U.S. 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, 2000
                                             -----------------

                        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.)

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

                                 (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  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. [X]

As of February 23, 2001 there were 3,544,629 shares of the Registrant's  Class A
common stock and 355,000 shares of the Registrant's  Class B common stock issued
and  outstanding.  The  aggregate  market  value  of  1,201,479  shares  of  the
Registrant's Class A common stock on February 23, 2001, which excludes 2,343,150
shares held by affiliates as a group, was $7,058,689. This value is based on the
average  bid and asked  prices of $5.875 per share on  February  23, 2001 of the
Class A common stock on the NASDAQ Small Cap Market.

                       DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2001 Annual Meeting of Stockholders  are
incorporated by reference into Part III of this Form 10-K.


<PAGE>

                Intervest Bancshares Corporation and Subsidiaries

                         2000 ANNUAL REPORT ON FORM 10-K

                                TABLE OF CONTENTS

PART I
                                                                            Page
                                                                            ----
Item 1   Description of Business ...........................................   2

Item 2   Description of Properties..........................................  13

Item 3   Legal Proceedings..................................................  13

Item 4   Submission of Matters to a Vote of Security Holders................  13


Item 4A  Executive Officers and Other Key Employees.........................  13

PART II

Item 5   Market for Common Equity and Related Stockholder Matters...........  15

Item 6   Selected Financial Data............................................  16

Item 7   Management's Discussion and Analysis of Financial Condition
               and Results of Operations....................................  17

Item7A   Quantitative and Qualitative Disclosures About Market Risk.........  34

Item 8   Financial Statements and Supplementary Data........................  34

Item 9   Changes In and Disagreements with Accountants on
               Accounting and Financial Disclosure..........................  66

PART III

Item 10  Directors and Executive Officers...................................  66

Item 11  Executive Compensation.............................................. 66

Item 12  Security Ownership of Certain Beneficial Owners and Management...... 66

Item 13  Certain Relationships and Related Transactions...................... 66

PART IV

Item 14  Exhibits, Financial Statements Schedules and Reports on Form 8-K.... 66

Signatures................................................................... 68


                                       1
<PAGE>
                                     PART I
Item 1. Description of 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.  The following  factors are among those
that could cause actual results to differ  materially  from the  forward-looking
statements:  changes in general economic, market and regulatory conditions;  the
development  of an  interest  rate  environment  that may  adversely  affect the
Company's  interest rate spread,  other income or cash flow anticipated from the
Company's operations, investment and lending activities; and changes in laws and
regulations affecting banks and bank holding companies.

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

Intervest  Bancshares  Corporation  is a registered  bank  holding  company (the
"Holding Company") incorporated in 1993 under the laws of the State of Delaware.
Its principal office is located at 10 Rockefeller  Plaza,  Suite 1015, New York,
New York 10020, and its telephone number is 212-218-2800.  The Holding Company's
Class A common  stock was  approved  for listing on the NASDAQ  SmallCap  Market
(Symbol:  IBCA) in November 1997.  Prior to then,  there had been no established
trading market for the securities of the Holding Company.  At December 31, 2000,
the Holding  Company  owned 100% of the  outstanding  capital stock of Intervest
National Bank,  Intervest Bank and Intervest  Corporation of New York (hereafter
referred to collectively as the "Company," on a consolidated  basis).  Intervest
Bank and Intervest National Bank may be referred to collectively as the "Banks."

At December 31, 2000, the Company had total assets of $416,927,000, net loans of
$266,326,000, deposits of $300,241,000,  debentures and related interest payable
of  $72,813,000,  and  stockholders'  equity of  $36,228,000,  compared to total
assets of  $340,481,000,  net loans of  $212,937,000,  deposits of $201,080,000,
debentures and related interest payable of $92,422,000 and stockholders'  equity
of $33,604,000, at December 31,1999.

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

Intervest Bank and Intervest National Bank
------------------------------------------

Intervest Bank is a Florida state-chartered commercial bank that provides a wide
range of banking services to small and middle-market  businesses and individuals
through its banking offices located in Pinellas County,  Florida.  The principal
executive offices of Intervest Bank are located at 625 Court Street, Clearwater,
Florida  33756.  In  addition,  Intervest  Bank  has  four  branches;  three  in
Clearwater, Florida and one in South Pasadena, Florida.

At December 31, 2000, Intervest Bank had total assets of $218,588,000, net loans
of  $127,553,000,   deposits  of  $200,990,000,   and  stockholder's  equity  of
$14,496,000,   compared  to  total   assets  of   $189,477,000,   net  loans  of
$105,286,000, deposits of $166,969,000, and stockholder's equity of $12,746,000,
at December 31, 1999.

                                       2
<PAGE>
Intervest  National Bank is a nationally  chartered  commercial bank that opened
for  business on April 1, 1999.  It is located at One  Rockefeller  Plaza in New
York City and provides full  commercial  banking  services,  including  Internet
banking through its Web Site: www.intervestnatbank.com.

At December 31, 2000,  Intervest National Bank had total assets of $117,384,000,
net loans of $80,846,000,  deposits of $101,266,000, and stockholder's equity of
$13,110,000,  compared to total assets of $57,562,000, net loans of $41,764,000,
deposits of $47,475,000 and stockholder's equity of $8,493,000,  at December 31,
1999.

The Banks conduct a personalized commercial and consumer banking business, which
consists of attracting  deposits from the areas served by their banking offices.
Intervest  National  Bank also uses the Internet for  attracting  its  deposits,
which can attract  deposit  customers from within as well as outside its primary
market area. The deposits,  together with funds derived from other sources,  are
used to originate a variety of real estate, commercial and consumer loans and to
purchase investment  securities.  The Banks emphasize multifamily and commercial
residential real estate lending and also offer commercial and consumer loans.

The revenues of the Banks 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 Banks'
lending  activities  are deposits,  repayment of loans,  maturities and calls of
securities  and cash  flow  generated  from  operating  activities.  The  Banks'
principal  expenses are interest  paid on deposits and operating and general and
administrative expenses.

Deposit  flows and the rates paid thereon are  influenced  by interest  rates on
competing  investments  available  to  depositors  and general  market  rates of
interest.  Lending  activities  are  affected  by the demand for real estate and
other  types of loans,  interest  rates at which such  loans may be offered  and
other factors affecting the availability of funds to lend. The Banks face strong
competition in the attraction of deposits and in the  origination of loans.  The
Banks' deposits are insured by the Federal Deposit Insurance  Corporation (FDIC)
to the extent permitted by law.

As is the case with banking  institutions  generally,  the Banks' operations are
significantly  influenced by general economic conditions and by related monetary
and fiscal policies of banking regulatory agencies,  including the FRB and FDIC.
Intervest  National  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),  while  Intervest  Bank is subject to the  supervision,
regulation and examination by the Florida Department of Banking and Finance.

On June 15, 2000,  Intervest National Bank and its primary  regulator,  the OCC,
entered into a Memorandum of  Understanding.  The memorandum is a formal written
agreement  whereby,  among other things,  Intervest  National Bank shall review,
revise,  develop and implement  various  policies and procedures with respect to
its lending and credit underwriting.  Management has implemented various actions
towards  bringing   Intervest  National  Bank  into  full  compliance  with  the
memorandum.

Intervest Corporation of New York
---------------------------------

Intervest  Corporation of New York is in the business of investing  primarily in
commercial  and  multifamily  real  estate  mortgage  loans on income  producing
properties, such as office and commercial properties and multifamily residential
apartment  buildings.  It also makes loans on other types of properties  and may
resell mortgages. Intervest Corporation of New York is located at 10 Rockefeller
Plaza in New York City.

Intervest Corporation of New York was acquired on March 10, 2000, by the Holding
Company.  In the  acquisition,  all the  outstanding  capital stock of Intervest
Corporation  of New York was  acquired in exchange for  1,250,000  shares of the
Holding  Company's  Class A  common  stock.  Former  shareholders  of  Intervest
Corporation  of New York are officers and directors of Intervest  Corporation of
New  York  and  the  Holding  Company.  The  acquisition  was  accounted  for at
historical cost similar to the pooling-of-interests method of accounting.  Under
this method of  accounting,  the  recorded  assets,  liabilities,  shareholders'
equity, income and expenses of both companies are combined and recorded at their
historical cost amounts.  Accordingly, all prior period financial information in
                                       3
<PAGE>
this report on Form 10-K has been  adjusted to include the accounts of Intervest
Corporation of New York.  All material  intercompany  accounts and  transactions
have been eliminated in consolidation.

At December  31,  2000,  Intervest  Corporation  of New York had total assets of
$74,860,000,  net loans of $51,992,000,  debentures and related interest payable
of $64,347,000, and stockholder's equity of $9,269,000, compared to total assets
of  $98,740,000,  net loans of  $63,290,000,  debentures  and  related  interest
payable of $84,600,000, and stockholder's equity of $12,140,000, at December 31,
1999. In 2000,  Intervest  Corporation of New York paid a $3,000,000 dividend to
the Holding Company.

Intervest  Corporation of New York's operations are significantly  influenced by
the movement of interest rates and by general economic conditions,  particularly
those in the New York City  metropolitan  area where most of the properties that
secure its mortgage loans are concentrated.

Market Area

Intervest Bank's facilities are located in Pinellas County,  which is the Bank's
primary  market  area and the most  populous  county  in the  Tampa  Bay area of
Florida (with an estimated resident population of over 800,000 people). The area
has many more  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). Intervest Bank's deposit gathering and lending markets are concentrated
in the  communities  surrounding  its offices in Clearwater and South  Pasadena,
Florida.  Management  believes  that its offices are located in an area  serving
small and mid-sized  businesses and serving middle and upper income  residential
communities.

Intervest  National Bank's  facilities are located in Rockefeller  Center in New
York City and its primary market area is the New York City metropolitan  region,
and Manhattan in particular.  Its 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 area.

Intervest Corporation of New York's lending activities have been concentrated in
the New York City  metropolitan  region.  It also makes  loans in other  states,
including  Connecticut,  Florida,  New  Jersey,  North  Carolina,  Pennsylvania,
Virginia and Washington D.C.

During the last three years, the economy of the New York City  metropolitan area
has shown increased growth as evidenced by local employment  growth  statistics.
Improvement  can also be seen in the local real estate  market as  reflected  in
increased existing home sales and real estate values during the past few years.

Competition

The deregulation of the banking  industry and the widespread  enactment of state
laws that permit multi-bank holding companies, as well as an increasing level of
interstate banking, have created a highly competitive environment for commercial
banking. In one or more aspects of their business,  the Banks compete 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 bank holding  companies,  have  substantially
greater  resources and lending limits,  and may offer services that the Banks do
not currently provide. In addition,  many of the Banks' non-bank competitors are
not subject to the same extensive  federal  regulations that govern bank 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.  Management  believes that a community bank is better positioned
to establish  personalized banking  relationships with both commercial customers
and individual  households.  The Banks' community  commitment and involvement in
                                       4
<PAGE>
their  primary  market  areas,  as well  as  their  commitment  to  quality  and
personalized  banking  services  are  factors  that  contribute  to each  Bank's
competitiveness.  Management believes a locally-based bank is often perceived by
the local  business  community as  possessing a clearer  understanding  of local
commerce and their needs.  Consequently,  management believes that the Banks can
compete  successfully  in their primary market areas by making  prudent  lending
decisions  quickly  and  more  efficiently  than  their   competitors,   without
compromising asset quality or profitability, although no assurances can be given
that such  factors  will assure  success.  In  addition,  management  believes a
personalized  service  approach  enables  the Banks to attract  and retain  core
deposits.

In making its  investments,  Intervest  Corporation of New York 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  engaged in  purchasing
mortgages or making real property investments with investment objectives similar
in whole or part to its own. An increase  in the general  availability  of funds
may increase  competition  in the making of  investments  in mortgages  and real
property, and may reduce the yields available therefrom.

Asset Quality

The Banks  seek to  maintain  a high  level of asset  quality  when  considering
investments in securities and the  originations of loans. In originating  loans,
the Banks place  emphasis  on the  borrower's  ability to generate  cash flow to
support its debt obligations and other cash related expenses. The Banks' lending
activities  are  conducted  pursuant to written  policies  and  defined  lending
limits.  Depending  on their type and size,  certain  loans must be reviewed and
approved  by a Loan  Committee  comprised  of  certain  members  of the Board of
Directors prior to being  originated.  As part of its loan portfolio  management
strategy,  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 Banks typically do not exceed 80%. In addition,  physical  inspections of
properties  being considered for mortgage loans are made as part of the approval
process.

Each  Bank's  Loan  Committee,  as well as its  senior  management  and  lending
officers,   concentrate   their   efforts  and  resources  on  loan  review  and
underwriting procedures. Internal controls include ongoing reviews of loans made
to monitor  documentation and ensure the existence and valuations of collateral.
Each Bank  also has in place a review  process  with the  objective  of  quickly
identifying,  evaluating and  initiating  necessary  corrective  actions for any
problem loans.

Intervest  Corporation of New York does not have formal  policies  regarding the
percentage of its assets that may be invested in any single  mortgage,  the type
of  mortgage  loans and  investments  it can make,  the  geographic  location of
properties  collateralizing  those mortgages,  limits as to loan-to-value ratios
and the loan approval process.

There can be no  assurance  that a downturn  in real estate  values,  as well as
other  economic  factors,  would not have an  adverse  impact  on the  Company's
profitability.  At  December  31,  2000 and 1999,  the  Company did not have any
nonperforming assets or impaired loans.

Lending Activities

The Company's  lending  activities  include real estate loans and commercial and
consumer loans. Real estate loans include primarily the origination of loans for
commercial  and  multifamily  properties.  While the Bank's  lending  activities
include  single-family   residential  mortgages,   such  lending  has  not  been
emphasized.  Commercial  loans  are  originated  for  working  capital  funding.
Consumer  loans  include  those for the  purchase of  automobiles,  boats,  home
improvements and investments.

At December 31, 2000, the Company's net loan portfolio  amounted to $266,326,000
compared to  $212,937,000  at December 31, 1999.  At December 31, 2000 and 1999,
the loan portfolio  consisted  predominantly  of commercial and multifamily real
estate mortgage loans.
                                       5
<PAGE>
Commercial and Multifamily Real Estate Mortgage Lending
-------------------------------------------------------

Almost all of the Company's current loan portfolio is comprised of loans secured
by commercial and  multifamily  real estate,  including  rental and  cooperative
apartment buildings, office buildings and shopping centers.

Commercial and multifamily mortgage lending generally involves greater risk than
1-4 family  residential  lending.  Such lending  typically  involves larger loan
balances to single  borrowers and repayment of loans secured by income producing
properties  is  typically  dependent  upon  the  successful   operation  of  the
underlying real estate.

Mortgage loans on commercial and multifamily  properties are normally originated
for terms of no more than 20 years,  many with variable  interest rates that are
based on the prime rate.  Additionally,  many loans have an interest  rate floor
which resets upward along with any increase in the loan's  interest  rate.  This
feature  reduces  the loan's  interest  rate  exposure  to periods of  declining
interest rates.

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 mortgages  owned 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 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 are generally not
personal  obligations  of the  borrower  and are not  insured or  guaranteed  by
governmental agencies or otherwise.

Commercial Lending
------------------

The Banks offer a variety of  commercial  loan  services  including  term loans,
lines of credit and equipment financing.  Short-to-medium term commercial loans,
both collateralized and  uncollateralized,  are made available to businesses for
working  capital needs  (including  those secured by inventory,  receivables and
other assets),  business  expansion  (including  acquisitions of real estate and
improvements),   and  the  purchase  of  equipment  and  machinery.  The  Banks'
commercial  loans are  typically  underwritten  on the  basis of the  borrower's
ability to make repayment from the cash flow of their business and are generally
collateralized  as discussed  above. As a result,  the availability of funds for
the repayment of commercial loans may be substantially  dependent on the success
of the  business  itself.  Further,  the  collateral  underlying  the  loans may
depreciate over time,  cannot be appraised with as much precision as residential
real estate, and may fluctuate in value based on the success of the business.

Consumer Lending
----------------

The Banks offer consumer loans including those for: the purchase of automobiles,
recreation vehicles and boats; second mortgages; home improvements;  home equity
lines of credit; and personal loans (both collateralized and  uncollateralized).
Consumer loans  typically have a short term and carry higher interest rates than
other types of loans.  In  addition,  consumer  loans have  additional  risks of
collectability when compared to traditional types of loans granted by commercial
banks such as  residential  mortgage  loans.  In many  instances,  the Banks are
required  to rely on the  borrower's  ability  to repay the loan  from  personal
income  sources,  since the  collateral  may be of reduced  value at the time of
collection.

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

Loan  originations  are derived from the  following:  advertising in newspapers;
referrals  from mortgage  brokers;  existing  customers and  borrowers;  walk-in
customers; and through direct solicitation by the Company's officers.

The Company's underwriting  procedures normally require the following:  physical
inspections by management of properties  being  considered  for mortgage  loans;
mortgage title  insurance,  hazard  insurance;  and an appraisal of the property
                                       6
<PAGE>
securing the loan to determine the property's  adequacy as security performed by
an appraiser approved by the Company. In addition, the Company analyzes relevant
real property and  financial  factors,  which in certain cases 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.

Real Estate Investing Activities

The Company,  from time to time, may purchase equity  interests in real property
or it may  acquire  such an equity  interest  pursuant to a  foreclosure  upon a
mortgage in the normal course of business. With respect to such equity interests
in real estate,  the Company may acquire and retain title to  properties  either
directly  or through a  subsidiary.  While no such  transactions  are  presently
pending,  the Company  would  consider the  expansion  of its  business  through
investments  in or  acquisitions  of other  companies  engaged in real estate or
mortgage  business  activities.  While  the  Company  has  not  previously  made
acquisitions  of  real  property  or  managed  income-producing   property,  its
management has had  substantial  experience in the acquisition and management of
properties and, in particular, multifamily residential properties.

Investment Activities

The Banks' investment policies and strategies are reviewed and approved by their
respective  Board of  Directors  and  Investment  Committees.  The  Company  has
historically   purchased  securities  that  are  issued  directly  by  the  U.S.
government or one of its agencies.  Accordingly,  the Company's  investments  in
securities carry a significantly  lower credit risk than its loan portfolio.  To
manage interest rate risk, the Company normally  purchases  securities that have
adjustable   rates  or   securities   with  fixed  rates  that  have  short-  to
intermediate-maturity terms. From time to time, a securities  available-for-sale
portfolio may be maintained to provide  flexibility for  implementing  asset and
liability  management  strategies.  The  Company  does  not  engage  in  trading
activities.

On  December  31,  2000,   Intervest  Bank  transferred  its  entire  securities
held-to-maturity portfolio (consisting of U.S. government agency securities with
an estimated fair value of  $74,789,000)  to the  securities  available-for-sale
portfolio. In 1999, there were no securities classified as available for sale.

Securities held to maturity totaled  $20,970,000 at December 31, 2000,  compared
to $83,132,000 at December 31, 1999. At December 31, 2000, the  held-to-maturity
portfolio  consisted of Intervest  National Bank's  holdings of U.S.  government
agency securities.

The  Company  also  invests  in  various  money-market  instruments,   including
overnight  and  term  federal  funds,   short-term  bank  commercial  paper  and
certificate  of  deposits.  These  instruments  are used to  temporarily  invest
available funds resulting from deposit-gathering activities and normal cash flow
from operations.  Cash and short-term  investments at December 31, 2000 amounted
to $42,938,000, compared to $32,095,000 at December 31, 1999.

Deposit-Gathering Activities

The Banks' primary  sources of funds consist of the following:  retail  deposits
obtained  through  their  branch  offices and  through  the mail;  amortization,
satisfactions and repayments of loans;  maturities and calls of securities;  and
cash generated by operating activities.

Deposit   accounts  are  solicited  from   individuals,   small  businesses  and
professional  firms located  throughout  the Banks' primary market areas through
the offering of a broad  variety of deposit  services.  Intervest  National Bank
also uses its Web Site on the Internet: www.intervestnatbank.com, which attracts
deposit  customers  from both within and outside its  primary  market  area.  At
December  31,  2000,  deposit  liabilities  totaled  $300,241,000,  compared  to
$201,080,000  at December  31, 1999.  Deposit  services  include the  following:
                                         7
<PAGE>
certificates  of  deposit   (including   denominations  of  $100,000  or  more);
individual  retirement accounts (IRAs); other time deposits;  checking and other
demand deposit accounts;  negotiable order of withdrawal (NOW) accounts; savings
accounts;  and  money-market  accounts.  Interest  rates offered by the Banks on
deposit  accounts are normally  competitive  with those in the principal  market
area of each  Bank.  In  addition,  the  determination  of rates and terms  also
considers the Banks' liquidity  requirements,  growth goals,  capital levels and
federal  regulations.  Maturity terms,  service fees and withdrawal penalties on
deposit products are reviewed and established by the Banks on a periodic basis.

The Banks offer 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,  Intervest Bank offers safe
deposit boxes to its customers,  while Intervest National Bank provides internet
banking  services.  The  Banks  periodically  review  the  scope of the  banking
products  and  services  they offer  consistent  with market  opportunities  and
available resources.

Other Sources of Funds

The Banks  purchase  federal  funds from time to time to manage their  liquidity
needs.  At December 31, 2000 there were no such funds  outstanding,  compared to
$6,955,000 outstanding at December 31, 1999.

Intervest Bank has agreements with correspondent  banks whereby it may borrow up
to $6,000,000 on an unsecured basis. There were no outstanding  borrowings under
these agreements at December 31, 2000 or 1999.

Intervest  Corporation  of New  York's'  principal  sources of funds  consist of
borrowings  (through the sale of its debentures),  mortgage  repayments and cash
flow generated from operations.  At December 31, 2000, Intervest  Corporation of
New York had debentures  outstanding of $57,150,000,  compared to $77,400,000 at
December 31, 1999. The Holding  Company has sold  debentures for working capital
purposes.  At December 31, 2000 and 1999,  $6,930,000  of the Holding  Company's
debentures were outstanding.  In February of 2001, the Holding Company completed
the  sale  of  additional  debentures  in  the  aggregate  principal  amount  of
$3,500,000. For a further discussion of all the debentures, including conversion
prices  and  redemption  premiums,  see  note  8 to the  consolidated  financial
statements.

Employees

At December 31, 2000, the Company employed 49 full-time employees. The employees
are not covered by a collective  bargaining  agreement and the Company  believes
its employee relations are good.

Federal and State Taxation

The Holding Company and its subsidiaries file a consolidated  federal income tax
return. The Holding Company,  Intervest National Bank and Intervest  Corporation
of New York file consolidated state and city income tax returns in New York. The
Holding  Company  also  files  state  income  tax  returns  in New  Jersey and a
franchise tax return in Delaware. Intervest 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 to the Holding Company and its subsidiaries on the basis of
their  respective  taxable  income or taxable loss included in the  consolidated
income tax return.

Banks and bank holding  companies  are subject to federal and state income taxes
in the same manner as other  corporations.  Florida taxes banks under  primarily
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.
                                       8
<PAGE>
Although the Banks' 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 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 the
asset size of the bank,  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.
<TABLE>
Investment in Subsidiaries

                                                 At December 31, 2000
                                                 --------------------             Subsidiaries
($ in thousands)                       % of                       Equity in       Earnings (Loss) for the
                                       Voting      Total          Underlying      Years Ended December 31,
Subsidiary                             Stock     Investment       Net Assets      2000        1999         1998
---------------------------            -----     ----------       ----------      ----        ----         ----
<S>                                    <C>        <C>               <C>          <C>         <C>         <C>
Intervest Bank                         100%       $14,496           $14,496      $2,002      $1,642      $1,149
Intervest National Bank                100%       $13,110           $13,110      $  617      $ (507)     $    -
Intervest Corporation of New York      100%       $ 9,269           $ 9,269      $  129      $  572      $  947
</TABLE>
Intervest  Corporation  of New York paid a dividend of $3,000,000 to the Holding
Company in 2000.  There were no other  dividends paid to the Holding  Company in
2000, 1999 or 1998.

Supervision and Regulation

Bank holding  companies and banks are  extensively  regulated under both federal
and state laws and regulations that are intended to protect  depositors.  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
-------------------------------

As a bank holding company  registered under the Bank Holding Company Act of 1956
(BHCA),  the Holding Company is subject to the regulation and supervision of the
FRB. The Holding  Company is required to file with the FRB periodic  reports and
other   information   regarding  its  business   operations  and  those  of  its
subsidiaries.  Under the BHCA, the Holding Company's activities and those of its
subsidiaries are limited to banking,  managing or controlling banks,  furnishing
services to or performing services for its subsidiaries or engaging in any other
activity  which the FRB  determines  to be so  closely  related  to  banking  or
managing or controlling banks as to be properly incident thereto.

