UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~(X)~~ x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE ~~SECURITIES~~ ~~EXCHANGE~~QUARTERLY ~~ACT~~PERIOD OFENDED ~~1934~~March 31, 2009

FOR THE QUARTERLY PERIOD ENDED March 31, 2008

~~( )~~ ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

THE SECURITIES EXCHANGE ACT OF 1934

For The Transition Period From To

Commission file number. 33-27404-NY

INTERVEST MORTGAGE CORPORATION

(Exact name of registrant as specified in its charter)

New York

13-3415815

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

One Rockefeller Plaza, Suite 400 ~~New York, New York 10020-2002 (Address of principal executive offices including Zip Code) (212) 218-2800 (Registrant’s telephone number, including area code)~~

~~Not~~New ~~Applicable (Former name~~York, ~~former~~New ~~address~~York ~~and~~10020-2002 ~~former fiscal year, if changed since last report)~~

~~Indicate by check mark whether the registrant:~~ (~~1) has~~Address ~~filed~~of ~~all~~principal ~~reports~~executive ~~required to be filed by~~offices ~~Section 12,~~including 13Zip ~~or 15(d~~Code) 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 X No .~~(212) 218-2800

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes x No ¨.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).* Yes ¨ No ¨. * The registrant has not yet been phased into the interactive data requirements.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Check one:

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer X x Smaller ~~Reporting~~reporting ~~Company~~ company ¨

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act): Yes ¨ No x.

Yes No X .

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Title of Each Class:		Shares Outstanding:
Common Stock, no par value per share		100 shares outstanding as of April 2429, ~~2008~~2009

INTERVEST MORTGAGE CORPORATION

FORM 10-Q

March 31, ~~2008~~2009

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		Page
		Page
Item 1.	Financial Statements
PART I. FINANCIAL INFORMATION		2
Condensed Balance Sheetsas of March 31, 2008 (Unaudited) and December 31, 2007		2
Item 1.	Financial Statements	2
Condensed Statements of Income (Unaudited)for the three months ended March 31, 2008 and 2007		3
Condensed Balance Sheets as of March 31, 2009 (Unaudited) and December 31, 2008		2
Condensed Statements of Changes in Stockholder’s Equity (Unaudited)for the three months ended March 31, 2008 and 2007		4
Condensed Statements of Operations (Unaudited) for the three months ended March 31, 2009 and 2008		3
Condensed Statements of Cash Flows (Unaudited)for the three months ended March 31, 2008 and 2007		5
Condensed Statements of Changes in Stockholder’s Equity (Unaudited) for the three months ended March 31, 2009 and 2008		4
Condensed Statements of Cash Flows (Unaudited) for the three months ended March 31, 2009 and 2008		5
Notes to Condensed Financial Statements (Unaudited)		6
Review by Independent Registered Public Accounting Firm		1215
Report of Independent Registered Public Accounting Firm		1316
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1417
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2026
Item 4.	Controls and Procedures	2126
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	2227
Item 1A.	Risk Factors	2227
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2227
Item 3.	Defaults Upon Senior Securities	2227
Item 4.	Submission of Matters to a Vote of Security Holders	2227
Item 5.	Other Information	2227
Item 6.	Exhibits	2227
Signature		2227
Certifications		2328

Private Securities Litigation Reform Act Safe Harbor Statement

Intervest Mortgage Corporation (The Company) is making this statement in order to satisfy the “Safe Harbor” provision contained in the Private Securities Litigation Reform Act of 1995. The statements contained in this report on Form 10-Q that are not statements of historical fact may include forward-looking statements that involve a number of risks and uncertainties. Such forward-looking statements are made based on management’s expectations and beliefs concerning future events impacting the Company and are subject to uncertainties and factors relating to the Company’s operations and economic environment, all of which are difficult to predict and many of which are beyond the control of the Company, that could cause actual results of the Company to differ materially from those matters expressed in or implied by forward-looking statements.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

Intervest Mortgage Corporation

Condensed Balance Sheets

($ in thousands)	March 31,2009	~~March 31,2008~~		December 31,2008		~~December 31,2007~~
		(Unaudited	)			(Audited	)
	(Unaudited)			(Audited)
ASSETS
Cash	$	~~9,966~~500		$	$6,253	~~1,394~~
Short-term investments		64,~~605~~818			13,696	~~11,288~~
Total cash and cash equivalents		165,~~571~~318			19,949	~~12,682~~
Mortgage loans receivable (net of allowance for loan losses of $1,299 and $1,295, respectively)		90,960				94,117
Mortgage loans receivable (net of unearned fees and discounts and allowance for loan losses)		37,117			49,950
Accrued interest receivable		~~432~~206			218	~~300~~
Loan fees receivable		~~586~~164			211	~~604~~
Fixed assets, net		3618			21	41
Deferred debenture offering costs, net		2,906				3,134
Foreclosed real estate		2,327			2,327
Other assets		1,189				1,189
Deferred debenture offering costs, net		724			1,823
Total assets	$	112,680			$	112,067
Other assets		1,396			968
LIABILITIES
Total assets	$	47,270		$	75,467
Mortgage escrow funds payable	$	1,388			$	992
LIABILITIES
Subordinated debentures payable		76,250				76,250
Mortgage escrow funds payable	$	753		$	800
Debenture interest payable		3,340				3,145
Subordinated debentures payable		14,000			40,000
Other liabilities		941				951
Debenture interest payable		599			1,960
Total liabilities	$	81,919			$	81,338
Other liabilities		794			963
STOCKHOLDER’S EQUITY
Total liabilities	$	16,146		$	43,723
Class A common stock (no par value, 200 shares authorized, 100 shares issued and outstanding)		2,100				2,100
STOCKHOLDER’S EQUITY
Class B common stock (no par value, 100 shares authorized, none issued)		-				-
Class A common stock (no par value, 200 shares authorized, 100 shares issued and outstanding)		2,100			2,100
Additional paid-in-capital		11,631				11,607
Class B common stock (no par value, 100 shares authorized, none issued)		—			—
Retained earnings		17,030				17,022
Additional paid-in-capital		11,803			11,791
Total stockholder’s equity		30,761				30,729
Retained earnings		17,221			17,853
Total liabilities and stockholder’s equity	$	112,680			$	112,067
Total stockholder’s equity		31,124			31,744
Total liabilities and stockholder’s equity	$	47,270		$	75,467

See accompanying notes to condensed financial statements.

Intervest Mortgage Corporation

Condensed Statements of ~~Income~~Operations

(Unaudited)

($ in thousands)	Three-Months EndedMarch 31,
	Three-Months EndedMarch 31,
	2008			2007
($ in thousands)	2009				2008
REVENUES
Interest and fee income on mortgages	$	~~1,455~~700		$	~~1,931~~$	1,455
Interest income on short-term investments		~~123~~37			~~409~~	123
Total interest and fee income		~~1,578~~737			~~2,340~~	1,578
Servicing agreement income – related party		774			1,152
Servicing agreement income - related party		—				774
Gain on early repayment of mortgages		24			70
(Loss) income from the early repayment of mortgage loans		(14	)			24
Other income		711			19	7
Total revenues		~~2,383~~734			~~3,581~~	2,383
EXPENSES
Interest on debentures		~~1,339~~412			~~1,437~~	1,339
Amortization of deferred debenture offering costs		~~228~~65			~~251~~	228
Provision (credit) for loan losses		4			(7)
Provision for loan losses		212				4
Salaries and employee benefits		~~526~~62			~~491~~	526
General and administrative		270			260
Loss on the early extinguishment of debentures		1,034				—
Total expenses		2,367			2,432
General and administrative		118				270
Income before income taxes		16			1,149
Total expenses		1,903				2,367
Provision for income taxes		8			531
(Loss) income before income taxes		(1,169	)			16
Net income	$	8		$	618
(Benefit) provision for income taxes		(537	)			8
Net (loss) income	($	632	)		$	8

See accompanying notes to condensed financial statements.

Intervest Mortgage Corporation

Condensed Statements of Changes in Stockholder’s Equity

(Unaudited)

($ in thousands)	Three-months Ended March 31,
	Three-months EndedMarch 31,
	2008			2007
($ in thousands)	2009				2008
CLASS A COMMON STOCK
Balance at beginning and end of period	$	2,100		$	~~2,100~~$	2,100
ADDITIONAL PAID-IN-CAPITAL
Balance at beginning of period		11,~~607~~791			~~11,510~~	11,607
Compensation expense related to stock options of parent company stock		24			-
Compensation from stock warrants/options		12				24
Balance at end of period		11,~~631~~803			~~11,510~~	11,631
RETAINED EARNINGS
Balance at beginning of period		17,~~022~~853			~~16,132~~	17,022
Net income for the period		8			618
Net (loss) income for the period		(632	)			8
Balance at end of period		17,~~030~~221			~~16,750~~	17,030
Total stockholder’s equity at end of period	$	3031,~~761~~124		$	~~30,360~~$	30,761

See accompanying notes to condensed financial statements.

Intervest Mortgage Corporation

Condensed Statements of Cash Flows

(Unaudited)

($ in thousands)	Three-months Ended March 31,
	Three-months EndedMarch 31,
	2008				2007
($ in thousands)	2009			2008
OPERATING ACTIVITIES
Net income	$	8			$	618
Net (loss) income	(632	)		8
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation	3	5		5		6
Provision (credit)for loan losses		4				(7	)
Provision for loan losses	212			4
Amortization of deferred debenture offering costs	65	~~228~~		228		~~251~~
Compensation expense related to stock options of parent company stock		24				-
Compensation from stock warrants/options	12			24
Amortization of premiums, fees and discounts, net		(108	)			(198	)
Loss on the early extinguishment of debentures	1,034			—
Gain on early repayment of mortgage loans receivable		(24	)			(70	)
Amortization of premiums, fees and discounts, net	(41	)		(108	)
Net increase in mortgage escrow funds payable		396				447
Loss (income) from early repayment of mortgage loans receivable	14			(24	)
Net increase in debenture interest payable		195				97
Net (decrease) increase in mortgage escrow funds payable	(47	)		396
Net change in all other assets and liabilities		(91	)			158
Net (decrease)increase in debenture interest payable	(1,361	)		195
Net cash provided by operating activities		637				1,302
Deferred (benefit) income tax	(91	)		21
INVESTING ACTIVITIES
Decrease in loan fees receivable	47			18
Principal repayments of mortgage loans receivable		4,452				7,713
Net change in all other assets and liabilities	(499	)		(130	)
Originations of mortgage loans receivable		(1,200	)			(6,450	)
Net cash (used in ) provided by operating activities	(1,284	)		637
Purchases of fixed assets, net			-			(3	)
INVESTING ACTIVITY
Net cash used in investing activities		3,252				1,260
Principal repayments of mortgage loans receivable	12,653			4,452
FINANCING ACTIVITIES
Originations of mortgage loans receivable	—			(1,200	)
Proceeds from issuance of debentures, net of offering costs			-			-
Net cash provided by investing activities	12,653			3,252
Principal repayments of debentures			-			(2,000	)
FINANCING ACTIVITY
Net cash (used in) financing activities			-			(2,000	)
Principal repayments of debentures	(26,000	)		—
Net increase in cash and cash equivalents		3,889				562
Net (decrease) increase in cash and cash equivalents	(14,631	)		3,889
Cash and cash equivalents at beginning of period	19,949	~~12,682~~		12,682		~~36,649~~
Cash and cash equivalents at end of period	$5,318	~~16,571~~		16,571	$	~~37,211~~
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest	$1,773	~~1,144~~		1,144	$	~~1,339~~
Income taxes	—		-	—		~~624~~

See accompanying notes to condensed financial statements.

Intervest Mortgage Corporation

Notes to Condensed Financial Statements (Unaudited)

Note 1 - General

The condensed financial statements of Intervest Mortgage Corporation in this report have not been audited except for the information derived from the ~~2007~~2008 audited ~~Financial~~financial ~~Statements~~statements and notes thereto. The financial statements in this report should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2007~~2008. Intervest Mortgage Corporation is hereafter referred to as the “Company”. The accounting and reporting policies of the Company conform to accounting principals generally accepted in the United States of America.

The Company is a wholly owned subsidiary of Intervest Bancshares Corporation (the “Parent Company”). The chairman and secretary of the Company are directors of the Company and are also officers and directors of the Parent Company. The chairman of the Company is also a principal shareholder of the Parent Company. The principal office of the Company is located at One Rockefeller Plaza, Suite 400, New York, New York 10020-2002, and its telephone number is 212-218-2800.

Intervest Mortgage Corporation’s business focuses on the origination of first mortgage and junior mortgage loans secured by commercial and multifamily real estate properties. The Company also provides loan origination services to Intervest National Bank (“the Bank”), an affiliated entity. Intervest Mortgage Corporation funds its lending business through the issuance of subordinated debentures in public offerings. The principal office of the Company is located at One Rockefeller Plaza, Suite 400, New York, New York 10020-2002, and its telephone number is 212-218-2800.

In the opinion of management, all material adjustments necessary for a fair presentation of financial condition and results of operations for the interim periods presented in this report have been made. These adjustments are of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of results that may be expected for the entire year or any other interim period. In preparing the condensed financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates. Estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses.

The Company’s lending business is dependent on its ability to generate a positive interest rate spread between the yields earned on its mortgage loans and the rates paid on its debentures. Competitive market conditions and lower pricing for new loans in the last two years have had the effect of decreasing the Company’s loan originations significantly from historical levels. The Company has not originated any new loans in the first three months of the current year. As a result, the Company has been applying the proceeds from loan repayments to redeem outstanding debentures, in many cases prior to their contractual maturity. Debentures totaling $26,000,000 have been redeemed in the first quarter of 2009 and an additional $4,000,000 of debentures will be redeemed on June 1, 2009.

