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                     U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-KSB

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
                                -----------------

                        Commission File Number 000-23377

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

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

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

                                 (212) 218-2800
             -------------------------------------------------------
                (Issuer'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 issuer:  (1) filed all reports required to be
filed by Section 13 or 15(d) of the  Securities  Exchange Act of 1934 during the
past 12 months (or for such shorter  period that the  registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days: Yes XX No .

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-B is not contained  herein,  and will not be contained,  to the
best of the Issuer's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment of
this Form 10-KSB. [X]

The Issuer's total  interest  income and total  noninterest  income for its most
recent fiscal year was $15,058,000 and $456,000, respectively.

The aggregate  market value of 1,183,666  shares of the Issuer's  Class A common
stock on February 10, 2000,  which excludes  1,101,963 shares held by affiliates
as a group,  was  $7,552,000.  This value is based on the  average bid and asked
prices of $6.38 per share on February  10,  2000 of the Class A common  stock on
the NASDAQ Small Cap Market.

As of February  10, 2000 there were  2,285,629  shares of the  Issuer's  Class A
common  stock  and  305,000   shares  of  the  Issuer's  Class  B  common  stock
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2000 Annual Meeting of Stockholders  are
incorporated by reference into Part III of this Form 10-KSB.

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<PAGE>


                Intervest Bancshares Corporation and Subsidiaries

                        1999 ANNUAL REPORT ON FORM 10-KSB

                                TABLE OF CONTENTS

PART I

                                                                            Page
                                                                            ----

Item 1   Description of Business ..........................................   1

Item 2   Description of Properties.........................................  11

Item 3   Legal Proceedings.................................................  12

Item 4   Submission of Matters to Vote of Security Holders................   12


PART II

Item 5   Market for Common Equity and Related Stockholder Matters.........   12

Item 6   Management's Discussion and Analysis or Plan of Operation........   14

Item 7   Financial Statements and Supplementary Data......................   31

Item 8   Changes In and Disagreements with Accountants on
            Accounting and Financial Disclosure...........................   59


PART III

Item 9   Directors, Executive Officers, Promoters and Control Persons;
             Compliance with Section 16(a) of the Exchange Act...........    59

Item 10  Executive Compensation..........................................    60

Item 11  Security Ownership of Certain Beneficial Owners and Management..    60

Item 12  Certain Relationships and Related Transactions..................    60

Item 13  Exhibits, Lists and Reports on Form 8-K.........................    61

Signatures...............................................................    62




<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-KSB 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, 1999,
the Holding  Company  owned 100% of the  outstanding  capital stock of Intervest
Bank and Intervest National Bank.  Hereafter,  the Holding Company and Intervest
Bank and Intervest  National Bank are 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, 1999, the Company had total assets of $247,829,000,  deposits of
$207,168,000,  convertible debentures of $6,930,000, and stockholders' equity of
$21,464,000. At December 31, 1998, the Company had total assets of $200,522,000,
deposits of $170,467,000, convertible debentures of $7,000,000 and stockholders'
equity of $19,544,000.

The Holding  Company's  primary  business is the operation of the Banks. It does
not engage in any other  substantial  business  activities  other than a limited
amount of real estate mortgage  lending.  In 1998, the Holding Company also sold
convertible  subordinated  debentures  in  the  aggregate  principal  amount  of
$7,000,000 for working capital purposes.

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, 1999, Intervest Bank had total assets of $189,477,000,  deposits
of  $166,969,000,  and  stockholders'  equity of $12,746,000,  compared to total
assets of  $184,460,000,  deposits of $170,467,000 and  stockholders'  equity of
$11,104,000, at December 31, 1998.

                                       1
<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, 1999,
Intervest National Bank had total assets of $57,562,000, deposits of $47,475,000
and stockholder's equity of $8,493,000

The Holding Company and Intervest Bank are subject to examination and regulation
by the Federal  Reserve Board (the "FRB") and the Banks' deposits are insured by
the Federal Deposit  Insurance  Corporation (the "FDIC") to the extent permitted
by law.  Intervest Bank is also subject to the supervision of and examination by
the Florida Department of Banking and Finance,  while Intervest National Bank is
subject to the  supervision  and regulation of the Office of the  Comptroller of
the Currency (the "OCC").

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.  Commercial loans include both
collateralized  and  uncollateralized  loans  for:  working  capital  (including
inventory,  receivables and business  expansion);  real estate  acquisitions and
improvements;  and purchases of equipment and machinery.  Consumer loans include
collateralized and uncollateralized loans for financing automobiles, boats, home
improvements and personal investments.

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, FDIC, OCC
and Florida Department of Banking and Finance.  Deposit flows and the rates paid
thereon are  influenced by interest rates on competing  investments  and general
market  rates of  interest.  Lending  activities  are affected by the demand for
financing of real estate and other types of loans,  which in turn is affected by
the  interest  rates at which such  financing  may be offered and other  factors
affecting  local  demand  and  availability  of  funds.  The Banks  face  strong
competition in the attraction of deposits and in the origination of loans.

The  revenues of the Banks are  primarily  derived  from  interest  on, and fees
received  in  connection  with,  loans  and from  interest  and  dividends  from
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.

Merger
------

In late 1999, Intervest Bancshares  Corporation  announced that it had agreed to
acquire   Intervest   Corporation   of  New  York,  a  company  with  assets  of
approximately  $99,000,000,  consisting  of a portfolio of mortgages on improved
real property and short-term investments,  primarily certificates of deposit and
U.S.  government  agency notes. The combined total assets of the two entities if
they had merged at December 31, 1999 would have been approximately $340,000,000.

The two entities are related in that the same persons  serve on their boards and
the holders of all of the shares of Intervest  Corporation  of New York also own
approximately 48% of the voting shares of Intervest Bancshares Corporation.  The
merger was approved by both Boards of Directors,  the  shareholders  of both the
Company and Intervest  Corporation of New York, and the Federal  Reserve Bank of
Atlanta. In the merger,  Intervest Corporation of New York shareholders received
an  aggregate  of  1,250,000  shares of the  Company's  Class A common  stock in
exchange for all of  Intervest  Corporation  of New York's  capital  stock.  The
merger  became  effective in March 2000 and will be accounted  for at historical
cost similar to the pooling-of-interests method of accounting.

                                       2
<PAGE>

Market Area

Intervest Bank's facilities are located in Pinellas County, which is its primary
market  area and is 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  deposit  gathering and lending 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.  The New York City  metropolitan  area
economy  during the  last three years 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.

The Holding Company's direct lending activities are concentrated in the New York
City metropolitan  region. It also considers  Connecticut,  Florida, New Jersey,
Pennsylvania and Washington D.C. as its primary lending market.

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
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.

Asset Quality

Management  seeks to maintain a high level of asset  quality.  The Banks seek to
maintain  diversification  when  considering  investments  in securities and the
originations  of  loans.  In  originating  loans,  emphasis  is  placed  on  the

                                       3
<PAGE>

borrower's  ability to generate  cash flow to support its debt  obligations  and
other cash  related  expenses.  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, the Banks typically limit their loans to
a maximum of 80% of the value of the underlying  real estate as determined by an
appraisal. In addition,  physical inspections of properties being considered for
mortgage loans are made as part of the approval process.

Each Bank's Loan Committee  concentrates  its efforts and resources,  as well as
their senior  management and lending  officers,  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.
The goal of this loan review process is to address any classified loans as early
as possible.

Management maintains a cautious outlook in anticipating the potential effects of
uncertain economic  conditions (both locally and nationally) and the possibility
of more stringent  regulatory  standards.  Management believes that its policies
and  procedures  reduce the Company's  exposure to the risks  associated  with a
downturn  in real  estate  values.  However,  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, 1999 and 1998, 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 Company'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, 1999,  the Company's loan  portfolio  amounted to  $149,647,000,
compared to $98,221,000 at December 31, 1998. At December 31, 1999 and 1998, the
loan portfolio consisted predominantly of real estate mortgage loans.

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

The Company offers real estate loans secured by commercial and residential  real
estate.  A substantial  portion of the Company's  loan portfolio is comprised of
loans secured by commercial and  multifamily  real estate,  including  apartment
buildings,  office  buildings and retail  shopping  centers.  The properties are
located mostly in the Company's primary market areas.

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.

The Company's underwriting  procedures require mortgage title insurance,  hazard
insurance  and an appraisal of the property  securing the loan to determine  the
property's  adequacy  as  security.  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 Company typically do not exceed 80%.

New mortgage  loans on commercial  real estate and  multifamily  properties  are
normally  originated for terms of no more than 20 years with interest rates that
are  predominantly  variable rate, 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.

                                       4
<PAGE>

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 purpose of a
particular loan generally determines its structure.  The Banks' commercial loans
primarily are  underwritten  in each Bank's  primary market area on the basis of
the borrower's  ability to service such debt from income. As a general practice,
the Banks take as collateral a lien on any available real estate,  equipment, or
other assets.  Working capital loans are primarily  collateralized by short-term
assets,  whereas term loans are primarily  collateralized by longer-term assets.
Intervest National Bank did not originate any commercial loans in 1999.

Unlike 1-4 family residential  mortgage loans,  (which generally are made on the
basis of the  borrower's  ability to make  repayment  from their  employment and
other income and which are  collateralized by real property whose value tends to
be more readily  ascertainable)  commercial  loans typically are underwritten on
the basis of the  borrower's  ability  to make  repayment  from the cash flow of
their  business and generally are  collateralized  by business  assets,  such as
accounts receivable,  equipment and inventory.  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
----------------

Consumer  loans  offered  by the  Banks  include  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 that charged on other types of loans. In addition,  consumer
loans pose 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.  Intervest  National  Bank  did not  originate  any
consumer loans in 1999.

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

Loan  originations  are  derived  from:  direct  solicitation  by the  Company's
officers; existing customers and borrowers;  advertising; walk-in customers; and
referrals from brokers.  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.  An  appraisal,  where  required,  of  any  real  estate  intended  to
collateralize  the proposed loan is  undertaken by an appraiser  approved by the
Company.  In addition,  physical  inspections of properties being considered for
mortgage loans are made as part of the approval process.

Investment Activities

The Banks' investment policies and strategies are reviewed and approved by their
respective  Board  of  Directors  and  Investment  Committees.  The  Banks  have
historically  only  purchased  securities  that are issued  directly by the U.S.
government  or one of its  agencies.  Accordingly,  the  Banks'  investments  in
securities  carry a significantly  lower credit risk than their loan portfolios.
To manage interest rate risk, the Banks normally  purchase  securities that have
adjustable   rates  or   securities   with  fixed  rates  that  have  short-  to
intermediate-maturity  terms. Securities held to maturity totaled $83,132,000 at
December 31, 1999, compared to $82,338,000 at December 31, 1998.

From time to time,  the Banks may also maintain a securities  available-for-sale
account to provide flexibility in the management of asset/liability  strategies.
During 1999 and 1998, there were no securities classified as available for sale.
The Company does not engage in trading activities.

                                       5
<PAGE>

The  Company  also  invests  in  various  money-market  instruments,   including
overnight  and term  Federal  funds.  These  investments  are used to invest the
Company's  available funds resulting from  deposit-taking  operations and normal
cash flow and to help  satisfy  both  internal  liquidity  needs and  regulatory
liquidity requirements.

Deposit Activities

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

Deposits  are the  major  source  of the  Bank's  funds  for  lending  and other
investment  purposes.  The  majority  of 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's deposit gathering market also includes its
Web  Site on the  Internet:  www.intervestnatbank.com,  which  attracts  deposit
customers  from both  within and  outside its  primary  market  area.  Intervest
National Bank  advertises its products and services on various Web sites such as
Bank Rate Monitor.

Deposit services include:  certificates of deposit (including jumbo certificates
in 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.
Transaction  accounts and  certificates of deposit  accounts are tailored to the
principal  market area of each Bank at rates  competitive to those in each area.
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 also 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 in order to determine  whether to add to or modify them,  consistent  with
market  opportunities  and available  resources.  At December 31, 1999,  deposit
liabilities totaled $207,168,000, compared to $170,467,000 at December 31, 1998.

Other Sources of Funds

From time to time, the Banks purchase  Federal funds to manage  liquidity needs.
At December 31, 1999,  $6,955,000  of overnight  Federal  funds  purchased  were
outstanding.  Intervest Bank has agreements with correspondent  banks whereby it
may borrow up to $8,000,000  on an unsecured  basis.  There were no  outstanding
borrowings  under these  agreements  at December 31, 1999 or 1998. In June 1998,
the Holding Company sold $7,000,000 of convertible  subordinated  debentures for
net  proceeds  of  approximately  $6,500,000.  The  funds  were used to fund the
initial  capital of Intervest  National  Bank.  For a further  discussion of the
debentures, see page 26.

Employees

At  December  31,  1999,  the  Company  employed 36  full-time  employees  and 4
part-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 the Banks file a consolidated  Federal income tax return
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.  Banks and bank holding companies are subject to Federal and state income
taxes in the same manner as other corporations. 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.

                                       6
<PAGE>

Although the Banks' income tax liability is determined  under  provisions of the
Internal  Revenue Code of 1986, as amended (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.

The Holding Company files state income tax returns in New Jersey and a franchise
tax return in Delaware.  The Holding  Company and  Intervest  National Bank file
consolidated state and city income tax returns in New York. Intervest Bank files
a state income tax return in Florida.  Florida  taxes banks under  primarily the
same provisions as other corporations.  The Holding Company's activities,  other
than  Intervest  Bank's  operations,  are  taxable  in the  State  of New  York.
Generally, New York State and City taxable income is calculated under applicable
Code sections with some modifications required by state law.

Investment in Subsidiaries
<TABLE>
<CAPTION>

                                                 At December 31, 1999
                                    ---------------------------------------------             Holding Company's Share
($ in thousands)                      % of                             Equity in            of Earnings (Loss) for the
                                     Voting               Total        Underlying           Years Ended December 31,
Subsidiary                           Stock           Investment        Net Assets           1999        1998         1997
---------------------------          -------         ----------        ----------           ----        ----        -----
<S>                                   <C>             <C>               <C>               <C>         <C>           <C>
Intervest Bank                        100%            $12,746           $12,746           $1,642      $1,149        $753
Intervest National Bank               100               8,493             8,493             (507)         -           -
</TABLE>


There were no dividends paid to the Holding Company by its subsidiaries in 1999,
1998 or 1997.

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,  not
stockholders.  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.

                                       7
<PAGE>

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.

It is the  policy  of the FRB  that  bank  holding  companies  should  pay  cash
dividends  on common stock only out of income  available  over the past year and
only if prospective  earnings  retention is consistent  with the  organization's
expected  future needs and financial  condition.  The policy  provides that bank
holding  companies should not maintain a level of cash dividends that undermines
the bank  holding  company's  ability  to serve as a source of  strength  to its
banking  subsidiaries.   In  addition,   the  Federal  regulatory  agencies  are
authorized  to  prohibit a banking  institution  or bank  holding  company  from
engaging  in  an  unsafe  or  unsound  banking  practice.   Depending  upon  the
circumstances, the agencies could take the position that paying a dividend would
constitute  an unsafe or unsound  banking  practice.  Under FRB  policy,  a bank
holding  company is  expected  to act as a source of  financial  strength to its
banking subsidiaries and to commit resources to their support.  Such support may
be required at times when,  absent this FRB policy, a holding company may not be
inclined to provide it. As discussed  below,  a bank holding  company in certain
circumstances   could  be  required  to   guarantee   the  capital  plan  of  an
undercapitalized banking subsidiary.

The FRB monitors the capital adequacy of bank holding  companies and has adopted
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
(generally, common stockholders' equity, perpetual noncumulative preferred stock
and minority  interests  in  consolidated  subsidiaries,  less  goodwill,  other
disallowed intangibles and disallowed deferred tax assets, among other items) 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,  1999,  the  Company's
consolidated  ratio of total capital to risk-weighted  assets was 13.18% and its
risk-based Tier 1 capital ratio was 11.93%.

The FRB also uses a leverage  ratio to  evaluate  the  capital  adequacy of bank
holding companies. The leverage ratio applicable to the Holding Company requires
a ratio of Tier 1 capital to adjusted  total average assets of not less than 3%,
although most  organizations  are expected to maintain  leverage ratios that are
100-200 basis points above this minimum ratio.  The Holding  Company's  leverage
ratio at December 31, 1999, was 8.46%.

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.

                                       8
<PAGE>

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 primary  supervision,  examination and regulation by
the OCC, as well as the 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,  as  defined  in the  statute,  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  transaction  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
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."   The  Federal  banking
agencies have issued uniform regulations defining such capital levels. Under the
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

                                       9
<PAGE>

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,  1999  and  1998,   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
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 2000.

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

                                       10
<PAGE>
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, enacted
in 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 will permit 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 and baking 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,
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  is  located  in  leased  premises  at 10
Rockefeller Plaza, New York, N.Y, 10020.  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

                                       11
<PAGE>
(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.

