SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 33-22976-NY
INTERVEST CORPORATION OF NEW YORK
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
New York 13-3415815
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Rockefeller Plaza, New York, New York 10020-1903
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 218-2800
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO .
Indicate the number of shares outstanding of each of the Registrant's classes of
Common Stock as of the latest practicable date.
Class of Common Stock Outstanding at March 31, 1999
- --------------------- -----------------------------
Common Stock: No Par Value 31.84 Shares
Class B Stock: No Par Value 15.89 Shares
1
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PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. Financial Statements
- ----------------------------
Results for the three months ended March 31, 1999 and 1998 include, in the
opinion of management, all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results for the three months ended March 31, 1999 and 1998 are not
necessarily indicative of the results for the full years.
<PAGE>
<TABLE>
<CAPTION>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1999 1998
--------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 25,551,000 $ 27,426,000
Mortgages receivable, including due from affiliates
of $500,000 (notes 2,4 and 5) 70,896,000 67,533,000
Deferred debenture offering costs, net of accumulated
amortization of $3,580,000 and $3,482,000 (Note 2) 3,471,000 3,646,000
Other assets (Note 7) 1,343,000 1,282,000
------------ ------------
TOTAL ASSETS $101,261,000 $ 99,887,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 110,000 $ 169,000
Mortgage escrow deposits 2,943,000 2,035,000
Subordinated debentures payable (Note 3) 80,400,000 80,300,000
Debenture interest payable at maturity (Note 3) 5,652,000 5,491,000
Deferred mortgage interest and fees 360,000 324,000
------------ ------------
TOTAL LIABILITIES 89,465,000 88,319,000
------------ ------------
Commitments and other matters (Note 6)
STOCKHOLDERS' EQUITY
Common stock, no par value; authorized 200 shares;
issued and outstanding 32 shares 2,000,000 2,000,000
Class B stock, no par value; authorized 100 shares;
issued and outstanding 16 shares 100,000 100,000
Additional paid-in capital 3,509,000 3,509,000
Retained earnings 6,187,000 5,959,000
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 11,796,000 11,568,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $101,261,000 $ 99,887,000
============ ============
</TABLE>
See notes to financial statements
<PAGE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
Three Months Ended
March 31,
------------------
1999 1998
---- ----
(Unaudited)
REVENUE
Interest income
Affiliates $ 13,000 $ 173,000
Others 2,502,000 2,610,000
---------- ----------
2,515,000 2,783,000
Other income (Note 5) 155,000 136,000
Gain on early repayment of Discounted
Mortgages receivable (Note 4) 275,000 7,000
---------- ----------
2,945,000 2,926,000
---------- ----------
EXPENSES
Interest 2,043,000 2,130,000
General and administrative (Note 5) 254,000 181,000
Amortization of deferred debenture offering
Costs (Note 2) 227,000 224,000
---------- ----------
2,524,000 2,535,000
---------- ----------
Income before income taxes 421,000 391,000
Provision for income taxes (Note 7) 193,000 180,000
---------- ----------
NET INCOME 228,000 211,000
Retained earnings - beginning 5,959,000 5,012,000
---------- ----------
RETAINED EARNINGS - END $6,187,000 $5,223,000
========== ==========
See notes to financial statements
4
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<TABLE>
<CAPTION>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
------------------
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 228,000 $ 211,000
Adjustments to reconcile net income to net
Cash provided by operating activities:
Amortization of discount on mortgages receivable (112,000) (154,000)
Amortization of deferred debenture offering costs 227,000 224,000
Gain on early repayment of discounted mortgages (275,000) (7,000)
Changes in operating assets and liabilities:
Other assets (61,000) (57,000)
Accounts payable and accrued liabilities (59,000) 4,000
Mortgage escrow deposits 908,000 640,000
Debenture interest payable at maturity 161,000 559,000
Deferred mortgage interest and fees 36,000 46,000
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,053,000 1,466,000
------------ ------------
INVESTING ACTIVITIES
Collection of mortgages receivable 11,910,000 4,642,000
Mortgages receivable acquired
Properties owned by affiliates (2,000,000)
Properties owned by others (14,886,000) (14,987,000)
------------ ------------
NET CASH (USED IN) INVESTING ACTIVITIES (2,976,000) (12,345,000)
------------ ------------
FINANCING ACTIVITIES
Proceeds from subordinated debenture offerings 600,000
Payment of debenture offering costs (52,000)
Principal payments of subordinated debentures (500,000)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 48,000 0
------------ ------------
DECREASE IN CASH AND CASH EQUIVALENTS (1,875,000) (10,879,000)
Cash and cash equivalents at beginning of period 27,426,000 15,596,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 25,551,000 $ 4,717,000
============ ============
</TABLE>
See notes to financial statements
5
<PAGE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month Periods
Ended March 31, 1999 and 1998)
(NOTE 1) - The Company:
- -----------------------
Intervest Corporation of New York (the "Company") was formed by Lowell S.