In light of the conditions discussed above, the Company is currently exploring a business combination with Intervest National Bank (the Bank) whereby all of the assets and liabilities of the Company including its loan portfolio would be transferred to the Bank. The Company’s remaining series 6/12/06 debentures due July 1, 2014 would be repaid in full. The Company has $577,000 of unamortized deferred offering costs at March 31, 2009 relating to these debentures which are being amortized on a monthly basis. The remaining balance would be expensed at the time the debentures are redeemed. The completion of this transaction would be subject to regulatory approval. The Bank is also a wholly owned subsidiary of the Parent Company.

The Company previously provided loan origination services to the Bank and has received fee income in connection with those services. In light of the significant reduction in the Company’s business activities, effective December 31, 2008, the intercompany service agreement was terminated. On January 1, 2009, the employees of the Company were transferred to and became employees of the Bank. They continue to perform loan origination services for the Bank consistent with past practice. Certain personnel of the Bank will administer the ongoing operations of the Company including any origination services that it may require, and the Company will reimburse the Bank for the cost of such services on a monthly basis.

Intervest Mortgage Corporation

Notes to Condensed Financial Statements (Unaudited)

Note 1 - General, continued

In the normal course, the Company’s business has focused on the origination of first mortgage and junior mortgage loans secured by commercial and multifamily real estate. The Company funds its loans through the issuance of subordinated debentures in public offerings. At March 31, 2009, 22% of its mortgage loan portfolio ($8,292,000) was on nonaccrual status, which has adversely affected its net interest income and cash flows.

The Company’s lending activities are comprised almost entirely of the origination for its loan portfolio of mortgage loans secured by commercial and multifamily real estate (including rental and cooperative/condominium apartment buildings, office buildings, mixed-use properties, shopping centers, hotels, restaurants, industrial/warehouse properties, parking lots/garages, mobile home parks, self-storage facilities and vacant land). Loans in the portfolio had an average remaining life of approximately 1.3 years at March 31, 2009.

The Company tends to lend in areas that are in the process of being revitalized or redeveloped, with a concentration of loans on properties located in New York State. A large number of the properties in New York are located in Manhattan, Brooklyn, Queens, Long Island, Staten Island and the Bronx. Many of the multifamily properties located in New York City and surrounding boroughs are also subject to rent control and rent stabilization laws, which limit the ability of the property owners to increase rents, which may in turn limit the borrower’s ability to repay those mortgage loans. At March 31, 2009, the Company also had loans on properties in Florida, Connecticut, Georgia, Illinois, and New Jersey.

The Company’s revenues consist of interest, dividends and fees earned on its interest-earning assets, which are comprised of mortgage loans and other short-term investments, and noninterest income. The Company’s expenses consist of interest paid on its outstanding debentures, as well as its operating and general expenses.

The Company’s profitability depends primarily on its net interest income, which is the difference between interest income generated from its interest-earning assets and interest expense incurred on its interest-bearing liabilities. Net interest income is dependent upon the interest-rate spread, which is the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities. When interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest-rate spread will generate net interest income. The interest-rate spread is affected by interest rates, and loan demand.

The Company’s profitability is also affected by the level of its noninterest income and expenses, provision for loan losses and income tax expense. Noninterest income consists mostly of loan fees as well as income from loan prepayments. When a mortgage loan is repaid prior to maturity, the Company may recognize prepayment income, which consists of the recognition of unearned fees associated with such loans at the time of payoff and the receipt of additional prepayment fees and or interest in certain cases, in accordance with the prepayment provisions of the mortgage loan. The Company’s income from loan prepayments fluctuates and cannot be predicted. Normally, loan prepayments tend to increase during periods of declining interest rates and tend to decrease during periods of increasing interest rates. However, given the nature and type of mortgage loans the Company originates, including their short average life, the Company may still experience loan prepayments notwithstanding the effects of movements in interest rates. Noninterest expenses consist of the following: salaries and employee benefits, occupancy and equipment, professional fees and services, and other operating and general expenses. The Company’s profitability is also significantly affected by general and local economic conditions, competition, changes in market interest rates, changes in real estate values, government policies and actions of regulatory authorities.

Intervest Mortgage Corporation

Notes to Condensed Financial Statements (Unaudited)

Note 1 - General, continued

The Company has experienced a significant increase in nonperforming assets since March 2007. As described below in foot note 2, total nonperforming assets at March 31, 2009 aggregated to $10,619,000, or 22.5% of the Company’s total assets. At March 31, 2009, nonperforming loans amounted to $8,292,000, or four loans and foreclosed real estate amounted to $2,327,000, or one property. Although the Company has never originated or acquired subprime loans nor invested in securities collateralized by subprime loans, the subprime loan crisis and resulting impact on the credit markets has affected the Company indirectly through reductions in overall real estate values, reduced home sales and construction, and a weakening of the overall economy, particularly in the State of Florida. The Company has also experienced the effects of misconduct committed by certain of its borrowers which required the Company to place certain loans that are collateralized by income producing properties on nonaccrual status, in some instances due to involuntary bankruptcy filings filed by third parties against the borrowers. Such filings resulted in the cessation of monthly loan payments to the Company and delay the Company’s ability to move forward with foreclosure or other proceedings to acquire and sell the collateral property. Although the Company has not experienced any loan chargeoffs in connection with its nonaccrual loans to date, it has incurred increased provisions for loan losses, expenses associated with credit collections and protecting its interest in nonperforming assets, and the loss of interest income on such assets, all of which has adversely affected the Company’s results of operations.

There can be no assurance that the Company will not incur additional loan loss provisions, loan chargeoffs or significant expenses in connection with the ultimate collection of its nonaccrual loans, which collection is anticipated to be through the eventual sale of the collateral property in most cases, or incur significant expenses in carrying and disposing of properties acquired through foreclosure. A prolonged downturn in real estate values and local economic conditions, as well as other factors, could have an adverse impact on the Company’s asset quality and the future level of nonperforming assets, chargeoffs and profitability.

Properties acquired through, or in lieu of, loan foreclosure will be sold when market conditions permit. Upon foreclosure of the property, the related loan is transferred from the loan portfolio to foreclosed real estate at the lower of the loan’s carrying value at the date of transfer, or estimated fair value of the property less estimated selling costs. Such amount becomes the new cost basis of the property. Adjustments made to the carrying value at the time of transfer are charged to the allowance for loan losses. After foreclosure, management periodically performs market valuations and the real estate is carried at the lower of cost or estimated fair value less estimated selling costs. Revenue and expenses from operations and changes in the valuation allowance of the property are included in the other expenses in the statements of operations.

Note 2 - Mortgage Loans Receivable

Mortgage loans receivable are summarized as follows:

($ in thousands)

At March 31, 2008

At December 31, 2007

At March 31, 2009

At December 31, 2008

# of loans

Amount

# of loans

Amount

($ in thousands)

# of loans

Amount

# of loans

Amount

Residential multifamily mortgage loans

2910

6113,~~874~~977

3014

6524,~~446~~391

Commercial real estate mortgage loans

2520

3023,~~081~~648

2421

2825,~~959~~885

Land development and other land loans

~~836~~827

~~1,638~~829

Mortgage loans receivable

5531

9238,~~791~~452

5636

9651,~~043~~105

Deferred loan fees and unamortized discount

(~~532~~135

)

(~~631)~~167

)

Mortgage loans receivable, net of fees and discount

9238,~~259~~317

9550,~~412~~938

Allowance for mortgage loan losses

(1,~~299~~200

)

(~~1,295)~~988

)

Mortgage loans receivable, net

9037,~~960~~117

9449,~~117~~950

Intervest Mortgage Corporation

Notes to Condensed Financial Statements (Unaudited)

Note 2 –- Mortgage Loans Receivable, Continued

The following table shows scheduled contractual principal repayments of the mortgage loans receivable portfolio at March 31, ~~2008~~2009:

($ in thousands)
For the nine-months ending December 31, 2008	$49,562
For the nine-months ending December 31, 2009	$	19,854
For the year ending December 31, 2009	24,870
For the year ending December 31, 2010		4,326
For the year ending December 31, 2010	2,075
For the year ending December 31, 2011		2,193
For the year ending December 31, 2011	2,364
For the year ending December 31, 2012		4,168
For the year ending December 31, 2012	4,716
For the year ending December 31, 2013		7,911
Thereafter	9,204
	$	38,452
	$92,791

Nonaccrual loans ~~remained~~ at ~~$28,370,000 (31% of the Company’s portfolio) at~~ March 31, ~~2008~~2009, ~~compared~~and to at December 31, ~~2007~~2008 and are summarized as follows:

($ in thousands)

Property Type	City	State	At March 31, ~~2008~~2009Principal ~~Principal~~ Balance		~~At December 31, 2007 Principal Balance~~	At December 31, 2008Principal Balance	~~Notes~~	Notes
Commercial real estate	St. Augustine	Florida	$ ~~6,034~~	6,034	~~$ 6,034~~	$	~~(1)~~6,034	(1	)
Multifamily real estate	New York	New York	4,387		4,387		(2)
Commercial real estate	Howell	New Jersey		1,659			1,659	(2	)
Multifamily real estate	New York	New York	4,119		4,119		(2)
Commercial real estate	Staten Island	New York		389			389	(3	)
Multifamily real estate	New York	New York	4,178		4,178		(2)
Commercial real estate	Yonkers	New York		210			210	(4	)
Multifamily real estate	New York	New York	4,445		4,445		(2)
			$	8,292		$	8,292
Multifamily real estate	New York	New York	1,249		1,249		(2)
Commercial real estate	Brooklyn	New York	2,299		2,299		(3)
Commercial real estate	Howell	New Jersey	1,659		1,659		(4)
			$ 28,370		$ 28,370

(1) ~~This~~Amount ~~loan~~represents ~~was~~the ~~placed~~Company’s on40 ~~nonaccrual~~% ~~status~~share in ~~July~~a ~~2007~~loan originated by Intervest National Bank. The ~~amount~~loan ~~represents~~is secured by a ~~participation~~waterfront ofhotel, restaurant and marina resort. In April 2009, the Bank and the debtor reached a multi-faceted settlement agreement whereby the total loan’s principal balance will be reduced to $613,~~034~~000,000. in The debtor will make a principal balance payment of $15100,~~087,~~000 ~~loan~~to ~~made~~further byreduce ~~Intervest~~the ~~National~~loan ~~Bank~~balance to $12,900,000. The ~~loan~~Company’s isnet ~~secured~~record byinvestment ain ~~waterfront~~this ~~hotel~~property, ~~restaurant~~net ~~and~~of ~~marina~~a ~~resort.~~specific ~~Foreclosure~~valuation ~~proceedings~~allowance, ~~concerning~~is ~~this~~$5,372,000. Payments on the loan ~~were~~are ~~instituted~~scheduled to begin on October 1, ~~but~~2009 ~~have~~and ~~been~~such ~~stayed~~loan bywill remain on nonaccrual status until a ~~bankruptcy~~satisfactory ~~filing~~payment history has been achieved under the restructured terms. The settlement is subject to confirmation of the bankruptcy court.

(2) Placed on nonaccrual status in ~~August~~December, 2007. ~~These~~Foreclosure ~~five~~proceedings ~~loans (totaling $18,378,000)~~ are ~~to borrowers with common principals. The principals of the borrowers are experiencing legal difficulties~~ in ~~connection with activities alleged by independent third parties to be fraudulent with respect to the purported placing of unauthorized and unrecorded mortgages on these and other properties~~process. On July 30, 2007, independent third parties filed for an involuntary bankruptcy against the borrowers. A trustee has been appointed and has taken control of the properties and the rents. The Trustee advised the Company in February of 2008 that a contract for sale was signed with respect to these properties. However, that sale was never consummated. In April of 2008, the Trustee advised the Company that a new contract of sale has been entered into for these properties.

(3) ~~Placed~~Borrower onhas ~~nonaccrual~~requested ~~status~~and inthe ~~October,~~Company ~~2006.~~has ~~Foreclosure~~agreed ~~proceedings~~to ~~concerning~~the ~~this~~deferral ~~loan~~of ~~were~~contractual ~~instituted~~loan ~~and~~payments athrough ~~foreclosure~~June ~~sale~~2009 ~~was~~to ~~scheduled,~~give ~~but~~the ~~has~~borrower ~~been~~time ~~stayed as~~to alease ~~result~~vacant ofspace at the property. The borrower ~~filing~~will ~~bankruptcy~~continue to make monthly escrow payments as required under the Bank’s first mortgage loan. The Company holds a second mortgage on this property.

(4) Placed on nonaccrual status in ~~December~~November, ~~2007~~2008. Foreclosure proceedings are ~~pending.~~in process

~~Although~~Nonaccrual ~~the~~loans ~~Company~~are ~~presently~~considered ~~believes~~impaired ~~that~~under the ~~estimated~~criteria ~~fair~~of ~~value~~SFAS No.114 “Accounting by Creditors for Impairment of ~~each~~a Loan – an amendment of ~~the~~FASB ~~underlying~~Statements ~~properties~~No. 5 ~~exceeds~~and ~~the~~15”. The Company’s recorded investment in ~~each~~these ofimpaired ~~the aforementioned~~loans was $7,513,000 and $7,884,000 at March 31, 2009 and December 31, 2008, respectively. At March 31, 2009 and December 31, 2008, nonaccrual loans had specific valuation allowances of $782,000 ~~there~~and ~~can~~$411,000 be(included noas ~~assurance~~part ~~that~~of the ~~Company~~overall ~~will~~allowance ~~not~~for ~~incur~~loan losses) in accordance with SFAS 114. Estimated loan-to-value ~~chargeoffs~~ratios, ornet ~~significant~~of ~~expenses~~specific ~~with~~valuation ~~respect~~allowances on nonaccrual (impaired) loans ranged from 67% to ~~the~~97% ~~ultimate~~at March 31, ~~collection~~2009. ofAt ~~these~~March 31, 2009 and December 31, 2008 there were no other loans classified as impaired.

