,300  holders  of  record  of  the  Class  A common stock, which
includes  persons or entities that hold their stock in nominee form or in street
name  through  various  brokerage  firms.  At December 31, 2005, there were four
holders  of  record  of  Class  B  common  stock.

The  last  reported sales price of our Class A common stock on December 29, 2005
was  $24.04 per share. The following table shows the high and low bid prices per
share  for  Class  A common stock by calendar quarter for the periods indicated.
The  quotations  set  forth  below  reflect  inter-dealer quotations that do not
include  retail  markups,  markdowns or commissions and may not represent actual
transactions.

<TABLE>
<CAPTION>
                                    2005                 2004
                                    ----                 ----
                                High    Low          High    Low
                               --------------       --------------
<S>                            <C>     <C>          <C>     <C>
          First quarter        $20.15  $17.51       $18.48  $14.42
          Second quarter       $19.25  $17.25       $17.76  $14.75
          Third quarter        $23.26  $17.80       $17.15  $14.45
          Fourth quarter       $27.40  $18.97       $19.74  $16.50
</TABLE>

DIVIDENDS

Class  A  and Class B common stockholders are entitled to receive cash dividends
when  and  if  declared by the Board of Directors out of funds legally available
for  such purposes. The Holding Company has not paid any cash or stock dividends
on  its capital stock and currently is not contemplating the payment of any cash
or  stock  dividend.

The  Holding  Company's  ability  to  pay cash dividends is limited to an amount
equal  to  the  surplus  which  represents  the  excess  of  its net assets over
paid-in-capital  or, if there is no surplus, net earnings for the current and/or
immediately  preceding  fiscal  year.  The  primary  source  of  funds  for cash
dividends  payable  by  the  Holding  Company  to  its  shareholders is the cash
dividends  received  from  its  subsidiaries. The payment of cash dividends by a
subsidiary  to  the  Holding Company is determined by that subsidiary's Board of
Directors  and is dependent upon a number of factors, including the subsidiary's
capital  requirements, applicable regulatory limitations, results of operations,
financial  condition  and  any restrictions arising from outstanding indentures.

The  Holding  Company's ability to pay cash dividends is further impacted by the
funding  requirements  of  a  total of $60 million of trust preferred securities
issued  by Intervest Statutory Trusts I, II, III and IV, all of the common stock
of which is owned by the Holding Company. These statutory trusts were formed for
the  sole  purpose  of  issuing  trust  preferred  securities.

The  Bank  pays  a  monthly  dividend to the Holding Company in order to provide
funds  for  the  debt service on the trust preferred securities, the proceeds of
which were contributed to the Bank as capital. Dividends paid by the Bank to the
Holding  Company  in  2005, 2004 and 2003 amounted to $4.4 million, $3.4 million
and  $1.7  million  respectively.

For  a  further  discussion  of  legal limitations with regard to the payment of
dividends, see the section "Supervision and Regulation" included in this report.


                                       29
<PAGE>
<TABLE>
<CAPTION>
ITEM 6.   SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

------------------------------------------------------------------------------------------------------------------------
                                                                     At or For The Year Ended December 31,
                                                         ---------------------------------------------------------------
($ in thousands, except per share data)                     2005         2004         2003         2002         2001
------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>          <C>          <C>          <C>          <C>
FINANCIAL CONDITION DATA:
Total assets. . . . . . . . . . . . . . . . . . . . . .  $1,706,423   $1,316,751   $  911,523   $  686,443   $  513,086
Cash and cash equivalents . . . . . . . . . . . . . . .  $   56,716   $   24,599   $   64,128   $   30,849   $   24,409
Securities available for sale . . . . . . . . . . . . .  $        -   $        -   $        -   $        -   $    6,192
Securities held to maturity, net. . . . . . . . . . . .  $  251,508   $  248,888   $  152,823   $  145,694   $   99,157
Loans receivable, net of deferred fees. . . . . . . . .  $1,367,986   $1,015,396   $  671,125   $  489,912   $  368,526
Deposits. . . . . . . . . . . . . . . . . . . . . . . .  $1,375,330   $  993,872   $  675,513   $  505,958   $  362,437
Borrowed funds and related accrued interest payable (1)  $  155,725   $  202,682   $  140,383   $  114,032   $  100,374
Stockholders' equity. . . . . . . . . . . . . . . . . .  $  136,178   $   90,094   $   75,385   $   53,126   $   40,395
Nonaccrual loans. . . . . . . . . . . . . . . . . . . .  $      750   $    4,607   $    8,474   $        -   $    1,243
Foreclosed real estate. . . . . . . . . . . . . . . . .  $        -   $        -   $        -   $    1,081   $        -
Allowance for loan losses . . . . . . . . . . . . . . .  $   15,181   $   11,106   $    6,580   $    4,611   $    3,380
Loan chargeoffs . . . . . . . . . . . . . . . . . . . .  $        -   $        -   $        -   $      150   $        -
Loan recoveries . . . . . . . . . . . . . . . . . . . .  $        -   $        -   $        -   $      107   $        -
------------------------------------------------------------------------------------------------------------------------
OPERATIONS DATA:
Interest and dividend income. . . . . . . . . . . . . .  $   97,881   $   66,549   $   50,464   $   43,479   $   35,462
Interest expense. . . . . . . . . . . . . . . . . . . .      57,447       38,683       28,564       26,325       24,714
                                                         ---------------------------------------------------------------
Net interest and dividend income. . . . . . . . . . . .      40,434       27,866       21,900       17,154       10,748
Provision for loan losses . . . . . . . . . . . . . . .       4,075        4,526        1,969        1,274          612
                                                         ---------------------------------------------------------------
Net interest and dividend income after
  provision for loan losses . . . . . . . . . . . . . .      36,359       23,340       19,931       15,880       10,136
Noninterest income. . . . . . . . . . . . . . . . . . .       6,594        5,140        3,321        2,218        1,655
Noninterest expenses. . . . . . . . . . . . . . . . . .      10,703        8,251        7,259        6,479        5,303
                                                         ---------------------------------------------------------------
Earnings before income taxes. . . . . . . . . . . . . .      32,250       20,229       15,993       11,619        6,488
Provision for income taxes. . . . . . . . . . . . . . .      14,066        8,776        6,873        4,713        2,710
                                                         ---------------------------------------------------------------
Net earnings. . . . . . . . . . . . . . . . . . . . . .  $   18,184   $   11,453   $    9,120   $    6,906   $    3,778
------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE DATA (2):
Basic earnings per share. . . . . . . . . . . . . . . .  $     2.65   $     1.89   $     1.85   $     1.71   $     0.97
Diluted earnings per share. . . . . . . . . . . . . . .  $     2.47   $     1.71   $     1.53   $     1.37   $     0.97
Book value per share. . . . . . . . . . . . . . . . . .  $    17.41   $    14.37   $    12.59   $    11.30   $    10.36
Market price per share. . . . . . . . . . . . . . . . .  $    24.04   $    19.74   $    14.65   $    10.80   $     7.40
------------------------------------------------------------------------------------------------------------------------
OTHER DATA AND RATIOS:
Total Class A and B common stock outstanding. . . . . .   7,823,058    6,271,433    5,988,377    4,703,087    3,899,629
Total Class A and B common stock warrants outstanding .     696,465      696,465      738,975    1,750,010    2,650,218
Average common shares used to calculate:
  Basic earnings per share. . . . . . . . . . . . . . .   6,861,667    6,068,755    4,938,995    4,043,619    3,899,629
  Diluted earnings per share. . . . . . . . . . . . . .   7,449,658    6,828,176    6,257,720    5,348,121    3,899,629
Adjusted net earnings for diluted earnings per share. .  $   18,399   $   11,707   $    9,572   $    7,342   $    3,778
Net interest margin . . . . . . . . . . . . . . . . . .        2.70%        2.52%        2.90%        2.88%        2.47%
Return on average assets. . . . . . . . . . . . . . . .        1.20%        1.02%        1.19%        1.13%        0.85%
Return on average equity. . . . . . . . . . . . . . . .       16.91%       14.14%       15.34%       15.56%        9.94%
Noninterest income to average assets. . . . . . . . . .        0.44%        0.46%        0.43%        0.36%        0.37%
Noninterest expenses to average assets. . . . . . . . .        0.71%        0.74%        0.95%        1.06%        1.19%
Total nonperforming assets to total assets. . . . . . .        0.04%        0.35%        0.93%        0.16%        0.24%
Total nonperforming loans to total loans. . . . . . . .        0.05%        0.45%        1.26%        0.00%        0.34%
Loans, net of unearned income to deposits . . . . . . .          99%         102%          99%          97%         102%
Loans, net of unearned income to deposits (bank only) .          88%          86%          79%          76%          79%
Allowance for loan losses to total net loans. . . . . .        1.11%        1.09%        0.98%        0.94%        0.92%
Allowance for loan losses to nonperforming assets . . .        2024%         241%          78%         427%         272%
Efficiency ratio. . . . . . . . . . . . . . . . . . . .          23%          25%          29%          33%          43%
Average stockholders' equity to average total assets. .        7.11%        7.23%        7.74%        7.27%        8.50%
Stockholders' equity to total assets. . . . . . . . . .        7.98%        6.84%        8.27%        7.74%        7.87%
Tier 1 capital to average assets. . . . . . . . . . . .       10.85%        9.03%       11.31%        9.88%       10.67%
Tier 1 capital to risk weighted assets. . . . . . . . .       12.39%       10.49%       13.28%       12.21%       12.89%
Total capital to risk weighted assets . . . . . . . . .       14.42%       14.23%       14.84%       13.06%       14.11%
------------------------------------------------------------------------------------------------------------------------

<FN>
(1)  Includes  trust  preferred  securities  of  $61,856,  $61,856,  $30,928,  $15,464 and $15,464 at December 31, 2005,
     2004,  2003,  2002,  2001,  respectively.

(2)  The  Company  has  never  paid  any  dividends whether in cash or otherwise on its Class A or Class B common stock.
</TABLE>


                                       30
<PAGE>
ITEM 7.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
          RESULTS OF OPERATIONS

OVERVIEW

Management's  discussion  and  analysis  of  financial  condition and results of
operations  that  follows  should  be  read in conjunction with the consolidated
financial  statements  and  notes  thereto included in this report on Form 10-K.

Intervest  Bancshares  Corporation  has  three  wholly  owned  consolidated
subsidiaries  -  Intervest  National  Bank,  Intervest  Mortgage Corporation and
Intervest  Securities  Corporation  (hereafter  referred  to collectively as the
"Company"  on  a  consolidated  basis).  Intervest  Bancshares  Corporation  and
Intervest National Bank may be referred to individually as the "Holding Company"
and  the  "Bank,"  respectively.  Intervest Bancshares Corporation also has four
wholly  owned  unconsolidated subsidiaries, Intervest Statutory Trust I, II, III
and  IV,  which  were  formed in connection with the issuance of trust preferred
securities. For a discussion of the Company's business, see the section entitled
"Item  1  Business"  in  this  report.

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

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

The  Company's  profitability  is  also affected by the level of its noninterest
income  and  expenses,  provision  for  loan  losses  and  income  tax  expense.
Noninterest  income  consists  mostly  of loan and other banking fees as well as
income  from loan prepayments. When a mortgage loan is repaid prior to maturity,
the  Company  may recognize prepayment income, which consists of the recognition
of  unearned  fees  associated  with  such  loans  at the time of payoff and the
receipt  of additional prepayment fees and interest in certain cases. The amount
of  income  from  loan  prepayments  can  fluctuate  significantly and cannot be
predicted.  Normally,  the  number  of instances of prepayment of mortgage loans
tends  to  increase  during  periods  of  declining  interest rates and tends to
decrease  during  periods  of  increasing  interest rates. Many of the Company's
mortgage  loans  include  provisions  relating to prepayment and others prohibit
prepayment  of  indebtedness  entirely.  Noninterest  expense  consists  of
compensation  and  benefits  expense,  occupancy  and  equipment  expenses, data
processing  expenses,  advertising expense, professional fees, insurance expense
and  other operating expenses. The Company's profitability is also significantly
affected  by  general  and  local  economic  conditions, competition, changes in
market  interest  rates,  government  policies  and  actions  of  regulatory
authorities.

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

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


                                       31
<PAGE>
such  as  the  war  on terrorism, and natural disasters, such as hurricanes, may
have  an  adverse  impact on economic conditions. Economic conditions affect the
market  value of the mortgaged properties underlying the Company's loans as well
as  the  levels  of  rent  and  occupancy  of  income-producing  properties.

CRITICAL ACCOUNTING POLICIES

The  preparation  of  the  Company's  consolidated  financial statements and the
information  included in Management's Discussion and Analysis herein is governed
by  policies  that  are based on accounting principles generally accepted in the
United  States  (GAAP)  and  general  practices within the banking industry. The
financial  information  contained in the Company's financial statements is, to a
significant  extent,  based on measures of the financial effects of transactions
and  events  that  have  already occurred. A variety of factors could affect the
ultimate  value  that  is  obtained  either  when earning income, recognizing an
expense, recovering an asset or relieving a liability.  In addition, GAAP itself
may  change  from  one previously acceptable method to another method.  Although
the  economics  of  the  Company's transactions would be the same, the timing of
events  that  would  impact  its  transactions  could  change.  Among  the  more
significant  policies  of the Company are those that govern accounting for loans
and  the  allowance  for  loan  losses.  For  a  summary of all of the Company's
significant  accounting  policies,  see  note  1  to  the consolidated financial
statements  included  in  this  report.

An  accounting  policy  is  deemed  to  be  "critical"  if  it is important to a
company's  results  of  operations  and  financial  condition,  and  requires
significant judgment and estimates on the part of management in its application.
The  preparation  of  financial statements and related disclosures in conformity
with  GAAP  requires  management  to  make estimates and assumptions that affect
certain  amounts  reported  in the financial statements and related disclosures.
Actual  results  could differ from these estimates and assumptions.  The Company
believes  that the estimates and assumptions used in connection with the amounts
reported  in its financial statements and related disclosures are reasonable and
made  in  good  faith.

The  Company  believes  that  currently its only significant critical accounting
policy  relates  to  the  determination  of  the  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  losses  on  loans. The impact of a sudden large loss
could  deplete  the  allowance  and  potentially require increased provisions to
replenish  the  allowance,  which could negatively affect the Company's earnings
and  financial  position.

The allowance for loan losses reflects management's judgment as to the estimated
losses  that  may  result from defaults in the loan portfolio. The allowance for
loan  losses is established through a provision charged to operations. Loans are
charged  against  the  allowance when management believes that the collection of
the  principal  is  unlikely.  Subsequent recoveries are added to the allowance.

The  adequacy of the Company's allowance for loan losses is evaluated monthly or
more  frequently  when  necessary  with  consideration  given  to  the following
factors: (i) the size of the loan portfolio, which continues to experience rapid
growth  and an increase in individual loan balances; (ii) the nature of the loan
portfolio,  which  is  concentrated  on  commercial  and multifamily real estate
properties,  including loans on substantially vacant properties and vacant land,
all  of  which are generally considered to have more credit risk than 1-4 family
residential  lending because these loans tend to involve larger loan balances to
single  borrowers and their repayment is typically dependent upon the successful
operation  of  the underlying real estate for income-producing properties, while
loans  on vacant land typically do not have income streams and depend upon other
sources  of  cash  flow  from the borrower for repayment; (iii) specific problem
loans,  including loans on nonaccrual status, and estimates of fair value of the
underlying  properties;  (iv)  historical chargeoffs and recoveries; (v) adverse
situations  which  may  affect  the  borrowers'  ability  to  repay;  and  (vi)
management's  perception  of  the current and anticipated economic conditions in
the  Company's  lending  areas,  which are concentrated in New York and Florida.
Although  management  believes  it  uses  the best information available to make
determinations with respect to the allowance for loan losses, future adjustments
may  be  necessary  if  economic conditions, or other factors, differ from those
previously  assumed  in  the  determination  of  the  level  of  the  allowance.

For  calculation  purposes,  the  allowance  for  loan losses is comprised of an
unallocated  portion  (which  is derived from an estimated loss factor currently
ranging  from  0.30%  to 1.35% multiplied by the principal amount of loans rated
acceptable, and higher percentages for loans that are assigned a credit grade of
special  mention  or  lower)  and,


                                       32
<PAGE>
from  time  to  time,  an  allocated  (or  specific)  portion  on certain loans,
particularly  for  loans  that  have  been  identified  as  being  impaired.

Statement  of Financial Accounting Standards (SFAS) No. 114 specifies the manner
in  which the portion of the allowance for loan losses related to impaired loans
is  computed.  A  loan  is  normally  deemed  impaired  when, based upon current
information  and  events,  it is probable that we will be unable to collect both
full  principal  and interest due according to the contractual terms of the loan
agreement.  Impairment  for  larger balance loans such as commercial real estate
and  multifamily  loans  are  measured  based  on: the present value of expected
future  cash  flows,  discounted  at  the loan's effective interest rate; or the
observable  market  price of the loan; or the estimated fair value of the loan's
collateral,  if  payment  of  the  principal  and interest is dependent upon the
collateral.       When  the fair value of the property is less than the recorded
investment  in  the loan, this deficiency is recognized as a valuation allowance
within  the overall allowance for loan losses and a charge through the provision
for  loan  losses.  The  Company's  policy  is  to charge off any portion of the
recorded  investment  in the loan that exceeds the fair value of the collateral.
The  Company  considers  a  variety  of factors in determining whether a loan is
impaired,  including  (i) any notice from the borrower that the borrower will be
unable  to  repay all principal and interest amounts contractually due under the
loan  agreement,  (ii) any delinquency in the principal and/or interest payments
other than minimum delays or shortfalls in payments, and (iii) other information
known  by  management  that  would  indicate the full repayment of principal and
interest  is  not  probable.  In  evaluating  loans  for  impairment, management
generally  considers  delinquencies of 60 days or less to be minimum delays, and
accordingly  does  not  consider  such  delinquent  loans  to be impaired in the
absence  of  other  indications.  Impaired  loans  normally  consist of loans on
nonaccrual  status.  Generally,  all  loans  are  evaluated  for impairment on a
loan-by-loan  basis.

Finally,  the  Company's  regulators,  as  an integral part of their examination
process,  periodically  review  the  allowance for loan losses. Accordingly, the
Company may be required to take certain chargeoffs and/or recognize additions to
the allowance based on the regulators' judgment concerning information available
to  them  during  their  examination.

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2005 AND DECEMBER 31, 2004.

Overview
--------

Total assets at December 31, 2005 increased to $1.7 billion from $1.3 billion at
December  31,  2004.  Total  liabilities  at December 31, 2005 increased to $1.6
billion  from  $1.2  billion  at  December  31,  2004,  and stockholders' equity
increased to $136.2 million at December 31, 2005, from $90.1 million at December
31,  2004. Book value per common share increased to $17.41 at December 31, 2005,
from  $14.37  at  December  31,  2004.

Selected  balance  sheet  information by entity as of December 31, 2005 follows:

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

Cash and cash equivalents                     $  4,242   $   52,692   $   27,893   $       500  $ (28,611)  $      56,716
Security investments                                 -      256,749            -             -          -         256,749
Loans receivable, net of deferred fees          11,464    1,274,058       82,464             -          -       1,367,986
Allowance for loan losses                          (85)     (14,846)        (250)            -          -         (15,181)
Investment in consolidated subsidiaries        183,963            -            -             -   (183,963)              -
All other assets                                 4,803       29,740        5,702            11       (103)         40,153
--------------------------------------------------------------------------------------------------------------------------
Total assets                                  $204,387   $1,598,393   $  115,809   $       511  $(212,677)  $   1,706,423
--------------------------------------------------------------------------------------------------------------------------
Deposits                                      $      -   $1,403,969   $        -   $         -  $ (28,639)  $   1,375,330
Borrowed funds and related interest payable     68,047          229       87,449             -          -         155,725
All other liabilities                              162       37,353        1,744             6        (75)         39,190
--------------------------------------------------------------------------------------------------------------------------
Total liabilities                               68,209    1,441,551       89,193             6    (28,714)      1,570,245
--------------------------------------------------------------------------------------------------------------------------
Stockholders' equity                           136,178      156,842       26,616           505   (183,963)        136,178
--------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity    $204,387   $1,598,393   $  115,809   $       511  $(212,677)  $   1,706,423
--------------------------------------------------------------------------------------------------------------------------

<FN>
(1)  All  significant  intercompany  balances and transactions are eliminated in consolidation. Such amounts arise largely
     from  intercompany  deposit  accounts  and  investments  in  subsidiaries.
</TABLE>


                                       33
<PAGE>
A  comparison  of  the  Company's  consolidated  balance  sheets  follows:

<TABLE>
<CAPTION>
                                                                     At December 31, 2005          At December 31, 2004
                                                                     --------------------          --------------------
                                                                   Carrying         % of         Carrying         % of
($ in thousands)                                                     Value      Total Assets       Value      Total Assets
---------------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>            <C>            <C>            <C>
Cash and cash equivalents                                        $      56,716           3.3%  $      24,599           1.9%
Security investments                                                   256,749          15.0         253,980          19.3
Loans receivable, net of deferred fees and loan loss allowance       1,352,805          79.3       1,004,290          76.3
All other assets                                                        40,153           2.4          33,882           2.5
---------------------------------------------------------------------------------------------------------------------------
Total assets                                                     $   1,706,423         100.0%  $   1,316,751         100.0%
---------------------------------------------------------------------------------------------------------------------------
Deposits                                                         $   1,375,330          80.6%  $     993,872          75.5%
Borrowed funds and related interest payable                            155,725           9.1         202,682          15.4
All other liabilities                                                   39,190           2.3          30,103           2.3
---------------------------------------------------------------------------------------------------------------------------
Total liabilities                                                    1,570,245          92.0       1,226,657          93.2
---------------------------------------------------------------------------------------------------------------------------
Stockholders' equity                                                   136,178           8.0          90,094           6.8
---------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity                       $   1,706,423         100.0%  $   1,316,751         100.0%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

Cash  and  Cash  Equivalents
----------------------------

Cash  and cash equivalents increased to $56.7 million at December 31, 2005, from
$24.6  million  at December 31, 2004, due to a higher level of overnight federal
fund  investments.  The  increase  reflected the temporary investment of deposit
inflows,  a  portion  of  which  is  expected  to  fund new loans. Cash and cash
equivalents  include  federal  funds  sold  and  interest-bearing  and
noninterest-bearing  cash  balances with banks, and other short-term investments
that  have  original  maturities  of  three  months  or  less.  The  short-term
investments  are  normally  comprised  of  commercial  paper and certificates of
deposit  issued  by  large  commercial banks and U.S. government securities. 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  as  to  which  the  Company  has  the  intent and ability to hold to
maturity  are  classified  as  held  to  maturity and carried at amortized cost.
Currently,  only  the  Bank  holds such security investments, which increased to
$251.5  million  at December 31, 2005, from $248.9 million at December 31, 2004.
The  increase  reflected new purchases exceeding maturities and calls during the
period.  The  Bank  continues  to invest in short-term (up to 5 year maturities)
U.S.  government  agency  debt  obligations to emphasize liquidity and currently
targets  its  loan-to-deposit  ratio  at  approximately  85%.

At  December 31, 2005, the portfolio consisted of short-term debt obligations of
the  Federal Home Loan Bank, Federal Farm Credit Bank, Federal National Mortgage
Association  and  Federal Home Loan Mortgage Corporation with a weighted-average
yield  of 3.26% and a weighted-average remaining maturity of 1.1 years, compared
to  2.33%  and 1.4 years, respectively, at December 31, 2004. The securities are
fixed  rate  or  have predetermined scheduled rate increases, and some have call
features  that  allow the issuer to call the security before its stated maturity
without  penalty.  At December 31, 2005 and 2004, the portfolio's estimated fair
value  was  $249.1  million  and  $247.2  million,  respectively.

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 maintained an investment in
their  capital stock of $3.4 million and $1.8 million, respectively, at December
31,  2005.  The  FRB stock currently pays a dividend of 6%, while the FHLB stock
dividend  fluctuates  and  most  recently was 5.11%. The total investment, which
amounted  to  $5.2  million  at  December  31, 2005, compared to $5.1 million at
December  31,  2004,  fluctuates  based  on the Bank's capital level for the FRB
stock  and  the  Bank's  loans  and  borrowings  for  the  FHLB  stock.

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

Loans  receivable,  net  of  deferred  fees  and  the allowance for loan losses,
increased to $1.4 billion at December 31, 2005 from $1.0 billion at December 31,
2004.  The  growth  reflected  new  mortgage  loan  originations  secured  by


                                       34
<PAGE>
commercial  and multifamily real estate exceeding principal repayments. New loan
originations  totaled  $707  million  in 2005, compared to $626 million in 2004.

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,
mix-used  properties,  shopping  centers,  hotels,  restaurants,  industrial
properties,  parking  lots/garages  and vacant land). At December 31, 2005, such
loans consisted of 529 loans with an aggregate principal balance of $1.4 billion
and  an average principal size of $2.6 million. Loans with principal balances of
$5.0  million or more aggregated to 69 loans or $639.3 million, with the largest
loan  amounting  to  $20.0  million.