Dansker, Lawrence G. Bergman and Helene D. Bergman for the purpose of engaging
in the real estate business, including the acquisition and purchase of real
estate mortgage loans.
(NOTE 2) - Significant Accounting Policies:
- -------------------------------------------
(a) Consolidation Policy:
The financial statements include the accounts of all subsidiaries.
Material intercompany items are eliminated in consolidation.
(b) Mortgage Loans:
Loans are stated at their outstanding principal balances, net of any
deferred fees or costs on originated loans and unamortized discounts on
purchased loans. Interest income is accrued on the unpaid principal balance.
Discounts are amortized to income over the life of the related receivables using
the constant interest method. Loan origination fees net of certain direct
origination costs are deferred and recognized as an adjustment of the yield of
the related loans.
(c) Allowance for losses:
An allowance for loss related to loans that are impaired is based on
discounted cash flows using the loan's initial effective interest rate or the
fair value of the collateral. Management's periodic evaluation of the need for,
or adequacy of the allowance is based on the Company's past loan loss
experience, known and inherent risks in the portfolio, adverse situations that
may affect the borrower's ability to repay (including the timing of future
payments), the estimated value of the underlying collateral and other relevant
factors. This evaluation is inherently subjective as it requires material
estimates including the amounts and timing of future cash flows expected to be
received on any impaired loans that may be susceptible to significant change.
For financial reporting purposes mortgages are deemed to be delinquent when
payment of either principal or interest is more than 90 days past due.
(d) Deferred debenture offering costs:
Costs relating to offerings of debentures are amortized over the terms
of the debentures based on serial maturities. Deferred debenture offering costs
consist primarily of underwriters commissions.
6
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INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month Periods
Ended March 31, 1999 and 1998)
(NOTE 2) - Significant Accounting Policies: (continued)
- -------------------------------------------------------
(e) Statement of cash flows:
For purposes of the statement of cash flows, the Company considers all
highly liquid instruments purchased with an original maturity of three months or
less to be cash equivalents. Interest and income taxes were paid as follows:
Three Months Ended March 31, Interest Income Taxes
- ---------------------------- -------- ------------
1999 $1,882,000 $ 234,000
1998 1,572,000 22,000
(f) Estimated fair value of financial instruments:
The Company considers the carrying amounts presented for mortgages
receivable and subordinated debentures payable on the consolidated balance
sheets to be reasonable approximations of fair value. The Company's variable or
floating interest rates on large portions of its receivables and payables
approximate those which would prevail in current market transactions.
Considerable judgement is necessarily required in interpreting market data to
develop the estimates of fair value, and accordingly, the estimates are not
necessarily indicative of the amounts that the Company could realize in a
current market transaction.
(g) Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(h) Concentration of credit risk:
(1) The Company places its temporary cash investments with higher
credit-quality financial institutions, including a bank, which is affiliated
with the Company and in governmental obligations. Such investments are generally
in excess of the FDIC insurance limit. The Company has not experienced any
losses from such investments.
7
<PAGE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month Periods
Ended March 31, 1999 and 1998)
(NOTE 2) - Significant Accounting Policies: (continued)
- -------------------------------------------------------
(2) The Company's mortgage portfolio is composed predominantly of
mortgages on multi-family residential properties in the New York City area, most
of which are subject to applicable rent control and rent stabilization statutes
and regulations. In both cases, any increases in rent are subject to specific
limitations. As such, properties of the nature of those constituting the most
significant portion of the Company's mortgage portfolio are not affected by the
general movement of real estate values in the same manner as other
income-producing properties, although there can be no assurances that this will
continue, the rental housing market in New York City remains stable.