Intervest Mortgage Corporation

Notes to Condensed Financial Statements (Unaudited)

Note 2 –- Mortgage Loans Receivable, Continued

~~These~~A ~~loans~~loan ~~are~~with ~~considered~~a ~~impaired~~principal ~~under~~amount ~~the criteria~~ of ~~SFAS No.114. The Company’s recorded investment in these loans was~~ $281,~~441~~958,000 and $281,~~429~~964,000 at March 31, ~~2008~~2009 and December 31, ~~2007,~~ 2008 respectively. ~~The~~was ~~Company~~more ~~believes~~than ~~that~~ninety adays ~~specific~~past ~~valuation~~due ~~allowance~~its ~~for~~stated ~~impaired~~maturity ~~loans~~and iswas ~~not~~classified ~~required~~as ninety days past due and still accruing interest. This loan continues to be current with its monthly payments at ~~any~~both ~~time~~March 31, ~~since~~2009 and December 31, 2008. The borrower has provided the Company ~~believes~~with ~~that~~a ~~the estimated~~contract ~~fair~~for ~~value~~sale of the ~~underlying~~ property ~~exceeds~~and it is anticipated that this loan will be repaid in the ~~Company’s~~first ~~recorded~~half ~~investment~~of 2009.

~~Interest~~At ~~income~~March 31, ~~that~~2009 ~~was~~and ~~not~~December 31, ~~recorded~~2008, on the ~~nonaccrual loans~~Company ~~under~~had ~~their~~$2,327,000 ~~contractual~~of ~~terms~~foreclosed ~~for~~real ~~the~~estate. ~~quarters~~This ~~ended~~consists ~~March 31~~of a commercial property in Brooklyn, ~~2008~~New ~~and~~York. ~~2007~~Real ~~were~~estate ~~$656~~properties acquired through,~~000~~ ~~and~~or ~~$53~~in lieu of,~~000~~ ~~respectively~~loan foreclosure are to be sold. ~~The~~Upon ~~average~~foreclosure ~~balance~~of the property, the related loan is transferred from the loan portfolio to foreclosed real estate at the lower of ~~nonaccrual~~the ~~(impaired)~~loan’s ~~loans~~carrying ~~for~~value at the ~~quarter~~date ~~ended~~of ~~March 31~~transfer, ~~2008~~or ~~was~~estimated ~~$28,370,000~~fair ~~compared~~value toof the property less $2estimated selling costs. Such amount becomes the new cost basis of the property. Adjustments made to the carrying value at the time of transfer are charged to the allowance for loan losses. After foreclosure,~~299,000~~ management periodically performs market valuations and the ~~quarter~~real ~~ended~~estate is carried at the lower of cost or estimated fair value less estimated selling costs. Revenue and expenses from operations and changes in the valuation allowance of the property are included in general and administrative expense in the condensed statements of operation. There was no valuation allowance for foreclosed properties at March 31, ~~2007~~2009 or at anytime during 2008.

~~There~~In ~~was~~the ~~one~~first ~~loan~~quarter ~~past~~of ~~due~~2009 ~~ninety~~the ~~days~~company ~~and~~sold ~~still~~five ~~accruing~~loans ~~interest~~ with aan aggregate principal balance of $~~837~~12,035,000 ~~at March 31,~~to ~~2008~~the bank. ~~This~~These ~~loan~~loans ishad ininterest ~~the~~rates ~~process~~between of6.5% ~~being~~and ~~extended~~7.25 % byand ~~Intervest~~were ~~National~~sold ~~Bank.~~at ~~All~~their ~~monthly~~current principal ~~payments~~balance. ~~have~~The ~~been~~Company ~~made~~will onabsorb athe ~~timely~~legal ~~basis~~costs ~~for~~of ~~this~~closing ~~loan~~these sales. ~~There~~The ~~were~~proceeds nofrom ~~loans~~these ~~ninety~~sales ~~days~~were ~~past~~used ~~due~~to ~~and~~repay ~~still~~debentures ~~accruing~~as atfurther ~~December 31, 2007~~described in note 5.

Note 3 - Allowance for Mortgage Loan Losses

Activity in the allowance for mortgage loan losses for the periods indicated is summarized as follows:

			Three-Months Ended March 31,
	Three-Months EndedMarch 31,
($ in thousands)	~~($ in thousands)~~2009		~~2008~~	2008	~~2007~~
Balance at beginning of period	~~Balance at beginning of period~~$	988	~~$1,295~~	$	~~$262~~1,295
	Provision ( credit ) charged to operations		4		(7	)
Provision charged to operations		212			4
Balance at end of period	~~Balance at end of period~~$	1,200	~~$1,299~~	$	~~$255~~1,299

The ~~allowance~~nonaccrual ~~for~~loans ~~mortgage~~were ~~loan~~analyzed ~~losses~~by management and the ~~total~~allowance ~~nonaccrual~~for mortgage loan ~~balances~~losses ~~remained~~increased ~~relatively~~compared ~~unchanged at~~to ~~March~~December 31, 2008 ~~compared~~due to ~~December 31,~~downgrades ~~2007.~~on ~~Each~~two ~~individual~~loans ~~nonaccrual~~most ~~loan~~notably ~~was analyzed by management and it was determined that no specific reserves were needed, based upon~~ the Company’s ~~belief~~participation ~~that~~in ~~the~~a ~~underlying~~loan ~~collateral~~described ~~of each~~in ~~loan~~note ~~exceeds~~one to the ~~recorded~~nonaccrual ~~investment~~table ofon the ~~loan~~previous page.

Note 4 - Deferred Debenture Offering Costs

Deferred debenture offering costs are summarized as follows:

($ in thousands)	At March 31,~~2008~~2009		~~At December 31,2007~~	At December 31,2008
Deferred debenture offering costs	$~~6,025~~	1,138	~~$6,025~~	$	3,299
Less accumulated amortization	~~(3,119)~~	(414	~~(2,891~~)		(1,476	)
Deferred debenture offering costs, net	$~~2,906~~	724	~~$3,134~~	$	1,823

810

Intervest Mortgage Corporation

Notes to Condensed Financial Statements (Unaudited)

Note 5 - Subordinated Debentures Payable

The following table summarizes debentures payable.

($ in thousands)		At March 31, ~~2008~~2009		~~At December 31, 2007~~	At December 31,2008
Series 01/17/02 – interest at 7 3/4% fixed	- due October 1, 2009	$ 2,250		$ 2,250
Series 06/07/04 – interest at 6 3/4 % fixed	- due January 1, 2012	$	—		$	5,000
Series 08/05/02 – interest at 7 3/4% fixed	- due January 1, 2010	3,000		3,000
Series 03/21/05 – interest at 6 1/2% fixed	- due April 1, 2011		—			4,500
Series 01/21/03 – interest at 7 % fixed	- due July 1, 2008	3,000		3,000
Series 03/21/05 – interest at 7 % fixed	- due April 1, 2013		—			6,500
Series 01/21/03 – interest at 7 1/4% fixed	- due July 1, 2010	3,000		3,000
Series 08/12/05 – interest at 6 1/2% fixed	- due October 1, 2011		—			4,000
Series 07/25/03 – interest at 6 3/4% fixed	- due October 1, 2008	3,000		3,000
Series 08/12/05 – interest at 7 % fixed	- due October 1, 2013		—			6,000
Series 07/25/03 – interest at 7 % fixed	- due October 1, 2010	3,000		3,000
Series 06/12/06 – interest at 6 3/4 % fixed	- due July 1, 2012		4,000			4,000
Series 11/28/03 – interest at 6 1/2% fixed	- due April 1, 2009	3,500		3,500
Series 06/12/06 – interest at 7 % fixed	- due July 1, 2014		10,000			10,000
Series 11/28/03 – interest at 6 3/4 % fixed	- due April 1, 2011	4,500		4,500
		$	14,000		$	40,000
Series 06/07/04 – interest at 6 1/2% fixed	- due January 1, 2010	4,000		4,000
Series 06/07/04 – interest at 6 3/4 % fixed	- due January 1, 2012	5,000		5,000
Series 03/21/05 – interest at 6 1/4 % fixed	- due April 1, 2009	3,000		3,000
Series 03/21/05 – interest at 6 1/2% fixed	- due April 1, 2011	4,500		4,500
Series 03/21/05 – interest at 7 % fixed	- due April 1, 2013	6,500		6,500
Series 08/12/05 – interest at 6 1/4 % fixed	- due October 1, 2009	2,000		2,000
Series 08/12/05 – interest at 6 1/2% fixed	- due October 1, 2011	4,000		4,000
Series 08/12/05 – interest at 7 % fixed	- due October 1, 2013	6,000		6,000
Series 06/12/06 – interest at 6 1/2 % fixed	- due July 1, 2010	2,000		2,000
Series 06/12/06 – interest at 6 3/4 % fixed	- due July 1, 2012	4,000		4,000
Series 06/12/06 – interest at 7 % fixed	- due July 1, 2014	10,000		10,000
		$ 76,250		$ 76,250

-• On ~~April~~January 1, ~~2008~~2009, the Company’s Series 13/1721/0205 debentures due ~~October~~April 1, ~~2009~~20011 were repaid for $24,~~250~~500,000 of principal and $90174,000 of accrued interest.

-• On ~~April~~February 1, ~~2008~~2009, the Company’s Series 86/507/0204 debentures due January 1, ~~2010~~2012 were repaid for $35,000,000 of principal and $~~353~~237,000 of accrued interest.

-• On ~~April~~February 1, ~~2008~~2009, the Company’s Series 13/21/0305 debentures due ~~July~~April 1, ~~2008~~2013 were repaid for $36,~~000~~500,000 of principal and $53239,000 of accrued interest.

~~Interest~~• isOn ~~paid~~February ~~quarterly~~1, on2009, the Company’s ~~debentures except for the following series, all of which accrue and compound interest quarterly, with such interest due and payable at maturity: $80,000 of~~ Series ~~1/17/02; $570,000 of Series~~ 8/0512/~~02;~~05 ~~$1,340,000~~debentures ofdue ~~Series~~October ~~11/28/03; $~~1,~~440,000~~ of2011 ~~Series~~were ~~6/7/04;~~repaid for $14,~~920,~~000 ~~of Series 3/21/05; $1~~,~~820,~~000 of ~~Series~~principal ~~8/12/05;~~ and $2168,~~280,~~000 of ~~Series~~accrued ~~6/12/06~~interest.

~~The~~• ~~holders~~On ofMarch ~~series~~ 1~~/21/03 through series 8/12/05 debentures can require the Company~~, ~~on a first come basis during a specified time~~2009, to ~~repurchase~~ the ~~debentures~~Company’s ~~for face amount plus accrued interest once each year (beginning April 1, 2009 for~~ Series ~~3/21/05 and October 1, 2009 for Series~~ 8/12/05) ~~provided;~~debentures ~~however,~~due inOctober no1, ~~calendar~~2013 ~~year~~were ~~will~~repaid ~~the~~for ~~Company be required to purchase more than~~ $~~100~~6,000,000 inof principal ~~amount~~and ~~of each maturity~~$203,000 ~~in each series~~ of ~~debentures,~~accrued ~~on a non-cumulative basis~~interest.

Interest is paid quarterly on $12,070,000 of the Company’s series 6/12/06 debentures, while interest is accrued and compound quarterly on $1,930,000 of the Series 6/12/06 debentures.

The Company’s debentures may be redeemed at its option at any time, in whole or in part. These redemptions would be for face value. All the debentures are unsecured and subordinate to all present and future senior indebtedness, as defined in the indenture related to each debenture.

9Scheduled contractual maturities of debentures and the related accrued interest as of March 31, 2009 are summarized as follows:


*($ in thousands)*	Principal		Accrued Interest
For the nine-months ending December 31, 2009	$	—	$	209
For the year ending December 31, 2010		—		—
For the year ending December 31, 2011		—		—
For the year ending December 31, 2012		4,000		108
Thereafter		10,000		282

	$	14,000	$	599

The Company has notified holders of Series 6/12/06 debentures due to mature on July 1, 2012 that these debentures will be redeemed on June 1, 2009. At that time, $4,000,000 of principal, $108,000 of accrued interest and $46,000 of interest for the period April 1, 2009 through May 31, 2009 will be paid to the holders of these debentures. The Company will recognize a loss on early disposition of debentures of $126,000 resulting from the acceleration of the amortization of deferred offering costs.

Intervest Mortgage Corporation

Notes to Condensed Financial Statements (Unaudited)

Note 56 - ~~Subordinated~~Related ~~Debentures~~Party ~~Payable,~~Transactions ~~Continued~~

~~Scheduled~~From ~~contractual~~time ~~maturities~~to oftime, ~~debentures~~the ~~and~~Company ~~the~~participates ~~related~~with ~~accrued~~Intervest ~~interest~~National asBank (another wholly owned subsidiary of the Parent Company) in certain mortgage loans receivable. The Company had a $6,034,000 participation outstanding with Intervest National Bank at both March 31, ~~2008~~2009 ~~are summarized~~and asDecember 31, ~~follows:~~2008.

($ in thousands)	Principal	Accrued Interest
For the nine-months ending December 31, 2008	$ 11,250	$ 1,497
For the year ending December 31, 2009	8,500	303
For the year ending December 31, 2010	12,000	246
For the year ending December 31, 2011	13,000	529
For the year ending December 31, 2012	9,000	257
Thereafter	22,500	508
	$ 76,250 (1)	$3,340 (1)

The Company had a servicing agreement with Intervest National Bank whereby the Company provided the Bank with origination services which included: the identification of potential properties and borrowers; the inspection of properties constituting collateral for such loans; the negotiation of the terms and conditions of such loans in accordance with the Intervest National Bank’s underwriting standards; preparing commitment letters and coordinating the loan closing process. This agreement was terminated effective December 31, 2008. The Company did not have earning from this agreement in the quarter ended March 31, 2009 while the Company earned $774,000 for the quarter ended March 31, 2008.