As a bank holding  company,  the Holding Company is required to obtain the prior
approval of the FRB before acquiring direct or indirect  ownership or control of
more than 5% of the voting  shares of a bank or bank  holding  company.  The FRB
will not  approve any  acquisition,  merger or  consolidation  that would have a
substantial  anti-competitive result, unless the anti-competitive effects of the
proposed  transaction are outweighed by a greater public interest in meeting the
needs and convenience of the public. The FRB also considers managerial,  capital
and other financial factors in acting on acquisition or merger  applications.  A
bank holding company may not engage in, or acquire direct or indirect control of
more than 5% of the voting  shares of any  company  engaged  in any  non-banking
activity,  unless such  activity  has been  determined  by the FRB to be closely
related to banking or  managing  banks.  The FRB has  identified  by  regulation
various  non-banking  activities in which a bank holding company may engage with
notice to, or prior approval by, the FRB.
                                       9
<PAGE>
The FRB  monitors  the  capital  adequacy  of bank  holding  companies  and uses
risk-based  capital adequacy  guidelines to evaluate bank holding companies on a
consolidated basis. The 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%. At December 31,
2000, the Company's  consolidated ratio of total capital to risk-weighted assets
was 12.63% and its  risk-based  Tier 1 capital ratio was 11.72%.  The guidelines
also require a ratio of Tier 1 capital to adjusted  total average  assets of not
less than 3%. The Holding  Company's  leverage  ratio at December 31, 2000,  was
8.75%.

The  federal  banking  agencies'  risk-based  and  leverage  ratios are  minimum
supervisory  ratios  generally  applicable  to banking  organizations  that meet
certain  specified  criteria,  assuming  that they have the  highest  regulatory
rating. Banking organizations not meeting these criteria are expected to operate
with capital  positions well above the minimum  ratios.  The FRB guidelines also
provide  that  banking  organizations  experiencing  internal  growth  or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels, without significant reliance on intangible
assets.  In addition,  the regulations of the FRB provide that  concentration of
credit risk and certain risk arising from nontraditional  activities, as well as
an  institution's  ability to manage these risks,  are  important  factors to be
taken into account by regulatory agencies in assessing an organization's overall
capital adequacy.

The FRB and the other federal banking agencies have adopted  amendments to their
risk-based capital regulations to provide for the consideration of interest rate
risk in the agency's  determination of a banking institution's capital adequacy.
The amendments  require such  institutions  to  effectively  measure and monitor
their interest rate risk and to maintain capital adequate for that risk.

Bank Regulation
---------------

Intervest  Bank  is  a  state-chartered   banking  corporation  subject  to  the
supervision of and examination by the FRB, the Florida Department of Banking and
Finance  and  the  FDIC.   Intervest   National  Bank,  as  a  national  banking
association,  is subject to supervision,  examination and regulation by the OCC,
FRB and FDIC.  These  regulators  have the power to:  enjoin  "unsafe or unsound
practices;" require affirmative action to correct any conditions  resulting from
any violation or practice;  issue an administrative order that can be judicially
enforced;  direct an increase in capital;  restrict the growth of a bank; assess
civil monetary penalties; and remove officers and directors.

The  operations of the Banks are subject to numerous  statutes and  regulations.
Such statutes and  regulations  relate to required  reserves  against  deposits,
investments, loans, mergers and consolidations,  issuance of securities, payment
of  dividends,  establishment  of  branches,  and other  aspects  of the  Banks'
operations.  Various consumer laws and regulations also affect the operations of
the Banks,  including state usury laws,  laws relating to fiduciaries,  consumer
credit and equal credit, and fair credit reporting.

The Banks are subject to Sections 23A and 23B of the Federal  Reserve Act, which
governs certain transactions,  such as loans, extensions of credit,  investments
and purchases of assets  between  member banks and their  affiliates,  including
their parent holding  companies.  These restrictions limit the transfer of funds
to the Holding Company in the form of loans, extensions of credit, investment or
purchases of assets ("Transfers"), and they require that the Banks' transactions
with the  Holding  Company  be on  terms no less  favorable  to the  Banks  than
comparable transactions between the Banks and unrelated third parties. Transfers
by the Banks to the Holding  Company are limited in amount to 10% of each Bank's
capital  and  surplus,  and  transfers  to all  affiliates  are  limited  in the
aggregate to 20% of each Bank's capital and surplus. Furthermore, such loans and
extensions of credit are also subject to various collateral requirements.  These
regulations and restrictions may limit the Holding  Company's  ability to obtain
funds from the Banks for its cash needs,  including funds for acquisitions,  and
the payment of dividends, interest and operating expenses.

The  Banks are  prohibited  from  engaging  in  certain  tying  arrangements  in
connection with any extension of credit, lease or sale of property or furnishing
of services.  For  example,  the Banks may not  generally  require a customer to
obtain other services from the Banks or the Holding Company, and may not require
the customer to promise not to obtain  other  services  from a  competitor  as a
                                       10
<PAGE>
condition  to an  extension  of  credit.  The Banks are also  subject to certain
restrictions  imposed by the  Federal  Reserve  Act on  extensions  of credit to
executive officers, directors, principal stockholders or any related interest of
such persons.  Extensions of credit (i) must be made on  substantially  the same
terms  (including  interest  rates and  collateral)  as,  and  following  credit
underwriting procedures that are not less stringent than those prevailing at the
time for, comparable transactions with persons not covered above and who are not
employees  and (ii) must not involve  more than the normal risk of  repayment or
present other unfavorable  features.  In addition,  extensions of credit to such
persons  beyond limits set by FRB  regulations  must be approved by the Board of
Directors. The Banks are also subject to certain lending limits and restrictions
on overdrafts to such persons.  A violation of these  restrictions may result in
the  assessment  of  substantial  civil  monetary  penalties on the Banks or any
officer, director,  employee, agent or other person participating in the conduct
of the affairs of the Banks or the imposition of a cease and desist order.

Applicable law provides the federal  banking  agencies with broad powers to take
prompt corrective action to resolve problems of insured depository institutions.
The extent of those powers  depends upon whether the  institution in question is
"well capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," or "critically  undercapitalized." Under federal regulations,
a bank is considered "well capitalized" if it has (i) a total risk-based capital
ratio  of 10% or  greater,  (ii) a Tier  1  risk-based  capital  ratio  of 6% or
greater,  (iii) a leverage ratio of 5% or greater and (iv) is not subject to any
order or written directive to meet and maintain a specific capital level for any
capital measure. An "adequately capitalized" bank is defined as one that has (i)
a total  risk-based  capital  ratio of 8% or greater,  (ii) a Tier 1  risk-based
capital ratio of 4% or greater,  and (iii) a leverage ratio of 4% or greater (or
3% or greater in the case of a bank with a composite CAMELS rating of 1). A bank
is considered (a)  "undercapitalized  " if it has (i) a total risk-based capital
ratio of less than 8%, (ii) a Tier 1 risk-based  capitalized  ratio of less than
4%, or (iii) a leverage  ratio of less than 4% (or 3% in the case of a bank with
a composite CAMELS rating of 1); (b) "significantly  undercapitalized" if a bank
has  (i) a  total  risk-based  capital  ratio  of less  than  6%,  (ii) a Tier 1
risk-based  Capital ratio of less than 3% or (iii) a leverage ratio of less than
3%,  and (c)  "critically  undercapitalized"  if a bank has a ratio of  tangible
equity to total  assets equal to or less than 2%. At December 31, 2000 and 1999,
each Bank met the definition of a well-capitalized institution.

The  deposits  of the Banks are insured by the FDIC  through the Bank  Insurance
Fund (the  "BIF") to the extent  provided  by law.  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
institutions  capital  position  and other  supervisory  factors.  Congress  has
enacted  legislation that, among other things,  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  equal to an
estimated $0.024 per $100 of eligible deposits each year.

Regulations  promulgated by the FDIC pursuant to the Federal  Deposit  Insurance
Corporation  Improvement  Act of 1991 ("1991 Banking Law") place  limitations on
the  ability of certain  insured  depository  institutions  to accept,  renew or
rollover deposits by offering rates of interest which are  significantly  higher
than the prevailing  rates of interest on deposits  offered by other  depository
institutions  having the same type of charter  in such  depository  institutions
normal market area. Under these regulations,  well-capitalized  institutions may
accept,  renew or rollover such deposits without  restriction,  while adequately
capitalized  institutions  may accept,  renew or rollover  such  deposits with a
waiver  from the FDIC  (subject  to certain  restrictions  on payment of rates).
Undercapitalized institutions may not accept, renew or rollover such deposits.

Under the Financial  Institutions  Reform,  Recovery and Enforcement Act of 1989
("FIRREA"),  a depository institution insured by the FDIC can be held liable for
any loss  incurred  by, or  reasonably  expected to be incurred  by, the FDIC in
connection with (i) the default of a commonly controlled FDIC-insured depository
institution or (ii) any assistance provided by the FDIC to a commonly controlled
FDIC-insured institution in danger of default. "Default" is defined generally as
the  appointment  of a  conservator  or  receiver  and "in danger of Default" is
defined  generally as the  existence  of certain  conditions  indicating  that a
"default"  is likely  to occur in the  absence  of  regulatory  assistance.  The
Federal Community  Reinvestment Act of 1977 ("CRA"),  among other things, allows
                                       11
<PAGE>
regulators to withhold  approval of an  acquisition  or the  establishment  of a
branch  unless  the  applicant  has  performed  satisfactorily  under  the  CRA.
Satisfactory  performance  means  adequately  meeting  the  credit  needs of the
communities the institution serves, including low and moderate income areas. The
applicable  federal  regulators now regularly conduct CRA examinations to assess
the  performance  of  financial  institutions.  Intervest  Bank has  received  a
"satisfactory"  rating in its most recent CRA  examination.  Intervest  National
Bank will be initially examined for CRA compliance in 2001.

The federal  regulators  have adopted  regulations  and  examination  procedures
promoting the safety and soundness of individual  institutions  by  specifically
addressing,  among other things: (i) internal controls;  information systems and
internal audit systems; (ii) loan documentation; (iii) credit underwriting; (iv)
interest rate  exposure;  (v) asset growth;  (vi) ratio of classified  assets to
capital;  (vii) minimum earnings; and (viii) compensation and benefits standards
for management officials.

The FRB, OCC and other federal banking agencies have broad  enforcement  powers,
including the power to terminate deposit insurance, and impose substantial fines
and other civil and criminal  penalties and appoint a  conservator  or receiver.
Failure to comply with applicable laws,  regulations and supervisory  agreements
could  subject  the  Holding  Company or its  banking  subsidiaries,  as well as
officers,   directors   and  other   institution-affiliated   parties  of  these
organizations,  to  administrative  sanctions  and  potentially  civil  monetary
penalties.  In addition, the Florida Department of Banking and Finance possesses
certain enumerated enforcement powers to address violations of the Florida State
Law by state-chartered banks and to preserve safety and soundness, including, in
the most severe cases, the authority to take possession of a state bank.

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 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 was
signed by the  President  on November  12, 1999.  This new  legislation  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.  Additional
legislative and regulatory  proposals have been made and others can be expected.
These include proposals designed to improve the overall the 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.

Monetary Policy and Economic Control
------------------------------------

The  commercial  banking  business in which the Company  engages 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  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 have had
a  significant  effect on the  operating  results  of  commercial  banks and are
expected  to continue to do so in the  future.  The  monetary  policies of these
agencies are influenced by various factors,  including inflation,  unemployment,
                                       12
<PAGE>
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.

Item 2.   Description of Properties

The office of the  Holding  Company  and  Intervest  Corporation  of New York is
located in leased premises (of  approximately  4,000 sq. ft.) on the tenth floor
of 10 Rockefeller  Plaza,  New York, N.Y, 10020.  The lease expires in September
2004.

Intervest  National  Bank's  office  is  located  on  the  third  floor  of  One
Rockefeller  Plaza,  New York, N.Y, 10020.  The office consists of approximately
7,000 sq. ft. and has been leased through May 2008.

Intervest Bank maintains its principal  office at 625 Court Street,  Clearwater,
Florida, 33756. In addition,  Intervest Bank operates four 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, all of the offices of Intervest Bank are owned by Intervest Bank. The
office  at  625  Court  Street  consists  of  a  two-story  building  containing
approximately   22,000  sq.  ft.   Intervest  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
Intervest  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 Intervest Bank. The
branch  office  at 2575  Ulmerton  Road  is a  three-story  building  containing
approximately   17,000  sq.  ft.   Intervest  Bank  occupies  the  ground  floor
(approximately 2,500 sq. ft.) and leases the upper floors to 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 Intervest  Bank. In
addition,   each  of  Intervest  Bank's  offices  include  drive-through  teller
facilities.

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 claims to enforce
liens,  claims  involving the making and servicing of mortgage loans,  and other
issues  incident to the  Company's  business.  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, or financial position of the Company.

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,  2000,  to a vote of security  holders of the Company,  through the
solicitation of proxies or otherwise.

Item 4A. Executive Officers and Other Key Employees

     Jerome  Dansker,  age 82,  serves as Chairman of the Board of Directors and
Executive Vice President of Intervest Bancshares  Corporation.  He has served as
Executive Vice President since 1994 and as Chairman of the Board since 1996. Mr.
Dansker  received a  Bachelor  of Science  degree  from the New York  University
School  of  Commerce,  Accounts  and  Finance,  a Law  degree  from the New York
University  School of Law,  and is  admitted  to  practice as an attorney in the
State of New York. Mr. Dansker also serves as Chairman of the Board of Directors
and Chairman of the Loan  Committee of Intervest  National  Bank and as Director
and Chairman of the Loan Committee of Intervest Bank. He is also Chairman of the
Board of Directors and Executive Vice President of Intervest  Corporation of New
York.

     Lowell S. Dansker, age 50, serves as a Director, President and Treasurer of
Intervest  Bancshares  Corporation,  and has served in such capacities since the
Company was  organized in 1993.  Mr.  Dansker  received a Bachelor of Science in
Business Administration from Babson College, a Law degree from the University of
Akron  School of Law,  and is  admitted  to practice as an attorney in New York,
Ohio,  Florida and the  District of Columbia.  Mr.  Dansker also serves as Chief
Executive  Officer,  Director  and a member of the Loan  Committee  of Intervest
National Bank and as  Co-Chairman  of the Board of Directors and a member of the
Loan Committee of Intervest Bank. He is also a Director, President and Treasurer
of Intervest Corporation of New York.

     Lawrence G.  Bergman,  age 56,  serves as a Director,  Vice  President  and
Secretary of Intervest Bancshares  Corporation and has served in such capacities
since the Company was  organized  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 and as Co-Chairman of the Board of
Directors  and a member of the Loan  Committee of Intervest  Bank.  He is also a

                                       13
<PAGE>

Director, Vice-President and Secretary of Intervest Corporation of New York.

     Keith A. Olsen,  age 47,  serves as  President  of  Intervest  Bank and has
served in such capacity  since 1994.  Prior to that, Mr. Olsen was a Senior Vice
President of Intervest Bank since 1991. 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 15 years and has served as a senior
bank officer for more than 10 years.

     Petra H.  Coover,  age 54,  serves as Senior Vice  President  of Lending of
Intervest Bank and has served in such capacity since August 1999. Prior to that,
Ms. Coover  served as Vice  President of Intervest  Bank since 1994.  Ms. Coover
received a B.A. degree in business  administration from Eckerd College.  She has
also  attended  The  National  School  of Real  Estate  Finance  of  Ohio  State
University, the Commercial Lending School of the University of South Florida and
the International  Business Institute in the Netherlands.  Ms. Coover has been a
bank officer for more than 15 years.

     Charlotte  H.  Grant,  age 62,  serves as Senior Vice  President  and Chief
Financial Officer of Intervest Bank and has served in that capacity since August
1999. Prior to that, Ms. Grant served as Vice President and Cashier of Intervest
Bank since July 1998. Ms. Grant received a Bachelors  degree from the University
of South Florida and a Masters Degree from the University of Tampa. Ms. Grant is
a Certified Public Accountant. Prior to joining Intervest Bank, Ms. Grant served
as Chief Financial  Officer of First Community Bank of America from October 1997
to July 1998 and as an Accountant  in Practice with the firm of Hacker,  Johnson
and Smith,  PA (the Company's  auditors)  from 1993 to 1997.  Prior to that, Ms.
Grant was a Manager of Financial Reporting for First Florida Bank.

     Raymond C. Sullivan,  age 54, serves as President and Director of Intervest
National Bank and has served in that capacity  since April 1999.  Prior to that,
Mr. Sullivan was an employee of Intervest Bancshares Corporation from March 1998
to March 1999. Mr. Sullivan received an MBA degree from Fordham  University,  an
M.S.  degree from City  College of New York and a B.A.  degree from St.  Francis
College.  Mr.  Sullivan also has a  Certificate  in Advanced  Graduate  Study in
Accounting  from Pace  University  and is a graduate of the  National  School of
Finance and Management.  Mr.  Sullivan has over 27 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 an Executive  Vice
President, Chief Operations Officer and Director of Central Federal Savings Bank
from 1985 to 1992.

     John J. Arvonio,  age 38, serves as Senior Vice President,  Chief Financial
Officer and Secretary of Intervest National Bank and has served in such capacity
since  September  2000.  Prior to that, Mr.  Arvonio  served as Vice  President,
Controller and Secretary of Intervest  National Bank since April 1999.  Prior to
that, Mr. Arvonio was an employee of Intervest Bancshares Corporation from April
1998 to March 1999. Mr. Arvonio  received a B.B.A.  degree from Iona College and
is a  Certified  Public  Accountant.  Mr.  Arvonio  has over 12 years of banking
experience.  Prior to joining the  Company,  Mr.  Arvonio  served as Second Vice
President,  Technical Advisor and Assistant  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.

                                       14
<PAGE>

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

Market for Securities

The Holding Company's Class A common stock is traded over the counter and quoted
on the NASDAQ  SmallCap  Market  under the symbol:  IBCA.  At December 31, 2000,
there were  approximately  700  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, 2000,  there were
four  holders  of record  of Class B common  stock.  There is no  public-trading
market for the Class B common stock.

The high and low sales prices (as  obtained  from NASDAQ) for the Class A common
stock by calendar quarter for 2000 and 1999 are as follows:

                                        2000                     1999
                                        ----                     ----
                                High             Low      High             Low
                                --------------------      --------------------
          First quarter         $7.00          $5.50      $11.00         $7.63
          Second quarter        $8.00          $4.75      $19.00         $7.81
          Third quarter         $7.00          $4.75      $ 9.75         $7.44
          Fourth quarter        $5.50          $3.38      $ 9.00         $5.06

Dividends

Class A and Class B common  stockholders are entitled to receive  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  dividends on its capital
stock and currently is not contemplating the payment of a dividend.

The Holding  Company's ability to pay dividends is generally limited to earnings
from  the  prior  year,  although  retained  earnings  and  dividends  from  its
subsidiaries may also be used to pay dividends under certain circumstances.  The
primary  source of funds for  dividends  payable by the  Holding  Company to its
shareholders  is the dividends  received from its  subsidiaries.  The payment of
dividends  by  a  subsidiary  to  the  Holding  Company  is  determined  by  the
subsidiary's  Board of  Directors  and is  dependent  upon a number of  factors,
including the subsidiary's capital requirements, regulatory limitations, results
of operations and financial condition.

There are also various legal limitations with respect to the Banks' financing or
otherwise supplying funds to the Holding Company.  In particular,  under federal
banking  law,  the  Banks may not  declare a  dividend  that  exceeds  undivided
profits. In addition, the approval of the FRB, the OCC (in the case of Intervest
National Bank) and the Florida Department of Banking and Finance (in the case of
Intervest  Bank),  is required if the total amount of all dividends  declared in
any calendar  year exceeds the Bank's net profits for that year,  combined  with
its  retained  net profits  for the  preceding  two years.  The FRB also has the
authority to limit  further the payment of dividends by the Banks under  certain
circumstances.  In addition, federal banking laws prohibit or restrict each Bank
from extending  credit to the Holding Company under certain  circumstances.  The
FRB and the OCC have established certain financial and capital requirements that
affect the ability of banks to pay dividends and also have the general authority
to prohibit  banks from  engaging in unsafe or unsound  practices in  conducting
business.  Depending upon the financial condition of either Bank, the payment of
cash dividends could be deemed to constitute such an unsafe or unsound practice.

Under FRB  policy,  a bank  holding  company is  expected  to act as a source of
financial  strength to its subsidiary  banks and to commit  resources to support
each such bank.  Consistent  with this  policy,  the FRB has stated  that,  as a
matter of prudent banking,  a bank holding company generally should not pay cash
dividends  unless the  available  net  earnings of the bank  holding  company is
sufficient to fully fund the  dividends,  and the  prospective  rate of earnings
retention appears to be consistent with a holding company's capital needs, asset
quality and overall financial condition.

                                       15
<PAGE>

<TABLE>

Item 6.   Selected Consolidated Financial and Other Data
--------------------------------------------------------------------------------
                                                                             At or For The Year Ended December 31,
                                                               ---------------------------------------------------------------------
($ in thousands, except per share amounts)                            2000          1999          1998         1997          1996
------------------------------------------------------------------------------------------------------------------------------------
Financial Condition Data:
<S>                                                               <C>           <C>           <C>          <C>           <C>
Total assets...................................................   $416,927      $340,481      $300,080     $245,262      $196,867
Cash and cash equivalents......................................     42,938        32,095        40,977       24,043        23,038
Securities available for sale..................................     74,789             -             -            -             -
Securities held to maturity, net...............................     20,970        83,132        82,338       58,821        34,507
Loans receivable, net..........................................    266,326       212,937       164,986      150,832       129,676
Deposits.......................................................    300,241       201,080       170,420      130,412        93,228
Federal funds purchased........................................          -         6,955             -            -             -
Debentures and related accrued interest payable................     72,813        92,422        93,090       82,966        79,006
Stockholders' equity...........................................     36,228        33,604        31,112       28,142        19,822
Nonaccrual loans...............................................          -             -             -            -             -
Allowance for loan loss reserves...............................      2,768         2,493         1,662        1,173           811
Loan chargeoffs................................................          -             -             -            -            65
Loan recoveries................................................          -             1            10           10            33
------------------------------------------------------------------------------------------------------------------------------------
Operations Data:
Interest and dividend income...................................    $31,908       $25,501       $24,647     $ 19,807      $ 16,206
Interest expense...............................................     23,325        18,419        17,669       15,008        11,649
                                                                --------------------------------------------------------------------
Net interest and dividend income...............................      8,583         7,082         6,978        4,799         4,557
Provision for loan loss reserves...............................        275           830           479          352           250
                                                                --------------------------------------------------------------------
Net interest and dividend income after
     provision for loan loss reserves..........................      8,308         6,252         6,499        4,447         4,307
Noninterest income.............................................        983           900           700          382           414
Noninterest expenses...........................................      4,568         4,059         3,077        2,679         2,499
                                                                --------------------------------------------------------------------
Earnings before income taxes, extraordinary item
     and change in accounting principle........................      4,723         3,093         4,122        2,150         2,222
Provision for income taxes.....................................      1,909         1,198         1,740          860           967
                                                                --------------------------------------------------------------------
Earnings before extraordinary item and
     change in accounting principle............................      2,814         1,895         2,382        1,290         1,255
Extraordinary item, net of tax (1).............................       (206)            -             -            -             -
Cumulative effect of accounting change, net of tax (2).........          -          (128)            -            -             -
                                                                --------------------------------------------------------------------
Net earnings...................................................    $ 2,608       $ 1,767        $2,382      $ 1,290        $1,255
------------------------------------------------------------------------------------------------------------------------------------
Per Share Data:
Basic earnings per share.......................................    $  0.67        $ 0.47        $ 0.64      $  0.44        $ 0.43
Diluted earnings per share.....................................       0.67          0.44          0.54         0.39          0.43
Common book value per share....................................       9.29          8.76          8.33         7.66          6.84
Dividends per share............................................          -             -             -            -             -
------------------------------------------------------------------------------------------------------------------------------------
Other Data and Ratios:
Common shares outstanding......................................  3,899,629     3,836,879     3,734,515    3,674,415     2,900,000
Average common shares used to calculate:
     Basic earnings per share..................................  3,884,560     3,760,293     3,707,113    2,962,292     2,900,000
     Diluted earnings per share................................  3,884,560     4,020,118     4,723,516    3,322,459     2,900,000
Adjusted net earnings for diluted earnings per share...........     $2,608        $1,767        $2,554       $1,290        $1,255
Full-service banking offices...................................          5             5             5            4             4
Return on average assets.......................................       0.69%         0.57%         0.87%        0.59%         0.75%
Return on average equity.......................................       7.48%         5.48%         8.05%        6.00%         6.54%
Loans, net of unearned income to deposits......................      88.70%       105.90%        96.81%      115.66%       139.10%
Allowance for loan losses to total net loans...................       1.04%         1.17%         1.01%        0.78%         0.63%
Average stockholders' equity to average total assets...........       9.18%        10.37%        10.82%        9.86%        11.41%
Stockholders' equity to total assets...........................       8.69%         9.87%        10.37%       11.47%        10.07%
------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1)  Represents a charge, net of taxes, from the early retirement of debentures.
(2)  Represents  a charge,  net of taxes,  from the  adoption  of  Statement  of
     Position 98-5, "Reporting on the Costs of Start-Up Activities."
</FN>
</TABLE>

                                       16
<PAGE>

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

General

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 included in this report on Form 10-K.