(NOTE 3) - Subordinated Debentures Payable:
- -------------------------------------------
The Company's Registered Floating Rate Redeemable Debentures consist of the
following:
March 31, December 31,
1999 1998
---- ----
Series 5/13/91, interest at 2% above prime $ 5,000,000 $ 5,000,000
Series 2/20/92, interest at 2% above prime 4,000,000 4,500,000
Series 6/29/92, interest at 2% above prime 7,000,000 7,000,000
Series 9/13/93, interest at 2% above prime 8,000,000 8,000,000
Series 1/28/94, interest at 2% above prime 4,500,000 4,500,000
Series 10/28/94, interest at 2% above prime 4,500,000 4,500,000
Series 5/12/95, interest at 2% above prime 9,000,000 9,000,000
Series 10/19/95, interest at 2% above prime 9,000,000 9,000,000
Series 5/10/96, interest at 2% above prime 10,000,000 10,000,000
Series 10/15/96, interest at 2% above prime 5,500,000 5,500,000
Series 4/30/97, interest at 9% ............ 500,000 500,000
Series 4/30/97, interest at 1% above prime 8,000,000 8,000,000
Series 11/10/98, interest at 8% ............ 1,400,000 1,400,000
Series 11/10/98, interest at 81/2% ......... 1,400,000 1,400,000
Series 11/10/98, interest at 9% ............ 2,600,000 2,000,000
----------- -----------
$80,400,000 $80,300,000
=========== ===========
"Prime" refers to the prime rate of Chase Manhattan Bank.
8
<PAGE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month Periods
Ended March 31, 1999 and 1998)
(NOTE 3) - Subordinated Debentures Payable (continued):
- -------------------------------------------------------
Prime was 7 3/4% on March 31, 1999 and on December 31, 1998. Minimum interest is
9 1/2% and maximum interest is 15% on Series 5/13/91. Series 2/20/92 has minimum
interest of 8% and maximum interest of 14%, Series 6/29/92 has maximum interest
of 14% and Series 9/13/93, 1/28/94, 10/28/94, 5/12/95, 10/19/95, 5/10/96,
10/15/96 and 4/30/97 due October 1, 2005 have maximum interest of 12%.
Payment of interest on an aggregate of $16,470,000 of debentures is deferred
until maturity and such deferred earns interest at prime. Any debenture holder
who has deferred receipt of interest may at any time elect to receive the
deferred interest and subsequently receive regular payments of interest, except
holders of Series 11/10/98.
The debentures may be redeemed, in whole or in part, at any time at the option
of the Company. For debentures issued after 1996, redemption would generally be
at a premium of 1% or 2% if the redemption is prior to 2000. After January 1,
2000, Series 11/10/98 debenture holders can require the Company to repurchase up
to $100,000 principal amount of debentures plus accrued interest each year.
The debentures are unsecured and subordinated to all present and future senior
indebtedness, as defined.
Maturities of debentures are summarized as follows:
Year Ending December 31, March 31, 1999
- ------------------------ --------------
1999 $ 9,500,000
2000 7,000,000
2001 9,400,000
2002 4,500,000
2003 5,900,000
Thereafter until 2005 44,100,000
-----------
Total $80,400,000
===========
(NOTE 4) - Mortgages Receivable:
- --------------------------------
Information as to mortgages receivable is summarized as follows:
March 31, 1999 December 31, 1998
-------------- -----------------
First Mortgages ...... $69,114,000 $67,574,000
Junior Mortgages ..... 2,365,000 500,000
----------- -----------
71,479,000 68,074,000
Less Unearned Discount 583,000 541,000
----------- -----------
Total ................ $70,896,000 $67,533,000
=========== ===========
9
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INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month Periods
Ended March 31, 1999 and 1998)
(NOTE 4) - Mortgages Receivable: (continued)
- --------------------------------------------
Interest rates on mortgages range from 6% to 15%. Certain mortgages have been
discounted utilizing rates ranging from 11% to 17%.
During the first quarter of 1999 and 1998, certain mortgages were paid in full
prior to their maturity date. This resulted in the recognition of a gain, which
represents the balance of the unamortized discount applicable to these
mortgages.
Annual maturities of mortgages receivable during the next five years are
summarized as follows:
Year Ending December 31, March 31, 1999
- ------------------------ --------------
1999 $31,308,000
2000 14,061,000
2001 6,141,000
2002 1,162,000
2003 1,969,000
Thereafter until 2015 16,838,000
-----------
Total $71,479,000
===========
The Company evaluates its portfolio of mortgage loans on an individual basis,
comparing the amount at which the investment is carried to its estimated net
realizable value. At the respective balance sheet dates, no allowances were
required.