1)The AsCompany ~~discussed~~reimbursed ~~above,~~the Bank $836,~~250,~~000 offor ~~debentures~~services ~~included~~provided onby ~~this~~Bank ~~chart~~personal ~~were~~during ~~repaid~~the ~~prior~~first toquarter ~~maturity~~of ~~on April 1,~~2009 ~~2008~~related ~~along~~to ~~with~~ the ~~corresponding~~ongoing ~~interest~~operations ~~payable~~of the Company. There were no such services provided in 2008.

~~Note~~The 6Company –reimbursed ~~Related~~the ~~Party~~Parent ~~Transactions~~Company $9,000 and $125,000 for the rent on the space the Company occupies for the three months ended March 31, 2009 and 2008, respectively. The Company now occupies much less space than it previously had. The Company will reimburse the Parent Company for the leased space it shares with affiliates as follows: $27,000 for the remaining nine months of 2009; $36,000 in each of the years 2010 through 2013 and 12,000 in 2014 through the remainder of the lease term in March 2014, for an aggregate amount of $183,000. The Parent Company’s lease contains operating escalation clauses related to taxes and operating costs based upon various criteria and is accounted for as an operating lease. The Company will pay its proportional share of any such additional expense.

~~From~~The ~~time~~Company tohas ~~time,~~a management agreement with the Parent Company, ~~participates~~that ~~with~~is ~~Intervest~~renewed ~~National~~annually, ~~Bank~~under ~~(another~~which ~~wholly~~the ~~owned~~Company ~~subsidiary~~incurs a management fee of ~~the~~$12,500 per month. The Parent Company) inprovides ~~certain~~services ~~mortgage~~related ~~loans~~to ~~receivable.~~corporate finance and planning, ~~The~~intercompany ~~Company~~administration, ~~had~~and acts as a liaison for the Company in various corporate matters. The Company paid $637,~~034,000~~500 ~~participation~~to ~~outstanding~~the ~~with~~Parent ~~Intervest~~Company ~~National~~for ~~Bank~~both atof ~~both~~the quarters ended March 31, ~~2008~~2009 and ~~December 31~~2008, ~~2007~~respectively.

The Company has aten ~~servicing~~second ~~agreement~~mortgages ~~with~~totaling ~~Intervest~~$5,052,000, ~~National~~seven ~~Bank~~of ~~whereby the Company provides the Bank with origination services~~ which ~~include:~~are ~~the identification of potential properties and borrowers; the inspection of properties constituting collateral for such~~ loans; ~~the~~where ~~negotiation of the terms and conditions of such loans in accordance with the~~ Intervest National Bank’s ~~underwriting~~holds ~~standards; preparing commitment letters and coordinating~~ the ~~loan~~first ~~closing process. This agreement renews each January 1 unless terminated by either party. The Company earned $774~~mortgage,~~000~~ ~~and~~while ~~$1,152,000 for~~ the ~~quarters~~Company ~~ended~~holds ~~March 31, 2008 and March 31, 2007, respectively. Servicing agreement income decreased in~~ the first ~~three~~mortgage ~~months~~for oftwo ~~2008 due to lower level~~ of ~~fees~~its ~~being~~own ~~generated~~second ~~by our affiliate~~mortgages.

~~The~~Note ~~Company~~7 ~~reimbursed~~– ~~the~~Fair ~~Parent~~Value ~~Company~~Measurements $125,000 and $120,000 for the rent on the space the Company occupies for the three months ended March 31, 2008 and 2007, respectively. The Company will reimburse the Parent Company for the leased space it shares with affiliates as follows: $329,000 for the remaining nine months of 2008; $439,000 in 2009; $439,000 in 2010; $442,000 in 2011; $460,000 in 2012 and $575,000 thereafter for the remainder of the lease term, through March 2014, for an aggregate amount of $2,684,000. The Parent Company’s lease contains operating escalation clauses related to taxes and operating costs based upon various criteria and is accounted for as an operating lease. The Company will pay its proportional share of any such additional expense. For the year ended December 31, 2007, contractual payments for base rent reimbursed to the Parent Company amounted to $403,000 while the fully escalated payments for base rent and escalation payments amount to $502,000. The lease expires in March 2014.

The Company ~~has~~uses afair ~~management~~value ~~agreement~~measurements ~~with~~to ~~the~~record ~~Parent~~fair ~~Company,~~value ~~that~~adjustments isto ~~renewed~~certain ~~annually,~~assets ~~under~~and ~~which~~liabilities ~~the~~and to determine fair value disclosures. Currently, the Company ~~incurs~~has ano ~~management~~assets ~~fee~~or ofliabilities ~~$12,500~~that ~~per~~are ~~month~~recorded at fair value on a recurring basis. ~~The Parent~~From time to time, however, the Company ~~provides~~may ~~services~~be ~~related~~required to ~~corporate~~record ~~finance~~at ~~and~~fair ~~planning,~~value ~~intercompany~~other ~~administration~~assets or liabilities on a non-recurring basis, such as impaired loans and ~~acts~~foreclosed asreal aestate. ~~liaison~~These ~~for~~non-recurring fair value adjustments involve the ~~Company~~application inof ~~various~~lower-of-cost-or-market ~~corporate~~accounting ~~matters~~or write-downs of individual assets. ~~The~~In accordance with SFAS 157, the Company ~~paid~~groups ~~$37~~its assets and liabilities at fair value in three levels,~~500~~ tobased on the ~~Parent~~markets ~~Company~~in ~~for~~which ~~both~~the assets are traded and the reliability of the ~~quarters ended~~assumptions ~~March 31,~~used ~~2008~~to ~~and~~determine ~~2007~~fair value, ~~respectively.~~as follows:

~~The~~Level ~~company~~1 ~~has~~- ~~Fourteen~~Valuation ~~second~~is ~~mortgages~~based ~~totaling~~upon ~~$7,589,000,~~quoted ~~eleven~~prices ~~of which are loans where Intervest National Bank holds the first mortgage, while the Company holds the first mortgage~~ for ~~two~~identical ofinstruments ~~its~~traded ~~own~~in ~~second~~active ~~mortgages.~~markets;

1012

Intervest Mortgage Corporation

Notes to Condensed Financial Statements (Unaudited)

Note 7 - ~~Recent~~Fair ~~Accounting~~Value ~~Pronouncements~~Measurements, Continued

~~SFAS~~Level ~~141(R)~~2 - ~~Business~~Valuation ~~Combinations.~~is ~~SFAS~~based ~~No. 141(R)~~upon isquoted ~~effective~~prices for ~~the~~similar ~~Company’s~~instruments ~~2009 financial~~in ~~statements.~~active ~~SFAS 141(R) requires~~markets, ~~among~~quoted ~~other~~prices ~~things,~~for identical ~~the~~or ~~acquiring~~similar ~~entity~~instruments in amarkets ~~business~~that ~~combination~~are tonot ~~recognize~~active ~~all (~~and ~~only)~~model-based ~~the~~valuation ~~assets~~techniques ~~acquired and liabilities assumed in the transaction; establishes the acquisition date fair value as the measurement objective~~ for ~~all~~which ~~assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users~~ all ofsignificant ~~the~~assumptions ~~information~~are ~~they~~observable ~~need~~in ~~to evaluate and understand~~ the ~~nature~~market; and ~~financial effect of the business combination. The adoption of this statement is expected to have no effect on the Company’s financial statements.~~

~~SFAS~~Level ~~157~~3 - ~~Fair~~Valuation ~~Value Measurements.~~is Ongenerated ~~January 1,~~from ~~2008,~~model-based ~~the~~techniques ~~Company~~that ~~adopted~~use ~~SFAS~~significant ~~No. 157,~~assumptions ~~“Fair~~not ~~Value~~observable ~~Measurements~~in the market.” ~~SFAS~~These ~~157,~~assumptions ~~among~~reflect ~~other~~the ~~things,~~Company’s ~~defines~~estimates ~~fair~~of ~~value,~~assumptions ~~establishes~~that amarket participants ~~framework~~would ~~for~~use ~~measuring~~in ~~fair~~pricing ~~value~~the ~~and~~asset ~~enhances~~or ~~disclosures about~~liability. ~~fair~~Valuation ~~value~~techniques ~~measurements~~include ~~required~~the ~~under~~use ~~other~~of ~~accounting~~option ~~pronouncements~~pricing models, ~~but~~discounted ~~does~~cash ~~not~~flow ~~change~~models ~~existing~~and ~~guidance~~similar astechniques. toThe ~~whether~~results orcannot ~~not~~be andetermined ~~instrument~~with isprecision ~~carried~~and atmay ~~fair~~not ~~value.~~be ~~The~~realized ~~adoption~~in an ofactual ~~this~~sale ~~statement~~or ~~had~~immediate nosettlement ~~effect~~of on the ~~Company’s financial~~asset ~~statements~~or liability.

~~SFAS~~The ~~159~~Company -bases ~~Fair~~its ~~Value~~fair ~~Accounting.~~values Onon ~~January 1, 2008,~~ the ~~Company~~price ~~adopted~~that ~~SFAS~~would ~~No. 159,~~be ~~The~~received ~~Fair~~to ~~Value~~sell ~~Option~~an asset ~~for~~or ~~Financial~~paid ~~Assets~~to ~~and~~transfer ~~Financial~~a ~~Liabilities~~liability in an orderly transaction between market participants at the measurement date. SFAS ~~159~~157 ~~allows~~requires ~~companies~~the Company to ~~elect~~maximize tothe ~~follow~~use of observable inputs and minimize the use of unobservable inputs when measuring fair value. In instances where the determination of the fair value ~~accounting~~measurement ~~for~~is ~~certain~~based ~~financial~~on ~~assets~~inputs ~~and~~from ~~liabilities~~different inlevels anof ~~effort~~the tofair ~~mitigate~~value ~~volatility~~hierarchy, the level in ~~earnings~~the ~~without~~fair ~~having~~value tohierarchy ~~apply~~within ~~complex~~which ~~hedge~~the entire fair value measurement falls is based on ~~accounting~~the ~~provisions~~lowest level input that is significant to the fair value measurement in its entirety. The ~~adoption~~Company’s assessment of ~~this~~the ~~statement~~significance ~~had~~of noa ~~effect~~particular oninput to the ~~Company’s~~fair ~~financial~~value ~~statements~~measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

~~SFAS~~The ~~160~~following -describes ~~Noncontrolling~~valuation ~~Interest~~methodologies ~~in Consolidated~~used Financial Statements. In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interest in Consolidated Financial Statements.” SFAS 160’s objective is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for ~~the~~assets ~~noncontrolling~~measured ~~interest~~at infair avalue ~~subsidiary~~on ~~and for deconsolidation of~~ a ~~subsidiary.~~ ~~SFAS~~non-recurring ~~160 shall be effective for the Company’s 2009 financial statements~~basis. ~~The adoption of this statement is not expected to have any effect on the Company’s financial statements.~~

11Impaired Loans. The Company’s loans are evaluated individually for impairment. A loan is considered impaired when, based upon current information and events, it is probable that we will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the loan agreement. The Company’s impaired loans are normally collateral dependent and, as such, are carried at the lower of the Company’s net recorded investment in the loan or the estimated fair value of the collateral less estimated selling costs. Adjustments to recorded investment are made through specific valuation allowances that are recorded as part of the overall allowance for loan losses. Estimates of fair value is determined based on a variety of information, including the use of available appraisals, estimates of market value by licensed appraisers or local real estate brokers and the knowledge and experience of the Company’s senior lending officer (the Chairman) related to values of properties in the Company’s market areas. These officers take into consideration the type, location and occupancy of the property as well as current economic conditions in the area the property is located in assessing estimates of fair value. Accordingly, fair value estimates for impaired loans is classified as Level 3.

Foreclosed Real Estate. Foreclosed real estate represents real estate acquired by the Company as a result of foreclosure or by deed in lieu of foreclosure and is carried, net of a valuation allowance for losses if any, at the lower of cost or estimated fair value less estimated selling costs. Fair value is estimated in the same manner as impaired loans and, as such, is also classified as Level 3. As these properties are actively marketed, estimated fair value may be periodically adjusted though the valuation allowance for losses to reflect changes in values resulting from changing market conditions.

Intervest Mortgage Corporation

Notes to Condensed Financial Statements (Unaudited)

Note 7 - Fair Value Measurements, Continued

The following table provides the level of valuation assumptions used to determine the carrying value of our assets measured at fair value at March 31, 2009.


	Net carrying value at March 31, 2009								Total Losses (2)
*($ in thousands)*	Total		Level 1		Level 2		Level 3		Quarter Ended March 31, 2009		Quarter Ended March 31, 2008
Impaired loans (1)	$	7,513	$	—	$	—	$	7,513	$	341	$	—
Foreclosed real estate		2,327		—		—		2,327		—		—

(1)	Impaired loans are comprised of nonaccrual loans.

(2)

The loss for impaired loans represents a specific valuation allowance recorded in accordance with SFAS 114 during the period that is included in the provision for loan losses, plus loan charge offs recorded during the period. The loss for foreclosed real estate represents write downs in carrying values subsequent to foreclosure, plus losses from the sale of foreclosed properties during the period that are charged to real estate activities expense in the condensed financial statements.

Note 8 - Recent Accounting Pronouncements

SFAS 141(R) - Business Combinations. On January 1, 2009, the Company adopted SFAS 141(R), which requires, among other things, the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. The adoption of this statement had no effect on the Company’s financial statements.

SFAS 161 - Disclosures about Derivative Instruments and Hedging Activities, an amendment of SFAS 133. On January 1, 2009, the Company adopted SFAS 161, which, among other things, provides for enhanced disclosures about how and why an entity uses derivatives and how and where those derivatives and related hedged items are reported in the entity’s financial statements. The Company currently does not engage in trading or hedging activities, nor does it invest in interest rate derivatives or enter into interest rate swaps. The adoption of SFAS 161 had no impact on the Company’s financial statements.

