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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
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Commission File Number 33-22976-NY
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INTERVEST MORTGAGE CORPORATION
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(Exact name of registrant as specified in its charter)
New York 13-3415815
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(State or other jurisdiction (I.R.S. employer
of incorporation) identification no.)
10 ROCKEFELLER PLAZA, SUITE 1015
NEW YORK, NEW YORK 10020-1903
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(Address of principal executive offices)
(212) 218-2800
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act
of 1934
None
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(Title of class)
Securities registered pursuant to Section 12(g) of the Securities Exchange Act
of 1934
None
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(Title of class)
Indicate by check mark whether the registrant: (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days: Yes XX No .
-- --
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment of this Form 10-K. [X]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act): Yes No XX.
-- --
As of February 1, 2004, there were 100 shares of the registrant's common stock
outstanding, all of which are held by its Parent Corporation.
DOCUMENTS INCORPORATED BY REFERENCE
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None
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INTERVEST MORTGAGE CORPORATION
2003 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
PAGE
ITEM 1 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ITEM 2 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ITEM 3 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 5
ITEM 4 Submission of Matters to Vote of Security Holders. . . . . . . . 5
PART II
ITEM 5 Market for Common Equity and Related Stockholder Matters . . . . 6
ITEM 6 Selected Financial Data. . . . . . . . . . . . . . . . . . . . . 6
ITEM 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . 7
ITEM 7A Quantitative and Qualitative Disclosures about Market Risk . . . 13
ITEM 8 Financial Statements and Supplementary Data. . . . . . . . . . . 13
ITEM 9 Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . . . . . 32
ITEM 9A Controls and Procedures. . . . . . . . . . . . . . . . . . . . . 32
PART III
ITEM 10 Directors and Executive Officers of the Registrant . . . . . . . 32
ITEM 11 Executive Compensation . . . . . . . . . . . . . . . . . . . . . 34
ITEM 12 Security Ownership of Certain Beneficial Owners and Management . 34
ITEM 13 Certain Relationships and Related Transactions . . . . . . . . . 34
ITEM 14 Principal Accountant Fees and Services . . . . . . . . . . . . . 35
PART IV
ITEM 15 Exhibits, Financial Statement Schedules and Reports on Form 8-K. 35
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
1
PART I
ITEM 1. BUSINESS
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PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
The Company is making this statement in order to satisfy the "Safe Harbor"
provision contained in the Private Securities Litigation Reform Act of 1995. The
statements contained in this report on Form 10-K that are not statements of
historical fact may include forward-looking statements that involve a number of
risks and uncertainties. Such forward-looking statements are made based on
management's expectations and beliefs concerning future events impacting the
Company and are subject to uncertainties and factors relating to the Company's
operations and economic environment, all of which are difficult to predict and
many of which are beyond the control of the Company, that could cause actual
results of the Company to differ materially from those matters expressed in or
implied by forward-looking statements. The following factors are among those
that could cause actual results to differ materially from the forward-looking
statements: changes in general economic, market and regulatory conditions; the
development of an interest rate environment that may adversely affect the
Company's 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.
GENERAL
Intervest Mortgage Corporation and its wholly owned subsidiaries, Intervest
Distribution Corporation and Intervest Realty Servicing Corporation (hereafter
referred to as the "Company" on a consolidated basis), are 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 principal office of the Company is located at 10 Rockefeller Plaza,
Suite 1015, New York, New York 10020-1903, and its telephone number is
212-218-2800.
Intervest Bancshares Corporation (which is a financial holding company and
hereafter referred to as the "Parent Company") owns 100% of the capital stock of
the Company. The Company's executive officers are directors of the Company and
are also officers, directors and principal shareholders of the Parent Company.
In addition to Intervest Mortgage Corporation, the Parent Company also owns
Intervest National Bank (a national bank with its headquarters and full-service
banking office in Rockefeller Center, New York, and four full-service banking
offices in Clearwater, Florida and one in South Pasadena, Florida) and
Intervest Securities Corporation (a broker/dealer that is an NASD and SIPC
member firm also located in Rockefeller Center, New York). Intervest Securities
Corporation participates as a selected dealer from time to time in the Company's
offerings of debentures.
MARKET AREA AND COMPETITION
The Company's lending activities have been concentrated in the New York City
metropolitan region. The Company also makes loans in other states, including
Connecticut, Florida, Georgia, Maryland, New Jersey, North Carolina,
Pennsylvania, Virginia and Washington D.C.
In connection with originating mortgage loans, the Company experiences
significant competition from banks, insurance companies, savings and loan
associations, mortgage bankers, pension funds, real estate investment trusts,
limited partnerships and other lenders and investors engaged in purchasing
mortgages or making real property investments with investment objectives similar
in whole or in part to the Company's. An increase in the general availability of
funds may increase competition in the making of investments in mortgages and
real property, and may reduce the yields available from such investments.
LENDING ACTIVITIES
The Company's lending activities include both long-term and short-term mortgage
loans on properties, such as multifamily residential apartment buildings, office
buildings and commercial properties. The Company also may acquire or originate
mortgage loans on other types of properties, and may resell mortgages.
At December 31, 2003, the Company's loan portfolio amounted to $90,417,000,
compared to $74,305,000 at December 31, 2002. At December 31, 2003, $41,063,000,
or thirty-eight (38) mortgage loans receivable, were collateralized by
2
multi-family apartment buildings located in the City of New York. These loans
represent approximately 45% of the principal balance of the Company's portfolio.
Mortgage loans originated and acquired are solicited directly by the Company's
officers, from existing borrowers, through advertising and from broker
referrals. The Company has in the past and may in the future participate in
mortgages originated by its affiliates, including Intervest National Bank.
The Company's mortgage loans typically provide for periodic payments of interest
and principal during the term of the mortgage, with the remaining principal
balance and any accrued interest due at the maturity date. The majority of the
mortgages owned by the Company provide for balloon payments at maturity, which
means that a substantial part or the entire original principal amount is due in
one lump sum payment at maturity. Seventy-two (72) of the mortgage loans in the
Company's portfolio, representing approximately 88% of the principal balance of
the Company's portfolio, have balloon payments due at the time of their
maturity. If the net revenue from the property is not sufficient to make all
debt service payments due on the mortgage, or if at maturity or the due date of
any balloon payment, the owner of the property fails to raise the funds (by
refinancing, sale or otherwise) to make the lump sum payment, the Company could
sustain a loss on its investment in the mortgage. To the extent that the
aggregate net revenues from the Company's mortgage investments are insufficient
to provide funds equal to the payments due under the Company's debt obligations,
then the Company would be required to utilize its working capital for such
purposes or otherwise obtain the necessary funds from outside sources. No
assurance can be given that such funds would be available to the Company. The
Company's mortgage loans are generally not personal obligations of the borrower
and are not insured or guaranteed by governmental agencies.
In determining whether to make mortgage loans, the Company analyzes relevant
real property and financial factors, which may include factors such as: the
condition and use of the subject property; the property's income-producing
capacity; and the quality, experience and creditworthiness of the property's
owner. The Company requires that all mortgaged properties be covered by
property insurance in amounts deemed adequate in the opinion of management. In
addition, representatives of the Company, as part of the approval process, make
physical inspections of properties being considered for mortgage loans.
The Company's mortgage loans include first mortgage loans and junior mortgage
loans. The Company owns Forty-five (45) junior mortgages. These mortgages are
subordinate in right of payment to senior mortgages on the various properties.
In all cases, in the opinion of management, the current value of the underlying
property collateralizing the mortgage loan is in excess of the stated amount of
its junior mortgage loan plus the senior loan. Therefore, in the opinion of
management of the Company, each property on which a mortgage owned by the
Company is a lien constitutes adequate collateral for the related mortgage loan.
Accordingly, in the event the owner of a property fails to make required debt
service payments, management believes that, based upon current value, upon a
foreclosure of the mortgage and sale of the property, the Company would recover
its entire investment. However, there can be no assurance that the current
value of the underlying property will be maintained.
The Company does not have a formal policy regarding the percentage of its assets
that may be invested in any single mortgage, or in any type of mortgage
investment, or regarding the geographic location of properties collateralizing
the mortgages owned by the Company.
The majority of the Company's mortgages are non-recourse. It is expected that
most mortgages that the Company acquires in the future will be non-recourse
mortgages as well. Under the terms of non-recourse mortgages, the owner of the
property subject to the mortgage has no personal obligation to pay the mortgage
note which the mortgage secures. Therefore, in the event of default, the
Company's ability to recover its investment is solely dependent upon the value
of the mortgaged property and balances of any loans secured by mortgages and
liens that are senior in right to the Company, which must be paid from the net
proceeds of any foreclosure proceeding. Any loss the Company may incur as a
result of the foregoing factors may have a material adverse effect on the
Company's business, financial condition and results of operations. At December
31, 2003: four of the mortgages in the Company's portfolio (representing
approximately 8% of the principal balance in the Company's portfolio) allowed
recourse against the mortgagor only with respect to liabilities related to
tenant security deposits; forty-six (46) of the mortgages (representing
approximately 55% of the principal balance in the Company's portfolio) allowed
recourse against the mortgagor only with respect to liabilities relating to
tenant security deposits, proceeds from insurance policies, losses arising under
environmental laws and losses resulting from waste or acts of malfeasance;
twenty six (26) loans (representing approximately 36% of the portfolio), are
3
full recourse; two(2) loans (representing approximately 1% of the portfolio),
are full recourse loans currently in default; and four loans were without
recourse. In addition, at December 31, 2003, twenty-five (25) of the Company's
mortgages were guaranteed by third parties.
REAL ESTATE INVESTING ACTIVITIES
The Company periodically may purchase equity interests in real property or it
may acquire such an equity interest pursuant to a foreclosure upon a mortgage in
the normal course of business. With respect to such equity interests in real
estate, the Company may acquire and retain title to properties either directly
or through a subsidiary. While no such transactions are presently pending, the
Company would, in appropriate circumstances, consider the expansion of its
business through investments in or acquisitions of other companies engaged in
real estate or mortgage business activities. While the Company has not
previously made acquisitions of real property, its management has had
substantial experience in the acquisition and management of properties.
TEMPORARY INVESTMENT ACTIVITIES
The Company has historically invested its excess cash (after meeting its lending
commitments) in commercial paper and certificate of deposits issued by large
commercial banks and U.S. government securities. The level of such investments
fluctuates based on various factors, including liquidity needs, loan demand and
scheduled repayments of debentures. Cash and short-term investments at December
31, 2003 amounted to $25,772,000, compared to $17,946,000 at December 31, 2002.
LOAN LOSS EXPERIENCE
For financial reporting purposes, the Company considers a loan as delinquent or
non-performing when it is contractually past due 90 days or more as to principal
or interest payments. The Company evaluates its portfolio of mortgage loans
based on various factors to determine the need for an allowance for loan losses.
At December 31, 2003, the allowance was $191,000, compared to $101,000 at
December 31, 2002. At December 31, 2003, two real estate loans with an aggregate
principal balance of $1,058,000 were on nonaccrual status. These loans were
considered impaired under the criteria of SFAS No. 114. The company believes the
estimated fair value of each of the underlying properties (which are located in
New York City ) is greater than its recorded investment. As a result, there was
no specific valuation allowance maintained. During March 2004, one of the
aforementioned loans was repaid in full and the other was brought current and
returned to accrual status. At December 31, 2003 and 2002, there were no other
impaired loans or loans ninety days past due and still accruing interest.
SOURCES OF 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. Subordinated debentures outstanding at
December 31, 2003 totaled $87,350,000, compared to $74,000,000 at December 31,
2002.
EMPLOYEES
At December 31, 2003, the Company employed sixteen 16 full-time employees. The
Company provides a health care insurance benefit plan and a 401K plan to its
employees. The employees are not covered by a collective bargaining agreement
and the Company believes its employee relations are good.
FEDERAL AND STATE TAXATION
The Company files consolidated federal, New York State and City income tax
returns with its Parent Company on a calendar year basis. Consolidated returns
have the effect of eliminating intercompany distributions, including dividends,
from the computation of consolidated taxable income for the taxable year in
which the distributions occur. Income taxes are provided in the consolidated
financial statements as if the Company filed a separate consolidated tax return
with its subsidiaries.
4
INVESTMENT IN SUBSIDIARIES
The following table provides information regarding Intervest Mortgage
Corporation's subsidiaries:
At December, 31 2003
----------------------------------- Subsidiaries
($in thousands) % of Equity in Earnings (Loss) for the
Voting Total Underlying Year Ended Dec. 31,
Subsidiary Stock Investment Net Assets 2003 2002 2001
- --------------------------------------- --------- ----------- ----------- -------- -------- --------
Intervest Distribution Corporation 100% $ 31 $ 31 $ (1) $ (1) $ (1)
Intervest Realty Servicing Corporation 100% $ 692 $ 692 $ 3 $ 6 $ 11
There were no dividends paid to the Company by its subsidiaries in 2003, 2002 or
2001.
EFFECT OF GOVERNMENT REGULATION
Investment in mortgages on real properties may be impacted by government
regulation in several ways. Residential properties may be subject to rent
control and rent stabilization laws. As a consequence, the owner of the
property may be restricted in its ability to raise the rents on apartments. If
real estate taxes, fuel costs and maintenance of and repairs to the property
were to increase substantially, and such increases are not offset by increases
in rental income, the ability of the owner of the property to make the payments
due on the mortgage as and when they are due might be adversely affected.
Laws and regulations relating to asbestos have been adopted in many
jurisdictions, including New York City, which require that whenever any work is
undertaken in a property in an area in which asbestos is present, the asbestos
must be removed or encapsulated in accordance with such applicable local and
federal laws and regulations. The cost of asbestos removal or encapsulation may
be substantial, and if there were not sufficient cash flow from the property,
after debt service on mortgages, to fund the required work, and the owner of the
property fails to fund such work from other sources, the value of the property
could be adversely affected, with consequent impairment of the security for the
mortgage.