(NOTE 5) - Related Party Transactions:
- --------------------------------------
During the first quarter of 1999, the Company acquired first mortgages in the
aggregate principal amount of $5,629,000 from Intervest Bancshares Corporation,
an affiliate of the Company.
Other income includes fees of $1,000 from affiliates for both three months ended
March 31, 1999 and March 31, 1998.
<PAGE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month Periods
Ended March 31, 1999 and 1998)
(NOTE 5) - Related Party Transactions: (continued)
- --------------------------------------------------
The Company utilized personnel and other facilities of affiliated entities and
was charged service fees for general and administrative expenses for placing
mortgages, servicing mortgages and distributing debenture interest checks. Such
fees amounted to $72,000 for the three months ended March 31, 1998. Management
believes these service fees are reasonable. Effective January 1, 1999, personnel
performing the services were transferred to the Company and accordingly, the
appointed entities discontinued charging service fees to the Company.
The Company participates with Intervest Bank in one mortgage. The balance of the
Company's participation in this mortgage was $205,000 and $237,000 at March 31,
1999 and December 31, 1998, respectively. The stockholders of the Company are
officers, directors and stockholders of the parent of Intervest Bank.
(NOTE 6) - Commitments:
- -----------------------
(a) Office lease:
The Company occupies its office space under a lease which terminates on
September 30, 2004. In addition to minimum rents the Company is required to pay
its proportionate share of increases in the building's real estate taxes and
costs of operation and maintenance as additional rent. Rent expense amounted to
$44,000 for both the three months ended March 31, 1999 and 1998.
Future minimum rents under the lease, as of December 31, 1998, are as follows:
Year Ending December 31
-----------------------
1999 $ 174,902
2000 179,133
2001 191,828
2002 191,828
2003 191,828
Thereafter 143,871
----------
Total $1,073,390
==========
11
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INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month Periods
Ended March 31, 1999 and 1998)
(b) Employment agreement:
Effective as of July 1, 1995, the Company entered into an employment agreement
with its Executive Vice President for a term of ten years at an annual salary in
the present amount of $148,877, which is subject to increase annually by six
percent or by the percentage increase in the consumer price index, if higher. In
the event of the executive's death or disability, one-half of this amount will
continue to be paid for a term as defined in the agreement.
Effective August 3, 1998, the Company modified the employment agreement to
provide for additional compensation of $1,000 per month for each $10,000,000 of
gross assets of the Company in excess of $100,000,000.
12
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INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month Periods
Ended March 31, 1999 and 1998)
(NOTE 7) - Income Taxes:
- ------------------------
The Company has provided for income taxes in the periods presented based on the
federal, state and city tax rates in effect for these periods.
The provision for income taxes consists of the following components:
Three Months Ended
March 31,
------------------
1999 1998
---- ----
Current taxes:
Federal ........... $116,000 $106,000
State and local ... 77,000 72,000
Deferred taxes:
Federal ........... 1,500
State and local ... 500
-------- --------
Total tax provision $193,000 $180,000
======== ========
Temporary differences exist between financial accounting and tax reporting,
which result in a net deferred asset, included in other assets, as follows:
March 31, 1999 December 31, 1998
-------------- -----------------
Debenture underwriting commissions $ 1,000 $ 3,000
Deferred fees and interest ....... 46,000 45,000
Discount on mortgages receivable . (17,000) (18,000)
-------- --------
Total ............................ $ 30,000 $ 30,000
======== ========
The amounts of income taxes provided varied from the amounts which would be
"expected" to be provided at the statutory federal income tax rates in effect
for the following reasons:
Three Months Ended
March 31,
------------------
1999 1998
---- ----
Tax computed based upon the
statutory federal tax rate ...... $ 143,000 $ 133,000
State and local income tax,
net of federal income tax benefit 51,000 48,000
Non-taxable income ................... (2,000) (1,000)
Other ................................ 1,000
--------- ---------
Total ................................ $ 193,000 $ 180,000
========= =========
13
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources:
The Company is engaged in the real estate business, including the origination
and purchase of real estate mortgage loans, consisting of first mortgage, junior
mortgage and wraparound mortgage loans. The Company's current investment policy
emphasizes the investment in mortgage loans on income producing properties. The
majority of the Company's loans are expected to mature within approximately five
years.