Intervest Bancshares Corporation has three wholly owned subsidiaries - Intervest
National Bank,  Intervest Bank and Intervest  Corporation of New York (hereafter
referred to  collectively as the "Company" on a consolidated  basis).  Intervest
Bank and Intervest National Bank may be referred to collectively as the "Banks,"
and  Intervest  Bancshares  Corporation  may be  referred  to by  itself  as the
"Holding Company."

The Holding Company's primary business is the operation of its subsidiaries.  It
does not  engage in any  other  substantial  business  activities  other  than a
limited amount of real estate mortgage  lending.  From time to time, the Holding
Company sells debentures to raise funds for working capital purposes.

Intervest National Bank is a nationally chartered,  full-service commercial bank
located in  Rockefeller  Center in New York City and it opened for  business  on
April 1, 1999. Intervest Bank is a Florida state-chartered  commercial bank with
four banking offices in Clearwater,  Florida and one in South Pasadena, Florida.
The Banks conduct a personalized commercial and consumer banking business, which
consists of attracting  deposits from the areas served by their banking offices.
Intervest  National Bank also provides Internet banking services through its Web
Site: www.intervestnatbank.com, which can attract deposit customers from outside
its primary  market area.  The deposits,  together with funds derived from other
sources, are used to originate a variety of real estate, commercial and consumer
loans and to purchase investment  securities.  The Banks' emphasize  multifamily
and commercial residential lending.

Intervest  Corporation of New York is located in Rockefeller  Center in New York
City  and is in  the  business  of  originating  and  acquiring  commercial  and
multifamily  loans.  On March 10,  2000,  the Holding  Company  acquired all the
outstanding  capital stock of Intervest  Corporation of New York in exchange for
1,250,000  shares of the Holding  Company's Class A common stock. As a result of
the  acquisition,  Intervest  Corporation  of New York  became  a  wholly  owned
subsidiary of the Holding Company.  Former shareholders of Intervest Corporation
of New York are officers and directors of both the Holding Company and Intervest
Corporation of New York. The  acquisition  was accounted for at historical  cost
similar to the pooling-of-interests  method of accounting.  Under this method of
accounting, the recorded assets,  liabilities,  shareholders' equity, income and
expenses of both  companies are combined and recorded at their  historical  cost
amounts.  Accordingly,  all prior period financial information in this report on
Form 10-K has been adjusted to include the accounts of Intervest  Corporation of
New York.

The Company's  profitability  depends primarily on net interest income, which is
the difference  between  interest  income  generated  from its  interest-earning
assets less 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,  the provision  for loan loss  reserves,  and its effective
income tax rate. Noninterest income consists primarily of loan and other banking
fees.  Noninterest expense consists of compensation and benefits,  occupancy and
equipment  related  expenses,  data processing  expenses,  advertising  expense,
deposit  insurance  premiums  and  other  operating   expenses.   The  Company's
profitability is also significantly affected by general economic and competitive
conditions, changes in market interest rates, government policies and actions of
regulatory authorities.

                                       17
<PAGE>

Comparison  of Results of Operations  for the Years Ended  December 31, 2000 and
1999.

General
-------

The Company's net earnings for 2000 increased to $2,608,000,  or $0.67 per fully
diluted share,  from $1,767,000,  or $0.44 per fully diluted share in 1999, or a
48% year-to-year  increase. Net earnings for 2000 represent the highest level of
earnings  reported by the Company  since its  inception  in 1993.  The growth in
earnings from 1999 was  primarily  due to a $1,501,000  increase in net interest
and  dividend  income and a $555,000  decrease  in the  provision  for loan loss
reserves.  These  items  were  partially  offset by a $711,000  increase  in the
provision  for income  taxes,  an  increase  in  operating  expenses of $299,000
resulting largely from a full year of operations of Intervest National Bank, and
approximately  $210,000 of nonrecurring expenses associated with the acquisition
of Intervest Corporation of New York in March of 2000.
<TABLE>

Selected information regarding results of operations for the Holding Company and
its subsidiaries for 2000 follows:

                                                                           Intervest      Intervest      Inter-
                                                    Holding     Intervest   National    Corporation     company
($ in thousands)                                    Company          Bank       Bank    of New York    Balances    Consolidated
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>          <C>         <C>           <C>          <C>           <C>
Interest and dividend income                         $ 672        $15,104     $7,878        $8,519       $(265)        $31,908
Interest expense                                       686         10,303      4,965         7,636        (265)         23,325
                                                    --------------------------------------------------------------------------------
Net interest and dividend (expense) income             (14)         4,801      2,913           883           -           8,583
Provision (credit) for loan loss reserves               17            (93)       351             -           -             275
Noninterest income                                     165            347        132           563        (224)            983
Noninterest expenses                                   405          2,031      1,533           823        (224)          4,568
                                                    --------------------------------------------------------------------------------
(Loss) earnings before taxes and extraordinary item   (271)         3,210      1,161           623           -           4,723
(Credit) provision for income taxes                   (131)         1,208        544           288           -           1,909
Extraordinary item, net of tax                           -              -          -          (206)          -            (206)
------------------------------------------------------------------------------------------------------------------------------------
Net (loss) earnings                                  $(140)       $ 2,002     $  617        $  129      $    -         $ 2,608
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

Net interest and dividend income is the Company's primary source of earnings and
is   influenced   primarily   by  the   amount,   distribution   and   repricing
characteristics of its interest-earning assets and interest-bearing  liabilities
as well as by the relative levels and movements of interest rates.  Net interest
and dividend  income  increased to $8,583,000 in 2000,  from $7,082,000 in 1999.
The improvement was  attributable to a $74,961,000  increase in the average loan
portfolio,  partially offset by a decline in the Company's  interest rate spread
from 1.69% to 1.64%.  The growth in the loan portfolio was funded primarily by a
$78,008,000 increase in average deposits.

The  Company's  cost of funds in 2000  increased 16 basis points to 7.04% due to
the rising interest rate environment,  as evidenced by the Federal Reserve Board
increasing the federal funds target rate on six occasions  between June 1999 and
June 2000,  for a total of 175 basis points.  This resulted in higher rates paid
for deposit  accounts and  floating-rate  debentures,  as well as an increase in
depositors' preference for certificates of deposit accounts, which normally have
higher rates than savings and money-market accounts.

The Company's  yield on earning assets in 2000 increased 11 basis point to 8.68%
due to  higher  yields  earned on  investment  securities  and other  short-term
investments,  partially  offset by a decline in the yield on the loan portfolio.
Despite the higher rate  environment,  the average  yield on the loan  portfolio
declined to 9.93% from 10.68%,  due to  competitive  lending  conditions  (which
resulted in originations of new loans with lower rates than the average yield of
the portfolio in 1999, as well as prepayments  of  higher-yielding  loans).  The
effect of the preceding was partially  offset by rate increases on floating-rate
loans.

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 2000 and 1999. 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 mainly 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.

                                       18
<PAGE>


<TABLE>
                                                                         For the Year Ended December 31,
                                                                         --------------------------------
                                                                   2000                                    1999
                                                    -----------------------------------    ------------------------------------
                                                      Average     Interest    Yield/         Average      Interest    Yield/
 ($ in thousands)                                     Balance    Inc./Exp.     Rate          Balance     Inc./Exp.     Rate
 -----------------------------------------------------------------------------------------------------------------------------------
                      Assets
 Interest-earning assets:
<S>                                                   <C>          <C>         <C>           <C>           <C>        <C>
      Loans                                           $250,941     $24,923     9.93%         $175,980      $18,794    10.68%
      Securities                                       101,532       6,056     5.96           108,336        6,123     5.65
      Other interest-earning assets                     14,925         929     6.22            13,089          584     4.46
 -----------------------------------------------------------------------------------------------------------------------------------
 Total interest-earning assets                         367,398     $31,908     8.68%          297,405      $25,501     8.57%
 -----------------------------------------------------------------------------------------------------------------------------------
 Noninterest-earning assets                             12,257                                 13,610
 -----------------------------------------------------------------------------------------------------------------------------------
 Total assets                                         $379,655                               $311,015
 -----------------------------------------------------------------------------------------------------------------------------------
       Liabilities and Stockholders' Equity
 Interest-bearing liabilities:
    Interest checking  deposits                       $  7,611     $   232     3.05%         $  7,687      $   238     3.10%
    Savings deposits                                    17,070         897     5.25            25,160        1,059     4.21
    Money market deposits                               52,182       2,832     5.43            42,078        1,882     4.47
    Certificates of deposit                            175,552      10,892     6.20            99,482        5,524     5.55
                                                    --------------------------------------------------------------------------------
    Total deposit accounts                             252,415      14,853     5.88           174,407        8,703     4.99
    Federal funds purchased                              2,544         150     5.90               517           29     5.61
    Debentures and accrued interest payable             76,546       8,322    10.87            92,888        9,687    10.43
 -----------------------------------------------------------------------------------------------------------------------------------
 Total interest-bearing liabilities                    331,505     $23,325     7.04%          267,812      $18,419     6.88%
 -----------------------------------------------------------------------------------------------------------------------------------
 Noninterest-bearing deposits                            5,696                                  4,436
 Noninterest-bearing liabilities                         7,599                                  6,529
 Stockholders' equity                                   34,855                                 32,238
 -----------------------------------------------------------------------------------------------------------------------------------
 Total liabilities and stockholders' equity           $379,655                               $311,015
 -----------------------------------------------------------------------------------------------------------------------------------
 Net interest and dividend income/spread                           $ 8,583     1.64%                       $ 7,082     1.69%
 -----------------------------------------------------------------------------------------------------------------------------------
 Net interest-earning assets/margin                   $ 35,893                 2.34%         $ 29,593                  2.38%
 -----------------------------------------------------------------------------------------------------------------------------------
 Ratio of total interest-earning assets
    to total interest-bearing liabilities                1.11x                                  1.11x
 -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<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).

                                                       For the Year Ended December 31, 2000 vs. 1999
                                                       ---------------------------------------------
                                                       Increase (Decrease) Due To Change In:
                                                       -------------------------------------
     ($ in thousands)                                    Rate      Volume   Rate/Volume     Total
     -------------------------------------------------------------------------------------------------------------
     Interest-earning assets:
        <S>                                          <C>           <C>         <C>         <C>
        Loans                                        $(1,320)      $8,006      $(557)      $6,129
        Securities                                       336         (384)       (19)         (67)
        Other interest-earning assets                    230           82         33          345
     -------------------------------------------------------------------------------------------------------------
     Total interest-earning assets                      (754)       7,704       (543)       6,407
     -------------------------------------------------------------------------------------------------------------
     Interest-bearing liabilities:
        Interest checking deposits                        (4)          (2)         -           (6)
        Savings deposits                                 262         (341)       (83)        (162)
        Money-market deposits                            404          452         94          950
        Certificates of deposit                          647        4,222        499        5,368
                                                       -----------------------------------------------------------
        Total deposit accounts                         1,309        4,331        510        6,150
        Federal funds purchased                            1          114          6          121
        Debentures and accrued interest payable          409       (1,704)       (70)      (1,365)
     -------------------------------------------------------------------------------------------------------------
     Total interest-bearing liabilities                1,719        2,741        446        4,906
     -------------------------------------------------------------------------------------------------------------
     Net change in interest and dividend income      $(2,473)      $4,963      $(989)      $1,501
     -------------------------------------------------------------------------------------------------------------
</TABLE>

                                       19
<PAGE>

Provision for Loan Loss Reserves
--------------------------------

The provision for loan loss reserves is based on management's ongoing assessment
of the  adequacy  of the  allowance  for loan loss  reserves,  which  takes into
consideration a number of factors, including the level of outstanding loans. See
the section  "Comparison of Financial  Condition at December 31, 2000 and 1999,"
for a discussion of these factors.  The provision  amounted to $275,000 in 2000,
compared to $830,000 in 1999. The 1999 provision  included  $444,000 recorded by
Intervest  National  Bank as its  initial  provision  for loan loss  reserves in
conjunction with approximately  $42,000,000 of new loan originations in 1999. At
December 31, 2000 and 1999,  the Company did not have any nonaccrual or impaired
loans.

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

Noninterest  income,  which is comprised  mainly of fees from  customer  service
charges and income from mortgage  lending  activities,  increased to $983,000 in
2000,  from  $900,000 in 1999.  The increase was due to a higher level of income
from the early repayment of loans, which consists of the recognition of unearned
fees and  discounts  associated  with such loans and the  receipt of  prepayment
penalties in certain cases.

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

Noninterest  expenses  increased to $4,568,000 in 2000, from $4,059,000 in 1999.
The  increase  was  due  to  approximately  $210,000  of  nonrecurring  expenses
(consisting  of  attorney  and  consulting  fees,   printing  costs,  and  stock
compensation)  associated with the  acquisition of Intervest  Corporation of New
York. The remaining $299,000 increase was due to higher compensation,  occupancy
and  equipment  expenses  resulting  from a full year of operations of Intervest
National Bank in 2000, compared to nine months of operations in 1999.

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

The provision for income taxes  increased to $1,909,000 in 2000, from $1,198,000
in 1999,  due to higher  pre-tax  earnings.  The  Company's  effective  tax rate
(inclusive of state and local taxes) amounted to 40% in 2000, compared to 39% in
1999.

Extraordinary Item
------------------

In  2000,  Intervest  Corporation  of  New  York  redeemed  debentures  totaling
$24,000,000 in principal prior to maturity for the outstanding  principal amount
plus  accrued  interest  aggregating   $3,970,000.   In  connection  with  these
redemptions,  $382,000 of  unamortized  deferred  debenture  offering  costs was
charged to expense and reported as an extraordinary charge, net of a tax benefit
of  $176,000,  in the  consolidated  statement  of  earnings  for the year ended
December 31, 2000.

Cumulative Effect of Change in Accounting Principle
---------------------------------------------------

See the  "Comparison  of Results of Operations  for the Years Ended December 31,
1999 and 1998" for a discussion of the change in accounting principle.

                                       20
<PAGE>


Comparison  of Results of Operations  for the Years Ended  December 31, 1999 and
1998.

General
-------

The Company's net earnings for 1999 were $1,767,000,  or $0.44 per fully diluted
share,  compared to $2,382,000,  or $0.54 per fully diluted share, for 1998. The
decline in net  earnings  was almost  entirely  due to the opening of  Intervest
National Bank. The new bank recorded a net loss from its initial  nine-months of
operations in 1999 of $507,000, which included $444,000 allocated to its initial
provision for loan loss  reserves,  as well as a one-time net charge of $128,000
in connection with the required adoption of a new accounting standard related to
the costs of start-up activities. Intervest National Bank opened for business on
April 1, 1999.

<TABLE>

Selected information  regarding results of operations of the Holding Company and
its subsidiaries for 1999 follows:
                                                                           Intervest      Intervest      Inter-
                                                      Holding   Intervest   National    Corporation     company
($ in thousands)                                      Company        Bank       Bank    of New York    Balances    Consolidated
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>      <C>         <C>           <C>          <C>            <C>
Interest and dividend income                             $744     $12,827     $1,558        $10,552      $(180)         $25,501
Interest expense                                          637       8,106        806          9,050       (180)          18,419
                                                      ------------------------------------------------------------------------------
Net interest and dividend income                          107       4,721        752          1,502          -            7,082
(Credit) provision for loan loss reserves                 (42)        428        444              -          -              830
Noninterest income                                        159         346         42            444        (91)             900
Noninterest expenses                                      195       2,046      1,015            894        (91)           4,059
                                                      ------------------------------------------------------------------------------
Earnings (loss) before taxes
    and accounting change                                 113       2,593       (665)         1,052          -            3,093
Provision (credit) for income taxes                        53         951       (286)           480          -            1,198
Cumulative effect of change
    in accounting principle, net of tax                     -           -       (128)             -          -             (128)
------------------------------------------------------------------------------------------------------------------------------------
Net earnings (loss)                                      $ 60     $ 1,642     $ (507)       $   572      $   -          $ 1,767
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

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

Net  interest  and  dividend  income  increased  to  $7,082,000  in  1999,  from
$6,978,000  in  1998.  The  increase  was  due  to  a  $37,944,000  increase  in
interest-earning  assets,  partially  offset  by a decline  in the net  interest
margin from 2.69% in 1998, to 2.38% in 1999.

The decline in the margin was a function of a lower  interest rate spread caused
by the yield on the Company's  earning assets  declining at faster pace than its
cost of funds.  The yield on earning assets declined by 93 basis points to 8.57%
in 1999,  largely  due to a lower  yield on the  loan  portfolio,  as well as an
increase in  securities  and  short-term  investments  as a percentage  of total
interest-earning  assets.  Securities  and short-term  investments  have a lower
yield than the Company's loan portfolio. The Company's cost of funds declined by
65 basis  points  in 1999 to  6.88%,  due to a decline  in the  average  cost of
deposits and debentures payable.

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 1999 and 1998. 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 mainly 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.

                                       21
<PAGE>

<TABLE>

                                                                          For the Year Ended December 31,
                                                                          --------------------------------
                                                                  1999                                         1998
                                                   --------------------------------------     --------------------------------------
                                                     Average      Interest    Yield/         Average      Interest    Yield/
($ in thousands)                                     Balance     Inc./Exp.     Rate          Balance     Inc./Exp.     Rate
------------------------------------------------------------------------------------------------------------------------------------
                     Assets
Interest-earning assets:
<S>                                                  <C>           <C>        <C>            <C>           <C>         <C>
   Loans                                             $175,980      $18,794    10.68%         $170,675      $19,383     11.36%
   Securities                                         108,336        6,123     5.65            79,539        4,816      6.05
   Other interest-earning assets                       13,089          584     4.46             9,247          448      4.46
------------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets                         297,405      $25,501     8.57%          259,461      $24,647      9.50%
------------------------------------------------------------------------------------------------------------------------------------
Noninterest-earning assets                             13,610                                  14,276
------------------------------------------------------------------------------------------------------------------------------------
Total assets                                         $311,015                                $273,737
------------------------------------------------------------------------------------------------------------------------------------
      Liabilities and Stockholders' Equity
Interest-bearing liabilities:
   Interest checking deposits                         $ 7,687      $   238     3.10%         $  5,286      $   216      4.09%
   Savings deposits                                    25,160        1,059     4.21            17,210          832      4.83
   Money market deposits                               42,078        1,882     4.47            22,855        1,079      4.72
   Certificates of deposit                             99,482        5,524     5.55           101,547        5,821      5.73
                                                   ---------------------------------------------------------------------------------
   Total deposit accounts                             174,407        8,703     4.99           146,898        7,948      5.41
   Federal funds purchased                                517           29     5.61                20            1      5.00
   Debentures and accrued interest payable             92,888        9,687    10.43            87,781        9,720     11.07
------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities                    267,812      $18,419     6.88%          234,699      $17,669      7.53%
------------------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits                            4,436                                   3,096
Noninterest-bearing liabilities                         6,529                                   6,337
Stockholders' equity                                   32,238                                  29,605
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity           $311,015                                $273,737
------------------------------------------------------------------------------------------------------------------------------------
Net interest and dividend income/spread                            $ 7,082     1.69%                       $ 6,978      1.97%
------------------------------------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin                    $29,593                  2.38%         $ 24,762                   2.69%
------------------------------------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
    to total interest-bearing liabilities               1.11x                                   1.11x
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>

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

                                                                   For the Year Ended December 31, 1999 vs. 1998
                                                                   ---------------------------------------------
                                                                   Increase (Decrease) Due To Change In:
                                                                   -------------------------------------
     ($ in thousands)                                                  Rate        Volume     Rate/Volume       Total
     -------------------------------------------------------------------------------------------------------------------------------
     Interest-earning assets:
<S>                                                                <C>             <C>             <C>         <C>
        Loans                                                      $(1,161)        $  603          $ (31)      $ (589)
        Securities                                                    (318)         1,742           (117)       1,307
        Other interest-earning assets                                  (35)           186            (15)         136
     -------------------------------------------------------------------------------------------------------------------------------
     Total interest-earning assets                                  (1,514)         2,531           (163)         854
     -------------------------------------------------------------------------------------------------------------------------------
     Interest-bearing liabilities:
        Interest checking deposits                                     (52)            98            (24)          22
        Savings deposits                                              (107)           384            (50)         227
        Money market deposits                                          (57)           907            (47)         803
        Certificates of deposit                                       (183)          (118)             4         (297)
                                                                   -----------------------------------------------------------------
        Total deposit accounts                                        (399)         1,271           (117)         755
        Federal funds purchased                                          -             25              3           28
        Debentures and accrued interest payable                       (562)           564            (35)         (33)
     -------------------------------------------------------------------------------------------------------------------------------
     Total interest-bearing liabilities                               (961)         1,860           (149)         750
     -------------------------------------------------------------------------------------------------------------------------------
     Net change in interest and dividend income                    $  (553)        $  671          $ (14)      $  104
     -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       22
<PAGE>

Provision for Loan Loss Reserves
--------------------------------

The provision for loan loss reserves is based on management's ongoing assessment
of the  adequacy  of the  allowance  for loan loss  reserves,  which  takes into
consideration a number of factors, including the level of outstanding loans. See
the section  "Comparison of Financial  Condition at December 31, 2000 and 1999,"
for a discussion of these factors.  The provision  amounted to $830,000 in 1999,
compared to $479,000 in 1998. The 1999 provision  included  $444,000 recorded by
Intervest  National  Bank as its  initial  provision  for loan loss  reserves in
conjunction with approximately $42,000,000 of new loan originations. At December
31, 1999 and 1998, the Company did not have any nonaccrual or impaired loans.

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

Noninterest  income,  which is comprised  mainly of fees from  customer  service
charges and income from mortgage  lending  activities,  increased to $900,000 in
1999,  from  $700,000 in 1998.  The  increase  was due to higher fee income from
mortgage lending activities. Such fees include loan prepayment fees, fees earned
on expired commitments, and loan service, inspection and maintenance charges.

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

Noninterest  expenses  increased to $4,059,000 in 1999, from $3,077,000 in 1998.
The increase was almost  entirely due to the opening of Intervest  National Bank
on April 1,  1999,  which  increased  compensation  expense  (due to  additional
staffing) and occupancy and equipment expenses (due to the leasing of new office
space and fixed asset depreciation).

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

The provision for income taxes  decreased to $1,198,000 in 1999, from $1,740,000
in  1998,  due to lower  pre-tax  earnings.  The  Company's  effective  tax rate
(inclusive of state and local taxes) amounted to 39% in 1999, compared to 42% in
1998.  The  decline in the rate was due to New York State and City tax  benefits
resulting from Intervest National Bank's operating loss in 1999.

Cumulative Effect of Change in Accounting Principle
---------------------------------------------------

The change in  accounting  principle  represents  the  required  adoption of the
AICPA's  Statement of Position  (SOP) 98-5,  "Reporting on the Costs of Start-Up
Activities," which applies to all companies except as provided for therein.  The
SOP requires that all start-up  costs  (except for those that are  capitalizable
under other generally  accepted  accounting  principles) be expensed as incurred
for  financial  statement  purposes  effective  January 1, 1999.  Previously,  a
portion of start-up costs were generally capitalized and amortized over a period
of time. The adoption of this statement  resulted in the immediate  expensing on
January 1, 1999 of $193,000 in start-up costs incurred through December 31, 1998
in connection with organizing Intervest National Bank. A deferred tax benefit of
$65,000 was recorded in conjunction with this charge.

                                       23
<PAGE>

Comparison of Financial Condition at December 31, 2000 and December 31, 1999.