At  December 31, 2005, $0.7 million of loans were on nonaccrual status, compared
to  $4.6  million  at  December  31,  2004.  In  April  2005,  the  property
collateralizing  a nonaccrual loan at December 31, 2004 with a principal balance
of  $3.9  million was sold at foreclosure to a third party. The loan was paid in
full  and  the  Bank  recovered  all amounts due thereunder. With respect to two
loans on nonaccual status at December 31, 2005, the borrower declared bankruptcy
and  the  Bankruptcy  Trustee has sold the properties collateralizing the loans.
The  proceeds  of  the  sale  are  sufficient  to  provide  for repayment of the
Company's  recorded  investment  and the Company is taking appropriate action to
obtain the proceeds from the Bankruptcy Trustee. Nonaccrual loans are considered
impaired  under  the  criteria  of  SFAS No. 114, but no valuation allowance was
maintained  at any time since the Company believes that the estimated fair value
of  the  underlying properties exceeded its recorded investment. At December 31,
2005  and  December  31,  2004,  there  were  no  other  impaired  loans.

At  December 31, 2005, there were $2.6 million of loans ninety days past due and
still  accruing  interest  because  they  were  deemed  by management to be well
secured  and  in  the process of collection. Such amount represented three loans
that  are  past  their maturity date, but in each case the borrower continues to
make  monthly  payments of interest and principal. During January 2006, one loan
in  the  amount of $1.1 million that was ninety days past due and still accruing
was  repaid  in full. Based upon discussions with the remaining borrowers, it is
anticipated that the remaining loans will be repaid in full or refinanced in the
near  term. There were no loans ninety days past due and still accruing interest
at  December  31,  2004.

Allowance  for  Loan  Losses
----------------------------

At  December  31, 2005, the allowance for loan losses amounted to $15.2 million,
compared  to $11.1 million at December 31, 2004. The allowance represented 1.11%
of total loans (net of deferred fees) outstanding at December 31, 2005 and 1.09%
at  December  31,  2004.  The  increase  in  the allowance was due to provisions
aggregating  $4.1  million during 2005 resulting largely from loan growth (which
amounted  to  $354  million from December 31, 2004). For a further discussion of
the  criteria  the  Company uses to determine the adequacy of the allowance, see
the  section  entitled  "Critical  Accounting Policies" included in this report.

All  Other  Assets
------------------

The  following  below  sets  forth  the  composition  of  the caption "All other
assets:"

<TABLE>
<CAPTION>
                                                         At December 31,
                                                         ---------------
      ($ in thousands)                                   2005       2004
     ---------------------------------------------------------------------
<S>                                                   <C>        <C>
     Accrued interest receivable                      $   7,706  $   6,699
     Loan fees receivable                                10,941      8,208
     Premises and equipment, net                          6,421      6,636
     Deferred income tax asset                            6,988      5,095
     Deferred debenture offering costs, net               5,610      4,929
     Investment in unconsolidated subsidiaries            1,856      1,856
     All other                                              631        459
     ---------------------------------------------------------------------
                                                      $  40,153  $  33,882
     ---------------------------------------------------------------------
</TABLE>

Accrued interest receivable fluctuates based on the amount of loans, investments
and  other  interest-earning  assets  outstanding  and  the  timing  of interest
payments  received.  The increase of $1.0 million from December 31, 2004 was due
to  the  growth  in  all  of  these  assets.


                                       35
<PAGE>
Loan fees receivable are fees due to the Company in accordance with the terms of
mortgage  loans.  Such  amounts are generally due upon the full repayment of the
loan.  This  fee is recorded as deferred income at the time a loan is originated
and  is  then  amortized to interest income over the life of the loan as a yield
adjustment.  The  increase of $2.7 million from December 31, 2004 was due to the
increase  in  the  loan  portfolio.

Premises  and  equipment decreased by $0.2 million from December 31, 2004 as net
purchases  of  $0.3  million  during  the period were more than offset by normal
depreciation  and  amortization.

The deferred income tax asset relates primarily to the unrealized tax benefit on
the  Company's  allowance  for  loan losses. The allowance has been expensed for
financial  statement  purposes but it is currently not deductible for income tax
purposes until actual loan chargeoffs are incurred. The increase in the deferred
tax  asset of $1.9 million from December 31, 2004 is primarily a function of the
increase  in  the  allowance  for  loan  losses  during  the  period.

Deferred debenture offering costs consist primarily of underwriters' commissions
and  are  amortized  over  the terms of the debentures. The net increase of $0.7
million  from  December  31,  2004  was  due to $1.9 million of additional costs
incurred  in connection with the issuance of new debentures, partially offset by
normal  amortization  during  the  period.

The  investment in unconsolidated subsidiaries consists of the Holding Company's
total  common  stock  investment in Intervest Statutory Trust I, II, III and IV.

Deposits
--------

Deposits  increased to $1.4 billion at December 31, 2005, from $993.9 million at
December  31, 2004, reflecting an increase in certificate of deposit accounts of
$373.7 million and a net increase in checking, savings and money market accounts
totaling  $7.8  million.  At  December 31, 2005, certificate of deposit accounts
totaled $1.1 billion, and checking, savings and money market accounts aggregated
$256.8  million.  The same categories of deposit accounts totaled $744.8 million
and  $249.1  million, respectively, at December 31, 2004. Certificate of deposit
accounts  represented  81%  of  total  deposits  at December 31, 2005 and 75% at
December  31,  2004. In June 2005, the Bank began accepting brokered deposits as
another  source  of  funds.  Such accounts totaled $40.5 million at December 31,
2005.

Borrowed  Funds  and  Related  Interest  Payable
------------------------------------------------

The  following  table  summarizes  borrowed  funds and related interest payable:

<TABLE>
<CAPTION>
                                                          At December 31, 2005    At December 31, 2004
                                                         ----------------------  ----------------------
                                                                       Accrued                 Accrued
      ($ in thousands)                                    Principal    Interest   Principal    Interest
     --------------------------------------------------------------------------------------------------
<S>                                                      <C>         <C>         <C>         <C>
     Debentures - Intervest Mortgage Corporation         $   82,750  $    4,699  $   88,850  $    8,219
     Debentures - Holding Company                             4,640       1,397       5,580       1,749
     Debentures - Capital Securities - Holding Company       61,856         154      61,856         165
     FHLB advances - Intervest National Bank                      -           -      36,000          21
     Mortgage note payable - Intervest National Bank            229           -         242           -
     --------------------------------------------------------------------------------------------------
                                                         $  149,475  $    6,250  $  192,528  $   10,154
     --------------------------------------------------------------------------------------------------
</TABLE>

Intervest  Mortgage  Corporation's  debentures  outstanding  decreased  due  to
repayments  exceeding  new  issues.

The  Holding  Company's  debentures  outstanding decreased due to the conversion
into  common  stock  of  its  convertible  debentures.  In 2005, $1.6 million of
convertible  debentures  ($0.9  million of principal and $0.7 million of related
accrued  interest  payable)  were converted into shares of the Holding Company's
Class  A  common  stock  at  the  election  of  the  debenture  holders.

The  Bank from time to time may borrow funds on an overnight or short-term basis
to  manage  its liquidity needs.  At December 31, 2004, the Bank had $36 million
of  FHLB borrowings outstanding, of which $19 million was repaid in January 2005
and  $17  million  was  repaid  in  February  2005  through  deposit  inflows.


                                       36
<PAGE>
The  Bank also has a mortgage note payable outstanding amounting to $0.2 million
at December 31, 2005 and 2004. The note was issued in connection with the Bank's
purchase in 2002 of property that is located across from its Court Street branch
office  in  Florida.

Accrued  interest payable on borrowed funds amounted to $6.3 million at December
31 2005, compared to $10.2 million at December 31, 2004. The decrease was due to
repayments  of interest as well as the decrease resulting from the conversion of
debentures,  partially  offset  by  new accruals. A large portion of the accrued
interest payable is due and payable at the maturity of various debentures. For a
further  discussion  of  borrowed  funds,  see notes 7 and 9 to the consolidated
financial  statements included in this report, as well as the section "Liquidity
and  Capital  Resources."

All  Other  Liabilities
-----------------------

The  following  table  sets  forth  the  composition  of  the caption "All other
liabilities:"

<TABLE>
<CAPTION>
                                                         At December 31,
                                                         ---------------
           ($ in thousands)                              2005       2004
          ----------------------------------------------------------------
<S>                                                   <C>        <C>
          Mortgage escrow funds payable               $  20,302  $  14,533
          Official checks outstanding                    11,689     12,061
          Accrued interest payable on deposits            3,232      1,718
          Income taxes payable                            1,643         81
          All other liabilities                           2,324      1,710
          ----------------------------------------------------------------
                                                      $  39,190  $  30,103
          ----------------------------------------------------------------
</TABLE>

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 of $5.8 million from December 31, 2004 reflected the
growth  in  the  loan  portfolio  as  well  as  the  timing  of  tax  payments.

Official  checks  outstanding  vary  and  fluctuate  based  on banking activity.
Accrued  interest  payable  on  deposits  fluctuates based on total deposits and
timing  of  interest  payments. The increase of $1.5 million in accrued interest
payable  from  December  31, 2004 reflected the growth in deposits. Income taxes
payable  fluctuates  based  on  the  Company's  earnings, effective tax rate and
timing  of  tax  payments.

All other liabilities are comprised mainly of accrued expenses and fees received
on  loan commitments that have not yet been funded. The increase of $0.6 million
from  December  31,  2004  reflected  a  higher  level  of  accrued  expenses.

Stockholders'  Equity
---------------------

Stockholders'  equity increased to $136.2 million from $90.1 million at December
31,  2004  as  follows:

<TABLE>
<CAPTION>
                                                                                                Per
      ($ in thousands)                                                     Amount    Shares    Share
     -----------------------------------------------------------------------------------------------
<S>                                                                      <C>       <C>        <C>
     Stockholders' equity at December 31, 2004                           $ 90,094  6,271,433  $14.37
     Net earnings for the year                                             18,184          -       -
     Class A common stock issued in public offering                        26,311  1,436,468   18.32
     Convertible debentures converted at election of debenture holders      1,589    115,157   13.80
     -----------------------------------------------------------------------------------------------
     Stockholders' equity at December 31, 2005                           $136,178  7,823,058  $17.41
     -----------------------------------------------------------------------------------------------
</TABLE>

The  Holding  Company  completed  in  August 2005 a public offering of 1,250,000
shares  of  its  Class A Common Stock for $19.75 per share and in September 2005
issued an additional 186,468 shares of Class A common stock for $19.75 per share
in  connection  with  the  exercise by the underwriters of an option to purchase
additional  shares to cover over-allotments. The issuance of these shares, after
underwriting  commissions  and expenses, resulted in $26.3 million of additional
capital  for  the  Company.


                                       37
<PAGE>
COMPARISON  OF  RESULTS  OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2005 AND
2004.

Overview
--------

Consolidated net earnings for the year ended December 31, 2005 increased by $6.7
million,  or  59%,  to  $18.2  million,  or  $2.47 per diluted share, from $11.5
million, or $1.71 per diluted share, reported in 2004. The $6.7 million increase
in  earnings  was  due  to  growth  in net interest and dividend income of $12.6
million, an increase of $1.5 million in noninterest income and a decrease in the
provision  for  loan  losses  of $0.4 million. These improvements were partially
offset  by  a  $5.3  million  increase  in income tax expense and a $2.5 million
increase  in  noninterest  expenses.  The Company's return on average assets and
equity  improved  to  1.20%  and  16.91%,  respectively, in 2005, from 1.02% and
14.14%  in  2004, and its efficiency ratio (which is a measure of its ability to
control  expenses as a percentage of its revenues) continues to be favorable and
improved  to  23%  in  2005  from  25%  in  2004.

Selected information regarding results of operations by entity for 2005 follows:

<TABLE>
<CAPTION>
                                             Intervest    Intervest    Intervest              Inter-
                                             National     Mortgage    Securities    Holding   Company
($ in thousands)                               Bank         Corp.        Corp.      Company   Amts (2)   Consolidated
----------------------------------------------------------------------------------------------------------------------
<S>                                         <C>          <C>          <C>          <C>        <C>        <C>
Interest and dividend income                $   87,257   $   10,197   $        13  $    931   $   (517)  $      97,881
Interest expense                                45,591        7,370             -     5,003       (517)         57,447
                                            --------------------------------------------------------------------------
Net interest and dividend income                41,666        2,827            13    (4,072)         -          40,434
Provision for loan losses                        4,157          (82)            -         -          -           4,075
Noninterest income                               5,524        6,008           115       520     (5,573)          6,594
Noninterest expenses                            12,329        3,172            83       692     (5,573)         10,703
                                            --------------------------------------------------------------------------
Earnings before taxes                           30,704        5,745            45    (4,244)         -          32,250
Provision for income taxes                      13,349        2,656            21    (1,960)         -          14,066
----------------------------------------------------------------------------------------------------------------------
Net earnings                                $   17,355   $    3,089   $        24  $ (2,284)  $      -   $      18,184
----------------------------------------------------------------------------------------------------------------------
Intercompany dividends (1)                      (4,356)           -             -     4,356   $      -               -
----------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany dividends   $   12,999   $    3,089   $        24  $  2,072   $      -   $      18,184
----------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany
    dividends for 2004                      $    7,436   $    2,354   $        22  $  1,641   $      -   $      11,453
----------------------------------------------------------------------------------------------------------------------
<FN>
(1)  Dividends  to  the  Holding  Company  provide  funds  for  the  debt  service on the Capital Securities, which is
     included  in  the  Holding  Company's  interest  expense.
(2)  All  significant  intercompany  balances  and  transactions  are  eliminated in consolidation. Such amounts arise
     from  intercompany  deposit  accounts  and  management  and  service  agreements.
</TABLE>

Net  Interest  and  Dividend  Income
------------------------------------

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

Net  interest and dividend income increased by $12.6 million to $40.4 million in
2005,  from  $27.8 million in 2004. The improvement was attributable to a $392.8
million  increase  in  average  interest-earning assets resulting from continued
growth  in loans of $338.4 million and a higher level of security and short-term
investments  aggregating  to  $54.4  million.  The  growth in average assets was
funded  by  $354.7 million of additional interest-bearing deposits, $3.6 million
of  additional  borrowed  funds  and  a  $26.5 million increase in stockholders'
equity  (resulting from earnings and the issuance of shares in a public offering
and  from  the  conversion  of  convertible  debentures).

The Company's net interest margin increased to 2.70% in 2005 from 2.52% in 2004.
The  higher  margin  was  due  to the Company's yield on interest-earning assets
increasing  at  a  faster  pace  than  its  cost  of funds. In a steadily rising
interest  rate  environment in 2005, the yield on the Company's interest-earning
assets  increased  51  basis  points  to  6.53% in 2005, primarily due to higher
yields  on  new  mortgage  loans  originated,  an  increase  in yields earned on
variable-rate  loans  indexed  to  the  prime  rate, and higher yields earned on
security  and  other short-term investments. The cost of funds also increased by
37  basis  points to 4.21% in 2005 due to higher rates paid on deposit accounts.


                                       38
<PAGE>
The  following  table  provides  information  on average assets, liabilities and
stockholders'  equity;  yields earned on interest-earning assets; and rates paid
on  interest-bearing  liabilities  for 2005 and 2004. The yields and rates shown
are  based  on a computation of income/expense (including any related fee income
or  expense)  for  each  year  divided  by  average  interest-earning
assets/interest-bearing  liabilities  during  each  year.  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  year.

<TABLE>
<CAPTION>
                                                                       For the Year Ended December 31,
                                                                       -------------------------------
                                                                 2005                                   2004
                                                   ------------------------------------  ------------------------------------
                                                     Average    Interest      Yield/       Average    Interest      Yield/
($ in thousands)                                     Balance    Inc./Exp.      Rate        Balance    Inc./Exp.      Rate
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>          <C>         <C>          <C>          <C>         <C>
                      Assets
Interest-earning assets:
  Loans (1)                                        $1,206,089   $   89,590        7.43%  $  867,724   $   61,928        7.14%
  Securities                                          258,906        7,229        2.79      207,557        4,259        2.05
  Other interest-earning assets                        32,865        1,062        3.23       29,766          362        1.22
-----------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets                       1,497,860   $   97,881        6.53%   1,105,047   $   66,549        6.02%
-----------------------------------------------------------------------------------------------------------------------------
Noninterest-earning assets                             14,906                                15,505
-----------------------------------------------------------------------------------------------------------------------------
Total assets                                       $1,512,766                            $1,120,552
-----------------------------------------------------------------------------------------------------------------------------
      Liabilities and Stockholders' Equity
Interest-bearing liabilities:
  Interest checking deposits                       $   10,636   $      166        1.56%  $   12,052   $      187        1.55%
  Savings deposits                                     22,397          536        2.39       30,803          550        1.79
  Money market deposits                               202,618        5,947        2.94      191,495        3,583        1.87
  Certificates of deposit                             966,128       38,270        3.96      612,735       22,010        3.59
-----------------------------------------------------------------------------------------------------------------------------
  Total deposit accounts                            1,201,779       44,919        3.74      847,085       26,330        3.11
-----------------------------------------------------------------------------------------------------------------------------
  Federal funds purchased and FHLB advances             4,871          139        2.85        1,914           40        2.09
  Debentures and accrued interest payable              96,007        8,014        8.35      109,697        8,801        8.02
  Debentures - capital securities                      61,856        4,359        7.05       47,533        3,495        7.35
  Mortgage note payable                                   236           16        6.99          249           17        7.00
-----------------------------------------------------------------------------------------------------------------------------
  Total borrowed funds                                162,970       12,528        7.69      159,393       12,353        7.75
-----------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities                  1,364,749   $   57,447        4.21%   1,006,478   $   38,683        3.84%
-----------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits                            6,335                                 6,599
Noninterest-bearing liabilities                        34,162                                26,471
Stockholders' equity                                  107,520                                81,004
-----------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity         $1,512,766                            $1,120,552
-----------------------------------------------------------------------------------------------------------------------------
Net interest and dividend income/spread                         $   40,434        2.32%               $   27,866        2.18%
-----------------------------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin                 $  133,111                     2.70%  $   98,569                     2.52%
-----------------------------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
    to total interest-bearing liabilities                1.10x                                 1.10x
-----------------------------------------------------------------------------------------------------------------------------
Other Ratios:
  Return on average assets                               1.20%                                 1.02%
  Return on average equity                              16.91%                                14.14%
  Noninterest expense to average assets                  0.71%                                 0.74%
  Efficiency ratio (2)                                     23%                                   25%
  Average stockholders' equity to average assets         7.11%                                 7.23%
-----------------------------------------------------------------------------------------------------------------------------
<FN>
(1)  Includes  nonaccrual  loans.
(2)  Defined  as  noninterest expenses (excluding the provision for loan losses) as a percentage of net interest and dividend
     income  plus  noninterest  income.
</TABLE>

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


                                       39
<PAGE>
<TABLE>
<CAPTION>
                                             For the Year Ended December 31, 2005 vs. 2004
                                             ---------------------------------------------
                                             Increase (Decrease) Due To Change In:
                                             -------------------------------------
($ in thousands)                                 Rate          Volume       Rate/Volume       Total
-------------------------------------------------------------------------------------------------------
<S>                                          <C>            <C>            <C>            <C>
Interest-earning assets:
  Loans                                      $      2,516   $     24,159   $        987   $     27,662
  Securities                                        1,536          1,053            381          2,970
  Other interest-earning assets                       598             38             64            700
-------------------------------------------------------------------------------------------------------
Total interest-earning assets                       4,650         25,250          1,432         31,332
-------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
  Interest checking deposits                            1            (22)             -            (21)
  Savings deposits                                    185           (150)           (49)           (14)
  Money market deposits                             2,049            208            107          2,364
  Certificates of deposit                           2,267         12,687          1,306         16,260
-------------------------------------------------------------------------------------------------------
Total deposit accounts                              4,502         12,723          1,364         18,589
-------------------------------------------------------------------------------------------------------
Federal funds purchased and FHLB advances              15             62             22             99
Debentures and accrued interest payable               362         (1,098)           (51)          (787)
Debentures - capital securities                      (143)         1,040            (33)           864
Mortgage note payable                                   -             (1)             -             (1)
-------------------------------------------------------------------------------------------------------
Total borrowed funds                                  234              3            (62)           175
-------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities                  4,736         12,726          1,302         18,764
-------------------------------------------------------------------------------------------------------
Net change in interest and dividend income   $        (86)  $     12,524   $        130   $     12,568
-------------------------------------------------------------------------------------------------------
</TABLE>

Provision  for  Loan  Losses
----------------------------

The provision for loan losses decreased by $0.4 million to $4.1 million in 2005,
from  $4.5  million in 2004. The lower provision was a function of the favorable
impact  (of  approximately $0.6 million) from the satisfaction of a $3.9 million
nonaccrual  loan  in the second quarter of 2005, partially offset by an increase
in  the  amount  of  loan  growth.  Total  loans grew by $354.3 million in 2005,
compared  to  $347.9  million  in  2004.

Noninterest  Income
-------------------

Noninterest  income  increased  by  $1.5  million to $6.6 million in 2005 and is
summarized  as  follows:

<TABLE>
<CAPTION>
                                                              For the Year Ended December 31,
                                                              -------------------------------
      ($ in thousands)                                             2005              2004
     -----------------------------------------------------------------------------------------
<S>                                                         <C>               <C>
     Customer service fees                                  $            334  $            252
     Income from mortgage lending activities (1)                       1,082             1,221
     Income from the early repayment of mortgage loans (2)             5,062             3,546
     Commissions and fees                                                115               119
     Gain from early call of investment securities (3)                     1                 2
     -----------------------------------------------------------------------------------------
                                                            $          6,594  $          5,140
     -----------------------------------------------------------------------------------------

<FN>
     (1)  Consists  mostly  of  fees  from  expired  loan  commitments  and  loan  servicing,
          maintenance and inspections charges.
     (2)  Consists  of the recognition of unearned fees associated with such loans at the time
          of payoff and the receipt of prepayment penalties and interest in certain cases.
     (3)  Consists  of the recognition of any unamortized premium or discount at time of call.
</TABLE>

Noninterest  income  increased due to a $1.5 million increase in income from the
prepayment  of  mortgage  loans  and  a $0.1 million increase in fees from early
deposit  withdrawals, partially offset by a $0.1 million decrease in fees earned
from  expired  loan  commitments that were not funded. The prepayment income for
the  2005  period  included  $0.6  million  from  the  early satisfaction of the
nonaccrual  loan  noted above. The Company's income from loan prepayments, which
fluctuates  and  cannot  be  predicted,  tends  to  increase  during  periods of
declining  interest  rates  and  tends  to decrease during periods of increasing
interest  rates.

Noninterest  Expenses
---------------------

Noninterest  expenses increased by $2.5 million to $10.7 million in 2005 and are
summarized  as  follows:


                                       40
<PAGE>
<TABLE>
<CAPTION>
                                               For the Year Ended December 31,
                                               -------------------------------
     ($ in thousands)                               2005              2004
     ---------------------------------------------------------------------------
<S>                                           <C>               <C>
     Salaries and employee benefits           $          5,726  $          4,046
     Occupancy and equipment, net                        1,487             1,659
     Data processing                                       605               428
     Professional fees and services                        773               411
     Stationery, printing and supplies                     211               180
     Postage and delivery                                  129               111
     FDIC and general insurance                            324               264
     Director and committee fees                           527               397
     Advertising and promotion                             225               110
     All other expenses                                    696               645
     ---------------------------------------------------------------------------
                                              $         10,703  $          8,251
     ---------------------------------------------------------------------------
</TABLE>

Salaries  and  employee  benefits  expense  increased  primarily  due  to salary
increases,  a  higher cost of employee benefits and additional staff aggregating
$0.8  million,  and  a  $0.8  million  increase  in  bonus  payments  to certain
executives  of  the  Company  in connection with capital raising activities. The
Company had 69 fulltime employees at December 31, 2005 versus 64 at December 31,
2004.

Occupancy  and  equipment  expense  decreased  due to a decrease in rent expense
resulting  from  the  termination  in  September  2004  of  Intervest  Mortgage
Corporation's  lease on its former space at 10 Rockefeller Plaza and an increase
in  sublease  income from the Bank's Florida offices. These items were partially
offset  by  increased  rent  on  the  Company's  new  larger office space at One
Rockefeller  Plaza.

Data  processing  expense  increased  primarily  due to the growth in the Bank's
assets.

Professional fees expense increased due to the growth in the Company's assets as
well  as additional accruals (of $0.2 million) for consulting expense associated
with  the  ongoing  compliance with the Sarbanes Oxley requirements for internal
controls.

Director  and  committee  fees  expense  increased  due  to  higher fees paid to
directors for each board and committee meeting attended. The fees were increased
for  board and committee meetings in October 2004 and an additional increase was
made  in  June  2005  for  audit  committee  meetings.