The Company's liquidity is managed to ensure that sufficient funds are available
to meet maturities of borrowings or to make other investments, taking into
account anticipated cash flows and available sources of funds. The Company's
principal sources of funds have consisted of borrowings (principally through the
issuance of its subordinated debentures), mortgage repayments and cash flow from
ongoing operations. The Company recently filed a registration statement related
to the offer and sale of up to $5,500,000 principal amount of its subordinated
debenture. Total stockholder's equity at March 31, 1999 was $11,796,000,
compared with $11,568,000 at December 31, 1998. The Company considers its
current liquidity and additional sources of funds sufficient to satisfy its
outstanding commitments and its maturing liabilities.
Results of Operations:
Three Months Ended March 31, 1999 and 1998
For the three months ended March 31, 1999 interest income was $2,515,000 as
compared to $2,783,000 for the same period a year ago. The decrease of $268,000
resulted primarily from a decrease in mortgages receivable from $86,822,000 at
March 31, 1998 to $70,896,000 at March 31, 1999 and lower interest rates on
certain mortgages.
Interest expense for the 1999 period was $2,043,000 as compared to $2,130,000
for the 1998 period. The decrease of $87,000 resulted mainly from lower interest
rates on certain debentures.
General and administrative expenses for 1999 period was $254,000 as compared to
$181,000 for 1998. The increase of $73,000 resulted mainly from increases in
payroll and advertising expenses, offset in part by a decrease in management
fee.
The provision for income taxes are $193,000 and $180,000 for three months ended
March 31, 1999 and 1998, respectively. These provisions represent 46% of pretax
income for each period.
Since the Company intends to continue to expand its asset base, including its
mortgage portfolio, it is anticipated that its interest income will continue to
grow. To the extent that such growth is funded in reliance upon long-term
obligations, such as the Debentures, interest expense will likewise increase.
Such increase will depend upon the principal amounts of the additional assets or
liabilities, as well as interest rates.
The Company is engaged in the real estate business and its results of operations
are affected by general economic trends in real estate markets, as well as by
trends in the general economy and the movement of interest rates. Since the
properties underlying the Company's mortgages are concentrated in the New York
City area, the economic condition in that area can also have an impact on the
Company's operations.
14
<PAGE>
The number of instances of prepayment of mortgage loans tends to increase during
periods of declining interest rates and tends to decrease during periods of
increasing interest rates. Certain of the Company's mortgages include prepayment
provisions, and others prohibit prepayment of indebtedness entirely. In any
event, the Company believes that it would reinvest the proceeds of any
prepayments of mortgage loans in new mortgages consistent with its mortgage
investment policy.
The rental housing market in New York City remains stable and the Company
expects that such properties will continue to appreciate in value with little or
no reduction in occupancy rates. The Company's mortgage portfolio is composed
predominantly of mortgages on multi-family residential properties, most of which
are subject to applicable rent control and rent stabilization statutes and
regulations. In both cases, any increases in rent are subject to specific
limitations. As such, properties of the nature of those constituting the most
significant portion of the Company's mortgage portfolio are not affected by the
general movement of real estate values in the same manner as other
income-producing properties.
Business:
The Company is engaged in the real estate business and has historically invested
primarily in real estate mortgage loans secured by income producing real
property. It is anticipated that a substantial portion of the loans to be made
by the Company will be loans with terms of approximately five years. Such
transactions typically require an understanding of the underlying real estate
transaction and rapid processing and funding as a principal basis for competing
in the making of these loans. The Company does not finance new construction.
At March 31, 1999, 48% of the outstanding principal amount of the Company's
loans (net of discounts) were secured by properties located in the greater New
York metropolitan area. The balance of the Company's loans are secured by
properties located in Connecticut, the District of Columbia, Florida, Georgia,
Maryland, New Jersey, suburbs of New York City, North Carolina, Pennsylvania and
Virginia.
Certain of the Company's real estate mortgage loans bear interest at a fixed
rate. The balance of such loans bear interest at fluctuating rates. Interest on
the loans is usually payable monthly.
The Company may also, from time to time, acquire interests in real property,
including fee interests.
Investment Policy-Operations:
The Company's current investment policy related to mortgages emphasizes
investments in short-term real estate mortgages secured by income producing real
property, located primarily in the greater New York metropolitan area.