Overview
--------

Total assets at December 31, 2000 increased to $416,927,000,  from  $340,481,000
at December 31, 1999. The increase is reflected  primarily in new mortgage loans
originated  and  purchases of new security  investments.  Total  liabilities  at
December 31, 2000 increased to $380,699,000,  from  $306,877,000 at December 31,
1999, due to growth in deposit accounts.  The increase in deposits was partially
offset by the  retirement  of certain  debentures  payable and the  repayment of
federal  funds  purchased.  Stockholders'  equity  increased to  $36,288,000  at
December 31, 2000,  from  $33,604,000 at year-end  1999. The increase  reflected
earnings for 2000 and the issuance of common  stock in  connection  with a stock
award and the  exercise of warrants.  Book value per common  share  increased to
$9.29 per share at December 31, 2000, from $8.76 at December 31, 1999.


<TABLE>
Selected balance sheet  information for the Holding Company and its subsidiaries
as of December 31, 2000 follows:

                                                                          Intervest      Intervest      Inter-
                                                    Holding   Intervest    National    Corporation     company
($ in thousands)                                    Company        Bank        Bank    of New York    Balances    Consolidated
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>        <C>         <C>             <C>       <C>              <C>
Assets                                              $44,876    $218,588    $117,384        $74,860   $(38,781)        $416,927
Cash and cash equivalents                             1,447       9,903      13,994         19,476     (1,882)          42,938
Securities available for sale, net                        -      74,789           -              -          -           74,789
Securities held to maturity, net                          -           -      20,970              -          -           20,970
Loans receivable, net of deferred fees                5,935     127,553      80,846         51,992          -          266,326
Allowance for loan loss reserves                         30       1,943         795              -          -            2,768
Deposits                                                  -     200,990     101,266              -     (2,015)         300,241
Debentures and accrued interest payable               8,466           -           -         64,347          -           72,813
Stockholders' equity                                 36,228      14,496      13,110          9,269    (36,875)          36,228
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
A comparison of the Company's consolidated balance sheet as of December 31, 2000
and 1999 follows:

                                                                   At December 31, 2000            At December 31, 1999
                                                                   --------------------            --------------------
                                                                  Carrying       % of            Carrying        % of
($ in thousands)                                                    Value    Total Assets          Value     Total Assets
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>               <C>         <C>                 <C>
Cash and cash equivalents                                          $ 42,938           10.3%       $ 32,095            9.4%
Securities available for sale, net                                   74,789           17.9               -              -
Securities held to maturity, net                                     20,970            5.0          83,132           24.4
Federal Reserve Bank stock                                              605            0.2             508            0.2
Loans receivable,  net of deferred fees and loan loss reserves      263,558           63.2         210,444           61.8
All other assets                                                     14,067            3.4          14,302            4.2
------------------------------------------------------------------------------------------------------------------------------------
Total assets                                                       $416,927          100.0%       $340,481          100.0%
------------------------------------------------------------------------------------------------------------------------------------
Deposits                                                           $300,241           72.0%       $201,080           59.1%
Federal funds purchased                                                   -              -           6,955            2.0
Debentures payable                                                   64,080           15.4          84,330           24.8
Accrued interest payable on debentures                                8,733            2.1           8,092            2.3
All other liabilities                                                 7,645            1.8           6,420            1.9
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities                                                   380,699           91.3         306,877           90.1
------------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity                                                 36,228            8.7          33,604            9.9
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity                         $416,927          100.0%       $340,481          100.0%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

Cash and cash equivalents include  interest-bearing and noninterest-bearing cash
balances,   investments  in  overnight   federal  funds  and  other   short-term
investments  that  have  original  maturities  of three  months  or less.  Other
short-term   investments  are  normally  comprised  of  bank  commercial  paper,
certificates of deposit and U.S.  government  securities.  The level of cash and
cash equivalents fluctuates based on various factors, including liquidity needs,
loan  demand,  deposit  flows,  repayments  of  borrowed  funds and  alternative
security investment opportunities.

                                       24
<PAGE>

Securities
----------

The Company invests in securities after satisfying its liquidity  objectives and
lending commitments. The Company has historically only purchased securities that
are issued by the U.S. government or one of its agencies. The Company's security
investments  have lower yields than its loan portfolio.  To manage interest rate
risk, the Company  normally  purchases  securities that have adjustable rates or
securities with fixed rates that have short- to intermediate-maturity terms.

From time to time, the Banks maintain a securities  available-for-sale portfolio
to provide flexibility in implementing asset/liability management strategies. On
December  31,  2000,   Intervest   Bank   transferred   its  entire   securities
held-to-maturity portfolio (consisting of U.S. government agency securities with
an estimated fair value of  $74,789,000)  to the  securities  available-for-sale
portfolio.  At December  31, 2000,  a valuation  allowance  of  $252,000,  which
represents the unrealized  loss on securities  available for sale, net of taxes,
was  recorded as a component of  stockholders'  equity in  connection  with this
transfer.

The available-for-sale  portfolio consists of fixed-rate debt obligations of the
Federal  Home Loan Bank  (FHLB),  Federal  Farm  Credit  Bank (FFCB) and Federal
National  Mortgage  Association  (FNMA).  Most of the securities have terms that
allow the issuer the right to call or prepay its obligation  without  prepayment
penalty.  There were no sales of securities  during 2000,  1999 and 1998, and no
transfers of securities to the available-for-sale portfolio in 1999 or 1998. The
Company does not engage in trading activities.

Securities  for which the Banks have the intent and  ability to hold to maturity
are  classified  as held to maturity and carried at amortized  cost.  Securities
held  to  maturity  totaled  $20,970,000  at  December  31,  2000,  compared  to
$83,132,000 at December 31, 1999. The decrease  reflected the transfer discussed
above, partially offset by additional purchases. The estimated fair value of the
held-to-maturity  portfolio was $20,978,000 at December 31, 2000 and $79,882,000
at  December  31,  1999.  At  December  31,  2000,  securities  held to maturity
consisted of Intervest  National  Bank's holdings of short-term (due in one year
or less),  fixed-rate  debt  obligations of the FHLB,  FNMA and the Federal Home
Loan Mortgage Corporation (FHLMC).

In order for the Banks to be members of the Federal Reserve Banking System,  the
Banks  maintain an investment in the capital stock of the Federal  Reserve Bank,
which pays a dividend that is currently 6%. The amount of the investment,  which
amounted  to  $605,000 at  December  31,  2000 and  $508,000  at year-end  1999,
fluctuates based on each Bank's capital level.

Loans Receivable
----------------

Loans  receivable,  (before the  allowance  for loan loss  reserves and deferred
fees),  increased to  $268,305,000  at December 31, 2000,  from  $214,682,000 at
December  31,  1999,  due to new  originations  of  commercial  real  estate and
multifamily  loans,  partially offset by principal  repayments.  At December 31,
2000,  the loan  portfolio  consisted of  $59,587,000  of  fixed-rate  loans and
$208,718,000 of adjustable-rate loans.

At December 31, 2000 and 1999, the loan portfolio was concentrated in commercial
real estate and multifamily  mortgage loans.  Such loans represented 98% and 97%
of the total loan portfolio in 2000 and 1999, respectively.  Loan concentrations
are  defined  as  amounts  loaned to a number of  borrowers  engaged  in similar
activities,  which would cause the loans to be similarly impacted by economic or
other  conditions.  Credit risk, which represents the possibility of the Company
not recovering amounts due from its borrowers, is significantly related to local
economic  conditions  in the areas the  properties  are located,  as well as the
Company's underwriting standards. Economic conditions affect the market value of
the underlying collateral as well as the levels of occupancy of income-producing
properties  (such  as  office   buildings,   shopping  centers  and  rental  and
cooperative apartment buildings).

                                       25
<PAGE>

<TABLE>
The following table sets forth information concerning the loan portfolio:

                                                       At December 31, 2000                 At December 31, 1999
                                                       --------------------                 --------------------
                                                   # of                   % of          # of                     % of
     ($ in thousands)                             loans      Amount      Total         loans        Amount      Total
     -------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>    <C>            <C>            <C>      <C>            <C>
     Residential multifamily loans                  137    $144,916       54.0%          120      $116,729       54.4%
     Commercial real estate loans                   124     118,368       44.1           110        93,293       43.5
     Residential 1-4 family loans                    39       3,034        1.1            44         2,311        1.1
     Commercial loans                                39       1,781        0.7            42         2,107        1.0
     Consumer loans                                  18         206        0.1            24           242          -
     -------------------------------------------------------------------------------------------------------------------------------
     Total gross loans receivable                   357     268,305      100.0%          340       214,682      100.0%
     Deferred loan fees                                      (1,979)                                (1,745)
     -------------------------------------------------------------------------------------------------------------------------------
     Loans, net of deferred fees                            266,326                                212,937
     Allowance for loan loss reserves                        (2,768)                                (2,493)
     -------------------------------------------------------------------------------------------------------------------------------
     Loans receivable, net                                 $263,558                               $210,444
     -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

                                                             At December 31,
                                                             ---------------
       ($ in thousands)                                  2000              1999
       -------------------------------------------------------------------------
       Within one year                               $120,258          $ 48,577
       Over one to five years                         107,490           127,880
       Over five years                                 40,557            38,225
       -------------------------------------------------------------------------
                                                     $268,305          $214,682
       -------------------------------------------------------------------------

At  December  31,  2000,   $115,718,000  of  loans  with  adjustable  rates  and
$32,329,000 of loans with fixed rates were due after one year.

The following table sets forth the activity in the loan portfolio:

                                                 For the Year Ended December 31,
                                                 -------------------------------
       ($ in thousands)
                                                            2000           1999
       -------------------------------------------------------------------------
       Loans receivable, net, at beginning of year      $210,444       $163,324
         Loans originated and purchased                  124,669        112,629
         Principal repayments                            (71,046)       (64,244)
         Recoveries                                            -              1
         Increase in deferred loan fees                     (234)          (435)
         Increase in allowance for loan loss reserves       (275)          (831)
       -------------------------------------------------------------------------
       Loans receivable, net, at end of year            $263,558       $210,444
       -------------------------------------------------------------------------

Nonaccrual Loans
----------------

During 2000 and 1999, the Company did not have any loans on a nonaccrual status.
The  Company's  policy is to  discontinue  the  accrual of  interest  income and
classify a loan as nonaccrual  when principal or interest is past due 90 days or
more  and the  loan  is not  adequately  collateralized  and in the  process  of
collection,  or when in the opinion of the  Company's  management,  principal or
interest is not likely to be paid in accordance with the terms of the loan.

Allowance for Loan Loss Reserves
--------------------------------

The allowance for loan loss reserves is established  through a provision charged
to operations.  Loans are charged against the allowance when management believes
that the collectability of the principal is unlikely.  Subsequent recoveries are
added to the  allowance.  The adequacy of the allowance is evaluated  monthly or
more  frequently  when  necessary  with  consideration  given to: the nature and
volume of the loan portfolio;  overall portfolio quality;  loan  concentrations;
specific  problem loans and  commitments  and  estimates of fair value  thereof;

                                       26
<PAGE>

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.  Although
management   believes   it  uses  the  best   information   available   to  make
determinations  with respect to the  allowance  for loan loss  reserves,  future
adjustments may be necessary if economic  conditions,  or other factors,  differ
from those assumed in the determination of the level of the allowance.

In  addition,  SFAS No. 114  specifies  the  manner in which the  portion of the
allowance for loan loss reserves  related to impaired loans is computed.  A loan
is normally deemed impaired when, based upon current  information and events, it
is probable  that the Company 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 loss  reserves and a charge  through the  provision for loan
loss reserves. 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 net
carrying  amount of an impaired  loan does not at any time  exceed the  recorded
investment in the loan.

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,  except for  smaller  balance  homogeneous  loans,  such as
consumer loans,  whose  evaluation for impairment is done on an aggregate basis.
For consumer loans,  historical  charge-off experience as well as the charge off
experience  of peer groups and  industry  statistics  are used to  evaluate  the
adequacy of the allowance for loan loss reserves.  The Company's regulators,  as
an integral part of their examination process, periodically review the allowance
for loan loss reserves. 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.

At December 31, 2000, the Company's allowance for loan loss reserves amounted to
$2,768,000  compared to $2,493,000 at year-end 1999. The increase  reflected the
growth in the loan portfolio. During 2000 and 1999, the Company did not have any
loans on a nonaccrual status or classified as impaired. At December 31, 2000 and
1999,  the  allowance  for loan loss  reserves  was  predominately  allocated to
commercial real estate and multifamily loans.

The  following  table sets forth  information  with respect to the allowance for
loan loss reserves:

                                                 For the Year Ended December 31,
                                                 -------------------------------

($ in thousands)                                         2000              1999
--------------------------------------------------------------------------------
Allowance at beginning of year                       $  2,493          $  1,662
Provision charged to operations                           275               830
Recoveries                                                  -                 1
--------------------------------------------------------------------------------
Allowance at end of year                             $  2,768          $  2,493
--------------------------------------------------------------------------------
Ratio of allowance to total loans, net of
deferred fees                                            1.04%             1.17%
Total loans, net of deferred fees                    $266,326          $212,937
Average loans outstanding during the year            $250,941          $175,980
--------------------------------------------------------------------------------

                                       27
<PAGE>

Foreclosed Real Estate
----------------------

During 2000 and 1999, the Company did not have any foreclosed real estate.

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

The following table sets forth the composition of all other assets:

                                                              At December 31,
                                                              ---------------
      ($ in thousands)                                     2000            1999
      --------------------------------------------------------------------------
      Accrued interest receivable                        $2,961          $1,995
      Loans fee receivable                                1,276             839
      Premises and equipment, net                         5,731           5,863
      Deferred income tax asset                           1,105             936
      Deferred debenture offering costs                   2,835           3,721
      All other                                             159             948
      --------------------------------------------------------------------------
                                                        $14,067         $14,302
      --------------------------------------------------------------------------

Accrued interest receivable fluctuates based on the amount of loans, investments
and other interest-earning assets outstanding.  The increase reflected growth in
these accounts.

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. The increase
was due to an increase in mortgage loans outstanding.

Premises  and  equipment  is  detailed in note 6 to the  consolidated  financial
statements.

The deferred income tax asset relates primarily to the unrealized tax benefit on
the  Company's  allowance  for loan loss  reserves and  organizational  start-up
costs. These charges have been expensed for financial  statement  purposes,  but
are  not  all  currently  deductible  for  income  tax  purposes.  The  ultimate
realization  of the  deferred  tax asset is  dependent  upon the  generation  of
sufficient  taxable  income by the  Company  during the  periods in which  these
temporary  differences become deductible for tax purposes.  Management  believes
that it is more likely than not that the  Company's  deferred  tax asset will be
realized and accordingly,  a valuation allowance for deferred tax assets was not
maintained at any time during 2000 and 1999.

Deferred debenture offering costs consist primarily of underwriters' commissions
and are  amortized  over the terms of the  debentures.  The  decline  was due to
normal  amortization  as well as the  accelerated  amortization  of  $382,000 in
connection  with  the  early  retirement  of  debentures.  See  note  8  to  the
consolidated financial statements for a further discussion.

Deposits
--------

Deposit  liabilities  increased  to  $300,241,000  at December  31,  2000,  from
$201,080,000  at December 31,  1999,  due to growth in  certificates  of deposit
accounts.  At  December  31,  2000,  certificates  of deposit  accounts  totaled
$217,656,000  and  demand  deposit,   savings,  NOW  and  money-market  accounts
aggregated  $82,585,000.   The  same  categories  of  deposit  accounts  totaled
$122,794,000 and $78,286,000,  respectively,  at December 31, 1999. Certificates
of deposit  accounts  represented  73% of total  deposits at December  31, 2000,
compared to 61% at year-end 1999.

Management  believes the Banks do not have a concentration  of deposits from any
one source.  Management  believes that a large portion of the Banks'  depositors
are residents in their primary  market areas,  although there has been growth in
deposits from outside the primary areas resulting from Intervest National Bank's
deposit-gathering   activities   through   its  Web   Site   on  the   Internet:
www.intervestnatbank.com. The Banks do not accept brokered deposits.

                                       28
<PAGE>

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

                                 At December 31, 2000       At December 31, 1999
                                 --------------------       --------------------
 ($ in thousands)                 Amount   % of Total       Amount    % of Total
 -------------------------------------------------------------------------------
 Demand deposits                $  5,035         1.7%     $  4,337          2.2%
 Interest-checking deposits        9,188         3.1         6,636          3.3
 Savings deposits                 15,743         5.2        18,722          9.3
 Money-market deposits            52,619        17.5        48,591         24.1
 Certificates of deposit         217,656        72.5       122,794         61.1
 -------------------------------------------------------------------------------
 Total deposit accounts (1)     $300,241       100.0%     $201,080        100.0%
 -------------------------------------------------------------------------------
[FN]
     (1)  Includes  individual  retirement  accounts  totaling  $22,307,000  and
          $11,483,000  at  December  31, 2000  and  1999,  respectively,  nearly
          all of which are certificates of deposit.
</FN>

The  following  table sets forth  certificates  of deposits by maturity  for the
periods indicated:

                              At December 31, 2000         At December 31, 1999
                              --------------------         --------------------
                                           Wtd-Avg                      Wtd-Avg
($ in thousands)              Amount   Stated Rate         Amount   Stated Rate
--------------------------------------------------------------------------------
Within one year             $133,433         6.44%        $75,815          5.56%
Over one to two years         47,878         6.65          18,992          5.77
Over two to three years        8,274         6.23          12,148          6.03
Over three to four years       9,359         6.37           5,288          5.84
Over four years               18,712         6.88          10,551          6.32
--------------------------------------------------------------------------------
                            $217,656         6.51%       $122,794          5.72%
--------------------------------------------------------------------------------

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

                                                               At December 31,
                                                               ---------------
($ in thousands)                                             2000          1999
--------------------------------------------------------------------------------
Due within three months or less                           $14,088        $3,276
Due over three months to six months                         5,175         2,337
Due over six months to one year                            11,179         6,974
Due over one year                                          18,432         5,653
--------------------------------------------------------------------------------
                                                          $48,874       $18,240
--------------------------------------------------------------------------------
As a percentage of total deposits                            16.3%          9.1%
--------------------------------------------------------------------------------

The following table sets forth net deposit flows:

                                                 For the Year Ended December 31,
                                                 -------------------------------
($ in thousands)                                             2000          1999
--------------------------------------------------------------------------------
Net increase before interest credited                     $84,289       $21,948
Net interest credited                                      14,872         8,712
--------------------------------------------------------------------------------
Net deposit increase                                      $99,161       $30,660
--------------------------------------------------------------------------------

Federal Funds Purchased
-----------------------

From time to time,  the Banks purchase  federal funds to manage their  liquidity
needs.  At December  31,  2000,  there were no  outstanding  funds,  compared to
$6,955,000 outstanding at December 31, 1999.

Debentures Payable and Accrued Interest Payable on Debentures
-------------------------------------------------------------

At December 31, 2000,  debentures  payable amounted to $64,080,000,  compared to
$84,330,000 at year-end 1999. In the first half of 2000,  Intervest  Corporation
of New York  redeemed  debentures  totaling  $24,000,000  in principal  prior to
maturity for the outstanding  principal amount plus accrued interest aggregating
$3,970,000. In November of 2000, Intervest Corporation of New York completed the
sale of additional  debentures in the aggregate  principal amount of $3,750,000,
which resulted in net proceeds of $3,500,000 after underwriter's commissions and
other issuance costs. From time to time, Intervest Corporation of New York sells

                                       29
<PAGE>

debentures  and the  proceeds  are  used for the  origination  and  purchase  of
commercial and multifamily mortgage loans.

At December 31, 2000,  debentures  payable consisted of $57,150,000 of Intervest
Corporation  of New  York's  registered  floating  and  fixed-rate  subordinated
debentures  and  $6,930,000  of the  Holding  Company's  fixed-rate  convertible
subordinated  debentures.  From time to time,  the  Holding  Company  also sells
debentures to raise funds for working  capital  purposes.  In February 2001, the
Holding  Company  completed the sale of  additional  debentures in the aggregate
principal amount of $3,500,000.

At  December  31,  2000,  accrued  interest  payable on  debentures  amounted to
$8,733,000,  relatively  unchanged  from  $8,092,000  at year-end  1999,  as the
payment of interest in connection  with the early  retirement of the  debentures
discussed above was partially offset by additional accruals in 2000. The accrued
interest  at December  31,  2000 is due and  payable at the  maturity of various
debentures.  For a further  discussion of the debentures,  including  conversion
prices  and  redemption  premiums,  see  note  8 to the  consolidated  financial
statements.

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

The following table shows the composition of all other liabilities:

                                                       At December 31,
                                                       ---------------
($ in thousands)                                     2000            1999
--------------------------------------------------------------------------------
Mortgage escrow funds payable                      $3,397          $3,375
Accrued interest payable on deposits                  856             461
Official checks outstanding                         2,281           1,821
All other                                           1,111             763
--------------------------------------------------------------------------------
                                                   $7,645          $6,420
--------------------------------------------------------------------------------

Mortgage escrow funds payable  represent  advance payments made by borrowers for
real  estate  taxes and  insurance  that are  remitted  by the  Company to third
parties.  The  amount  fluctuates  based on the  timing  of  payments  to taxing
authorities as well as the level of outstanding loans.  Accrued interest payable
on deposit accounts fluctuates based on the level of outstanding  deposits.  The
level of official  checks  outstanding  varies and  fluctuates  based on banking
activity.

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

Stockholders'  equity  increased  to  $36,228,000  at December  31,  2000,  from
$33,604,000  at December  31,  1999.  The  increase  was due to net  earnings of
$2,608,000 and the issuance of $242,000 of common stock, partially offset by the
recording at December 31, 2000, of a valuation allowance for the unrealized loss
on securities available for sale, net of taxes, of $252,000,  in connection with
the transfer of securities to the available for sale portfolio.

In 2000, 62,750 shares of common stock were issued as follows:  12,750 shares of
Class A common stock upon the exercise of Class A warrants; and 50,000 shares of
Class B common stock issued in  connection  with the merger.  (See note 2 to the
consolidated  financial  statements for a further discussion of the stock issued
in connection with the merger.)

                         Asset and Liability Management

Interest  rate risk  arises  from  differences  in the  repricing  of assets and
liabilities  within a given time period.  The primary objective of the Company's
asset/liability  management strategy is to limit, within established guidelines,
the adverse  impact of changes in interest  rates on the  Company's net interest
income and capital.  This  strategy is overseen in part through the direction of
the Asset and  Liability  Committee  ("ALCO") of the Board of  Directors of each
Bank, which  establishes  policies and monitors results to control interest rate
sensitivity.

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

                                       30
<PAGE>

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  a  one-year  time  period.  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.

During a period of rising interest rates, a negative gap would tend to adversely
affect net  interest  income,  while a  positive  gap would tend to result in an
increase in net interest  income.  During a period of falling  interest rates, a
negative gap would tend to result in an increase in 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 as "interest rate caps or collars" 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.

For purposes of creating the gap analysis that follows,  deposits with no stated
maturities are treated as readily  accessible  accounts.  Given this assumption,
the  Company's  negative  one-year  interest  rate  sensitivity  gap was 3.0% at
December  31, 2000 and 23.7% at December 31, 1999.  However,  if those  deposits
were treated differently,  then the interest-rate  sensitivity gap would change.
The behavior of core  depositors  may not  necessarily  result in the  immediate
withdrawal  of funds in the event  deposit  rates  offered  by the Banks 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 Company's one-year interest-rate sensitivity gap would have been
a positive 11.0% at year-end 2000, compared to a negative 7.4% at year-end 1999.

The Company has a "floor," or minimum rate, on many of its floating-rate  loans.
The floor for each specific  loan is  determined  in relation to the  prevailing
market rates on the date of origination  and most adjust upwards in the event of
increases in the loan's interest rate.

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.

                                       31
<PAGE>


<TABLE>
The  following   table   summarizes   information   relating  to  the  Company's
interest-earning  assets and  interest-bearing  liabilities  as of December  31,
2000, that are scheduled to mature or reprice within the periods shown.