Laws regulating the storage, disposal and clean up of hazardous or toxic
substances at real property have been adopted at the federal, state and local
levels. Such laws may impose a lien on the real property superior to any
mortgages on the property. In the event such a lien were imposed on any
property, which serves as security for a mortgage owned by the Company, the
security for such mortgage could be impaired. In addition, as a bank holding
company, the Parent Company is extensively regulated under both federal and
state laws and regulations.
ITEM 2. PROPERTIES
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The Company's office is located in leased premises (approximately 6,000 square
feet) on the tenth floor of 10 Rockefeller Plaza, New York, N.Y, 10020, which
it shares with its Parent company. In October 2003, the Parent Company leased
the entire fourth floor of One Rockefeller Plaza in New York City (approximately
21,400 square feet) through March 2014. The Company expects to be moving from
its present location to a portion of the recently leased space in the second
quarter of 2004. The current lease for the tenth floor of 10 Rockefeller Plaza
will expire in September 2004, or earlier if such space is rented by the
landlord prior thereto.
ITEM 3. LEGAL PROCEEDINGS
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The Company may periodically be party to or otherwise involved in legal
proceedings arising in the normal course of business, such as claims to enforce
liens, claims involving the making and servicing of real property loans, and
other issues incident to the Company's business. Management does not believe
that there is any pending or threatened proceeding against the Company which, if
determined adversely, would have a material effect on the business, results of
operations, or financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None
5
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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The Company is a wholly owned subsidiary of the Parent Company. The payment of
dividends by the Company to the Parent Company is subject to restrictions. The
Company cannot declare or pay any dividend or make any distribution on its
capital stock (other than dividends or distributions payable in capital stock),
or purchase, redeem or otherwise acquire or retire for value, or permit any
subsidiary to purchase or otherwise acquire for value, capital stock of the
Company, if at the time of such payment, the Company is not in compliance with
the indentures under which the Company's debentures were issued. The payment of
dividends is determined by the Company's Board of Directors and in addition to
the restrictions noted above, is dependent upon results of operations and
financial condition of the Company, and tax considerations of both the Company
and the Parent Company. The Company paid a $3,000,000 dividend to the Parent
Company in 2000. The actual amount, if any, and timing of future dividends will
depend on such factors.
ITEM 6. SELECTED FINANCIAL DATA
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The table below presents selected consolidated financial data. This data should
be read in conjunction with, and are qualified in their entirety by, the
Consolidated Financial Statements and the Notes thereto, and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included elsewhere in this report.
At or For The Year Ended December 31,
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($in thousands) 2003 2002 2001 2000 1999
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FINANCIAL CONDITION DATA:
Total assets $119,578 $97,311 $83,083 $74,860 $98,740
Cash and short-term investments 25,772 17,946 16,752 19,476 30,754
Mortgage loans receivable, net of deferred fees 89,307 73,499 62,665 51,992 63,290
Subordinated debentures and related interest payable (1) 99,402 84,751 72,113 64,347 84,600
Stockholder's equity 18,173 11,413 9,847 9,269 12,140
Allowance for mortgage loan losses 191 101 18 - -
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OPERATIONS DATA:
Interest income $ 9,269 $ 8,420 $ 7,625 $ 8,519 $10,552
Service fee income 2,343 1,597 463 285 223
Gain on early repayment of mortgages receivable 260 334 582 340 369
Other income 196 125 106 130 75
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Total revenues 12,068 10,476 8,776 9,274 11,219
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Interest expense 6,187 5,483 5,849 6,922 8,150
Amortization of deferred debenture offering costs 953 805 662 714 899
General and administrative expenses 1,673 1,415 1,192 1,015 1,118
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Total expenses 8,813 7,703 7,703 8,651 10,167
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Earnings before income taxes and extraordinary item 3,255 2,773 1,073 623 1,052
Provision for income taxes 1,496 1,207 495 288 480
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Income before extraordinary item 1,759 1,566 578 335 572
Extraordinary item, net of taxes (2) - - - (206) -
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Net income $ 1,759 $ 1,566 $ 578 $ 129 $ 572
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RATIOS AND OTHER DATA
Ratio of earnings to fixed charges (3) 1.5x 1.4x 1.2x 1.1x 1.1x
Dividends paid to Parent Company $ - $ - $ - $ 3,000 $ -
- -------------------------------------------------------------------------------------------------------
(1) Includes current portion of obligations.
(2) Represents a charge, net of taxes, in connection with the early retirement of certain debentures.
(3) The ratio of earnings to fixed charges has been computed by dividing earnings (before the provision
for income taxes and fixed charges) by fixed charges. Fixed charges consist of interest expense
incurred during the period and amortization of deferred debenture offering costs.
6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS
-----------------------
GENERAL
Intervest Mortgage Corporation and its wholly owned subsidiaries, Intervest
Distribution Corporation and Intervest Realty Servicing Corporation (hereafter
referred to as the "Company" on a consolidated basis), are 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.
Intervest Bancshares Corporation (which is a financial holding company and
hereafter referred to as the "Parent Company") owns 100% of the capital stock of
the Company. The Company's executive officers are directors of the Company and
are also officers, directors and principal shareholders of the Parent Company.
In addition to Intervest Mortgage Corporation, the Parent Company also owns
Intervest National Bank (a national bank with its headquarters and full-service
banking office in Rockefeller Center, New York, and four full-service banking
offices in Clearwater, Florida and one in South Pasadena, Florida) and
Intervest Securities Corporation (a broker/dealer that is an NASD and SIPC
member firm also located in Rockefeller Center, New York). Intervest Securities
Corporation participates as a selected dealer from time to time in the Company's
offerings of debentures.
The Company has historically invested primarily in short-term real estate
mortgage loans secured by income producing real property that mature within
approximately five years. The properties to be mortgaged are inspected by
representatives of the Company and mortgage loans are made only on those type of
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. While the Company has not previously made acquisitions of real
property, it may also, from time to time, acquire interests in real property,
including fee interests.
The Company's mortgage portfolio is composed predominantly of mortgages on
multi-family residential properties, many 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.
The 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. Of the eighty-two (82)
mortgages in the portfolio: six allow prepayment without penalty; four prohibit
prepayment; thirty-eight (38) permit prepayment only after passage of a specific
period; and thirty-four (34) permit prepayment after payment of penalties
ranging from 0.5% up to 5% of the principal balance.
The Company's profitability depends on its net interest income, which is the
difference between interest income generated from its mortgage loans and the
interest expense, inclusive of amortization of offering costs, incurred on its
debentures. The Company's profitability is also affected by its noninterest
income and expenses, provision for loan losses and effective income tax rate.
Noninterest income consists of fee income from providing mortgage loan
origination and other services to Intervest National Bank as well as loan
service charges and prepayment income generated from the Company's loan
portfolio. Noninterest expense consists mainly of compensation and benefits
expense, occupancy expenses, professional fees, insurance expense and other
operating expenses.
The Company's profitability is significantly affected by general economic and
competitive conditions, changes in market interest rates, government policies
and actions of regulatory authorities. Since the properties underlying the
Company's mortgages are concentrated in the New York City area, the economic
conditions in that area also have an impact on the Company's operations.
Additionally, terrorist acts, such as those that occurred on September 11, 2001,
and armed conflicts, such as the recent Gulf War, may have an adverse impact on
economic conditions.
7
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2003 AND DECEMBER 31, 2002
Total assets at December 31, 2003 increased to $119,578,000, from $97,311,000 at
December 31, 2002. The increase is primarily reflected in new loan originations.
Cash and cash equivalents increased to $25,772,000 at December 31, 2003, from
$17,946,000 at December 31, 2002.
Mortgage loans receivable, net of unearned income and allowance for loan losses,
amounted to $89,116,000 at December 31, 2003, compared to $73,398,000 at
December 31, 2002. At December 31, 2003, two real estate loans with an aggregate
principal balance of $1,058,000 were on nonaccrual status. These loans were
considered impaired under the criteria of SFAS No.114. The company believes the
estimated fair value of each of the underlying properties (which are located in
New York City ) is greater than its recorded investment. As a result, there was
no specific valuation allowance maintained. During March 2004, one of the
aforementioned loans was repaid in full and the other was brought current and
returned to accrual status. At December 31, 2003 and 2002, there were no other
impaired loans or loans ninety days past due and still accruing interest.
Management's periodic evaluation of the need for or adequacy of the allowance
for loan losses 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. The allowance for
loan losses amounted to $191,000 at December 31, 2003 and $101,000 at December
31, 2002. An allowance was not maintained at any time during 2000. Although
management believes it uses the best information available to make
determinations with respect to the need for and amount of the allowance, future
adjustments may be necessary if economic conditions, or other factors, differ
from those assumed.
Deferred debenture offering costs, net of accumulated amortization, increased to
$2,851,000 at December 31, 2003, from $2,556,000 at December 31, 2002. The
increase was primarily due to $1,248,000 of additional deferred costs associated
with the issuance of new debentures, partially offset by normal amortization.
Total liabilities at December 31, 2003 increased to $101,405,000, from
$85,898,000 at December 31, 2002. The increase primarily reflected an increase
in debentures to $87,350,000 at year-end 2003, from $74,000,000 at December 31,
2002. The increase was due to the issuance of Series 1/21/03 and 7/25/03
debentures totaling $16,000,000 in principal amount. The sales, after
underwriter's commissions and other issuance costs, resulted in net proceeds of
$14,826,000. The new debentures were offset by Series 11/10/98 debentures that
matured and were retired on January 1, 2003 (principal of $1,400,000 and accrued
interest of $570,000) and Series 9/18/00 debentures (maturing on January 1,
2004) that were redeemed on November 1, 2003 (principal of $1,250,000 and
accrued interest of $335,000).
At December 31, 2003, debenture interest payable at maturity amounted to
$12,052,000, compared to $10,751,000 at year-end 2002. The increase was due to
accruals during the year less the repayment of interest resulting from the
maturity or early redemption of debentures. Nearly all of the accrued interest
payable at December 31, 2003 is due and payable at the maturity of various
debentures.
Stockholder's equity increased to $18,173,000 at December 31, 2003, from
$11,413,000 at December 31, 2002 due to net income of $1,759,000 and capital
contributions from the Parent Company of $5,001,000.
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 AND
2002
The Company's net income increased $193,000 to $1,759,000 in 2003 from
$1,566,000 in 2002. The increase was primarily due to a $746,000 increase in
service fee income received from Intervest National Bank, partially offset by a
$289,000 increase in income tax expense and a $258,000 increase in general and
administrative expenses.
The following table provides information on average assets, liabilities and
stockholders' equity; yields earned on interest-earning assets; and rates paid
on interest-bearing liabilities for 2003 and 2002. The yields and rates shown
are based on a computation of income/expense (including any related fee income
or expense) for each year divided by average interest-earning
8
assets/interest-bearing liabilities during each year. Average balances are
derived from daily balances. Net interest margin is computed by dividing net
interest and dividend income by the average of total interest-earning assets
during each year.
For the Year Ended December 31,
------------------------------------------------------------
2003 2002
----------------------------- -----------------------------
Average Interest Yield/ Average Interest Yield/
($in thousands) Balance Inc./Exp. Rate Balance Inc./Exp. Rate
- ---------------------------------------------------------------------------------------------------------
Assets
Mortgage loans receivable (1) $ 91,123 $ 9,066 9.95% $ 71,346 $ 8,131 11.40%
Short-term investments 13,502 203 1.50 15,473 289 1.87
- ---------------------------------------------------------------------------------------------------------
Total interest-earning assets 104,625 $ 9,269 8.86% 86,819 $ 8,420 9.70%
- ---------------------------------------------------------------------------------------------------------
Noninterest-earning assets 3,659 3,000
- ---------------------------------------------------------------------------------------------------------
Total assets $108,284 $ 89,819
- ---------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Debentures and accrued interest payable $ 92,172 $ 7,140 7.75% $ 77,742 $ 6,288 8.09%
Noninterest-bearing liabilities 1,858 1,488
Stockholders' equity 14,254 10,589
- ---------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $108,284 $ 89,819
- ---------------------------------------------------------------------------------------------------------
Net interest income $ 2,129 $ 2,132
- ---------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin $ 12,453 2.03% $ 9,077 2.46%
- ---------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
to total interest-bearing liabilities 1.13x 1.12x
- ---------------------------------------------------------------------------------------------------------
(1) Mortgage loans receivable include non-performing loans.
Net interest income amounted to $2,129,000 in 2003, compared to $2,132,000 in
2002. The growth in average interest-earning assets was offset by the Company's
yield on interest-earning assets decreasing at a faster pace than its cost of
debentures. The growth in average assets consisted of net new mortgage loans of
$19,777,000 funded primarily by new debentures of $14,430,000 and a $3,665,000
increase in average stockholders' equity.
The yield on interest-earning assets decreased 84 basis points (bp) to 8.86% in
2003 due to lower rates on new mortgage loans originated, prepayments of
higher-yielding loans and lower yields earned on short-term investments. The
cost of debentures decreased 34 bp to 7.75% in 2003 largely due to lower rates
paid on $41,500,000 of floating-rate debentures. These debentures are indexed to
the JPMorgan Chase Bank prime rate, which decreased by a total of 25 bp from
December 2002.
Service agreement income from Intervest National Bank increased to $2,343,000 in
2003, from $1,597,000 in 2002. The increase of $746,000 was due to increased
loan origination services provided to the bank.
General and administrative expenses aggregated $1,673,000 in 2003, compared to
$1,415,000 in 2002. The increase of $258,000 was primarily the result of an
increase in salary expense of $149,000 (resulting from additional staff, salary
increases and a higher cost of benefits) and a $45,000 increase in occupancy
expense, primarily due to additional rented space and higher escalation costs
under the lease.
The provision for income taxes amounted to $1,496,000 and $1,207,000 in 2003 and
2002, respectively. The provision represented 46% and 44% of pretax income for
2003 and 2002, respectively.
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2002 AND
2001
The Company's net income increased $988,000 to $1,566,000 in 2002 from $578,000
in 2001. The increase was primarily due to a $1,134,000 increase in service fee
income received from Intervest National Bank and an increase in net interest
income of $1,018,000. These increases were partially offset by a $248,000
decrease in gains from early repayment of mortgages, a $712,000 increase in
income tax expense and a $223,000 increase in general and administrative
expenses.