EITF 99-20- Impairment. In January 2009, the FASB issued Staff Position (FSP) EITF 99-20-1, Amendments to the Impairment Guidance of EITF Issue No. 99-20 (FSP EITF 99-20-1). FSP EITF 99-20-1 amends the impairment guidance in EITF Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets, to achieve more consistent determination of whether an other-than-temporary impairment has occurred. FSP EITF 99-20-1 is effective for interim and annual reporting periods ending after December 15, 2008, and shall be applied prospectively. Retrospective application to a prior interim or annual reporting period is not permitted. The adoption of FSP EITF 99-20-1 had no impact on the Company’s condensed financial statements.

Intervest Mortgage Corporation

Review by Independent Registered Public Accounting Firm

Hacker, Johnson & Smith P.A., P.C., the Company’s independent registered public accounting firm, has made a limited review of the financial data as of March 31, ~~2008~~2009, and for the three-month periods ended March 31, 2009 ~~2008~~ and ~~2007~~2008 presented in this document, in accordance with the standards established by the Public Company Accounting Oversight Board.

The report of Hacker, Johnson & Smith P.A., P.C. furnished pursuant to Article 10 of Regulation S-X is included herein.

1215

Intervest Mortgage Corporation

Notes to Condensed Financial Statements (Unaudited)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholder

Intervest Mortgage Corporation

New York, New York:

We have reviewed the accompanying condensed balance sheet of Intervest Mortgage Corporation (the “Company”) as of March 31, ~~2008~~2009, and the related condensed statements of ~~income~~operation, changes in stockholder’s equity and cash flows for the three months ended March 31, ~~2008~~2009 and ~~2007~~2008. These interim condensed financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the condensed financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the balance sheet of the Company as of December 31, ~~2007~~2008 and the related statements of income, changes in stockholder’s equity and cash flows for the year then ended (not presented herein), and in our report dated February 2224, ~~2008~~2009, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying balance sheet as of December 31, ~~2007~~ 2008 is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived.

/s/ Hacker, Johnson & Smith P.A., P.C. Hacker, Johnson & Smith P.A., P.C. Tampa, Florida April 24, ~~2008~~2009

1316

Intervest Mortgage Corporation

Notes to Condensed Financial Statements (Unaudited)

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

~~Intervest Mortgage Corporation~~Management’s ~~business~~discussion ~~focuses~~and onanalysis ~~the origination~~ of ~~first~~financial ~~mortgage~~condition and ~~junior~~results ~~mortgage~~of ~~loans~~operations ~~secured by multifamily and~~that ~~commercial~~follows ~~real~~should ~~estate~~be ~~properties.~~read Itin ~~also~~conjunction ~~provides~~with ~~loan~~the ~~origination~~financial ~~services~~statements toand ~~its~~notes ~~affiliate,~~thereto ~~Intervest~~included ~~National Bank. Intervest Mortgage Corporation funds its lending business through the issuance of subordinated debentures~~ in ~~public~~this ~~offerings. It~~report ~~currently~~on ~~has~~Form no10-Q ~~subsidiaries.~~as ~~Intervest~~well ~~Mortgage Corporation is referred to~~ as the ~~“Company”.~~entire ~~The~~annual ~~principal~~report ~~office~~ of ~~the~~Form ~~Company~~10-K isfor ~~located~~the atyear ~~One~~ended ~~Rockefeller Plaza~~December 31, ~~Suite 400, New York, New York 10020-2002, and its telephone number is 212-218-2800~~2008.

Intervest ~~Bancshares~~Mortgage Corporation’s ~~(which~~business isfocuses aon ~~financial holding company and hereafter referred to as~~ the ~~“Parent~~origination ~~Company”) owns 100%~~ of ~~the~~first ~~capital~~mortgage ~~stock~~and ofjunior ~~the~~mortgage ~~Company.~~loans ~~The~~secured ~~Company’s~~by ~~chairman~~commercial and ~~secretary~~multifamily ~~are~~real ~~also officers, and directors of the Parent Company~~estate properties. ~~The~~Through ~~Company’s~~December 31, ~~chairman~~2008, isit also aprovided ~~principal~~loan ~~shareholder~~origination ofservices ~~the Parent Company. In addition~~ to Intervest ~~Mortgage~~ ~~Corporation, the Parent Company also owns Intervest~~ National Bank (a“the ~~national~~Bank”). ~~bank~~Intervest ~~with~~Mortgage ~~its~~Corporation ~~headquarters~~has ~~and~~funded ~~full-service~~its ~~banking~~lending ~~office~~business inthrough ~~Rockefeller~~the ~~Plaza,~~issuance ~~New~~of ~~York,~~subordinated ~~and six full-service banking offices~~ debentures in ~~Florida,~~public ~~including~~offerings. ~~four~~Intervest ~~in Clearwater,~~Mortgage ~~Florida,~~Corporation ~~one~~is inhereafter ~~Clearwater~~referred ~~Beach,~~to ~~Florida~~as ~~and~~the ~~one in South Pasadena, Florida)~~“Company”.

~~The~~Intervest ~~Company~~Bancshares ~~has~~Corporation (which is a financial ~~servicing~~holding ~~agreement~~company ~~with~~and ~~Intervest~~hereafter ~~National Bank~~referred to ~~provide~~as ~~origination~~the ~~services~~“Parent ~~which~~Company”) ~~include:~~owns 100% of the ~~identification~~capital stock of ~~potential~~the ~~properties~~Company. The Company’s chairman and ~~borrowers;~~secretary ~~the~~are ~~inspection~~also officers, and directors of ~~properties~~the ~~constituting~~Parent ~~collateral~~Company. ~~for~~The Company’s ~~such~~chairman ~~loans;~~is ~~the~~also ~~negotiation~~a principal shareholder of the ~~terms~~Parent ~~and~~Company. ~~conditions~~In ofaddition ~~such~~to ~~loans~~Intervest ~~in accordance~~Mortgage ~~with~~Corporation, the Parent Company also owns Intervest National Bank’s ~~underwriting~~(a ~~standards;~~national ~~preparing~~bank ~~commitment~~with ~~letters;~~its headquarters and ~~coordinating~~full-service ~~the~~banking ~~loan~~office in ~~closing~~Rockefeller ~~process.~~Center, ANew ~~significant~~York, ~~portion~~and ofsix ~~the~~full-service ~~Company’s~~banking ~~income~~offices ~~consists~~in ofFlorida, ~~servicing~~including ~~agreement~~four ~~income~~in ~~derived~~Clearwater, ~~from Intervest~~Florida, ~~National~~one ~~Bank.~~in Clearwater Beach, Florida and one in South Pasadena, Florida

~~The~~A significant portion of the Company’s ~~lending~~income, ~~activities~~in ~~consist~~recent ofyears, ~~mortgage~~has ~~loans~~been onderived ~~real~~from ~~estate~~non-interest ~~properties~~income ~~that~~consisting ~~usually~~of ~~mature~~servicing ~~within approximately~~agreement ~~three~~income ~~years~~from an affiliate company, ~~including~~Intervest ~~multifamily~~National ~~residential~~Bank. ~~apartment~~Through ~~buildings~~December 31, ~~office buildings~~2008, ~~commercial~~the ~~properties~~Company ~~and~~had ~~vacant~~a ~~land.~~servicing ~~The~~agreement ~~Company~~with ~~also~~Intervest ~~may~~National ~~acquire~~Bank orto ~~originate~~provide ~~mortgage~~origination ~~loans~~services onwhich ~~other~~include: ~~types~~the identification of potential properties, and ~~may~~borrowers; ~~resell~~the ~~mortgages~~inspection toof ~~third~~properties ~~parties.~~constituting Nocollateral ~~mortgage~~for such loans; ~~have~~the ~~been~~negotiation ~~resold~~of tothe ~~third~~terms ~~parties~~and ~~during~~conditions of such loans in accordance with the ~~past~~Intervest ~~five~~National ~~years~~Bank’s underwriting standards; preparing commitment letters and coordinating the loan closing process.

~~Many~~In light of the ~~properties~~significant ~~collateralizing~~reduction ~~the loans~~ in loan originations by the Company’s ~~mortgage~~in ~~loan~~recent ~~portfolio~~years, ~~are~~effective ~~subject~~as toof ~~applicable~~January 1, ~~rent~~2009, the ~~control~~employees ~~and~~of ~~rent~~the ~~stabilization~~Company ~~statutes~~became ~~and~~employees ~~regulations.~~of InIntervest ~~both~~National ~~cases,~~Bank ~~any~~and ~~increases~~will incontinue ~~rent~~to ~~are~~provide ~~subject~~loan toorigination ~~specific~~services ~~limitations~~consistent with past practice. AsThe ~~such~~ongoing requirements of the Company, ~~properties~~including ~~constituting~~any aorigination services that it may ~~significant~~require, ~~portion~~will ofbe performed by the same personnel and the Company’s ~~mortgage~~will ~~portfolio~~reimburse ~~are~~Intervest ~~not~~National asBank ~~susceptible~~for tothe ~~fluctuations~~cost inof ~~valuation~~such asservices ~~other~~on ~~income-producing~~a ~~properties~~monthly basis.

~~Many~~The ~~of the~~ Company’s ~~mortgage~~is ~~loans~~currently ~~include~~exploring ~~provisions relating to prepayment and others prohibit prepayment of indebtedness entirely. When~~ a ~~mortgage~~business ~~loan~~combination iswith ~~repaid~~Intervest ~~prior~~National toBank ~~maturity,~~ (the ~~Company~~Bank) ~~may~~whereby ~~recognize~~all ~~prepayment~~of ~~income, which~~the ~~consists~~assets ~~largely~~and liabilities of the ~~recognition~~Company ofincluding ~~unearned~~its ~~fees~~loan ~~associated~~portfolio ~~with~~would ~~such~~be ~~loans~~transferred atto the ~~time~~Bank. All of ~~payoff and~~ the Company’s ~~receipt~~remaining ofdebentures ~~prepayment~~would ~~fees~~be ~~and~~repaid ~~interest~~ in ~~certain cases~~full. The ~~amount~~completion ~~and timing~~ of, asthis ~~well~~transaction aswould ~~income from, loan prepayments, if any, cannot~~ be ~~predicted~~subject ~~and~~to ~~can~~regulatory ~~fluctuate significantly~~approval. ~~Normally,~~The ~~the~~Bank ~~number~~is ofalso ~~instances~~a ofwholly ~~prepayment~~owned ofsubsidiary ~~mortgage loans tends to increase during periods~~ of ~~declining~~the ~~interest~~Parent ~~rates and tends to decrease during periods of increasing interest rates~~Company.

The Company’s ~~profitability~~lending isactivities ~~affected~~consist byof ~~its~~originating ~~net~~mortgage ~~interest~~loans ~~income,~~on ~~which~~real isestate ~~the~~properties ~~difference~~that ~~between~~mature ~~interest~~within ~~income~~approximately ~~generated~~five ~~from~~years, ~~its~~including ~~mortgage loans~~multifamily ~~and~~residential ~~the~~apartment ~~interest expense~~buildings, ~~inclusive~~office ~~of amortization of offering costs~~buildings, ~~incurred~~commercial onproperties ~~its~~and ~~debentures~~vacant land. The Company’s ~~profitability is~~ also ~~affected~~may byacquire ~~its~~or ~~noninterest~~originate ~~income~~mortgage ~~and~~loans ~~expenses,~~on ~~provision~~other ~~for~~types ~~loan~~of ~~losses~~properties, and ~~income~~may ~~tax~~resell ~~expense. Noninterest~~mortgages ~~income~~to ~~consists~~third ofparties. ~~fee~~No ~~income from providing~~ mortgage ~~loan~~loans ~~origination~~have ~~services~~been resold to ~~Intervest~~third ~~National~~parties ~~Bank,~~during ~~as well as loan service charges and prepayment income generated from~~ the ~~Company’s~~past ~~loan~~five ~~portfolio~~years. ~~Noninterest expense consists mainly of salaries and employee benefits expense, occupancy expenses, professional fees, insurance expense and other operating expenses.~~

1417

~~Intervest~~Many ~~Mortgage~~of ~~Corporation~~the properties collateralizing the loans in the Company’s mortgage loan portfolio 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 a 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.

~~Notes~~Many of the Company’s mortgage loans include provisions relating to ~~Condensed~~prepayment ~~Financial~~and ~~Statements~~others ~~(Unaudited)~~prohibit prepayment of indebtedness entirely or for fixed periods of time. When a mortgage loan is repaid prior to maturity, the Company may recognize prepayment income, which consists largely of the recognition of unearned fees associated with such loans at the time of payoff and the receipt of prepayment fees and interest in certain cases. The amount and timing of, as well as income from, loan prepayments, if any, cannot be predicted and can fluctuate significantly. Normally, the number of instances of prepayment of mortgage loans tends to increase during periods of declining interest rates and tends to decrease during periods of increasing interest rates.