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

Item 3.   Legal Proceedings

The Company is periodically  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 real property 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,  1999,  to a vote of security  holders of the Company,  through the
solicitation of proxies or otherwise.


                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

Market for Securities

The 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, 1999, there were
approximately 800 holders of record of the Company's Class A common stock, which
includes  persons or entities  who hold their stock in nominee form or in street
name through  various  brokerage  firms.  At December 31, 1999,  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 1998 and 1999 are
as follows:

                                  1999                          1998
                                  ----                          ----
                            High        Low                 High        Low
                            ----        ---                 ----        ---

    First quarter         $ 11.00     $  7.63              $15.25      $11.00
    Second quarter        $ 19.00     $  7.81              $16.00      $11.25
    Third quarter         $  9.75     $  7.44              $13.00      $ 8.25
    Fourth quarter        $  9.00     $  5.06              $10.00      $ 8.00

Dividends

Holders of the Holding  Company's  Class A common  stock are entitled to receive
dividends  when and if declared by the Board of Directors  out of funds  legally
available  therefor.  Dividends  may also be  declared  or paid with  respect to
shares of Class B common stock  beginning  January 1, 2000. The Holding  Company
has not paid any cash  dividends on its capital  stock and there is no immediate
prospect or  contemplation of the payment of dividends on its stock. 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 payable to it by the Banks.

                                       12
<PAGE>
The  payment of  dividends  by the Banks is subject to a  determination  by each
Bank's Board of Directors and is dependent  upon a number of factors,  including
capital requirements,  regulatory limitations,  the particular Bank's results of
operations  and financial  condition,  tax  considerations  of the Banks and the
Holding Company, the number of outstanding shares of stock, and general economic
conditions.  There are  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  proceeding  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.

The FRB and Florida Department of Banking and Finance have publicly stated their
view that it is generally an unsafe and unsound  practice to pay cash  dividends
except out of current  operating  earnings.  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.

The  ability  of the Banks and the  Holding  Company  to pay cash  dividends  is
currently, and in the future influenced by regulatory policies or agreements and
by capital  guidelines.  Accordingly,  the actual amount,  if any, and timing of
future  dividends  will depend on,  among other  things,  future  earnings,  the
financial condition of the Banks and the Holding Company,  the amount of cash on
hand  at the  Holding  Company  level,  outstanding  debt  obligations  and  the
requirements imposed by regulatory authorities.

                                       13
<PAGE>
Item 6.   Management's Discussion and Analysis or Plan of Operation

                             Selected Financial Data

The table below presents selected consolidated  financial data. This data should
be read in  conjunction  with,  and are  qualified  in their  entirety  by,  the
Consolidated  Financial  Statements  and the  Notes  thereto,  and  Management's
Discussion  and  Analysis  of  Financial  Condition  and  Results of  Operations
included elsewhere in this report.


<TABLE>
<CAPTION>

------------------------------------------------------ -------------------------------------------------------------------
                                                                     At or For The Year Ended December 31,
                                                       ------------- ------------ ------------- ------------- ------------
($ in thousands, except per share amounts)                     1999         1998          1997          1996         1995
------------------------------------------------------ ------------- ------------ ------------- ------------- ------------
<S>                                                       <C>          <C>           <C>           <C>          <C>
Financial Condition Data:

Total assets                                               $247,829     $200,522      $150,755      $105,196      $68,942
Cash and cash equivalents                                     7,329       13,472         9,176         6,320        8,551
Loans receivable, net of deferred fees                      149,647       97,736        76,825        60,310       37,058
Securities, net                                              83,132       82,338        58,821        34,507       19,630
Deposits                                                    207,168      170,467       131,167        93,447       58,601
Federal funds purchased                                       6,955            -             -             -            -
Convertible debentures                                        6,930        7,000             -             -            -
Stockholders' equity                                         21,464       19,544        17,620         9,747        9,189
Nonaccrual loans                                                  -            -             -             -            -
Allowance for loan loss reserves                              2,493        1,662         1,173           811          593
Loan chargeoffs                                                   -            -             -            65           30
Loan recoveries                                                   1           10            10            33           21
------------------------------------------------------ ------------- ------------ ------------- ------------- ------------
Operations Data:

Interest and dividend income                                $15,058      $12,934        $9,347       $ 6,381      $ 4,190
Interest expense                                              9,478        8,297         5,894         3,745        2,225
                                                       ------------- ------------ ------------- ------------- ------------
Net interest and dividend income                              5,580        4,637         3,453         2,636        1,965
Provision for loan loss reserves                                830          479           352           250          233
                                                       ------------- ------------ ------------- ------------- ------------
Net interest and dividend income after
     provision for loan loss reserves                         4,750        4,158         3,101         2,386        1,732
Noninterest income                                              456          349           136           106           89
Noninterest expenses                                          3,165        2,133         1,906         1,551        1,415
                                                       ------------- ------------ ------------- ------------- ------------
Earnings before income taxes and change
     in accounting principle                                  2,041        2,374         1,331           941          406
Provision for income taxes                                      718          939           487           383          136
Cumulative effect of accounting change (1)                      128            -             -             -            -
                                                       ------------- ------------ ------------- ------------- ------------
Net earnings                                                $ 1,195      $ 1,435        $  844        $  558       $  270
------------------------------------------------------ ------------- ------------ ------------- ------------- ------------
Per Share Data:

Basic earnings per share                                    $  0.48      $  0.58         $0.49         $0.34       $ 0.16
Diluted earnings per share                                     0.43         0.46          0.41          0.34         0.16
Common book value per share                                    8.30         7.87          7.27          5.91         5.57
Dividends per share                                               -            -             -             -            -
------------------------------------------------------ ------------- ------------ ------------- ------------- ------------
Other Data and Ratios:

Common shares outstanding                                 2,586,879    2,484,515     2,424,415     1,650,000    1,650,000
Average common shares used to calculate:
     Basic earnings per share                             2,510,293    2,457,113     1,712,292     1,650,000    1,650,000
     Diluted earnings per share                           2,770,118    3,473,516     2,072,459     1,650,000    1,650,000
Adjusted net earnings for diluted earnings per share         $1,195       $1,607          $844          $558         $270
Full-service banking offices                                      6            5             5             4            4
Return on average assets                                      0.56%        0.81%         0.68%         0.67%        0.51%
Return on average equity                                      5.89%        7.74%         7.53%         5.91%        3.01%
Loans, net of unearned income to deposits                    72.23%       57.33%        58.57%        64.54%       63.24%
Allowance for loan losses to total net loans                  1.67%        1.70%         1.53%         1.34%        1.60%
Average stockholders' equity to average total assets          9.50%       10.49%         8.96%        11.29%       16.89%
Stockholders' equity to total assets                          8.66%        9.75%        11.69%         9.27%       13.32%
------------------------------------------------------ ------------- ------------ ------------- ------------- ------------
<FN>
(1)  Represents a cumulative charge, net of applicable taxes, resulting from the
     adoption on January 1, 1999 of the  AICPA's  Statement  of  Position  98-5,
     "Accounting for Start-Up Costs."
</FN>
</TABLE>

                                       14
<PAGE>

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 thereto beginning on page 34.

Intervest  Bancshares  Corporation's  principal  assets  are its 100%  ownership
interest in Intervest Bank and Intervest  National  Bank's  outstanding  capital
stock.  Intervest Bancshares  Corporation (referred to by itself as the "Holding
Company") and Intervest  Bank and Intervest  National Bank (referred to together
as the "Banks") are referred to  collectively as the "Company" on a consolidated
basis.

Intervest  National  Bank  is a  full-service  commercial  bank  located  at One
Rockefeller  Plaza,  Suite 300,  New York,  New York,  10020.  It  received  its
national  charter  from the OCC and  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 Holding  Company's  primary  business is the operation of the Banks. It does
not engage in any other  substantial  business  activities  other than a limited
amount of real estate mortgage lending. As a result, the Company's  consolidated
results  of  operations  are  dependent  largely  upon  the  Banks'  results  of
operations. Each Bank conducts a full-service commercial banking business, which
consists of  attracting  deposits from the general  public and  investing  those
funds, together with other source 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 through its Web Site: www.intervestnatbank.com.

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.  Additionally,  the Company's
profitability is affected by such factors as the level of its noninterest income
and expenses,  the provision for loan loss reserves, and the Company's 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.

In late 1999, Intervest Bancshares  Corporation  announced that it had agreed to
acquire   Intervest   Corporation   of  New  York,  a  company  with  assets  of
approximately  $99,000,000,  consisting  of a portfolio of mortgages on improved
real property and short-term investments,  primarily certificates of deposit and
U.S.  government  agency notes. The combined total assets of the two entities if
they had merged at December 31, 1999 would have been approximately $340,000,000.

The two entities are related in that the same persons  serve on their boards and
the holders of all of the shares of Intervest  Corporation  of New York also own
approximately 48% of the voting shares of Intervest Bancshares Corporation.  The
merger was approved by both Boards of Directors,  the  shareholders  of both the
Company and Intervest  Corporation of New York, and the Federal  Reserve Bank of
Atlanta. In the merger,  Intervest Corporation of New York shareholders received
an  aggregate  of  1,250,000  shares of the  Company's  Class A common  stock in
exchange for all of  Intervest  Corporation  of New York's  capital  stock.  The
merger  became  effective in March 2000 and will be accounted  for at historical
cost similar to the pooling-of-interests method of accounting.

                                       15
<PAGE>

                              Results of Operations

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

General
-------

Consolidated  earnings for the year ended December 31, 1999 were $1,195,000,  or
$0.43 per diluted share, compared to $1,435,000,  or $0.46 per diluted share for
1998. The decline in earnings was due to the opening of Intervest National Bank.
The new bank  recorded a net loss from  operations 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 related to the required adoption,  on January 1,
1999, of the AICPA's  Statement of Position (SOP) 98-5,  "Reporting on the Costs
of Start-Up Activities." The aforementioned items were almost entirely offset by
continued  earnings  growth from  Intervest  Bank,  whose net  earnings  rose to
$1,642,000  in 1999,  from  $1,149,000  in 1998.  The  Holding  Company  had net
earnings of $60,000 in 1999,  compared to $286,000  in 1998.  The  decrease  was
attributable to the funding of Intervest National Bank's initial capital.

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

Net  interest  and  dividend  income  increased  to  $5,580,000  in  1999,  from
$4,637,000   in  1998.   The  increase  was  due  to  growth  in  the  Company's
interest-earning assets and a slight improvement in the net interest rate spread
from 2.20% in 1998, to 2.25% in 1999.  Average  interest-earning  assets grew by
$35,902,000, reflecting the opening of Intervest National Bank.

The Company's net interest margin was 2.73% in 1999,  compared to 2.75% in 1998.
The slight  decline  in the  margin  was due to a  decrease  in the ratio of the
Company's average  earning-assets to average  interest-bearing  liabilities from
1.11 in  1998  to  1.10 in  1999,  offset  almost  entirely  by a 5 basis  point
improvement in the net interest rate spread.

The Company's yield on earning assets declined by 31 basis points  primarily due
to the following factors:  the very competitive  lending environment during 1999
which  resulted  in  originations  of new  loans  at  lower  rates  as  well  as
prepayments of higher-yielding  loans;  calls of higher-yielding  U.S government
agency securities with the resulting  proceeds being invested in securities with
lower rates; and lower rates earned on short-term investments.

The  Company's  cost of funds  declined by 36 basis points due to lower  average
rates  paid on  deposit  accounts  as well as a change  in the mix of  deposits.
Lower-cost  deposits  held  in  checking,   savings  and  money-market  accounts
increased in 1999,  while the level of higher-cost time deposits  declined.  The
decline in the cost of  deposits  was offset to some  degree by the  higher-cost
funds obtained  through the sale of convertible  subordinated  debentures by the
Holding Company in June 1998.

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

                                       16
<PAGE>

<TABLE>
<CAPTION>

                                                                         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
<S>                                                    <C>           <C>       <C>              <C>          <C>       <C>
 Interest-earning assets:
    Loans                                              $110,006     $ 9,691    8.81%           $ 90,470      $8,278    9.15%
    Securities                                           83,914       4,873    5.81              69,508       4,224    6.08
    Other interest-earning assets                        10,304         494    4.79               8,344         432    5.18
 -------------------------------------------------- ------------ ----------- ----------    ------------- ----------- ----------
 Total interest-earning assets                          204,224     $15,058    7.37%            168,322     $12,934    7.68%
 -------------------------------------------------- ------------ ----------- ----------    ------------- ----------- ----------
 Noninterest-earning assets                               9,453                                   8,395
 -------------------------------------------------- ------------ ----------- ----------    ------------- ----------- ----------
 Total assets                                          $213,677                                $176,717
 -------------------------------------------------- ------------ ----------- ----------    ------------- ----------- ----------

       Liabilities and Stockholders' Equity
 Interest-bearing liabilities:
    Money market and checking (NOW) deposits           $ 52,105     $ 2,222    4.26%           $ 28,756      $1,324    4.60%
    Savings deposits                                     25,321       1,066    4.21              17,210         832    4.83
    Certificates of deposits                             99,482       5,524    5.55             101,547       5,821    5.73
                                                    ------------ ----------- ----------     ------------- ----------- ----------
    Total deposit accounts                              176,908       8,812    4.98             147,513       7,977    5.41
    Federal funds purchased                                 517          29    5.61                  20           1    5.00
    Convertible debentures                                7,531         637    8.45               3,777         319    8.45
 -------------------------------------------------- ------------ ----------- ----------    ------------- ----------- ----------
 Total interest-bearing liabilities                     184,956     $ 9,478    5.12             151,310      $8,297    5.48%
 -------------------------------------------------- ------------ ----------- ----------    ------------- ----------- ----------
 Noninterest-bearing deposits                             4,436                                   3,096
 Noninterest-bearing liabilities                          3,980                                   3,782
 Stockholders' equity                                    20,305                                  18,529
 -------------------------------------------------- ------------ ----------- ----------    ------------- ----------- ----------
 Total liabilities and stockholders' equity            $213,677                                $176,717
 -------------------------------------------------- ------------ ----------- ----------    ------------- ----------- ----------
 Net interest and dividend income/spread                            $ 5,580    2.25%                         $4,637    2.20%
 -------------------------------------------------- ------------ ----------- ----------    ------------- ----------- ----------
 Net interest-earning assets/margin                    $ 19,268                2.73%           $ 17,012                2.75%
 -------------------------------------------------- ------------ ----------- ----------    ------------- ----------- ----------
 Ratio of total interest-earning assets
    to total interest-bearing liabilities                 1.10x                                   1.11x
 -------------------------------------------------- ------------ ----------- ---------- -- ------------- ----------- ----------
</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).
<TABLE>
<CAPTION>

                                                                   For the Year Ended December 31, 1999 vs. 1998
                                                                    Increase (Decrease) Due To Change In:

     ($ in thousands)                                                  Rate        Volume     Rate/Volume       Total
     --------------------------------------------------------- ------------- ------------- --------------- -----------
<S>                                                                  <C>          <C>           <C>            <C>
     Interest-earning assets:
        Loans                                                        $(308)       $1,788        $(67)          $1,413
        Securities                                                    (188)          875         (38)             649
        Other interest-earning assets                                  (32)          101          (7)              62
     --------------------------------------------------------- ------------- ------------- --------------- -----------
     Total interest-earning assets                                    (528)        2,764        (112)           2,124
     --------------------------------------------------------- ------------- ------------- --------------- -----------
     Interest-bearing liabilities:
        Money market and checking (NOW )deposits                      (112)        1,087         (77)             898
        Savings deposits                                              (107)          392         (51)             234
        Certificates of deposit                                       (182)         (118)          3             (297)
                                                               ------------- ------------- --------------- -----------
        Total deposit accounts                                        (401)        1,361        (125)             835
        Federal funds purchased                                         -             25           3               28
        Convertible debentures                                          -            318           -              318
     --------------------------------------------------------- ------------- ------------- --------------- -----------
     Total interest-bearing liabilities                               (401)        1,704        (122)           1,181
     --------------------------------------------------------- ------------- ------------- --------------- -----------
     Net change in interest and dividend income                      $(127)       $1,060         $10          $   943
     --------------------------------------------------------- ------------- ------------- --------------- -----------
</TABLE>
                                       17
<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. 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.  See the section "Comparison of Financial Condition at
December 31, 1999 and  December  31,  1998," for  additional  discussion  of the
allowance for loan loss reserves. At December 31, 1999 and 1998, the Company did
not have any nonaccrual or impaired loans.

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

Total  noninterest  income increased to $456,000 in 1999, from $349,000 in 1998.
The increase was due to higher loan 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 $3,165,000 in 1999, from $2,133,000 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 staff)
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 $718,000 in 1999,  from $939,000 in
1998, due to lower pre-tax earnings. The Company's effective tax rate (inclusive
of state and local taxes) amounted to 35.3% in 1999,  compared to 39.6% in 1998.
The  decline  in the rate  was due to  increased  tax  benefits  from  Intervest
National  Bank's taxable loss in 1999.  The new bank has a higher  effective tax
rate  resulting  from New  York  State  and  City  taxes.  The  Company  files a
consolidated  Federal income tax return, while the Holding Company and Intervest
National  Bank file  consolidated  New York State and City  income tax  returns.
Intervest Bank files a state income tax return in Florida.