9
The following table provides information on average assets, liabilities and
stockholders' equity; yields earned on interest-earning assets; and rates paid
on interest-bearing liabilities for 2002 and 2001. The yields and rates shown
are based on a computation of income/expense (including any related fee income
or expense) for each year divided by average interest-earning
assets/interest-bearing liabilities during each year. Average balances are
derived from daily balances. Net interest margin is computed by dividing net
interest and dividend income by the average of total interest-earning assets
during each year.
For the Year Ended December 31,
------------------------------------------------------------
2002 2001
----------------------------- -----------------------------
Average Interest Yield/ Average Interest Yield/
($in thousands) Balance Inc./Exp. Rate Balance Inc./Exp. Rate
- ---------------------------------------------------------------------------------------------------------
Assets
Mortgage loans receivable $ 71,346 $ 8,131 11.40% $ 59,183 $ 7,009 11.84
Short-term investments 15,473 289 1.87 14,837 616 4.15
- ---------------------------------------------------------------------------------------------------------
Total interest-earning assets 86,819 $ 8,420 9.70% 74,020 $ 7,625 10.30%
- ---------------------------------------------------------------------------------------------------------
Noninterest-earning assets 3,000 2,485
- ---------------------------------------------------------------------------------------------------------
Total assets $ 89,819 $ 76,505
- ---------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Debentures and accrued interest payable $ 77,742 $ 6,288 8.09% $ 65,664 $ 6,511 9.92%
Noninterest-bearing liabilities 1,488 1,472
Stockholders' equity 10,589 9,369
- ---------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 89,819 $ 76,505
- ---------------------------------------------------------------------------------------------------------
Net interest income $ 2,132 $ 1,114
- ---------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin $ 9,077 2.46% $ 8,356 1.50%
- ---------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
to total interest-bearing liabilities 1.12x 1.13x
- ---------------------------------------------------------------------------------------------------------
Net interest income increased to $2,132,000 in 2002 from $1,114,000 in 2001 due
to growth in average interest-earning assets an increase in the net interest
margin. The growth in average assets consisted of net new mortgage loans of
$12,163,000 funded by new debentures of $12,078,000 and a $1,220,000 increase
in average stockholders' equity.
The yield on interest-earning assets decreased 60 basis points (bp) to 9.70% in
2002 due to lower rates on new mortgage loans originated, prepayments of
higher-yielding loans and lower yields earned on short-term investments. The
cost of debentures decreased at a faster pace, or 183 bp, to 8.09% in 2002
largely due to lower rates paid on $41,500,000 of floating-rate debentures.
These debentures are indexed to the JPMorgan Chase Bank prime rate, which
decreased a total of 525 basis points from January 1, 2001 to December 31, 2002.
Service agreement income from Intervest National Bank was $1,597,000 in 2002,
compared to $463,000 in 2001. The increase of $1,134,000 was due to increased
loan origination services provided to the bank.
Gain on early repayment of mortgages was $334,000 in 2002, compared to $582,000
in 2001. The decrease of $248,000 was due mostly to a large prepayment fee in
2001 which did not recur.
General and administrative expenses aggregated $1,415,000 in 2002, compared to
$1,192,000 in 2001. The increase of $223,000 was primarily the result of an
increase in salary expense due to additional staff, salary increases and a
higher cost of benefits.
The provision for income taxes amounted to $1,207,000 and $495,000 in 2002 and
2001, respectively. The provision represented 44% and 46% of pretax income for
2002 and 2001, respectively.
10
LIQUIDITY AND CAPITAL RESOURCES
The Company manages its liquidity position on a daily basis to assure that funds
are available to meet operations, lending commitments and the repayment of
debentures. 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 consolidated statements of cash flows in this report.
On April 1, 2002, $2,500,000 of principal and $586,000 of accrued interest was
repaid on Series 6/28/99 debentures due July 1, 2002. On January 1, 2003,
$1,400,000 of principal and $570,000 of accrued interest was repaid on Series
11/10/98 debentures due January 1, 2003. On November 1, 2003, $1,250,000 of
principal and $335,000 of accrued interest was repaid on Series 9/18/00
debentures due January 1, 2004.
In February of 2002, August of 2002, February 2003, August 2003 and January
2004, the Company completed the sale of debentures in the principal amounts of
$5,750,000 $7,750,000, $7,500,000, $8,500,000 and $10,000,000, respectively,
which resulted in net proceeds of approximately $5,299,000, $7,172,000,
$6,953,000, $7,909,000 and $9,280,000, respectively, after underwriter's
commissions and other issuance costs.
The Company intends to file an offering to issue additional subordinated
debentures. It is anticipated that debentures in an aggregate principal amount
of up to $11,500,000 will be issued in the second quarter of 2004.
OFF-BALANCE SHEET COMMITMENTS
At December 31, 2003, the Company's total commitments to lend aggregated
$14,435,000, all of which will either close or expire in 2004. The Company
considers its current liquidity and sources of funds sufficient to satisfy its
outstanding lending commitments and its maturing liabilities. The Company issues
commitments to extend credit in the normal course of business, which may
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amounts recognized in the consolidated balance sheets. Commitments to
extend credit are agreements to lend funds under specified conditions. Such
commitments generally have fixed expiration dates or other termination clauses
and may require payment of fees. Since some of the commitments are expected to
expire without being drawn upon, the total commitment amount does not
necessarily represent future cash requirements.
CONTRACTUAL OBLIGATIONS
The following table summarizes the Company's payments due for specific
contractual obligations at December 31, 2003.
Due In
----------------------------------------
2005 and 2007 and 2009 and
($in thousands) Total 2004 2006 2008 Later
- ------------------------------------------------------------------------------------------------
Subordinated debentures payable $ 87,350 $20,000 $ 38,100 $ 15,250 $ 14,000
Debenture interest payable 12,052 6,656 4,707 532 157
Operating lease payments due third party 177 177 - - -
Operating lease payments due Parent Company 4,271 297 792 824 2,358
- ------------------------------------------------------------------------------------------------
$103,850 $27,130 $ 43,599 $ 16,606 $ 16,515
- ------------------------------------------------------------------------------------------------
ASSET AND LIABILITY MANAGEMENT
Interest rate risk arises from differences in the repricing of assets and
liabilities within a given time period. The Company uses "gap analysis," which
measures the difference between interest-earning assets and interest-bearing
liabilities that mature or reprice within a given time period, to monitor its
interest rate sensitivity. An asset or liability is normally considered to be
interest-rate sensitive if it will reprice or mature within one year or less.
The interest-rate sensitivity gap is the difference between interest-earning
assets and interest-bearing liabilities scheduled to mature or reprice within a
one-year time period. A gap is considered positive when the amount of interest
rate-sensitive assets exceeds the amount of interest rate-sensitive liabilities.
Conversely, a gap is considered negative when the opposite is true.
11
During a period of rising interest rates, a negative gap would tend to adversely
affect net interest income, while a positive gap would tend to result in an
increase in net interest income. During a period of falling interest rates, a
negative gap would tend to result in an increase in net interest income, while a
positive gap would tend to adversely affect net interest income. If the
repricing of the Company's assets and liabilities were equally flexible and
moved concurrently, the impact of any increase or decrease in interest rates on
net interest income would be minimal.
A simple interest rate gap analysis by itself may not be an accurate indicator
of how net interest income will be affected by changes in interest rates for the
following reasons. Income associated with interest-earning assets and costs
associated with interest bearing liabilities may not be affected uniformly by
changes in interest rates. In addition, the magnitude and duration of changes in
interest rates may have a significant impact on net interest income. For
example, although certain assets and liabilities may have similar maturities or
periods of repricing, they may react in different degrees to changes in market
interest rates. Interest rates on certain types of assets and liabilities
fluctuate in advance of changes in general market interest rates, while interest
rates on other types may lag behind changes in market rates. The ability of many
borrowers to service their debts also may decrease in the event of an
interest-rate increase.
The Company has a "floor," or minimum rate, on many of its floating-rate loans.
The floor for each specific loan is determined in relation to the prevailing
market rates on the date of origination and most adjust upwards in the event of
increases in the prevailing rate. This feature reduces the effect on interest
income in a falling rate environment.
Notwithstanding all of the above, there can be no assurances that a sudden and
substantial increase in interest rates may not adversely impact the Company's
earnings, to the extent that the interest rates borne by assets and liabilities
do not change at the same speed, to the same extent, or on the same basis.
The following table summarizes information relating to the Company's
interest-earning assets and interest-bearing liabilities as of December 31,
2003, that are scheduled to mature or reprice within the periods shown.
Floating-rate loans and debentures, which are subject to adjustment at any time,
are included in the 0-3 month period rather than in the period in which they
mature. Fixed-rate loans and debentures are scheduled according to their
contractual maturities.
0-3 4-12 Over 1-4 Over 4
($in thousands) Months Months Years Years Total
- ---------------------------------------------------------------------------------------
Floating- rate loans $57,644 $ - $ - $ - $ 57,644
Fixed- rate loans 7,530 6,392 5,600 13,251 32,773
- ---------------------------------------------------------------------------------------
Total Loans 65,174 6,392 5,600 13,251 90,417
Short-term investments 24,393 - - - 24,393
- ---------------------------------------------------------------------------------------
Total rate-sensitive assets $89,567 $ 6,392 $ 5,600 $ 13,251 $114,810
- ---------------------------------------------------------------------------------------
Debentures payable $41,500 $ 2,000 $ 19,600 $ 24,250 $ 87,350
Accrued interest on debentures 7,565 898 2,966 623 12,052
- ---------------------------------------------------------------------------------------
Total rate-sensitive liabilities $49,065 $ 2,898 $ 22,566 $ 24,873 $ 99,402
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
GAP (repricing differences) $40,502 $ 3,494 $ (16,966) $(11,622) $ 15,408
- ---------------------------------------------------------------------------------------
Cumulative GAP $40,502 $43,996 $ 27,030 $ 15,408 $ 15,408
- ---------------------------------------------------------------------------------------
Cumulative GAP to total assets 33.9% 36.8% 22.6% 12.9% 12.9%
- ---------------------------------------------------------------------------------------
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related financial data concerning the Company
presented herein have been prepared in accordance with accounting principles
generally accepted in the United States of America, which require the
measurement of financial position and operating results in terms of historical
dollars without considering changes in the relative purchasing power of money
over time due to inflation.
The primary impact of inflation on the operations of the Company is reflected in
increased operating costs. Virtually all of the assets and liabilities of the
Company are monetary in nature. As a result, changes in interest rates have a
more significant impact on the performance of the Company than do the effects of
changes in the general rate of inflation and changes in prices. Additionally,
interest rates do not necessarily move in the same direction or in the same
magnitude as the prices of goods and services.
12
In a rising rate environment, it is possible that the Company would have to
devote a higher percentage of the interest payments it receives from its
fixed-rate mortgages to meet the interest payments due on variable-rate
Debentures. However, it should be noted that the interest rate on variable-rate
debentures is limited to a maximum of 12%.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------------
Market risk is the risk of loss from adverse changes in market prices and
interest rates. The Company's market risk arises primarily from interest rate
risk inherent in its lending and debenture-selling activities. The Company has
not engaged in and accordingly has no risk related to trading accounts,
commodities or foreign exchange. The measurement of market risk associated with
financial instruments is meaningful only when all related and offsetting on-and
off-balance sheet transactions are aggregated, and the resulting net positions
are identified. Disclosures about the fair value of financial instruments as of
December 31, 2003 and 2002, which reflect changes in market prices and rates,
can be found in note 13 of the notes to consolidated financial statements.
Management actively monitors and manages the Company's interest rate risk
exposure. The primary objective in managing interest rate risk is to limit,
within established guidelines, the adverse impact of changes in interest rates
on the Company's net interest income and capital. For a further discussion, see
the section "Asset and Liability Management."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-----------------------------------------------
FINANCIAL STATEMENTS
The following consolidated financial statements of the Company are included
herein:
- - Independent Auditors' Report (PAGE 14)
- ---------------------------------
- - Consolidated Balance Sheets at December 31, 2003 and 2002 (PAGE 15)
- --------------------------------------------------------------------
- - Consolidated Statements of Operations for the Years Ended December 31, 2003,
- --------------------------------------------------------------------------------
2002 and 2001 (PAGE 16)
---------------
- - Consolidated Statements of Changes in Stockholders' Equity for the Years
- --------------------------------------------------------------------------------
Ended December 31, 2003, 2002 and 2001 (PAGE 17)
-------------------------------------------
- - Consolidated Statements of Cash Flows for the Years Ended December 31, 2003,
- --------------------------------------------------------------------------------
2002 and 2001 (PAGE 18)
---------------
- - Notes to the Consolidated Financial Statements (PAGES 19 TO 29)
- ------------------------------------------------------
- - Schedule IV - Mortgage Loans on Real Estate (PAGES 30 AND 31)
- -----------------------------------------------------
Other financial statement schedules and inapplicable periods with respect to
schedules listed above are omitted because the conditions requiring their filing
do not exist or the information required thereby is included in the financial
statements filed, including the notes thereto.