Advertising  expense increased due to additional advertising to support loan and
deposit  growth.  Stationery,  printing  and supplies, postage and delivery, and
FDIC  and  general  insurance  expenses increased primarily due to the Company's
growth  as  well  as  a  rate  increase  for  general  insurance.

All  other  expense  increased primarily due to the payment of a Nasdaq National
Market entry fee. The Company's Class A common stock began trading on the Nasdaq
National Market on June 27, 2005. Previously, the stock had traded on the Nasdaq
SmallCap  Market.

Provision  for  Income  Taxes
-----------------------------

The  provision  for  income  taxes increased by $5.3 million to $14.1 million in
2005,  from  $8.8  million  in 2004, due to higher pre-tax income. The Company's
effective  tax  rate  (inclusive  of state and local taxes) amounted to 43.6% in
2005,  compared  to  43.4%  in  2004.

COMPARISON  OF  RESULTS  OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2004 AND
2003.

Overview
--------

Consolidated net earnings for the year ended December 31, 2004 increased by $2.3
million,  or  26%,  to  $11.5  million,  or  $1.71  per diluted share, from $9.1
million, or $1.53 per diluted share, reported in 2003. The $2.3 million increase
in  earnings  was  due  to  growth  in  net interest and dividend income of $6.0
million  and  an  increase  of $1.8 million in noninterest income. These revenue
increases  were partially offset by a $2.6 million increase in the provision for
loan  losses,  a  $1.9 million increase in income tax expense and a $1.0 million
increase  in  noninterest  expenses.  The Company's return on average assets and
equity was 1.02% and 14.14%, respectively, in 2004, compared to 1.19% and 15.34%
in  2003,  and its efficiency ratio (which is a measure of the Company's ability
to  control  expenses  as  a  percentage of its revenues) stood at 25% for 2004.


                                       41
<PAGE>
Selected information regarding results of operations by entity for 2004 follows:

<TABLE>
<CAPTION>
                                             Intervest   Intervest    Intervest                Inter-
                                             National     Mortgage    Securities    Holding   Company
($ in thousands)                               Bank        Corp.        Corp.       Company   Amts (2)   Consolidated
---------------------------------------------------------------------------------------------------------------------
<S>                                         <C>          <C>         <C>           <C>        <C>        <C>
Interest and dividend income                $   55,770   $    9,896  $         6   $  1,087   $   (210)  $     66,549
Interest expense                                26,597        7,945            -      4,351       (210)        38,683
---------------------------------------------------------------------------------------------------------------------
Net interest and dividend income                29,173        1,951            6     (3,264)         -         27,866
Provision for loan losses                        4,379          140            -          7          -          4,526
Noninterest income                               4,272        4,915          119        389     (4,555)         5,140
Noninterest expenses                             9,935        2,347           84        440     (4,555)         8,251
---------------------------------------------------------------------------------------------------------------------
Earnings before taxes                           19,131        4,379           41     (3,322)         -         20,229
Provision for income taxes                       8,266        2,025           19     (1,534)         -          8,776
---------------------------------------------------------------------------------------------------------------------
Net earnings                                $   10,865   $    2,354  $        22   $ (1,788)  $      -   $     11,453
---------------------------------------------------------------------------------------------------------------------
Intercompany dividends (1)                      (3,429)           -            -      3,429          -              -
---------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany dividends   $    7,436   $    2,354  $        22   $  1,641   $      -   $     11,453
---------------------------------------------------------------------------------------------------------------------
Net earnings after intercompany
    dividends for 2003                      $    6,972   $    1,759  $        (6)  $    395   $      -   $      9,120
---------------------------------------------------------------------------------------------------------------------
<FN>
(1)  Dividends  to  the  Holding  Company  provide  funds for the debt service on the Capital Securities, which is
     included  in  the  Holding  Company's  interest  expense.
(2)  All  significant  intercompany  balances and transactions are eliminated in consolidation. Such amounts arise
     from  intercompany  deposit  accounts  and  management  and  service  agreements.
</TABLE>

Net  Interest  and  Dividend  Income
------------------------------------

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

Net  interest  and dividend income increased by $6.0 million to $27.9 million in
2004,  from  $21.9 million in 2003. The improvement was attributable to a $350.7
million  increase  in  average  interest-earning assets resulting from continued
growth  in loans of $282.2 million and a higher level of security and short-term
investments which totaled $68.6 million. The growth in average assets was funded
by  $287.4  million  of new deposits, $34.4 million of additional borrowed funds
and  a  $21.6  million increase in stockholders' equity (resulting from earnings
and  the  issuance  of shares upon the exercise of Class A common stock warrants
and  conversion  of  convertible  debentures).

The Company's net interest margin decreased to 2.52% in 2004 from 2.90% in 2003.
The  decrease  was  due  to  the  Company's  yield  on  interest-earning  assets
decreasing  at  a  faster  pace  than  its cost of funds. In a low interest rate
environment,  the  yield on interest-earning assets decreased 67 basis points to
6.02%  in  2004  due  to  lower  rates  on  new  mortgage  loans  originated and
prepayments  of  higher-yielding  loans.  The  cost  of funds decreased 33 basis
points  to  3.84%  in  2004  due to lower rates paid on deposit accounts and the
addition of new debentures with lower rates than existing ones, partially offset
by  rate  increases  on floating-rate debentures. These floating-rate debentures
are indexed to the JPMorgan Chase Bank prime rate, which increased by a total of
125  basis  points  from  year-end  2003.

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 2004 and 2003. The yields and rates shown
are  based  on a computation of income/expense (including any related fee income
or  expense)  for  each  year  divided  by  average  interest-earning
assets/interest-bearing  liabilities  during  each  year.  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  year.


                                       42
<PAGE>
<TABLE>
<CAPTION>
                                                                       For the Year Ended December 31,
                                                                       -------------------------------
                                                                  2004                                 2003
                                                   -----------------------------------  -------------------------------------
                                                     Average    Interest      Yield/       Average    Interest      Yield/
($ in thousands)                                     Balance    Inc./Exp.      Rate        Balance    Inc./Exp.      Rate
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>          <C>         <C>          <C>          <C>         <C>
                       Assets
Interest-earning assets:
  Loans (1)                                        $  867,724   $   61,928        7.14%  $  585,556   $   47,223        8.06%
  Securities                                          207,557        4,259        2.05      143,766        2,965        2.06
  Other interest-earning assets                        29,766          362        1.22       24,983          276        1.10
-----------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets                       1,105,047   $   66,549        6.02%     754,305   $   50,464        6.69%
-----------------------------------------------------------------------------------------------------------------------------
Noninterest-earning assets                             15,505                                13,686
-----------------------------------------------------------------------------------------------------------------------------
Total assets                                       $1,120,552                            $  767,991
-----------------------------------------------------------------------------------------------------------------------------
        Liabilities and Stockholders' Equity
Interest-bearing liabilities:
  Interest checking deposits                       $   12,052   $      187        1.55%  $   11,120   $      182        1.64%
  Savings deposits                                     30,803          550        1.79       31,782          601        1.89
  Money market deposits                               191,495        3,583        1.87      146,509        2,763        1.89
  Certificates of deposit                             612,735       22,010        3.59      370,235       14,891        4.02
-----------------------------------------------------------------------------------------------------------------------------
  Total deposit accounts                              847,085       26,330        3.11      559,646       18,437        3.29
-----------------------------------------------------------------------------------------------------------------------------
  Federal funds purchased and FHLB advances             1,914           40        2.09            -            -           -
  Debentures and accrued interest payable             109,697        8,801        8.02      105,347        8,316        7.89
  Debentures - capital securities                      47,533        3,495        7.35       19,356        1,793        9.26
  Mortgage note payable                                   249           17        7.00          261           18        7.00
-----------------------------------------------------------------------------------------------------------------------------
  Total borrowed funds                                159,393       12,353        7.75      124,964       10,127        8.10
-----------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities                  1,006,478   $   38,683        3.84%     684,610   $   28,564        4.17%
-----------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits                            6,599                                 5,666
Noninterest-bearing liabilities                        26,471                                18,264
Stockholders' equity                                   81,004                                59,451
-----------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity         $1,120,552                            $  767,991
-----------------------------------------------------------------------------------------------------------------------------
Net interest and dividend income/spread                         $   27,866        2.18%               $   21,900        2.52%
-----------------------------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin                 $   98,569                     2.52%  $   69,695                     2.90%
-----------------------------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
    to total interest-bearing liabilities                1.10x                                 1.10x
-----------------------------------------------------------------------------------------------------------------------------
Other Ratios:
  Return on average assets                               1.02%                                 1.19%
  Return on average equity                              14.14%                                15.34%
  Noninterest expense to average assets                  0.74%                                 0.95%
  Efficiency ratio (2)                                     25%                                   29%
  Average stockholders' equity to average assets         7.23%                                 7.74%
-----------------------------------------------------------------------------------------------------------------------------
<FN>
(1)  Includes  nonaccrual  loans.
(2)  Defined  as  noninterest expenses (excluding the provision for loan losses) as a percentage of net interest and dividend
     income  plus  noninterest  income.
</TABLE>

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


                                       43
<PAGE>
<TABLE>
<CAPTION>
                                             For the Year Ended December 31, 2004 vs. 2003
                                             ---------------------------------------------
                                             Increase (Decrease) Due To Change In:
                                             -------------------------------------
($ in thousands)                                 Rate          Volume       Rate/Volume       Total
-------------------------------------------------------------------------------------------------------
<S>                                          <C>            <C>            <C>            <C>
Interest-earning assets:
  Loans                                      $     (5,387)  $     22,743   $     (2,651)  $     14,705
  Securities                                          (14)         1,314             (6)         1,294
  Other interest-earning assets                        30             53              3             86
-------------------------------------------------------------------------------------------------------
Total interest-earning assets                      (5,371)        24,110         (2,654)        16,085
-------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
  Interest checking deposits                          (10)            15              -              5
  Savings deposits                                    (32)           (19)             -            (51)
  Money market deposits                               (29)           850             (1)           820
  Certificates of deposit                          (1,592)         9,749         (1,038)         7,119
-------------------------------------------------------------------------------------------------------
Total deposit accounts                             (1,663)        10,595         (1,039)         7,893
-------------------------------------------------------------------------------------------------------
Federal funds purchased and FHLB advances               -              -             40             40
Debentures and accrued interest payable               137            343              5            485
Debentures - capital securities                      (370)         2,609           (537)         1,702
Mortgage note payable                                   -             (1)             -             (1)
-------------------------------------------------------------------------------------------------------
Total borrowed funds                                 (233)         2,951           (492)         2,226
-------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities                 (1,896)        13,546         (1,531)        10,119
-------------------------------------------------------------------------------------------------------
Net change in interest and dividend income   $     (3,475)  $     10,564   $     (1,123)  $      5,966
-------------------------------------------------------------------------------------------------------
</TABLE>

Provision  for  Loan  Losses
----------------------------

The  provision  for  loan  losses  increased  to  $4.5 million in 2004 from $2.0
million  in  2003.  The  higher  provision  was a function of loan growth, which
amounted  to  $347.9 million in 2004 compared to $183.6 million in 2003, as well
as a decrease in the credit grade of two loans during the third quarter of 2004.

Noninterest  Income
-------------------

Noninterest  income  increased  by  $1.8  million to $5.1 million in 2004 and is
summarized  as  follows:

<TABLE>
<CAPTION>
                                                                 For the Year Ended December 31,
                                                                 -------------------------------
      ($ in thousands)                                                2004              2003
     ---------------------------------------------------------------------------------------------
<S>                                                            <C>               <C>
     Customer service fees                                     $            252  $            187
     Income from mortgage lending activities (1)                          1,221               824
     Income from the early repayment of mortgage loans (2)                3,546             2,317
     Commissions and fees                                                   119                38
     Gain (loss) from early call of investment securities (3)                 2               (51)
     All other noninterest income                                             -                 6
     ---------------------------------------------------------------------------------------------
                                                               $          5,140  $          3,321
     ---------------------------------------------------------------------------------------------
<FN>
     (1)  Consists  mostly  of  fees  from  expired  loan  commitments  and  loan  servicing,
          Maintenance  and  inspections  charges.
     (2)  Consists  of  the recognition of unearned fees associated with such loans at the time of
          payoff  and  the  receipt  of  prepayment  penalties  and  interest  in  certain  cases.
     (3)  Consists  of  the  recognition  of  any unamortized premium or discount at time of call.
</TABLE>

Noninterest income increased primarily due to higher income of $1.2 million from
the  prepayment  of  mortgage  loans,  a  $0.3  million increase in loan service
charges  and  $0.1  million  of additional fee income from loan commitments that
expired  and  were  not  funded.

Noninterest  Expenses
---------------------

Noninterest  expenses  increased  by $1.0 million to $8.3 million in 2004 and is
summarized  as  follows:


                                       44
<PAGE>
<TABLE>
<CAPTION>
                                           For the Year Ended December 31,
                                           -------------------------------
     ($ in thousands)                          2004              2003
     ----------------------------------------------------------------------
<S>                                      <C>               <C>
     Salaries and employee benefits      $          4,046  $          3,655
     Occupancy and equipment, net                   1,659             1,270
     Data processing                                  428               533
     Professional fees and services                   411               364
     Stationery, printing and supplies                180               152
     Postage and delivery                             111               101
     FDIC and general insurance                       264               225
     Director and committee fees                      397               229
     Advertising and promotion                        110                35
     All other expenses                               645               695
     ----------------------------------------------------------------------
                                         $          8,251  $          7,259
     ----------------------------------------------------------------------
</TABLE>

Salaries  and  employee  benefits  expense  increased due to the following: $0.6
million from salary increases, a higher cost of employee benefits and additional
staff;  $0.4 million from bonus payments to certain executives of the Company in
connection  with  the  sale  of capital securities and leasing of new space; and
$41,000 of additional commission expense. The increases were partially offset by
a  $0.4  million  decrease in compensation from common stock warrants and a $0.2
million  decrease  in  compensation resulting from a higher level of SFAS No. 91
direct  fee  income (due to more loan originations). The Company had 64 fulltime
employees  at  December  31, 2004 versus 61 at December 31, 2003. See note 14 to
the  consolidated  financial  statements  included in this report for additional
information  on  common  stock  warrants.

Occupancy  and  equipment  expense increased due to the leasing of larger office
space.  In May 2004, Intervest Bancshares Corporation, Intervest National Bank's
New  York  office,  Intervest  Mortgage  Corporation  and  Intervest  Securities
Corporation  moved  into newly constructed offices on the entire fourth floor at
One  Rockefeller  Plaza in New York City. Intervest Mortgage Corporation's lease
obligation  of  approximately  $22,000  per  month  on  its  former  space at 10
Rockefeller  Plaza  expired  in  September  2004.

Data processing expense decreased due to lower fees incurred by the Bank despite
an  increase  in  its assets. The Bank renegotiated its data processing contract
during  late  2003  by  extending  the  expiration date to 2010 and reducing the
processing fee to a fixed amount until its assets reach $1.1 billion. Thereafter
the  fee  becomes  variable and is calculated based on total assets. Previously,
the data processing fee was entirely variable and a function of the Bank's total
assets.

Professional  fees  and services, stationery, printing and supplies, postage and
delivery,  and  FDIC and general insurance expenses increased largely due to the
Company's  growth.

Director  and  committee fees increased due to higher fees paid to directors for
each  board and committee meeting attended. The fees were increased in June 2003
and  October  2004.

Advertising  expense increased due to additional advertising to support loan and
deposit  growth.

All  other  expenses  were  lower  due  to  a decrease of $49,000 in losses from
transactional  accounts  and  a  decrease  in foreclosed real estate expenses of
$64,000,  partial  offset  by  increased  travel,  telephone  and  franchise tax
expense.

Provision for Income Taxes
--------------------------

The  provision  for  income  taxes  increased by $1.9 million to $8.8 million in
2004,  from  $6.9  million  in 2003, due to higher pre-tax income. The Company's
effective  tax  rate  (inclusive  of state and local taxes) amounted to 43.4% in
2004,  compared  to  43.0%  in  2003.

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  19  to  the
consolidated  financial  statements  included  in  this  report.


                                       45
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

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

The  Bank has and expects to continue to rely heavily on certificates of deposit
(time deposits) as a source of funds. Total deposits amounted to $1.4 billion at
December  31,  2005 and time deposits represented 81%, or $1.1 billion, of those
deposits.  Additionally,  time deposits of $100,000 or more at December 31, 2005
totaled $371.8 million and included $40.5 million of brokered deposits. The Bank
began  accepting  brokered deposits as another source of funds beginning in June
2005. 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. The Bank
needs  to  pay competitive interest rates to attract and retain time deposits to
fund its loan originations. In addition, the Bank has and expects to continue to
rely  on  capital contributions from the Holding Company to increase its capital
to  support  its  rapid  asset growth. The Holding Company made a total of $32.5
million  of capital contributions to the Bank during 2005. At December 31, 2005,
the  Bank had $382.0 million of time deposits maturing by December 31, 2006. The
Bank  expects  that  a substantial portion of these deposits will be renewed and
stay  with  the  Bank.

The  Bank,  from  time  to  time, may borrow funds on an overnight or short-term
basis  to  manage  its  liquidity  needs.  At  December  31,  2005, the Bank had
agreements with correspondent banks whereby it could borrow up to $16 million on
an  unsecured  basis. In addition, as a member of the FHLB and FRB, the Bank can
also  borrow  from  these institutions on a secured basis. During 2005, the Bank
borrowed  a  total  of  $60.4  million of short-term FHLB advances and overnight
federal  funds  purchases and repaid a total of $96.4 million for a net decrease
of $36.0 million from short-term borrowings outstanding at December 31, 2004. At
December  31,  2005,  there  were  no  outstanding  borrowings  from  any of the
aforementioned  sources. At December 31, 2005, the Bank had available collateral
consisting  of investment securities to support total borrowings of $243 million
from  the  FHLB  and  FRB.

Intervest  Mortgage  Corporation  has  and  expects  to  continue to rely on the
issuance of its subordinated debentures in registered, best efforts offerings to
the  public  as a source of funds to support its loan originations. In addition,
as  the Bank's mortgage loan portfolio has grown, service fee income received by
Intervest  Mortgage  Corporation  from  the  Bank  has  comprised  an increasing
percentage  of  Intervest  Mortgage  Corporation's  cash  flow.  The  Bank has a
servicing  agreement  with  Intervest  Mortgage  Corporation  whereby  Intervest
Mortgage  Corporation  provides the Bank with mortgage loan origination services
for  a  monthly  fee  that  is  based  on loan origination volumes. The services
include the identification of potential properties and borrowers; the inspection
of  properties  constituting  collateral  for such loans; the negotiation of the
terms  and  conditions  of such loans in accordance with the Bank's underwriting
standards;  and  coordinating the preparation of commitment letters and the loan
closing  process. The services are performed by Intervest Mortgage Corporation's
personnel  and the related expenses are borne by Intervest Mortgage Corporation.
In addition, from time to time, Intervest Mortgage Corporation has also received
capital  contributions  from  the  Holding  Company.

Intervest Mortgage Corporation's lending business is dependent on its continuing
ability  to  sell  its  debentures  with  interest  rates that would result in a
positive  interest rate spread, which is the difference between yields earned on
its  loans  and  the  rates  paid  on  its  debentures.

As  detailed in note 7 to the consolidated financial statements included in this
report,  at  December  31,  2005, $82.8 million in aggregate principal amount of
Intervest  Mortgage  Corporation's subordinated debentures were outstanding with
fixed  interest  rates  that  range from 6.25% to 9.00% per annum and maturities
that range from July 1, 2006 to October 1, 2013. During 2005, Intervest Mortgage
Corporation  repaid  various  debentures  for  a  total  of  $37.2  million


                                       46
<PAGE>
($32.1  million  of  principal  and  $5.1  million  of  related accrued interest
payable),  and issued new debentures with an aggregate principal amount of $26.0
million  for  net  proceeds, after offering costs, of $24.1 million. At December
31,  2005,  Intervest  Mortgage  Corporation  had $8.8 million of debentures and
related  accrued  interest  payable  maturing  by  December  31, 2006, which are
expected  to  be  repaid  from  cash  flow generated from maturities of existing
mortgage  loans,  ongoing  operations  and cash on hand. In the first quarter of
2006, Intervest Mortgage Corporation anticipates filing a registration statement
with  the SEC related to a public offering of additional debentures of up to $16
million  in  aggregate  principal  amount.

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

At  December  31,  2005,  the Holding Company had $1.3 million of debentures and
related  accrued  interest  payable  maturing  by  December  31, 2006, which are
expected to be repaid from cash on hand. The Holding Company completed in August
2005  a  public  offering  of  1,250,000  shares of its Class A common stock for
$19.75  per  share  and in September 2005 issued an additional 186,468 shares of
Class A common stock for $19.75 per share in connection with the exercise by the
underwriters  of  an  option  to  purchase  additional  shares  to  cover
over-allotments.  The  issuance  of these shares, after underwriting commissions
and  expenses,  resulted in $26.3 million of additional capital for the Company.

The  Holding  Company,  through  its  wholly  owned  business  trusts  Intervest
Statutory  Trust  I,  II,  III  and IV, issued in December 2001, September 2003,
March  2004  and September 2004, $15.0 million, respectively, of trust preferred
securities  for  a  total  of  $60  million  at both fixed and variable rates of
interest  that mature in 2031 or later. The total proceeds from these securities
have  been  invested in the Bank at various times through capital contributions.
The  Holding  Company  is required to make interest payments on the principal of
those  securities,  which  currently  amount  to $4.4 million annually. The Bank
provides  funds to Holding Company in the form of dividends for this purpose. At
December 31, 2005, approximately $45.4 million of the trust preferred securities
qualified  as  regulatory  Tier  1 capital and the remainder qualified as Tier 2
capital  in  the  Holding  Company's  computation  of  regulatory  capital.

Additional  information  concerning  outstanding  time  deposits, debentures and
trust  preferred  securities, including interest rates and maturity dates can be
found  in notes 6, 7 and 9 of the notes to the consolidated financial statements
included  in  this  report.

At  December  31,  2005,  the  Company's total commitments to lend aggregated to
$102.4  million. Although there is no certainty, management anticipates that the
majority  of  these  loan commitments will be funded over the next 12 months. If
all  these  commitments  were  to  close, they would be funded by the sources of
funds  described  above.

The  Company  considers its current liquidity and sources of funds sufficient to
satisfy  its  outstanding  lending  commitments  and  its  maturing liabilities.
Management  is  not  aware  of  any  trends,  known  demand,  commitments  or
uncertainties  which  are expected to have a material impact on future operating
results,  liquidity  or  capital  resources.


                                       47
<PAGE>
CONTRACTUAL OBLIGATIONS

The  table below summarizes the Company's contractual obligations as of December
31,  2005.

<TABLE>
<CAPTION>
                                                                                  Due In
                                                                -----------------------------------------
                                                                          2007 and   2009 and   2011 and
($ in thousands)                                      Total       2006      2008       2010       Later
---------------------------------------------------------------------------------------------------------
<S>                                                 <C>         <C>       <C>        <C>        <C>
Subordinated debentures and mortgage note payable   $   87,619  $  7,264  $  23,171  $  26,536  $  30,648
Subordinated debentures - capital securities            61,856         -          -          -     61,856
Accrued interest payable on all borrowed funds           6,096     2,828      2,455        532        281
Deposits with no stated maturities                     256,816   256,816          -          -          -
Deposits with stated maturities                      1,118,514   381,968    386,244    323,074     27,228
Operating lease payments                                 7,336       911      1,708      1,755      2,962
Unfunded loan commitments (1)                          101,597    97,057      4,540          -          -
Available lines of credit (1)                              737       737          -          -          -
Standby letters of credit (1)                              100       100          -          -          -
---------------------------------------------------------------------------------------------------------
                                                    $1,640,671  $747,681  $ 418,118  $ 351,897  $ 122,975
---------------------------------------------------------------------------------------------------------
<FN>
(1)  Since  some  of  the  commitments  are  expected  to  expire  without  being  drawn  upon, the total
     commitment  amount  does  not  necessarily  represent  future  cash  requirements.
</TABLE>

REGULATORY CAPITAL

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

The  Bank is required to maintain regulatory defined minimum Tier 1 leverage and
Tier  1and  total  risk-based  capital  ratio  levels of at least 4%, 4% and 8%,
respectively.  At  December 31, 2005 and 2004, management believes  the Bank met
its  capital  adequacy  requirements  and  is  a well-capitalized institution as
defined in the regulations, which require minimum Tier 1 leverage and Tier 1 and
total risk-based ratios of 5%, 6% and 10%, respectively. Management is not aware
of  any  conditions  or  events  that  would  change the Bank's designation as a
well-capitalized  institution.

