U.S. 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, 2000
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, Suite 1015, New York, New York 10020-1903
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 218-2800
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 April 30, 2000
- -------------------------------------- -----------------------------
Common Stock: No Par Value 100 Shares
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2000 1999
----------------- ----------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $16,624,000 $30,728,000
Mortgages receivable (notes 2, 4 and 5) 66,918,000 63,290,000
Deferred debenture offering costs, net of accumulated
amortization of $3,031,000 in 2000 and $3,353,000
in 1999 (Note 2) 3,021,000 3,242,000
Fixed assets, net of accumulated depreciation of $11,000
in 2000 and $6,000 in 1999 (Note 5) 91,000 96,000
Interest receivable 1,049,000 998,000
Income taxes receivable 356,000 320,000
Other assets 55,000 66,000
----------- ----------
TOTAL ASSETS $88,114,000 $98,740,000
=========== ===========
LIABILITIES
Accounts payable and accrued expenses $ 93,000 $ 107,000
Mortgage escrow deposits 2,083,000 1,854,000
Subordinated debentures payable (Note 3) 70,400,000 77,400,000
Debenture interest payable at maturity (Note 3) 6,378,000 7,200,000
Other liabilities 55,000 39,000
----------- -----------
TOTAL LIABILITIES 79,009,000 86,600,000
----------- -----------
Commitments and other matters (Note 6)
STOCKHOLDERS' EQUITY
Common stock $ 2,100,000 $ 2,000,000
Class B common stock 0 100,000
Additional paid-in capital 3,509,000 3,509,000
Retained earnings 3,496,000 6,531,000
------------ -----------
TOTAL STOCKHOLDERS' EQUITY 9,105,000 12,140,000
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $88,114,000 $98,740,000
=========== ===========
See notes to financial statements
</TABLE>
2
<PAGE>
<TABLE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
2000 1999
----------- -------
(Unaudited)
REVENUES
<S> <C> <C>
Interest income $ 2,279,000 $2,515,000
Other income (Note 5) 172,000 155,000
Gain on early repayment of discounted
mortgages receivable (Note 4) 15,000 275,000
--------- ---------
2,466,000 2,945,000
--------- ---------
EXPENSES
Interest on debentures 2,036,000 2,043,000
General and administrative (Note 5) 272,000 254,000
Amortization of deferred debenture offering
costs (Note 2) 221,000 227,000
Depreciation expense 5,000 0
--------- ---------
2,534,000 2,524,000
--------- ---------
(Loss) income before income taxes (68,000) 421,000
(Benefit) provision for income taxes (Note 7) (33,000) 193,000
--------- ---------
NET (LOSS) INCOME $ (35,000) $ 228,000
========= =========
See notes to financial statements.
</TABLE>
3
<PAGE>
<TABLE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Quarters Ended
March 31,
-------------------------------
2000 1999
--------- -------
(Unaudited)
COMMON STOCK
<S> <C> <C>
Balance at beginning of period $2,000,000 $2,000,000
Retirement of 32 shares (2,000,000) 0
Issuance of 100 shares to Parent Company 2,100,000 0
--------- ---------
Balance at end of period 2,100,000 2,000,000
--------- ---------
CLASS B COMMON STOCK
Balance at beginning of period 100,000 100,000
Retirement of 16 shares (100,000) 0
--------- ---------
Balance at end of period 0 100,000
--------- ---------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning and end of period 3,509,000 3,509,000
--------- ---------
RETAINED EARNINGS
Balance at beginning of period 6,531,000 5,959,000
Cash dividend paid to Parent Company (3,000,000) 0
Net (loss) income for the period (35,000) 228,000
--------- ---------
Balance at end of period 3,496,000 6,187,000
--------- ---------
Total stockholders' equity at end of period $9,105,000 $11,796,000
========= ==========
See notes to financial statements.
