================================================================================
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 QUARTERLY PERIOD ENDED September 30, 2000
Commission File No. 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 identification no.)
incorporation)
10 Rockefeller Plaza, Suite 1015
New York, New York 10020-1903
--------------------------------------------------------------------
(Address of principal executive offices)
(212) 218-2800
--------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 12, 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 the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:
Title of Each Class: Shares Outstanding:
-------------------- -------------------
Common Stock, no par value per share 100 shares outstanding at November 1, 2000
------------------------------------ ------------------------------------------
================================================================================
<PAGE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
FORM 10-Q
September 30, 2000
TABLE OF CONTENTS
I. FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of September 30, 2000 (Unaudited) and December 31, 1999 ........ 2
Condensed Consolidated Statements of Operations (Unaudited)
for the Quarters and Nine-Months Ended September 30, 2000 and 1999 . 3
Condensed Consolidated Statements of Changes in Stockholder's Equity
(Unaudited) for the Nine-Months Ended September 30, 2000 and 1999... 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Nine-Months Ended September 30, 2000 and 1999............... 5
Notes to Condensed Consolidated Financial Statements (Unaudited) ...... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ..................................... 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk..... 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 11
Item 2. Changes in Securities and Use of Proceeds...................... 11
Item 3. Defaults Upon Senior Securities................................ 12
Item 4. Submission of Matters to a Vote of Security Holders............ 12
Item 5. Other Information.............................................. 12
Item 6. Exhibits and Reports on Form 8-K .............................. 12
Signatures................................................................... 12
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-Q 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 net interest income, other income or cash flow anticipated from the
Company's operations, investment and lending activities; and changes in laws and
regulations affecting the Company.
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
Intervest Corporation of New York and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
($ in thousands) 2000 1999
-------------------------------------------------------------------------- --------------- ----------------
ASSETS
<S> <C> <C>
Cash and due from banks $3,057 $1,535
Short-term investments 7,895 29,219
--------------- ----------------
Total cash and cash equivalents 10,952 30,754
Mortgage loans receivable, net of unearned fees and discount (note 2) 55,464 63,290
Accrued interest receivable 500 646
Income taxes receivable - 320
Fixed assets, net 81 96
Deferred debenture offering costs, net (note 3) 2,309 3,242
Other assets 333 392
-------------------------------------------------------------------------- --------------- ----------------
Total assets $69,639 $98,740
-------------------------------------------------------------------------- --------------- ----------------
LIABILITIES
Mortgage escrow funds payable $1,108 $1,854
Income taxes payable 157 -
Subordinated debentures payable (note 4) 53,400 77,400
Debenture interest payable at maturity (note 4) 5,587 7,200
Other liabilities 225 146
-------------------------------------------------------------------------- --------------- ----------------
Total liabilities 60,477 86,600
-------------------------------------------------------------------------- --------------- ----------------
STOCKHOLDER'S EQUITY
Common stock (no par value, 100 and 31.84 shares
issued and outstanding, respectively) 2,100 2,000
Class B common stock (no par value, 15.89 shares
issued and outstanding at December 31, 1999) - 100
Additional paid-in-capital 3,509 3,509
Retained earnings 3,553 6,531
-------------------------------------------------------------------------- --------------- ----------------
Total stockholder's equity 9,162 12,140
-------------------------------------------------------------------------- --------------- ----------------
Total liabilities and stockholder's equity $69,639 $98,740
-------------------------------------------------------------------------- --------------- ----------------
See accompanying notes to condensed consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
Intervest Corporation of New York and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Quarter Ended Nine-Months Ended
September 30, September 30,
------------ ----------- ------------ ------------
($ in thousands) 2000 1999 2000 1999
----------------------------------------------------------------------------- ------------ ----------- ------------ ------------
REVENUES
<S> <C> <C> <C> <C>
Interest and fee income on mortgages $1,856 $2,379 $5,832 $7,192
Interest income on short-term investments 159 413 709 1,020
------------ ----------- ------------ ------------
Total interest income 2,015 2,792 6,541 8,212
Gain on early repayment of mortgages 153 67 186 369
Other income (note 5) 112 116 308 168
----------------------------------------------------------------------------- ------------ ----------- ------------ ------------
Total revenues 2,280 2,975 7,035 8,749
----------------------------------------------------------------------------- ------------ ----------- ------------ ------------
EXPENSES
Interest on debentures 1,543 2,044 5,313 6,121