The Company’s profitability is ~~significantly~~ affected by ~~general~~its ~~economic~~net interest income, which is the difference between interest income generated from its mortgage loans and ~~competitive~~income ~~conditions,~~from ~~changes~~investments inand ~~market~~the interest ~~rates~~expense, ~~government~~inclusive ~~policies~~of ~~and actions~~amortization of ~~regulatory~~offering ~~authorities.~~costs, ~~Since~~incurred ~~the~~on ~~properties~~its ~~underlying~~debentures. ~~the~~The Company’s ~~mortgages~~profitability ~~are~~is ~~concentrated~~also inaffected ~~the~~by ~~New~~its ~~York~~noninterest ~~City~~income ~~area~~and expenses, ~~the~~provision ~~economic~~for loan ~~conditions~~losses inand ~~that~~income ~~area~~tax ~~also~~expense. ~~have~~Noninterest anincome ~~impact~~consists onof loan service charges and prepayment income generated from the Company’s ~~operations~~loan portfolio. ~~Additionally, terrorist~~Noninterest ~~acts~~expense ~~and~~consists ~~armed~~mainly ~~conflicts,~~of ~~such~~compensation asand ~~the~~benefits ~~war~~expense, ~~on terrorism~~occupancy expenses, ~~may~~professional ~~have~~fees, aninsurance ~~adverse~~expense ~~impact~~and onother ~~economic~~operating ~~conditions~~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 plus the Company’s participation in a Florida loan, the economic conditions in those areas also have an impact on the Company’s operations. Additionally, terrorist acts and armed conflicts, such as the war on terrorism, may have an adverse impact on economic conditions.

Critical Accounting Policies

An accounting policy is deemed to be “critical” if it is important to a company’s results of operations and financial condition, and requires significant judgment and estimates on the part of management in its application. The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain amounts reported in the financial statements and related disclosures. Actual results could differ from these estimates and assumptions. The Company believes that the estimates and assumptions used in connection with the amounts reported in its financial statements and related disclosures are reasonable and made in good faith. The Company believes that currently its only significant critical accounting policy relates to the determination of the allowance for loan losses. The allowance for loan losses is a critical accounting estimate because it is highly susceptible to change from period to period requiring management to make assumptions about future loan charge-offs. The impact of a sudden large charge-off could deplete the allowance and potentially require increased provisions to replenish the allowance, which could negatively affect the Company’s earnings and financial position.

For a further discussion of this policy, as well as all of the Company’s significant accounting policies, see note 1 to the financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2007~~2008.

~~Comparison~~18 ~~of Financial Condition at March 31, 2008 and December 31, 2007~~

TotalTable assets at March 31, 2008 increased slightly to $112,680,000, from $112,067,000 at December 31, 2007. The increase is primarily the result of an increase in cash received related to the collection of escrow funds. Contents

~~Cash~~Comparison ~~and~~of ~~cash~~Financial ~~equivalents~~Condition ~~amounted to $16,571,000~~ at March 31, ~~2008,~~2009 ~~compared~~and ~~to $12,682,000 at~~ December 31, ~~2007.~~2008 ~~The increase is primarily due to a decrease in mortgage loans receivable of $3,157,000 and the regular collection of mortgage escrow funds.~~

~~Mortgage~~Total ~~loans~~assets ~~receivable~~at March 31, ~~net~~2009 ofdecreased ~~unearned~~to ~~income and allowance for mortgage loan losses~~$47,270,000, ~~amounted~~from to $9075,~~960~~467,000 at ~~March~~December 31, 2008,. ~~compared~~The decrease is primarily the result of the use of assets for the repayment prior to maturity of debentures with a face amount of $9426,~~117~~000,000 ~~at December 31~~and $1,361,000 ~~2007~~of related interest payable. ~~The~~These ~~decrease~~debentures ~~was~~were ~~due~~repaid towith ~~repayments~~$14,631,000 of ~~mortgage~~cash ~~loans~~on ~~exceeding~~hand ~~originations~~as well as $12,833,000 of ~~new~~cash ~~mortgage~~mostly ~~loans~~relating ~~during~~to the ~~period~~sale of loans to Intervest National Bank.

AtCash ~~both~~ and cash equivalents amounted to $5,318,000 at March 31, ~~2008~~2009, ~~and~~compared to $19,949,000 at December 31, 2008. ~~2007,~~The ~~nonaccrual~~decrease ~~loans~~of ~~were~~ $2814,~~370~~631,000. ~~See~~was ~~footnote~~primarily 2due to the ~~financial~~repayment ~~statements,~~of ~~included~~debentures inprior ~~this~~to ~~report,~~maturity ~~for~~as adiscussed ~~more~~in ~~complete~~note ~~discussion~~5 ~~concerning~~to ~~nonaccrual~~the ~~loans~~financial statements in this report.

~~The~~Mortgage loans receivable, net of unearned income and allowance for mortgage loan losses, ofamounted to $137,~~299~~117,000 ~~was relatively unchanged~~ at March 31, ~~2008~~2009, compared to $149,~~295~~950,000 at December 31, ~~2007~~2008. ~~Each~~The ~~individual~~decrease ~~nonaccrual loan~~of $12,833,000 was ~~analyzed~~primarily bydue ~~management~~to ~~and~~the itsale ~~was~~of ~~determined~~mortgage ~~that~~loans nowith ~~specific~~a ~~reserves~~face ~~were~~value ~~needed~~of $12,035,000 ~~based~~to ~~upon~~Intervest ~~the~~National ~~Company’s~~Bank. ~~belief~~The ~~that~~proceeds ~~the~~from ~~underlying~~these ~~collateral~~sale ofwas ~~each~~used ~~loan~~to ~~exceeds~~repay ~~the~~debentures ~~recorded~~as ~~investment~~discussed ofabove. Mortgage loans receivable also decreased due to an increase in the allowance for loan losses as discussed below.

Loan originations and repayments for the last eight consecutive quarters are summarized in the following table:


*($ in thousands)*	Mar 31, 2009	Dec 31, 2008	Sep 30, 2008	Jun 30, 2008	Mar 31, 2008	Dec 31, 2007	Sep 30, 2007	Jun 30, 2007
Originations:			—	—	1,200	6,933	16,650	18,355


Principal Repayments:	12,653	4,254	29,207	5,927	4,452	3,252	6,759	12,459

At both March 31, 2009 and December 31, 2008, nonaccrual loans were $8,292,000. See note 2 to the financial statements, included in this report, for a more complete discussion concerning nonaccrual loans.

The allowance for loan losses was $1,200,000 at March 31, 2009, compared to $988,000 at December 31, 2008. The increase in the allowance was primarily due to a downgrade of the Company’s participation in a loan in Saint Augustine Florida as a result of a preliminary agreement with the borrower, as discussed in note 2 to the financial statement included in this report. Additionally, each individual nonaccrual loan was analyzed by management and it was determined that no specific reserves were needed, based upon the Company’s belief that the underlying collateral of each loan exceeds the recorded investment of the loan.

Whenever the Company experiences payment problems with a loan, an internal review of that loan is performed by the Company’s senior lending officer to re-evaluate the internal credit rating that is assigned to the loan. This credit rating directly affects the computation of the allowance for loan losses. The estimated loss factors that the Company applies to its loans to calculate the allowance for loan losses increase as a loan’s credit rating decreases. Nonaccrual and/or problem loans are normally downgraded based on known facts and circumstances at the time of review, which in turn affects the level of the allowance for loan losses. The review includes the physical inspection of such properties, generally conducted every six months, and the monitoring of impositions and insurance premiums to preserve the Company’s security interest in the properties.

1519

~~Intervest~~A ~~Mortgage~~more ~~Corporation~~detailed discussion of the factors and estimates used in computing the allowance can be found under the caption “Critical Accounting Policies” in the Company’s annual report on Form 10-K for the year ended December 31, 2008.

~~Notes~~Accrued interest receivable was $206,000 at March 31, 2009, compared to ~~Condensed~~$218,000 ~~Financial~~at ~~Statements~~December 31, ~~(Unaudited)~~2008. The decrease in accrued interest at March 31, 2009 is primarily due to a reduced level of loans outstanding.

ALoan ~~more~~fees ~~detailed~~receivable ~~discussion~~were of$164,000 ~~the~~at ~~factors~~March 31, ~~and~~2009, ~~estimates~~compared ~~used~~to in$211,000 ~~computing~~at ~~the~~December 31, ~~allowance~~2008. ~~can~~This bedecrease ~~found~~is ~~under~~mostly ~~the~~due ~~caption~~to ~~“Critical~~normal ~~Accounting~~amortization ~~Policies”~~of ~~in the~~loan ~~Company’s~~fees ~~annual~~and ~~report~~a onlower ~~Form~~level ~~10-K~~of ~~for~~loans ~~the year ended December 31, 2007~~outstanding.

~~Accrued~~Deferred ~~interest~~subordinated ~~receivable~~debenture ~~was~~offering costs, net of accumulated amortization, decreased to $~~432~~724,000 at March 31, ~~2008~~2009, ~~compared~~ tofrom $~~300~~1,823,000 at December 31, ~~2007~~2008. The ~~increase~~decrease inof ~~accrued~~$1,099,000 ~~interest~~was atdue ~~March 31,~~to ~~2008~~the iswrite ~~primarily~~off ~~due~~of to$1,034,000 ~~fact~~of ~~that~~deferred ~~accrued~~offering ~~interest~~costs ~~receivable~~related isto ~~lower~~the ~~than~~debentures ~~normal~~redeemed atin ~~December 31~~the first quarter of ~~any~~2009. ~~year~~Since ~~due~~these debentures were redeemed prior to ~~additional~~their ~~deposits~~stated ~~made~~maturity, ~~on December 31~~the ~~since~~remaining ~~January 1~~unamortized iscost aassociated ~~holiday.~~with ~~Similar~~these ~~deposits~~debentures ~~for~~were written off as part of the ~~second~~redemption ~~quarter~~of ~~were~~the ~~made~~debentures. Additionally, asdeferred ~~usual,~~offering oncost ~~April 1,~~decreased ~~2008,~~due ato ~~regular~~normal ~~business~~amortization ~~day~~during the first three months of 2009.

~~Loan~~Other ~~fees~~assets ~~receivable~~ were $~~586~~1,396,000 at March 31, ~~2008~~2009, compared to $~~604~~968,000 at December 31, ~~2007~~2008. ~~This~~The ~~decrease~~increase of $428,000 is ~~mostly~~primarily due to ~~normal~~an ~~amortization~~increase ofin ~~loan~~income ~~fees~~tax receivable resulting from the first quarter loss.

~~Deferred~~Total ~~subordinated~~liabilities ~~debenture~~at ~~offering costs~~March 31, ~~net~~2009 decreased ofto ~~accumulated amortization~~$16,146,000, ~~decreased~~from to $243,~~906~~723,000 at ~~March~~December 31, 2008, ~~from~~principally due to the repayment prior to maturity of debentures with a face amount of $326,~~134~~000,000 atas ~~December 31~~well as $1,361,000 ~~2007.~~of ~~The~~interest ~~decrease~~payable ~~was~~mostly ~~due~~related to ~~normal~~the ~~amortization~~ repayment of debentures, ~~deferred~~as ~~offering~~described ~~costs~~in ~~during~~note ~~the~~5 ~~first~~to ~~three~~the ~~months~~financial ~~of 2008~~statements.

~~Other~~Mortgage ~~assets~~escrow ~~were~~funds payable decreased to $1753,~~189,~~000 at ~~both~~ March 31, 2008, ~~and~~compared to $800,000 at December 31, ~~2007~~2008. This decrease is primarily due to a lower level of loans outstanding which was partially offset by the normal escrow collection cycle which results in lower balances at June 30 and December 31 of any given year since semi-annual tax payments to the City of New York are made just prior to those two dates. Correspondingly, accrued interest balances increase at March 31 and September 30 in any given year as funds are being collected for these previously described payments. Mortgage escrow funds payable represent advance payments made to the Company by the borrowers for taxes, insurance and other charges that are remitted by the Company to third parties.

~~Total~~Subordinated ~~liabilities~~debentures decreased to $14,000,000 at March 31, ~~2008~~2009 ~~increased~~compared to $8140,~~919,~~000, ~~from $81,338,~~000 at December 31, ~~2007,~~2008. ~~principally~~The ~~due~~decrease tois anprimarily ~~increase~~the inresult ~~escrow~~of the ~~funds~~redemption ~~payable~~of debentures with a face amount of $26,000,000, as described in note 5 to the financial statements.

~~Mortgage~~Subordinated ~~escrow~~debentures ~~funds~~interest payable decreased ~~increased~~ to $1599,~~388,~~000 at March 31, ~~2008~~2009, ~~compared~~from to $~~992~~1,960,000 at December 31, ~~2007.~~2008, ~~This~~primarily ~~increase is~~ due to ~~the~~redemption ~~normal escrow collection cycle which results in lower balances at June 30 and Dec 31~~ of ~~any~~debentures ~~given~~with ~~year~~a ~~since~~face ~~semi-annual~~amount ~~tax payments to the City~~ of ~~New York are made just prior to those two dates. Correspondingly~~$26,000,000 ~~accrued interest balances increase at March 31 and September 30 in any given year~~ as ~~funds~~discussed ~~are being collected for previously described these payments~~above. ~~Mortgage escrow funds payable represent advance payments made to the Company by the borrowers for taxes, insurance and other charges that are remitted by the Company to third parties.~~

~~Subordinated~~Other ~~debentures~~liabilities ~~outstanding~~decreased ~~remained~~to ~~unchanged at~~ $76794,~~250,~~000 at ~~both~~ March 31, ~~2008 and December 31~~2009, ~~2007.~~compared ~~However,~~to $8963,~~250,~~000 ofat ~~debentures~~December 31, ~~were~~2008 ~~repaid~~primarily ~~prior~~due to ~~maturity~~a onreduction ~~April 1,~~in ~~2008~~income astax ~~described~~payable inof ~~note~~$106,000 5as towell ~~the~~as ~~financial~~a ~~statements~~reduction ~~included~~of $34,000 in commitment ~~this~~fees ~~report~~outstanding.

~~Subordinated~~20 ~~debentures interest payable increased to $3,340,000 at March 31, 2008, from $3,145,000 at December 31, 2007, primarily due to the accrual of interest on subordinated debentures outstanding.~~

Other liabilities were relatively unchanged at $941,000 at March 31, 2008, compared to $951,000 at December 31, 2007.