</TABLE>
4
<PAGE>
<TABLE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
---------------------------
2000 1999
----------- ------
(Unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net (loss) income $ (35,000) $ 228,000
Adjustments to reconcile net (loss) income to net
cash provided by operating activities
Amortization of discount and fees on mortgages receivable (98,000) (66,000)
Amortization of deferred debenture offering costs 222,000 227,000
Depreciation expense 5,000 0
Gain on early repayment of discounted mortgages (15,000) (275,000)
Changes in:
Interest receivable (51,000) (27,000)
Income taxes receivable (36,000) (41,000)
Other assets 11,000 9,000
Accounts payable and accrued expenses (14,000) (59,000)
Mortgage escrow deposits 229,000 908,000
Debenture interest payable at maturity (822,000) 161,000
Other liabilities 16,000 (10,000)
--------- -----------
Net cash (used in) provided by operating activities (588,000) 1,055,000
--------- ---------
Cash flows from investing activities:
Purchase of fixed assets 0 (2,000)
Repayment of mortgages receivable 7,464,000 11,910,000
Mortgages receivable originated and purchased (10,980,000) (14,886,000)
----------- ----------
Net cash (used in) investing activities (3,516,000) (2,978,000)
----------- ----------
Cash flows from financing activities:
Dividend to Parent Company (3,000,000) 0
Proceeds from subordinated debenture offerings 0 600,000
Payment of debenture offering costs 0 (52,000)
Redemption of subordinated debentures (7,000,000) (500,000)
----------- ----------
Net cash (used in) provided by financing activities (10,000,000) 48,000
----------- ---------
Net decrease in cash and cash equivalents (14,104,000) (1,875,000)
Cash and cash equivalents at beginning of period 30,728,000 27,426,000
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $16,624,000 $25,551,000
=========== ==========
See notes to financial statements.
</TABLE>
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, 2000 and 1999)
(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.
On March 10, 2000, Intervest Bancshares Corporation acquired all the outstanding
shares of the Company for 1,250,000 shares of its Class A common stock. The
former shareholders of the Company are officers of Intervest Bancshares
Corporation and serve on the boards of directors of both companies.
Results for the three months ended March 31, 2000 and 1999 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, 2000 and 1999 are not
necessarily indicative of the results for the full years. Certain
reclassifications have been made to prior period amounts to conform to the
current period's presentation.
(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.
6
<PAGE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month Periods Ended
March 31, 2000 and 1999)
(NOTE 2) - Significant Accounting Policies (continued):
(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.
(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
--------------------------- -------- ------------
2000......................... $2,857,000 $ 0
1999......................... $1,882,000 $ 234,000
(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.
The fixed interest rates on the Company's mortgages receivable and debentures
payable also approximate current market rates. 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 banks, which are
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, 2000 and 1999)
(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:
<TABLE>
March 31, December 31,
2000 1999
-------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Series 6/29/92, interest at 2% above prime, due April 1, 2000................... $ 0 $ 7,000,000
Series 9/13/93, interest at 2% above prime, due October 1, 2001................. 8,000,000 8,000,000
Series 1/28/94, interest at 2% above prime, due April 1, 2002................... 4,500,000 4,500,000
Series 10/28/94, interest at 2% above prime, due April 1, 2003.................. 4,500,000 4,500,000
Series 5/12/95, interest at 2% above prime, due April 1, 2004................... 9,000,000 9,000,000
Series 10/19/95, interest at 2% above prime, due October 1, 2004................ 9,000,000 9,000,000
Series 5/10/96, interest at 2% above prime, due April 1, 2005................... 10,000,000 10,000,000
Series 10/15/96, interest at 2% above prime, due October 1, 2005................ 5,500,000 5,500,000
Series 4/30/97, interest at 1% above prime, due October 1, 2005................. 8,000,000 8,000,000
Series 11/10/98, interest at 8%, due January 1, 2001............................ 1,400,000 1,400,000
Series 11/10/98, interest at 8 1/2%, due January 1, 2003........................ 1,400,000 1,400,000
Series 11/10/98, interest at 9%, due January 1, 2005............................ 2,600,000 2,600,000
Series 6/28/99, interest at 8%, due July 1, 2002................................ 2,500,000 2,500,000
Series 6/28/99, interest at 8 1/2%, due July 1, 2004............................ 2,000,000 2,000,000
Series 6/28/99, interest at 9%, due July 1, 2006................................ 2,000,000 2,000,000
------------ ------------
$70,400,000 $77,400,000
============ ============
</TABLE>
"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, 2000 and 1999)
(NOTE 3) - Subordinated Debentures Payable (continued):
Prime was 9% on March 31, 2000 and 8 1/2% on December 31, 1999. On March 1,
2000, Series 6/29/92 debentures totaling $7,000,000 in principal and maturing on
April 1, 2000 were redeemed for the outstanding principal amount plus accrued
interest of $1,435,000. Additionally, on May 1, 2000, Series 9/13/93 and 1/28/94
debentures were also redeemed early for outstanding principal totaling
$12,500,000 plus accrued interest of $1,580,000. In connection with this early
redemption, approximately $250,000 of unamortized deferred debenture offering
costs was charged to expense, in the second quarter, 2000.
The Series 10/28/94, 5/12/95, 10/19/95, 5/10/96, 10/15/96 and 4/30/97 debentures
have a maximum interest rate of 12%. Additionally, payment of interest on an
aggregate of $19,060,000 of debentures which is compounded, is deferred until
maturity. The payment of interest on the remaining debentures is made quarterly.
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 the various Series 11/10/98 and Series 6/28/99.