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

<TABLE>
<CAPTION>
                                                            At December 31,
                                                            ---------------
      ($ in thousands)                                     2005         2004
      --------------------------------------------------------------------------
<S>                                                     <C>          <C>
      Tier 1 Capital                                    $  156,842   $  106,724
      Tier 2 Capital                                        14,846       10,689
      --------------------------------------------------------------------------
      Total risk-based capital                          $  171,688   $  117,413
      --------------------------------------------------------------------------
      Net risk-weighted assets                          $1,362,728   $  971,823
      Average assets for regulatory purposes            $1,562,779   $1,140,624
      --------------------------------------------------------------------------
      Tier 1 capital to average assets                       10.04%        9.36%
      Tier 1 capital to risk-weighted assets                 11.51%       10.98%
      Total capital to risk-weighted assets                  12.60%       12.08%
      --------------------------------------------------------------------------
</TABLE>

The  Holding  Company  on  a consolidated basis is subject to minimum regulatory
capital  requirements  administered by the FRB. These guidelines require a ratio
of  Tier 1 or Core Capital, as defined in the guidelines, to total risk-weighted
assets of at least 4% and a ratio of total capital to risk-weighted assets of at
least  8%.  The  guidelines  also  require a ratio of Tier 1 capital to adjusted
total  average  assets  of  not  less  than  3%.  At December 31, 2005 and 2004,
management  believes  that  the  Holding  Company  met  its  capital  adequacy
requirements.


                                       48
<PAGE>
Information  regarding  the  Holding  Company's  regulatory  capital and related
ratios  is  summarized  below:

<TABLE>
<CAPTION>
                                                             At December 31,
                                                             ---------------
      ($ in thousands)                                      2005         2004
     ---------------------------------------------------------------------------
<S>                                                     <C>          <C>
     Tier 1 Capital (1)                                 $  181,571   $  115,031
     Tier 2 Capital (1)                                     29,788       41,074
     ---------------------------------------------------------------------------
     Total risk-based capital                           $  211,359   $  156,105
     ---------------------------------------------------------------------------
     Net risk-weighted assets                           $1,466,027   $1,096,711
     Average assets for regulatory purposes             $1,673,832   $1,273,770
     ---------------------------------------------------------------------------
     Tier 1 capital to average assets                        10.85%        9.03%
     Tier 1 capital to risk-weighted assets                  12.39%       10.49%
     Total capital to risk-weighted assets                   14.42%       14.23%
     ---------------------------------------------------------------------------
<FN>
     (1)  There  are  $60  million  of qualifying capital securities outstanding
          (total  debentures  of  $61.9 million issued to Statutory Trust I, II,
          III  and  IV  by  the  Holding  Company  less  the  Holding  Company's
          investments in those trusts aggregating $1.9 million). At December 31,
          2005  and  December 31, 2004, $45.4 million and $30.0 million of those
          securities,  respectively,  was  included  in  Tier 1 Capital, and the
          remaining  portion  was  included  in Tier 2 Capital. The inclusion of
          these  securities  in Tier 1 capital is limited to 25% of core capital
          elements,  as  defined  in  the  FDIC  regulations
</TABLE>

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

Until March 31, 2009, BHCs generally must comply with the current Tier 1 capital
limits. That is, BHCs generally should calculate their Tier 1 capital on a basis
that  limits  the  aggregate amount of qualifying cumulative perpetual preferred
stock  and  qualifying  trust  preferred  securities to 25 percent of the sum of
qualifying  common stockholder's equity, qualifying noncumulative and cumulative
perpetual  preferred  stock  (including  related  surplus),  qualifying minority
interest  in  the  equity  accounts of consolidated subsidiaries, and qualifying
trust preferred securities. Amounts of qualifying cumulative perpetual preferred
stock  and  qualifying trust preferred securities in excess of this limit may be
included  in  Tier  2  capital.

Beginning  March  31,  2009, qualifying cumulative perpetual preferred stock and
trust  preferred  securities, as well as certain types of minority interest, are
limited  to  25 percent of the sum of core capital elements net of goodwill. The
Holding  Company  currently  does  not  have  any  goodwill.

Beginning March 31, 2009, the excess amounts of restricted core capital elements
in  the form of qualifying trust preferred securities included in Tier 2 capital
are limited to 50 percent of Tier 1 capital (net of goodwill). Amounts in excess
of  this  limit will still be taken into account in the overall assessment of an
organization's  funding  and  financial  condition. The final rule also provides
that in the last five years before the underlying subordinated note matures, the
associated  trust preferred securities must be treated as limited-life preferred
stock.  Thus,  in  the  last five years of the life of the note, the outstanding
amount  of  trust  preferred securities will be excluded from Tier 1 capital and
included  in  Tier 2 capital, subject, together with subordinated debt and other
limited-life preferred stock, to a limit of 50 percent of Tier 1 capital. During
this  period,  the  trust  preferred  securities will be amortized out of Tier 2
capital  by  one-fifth  of  the original amount (less redemptions) each year and
excluded  totally  from  Tier  2  capital  during  the  last year of life of the
underlying  note.

As  of  December  31,  2005,  assuming  the Company no longer included its trust
preferred  securities in Tier 1 Capital, the Company would still exceed the well
capitalized  threshold  under  the  regulatory  framework  for prompt corrective
action.

Intervest  Securities  Corporation  is  subject to the SEC's Uniform Net Capital
Rule  which  requires  the  maintenance  of  minimum  net  capital of $5,000. At
December  31,  2005 and 2004, Intervest Securities Corporation's net capital was
$0.5  million.


                                       49
<PAGE>
ASSET AND LIABILITY MANAGEMENT

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

The  Company  uses  "gap  analysis,"  which  measures  the  difference  between
interest-earning  assets and interest-bearing liabilities that mature or reprice
within  a  given time period, to monitor its interest rate sensitivity. An asset
or  liability  is  normally  considered to be interest-rate sensitive if it will
reprice  or mature within one year or less. The interest-rate sensitivity gap is
the  difference between interest-earning assets and interest-bearing liabilities
scheduled  to  mature  or  reprice within one-year. A gap is considered positive
when the amount of interest rate-sensitive assets exceeds the amount of interest
rate-sensitive  liabilities.  Conversely,  a gap is considered negative when the
opposite  is  true.

In  a  period  of  rising interest rates, a negative gap would tend to adversely
affect  net  interest  income,  while  a positive gap would tend to increase net
interest  income.  In  a  period of falling interest rates, a negative gap would
tend  to  increase  net  interest  income,  while  a  positive gap would tend to
adversely  affect  net interest income. If the repricing of the Company's assets
and  liabilities were equally flexible and moved concurrently, the impact of any
increase  or decrease in interest rates on net interest income would be minimal.

A  simple  interest rate gap analysis by itself may not be an accurate indicator
of how net interest income will be affected by changes in interest rates for the
following  reasons.  Income  associated  with  interest-earning assets and costs
associated  with  interest-bearing  liabilities may not be affected uniformly by
changes in interest rates. In addition, the magnitude and duration of changes in
interest  rates  may  have  a  significant  impact  on  net interest income. For
example,  although certain assets and liabilities may have similar maturities or
periods  of  repricing, they may react in different degrees to changes in market
interest  rates.  Interest  rates  on  certain  types  of assets and liabilities
fluctuate in advance of changes in general market interest rates, while interest
rates  on  other  types  may  lag  behind  changes in market rates. In addition,
certain  assets,  such  as  adjustable-rate  mortgage  loans,  may have features
generally  referred to in the industry as "interest rate caps and floors," which
limit  changes  in interest rates on a short-term basis and over the life of the
asset.  In  the  event of a change in interest rates, asset prepayment and early
deposit withdrawal levels also could deviate significantly from those assumed in
calculating  the  interest-rate  gap.  The  ability of many borrowers to service
their debts also may decrease in the event of an interest-rate increase, and the
behavior  of depositors may be different than those assumed in the gap analysis.

The  Company's  one-year  positive  interest  rate  sensitivity gap increased to
$498.7  million  ,  or  29.2% of total assets, at December 31, 2005, from $114.0
million,  or  8.7%  at  December  31,  2004.  The  increase  in the positive gap
primarily  reflects  an increase in loans that reprice or mature within one year
funded  by  time  deposits  with  terms  of  more than one year. For purposes of
computing the gap, all deposits with no stated maturities are treated as readily
accessible  accounts.  However,  if  such deposits were treated differently, the
one-year  gap  would  then  change.  The  behavior  of  core  depositors may not
necessarily  result  in  the  immediate withdrawal of funds in the event deposit
rates  offered by the Bank did not change as quickly and uniformly as changes in
general  market  rates.  For  example,  if  only  25% of deposits with no stated
maturity were assumed to be readily accessible, the one-year gap would have been
a positive 40.1% at December 31, 2005, compared to a positive 22.5 % at December
31,  2004.

Many  of the Company's floating-rate loans have a "floor," or minimum rate, that
is determined in relation to prevailing market rates on the date of origination.
This floor only adjusts upwards in the event of increases in the loan's interest
rate.  This  feature  reduces  the  unfavorable  effect  on interest income of a
falling  rate  environment because the interest rates on such loans do not reset
downward.  However, the Company may nonetheless experience loan prepayments, the
amount  of  which cannot be predicted, and reinvestment risk associated with the
resulting  proceeds.

Notwithstanding  all  of the above, there can be no assurances that a sudden and
substantial  increase  in  interest rates may not adversely impact the Company's
earnings,  to the extent that the interest rates borne by assets and liabilities
do  not  change  at  the  same  speed, to the same extent, or on the same basis.


                                       50
<PAGE>
The  table  below  summarizes  interest-earning  assets  and  interest-bearing
liabilities  as  of  December  31, 2005, that are scheduled to mature or reprice
within  the  periods  shown.

<TABLE>
<CAPTION>
                                                  0-3        4-12    Over 1-4      Over 4
($ in thousands)                               Months      Months       Years       Years        Total
-------------------------------------------------------------------------------------------------------
<S>                                         <C>         <C>         <C>         <C>         <C>
Loans (1)                                   $ 549,600   $ 370,277   $ 384,893   $  76,274   $1,381,044
Securities held to maturity (2)                63,437     108,317      79,754           -      251,508
Short-term investments                         45,121           -           -           -       45,121
FRB and FHLB stock                              1,803           -           -       3,438        5,241
-------------------------------------------------------------------------------------------------------
Total rate-sensitive assets                 $ 659,961   $ 478,594   $ 464,647   $  79,712   $1,682,914
-------------------------------------------------------------------------------------------------------
Deposit accounts (3):
  Interest checking deposits                $   7,202   $       -   $       -   $       -   $    7,202
  Savings deposits                             17,351           -           -           -       17,351
  Money market deposits                       223,075           -           -           -      223,075
  Certificates of deposit                      97,265     284,702     546,589     189,958    1,118,514
-------------------------------------------------------------------------------------------------------
Total deposits                                344,893     284,702     546,589     189,958    1,366,142
-------------------------------------------------------------------------------------------------------
Debentures and mortgage note payable (1)            -       7,250      83,032      59,193      149,475
Accrued interest on all borrowed funds (1)      1,385       1,597       2,745         523        6,250
-------------------------------------------------------------------------------------------------------
Total borrowed funds                            1,385       8,847      85,777      59,716      155,725
-------------------------------------------------------------------------------------------------------
Total rate-sensitive liabilities            $ 346,278   $ 293,549   $ 632,366   $ 249,674   $1,521,867
-------------------------------------------------------------------------------------------------------
GAP (repricing differences)                 $ 313,683   $ 185,045   $(167,719)  $(169,962)  $  161,047
-------------------------------------------------------------------------------------------------------
Cumulative GAP                              $ 313,683   $ 498,728   $ 331,009   $ 161,047   $  161,047
-------------------------------------------------------------------------------------------------------
Cumulative GAP to total assets                   18.4%       29.2%       19.4%        9.4%         9.4%
-------------------------------------------------------------------------------------------------------
<FN>
Significant assumptions used in preparing the gap table above:
(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
are  excluded  from  this  analysis.
(2)  Securities  are  scheduled  according  to the earlier of their contractual maturity or the date in
which  the  interest rate is scheduled to increase. The effects of possible prepayments that may result
from  the  issuer's  right  to call a security before its contractual maturity date are not considered.
(3)  Interest  checking,  savings  and  money  market  deposits  are  regarded  as  readily  accessible
withdrawable  accounts;  and  certificates  of  deposit  are  scheduled  through  their maturity dates.
</TABLE>

SARBANES OXLEY ACT OF 2002

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

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

In  this  regard,  the  Company has begun a process to document and evaluate its
internal  control  over  financial  reporting  in  order  to  satisfy  these
requirements.  The  process  includes  dedicating  internal resources toward the
adoption  of a detailed work plan and will also involve the retention of outside
consultants.

This  process  is  designed  to (i) assess and document the adequacy of internal
control  over financial reporting, (ii) take steps to improve control processes,
where  appropriate,  and  (iii)  verify  through  testing  that  controls  are
functioning  as  documented.  To  date,  the  Company  has  identified  certain
deficiencies  in  the design and operating effectiveness of its internal control
over  financial  reporting, and it believes that they have been corrected or are
in  the  process  of  being  corrected.  Although this process is not completed,
management  is  not  aware  of  any


                                       51
<PAGE>
"significant  deficiencies"  or  "material weaknesses" in the Company's internal
controls  over  financial  reporting,  as  defined  in applicable Securities and
Exchange  Commission  rules  and  regulations.

RECENT ACCOUNTING PRONOUNCEMENTS

See  note 1 to the consolidated financial statements included in this report for
a  discussion  of  this  topic.

IMPACT OF INFLATION AND CHANGING PRICES

The  financial  statements  and  related  financial  data concerning the Company
presented  herein  have  been  prepared in accordance with accounting principles
generally  accepted  in  the  United  States  of  America,  which  require  the
measurement  of  financial position and operating results in terms of historical
dollars  without  considering  changes in the relative purchasing power of money
over time due to inflation. The primary impact of inflation on the operations of
the  Company  is  reflected  in  increased operating costs. Virtually all of the
assets  and  liabilities  of  the  Company  are monetary in nature. As a result,
changes  in  interest rates have a more significant impact on the performance of
the  Company than do the effects of changes in the general rate of inflation and
in  prices.  Interest  rates do not necessarily move in the same direction or in
the  same  magnitude  as  the  prices  of  goods  and  services.

ITEM 7A.  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,
2005 and 2004, which reflect changes in market prices and rates, can be found in
note  20  to  the  consolidated  financial  statements  included in this report.

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. For a further discussion, see
the  section entitled "Asset and Liability Management" in Item 7 of this report.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

FINANCIAL STATEMENTS

The  following  consolidated  financial  statements  of the Company are included
herein:

-    Report of Independent Registered Public Accounting Firm - Hacker, Johnson &
       Smith,  P.A.,  P.C.  (PAGE  53)
-    Consolidated  Balance  Sheets  at  December  31,  2005  and  2004 (PAGE 54)
-    Consolidated  Statements of Earnings for the Years Ended December 31, 2005,
       2004  and  2003  (PAGE  55)
-    Consolidated  Statements  of  Changes in Stockholders' Equity for the Years
       Ended  December  31,  2005,  2004  and  2003  (PAGE  56)
-    Consolidated  Statements  of  Cash  Flows  for the Years Ended December 31,
       2005,  2004  and  2003  (PAGE  57)
-    Notes  to  the  Consolidated  Financial  Statements  (PAGES  58  TO  79)

SUPPLEMENTARY DATA

Other  financial  statement  schedules  and inapplicable periods with respect to
schedules listed above are omitted because the conditions requiring their filing
do not exist or the information required thereby is included in the consolidated
financial  statements  filed,  including  the  notes  thereto.


                                       52
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


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

We  have  audited  the  accompanying  consolidated  balance  sheets of Intervest
Bancshares  Corporation and Subsidiaries (the "Company") as of December 31, 2005
and  2004  and  the  related  consolidated  statements  of  earnings, changes in
stockholders'  equity,  and  cash  flows for each of the years in the three-year
period  ended  December  31,  2005.  These  financial  statements  are  the
responsibility  of the Company's management. Our responsibility is to express an
opinion  on  these  financial  statements  based  on  our  audits.

We  conducted  our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements  are free of material misstatement. An audit includes examining, on a
test  basis,  evidence  supporting  the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made  by  management,  as well as evaluating the overall
financial  statement  presentation.  We  believe  that  our  audits  provide  a
reasonable  basis  for  our  opinion.

In  our opinion, the consolidated financial statements referred to above present
fairly,  in  all  material  respects,  the  financial position of the Company at
December 31, 2005 and 2004, and the results of its operations and its cash flows
for  each  of  the  years  in  the  three-year period ended December 31, 2005 in
conformity with generally accepted accounting principles in the United States of
America.

/s/ Hacker, Johnson & Smith, P.A., P.C.
---------------------------------------
Hacker, Johnson & Smith, P.A., P.C.
Tampa, Florida
February 3, 2006


                                       53
<PAGE>
<TABLE>
<CAPTION>
                                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                                           CONSOLIDATED BALANCE SHEETS

                                                                                              AT DECEMBER 31,
                                                                                          ----------------------
($ in thousands, except par value)                                                           2005        2004
----------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>         <C>
ASSETS
Cash and due from banks                                                                   $   11,595  $   12,026
Federal funds sold                                                                            42,675       9,948
Commercial paper and other short-term investments                                              2,446       2,625
                                                                                          ----------------------
  Total cash and cash equivalents                                                             56,716      24,599
Securities held to maturity, net                                                             251,508     248,888
Federal Reserve Bank and Federal Home Loan Bank stock, at cost                                 5,241       5,092
Loans receivable (net of allowance for loan losses of $15,181 and $11,106, respectively)   1,352,805   1,004,290
Accrued interest receivable                                                                    7,706       6,699
Loan fees receivable                                                                          10,941       8,208
Premises and equipment, net                                                                    6,421       6,636
Deferred income tax asset                                                                      6,988       5,095
Deferred debenture offering costs, net                                                         5,610       4,929
Other assets                                                                                   2,487       2,315
================================================================================================================
TOTAL ASSETS                                                                              $1,706,423  $1,316,751
================================================================================================================
LIABILITIES
Deposits:
  Noninterest-bearing demand deposit accounts                                             $    9,188  $    6,142
  Interest-bearing deposit accounts:
    Checking (NOW) accounts                                                                    7,202      15,051
    Savings accounts                                                                          17,351      27,359
    Money market accounts                                                                    223,075     200,549
    Certificate of deposit accounts                                                        1,118,514     744,771
                                                                                          ----------------------
  Total deposit accounts                                                                   1,375,330     993,872
  Borrowed Funds:
    Federal Home Loan Bank advances                                                                -      36,000
    Subordinated debentures                                                                   87,390      94,430
    Subordinated debentures - capital securities                                              61,856      61,856
    Accrued interest payable on all borrowed funds                                             6,250      10,154
    Mortgage note payable                                                                        229         242
                                                                                          ----------------------
Total borrowed funds                                                                         155,725     202,682
Accrued interest payable on deposits                                                           3,232       1,718
Mortgage escrow funds payable                                                                 20,302      14,533
Official checks outstanding                                                                   11,689      12,061
Other liabilities                                                                              3,967       1,791
----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES                                                                          1,570,245   1,226,657
----------------------------------------------------------------------------------------------------------------
Commitments and contingencies (notes 5, 9, 17 and 19)
STOCKHOLDERS' EQUITY
Preferred stock  (300,000 shares authorized, none issued)                                          -           -
Class A common stock  ($1.00 par value, 9,500,000 shares authorized,
  7,438,058 and 5,886,433 shares issued and outstanding, respectively)                         7,438       5,886
Class B common stock  ($1.00 par value, 700,000 shares authorized,
  and 385,000 shares issued and outstanding)                                                     385         385
Additional paid-in-capital, common                                                            65,309      38,961
Retained earnings                                                                             63,046      44,862
----------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY                                                                   136,178      90,094
================================================================================================================
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                $1,706,423  $1,316,751
================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.


                                       54
<PAGE>
<TABLE>
<CAPTION>
                        INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF EARNINGS

                                                                      YEAR ENDED DECEMBER 31,
                                                                   -----------------------------
($ in thousands, except per share data)                              2005      2004      2003
------------------------------------------------------------------------------------------------
<S>                                                                <C>       <C>       <C>
INTEREST AND DIVIDEND INCOME
Loans receivable                                                   $ 89,590  $ 61,928  $ 47,223
Securities                                                            7,229     4,259     2,965
Other interest-earning assets                                         1,062       362       276
------------------------------------------------------------------------------------------------
TOTAL INTEREST AND DIVIDEND INCOME                                   97,881    66,549    50,464
------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits                                                             44,919    26,330    18,437
Subordinated debentures                                               8,014     8,801     8,316
Subordinated debentures - capital securities                          4,359     3,495     1,793
Other borrowed funds                                                    155        57        18
------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE                                               57,447    38,683    28,564
------------------------------------------------------------------------------------------------
NET INTEREST AND DIVIDEND INCOME                                     40,434    27,866    21,900
Provision for loan losses                                             4,075     4,526     1,969
------------------------------------------------------------------------------------------------
NET INTEREST AND DIVIDEND INCOME AFTER PROVISION FOR LOAN LOSSES     36,359    23,340    19,931
------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Customer service fees                                                   334       252       187
Income from mortgage lending activities                               1,082     1,221       824
Income from the early repayment of mortgage loans                     5,062     3,546     2,317
Commissions and fees                                                    115       119        38
Gain (loss) from early call of investment securities                      1         2       (51)
All other                                                                 -         -         6
------------------------------------------------------------------------------------------------
TOTAL NONINTEREST INCOME                                              6,594     5,140     3,321
------------------------------------------------------------------------------------------------
NONINTEREST EXPENSES
Salaries and employee benefits                                        5,726     4,046     3,655
Occupancy and equipment, net                                          1,487     1,659     1,270
Data processing                                                         605       428       533
Professional fees and services                                          773       411       364
Stationery, printing and supplies                                       211       180       152
Postage and delivery                                                    129       111       101
FDIC and general insurance                                              324       264       225
Director and committee fees                                             527       397       229
Advertising and promotion                                               225       110        35
All other                                                               696       645       695
------------------------------------------------------------------------------------------------
TOTAL NONINTEREST EXPENSES                                           10,703     8,251     7,259
------------------------------------------------------------------------------------------------
Earnings before income taxes                                         32,250    20,229    15,993
Provision for income taxes                                           14,066     8,776     6,873
================================================================================================
NET EARNINGS                                                       $ 18,184  $ 11,453  $  9,120
================================================================================================


BASIC EARNINGS PER SHARE                                           $   2.65  $   1.89  $   1.85
DILUTED EARNINGS PER SHARE                                         $   2.47  $   1.71  $   1.53
------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.


                                       55
<PAGE>
<TABLE>
<CAPTION>
                                 INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                             CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                                                                                       YEAR ENDED DECEMBER 31,
                                                                                 ----------------------------------
($ in thousands)                                                                    2005        2004        2003
-------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>         <C>         <C>
CLASS A COMMON STOCK
Balance at beginning of year                                                     $    5,886  $    5,603  $    4,348
Issuance of 42,510 shares and 945,717 shares upon the exercise of warrants                -          43         946
Issuance of 115,157 shares, 240,546 shares and 309,573 shares
    upon the conversion of debentures                                                   115         240         309
Issuance of 1,436,468 shares in public offering                                       1,437           -           -
-------------------------------------------------------------------------------------------------------------------
Balance at end of year                                                                7,438       5,886       5,603
-------------------------------------------------------------------------------------------------------------------

CLASS B COMMON STOCK
Balance at beginning of year                                                            385         385         355
Issuance of 30,000 shares to acquire Intervest Securities Corporation                     -           -          30
-------------------------------------------------------------------------------------------------------------------
Balance at end of year                                                                  385         385         385
-------------------------------------------------------------------------------------------------------------------

ADDITIONAL PAID-IN-CAPITAL, COMMON
Balance at beginning of year                                                         38,961      35,988      24,134
Compensation related to vesting of certain Class B stock warrants                         -           9          26
Compensation related to the modification of certain Class A stock warrants                -           -         418
Issuance of 30,000 shares of Class B stock to acquire
    Intervest Securities Corporation                                                      -           -         185
Issuance of 42,510 shares and 945,717 shares of Class A stock upon the
    exercise of Class A stock warrants, inclusive of tax benefits                         -         383       8,520
Issuance of 115,157 shares, 240,546 shares and 309,573 shares of Class A stock
    upon the conversion of debentures                                                 1,474       2,581       2,705
Issuance of 1,436,468 shares in public offering                                      24,874           -           -
-------------------------------------------------------------------------------------------------------------------
Balance at end of year                                                               65,309      38,961      35,988
-------------------------------------------------------------------------------------------------------------------

RETAINED EARNINGS
Balance at beginning of year                                                         44,862      33,409      24,289
Net earnings for the year                                                            18,184      11,453       9,120
-------------------------------------------------------------------------------------------------------------------
Balance at end of year                                                               63,046      44,862      33,409
-------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY AT END OF YEAR                                        $  136,178  $   90,094  $   75,385
-------------------------------------------------------------------------------------------------------------------

RECONCILIATION OF SHARES OUTSTANDING
Total Class A and Class B shares outstanding at beginning of year                 6,271,433   5,988,377   4,703,087
Issuance of shares upon the exercise of warrants                                          -      42,510     945,717
Issuance of shares upon the conversion of debentures                                115,157     240,546     309,573
Issuance of shares in public offering                                             1,436,468           -           -
Issuance of shares to acquire Intervest Securities Corporation                            -           -      30,000
-------------------------------------------------------------------------------------------------------------------
TOTAL CLASS A AND CLASS B SHARES OUTSTANDING AT END OF YEAR                       7,823,058   6,271,433   5,988,377
-------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.