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

The  cumulative  effect of the change in  accounting  principle  represents  the
required  adoption,  on January 1, 1999,  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.

Comparison  of Results of Operations  for the Years Ended  December 31, 1998 and
1997.

General
-------

Net earnings for the year ended December 31, 1998 were  $1,435,000,  compared to
$844,000 for the year ended December 31, 1997. On a diluted per share basis, net
earnings  was $0.46 for 1998,  compared to $0.41 for 1997.  The  increase in net
earnings was primarily due to a $1,184,000 increase in net interest and dividend
income and a $213,000  increase in  noninterest  income.  These  increases  were
partially  offset by a higher  income  tax  provision  of  $452,000,  a $227,000
increase in noninterest  expenses and an increase in the provision for loan loss
reserves of $127,000.

                                       18
<PAGE>

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

The Company's net interest and dividend income  increased to $4,637,000 in 1998,
from  $3,453,000  in 1997.  The  increase  was due to  growth  in the  Company's
interest-earning  assets,  partially  offset  by a decline  in the net  interest
margin from 2.92% in 1997 to 2.75% in 1998.

The decline in the margin was a function of a lower  interest rate spread caused
by a decline in the yield on the Company's earning assets and an increase in its
cost of funds.  The yield on earning assets  declined by 22 basis points largely
due to a decline in the yield on the loan  portfolio  as well as an  increase in
securities and  short-term  investments.  Securities and short-term  investments
have a lower yield than the Company's  loan  portfolio.  The  Company's  cost of
funds increased by 4 basis points due to higher-cost funds obtained through sale
of the Debentures,  partially offset by a slight decline in the average cost for
deposit  accounts.  The  effect of the  decrease  in the  interest  rate  spread
described above was partially offset by an increase of $7,007,000 in net average
interest-earning  assets. This increase was largely due to the investment of the
proceeds  from the  issuance  of  common  stock as well as the  reinvestment  of
earnings  generated from operations.  The table that follows,  for the years end
December 31, 1998 and 1997,  sets forth the same  information  that is described
above the table on page 17.
<TABLE>
<CAPTION>

                                                                        For the Year Ended December 31,
                                                                        -------------------------------
                                                                  1998                                     1997
                                                   ------------- ----------- ---------     ------------- ----------- ----------
                                                     Average      Interest    Yield/         Average      Interest    Yield/
($ in thousands)                                     Balance     Inc./Exp.     Rate          Balance     Inc./Exp.     Rate
-------------------------------------------------- ------------- ----------- ---------      ------------- ----------- ----------
<S>                                                     <C>          <C>       <C>              <C>          <C>       <C>
                     Assets
Interest-earning assets:
   Loans                                                $90,470      $8,278    9.15%            $68,711      $6,415    9.34%
   Securities                                            69,508       4,224    6.08              42,763       2,632    6.15
   Other interest-earning assets                          8,344         432    5.18               6,913         300    4.34
-------------------------------------------------- ------------- ----------- ---------     ------------- ----------- ----------
Total interest-earning assets                           168,322     $12,934    7.68%            118,387      $9,347    7.90%
-------------------------------------------------- ------------- ----------- ---------     ------------- ----------- ----------
Noninterest-earning assets                                8,395                                   6,619
-------------------------------------------------- ------------- ----------- ---------     ------------- ----------- ----------
Total assets                                           $176,717                                $125,006
-------------------------------------------------- ------------- ----------- ---------     ------------- ----------- ----------

      Liabilities and Stockholders' Equity
Interest-bearing liabilities:
   Money market and checking (NOW) deposits             $28,756      $1,324    4.60%           $ 18,087        $816    4.51%
   Savings deposits                                      17,210         832    4.83               9,128         446    4.89
   Certificates of deposit                              101,547       5,821    5.73              81,149       4,631    5.71
                                                   ------------- ----------- ---------     ------------- ----------- ----------
   Total deposit accounts                               147,513       7,977    5.41             108,364       5,893    5.44
   Federal funds purchased                                   20           1    5.00                  18           1    5.56
   Convertible debentures                                 3,777         319    8.45                   -           -       -
-------------------------------------------------- ------------- ----------- ---------     ------------- ----------- ----------
Total interest-bearing liabilities                      151,310      $8,297    5.48%            108,382      $5,894    5.44%
-------------------------------------------------- ------------- ----------- ---------     ------------- ----------- ----------
Noninterest-bearing deposits                              3,096                                   2,325
Noninterest-bearing liabilities                           3,782                                   3,088
Stockholders' equity                                     18,529                                  11,211
-------------------------------------------------- ------------- ----------- ---------     ------------- ----------- ----------
Total liabilities and stockholders' equity             $176,717                                $125,006
-------------------------------------------------- ------------- ----------- ---------     ------------- ----------- ----------
Net interest and dividend income/spread                              $4,637    2.20%                         $3,453    2.46%
-------------------------------------------------- ------------- ----------- ---------     ------------- ----------- ----------
Net interest-earning assets/margin                      $17,012                2.75%           $ 10,005                2.92%
-------------------------------------------------- ------------- ----------- ---------     ------------- ----------- ----------
Ratio of total interest-earning assets
    to total interest-bearing liabilities                 1.11x                                   1.09x
-------------------------------------------------- ------------- ----------- ---------     ------------- ----------- ----------
</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).

                                       19
<PAGE>
<TABLE>
<CAPTION>

                                                                   For the Year Ended December 31, 1998 vs. 1997
                                                                    Increase (Decrease) Due To Change In:

     ($ in thousands)                                            Rate            Volume     Rate/Volume       Total
     --------------------------------------------------------- ------------- ------------- --------------- -----------
<S>                                                            <C>                 <C>          <C>            <C>
     Interest-earning assets:
        Loans                                                  $(131)              $2,032        $(38)         $1,863
        Securities                                               (30)               1,645         (23)          1,592
        Other interest-earning assets                             58                   62          12             132
     --------------------------------------------------------- ------------- ------------- --------------- -----------
     Total interest-earning assets                              (103)               3,739         (49)          3,587
     --------------------------------------------------------- ------------- ------------- --------------- -----------
     Interest-bearing liabilities:
        Money market and checking (NOW) deposits                  16                  481          11             508
        Savings deposits                                          (5)                 395          (4)            386
        Certificates of deposit                                   16                1,165           9           1,190
                                                               ------------- ------------- --------------- -----------
        Total deposit accounts                                    27                2,041          16           2,084
        Convertible debentures                                     -                    -         319             319
     --------------------------------------------------------- ------------- ------------- --------------- -----------
     Total interest-bearing liabilities                           27                2,041         335           2,403
     --------------------------------------------------------- ------------- ------------- --------------- -----------
     Net change in interest and dividend income                $(130)              $1,698       $(384)         $1,184
     --------------------------------------------------------- ------------- ------------- --------------- -----------
</TABLE>

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. The
provision  amounted  to $479,000  in 1998,  compared  to  $352,000 in 1997.  The
increase  reflected  primarily  a  higher  level of loan  originations.  See the
section "Comparison of Financial Condition at December 31, 1999 and December 31,
1998," for  additional  discussion of the allowance for loan loss  reserves.  At
December 31, 1998 and 1997,  the Company did not have any nonaccrual or impaired
loans.

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

Total  noninterest  income increased to $349,000 in 1998, from $136,000 in 1997.
The increase  primarily  reflected  an increase in service  charge fee income as
well as a higher level of loan prepayment fees.

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

Noninterest  expenses  increased to $2,133,000 in 1998, from $1,906,000 in 1997.
The increase was largely due to higher salaries and employee  benefits,  as well
as an increase in professional fees and services,  resulting  primarily from the
Company's growth, need for additional staff and normal merit increases.

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

The provision for income taxes  increased to $939,000 in 1998,  from $487,000 in
1997, largely due to higher pre-tax earnings.  The Company's  effective tax rate
(inclusive  of state and local  taxes)  amounted  to 39.6% in 1998,  compared to
36.6% in 1997.  The higher rate for 1998 reflects an increase in the earnings of
the Holding  Company,  which has a higher state  income tax rate than  Intervest
Bank.

                               Financial Condition

Comparison of Financial Condition at December 31, 1999 and December 31, 1998.

Overview
--------

Total assets  increased to $247,829,000 at December 31, 1999, from  $200,522,000
at December 31, 1998.  Total  liabilities  increased to $226,365,000 at December
31, 1999, from  $180,978,000 at December 31, 1998. The increases were due to the
opening of Intervest  National Bank, which resulted in new loan originations and
deposit liabilities.  Stockholders' equity grew to $21,464,000 at year-end 1999,
from  $19,544,000  at  December  31,  1998,  reflecting  an increase in retained
earnings and the exercise of common stock warrants.

                                       20
<PAGE>
The Company's balance sheet was comprised of the following:
<TABLE>
<CAPTION>

                                                          At December 31, 1999               At December 31, 1998
                                                          --------------------               --------------------
                                                        Carrying        % of               Carrying        % of
      ($ in thousands)                                     Value    Total Assets             Value     Total Assets
      --------------------------------------------- -------------- ---------------- -- ------------- ------------------
<S>                                                      <C>          <C>                <C>              <C>
      Cash and cash equivalents                           $ 7,329       3.0%              $13,472           6.7%
      Securities held to maturity, net                     83,132      33.5                82,338          41.1
      Federal Reserve Bank stock                              508       0.2                   233           0.1
      Loans receivable, net of loan loss reserves         147,154      59.4                96,074          47.9
      All other assets                                      9,706       3.9                 8,405           4.2
      --------------------------------------------- -------------- ---------------- -- ------------- ------------------
      Total assets                                       $247,829     100.0%             $200,522         100.0%
      --------------------------------------------- -------------- ---------------- -- ------------- ------------------
      Deposits                                           $207,168      83.6%             $170,467          85.0%
      Federal funds purchased                               6,955       2.8                     -             -
      Convertible debentures payable                        6,930       2.8                 7,000           3.5
      All other liabilities                                 5,312       2.1                 3,511           1.8
      --------------------------------------------- -------------- ---------------- -- ------------- ------------------
      Total liabilities                                   226,365      91.3               180,978          90.3
      --------------------------------------------- -------------- ---------------- -- ------------- ------------------
      Stockholders' equity                                 21,464       8.7                19,544           9.7
      --------------------------------------------- -------------- ---------------- -- ------------- ------------------
      Total liabilities and stockholders' equity         $247,829     100.0%             $200,522         100.0%
      --------------------------------------------- -------------- ---------------- -- ------------- ------------------
</TABLE>

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

Cash and cash  equivalents  decreased due to the  deployment of funds into loans
and security investments.

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.  Accordingly,  the
Company's  investments  in  securities  carry  lower  yields,  but  also  have 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.

Securities  for which the Company has the intent and ability to hold to maturity
are  classified  as held to maturity and carried at amortized  cost.  Securities
held  to  maturity  totaled  $83,132,000  at  December  31,  1999,  compared  to
$82,338,000   at  December  31,   1998.   The   estimated   fair  value  of  the
held-to-maturity  portfolio was  $79,882,000  at December 31, 1999,  compared to
$82,173,000  at  December  31,  1998.  The  decline in  estimated  fair value is
reflective of the higher interest rate environment in the latter part of 1999.

At December 31, 1999,  the  securities  portfolio  consisted of fixed-rate  debt
obligations of the Federal Home Loan Bank,  Federal Farm Credit Bank and Federal
National Mortgage  Association.  The securities have terms that allow the issuer
the right to call or prepay its obligation without prepayment penalty.

From time to time,  the Banks may also maintain a securities  available-for-sale
account to provide flexibility in the management of asset/liability  strategies.
During 1999 and 1998, there were no securities classified as available for sale.
The Company does not engage in trading activities.

The  investment in the capital stock of the Federal  Reserve Bank,  which pays a
dividend,  is  required  in order for the  Banks to be  members  of the  Federal
Reserve Banking System. The amount of the investment,  which fluctuates based on
certain  criteria,  was $508,000 at December  31, 1999,  compared to $233,000 at
December 31, 1998. The increase reflected the opening of Intervest National Bank
on April 1, 1999.

                                       21
<PAGE>

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

Loans  receivable,  before the  allowance for loan loss  reserves,  increased to
$149,647,000 at December 31, 1999, from $97,736,000 at December 31, 1998, due to
new  originations  of commercial real estate and  multifamily  loans,  partially
offset by principal repayments and sales of loans. In the first quarter of 1999,
four  multifamily  real estate  loans,  with an aggregate  principal  balance of
$5,604,000,  held by the  Holding  Company  were sold in order to  increase  its
liquidity for funding  Intervest  National  Bank's  initial  capital on April 1,
1999. The loans were sold to Intervest Corporation of New York, a related party,
at the outstanding principal balance plus accrued interest.

At December 31, 1999, the loan portfolio  consisted of $92,748,000 of fixed-rate
loans and $57,815,000 of adjustable-rate loans. New mortgage loans on commercial
real estate and multifamily  properties are normally  originated for terms of no
more than 20 years with interest  rates that are  predominantly  variable  rate,
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.

Commercial  real estate and  multifamily  real estate  properties  collateralize
almost all of the loans in the  Company's  loan  portfolio.  As of December  31,
1999, 97% of the loan portfolio was concentrated in loans collateralized by such
properties,  compared to 94% at  December  31,  1998.  Loan  concentrations  are
defined  as  amounts  loaned  to  a  number  of  borrowers  engaged  in  similar
activities, which would cause them 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 as well as the Company's underwriting standards.  Economic conditions
affect the income  levels of borrowers  and the market  value of the  underlying
collateral.  In addition,  although commercial real estate and multifamily loans
typically bear higher  interest rates than 1-4 family  residential  loans,  they
entail  certain  risks not  normally  found in 1-4 family  residential  mortgage
lending.  Commercial  real estate and  multifamily  loans usually involve larger
loans to single borrowers. In addition, satisfactory payment experience on loans
secured  by  income-producing  properties  (such as office  buildings,  shopping
centers and rental and cooperative  apartment buildings) is largely dependent on
high  levels of  occupancy.  Thus,  these  loans  are more  subject  to  adverse
conditions in the real estate market and economy or specific conditions at or in
the vicinity of the property's location.

The  following  table sets  forth  information  concerning  the  Company's  loan
portfolio by type of loan:
<TABLE>
<CAPTION>

                                                         At December 31, 1999                   At December 31, 1998
                                                         --------------------                   --------------------
                                                   # of                   % of           # of                    % of
     ($ in thousands)                             loans      Amount       Total          loans      Amount       Total
     --------------------------------------- ----------- -------------- ----------- ------------ ------------- -----------
<S>                                                 <C>      <C>          <C>              <C>       <C>          <C>
     Commercial real estate loans                   101      $78,425      52.1%            95        $68,828      70.1%
     Residential multifamily loans                   96       67,478      44.8             51         23,707      24.1
     Residential 1-4 family loans                    44        2,311       1.5             47          2,627       2.7
     Commercial loans                                42        2,107       1.4             49          2,875       2.9
     Consumer loans                                  24          242       0.2             17            184       0.2
     --------------------------------------- ----------- -------------- ----------- ------------ ------------- -----------
     Total gross loans receivable                   307      150,563     100.0%           259         98,221     100.0%
     Deferred loan fees                                         (916)                                   (485)
     --------------------------------------- ----------- -------------- ----------- ------------ ------------- -----------
     Loans, net of deferred fees                             149,647                                  97,736
     Allowance for loan loss reserves                         (2,493)                                 (1,662)
     --------------------------------------- ----------- -------------- ----------- ------------ ------------- -----------
     Loans receivable, net                                  $147,154                                 $96,074
     --------------------------------------- ----------- -------------- ----------- ------------ ------------- -----------
</TABLE>






                                       22
<PAGE>

The following  table shows the  scheduled  contractual  principal  repayments by
period of the Company's loan portfolio:
<TABLE>
<CAPTION>

                                                                               At December 31,
                                                                               ---------------
                      ($ in thousands)                                          1999             1998
                      --------------------------------------------------- ---------------- -----------------
<S>                                                                          <C>               <C>
                      Within one year                                        $  22,749         $15,674
                      Over one to five years                                   100,585          69,416
                      Over five years                                           27,229          13,131
                      --------------------------------------------------- ---------------- -----------------
                                                                              $150,563         $98,221
                      --------------------------------------------------- ---------------- -----------------
</TABLE>

At December 31, 1999, $44,631,000 of loans with adjustable rates and $83,182,000
of loans with fixed rates were due after one year.