Amortization of deferred debenture offering costs 153 225 552 678
General and administrative 200 281 750 823
----------------------------------------------------------------------------- ------------ ----------- ------------ ------------
Total expenses 1,896 2,550 6,615 7,622
----------------------------------------------------------------------------- ------------ ----------- ------------ ------------
Income before income taxes and extraordinary item 384 425 420 1,127
Provision for income taxes 177 195 192 516
------------ ----------- ------------ ------------
Income before extraordinary item 207 230 228 611
Extraordinary item, net of tax (note 4) - - (206) -
----------------------------------------------------------------------------- ----------- ------------ ------------- -----------
Net income $207 $230 $ 22 $611
----------------------------------------------------------------------------- ------------ ----------- ------------ ------------
See accompanying notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
Intervest Corporation of New York and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholder's Equity
(Unaudited)
Nine-Months Ended
September 30,
-----------------------------
($ in thousands) 2000 1999
----------------------------------------------------------------------------------------- -------------- --------------
COMMON STOCK
<S> <C> <C>
Balance at beginning of period $ 2,000 $ 2,000
Retirement of 31.84 shares (2,000) -
Issuance of 100 shares to Parent Company 2,100 -
----------------------------------------------------------------------------------------- -------------- --------------
Balance at end of period 2,100 2,000
----------------------------------------------------------------------------------------- -------------- --------------
CLASS B COMMON STOCK
Balance at beginning of period 100 100
Retirement of 15.89 shares (100) -
----------------------------------------------------------------------------------------- -------------- --------------
Balance at end of period - 100
----------------------------------------------------------------------------------------- -------------- --------------
ADDITIONAL PAID-IN-CAPITAL, COMMON
----------------------------------------------------------------------------------------- -------------- --------------
Balance at beginning and end of period 3,509 3,509
----------------------------------------------------------------------------------------- -------------- --------------
RETAINED EARNINGS
Balance at beginning of period 6,531 5,959
Cash dividend declared and paid to Parent Company (3,000) -
Net income for the period 22 611
----------------------------------------------------------------------------------------- -------------- --------------
Balance at end of period 3,553 6,570
----------------------------------------------------------------------------------------- -------------- --------------
----------------------------------------------------------------------------------------- -------------- --------------
Total stockholder's equity at end of period $ 9,162 $12,179
----------------------------------------------------------------------------------------- -------------- --------------
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
Intervest Corporation of New York and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine-Months Ended
September 30,
---------------- -----------------
($ in thousands) 2000 1999
--------------------------------------------------------------------------------- ---------------- -----------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 22 $ 611
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 15 3
Amortization of deferred debenture offering costs 933 678
Gain on early repayment of mortgages (186) (369)
Decrease in mortgage escrow funds payable (746) (57)
(Decrease) increase in debenture interest payable at maturity (1,613) 1,111
Change in all other assets and liabilities, net 991 415
--------------------------------------------------------------------------------- ---------------- -----------------
Net cash (used) provided by operating activities (584) 2,392
--------------------------------------------------------------------------------- ---------------- -----------------
INVESTING ACTIVITIES
Principal repayments of mortgage loans receivable, net 7,782 15,267
Purchases of premises and equipment, net - (62)
--------------------------------------------------------------------------------- ---------------- -----------------
Net cash provided by investing activities 7,782 15,205
--------------------------------------------------------------------------------- ---------------- -----------------
FINANCING ACTIVITIES
Proceeds from issuance of debentures, net of offering costs - 6,606
Repayments of debentures (24,000) (10,000)
Dividends paid to Parent Company (3,000) -
--------------------------------------------------------------------------------- ---------------- -----------------
Net cash used by financing activities (27,000) (3,394)
--------------------------------------------------------------------------------- ---------------- -----------------
Net (decrease) increase in cash and cash equivalents (19,802) 14,203
Cash and cash equivalents at beginning of period 30,754 27,452
--------------------------------------------------------------------------------- ---------------- -----------------
Cash and cash equivalents at end of period $10,952 $ 41,655
--------------------------------------------------------------------------------- ---------------- -----------------
SUPPLEMENTAL DISCLOSURES
Cash paid (received) during the period for:
Interest $ 6,926 $ 5,011
Income taxes (469) 624
--------------------------------------------------------------------------------- ---------------- -----------------
See accompanying notes to condensed consolidated financial statements.