All the debentures may be redeemed, in whole or in part, at any time at the
option of the Company for face value, except for debentures issued after 1997,
which would be at a premium of 1% if the redemption is prior to July 1, 2000.
Series 11/10/98 and Series 6/28/99 debenture holders can require the Company to
repurchase up to $100,000 principal amount of debentures plus accrued interest
each year after January 1, 2000 and July 1, 2002, respectively.
The debentures are unsecured and subordinated to all present and future senior
indebtedness, as defined.
Scheduled contractual maturities of all debentures as of March 31, 2000 are
summarized as follows:
Year Ending December 31, Principal Accrued Interest
------------------------ ------------- ----------------
2001............................. $9,400,000 $1,147,000
2002............................. 7,000,000 595,000
2003............................. 5,900,000 591,000
2004............................. 20,000,000 2,687,000
Thereafter until 2006............ 28,100,000 1,358,000
------------ ----------
Total............................ $70,400,000 $6,378,000
=========== ==========
(NOTE 4) - Mortgages Receivable:
Information as to mortgages receivable is summarized as follows:
<TABLE>
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
First Mortgages............................ $56,971,000 $58,480,000
Junior Mortgages.......................... 10,715,000 5,638,000
----------- -----------
67,686,000 64,118,000
Less Unearned Discount and Fees......... 768,000 828,000
----------- -----------
Total...................................... $66,918,000 $63,290,000
=========== ===========
</TABLE>
9
<PAGE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month Periods Ended
March 31, 2000 and 1999)
(NOTE 4) - Mortgages Receivable: (continued)
- -------------------------------
Interest rates on mortgages range from 6% to 24%. Certain mortgages have been
discounted utilizing rates ranging from 11% to 17%.
During the first quarter of 2000 and 1999, 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, 2000
------------------------ --------------
2000............................... 24,866,000
2001............................... 14,349,000
2002............................... 10,140,000
2003............................... 1,961,000
2004............................... 5,971,000
Thereafter until 2015.............. 10,399,000
------------
Total.............................. $67,686,000
============
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:
Intervest Securities Corporation, an affiliate of the Company, acted as the
placement agent in the Company's 1998 private placement of subordinated
debentures and received commissions and fees aggregating $35,700 in the first
quarter of 1999 in connection therewith.
On December 1, 1999, the Company entered into a Service Agreement with Intervest
National Bank, a wholly owned subsidiary of Intervest Bancshares Corporation.
The Company received $71,000 for three months ended March 31, 2000 in connection
with this agreement which was included in other income. In addition, $1,000 for
both three months ended March 31, 2000 and March 31, 1999 from affiliates were
included in other income.
10
<PAGE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month Periods Ended
March 31, 2000 and 1999)
(NOTE 5) - Related Party Transactions: (continued)
- -------------------------------------
The Company participates with Intervest Bank and Intervest National Bank in
mortgages. The balances of the Company's participation in these mortgages were
$6,864,536 and $7,747,000 at March 31, 2000 and December 31, 1999, respectively.
These two banks are wholly owned subsidiaries of Intervest Bancshares
Corporation.
During 1999, the Company acquired furniture, fixtures and equipment in the
amount of $40,000 from an affiliate of the Company.
(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, 2000 and 1999.
Future minimum rents under the lease, as of March 31, 2000, are as follows:
Year Ending December 31
-----------------------
2000......................................... 135,408
2001......................................... 191,828
2002......................................... 191,828
2003......................................... 191,828
2004......................................... 143,871
---------
Total........................................ $854,763
========
(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 $157,810, 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.