The following table sets forth the activity in the loan portfolio:
<TABLE>
<CAPTION>

                                                                           For the Year Ended December 31,
                                                                           -------------------------------
                      ($ in thousands)                                         1999             1998
                      --------------------------------------------------- ---------------- -----------------
<S>                                                                         <C>                <C>
                      Loans receivable, net, at beginning of year            $96,074           $75,652
                        Loans originated and purchased                        80,477            33,222
                        Principal repayments                                 (22,504)          (12,237)
                        Loans sold                                            (5,604)                -
                        Recoveries                                                 1                10
                        Increase in unearned loan fees                          (459)              (84)
                        Increase in allowance for loan loss reserves            (831)             (489)
                      --------------------------------------------------- ---------------- -----------------
                      Loans receivable, net, at end of year                 $147,154           $96,074
                      --------------------------------------------------- ---------------- -----------------
</TABLE>

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

During 1999 and 1998, 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 for loan
loss reserves charged to operations. Loans are charged against the allowance for
loan loss  reserves 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;  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, as amended by SFAS No. 118,  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  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

                                       23
<PAGE>

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  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.

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.

Management evaluates all commercial real estate,  residential mortgage loans and
commercial  loans for impairment on a loan-by-loan  basis.  For smaller  balance
homogeneous loans, such as consumer loans, evaluations for impairment is done on
an  aggregate  basis.  The  Company  utilizes  its  own  historical   charge-off
experience  as well as the charge off  experience of its peer group and industry
statistics  to evaluate the adequacy of the allowance for loan loss reserves for
consumer loans. 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.

At December 31, 1999, the Company's allowance for loan loss reserves amounted to
$2,493,000,  compared to $1,662,000 at year-end 1998. The increase reflected the
growth in the loan portfolio. During 1999 and 1998, the Company did not have any
loans on a nonaccrual status or classified as impaired. At December 31, 1999 and
1998,  the  allowance  for loan loss  reserves  was  predominately  allocated to
commercial real estate and multifamily loans.

The following table sets forth certain information with respect to the Company's
allowance for loan loss reserves:
<TABLE>
<CAPTION>

                                                                           For the Year Ended December 31,
                                                                           -------------------------------
                  ($ in thousands)                                               1999              1998
                  ------------------------------------------------------- ----------------- ------------------
<S>                                                                            <C>                 <C>
                  Allowance at beginning of year                               $  1,662           $ 1,173
                  Provision charged to operations                                   830               479
                  Recoveries                                                          1                10
                  ------------------------------------------------------- ----------------- ------------------
                  Allowance at end of year                                     $  2,493           $ 1,662
                  ------------------------------------------------------- ----------------- ------------------
                  Ratio of  allowance  to total  loans,  net of deferred fees      1.67%             1.70%
                  Total loans, net of deferred fees                            $149,647           $97,736
                  Average loans during the year                                $110,006           $90,470
                  ------------------------------------------------------- ----------------- ------------------
</TABLE>

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

During 1999 and 1998, the Company did not have any foreclosed real estate.

                                       24
<PAGE>

All Other Assets

The following table shows the composition of all other assets:
<TABLE>
<CAPTION>

                                                                               At December 31,
                                                                               ---------------
                         ($ in thousands)                                   1999            1998
                         ------------------------------------------- -------------- ---------------
<S>                                                                         <C>             <C>
                         Accrued interest receivable                        $1,836          $1,800
                         Premises and equipment, net                         5,767           4,917
                         Deferred income tax asset                             912             579
                         Deferred debenture offering costs                     479             522
                         All other                                             712             587
                         ------------------------------------------- -------------- ---------------
                                                                            $9,706          $8,405
                         ------------------------------------------- -------------- ---------------
</TABLE>

All other  assets  increased  due to  purchases  of fixed  assets,  primarily by
Intervest  National Bank,  and an increase in the Company's  deferred tax asset.
The 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 1999 and 1998.

Deposits
--------

Deposit  liabilities  increased  to  $207,168,000  at December  31,  1999,  from
$170,467,000 at December 31, 1998. The increase was  attributable to the opening
of Intervest  National  Bank on April 1, 1999,  whose  deposit  accounts grew to
approximately  $47,000,000 at year-end 1999. At December 31, 1999,  time deposit
accounts  totaled  $122,794,000  and demand  deposits  and savings and  checking
accounts aggregated $84,374,000. The same categories of deposit accounts totaled
$99,033,000 and $71,434,000, respectively, at December 31, 1998. Certificates of
deposit  accounts  represented  59% of total  deposits  at  December  31,  1999,
compared to 58% at year-end 1998.

The Company  believes it does not have a concentration  of deposits from any one
source. Management believes that a large portion of the Company's depositors are
residents  in its  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 Company does not accept brokered deposits.

The following table shows the distribution of deposit accounts by type:
<TABLE>
<CAPTION>

                                                         At December 31, 1999            At December 31, 1998
             ($ in thousands)                           Amount    % of Total            Amount      %  of Total
             --------------------------------- ---------------- --------------- --------------- ----------------
<S>                                                   <C>          <C>                <C>             <C>
             Demand deposits                           $ 4,347       2.1%              $ 3,027          1.8%
             NOW deposits                                6,636       3.2                 7,955          4.7
             Money market deposits                      54,302      26.2                33,629         19.7
             Savings deposits                           19,089       9.2                26,823         15.7
             Certificates of deposit                   122,794      59.3                99,033         58.1
             --------------------------------- ---------------- --------------- --------------- ----------------
             Total deposit accounts (1)               $207,168     100.0%             $170,467        100.0%
             --------------------------------- ---------------- --------------- --------------- ----------------

<FN>
(1)      Includes  individual   retirement  accounts  totaling  $11,483,000  and
         $7,986,000 at December 31, 1999 and 1998,  respectively,  almost all of
         which are in the form of certificates of deposit.
</FN>
</TABLE>
                                       25
<PAGE>

The  following  table  presents  certificates  of deposits  by maturity  for the
periods indicated:
<TABLE>
<CAPTION>

                                                               At December 31, 1999       At December 31, 1998
                                                               --------------------       --------------------
                                                                            Wtd-Avg                    Wtd-Avg
                        ($ in thousands)                     Amount     Stated Rate      Amount    Stated Rate
                        ----------------------------- -------------- --------------- ----------- --------------
<S>                                                         <C>             <C>         <C>              <C>
                        Within one year                     $75,815         5.56%       $55,130          5.36%
                        Over one to two years                18,992         5.77         17,052          5.90
                        Over two to three years              12,148         6.03         10,153          6.00
                        Over three to four years              5,288         5.84         10,576          6.06
                        Over four years                      10,551         6.32          6,122          5.85
                        ----------------------------- -------------- --------------- ----------- --------------
                                                           $122,794         5.72%       $99,033          5.62%
                        ----------------------------- -------------- --------------- ----------- --------------
</TABLE>

The  following  table  shows  the  maturities  of  certificates  of  deposit  in
denominations of $100,000 or more:
<TABLE>
<CAPTION>

                                                                                  At December 31,
                                                                                  ---------------
                       ($ in thousands)                                          1999          1998
                       --------------------------------------------------- ------------- -------------
<S>                                                                             <C>           <C>
                       Due within three months or less                           $3,276        $1,800
                       Due over three months to six months                        2,337         1,757
                       Due over six months to one year                            6,974         3,796
                       Due over one year                                          5,653         3,609
                       --------------------------------------------------- ------------- -------------
                                                                                $18,240       $10,962
                       --------------------------------------------------- ------------- -------------
                       As a percentage of total deposits                            8.8%          6.4%
                       --------------------------------------------------- ------------- -------------
</TABLE>

The following table shows net deposit flows:
<TABLE>
<CAPTION>
                                                                       For the Year Ended December 31,
                                                                       -------------------------------
                        ($ in thousands)                                        1999           1998
                        ---------------------------------------- -------------------- ----------------
<S>                                                                          <C>              <C>
                        Net increase before interest credited                $27,989          $31,323
                        Net interest credited                                  8,712            7,977
                        ---------------------------------------- -------------------- ----------------
                        Net deposit increase                                 $36,701          $39,300
                        ---------------------------------------- -------------------- ----------------
</TABLE>

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

From time to time, the Banks purchase  Federal funds to manage  liquidity needs.
At December 31, 1999, $6,955,000 of Federal funds purchased were outstanding.

Convertible Debentures
----------------------

In June 1998, the Holding  Company sold  $7,000,000 of Convertible  Subordinated
Debentures (the "Debentures") in a public offering.  The proceeds from the sale,
net  of  underwriting  discounts,   commissions  and  other  fees,  amounted  to
approximately  $6,500,000.   The  Debentures  are  due  July  1,  2008  and  are
convertible  at the  option of the  holders  at any time prior to April 1, 2008,
unless previously redeemed by the Holding Company, into shares of Class A common
stock of the Holding Company at various  conversion  prices. The Holding Company
also has the  option at any time to call all or any part of the  Debentures  for
payment and redeem the same at any time prior to maturity thereof.  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.

Interest on the Debentures accrues and compounds each calendar quarter at 8% and
is payable at the maturity whether by acceleration, redemption or otherwise. Any
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. For a further discussion of conversion prices and redemption
premiums, see note 7 to the consolidated financial statements.

                                       26
<PAGE>

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

The following table shows the composition of all other liabilities:
<TABLE>
<CAPTION>

                                                                              At December 31,
                                                                              ---------------
                         ($ in thousands)                                   1999            1998
                         ------------------------------------------- -------------- ---------------
<S>                                                                         <C>             <C>
                         Accrued interest payable on debentures              $ 892           $ 299
                         Accrued interest payable on deposits                  461             386
                         Mortgage escrow funds payable                       1,521             870
                         Official checks outstanding                         1,821           1,572
                         All other                                             617             384
                         ------------------------------------------- -------------- ---------------
                                                                            $5,312          $3,511
                         ------------------------------------------- -------------- ---------------
</TABLE>

All other  liabilities  increased  primarily  due to:  an  increase  in  accrued
interest payable on the Debentures (see page 26 for additional  discussion);  an
increase  in official  checks  outstanding;  and an increase in mortgage  escrow
funds payable.

Mortgage escrow funds payable  represent  advance payments made by borrowers for
property  taxes and insurance that are remitted by the Company to third parties.
The increase  reflects the timing of payments to taxing  authorities  as well as
the growth in the loan portfolio.

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

Stockholders'  equity  increased  due to net  earnings  of  $1,195,000  and  the
issuance of 102,364  shares of common  stock,  which  resulted,  net of issuance
costs, in a $699,000 aggregate increase in stockholders' equity. The shares were
issued as follows:  7,554 shares of Class A common stock upon the  conversion of
convertible debentures;  89,300 shares of Class A common stock upon the exercise
of Class A  warrants,  510 shares of Class A common  stock in  exchange  for the
shares of minority  shareholders  of Intervest Bank, and 5,000 shares of Class B
common stock upon the exercise of Class B stock warrants.

                                       27
<PAGE>

                         Asset and Liability Management

The Company's  primary objective in managing  interest-rate  risk is to minimize
the adverse  impact of changes in interest  rates on the  Company's net interest
income and capital, while adjusting the Company's  asset/liability  structure to
maximize the net yield on that  structure.  The Company relies  primarily on its
asset-liability  strategy  to control  interest  rate  risk.  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.

ALCO  examines the extent to which  assets and  liabilities  are  "interest-rate
sensitive"  and  monitors  the  interest-rate  sensitivity  "gap."  An  asset or
liability  is  normally  considered  to be  interest-rate  sensitive  if it will
reprice or mature within one year or less. The interest-rate  sensitivity gap is
the difference between interest-earning assets and interest-bearing  liabilities
scheduled  to  mature  or  reprice  within  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 due to
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," 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 on page 29,  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 29.7% at
December  31, 1999 and 36.7% at December 31, 1998.  However,  if those  deposits
were treated differently in the gap analysis, then the interest-rate sensitivity
gap would be lower.  The behavior of core depositors may not necessarily  result
in the  immediate  withdrawal of funds in the event deposit rates offered by the
Company 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  negative one-year gap would have been
5.5% at year-end 1999, compared to 11.1% at year-end 1998.

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.

                                       28
<PAGE>

Notwithstanding the aforementioned, 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.

The  following   table   summarizes   information   relating  to  the  Company's
interest-earning  assets and  interest-bearing  liabilities  as of December  31,
1999, that are scheduled to mature or reprice within the periods shown.
<TABLE>
<CAPTION>

                                                      0-3           4-12       Over 1-4         Over 4
        ($ in thousands)                             Months        Months        Years          Years         Total
    ----------------------------------------      ------------  ------------ -----------    ------------- -------------
<S>                                               <C>            <C>          <C>              <C>          <C>
        Loans (1)                                 $  20,733      $ 56,173     $ 60,627       $13,030     $150,563
        Securities (2)                                3,988         3,919       44,015        31,210       83,132
        Federal funds sold                            3,900             -            -             -        3,900
        Short-term investments                          291             -            -             -          291
        Federal Reserve Bank stock                       -              -            -           508          508
        Interest-bearing deposits                       100             -            -             -          100
        ---------------------------------------- ------------ ------------- ------------- ------------- -------------
        Total rate-sensitive assets               $  29,012      $ 60,092     $104,642       $44,748     $238,494
        ---------------------------------------- ------------ ------------- ------------- ------------- -------------

        Deposit accounts (3):
          Checking (NOW) deposits                 $   6,636      $      -     $      -       $     -     $  6,636
          Savings deposits                           19,089             -            -             -       19,089
          Money market deposits                      54,302             -            -             -       54,302
          Certificates of deposit                    19,832        55,983       36,428        10,551      122,794
                                                 ------------ ------------- ------------- ------------- -------------
          Total deposits                             99,859        55,983       36,428        10,551      202,821
        Federal funds purchased                       6,955             -            -             -        6,955
        Convertible subordinated debentures               -             -            -         6,930        6,930
        Accrued interest on debentures                    -             -          892             -          892
        ---------------------------------------- ------------ ------------- ------------- ------------- -------------
        Total rate-sensitive liabilities          $ 106,814      $ 55,983     $ 37,320       $17,481     $217,598
        ---------------------------------------- ------------ ------------- ------------- ------------- -------------
        ---------------------------------------- ------------ ------------- ------------- ------------- -------------
        GAP (repricing differences)               $ (77,802)     $  4,109     $ 67,322       $27,267     $ 20,896
        ---------------------------------------- ------------ ------------- ------------- ------------- -------------
        Cumulative GAP                            $ (77,802)     $(73,693)    $ (6,371)      $20,896     $ 20,896
        ---------------------------------------- ------------ ------------- ------------- ------------- -------------
        Cumulative GAP to total assets                -31.4%        -29.7%        -2.6%          8.4%         8.4%
        ---------------------------------------- ------------ ------------- ------------- ------------- -------------

         Assumptions used in preparing the table above:
<FN>

         (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; (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>
</TABLE>

                         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  funding  commitments,
deposit  withdrawals and the repayment of borrowed funds. The Company's  primary
sources of funds consist of: retail  deposits  obtained  through the Bank 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 cash  flows  from the
Company's operating,  investing and financing  activities,  see the consolidated
statements of cash flows included in the financial statements.

At  December  31,  1999,  the  Company's  total  commitment  to lend  aggregated
$27,921,000.  Based on its cash flow  projections,  the Company believes that it
can fund all of its  outstanding  lending  commitments  from the  aforementioned
sources of funds.

                                       29
<PAGE>

Intervest Bank has agreements with correspondent  banks whereby it may borrow up
to $8,000,000 on an unsecured basis. There were no outstanding  borrowings under
these agreements at December 31, 1999 or 1998.

The Banks are subject to various regulatory capital requirements administered by
the Federal banking  agencies.  The FDIC  Improvement  Act of 1991,  among other
matters,  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
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,
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.

Information  regarding  the Banks'  regulatory  capital  and  related  ratios is
summarized below:
<TABLE>
<CAPTION>

                                                                      Intervest Bank               Intervest National Bank
                                                                      At December 31,                  At December 31,
                                                                      ---------------                  ---------------
($ in thousands)                                                   1999             1998            1999             1998
------------------------------------------------------------ --------------- ---------------- --------------- ----------------
<S>                                                             <C>             <C>                <C>
Tier 1 Capital:
   Common stockholders' equity                                  $  12,746       $  11,104          $  8,493            -
   Less disallowed portion of deferred tax asset                     (570)           (412)             (213)           -
------------------------------------------------------------ --------------- ---------------- --------------- ----------------
Total Tier 1 capital                                               12,176          10,692             8,280            -
------------------------------------------------------------ --------------- ---------------- --------------- ----------------
Tier 2 Capital:
   Allowable portion of allowance for loan loss reserves            1,561           1,354               444            -
------------------------------------------------------------ --------------- ---------------- --------------- ----------------
Total risk-based capital                                        $  13,737       $  12,046          $  8,724            -
------------------------------------------------------------ --------------- ---------------- --------------- ----------------
Net risk-weighted assets                                        $ 124,389       $ 108,050          $ 45,860            -
Average assets for regulatory purposes                          $ 189,069       $ 177,148          $ 50,838            -
Tier 1 capital to average regulatory assets                          6.44%           6.04%            16.29%           -
Tier 1 capital to risk-weighted assets                               9.79%           9.90%            18.06%           -
Total capital to risk-weighted assets                               11.04%          11.15%            19.02%           -
------------------------------------------------------------ --------------- ---------------- --------------- ----------------
</TABLE>

                        Recent Accounting Pronouncements

Refer to note 1 to the  notes to the  consolidated  financial  statements  for a
discussion  of  this  topic  as well  as  page  18 for a  discussion  of the new
accounting principle related to start-up costs.