                                       56
<PAGE>
<TABLE>
<CAPTION>
                                    INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                            YEAR ENDED DECEMBER 31,
                                                                                      ----------------------------------
($ in thousands)                                                                         2005        2004        2003
------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>         <C>         <C>
OPERATING ACTIVITIES
Net earnings                                                                          $  18,184   $  11,453   $   9,120
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization                                                               551         593         568
Provision for loan losses                                                                 4,075       4,526       1,969
Deferred income tax benefit                                                              (1,893)     (2,135)       (963)
Amortization of deferred debenture offering costs                                         1,173       1,249       1,084
Compensation expense related to common stock warrants                                         -           9         444
Amortization of premiums (accretion) of discounts and deferred loan fees, net            (7,903)     (3,539)     (1,610)
Net loss from sale of foreclosed real estate                                                  -           -          51
Net (decrease) increase in accrued interest payable on debentures                        (3,210)     (3,254)      1,648
Net (decrease) increase in official checks outstanding                                     (372)      5,939       1,749
Net increase in loan fees receivable                                                     (2,733)     (2,586)     (1,916)
Net change in all other assets and liabilities                                           12,862       7,223       6,783
------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                                20,734      19,478      18,927
------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Net decrease in interest-earning time deposits with banks                                     -           -       2,000
Maturities and calls of securities held to maturity                                      92,058      88,880     117,755
Purchases of securities held to maturity                                                (95,436)   (187,089)   (127,221)
Net increase in loans receivable                                                       (354,301)   (347,887)   (182,674)
Sale of foreclosed real estate                                                                -           -         150
Cash acquired through acquisition of Intervest Securities Corporation                         -           -         218
Purchases of Federal Reserve Bank and Federal Home Loan Bank stock, net                    (149)     (2,017)     (1,967)
Purchases of premises and equipment, net                                                   (336)     (1,477)       (222)
Investment in unconsolidated subsidiaries                                                     -        (928)       (464)
------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES                                                  (358,164)   (450,518)   (192,425)
------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase in deposits                                                                381,458     318,359     169,555
Net increase in mortgage escrow funds payable                                             5,769       3,993       4,646
Net (decrease) increase in FHLB advances                                                (36,000)     36,000           -
Principal repayments of debentures and mortgage note payable                            (32,113)    (20,013)     (3,661)
Gross proceeds from issuance of debentures                                               26,000      52,428      31,000
Debentures issuance costs                                                                (1,878)     (2,217)     (1,694)
Gross proceeds from issuance of common stock                                             28,370       2,961       6,931
Common stock issuance costs                                                              (2,059)          -           -
------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                               369,547     391,511     206,777
------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                                     32,117     (39,529)     33,279
Cash and cash equivalents at beginning of year                                           24,599      64,128      30,849
========================================================================================================================
CASH AND CASH EQUIVALENTS AT END OF YEAR                                              $  56,716   $  24,599   $  64,128
========================================================================================================================
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for interest                                                $  57,970   $  40,050   $  25,647
Cash paid during the year for income taxes                                               14,397      11,637       7,557
Loan to finance sale of foreclosed real estate                                                -           -         880
Conversion of debentures and accrued interest payable into Class A common stock           1,589       2,821       3,015
Issue Class B common stock to purchase Intervest Securities Corporation                       -           -         215
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.


                                       57
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

1.   DESCRIPTION  OF  BUSINESS  AND  SUMMARY  OF SIGNIFICANT ACCOUNTING POLICIES

     DESCRIPTION  OF  BUSINESS

     Intervest  Bancshares Corporation is a registered financial holding company
     referred  to  by  itself  as  the  "Holding  Company."  Its  wholly  owned
     consolidated  subsidiaries  are:  Intervest  National  Bank  (the  "Bank");
     Intervest  Mortgage  Corporation; and Intervest Securities 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 offices of the
     Holding  Company,  Intervest  Mortgage  Corporation,  Intervest  Securities
     Corporation and the Bank's headquarters and full-service banking office are
     located  on  the  entire  fourth floor of One Rockefeller Plaza in New York
     City,  New  York,  10020-2002.

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

     The  Bank  is a nationally chartered, full-service commercial bank that has
     its  headquarters  and  full-service banking office in Rockefeller Plaza in
     New York City, and a total of five full-service banking offices in Pinellas
     County,  Florida  -  four in Clearwater and one in South Pasadena. The Bank
     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  business  focuses on the origination of
     first  mortgage  and  junior  mortgage  loans  secured  by  commercial  and
     multifamily  real  estate  properties.  It  also  provides loan origination
     services  to  the  Bank.  Intervest  Mortgage Corporation funds its lending
     business  through  the  issuance  of  subordinated  debentures  in  public
     offerings.  It  currently has one active wholly owned subsidiary, Intervest
     Realty  Servicing  Corporation,  which  is  engaged  in  certain  mortgage
     servicing  activities.

     Intervest  Securities  Corporation  is  a broker/dealer and a member of the
     National Association of Securities Dealers (NASD) whose business activities
     to  date  have  not been material. Its only revenues have been derived from
     participating  as  a selected dealer from time to time in offerings of debt
     securities  of  the  Company,  primarily  those  of  Intervest  Mortgage
     Corporation.

     Intervest  Statutory  Trust I, II, III and IV are wholly owned subsidiaries
     of  the  Holding  Company  that  are unconsolidated entities as required by
     Financial  Accounting  Standards  Board  (FASB)  Interpretation  No.  46-R,
     "Consolidation of Variable Interest Entities." Intervest Statutory Trust I,
     II,  III  and  IV  issued  in December 2001, September 2003, March 2004 and
     September  2004, $15.0 million, respectively, of trust preferred securities
     for a total of $60.0 million. Each trust was formed for the sole purpose of
     issuing and administering the trust preferred securities. The trusts do not
     conduct any trade or business. For a further discussion, see note 9 herein.


                                       58
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

1.   DESCRIPTION  OF  BUSINESS  AND  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
     CONTINUED

     PRINCIPLES OF CONSOLIDATION, BASIS OF PRESENTATION AND USE OF ESTIMATES

     The  consolidated  financial statements include the accounts of the Holding
     Company  and its subsidiaries - Intervest National Bank, Intervest Mortgage
     Corporation  and  Intervest  Securities  Corporation.  All  significant
     intercompany  balances  and  transactions  have  been  eliminated  in
     consolidation.

     Certain  reclassifications  have been made to prior year amounts to conform
     to  the  current year's presentation. 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 and liabilities, and disclosure of contingent liabilities, as of the
     date  of  the  consolidated financial statements, and revenues and expenses
     during  the  reporting  periods.  Actual  results  could  differ from those
     estimates.  Estimates  that  are  particularly  susceptible  to significant
     change relate to the determination of the allowance for loan losses and the
     estimated  fair  values  of  financial  instruments.

     CASH  EQUIVALENTS

     For purposes of the consolidated statements of cash flows, cash equivalents
     include  federal  funds  sold  (generally  sold  for  one-day  periods) and
     commercial  paper  and other short-term investments that have maturities of
     three  months  or  less  from  the  time  of  purchase.

     SECURITIES

     Securities  that  the  Company  has  the  ability  and intent to hold until
     maturity  are  classified as securities held to maturity and are carried at
     cost,  adjusted  for  accretion  of discounts and amortization of premiums,
     which  are  recognized  into interest income using the interest method over
     the  period to maturity. Securities that are held for indefinite periods of
     time  which  management  intends  to  use  as  part  of its asset/liability
     management strategy, or that may be sold in response to changes in interest
     rates  or  other  factors,  are  classified  as  available for sale and are
     carried  at fair value. Unrealized gains and losses on securities available
     for sale, net of related income taxes, are reported as a separate component
     of comprehensive income. Realized gains and losses from sales of securities
     are  determined  using the specific identification method. The Company does
     not  acquire  securities for the purpose of engaging in trading activities.

     LOANS  RECEIVABLE

     Loans  that  the  Company  has  the  intent  and  ability  to  hold for the
     foreseeable  future  or until maturity or satisfaction are carried at their
     outstanding  principal  net  of  chargeoffs, the allowance for loan losses,
     unamortized discounts and deferred loan fees or costs. Loan origination and
     commitment  fees,  net  of  certain  costs,  are  deferred and amortized to
     interest income as an adjustment to the yield of the related loans over the
     contractual  life  of  the  loans using the interest method. When a loan is
     paid  off  or sold, or if a commitment expires unexercised, any unamortized
     net  deferred  amount  is  credited  or  charged  to  earnings accordingly.

     Loans are placed on nonaccrual status when principal or interest becomes 90
     days or more past due unless the loan is well secured and in the process of
     collection.  Accrued  interest receivable previously recognized is reversed
     when  a  loan  is placed on nonaccrual status. Amortization of net deferred
     fee  income is discontinued for loans placed on nonaccrual status. Interest
     payments received on loans in nonaccrual status are recognized as income on
     a  cash basis unless future collections of principal are doubtful, in which
     case  the  payments received are applied as a reduction of principal. Loans
     remain  on  nonaccrual  status  until  principal  and interest payments are
     current.


                                       59
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

1.   DESCRIPTION  OF  BUSINESS  AND  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
     CONTINUED

     ALLOWANCE  FOR  LOAN  LOSSES

     The  allowance  for  loan  losses is netted against loans receivable and is
     increased  by  provisions charged to operations and decreased by chargeoffs
     (net  of  recoveries).  The  adequacy of the allowance is evaluated monthly
     with  consideration  given  to:  the nature and size of the loan portfolio;
     overall  portfolio quality; loan concentrations; specific problem loans and
     estimates  of  fair  value  thereof;  historical chargeoffs and recoveries;
     adverse  situations  which  may affect the borrowers' ability to repay; and
     management's  perception of the current and anticipated economic conditions
     in  the  Company's  lending  areas.  In  addition,  Statement  of Financial
     Accounting  Standards  (SFAS)  No.  114  specifies  the manner in which the
     portion  of  the  allowance  for loan losses is computed related to certain
     loans  that  are  impaired.  A loan is normally deemed impaired when, based
     upon  current  information  and  events, it is probable the Company will be
     unable  to  collect  both  principal  and  interest  due  according  to the
     contractual terms of the loan agreement. Impaired loans normally consist of
     loans on nonaccrual status. Interest income on impaired loans is recognized
     on  a  cash  basis.  Impairment  for commercial real estate and multifamily
     loans  is  measured  based  on:  the  present value of expected future cash
     flows,  discounted at the loan's effective interest rate; or the observable
     market  price  of  the  loan;  or  the  estimated  fair value of the loan's
     collateral,  if payment of the principal and interest is dependent upon the
     collateral.  When  the fair value of the property is less than the recorded
     investment  in  the  loan,  this  deficiency  is  recognized as a valuation
     allowance within the overall allowance for loan losses and a charge through
     the  provision  for loan losses. The Company charges off any portion of the
     recorded  investment  in  the  loan  that  exceeds  the  fair  value of the
     collateral.  The  net  carrying  amount of an impaired loan does not at any
     time  exceed  the  recorded  investment  in  the  loan.

     Lastly,  the Company's regulators, as an integral part of their examination
     process,  periodically  review  the allowance for loan losses. Accordingly,
     the  Company  may  be  required to take certain chargeoffs and/or recognize
     additions  to  the  allowance  based on the regulators' judgment concerning
     information  available  to  them  during  their  examination.

     PREMISES  AND  EQUIPMENT

     Land  is  carried at cost. Buildings, leasehold improvements and furniture,
     fixtures  and  equipment are carried at cost, less accumulated depreciation
     and  amortization.  Depreciation is computed using the straight-line method
     over  the  estimated  useful  life of the asset. Leasehold improvements are
     amortized  using  the  straight-line  method  over the terms of the related
     leases, or the useful life of the asset, whichever is shorter. Maintenance,
     repairs  and  minor  improvements  are  expensed  as  incurred, while major
     improvements  are  capitalized.

     DEFERRED  DEBENTURE  OFFERING  COSTS

     Costs  relating  to offerings of debentures are amortized over the terms of
     the  debentures.  The costs consist primarily of underwriters' commissions.
     Accumulated  amortization amounted to $3.0 million at December 31, 2005 and
     $4.4  million  at  December  31,  2004.

     FORECLOSED  REAL  ESTATE

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


                                       60
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

1.   DESCRIPTION  OF  BUSINESS  AND  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
     CONTINUED

     STOCK-BASED  COMPENSATION

     The  Company  used Accounting Principles Board (APB) No.25, "Accounting for
     Stock  Issued  to  Employees" and related interpretations in accounting for
     compensation  related  to  its stock warrants in 2005, 2004 and 2003. Under
     APB No. 25, if the exercise price of the Company's stock warrants issued to
     employees  or  directors equals the market price of the underlying stock on
     the  date  of  the  grant  or  modification,  no  compensation  expense  is
     recognized.  SFAS  No.123,  "Accounting  for  Stock-Based Compensation," as
     amended  by SFAS No.148 "Accounting for Stock-Based Compensation Transition
     and Disclosure," collectively "SFAS No.123," requires pro forma disclosures
     of  net  earnings  and  earnings  per  share  determined  as if the Company
     accounted  for  its  stock  warrants  under  the  fair  value  method.  Had
     compensation  expense  been  determined  based on estimated fair value, the
     Company's  net  earnings  and  earnings  per share would have not have been
     materially  different  than  those reported. As discussed under the caption
     "Recent  Accounting  and  Regulatory Developments," on January 1, 2006, the
     Company  adopted  SFAS  No. 123-R "Share-Based Payment," which replaces the
     existing  SFAS  123  and  supersedes  APB  25.

     ADVERTISING  COSTS

     Advertising costs are expensed as incurred.

     INCOME  TAXES

     Deferred tax assets and liabilities are recognized for the estimated future
     tax  consequences  attributable  to  temporary  differences  between  the
     financial statement carrying amounts of existing assets and liabilities and
     their  respective  tax  bases.  Deferred  tax  assets  and  liabilities are
     measured using enacted tax rates expected to apply to taxable income in the
     year  in  which those temporary differences are expected to be recovered or
     settled.  A  valuation  allowance is recorded if it is more likely than not
     that  some  portion  or all of the deferred tax assets will not be realized
     based  on  a  review  of  available  evidence.

     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).

     COMPREHENSIVE  INCOME

     Accounting  principles generally require that recognized revenue, expenses,
     gains  and  losses be included in net earnings. However, certain changes in
     assets  and  liabilities,  such  as  unrealized  gains  and  losses  on
     available-for-sale  securities, are reported as a separate component of the
     stockholders'  equity section of the consolidated balance sheet, such items
     along  with  net  earnings,  are  components  of  comprehensive  income.

     OFF-BALANCE  SHEET  FINANCIAL  INSTRUMENTS

     In  the  ordinary  course  of business, the Company enters into off-balance
     sheet  financial  instruments  consisting  of commitments to extend credit,
     unused  lines  of  credit  and  standby  letters  of credit. Such financial
     instruments  are  recorded in the financial statements when they are funded
     or  related  fees  are  incurred  or  received.


                                       61
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

1.   DESCRIPTION  OF  BUSINESS  AND  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
     CONTINUED

     RECENT  ACCOUNTING  AND  REGULATORY  DEVELOPMENTS

     SHARE-BASED  COMPENSATION.  In  December 2004, the FASB issued SFAS No. 123
     (Revised  2004),  "Share-Based  Payment"  (SFAS  123-R), which replaces the
     existing  SFAS 123 and supersedes APB No. 25. SFAS 123-R requires companies
     recognize  in  the  income  statement  the  grant-date  fair value of stock
     options  and  other  equity-based  compensation  issued  to  employees  and
     directors,  but expresses no preference for a type of valuation model. SFAS
     123-R  is  effective  for interim and annual reporting periods beginning on
     January  1,  2006.  Accordingly, the Company's financial statements will be
     prepared  in accordance with this new standard beginning on January 1, 2006
     if  and  when  the  Company issues any new stock warrants and/or options to
     employees or directors in the future. SFAS 123-R does not impact any of the
     Company's  outstanding  warrants  at  December  31,  2005, all of which are
     vested  and  were  issued  prior  to  this  new  standard.

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

     CERTAIN LOANS AND DEBT SECURITIES ACQUIRED IN A TRANSFER. In December 2003,
     the  American Institute of Certified Public Accountants issued Statement of
     Position  03-3,  "Accounting for Certain Loans and Debt Securities Acquired
     in  a  Transfer"  (SOP 03-3). SOP 03-3 addresses accounting for differences
     between  contractual  cash flows expected to be collected and an investor's
     initial  investment  in  loans or debt securities acquired in a transfer if
     those  differences  are  attributable, at least in part, to credit quality.
     SOP 03-3 also prohibits "carrying over" or creation of valuation allowances
     in  the  initial  accounting  of  all loans acquired in a transfer that are
     within  the  scope  of SOP 03-3. The prohibition of the valuation allowance
     carryover applies to the purchase of an individual loan, a pool of loans, a
     group  of loans, and loans acquired in a purchase business combination. SOP
     03-3  was  effective  for  loans  acquired  in fiscal years beginning after
     December  15,  2004.  The adoption of SOP 03-3 did not impact the Company's
     financial  condition  or  result  of  operations.

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


                                       62
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

2.   SECURITIES

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

<TABLE>
<CAPTION>
                                              Gross        Gross   Estimated              Wtd-Avg
                             Amortized   Unrealized   Unrealized        Fair   Wtd-Avg  Remaining
     ($ in thousands)             Cost        Gains       Losses       Value     Yield   Maturity
     --------------------------------------------------------------------------------------------
<S>                         <C>         <C>          <C>          <C>         <C>       <C>
     At December 31, 2005   $  251,508  $        14  $     2,434  $  249,088     3.26%  1.1 Years
     At December 31, 2004   $  248,888  $        12  $     1,689  $  247,211     2.33%  1.4 Years
     --------------------------------------------------------------------------------------------
</TABLE>

     All  the  securities at December 31, 2005 and 2004 were debt obligations of
     U.S.  government  corporations or sponsored agencies (FHLB, FNMA, FHLMC, or
     FFCB)  and  were  held by the Bank. The securities have fixed rates or have
     predetermined  scheduled  rate  increases, and some have call features that
     allow  the  issuer  to  call the security at par before its stated maturity
     without  penalty.

     At  December  31, 2005, the portfolio consisted of 159 securities, of which
     150  had  an  unrealized  loss.  Substantially all of the losses were for a
     continuous  period  of  more  than  12 months. Management believes that the
     cause  of  the unrealized losses is directly related to changes in interest
     rates.  In  general,  as  interest rates rise, the fair value of fixed rate
     securities  will  decrease;  as  interest rates fall, their fair value will
     increase.

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

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

<TABLE>
<CAPTION>
          ($ in thousands)                         Amortized Cost   Estimated Fair Value   Average Yield
          ----------------------------------------------------------------------------------------------
<S>                                               <C>              <C>                    <C>
          At December 31, 2005:
          Due in one year or less                 $       124,413  $             123,345           2.71%
          Due after one year through five years           127,095                125,743           3.79%
          ----------------------------------------------------------------------------------------------
                                                  $       251,508  $             249,088           3.26%
          ----------------------------------------------------------------------------------------------
          At December 31, 2004:
          Due in one year or less                 $        84,586  $              84,235           1.81%
          Due after one year through five years           164,302                162,976           2.59%
          ----------------------------------------------------------------------------------------------
                                                  $       248,888  $             247,211           2.33%
          ----------------------------------------------------------------------------------------------
</TABLE>

     There  were  no securities classified as available for sale and no sales of
     securities  during  2005,  2004  and  2003.

3.   LOANS  RECEIVABLE

     Loans  receivable  is  as  follows:

<TABLE>
<CAPTION>
                                                    At December 31, 2005     At December 31, 2004
                                                    --------------------     --------------------
           ($ in thousands)                         # of Loans    Amount     # of Loans    Amount
          -----------------------------------------------------------------------------------------
<S>                                                <C>         <C>          <C>         <C>
          Commercial real estate loans                    264  $  735,650          244  $  601,512
          Residential multifamily loans                   234     538,760          249     403,613
          Land development and other land loans            31     105,251           11      19,198
          Residential 1-4 family loans                      3         100            4         984
          Commercial business loans                        22       1,089           23       1,215
          Consumer loans                                   10         194           12         221
          -----------------------------------------------------------------------------------------
          Loans receivable                                564   1,381,044          543   1,026,743
          -----------------------------------------------------------------------------------------
          Deferred loan fees                                      (13,058)                 (11,347)
          -----------------------------------------------------------------------------------------
          Loans receivable, net of deferred fees                1,367,986                1,015,396
          -----------------------------------------------------------------------------------------
          Allowance for loan losses                               (15,181)                 (11,106)
          -----------------------------------------------------------------------------------------
          Loans receivable, net                                $1,352,805               $1,004,290
          -----------------------------------------------------------------------------------------
</TABLE>


                                       63
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

3.   LOANS RECEIVABLE, CONTINUED

     At  December  31,  2005, $0.7 million of loans were on a nonaccrual status,
     compared  to $4.6 million at December 31, 2004. 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  the  underlying  properties  exceeded  the  Company's  recorded
     investment.  In  April 2005, the property collateralizing a loan classified
     as nonaccrual at December 31, 2004 with a principal balance of $3.9 million
     was  sold  at foreclosure to a third party. The loan was repaid in full and
     the  Bank  recovered  all  amounts due thereunder. At December 31, 2005 and
     2004,  there  were  no  other  loans  classified as nonaccrual or impaired.

     At December 31, 2005, there were $2.6 million of loans ninety days past due
     and still accruing interest since they were deemed by management to be well
     secured and in the process of collection. There were no loans classified as
     such  at  December  31,  2004.

     Interest  income  that  was  not  recorded  on nonaccrual loans under their
     contractual  terms  amounted  to $0.1 million in 2005, $0.2 million in 2004
     and  $0.3  million  in  2003.  The average balance of nonaccrual (impaired)
     loans  for  2005,  2004  and  2003  was $3.8 million, $3.2 million and $4.6
     million,  respectively.

     Credit  risk  represents  the  possibility  of  the  Company not recovering
     amounts  due  from  its  borrowers  and  is  significantly related to local
     economic  conditions  in  the  areas  the  properties are located. Economic
     conditions  affect the market value of the underlying collateral as well as
     the  levels  of  rent and occupancy of income-producing properties (such as
     office  buildings,  shopping  centers  and rental and cooperative apartment
     buildings).

     The geographic distribution of the loan portfolio is as follows:

<TABLE>
<CAPTION>
                                         At December 31, 2005     At December 31, 2004
                                         --------------------     --------------------
          ($ in thousands)               Amount    % of Total     Amount    % of Total
          -----------------------------------------------------------------------------
<S>                                    <C>         <C>          <C>         <C>
          New York                     $  896,746        64.9%  $  729,301        71.0%
          Florida                         323,764        23.5      198,823        19.4
          Connecticut and New Jersey       84,373         6.1       51,186         5.0
          All other                        76,161         5.5       47,433         4.6
          -----------------------------------------------------------------------------
                                       $1,381,044       100.0%  $1,026,743       100.0%
          -----------------------------------------------------------------------------
</TABLE>

4.   ALLOWANCE  FOR  LOAN  LOSSES

     Activity in the allowance for loan losses is as follows:

<TABLE>
<CAPTION>
                                                 For the Year Ended December 31,
                                                 -------------------------------
           ($ in thousands)                      2005          2004          2003
          --------------------------------------------------------------------------
<S>                                         <C>           <C>           <C>
          Allowance at beginning of year    $     11,106  $      6,580  $      4,611
          Provision charged to operations          4,075         4,526         1,969
          --------------------------------------------------------------------------
          Allowance at end of year          $     15,181  $     11,106  $      6,580
          --------------------------------------------------------------------------
</TABLE>

5.   PREMISES  AND  EQUIPMENT,  LEASE  COMMITMENTS  AND  RENTAL  EXPENSE

     Premises and equipment is as follows:

<TABLE>
<CAPTION>
                                                            At December 31,
                                                            ---------------
          ($ in thousands)                                  2005       2004
          --------------------------------------------------------------------
<S>                                                       <C>        <C>
          Land                                            $  1,516   $  1,516
          Buildings                                          5,002      4,979
          Leasehold improvements                             1,356      1,355
          Furniture, fixtures and equipment                  2,282      2,276
          --------------------------------------------------------------------
          Total cost                                        10,156     10,126
          --------------------------------------------------------------------
          Less accumulated deprecation and amortization     (3,735)    (3,490)
          --------------------------------------------------------------------
          Net book value                                  $  6,421   $  6,636
          --------------------------------------------------------------------
</TABLE>


                                       64
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

5.   PREMISES  AND  EQUIPMENT,  LEASE  COMMITMENTS AND RENTAL EXPENSE, CONTINUED

     Depreciation  and  amortization  of  premises and equipment, reflected as a
     component  of  noninterest  expense  in  the  consolidated  statements  of
     earnings,  was  $0.6  million  for  2005,  2004  and  2003.