                                                         0-3          4-12       Over 1-4     Over 4
                                                         ---          ----       -------      ------
         ($ in thousands)                              Months        Months       Years       Years         Total
        ----------------------------------------------------------------------------------------------------------------------------
<S>           <C>                                    <C>          <C>            <C>           <C>          <C>
        Loans (1)                                    $83,130      $103,991       $53,995       $27,189      $268,305
        Securities available for sale (2)                  -         1,000        57,014        17,180        75,194
        Securities held to maturity (2)                9,310        11,660             -             -        20,970
        Federal funds sold                            20,268             -             -             -        20,268
        Short-term investments                        17,654             -             -             -        17,654
        Federal Reserve Bank stock                         -             -             -           605           605
        ----------------------------------------------------------------------------------------------------------------------------
        Total rate-sensitive assets                 $130,362      $116,651      $111,009       $44,974      $402,996
        ----------------------------------------------------------------------------------------------------------------------------
        Deposit accounts (3):
          Interest-checking deposits                 $ 9,188        $    -        $    -         $   -       $ 9,188
          Savings deposits                            15,743             -             -             -        15,743
          Money-market deposits                       52,619             -             -             -        52,619
          Certificates of deposit                     40,558        92,875        65,511        18,712       217,656
                                                 -----------------------------------------------------------------------------------
          Total deposits                             118,108        92,875        65,511        18,712       295,206
        Debentures payable                            42,900             -         7,150        14,030        64,080
        Accrued interest on debentures                 5,541             -         2,365           827         8,733
        ----------------------------------------------------------------------------------------------------------------------------
        Total rate-sensitive liabilities            $166,549      $ 92,875      $ 75,026       $33,569      $368,019
        ----------------------------------------------------------------------------------------------------------------------------

        ----------------------------------------------------------------------------------------------------------------------------
        GAP (repricing differences)                 $(36,187)     $ 23,776      $ 35,983       $11,405       $34,977
        ----------------------------------------------------------------------------------------------------------------------------
        Cumulative GAP                              $(36,187)     $(12,411)     $ 23,572       $34,977       $34,977
        ----------------------------------------------------------------------------------------------------------------------------
        Cumulative GAP to total assets                  -8.7%         -3.0%          5.7%          8.4%          8.4%
        ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
[FN]
         Significant assumptions used in preparing the table above:

         (1)  Adjustable-rate  loans are  included  in the period in which their
         interest  rates are next  scheduled to adjust rather than in the period
         in which the loans mature.  Fixed-rate  loans are scheduled,  including
         repayments,  according to their contractual maturities;  (2) securities
         are scheduled according to their contractual maturity dates, which does
         not take into  consideration  the effects of possible  prepayments that
         may  result  from the  issuer's  right to call a  security  before  its
         contractual   maturity  date.   Additionally,   unrealized   losses  on
         securities available for sale are ignored for this analysis;  (3) money
         market,  NOW and savings  deposits  are  regarded  as ready  accessible
         withdrawable  accounts;  and  certificates  of  deposit  are  scheduled
         through their maturity dates.
</FN>

                         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: retail deposits  obtained through the Banks' branch offices
and through the mail;  amortization,  satisfactions and repayments of loans; the
maturities and calls of securities;  and cash provided by operating  activities.
For  additional  information  concerning  the  Company's  cash  flows,  see  the
consolidated statements of cash flows included in this report.

At  December  31,  2000,  the  Company's  total  commitment  to lend  aggregated
$18,037,000.  The Company  believes that it can fund such  commitments  from the
aforementioned sources of funds.

Intervest Bank has agreements with correspondent  banks whereby it may borrow up
to $6,000,000 on an unsecured basis. There were no outstanding  borrowings under
these agreements at December 31, 2000 or 1999.

The Banks are subject to various regulatory capital requirements administered by
the federal banking  agencies.  The FDIC  Improvement  Act of 1991,  among other
things,  established  five capital  categories  ranging from well capitalized to
critically undercapitalized. Such classifications are used by the FDIC and other
bank regulatory agencies to determine various matters, including prompt

                                       32
<PAGE>

corrective  action  and  each   institution's  FDIC  deposit  insurance  premium
assessments.  The capital categories involve  quantitative  measures of a bank's
assets,  liabilities,  and certain  off-balance-sheet  items as calculated under
regulatory accounting practices.  The Banks' capital amounts and classifications
are also subject to qualitative  judgments by the regulators  about  components,
risk weightings, and other factors. Failure to meet minimum capital requirements
can initiate certain mandatory and possibly additional  discretionary actions by
the regulators  that, if undertaken,  could have a direct material effect on the
Company's consolidated financial statements.

The Banks are required to maintain,  for  regulatory  compliance  and  reporting
purposes,  regulatory  defined minimum  leverage and Tier 1 and total risk-based
capital  ratio levels of at least 4%, 4% and 8%,  respectively.  At December 31,
2000 and 1999,  management  believes that the Banks met their  capital  adequacy
requirements.  The Banks are  well-capitalized  institutions  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  believes  that
there are no current  conditions  or events  outstanding  which would change the
Banks' designations as well-capitalized institutions.

On June 15, 2000,  Intervest  National Bank and its primary  regulator,  the OCC
entered into a Memorandum of Understanding. The memorandum is a formal written
agreement  whereby,  among other things,  Intervest  National Bank shall review,
revise,  develop and implement  various  policies and procedures with respect to
its lending and credit underwriting.  Management has implemented various actions
towards  bringing   Intervest  National  Bank  into  full  compliance  with  the
memorandum.
<TABLE>

Information  regarding  the Banks'  regulatory  capital  and  related  ratios is
summarized below:

                                                                      Intervest Bank            Intervest National Bank
                                                                      --------------            -----------------------
                                                                      At December 31,               At December 31,
                                                                      ---------------               ---------------
($ in thousands)                                                   2000           1999           2000           1999
------------------------------------------------------------------------------------------------------------------------------------
Tier 1 Capital:
<S>                                                               <C>             <C>          <C>            <C>
   Stockholder's equity                                           $ 14,496        $ 12,746     $ 13,110       $ 8,493
   Disallowed portion of deferred tax asset                           (584)           (570)        (193)         (213)
   Unrealized loss on debt securities, net of tax                      252               -            -             -
------------------------------------------------------------------------------------------------------------------------------------
Total Tier 1 capital                                                14,164          12,176       12,917         8,280
------------------------------------------------------------------------------------------------------------------------------------
Tier 2 Capital:
   Allowable portion of allowance for loan loss reserves             1,855           1,561          795           444
------------------------------------------------------------------------------------------------------------------------------------
Total risk-based capital                                          $ 16,019        $ 13,737     $ 13,712       $ 8,724
------------------------------------------------------------------------------------------------------------------------------------
Net risk-weighted assets                                          $148,324        $124,389     $ 89,809       $45,860
Average assets for regulatory purposes                            $213,200        $189,069     $114,448       $50,838
Tier 1 capital to average assets                                      6.64%           6.44%       11.29%        16.29%
Tier 1 capital to risk-weighted assets                                9.55%           9.79%       14.38%        18.06%
Total capital to risk-weighted assets                                10.80%          11.04%       15.27%        19.02%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                        Recent Accounting Pronouncements

See note 1 to the  consolidated  financial  statements  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  generally  accepted
accounting  principles,  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 changes in prices.  Interest  rates
do not  necessarily  move in the same  direction or in the same magnitude as the
prices of goods and services.

                                       33
<PAGE>

                                 Year 2000 Issue

The Year 2000 issue is the result of computer  programs  that were written using
two digits rather than four digits to define the  applicable  year. As a result,
such  programs  may  recognize a date using "00" as the year 1900 instead of the
year 2000,  which could result in system failures or  miscalculations.  Prior to
January 1, 2000, the Company had completed all upgrades necessary to ensure that
its operating  and  financial  systems were Year 2000  compliant.  To date,  the
Company has not experienced any problems as a result of the Year 2000 issue, nor
does management expect it will.  Expenses incurred by the Company related to the
Year 2000 issue have not been material.

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.  The Company has no
risk  related  to  trading  accounts,   commodities  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, 2000 and 1999, which
reflect changes in market prices and rates, can be found in Note 20 of the notes
to consolidated financial statements.

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 "Asset and Liability Management."

Item 8.  Financial Statements and Supplementary Data

                              Financial Statements

The  following   consolidated   financial  statements  of  Intervest  Bancshares
Corporation and Subsidiaries are included herein:

- Independent Auditors' Report - Hacker, Johnson & Smith PA (page 36)
- Independent Auditors' Report - Richard A. Eisner & Company, LLP (page 37)
- Consolidated Balance Sheets at December 31, 2000 and 1999  (page 38)
- Consolidated  Statements  of Earnings for the  Years Ended  December 31, 2000,
        1999 and 1998 (page 39)
- Consolidated  Statements  of  Comprehensive   Income  for  the   Years   Ended
        December 31, 2000, 1999 and 1998  (page 40)
- Consolidated  Statements  of  Changes  in  Stockholders'  Equity for the Years
        Ended December 31, 2000, 1999 and 1998 (page 41)
- Consolidated  Statements  of Cash Flows for the Years Ended December 31, 2000,
        1999 and 1998 (page 42)
- Notes to the Consolidated  Financial Statements (pages 43 to 65)

                               Supplementary Data

Securities Available for Sale
-----------------------------
<TABLE>

The following table sets forth, by maturity distribution, information pertaining
to securities available for sale:

                                                       After One Year to      After Five Years to
                                                       ------------------     --------------------
                                 One Year 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
------------------------------------------------------------------------------------------------------------------------------------
At December 31, 2000:
<S>                                <C>       <C>       <C>          <C>         <C>           <C>        <C>          <C>
U.S. Government agencies           $998      5.42%     $63,809      5.70%       $9,982        6.56%      $74,789      5.81%

</TABLE>

                                       34
<PAGE>
                          Supplementary Data, Continued

Securities Held to Maturity
--------------------------
<TABLE>

The following table sets forth, by maturity distribution, information pertaining
to securities held to maturity:

                                                       After One Year to      After Five Years to
                                                       -----------------      -------------------
                                 One Year 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
------------------------------------------------------------------------------------------------------------------------------------
At December 31, 2000:
---------------------
<S>                             <C>          <C>         <C>                   <C>                     <C>            <C>
U.S. Government agencies        $20,970      6.52%       $     -        -%     $     -          -%     $20,970        6.52%

At December 31, 1999
--------------------
U.S. Government agencies        $ 7,907      5.72%       $58,013     5.65%     $17,212       6.36%     $83,132        5.80%

At December 31, 1998
--------------------
U.S. Treasury securities        $ 2,015      6.03%       $     -        -%     $     -          -%     $ 2,015        6.03%
U.S. Government agencies              -         -         61,060     5.80       19,263       6.18       80,323        5.89
------------------------------------------------------------------------------------------------------------------------------------
Total                           $ 2,015      6.03%       $61,060     5.80%     $19,263       6.18%     $82,338        5.89%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Loans and Allowance for Loan Loss Reserves
------------------------------------------
<TABLE>

The following table sets forth  information  with respect to loans receivable at
December 31:
                                                      2000           1999           1998           1997           1996
                                                      ----           ----           ----           ----           ----
                                                    Carrying       Carrying       Carrying       Carrying       Carrying
($ in thousands)                                      Value         Value          Value          Value          Value
----------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>           <C>          <C>             <C>             <C>
Commercial real estate and multifamily loans        $263,284      $210,022     $160,610        $146,375        $124,752
Residential 1-4 family loans                           3,034         2,311        2,627           3,162           2,784
Construction loans                                         -             -            -             158              47
Commercial loans                                       1,781         2,107        2,875           2,641           3,514
Consumer loans                                           206           242          184              92             157
                                                  --------------------------------------------------------------------------
Total gross loans receivable                         268,305       214,682      166,296         152,428         131,254
Deferred loan fees                                    (1,979)       (1,745)      (1,310)         (1,596)         (1,578)
                                                  --------------------------------------------------------------------------
Loans receivable, net of deferred fees               266,326       212,937      164,986         150,832         129,676
Allowance for loan loss reserves                      (2,768)       (2,493)      (1,662)         (1,173)           (811)
----------------------------------------------------------------------------------------------------------------------------
Loans receivable, net                               $263,558      $210,444     $163,324        $149,659        $128,865
----------------------------------------------------------------------------------------------------------------------------
Loans included above that were
   on a nonaccrual status at year end$              $      -      $      -     $      -        $      -        $      -
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>

The  following  table sets forth  information  with respect to the allowance for
loan loss reserves at December 31:

($ in thousands)                                           2000          1999          1998           1997          1996
----------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>           <C>           <C>            <C>           <C>
Allowance at beginning of year                         $  2,493      $  1,662      $  1,173       $    811      $    593
Provision charged to operations                             275           830           479            352           250
Chargeoffs                                                    -             -             -              -           (65)
Recoveries                                                    -             1            10             10            33
----------------------------------------------------------------------------------------------------------------------------
Allowance at end of year                               $  2,768      $  2,493      $  1,662       $  1,173      $    811
----------------------------------------------------------------------------------------------------------------------------
Total loans, net of deferred fees                      $266,326      $212,937      $164,986       $150,832      $129,676
Average loans outstanding during the year              $250,941      $175,980      $170,675       $141,612      $124,732
Ratio of allowance to net loans receivable                1.04%         1.17%         1.01%          0.78%         0.63%
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

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 financial
statements filed, including the notes thereto.

                                       35
<PAGE>

                          Independent Auditors' Report

         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, 2000 and 1999 and the related  consolidated  statements
         of earnings, comprehensive income, changes in stockholders' equity, and
         cash  flows  for  each of the  years  in the  three-year  period  ended
         December 31, 2000. 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 did not audit the
         financial statements of Intervest  Corporation of New York, whose total
         assets as of December 31, 2000 and 1999, constituted 17.8% and 27.2% of
         the  related  consolidated  totals,  and  whose  net  interest  income,
         noninterest  income and net earnings  for the years ended  December 31,
         2000, 1999 and 1998, constituted 10.3%, 48.6% and 5.0%, respectively in
         2000, 21.2%, 49.3% and 32.4%, respectively in 1999 and 33.6%, 50.1% and
         39.8%,  respectively in 1998, of the related consolidated totals. Those
         statements  were  audited  by  other  auditors  whose  report  has been
         furnished  to us, and our opinion  insofar as it relates to the amounts
         included in the consolidated  totals, are based solely on the report of
         the other auditors.

                  We conducted our audits in accordance with generally  accepted
         auditing  standards.  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,  based on our  audits and the report of other
         auditors,  the  consolidated  financial  statements  referred  to above
         present fairly, in all material respects, the financial position of the
         Company  at  December  31,  2000  and  1999,  and  the  results  of its
         operations  and its cash flows for each of the years in the  three-year
         period ended December 31, 2000 in conformity  with  generally  accepted
         accounting principles.


         /s/ HACKER, JOHNSON & SMITH PA
         ------------------------------
         HACKER, JOHNSON & SMITH PA
         Tampa, Florida
         January 18, 2001

                                       36
<PAGE>

                          Independent Auditors' Report

         Board of Directors and Stockholder
         Intervest Corporation of New York
         New York, New York:

         We  have  audited  the  accompanying  consolidated  balance  sheets  of
         Intervest  Corporation of New York and Subsidiaries  (the "Company") at
         December 31, 2000 and 1999 and the related  consolidated  statements of
         operations,  changes in stockholder's equity and cash flows for each of
         the years in the three-year  period ended December 31, 2000. Our audits
         also included the financial  statement  schedule  listed in the exhibit
         index  as  item   14(a)(2).   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 generally  accepted auditing
         standards.  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
         fairly present, in all material respects, the financial position of the
         Company  at  December  31,  2000 and  1999,  and the  results  of their
         operations and their cash flows for each of the years in the three-year
         period ended December 31, 2000 in conformity  with  generally  accepted
         accounting  principles.  Also in our opinion,  the schedule referred to
         above,  when considered in relation to the basic  financial  statements
         taken  as a whole,  presents  fairly,  in all  material  respects,  the
         information set forth therein.

         /s/ Richard A. Eisner & Company, LLP
         ------------------------------------
         Richard A. Eisner & Company, LLP
         New York, New York
         January 18, 2001

                                       37
<PAGE>

<TABLE>

                Intervest Bancshares Corporation and Subsidiaries

                           Consolidated Balance Sheets

                                                                                     At December 31,
                                                                                --------------------------
       ($ in thousands, except par value)                                           2000         1999
       ---------------------------------------------------------------------------------------------------
       ASSETS
<S>                                                                             <C>           <C>
       Cash and due from banks                                                  $  5,016      $ 4,663
       Federal funds sold                                                         20,268        3,900
       Short-term investments                                                     17,654       23,532
                                                                                --------------------------
           Total cash and cash equivalents                                        42,938       32,095
       Securities available for sale, net                                         74,789            -
       Securities held to maturity, net                                           20,970       83,132
       Federal Reserve Bank stock, at cost                                           605          508
       Loans receivable (net of allowance for loan losses                        263,558      210,444
       of $2,768 in 2000 and $2,493 in 1999)
       Accrued interest receivable                                                 2,961        1,995
       Premises and equipment, net                                                 5,731        5,863
       Deferred income tax asset                                                   1,105          936
       Deferred debenture offering costs                                           2,835        3,721
       Other assets                                                                1,435        1,787
       ---------------------------------------------------------------------------------------------------
       Total assets                                                             $416,927     $340,481
       ---------------------------------------------------------------------------------------------------
       LIABILITIES
       Deposits:
          Noninterest-bearing demand deposit accounts                             $5,035      $ 4,337
          Interest-bearing deposit accounts:
             Checking (NOW) accounts                                               9,188        6,636
             Savings accounts                                                     15,743       18,722
             Money-market accounts                                                52,619       48,591
             Certificate of deposit accounts                                     217,656      122,794
                                                                                -------------------------
       Total deposit accounts                                                    300,241      201,080
       Federal funds purchased                                                         -        6,955
       Subordinated debentures payable                                            64,080       84,330
       Accrued interest payable on debentures                                      8,733        8,092
       Mortgage escrow funds payable                                               3,397        3,375
       Official checks outstanding                                                 2,281        1,821
       Other liabilities                                                           1,967        1,224
       ---------------------------------------------------------------------------------------------------
       Total liabilities                                                         380,699      306,877
       ---------------------------------------------------------------------------------------------------
       Commitments and contingencies (notes 6, 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,
             3,544,629 and 3,531,879 shares issued and outstanding, respectively)  3,545        3,532
       Class B common stock  ($1.00 par value, 700,000 shares authorized,
             355,000 and 305,000 shares issued and outstanding, respectively)        355          305
       Additional paid-in-capital, common                                         18,975       18,770
       Retained earnings                                                          13,605       10,997
       Accumulated other comprehensive income:
           Net unrealized loss on securities available for sale, net of tax         (252)           -
       ---------------------------------------------------------------------------------------------------
       Total stockholders' equity                                                 36,228       33,604
       ---------------------------------------------------------------------------------------------------
       Total liabilities and stockholders' equity                               $416,927     $340,481
       ---------------------------------------------------------------------------------------------------
          See accompanying notes to consolidated financial statements.

</TABLE>

                                       38
<PAGE>

               Intervest Bancshares Corporation and Subsidiaries

                       Consolidated Statements of Earnings

<TABLE>
                                                                                                 Year Ended December 31,
                                                                                        ---------------------------------------
($ in thousands, except per share data)                                                     2000         1999           1998
-------------------------------------------------------------------------------------------------------------------------------
INTEREST AND DIVIDEND INCOME
<S>                                                                                      <C>          <C>            <C>
Loans receivable                                                                         $24,923      $18,794        $19,383
Securities                                                                                 6,056        6,123          4,816
Other interest-earning assets                                                                929          584            448
-------------------------------------------------------------------------------------------------------------------------------
Total interest and dividend income                                                        31,908       25,501         24,647
-------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits                                                                                  14,853        8,703          7,948
Federal funds purchased                                                                      150           29              1
Debentures payable                                                                         8,322        9,687          9,720
-------------------------------------------------------------------------------------------------------------------------------
Total interest expense                                                                    23,325       18,419         17,669
-------------------------------------------------------------------------------------------------------------------------------
Net interest and dividend income                                                           8,583        7,082          6,978
Provision for loan loss reserves                                                             275          830            479
-------------------------------------------------------------------------------------------------------------------------------
Net interest and dividend income after provision for loan loss reserves                    8,308        6,252          6,499
-------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Customer service fees                                                                        139          140            139
Income from lending activities                                                               809          744            536
All other                                                                                     35           16             25
-------------------------------------------------------------------------------------------------------------------------------
Total noninterest income                                                                     983          900            700
-------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSES
Salaries and employee benefits                                                             2,228        1,915          1,349
Occupancy and equipment, net                                                               1,090          963            573
Advertising and promotion                                                                     35          142            149
Professional fees and services                                                               410          258            260
Stationery, printing and supplies                                                            140          165            103
All other                                                                                    665          616            643
-------------------------------------------------------------------------------------------------------------------------------
Total noninterest expenses                                                                 4,568        4,059          3,077
-------------------------------------------------------------------------------------------------------------------------------
Earnings before taxes, extraordinary item and change in accounting principle               4,723        3,093          4,122
Provision for income taxes                                                                 1,909        1,198          1,740
                                                                                -----------------------------------------------
Earnings before extraordinary item and change in accounting principle                      2,814        1,895          2,382
Extraordinary item, net of tax (note 8)                                                     (206)           -              -

Cumulative effect of change in accounting principle, net of tax (note 1)                       -         (128)             -
-------------------------------------------------------------------------------------------------------------------------------
Net earnings                                                                             $ 2,608      $ 1,767        $ 2,382
-------------------------------------------------------------------------------------------------------------------------------
Basic earnings per share:
    Earnings before extraordinary item and change in accounting principle                $  0.72      $  0.50        $  0.64
    Extraordinary item, net of tax                                                         (0.05)           -              -
    Cumulative effect of change in accounting principle, net of tax                            -        (0.03)             -
-------------------------------------------------------------------------------------------------------------------------------
   Net earnings per share                                                                $  0.67      $  0.47        $  0.64
-------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share:
    Earnings before extraordinary item and change in accounting principle                $  0.72      $  0.47        $  0.54
    Extraordinary item, net of tax                                                         (0.05)           -              -
    Cumulative effect of change in accounting principle, net of tax                            -        (0.03)             -
-------------------------------------------------------------------------------------------------------------------------------
   Net earnings per share                                                                 $ 0.67       $ 0.44         $ 0.54
-------------------------------------------------------------------------------------------------------------------------------
    See accompanying notes to consolidated financial statements.
</TABLE>

                                       39
<PAGE>

               Intervest Bancshares Corporation and Subsidiaries

                 Consolidated Statements of Comprehensive Income


<TABLE>
                                                                                                  Year Ended December 31,
                                                                                          ---------------------------------------
($ in thousands)                                                                                 2000          1999         1998
------------------------------------------------------------------------------------------------------------------------------------

<S>                                                                                            <C>           <C>          <C>
Net earnings                                                                                   $2,608        $1,767       $2,382
                                                                                              --------------------------------------
   Net unrealized holding losses on securities arising during the year                           (405)            -            -
   Provision for income taxes related to unrealized holding losses on securities                  153             -            -
------------------------------------------------------------------------------------------------------------------------------------
Other comprehensive loss, net of tax                                                             (252)            -            -
------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income, net of tax                                                         $2,356        $1,767       $2,382
------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>

                                       40
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries

           Consolidated Statements of Changes in Stockholders' Equity

<TABLE>

                                                                                                  Year Ended December 31,
                                                                                       ------------------------------------------
($ in thousands)                                                                            2000           1999           1998
---------------------------------------------------------------------------------------------------------------------------------
CLASS A COMMON STOCK
<S>                                                                                       <C>            <C>            <C>
Balance at beginning of year                                                              $3,532         $3,434         $3,374
Issuance of 510 shares in exchange for common stock of minority
     stockholders of Intervest Bank                                                            -              1              -
Issuance of 7,554 shares upon the conversion of debentures                                     -              7              -
Issuance of 12,750, 89,300 and 60,100 shares, respectively,
     upon the exercise of warrants                                                            13             90             60
---------------------------------------------------------------------------------------------------------------------------------
Balance at end of year                                                                     3,545          3,532          3,434
---------------------------------------------------------------------------------------------------------------------------------

CLASS B COMMON STOCK
Balance at beginning of year                                                                 305            300            300
Issuance of 5,000 shares upon the exercise of warrants                                         -              5              -
Issuance of 50,000 shares of restricted stock compensation                                    50              -              -
---------------------------------------------------------------------------------------------------------------------------------
Balance at end of year                                                                       355            305            300
---------------------------------------------------------------------------------------------------------------------------------

ADDITIONAL PAID-IN-CAPITAL, COMMON
Balance at beginning of year                                                              18,770         18,148         17,719
Issuance of 510 shares in exchange for common stock of minority
     stockholders of Intervest Bank                                                            -              6              -
Issuance of 7,554 shares upon the conversion of debentures,
     net of issuance costs                                                                     -             56              -
Compensation related to issuance of Class B stock warrants                                    26             26             43
Issuance of 50,000 shares of restricted Class B stock compensation                           109              -              -
Issuance of 12,750, 94,300 and 60,100 shares upon
     exercise of stock warrants, inclusive of tax benefits                                    70            534            386
---------------------------------------------------------------------------------------------------------------------------------
Balance at end of year                                                                    18,975         18,770         18,148
---------------------------------------------------------------------------------------------------------------------------------

RETAINED EARNINGS
Balance at beginning of year                                                              10,997          9,230          6,848
Net earnings for the year                                                                  2,608          1,767          2,382
---------------------------------------------------------------------------------------------------------------------------------
Balance at end of year                                                                    13,605         10,997          9,230
---------------------------------------------------------------------------------------------------------------------------------

ACCUMULATED OTHER COMPREHENSIVE INCOME, NET
Balance at beginning of year                                                                   -              -              -
Net change in accumulated other comprehensive income, net                                   (252)             -              -
---------------------------------------------------------------------------------------------------------------------------------
Balance at end of year                                                                      (252)             -              -
---------------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity at end of year                                                $36,228        $33,604        $31,112
---------------------------------------------------------------------------------------------------------------------------------
  See accompanying notes to consolidated financial statements.