                     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. Unlike most industrial  companies,  virtually all of the assets
and liabilities of a financial  institution are monetary in nature. As a result,
changes in interest rates have a more significant impact on the performance of a
financial  institution  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.

                                       30
<PAGE>

                                   Market Risk

Market  risk is the risk of loss that can occur from  adverse  changes in market
prices and rates.  The Company's market risk arises primarily from interest rate
risk  inherent in its lending and  deposit  gathering  activities.  To that end,
management  actively  monitors and manages its interest rate risk exposure.  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, 1999 and 1998, which
reflect changes in market prices and rates, can be found in Note 19 of the notes
to consolidated financial statements.

The Company's  primary objective in managing  interest-rate  risk is to minimize
the adverse  impact of changes in interest  rates on the  Company's net interest
income and capital, while adjusting the Company's  asset/liability  structure to
maximize the net yield on that  structure.  The Company relies  primarily on its
asset-liability  strategy  to control  interest  rate  risk.  This  strategy  is
overseen in part through the direction of the Asset and Liability  Committees of
the Board of Directors  of each Bank,  which  establishes  policies and monitors
results to control interest rate sensitivity. For a further discussion, of asset
and liability management, see page 28.

                                 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.  The Company has
not determined what effect, if any, the Year 2000 issue has had on its customers
and vendors.  To date, the Company has not  experienced any problems as a result
of the Year 2000 issue.  Expenses  incurred  by the Company  related to the Year
2000 issue have not been material.

Item 7.  Financial Statements and Supplementary Data

                              Financial Statements

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

Independent Auditors' Report  (page 33)
Consolidated Balance Sheets at December 31, 1999 and 1998  (page 34)
Consolidated  Statements  of Earnings for the Years Ended  December 31, 1999 and
  1998 (page 35)
Consolidated  Statements of Changes in  Stockholders' Equity for the Years Ended
  December 31, 1999 and 1998 (page 36)
Consolidated  Statements of Cash Flows for the Years Ended December 31, 1999 and
  1998 (page 37)
Notes to the Consolidated Financial Statements (pages 38 to 58)


                                       31
<PAGE>
                               Supplementary Data
Securities

The following table sets forth, by maturity distribution, information pertaining
to securities held to maturity:
<TABLE>
<CAPTION>
                                                         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
---------------------------- ----------- -----------   ----------- ----------- ----------- ----------- ----------- -----------
<S>                             <C>           <C>       <C>           <C>       <C>           <C>       <C>            <C>
At December 31, 1999:
---------------------
U.S. Government
   agencies securities          $ 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 securities               -          -        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%
---------------------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------

At December 31, 1997:
---------------------
U.S. Treasury securities        $ 1,996       6.10%     $ 2,031       6.03%     $    -         -  %     $ 4,027        6.06%
U.S. Government
   agencies securities           11,173       6.08       30,859       6.23       12,762       6.46       54,794        6.28
---------------------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total                           $13,169       6.08%     $32,890       6.21%     $12,762       6.46%     $58,821        6.24%
---------------------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
Loans and Allowance for Loan Loss Reserves
------------------------------------------

The following  table sets forth  information  with respect to the composition of
loans receivable at December 31:
<TABLE>
<CAPTION>

                                                       1999          1998         1997         1996          1995
                                                       ----          ----         ----         ----          ----
                                                     Carrying      Carrying     Carrying     Carrying      Carrying
($ in thousands)                                      Value         Value         Value        Value        Value
------------------------------------------------- ------------- ------------- ------------ ------------ -------------
<S>                                                  <C>           <C>          <C>           <C>          <C>
Commercial real estate and multifamily loans         $146,101      $92,535      $71,173       $54,151      $29,384
Residential 1-4 family loans                            2,413        2,627        3,162         2,784        3,046
Construction loans                                        -            -            158            47          335
Commercial loans                                        1,783        2,875        2,641         3,514        4,391
Consumer loans                                            266          184           92           157          115
------------------------------------------------- ------------- ------------- ------------ ------------ -------------
Total gross loans receivable                          150,563       98,221       77,226        60,653       37,271
------------------------------------------------- ------------- ------------- ------------ ------------ -------------
Deferred loan fees and unamortized discounts             (916)        (485)        (401)         (343)        (213)
Allowance for loan loss reserves                       (2,493)      (1,662)      (1,173)         (811)        (593)
------------------------------------------------- ------------- ------------- ------------ ------------ -------------
Loans receivable, net                                $147,154      $96,074      $75,652       $59,499      $36,465
------------------------------------------------- ------------- ------------- ------------ ------------ -------------
Loans included above that were
   on a nonaccrual status at year end                $    -        $   -        $   -         $   -        $   -
------------------------------------------------- ------------- ------------- ------------ ------------ -------------
</TABLE>
The  following  table sets forth  information  with respect to the allowance for
loan loss reserves at December 31:
<TABLE>
<CAPTION>

($ in thousands)                                        1999          1998         1997         1996           1995
------------------------------------------------- ------------- ------------- ------------ ------------ -------------
<S>                                                  <C>            <C>         <C>           <C>            <C>
Allowance at beginning of year                       $  1,662       $ 1,173     $   811       $   593        $   369
Provision charged to operations                           830           479         352           250            233
Chargeoffs                                                  -             -           -           (65)           (30)
Recoveries                                                  1            10          10            33             21
------------------------------------------------- ------------- ------------- ------------ ------------ -------------
Allowance at end of year                             $  2,493       $ 1,662     $ 1,173       $   811        $   593
------------------------------------------------- ------------- ------------- ------------ ------------ -------------
Total loans, net of deferred fees and discounts      $149,647       $97,736     $76,825       $60,310        $37,058
Average loans outstanding for the year               $110,006       $90,470     $68,711       $49,266        $28,052
Net chargeoffs (recoveries) to average loans
    outstanding during the year                             -%            -%          -          0.06%          0.03%
Ratio of allowance to net loans receivable               1.67%         1.70%       1.53%         1.34%          1.60%
------------------------------------------------- ------------- ------------- ------------ ------------ -------------
</TABLE>
                                       32
<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") at
         December 31, 1999 and 1998 and the related  consolidated  statements of
         earnings, changes in stockholders' equity, and cash flows for the years
         then ended.  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,  1999  and  1998,  and  the  results  of its
         operations  and its cash flows for the years  then ended in  conformity
         with generally accepted accounting principles.

         As discussed in Note 1 to the consolidated  financial  statements,  the
         Company  changed  its  method  of  accounting  for  organizational  and
         preopening costs.  Effective January 1, 1999, the Company adopted AICPA
         Statement  of  Position  98-5  "Reporting  on  the  Costs  of  Start-Up
         Activities."

         HACKER, JOHNSON, COHEN & GRIEB PA
         Tampa, Florida

         January 14, 2000, except for Note 23, as
                   to which the date is March 10, 2000












                                       33
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries

                           Consolidated Balance Sheets
<TABLE>
<CAPTION>

                                                                                                   As of December 31,
                                                                                               ------------ -------------
       ($ in thousands, except par value)                                                            1999       1998
       --------------------------------------------------------------------------------------- ------------ -------------
<S>                                                                                               <C>           <C>
       ASSETS
       Cash and due from banks                                                                      $3,138       $ 2,876
       Federal funds sold                                                                            3,900         6,473
       Short-term investments                                                                          291         4,123
                                                                                               ------------ -------------
           Total cash and cash equivalents                                                           7,329        13,472
       Interest-bearing deposits with banks                                                            100           199
       Securities held to maturity, net  (estimated fair value of
            $79,882 and $82,173, respectively)                                                      83,132        82,338
       Federal Reserve Bank stock, at cost                                                             508           233
       Loans receivable  (net of allowance for loan loss reserves of
            $2,493 and $1,662, respectively)                                                       147,154        96,074
       Accrued interest receivable                                                                   1,836         1,800
       Premises and equipment, net                                                                   5,767         4,917
       Deferred income tax asset                                                                       912           579
       Other assets                                                                                  1,091           910
       --------------------------------------------------------------------------------------- ------------ -------------
       Total assets                                                                               $247,829      $200,522
       --------------------------------------------------------------------------------------- ------------ -------------
       LIABILITIES
       Deposits:
          Noninterest-bearing demand deposit accounts                                             $  4,347     $   3,027
          Interest-bearing deposit accounts:
             Checking (NOW) accounts                                                                 6,636         7,955
             Savings accounts                                                                       19,089        26,823
             Money-market accounts                                                                  54,302        33,629
             Certificate of deposit accounts                                                       122,794        99,033
                                                                                               ------------ -------------
       Total deposit accounts                                                                      207,168       170,467
       Federal funds purchased                                                                       6,955             -
       Convertible subordinated debentures payable                                                   6,930         7,000
       Accrued interest payable on debentures                                                          892           299
       Mortgage escrow funds payable                                                                 1,521           870
       Official checks outstanding                                                                   1,821         1,572
       Other liabilities                                                                             1,078           747
       --------------------------------------------------------------------------------------- ------------ -------------
       Total liabilities                                                                           226,365       180,955
       --------------------------------------------------------------------------------------- ------------ -------------
       Minority interest                                                                                 -            23
       Commitments and contingencies (notes 5, 16, 18 and 22)
       STOCKHOLDERS' EQUITY
       Preferred stock  (300,000 shares authorized, none issued)                                         -             -
       Class A common stock  ($1.00 par value, 7,500,000 shares authorized,
             2,281,879 and 2,184,515 shares issued and outstanding, respectively)                    2,282         2,184
       Class B common stock  ($1.00 par value, 700,000 shares authorized,
             305,000 and 300,000 shares issued and outstanding, respectively)                          305           300
       Additional paid-in-capital, common                                                           14,411        13,789
       Retained earnings                                                                             4,466         3,271
       --------------------------------------------------------------------------------------- ------------ -------------
       Total stockholders' equity                                                                   21,464        19,544
       --------------------------------------------------------------------------------------- ------------ -------------
       Total liabilities and stockholders' equity                                                 $247,829      $200,522
       --------------------------------------------------------------------------------------- ------------ -------------
</TABLE>
          See accompanying notes to consolidated financial statements.

                                       34
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries

                       Consolidated Statements of Earnings
<TABLE>
<CAPTION>

                                                                                                  For the Year Ended
                                                                                                     December 31,

                                                                                              ---------------------------
       ($ in thousands, except per share data)                                                    1999            1998
       -------------------------------------------------------------------------------------- ------------- -------------
<S>                                                                                            <C>               <C>
       INTEREST AND DIVIDEND INCOME
       Loans receivable                                                                       $  9,691          $ 8,278
       Securities                                                                                4,873            4,224
       Other interest-earning assets                                                               494              432
       -------------------------------------------------------------------------------------- ------------- -------------
       Total interest and dividend income                                                       15,058           12,934
       -------------------------------------------------------------------------------------- ------------- -------------
       INTEREST EXPENSE
       Deposits                                                                                  8,812            7,977
       Federal funds purchased                                                                      29                1
       Convertible subordinated debentures                                                         637              319
       -------------------------------------------------------------------------------------- ------------- -------------
       Total interest expense                                                                    9,478            8,297
       -------------------------------------------------------------------------------------- ------------- -------------
       Net interest and dividend income                                                          5,580            4,637
       Provision for loan loss reserves                                                            830              479
       -------------------------------------------------------------------------------------- ------------- -------------
       Net interest and dividend income after provision for loan loss reserves                   4,750            4,158
       -------------------------------------------------------------------------------------- ------------- -------------
       NONINTEREST INCOME
       Customer service fees                                                                       140              139
       Income from lending activities                                                              259              195
       Net gain on sale of loans                                                                    56                -
       All other                                                                                     1               15
       -------------------------------------------------------------------------------------- ------------- -------------
       Total noninterest income                                                                    456              349
       -------------------------------------------------------------------------------------- ------------- -------------
       NONINTEREST EXPENSES
       Salaries and employee benefits                                                            1,523            1,056
       Occupancy and equipment, net                                                                782              467
       Advertising and promotion                                                                    33               31
       Professional fees and services                                                              230              225
       Stationery, printing and supplies                                                           145               98
       All other                                                                                   452              256
       -------------------------------------------------------------------------------------- ------------- -------------
       Total noninterest expenses                                                                3,165            2,133
       -------------------------------------------------------------------------------------- ------------- -------------
       Earnings before income taxes and change in accounting principle                           2,041            2,374
       Provision for income taxes                                                                  718              939
       Cumulative effect of change in accounting principle (note 1)                               (128)               -
       -------------------------------------------------------------------------------------- ------------- -------------
       Net earnings                                                                            $ 1,195          $ 1,435
       -------------------------------------------------------------------------------------- ------------- -------------
       Basic earnings per share:
           Earnings before change in accounting principle                                      $  0.53          $  0.58
           Cumulative effect of change in accounting principle                                   (0.05)               -
       -------------------------------------------------------------------------------------- ------------- -------------
           Net earnings per share                                                              $  0.48          $  0.58
       -------------------------------------------------------------------------------------- ------------- -------------
       Diluted earnings per share:
           Earnings before change in accounting principle                                      $  0.48          $  0.46
           Cumulative effect of change in accounting principle                                   (0.05)               -
       -------------------------------------------------------------------------------------- ------------- -------------
           Net earnings per share                                                              $  0.43          $  0.46
       -------------------------------------------------------------------------------------- ------------- -------------
</TABLE>
           See accompanying notes to consolidated financial statements.

                                       35
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries

           Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>

                                                                                                  For the Year Ended
                                                                                                     December 31,

                                                                                              ---------------------------
       ($ in thousands)                                                                            1999          1998
       -------------------------------------------------------------------------------------- ------------- -------------
<S>                                                                                                <C>           <C>
       CLASS A COMMON STOCK
       Balance at beginning of year                                                                 $2,184        $2,124
       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 89,300 and 60,100 shares, respectively, upon the
            exercise of warrants                                                                        90            60
       -------------------------------------------------------------------------------------- ------------- -------------
       Balance at end of year                                                                        2,282         2,184
       -------------------------------------------------------------------------------------- ------------- -------------
       CLASS B COMMON STOCK
       Balance at beginning of year                                                                    300           300
       Issuance of 5,000 shares upon the exercise of warrants                                            5             -
       -------------------------------------------------------------------------------------- ------------- -------------
       Balance at end of year                                                                          305           300
       -------------------------------------------------------------------------------------- ------------- -------------
       ADDITIONAL PAID-IN-CAPITAL, COMMON
       Balance at beginning of year                                                                 13,789        13,360
       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            43
       Issuance of 94,300 and 60,100 shares upon exercise of stock warrants,
            including tax benefits                                                                     534           386
       -------------------------------------------------------------------------------------- ------------- -------------
       Balance at end of year                                                                       14,411        13,789
       -------------------------------------------------------------------------------------- ------------- -------------
       RETAINED EARNINGS
       Balance at beginning of year                                                                  3,271         1,836
       Comprehensive income - net earnings for the year                                              1,195         1,435
       -------------------------------------------------------------------------------------- ------------- -------------
       Balance at end of year                                                                        4,466         3,271
       -------------------------------------------------------------------------------------- ------------- -------------
       -------------------------------------------------------------------------------------- ------------- -------------
       Total stockholders' equity at end of year                                                   $21,464       $19,544
       -------------------------------------------------------------------------------------- ------------- -------------
</TABLE>
           See accompanying notes to consolidated financial statements.