13
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholder
Intervest Mortgage Corporation
New York, New York
We have audited the accompanying consolidated balance sheets of Intervest
Mortgage Corporation and Subsidiaries as of December 31, 2003 and 2002 and the
related consolidated statements of operations, changes in stockholder's equity
and cash flows for each of the years in the three-year period ended December 31,
2003. Our audit also included Schedule IV - mortgage loans on real estate as of
December 31, 2003. These financial statements and related schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and the related schedule based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Intervest Mortgage
Corporation and subsidiaries as of December 31, 2003 and 2002, and the
consolidated results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 2003 in conformity with
accounting principles generally accepted in the United States of America. Also
in our opinion, the schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
/s/ Eisner LLP
- ---------------
New York, New York
February 3, 2004
With respect to note 3
March 16, 2004
14
INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31,
-------------------
($in thousands) 2003 2002
- ---------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 1,379 $ 3,225
Short-term investments (note 2) 24,393 14,721
-------------------
Total cash and cash equivalents 25,772 17,946
Time deposits with banks - 2,000
Mortgage loans receivable 89,116 73,398
(net of unearned fees and discounts and allowance for loan losses, notes 3 and 4)
Accrued interest receivable 642 583
Fixed assets, net (note 5) 86 67
Deferred debenture offering costs, net (note 6) 2,851 2,556
Other assets 1,111 761
- ---------------------------------------------------------------------------------------------------------
TOTAL ASSETS $119,578 $ 97,311
=========================================================================================================
LIABILITIES
Mortgage escrow funds payable $ 1,671 $ 660
Subordinated debentures payable (note 7) 87,350 74,000
Debenture interest payable at maturity (note 7) 12,052 10,751
Other liabilities 332 487
- ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 101,405 85,898
- ---------------------------------------------------------------------------------------------------------
Commitments and contingencies (notes 5 and 12)
STOCKHOLDER'S EQUITY
Class A common stock 2,100 2,100
(no par value, 200 shares authorized, 100 issued and outstanding)
Class B common stock ( no par value, 100 shares authorized, none issued ) - -
Additional paid-in-capital 8,510 3,509
Retained earnings (note 8) 7,563 5,804
- ---------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 18,173 11,413
- ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $119,578 $ 97,311
=========================================================================================================
See accompanying notes to consolidated financial statements.
15
INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31,
------------------------
($in thousands) 2003 2002 2001
- ----------------------------------------------------------------------------------------------------
REVENUES
Interest and fee income on mortgages $ 9,066 $ 8,131 $7,009
Interest income on short-term investments 203 289 616
------- ------- ------
Total interest and fee income 9,269 8,420 7,625
Service agreement income - related party (note 10) 2,343 1,597 463
Gain on early repayment of mortgages 260 334 582
Other income 196 125 106
- ----------------------------------------------------------------------------------------------------
TOTAL REVENUES 12,068 10,476 8,776
- ----------------------------------------------------------------------------------------------------
EXPENSES
Interest on debentures 6,187 5,483 5,849
Amortization of deferred debenture offering costs 953 805 662
General and administrative 1,673 1,415 1,192
- ----------------------------------------------------------------------------------------------------
TOTAL EXPENSES 8,813 7,703 7,703
- ----------------------------------------------------------------------------------------------------
Income before provision income taxes 3,255 2,773 1,073
Provision for income taxes (note 11) 1,496 1,207 495
- ----------------------------------------------------------------------------------------------------
NET INCOME $ 1,759 $ 1,566 $ 578
====================================================================================================
See accompanying notes to consolidated financial statements.
16
INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
YEAR ENDED DECEMBER 31,
------------------------
($in thousands) 2003 2002 2001
- -------------------------------------------------------------------------------------------
CLASS A COMMON STOCK
- -------------------------------------------------------------------------------------------
Balance at beginning and end of year $ 2,100 $ 2,100 $2,100
- -------------------------------------------------------------------------------------------
CLASS B COMMON STOCK
- -------------------------------------------------------------------------------------------
Balance at beginning and end of year - - -
- -------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN-CAPITAL
Balance at beginning of year 3,509 3,509 3,509
Contribution from Parent Company 5,001 - -
- -------------------------------------------------------------------------------------------
Balance at end of year 8,510 3,509 3,509
- -------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance at beginning of year 5,804 4,238 3,660
Net income 1,759 1,566 578
- -------------------------------------------------------------------------------------------
Balance at end of year 7,563 5,804 4,238
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY AT END OF YEAR $18,173 $11,413 $9,847
===========================================================================================
See accompanying notes to consolidated financial statements.
17
INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
-------------------------------
($in thousands) 2003 2002 2001
- --------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 1,759 $ 1,566 $ 578
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 33 28 24
Amortization of deferred debenture offering costs 953 805 662
Amortization of premiums, fees and discounts, net (878) (640) (608)
Gain on early repayment of mortgage loans (260) (334) (582)
Increase (decrease) in mortgage escrow funds payable 1,011 2 (170)
Increase in debenture interest payable at maturity 1,301 1,638 1,917
Change in all other assets and liabilities, net 968 883 1,023
- --------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,887 3,948 2,844
- --------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Principal repayments of mortgage loans receivable 62,209 25,494 38,294
Originations and purchases of mortgage loans receivable (78,321) (36,205) (49,088)
Decrease (increase) in interest-earning time deposits 2,000 (2,000) -
Purchases of fixed assets (52) (31) (10)
- --------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (14,164) (12,742) (10,804)
- --------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from issuance of debentures, net of offering costs 14,752 12,488 6,636
Principal repayments of debentures (2,650) (2,500) (1,400)
Capital contribution from Parent Company 5,001 - -
- --------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 17,103 9,988 5,236
- --------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 7,826 1,194 (2,724)
Cash and cash equivalents at beginning of year 17,946 16,752 19,476
- --------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 25,772 $ 17,946 $ 16,752
==================================================================================================
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest $ 4,886 $ 3,845 $ 3,933
Income taxes 1,817 1,214 490
- --------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
18
INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Intervest Mortgage Corporation and Subsidiaries (the "Company") is engaged
in the real estate business, including the origination and purchase of real
estate mortgage loans on income producing properties. The Company is a
wholly owned subsidiary of Intervest Bancshares Corporation (the "Parent
Company"). Officers of the Company are Directors of the Company and are
officers, principal shareholders and Directors of the Parent Company.
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Intervest
Mortgage Corporation and its wholly owned subsidiaries, Intervest
Distribution Corporation and Intervest Realty Servicing Corporation. All
material intercompany accounts and transactions have been eliminated in
consolidation. Certain reclassifications have been made to prior year
amounts to conform to the current year's presentation. The accounting and
reporting policies of the Company conform to accounting principals
generally accepted in the United States of America.
USE OF ESTIMATES
In preparing the consolidated financial statements, management is required
to make estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosure of contingent assets and
liabilities, as of the date of the financial statements and revenues and
expenses during the reporting periods. Actual results could differ from
those estimates. Material estimates that are particularly susceptible to
significant change relate to the determination of the allowance for loan
losses and estimated fair values of the company's financial instruments.
CASH EQUIVALENTS
For purposes of the statements of cash flows, cash equivalents include
short-term investments that have maturities of three months or less when
purchased.
MORTGAGE LOANS RECEIVABLE
Mortgage loans receivable are stated at their outstanding principal
balances, net of any deferred fees or costs on originated mortgage loans
receivable, unamortized discounts on purchased mortgage loans receivable
and the allowance for loan losses. Purchased mortgage loans receivable, all
of which have been made from affiliated companies, are recorded at cost,
which is equivalent to the carrying amount of the seller. The purchase
price is deemed equivalent to the fair value of the mortgage loans
receivable based on their interest rates. Interest income is accrued on the
unpaid principal balance. Discounts are amortized to income over the life
of the related mortgage loans receivable 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
mortgage loans receivable. When a loan is paid off or sold, or if a
commitment expires unexercised, any unamortized net deferred amount is
credited or charged to earnings accordingly.
Mortgage loans receivable are placed on nonaccrual status when principal or
interest becomes 90 days or more past due. Accrued interest receivable
previously recognized is reversed and amortization of net deferred fee
income is discontinued for mortgage loans receivable placed on a nonaccrual
status. Interest payments received on mortgage loans receivable in a
nonaccrual status are recognized as income on a cash basis unless future
collections on principal are doubtful, in which case the payments received
are applied as a reduction of principal. Mortgage loans receivable remain
on nonaccrual status until principal and interest payments are current.
19
INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED
ALLOWANCE FOR MORTGAGE LOANS LOSSES
The allowance for mortgage loan losses is netted against mortgage loans
receivable and is increased by provisions charged to operations and
decreased by chargeoffs (net of recoveries). The adequacy of the allowance
is evaluated monthly with consideration given to the nature and volume of
the loan portfolio, overall portfolio quality, loan concentrations,
specific problem mortgage loans receivable and commitments and estimates of
fair value thereof; historical chargeoffs and recoveries, adverse
situations which may affect the borrowers' ability to repay, and
management's perception of the current and anticipated economic conditions
in the Company's lending areas. In addition, Statement of Financial
Accounting Standards (SFAS) No. 114 specifies the manner in which the
portion of the allowance for loan losses is computed related to certain
mortgage loans receivable that are impaired. A loan is normally deemed
impaired when, based upon current information and events, it is probable
the Company will be unable to collect both principal and interest due
according to the contractual terms of the loan agreement. Impaired mortgage
loans receivable normally consist of mortgage loans receivable on
nonaccrual status. Interest income on impaired mortgage loans receivable is
recognized on a cash basis. Impairment for commercial real estate and
residential mortgage loans receivable is measured based on the present
value of expected future cash flows, discounted at the loan's effective
interest rate, or the observable market price of the loan or the estimated
fair value of the loan's collateral, if payment of the principal and
interest is dependent upon the collateral. When the fair value of the
property is less than the recorded investment in the loan, this deficiency
is recognized as a valuation allowance, and a charge to the provision for
loan losses. The Company will charge off any portion of a recorded
investment in a loan that exceeds its fair value of the collateral.
FIXED ASSETS
Fixed assets are carried at cost net of accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful life of the asset. Maintenance, repairs and minor improvements are
charged to operating expenses as incurred.
DEFERRED DEBENTURE OFFERING COSTS
Costs relating to offerings of debentures are amortized over the terms of
the debentures. Deferred debenture offering costs consist primarily of
underwriters' commissions.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
year in which those temporary differences are expected to be reversed or
settled. The effect on deferred tax assets and liabilities of a change in
tax law or rates is recognized in income in the period that includes the
enactment date of change. A valuation allowance is recorded if it is more
likely than not that some portion or all of the deferred tax assets will
not be realized based on a review of available evidence.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
In the ordinary course of business, the Company enters into off-balance
sheet financial instruments consisting of commitments to extend credit.
Such financial instruments are recorded in the consolidated financial
statements when they are funded and related fees are recorded when incurred
or received.
20
INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED
RECENTLY ISSUED ACCOUNTING STANDARDS
ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES. On
January 1, 2003, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities," which addresses financial accounting and reporting
for costs associated with exit or disposal activities and nullifies the
Emerging Issues Task Force's Issue ("EITF") No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to
Exit an Activity (including Certain Costs Incurred in a Restructuring)."
The adoption of this statement had no impact on the Company's consolidated
financial statements.
ACCOUNTING FOR GUARANTEES. On January 1, 2003, the Company adopted FASB
Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others which expands previously issued accounting guidance and
disclosure requirements for certain guarantees. FIN 45 requires the Company
to recognize an initial liability for the fair value of an obligation
assumed by issuing a guarantee. The adoption of FIN 45 had no impact on the
Company's consolidated financial statements.
CONSOLIDATION OF VARIABLE INTEREST ENTITIES. In January 2003, the FASB
released Interpretation No. 46, ("FIN 46") "Consolidation of Variable
Interest Entities." FIN 46, as revised in December 2003, changes the method
of determining whether certain variable interest entities should be
included in the Company's financial statementsThe Company adopted FIN 46 in
December 2003 and it had no impact on the Company's consolidated financial
statements since the Company it does not have any such entities.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. In April
2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities under
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The adoption of SFAS 149 had no impact on the Company's
consolidated financial statements.
ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH
LIABILITIES AND EQUITY. In May 2003, the FASB issued SFAS No. 150,
"Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity." SFAS 150 establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics
of both liabilities and equity. It requires that an issuer classify a
financial instrument that is within its scope as a liability (or an asset
in some circumstances). Many of those instruments were previously
classified as equity. SFAS 150 is effective for financial instruments
entered into or modified after May 31, 2003. However, the effective date of
the statement's provisions related to the classification and measurement of
certain mandatorily redeemable noncontrolling interests has been deferred
indefinitely by the FASB, pending further Board action. The adoption of
SFAS 150 had no impact on the Company's consolidated financial statements.
2. SHORT-TERM INVESTMENTS
At December 31, 2003 and 2002, short-term investments was comprised of bank
commercial paper, money market and savings accounts with banks.
21
INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
- --------------------------------------------------------------------------------
3. MORTGAGE LOANS RECEIVABLE
Mortgage loans receivable are summarized as follows:
At December 31, 2003 At December 31, 2002
-------------------- --------------------
($in thousands) # of loans Amount # of loans Amount
- ------------------------------------------------------------------------------------------------
Residential multifamily mortgage loans receivable 47 $48,039 39 $45,590
Commercial real estate mortgage loans receivable 32 30,596 22 28,715
Land and land development loans receivable 3 11,782 - -
- ------------------------------------------------------------------------------------------------
Mortgage loans receivable 82 90,417 61 74,305
- ------------------------------------------------------------------------------------------------
Deferred loan fees and unamortized discount (1,110) (806)
- ------------------------------------------------------------------------------------------------
Mortgage loans receivable, net of fees and discount 89,307 73,499
- ------------------------------------------------------------------------------------------------
Allowance for mortgage loan losses (191) (101)
- ------------------------------------------------------------------------------------------------
Mortgage loans receivable, net $89,116 $73,398
- ------------------------------------------------------------------------------------------------
At December 31, 2003, the loan portfolio consisted of $61,869,000 and
$28,548,000 of first mortgage loans and junior mortgage loans,
respectively. These loans were comprised of $32,773,000 of fixed-rate loans
and $57,644,000 of adjustable-rate loans. At December 31, 2002, the loan
portfolio consisted of $50,419,000 and $23,886,000 of first mortgage loans
and junior mortgage loans receivable, respectively. These loans were
comprised of $23,020,000 of fixed-rate mortgage loans receivable and
$51,285,000 of adjustable-rate mortgage loans receivable.
At December 31, 2003, effective interest rates on mortgages ranged from
5.08% to 17.19%, compared to 6.98% to 14.03% at December 31, 2002. Many of
the mortgage loans receivable have an interest rate floor which resets
upward along with any increase in the loan's interest rate. This feature
reduces the loan's interest rate exposure in periods of declining interest
rates.
During 2003, 2002 and 2001, certain mortgages were repaid in full prior to
their maturity date. The prepayments resulted in the recognition of
unearned fees and discounts associated with such mortgage loans receivable,
as well as the receipt of prepayment penalties in certain cases. For 2003,
2002 and 2001, income associated with the prepayments of mortgages was
$260,000, $334,000 and $582,000, respectively.