     The  offices  of  the  Holding  Company,  Intervest  Mortgage  Corporation,
     Intervest  Securities  Corporation  and  the  Bank's  headquarters  and
     full-service  banking  office  are located in leased premises on the entire
     fourth  floor  of  One Rockefeller Plaza in New York City. In addition, the
     Bank  leases  its  Belcher  Road office in Clearwater, Florida. Both leases
     contain  operating  escalation clauses related to taxes and operating costs
     based  upon various criteria and are accounted for as operating leases, and
     they expire in March 2014 and June 2007, respectively. The Bank owns all of
     its  remaining offices in Florida and also leases a portion of the space in
     its  office buildings in Florida that is not used for banking operations to
     other  companies  under leases that expire at various times through October
     2009.

     Future  minimum  annual  lease  payments  (expense) and sublease income due
     under  non-cancelable  leases  as  of  December  31,  2005  are as follows:

<TABLE>
<CAPTION>
                                             Minimum Rentals
                                             ---------------
          ($ in thousands)           Lease Expense   Sublease Income
          -----------------------------------------------------------
<S>                                  <C>             <C>
          In 2006                    $          911  $            426
          In 2007                               852               247
          In 2008                               856                45
          In 2009                               877                24
          In 2010                               878                 -
          Thereafter                          2,962                 -
          -----------------------------------------------------------
                                     $        7,336  $            742
          -----------------------------------------------------------
</TABLE>

     Rent  expense  under operating leases aggregated $0.9 million in 2005, $1.0
     million  in  2004  and $0.7 million in 2003. Lease rental income aggregated
     $0.6  million  in  2005  and  $0.5  million  in  2004  and  2003.

6.   DEPOSITS

     Scheduled  maturities  of  certificates of deposit accounts are as follows:

<TABLE>
<CAPTION>
                                           At December 31, 2005        At December 31, 2004
                                           --------------------        --------------------
                                                        Wtd-Avg                     Wtd-Avg
           ($ in thousands)              Amount     Stated Rate      Amount     Stated Rate
          ---------------------------------------------------------------------------------
<S>                                  <C>           <C>           <C>           <C>
          Within one year            $    381,968         3.77%  $    269,553         2.84%
          Over one to two years           259,698         4.30        119,780         3.43
          Over two to three years         126,546         4.13        134,409         4.48
          Over three to four years        160,344         4.43         75,317         4.06
          Over four years                 189,958         4.69        145,712         4.48
          ---------------------------------------------------------------------------------
                                     $  1,118,514         4.18%  $    744,771         3.68%
          ---------------------------------------------------------------------------------
</TABLE>

     Certificate  of deposit accounts of $100,000 or more totaled $371.8 million
     and $215.9 million at December 31, 2005 and 2004, respectively. At December
     31,  2005, certificate of deposit accounts of $100,000 or more by remaining
     maturity  were  as follows: due within one year $120.4 million; over one to
     two years $100.0 million; over two to three years $33.7 million; over three
     to  four  years  $53.1  million;  and  over  four  years  $64.6  million.

     Interest  expense  on  deposits  is  as  follows:

<TABLE>
<CAPTION>
                                             For the Year Ended December 31,
                                             -------------------------------
      ($ in thousands)                       2005          2004          2003
     ---------------------------------------------------------------------------
<S>                                     <C>           <C>           <C>
     Interest checking accounts         $        166  $        187  $        182
     Savings accounts                            536           550           601
     Money market accounts                     5,947         3,583         2,763
     Certificates of deposit accounts         38,270        22,010        14,891
     ---------------------------------------------------------------------------
                                        $     44,919  $     26,330  $     18,437
     ---------------------------------------------------------------------------
</TABLE>


                                       65
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

7.   SUBORDINATED  DEBENTURES  AND  MORTGAGE  NOTE  PAYABLE

     Subordinated  debentures  and  mortgage  note  payable  outstanding  are
     summarized  as  follows:

<TABLE>
<CAPTION>
                                                                                   At December 31,
     ($ in thousands)                                                              2005       2004
     ------------------------------------------------------------------------------------------------
<S>                                                                              <C>        <C>
     INTERVEST MORTGAGE CORPORATION:
     Series 05/10/96 - interest at 2% above prime (1) - due April 1, 2005        $       -  $  10,000
     Series 10/15/96 - interest at 2% above prime (1) - due October 1, 2005              -      5,500
     Series 04/30/97 - interest at 1% above prime (1) - due October 1, 2005              -      8,000
     Series 11/10/98 - interest at 9% fixed           - due January 1, 2005              -      2,600
     Series 06/28/99 - interest at 9% fixed           - due July 1, 2006             2,000      2,000
     Series 09/18/00 - interest at 8 1/2% fixed       - due January 1, 2006              -      1,250
     Series 09/18/00 - interest at 9% fixed           - due January 1, 2008          1,250      1,250
     Series 08/01/01 - interest at 7 1/2% fixed       - due April 1, 2005                -      1,750
     Series 08/01/01 - interest at 8% fixed           - due April 1, 2007            2,750      2,750
     Series 08/01/01 - interest at 8 1/2% fixed       - due April 1, 2009            2,750      2,750
     Series 01/17/02 - interest at 7 1/4% fixed       - due October 1, 2005              -      1,250
     Series 01/17/02 - interest at 7 1/2% fixed       - due October 1, 2007          2,250      2,250
     Series 01/17/02 - interest at 7 3/4% fixed       - due October 1, 2009          2,250      2,250
     Series 08/05/02 - interest at 7 1/4% fixed       - due January 1, 2006              -      1,750
     Series 08/05/02 - interest at 7 1/2% fixed       - due January 1, 2008          3,000      3,000
     Series 08/05/02 - interest at 7 3/4% fixed       - due January 1, 2010          3,000      3,000
     Series 01/21/03 - interest at 6 3/4% fixed       - due July 1, 2006             1,500      1,500
     Series 01/21/03 - interest at 7 % fixed          - due July 1, 2008             3,000      3,000
     Series 01/21/03 - interest at 7 1/4% fixed       - due July 1, 2010             3,000      3,000
     Series 07/25/03 - interest at 6 1/2% fixed       - due October 1, 2006          2,500      2,500
     Series 07/25/03 - interest at 6 3/4% fixed       - due October 1, 2008          3,000      3,000
     Series 07/25/03 - interest at 7 % fixed          - due October 1, 2010          3,000      3,000
     Series 11/28/03 - interest at 6 1/4% fixed       - due April 1, 2007            2,000      2,000
     Series 11/28/03 - interest at 6 1/2% fixed       - due April 1, 2009            3,500      3,500
     Series 11/28/03 - interest at 6 3/4% fixed       - due April 1, 2011            4,500      4,500
     Series 06/07/04 - interest at 6 1/4% fixed       - due January 1, 2008          2,500      2,500
     Series 06/07/04 - interest at 6 1/2% fixed       - due January 1, 2010          4,000      4,000
     Series 06/07/04 - interest at 6 3/4% fixed       - due January 1, 2012          5,000      5,000
     Series 03/21/05 - interest at 6 1/4% fixed       - due April 1, 2009            3,000          -
     Series 03/21/05 - interest at 6 1/2% fixed       - due April 1, 2011            4,500          -
     Series 03/21/05 - interest at 7% fixed           - due April 1, 2013            6,500          -
     Series 08/12/05 - interest at 6 1/4% fixed       - due October 1, 2009          2,000          -
     Series 08/12/05 - interest at 6 1/2% fixed       - due October 1, 2011          4,000          -
     Series 08/12/05 - interest at 7% fixed           - due October 1, 2013          6,000          -
                                                                                 --------------------
                                                                                    82,750     88,850
     INTERVEST BANCSHARES CORPORATION:
     Series 05/14/98 - interest at 8% fixed           - due July 1, 2008             2,140      3,080
     Series 12/15/00 - interest at 8 1/2% fixed       - due April 1, 2006            1,250      1,250
     Series 12/15/00 - interest at 9% fixed           - due April 1, 2008            1,250      1,250
                                                                                     4,640      5,580
                                                                                 --------------------
     INTERVEST NATIONAL BANK:
     Mortgage note payable (2) - interest at 7% fixed - due February 1, 2017           229        242
     ------------------------------------------------------------------------------------------------
                                                                                 $  87,619  $  94,672
     ------------------------------------------------------------------------------------------------

<FN>
     (1) Prime represents prime rate of JPMorganChase Bank, which was 7.25% and 5.25% at December 31,
     2005  and  2004, respectively. (2) The note cannot be prepaid except during the last year of its
     term.
</TABLE>

     Scheduled  contractual  maturities  as of December 31, 2005 are as follows:

<TABLE>
<CAPTION>
               ($ in thousands)           Principal   Accrued Interest
               -------------------------------------------------------
<S>                                       <C>         <C>
               In 2006                    $    7,264  $          2,828
               In 2007                         7,015               192
               In 2008                        16,156             2,263
               In 2009                        13,517               290
               In 2010                        13,019               242
               Thereafter                     30,648               281
               -------------------------------------------------------
                                          $   87,619  $          6,096
               -------------------------------------------------------
</TABLE>


                                       66
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

7.   SUBORDINATED  DEBENTURES  AND  MORTGAGE  NOTE  PAYABLE,  CONTINUED


     Intervest  Mortgage  Corporation repaid and issued the following debentures
     in  2005:

          Series 11/10/98 matured on 1/01/05 and were repaid for $2.6 million of
          principal  and  $1.8  million  of  accrued  interest;
          Series  05/10/96  matured on 4/01/05 and were repaid for $10.0 million
          of  principal  and  $2.2  million  of  accrued  interest;
          Series  08/01/01  matured on 4/01/05 and were repaid for $1.75 million
          of  principal  and  $0.1  million  of  accrued  interest;
          Series  10/15/96  due  10/01/05  were  repaid early on 8/1/05 for $5.5
          million  of  principal  and  $0.1  million  of  accrued  interest;
          Series  01/17/02  due  10/01/05  were repaid early on 8/1/05 for $1.25
          million  of  principal  and  $0.1  million  of  accrued  interest;
          Series  04/30/97  due  10/01/05  were  repaid early on 9/1/05 for $8.0
          million  of  principal  and  $0.1  million  of  accrued  interest;
          Series  09/18/00  due  1/1/06  were  repaid early on 12/1/05 for $1.25
          million  of  principal  and  $0.6  million  of  accrued  interest;
          Series  08/05/02  due  1/1/06  were  repaid early on 12/1/05 for $1.75
          million  of  principal  and  $0.1  million  of  accrued  interest;
          Series 03/21/05 issued in April for $14.0 million of principal for net
          proceeds,  after  offering  costs,  of  $13.0  million;  and
          Series 08/12/05 issued in September for $12.0 million of principal for
          net  proceeds,  after  offering  costs,  of  $11.1  million.

     Interest  is  paid quarterly on Intervest Mortgage Corporation's debentures
     except  for  the following: all of Series 6/28/99 and 9/18/00; $0.6 million
     of  Series  8/01/01; $0.3 million of Series 1/17/02; $1.1 million of Series
     8/05/02;  $1.8  million  of Series 11/28/03; $1.9 million of Series 6/7/04;
     $1.9  million of Series 3/21/05; and $1.8 million of Series 8/12/05, all of
     which  accrue  and  compound interest quarterly, with such interest due and
     payable  at  maturity.

     The holders of Intervest Mortgage Corporation's Series 6/28/99, 9/18/00 and
     1/17/02  through  8/12/05  debentures  can  require  Intervest  Mortgage
     Corporation,  on  a first come basis during a specified time, to repurchase
     the  debentures  for  face  amount  plus  accrued  interest  once each year
     (beginning  January  1,  2006  for  Series 8/05/02, July 1, 2006 for Series
     1/21/03,  October  1,  2006  for Series 7/25/03, January 1, 2007 for Series
     11/28/03,  January  1,  2008  for  Series  6/7/04, April 1, 2009 for Series
     3/21/05  and  October  1, 2009 for Series 8/12/05). However, in no calendar
     year  can  the required purchases be more than $100,000 in principal amount
     of  each maturity, in each series of debentures, on a non-cumulative basis.

     Intervest  Mortgage  Corporation's debentures may be redeemed at its option
     at any time, in whole or in part, for face value, except for Series 3/21/05
     and Series 8/12/05, which would be at a premium of 1% if they were redeemed
     prior  to  October  1,  2006  and  April  1,  2007,  respectively.  All the
     debentures  are  unsecured and subordinate to all present and future senior
     indebtedness,  as  defined  in  the  indenture  related  to each debenture.

     The  Holding  Company's  Series  5/14/98  subordinated  debentures  are
     convertible along with accrued interest at the option of the holders at any
     time  prior to April 1, 2008 into shares of its Class A common stock at the
     following  conversion  prices per share: $16.00 in 2006; $18.00 in 2007 and
     $20.00  from January 1, 2008 through April 1, 2008. The Holding Company has
     the right to establish conversion prices that are less than those set forth
     above  for  such  periods  as  it  may  determine. In 2005, $1.6 million of
     debentures ($0.9 million of principal and $0.7 million of accrued interest)
     were  converted  into  shares  of Class A common stock at $14.00 per share.

     At  December  31,  2005,  interest accrued and compounded quarterly on $1.6
     million  of  the Holding Company's convertible debentures at the rate of 8%
     per  annum,  while  $0.5 million of the convertible debentures pay interest
     quarterly at the rate of 8% per annum. All accrued interest of $1.3 million
     is  due  and  payable  at  maturity  whether by acceleration, redemption or
     otherwise.  Any  convertible  debenture  holder may, on or before July 1 of
     each  year, elect to be paid all accrued interest and to thereafter receive
     regular  quarterly payments of interest. The Holding Company may redeem any
     of  its  debentures,  in  whole  or  in  part,  at any time for face value.


                                       67
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

8.   SHORT-TERM  BORROWINGS  AND  LINES  OF  CREDIT

     From  time to time, the Bank may borrow funds on an overnight or short-term
     basis  to  manage  its  liquidity needs. At December 31, 2005, the Bank had
     agreements  with  correspondent  banks  whereby  it  could borrow up to $16
     million on an unsecured basis. In addition, as a member of the Federal Home
     Loan  Bank  of  New  York  (FHLB)  and the Federal Reserve Bank of New York
     (FRB), the Bank can also borrow from these institutions on a secured basis.
     At  December  31,  2005,  the  Bank  had available collateral consisting of
     investment  securities to support total borrowings of $243 million from the
     FHLB  and  FRB.  At December 31, 2005, there were no outstanding borrowings
     from  any  of  the  aforementioned  sources.

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

<TABLE>
<CAPTION>
     ($ in thousands)                                        2005      2004     2003
     -------------------------------------------------------------------------------
<S>                                                       <C>       <C>       <C>

       Balance at year end                                $     -   $36,000   $    -
       Maximum amount outstanding at any month end        $17,000   $36,000   $    -
       Average outstanding balance for the year           $ 4,871   $ 1,914   $    -
       Weighted-average interest rate paid for the year      2.85%     2.08%      -%
       Weighted-average interest rate at year end               -%     2.56%      -%
     -------------------------------------------------------------------------------
</TABLE>

9.   SUBORDINATED  DEBENTURES  -  CAPITAL  SECURITIES

     Capital Securities (commonly referred to as Trust Preferred Securities) are
     summarized  as  follows:

<TABLE>
<CAPTION>
                                                              At December 31, 2005    At December 31, 2004
                                                              --------------------    --------------------
                                                                            Accrued                 Accrued
($ in thousands)                                              Principal    Interest   Principal    Interest
-----------------------------------------------------------------------------------------------------------
<S>                                                          <C>         <C>         <C>         <C>
Capital Securities   I -  debentures due December 18, 2031   $   15,464  $       59  $   15,464  $       59
Capital Securities  II - debentures due September 17, 2033       15,464          35      15,464          41
Capital Securities III - debentures due March 17, 2034           15,464          31      15,464          36
Capital Securities  IV - debentures due September 20, 2034       15,464          29      15,464          29
-----------------------------------------------------------------------------------------------------------
                                                             $   61,856  $      154  $   61,856  $      165
-----------------------------------------------------------------------------------------------------------
</TABLE>

     The  Capital  Securities  are  obligations  of the Holding Company's wholly
     owned  statutory  business trusts, Intervest Statutory Trust I, II, III and
     IV.  Each Trust was formed with a capital contribution of $464,000 from the
     Holding  Company  and for the sole purpose of issuing and administering the
     Capital  Securities.  The  proceeds  from  the  issuance  of  the  Capital
     Securities  together with the capital contribution for each Trust were used
     to  acquire  the  Holding Company's Junior Subordinated Debentures that are
     due  concurrently  with the Capital Securities. The Capital Securities, net
     of  the  Company's capital contributions totaling $1.9 million, qualify for
     inclusion  in  regulatory  capital.

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

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


                                       68
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

9.   SUBORDINATED  DEBENTURES  -  CAPITAL  SECURITIES,  CONTINUED

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

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

10.  STOCKHOLDERS'  EQUITY

     The  Holding  Company's  Board  of  Directors  is authorized to issue up to
     300,000  shares  of  preferred  stock  of  the  Holding  Company  without
     stockholder  approval.  The  powers,  preferences  and  rights,  and  the
     qualifications,  limitations,  and  restrictions  thereof  on any series of
     preferred stock issued is determined by the 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 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 of
     the Holding Company. The shares of Class B common stock are convertible, on
     a  share-for-share  basis,  into  Class  A  common  stock  at  any  time.

11.  ASSET AND DIVIDEND RESTRICTIONS

     The  Bank  is  required under Federal Reserve Board regulations to maintain
     reserves,  generally  consisting  of  cash or noninterest-earning accounts,
     against  its  transaction accounts. At December 31, 2005 and 2004, balances
     maintained  as  reserves  were approximately $1.1 million and $1.2 million,
     respectively.

     As  a  member  of the Federal Reserve Banking and Federal Home Loan Banking
     systems,  the  Bank must maintain an investment in the capital stock of the
     FRB  and  FHLB.  At December 31, 2005 and 2004, the total investment, which
     earns a dividend, aggregated $5.2 million and $5.1 million. At December 31,
     2005  and  2004, U.S. government agency securities with a carrying value of
     $72.1 million and $82.2 million, respectively, were pledged against various
     lines  of  credit.

     The payment of dividends by the Holding Company to its shareholders and the
     payment  of  dividends by the Holding Company's subsidiaries to the Holding
     Company  itself  are subject to various regulatory restrictions, as well as
     restrictions that may arise from outstanding indentures. These restrictions
     take  into  consideration  various  factors  such  as  whether  there  are
     sufficient  net  earnings,  as  defined,  liquidity, asset quality, capital
     adequacy  and  economic conditions. The holders of Class A common stock and
     Class B common stock share ratably in any dividend. The Holding Company has
     not  paid  any  dividends  on  its  capital  stock  and  currently  is  not
     contemplating  the  payment  of  a  dividend.


                                       69
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

12.  PROFIT  SHARING  PLANS

     The Company sponsors tax-qualified, profit sharing plans in accordance with
     the  provisions  of  Section  401(k)  of the Internal Revenue Code, whereby
     eligible  employees meeting certain length-of-service requirements may make
     tax-deferred  contributions  up  to  certain  limits.  The  Company  makes
     discretionary  matching  contributions  up  to 3% of employee compensation,
     which vest to the employees over a period of time. Total cash contributions
     to the plans included in the consolidated statements of earnings aggregated
     $72,000,  $68,000  and  $55,000  in  2005,  2004  and  2003,  respectively.

13.  RELATED  PARTY  TRANSACTIONS

     At  December  31,  2005  and  2004,  consolidated deposits included deposit
     accounts  from  affiliated  companies,  directors,  executive  officers and
     members  of  their  immediate  families  and  related business interests of
     approximately $24 million and $18 million, respectively. There are no loans
     to  any  directors  or  executive  officers  of  the Holding Company or its
     subsidiaries.

     The  Company  paid fees of approximately $0.2 million in 2005, $0.2 million
     in 2004 and $0.3 million in 2003 for legal services rendered by a law firm,
     a  principal  of  which  is  a  director of the Company. Intervest Mortgage
     Corporation  paid  commissions and fees in connection with the placement of
     debentures  of approximately $0.9 million in 2005, $0.7 million in 2004 and
     $0.5 million in 2003 to a broker/dealer, a principal of which is a director
     of  the  Company.  The  Bank  paid commissions to the same broker/dealer of
     approximately  of  $22,000  in 2005, $69,000 in 2004 and $53,000 in 2003 in
     connection  with  the  purchase  of  investment  securities.

14.  COMMON  STOCK  WARRANTS

     The  Holding  Company  had  696,465  common  stock  warrants outstanding at
     December  31,  2005  and 2004, that entitle its holder, the Chairman of the
     Board  of  the  Company, to purchase one share of Class A or Class B common
     stock  as  the  case  may  be for each warrant. All warrants are vested and
     currently  exercisable.

     Data  concerning  common  stock  warrants  is  as  follows:

<TABLE>
<CAPTION>
                                                               Exercise Price Per Warrant
                                                               --------------------------         Total           Wtd-Avg
Class A Common Stock Warrants:                                  $6.67            $10.01          Warrants      Exercise Price
------------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>               <C>              <C>
Outstanding at December 31, 2002                                   501,465        1,053,545        1,555,010   $          8.93
-------------------------------------------------------------------------------------------------------------
  Exercised in 2003                                                      -         (945,717)        (945,717)  $         10.01
  Expired in 2003                                                        -          (65,318)         (65,318)  $         10.01
-------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 2003 (1)                               501,465           42,510          543,975   $          6.93
-------------------------------------------------------------------------------------------------------------
  Exercised in 2004                                                      -          (42,510)         (42,510)  $         10.01
-------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 2004 and 2005                          501,465                -          501,465   $          6.67
-------------------------------------------------------------------------------------------------------------
Remaining contractual life in years at December 31, 2005               1.1                -              1.1
------------------------------------------------------------------------------------------------------------------------------

(1)  The  holders  of  the  42,510  warrants  outstanding  at  December  31,  2003 presented these warrants to the Company for
exercise  prior  to  the  expiration  date  of  December  31,  2003.  The  resulting  shares  were  issued  in  January  2004.

                                                               Exercise Price Per Warrant
                                                               --------------------------         Total           Wtd-Avg
CLASS B COMMON STOCK WARRANTS:                                   $6.67           $10.00          Warrants     Exercise Price
------------------------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 2003, 2004 and 2005                    145,000           50,000          195,000  $           7.52
------------------------------------------------------------------------------------------------------------
Remaining contractual life in years at December 31, 2005               2.1              2.1              2.1
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

     For  the  reporting  periods of this report, the Company elected to use the
     intrinsic  value-based  method  prescribed  under  APB  Opinion  No.  25,
     "Accounting  for  Stock  Issued  to Employees," in accounting for its stock
     warrants. Under this method, compensation expense related to stock warrants
     granted  to  employees  is  the  excess, if any, of the market price of the
     stock  as  of the grant or modification date over the exercise price of the
     warrant.


                                       70
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

14.  COMMON  STOCK  WARRANTS,  CONTINUED

     For  warrants  granted  to  employees  whose  exercise price was reduced to
     $10.01  effective January 1, 2002 and whose expiration date was extended in
     2002,  compensation  expense was recorded under variable rate accounting as
     prescribed  by  APB No. 25 and related interpretations. For these warrants,
     which  originally  totaled  138,500,  compensation  expense was recorded in
     salaries  and employee benefits expense with a corresponding credit to paid
     in  capital  in  the  consolidated  financial  statements.

     Compensation  expense  recorded in connection with common stock warrants is
     summarized  as  follows:

<TABLE>
<CAPTION>
                                                                    For the Year Ended December 31,
                                                                    -------------------------------
      ($ in thousands)                                               2005          2004          2003
     ---------------------------------------------------------------------------------------------------
<S>                                                             <C>           <C>           <C>
     Compensation expense recorded in connection with vesting
       of Class B common stock warrants during the period       $          -  $          9  $         26
     Compensation expense recorded in connection with
       Class A common stock warrants whose terms were modified             -             -           418
     ---------------------------------------------------------------------------------------------------
                                                                $          -  $          9  $        444
     ---------------------------------------------------------------------------------------------------
</TABLE>

     On  January  1,  2006,  the  Company  adopted  SFAS No. 123-R, "Share-Based
     Payment"  replaces  SFAS 123 and supersedes APB No. 25. SFAS 123-R requires
     companies to recognize in the income statement the grant-date fair value of
     stock  options  and other equity-based compensation issued to employees and
     directors,  but  expresses  no  preference  for  a type of valuation model.
     Accordingly,  the  new  standard  will  apply  to new stock warrants and/or
     options issued to employees or directors in the future. SFAS 123-R does not
     impact  any of the Company's outstanding warrants at December 31, 2005, all
     of  which  are  vested  and  were  issued  prior  to  this  new  standard.