                                       36
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries

                      Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                                              For the Year Ended
                                                                                                  December 31,
                                                                                                  ------------
                                                                                        --------------------------------
      ($ in thousands)                                                                         1999            1998
      --------------------------------------------------------------------------------- ---------------- ---------------
<S>                                                                                         <C>               <C>
      OPERATING ACTIVITIES
      Net earnings                                                                          $  1,195          $ 1,435
      Adjustments to reconcile  net  earnings to net cash  provided by operating
          activities:
      Depreciation and amortization                                                              410              337
      Provision for loan loss reserves                                                           830              479
      Deferred income tax benefit                                                               (333)             (94)
      Interest expense on debentures                                                             637              319
      Compensation expense related to stock warrants                                              26               43
      Gain on sale of loans                                                                      (56)               -
      Amortization of premiums, fees and discounts, net                                         (281)            (218)
      Increase in official checks outstanding                                                    249              853
      Decrease (increase) in all other assets and liabilities, net                               561             (575)
      --------------------------------------------------------------------------------- ---------------- ---------------
      Net cash provided by operating activities                                                3,238            2,579
      --------------------------------------------------------------------------------- ---------------- ---------------
      INVESTING ACTIVITIES
      Decrease (increase) in interest-earning deposits                                            99             (100)
      Maturities and calls of securities held to maturity                                     32,556           50,050
      Purchases of securities held to maturity                                               (33,278)         (73,650)
      Loan originations, net of principal repayments                                         (57,812)         (20,657)
      Sale of loans                                                                            5,660                -
      Purchases of Federal Reserve Bank stock, net                                              (275)               -
      Purchases of premises and equipment, net                                                (1,260)            (377)
      --------------------------------------------------------------------------------- ---------------- ---------------
      Net cash used by investing activities                                                  (54,310)         (44,734)
      --------------------------------------------------------------------------------- ---------------- ---------------
      FINANCING ACTIVITIES
      Net increase in demand, savings, NOW and money-market deposits                          12,940           33,645
      Net increase in certificates of deposit                                                 23,761            5,655
      Net increase in mortgage escrow funds payable                                              651              280
      Net proceeds from federal funds purchased                                                6,955                -
      Net proceeds from sale of convertible debentures                                             -            6,457
      Net proceeds from issuance of common stock                                                 622              414
      --------------------------------------------------------------------------------- ---------------- ---------------
      Net cash provided by financing activities                                               44,929           46,451
      --------------------------------------------------------------------------------- ---------------- ---------------
      Net (decrease) increase in cash and cash equivalents                                    (6,143)           4,296
      Cash and cash equivalents at beginning of year                                          13,472            9,176
      --------------------------------------------------------------------------------- ---------------- ---------------
      Cash and cash equivalents at end of year                                              $  7,329         $ 13,472
      --------------------------------------------------------------------------------- ---------------- ---------------
      SUPPLEMENTAL DISCLOSURES Cash paid during the year for:
         Interest                                                                           $  8,741         $  7,929
         Income taxes                                                                          1,209              849
      Noncash activities:
         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>
         See accompanying notes to consolidated financial statements.

                                       37
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                 For the Years Ended December 31, 1999 and 1998

--------------------------------------------------------------------------------
1.       Description of Business and Summary of Significant Accounting Policies

         Description of Business

         Intervest   Bancshares   Corporation   (the   "Holding   Company")  was
         incorporated on February 5, 1993 and is headquartered in New York City.
         At December 31, 1999, the Holding  Company owns 100% of the outstanding
         common and preferred stock of Intervest Bank and 100% of the oustanding
         common  stock  of  Intervest  National  Bank.  Hereafter,  the  Holding
         Company,  Intervest  Bank and  Intervest  National Bank are referred to
         collectively  as the  "Company," on a consolidated  basis.  The Holding
         Company's  primary  business is the  ownership  of  Intervest  Bank and
         Intervest National Bank (the "Banks.")

         Intervest  National Bank is a full-service  commercial  bank located at
         One  Rockefeller  Plaza,  Suite  300,  New York,  New York,  10020.  It
         received its national charter from the Office of the Comptroller of the
         Currency and 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.  Each  Bank
         conducts a full-service commercial banking business,  which consists of
         attracting  deposits from the general public and investing those funds,
         together with other source 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.

         Principles of Consolidation, Basis of Presentation and Use of Estimates

         The  consolidated  financial  statements  include  the  accounts of the
         Holding Company and the Banks.  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.

         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.

         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,  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.

                                       38
<PAGE>

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

1.       Description of Business and Summary of Significant Accounting Policies,
         Continued

         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 origination 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 as appropriate.

         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.

         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.
                                       39
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                 For the Years Ended December 31, 1999 and 1998

--------------------------------------------------------------------------------

1.       Description of Business and Summary of Significant Accounting Policies,
         Continued

         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.

         Stock Based Compensation

         Statement of Financial  Accounting  Standards No. 123,  "Accounting for
         Stock-Based  Compensation,"  establishes a "fair value" based method of
         accounting  for  stock-based  compensation  plans  and  encourages  all
         entities to adopt that method of accounting  for all their  stock-based
         compensation  plans.  However it also  allows an entity to  continue to
         measure   compensation   cost  for  those  plans  using  the  intrinsic
         value-based  method of accounting  prescribed by Accounting  Principles
         Board Opinion No. 25,  "Accounting  for Stock Issued to Employees." The
         Company has elected to follow APB No. 25 and related interpretations in
         accounting for its  stock-based  compensation,  which is in the form of
         stock  warrants.  Statement 123 requires pro forma  disclosures  of net
         earnings and earnings per share determined as if the Company  accounted
         for its stock warrants under the fair value method.

         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.

         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).
                                       40
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                 For the Years Ended December 31, 1999 and 1998

--------------------------------------------------------------------------------

1.       Description of Business and Summary of Significant Accounting Policies,
         Continued

         Foreclosed Real Estate

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

         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.  In June
         1998,  the  Financial   Accounting   Standards  Board  ("FASB")  issued
         Statement of Financial  Accounting  Standards No. 133  "Accounting  for
         Derivative   Instruments   and  Hedging   Activities."   SFAS  No.  133
         establishes   accounting   and  reporting   standards  for   derivative
         instruments, including certain derivative instruments embedded in other
         contracts  and for hedging  activities.  In June 1999,  the FASB issued
         Statement of Financial  Accounting  Standards No. 137  "Accounting  for
         Derivative  Instruments  and  Hedging  Activities  -  Deferral  of  the
         Effective Date of FASB Statement No. 133." SFAS No. 137 delays SFAS No.
         133' s  effective  date to all  fiscal  quarters  of all  fiscal  years
         beginning after June 15, 2000.

         Since  the  Company  does  not  currently  use   derivative   financial
         instruments,  the  standard  will not have any impact on the  Company's
         financial statements when adopted.

         Accounting for the Costs of Computer Software Developed or Obtained for
         Internal  Use. On January 1, 1999 the  Company  adopted the AICPA's SOP
         98-1,  "Accounting  for the Costs of  Computer  Software  Developed  or
         Obtained  for  Internal  Use." The SOP,  among other  things,  provides
         guidance as to when and what types of costs should be capitalized as it
         relates to  internal-use  software.  The adoption of this statement did
         not have any impact on the Company's financial statements.

                                      41
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                 For the Years Ended December 31, 1999 and 1998

--------------------------------------------------------------------------------

2.       Securities  Held To  Maturity

         The carrying and estimated fair values of securities held to maturity
are summarized as follows:
<TABLE>
<CAPTION>

                                                                                     Gross          Gross    Estimated
                                                                   Amortized    Unrealized     Unrealized         Fair
                 ($ in thousands)                                       Cost         Gains         Losses        Value
                 ---------------------------------------------- ------------- ------------- -------------- ------------
<S>                                                                  <C>              <C>          <C>        <C>
                 At December 31, 1999:
                    U.S. Government agency securities                $83,132        $  1         $3,251       $79,882
                 ---------------------------------------------- ------------- ------------- -------------- ------------
                 At December 31, 1998:
                    U.S. Treasury securities                         $ 2,015        $ 15         $    -       $ 2,030
                    U.S. Government agency securities                 80,323         186            366        80,143
                 ---------------------------------------------- ------------- ------------- -------------- ------------
                                                                     $82,338        $201         $  366       $82,173
                 ---------------------------------------------- ------------- ------------- -------------- ------------
</TABLE>

         At December 31, 1999 and 1998, the  securities  portfolio was comprised
         of securities with fixed rates of interest.  The weighted-average yield
         of the portfolio was approximately  5.80% at December 31, 1999 and 5.89
         % at December 31, 1998. At December 31, 1999 and 1998,  U.S  Government
         agency  securities  consisted of debt  obligations  of the Federal Home
         Loan Bank,  Federal  Farm  Credit Bank and  Federal  National  Mortgage
         Association.  There  were  no  sales  of  securities  or  transfers  of
         securities  to an  available  for sale  account  during the years ended
         December 31, 1999 and 1998.

         The carrying and estimated  fair values of securities  held to maturity
         at December 31, 1999,  by remaining  term to  contractual  maturity are
         summarized as follows:
<TABLE>
<CAPTION>

                                                                               Amortized    Estimated Fair
                         ($ in thousands)                                           Cost             Value
                         --------------------------------------------- ------------------ -----------------
<S>                                                                              <C>               <C>
                         Due in one year or less                                 $ 7,907           $ 7,908
                         Due after one year through five years                    58,013            55,708
                         Due after five years through ten years                   17,212            16,266
                         --------------------------------------------- ------------------ -----------------
                                                                                 $83,132           $79,882
                         --------------------------------------------- ------------------ -----------------
</TABLE>

3.       Loans Receivable

         Loans receivable are summarized as follows:
<TABLE>
<CAPTION>

                                                                At December 31, 1999        At December 31, 1998
                                                                --------------------    -   --------------------
              ($ in thousands)                                # of loans      Amount     # of loans      Amount
              ----------------------------------------------- ----------- ------------- ------------ ----------------
<S>                                                               <C>     <C>             <C>            <C>
              Commercial real estate loans                        101     $  78,425        95            $68,828
              Residential multifamily loans                        96        67,478        51             23,707
              Residential 1-4 family loans                         44         2,311        47              2,627
              Commercial loans                                     42         2,107        49              2,875
              Consumer loans                                       24           242        17                184
              ----------------------------------------------- ----------- ------------- ------------ ----------------
              Loans receivable                                    307       150,563       259             98,221
              ----------------------------------------------- ----------- ------------- ------------ ----------------
              Deferred loan fees                                               (916)                        (485)
              Allowance for loan loss reserves                               (2,493)                      (1,662)
              ----------------------------------------------- ----------- ------------- ------------ ----------------
              Loans receivable, net                                        $147,154                      $96,074
              ----------------------------------------------- ----------- ------------- ------------ ----------------
</TABLE>

         At December 31, 1999 and 1998, there were no loans held for sale.

                                       42
<PAGE>

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

3.       Loans Receivable, Continued

         The  geographic  distribution  of the loan  portfolio is  summarized as
follows:
<TABLE>
<CAPTION>

                                                             At December 31, 1999       At December 31, 1998
                                                             --------------------       --------------------
                      ($ in thousands)                      Amount    % of Total       Amount    % of Total
                      ---------------------------------- ----------- ------------- ------------ -------------
<S>                                                        <C>            <C>          <C>            <C>
                      Florida                               $92,255         61.3%      $82,167         83.7%
                      New York                               54,143         36.0        16,054         16.3
                      All other                               4,165          2.7            -            -
                      ---------------------------------- ----------- ------------- ------------ -------------
                                                           $150,563        100.0%      $98,221        100.0%
                      ---------------------------------- ----------- ------------- ------------ -------------
</TABLE>

         Credit  risk,  which  represents  the  possibility  of the  Company not
         recovering amounts due from its borrowers,  is significantly related to
         local  economic  conditions  as  well  as  the  Company's  underwriting
         standards.  Economic  conditions  affect the income levels of borrowers
         and  the  market  value  of the  underlying  collateral.  In  addition,
         although  commercial real estate and  multifamily  loans typically bear
         higher interest rates than 1-4 family  residential  loans,  they entail
         certain  risks not normally  found in 1-4 family  residential  mortgage
         lending.  Commercial real estate and multifamily  loans usually involve
         larger loans to single  borrowers.  In addition,  satisfactory  payment
         experience on loans  secured by  income-producing  properties  (such as
         office buildings, shopping centers and rental and cooperative apartment
         buildings)  is largely  dependent  on high levels of  occupancy.  Thus,
         these loans are more subject to adverse  conditions  in the real estate
         market and economy or specific  conditions at or in the vicinity of the
         property's location.

4.       Allowance for Loan Loss Reserves

         Activity  in the  allowance  for loan loss  reserves is  summarized  as
         follows:
<TABLE>
<CAPTION>

                                                                             For the Year Ended December 31,
                                                                             -------------------------------
                      ($ in thousands)                                              1999                1998
                      -------------------------------------------------- ---------------- -------------------
<S>                                                                               <C>                 <C>
                      Balance at beginning of year                                $1,662              $1,173
                      Provision charged to operations                                830                 479
                      Recoveries                                                       1                  10
                      -------------------------------------------------- ---------------- -------------------
                      Balance at end of year                                      $2,493              $1,662
                      -------------------------------------------------- ---------------- -------------------
</TABLE>

         There were no loans on  nonaccrual  status or  classified  as  impaired
         during the years ended December 31, 1999 or 1998.

5.       Premises and Equipment,  Lease  Commitments and Rental Expense

         Premises and equipment is summarized as follows:

<TABLE>
<CAPTION>

                                                                                     At December 31,
                                                                                     ---------------
                      ($ in thousands)                                             1999            1998
                      ------------------------------------------------------- --------------- ---------------
<S>                                                                              <C>            <C>
                      Land                                                       $ 1,264        $1,264
                      Buildings                                                    4,016         3,419
                      Leasehold improvements                                         324           136
                      Furniture, fixtures and equipment                            1,765         1,289
                      ------------------------------------------------------- --------------- ---------------
                      Total cost                                                   7,369         6,108
                      ------------------------------------------------------- --------------- ---------------
                      Less accumulated deprecation and amortization               (1,602)       (1,191)
                      ------------------------------------------------------- --------------- ---------------
                      Net book value                                             $ 5,767       $ 4,917
                      ------------------------------------------------------- --------------- ---------------
</TABLE>
                                       43
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                 For the Years Ended December 31, 1999 and 1998

--------------------------------------------------------------------------------
5.       Premises and Equipment, Lease Commitments and Rental Expense, Continued

         Intervest  Bank leases its Belcher Road office and  Intervest  National
         Bank leases its New York office.  The leases,  which contain  operating
         escalation  clauses based upon various  criteria,  are accounted for as
         operating leases expiring in June 2007 and May 2008, respectively.

         The  Company's  future  minimum  annual  lease  rental  payments  under
         noncancellable  operating  leases at December 31, 1999,  aggregated  as
         follows: $354,000 in 2000; $357,000 in 2001; $360,000 in 2002; $363,000
         in 2003;  $394,000 in 2004;  and $1,358,000  thereafter.  The Company's
         rental  expense  aggregated  $284,000 and  $94,000,  for 1999 and 1998,
         respectively.

         Intervest Bank subleases  certain of its space to other companies under
         leases  that  expire at  various  times  through  August  2007.  Future
         sublease  rental  income at December  31, 1999  aggregated  as follows:
         $319,000 in 2000; $246,000 in 2001; $223,000 in 2002; $198,000 in 2003;
         $197,000 in 2004;  and  $464,000  thereafter.  Sublease  rental  income
         aggregated $338,000 for 1999 and 1998, respectively.

6.       Deposits

         Scheduled maturities of certificates of deposit accounts are summarized
         as follows:
<TABLE>
<CAPTION>

                                                               At December 31, 1999       At December 31, 1998
                                                               --------------------       --------------------
                                                                            Wtd-Avg                    Wtd-Avg
                        ($ in thousands)                     Amount     Stated Rate      Amount    Stated Rate
                        ----------------------------- -------------- --------------- ----------- --------------
<S>                                                        <C>              <C>         <C>           <C>
                        Within one year                     $75,815         5.56%       $55,130       5.36%
                        Over one to two years                18,992         5.77         17,052       5.90
                        Over two to three years              12,148         6.03         10,153       6.00
                        Over three to four years              5,288         5.84         10,576       6.06
                        Over four years                      10,551         6.32          6,122       5.85
                        ----------------------------- -------------- --------------- ----------- --------------
                                                           $122,794         5.72%       $99,033       5.62%
                        ----------------------------- -------------- --------------- ----------- --------------
</TABLE>

         Certificates   of  deposit   accounts  of  $100,000  or  more   totaled
         $18,240,000   and   $10,962,000   at   December   31,  1999  and  1998,
         respectively. At December 31, 1999, certificates of deposit accounts of
         $100,000 or more by remaining maturity were as follows:  due within one
         year  $12,587,000;  over one to two years  $2,568,000 over two to three
         years $968,000;  over three to four years $102,000; and over four years
         $2,015,000.

         Interest expense on deposits is summarized as follows:
<TABLE>
<CAPTION>

                                                                           For the Year Ended December 31,
                                                                           -------------------------------
                           ($ in thousands)                                     1999                1998
                           ---------------------------------------- ----------------- -------------------
<S>                                                                           <C>                 <C>
                           Money-market and NOW accounts                      $2,222              $1,324
                           Savings accounts                                    1,066                 832
                           Certificates of deposit accounts                    5,524               5,821
                           ---------------------------------------- ----------------- -------------------
                                                                              $8,812              $7,977
                           ---------------------------------------- ----------------- -------------------
</TABLE>
                                       44
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                 For the Years Ended December 31, 1999 and 1998

--------------------------------------------------------------------------------
 7.      Convertible Debentures

         In  June  1998,  the  Holding  Company  sold  Convertible  Subordinated
         Debentures  (the  "Debentures")  in the aggregate  principal  amount of
         $7,000,000 in a public  offering.  The proceeds  from the sale,  net of
         underwriting  discounts  and  other  fees,  amounted  to  approximately
         $6,500,000.  The Debentures are due July 1, 2008 and are convertible at
         the option of the  holders  at any time prior to April 1, 2008,  unless
         previously  redeemed  by the  Holding  Company,  into shares of Class A
         common stock of the Holding Company at the following current conversion
         prices  per  share:  $10.00 in 1999;  $12.50  in 2000;  $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.