Credit risk, which represents the possibility of the Company not recovering
amounts due from its borrowers, is significantly related to local economic
conditions in the areas the properties are located, as well as the
Company's underwriting standards. Economic conditions affect the market
value of the underlying collateral as well as the levels of occupancy of
income-producing properties (such as office buildings, shopping centers and
rental and cooperative apartment buildings).
The geographic distribution of the properties that collateralize the loan
portfolio is summarized as follows:
At December 31, 2003 At December 31, 2002
-------------------- --------------------
($in thousands) Amount % of Total Amount % of Total
- -----------------------------------------------------------
New York $80,130 88.6% $59,694 80.3%
Florida 5,200 5.8 3,462 4.7
Pennsylvania 2,156 2.4 1,940 2.6
New Jersey 1,309 1.4 8,331 11.2
Connecticut 793 0.9 - -
All other 829 0.9 878 1.2
- -----------------------------------------------------------
$90,417 100.0% $74,305 100.0%
- -----------------------------------------------------------
22
INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
- --------------------------------------------------------------------------------
3. MORTGAGE LOANS RECEIVABLE, CONTINUED
The following table shows scheduled contractual principal repayments of the
loan portfolio at December 31, 2003:
($in thousands)
- --------------------------------------
Year ended December 31, 2004 $22,477
Year ended December 31, 2005 33,551
Year ended December 31, 2006 11,913
Year ended December 31, 2007 1,749
Year ended December 31, 2008 7,720
Thereafter 13,007
- --------------------------------------
$90,417
- --------------------------------------
At December 31, 2003, $49,089,000 of mortgage loans receivable with
adjustable rates and $18,851,000 of mortgage loans receivable with fixed
rates were due after one year. At December 31, 2003, two real estate loans
with an aggregate principal balance of $1,057,000 were on nonaccrual
status. These loans are considered impaired under the criteria of SFAS
No.114. Both loans are second mortgages where Intervest National Bank, an
affiliated Company, holds the first mortgage. The Company's recorded
investment in these loans totaled $1,058,000. The Company has commenced
foreclosure proceedings against the borrowers and currently believes the
estimated fair value of each of the underlying properties is sufficient to
provide for repayment of its recorded investment. As a result, the Company
believes that no specific valuation allowance is required. In March 2004,
one of the aforementioned loans was repaid in full and the other was
brought current and returned to accrual status. Interest income that was
not recorded on the nonaccrual loans under their contractual terms amounted
to $58,000 for the year ended December 31, 2003. The average balance of
impaired loans for the year ended December 31, 2003 was approximately
$610,000. At December 31, 2003 and 2002, there were no other impaired loans
or loans which were ninety days past due and still accruing interest.
4. ALLOWANCE FOR MORTGAGE LOAN LOSSES
Activity in the allowance for mortgage loan losses for is summarized as
follows:
For the Year Ended
December 31,
-------------------------------------
($in thousands) 2003 2002 2001
- -----------------------------------------------------------------------
Balance at beginning of year $ 101 $ 18 $ -
Provision charged to operations 90 83 18
- -----------------------------------------------------------------------
Balance at end of year $ 191 $ 101 $ 18
- -----------------------------------------------------------------------
5. FIXED ASSETS, LEASE COMMITMENTS AND RENTAL EXPENSE
Fixed assets are summarized as follows:
At December 31,
-----------------
($in thousands) 2003 2002
- ----------------------------------------------------
Furniture, fixtures and equipment $ 99 $ 85
Automobiles 43 58
- ----------------------------------------------------
Total cost 142 143
- ----------------------------------------------------
Less accumulated deprecation (56) (76)
- ----------------------------------------------------
Fixed assets, net $ 86 $ 67
- ----------------------------------------------------
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.
23
INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
- --------------------------------------------------------------------------------
5. FIXED ASSETS, LEASE COMMITMENTS AND RENTAL EXPENSE, CONTINUED
Rent expense amounted to $242,000 in 2003, $218,000 in 2002, and $183,000
in 2001. The Company shares its rented space with affiliates who were
charged rent of $1,000 in 2003, 2002 and 2001. The Company's future minimum
annual lease payments under this operating lease from January 1, 2004 to
September 30, 2004 aggregate $177,000. In October 2003, the Parent Company
leased the entire fourth floor of One Rockefeller Plaza in New York City
through March 2014. The Company will be moving from its present New York
location to the fourth floor upon completion of renovations and is expected
to occupy approximately one-half of such space. The current lease for the
tenth floor of 10 Rockefeller Plaza will expire in September 2004, or
earlier if such space is rented by the landlord prior thereto. The Company
will reimburse the Parent Company for the new leased space as follows:
$297,000 in 2004; $396,000 in 2005; $396,000 in 2006; $396,000 in 2007;
$428,000 in 2008; and $2,358,000 thereafter for an aggregate amount of
$4,271,000.
6. DEFERRED DEBENTURE OFFERING COSTS
Deferred debenture offering costs are summarized as follows:
At December 31,
--------------------
($in thousands) 2003 2002
- ------------------------------------------------------------
Deferred debenture offering costs $ 7,209 $ 6,044
Less accumulated amortization (4,358) (3,488)
- ------------------------------------------------------------
Deferred debenture offering costs, net $ 2,851 $ 2,556
- ------------------------------------------------------------
7. SUBORDINATED DEBENTURES PAYABLE
The following table summarizes debenture payable.
At December 31,
---------------------
($in thousands) 2003 2002
- -------------------------------------------------------------------------------------------
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 1/2% fixed - due January 1, 2003 - 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 1/2% fixed - due July 1, 2004 2,000 2,000
Series 06/28/99 - interest at 9% fixed - due July 1, 2006 2,000 2,000
Series 09/18/00 - interest at 8% fixed - due January 1, 2004 - 1,250
Series 09/18/00 - interest at 8 1/2% fixed - due January 1, 2006 1,250 1,250
Series 09/18/00 - interest at 9% fixed - due January 1, 2008 1,250 1,250
Series 08/01/01 - interest at 7 1/2% fixed - due April 1, 2005 1,750 1,750
Series 08/01/01 - interest at 8% fixed - due April 1, 2007 2,750 2,750
Series 08/01/01 - interest at 8 1/2% fixed - due April 1, 2009 2,750 2,750
Series 01/17/02 - interest at 7 1/4% fixed - due October 1, 2005 1,250 1,250
Series 01/17/02 - interest at 7 1/2% fixed - due October 1, 2007 2,250 2,250
Series 01/17/02 - interest at 7 3/4% fixed - due October 1, 2009 2,250 2,250
Series 08/05/02 - interest at 7 1/4% fixed - due January 1, 2006 1,750 1,750
Series 08/05/02 - interest at 7 1/2% fixed - due January 1, 2008 3,000 3,000
Series 08/05/02 - interest at 7 3/4% fixed - due January 1, 2010 3,000 3,000
Series 01/21/03 - interest at 6 3/4% fixed - due July 1, 2006 1,500 -
Series 01/21/03 - interest at 7 % fixed - due July 1, 2008 3,000 -
Series 01/21/03 - interest at 7 1/4% fixed - due July 1, 2010 3,000 -
Series 07/25/03 - interest at 6 1/2% fixed - due October 1, 2006 2,500 -
Series 07/25/03 - interest at 6 3/4% fixed - due October 1, 2008 3,000 -
Series 07/25/03 - interest at 7 % fixed - due October 1, 2010 3,000 -
- -------------------------------------------------------------------------------------------
87,350 74,000
- -------------------------------------------------------------------------------------------
24
INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
- --------------------------------------------------------------------------------
7. SUBORDINATED DEBENTURES PAYABLE, CONTINUED
The "Prime" in the preceding table refers to the prime rate of JPMorgan
Chase Bank, which was 4.00% on December 31, 2003 and 4.25% at December 31,
2002.
In January of 2004, the Company issued its Series 11/28/03 debentures in
the principal amount of $10,000,000 of which $8,250,000 accrue and pay
interest quarterly and $1,750,000 accrue and compound interest quarterly
until maturity. Net proceeds, after deferred offering costs, amounted to
$9,358,000
In September of 2003, the Company issued its Series 07/25/03 debentures in
the principal amount of $8,500,000. Net proceeds, after deferred offering
costs, amounted to $7,891,000. This series accrues and pays interest
quarterly.
In March of 2003, the Company issued its Series 01/21/03 debentures in the
principal amount of $7,500,000. Net proceeds, after deferred offering
costs, amounted to $6,935,000. This series accrues and pays interest
quarterly.
The Company's Series 09/18/00 debentures due January 1, 2004 were redeemed
on November 1, 2003. On such date, those debentures were redeemed for a
total of $1,585,000, which was comprised of $1,250,000 of principal and
$335,000 of accrued interest.
On January 1, 2003, series 11/10/98 debentures totaling $1,400,000 in
principal plus accrued interest of $570,000 matured and were repaid.
The Series 5/12/95, 10/19/95, 5/10/96, 10/15/96 and 4/30/97 floating-rate
debentures have a maximum interest rate of 12%. Interest on an aggregate of
$6,330,000 of these debentures is accrued and compounded quarterly, and is
due and payable at maturity. The payment of interest on the remaining
debentures is made quarterly. Any debenture holder in the aforementioned
Series whose interest accrues and is due at maturity may at any time elect
to receive the accrued interest and subsequently receive regular payments
of interest.
The Series 11/10/98, 6/28/99, 9/18/00, $770,000 of Series 8/1/01, $270,000
of Series 1/17/02 and $1,520,000 of Series 8/5/02 debentures accrue and
compound interest quarterly, with such interest due and payable at
maturity. Interest is paid quarterly on the remaining debentures in series
8/1/01, 1/17/02 and 8/5/02. The holders of Series 11/10/98, 6/28/99,
9/18/00, 1/17/02 8/5/02, 1/21/03, 7/25/03 and 11/28/03 debentures can
require the Company to repurchase the debentures for face amount plus
accrued interest each year (beginning October 1, 2005 for Series 1/17/02,
January 1, 2006 for Series 8/5/02, July 1, 2006 for Series 1/21/03, October
1, 2006 for Series 7/25/03 and January 1, 2007 for Series 11/28/03)
provided, however, that in no calendar year will the Company be required to
purchase more than $100,000 in principal amount of each maturity, in each
series of debentures, on a non-cumulative basis
All the debentures may be redeemed, in whole or in part, at any time at the
option of the Company, for face value, except for Series 1/21/03, Series
7/25/03 and Series 11/28/03 debentures. The Series 1/21/03 debentures would
be redeemable at a premium of 1% if the redemption were prior to April 1,
2004. The Series 7/25/03 debentures would be redeemable at a premium of 1%
if the redemption were prior to July 1, 2004. The Series 11/28/03
debentures would be redeemable at a premium of 1% if the redemption were
prior to January 1, 2005. All the debentures are unsecured and subordinate
to all present and future senior indebtedness, as defined in the indenture
related to the debenture.
25
INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
- --------------------------------------------------------------------------------
7. SUBORDINATED DEBENTURES PAYABLE, CONTINUED
Scheduled contractual maturities of debentures as of December 31, 2003 are
summarized as follows:
($in thousands) Principal Accrued Interest
- ------------------------------------------------------------
Year ended December 31, 2004 $ 20,000 $ 6,656
Year ended December 31, 2005 29,100 3,325
Year ended December 31, 2006 9,000 1,382
Year ended December 31, 2007 5,000 66
Year ended December 31, 2008 10,250 466
Thereafter 14,000 157
- ------------------------------------------------------------
$ 87,350 $ 12,052
- ------------------------------------------------------------
8. DIVIDEND RESTRICTION
The payment of dividends by the Company to the Parent Company is subject to
restrictions. The Company cannot declare or pay any dividend or make any
distribution on its capital stock (other than dividends or distributions
payable in capital stock), or purchase, redeem or otherwise acquire or
retire for value, or permit any subsidiary to purchase or otherwise acquire
for value, capital stock of the Company, if at the time of such payment,
the Company is not in compliance with the indentures under which the
Company's debentures were issued.
9. PROFIT SHARING PLAN
The Company maintains a tax-qualified, profit sharing plan and trust in
accordance with the provisions of Section 401(k) of the Internal Revenue
Code. The plan is available to each of the Company's eligible employees who
elect to participate after meeting certain length-of-service requirements.
The Company makes discretionary matching contributions up to 3% of employee
compensation, which vest to the employees over a period of time. Total cash
contributions to the plan for 2003, 2002 and 2001 were $13,000, $13,000 and
$7,000, respectively.
10. RELATED PARTY TRANSACTIONS
The Company participates with Intervest National Bank (a wholly owned
subsidiary of the Parent Company) in certain mortgage loans receivable. The
balances of the Company's participation in these mortgages were $5,533,000
and $6,224,000 at December 31, 2003 and 2002, respectively.
The Company has a service agreement, which renews each January 1 unless
terminated by either party, with Intervest National Bank with respect to
providing mortgage loan origination and other services to Intervest
National Bank. The Company earned $2,343,000, $1,597,000 and $463,000 from
Intervest National Bank for 2003, 2002 and 2001, respectively, in
connection with this service agreement.
The Company has interest-bearing and noninterest-bearing deposit accounts
with Intervest National Bank totaling $18,869,000 at December 31, 2003 and
$4,255,000 at December 31, 2002. The Company received interest income of
$102,000, $81,000 and $41,000, in 2003, 2002 and 2001, respectively, in
connection with such deposits. These amounts are included in interest
income in the consolidated statements of operations.
Intervest Securities Corporation, an affiliate, received commissions and
fees aggregating $77,100, $58,000 and $0 in 2003, 2002 and 2001 in
connection with the placement of subordinated debentures of the Company.
The Company paid fees of approximately $199,000 in 2003, $115,000 in 2002
and $140,000 in 2001 for legal services rendered by a law firm, a principal
of which is a director of the Company. The Company paid commissions and
fees in connection with the placement of debentures aggregating $531,000 in
2003, $515,000 in 2002 and $301,000 in 2001 to a broker/dealer, a principal
of which is a director of the Company.