</TABLE>

                                       41
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries

                      Consolidated Statements of Cash Flows
<TABLE>

                                                                                                 Year Ended December 31,
                                                                                   -------------------------------------------------
($ in thousands)                                                                          2000             1999            1998
------------------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S>                                                                                   <C>              <C>             <C>
Net earnings                                                                          $  2,608         $  1,767        $  2,382

Adjustments  to  reconcile  net  earnings  to net  cash  provided  by  operating
    activities:
Depreciation and amortization                                                              433              416             337
Provision for loan loss reserves                                                           275              830             479
Deferred income tax benefit                                                                (16)            (327)            (84)
Amortization of deferred debenture offering costs                                        1,136              943             912
Compensation expense from awards of common stock and warrants                              185               26              43
Amortization of premiums, fees and discounts, net                                       (1,814)          (1,000)         (1,107)
Net increase in accrued interest payable on debentures                                     641            2,302             824
Net increase in official checks outstanding                                                460              249             853
Net decrease in all other assets and liabilities                                         1,912            1,240             430
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                                5,820            6,446           5,069
------------------------------------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES
Decrease in interest-earning time deposits                                                   -               99               -
Maturities and calls of securities held to maturity                                     26,393           32,556          50,050
Purchases of securities held to maturity                                               (39,160)         (33,278)        (73,650)
Net increase in loans receivable                                                       (53,623)         (48,386)        (13,868)
Purchases of Federal Reserve Bank stock, net                                               (97)            (275)              -
Purchases of premises and equipment, net                                                  (301)          (1,362)           (377)
------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                                                  (66,788)         (50,646)        (37,845)
------------------------------------------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES
Net increase in demand, savings, NOW and money-market deposits                           4,299            6,904          34,353
Net increase in certificates of deposit                                                 94,862           23,761           5,655
Net increase in mortgage escrow funds payable                                               22              470             698
(Repayments of) proceeds from federal funds purchased, net                              (6,955)           6,955               -
Proceeds from sale of debentures, net of issuance costs                                  3,500            6,606          10,990
Principal repayments of debentures                                                     (24,000)         (10,000)         (2,500)
Net proceeds from issuance of common stock, net of issuance costs                           83              622             514
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities                                               71,811           35,318          49,710
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                                    10,843           (8,882)         16,934
Cash and cash equivalents at beginning of year                                          32,095           40,977          24,043
------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                                               $42,938          $32,095         $40,977
------------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
   Interest                                                                            $21,532          $15,074         $15,885
   Income taxes                                                                          1,004            1,989           1,506
Noncash activities:
   Transfers of securities from held-to-maturity to available-for-sale                  74,789                -               -
   Accumulated other comprehensive income, change in
         unrealized loss on securities available for sale, net of tax                     (252)               -               -
   Conversion of debentures into Class A common stock                                        -               70               -
   Issuance of common stock in exchange for common stock of minority
        stockholders of Intervest Bank                                                       -                7               -
------------------------------------------------------------------------------------------------------------------------------------
         See accompanying notes to consolidated financial statements.

</TABLE>

                                       42
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
1.       Description of Business and Summary of Significant Accounting Policies

         Description of Business

         Intervest   Bancshares   Corporation   (the   "Holding   Company")  was
         incorporated in 1993 and is  headquartered in New York City. Its wholly
         owned  subsidiaries  are Intervest  National  Bank,  Intervest Bank and
         Intervest  Corporation  of New  York.  Hereafter,  Intervest  Bank  and
         Intervest National Bank are referred to together as the "Banks" and all
         the  entities  are  referred to  collectively  as the  "Company,"  on a
         consolidated  basis.  The  Holding  Company's  primary  business is the
         ownership of its subsidiaries.

         Intervest  National  Bank is a  nationally  chartered  commercial  bank
         located in  Rockefeller  Plaza in New York City. It opened for business
         on  April  1,  1999.  Intervest  Bank  is  a  Florida  state  chartered
         commercial  bank with four banking  offices in Clearwater,  Florida and
         one in South  Pasadena,  Florida.  The  Banks  conduct  a  full-service
         commercial banking business, which consists of attracting deposits from
         the general  public and  investing  those  funds,  together  with other
         sources of funds,  primarily  through the origination of commercial and
         multifamily  real estate  loans,  and through the  purchase of security
         investments.  Intervest  National Bank also provides  Internet  banking
         services at its Web Site: www.intervestnatbank.com.

         Intervest  Corporation of New York is located in  Rockefeller  Plaza in
         New York  City and is in the  business  of  originating  and  acquiring
         commercial and multifamily  residential  loans. As discussed in note 2,
         Intervest  Corporation of New York was acquired by the Holding  Company
         on March 10, 2000. The acquisition was accounted for at historical cost
         similar to the  pooling-of-interests  method of accounting.  Under this
         method of accounting, the recorded assets,  liabilities,  shareholders'
         equity, income and expenses of both companies are combined and recorded
         at  their  historical  cost  amounts.  Accordingly,  all  prior  period
         financial  information  in this report has been adjusted to include the
         accounts of Intervest Corporation of New York.

         Principles of Consolidation, Basis of Presentation and Use of Estimates

         The  consolidated  financial  statements  include  the  accounts of the
         Holding  Company and its  subsidiaries.  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  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 financial  statements  and revenues
         and expenses during the reporting periods.  Actual results could differ
         from  those  estimates.   Material   estimates  that  are  particularly
         susceptible  to  significant  change  in the near  term  relate  to the
         determination  of the  allowance  for loan loss  reserves  and deferred
         income tax assets.

         Cash Equivalents

         For purposes of the statements of cash flows, cash equivalents  include
         Federal  funds  sold and  short-term  investments.  Federal  funds  are
         generally  sold for one-day  periods and  short-term  investments  have
         maturities of three months or less from the time of purchase.

                                       43
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
1.       Description of Business and Summary of Significant Accounting Policies,
         Continued

         Securities

         Securities  for which 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  any  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  are
         determined using the specific identification method.

         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
         loss reserves,  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.  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.

         Allowance for Loan Loss Reserves

         The allowance for loan loss reserves 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 volume of
         the loan portfolio;  overall portfolio  quality;  loan  concentrations;
         specific  problem  loans and  commitments  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,  SFAS No. 114 specifies the manner in which
         the portion of the allowance for loan loss reserves 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 residential  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.

                                       44
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
1.       Description of Business and Summary of Significant Accounting Policies,
         Continued

         Allowance for Loan Loss Reserves, Continued

         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 loss  reserves and a
         charge  through the  provision  for loan losses.  The Company  normally
         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 loss
         reserves.  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
         charged to operating expense 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.  Deferred debenture offering costs consist primarily
         of  underwriters'  commissions.  Accumulated  amortization  amounted to
         $2,331,000 at December 31, 2000 and $3,453,000 at December 31, 1999.

         Stock Based Compensation

         The  Company  follows  APB No.  25,  "Accounting  for  Stock  Issued to
         Employees"   and  related   interpretations   in  accounting   for  its
         stock-based compensation,  which is in the form of stock warrants. SFAS
         No. 123, "Accounting for Stock-Based  Compensation," 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.

         Advertising Costs

         Advertising costs are expensed as incurred.

         Income Taxes

         Under SFAS No. 109,  "Accounting for 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. The effect on deferred tax assets and liabilities
         of a change in tax law or rates is  recognized  in income in the period
         that includes the enactment  date of change.  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.

                                       45
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
1.       Description of Business and Summary of Significant Accounting Policies,
         Continued

         Earnings Per Share (EPS)

         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 outstanding  dilutive  common
         stock warrants  (which are computed using the "treasury  stock method")
         and convertible  debentures (computed using the "if converted method").
         Diluted EPS considers  the  potential  dilution that could occur if the
         Company's  outstanding  stock warrants and convertible  debentures were
         converted into common stock that then shared in the Company's  earnings
         (as  adjusted  for  interest  expense that would no longer occur if the
         debentures were converted).

         Comprehensive Income

         The  Company  follows  SFAS  130,  "Reporting   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 equity section of the 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 consolidated  financial statements when
         they are funded or related fees are incurred or received.

         Recent Accounting Pronouncements

         Accounting for Start-Up  Costs. On January 1, 1999, the Company adopted
         as required the AICPA's Statement of Position (SOP) 98-5, "Reporting on
         the Costs of Start-Up  Activities."  The SOP requires that all start-up
         costs (except for those that are  capitalizable  under other  generally
         accepted  accounting  principles) be expensed as incurred for financial
         statement purposes effective January 1, 1999. Previously,  a portion of
         start-up costs were generally  capitalized  and amortized over a period
         of time.  The  adoption of this  statement  resulted in a net charge of
         $128,000 on January 1, 1999. The charge  represents the expensing,  net
         of a tax benefit,  of cumulative  start-up costs that had been incurred
         through  December  31, 1998 in  connection  with  organizing  Intervest
         National Bank.

         Accounting for Derivative Instruments and Hedging Activities. Statement
         of Financial  Accounting  Standards No. 133  "Accounting for Derivative
         Instruments  and  Hedging  Activities,"  requires  companies  to record
         derivatives on the balance sheet as assets or liabilities,  measured at
         fair value.  Gains and losses  resulting  from changes in the values of
         those  derivatives  would be accounted for depending on the uses of the
         derivatives and whether they qualify for hedge accounting.  The Company
         will be required  to adopt this  statement  effective  January 1, 2001.
         Since the Company does not use  derivatives,  this  statement  will not
         have any impact on the Company's financial statements.

                                       46
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
2.       Acquisition of Intervest Corporation of New York

         On March 10, 2000,  the Holding  Company  acquired all the  outstanding
         capital  stock of  Intervest  Corporation  of New York in exchange  for
         1,250,000  shares of the Holding  Company's  Class A common stock. As a
         result of the acquisition,  Intervest  Corporation of New York became a
         wholly owned subsidiary of the Holding Company.  Former shareholders of
         Intervest  Corporation  of New York are officers and  directors of both
         the Holding Company and Intervest Corporation of New York (ICNY).

         In  connection  with the  acquisition,  the  Holding  Company  incurred
         approximately  $210,000  in  expenses  related to legal and  consulting
         fees, printing and stock compensation  expense.  The Board of Directors
         and the  Holding  Company's  shareholders  approved  a grant of  50,000
         shares of Class B common stock to the  Chairman of the Holding  Company
         for his services with respect to the development, structuring and other
         activities  associated  with the merger.  This  resulted in $159,000 of
         compensation   expense  being  recorded,   which  is  included  in  the
         consolidated statement of earnings for 2000.
<TABLE>

         Pro forma consolidated balance sheet information follows as of December
         31, 1999:

                                                                    Originally      Historical       Pro Forma
         ($ in thousands)                                            Reported          ICNY         Adjustments      Adjusted
         ---------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>             <C>         <C>       <C>       <C>
         Cash and cash equivalents                                   $  7,429        $30,754     $(6,088)  (1)       $ 32,095
         Securities held to maturity, net                              83,132              -         -                 83,132
         Federal Reserve Bank stock                                       508              -         -                    508
         Loans receivable, net                                        147,154         63,290         -                210,444
         Accrued interest receivable                                    1,349            646         -                  1,995
         Premises and equipment, net                                    5,767             96         -                  5,863
         Deferred income tax asset                                        912             24         -                    936
         Deferred debenture offering costs                                479          3,242         -                  3,721
         Other assets                                                   1,099            688         -                  1,787
         -----------------------------------------------------------------------------------------------------------------------
         Total assets                                                $247,829        $98,740     $(6,088)            $340,481
         -----------------------------------------------------------------------------------------------------------------------

         Deposit liabilities                                         $207,168          $   -     $(6,088) (1)        $201,080
         Federal funds purchased                                        6,955              -         -                  6,955
         Debentures payable                                             6,930         77,400         -                 84,330
         Accrued interest payable on debentures                           892          7,200         -                  8,092
         Mortgage escrow funds payable                                  1,521          1,854         -                  3,375
         Official checks outstanding                                    1,821              -         -                  1,821
         Other liabilities                                              1,078            146         -                  1,224
         -----------------------------------------------------------------------------------------------------------------------
         Total liabilities                                            226,365         86,600      (6,088)             306,877
         -----------------------------------------------------------------------------------------------------------------------

         Common stock and paid-in capital                              16,998          5,609         -                 22,607
         Retained earnings                                              4,466          6,531         -                 10,997
         -----------------------------------------------------------------------------------------------------------------------
         Total stockholders' equity                                    21,464         12,140         -                 33,604
         -----------------------------------------------------------------------------------------------------------------------
         Total liabilities and stockholders' equity                  $247,829        $98,740     $(6,088)            $340,481
         -----------------------------------------------------------------------------------------------------------------------
<FN>
        (1)   Represents  the  elimination  of  certain   intercompany   deposit
              accounts.   Certain   reclassifications  were  also  made  to  the
              historical  amounts of Intervest  Corporation  of New York and the
              Company to conform to the current period's presentation.

</FN>
</TABLE>

                                       47
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
2.       Acquisition of Intervest Corporation of New York, Continued
<TABLE>

         A pro  forma  summary  of  the  Company's  consolidated  statements  of
earnings follows for the periods indicated:

                                                                                    For the Year Ended December 31, 1999
                                                                             ---------------------------------------------------
                                                                           Originally   Historical    Pro Forma
         ($ in thousands)                                                   Reported       ICNY      Adjustments     Adjusted
         -----------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>         <C>        <C>               <C>
         Interest and dividend income                                         $15,058     $10,552    $ (109)(a)        $25,501
         Interest expense                                                       9,478       9,050      (109)(a)         18,419
                                                                             ---------------------------------------------------
         Net interest and dividend income                                       5,580       1,502         -              7,082
         Provision for loan loss reserves                                         830           -         -                830
                                                                             ---------------------------------------------------
         Net interest and dividend income
             after provision for loan loss reserves                             4,750       1,502         -              6,252
         Noninterest income                                                       456         444         -                900
         Noninterest expenses                                                   3,165         894         -              4,059
                                                                             ---------------------------------------------------
         Earnings before taxes and change in accounting principle               2,041       1,052         -              3,093
         Provision for income taxes                                               718         480         -              1,198
         Cumulative effect of change in accounting principle, net of tax         (128)          -         -               (128)
         -----------------------------------------------------------------------------------------------------------------------
         Net earnings                                                         $ 1,195       $ 572     $   -             $1,767
         -----------------------------------------------------------------------------------------------------------------------
         Basic earnings per share                                              $ 0.48           -         -             $ 0.47
         Diluted earnings per share                                            $ 0.43           -         -             $ 0.44
         Average number of common shares outstanding - Basic                2,510,293           -      1,250,000     3,760,293
         Average number of common shares outstanding - Diluted              2,770,118           -      1,250,000     4,020,118
         -----------------------------------------------------------------------------------------------------------------------

<FN>
(a)      Represents the elimination of certain intercompany interest income and  expense.
</FN>


                                                                                    For the Year Ended December 31, 1998
                                                                             ---------------------------------------------------
                                                                           Originally   Historical    Pro Forma
         ($ in thousands)                                                   Reported       ICNY      Adjustments        Adjusted
         -----------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>         <C>           <C>             <C>
         Interest and dividend income                                         $12,934     $11,742       $ (29)(a)        $24,647
         Interest expense                                                       8,297       9,401         (29)(a)         17,669
                                                                             ---------------------------------------------------
         Net interest and dividend income                                       4,637       2,341           -              6,978
         Provision for loan loss reserves                                         479           -           -                479
                                                                             ---------------------------------------------------
         Net interest and dividend income
              after provision for loan loss reserves                            4,158       2,341           -              6,499
         Noninterest income                                                       349         351           -                700
         Noninterest expenses                                                   2,133         944           -              3,077
                                                                             ---------------------------------------------------
         Earnings before taxes                                                  2,374       1,748           -              4,122
         Provision for income taxes                                               939         801           -              1,740
         -----------------------------------------------------------------------------------------------------------------------
         Net earnings                                                         $ 1,435     $   947       $   -            $ 2,382
         -----------------------------------------------------------------------------------------------------------------------
         Adjusted net earnings for diluted earnings per share computation     $ 1,607     $   947       $   -            $ 2,554
         Basic earnings per share                                             $  0.58           -           -            $  0.64
         Diluted earnings per share                                           $  0.46           -           -            $  0.54

         Average number of common shares outstanding - Basic                2,457,113           -        1,250,000     3,707,113
         Average number of common shares outstanding - Diluted              3,473,516           -        1,250,000     4,723,516
         -----------------------------------------------------------------------------------------------------------------------
<FN>
(a)      Represents the elimination of certain intercompany interest income and  expense.
</FN>
</TABLE>

                                       48
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
2.       Acquisition of Intervest Corporation of New York, Continued
<TABLE>

         A summary of the Company's  consolidated statement of earnings for 2000
         follows:
                                                                                          For the Year Ended
                                                                                           December 31, 2000
                                                                                      -------------------------
                                                                                        Excluding        As
            ($ in thousands)                                                               ICNY        Reported
            ----------------------------------------------------------------------------------------------------
<S>                                                                                        <C>          <C>
            Interest and dividend income                                                   $23,389      $31,908
            Interest expense                                                                15,689       23,325
                                                                                       -------------------------
            Net interest and dividend income                                                 7,700        8,583
            Provision for loan loss reserves                                                   275          275
                                                                                       -------------------------
            Net interest and dividend income after provision for loan loss reserves          7,425        8,308
            Noninterest income                                                                 505          983
            Noninterest expenses                                                             3,830        4,568
                                                                                       -------------------------
            Earnings before taxes and extraordinary item                                     4,100        4,723
            Provision for income taxes                                                       1,621        1,909
            Extraordinary item, net of tax                                                       -         (206)
            ----------------------------------------------------------------------------------------------------
            Net earnings                                                                   $ 2,479      $ 2,608
            ----------------------------------------------------------------------------------------------------
            The  amounts  reported  in  the table above are after elimination of
            intercompany revenue and expense.
</TABLE>


3.       Securities

         The carrying values (estimated fair values) of securities available for
         sale at December 31, 2000 are summarized as follows:

<TABLE>
                                                                        Gross        Gross
                                                        Amortized  Unrealized   Unrealized  Carrying
                 ($ in thousands)                            Cost       Gains       Losses     Value
                 ------------------------------------------------------------------------------------
<S>                                                       <C>              <C>        <C>    <C>
                 U.S. Government agency securities        $75,194          $-         $405   $74,789
                 ------------------------------------------------------------------------------------
</TABLE>

         On December 31, 2000,  Intervest Bank transferred its entire securities
         held-to-maturity   portfolio  (consisting  of  U.S.  government  agency
         securities  with  an  estimated  fair  value  of  $74,789,000)  to  the
         securities available-for-sale portfolio. The transfer was made in order
         to  provide   additional   flexibility  for   implementing  the  Bank's
         asset/liability management strategies.

         The   available-for-sale   portfolio   consists  of   fixed-rate   debt
         obligations  of the Federal Home Loan Bank (FHLB),  Federal Farm Credit
         Bank (FFCB) and Federal National Mortgage  Association  (FNMA). Most of
         the  securities  have  terms that allow the issuer the right to call or
         prepay its obligation without prepayment penalty.  The weighted-average
         yield of the  portfolio  was 5.81% at December 31, 2000.  There were no
         sales of  securities  during 2000,  1999 and 1998,  and no transfers of
         securities  to  the  available-for-sale  portfolio  in  1999  or  1998.
         Intervest  Bank expects to classify any future  purchases of securities
         until 2002 as available for sale.

         The  amortized  cost and  carrying  values  (estimated  fair values) of
         securities  available for sale at December 31, 2000, by remaining  term
         to contractual maturity are summarized as follows:
                                                        Amortized       Carrying
             ($ in thousands)                                Cost          Value
             -------------------------------------------------------------------
             Due in one year or less                     $  1,000           $998
             Due after one year through five years         64,190         63,809
             Due after five years through ten years        10,004          9,982
             -------------------------------------------------------------------
                                                          $75,194        $74,789
             -------------------------------------------------------------------

                                       49
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
3.       Securities, Continued

<TABLE>
         The  carrying  values  (amortized  cost) and  estimated  fair values of
         securities held to maturity are summarized as follows:

                                                                        Gross       Gross  Estimated
                                                                        -----       -----  ---------
                                                        Amortized  Unrealized  Unrealized       Fair
                                                        ---------  ----------  ----------       ----
           ($ in thousands)                                  Cost       Gains      Losses      Value
           ---------------------------------------------------------------------------------------------
           At December 31, 2000:
<S>                                                       <C>                <C>        <C>     <C>
              U.S. Government agency securities           $20,970            $8         $  -    $20,978
           ---------------------------------------------------------------------------------------------

           At December 31, 1999:
              U.S. Government agency securities           $83,132            $1       $3,251    $79,882
           ---------------------------------------------------------------------------------------------
</TABLE>


         At  December  31,  2000,  securities  held  to  maturity  consisted  of
         Intervest  National  Bank's  holdings of short-term (due in one year or
         less),  fixed-rate  debt  obligations of the FHLB, FNMA and the Federal
         Home Loan Mortgage Corporation  (FHLMC). The weighted-average  yield of
         the held-to-maturity portfolio was 6.52% at December 31, 2000 and 5.80%
         at December 31, 1999.

4.       Loans Receivable

<TABLE>
         Loans receivable are summarized as follows:

                                                  At December 31, 2000         At December 31, 1999
                                                  --------------------         --------------------
           ($ in thousands)                     # of loans        Amount     # of loans        Amount
           -------------------------------------------------------------------------------------------
<S>                                                 <C>         <C>                <C>       <C>
           Residential multifamily loans            137         $144,916           120       $116,729
           Commercial real estate loans             124          118,368           110         93,293
           Residential 1-4 family loans              39            3,034            44          2,311
           Commercial business loans                 39            1,781            42          2,107
           Consumer loans                            18              206            24            242
           -------------------------------------------------------------------------------------------
           Loans receivable                         357          268,305           340        214,682
           -------------------------------------------------------------------------------------------
           Deferred loan fees                                     (1,979)                      (1,745)
           Allowance for loan loss reserves                       (2,768)                      (2,493)
           -------------------------------------------------------------------------------------------
           Loans receivable, net                                $263,558                     $210,444
           -------------------------------------------------------------------------------------------
</TABLE>


         Credit  risk,  which  represents  the  possibility  of the  Company not
         recovering amounts due from its borrowers,  is significantly related to
         local economic  conditions in the areas the properties are located,  as
         well  as the  Company's  underwriting  standards.  Economic  conditions
         affect the market  value of the  underlying  collateral  as well as the
         levels of  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  summarized as
follows:
<TABLE>



                                          At December 31, 2000      At December 31, 1999
                                         ---------------------      --------------------
           ($ in thousands)                 Amount    % of Total       Amount    % of Total
           --------------------------------------------------------------------------------
<S>                                       <C>             <C>        <C>            <C>
           New York                       $134,905        50.3%      $103,477       48.2%
           Florida                         125,350        46.7         95,383       44.4
           Connecticut and New Jersey        5,263         2.0          9,722        4.5
           All other                         2,787         1.0          6,100        2.9
           --------------------------------------------------------------------------------
                                          $268,305       100.0%      $214,682      100.0%
           --------------------------------------------------------------------------------
</TABLE>

                                       50
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
5.       Allowance for Loan Loss Reserves
         Activity in  the  allowance  for loan loss  reserves is  summarized  as
         follows:
                                                 For the Year Ended December 31,
                                                 -------------------------------
          ($ in thousands)                      2000          1999         1998
          ----------------------------------------------------------------------
          Allowance at beginning of year      $2,493        $1,662       $1,173
          Provision charged to operations        275           830          479
          Recoveries                               -             1           10
          ----------------------------------------------------------------------
          Allowance at end of year            $2,768        $2,493       $1,662
          ----------------------------------------------------------------------

         No loans were on  nonaccrual  status or classified as impaired in 2000,
         1999 or 1998.