15.  INCOME  TAXES

     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
     Holding  Company also files a franchise tax return in Delaware and the Bank
     files  a  state  income  tax  return in Florida. All returns are filed on a
     calendar  year  basis.

     At  December  31,  2005  and 2004, the Company had a net deferred tax asset
     amounting to $7.0 million and $5.1 million, respectively. The asset relates
     to  the  unrealized  benefit  for  net  temporary  differences  between the
     financial statement carrying amounts of existing assets and liabilities and
     their  respective  tax  bases that will result in future tax deductions. In
     assessing  the  realizability  of deferred tax assets, management considers
     whether it is more likely than not that some portion or all of the deferred
     tax  assets  will  not  be realized based on available evidence. Management
     concluded  that  a  valuation  allowance  for  deferred  tax assets was not
     necessary  at  any  time  during  the  reporting  periods.

     Allocation  of  federal,  state  and local income taxes between current and
     deferred  portions  is  as  follows:

<TABLE>
<CAPTION>
           ($ in thousands)                Current    Deferred    Total
          -------------------------------------------------------------
<S>                                       <C>       <C>         <C>
          Year Ended December 31, 2005:
          -----------------------------
            Federal                       $ 11,122  $  (1,547)  $ 9,575
            State and Local                  4,837       (346)    4,491
          -------------------------------------------------------------
                                          $ 15,959  $  (1,893)  $14,066
          -------------------------------------------------------------
          Year Ended December 31, 2004:
          -----------------------------
            Federal                       $  7,707  $  (1,742)  $ 5,965
            State and Local                  3,204       (393)    2,811
          -------------------------------------------------------------
                                          $ 10,911  $  (2,135)  $ 8,776
          -------------------------------------------------------------
          Year Ended December 31, 2003:
          -----------------------------
            Federal                       $  5,576  $    (782)  $ 4,794
            State and Local                  2,260       (181)    2,079
          -------------------------------------------------------------
                                          $  7,836  $    (963)  $ 6,873
          -------------------------------------------------------------
</TABLE>


                                       71
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

15.  INCOME  TAXES,  CONTINUED

     The  components  of  the  deferred  tax  benefit  are  as  follows:

<TABLE>
<CAPTION>
                                               For the Year Ended December 31,
                                               -------------------------------
          ($ in thousands)                     2005           2004           2003
          ----------------------------------------------------------------------------
<S>                                        <C>            <C>            <C>
          Allowance for loan losses        $     (1,939)  $     (2,073)  $       (896)
          Organization and startup costs              -             11             29
          Deferred compensation                    (175)            (4)            45
          Depreciation                              165            (88)           (65)
          Deferred income                            56             19            (75)
          All other                                   -              -             (1)
          ----------------------------------------------------------------------------
                                           $     (1,893)  $     (2,135)  $       (963)
          ----------------------------------------------------------------------------
</TABLE>

     The tax effects of the temporary differences that give rise to the deferred
     tax  asset  are  as  follows:

<TABLE>
<CAPTION>
                                         At December 31,
                                         ---------------
          ($ in thousands)               2005       2004
          ------------------------------------------------
<S>                                   <C>        <C>
          Allowance for loan losses   $   6,480  $   4,541
          Deferred compensation             252         77
          Depreciation                      102        267
          Deferred income                   144        200
          All other                          10         10
          ------------------------------------------------
          Total deferred tax asset    $   6,988  $   5,095
          ------------------------------------------------
</TABLE>

     The  reconciliation  between  the statutory federal income tax rate and the
     Company's effective income tax rate (including state and local taxes) is as
     follows:

<TABLE>
<CAPTION>
                                                                      For the Year Ended December 31,
                                                                      -------------------------------
                                                                      2005          2004          2003
          ------------------------------------------------------------------------------------------------
<S>                                                               <C>           <C>           <C>
          Tax provision at statutory rate                                35.0%         35.0%         35.0%
          Increase in taxes resulting from:
            State and local income taxes, net of federal benefit          8.6           8.4           8.2
            other                                                           -             -          (0.2)
          ------------------------------------------------------------------------------------------------
                                                                         43.6%         43.4%         43.0%
          ------------------------------------------------------------------------------------------------
</TABLE>

16.  EARNINGS  PER  SHARE

     The  following  table  reflects  the  reconciliation  of  the  basic  EPS
     computation  to  the  diluted  EPS  computation:

<TABLE>
<CAPTION>
                                                                               For the Year Ended December 31,
                                                                               -------------------------------
($ in thousands, except share and per share amounts)                           2005          2004          2003
-------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>           <C>           <C>
Basic Earnings Per Share:
  Net earnings applicable to common stockholders                           $     18,184  $     11,453  $      9,120
  Weighted-average number of common shares outstanding                        6,861,887     6,068,755     4,938,995
-------------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share                                                   $       2.65  $       1.89  $       1.85
-------------------------------------------------------------------------------------------------------------------
Diluted Earnings Per Share:
  Net earnings applicable to common stockholders                           $     18,184  $     11,453  $      9,120
  Adjustment to net earnings from assumed conversion of debentures                  215           254           452
                                                                           ----------------------------------------
  Adjusted net earnings for diluted earnings per share computation         $     18,399  $     11,707  $      9,572
                                                                           ----------------------------------------
  Weighted-Average number of common shares outstanding:
    Common shares outstanding                                                 6,861,887     6,068,755     4,938,995
    Potential dilutive shares resulting from exercise of warrants (1)           266,668       255,171       356,339
    Potential dilutive shares resulting from conversion of debentures (1)       321,103       504,250       962,386
                                                                           ----------------------------------------
  Total average number of common shares outstanding used for dilution         7,449,658     6,828,176     6,257,720
-------------------------------------------------------------------------------------------------------------------
Diluted Earnings Per Share                                                 $       2.47  $       1.71  $       1.53
-------------------------------------------------------------------------------------------------------------------
<FN>
(1) All warrants and convertible debentures outstanding were considered in the computation of diluted EPS because
they were dilutive.
</TABLE>


                                       72
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

17.  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.

18.  REGULATORY  CAPITAL

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

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

     Prompt  corrective  action  provisions  are  not applicable to bank holding
     companies.  Quantitative  measures established by the regulations to ensure
     capital  adequacy  require  the  Company  and  the Bank to maintain minimum
     amounts  and ratios of total and Tier 1 capital to risk-weighted assets and
     of  Tier  1  capital  to  average  assets,  as  defined by the regulations.

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

     Management believes, as of December 31, 2005 and 2004, that the Company and
     the  Bank  met all capital adequacy requirements to which they are subject.
     As  of  December  31,  2005,  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.

     Intervest  Securities  Corporation  is  subject  to  the  SEC's Uniform Net
     Capital  Rule,  which  requires  the  maintenance of minimum net capital of
     $5,000.  At  December 31, 2005 and 2004, Intervest Securities Corporation's
     net  capital  was  $0.5  million.


                                       73
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

18.  REGULATORY  CAPITAL,  CONTINUED

     The table that follows presents information regarding the Company's and the
     Bank's  capital  adequacy.

<TABLE>
<CAPTION>
                                                                                             Minimum to Be Well
                                                                                             Capitalized Under
                                                                          Minimum Capital    Prompt Corrective
                                                           Actual           Requirements     Action Provisions
                                                           ------           ------------     -----------------
      ($ in thousands)                                 Amount    Ratio     Amount    Ratio     Amount    Ratio
     ----------------------------------------------------------------------------------------------------------
<S>                                                  <C>       <C>       <C>       <C>       <C>       <C>
     Consolidated as of December 31, 2005:
     -------------------------------------
       Total capital to risk-weighted assets         $211,359    14.42%  $117,282     8.00%        NA        NA
       Tier 1 capital to risk-weighted assets        $181,571    12.39%  $ 58,641     4.00%        NA        NA
       Tier 1 capital to average assets              $181,571    10.85%  $ 66,953     4.00%        NA        NA

     Consolidated as of December 31, 2004:
     -------------------------------------
       Total capital to risk-weighted assets         $156,105    14.23%  $ 87,737     8.00%        NA        NA
       Tier 1 capital to risk-weighted assets        $115,031    10.49%  $ 43,868     4.00%        NA        NA
       Tier 1 capital to average assets              $115,031     9.03%  $ 50,951     4.00%        NA        NA

     Intervest National Bank at December 31, 2005:
     ---------------------------------------------
       Total capital to risk-weighted assets         $171,688    12.60%  $109,018     8.00%  $136,273    10.00%
       Tier 1 capital to risk-weighted assets        $156,842    11.51%  $ 54,509     4.00%  $ 81,764     6.00%
       Tier 1 capital to average assets              $156,842    10.04%  $ 62,511     4.00%  $ 78,139     5.00%

     Intervest National Bank at December 31, 2004:
     ---------------------------------------------
       Total capital to risk-weighted assets         $117,413    12.08%  $ 77,746     8.00%  $ 97,182    10.00%
       Tier 1 capital to risk-weighted assets        $106,724    10.98%  $ 38,873     4.00%  $ 58,309     6.00%
       Tier 1 capital to average assets              $106,724     9.36%  $ 45,625     4.00%  $ 57,031     5.00%
     ----------------------------------------------------------------------------------------------------------
</TABLE>

19.  OFF-BALANCE  SHEET  FINANCIAL  INSTRUMENTS

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

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

     The  contractual  amounts  of  the  Company's  off-balance  sheet financial
     instruments  are  as  follows:

<TABLE>
<CAPTION>
                                             At December 31,
                                             ---------------
          ($ in thousands)                   2005       2004
          -----------------------------------------------------
<S>                                        <C>        <C>
          Unfunded loan commitments        $ 101,597  $ 159,697
          Available lines of credit              737        789
          Standby letters of credit              100        750
          -----------------------------------------------------
                                           $ 102,434  $ 161,236
          -----------------------------------------------------
</TABLE>


                                       74
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

20.  FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS

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

<TABLE>
<CAPTION>
                                                              At December 31, 2005      At December 31, 2004
                                                              --------------------      --------------------
                                                              Carrying         Fair     Carrying         Fair
          ($ in thousands)                                       Value        Value        Value        Value
          ---------------------------------------------------------------------------------------------------
<S>                                                        <C>          <C>          <C>          <C>
          Financial Assets:
            Cash and cash equivalents                      $    56,716  $    56,716  $    24,599  $    24,599
            Securities held to maturity, net                   251,508      249,088      248,888      247,211
            FRB and FHLB stock                                   5,241        5,241        5,092        5,092
            Loans receivable, net                            1,352,805    1,355,504    1,004,290    1,011,559
            Accrued interest receivable                          7,706        7,706        6,699        6,699
          Financial Liabilities:
            Deposit liabilities                              1,375,330    1,366,539      993,872      997,939
            Borrowed funds plus accrued interest payable       155,725      156,615      202,682      204,578
            Accrued interest payable on deposits                 3,232        3,232        1,718        1,718
          Off-Balance Sheet Instruments:
            Commitments to lend                                    794          794          920          920
          ---------------------------------------------------------------------------------------------------
</TABLE>

     Fair  value  estimates  are  made  at  a  specific  point  in time based on
     available  information.  Where  available,  quoted  market prices are used.
     However, a significant portion of the Company's financial instruments, such
     as  mortgage  loans, do not have an active marketplace in which they can be
     readily sold or purchased to determine fair value. Consequently, fair value
     estimates  for such instruments are based on assumptions made by management
     that  include  the  instrument's  credit  risk  characteristics  and future
     estimated cash flows and prevailing interest rates. As a result, these fair
     value estimates are subjective in nature, involve uncertainties and matters
     of significant judgment and therefore, cannot be determined with precision.
     Accordingly,  changes  in  any  of management's assumptions could cause the
     fair  value  estimates  to  deviate substantially. The fair value estimates
     also  do  not  reflect any additional premium or discount that could result
     from  offering  for  sale,  at one time, the Company's entire holdings of a
     particular  financial  instrument,  nor  estimated  transaction  costs.

     Further,  the  tax  ramifications  related to the realization of unrealized
     gains  and  losses  can  have  a  significant  effect  on and have not been
     considered  in  the  fair value estimates. Finally, fair value estimates do
     not  attempt  to  estimate  the  value  of anticipated future business, the
     Company's  customer  relationships, branch network, and the value of assets
     and liabilities that are not considered financial instruments, such as core
     deposit  intangibles  and  premises  and  equipment.

     The  following methods and assumptions were used to estimate the fair value
     of  financial  instruments:

     SECURITIES.  The  estimated  fair  value  of securities held to maturity is
     based on quoted market prices. The estimated fair value of the FRB and FHLB
     stock  approximates  carrying  value  since  the  securities do not present
     credit  concerns  and  are  redeemable  at  cost.

     LOANS  RECEIVABLE.  The  estimated  fair  value  of  loans  is  based  on a
     discounted cash flow analysis, using interest rates currently being offered
     for  loans  with  similar  terms  to  borrowers  of similar credit quality.
     Management  can make no assurance that its perception and quantification of
     credit  risk  would  be  viewed  in  the same manner as that of a potential
     investor. Therefore, changes in any of management's assumptions could cause
     the  fair  value  estimates  of  loans  to  deviate  substantially.

     DEPOSITS.  The  estimated  fair  value of deposits with no stated maturity,
     such  as  savings,  money  market,  checking and noninterest-bearing demand
     deposit  accounts  approximates carrying value. The estimated fair value of
     certificates  of  deposit  are  based  on  the  discounted  value  of their
     contractual  cash  flows.  The  discount  rate  used  in  the present value
     computation  was  estimated by comparison to current interest rates offered
     by  the Bank for certificates of deposit with similar remaining maturities.


                                       75
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

20.  FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS,  CONTINUED

     BORROWED  FUNDS  AND  ACCRUED INTEREST PAYABLE. The estimated fair value of
     borrowed  funds  and  related  accrued  interest  payable  is  based  on  a
     discounted  cash flow analysis. The discount rate used in the present value
     computation  was  estimated by comparison to what management believes to be
     the  Company's  incremental  borrowing  rate  for  similar  arrangements.

     ALL  OTHER  FINANCIAL  ASSETS  AND LIABILITIES. The estimated fair value of
     cash and cash equivalents, accrued interest receivable and accrued interest
     payable  on  deposits  approximates  their  carrying  values  since  these
     instruments  are  payable  on  demand  or  have  short-term  maturities.

     OFF-BALANCE  SHEET INSTRUMENTS. The carrying amounts of commitments to lend
     approximated estimated fair value. The fair value of commitments to lend is
     based  on  fees  currently charged to enter into similar agreements, taking
     into  account the remaining terms of the agreements and the counter party's
     credit  standing.

21.  BUSINESS  SEGMENT  INFORMATION

     The  Company  follows  the  provisions  of SFAS No. 131, "Disclosures about
     Segments of an Enterprise and Related Information." An operating segment is
     defined  therein  as  a component of an enterprise that engages in business
     activities  from  which  it  may  earn  revenues  and  incur expenses whose
     separate  financial  information is available and is evaluated regularly by
     the  Company's  chief  operating  decision  makers  to  perform  resource
     allocations  and  performance  assessments.

     The  Company's  primary business is banking and real estate lending as more
     fully  described  in  note  1  herein.  The  Company's day-to-day operating
     decisions  are  normally  made by the members of its Executive Committee of
     the  Board  of Directors, which is comprised of the Chairman, Vice Chairman
     and  Vice  President of the Company. The Executive Committee generally uses
     revenue  and  earnings  performance of each segment to determine operating,
     strategic  and  resource  allocation  decisions.

     The  accounting  policies  of the segments identified below are the same as
     those  described  in  the  summary  of significant accounting policies. The
     revenues and net earnings of the segments are not necessarily indicative of
     the amounts which would be achieved if each of the segments were a separate
     company.

     The  following  table  presents certain information regarding the Company's
     operations  by  business  segment:

<TABLE>
<CAPTION>
                                  Revenues, Net of Interest Expense         Net Earnings (Loss)               Total Assets
                                  ---------------------------------         -------------------               ------------
     ($ in thousands)                2005        2004        2003       2005       2004        2003        2005         2004
     ---------------------------------------------------------------------------------------------------------------------------
<S>                               <C>         <C>         <C>         <C>        <C>        <C>         <C>          <C>
     Intervest National Bank (1)  $  42,834   $  30,016   $  22,604   $  12,999  $   7,436  $   6,972   $1,598,393   $1,183,509
     Intervest Mortgage Corp.         8,835       6,866       4,928       3,089      2,354      1,759      115,809      122,451
     Intervest Securities Corp.         128         125          41          24         22         (6)         511          484
     Holding Company (1)                804         554         142       2,072      1,641        395      204,387      159,522
     Intersegment (2)                (5,573)     (4,555)     (2,494)          -          -          -     (212,677)    (149,215)
     ---------------------------------------------------------------------------------------------------------------------------
     Consolidated                 $  47,028   $  33,006   $  25,221   $  18,184  $  11,453  $   9,120   $1,706,423   $1,316,751
     ---------------------------------------------------------------------------------------------------------------------------

<FN>
     (1)  Revenues,  net  of interest expense and net earnings amounts are shown after intercompany dividends of $4.4 million in
     2005,  $3.4  million in 2004 and $1.7 million in 2003 that were paid by the Bank to the Holding Company for debt service on
     trust  preferred  securities,  the  proceeds  of  which  are  invested  in  the  capital  of  the  Bank.


     (2)  Intersegment  revenues,  net  of  interest  expense,  arise  from intercompany management and loan origination service
     agreements.  All  significant  intercompany  balances  and  transactions  are  eliminated  in consolidation. The Bank has a
     servicing  agreement  with  Intervest Mortgage Corporation to provide the Bank with mortgage loan origination services. The
     services  include:  the  identification  of  potential  properties and borrowers; the inspection of properties constituting
     collateral  for  such  loans;  the  negotiation  of  the  terms  and conditions of such loans in accordance with the Bank's
     underwriting standards; preparing commitment letters; and coordinating the loan closing process. The services are performed
     by Intervest Mortgage Corporation's personnel and the expenses associated with the services are borne by Intervest Mortgage
     Corporation.  The  Bank paid $5.1 million, $4.3 million and $2.3 million in 2005, 2004 and 2003, respectively, to Intervest
     Mortgage  Corporation  in  connection  with this servicing agreement. The Holding Company receives management fees from the
     Bank  and  Intervest  Mortgage  Corporation  as  a  result of providing services to these subsidiaries related to corporate
     finance and planning and intercompany administration, and to act as a liaison for the Company in various corporate matters.
     Management fees amounted to $0.5 million, $0.4 million and $0.2 million in 2005, 2004 and 2003, respectively.
</TABLE>


                                       76
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

22.  HOLDING  COMPANY  FINANCIAL  INFORMATION

<TABLE>
<CAPTION>
                                                      CONDENSED BALANCE SHEETS
                                                                                                       At December 31,
                                                                                                       ---------------
          ($ in thousands)                                                                             2005       2004
          ---------------------------------------------------------------------------------------------------------------
<S>                                                                                                  <C>        <C>
          ASSETS
          Cash and due from banks                                                                    $      76  $      74
          Short-term investments                                                                         4,166      4,788
                                                                                                     --------------------
            Total cash and cash equivalents                                                              4,242      4,862
          Loans receivable, net  (net of allowance for loan losses of $85 and $85, respectively)        11,379     13,993
          Investment in consolidated subsidiaries                                                      183,963    135,351
          Investment in unconsolidated subsidiaries - Intervest Statutory Trusts I, II, III and IV       1,856      1,856
          Deferred debenture offering costs, net of amortization                                         1,526      1,658
          Premises and equipment, net                                                                    1,010      1,132
          All other assets                                                                                 411        670
          ---------------------------------------------------------------------------------------------------------------
          TOTAL ASSETS                                                                               $ 204,387  $ 159,522
          ---------------------------------------------------------------------------------------------------------------

          LIABILITIES
          Debentures payable                                                                         $   4,640  $   5,580
          Debentures payable - capital securities                                                       61,856     61,856
          Accrued interest payable on all debentures                                                     1,551      1,914
          All other liabilities                                                                            162         78
          ---------------------------------------------------------------------------------------------------------------
          TOTAL LIABILITIES                                                                             68,209     69,428
          ---------------------------------------------------------------------------------------------------------------

          STOCKHOLDERS' EQUITY
          Common equity                                                                                136,178     90,094
          ---------------------------------------------------------------------------------------------------------------
          TOTAL STOCKHOLDERS' EQUITY                                                                   136,178     90,094
          ---------------------------------------------------------------------------------------------------------------
          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                 $ 204,387  $ 159,522
          ---------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                       CONDENSED STATEMENTS OF EARNINGS
                                                                                              For the Year Ended December 31,
                                                                                              -------------------------------
          ($ in thousands)                                                                  2005           2004           2003
          -------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>            <C>            <C>
          Interest income                                                               $        931   $      1,087   $      1,125
          Dividend income from subsidiary (1)                                                  4,356          3,429          1,695
          Interest expense                                                                     5,003          4,351          3,024
                                                                                        -------------------------------------------
          Net interest and dividend income (expense)                                             284            165           (204)
          Provision for loan losses                                                                -              7             32
          Noninterest income                                                                     520            389            346
          Noninterest expenses                                                                   692            440            748
                                                                                        -------------------------------------------
          Income (loss) before income taxes                                                      112            107           (638)
          Credit for income taxes (2)                                                         (1,960)        (1,534)        (1,033)
                                                                                        -------------------------------------------
          Net earnings before earnings of subsidiaries                                         2,072          1,641            395
          Equity in undistributed earnings of Intervest National Bank                         12,999          7,436          6,972
          Equity in undistributed earnings of Intervest Mortgage Corporation                   3,089          2,354          1,759
          Equity in undistributed earnings (loss) of Intervest Securities Corporation             24             22             (6)
          -------------------------------------------------------------------------------------------------------------------------
          NET CONSOLIDATED EARNINGS                                                     $     18,184   $     11,453   $      9,120
          -------------------------------------------------------------------------------------------------------------------------
<FN>
           (1)  Represent  dividends  paid  to  the  Holding  Company  from  the  Bank to provide funds for the debt service on the
                debentures  payable  - capital securities. This debt service is included in the Holding Company's interest expense.
                The  proceeds  from  the  capital  securities  are  invested  in  the  capital  of  the  Bank.
           (2)  Dividends  from  subsidiaries are eliminated in consolidation and are not included in the Holding Company's pre-tax
                income  for  purposes  of  computing  income  taxes.
</TABLE>


                                       77
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

22.  HOLDING  COMPANY  FINANCIAL  INFORMATION,  CONTINUED

<TABLE>
<CAPTION>
                                                    CONDENSED STATEMENTS OF CASH FLOWS
                                                                                         For the Year Ended December 31,
                                                                                         -------------------------------
           ($ in thousands)                                                            2005           2004           2003
           -------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>            <C>            <C>
           OPERATING ACTIVITIES
           Net earnings                                                            $     18,184   $     11,453   $      9,120
           Adjustments to reconcile net earnings to net cash provided
             by operating activities:
           Equity in earnings of subsidiaries                                           (20,468)       (13,241)       (10,420)
           Cash dividends received from subsidiary                                        4,356          3,429          1,695
           Provision for loan losses                                                          -              7             32
           Depreciation and amortization                                                    122             86              1
           Amortization of deferred debenture costs                                         108            115            131
           Amortization of deferred loan fees, net                                          (21)           (35)           (50)
           Deferred income tax expense (benefit)                                            182             (3)            38
           Compensation expense from awards/modifications of stock warrants                   -              9            444
           Increase in accrued interest payable on debentures                               310            576            347
           Change in all other assets and liabilities, net                                  185            (97)            93
           -------------------------------------------------------------------------------------------------------------------
           NET CASH PROVIDED BY OPERATING ACTIVITIES                                      2,958          2,299          1,431
           -------------------------------------------------------------------------------------------------------------------

           INVESTING ACTIVITIES
           Investment in subsidiaries, net                                              (32,500)       (33,928)       (20,715)
           Cash acquired through acquisition of Intervest Securities Corporation              -              -            218
           Purchase of equipment and leasehold improvements                                   -         (1,206)           (11)
           Loan principal repayments and (originations), net                              2,619          1,519         (6,316)
           -------------------------------------------------------------------------------------------------------------------
           NET CASH USED IN INVESTING ACTIVITIES                                        (29,881)       (33,615)       (26,824)
           -------------------------------------------------------------------------------------------------------------------

           FINANCING ACTIVITIES
           Net decrease in mortgage escrow funds payable                                     (8)           (16)           (75)
           Gross proceeds from issuance of debentures                                         -         30,928         15,464
           Debenture offering costs                                                           -           (663)          (446)
           Principal repayments of debentures                                                 -              -         (1,000)
           Proceeds from issuance of common stock upon the exercise
             of stock warrants                                                                -          2,961          6,931
           Proceeds from issuance of common stock in public offering                     28,370              -              -
           Common stock issuance costs                                                   (2,059)             -              -
           -------------------------------------------------------------------------------------------------------------------
           NET CASH PROVIDED BY FINANCING ACTIVITIES                                     26,303         33,210         20,874
           -------------------------------------------------------------------------------------------------------------------