The properties to be mortgaged are personally inspected by management and
mortgage loans are made only on those properties where management is
knowledgeable as to operating income and expense. The Company generally relies
upon its management in connection with the valuation of properties. From time to
time, however, it may engage independent appraisers and other agents to assist
in determining the value of income-producing properties underlying mortgages, in
which case the costs associated with such services are generally paid by the
mortgagor.
15
<PAGE>
Current Loan Status:
At March 31, 1999, the Company had 47 real estate mortgage loans in its
portfolio, totaling $71,479,000 (face amount) in aggregate principal amount.
Interest rates on the mortgage portfolio range between 6% and 15% per annum.
Certain mortgages have been discounted utilizing rates between 11% and 17% per
annum.
Certain information concerning the Company's mortgage loans outstanding at March
31, 1999 is set forth below:
Carrying
Amount of
Mortgage No. of
Loans Prior Liens Loans
----- ----------- -----
First Mortgage Loans $68,531,000 $ 0 45
Junior Mortgages ... 2,365,000 20,334,000 2
----------- ----------- --
$70,896,000 $20,334,000 47
=========== =========== ==
The historical cost of the mortgage loans which originated in connection with
the sale of real estate includes a discount to reflect an appropriate market
interest rate at the date of origination.
Year 2000 Readiness Disclosure:
The Year 2000 issue is the result of computer programs which 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.
The Company's operations are real estate related and are handled by desktop
computer processing. Such processing utilizes third-party software. Software
that is used to process the Company's general ledger, general cash
disbursements, cash receipts and loan accounting is Year 2000 compliant.
Incidental calculations are performed on spreadsheets, which are not date
dependent. The Company's ability to produce revenues is also not dependent upon
computer systems.
The Company also has subordinated debentures for which the Company relies on a
third-party vendor to provide registrar and trustee services. Such vendor has
informed the Company that it currently has a continuous program to achieve Year
2000 compliance for its mission-critical systems, and that the renovation and
testing of such systems has been substantially completed. Should this outside
service provider not be able to provide complete assurance of being Year 2000
compliant, the Company will terminate its relationship and transfer to a Year
2000 compliant vendor for the required services. In connection with the
debentures, the Company utilizes third-party software to generate checks for the
payment of interest to the debenture holders. The Year 2000 compliant version of
this software was recently installed and has been tested.
The Company has determined that the costs of making modifications to correct any
Year 2000 issues will not be material. Although management believes that the
Company will not incur material costs associated with the Year 2000 issue, there
can be no assurances that all hardware and software that the Company will use
will be Year 2000 compliant. Management cannot predict the amount of financial
difficulties it may incur due to its customers' and vendors' inability to
perform according to their agreements with the Company or the effects that other
third parties may cause as a result of this issue. Therefore, there can be no
assurance that the failure or delay of others to address the Year 2000 issue or
that the costs involved in such process will not have a material adverse effect
on the Company's business, financial condition, and results of operations.
16
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - the following exhibit is filed herewith
Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during this quarter
17
<PAGE>
SIGNATURES
PURSUANT to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INTERVEST CORPORATION OF NEW YORK
(Registrant)
Dated: May 11, 1999 ____________________________________________
Lowell S. Dansker, President
(Principal Executive Officer),
Treasurer
(Principal Financial Officer and
Principal Accounting Officer) and Director
Dated: May 11, 1999 ____________________________________________
Lawrence G. Bergman, Vice President,
Secretary and Director
17
<PAGE>
SIGNATURES
PURSUANT to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INTERVEST CORPORATION OF NEW YORK
(Registrant)
Dated: May 11, 1999 /S/ Lowell S. Dansker
---------------------
Lowell S. Dansker, President
(Principal Executive Officer),
Treasurer (Principal Financial Officer
and Principal Accounting Officer)
and Director
Dated: May 11, 1999 /S/ Lawrence G. Bergman
-----------------------
Lawrence G. Bergman, Vice President,
Secretary and Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains information extracted from Form 10-Q at March 31, 1999,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 25,551
<SECURITIES> 0
<RECEIVABLES> 70,896
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 101,261
<CURRENT-LIABILITIES> 0
<BONDS> 80,400
0
0
<COMMON> 2,100
<OTHER-SE> 9,696
<TOTAL-LIABILITY-AND-EQUITY> 101,261
<SALES> 0
<TOTAL-REVENUES> 2,945
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 254
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,270
<INCOME-PRETAX> 421
<INCOME-TAX> 193
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 228
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</TABLE>