</TABLE>
5
<PAGE>
Intervest Corporation of New York and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
--------------------------------------------------------------------------------
Note 1 - General
The condensed consolidated financial statements of Intervest Corporation of New
York and Subsidiaries (the "Company") in this report have not been audited
except for the information derived from the audited Consolidated Balance Sheet
as of December 31, 1999. The financial statements in this report should be read
in conjunction with the consolidated financial statements and related notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
The condensed consolidated financial statements include the accounts of
Intervest Corporation of New York and its wholly owned subsidiaries, Intervest
Distribution Corporation and Intervest Realty Servicing Corporation. All
material intercompany accounts and transactions have been eliminated in
consolidation.
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 investment policy
emphasizes the investment in mortgage loans on income producing properties.
On March 10, 2000, Intervest Bancshares Corporation (the "Parent Company")
acquired all the outstanding shares of the Company in exchange for 1,250,000
shares of the Parent Company's Class A common stock. Former shareholders of the
Company are officers of the Parent Company and serve on the Boards of Directors
of both companies.
In the opinion of management, all material adjustments necessary for a fair
presentation of financial condition and results of operations for the interim
periods presented in this report have been made. These adjustments are of a
normal recurring nature. The results of operations for the interim periods are
not necessarily indicative of results that may be expected for the entire year
or any other interim period. In preparing the condensed consolidated financial
statements, management is required to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses. Actual
results could differ from those estimates. Certain reclassifications have been
made to prior period amounts to conform to the current periods' presentation.
Note 2 - Allowance for Loan Loss Reserves
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.
Management believes that all loans at September 30, 2000 were collectible.
During the reporting periods in this report, an allowance for loan loss reserves
was not maintained and no loans were classified as nonaccrual or impaired.
Note 3 - Deferred Debenture Offering Costs
Costs related to offerings of debentures are deferred and amortized over the
respective terms of the debentures. Deferred debenture offering costs consist
primarily of underwriter's commissions. At September 30, 2000, deferred
debenture offering costs, net of accumulated amortization of $2,111,000,
amounted to $2,309,000. At December 31, 1999, deferred debenture offering costs,
net of accumulated amortization of $3,529,000, amounted to $3,242,000. See note
4 for a discussion of certain debentures that were retired by the Company.
6
<PAGE>
Intervest Corporation of New York and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
--------------------------------------------------------------------------------
Note 4 - Subordinated Debentures Payable and Extraordinary Item
The following table summarizes debentures payable.
<TABLE>
At September 30, At December 31,
($ in thousands) 2000 1999
-------------------------------------------------------------------- ------------------- --------------------
<S> <C> <C>
Series 06/29/92 - interest at 2% above prime - due April 1, 2000 $ - $7,000
Series 09/13/93 - interest at 2% above prime - due October 1, 2001 - 8,000
Series 01/28/94 - interest at 2% above prime - due April 1, 2002 - 4,500
Series 10/28/94 - interest at 2% above prime - due April 1, 2003 - 4,500
Series 05/12/95 - interest at 2% above prime - due April 1, 2004 9,000 9,000
Series 10/19/95 - interest at 2% above prime - due October 1, 2004 9,000 9,000
Series 05/10/96 - interest at 2% above prime - due April 1, 2005 10,000 10,000
Series 10/15/96 - interest at 2% above prime - due October 1, 2005 5,500 5,500
Series 04/30/97 - interest at 1% above prime - due October 1, 2005 8,000 8,000
Series 11/10/98 - interest at 8% fixed - due January 1, 2001 1,400 1,400
Series 11/10/98 - interest at 81/2% fixed - due January 1, 2003 1,400 1,400
Series 11/10/98 - interest at 9% fixed - due January 1, 2005 2,600 2,600
Series 06/28/99 - interest at 8% fixed - due July 1, 2002 2,500 2,500
Series 06/28/99 - interest at 81/2% fixed - due July 1, 2004 2,000 2,000
Series 06/28/99 - interest at 9% fixed - due July 1, 2006 2,000 2,000
-------------------------------------------------------------------- ------------------- --------------------
$53,400 $77,400
-------------------------------------------------------------------- ------------------- --------------------
The "Prime" refers to the prime rate of Chase Manhattan Bank, which was
9.5% on September 30 and June 30, 2000, 9% on March 31, 2000 and 8.50%
at December 31, 1999.