6.       Premises and Equipment, Lease Commitments and Rental Expense
         Premises and equipment is summarized as follows:
                                                               At December 31,
                                                               ---------------
          ($ in thousands)                                    2000         1999
          ----------------------------------------------------------------------
          Land                                              $1,264       $1,264
          Buildings                                          4,294        4,016
          Leasehold improvements                               324          324
          Furniture, fixtures and equipment                  1,889        1,867
          ----------------------------------------------------------------------
          Total cost                                         7,771        7,471
          ----------------------------------------------------------------------
          Less accumulated deprecation and amortization     (2,040)      (1,608)
          ----------------------------------------------------------------------
          Net book value                                    $5,731       $5,863
          ----------------------------------------------------------------------

         Intervest Bank leases its office at Belcher Road in Clearwater, Florida
         and Intervest National Bank and Intervest Corporation of New York lease
         their offices in Rockefeller  Center, New York City. The leases contain
         operating escalation clauses related to taxes and operating costs based
         upon  various  criteria  and  are  accounted  for as  operating  leases
         expiring in June 2007, May 2008 and September 2004, respectively. Total
         future   minimum   annual  lease   rental   payments  due  under  these
         noncancellable  operating  leases  as of  December  31,  2000  were  as
         follows: $551,000 in 2001; $554,000 in 2002; $558,000 in 2003; $541,000
         in 2004;  $400,000 in 2005;  and  $1,011,000  thereafter.  Rent expense
         aggregated $522,000 in 2000, $461,000 in 1999 and $271,000 in 1998.

         Intervest Bank subleases  certain of its space to other companies under
         leases  that  expire at  various  times  through  August  2007.  Future
         sublease  rental  income due under such leases as of December  31, 2000
         aggregated as follows:  $359,000 in 2001; $340,000 in 2002; $280,000 in
         2003;  $256,000 in 2004;  $231,000 in 2005;  and  $297,000  thereafter.
         Sublease rental income aggregated $340,000 in 2000 and $338,000 in 1999
         and 1998.

7.       Deposits
<TABLE>

         Scheduled maturities of certificates of deposit accounts are summarized
         as follows:

                                        At December 31, 2000       At December 31, 1999
                                        --------------------       --------------------
                                                     Wtd-Avg                     Wtd-Avg
          ($ in thousands)              Amount   Stated Rate       Amount    Stated Rate
          -----------------------------------------------------------------------------------
<S>                                   <C>            <C>          <C>           <C>
          Within one year             $133,433       6.44%        $75,815       5.56%
          Over one to two years         47,878       6.65          18,992       5.77
          Over two to three years        8,274       6.23          12,148       6.03
          Over three to four years       9,359       6.37           5,288       5.84
          Over four years               18,712       6.88          10,551       6.32
          -----------------------------------------------------------------------------------
                                      $217,656       6.51%       $122,794       5.72%
          -----------------------------------------------------------------------------------
</TABLE>

                                       51
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
7.       Deposits, Continued

         Certificates   of  deposit   accounts  of  $100,000  or  more   totaled
         $48,874,000   and   $18,240,000   at   December   31,  2000  and  1999,
         respectively. At December 31, 2000, certificates of deposit accounts of
         $100,000 or more by remaining maturity were as follows:  due within one
         year  $30,442,000;  over one to two years $11,677,000 over two to three
         years  $921,000;  over  three to four years  $2,052,000;  and over four
         years $3,782,000.

         Interest expense on deposits is summarized as follows:

                                                 For the Year Ended December 31,
                                                 -------------------------------
          ($ in thousands)                      2000         1999         1998
          ----------------------------------------------------------------------
          Interest-checking accounts           $ 232        $ 238         $216
          Savings accounts                       897        1,059          832
          Money-market accounts                2,832        1,882        1,079
          Certificates of deposit accounts    10,892        5,524        5,821
          ----------------------------------------------------------------------
                                             $14,853       $8,703       $7,948
          ----------------------------------------------------------------------

 8.      Debentures Payable and Extraordinary Item
<TABLE>

         Debentures outstanding are summarized as follows:

                                                                                             At December 31,
                                                                                             ---------------
          ($ in thousands)                                                                2000           1999
          ----------------------------------------------------------------------------------------------------
          INTERVEST CORPORATION OF NEW YORK:
<S>              <C>   <C>              <C>                        <C>                     <C>         <C>
          Series 06/29/92 - interest at 2% above prime - due April 1, 2000                 $   -       $7,000
          Series 09/13/93 - interest at 2% above prime - due October 1, 2001                   -        8,000
          Series 01/28/94 - interest at 2% above prime - due April 1, 2002                     -        4,500
          Series 10/28/94 - interest at 2% above prime - due April 1, 2003                     -        4,500
          Series 05/12/95 - interest at 2% above prime - due April 1, 2004                 9,000        9,000
          Series 10/19/95 - interest at 2% above prime - due October 1, 2004               9,000        9,000
          Series 05/10/96 - interest at 2% above prime - due April 1, 2005                10,000       10,000
          Series 10/15/96 - interest at 2% above prime - due October 1, 2005               5,500        5,500
          Series 04/30/97 - interest at 1% above prime - due October 1, 2005               8,000        8,000
          Series 11/10/98 - interest at 8% fixed       - due January 1, 2001               1,400        1,400
          Series 11/10/98 - interest at 81/2% fixed    - due January 1, 2003               1,400        1,400
          Series 11/10/98 - interest at 9% fixed       - due January 1, 2005               2,600        2,600
          Series 06/28/99 - interest at 8% fixed       - due July 1, 2002                  2,500        2,500
          Series 06/28/99 - interest at 81/2% fixed    - due July 1, 2004                  2,000        2,000
          Series 06/28/99 - interest at 9% fixed       - due July 1, 2006                  2,000        2,000
          Series 09/18/00 - interest at 8% fixed       - due January 1, 2004               1,250            -
          Series 09/18/00 - interest at 81/2% fixed    - due January 1, 2006               1,250            -
          Series 09/18/00 - interest at 9% fixed       - due January 1, 2008               1,250            -
                                                                                   ---------------------------
                                                                                          57,150       77,400
          INTERVEST BANCSHARES CORPORATION:
          Series 05/14/98 - interest at 8% fixed       - due July 1, 2008                  6,930        6,930
          ----------------------------------------------------------------------------------------------------
                                                                                         $64,080      $84,330
          ----------------------------------------------------------------------------------------------------
</TABLE>
         The "Prime" in the  preceding  table  refers to the prime rate of Chase
         Manhattan  Bank,  which  was 9.5% on  December  31,  2000 and  8.50% on
         December 31, 1999. In 2000, Intervest  Corporation of New York's Series
         6/29/92,  9/13/93, 1/28/94 and 10/28/94 debentures totaling $24,000,000
         in  principal  were  redeemed  prior to  maturity  for the  outstanding
         principal  amount plus  accrued  interest  aggregating  $3,970,000.  In
         connection  with  these  early  redemptions,  $382,000  of  unamortized
         deferred  debenture  offering costs was charged to expense and reported
         as an extraordinary  charge,  net of a tax benefit of $176,000,  in the
         consolidated  statement  of earnings  for the year ended  December  31,
         2000.

                                       52
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
8.       Debentures Payable and Extraordinary Item, Continued

         Intervest  Corporation  of New  York's  floating-rate  Series  5/12/95,
         10/19/95,  5/10/96,  10/15/96  and  4/30/97  debentures  have a maximum
         interest  rate of 12%.  Interest on an aggregate of $6,540,000 of these
         debentures is accrued and compounded quarterly,  and is due and payable
         at maturity.  The payment of interest on the  remaining  debentures  is
         made quarterly. Any debenture holder in the aforementioned Series whose
         interest  accrues  and is due at  maturity  may at any  time  elect  to
         receive the accrued interest and subsequently  receive regular payments
         of interest.

         Intervest Corporation of New York's Series 11/10/98,  6/28/99, 09/18/00
         debentures accrue and compound interest  quarterly,  with such interest
         due and  payable  at  maturity.  The  holders of these  debentures  can
         require Intervest  Corporation of New York to repurchase the debentures
         for face amount plus accrued  interest  each year  beginning on July 1,
         2001, July 1, 2002 and January 1, 2004, respectively, provided, however
         that in no  calendar  year will  Intervest  Corporation  of New York be
         required to purchase  more than  $100,000 in  principal  amount of each
         maturity of debentures, on a non-cumulative basis.

         All of Intervest  Corporation of New York's debentures may be redeemed,
         in whole or in part, at any time at the option of Intervest Corporation
         of New York,  for face  value,  except for Series  9/18/00  debentures,
         which would be at a premium of 1% if the redemption is prior to January
         1, 2002.  All the  debentures  are  unsecured  and  subordinate  to all
         present and future senior indebtedness, as defined.

         The Holding  Company's Series 5/14/98  subordinated  debentures are due
         July 1, 2008 and are  convertible  at the option of the  holders at any
         time prior to April 1, 2008, unless previously  redeemed by the Holding
         Company,  into shares of Class A common stock of the Holding Company at
         the following  conversion  prices per share:  $14.00 in 2001; $15.00 in
         2002;  $16.00 in 2003;  $18.00 in 2004; $21.00 in 2005; $24.00 in 2006;
         $27.00 in 2007 and $30.00 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.  On January 13, 1999,  the  conversion  prices were adjusted
         downward  from those set at the  original  offering  date to the prices
         shown above. During 1999,  debentures in the aggregate principal amount
         of $70,000, plus accrued interest,  were converted into shares of Class
         A common stock at the election of the debenture holders. The conversion
         price was $10 per  share,  which  resulted  in 7,554  shares of Class A
         common stock being issued in connection with the conversions.

         The Holding  Company also has the option at any time to call all or any
         part of the  convertible  debentures for payment and redeem the same at
         any time prior to maturity  thereof for face amount.  Interest  accrues
         and compounds each calendar  quarter at 8%. All accrued interest 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  commencing  July 1,  2003,  elect  to be paid  all  accrued
         interest and to thereafter receive payments of interest quarterly.

         Scheduled  contractual  maturities of all debentures as of December 31,
         2000 are summarized as follows:

          ($ in thousands)                          Principal   Accrued Interest
          ----------------------------------------------------------------------
          For the year ended December 31, 2001         $1,400             $1,233
          For the year ended December 31, 2002          2,500                295
          For the year ended December 31, 2003          1,400                265
          For the year ended December 31, 2004         21,250              3,418
          For the year ended December 31, 2005         26,100              1,682
          Thereafter                                   11,430              1,840
          ----------------------------------------------------------------------
                                                      $64,080             $8,733
          ----------------------------------------------------------------------

                                       53
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
  9.     Federal funds Purchased and Other Borrowed Funds

         From time to time, the Banks purchase federal funds to manage liquidity
         needs.  At  December  31,  2000,  there were no such fund  outstanding,
         compared to  $6,955,000 at December 31, 1999.  Intervest  Bank also has
         agreements  with  correspondent  banks  whereby  it  may  borrow  up to
         $6,000,000 on an unsecured basis. There were no outstanding  borrowings
         under these agreements at December 31, 2000 or 1999.

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.  At
         December 31, 2000 and 1999,  there  was 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 Banks are required  under  Federal  Reserve  Board  regulations  to
         maintain reserves,  generally consisting of cash or noninterest-earning
         accounts,  against its transaction  accounts.  At December 31, 2000 and
         1999, balances maintained as reserves were not material.

         As a member of  the  Federal  Reserve  Banking  system,  the Banks must
         maintain an  investment  in  the capital  stock of the Federal  Reserve
         Bank. At December 31, 2000 and 1999,  such  investment,  which  earns a
         dividend, aggregated $605,000 and $508,000,  respectively. At  December
         31, 2000, U.S. government  agency securities  available for sale with a
         carrying  value of $6,127,000  were  pledged  against  various  deposit
         accounts. At December 31, 1999, U.S. government  agency securities with
         a carrying  value of  $5,500,000  were  pledged  against  federal funds
         purchased.

         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 is subject to various  regulatory  restrictions.
         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.

12.      Profit Sharing Plans

         The Company's subsidiaries sponsor tax-qualified,  profit sharing plans
         in accordance  with the  provisions  of Section  401(k) of the Internal
         Revenue  Code.  The  plans  are  available  to  employees  who elect to
         participate  after  meeting  certain  length-of-service   requirements.
         Contributions  to the profit  sharing plans are  discretionary  and are
         determined  annually.  Total contributions to the plans included in the
         consolidated  statements of earnings  aggregated  $26,141,  $25,000 and
         $22,000 for 2000, 1999 and 1998, respectively.


                                       54
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
13.      Related Party Transactions

         Intervest  Bank has made loans to certain  of its  directors  and their
related entities. The activity is as follows:

                                                 For the Year Ended December 31,
                                                 -------------------------------

           ($ in thousands)                     2000          1999         1998
          ----------------------------------------------------------------------
          Balance at beginning of year        $3,395        $3,826       $3,242
          Additions                               50            25          868
          Repayments                            (134)         (456)        (284)
          ----------------------------------------------------------------------
          Balance at end of year              $3,311        $3,395       $3,826
          ----------------------------------------------------------------------

         There are no loans to any directors or officers of the Holding  Company
         or its  other  subsidiaries.  The  Banks  have  deposit  accounts  from
         directors,  executive  officers and members of their immediate families
         and related business interests of approximately  $3,967,000 at December
         31, 2000 and $3,482,000 at December 31, 1999.

14.      Common Stock Warrants

         The Holding Company has common stock warrants  outstanding that entitle
         the  registered  holders  thereof to purchase one share of common stock
         for each warrant. All warrants are exercisable when issued,  except for
         certain  Class B common  stock  warrants  issued in 1998.  The  Holding
         Company's  warrants  have been issued in  connection  with public stock
         offerings,  to directors and employees of Intervest  Bank and directors
         of the Holding  Company and to outside third parties for performance of
         services.
<TABLE>

         Data concerning common stock warrants is summarized as follows:

                                                               Exercise Price Per Warrant
                                                               --------------------------
                                                                                                    Total             Wtd-Avg
         Class A Common Stock Warrants:              $6.67          $11.50 (1)     $15.00 (2)     Warrants      Exercise Price
         ---------------------------------------------------------------------------------------------------------------------------
<S>                              <C> <C>         <C>                  <C>                        <C>                    <C>
         Outstanding at December 31, 1997        1,528,665            965,683              -     2,494,348              $ 7.96
            Granted in 1998                              -                 20        122,000       122,020              $14.00
            Exercised in 1998                      (56,100)            (4,000)             -       (60,100)             $ 6.89
                                                ------------------------------------------------------------
         Outstanding at December 31, 1998        1,472,565            961,703        122,000     2,556,268              $ 8.27
            Granted in 1999                              -              1,000              -         1,000              $10.00
            Exercised in 1999                      (89,000)              (300)             -       (89,300)             $ 6.68
                                                ------------------------------------------------------------
         Outstanding at December 31, 1999        1,383,565            962,403        122,000     2,467,968              $ 8.33
            Exercised in 2000                      (12,750)                 -              -       (12,750)             $ 6.67
         ---------------------------------------------------------------------------------------------------
         Outstanding at December 31, 2000        1,370,815            962,403        122,000     2,455,218              $ 8.98
         ---------------------------------------------------------------------------------------------------------------------------
         Remaining contractual life in years
             at December 31, 2000                      2.5                2.0            2.0          2.3
         ---------------------------------------------------------------------------------------------------------------------------
<FN>
         (1) The  exercise  price per warrant  increases  to $12.50 per share in
             2001 and $13.50 per share in 2002.

         (2) The  exercise  price per  warrant  increase  to $16.00 per share in
             2001 and $17.00 per share in 2002.
</FN>
</TABLE>

<TABLE>
                                                                 Exercise Price Per Warrant
                                                                 --------------------------        Total              Wtd-Avg
         Class B Common Stock Warrants:                                $6.67      $10.00 (1)    Warrants       Exercise Price
         ---------------------------------------------------------------------------------------------------------------------------
<S>                              <C>                                 <C>                          <C>               <C>
         Outstanding at December 31,1997                             150,000           -          150,000           $ 6.67
            Granted in 1998 (1)                                            -         50,000        50,000           $10.00
                                                                  ---------------------------------------
         Outstanding at December 31,1998                             150,000         50,000       200,000           $ 7.50
            Exercised in 1999                                         (5,000)             -        (5,000)          $ 6.67
         ------------------------------------------------------------------------------------------------
         Outstanding at December 31,1999 and 2000                    145,000         50,000       195,000           $ 7.52
         ------------------------------------------------------------------------------------------------
         Remaining contractual life in years at December 31, 2000        6.1            7.1           6.3
         ---------------------------------------------------------------------------------------------------------------------------
<FN>
         (1) At December 31, 2000,  21,300 of these  warrants  were  immediately
         exercisable.  An additional 7,100 warrants vest and become  exercisable
         on each April 27th of 2001,  2002,  2003,  and the  remaining  7,400 on
         April 27, 2004. The warrants,  which expire on January 31, 2008, become
         fully vested earlier upon certain conditions.
</FN>
</TABLE>

                                       55
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
14.      Common Stock Warrants, Continued

         The Company uses 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 is the excess,  if any, of the market
         price of the stock as of the grant date over the exercise  price of the
         warrant. The exercise price of the Class B warrants granted in 1998 was
         below  the  market  price of the  common  shares  at the date of grant.
         Therefore,  in  accordance  with  APB  Opinion  No.  25,  approximately
         $26,000,  $26,000  and $43,000 was  included in salaries  and  employee
         benefits expense for 2000, 1999 and 1998,  respectively,  in connection
         with these warrants.  No compensation  expense was recorded  related to
         the remaining  stock  warrants  granted in 1998 because their  exercise
         prices  were the same as the market  price of the common  shares at the
         date of grant.  Had  compensation  expense been determined based on the
         estimated  fair value of the  warrants at the grant date in  accordance
         with SFAS No.  123,  "Accounting  for  Stock-Based  Compensation,"  the
         Company's  net  earnings and earnings per share would have been reduced
         to the pro forma amounts as follows:
<TABLE>

                                                                For the Year Ended December 31,
                                                                -------------------------------
          ($ in thousands, except per share amounts)          2000           1999         1998
          -------------------------------------------------------------------------------------
<S>                                                         <C>            <C>          <C>
          Reported net earnings                             $2,608         $1,767       $2,382
          Pro forma net earnings (1)                        $2,585         $1,744       $2,093
          Reported basic earnings per share                  $0.67          $0.47        $0.64
          Pro forma basic earnings per share                 $0.66          $0.46        $0.56
          Reported diluted earnings per share                $0.67          $0.44        $0.54
          Pro forma diluted earnings per share               $0.66          $0.43        $0.48
          -------------------------------------------------------------------------------------
<FN>

 .                 (1) Pro forma net  earnings for 1998 does not reflect the full
                  impact of calculating  compensation expense related to Class B
                  stock  warrants  granted  in 1998,  since  the  total  expense
                  calculated  under SFAS No.123 is apportioned  over the vesting
                  period of those warrants.
</FN>
</TABLE>

         The per share  weighted-average  estimated  fair value of 172,000 stock
         warrants  granted to employees  and  directors in 1998 was $3.63 on the
         date  of  grant  using  the  Black-Scholes  option-pricing  model.  The
         following   weighted-average   assumptions   were  used:   no  expected
         dividends; expected life of 2.9 years, expected price volatility of 25%
         and a 5.5% risk-free  interest rate. For 1999, a fair value calculation
         for the 1,000 warrants issued was not performed  because the impact was
         not significant. The assumptions used are subjective in nature, involve
         uncertainties and cannot be determined with precision.

15.      Income Taxes

         The Holding Company and its  subsidiaries  file a consolidated  federal
         income tax return. The Holding Company also files  consolidated  income
         tax returns with Intervest  National Bank and Intervest  Corporation of
         New York in New York State and New York City. In addition,  the Holding
         Company  files a state  income tax return in New Jersey and a franchise
         tax return in Delaware.  Intervest Bank files a state income tax return
         in Florida. All the returns are filed on a calendar year basis.

         At December 31, 2000 and 1999, the Company had a net deferred tax asset
         of  $1,105,000  and  $936,000,  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.  The  ultimate
         realization  of  such  assets  is  dependent  upon  the  generation  of
         sufficient  taxable income during the periods in which those  temporary
         differences  become  deductible.  Management  believes  that it is more
         likely than not that the Company's  deferred tax asset will be realized
         and accordingly,  a valuation allowance for deferred tax assets was not
         maintained at any time during 2000, 1999 or 1998.

                                       56
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
15.      Income Taxes, Continued
<TABLE>

         The total tax expense (benefit) is as follows:

                                                               For the Year Ended December 31,
                                                               -------------------------------
          ($ in thousands)                                        2000        1999         1998
          -------------------------------------------------------------------------------------
<S>                                                             <C>          <C>         <C>
          Provision for income taxes                            $1,909       $1,198      $1,740
          Benefit from change in accounting principle                -          (65)          -
          Benefit from extraordinary item                         (176)           -           -
          -------------------------------------------------------------------------------------
                                                                $1,733       $1,133      $1,740
          -------------------------------------------------------------------------------------

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

                   ($ in thousands)                            Current     Deferred       Total
                   ------------------------------------------------------------------------------
                   Year Ended December 31, 2000:
                   ----------------------------
                      Federal                                   $1,350        $ (10)     $1,340
                      State and Local                              399           (6)        393
                   ------------------------------------------------------------------------------
                                                                $1,749        $ (16)     $1,733
                   ------------------------------------------------------------------------------
                   Year Ended December 31, 1999:
                   ----------------------------
                      Federal                                   $1,123        $(263)     $  860
                      State and Local                              337          (64)        273
                   ------------------------------------------------------------------------------
                                                                $1,460        $(327)     $1,133
                   ------------------------------------------------------------------------------
                   Year Ended December 31, 1998:
                   ----------------------------
                      Federal                                   $1,290        $ (74)      $1,216
                      State and Local                              534          (10)         524
                   ------------------------------------------------------------------------------
                                                                $1,824        $ (84)      $1,740
                   ------------------------------------------------------------------------------

         The components of the deferred tax benefit is summarized as follows:

                                                                   For the Year Ended December 31,
                                                                   ------------------------------
                   ($ in thousands)                                2000        1999        1998
                   ------------------------------------------------------------------------------
                   Allowance for loan loss reserves               $  16       $(262)      $(185)
                   Organization and startup costs                   (10)        (99)          -
                   Stock-based compensation                         (17)        (12)        (15)
                   Depreciation                                     (33)         (3)        (38)
                   Net operating loss carryforwards                   -          61         125
                   All other                                         28         (12)         29
                   ------------------------------------------------------------------------------
                                                                  $ (16)      $(327)      $ (84)
                   ------------------------------------------------------------------------------


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

                                                                                  At December 31,
                                                                                  --------------
                   ($ in thousands)                                               2000        1999
                   -------------------------------------------------------- ------------ -----------
                   Allowance for loan loss reserves                             $  729        $745
                   Unrealized net loss on securities available for sale            153           -
                   Organization and startup costs                                  109          99
                   Stock-based compensation                                         44          27
                   Depreciation                                                     55          22
                   All other                                                        15          43
                   -------------------------------------------------------------------------------
                   Total deferred tax asset                                     $1,105        $936
                   -------------------------------------------------------------------------------

</TABLE>

                                       57
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
15.      Income Taxes, Continued
<TABLE>

         The  reconciliation  between the statutory  federal income tax rate and
         the Company's  effective tax rate (including  state and local taxes) is
         as follows:
                                                                           For the Year Ended December 31,
                                                                           ------------------------------
                   ($ in thousands)                                        2000        1999         1998
                   --------------------------------------------------------------------------------------
<S>                                                                        <C>         <C>          <C>
                   Tax provision at statutory rate                         34.0%       34.0%        34.0%
                   Increase (decrease) in taxes resulting from:
                     State and local income taxes, net of federal benefit   6.4         6.3          8.2
                      Other                                                   -        (1.6)           -
                   -------------------------------------------------------------------------------------------
                                                                           40.4%       38.7%        42.2%
                   -------------------------------------------------------------------------------------------
</TABLE>

16.      Earnings Per Share
<TABLE>

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

                                                                                         For the Year Ended December 31,
                                                                                         ------------------------------
             ($ in thousands, except share and per share amounts)                        2000          1999         1998
             ------------------------------------------------------------------------------------------------------------
             Basic earnings per share:
<S>                                                                                    <C>           <C>          <C>
               Net earnings applicable to common stockholders                          $2,608        $1,767       $2,382
               Average number of common shares outstanding                          3,884,560     3,760,293    3,707,113
             ------------------------------------------------------------------------------------------------------------
             Basic earnings per share amount                                            $0.67         $0.47        $0.64
             ------------------------------------------------------------------------------------------------------------

             Diluted earnings per share:
               Net earnings applicable to common stockholders                          $2,608        $1,767       $2,382
               Adjustment to net earnings from assumed conversion of debentures             -             -          172
                                                                                    -------------------------------------
               Adjusted net earnings for diluted earnings per share computation        $2,608        $1,767       $2,554
                                                                                    -------------------------------------
               Average number of common shares outstanding:
                  Common shares outstanding                                         3,884,560     3,760,293    3,707,113
                   Potential dilutive shares resulting from exercise of warrants            -       259,825      630,457
                   Potential dilutive shares resulting from conversion of debentures        -             -      385,946
                                                                                    -------------------------------------
               Total average number of common shares outstanding used for dilution  3,884,560     4,020,118    4,723,516
             ------------------------------------------------------------------------------------------------------------
             Diluted earnings per share amount                                          $0.67         $0.44        $0.54
             ------------------------------------------------------------------------------------------------------------
</TABLE>

         Certain common stock  warrants were not considered in the  computations
         of diluted EPS because  they were not dilutive and they are as follows:
         2,650,000  warrants with exercise  prices  ranging from $6.67 to $15.00
         for 2000;  1,134,000  warrants with exercise prices ranging from $10.00
         to $14.00 for 1999;  and 122,000  warrants  with an  exercise  price of
         $14.00  for  1998.   Additionally,   convertible   debentures  totaling
         $6,930,000 and  convertible (at $12.50 per share in 2000 and $10.00 per
         share in 1999) into Class A common  stock were  excluded  from the 2000
         and 1999 diluted EPS computations because they were not dilutive.