         The Holding  Company also has the option at any time to call all or any
         part of the  Debentures  for  payment  and  redeem the same at any time
         prior to maturity  thereof.  The redemption price for the Debentures is
         the face amount plus a 1% premium if  redemption  occurs before July 1,
         2000,  or the face amount if the date of redemption is on or after July
         1, 2000.

         Interest on the  Debentures  will  accrue and  compound  each  calendar
         quarter at 8%. All accrued  interest is payable at the  maturity of the
         Debentures  whether  by  acceleration,  redemption  or  otherwise.  Any
         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.

         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.

8.       Other Borrowed Funds

         From  time to  time,  the  Banks  purchase  Federal  funds  to  manage
         liquidity needs. At December 31, 1999, $6,955,000 of overnight Federal
         funds were  outstanding.  These funds had an  interest  rate of 5.18%.
         Intervest Bank also has agreements with correspondent banks whereby it
         may  borrow up to  $8,000,000  on an  unsecured  basis.  There were no
         outstanding  borrowings under these agreements at December 31, 1999 or
         1998.

9.       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, 1999 and 1998,  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  after
         January 1, 2000.
                                    45
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                 For the Years Ended December 31, 1999 and 1998

--------------------------------------------------------------------------------
10.      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, 1999 and
         1998, 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, 1999 and 1998,  such  investment,  which earns a
         dividend,  aggregated  to  $508,000  and  $233,000,   respectively.  At
         December 31, 1999, U.S.  government  agency  securities with a carrying
         value of $5,500,000 were pledged against Federal Funds  Purchased.  See
         note 8 "Other Borrowed Funds."

         The payment of dividends by the Holding Company and by the Banks to the
         Holding Company 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.  Additionally,  no
         dividends  may be  declared  or paid with  respect to shares of Class B
         common  stock  until  January 1, 2000,  after which time the holders of
         Class A common stock and Class B common stock will share ratably in any
         dividend.  The Holding  Company has never paid a common dividend to its
         shareholders  and  currently  has no  intentions  of  paying  a  common
         dividend.

11.      Profit Sharing Plans

         The Banks sponsor  tax-qualified,  profit  sharing plans in accordance
         with  the  provisions of Section  401(k) of the Internal  Revenue Code.
         Each  plan  is  available  to  each  Bank's  employees  who  elect  to
         participate  after meeting certain length-of-service  requirements. The
         Banks'  contributions to the profit sharing plans are discretionary and
         are determined  annually. Total expense related to the contributions to
         the plans included  in the consolidated financial statements aggregated
         $25,000 and $22,000 for 1999 and 1998, respectively.

12.      Related Party Transactions

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

                                                                         For the Year Ended December 31,
                                                                         -------------------------------
                               ($ in thousands)                                  1999          1998
                               --------------------------------------------- ------------- --------------
<S>                                                                             <C>            <C>
                               Balance at beginning of year                     $3,826         $3,242
                               Additions                                            25            868
                               Repayments                                         (456)          (284)
                               --------------------------------------------- ------------- --------------
                               Balance at end of year                           $3,395         $3,826
                               --------------------------------------------- ------------- --------------
</TABLE>

         There are no loans to directors or officers of Intervest  National Bank
         and the Holding Company.

         The Banks participate with Intervest  Corporation of New York (ICNY) in
         various mortgage loans. These loans amounted to $7,747,000 and $237,000
         at  December  31,  1999 and 1998,  respectively.  The  Banks  also have
         deposit  accounts  from  directors,  executive  officers and members of
         their immediate  families,  ICNY and its affiliated  companies totaling
         approximately  $9,800,000  at  December  31,  1999,  and  approximately
         $800,000  at  December  31,  1998.   The   shareholders   of  ICNY  are
         shareholders,  directors and officers of the Company.  See note 23 with
         respect to the acquisition of ICNY by the Company.

                                       46
<PAGE>
                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                 For the Years Ended December 31, 1999 and 1998
--------------------------------------------------------------------------------

13.      Common Stock Warrants

         The  Holding  Company  has common  stock  warrants  outstanding,  which
         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.

         Data concerning common stock warrants is summarized as follows:
<TABLE>
<CAPTION>
                                                                  Exercise Price Per Warrant     Total            Wtd-Avg
         Class A Common Stock Warrants:               $6.67       $10.00  (1)     $14.00 (2)     Warrants      Exercise Price
         ------------------------------------------- ------------ ------------ -------------- ------------- ------------------
<S>                                                  <C>            <C>           <C>           <C>               <C>
         Outstanding at December 31,1997             1,528,665      965,683             -       2,494,348         $ 7.96
            Granted in 1998                                  -           20       122,020         122,000         $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
         -------------------------------------------------------- ------------ -------------- -------------
         Remaining contractual life in years
             at December 31, 1999                          3.4          3.0           3.0             3.2
         -------------------------------------------------------- ------------ -------------- ------------- ------------------
<FN>
         (1) These warrants  entitle the holder to purchase one share of Class A
         common  stock at a price of $10.00 per share as of December  31,  1999;
         $11.50 per share in 2000; $12.50 per share in 2001 and $13.50 per share
         in 2002.

         (2) These warrants  entitle the holder to purchase one share of Class A
         common  stock at a price of $14.00 per share as of December  31,  1999;
         $15.00 per share in 2000; $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                             145,000      50,000         195,000         $ 7.52
         -------------------------------------------------------- ------------ -------------- -------------
         Remaining contractual life in years
            at December 31, 1999                                         7.1         8.1             7.3
         -------------------------------------------------------- ------------ -------------- ------------- ------------------
<FN>

         (1) At December 31, 1999,  14,200 of these  warrants  were  immediately
         exercisable.  An additional 7,100 warrants vest and become  exercisable
         on each April 27th of 2000, 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>

         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
         and $43,000 was included in salaries and employee  benefits expense for
         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.

                                       47
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                 For the Years Ended December 31, 1999 and 1998

--------------------------------------------------------------------------------

13.      Common Stock Warrants, Continued

         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>
<CAPTION>

                                                                                     For the Year Ended December 31,
                                                                                     -------------------------------
                  ($ in thousands, except per share amounts)                                1999                1998
                  --------------------------------------------------------------- --------------- -------------------
<S>                                                                                       <C>                 <C>
                  Reported net earnings                                                   $1,195              $1,435
                  Pro forma net earnings (1)                                              $1,172              $1,146
                  Reported basic earnings per share                                       $ 0.48              $ 0.58
                  Pro forma basic earnings per share                                      $ 0.47              $ 0.47
                  Reported diluted earnings per share                                     $ 0.43              $ 0.46
                  Pro forma diluted earnings per share                                    $ 0.42              $ 0.38
                  --------------------------------------------------------------- --------------- -------------------

<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 1000 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.

14.      Income   Taxes

         The Holding Company and its  subsidiaries  file a consolidated  federal
         income tax return on a calendar  year basis.  The Holding  Company also
         files  consolidated  income tax returns with Intervest National Bank in
         New York State and New York City. In addition, the Holding Company also
         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.  At December 31, 1999 and 1998, the Company had a net deferred
         tax asset of $912,000 and $579,000,  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 1999 and 1998.

         The total tax expense (benefit) is as follows:
<TABLE>
<CAPTION>

                                                                              For the Year Ended December 31,
                                                                              -------------------------------
                      ($ in thousands)                                                      1999         1998
                      --------------------------------------------------- ----------- ------------ -----------
<S>                                                                                         <C>          <C>
                      Provision for income taxes                                            $718         $939
                      Benefit from change in accounting principle                            (65)           -
                      --------------------------------------------------- ----------- ------------ -----------
                                                                                            $653         $939
                      --------------------------------------------------- ----------- ------------ -----------
</TABLE>
                                       48
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                 For the Years Ended December 31, 1999 and 1998

--------------------------------------------------------------------------------
14.      Income Taxes, Continued

         Allocation of federal, state and local income taxes between current and
deferred portions is as follows:
<TABLE>
<CAPTION>
                             ($ in thousands)                                Current     Deferred       Total
                             -------------------------------------------- ----------- ------------ -----------
<S>                                                                           <C>           <C>          <C>
                             Year Ended December 31, 1999:
                                Federal                                        $ 839       $(267)        $572
                                State and Local                                  147         (66)          81
                             -------------------------------------------- ----------- ------------ -----------
                                                                               $ 986       $(333)        $653
                             -------------------------------------------- ----------- ------------ -----------
                             Year Ended December 31, 1998:
                                Federal                                        $ 815        $(80)        $735
                                State and Local                                  218         (14)         204
                             -------------------------------------------- ----------- ------------ -----------
                                                                              $1,033        $(94)        $939
                             -------------------------------------------- ----------- ------------ -----------
</TABLE>
         The  components  of deferred tax  (benefit)  expense are  summarized as
follows:
<TABLE>
<CAPTION>
                                                                            For the Year Ended December 31,
                                                                            -------------------------------
                             ($ in thousands)                                      1999            1998
                             ----------------------------------------------- ---------------- ---------------
<S>                                                                               <C>              <C>
                             Allowance for loan loss reserves                     $(262)          $(185)
                             Organization and startup costs                         (99)              -
                             Depreciation                                            (3)            (38)
                             Deferred loan fees                                       6               7
                             Net operating loss carryforwards                        61             125
                             Stock-based compensation                               (12)            (15)
                             All other                                              (24)             12
                             ----------------------------------------------- ---------------- ---------------
                                                                                  $(333)           $(94)
                             ----------------------------------------------- ---------------- ---------------
</TABLE>
         The tax  effects  of the  temporary  differences  that give rise to the
deferred tax asset are summarized as follows:
<TABLE>
<CAPTION>
                                                                                         At December 31,
                                                                                         ---------------
                             ($ in thousands)                                            1999       1998
                             ------------------------------------------------------- ----------- -----------
<S>                                                                                        <C>      <C>
                             Allowance for loan loss reserves                              $745     $483
                             Organization and startup costs                                  99        -
                             Stock-based compensation                                        27       15
                             Depreciation                                                    22       19
                             Deferred loan fees                                               -        6
                             Net operating loss carryforwards                                 -       61
                             All other                                                       19       (5)
                             ------------------------------------------------------- ----------- -----------
                             Total deferred tax asset                                      $912     $579
                             ------------------------------------------------------- ----------- -----------
</TABLE>
         The  reconciliation  between the statutory  federal income tax rate and
         the Company's  effective tax rate (including  state and local taxes) is
         as follows:
<TABLE>
<CAPTION>
                                                                               For the Year Ended December 31,
                                                                               -------------------------------
                             ($ in thousands)                                            1999         1998
                             ------------------------------------------------------- ------------ ------------
<S>                                                                                       <C>          <C>
                             Tax provision at statutory rate                              34.0%        34.0%
                             Increase (decrease) in taxes resulting from:
                               State and local income taxes, net of Federal benefit        2.9          5.6
                               Other                                                      (1.6)          -
                             ------------------------------------------------------- ------------ ------------
                                                                                          35.3%        39.6%
                             ------------------------------------------------------- ------------ ------------
</TABLE>
                                       49
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                 For the Years Ended December 31, 1999 and 1998

--------------------------------------------------------------------------------

15.      Earnings Per Share

         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:
<TABLE>
<CAPTION>

                                                                                         For the Year Ended December 31,
                                                                                         -------------------------------
             ($ in thousands, except share and per share amounts)                                     1999            1998
             ----------------------------------------------------------------------------- ---------------- ---------------
<S>                                                                                              <C>             <C>
             Basic earnings per share:
               Net earnings applicable to common stockholders                                       $1,195          $1,435
               Average number of common shares outstanding                                       2,510,293       2,457,113
             --------------------------------------------------------------------------------- ------------ ---------------
             Basic earnings per share amount                                                         $0.48           $0.58
             --------------------------------------------------------------------------------- ------------ ---------------
             Diluted earnings per share:
               Net earnings applicable to common stockholders                                       $1,195          $1,435
               Adjustment to net earnings from assumed conversion of debentures                          -             172
                                                                                               ------------ ---------------
               Adjusted net earnings for diluted earnings per share computation                     $1,195          $1,607
                                                                                               ------------ ---------------
               Average number of common shares outstanding:
                   Common shares outstanding                                                     2,510,293       2,457,113
                   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               2,770,118       3,473,516
             --------------------------------------------------------------------------------------------------------------
             Diluted earnings per share amount                                                       $0.43           $0.46
             --------------------------------------------------------------------------------- ------------ ---------------
</TABLE>

         A total of 1,012,000 and 122,000 common stock warrants with an exercise
         price of $10.00 and  $14.00,  respectively,  were not  included  in the
         computation  of diluted EPS for 1999 because their  exercise  price was
         greater than the average  market price of the common stock during 1999.
         In  addition,  the  Debentures  were  also  excluded  from the  diluted
         computation for 1999 because they were not dilutive. A total of 122,000
         common  stock  warrants  with an  exercise  price  of  $10.00  were not
         included  in the  computation  of diluted  EPS for 1998  because  their
         exercise  price was greater than the average market price of the common
         stock during 1998.

16.      Contingencies

         The Company is  periodically  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 real property
         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.

17.      Regulatory Matters

         The  Holding   Company  and  the  Banks  are  subject  to   regulation,
         examination  and supervision by the Federal Reserve Bank. The Banks are
         also subject to regulation, examination and supervision 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  the  Office  of the  Comptroller  of the
         Currency regulates Intervest National Bank.

                                       50
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                 For the Years Ended December 31, 1999 and 1998

--------------------------------------------------------------------------------

17.      Regulatory Matters, Continued

         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,  1999  and  1998,  that the
         Company, Intervest Bank and Intervest National Bank (as of December 31,
         1999  only) met all  capital  adequacy  requirements  to which they are
         subject.

         As of  December  31,  1999,  the  most  recent  notification  from  the
         regulators categorized the Banks as well-capitalized institutions under
         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.

         The  tables  below   present   information   regarding   the  Company's
         (consolidated) and the Banks' capital adequacy.
<TABLE>
<CAPTION>

         Consolidated                                                                                Minimum to Be Well
         ------------                                                                                ------------------
                                                                                                      Capitalized Under
                                                                                                      -----------------
                                                                               Minimum Capital        Prompt Corrective
                                                                               ---------------        -----------------
                                                             Actual              Requirements         Action Provisions
                                                             ------              ------------         -----------------

         ($ in thousands)                              Amount      Ratio      Amount      Ratio       Amount      Ratio
         ------------------------------------------- ----------- ----------- ---------- ----------- ----------- -----------
<S>                                                     <C>          <C>       <C>           <C>
         As of December 31, 1999:
            Total capital to risk-weighted assets       $22,811      13.18%    $13,847       8.00%          NA          NA
            Tier 1 capital to risk-weighted assets      $20,643      11.93%     $6,923       4.00%          NA          NA
            Tier 1 capital to average assets            $20,643       8.46%     $9,761       4.00%          NA          NA

         As of December 31, 1998:
            Total capital to risk-weighted assets       $20,628      17.01%     $9,702       8.00%          NA          NA
            Tier 1 capital to risk-weighted assets      $19,110      15.76%     $4,851       4.00%          NA          NA
            Tier 1 capital to average assets            $19,110       9.89%     $7,732       4.00%          NA          NA
         ------------------------------------------- ----------- ----------- ---------- ----------- ----------- -----------
</TABLE>

                                       51

<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                 For the Years Ended December 31, 1999 and 1998

--------------------------------------------------------------------------------

17.      Regulatory Matters, Continued
<TABLE>
<CAPTION>

                                                                                                     Minimum to Be Well
                                                                                                     ------------------
                                                                                                      Capitalized Under
                                                                                                      -----------------
                                                                               Minimum Capital        Prompt Corrective
                                                                               ---------------        -----------------
                                                             Actual              Requirements         Action Provisions
                                                             ------              ------------         -----------------
         ($ in thousands)                              Amount      Ratio      Amount      Ratio       Amount      Ratio
         ------------------------------------------- ----------- ----------- ---------- ----------- ----------- -----------
<S>                                                     <C>          <C>        <C>          <C>       <C>          <C>
         Intervest Bank
         --------------
         As of 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%

         As of December 31, 1998:
         ------------------------
            Total capital to risk-weighted assets       $12,046      11.15%     $8,644       8.00%     $10,805      10.00%
            Tier 1 capital to risk-weighted assets      $10,692       9.90%     $4,322       4.00%      $6,483       6.00%
            Tier 1 capital to average assets            $10,692       6.04%     $7,086       4.00%      $8,857       5.00%

         Intervest National Bank
         -----------------------
         As of 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>


18.      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 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.