26
INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
- --------------------------------------------------------------------------------
11. INCOME TAXES
The Company files consolidated federal and combined New York State and City
income tax returns with its Parent Company on a calendar year basis. Income
taxes are provided as if the Company filed a separate consolidated tax
return with its subsidiaries.
At December 31, 2003 and 2002, the Company's net deferred tax asset was
$317,000 and $201,000, respectively, which is included in other assets on
the balance sheet. The asset relates to the unrealized benefit for net
temporary differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. A valuation
allowance was not maintained at any time in 2003, 2002 or 2001.
Allocation of federal, state and local income taxes between current and
deferred portions is as follows:
($in thousands) Current Deferred Total
- ------------------------------------------------------------
Year Ended December 31, 2003:
- -----------------------------
Federal $ 1,007 $ (88) $ 919
State and Local 605 (28) 577
- ------------------------------------------------------------
$ 1,612 $ (116) $1,496
- ------------------------------------------------------------
Year Ended December 31, 2002:
- -----------------------------
Federal $ 736 $ (24) $ 712
State and Local 501 (6) 495
- ------------------------------------------------------------
$ 1,237 $ (30) $1,207
- ------------------------------------------------------------
Year Ended December 31, 2001:
- -----------------------------
Federal $ 406 $ (119) $ 287
State and Local 250 (42) 208
- ------------------------------------------------------------
$ 656 $ (161) $ 495
- ------------------------------------------------------------
The components of the deferred tax benefit are summarized as follows:
For the Year Ended December 31,
----------------------------------
($in thousands) 2003 2002 2001
- --------------------------------------------------------------------
Deferred loan fees and discount $ (76) $ 13 $ (148)
Allowance for loan losses (40) (38) (9)
Depreciation - (5) (4)
- --------------------------------------------------------------------
$ (116) $ (30) $ (161)
- --------------------------------------------------------------------
The tax effects of the temporary differences that give rise to the deferred
tax asset are summarized as follows:
At December 31,
--------------------
($in thousands) 2003 2002
- --------------------------------------------------------------------------
Attributable to: Deferred loan fees and discount $ 219 $ 144
Allowance for loan losses 87 46
Depreciation 11 11
- --------------------------------------------------------------------------
$ 317 $ 201
- --------------------------------------------------------------------------
A reconciliation between the statutory federal income tax rate and the Company's
effective tax rate follows:
For the Year Ended December 31,
-------------------------------
($in thousands) 2003 2002 2001
- --------------------------------------------------------------------------------------
Tax provision at statutory rate 34.0% 34.0% 34.0%
Increase in taxes resulting from:
State and local income taxes, net of federal benefit 11.9 9.4 12.0
All other 0.1 0.1 0.2
- --------------------------------------------------------------------------------------
46.0% 43.5% 46.2%
- --------------------------------------------------------------------------------------
27
INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
- --------------------------------------------------------------------------------
12. COMMITMENTS AND CONTINGENCIES
The Company has an employment agreement with Jerome Dansker, Chairman of
the Board and Executive Vice President, that expires June 30, 2005. The
agreement provides for an annual salary in the present amount of $199,231,
which is subject to increase annually by six percent or by the percentage
increase in the consumer price index, if higher. The agreement also
provides for monthly expense payments, the use of a car and medical
benefits. In the event of Mr. Dansker's death or disability, monthly
payments of one-half of this amount which otherwise would have been paid to
Mr. Dansker will continue until the longer of (i) the balance of the term
of employment, or (ii) three years. The agreement also provides 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. For 2003, Mr. Dansker
received $4,000 of such additional compensation. No additional compensation
has been paid for the years ended December 31, 2002 or 2001.
The Company issues commitments to extend credit in the normal course of
business, which may involve, to varying degrees, elements of credit and
interest rate risk in excess of the amounts recognized in the consolidated
balance sheets. Commitments to extend credit are agreements to lend funds
under specified conditions. Such commitments generally have fixed
expiration dates or other termination clauses and may require payment of
fees. Since some of the commitments are expected to expire without being
drawn upon, the total commitment amount does not necessarily represent
future cash requirements. Commitments to extend credit amounted to
$14,435,000 at December 31, 2003, all of which will either close or expire
in 2004.
The Company is periodically party to or otherwise involved in legal
proceedings arising in the normal course of business, such as claims to
enforce liens, claims involving the making and servicing of mortgage loans
receivable, and other issues incident to the Company's business. Management
does not believe that there is any pending or threatened proceeding against
the Company which, if determined adversely, would have a material effect on
the business, results of operations, or financial position of the Company.
13. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates are made at a specific point in time based on
available information about each financial instrument. Where available,
quoted market prices are used. However, a significant portion of the
Company's financial instruments, such as commercial real estate and
multifamily mortgage loans receivable, do not have an active marketplace in
which they can be readily sold or purchased to determine fair value.
Consequently, fair value estimates for such instruments are based on
assumptions made by management that include the financial instrument's
credit risk characteristics and future estimated cash flows and prevailing
interest rates. As a result, these fair value estimates are subjective in
nature, involve uncertainties and matters of significant judgment and
therefore, cannot be determined with precision. Accordingly, changes in any
of management's assumptions could cause the fair value estimates to deviate
substantially.
The fair value estimates also do not reflect any additional premium or
discount that could result from offering for sale, at one time, the
Company's entire holdings of a particular financial instrument, nor
estimated transaction costs. Further, the tax ramifications related to the
realization of unrealized gains and losses can have a significant effect on
and have not been considered in the fair value estimates. Finally, fair
value estimates do not attempt to estimate the value of anticipated future
business and the Company's customer relationships.
28
INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
- --------------------------------------------------------------------------------
13. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
The carrying and estimated fair values of the Company's financial
instruments are as follows:
At December 31, 2003 At December 31, 2002
-------------------------------------------
Carrying Fair Carrying Fair
($in thousands) Value Value Value Value
- ----------------------------------------------------------------------------------------
Financial Assets:
Cash and cash equivalents $ 25,772 $ 25,772 $ 17,946 $ 17,946
Time deposits with banks - - 2,000 2,000
Mortgage loans receivable, net 89,116 94,035 73,398 75,270
Accrued interest receivable 642 642 583 583
Financial Liabilities:
Debentures payable plus accrued interest 99,402 101,240 84,751 86,070
Off balance sheet instruments:
Commitments to lend 115 115 41 41
- ----------------------------------------------------------------------------------------
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
MORTGAGE LOANS RECEIVABLE. The estimated fair value of mortgage loans
receivable is based on a discounted cash flow analysis, using interest
rates currently being offered for mortgage loans receivable with similar
terms to borrowers of similar credit quality. Management can make no
assurance that its perception and quantification of credit risk would be
viewed in the same manner as that of a potential investor. Therefore,
changes in any of management's assumptions could cause the fair value
estimates of mortgage loans receivable to deviate substantially.
DEBENTURES AND ACCRUED INTEREST PAYABLE. The estimated fair value of
debentures and related accrued interest payable is based on a discounted
cash flow analysis. The discount rate used in the present value computation
was estimated by comparison to what management believes to be the Company's
incremental borrowing rate for similar arrangements.
ALL OTHER FINANCIAL ASSETS AND LIABILITIES. The estimated fair value of
cash and cash equivalents, time deposits with banks and accrued interest
receivable approximates their carrying values since these instruments are
payable on demand or have short-term maturities.
OFF-BALANCE SHEET INSTRUMENTS. The carrying amounts of commitments to lend
approximated estimated fair value. The fair value of commitments to lend is
based on fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreement and the counter-party's
credit standing.
29
INTERVEST MORTGAGE CORPORATION
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
As of DECEMBER 31, 2003
Principal
Stated Final Face Carrying amount subject
Interest Maturity Payment Prior Amount of Amount of to delinquent
Rate Date Terms Liens Mortgage Mortgage Principal or Interest
--------- -------- ------- ----------- ---------- ---------- ---------------------
COMMERCIAL FIRST MORTGAGES
Office Buildings
New City, New York 6.20% 12/08/10 Y $- $134,000 $106,000
New York, New York 6.75% 04/01/08 M 2,503,000 2,503,000
New York, New York 5.00% 04/01/09 M 1,298,000 1,298,000
New York, New York 8.50% 04/01/05 M 1,191,000 1,178,000
New York, New York 6.50% 09/01/04 M 1,795,000 1,772,000
Restaurants
Decatur and
Jonesboro, Georgia 8.50% 04/01/13 M - 359,000 300,000
Manassas, Virginia 6.50% 12/01/05 Y - 52,000 46,000
Irondequoint, New York 7.20% 12/01/12 Y - 181,000 147,000
Hotel
New York, New York 9.00% 02/01/04 M - 2,631,000 2,630,000
Warehouse
Brooklyn, New York 8.00% 03/01/08 M 3,697,000 3,647,000
Brooklyn, New York 6.38% 04/01/06 M 1,477,000 1,457,000
Garage
New York, New York 8.50% 11/01/03 M 2,163,000 2,158,000
Retail
Brooklyn, New York 5.25% 08/01/08 M 545,000 537,000
New Smyrna Beach, Florida 6.00% 12/31/12 M 1,732,000 1,732,000
New York, New York 7.00% 12/01/05 M 250,000 213,000
LAND ACQUISITION FIRST MORTGAGES
Land
New York, New York 6.75% 06/01/06 M 2,977,000 2,928,000
Brooklyn, New York 6.00% 01/01/05 M 6,455,000 6,391,000
Brooklyn, New York 5.00% 07/01/04 M 2,350,000 2,308,000
RESIDENTIAL FIRST MORTGAGES
Rental Apartments Buildings
Bronx, New York 12.75% 01/01/11 M - 847,000 847,000
Bronx, New York 12.00% 06/01/13 M - 1,723,000 1,634,000
Bronx, New York 13.50% 11/01/13 M - 4,159,000 4,159,000
New York, New York 7.00% 02/01/04 M 2,736,000 2,731,000
Brooklyn, New York 8.00% 09/01/04 M 522,000 519,000
New York, New York 8.00% 06/01/04 M 2,449,000 2,424,000
Philadelphia, Pennsylvania 7.00% 03/01/05 M 1,868,000 1,847,000
St. Petersburg, Florida 10.00% 03/01/05 M 880,000 870,000
Waterbury, Connecticut 7.50% 03/01/04 M 793,000 791,000
New York, New York 7.50% 03/01/06 M 1,352,000 1,334,000
Brooklyn, New York 7.35% 04/01/05 M 639,000 633,000
New York, New York 5.50% 06/01/05 M 3,354,000 3,308,000
New York, New York 6.50% 08/01/05 M 895,000 883,000
Brooklyn, New York 5.50% 08/01/18 M 2,572,000 2,538,000
New York, New York 6.85% 09/01/05 M 1,120,000 1,103,000
New York, New York 7.50% 10/01/05 M 1,647,000 1,620,000
Newark, New Jersey 5.50% 10/01/08 M 398,000 389,000
New York, New York 8.00% 05/01/06 M 1,382,000 1,357,000
Utica, New York 0.55% 07/01/04 M 742,000 735,000
COMMERCIAL JUNIOR MORTGAGES
Office Buildings
Tampa, Florida 10.50% 07/01/09 M 4,964,000 464,000 462,000
Wall township, New Jersey 9.00% 10/01/04 M 3,440,000 378,000 374,000
New York, New York 11.00% 07/01/05 M 6,453,000 740,000 732,000 741,000
Bronx, New York 12.00% 03/01/04 M 784,000 197,000 197,000
New York, New York 6.00% 02/01/05 M 6,198,000 450,000 448,000
Bronx, New York 7.50% 09/01/04 M 2,042,000 298,000 297,000
Retail
Vorhees, New Jersey 11.00% 08/01/04 M 2,153,000 233,000 232,000
Tuckerton, New Jersey 10.00% 04/01/04 M 2,170,000 300,000 297,000
New York, New York 10.00% 05/01/06 M 5,951,000 1,987,000 1,958,000
New Smyrna Beach, Florida 9.00% 09/01/04 M 2,790,000 198,000 196,000
New York, New York 9.00% 09/01/05 M 3,989,000 499,000 483,000
White Plains, New York 8.50% 04/01/07 M 10,452,000 997,000 981,000
Prepayment Penalty/
Other Fees
------------------------------------------------
COMMERCIAL FIRST MORTGAGES
Office Buildings
New City, New York none
New York, New York 4% prior to 4/1/04, 3% prior to 4/1/05
2% prior to 4/1/06 then 1%
New York, New York None
New York, New York 1%
New York, New York not prepayable until 5/1/04, then greater of
1% or 31 days interest on original principal
Restaurants
Decatur and
Jonesboro, Georgia none
Manassas, Virginia 0.50%
Irondequoint, New York 1%
Hotel
New York, New York 1%
Warehouse
Brooklyn, New York 5% until 2/29/04, 4% until 2/28/05 3%
until 2/28/06, 2% until 2/28/07, then 1%
Brooklyn, New York 1/2% of original principal plus interest
through 7/1/04
Garage
New York, New York 1%
Retail
Brooklyn, New York 5% till 8/1/04, 4% till 8/1/05, 3% till 8/1/06,
2% till 8/1/07, 1% till maturity
New Smyrna Beach, Florida None
New York, New York not prepayable until 6/1/05, greater of 1%
LAND ACQUISITION FIRST MORTGAGES or 31 days interest on $2 Million
Land
New York, New York not prepayable until 7/1/04, 2% untill 7/1/05,
then 1% thereafter
Brooklyn, New York not prepayable until 4/1/04, then 1/2%