17.      Contingencies

         The Company is periodically a party to or  otherwise  involved in legal
         proceedings arising in the normal course of business, such as claims to
         enforce  liens,  claims  involving the making and servicing of mortgage
         loans, and other issues incident to the Company's business.  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,  or financial
         position of the Company.

                                       58
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
18.      Regulatory Matters

         The Company is subject to regulation,  examination  and  supervision by
         the Federal  Reserve  Bank.  The Banks are also subject to  regulation,
         examination   and   supervision  by  the  Federal   Deposit   Insurance
         Corporation. In addition,  Intervest Bank is subject to the regulation,
         examination  and  supervision of the Florida  Department of Banking and
         Finance,  while  Intervest  National Bank is subject to the regulation,
         examination  and  supervision  of the Office of the  Comptroller of the
         Currency of the United States of America ("OCC").

         The  Company  (on a  consolidated  basis) and the Banks are  subject to
         various  regulatory  capital  requirements  administered by the federal
         banking  agencies.  Failure to meet capital  requirements  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 Banks' financial  statements.  Under capital adequacy
         guidelines and the regulatory  framework for prompt corrective  action,
         the Company and the Banks 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  Banks 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.

         Management  believes,  as of  December  31,  2000  and  1999,  that the
         Company,  Intervest  Bank and  Intervest  National Bank met all capital
         adequacy  requirements  to which they are  subject.  As of December 31,
         2000, the most recent notification from the regulators  categorized the
         Banks as well-capitalized  institutions 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 believes that there are no current conditions
         or events  outstanding  that would  change the  designations  from well
         capitalized.

         On June 15, 2000, Intervest National Bank and its primary regulator the
         OCC entered into a Memorandum  of  Understanding.  The  memorandum is a
         formal  written  agreement  whereby,  among  other  things,   Intervest
         National  Bank shall  review,  revise,  develop and  implement  various
         policies  and  procedures  with  respect  to  its  lending  and  credit
         underwriting.   Management  has  implemented  various  actions  towards
         bringing   Intervest  National  Bank  into  full  compliance  with  the
         memorandum.

         The following  tables present  information  regarding the Company's and
the Banks' capital adequacy.
<TABLE>

                                                                                                     Minimum to Be Well
                                                                                                     ------------------
                                                                                                      Capitalized Under
                                                                                                      -----------------
                                                                               Minimum Capital        Prompt Corrective
                                                                               ---------------        -----------------
                                                             Actual              Requirements         Action Provisions
                                                             ------              ------------         -----------------
         ($ in thousands)                              Amount      Ratio      Amount      Ratio       Amount      Ratio
         ------------------------------------------------------------------------------------------------------------------
         Consolidated as of December 31, 2000:
         ------------------------------------
<S>                                                     <C>          <C>       <C>           <C>
            Total capital to risk-weighted assets       $38,382      12.63%    $24,309       8.00%      NA          NA
            Tier 1 capital to risk-weighted assets      $35,614      11.72%    $12,155       4.00%      NA          NA
            Tier 1 capital to average assets            $35,614       8.75%    $16,275       4.00%      NA          NA

         Consolidated as of December 31, 1999:
         ------------------------------------
            Total capital to risk-weighted assets       $35,252      14.31%    $19,704       8.00%      NA          NA
            Tier 1 capital to risk-weighted assets      $32,759      13.30%     $9,852       4.00%      NA          NA
            Tier 1 capital to average assets            $32,759       9.55%    $13,720       4.00%      NA          NA
         ------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       59
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
18.      Regulatory Matters, Continued
<TABLE>

                                                                                                     Minimum to Be Well
                                                                                                     ------------------
                                                                                                      Capitalized Under
                                                                                                      -----------------
                                                                               Minimum Capital        Prompt Corrective
                                                                               ---------------        -----------------
                                                             Actual              Requirements         Action Provisions
                                                             ------              ------------         -----------------
         ($ in thousands)                              Amount      Ratio      Amount      Ratio       Amount      Ratio
         --------------------------------------------------------------------------------------------------------------

         Intervest Bank at December 31, 2000:
         -----------------------------------
<S>                                                     <C>          <C>       <C>           <C>       <C>        <C>
            Total capital to risk-weighted assets       $16,019      10.80%    $11,866       8.00%     $14,832    10.00%
            Tier 1 capital to risk-weighted assets      $14,164       9.55%     $5,933       4.00%      $8,899     6.00%
            Tier 1 capital to average assets            $14,164       6.64%     $8,528       4.00%     $10,660     5.00%

         Intervest Bank at December 31, 1999:
         -----------------------------------
            Total capital to risk-weighted assets       $13,737      11.04%     $9,951       8.00%     $12,439    10.00%
            Tier 1 capital to risk-weighted assets      $12,176       9.79%     $4,976       4.00%      $7,463     6.00%
            Tier 1 capital to average assets            $12,176       6.44%     $7,562       4.00%      $9,453     5.00%
         --------------------------------------------------------------------------------------------------------------

         Intervest National Bank at December 31, 2000:
         --------------------------------------------
            Total capital to risk-weighted assets       $13,712      15.27%     $7,185       8.00%      $8,981    10.00%
            Tier 1 capital to risk-weighted assets      $12,917      14.38%     $3,592       4.00%      $5,389     6.00%
            Tier 1 capital to average assets            $12,917      11.29%     $4,578       4.00%      $5,722     5.00%

         Intervest National Bank at December 31, 1999:
         --------------------------------------------
            Total capital to risk-weighted assets        $8,724      19.02%     $3,668       8.00%      $4,586    10.00%
            Tier 1 capital to risk-weighted assets       $8,280      18.06%     $1,834       4.00%      $2,752     6.00%
            Tier 1 capital to average assets             $8,280      16.29%     $2,034       4.00%      $2,542     5.00%
         --------------------------------------------------------------------------------------------------------------
</TABLE>
19.      Off-Balance Sheet Financial Instruments

         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.   These  financial  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   balance  sheets.  The  contract  amounts  of  these
         instruments  reflect the extent of involvement the Company has in these
         financial  instruments.  The  Company's  exposure to credit loss in the
         event of  nonperformance  by the other party to the  off-balance  sheet
         financial instruments is represented by the contractual amount of those
         instruments.  The  Company  uses the same  credit  policies  in  making
         commitments as it does for on-balance sheet 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 may 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 credit worthiness
         on a case-by-case basis. The amount of collateral  obtained,  if deemed
         necessary  by the  Company  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.

                                       60
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
19.      Off-Balance Sheet Financial Instruments, Continued

         The  following  is a summary of the notional  amounts of the  Company's
off-balance sheet financial instruments.

                                                                 At December 31,
                   ($ in thousands)                             2000        1999
                   -------------------------------------------------------------
                   Unfunded loan commitments                 $17,310     $26,256
                   Available lines of credit                     560         765
                   Standby letters of credit                     167         900
                   -------------------------------------------------------------
                                                             $18,037     $27,921
                   -------------------------------------------------------------

20.      Estimated Fair Value of Financial Instruments

         Fair  value  estimates  are made at a  specific  point in time based on
         available information about each financial instrument. Where available,
         quoted market prices are used.  However,  a significant  portion of the
         Company's  financial  instruments,  such as commercial  real estate and
         multifamily  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  financial  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.
<TABLE>

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

                                                                   At December 31, 2000      At December 31, 1999
                                                                   --------------------      --------------------
                                                                     Carrying        Fair    Carrying  Fair Value
                 ($ in thousands)                                       Value       Value       Value
                 ------------------------------------------------------------------------------------------------
                 Financial Assets:
<S>                                                                   <C>         <C>         <C>         <C>
                   Cash and cash equivalents                          $42,938     $42,938     $32,095     $32,095
                   Securities available for sale, net                  74,789      74,789           -           -
                   Securities held to maturity, net                    20,970      20,978      83,132      79,882
                   Federal Reserve Bank stock                             605         605         508         508
                   Loans receivable, net                              263,558     265,068     210,444     210,594
                   Accrued interest receivable                          2,961       2,961       1,995       1,995
                 Financial Liabilities:
                   Deposit liabilities                                300,241     300,775     201,080     200,623
                   Federal funds purchased                                  -           -       6,955       6,955
                   Debentures payable plus accrued interest            72,813      72,813      92,422      91,983
                   Accrued interest payable                               856         856         461         461
                 ------------------------------------------------------------------------------------------------
</TABLE>

                                       61
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
20.      Estimated Fair Value of Financial Instruments, Continued

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

         Securities.  The estimated fair value of securities  available for sale
         and held to maturity is based on quoted  market  prices.  The estimated
         fair value of the Federal  Reserve Bank stock  approximates  fair value
         since the security does not present  credit  concerns and is redeemable
         at cost.

         Loans Receivable.  The estimated fair value of variable rate loans that
         reprice  frequently and have no significant change in credit risk since
         origination  approximates  their carrying values.  For fixed-rate loans
         estimated fair value 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 Banks for certificates of deposit with similar remaining
         maturities.

         Debentures and Accrued  Interest  Payable.  The estimated fair value of
         debentures  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.  For  2000,  management  believes  that  the  incremental
         borrowing  rate   approximated  the  current  rates  for  each  of  the
         borrowings.

         All Other Financial Assets and Liabilities. The estimated fair value of
         cash and cash equivalents,  accrued interest receivable,  federal funds
         purchased and accrued  interest  payable  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.

                                       62
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
21.      Holding Company Financial Information

<TABLE>
                            Condensed Balance Sheets
                                                                                                  At December 31,
                                                                                                  ---------------
                      ($ in thousands)                                                            2000        1999
                      -----------------------------------------------------------------------------------------------
                      ASSETS
<S>                                                                                                 <C>    <C>
                      Cash and due from banks                                                     $    19  $     9
                      Short-term investments                                                        1,428    4,877
                                                                                               ----------------------
                         Total cash and cash equivalents                                            1,447    4,886
                      Loans receivable, net  (net of allowance for loan loss reserves
                           of  $30 and $13 at December 31, 2000 and 1999)                           5,905    2,584
                      Investment in subsidiaries                                                   36,875   33,379
                      Deferred debenture offering costs                                               438      479
                      All other assets                                                                211      117
                      -----------------------------------------------------------------------------------------------
                      Total assets                                                                $44,876  $41,445
                      -----------------------------------------------------------------------------------------------

                      LIABILITIES
                      Convertible subordinated debentures payable                                 $ 6,930  $ 6,930
                      Accrued interest payable on debentures                                        1,536      892
                      All other liabilities                                                           182       19
                      -----------------------------------------------------------------------------------------------
                      Total liabilities                                                             8,648    7,841
                      -----------------------------------------------------------------------------------------------

                      STOCKHOLDERS' EQUITY
                      Common equity                                                                36,228   33,604
                      -----------------------------------------------------------------------------------------------
                      Total stockholders' equity                                                   36,228   33,604
                      -----------------------------------------------------------------------------------------------
                      Total liabilities and stockholders' equity                                  $44,876  $41,445
                      -----------------------------------------------------------------------------------------------

                        Condensed Statements of Earnings

                                                                                    For the Year Ended December 31,
                      ($ in thousands)                                                 2000        1999        1998
                      -----------------------------------------------------------------------------------------------
                      Interest income                                                $  672      $  744     $   993
                      Interest expense                                                  686         637         319
                                                                                   ----------------------------------
                      Net interest (expense) income                                     (14)        107         674
                      Provision (credit) for loan loss reserves                          17         (42)         55
                      Noninterest income                                                165         161         109
                      Noninterest expenses                                              405         197         197
                                                                                   ----------------------------------
                      (Loss) earnings before income taxes                              (271)        113         531
                      (Credit) provision for income taxes                              (131)         53         245
                                                                                   ----------------------------------
                      Net (loss) earnings before earnings (loss) of subsidiaries       (140)         60         286
                      Equity in earnings of Intervest Bank                            2,002       1,642       1,149
                      Equity in earnings (loss) of Intervest National Bank              617        (507)          -
                      Equity in earnings of Intervest Corporation of New York           129         572         947
                      -----------------------------------------------------------------------------------------------
                      Net earnings                                                   $2,608      $1,767     $ 2,382
                      -----------------------------------------------------------------------------------------------

                      Cash dividends received from subsidiaries                      $3,000      $    -     $     -
</TABLE>

                                       63
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
21.      Holding Company Financial Information, Continued
<TABLE>

                                                       Condensed Statements of Cash Flows

                                                                                     For the Year Ended December 31,
                                                                                     -------------------------------
              ($ in thousands)                                                       2000          1999         1998
              --------------------------------------------------------------------------------------------------------
              OPERATING ACTIVITIES
<S>                                                                                <C>           <C>          <C>
              Net earnings                                                         $ 2,608       $ 1,767      $ 2,382
              Adjustments to  reconcile  net  earnings  to net cash
                   provided by operating activities:
              Equity in undistributed earnings of subsidiaries                      (2,748)       (1,707)      (2,096)
              Provision (credit) for loan loss reserves                                 17           (42)          55
              Deferred income tax (benefit) expense                                    (41)            7          (45)
              Compensation expense from awards of Class B stock and warrants           185            26           43
              Increase in accrued interest payable on debentures                       644           637          319
              Change in all other assets and liabilities, net                           24           135         (371)
              --------------------------------------------------------------------------------------------------------
              Net cash provided by operating activities                                689           823          287
              --------------------------------------------------------------------------------------------------------

              INVESTING ACTIVITIES
              Decrease (increase) in interest-earning deposits                           -           100         (100)
              Investment in subsidiaries                                            (4,000)       (9,018)        (500)
              Cash dividends received from subsidiaries                              3,000             -            -
              Sale of loans to subsidiaries                                              -         5,604            -
              Loan originations and principal repayments, net                       (3,368)        2,761      (10,032)
              --------------------------------------------------------------------------------------------------------
              Net cash used in investing activities                                 (4,368)         (553)     (10,632)
              --------------------------------------------------------------------------------------------------------

              FINANCING ACTIVITIES
              Net increase (decrease) in mortgage escrow funds payable                 157          (173)         142
              Proceeds from sale of convertible debentures, net of issuance costs        -             -        6,457
              Proceeds from issuance of common stock upon the exercise
                  of stock warrants, net of issuance costs                              83           622          414
              --------------------------------------------------------------------------------------------------------
              Net cash provided by financing activities                                240           449        7,013
              --------------------------------------------------------------------------------------------------------
              Net (decrease) increase in cash and cash equivalents                  (3,439)          719       (3,332)
              Cash and cash equivalents at beginning of year                         4,886         4,167        7,499
              --------------------------------------------------------------------------------------------------------
              Cash and cash equivalents at end of year                             $ 1,447       $ 4,886      $ 4,167
              --------------------------------------------------------------------------------------------------------

              SUPPLEMENTAL DISCLOSURES
              Cash paid during the year for:
                 Income taxes                                                      $  (110)      $   142      $   200
              Noncash transactions:
                 Accumulated other comprehensive income, change in
                   subsidiary's unrealized loss on securities available for sale      (252)            -            -
                 Conversion of debentures into Class A common stock                      -            70            -
                 Issuance of common stock in exchange for common
                   stock of minority stockholders of Intervest Bank                      -             7            -
              --------------------------------------------------------------------------------------------------------
</TABLE>

                                       64
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
              For the Years Ended December 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------
22.      Quarterly Financial Data (Unaudited)

<TABLE>
         The following is a summary of the  consolidated  statements of earnings
         by quarter:

                                                                                      For the Year Ended December 31, 2000
                                                                                      ------------------------------------
                                                                                      First      Second       Third      Fourth
         ($ in thousands, except per share amounts)                                 Quarter     Quarter     Quarter     Quarter
         ----------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>         <C>         <C>         <C>
         Interest and dividend income                                                $7,256      $7,658      $8,324      $8,670
         Interest expense                                                             5,412       5,552       5,943       6,418
                                                                                  ---------------------------------------------
         Net interest and dividend income                                             1,844       2,106       2,381       2,252
         Provision (credit) for loan loss reserves                                      155          90          47         (17)
                                                                                  ---------------------------------------------
         Net interest and dividend income
                after provision (credit) for loan loss reserves                       1,689       2,016       2,334       2,269
         Noninterest income                                                             162         178         338         305
         Noninterest expenses                                                         1,251       1,130       1,081       1,106
                                                                                  ---------------------------------------------
         Earnings before income taxes and extraordinary item                            600       1,064       1,591       1,468
         Provision for income taxes                                                     210         427         662         610
         Extraordinary item, net of tax                                                   -        (206)          -           -
         ----------------------------------------------------------------------------------------------------------------------
         Net earnings                                                                $  390      $  431      $  929      $  858
         ----------------------------------------------------------------------------------------------------------------------
         Basic earnings per share:
            Earnings before extraordinary item                                       $  .10      $  .16      $  .24      $  .22
            Extraordinary item, net of tax                                                -        (.05)          -           -
         ----------------------------------------------------------------------------------------------------------------------
            Net earnings per share                                                   $  .10      $  .11      $  .24      $  .22
         ----------------------------------------------------------------------------------------------------------------------
         Diluted earnings per share:
            Earnings before extraordinary item                                       $  .10      $  .16      $  .24      $  .22
            Extraordinary item, net of tax                                                -        (.05)           -          -
         ----------------------------------------------------------------------------------------------------------------------
            Net earnings per share                                                   $  .10      $  .11      $  .24      $  .22
         ----------------------------------------------------------------------------------------------------------------------

                                                                                      For the Year Ended December 31, 1999
                                                                                      ------------------------------------
                                                                                      First      Second       Third      Fourth
         ($ in thousands, except per share amounts)                                 Quarter     Quarter     Quarter     Quarter
         ----------------------------------------------------------------------------------------------------------------------
         Interest and dividend income                                                $6,129      $6,151      $6,487      $6,734
         Interest expense                                                             4,440       4,392       4,581       5,006
                                                                                  ---------------------------------------------
         Net interest and dividend income                                             1,689       1,759       1,906       1,728
         Provision for loan loss reserves                                               112         223         270         225
                                                                                  ---------------------------------------------
         Net interest and dividend income after provision for loan loss reserves      1,577       1,536       1,636       1,503
         Noninterest income                                                             414         143         219         124
         Noninterest expenses                                                           901       1,092       1,003       1,063
                                                                                  ---------------------------------------------
         Earnings before income taxes and change in accounting principle              1,090         587         852         564
         Provision for income taxes                                                     468         248         344         138
         Cumulative effect of change in accounting principle, net of tax               (128)          -           -           -
         ----------------------------------------------------------------------------------------------------------------------
         Net earnings                                                                $  494      $  339      $  508      $  426
         ----------------------------------------------------------------------------------------------------------------------
         Basic earnings per share:
             Earnings before change in accounting principle                          $  .16       $ .09      $  .14      $  .11
            Cumulative effect of change in accounting principle, net of tax            (.03)          -           -           -
         ----------------------------------------------------------------------------------------------------------------------
            Net earnings per share                                                   $  .13       $ .09      $  .14      $  .11
         ----------------------------------------------------------------------------------------------------------------------
         Diluted earnings per share:
             Earnings before change in accounting principle                          $  .15       $ .08      $  .13      $  .11
            Cumulative effect of change in accounting principle, net of tax            (.03)          -           -           -
         ----------------------------------------------------------------------------------------------------------------------
            Net earnings per share                                                   $  .12       $ .08      $  .13      $  .11
         ----------------------------------------------------------------------------------------------------------------------

</TABLE>

                                       65
<PAGE>

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

None
                                    PART III

Item 10.  Directors and Executive Officers

a.    Directors.  The information  required by this item is  contained under the
      section entitled  "Election of Directors" in the Company's Proxy Statement
      for  its  2001 Annual Meeting (the "Proxy  Statement") and is incorporated
      herein by reference.

b.    Executive Officers.  The information required by this item is set forth in
      Part  I  of  this report under the Caption Item 4A "Executive Officers and
      Other Key Employees".

c.    Compliance  with  Section 16(a).  Information  contained in the section of
      the Proxy Statement entitled "Section 16(a) Beneficial Ownership Reporting
      Compliance" is incorporated herein by reference.

Item 11.  Executive Compensation

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

Item 12.  Security Ownership of Certain Beneficial Owners and Management

The information contained in the section entitled "Security Ownership of Certain
Beneficial Owners and Management" of the Proxy Statement is incorporated  herein
by reference.

Item 13.  Certain Relationships and Related Transactions

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

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K
(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:

                                       66
<PAGE>

                                     PART IV


Exhibit No     Description of Exhibit
----------     ----------------------
2.0            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."

3.1            Restated   Certificate   of   Incorporation   of   the   Company,
               incorporated  by  reference to  Amendment  No.1 to the  Company's
               Registration   Statement   on  Form  SB-2  (No   333-33419,   the
               "Registration Statement"), filed with the Securities and Exchange
               Commission (the "Commission") on September 22, 1997, wherein such
               document is identified as Exhibit 3.1.

3.2            Bylaws  of  the  Company,   incorporated   by  reference  to  the
               Registration  Statement,  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 with the Commission on September 15, 1994.

4.2            Form  of  Certificate   for  Shares  of  Class  B  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 with the Commission on September 15, 1994.

4.3            Form of Warrant  issued to Mr. Jerome  Dansker,  incorporated  by
               reference to the Company's 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 Registration Statement, 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  Registration  Statement,
               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  (333-50113)  filed with the
               Commission on April 15,1998.

4.7            Form  of  Indenture between the Company and the Bank of New York,
               as Trustee, dated January 1, 2001.

12             Statement re: computation of ratios of earnings to fixed charges.

23.1           Consent of Independent Accountants.

23.2           Consent of Independent Accouttants.

(b) No  reports on Form 8-K were  filed  during  the last  quarter of the period
    covered by this report.

                                       67
<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:           March 6, 2001
    --------------------------------                    ------------------------
        Lowell S. Dansker, President

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 of the Board, Executive Vice President and Director:

By: /s/ Jerome Dansker                              Date:          March 6, 2001
   ---------------------------------                     -----------------------
        Jerome Dansker

President, Treasurer and Director
(Principal Executive, Financial and Accounting Officer):

By: /s/ Lowell S. Dansker                           Date:          March 6, 2001
     -------------------------------                     -----------------------
        Lowell S. Dansker

Vice President, Secretary and Director:

By: /s/ Lawrence G. Bergman                         Date:          March 6, 2001
   ---------------------------------                     -----------------------
        Lawrence G. Bergman

Directors:

By:                                                Date:
    --------------------------------                     -----------------------
        Michael A. Callen

By: /s/ Wayne F. Holly                              Date:          March 6, 2001
    --------------------------------                     -----------------------
        Wayne F. Holly

By: /s/ Edward J. Merz                              Date:          March 6, 2001
    --------------------------------                     -----------------------
        Edward J. Merz

By: /s/ Lawton Swan, III                            Date:          March 6, 2001
    --------------------------------                     -----------------------
        Lawton Swan, III

By: /s/ Thomas E. Willett                           Date:          March 6, 2001
    --------------------------------                     -----------------------
        Thomas E. Willett

By: /s/ David J. Willmott                           Date:          March 6, 2001
    --------------------------------                     -----------------------
        David J. Willmott

By: /s/ Wesley T. Wood                              Date:          March 6, 2001
    --------------------------------                     -----------------------
        Wesley T. Wood

                                       68