11
<PAGE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month Periods Ended
March 31, 2000 and 1999)
(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 (benefit) for income taxes consists of the following components:
Three Months Ended
March 31,
--------------------------
2000 1999
-------- ------
Current taxes:
Federal.............................. $ (22,000) 116,000
State and local...................... (14,000) 77,000
Deferred taxes:
Federal.............................. 2,000 0
State and local...................... 1,000 0
---------- --------
Total tax provision.................. $ (33,000) $193,000
========== ========
Temporary differences exist between financial accounting and tax reporting,
which result in a net deferred asset, included in other assets, as follows:
March 31, 2000 December 31, 1999
-------------- -----------------
Deferred fees and interest............ $ 36,000 $ 41,000
Discount on mortgages receivable...... (16,000) (17,000)
Deferred depreciation expense......... 1,000 0
-------- -------
Total............................ $21,000 $24,000
======== =======
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:
<TABLE>
Three Months Ended
March 31,
---------------------------
2000 1999
---- ----
<S> <C> <C>
Tax computed based upon the statutory federal tax rate................ $ (23,000) $143,000
State and local income tax, net of federal income tax benefit......... (8,000) 51,000
Non-taxable income ................................................... (3,000) (1,000)
Other................................................................. 1,000 0
-------- --------
Total ................................................................ $ (33,000) $193,000
======== ========
</TABLE>
12
<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's subordinated debentures Series 6/29/92
maturing April 1, 2000 were retired early on March 1, 2000, for the outstanding
principal amount of $7,000,000 plus accrued interest of $1,435,000. In addition,
on May 1, 2000, Series 9/13/93 and Series 1/28/94 debentures were also retired
early, in the total outstanding principal of $12,500,000 plus accrued interest
in the total amount of $1,580,000. The Company reserved enough funds to retire
these debentures. During the first quarter the Company paid a dividend of
$3,000,000 to its parent corporation. 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, 2000 and 1999
For the three months ended March 31, 2000 interest income was $2,279,000 as
compared to $2,515,000 for the same period a year ago. The decrease of $236,000
resulted primarily from a decrease in mortgages receivable from $70,896,000 at
March 31, 1999 to $67,181,000 at March 31, 2000 and lower interest rates on
certain mortgages, offset in part by increases in interest rate for floating
rate mortgages.
Interest expense for the 2000 period was $2,036,000 as compared to $2,043,000
for the 1999 period. The decrease of $7,000 resulted mainly from lower interest
rates on certain debentures, and a decrease in long term obligations, offset in
part by increases in interest rate for floating rate debentures.
General and administrative expenses for 2000 period was $272,000 as compared to
$254,000 for 1999. The increase of $18,000 resulted mainly from an increase in
payroll expense, offset in part by a decrease in advertising expense.
The benefit and provision for income taxes are $33,000 and $193,000 for three
months ended March 31, 2000 and 1999, respectively. They represent 49% and 46%
of pretax loss and income for each period.
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.
13
<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 be able to 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, 2000, 64% 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, Florida, Georgia, 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.
14
<PAGE>
Current Loan Status:
At March 31, 2000, the Company had 50 real estate mortgage loans in its
portfolio, totaling $67,686,000 (face amount) in aggregate principal amount.
Interest rates on the mortgage portfolio range between 6% and 24% 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, 2000 is set forth below:
<TABLE>
Carrying
Amount of
Mortgage No. of
Loans Prior Liens Loans
----------- -------------- -------
<S> <C> <C> <C>
First Mortgage Loans................................ $56,371,000 $ 0 43
Junior Mortgages.................................. 10,547,000 39,420,000 7
---------- ----------- ---
.......................................................... $66,918,000 $39,420,000 50
=========== =========== ===
</TABLE>
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.
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk
Market risk is the risk of loss from adverse changes in market prices
and interest rates. The Company's market risk arises primarily from interest
rate risk inherent in its loan portfolio, as well as its subordinated
debentures. As is indicated in Note 3 to the Consolidated Financial Statements,
many of the Company's subordinated debentures are at floating rates, keyed to
the prime rate of interest. Certain of the Company's mortgages are likewise at
floating rates. The Company has no risk related to trading accounts, commodities
or foreign exchange.
15
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
On March 10, 2000, the Company issued an aggregate of 100
shares of its common stock to Intervest Bancshares Corporation
in connection with the merger of a subsidiary of Intervest
Bancshares Corporation with and into the Company. The six
former shareholders of the Company received an aggregate of
1,250,000 shares of Class A Common Stock of Intervest
Bancshares Corporation in connection with the merger
transaction. The shares were not registered under the
Securities Act of 1933 (the "Act") and were issued in reliance
upon an exemption from registration under Section 4(2) of the
Act.
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) A Report on Form 8-K was filed on March 22, 2000, which
reported the Company's merger with Intervest Bancshares
Corporation.
16
<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 10, 2000 /S/ Lowell S. Dansker
---------------------
Lowell S. Dansker, President
(Principal Executive Officer),
Treasurer (Principal Financial
Officer and Principal Accounting
Officer) and Director
Dated: May 10, 2000 /S/ Lawrence G. Bergman
-----------------------
Lawrence G. Bergman, Vice President,
Secretary and Director
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains information extracted from Form
10-Q at March 31, 2000, 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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 16,624
<SECURITIES> 0
<RECEIVABLES> 66,918
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 102
<DEPRECIATION> (11)
<TOTAL-ASSETS> 88,114
<CURRENT-LIABILITIES> 0
<BONDS> 70,400
0
0
<COMMON> 2,100
<OTHER-SE> 7,005
<TOTAL-LIABILITY-AND-EQUITY> 88,114
<SALES> 0
<TOTAL-REVENUES> 2,466
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 277
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,257
<INCOME-PRETAX> (68)
<INCOME-TAX> (33)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (35)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