Brooklyn, New York not prepayable until 4/1/04, then 1%
RESIDENTIAL FIRST MORTGAGES
Rental Apartments Buildings
Bronx, New York no prepayment permitted
Bronx, New York no prepayment permitted
Bronx, New York no prepayment permitted
New York, New York 1%
Brooklyn, New York 1%
New York, New York 1%
Philadelphia, Pennsylvania not prepayable until 9/1/04, then 1%
St. Petersburg, Florida not prepayable until 9/1/04, then 1%
Waterbury, Connecticut 1%
New York, New York not prepayable until 6/1/05, then 1%
Brooklyn, New York not prepayable until 10/1/04, then 1%
New York, New York not prepayable until 12/1/04, then 1%
New York, New York not prepayable until 11/1/04, then 1%
Brooklyn, New York 2%
New York, New York not prepayable until 3/1/05, then 1%
New York, New York 1%
Newark, New Jersey 2%
New York, New York not prepayable until 9/15/05, then 1%
Utica, New York not prepayable until 4/1/04, then 1%
COMMERCIAL JUNIOR MORTGAGES
Office Buildings
Tampa, Florida 1%
Wall township, New Jersey 1%
New York, New York none until 10/1/04, then 1%
Bronx, New York 1%
New York, New York None
Bronx, New York not prepayable until 3/1/04, then 1/2% of
original principal
Retail
Vorhees, New Jersey not prepayable until 7/1/04, then 1%
Tuckerton, New Jersey 1%
New York, New York not prepayable until 6/1/05, then 1%
New Smyrna Beach, Florida 1%
New York, New York not prepayable until 3/1/05, then greater
of 1% or 31 days interest on original
principal
White Plains, New York not prepayable until 1/1/06, then greater
of 1% or 31 days interest on original
principal
30
INTERVEST MORTGAGE CORPORATION
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
As of DECEMBER 31, 2003
REAL ESTATE - continued
Storage
Lakeland, Florida 11.00% 04/01/07 M 6,989,000 436,000 432,000
Supermarket
New York, New York 12.00% 06/01/05 M 3,667,000 591,000 586,000
Warehouse
Long Island City, New York 12.00% 01/01/06 M 6,784,000 1,823,000 1,798,000
Brooklyn, New York 12.00% 05/01/04 M 3,682,000 398,000 396,000
New York, New York 10.00% 07/01/04 M 1,989,000 597,000 592,000
RESIDENTIAL JUNIOR MORTGAGES
Rental Apartments Buildings
New York, New York 10.00% 12/01/05 M 3,101,000 294,000 293,000
New York, New York 11.00% 01/01/05 M 405,000 1,165,000 1,157,000
Bronx, New York 11.00% 02/01/08 M 1,723,000 228,000 228,000
New York, New York 11.00% 02/01/05 M 3,277,000 1,724,000 1,712,000
New York, New York 11.00% 03/01/07 M 964,000 316,000 312,000 316,000
Philadelphia, Pennsylvania 11.00% 03/01/05 M 1,595,000 288,000 286,000
Bronx, New York 10.00% 07/01/04 M 2,299,000 168,000 170,000
Baltimore, Maryland 12.00% 08/01/05 M 3,972,000 419,000 415,000
New York, New York 12.00% 03/01/06 M 1,677,000 120,000 119,000
New York, New York 12.00% 10/01/05 M 697,000 113,000 112,000
Brooklyn, New York 10.00% 10/01/04 M 403,000 74,000 74,000
New York, New York 12.00% 09/01/06 M 2,209,000 396,000 392,000
New York, New York 12.00% 12/01/05 M 2,381,000 322,000 319,000
New York, New York 12.00% 06/01/05 M 1,321,000 594,000 588,000
New York, New York 12.00% 11/01/05 M 6,000,000 1,242,000 1,225,000
Bronx, New York 8.50% 05/01/05 M 790,000 198,000 197,000
New York, New York 12.00% 05/01/05 M 9,411,000 1,292,000 1,276,000
Brooklyn, New York 7.00% 04/17/04 M 947,000 499,000 497,000
New York, New York 11.00% 07/01/04 M 8,890,000 2,492,000 2,464,000
New York, New York 8.50% 09/01/08 M 1,591,000 348,000 343,000
Hempstead, New York 12.00% 04/01/05 M 5,093,000 100,000 99,000
New York, New York 12.00% 11/01/05 M 6,361,000 499,000 491,000
Brooklyn, New York 12.00% 06/01/06 M 1,275,000 100,000 99,000
New York, New York 9.00% 12/01/05 M 3,200,000 300,000 296,000
New York, New York 9.00% 12/01/06 M 2,200,000 300,000 296,000
Bronx, New York 12.00% 06/01/05 M 10,122,000 1,192,000 1,177,000
Tampa, Florida 10.00% 06/01/05 M 5,439,000 1,490,000 1,470,000
Bronx, New York 10.00% 07/01/05 M 5,976,000 1,690,000 1,666,000
------------ ----------- ----------- ----------------------
TOTAL $167,816,000 $90,417,000 $89,307,000 $1,057,000
============ =========== =========== ======================
Storage
Lakeland, Florida 4% until 4/1/04, 3% until 4/1/05
Supermarket 2% until 4/1/06, then 1%
New York, New York none until 9/1/04, then 31 days interest
Warehouse
Long Island City, New York 2% until 1/1/04, 1.5% until 4/1/05,
then 1% of outstanding balance
Brooklyn, New York 31 days interest on original balance
New York, New York not prepayable until 4/1/04, then 1%
RESIDENTIAL JUNIOR MORTGAGES
Rental Apartments Buildings
New York, New York 1%
New York, New York not prepayable until 4/1/04, then 1%
Bronx, New York no prepayment permitted
New York, New York not prepayable until 5/1/04, then 1%
New York, New York not prepayable until 12/1/05, then 1%
Philadelphia, Pennsylvania 1%
Bronx, New York none
Baltimore, Maryland not prepayable until 11/1/04, then 1%
New York, New York not prepayable until 3/1/05, then 1%
New York, New York not prepayable until 1/1/05, then 1%
Brooklyn, New York 1%
New York, New York 3% prior to 10/1/04 , then 1%
New York, New York 2% until 12/1/04 then 1%
New York, New York not prepayable until 9/1/04, then 1%
New York, New York not prepayable until 5/16/05, then 31days
interest on original balance
Bronx, New York not prepayable until 11/1/04, then the
greater of 31 days interest or 1% of
original principal
New York, New York 2% until 5/1/04 then 1%
Brooklyn, New York not prepayable until 2/16/04, then 1%
New York, New York Interest until 3/1/04, greater of 1% or 31
days interest on original amount
New York, New York 2% until 9/1/04, then 1% thereafter
Hempstead, New York not prepayable until 10/1/04, 31 days
interest thereafter
New York, New York 2% until 11/1/04, 31 days interest thereafter
Brooklyn, New York not prepayable until 9/15/05, then 31 days
interest
New York, New York not prepayable until 6/1/05, then greater
of 1% or 31 days interest on original
principal
New York, New York not prepayable until 3/1/06, then greater of
1% or 31 days interest on original principal
Bronx, New York 2% till 6/1/04, 1% thereafter
Tampa, Florida not prepayable until 12/1/04, then 1%
Bronx, New York not prepayable until 1/1/05, then 1%
Notes:
(Y) Yearly principal and interest payments
(M) Monthly principal and interest payments
The following summary reconciles mortgages receivable at their carrying value
Year Ended December 31,
-------------------------------------------
2003 2002 2001
------------- ------------- -------------
Balance at beginning of period $ 73,398,000 $ 62,647,000 $ 51,992,000
Additions during period
Mortgages originated and acquired 78,321,000 36,205,000 49,088,000
Deductions during period
Collections of principal, net of amortization of fees and (62,513,000) (25,371,000) (38,415,000)
discounts
Change in allowance for loan losses (90,000) (83,000) (18,000)
------------- ------------- -------------
Balance at end of period $ 89,116,000 $ 73,398,000 $ 62,647,000
============= ============= =============
31
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
----------------------------------------------------------------------
FINANCIAL DISCLOSURE
---------------------
None
ITEM 9A. CONTROLS AND PROCEDURES
-------------------------
a) Evaluation of disclosure controls and procedures. The Company maintains
controls and procedures designed to ensure that information required to be
disclosed in the reports that the Company files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the Securities and Exchange
Commission. Based upon their evaluation of those controls and procedures
performed within 90 days of the filing date of this report, the Chief Executive
and Chief Financial Officer of the Company concluded that the Company's
disclosure controls and procedures were adequate.
b) Changes in internal controls. The Company made no significant changes in
its internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation of those controls by the Chief
Executive and Chief Financial officer.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------------
The current Directors and Executive Officers of the Company are as follows:
LAWRENCE G. BERGMAN, age 59, serves as a Director, Vice President and
Secretary of the Company and has served in such capacities since 1987. Mr.
Bergman received a Bachelor of Science degree and a Master of Engineering
(Electrical) degree from Cornell University, and a Master of Science in
Engineering and a Ph.D. degree from The Johns Hopkins University. Mr. Bergman
is also a Director, Vice-President and Secretary of Intervest Bancshares
Corporation, the Parent Company, and a Director and a member of the Loan
Committee of Intervest National Bank and a Director and Vice President of
Intervest Securities Corporation, wholly owned subsidiaries of Intervest
Bancshares Corporation.
MICHAEL A. CALLEN, age 63, serves as a Director of the Company, and has
served in such capacity since October 1992. Mr. Callen received a Bachelor of
Arts degree from the University of Wisconsin in Economics and Russian. Mr.
Callen is President of Avalon Argus Associates, a financial consulting firm.
Previously, Mr. Callen had been Senior Advisor, The National Commercial Bank,
Jeddah, Kingdom of Saudi Arabia and was a Director and Sector Executive at
Citicorp/Citibank , responsible for corporate banking activities in North
America, Europe and Japan. Mr. Callen is a Director of Intervest Bancshares
Corporation and Intervest National Bank, and also serves as a Director of AMBAC,
Inc.
JEROME DANSKER, age 85, serves as Chairman of the Board of Directors and as
Executive Vice President of the Company, and has served in such capacities since
June 1996 and November 1993, respectively. Mr. Dansker received a Bachelor of
Science degree from the New York University School of Commerce, Accounts and
Finance, a law degree from the New York University School of Law, and is
admitted to practice as an attorney in the State of New York. Mr. Dansker is a
Director, Chairman of the Board and Executive Vice President of Intervest
Bancshares Corporation, the Parent Company. He is also Chairman of the Board of
Directors and Chairman of the Loan Committee of Intervest National Bank and
Chairman of the Board of Directors of Intervest Securities Corporation, wholly
owned subsidiaries of Intervest Bancshares Corporation.
LOWELL S. DANSKER, age 53, serves as Vice Chairman of the Board of
Directors and as President and Treasurer of the Company, and has served in such
capacities since 2003 and 1987, respectively. Mr. Dansker received a Bachelor
of Science in Business Administration from Babson College, a law degree from the
University of Akron School of Law, and is admitted to practice as an attorney in
New York, Ohio, Florida and the District of Columbia. Mr. Dansker is also Vice
Chairman, President and Treasurer of Intervest Bancshares Corporation, the
Parent Company, and he is the Chief Executive Officer, Director and a member of
the Loan Committee of Intervest National Bank and a Director and Chief Executive
Officer of Intervest Securities Corporation, wholly owned subsidiaries of
Intervest Bancshares Corporation.
32
PAUL DEROSA, age 62, serves as a Director of the Company, and has served in
such capacity since February, 2003. Mr. DeRosa is a graduate of Columbia
University with a Ph.D in Economics. Mr. DeRosa has been a principal of Mt.
Lucas Management Corporation, an investment firm, since 1998. He was an Officer
of Eastbridge Holdings Inc., an investment firm, from 1988 to 1998 and served as
its Chief Executive Officer from 1995 to 1998. Mr. DeRosa is also a Director of
Intervest Bancshares Corporation and Intervest National Bank.
STEPHEN A. HELMAN, age 65, serves as a Director of the Company and has
served in such capacity since December, 2003. Mr. Helman received a Bachelor of
Arts degree from the University of Rochester and a law degree from Columbia
University. Mr. Helman is a lawyer in private practice in New York, New York.
Mr. Helman is also a director of Intervest Bancshares Corporation. And Intervest
National Bank.
WAYNE F. HOLLY, age 47, serves as a Director of the Company and has served
in such capacity since June, 1999. Mr. Holly received a Bachelor of Science
degree in Economics from Alfred University. Mr. Holly is President of Sage,
Rutty & Co., Inc., a member of the Boston Stock Exchange, with offices in
Rochester, New York and Canandaigua, New York, and is also a Director of
Intervest Bancshares Corporation and Intervest National Bank.
LAWTON SWAN, III, age 61, serves as a Director of the Company, and has
served in such capacity since February, 2000. Mr. Swan received a Bachelor of
Science degree from Florida State University in Business Administration and
Insurance. Mr. Swan is President of Interisk Corporation, a consulting firm
specializing in risk management and employee benefit plans, which he founded in
1978. He is also a Director of Intervest Bancshares Corporation and Intervest
National Bank.
THOMAS E. WILLETT, age 56, serves as a Director of the Company, and has
served in such capacity since March, 1999. Mr. Willett received a Bachelor of
Science Degree from the United States Air Force Academy and a law degree from
Cornell University School of Law. Mr. Willett has been a partner of Harris
Beach LLP, a law firm in Rochester, New York, for more than five years and is a
Director of Intervest Bancshares Corporation and Intervest National Bank.
DAVID J. WILLMOTT, age 65, serves as a Director of the Company, and has
served in such capacity since June, 1989. Mr. Willmott is a graduate of Becker
Junior College and attended New York University Extension and Long Island
University Extension of Southampton College. Mr. Willmott is the Editor and
Publisher of Suffolk Life Newspapers, which he founded more than 25 years ago.
Mr. Willmott is also a Director of Intervest Bancshares Corporation and
Intervest National Bank.
WESLEY T. WOOD, age 61, serves as a Director of the Company, and has served
in such capacity since April, 1992. Mr. Wood received a Bachelor of Science
degree from New York University, School of Commerce. Mr. Wood is President of
Marketing Capital Corporation, an international marketing consulting and
investment firm which he founded in 1973. He is also a Director of Intervest
Bancshares Corporation and Intervest National Bank, a Director of the Center of
Direct Marketing at New York University, a member of the Marketing Committee at
Fairfield University in Connecticut, and a Trustee of St. Dominics in Oyster
Bay, New York.