Comparison of Results of Operations for the Quarters Ended March 31, 2008 and 2007

The Company’s net income decreased by $610,000 to $8,000 in the first quarter of 2008, from $618,000 for the first quarter of 2007. The decrease was primarily due to a decrease of $762,000 in interest and fee income and a decrease of $378,000 in servicing agreement income. These decreases were partially offset by a $523,000 decrease in the provision for income taxes and a $99,000 decrease in interest on debentures.

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 the periods indicated. The yields and rates shown are based on a computation of income/expense (including any related fee income or expense) for each period divided by average interest-earning assets/interest-bearing liabilities during each period. 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 period.

~~Intervest~~Comparison ~~Mortgage~~of ~~Corporation~~Results of Operations for the Quarters Ended March 31, 2009 and 2008

~~Notes~~The Company’s net income decreased by $640,000 to ~~Condensed~~a ~~Financial~~loss ~~Statements~~of ~~(Unaudited)~~$632,000 in the first quarter of 2009, from $8,000 for the first quarter of 2008. The decrease was primarily due to: a loss on early retirement of debentures of $1,034,000; a decrease of $841,000 in interest and fee income; a decrease of $774,000 in servicing agreement income and an increase in the provision for loan losses of $208,000. These decreases were partially offset by: a $1,090,000 decrease in interest on debentures and amortization of deferred offering costs; a $545,000 decrease in the provision for income taxes; a $464,000 decrease in salaries and employee benefit and a $152,000 decrease in general and administrative expense.

($ in thousands)	For the Three-Months Ended March 31,
	2008				2007
	Average Balance	Interest Inc./Exp.	Annual Yield/Rate(2)		AverageBalance	Interest Inc./Exp.	Annual Yield/Rate(2)
Assets
Mortgage loans receivable (1)	$ 94,513	$1,455	6.19%	$	77,856	$1,931	10.06%
Short-term investments	13,492	123	3.67		35,140	409	4.72
Total interest-earning assets	108,005	$1,578	5.88%		112,996	$2,340	8.40%
Noninterest-earning assets	3,634				4,921
Total assets	$111,639			$	117,917
Liabilities and Stockholders’ Equity
Debentures and accrued interest payable	$ 78,712	$1,567	8.01%	$	84,505	$1,688	8.10%
Noninterest-bearing liabilities	2,176				3,360
Stockholder’s equity	30,751				30,052
Total liabilities and stockholders’ equity	$111,639			$	117,917
Net interest income		$ 11				$652
Net interest-earning assets/margin	$ 29,293		0.04%	$	28,491		2.34%
Ratio of total interest-earning assets to total interest-bearing liabilities	1.37x				1.34x


	For the Three-Months Ended March 31,
	2009						2008
*($ in thousands)*	Average Balance		Interest Inc./Exp.		Annual Yield/Rate⁽²⁾		Average Balance		Interest Inc./Exp.		Annual Yield/Rate⁽²⁾
Assets
Mortgage loans receivable (1)	$	41,185	$	700	6.89	%	$	94,513	$	1,455	6.19	%
Short-term investments		11,801		37	1.27			13,492		123	3.67

Total interest-earning assets		52,986	$	737	5.64	%		108,005	$	1,578	5.88	%

Noninterest-earning assets		4,135						3,634

Total assets	$	57,121					$	111,639


Liabilities and Stockholders’ Equity
Debentures and accrued interest payable	$	24,077	$	477	8.03	%	$	78,712	$	1,567	8.01	%
Noninterest-bearing liabilities		1,618						2,176
Stockholder’s equity		31,426						30,751

Total liabilities and stockholders’ equity	$	57,121					$	111,639

Net interest income			$	260					$	11

Net interest-earning assets/margin	$	28,909			1.99	%	$	29,293			0.04	%

Ratio of total interest-earning assets to total interest-bearing liabilities		2.20x						1.37x

(1)	Mortgage loans receivable include non-performing loans

(2)	Annualized yield/rate

Net interest income is a major source of the Company’s revenues and is influenced primarily by the amount, distribution and repricing characteristics of its interest-earning assets and interest-bearing liabilities as well as by the relative levels and movements of interest rates.

Net interest income amounted to $11260,000 in the first quarter of ~~2008~~2009 compared to $~~652~~11,000 in the first quarter of ~~2007~~2008. The ~~decrease~~increase in net interest income was ~~almost~~primarily ~~entirely~~ due to athe ~~387~~use ~~basis~~of ~~point~~funds ~~decline~~received infrom the ~~yield~~satisfaction onof ~~the~~nonaccrual ~~Company’s~~loans ~~mortgage portfolio which was primarily due~~ to ~~the~~repay ~~fact~~subordinated ~~that~~debentures. ~~the Company earned $603~~Therefore,~~000~~ ~~less~~while onmortgage ~~nonaccrual~~ loans inand ~~the~~subordinated ~~first~~debentures ~~quarter~~both ofdecreased ~~2008~~by ~~compared~~similar ~~to the~~amounts, ~~first~~that ~~quarter~~part of ~~2007 and~~ the decrease ~~fact~~in ~~that new~~ loans ~~have~~that ~~been~~was ~~added~~due to the ~~Company’s~~payoff ~~portfolio with lower interest rates than maturing loans. Many~~ of ~~the~~nonaccrual ~~Company’s maturing~~ loans ~~had~~resulted ~~higher~~in ~~interest~~no ~~rates~~change in ~~2007~~net ~~due to the effect of~~ interest ~~rate~~income ~~increases~~while ~~over~~ the ~~two~~funds ~~year~~used ~~period~~from ~~which ended in~~ the ~~first~~nonaccrual ~~half~~loan ofrepayments ~~2007~~that ~~compared~~were used to arepay ~~declining~~debentures ~~rate~~resulted ~~environment~~in ~~since the fourth quarter of 2007. These declines were partially offset by~~ a ~~$5,793,000~~reduction ~~decrease~~ in ~~the~~interest ~~average~~expense ~~balance of~~and ~~debentures~~an ~~outstanding~~increase ~~and a 9 basis point decrease~~ in ~~the~~net ~~average~~ interest ~~rate of the Company’s outstanding debentures~~income.

~~Servicing~~21 agreement income decreased by $378,000 to $774,000 in the first quarter of 2008, from $1,152,000 in the same period of 2007 primarily due to a decrease in loan fees on mortgage loans originated by our affiliate, Intervest National Bank.

Gain on early repayment of mortgages decreased to $24,000 in the quarter ended March 31, 2008 compared to $70,000 in the quarter ended March 31, 2007. Gain on early repayment of mortgages is mostly based on individual loans being paid off earlier than the stated maturity. When a mortgage loan is repaid prior to maturity, the Company may recognize prepayment income, which consists largely of the recognition of unearned fees associated with such loans at the time of payoff and the receipt of prepayment fees and interest in excess of the contract rate in certain cases. The Company had less individual prepayment related gains in the first quarter of 2008 than the first quarter of 2007.

Salaries and employee benefits increased to $526,000 for the three months ended March 31, 2008 compared to $491,000 for the three months ended March 31, 2007. First quarter 2008 salaries included $24,000 of expense related to the issuance of stock options to the Company’s staff. The Company had 16 and 18 full time employees at March 31, 2008 and 2007, respectively.

The Company did not have service agreement income in the first quarter of 2009 compared to $774,000 in the first quarter of 2008. Effective January 1, 2009, the employees of the Company were transferred to and became employees of Intervest ~~Mortgage~~National ~~Corporation~~Bank where they continue to perform loan origination services for the Bank consistent with past practice. As a result, the Company did not have the fees generated by these former employees nor did the Company have the salary expense of these employees.

~~Notes~~The Company had a loss on early repayment of mortgages of $14,000 in the first quarter of 2009 which resulted from costs associated with selling loans to ~~Condensed~~Intervest ~~Financial~~National ~~Statements~~Bank ~~(Unaudited)~~compared to a gain of $24,000 in the quarter ended March 31, 2008. Gain on early repayment of mortgages is mostly based on individual loans being paid off earlier than the stated maturity. When a mortgage loan is repaid prior to maturity, the Company may recognize prepayment income, which consists largely of the recognition of unearned fees associated with such loans at the time of payoff and the receipt of prepayment fees and interest in excess of the contract rate in certain cases.

The ~~Company~~provision ~~recorded~~for aloan ~~provision~~losses ~~for~~increased ~~income~~to ~~taxes~~$212,000 for the first quarter of ~~2008~~2009 ~~amounting to $8,000,~~ compared to a $~~531~~4,000 ~~provision~~for in the first quarter of ~~2007~~2008. The ~~decrease~~ inincrease ~~the~~of ~~provision~~$208,000 was primarily due to the ~~corresponding~~downgrade ~~decrease~~of in the Company’s participation ~~pre-tax~~in ~~income.~~a ~~The~~loan ~~provision~~in ~~represented~~Saint ~~approximately~~Augustine ~~50%~~Florida ~~and~~as ~~46%~~described ofin ~~pretax~~note ~~income~~2 ~~for~~to the ~~quarters~~financial ~~ending March 31, 2008 and 2007 respectively~~statements. ~~The Company files consolidated Federal, New York State and New York City income tax returns with its Parent Company.~~

Salaries and employee benefits decreased to $62,000 for the three months ended March 31, 2009 compared to $526,000 for the three months ended March 31, 2008. The decrease was due to the transfer of the Company’s employees to the payroll of Intervest National Bank as discussed above. In the first quarter of 2009 the Company record salaries of $36,000 to reimburse Intervest National Bank for services performed by their staff relating to the operations of the Company. The Company had no full time employees at March 31, 2009 compared to 16 at March 31, 2008.

The Company recorded a loss of $1,034,000 on the early extinguishment of debentures due to the redemption prior to maturity of specific high rate debentures since market condition precluded the Company from reinvesting the proceeds from maturing loans at rates in excess of the rates on the repaid debentures. There were no losses during the first quarter of 2008.

General and administrative expenses decreased to $118,000 during the first quarter of 2009 compared to $270,000 in the first quarter of 2008, a decrease of $152,000. This decrease is primarily due to a $116,000 decrease in rent expense since the rent for the former employees of the Company is now being recorded by Intervest National Bank. Additionally, general and administrative expense decreased due to related decreases in expenses for telephone, trustee fees on debentures, insurance, travel and office supplies.

The Company recorded a tax benefit of $537,000 in the first quarter of 2009 compared to a tax provision of $8,000 in the first quarter of 2008. The decrease in the provision was due to the corresponding decrease in the Company’s pre-tax income. The provision represented approximately 46% and 50% of pretax income for the quarters ending March 31, 2009 and 2008 respectively. The Company files consolidated Federal, New York State and New York City income tax returns with its Parent Company.

Company Liquidity and Capital Resources

The Company’s lending business is dependent on its ability to generate a positive interest rate spread between the yields earned on its mortgage loans and the rates paid on its debentures. Competitive market conditions and lower pricing for new loans has made it increasingly difficult for the Company to identify suitable mortgage investment opportunities. As a result the Company has been using the proceeds from loan repayments to repay outstanding debentures, As discussed in note 5 to the financial statements, the Company has redeemed five different debenture series totaling $26,000,000 during 2009 to date. The Company has also notified holders of an additional debenture series that debentures totaling $4,000,000 will be redeemed on June 1, 2009. If current market conditions persist, additional early repayments of debentures will be considered.

The Company ~~relies~~has relied on the issuance of its subordinated debentures in registered, best efforts offerings to the public and proceeds of loan repayments as its primary ~~source~~sources of funds to support its loan originations. The Company needs to pay competitive interest rates to sell its debentures and also incurs underwriting commissions and other fees when debentures are sold, which reduce the net proceeds realized. InAs ~~addition~~described toin ~~funds~~note ~~from~~1 ~~sales~~to ofthe financial ~~debentures~~statements, asand in light of the ~~Bank’s~~significant ~~mortgage~~decline ~~loan~~in ~~portfolio~~the ~~has~~level ~~grown,~~of ~~service~~the ~~fee~~Company’s ~~income~~loan ~~received~~origination byactivities, ~~the~~a ~~Company~~servicing ~~from~~agreement ~~the~~with Intervest National Bank has ~~comprised~~not abeen ~~larger~~renewed ~~percentage~~for of2009. Rather, the Company’s ~~earnings~~employees became ~~and~~employees ~~resulting~~of ~~cash~~the ~~inflows~~Bank. ~~The~~Insofar ~~Bank~~as ~~has~~services, aincluding ~~servicing~~any ~~agreement~~origination ~~with~~services, ~~Intervest~~are ~~Mortgage~~performed ~~Corporation~~for ~~that~~the isCompany, ~~described~~the inCompany ~~Note~~will 6reimburse “the ~~Related~~Bank ~~party~~for ~~Transactions”~~the ~~included~~cost inof ~~this~~those ~~report~~services. ~~The~~As ~~Company~~a ~~received~~result ~~$774~~of these changes,~~000~~ in the ~~first~~Company ~~quarter~~no longer receives revenues for origination services. The impact of ~~2008~~any ~~from~~lost ~~the~~revenue ~~Bank~~will ~~pursuant~~be tomitigated or offset by the ~~agreement~~reduction in the Company’s salary and occupancy expense.

~~The~~As ~~Company,~~detailed asin ofnote 5 to the financial statements included elsewhere in this report, at March 31, 2009 and December 31, 2008, ~~had~~$14,000,000 and $7640,~~250~~000,000 respectively of the Company’s subordinated debentures ~~outstanding~~were ~~with~~outstanding with fixed interest rates that range from 6.2550% to 7.7500% per annum and maturities that range from ~~July~~April 1, ~~2008~~2011 to July 1, 2014. InDuring the first quarter of ~~2008~~2009, ~~Intervest~~the ~~Mortgage~~Company ~~Corporation~~repaid ~~did~~various ~~not~~debenture ~~issue~~series ~~any~~totaling ~~new debentures nor repay existing ones. At March 31, 2008,~~ $626,000,000. ofA more ~~debentures~~detailed ~~and~~discussion ~~$1,497,000~~ of ~~accrued~~these ~~interest~~redemptions ~~payable~~as ~~mature~~well byas ~~March 31,~~additional ~~2009.~~redemptions Onplanned ~~April 1,~~for ~~2008,~~2009 ~~The~~can ~~Company~~be ~~repaid~~found ~~from~~in ~~cash~~note on5 ~~hand $8,250,000 of debentures prior~~ to ~~their~~the ~~stated~~financial ~~maturity,~~statements ~~including $496,000~~in ofthis ~~related accrued interest payable~~document.