           Net (decrease) increase in cash and cash equivalents                            (620)         1,894         (4,519)
           Cash and cash equivalents at beginning of year                                 4,862          2,968          7,487
           -------------------------------------------------------------------------------------------------------------------
           CASH AND CASH EQUIVALENTS AT END OF YEAR                                $      4,242   $      4,862   $      2,968
           -------------------------------------------------------------------------------------------------------------------

           SUPPLEMENTAL DISCLOSURES
           Cash paid (received) during the year for:
             Interest                                                              $      4,585   $      3,658   $      2,545
             Income taxes                                                                (2,245)        (1,621)        (1,136)
           Noncash transactions:
             Conversion of debentures into Class A common stock:
               Principal converted                                                          940          1,760          2,090
               Accrued interest converted                                                   673          1,123          1,009
               Unamortized debenture offering costs converted                               (24)           (62)           (84)
             Class B stock issued to acquire Intervest Securities Corporation                 -              -            215
           -------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       78
<PAGE>
                INTERVEST BANCSHARES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
--------------------------------------------------------------------------------

23.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following information is as of or for the period ended:

<TABLE>
<CAPTION>
                                                                                               2005
                                                                                               ----
                                                                           First       Second        Third       Fourth
     ($ in thousands, except per share amounts)                           Quarter      Quarter      Quarter      Quarter
     ---------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>          <C>          <C>          <C>

     Interest and dividend income                                       $   20,568   $   22,696   $   25,761   $   28,856
     Interest expense                                                       12,283       13,500       15,106       16,558
                                                                        --------------------------------------------------
     Net interest and dividend income                                        8,285        9,196       10,655       12,298
     Provision for loan losses                                               1,033          452        1,803          787
                                                                        --------------------------------------------------
     Net interest and dividend income after provision for loan losses        7,252        8,744        8,852       11,511
     Noninterest income                                                        878        2,009        1,813        1,894
     Noninterest expenses                                                    2,374        2,749        2,566        3,014
                                                                        --------------------------------------------------
     Earnings before income taxes                                            5,756        8,004        8,099       10,391
     Provision for income taxes                                              2,508        3,481        3,533        4,544
     ---------------------------------------------------------------------------------------------------------------------
     NET EARNINGS                                                       $    3,248   $    4,523   $    4,566   $    5,847
     ---------------------------------------------------------------------------------------------------------------------
     BASIC EARNINGS PER SHARE:                                          $      .52   $      .72   $      .66   $      .75
     DILUTED EARNINGS PER SHARE:                                        $      .48   $      .67   $      .61   $      .71
     ---------------------------------------------------------------------------------------------------------------------
     Return on average assets                                                 0.94%        1.26%        1.17%        1.40%
     Return on average equity                                                14.25%       19.01%       16.32%       17.81%
     Total assets                                                       $1,427,439   $1,511,604   $1,630,845   $1,706,423
     Total cash and investment securities                               $  309,193   $  312,810   $  286,865   $  313,465
     Total loans, net of unearned fees                                  $1,095,161   $1,174,107   $1,319,155   $1,367,986
     Total deposits                                                     $1,123,657   $1,217,506   $1,302,309   $1,375,330
     Total borrowed funds and related interest payable                  $  177,995   $  163,021   $  160,491   $  155,725
     Total stockholders' equity                                         $   93,376   $   97,975   $  129,207   $  136,178
     ---------------------------------------------------------------------------------------------------------------------


                                                                                               2004
                                                                                               ----
                                                                           First       Second       Third        Fourth
     ($in thousands, except per share amounts)                            Quarter      Quarter      Quarter      Quarter
     ---------------------------------------------------------------------------------------------------------------------
     Interest and dividend income                                       $   14,593   $   15,391   $   17,655   $   18,910
     Interest expense                                                        8,215        8,866       10,348       11,254
                                                                        --------------------------------------------------
     Net interest and dividend income                                        6,378        6,525        7,307        7,656
     Provision for loan losses                                               1,077        1,284        1,067        1,098
                                                                        --------------------------------------------------
     Net interest and dividend income after provision for loan losses        5,301        5,241        6,240        6,558
     Noninterest income                                                      1,456        1,225        1,477          982
     Noninterest expenses                                                    1,918        2,045        2,141        2,147
                                                                        --------------------------------------------------
     Earnings before income taxes                                            4,839        4,421        5,576        5,393
     Provision for income taxes                                              2,104        1,916        2,424        2,332
     ---------------------------------------------------------------------------------------------------------------------
     NET EARNINGS                                                       $    2,735   $    2,505   $    3,152   $    3,061
     ---------------------------------------------------------------------------------------------------------------------
     BASIC EARNINGS PER SHARE:                                          $      .45   $      .42   $      .52   $      .50
     DILUTED EARNINGS PER SHARE:                                        $      .41   $      .37   $      .47   $      .46
     ---------------------------------------------------------------------------------------------------------------------
     Return on average assets                                                 1.15%        0.95%        1.05%        0.96%
     Return on average equity                                                14.32%       12.58%       15.32%       14.30%
     Total assets                                                       $  993,010   $1,119,266   $1,269,256   $1,316,751
     Total cash and investment securities                               $  210,747   $  220,653   $  307,120   $  278,579
     Total loans, net of unearned fees                                  $  763,108   $  877,296   $  939,001   $1,015,396
     Total deposits                                                     $  737,150   $  852,852   $  976,392   $  993,872
     Total borrowed funds and related interest payable                  $  155,034   $  155,640   $  180,368   $  202,682
     Total stockholders' equity                                         $   78,751   $   81,259   $   84,410   $   90,094
     ---------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       79
<PAGE>
ITEM 9.   CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING AND
          FINANCIAL  DISCLOSURE

In  2005, the Company's subsidiary, Invervest Mortgage Corporation, replaced its
independent  accountants  with the Company's independent accountants. There were
no  disagreements  with  the prior accountants. The information required by this
item  is  contained  in  the  Company's  definitive proxy statement for its 2006
Annual  Meeting  (the "Proxy Statement") under the section entitled "Independent
Public  Accountants"  and  is  incorporated  herein  by  reference.

ITEM 9A.  CONTROLS AND PROCEDURES

The  Company's  management  evaluated,  with  the participation of its Principal
Executive  and Financial Officers, the effectiveness of the Company's disclosure
controls  and  procedures  (as  defined in Rule 13a-15(e) or 15d-15(e) under the
Securities  Exchange  Act  of  1934) as of the end of the period covered by this
report. Based on such evaluation, the Principal Executive and Financial Officers
have  concluded  that  the  Company's  disclosure  controls  and  procedures are
designed  to ensure that information required to be disclosed in the reports the
Company  files  or  furnishes  under  the  Securities  Exchange  Act  of 1934 is
recorded,  processed,  summarized and reported within the time periods specified
in  the  SEC's  rules and regulations, and are operating in an effective manner.
The  Company made no significant changes in its internal controls over financial
reporting  or  in  other  factors that could significantly affect these controls
subsequent  to  December  31,  2005.

ITEM 9B.  OTHER INFORMATION

Not  Applicable

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS

     DIRECTORS.  The  information  required  by this item is contained under the
section  entitled  "Proposal  One: Election of Directors" of the Proxy Statement
and  is  incorporated  herein  by  reference.

     EXECUTIVE  OFFICERS.  The information required by this item is set forth at
the end of Part I of this report under the caption "Executive Officers and Other
Key  Employees."

     COMPLIANCE  WITH  SECTION  16(A).  The information required by this item is
contained  under  the  section  entitled  "Compliance  with Section 16(a) of the
Securities  Exchange  Act of 1934" in the Proxy Statement is incorporated herein
by  reference.

     AUDIT  COMMITTEE  FINANCIAL  EXPERT.  The information required by this item
regarding  the  audit  committee  of the Company's Board of Directors, including
information  regarding  audit  committee  financial experts serving on the audit
committee is contained in the section of the Proxy Statement entitled "Corporate
Governance  Principles  and  Board  Matters"  and  is  incorporated  herein  by
reference.

     CODE  OF  BUSINESS  CONDUCT  AND  ETHICS. The Company has a written code of
business  conduct  and  ethics  that  applies  to  its  directors,  officers and
employees, and also has a written code of ethics for its principal executive and
financial  officers.  The  Company's  Audit  Committee  has  procedures  for the
submission  of  complaints or concerns regarding financial statement disclosures
and  other  matters.  A  copy of these documents are attached as exhibits to the
Company's Report on Form 10-K for the year ended December 31, 2004, wherein such
documents  are  identified  as  Exhibit  14.1,  14.2  and  14.3. A copy of these
documents  will  be  furnished  upon  request  and  without charge to beneficial
holders  of  the Class A common stock of the Company. Written requests should be
directed  to:  Intervest  Bancshares  Corporation,  Attention:  Secretary,  One
Rockefeller  Plaza,  Suite  400,  New  York,  New  York  10020.

ITEM 11.   EXECUTIVE COMPENSATION

The  information  required  by  this  item  is contained in the section entitled
"Executive  Compensation"  of  the Proxy Statement and is incorporated herein by
reference.

ITEM 12.  SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED  STOCKHOLDER  TRANSACTIONS

The  information  required  by  this  item is contained in the sections entitled
"Security  Ownership  of  Certain  Beneficial Owners and Management" and "Equity
Compensation  Plan  Information"  of  the  Proxy  Statement and are incorporated
herein  by  reference.

ITEM 13.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

The  information  required  by  this  item  is contained in the section entitled
"Certain  Relationships  and Related Transactions" of the Proxy Statement and is
incorporated  herein  by  reference.


                                       80
<PAGE>
ITEM 14.   PRINCIPAL  ACCOUNTING  FEES  AND  SERVICES

The  information  required  by  this  item  is contained in the section entitled
"Independent  Public  Accountants"  of  the  Proxy Statement and is incorporated
herein  by  reference.

                                     PART IV

ITEM 15.   EXHIBITS  AND  FINANCIAL  STATEMENT  SCHEDULES

(A)  DOCUMENTS  FILED  AS  PART  OF  THIS  REPORT

     (1)  FINANCIAL  STATEMENTS:  See  Item  8  "Financial  Statements  and
          Supplementary  Data"

     (2)  FINANCIAL  STATEMENT  SCHEDULES:  See Item 8 "Financial Statements and
          Supplementary  Data"

     (3)  EXHIBITS: The following exhibits are filed herein as part of this Form
          10-K:

<TABLE>
<CAPTION>
EXHIBIT NO.  DESCRIPTION OF EXHIBIT
-----------  ----------------------
<S>          <C>
2.1 *        Agreement and Plan of Merger dated as of November 1, 1999 by and among Intervest
             Bancshares Corporation, ICNY Acquisition Corporation and Intervest Corporation of New
             York, incorporated by reference to the Company's definitive proxy statement for the special
             meeting of shareholders to be held March 10, 2000, wherein such document is identified as
             "Annex A."

2.2 *        Stock Purchase Agreement dated as of December 18, 2002, by and between Intervest
             Bancshares Corporation and Jean Dansker regarding the purchase and sale of the issued and
             outstanding shares of Intervest Securities Corporation, incorporated by reference to the
             Registration Statement on Form S-1 filed on July 8, 2005 (the "S-1"), wherein such
             document is identified as Exhibit 2.2.

3.1 *        Restated Certificate of Incorporation of the Company, incorporated by reference to the S-1,
             wherein such document is identified as Exhibit 3.1.

3.2 *        Bylaws of the Company as amended, incorporated by reference to the Company's report on
             Form 8-K dated June 23, 2005, wherein such document is identified as Exhibit 3.1.

4.1 *        Form of Certificate for Shares of Class A common stock, incorporated by reference to the
             Company's Pre-Effective Amendment No.1 to the Registration Statement on Form SB-2 (No.
             33-82246), filed on September 15, 1994, (the "SB-2"), wherein such document is identified
             as Exhibit 4.1

4.2 *        Form of Certificate for Shares of Class B common stock, incorporated by reference to the
             SB-2, wherein such document is identified as Exhibit 4.2.

4.3 *        Form of Warrant for Class B Common Stock issued to Mr. Jerome Dansker, incorporated by
             reference to the Company's Annual Report on Form 10-K for the year ended December 31,
             1995, wherein such document is identified as Exhibit 4.2.

4.4 *        Form of Warrant for Class A Common Stock, incorporated by reference to the SB-2, wherein
             such document is identified as Exhibit 4.3.

4.5 *        Form of Warrant Agreement between the Company and the Bank of New York, incorporated
             by reference to the SB-2, wherein such document is identified as Exhibit 4.4.

4.6 *        Form of Indenture between the Company and the Bank of New York, as Trustee,
             incorporated by reference to the Company's Registration Statement on Form SB-2 filed on
             April 15, 1998 (the "1998 SB-2").

4.7 *        Form of Indenture between the Company and the Bank of New York, as Trustee, dated
             January 1, 2001, incorporated by reference to the Company's Annual Report on Form 10-K
             for the year ended December 31, 2000, wherein such document is identified as Exhibit 4.7.

4.8 *        Form of Indenture between the Company, as Issuer, and State Street Bank and Trust
             Company, as Trustee, dated as of December 18, 2001, incorporated by reference to the
             Company's Annual Report on Form 10-K for the year ended December 31, 2001, wherein
             such document is identified as Exhibit 4.8.


                                       81
<PAGE>
EXHIBIT NO.  DESCRIPTION OF EXHIBIT
-----------  ----------------------
4.9 *        Form of Indenture between the Company, as Issuer, and U.S Bank National Association, as
             Trustee, dated as of September 17, 2003, incorporated by reference to the Company's Annual
             Report on Form 10-K for the year ended December 31, 2003, wherein such document is
             identified as Exhibit 4.9.

4.10 *       Form of Indenture between the Company, as Issuer, and U.S Bank National Association, as
             Trustee, dated as of March 17, 2004, incorporated by reference to the Company's Quarterly
             Report on Form 10-Q for the quarter ended September 30, 2004, wherein such document is
             identified as Exhibit 4.10.

4.11 *       Form of Indenture between the Company, as Issuer, and Wilmington Trust Company, as
             Trustee, dated as of September 20, 2004, incorporated by reference to the Company's
             Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, wherein such
             document is identified as Exhibit 4.11.

4.12 *       Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New
             York, as Trustee, dated as of November 1, 1996, incorporated by reference to Intervest
             Mortgage Corporation's Registration Statement on Form S-11, File No. 333-11413, filed on
             September 5, 1996, wherein such document is identified as Exhibit 4.1.

4.13 *       Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New
             York, as Trustee, dated as of May 1, 1997, incorporated by reference to Intervest Mortgage
             Corporation's Registration Statement on Form S-11, File No. 333-23093, filed on March 11,
             1997, wherein such document is identified as Exhibit 4.1.

4.14 *       Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New
             York, as Trustee, dated as of December 1, 1998, incorporated by reference to Intervest
             Mortgage Corporation's Annual Report on Form 10-K for the year ended December 31,
             1998, wherein such document is identified as Exhibit 4.1.

4.15 *       Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New
             York, as Trustee, dated as of July 1, 1999 incorporated by reference to Intervest Mortgage
             Corporation's Registration Statement on Form S-11, File No. 333-78135, filed on May 10,
             1999, wherein such document is identified as Exhibit 4.1.

4.16 *       Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New
             York, as Trustee, dated as of September 15, 2000, incorporated by reference to Intervest
             Mortgage Corporation's Annual Report on Form 10-K for the year ended December 31,
             2000, wherein such document is identified as Exhibit 4.16.

4.17 *       Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New
             York, as Trustee, dated as of August 1, 2001, incorporated by reference to Intervest
             Mortgage Corporation's Registration Statement on Form S-11, File No. 333-57324, filed on
             March 20, 2001, wherein such document is identified as Exhibit 4.1.

4.18 *       Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New
             York, as Trustee, dated as of February 1, 2002, incorporated by reference to Intervest
             Mortgage Corporation's Registration Statement on Form S-11, File No. 333-73580, filed on
             November 16, 2001, wherein such document is identified as Exhibit 4.1.

4.19 *       Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New
             York, as Trustee, dated as of August 1, 2002, incorporated by reference to Intervest
             Mortgage Corporation's Registration Statement on Form S-11, File No. 333-90346, filed on
             June 12, 2002, wherein such document is identified as Exhibit 4.1.


                                       82
<PAGE>
EXHIBIT NO.  DESCRIPTION OF EXHIBIT
-----------  ----------------------
4.20 *       Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New
             York, as Trustee, dated as of January 1, 2003, incorporated by reference to Intervest
             Mortgage Corporation's Registration Statement on Form S-11, File No. 333-101722, filed on
             December 9, 2002, wherein such document is identified as Exhibit 4.1.

4.21 *       Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New
             York, as Trustee, dated as of August 1, 2003, incorporated by reference to Intervest
             Mortgage Corporation's Registration Statement on Form S-11, File No. 333-105199, filed
             with the SEC on May 13, 2003, wherein such document is identified as Exhibit 4.1.

4.22 *       Form of Indenture between Intervest Mortgage Corporation, as Issuer, and The Bank of New
             York, as Trustee, dated as of December 1, 2003, incorporated by reference to Intervest
             Mortgage Corporation's Registration Statement on Form S-11, File No. 333-109128, filed
             with the SEC on September 25, 2003, wherein such document is identified as Exhibit 4.1.

4.23 *       Form of Indenture between the Company's subsidiary, Intervest Mortgage Corporation, and
             The Bank of New York dated as of June 1, 2004, incorporated by reference to Intervest
             Mortgage Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30,
             2004, wherein such document is identified as Exhibit 4.23.

4.24 *       Form of Indenture between the Company's subsidiary, Intervest Mortgage Corporation, and
             The Bank of New York dated as of April 1, 2005, incorporated by reference to Intervest
             Mortgage Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31,
             2005, wherein such document is identified as Exhibit 4.0.

4.25 *       Form of Indenture between the Company's subsidiary, Intervest Mortgage Corporation, and
             The Bank of New York incorporated by reference to Intervest Mortgage Corporation's
             Registration Statement on Form S-11 dated June 14, 2005, wherein such document is
             identified as Exhibit 4.1.

10.1 +*      Employment and Supplemental Benefits Agreement between the Company and Jerome
             Dansker dated as of July 1, 2004, incorporated by reference to the Company's Report on
             Form 10-Q for the quarter ended September 30, 2004, wherein such document is identified
             as Exhibit 10.0.

10.2 +*      Employment and Supplemental Benefits Agreement between the Company and Lowell S.
             Dansker dated as of July 1, 2004, incorporated by reference to the Company's Report on
             Form 10-Q for the quarter ended September 30, 2004, wherein such document is identified
             as Exhibit 10.1.

10.3 +*      Employment and Supplemental Benefits Agreement between the Company and Lawrence G.
             Bergman dated as of July 1, 2004, incorporated by reference to the Company's Report on
             Form 10-Q for the quarter ended September 30, 2004, wherein such document is identified
             as Exhibit 10.2.

10.4  +*     Employment Agreement between Intervest National Bank and Keith A. Olsen dated as of
             November 9, 2004, incorporated by reference to the Company's Report on Form 10-Q for the
             quarter ended September 30, 2004, wherein such document is identified as Exhibit 10.3.

10.5 +*      Employment Agreement between Intervest National Bank and Raymond C. Sullivan dated as
             of November 10, 2004, incorporated by reference to the Company's Report on Form 10-Q for
             the quarter ended September 30, 2004, wherein such document is identified as Exhibit 10.4.

10.6 +*      Employment Agreement between Intervest National Bank and John J. Arvonio dated as of
             November 10, 2004, incorporated by reference to the Company's Report on Form 10-Q for
             the quarter ended September 30, 2004, wherein such document is identified as Exhibit 10.5.

10.7 *       Mortgage Servicing Agreement dated as of April 1, 2002, as supplemented on October 21,
             2004 for the purpose of clarification of the intent of the original agreement between the
             Company's subsidiaries, Intervest Mortgage Corporation and Intervest National Bank,
             incorporated by reference to Intervest Mortgage Corporation's quarterly report on Form 10-Q
             for the quarter ended September 30, 2004, wherein such document is identified as Exhibit
             10.1.


                                       83
<PAGE>
EXHIBIT NO.  DESCRIPTION OF EXHIBIT
-----------  ----------------------
10.8 +*      Employment Agreement Intervest Mortgage Corporation and John H. Hoffmann dated as of
             November 10, 2004, incorporated by reference to Intervest Mortgage Corporation's quarterly
             report on Form 10-Q for the quarter ended September 30, 2004, wherein such document is
             identified as Exhibit 10.2.

10.9 +*      Employment Agreement between Intervest Mortgage Corporation and Jerome Dansker,
             dated as of July 1, 1995, incorporated by reference to Intervest Mortgage Corporation's
             Registration Statement on Form S-11, File No. 33-96662, filed on September 7, 1995,
             wherein such document is identified as Exhibit 10.2.

10.10 +*     Amendment to Employment Agreement between Intervest Mortgage Corporation and Jerome
             Dansker, dated August 3, 1998, incorporated by reference to Intervest Mortgage
             Corporation's Annual Report on Form 10-K for the year ended December 31, 1998, wherein
             such document is identified as Exhibit 10.1.

10.11 +*     Amendment to Employment Agreement between Intervest Mortgage Corporation and Jerome
             Dansker, dated as of July 1, 2004, incorporated by reference to Intervest Mortgage
             Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004,
             wherein such document is identified as Exhibit 10.0.

12.0 **      Computation of ratios of earnings to fixed charges.

14.1 *       Code of Business Conduct, incorporated by reference to the Company's Report on Form 10-
             K for the year ended December 31, 2004, wherein such document is identified as Exhibit
             14.1.

14.2 *       Code of Ethics, incorporated by reference to the Company's Report on Form 10-K for the
             year ended December 31, 2004, wherein such document is identified as Exhibit 14.2.

14.3 *       Procedures for Submissions Regarding Questionable Accounting, Internal Accounting
             Controls and Auditing Matters, incorporated by reference to the Company's Report on Form
             10-K for the year ended December 31, 2004, wherein such document is identified as Exhibit
             14.3.

21.0 **      Subsidiaries

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

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

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

---------------------------------------
*    Previously filed.
**   Filed herewith.
+    Denotes management contract or compensatory plan or arrangement.


                                       84
<PAGE>
                                   SIGNATURES

Pursuant  to  the requirements of Section 13 or 15(d) 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,  on  the  date  indicated.

INTERVEST  BANCSHARES  CORPORATION
(Registrant)

By:  /s/ Lowell S. Dansker                      Date:     February 23, 2006
     -----------------------------                   ----------------------
         Lowell S. Dansker,
         Vice Chairman, President and Treasurer (Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has  been  signed below by the following persons on behalf of the registrant and
in  the  capacities  and  on  the  date  indicated.

CHAIRMAN AND CHIEF EXECUTIVE OFFICER:
(PRINCIPAL EXECUTIVE OFFICER):

By:  /s/ Jerome Dansker                         Date:     February 23, 2006
     -----------------------------                   ----------------------
         Jerome Dansker

VICE CHAIRMAN, PRESIDENT AND TREASURER:
(PRINCIPAL FINANCIAL OFFICER):

By:  /s/ Lowell S. Dansker                      Date:     February 23, 2006
     -----------------------------                   ----------------------
         Lowell S. Dansker,

CHIEF ACCOUNTING OFFICER:
(PRINCIPAL ACCOUNTING OFFICER):

By:  /s/ John J. Arvonio                        Date:     February 23, 2006
     -----------------------------                   ----------------------
         John J. Arvonio

VICE PRESIDENT, SECRETARY AND DIRECTOR:

By:  /s/ Lawrence G. Bergman                    Date:     February 23, 2006
     -----------------------------                   ----------------------
         Lawrence G. Bergman

VICE PRESIDENT AND DIRECTOR:

By:  /s/ Stephen A. Helman                      Date:     February 23, 2006
     -----------------------------                   ----------------------
         Stephen A. Helman

DIRECTORS:

By:  /s/ Michael A. Callen                      Date:     February 23, 2006
     -----------------------------                   ----------------------
         Michael A. Callen

By:  /s/ Paul R. DeRosa                         Date:     February 23, 2006
     -----------------------------                   ----------------------
         Paul R. DeRosa

By:  /s/ Wayne F. Holly                         Date:     February 23, 2006
     -----------------------------                   ----------------------
         Wayne F. Holly

By:  /s/ Lawton Swan, III                       Date:     February 23, 2006
     -----------------------------                   ----------------------
         Lawton Swan, III

By:  /s/ Thomas E. Willett                      Date:     February 23, 2006
     -----------------------------                   ----------------------
         Thomas E. Willett

By:  /s/ David J. Willmott                      Date:     February 23, 2006
     -----------------------------                   ----------------------
         David J. Willmott

By:  /s/ Wesley T. Wood                         Date:     February 23, 2006
     -----------------------------                   ----------------------
         Wesley T. Wood


                                       85