All of the Directors of the Company have been elected to serve as Directors
until the next annual meeting of the Company's shareholders. Each of the
officers of the Company has been elected to serve as an officer until the next
annual meeting of the Company's Directors.
Jerome Dansker is the father of Lowell S. Dansker.
33
ITEM 11. EXECUTIVE COMPENSATION
-----------------------
The Chairman and Vice Chairman each receive a fee of $3,500 for each meeting of
the Board he attends and the other directors receives a fee of $750 for each
meeting attended. The Chairman of a Committee of the Board receives $750 for
each Committee meeting attended, and other members of such Committees receive
$500 per meeting attended.
Intervest Mortgage Corporation has an employment agreement with Jerome Dansker
that expires June 30, 2005. The agreement provides for an annual salary in the
present amount of $199,231, which is subject to increase annually by six percent
or by the percentage increase in the consumer price index, if higher. The
agreement also provides for monthly expense payments, the use of a car and
medical benefits. In the event of Mr. Dansker's death or disability, monthly
payments of one-half of the amount which otherwise would have been paid to Mr.
Dansker will continue to be paid to his legal representative until the longer of
(i) the balance of the term of employment, or (ii) three years. The agreement
also provides 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. For 2003,
Mr. Dansker received $4,000 of such additional compensation. No additional
compensation has been paid for the years ended December 31, 2002 or 2001.
The following table sets forth information concerning total compensation paid
during the last three years to Intervest's Chairman and Executive Vice President
and its Vice Chairman and President. No other executive officer of the Company
received annual compensation in excess of $100,000.
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term
Compensation
----------------------------------------------------------------
Other Annual
Name and Principal Position Year Salary(1) Bonuses Compensation(2) Awards Pay-Outs
- -----------------------------------------------------------------------------------------------------------
Jerome Dansker,
Chairman and Executive Vice President 2003 $ 224,564 $ - $ 14,600 $ - $ -
2002 $ 209,424 $ - $ 2,400 $ - $ -
2001 $ 214,057 $ - $ 1,700 $ - $ -
Lowell S Dansker,
Vice Chairman, President and Treasurer 2003 $ 5,460 $ - $ 14,250 $ - $ -
2002 $ 5,460 $ - $ 2,250 $ - $ -
2001 $ 5,586 $ - $ 1,525 $ - $ -
Lawrence G. Bergman,
Vice President and Secretary 2003 $ 92,500 $ 7,500 $ 4,250 $ - $ -
2002 $ 77,500 $ - $ 2,250 $ - $ -
2001 $ 29,969 $ - $ 1,525 $ - $ -
(1) Includes unused vacation and medical expense reimbursement paid by the Company for Jerome Dansker.
(2) Represents director and committee fees.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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Intervest Bancshares Corporation located at 10 Rockefeller Plaza, Suite 1015 New
York, New York owns 100% of the outstanding stock of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------
Mr. Wayne F. Holly, who is a director of the Company, also serves as President
of Sage, Rutty & Co., Inc., which firm has acted as an underwriter/placement
agent in connection with the Company's offerings of debentures, including the
offering of debentures conducted during fiscal 2003, 2002 and 2001. Sage, Rutty
and Co., Inc. received fees and commissions of $531,000 in 2003, $515,000 in
2002 and $306,000 in 2001.
Mr. Thomas E. Willett, who is a director of the Company, also is a partner in
the law firm of Harris Beach LLP, which firm has provided legal services to the
Company and the Parent Company in 2003, 2002 and 2001. Harris Beach LLP,
received fees of $199,000 in 2003, $115,000 in 2002, and $140,000 in 2001.
34
Intervest Securities Corporation, an affiliate, received commissions and fees
aggregating $77,100 in 2003 and $58,000 in 2002 in connection with the placement
of the Company's subordinated debentures.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
------------------------------------------
AUDIT FEES. The Company was billed $29,600 and $27,200 for the audit of the
Company's annual financial statements for the years ended December 31, 2003 and
2002 and for the review of the financial statements included in the Company's
Quarterly Reports on Form 10-Q filed during 2003 and 2002.
AUDIT-RELATED FEES. The Company was billed $22,800 and $8,000 for non-audit
services from the Company's principal accountant during the year ended December
31, 2003 and 2002 in connection with the review of the Company's registration
statements related to the issuance of subordinated debentures and the delivery
of consents related thereto.
TAX FEES. The Company was not billed for and did not receive any tax compliance,
tax advise or tax planning services from the Company's principal accountants in
the last two fiscal years.
OTHER MATTERS. The Audit Committee of the Board of Directors has considered
whether the provision of non-audit services as described above is compatible
with maintaining the independence of the Company's principal accountant.
Of the time expended by the Company's principal accountant to audit the
Company's financial statements for the fiscal year ended December 31, 2003, less
than 50% of such time involved work performed by persons other than the
principal accountant's full-time, permanent employees.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
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(a) DOCUMENTS FILED AS PART OF THIS REPORT
(1) FINANCIAL STATEMENTS:
See Item 8 "Financial Statements and Supplementary Data"
(2) FINANCIAL STATEMENT SCHEDULES:
IV - Mortgage loans receivable on Real Estate
(See Item 8 "Financial Statements and Supplementary Data")
All other schedules have been omitted because they are inapplicable,
not required, or the information is included in the Financial
Statements or Notes thereto.
(3) EXHIBITS: The following exhibits are filed herein as part of this Form
10-K:
35
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
2. Agreement and Plan of Merger dated as of November 1, 1999 by and among
the Company, Intervest Bancshares Corporation and ICNY Acquisition
Corporation, incorporated by reference to the Company's annual report
on Form 10-K for the year ended December 31, 1999, wherein such
document was filed as Exhibit 2.0.
3.1 Certificate of Incorporation of the Company, incorporated by reference
to Registrant's Registration Statement on Form S-18 (File No.
33-27404-NY), declared effective May 12, 1989.
3.2 Certificate of Amendment to Certificate of Incorporation dated August
17, 1998, incorporated by reference to the Company's annual report on
Form 10-K for the year ended December 31, 1998, wherein such document
was filed as Exhibit 3.
3.3 Certificate of Amendment to Certificate of Incorporation, dated August
22, 2002, and filed on September 9, 2002, relating to the change of
the registrant's name to Intervest Mortgage Corporation.
3.4 By-laws of the Company, incorporated by reference to the Company's
Registration Statement on Form S-11 (File No. 33-39971), declared
effective on May 13, 1991.
4.1 Form of Indenture between the Company and First American Bank of
Georgia, as trustee, dated as of April 15, 1990, incorporated by
reference to the Company's Registration Statement on Form S-11 (No.
33-33500), declared effective on March 28, 1990.
4.2 Form of Indenture between the Company and First American Bank of
Georgia, as trustee, dated as of June 1, 1991, incorporated by
reference to the Company's Registration Statement on Form S-11 (No.
33-39971), declared effective on May 13, 1991.
4.3 Form of Indenture between the Company and The Bank of New York, as
trustee, dated as of March 1, 1992, incorporated by reference to the
Company's Registration Statement on Form S-11 (File No. 33-44085),
declared effective on February 20, 1992.
4.4 Form of Indenture between the Company and The Bank of New York, as
trustee, dated as of July 1, 1992, incorporated by reference to the
Company's Registration Statement on Form S-11 (File No. 33-47801),
declared effective on June 29, 1992.
4.5 Form of Indenture between the Company and The Bank of New York, as
trustee, dated as of September 15, 1993, incorporated by reference to
the Company's Registration Statement on Form S-11 (File No. 33-65812),
declared effective on September 13, 1993.
4.6 Form of Indenture between the Company and The Bank of New York, as
trustee, dated as of February 1, 1994, incorporated by reference to
the Company's Registration Statement on Form S-11 (File No. 33-73108),
declared effective on January 28, 1994.
4.7 Form of Indenture between the Company and The Bank of New York, as
trustee, dated as of November 1, 1994, incorporated by reference to
the Company's Registration Statement on Form S-11 (File No. 33-84812),
declared effective on October 28, 1994.
4.8 Form of Indenture between the Company and The Bank of New York, as
trustee, dated as of June 1, 1995, incorporated by reference to the
Company's Registration Statement on Form S-11 (File No. 33-90596)
declared effective on May 12, 1995.
36
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------ -------------------------
4.9 Form of Indenture between the Company and The Bank of New York, as
trustee, dated as of November 1, 1995, incorporated by reference to
the Company's Registration Statement on Form S-11 (File No. 33-96662),
declared effective on October 19, 1995.
4.10 Form of Indenture between the Company and The Bank of New York, as
trustee, dated as of June 1, 1996, incorporated by reference to the
Company's Registration Statement on Form S-11 (File No. 333-2459),
declared effective on May 10, 1996.
4.11 Form of Indenture between the Company and The Bank of New York, as
trustee, dated as of November 1, 1996, incorporated by reference to
the Company's Registration Statement on Form S-11 (File No.
333-11413), declared effective on October 15, 1996.
4.12 Form of Indenture between the Company and The Bank of New York, as
trustee, dated as of May 1, 1997, incorporated by reference to the
Company's Registration Statement on Form S-11 (File No. 333-23093),
declared effective on April 30, 1997.
4.13 Form of Indenture between the Company and the Bank of New York, as
trustee, dated as of July 1, 1999, incorporated by reference to the
Company's Registration statement in Form S-11 (File No. 333-78135),
declared effective on June 28, 1999
4.14 Indenture between the Company and the Bank of New York, as Trustee,
dated December 1, 1998, incorporated by reference to the Company's
annual report on Form 10-K for the year ended December 31, 1998,
wherein such document was filed as Exhibit 4.
4.15 Agreements of Resignation, Appointment and Acceptance dated as of
April 30, 1992, by and among the Company, First American Bank of
Georgia, N.A. and The Bank of New York, incorporated by reference to
the Company's annual report on Form 10K for the year ended December
31, 1992 wherein such documents were filed as Exhibit 4.8.
4.16 Indenture between the Company and the Bank of New York, as Trustee,
dated September 15, 2000, incorporated by reference to the Company's
report on Form 10-K for the year ended December 31, 2000, wherein such
document was filed as exhibit 4.16
4.17 Indenture between the Company and the Bank of New York, as trustee,
dated August 1, 2001, incorporated by reference to the Company's
Registration Statement on Form S-11 (File No. 333-57324), declared
effective September 1, 2001.
4.18 Indenture between the Company and the Bank of New York, as trustee,
dated February 1, 2002, incorporated by reference to the Company's
Registration Statement on Form S-11 (File No. 333-73580), declared
effective January 17, 2002.
4.19 Indenture between the Company and the Bank of New York, as trustee,
dated August 1, 2002, incorporated by reference to the Company's
Registration Statement on Form S-11 (File No. 333-90346), declared
effective August 5, 2002.
4.20 Indenture between the Company and the Bank of New York, as trustee,
dated January 1, 2003, incorporated by reference to the Company's
Registration Statement on Form S-11 (File No. 333-101722), declared
effective January 21, 2003.
37
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------ -------------------------
4.21 Indenture between the Company and the Bank of New York, as trustee,
dated August 1, 2003, incorporated by reference to the Company's
Registration Statement on Form S-11 (File No. 333-105199), declared
effective July 25, 2003.
4.22 Indenture between the Company and the Bank of New York, as trustee,
dated December 1, 2003, incorporated by reference to the Company's
Registration Statement on Form S-11 (File No. 333-109128), declared
effective November 28, 2003.
10.0 Employment Agreement between the Company and Jerome Dansker dated as
of July 1, 1995, incorporated by reference to the Company's
Registration Statement on Form S-11 (File #33-96662), declared
effective on October 19, 1995.
10.1 Amendment to Employment Agreement between the Company and Jerome
Dansker dated August 3, 1998, incorporated by reference to the
Company's annual report on Form 10-K for the year ended December 31,
1998, wherein such document was filed as Exhibit 10.
10.2 Mortgage Servicing Agreement dated April 1, 2002, between the Company
and Intervest National Bank.
31 Certification of the principal executive and financial officer
pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.
32 Certification of the principal executive and financial officer
pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
(b) No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, on the date indicated.
INTERVEST MORTGAGE CORPORATION
(Registrant)
By: /s/ Lowell S. Dansker Date: February 26, 2004
------------------------- -----------------
Lowell S. Dansker, Vice Chairman and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
CHAIRMAN AND EXECUTIVE VICE PRESIDENT:
By: /s/ Jerome Dansker Date: February 26, 2004
------------------------- -----------------
Jerome Dansker
VICE CHAIRMAN, PRESIDENT AND TREASURER:
(PRINCIPAL EXECUTIVE, FINANCIAL AND ACCOUNTING OFFICER):
By: /s/ Lowell S. Dansker Date: February 26, 2004
------------------------- ------------------
Lowell S. Dansker
VICE PRESIDENT, SECRETARY AND DIRECTOR:
By: /s/ Lawrence G. Bergman Date: February 26, 2004
------------------------- -----------------
Lawrence G. Bergman
DIRECTORS:
By: /s/ Michael A. Callen Date: February 26, 2004
------------------------- -----------------
Michael A. Callen
By: /s/ Paul DeRosa Date: February 26, 2004
------------------------- -----------------
Paul DeRosa
By: /s/ Stephen A. Helman Date: February 26, 2004
------------------------- -----------------
Stephen A. Helman
By: /s/ Wayne F. Holly Date: February 26, 2004
------------------------- -----------------
Wayne F. Holly
By: /s/ Lawton Swan, III Date: February 26, 2004
------------------------- -----------------
Lawton Swan, III
By: /s/ Thomas E. Willett Date: February 26, 2004
------------------------- -----------------
Thomas E. Willett
By: /s/ David J. Willmott Date: February 26, 2004
------------------------- ------------------
David J. Willmott
By: /s/ Wesley T. Wood Date: February 26, 2004
--------------------------- -----------------
Wesley T. Wood
39
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILLED PURSUANT TO SECTION
15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT:
Registrant does not solicit proxies or proxy statements to holders of its
securities. The annual report to holders of its Debentures has not as yet been
distributed.
When the annual report has been distributed to the holders of Debentures, four
copies will be sent to the Commission.
40