~~The~~At ~~Company, as of~~ March 31, ~~2008~~2009, the Company had approximately $165,~~571~~318,000 in cash and ~~short-term~~cash ~~investments,~~equivalents ~~compared~~with ~~to $532,000~~no of commitments to lend~~. In addition~~, ~~$30,177,000~~Approximately million of its mortgage loans (excluding nonaccrual loans) are scheduled to mature by March 31, 2009, although some portion is expected to be extended or refinanced. As a result, both cash and short-term investments (less $811,~~746~~563,000 ~~used to repay the debentures on April 1, 2008 as noted above) as well as the proceeds from the repayment~~ of ~~maturing~~ mortgages will bemature ~~available for investment~~ in ~~new~~2009, ~~mortgage~~excluding ~~loans.~~nonaccrual ~~Competitive market conditions and lower pricing for new~~ loans ~~has also made it more difficult for the Company to identify suitable mortgage investment opportunities~~. ~~The Company’s loan originations have decreased significantly from its historical levels~~ ~~and amounted to $1,200,000 in the first quarter of 2008. The level of future loan originations will fluctuate with market conditions and is unpredictable.~~

The Company ~~experienced~~continues to have a significant ~~increase~~amount inof ~~nonaccrual~~its ~~loans~~assets inon ~~the~~a ~~third~~nonaccrual ~~quarter~~basis ofor ~~2007~~in foreclosed property. As of March 31, ~~2008~~2009, 3122% of its mortgage loan portfolio ($288,~~370~~292,000) was on nonaccrual status, ~~which~~and ~~has~~$2,327,000 ~~adversely~~was ~~affected~~classified ~~its~~as ~~net interest~~foreclosed ~~income~~property. ~~and~~The ~~cash~~nonperforming ~~flows~~assets ~~derived~~have ~~therefrom,~~adversely ~~and~~affected ~~has~~the ~~placed~~Company’s anet ~~greater~~interest ~~reliance~~income onand cash flows ~~generated~~derived ~~from~~there ~~its services provided to the Bank~~from. If this level of nonaccrual loans were to increase or continue for an extended period, the Company’s ability to issue new debentures to the public, ~~originate new loans~~ and meet its debt service and operating cash flow requirements could be adversely affected. InDuring the first quarter of ~~2008~~2009, the Company’s interest income from its accruing loan portfolio ~~slightly~~and other short term investments exceeded the interest expense from its outstanding debentures by $11260,000 . As noted above, various debentures were repaid during onthe ~~April 1,~~first ~~2008~~quarter of 2009 prior to their stated maturities, which ~~will~~resulted ~~result~~ in ~~approximately $39,000~~an ofincrease in incremental net interest income per month ~~going~~which ~~forward~~approximated the loss in net interest income from the repayment of mortgage loans. A loss of $~~117~~1,034,000 from the early extinguishment was recorded induring ~~April~~the ~~2008~~first quarter of 2009, which represents the expensing of remaining related unamortized issuance costs. Additionally, as discussed in note 5 to the financial statements, a repayment is scheduled for June 1, 2009. This repayment will result in approximately $23,000 of incremental interest income per month

~~The~~23 collection of nonaccrual loans is also aggressively being pursued through foreclosure actions. There can be no assurance that additional loan loss provisions, loan chargeoffs or significant expenses will not be incurred with respect

~~Intervest~~ commencing ~~Mortgage~~June ~~Corporation~~2009. A loss of $126,000 is expected to be recorded in the second quarter of 2009 relating to the early repayment of debentures in the first quarter of 2009 resulting from the acceleration of unamortized placement costs.

~~Notes~~The collection of nonaccrual loans is also aggressively being pursued through foreclosure actions. There can be no assurance that additional loan loss provisions, loan chargeoffs or significant expenses will not be incurred with respect to ~~Condensed~~the ~~Financial~~ultimate ~~Statements~~collection ~~(Unaudited)~~of the nonaccrual loans, which collection is anticipated to be from the eventual sale of the collateral properties in most cases.

toThere have been historic disruptions in the ~~ultimate~~financial ~~collection~~systems during the past year and many lenders and financial institutions have reduced or ceased to provide funding to borrowers. The availability of credit, confidence in the ~~nonaccrual~~entire ~~loans~~financial sector, ~~which~~and ~~collection~~volatility isin ~~anticipated~~financial tomarkets behas ~~from~~been adversely affected. Although the ~~eventual~~Company ~~sale~~does ofnot lend in the ~~collateral~~home ~~properties~~mortgage market, and does not invest in ~~most~~any ~~cases~~collateralized debt obligations or collateralized mortgage obligations, these disruptions are likely to have some impact on all lenders in the United States including the Company.

The Company considers its current liquidity and sources of funds sufficient to satisfy its outstanding lending commitments and maturing liabilities. Management is not aware of any trends, known demand, commitments or uncertainties other than those discussed above that are expected to have a material impact on future operating results, liquidity or capital resources of ~~each entity~~the Company. However, there can be no assurances that adverse conditions may not arise in credit markets that would adversely impact the Company’s ability to raise funds ~~(either~~ through ~~attracting deposits, from~~ borrowings ~~or sales of assets)~~ to meet its operations and satisfy its outstanding lending commitments and maturing liabilities.

Off-Balance Sheet Commitments

~~Commitments~~The toCompany ~~extend~~does ~~credit~~not ~~amounted~~have any commitments to ~~$532,000~~extend credit at March 31, ~~2008, of which nearly all will either close or expire in 2008~~2009. The Company ~~issues~~has issued 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 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 to the Company. Since some of the commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements.

Asset and Liability Management

Interest rate risk arises from differences in the repricing of assets and liabilities within a given time period. The Company does not engage in trading or hedging activities and does not invest in interest-rate derivatives or enter into interest rate swaps.

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.

In 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. In 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.~~

A24 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 may also decrease in the event of an interest rate increase.

~~Intervest~~ flexible ~~Mortgage~~and ~~Corporation~~moved concurrently, the impact of any increase or decrease in interest rates on net interest income would be minimal.

~~Notes~~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 ~~Condensed~~changes ~~Financial~~in ~~Statements~~market ~~(Unaudited)~~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 may also decrease in the event of an interest rate increase.

The Company has a “floor,” or minimum rate, on many of its floating-rate loans that is determined in relation to prevailing market rates on the date of origination. This floor only adjusts upwards in the event of increases in the loan’s interest rate. This feature reduces the effect on interest income of a falling rate environment because the interest rates on such loans do not reset downward. However, the Company may nonetheless experience loan prepayments, the amount of which cannot be predicted, and reinvestment risk associated with the resulting proceeds.

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 Company’s one-year interest rate sensitivity gap was a positive $3220,~~457~~161,000, or 2943% of total assets at March 31, ~~2008~~2009, which was a ~~decrease~~increase from a positive $4423,~~139~~727,000, or 3931%, at December 31, ~~2007~~2008. The ~~decline~~increase in the positive GAP percentage is mostly due to $520,~~250~~000,000 of debentures with maturities of over 1 year that were redeemed onin ~~April 1,~~the ~~2008~~first quarter of 2009. These debentures, and associated interest payable, ~~are~~were reported in the GAP table as maturing in 0-3 months since notice was given to the debenture holders that such a redemption would take place.

The following table summarizes information relating to the Company’s interest-earning assets and interest-bearing liabilities as of March 31, ~~2008~~2009, that are scheduled to mature or reprice within the periods shown.

($ in thousands)	0-3Months	~~0-3 Months~~			4-~~12 Months~~12Months		~~Over 1-4 Years~~	Over 1-4Years	~~Over 4 Years~~		Over 4Years	~~Total~~		Total
Floating-rate loans (1)	$	~~$16~~9,~~205~~275		$	-$	—	~~$ -~~	$	-—		$	~~16,205~~—		$	9,275
Fixed-rate loans (1)		74,~~069~~460			~~15,325~~	5,925	~~16,760~~		98,~~062~~375			482,~~216~~125			20,885
Total loans		2313,~~274~~735			~~15,325~~	5,925	~~16,760~~		98,~~062~~375			642,~~421~~125			30,160
Short-term investments		64,~~605~~818			-	—	-		-—			~~6,605~~—			4,818
Total rate-sensitive assets	$	2918,~~879~~553		$	~~15,325~~$	5,925	~~$ 16,760~~	$	98,~~062~~375		$	712,~~026~~125		$	34,978
Debentures payable (1)	$	84,~~250~~000		$	~~3,000~~$	—	~~$ 38,500~~	$	~~26,500~~—		$	7610,~~250~~000		$	14,000
Accrued interest on debentures		~~1,497~~317			-	—	~~1,269~~		~~574~~—			~~3,340~~282			599
Total rate-sensitive liabilities	$	94,~~747~~317		$	~~3,000~~$	—	~~$ 39,769~~	$	~~27,074~~—		$	7910,~~590~~282		$	14,599
GAP (repricing differences)	$	2014,~~132~~236		$	~~12,325~~$	5,925	~~$(23,009)~~	$	~~(18~~8,~~012~~375	)	$	(8,~~564)~~157	)	$	20,379
Cumulative GAP	$	2014,~~132~~236		$	~~32,457~~$	20,161	~~$(9,448)~~	$	~~$(8~~28,~~564~~536	)	$	(820,~~564)~~379		$	20,379
Cumulative GAP to total assets		1730.9%1	%		~~28.8%~~	42.7	~~(8.4)~~%		(760.~~6)%~~4	%		(743.~~6)%~~1	%		43.1	%

Significant assumptions used in preparing the preceding gap table follow:

(1)

Floating-rate loans that adjust at a specified time are included in the period in which their interest rates are next scheduled to adjust rather than in the period in which they mature. Fixed-rate loans and subordinated debentures payable are scheduled, including repayments, according to their contractual maturities. Deferred loan fees are excluded from this analysis. Non-performing loans and the effect of prepayments are excluded from this analysis.

~~Item 3.~~25 ~~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-issuance activities. The Company has not engaged in and accordingly has no risk related to trading accounts, commodities, sub prime residential mortgages, interest rate hedges, development loans, collateralized debt obligations, collateralized mortgage obligations 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, 2007, which reflect changes in market prices and rates, can be found in note 14 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

~~Intervest~~Item ~~Mortgage~~3. ~~Corporation~~Quantitative and Qualitative Disclosures about Market Risk

~~Notes~~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-issuance activities. The Company has not engaged in and accordingly has no risk related to ~~Condensed~~trading ~~Financial~~accounts, ~~Statements~~commodities, ~~(Unaudited)~~sub prime residential mortgages, interest rate hedges, development loans, collateralized debt obligations, collateralized mortgage obligations 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, 2008, which reflect changes in market prices and rates, can be found in note 14 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

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 4.

Controls and Procedures

The Company’s management evaluated, with the participation of its Principal Executive and Financial Officers, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on such evaluation, the Principal Executive and Financial Officers have concluded that the Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports 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 SEC’s rules and regulations, and are operating in an effective manner.

There has been no change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

2126

Intervest Mortgage Corporation

Notes to Condensed Financial Statements (Unaudited)

PART II. OTHER INFORMATION

ITEM 1.

Legal Proceedings

Not Applicable

ITEM 1A.

Risk Factors

The Company’s business is affected by a number of factors, including but not limited to the impact of: interest rates; loan demand; loan concentrations; loan prepayments; dependence on brokers and other sources for new loan referrals, ability to raise funds for investment; competition; general or local economic conditions; credit risk and the related adequacy of the allowance for loan losses; terrorist acts; natural disasters; armed conflicts; environmental liabilities; regulatory supervision and regulation and costs thereof; dependence on a limited number of key personnel; and voting control held by a limited number of stockholders who are also executive officers and directors.

This Item 1A requires disclosure of any material changes from risk factors previously disclosed in the Company’s most recent Form 10-K. There have been no material changes to the Company’s ~~remaining~~ risk factors disclosed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, where such factors are discussed on pages 811 through 1416.

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Not Applicable

ITEM 3.

Defaults Upon Senior Securities

Not Applicable

ITEM 4.

Submission of Matters to a Vote of Security Holders

Not Applicable

ITEM 5.

Other Information

Not Applicable

ITEM 6.

Exhibits

The following exhibits are filed as part of this report:


31.0	-	Certification of the principal executive officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.

31.1	-	Certification of the principal financial officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.

32.0	-	Certification of the principal executive and principal financial officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

INTERVEST MORTGAGE CORPORATION
Date: April 24, 2008	By:	/s/	Lowell S. Dansker
Date: April 29, 2009	By:	/s/ Lowell S. Dansker
		Lowell S. Dansker, Chairman, President and Chief Executive Officer (Principal Executive Officer)	~~Lowell S. Dansker, Chairman, President and Chief Executive Officer (Principal Executive Officer)~~
	By:	/s/ John H. Hoffmann	~~John H. Hoffmann~~
		John H. Hoffmann, Vice President and Chief Financial Officer (Principal Financial Officer)	~~John H. Hoffmann, Vice President and Chief Financial Officer (Principal Financial Officer)~~

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TotalTable assets at March 31, 2008 increased slightly to $112,680,000, from $112,067,000 at December 31, 2007. The increase is primarily the result of an increase in cash received related to the collection of escrow funds. Contents

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Filing Compare · INTERVEST MORTGAGE CORP