</TABLE>
In the first quarter of 2000, Series 6/29/92 debentures totaling $7,000,000 in
principal and maturing on April 1, 2000 were redeemed for outstanding principal
plus accrued interest of $1,435,000. In the second quarter of 2000, Series
9/13/93, 1/28/94 and 10/28/94 debentures maturing on October 1, 2001, April 1,
2002 and April 1, 2003, respectively, were redeemed for outstanding principal
aggregating $17,000,000 plus accrued interest totaling $2,535,000. In connection
with these early redemptions, approximately $382,000 of unamortized deferred
debenture offering costs, net of a tax benefit of $176,000, was charged to
expense and reported as an extraordinary item.
Series 5/12/95, 10/19/95, 5/10/96, 10/15/96 and 4/30/97 debentures have a
maximum interest rate of 12%. The payment of interest on an aggregate of
$18,440,000 of these debentures, which interest is compounded, is deferred until
maturity. The payment of interest on the remaining debentures is made quarterly.
Any debenture holder in the aforementioned Series who has deferred receipt of
interest may at any time elect to receive the deferred interest and subsequently
receive regular payments of interest.
The Series 11/10/98 and Series 6/28/99 debentures accrue and compound interest
quarterly. The holders of these debentures can require the Company to repurchase
the debentures for face amount plus accrued interest each year beginning on July
1, 2001 and July 1, 2002, respectively, provided, however that in no calendar
year will the Company be required to purchase more than $100,000 in principal
amount of each maturity of debentures, on a non-cumulative basis.
All the debentures may be redeemed, in whole or in part, at any time at the
option of the Company, for face value, except for Series 11/10/98 debentures due
January 1, 2003 and 2005, which would be at a premium of 1% if the redemption is
prior to January 1, 2001. All the debentures are unsecured and subordinate to
all present and future senior indebtedness, as defined.
7
<PAGE>
Intervest Corporation of New York and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
--------------------------------------------------------------------------------
Note 4 - Subordinated Debentures Payable and Extraordinary Item, Continued
Scheduled contractual maturities of debentures as of September 30, 2000 are
summarized as follows:
($ in thousands) Principal Accrued Interest
---------------------------------------------------------- ------------------
For the three-months ended December 31, 2000 $ - $ -
For the year ended December 31, 2001 1,400 216
For the year ended December 31, 2002 2,500 240
For the year ended December 31, 2003 1,400 230
For the year ended December 31, 2004 20,000 3,155
Thereafter 28,100 1,746
---------------------------------------------------------- ------------------
$53,400 $5,587
---------------------------------------------------------- ------------------
Note 5 - Related Party Transactions
In June 1999, the Company entered into a service agreement with Intervest
National bank, a wholly owned subsidiary of the Parent Company, to provide
certain services related to the mortgage lending activities of Intervest
National Bank. The Company received $61,000 and $205,000 from Intervest National
Bank for the quarter and nine-months ended September 30, 2000, respectively, in
connection with this service agreement. In 1999, the Company received $93,000
and $112,000 from Intervest National Bank for the quarter and nine-months ended
September 30, 1999, respectively, in connection with this service agreement.
These amounts are included in other income in the condensed consolidated
statements of operations.
The Company participates with Intervest Bank and Intervest National Bank in
certain mortgage loans. The balances of the Company's participation in these
mortgages were $3,694,000 and $7,747,000 at September 30, 2000 and December 31,
1999, respectively. These two banks are wholly owned subsidiaries of the Parent
Company.