                                       52
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                 For the Years Ended December 31, 1999 and 1998

--------------------------------------------------------------------------------

18.      Off-Balance Sheet Financial Instruments, Continued

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

                                                                                          At December 31,
                              ($ in thousands)                                            1999         1998
                              ----------------------------------------------------- ----------- ------------
<S>                                                                                    <C>           <C>
                              Unfunded loan commitments                                $26,256       $3,175
                              Available lines of credit                                    765          628
                              Standby letters of credit                                    900        1,100
                              ----------------------------------------------------- ----------- ------------
                                                                                       $27,921       $4,903
                              ----------------------------------------------------- ----------- ------------
</TABLE>

19.      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.

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

                                                                   At December 31, 1999      At December 31, 1998
                                                                   --------------------      --------------------
                                                                     Carrying        Fair      Carrying      Fair
                 ($ in thousands)                                       Value       Value         Value     Value
                 ----------------------------------------------- ------------- ----------- ------------- -----------
                 Financial Assets:
<S>                                                                   <C>         <C>           <C>         <C>
                   Cash and cash equivalents                         $  7,329    $  7,329      $ 13,472    $ 13,472
                   Securities held to maturity, net                    83,132      79,882        82,338      82,173
                   Loans receivable, net                              147,154     147,304        96,074      96,139
                   Federal Reserve Bank stock                             508         508           233         233
                   Interest-bearing deposits                              100         100           199         199
                   Accrued interest receivable                          1,836       1,836         1,800       1,800
                 Financial Liabilities:
                   Deposit liabilities                                207,168     206,711       170,467     172,194
                   Federal funds purchased                              6,955       6,955             -           -
                   Convertible debentures plus accrued interest         7,822       7,383         7,299       7,299
                   Accrued interest payable on deposits                   461         461           386         386
                 ----------------------------------------------- ------------- ----------- ------------- -----------
</TABLE>


                                       53

<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                 For the Years Ended December 31, 1999 and 1998

--------------------------------------------------------------------------------

19.      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 held to maturity are
         based on  quoted  market  prices.  The  carrying  value of the  Federal
         Reserve Bank stock  approximated  fair value since these  securities do
         not present credit concerns and are 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
         (one-to-four family residential,  commercial real estate and commercial
         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.

         Convertible  Debentures.  The estimated  fair value of the  convertible
         debentures and related  accrued  interest 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
         Holding Company's incremental borrowing rate for a similar arrangement.

         All Other Financial Assets and Liabilities.  The carrying value of cash
         and due  from  banks,  Federal  funds  sold and  purchased,  short-term
         investments and accrued  interest  receivable and payable  approximated
         fair  value  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.








                                       54

<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                 For the Years Ended December 31, 1999 and 1998

--------------------------------------------------------------------------------

20.      Holding Company Financial Information
<TABLE>
<CAPTION>

                                                  Condensed Balance Sheets
                                                                                         At December 31,
                                                                                         ---------------
                      ($ in thousands)                                                  1999         1998
                      --------------------------------------------------------- ------------- ------------
<S>                                                                                  <C>          <C>
                      ASSETS
                      Cash and due from banks                                          $   9        $  44
                      Short-term investments                                           4,877        4,123
                                                                                   ---------- ------------
                         Total cash and cash equivalents                               4,886        4,167
                      Interest-bearing deposits                                            -          100
                      Loans receivable (net of allowance for loan loss reserves
                           of  $13 and $55 at December 31, 1999 and 1998)              2,584       10,729
                      Investment in subsidiaries                                      21,239       11,081
                      Deferred debenture offering costs                                  479          522
                      All other assets                                                   117          544
                      ------------------------------------------------------------ ---------- ------------
                      Total assets                                                   $29,305      $27,143
                      ------------------------------------------------------------ ---------- ------------

                      LIABILITIES
                      Convertible subordinated debentures payable                     $6,930       $7,000
                      Accrued interest payable on convertible debentures                 892          299
                      All other liabilities                                               19          300
                      ------------------------------------------------------------ ---------- ------------
                      Total liabilities                                                7,841        7,599
                      ------------------------------------------------------------ ---------- ------------

                      STOCKHOLDERS' EQUITY
                      Common stock and paid-in capital                                16,998       16,273
                      Retained earnings                                                4,466        3,271
                      ------------------------------------------------------------ ---------- ------------
                      Total stockholders' equity                                      21,464       19,544
                      ------------------------------------------------------------ ---------- ------------
                      Total liabilities and stockholders' equity                     $29,305      $27,143
                      ------------------------------------------------------------ ---------- ------------
</TABLE>


                        Condensed Statements of Earnings
<TABLE>
<CAPTION>

                                                                                    For the Year Ended
                                                                                    ------------------
                                                                                       December 31,
                                                                                       ------------
                      ($ in thousands)                                               1999         1998
                      ----------------------------------------------------------- ------------ -----------
<S>                                                                               <C>          <C>
                      Interest income                                                $744        $ 993
                      Interest expense                                                637          319
                                                                                 ------------ -----------
                      Net interest income                                             107          674
                      Provision (credit) for loan loss reserves                       (42)          55
                      Noninterest income                                              161          109
                      Noninterest expense                                             197          197
                                                                                  ------------ -----------
                      Earnings before income taxes                                    113          531
                      Income taxes                                                     53          245
                                                                                  ------------ -----------
                      Net earnings before earnings (loss) of subsidiaries              60          286
                      Equity in earnings of Intervest Bank                          1,642        1,149
                      Equity in loss of Intervest National Bank                      (507)           -
                      ----------------------------------------------------------- ------------ -----------
                      Net earnings                                                 $1,195       $1,435
                      ----------------------------------------------------------- ------------ -----------
</TABLE>
                                       55
<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                 For the Years Ended December 31, 1999 and 1998

--------------------------------------------------------------------------------
20.      Holding Company Financial Information, Continued

                                              Condensed Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                                         For the Year Ended
                                                                                         ------------------
                                                                                             December 31,
                                                                                             ------------
              ($ in thousands)                                                            1999         1998
              ------------------------------------------------------------------- ------------- ------------
<S>                                                                                   <C>          <C>
              OPERATING ACTIVITIES
              Net earnings                                                            $ 1,195      $  1,435
              Adjustments to  reconcile  net  earnings  to net cash  provided by
                   operating activities:
              Equity in undistributed earnings of subsidiaries                         (1,135)       (1,149)
              Provision (credit) for loan loss reserves                                   (42)           55
              Deferred income tax expense (benefit)                                         7           (45)
              Compensation expense related to Class B warrants issued                      26            43
              Gain on sale of loans                                                       (56)            -
              Interest expense on debentures                                              637           319
              Change in all other assets and liabilities, net                             135          (371)
              ------------------------------------------------------------------- ------------- ------------
              Net cash provided by operating activities                                   767           287
              ------------------------------------------------------------------- ------------- ------------

              INVESTING ACTIVITIES
              Decrease (increase) in interest-earning deposits                            100          (100)
              Investment in preferred stock of subsidiary                                   -          (500)
              Investment in common stock of subsidiaries                               (9,018)            -
              Sale of loans                                                             5,660             -
              Loan originations and principal repayments, net                           2,761       (10,032)
              ------------------------------------------------------------------- ------------- ------------
              Net cash used by investing activities                                      (497)      (10,632)
              ------------------------------------------------------------------- ------------- ------------

              FINANCING ACTIVITIES
              Net (decrease) increase in mortgage escrow funds payable                   (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                                622           414
              ------------------------------------------------------------------- ------------- ------------
              Net cash provided by financing activities                                   449         7,013
              ------------------------------------------------------------------- ------------- ------------
              Net increase (decrease) in cash and cash equivalents                        719        (3,332)
              Cash and cash equivalents at beginning of year                            4,167         7,499
              ------------------------------------------------------------------- ------------- ------------
              Cash and cash equivalents at end of year                                $ 4,886       $ 4,167
              ------------------------------------------------------------------- ------------- ------------

              SUPPLEMENTAL DISCLOSURES
              Cash paid during the year for:
                 Income taxes                                                          $  142        $  200
              Noncash transactions:
                 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>

                                       56

<PAGE>

                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                 For the Years Ended December 31, 1999 and 1998

--------------------------------------------------------------------------------

21.      Quarterly Financial Data (Unaudited)

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

                                                                       For the Year Ended December 31, 1999
                                                                       ------------------------------------
                                                                        First     Second       Third     Fourth
          ($ in thousands, except per share amounts)                  Quarter    Quarter     Quarter    Quarter
          -------------------------------------------------------- ----------- ---------- ----------- ----------
<S>                                                                    <C>        <C>         <C>        <C>
          Interest and dividend income                                 $3,476     $3,389      $3,739     $4,454
          Interest expense                                              2,171      2,137       2,355      2,815
                                                                   ----------- ---------- ----------- ----------
          Net interest and dividend income                              1,305      1,252       1,384      1,639
          Provision for loan loss reserves                                112        223         270        225
                                                                   ----------- ---------- ----------- ----------
          Net interest and dividend income after
              provision for loan loss reserves                          1,193      1,029       1,114      1,414
          Noninterest income                                              123        100         128        105
          Noninterest expense                                             647        823         815        880
                                                                   ----------- ---------- ----------- ----------
          Earnings before income taxes and change in
              accounting principle                                        669        306         427        639
          Income taxes                                                    275        120         149        174
          Cumulative effect of change in accounting principle             128          -           -          -
          -------------------------------------------------------- ----------- ---------- ----------- ----------
          Net earnings                                                  $ 266      $ 186       $ 278      $ 465
          -------------------------------------------------------- ----------- ---------- ----------- ----------

          Basic earnings per share:
              Earnings before change in accounting principle            $ .16      $ .07       $ .11      $ .18
              Cumulative effect of change in accounting principle        (.05)         -           -          -
          -------------------------------------------------------- ----------- ---------- ----------- ----------
              Net earnings per share                                    $ .11      $ .07       $ .11      $ .18
          -------------------------------------------------------- ----------- ---------- ----------- ----------
          Diluted earnings per share:

              Earnings before change in accounting principle            $ .15      $ .07       $ .10      $ .17
              Cumulative effect of change in accounting principle        (.05)         -           -          -
          -------------------------------------------------------- ----------- ---------- ----------- ----------
             Net earnings per share                                     $ .10      $ .07       $ .10      $ .17
          -------------------------------------------------------- ----------- ---------- ----------- ----------

                                                                       For the Year Ended December 31, 1998
                                                                       ------------------------------------
                                                                        First     Second       Third     Fourth
          ($ in thousands, except per share amounts)                  Quarter    Quarter     Quarter    Quarter
          -------------------------------------------------------- ----------- ---------- ----------- ----------
          Interest and dividend income                                 $2,892     $3,075      $3,420     $3,547
          Interest expense                                              1,838      1,975       2,192      2,292
                                                                   ----------- ---------- ----------- ----------
          Net interest and dividend income                              1,054      1,100       1,228      1,255
          Provision for loan loss reserves                                100        130         127        122
                                                                   ----------- ---------- ----------- ----------
          Net interest and dividend income after
              provision for loan loss reserves                            954        970       1,101      1,133
          Noninterest income                                               65         85          71        128
          Noninterest expense                                             509        527         518        579
                                                                   ----------- ---------- ----------- ----------
          Earnings before income taxes                                    510        528         654        682
          Income taxes                                                    202        203         261        273
          -------------------------------------------------------- ----------- ---------- ----------- ----------
          Net earnings                                                  $ 308       $325        $393       $409
          -------------------------------------------------------- ----------- ---------- ----------- ----------

          Basic earnings per share                                      $ .13      $ .13       $ .16      $ .16
          Diluted earnings per share                                    $ .09      $ .10       $ .13      $ .14
          -------------------------------------------------------- ----------- ---------- ----------- ----------
</TABLE>

                                       57

<PAGE>


                Intervest Bancshares Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                 For the Years Ended December 31, 1999 and 1998

--------------------------------------------------------------------------------

22.      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.  The Company
         has not determined what effect,  if any, the Year 2000 issue has had on
         its customers and vendors. To date, the Company has not experienced any
         problems as a result of the Year 2000 issue.  Expenses  incurred by the
         Company related to the Year 2000 issue have not been material.

23.      Merger

         In late 1999,  Intervest Bancshares  Corporation  announced that it had
         agreed to acquire  Intervest  Corporation  of New York,  a company with
         assets of  approximately  $99,000,000,  consisting  of a  portfolio  of
         mortgages  on  improved  real  property  and  short-term   investments,
         primarily certificates of deposit and U.S. government agency notes. The
         combined  total  assets  of the two  entities  if they  had  merged  at
         December 31, 1999 would have been approximately $340,000,000.

         The two entities  are related in that the same  persons  serve on their
         boards and the holders of all of the shares of Intervest Corporation of
         New York also own  approximately  48% of the voting shares of Intervest
         Bancshares  Corporation.  The merger  was  approved  by both  Boards of
         Directors,   the   shareholders  of  both  the  Company  and  Intervest
         Corporation  of New York, and the Federal  Reserve Bank of Atlanta.  In
         the merger,  Intervest Corporation of New York shareholders received an
         aggregate of 1,250,000  shares of the Company's Class A common stock in
         exchange for all of Intervest  Corporation of New York's capital stock.
         The merger became  effective in March 2000 and will be accounted for at
         historical   cost  similar  to  the   pooling-of-interests   method  of
         accounting.

                                       58
<PAGE>

Item 8.  Changes In and  Disagreements  with  Accountants  on Accounting  and
         Financial Disclosure

None

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
          Compliance with Section 16(a) of the Exchange Act

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 2000 Annual  Meeting (the "Proxy  Statement")  and is  incorporated
     herein by reference.

b.   Executive Officers.  The following information is furnished with respect to
     executive officers and key employees of the Company.

                  Jerome  Dansker,  age 81,  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.  During the past five years, Mr. Dansker has been actively  involved
      in the ownership and operation of real estate and mortgage investments.

                  Lowell S. Dansker, age 49, serves as a Director, President and
      Treasurer of the Intervest Bancshares Corporation,  and has served in such
      capacities  since the  Company  was  organized.  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 the Intervest  Bank. He is also a Director,  President and Treasurer of
      Intervest Corporation of New York. During the past five years, Mr. Dansker
      has been  actively  involved in the ownership and operation of real estate
      and mortgage investments.

                  Lawrence  G.  Bergman,  age 55,  serves  as a  Director,  Vice
      President and Secretary of the Intervest  Bancshares  Corporation  and has
      served in such  capacities  since the Company was  organized.  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
      the Intervest  National Bank and as  Co-Chairman of the Board of Directors
      and a member of the Loan  Committee of the  Intervest  Bank.  He is also a
      Director,  Vice-President  and Secretary of Intervest  Corporation  of New
      York.  During the past five years, Mr. Bergman has been actively  involved
      in the ownership and operation of real estate and mortgage investments.

                  Keith A. Olsen,  age 46, 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.

                                       59
<PAGE>

b.       Executive Officers,  Continued

                  Petra H. Coover,  age 53,  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 61,  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, Cohen and Grieb, 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 53, 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 37, serves as Vice President,  Controller
      and  Secretary of Intervest  National Bank and has served in such capacity
      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 10 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.

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 10.  Executive Compensation

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

Item 11.  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 12.  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.

                                       60
<PAGE>
Item 13. Exhibits, Lists and Reports on Form 8-K

 a.  The following exhibits are incorporated by reference herein:

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.

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

23                         Consent of Independent Accountants.

27                         Financial Data Schedule (For SEC purposes only).

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


                                       61

<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 17, 2000
    --------------------------------           --------------------------------
        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 17, 2000
   -----------------------------------------         --------------------------
        Jerome Dansker

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

By: /s/ Lowell S. Dansker                      Date:             March 17, 2000
     -------------------------------                ---------------------------
        Lowell S. Dansker

Vice President, Secretary and Director:

By: /s/ Lawrence G. Bergman                    Date:             March 17, 2000
   -----------------------------------------         --------------------------
        Lawrence G. Bergman

Directors:

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

By: /s/ Milton F. Gidge                        Date:             March 17, 2000
    ----------------------------------------         --------------------------
        Milton F. Gidge

By: /s/ Wayne F. Holly                         Date:             March 17, 2000
    ----------------------------------------         --------------------------
        Wayne F. Holly

By:                                            Date:
    ----------------------------------------         --------------------------
        Edward J. Merz

By: /s/ Lawton Swan, III                       Date:             March 17, 2000
    --------------------------------                ---------------------------
        Lawton Swan, III

By: /s/ Thomas E. Willett                      Date:             March 17, 2000
    --------------------------------                ---------------------------
        Thomas E. Willett

By: /s/ David J. Willmott                      Date:             March 17, 2000
    --------------------------------                ---------------------------
        David J. Willmott

By:                                            Date:
    ----------------------------------------         --------------------------
        Wesley T. Wood

                                       62