8
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
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, economic conditions in that area can also have an impact on the
Company's operations.
On March 10, 2000, Intervest Bancshares Corporation (the "Parent Company")
acquired all the outstanding shares of the Company in exchange for 1,250,000
shares of the Parent Company's Class A common stock. Former shareholders of the
Company are officers of the Parent Company and serve on the Boards of Directors
of both companies.
The Company has historically invested primarily in short-term real estate
mortgage loans that mature in approximately five years and are secured by income
producing real property. 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 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. The Company does not finance new construction.
The Company may also, from time to time, acquire interests in real property,
including fee interests.
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.
Comparison of Financial Condition at September 30, 2000 and December 31, 1999
Total assets at September 30, 2000 declined to $69,639,000, from $98,740,000 at
December 31, 1999. The majority of the decrease was due to the early retirement
of $24,000,000 in debentures. The retirement of the debentures was funded by
cash and cash equivalents.
Mortgage loans receivable, net of unearned income, amounted to $55,464,000 at
September 30, 2000, compared to $63,290,000 at December 31, 1999. The decline
was due to maturities and early repayments of loans exceeding new originations.
At September 30, 2000 and December 31, 1999, the Company did not have any
nonperforming loans.
Deferred debenture offering costs, net of accumulated amortization, declined to
$2,309,000 at September 30, 2000, from $3,242,000 at December 31, 1999. The
decline was due to normal amortization as well as the accelerated amortization
of $382,000 in connection with the early retirement of $17,000,000 of debentures
in the second quarter of 2000.
9
<PAGE>
Total liabilities at September 30, 2000 declined to $60,477,000, from
$86,600,000 at December 31, 1999. The decline reflected the aforementioned
retirement of debentures and the payment of related accrued interest payable.
Subordinated debentures outstanding at September 30, 2000 declined to
$53,400,000, from $77,400,000 at December 31, 1999. Debenture interest payable
at maturity declined to $5,587,000 at September 30, 2000, from $7,200,000 at
December 31, 1999.
Stockholders' equity declined to $9,162,000 at September 30, 2000, from
$12,140,000 at year-end 1999. The decrease was due to the payment of a
$3,000,000 cash dividend to the Parent Company, partially offset by net income
of $22,000 for the nine-months ended September 30, 2000.
Comparison of Results of Operations for the Quarter Ended September 30, 2000
and 1999
The Company recorded net income of $207,000 for the third quarter of 2000,
compared to net income of $230,000 for the third quarter of 1999. The decline in
earnings was primarily due to a $276,000 decrease in net interest income,
partially offset by a lower level of general and administrative expenses.
Interest income was $2,015,000 for the quarter ended September 30, 2000,
compared to $2,792,000 for the same period a year ago. The decrease of $777,000
was due to the decline in mortgage loans and short-term investments. The decline
in interest-earning assets was partially offset by interest rate increases on
floating-rate mortgage loans and higher yields earned on short-term investments.
Interest expense on debentures was $1,543,000 for the quarter ended September
30, 2000, compared $2,044,000 for the same period of 1999. The decrease of
$501,000 was due to a decline in the principal amount of debentures outstanding,
offset in part by interest rate increases on floating-rate debentures that are
indexed to the Chase Manhattan Prime Rate, which increased on six occasions
between June 1999 and June 2000, for a total increase of 175 basis points.
Amortization of deferred debenture offering costs was $153,000 for the quarter
ended September 30, 2000, compared to $225,000 for the same period of 1999. The
decrease of $72,000 reflected the retirement of debentures.
General and administrative expenses declined to $200,000 for the quarter ended
September 30, 2000, from $281,000 for the same period of 1999. The decrease
primarily reflected a decline in compensation and benefits.
The provision for income taxes amounted to $177,000 and $195,000 for the quarter
ended September 30, 2000 and 1999, respectively. The provision represented 46%
of pretax income for each period.
Comparison of Results of Operations for the Nine-months Ended September 30, 2000
and 1999
The Company recorded net income $22,000 for the nine-months ended September 30,
2000, compared to net income of $611,000 for the same period of 1999. The
decline in earnings was primarily due to a $862,000 decline in net interest
income and an extraordinary charge, net of taxes, of $206,000, in connection
with the early retirement of debentures. These items were partially offset by a
$324,000 decline in the provision for income taxes.
Interest income was $6,541,000 for the nine-months ended September 30, 2000,
compared to $8,212,000 for the same period a year ago, or a decrease of
$1,671,000. Interest expense on debentures was $5,313,000 for the nine-months
ended September 30, 2000, compared to $6,121,000 for the same period of 1999, or
an $809,000 decrease. Amortization of deferred debenture offering costs was
$552,000 for the nine-months ended September 30, 2000, compared to $678,000 for
the same period of 1999, or a decrease of $126,000. General and administrative
expenses aggregated $750,000 for the nine-months ended September 30, 2000,
compared to $823,000 for the same period of 1999, or a decrease of $72,000. The
reasons for the aforementioned declines are the same as those discussed in the
Comparison of Results of Operations for the Quarter Ended September 30, 2000 and
September 30, 1999.
The provision for income taxes amounted to $192,000 and $516,000 for the
nine-months ended September 30, 2000 and 1999, respectively. The provision
represented 46% of pretax income for each period.
10
<PAGE>
The extraordinary item represents $382,000 of unamortized deferred debenture
offering costs that was charged to expense in the second quarter of 2000 in
connection with the earlier retirement of debentures. This expense was reported
as an extraordinary charge, net of a tax benefit of $176,000, in the condensed
consolidated statements of operations for the nine-months ended September 30,
2000.
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 and
the repayment of borrowed funds. The Company's principal sources of funds have
consisted of borrowings (through the issuance of its subordinated debentures),
mortgage repayments and cash flow generated from ongoing operations. For
information about the cash flows from the Company's operating, investing and
financing activities, see the condensed consolidated statements of cash flows in
this report.
In the first half of 2000, the Company repaid $24,000,000 in principal amount of
debentures, plus accrued interest of $3,970,000 to debenture holders. The
Company maintained adequate funds to retire these debentures. During the first
quarter of 2000, the Company paid a cash dividend of $3,000,000 to the Parent
Company. At September 30, 2000, the Company's total commitment to lend
aggregated approximately $1,800,000.
The Company considers its current liquidity and sources of funds sufficient to
satisfy its outstanding lending commitments and its maturing liabilities.
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 upgrades necessary to ensure that its
operating and financial systems were Year 2000 compliant. To date, the Company
has not experienced any problems as a result of the Year 2000 issue, nor does
management expect it will. Expenses incurred by the Company related to the Year
2000 issue have not been material.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss from adverse changes in market prices and
interest rates. The Company's market risk arises primarily from interest rate
risk inherent in its lending and debenture issuing activities. The Company has
no risk related to trading accounts, commodities or foreign exchange.
Management actively monitors and manages the Company's interest rate risk
exposure. The primary objective in managing interest rate risk is to limit the
adverse impact of changes in interest rates on the Company's net interest income
and capital. A sudden and substantial increase in interest rates could 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. Management believes that there have been no significant
changes in the Company's market risk exposure since December 31, 1999.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Not Applicable
ITEM 2. Changes in Securities and Use of Proceeds
(a) Not Applicable (b) Not Applicable (c) Not Applicable (d) Not Applicable
11
<PAGE>
ITEM 3. Defaults Upon Senior Securities
Not Applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) Not Applicable
(b) Not Applicable
(c) Not Applicable
(d) Not Applicable.
ITEM 5. Other Information
Not Applicable
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index (numbered in accordance with Item 601 of Regulation S-B)
27 - Financial Data Schedule (For SEC Purposes only)
(b) No reports on Form 8-K were filed during the reporting period
Signatures
Pursuant to the requirements 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.
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
Date: November 10, 2000 By: /s/ Lowell S. Dansker
--------------------------------------------------
Lowell S. Dansker, President (Principal
Executive Officer), Treasurer (Principal
Financial Officer and Principal
Accounting Officer) and Director
Date: November 10, 2000 By: /s/ Lawrence G. Bergman
--------------------------------------------------
Lawrence G. Bergman, Vice President,
Secretary and Director
12
