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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004
------------------

Commission File No. 33-22976-NY
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INTERVEST MORTGAGE CORPORATION
------------------------------
(Exact name of registrant as specified in its charter)


New York 13-3415815
- ------------------------------------- -----------------------------------
(State or other jurisdiction (I.R.S. employer
of incorporation) identification no.)


1 ROCKEFELLER PLAZA, SUITE 400
NEW YORK, NEW YORK 10020-2002
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(Address of principal executive offices)

(212) 218-2800
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(Registrant's telephone number, including area code)



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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the Exchange Act):
YES [_] NO [X].

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

Title of Each Class: Shares Outstanding:
- ------------------- --------------------

Common Stock, no par value per share 100 shares outstanding at October 29, 2004
- ------------------------------------ ------------------------------------------


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INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
FORM 10-Q
SEPTEMBER 30, 2004
TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION Page
----

ITEM 1. FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets
as of September 30, 2004 (Unaudited) and December 31,2003. . . . . . . . . . . 2

Condensed Consolidated Statements of Operations (Unaudited)
for the Three-Months and Nine-Months Ended September 30, 2004 and 2003 . . . . 3

Condensed Consolidated Statements of Changes in Stockholder's Equity (Unaudited)
for the Nine-Months Ended September 30, 2004 and 2003. . . . . . . . . . . . . 4

Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Nine-Months Ended September 30, 2004 and 2003. . . . . . . . . . . . . 5

Notes to Condensed Consolidated Financial Statements (Unaudited) . . . . . . . . 6

Review by Independent Registered Public Accounting Firm. . . . . . . . . . . . . 11

Review Report of Independent Registered Public Accounting Firm . . . . . . . . . 12

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 13

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. . . . . . . . 20

ITEM 4. CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . 20

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS . . . . . . . 21

ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . . . . . . 21

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . 21

ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

ITEM 6. EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21



PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
- ---------------------------------------------------------------------
The Company is making this statement in order to satisfy the "Safe Harbor"
provision contained in the Private Securities Litigation Reform Act of 1995. The
statements contained in this report on Form 10-Q that are not statements of
historical fact may include forward-looking statements that involve a number of
risks and uncertainties. Such forward-looking statements are made based on
management's expectations and beliefs concerning future events impacting the
Company and are subject to uncertainties and factors relating to the Company's
operations and economic environment, all of which are difficult to predict and
many of which are beyond the control of the Company, that could cause actual
results of the Company to differ materially from those matters expressed in or
implied by forward-looking statements. The following factors are among those
that could cause actual results to differ materially from the forward-looking
statements: changes in general economic, market and regulatory conditions, the
development of an interest rate environment that may adversely affect the
Company's net interest income, other income or cash flow anticipated from the
Company's operations, investment and lending activities; and changes in laws and
regulations affecting the Company.


1

PART I. FINANCIAL INFORMATION
- --------------------------------
ITEM 1. FINANCIAL STATEMENTS
- -------------------------------



INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


SEPTEMBER 30, DECEMBER 31,
($ in thousands) 2004 2003
- ------------------------------------------------------------------------------------------------------------------
(Unaudited)

ASSETS
Cash $ 12,745 $ 1,379
Short-term investments 5,932 24,393
-------------------------------
Total cash and cash equivalents 18,677 25,772
Mortgage loans receivable (net of unearned fees and discounts and allowance
for loan losses aggregating $1,577 and $1,301, respectively-notes 2 and 3) 108,586 89,116
Accrued interest receivable 730 642
Fixed assets, net 80 86
Deferred debenture offering costs, net (note 4) 3,536 2,851
Other assets 1,407 1,111
- ------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 133,016 $ 119,578
==================================================================================================================


LIABILITIES
Mortgage escrow funds payable $ 2,181 $ 1,671
Subordinated debentures payable (note 5) 97,850 87,350
Debenture interest payable at maturity (note 5) 9,987 12,052
Other liabilities 166 332
- ------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 110,184 101,405
- ------------------------------------------------------------------------------------------------------------------


STOCKHOLDER'S EQUITY
Class A common stock (no par value, 200 shares authorized, 100 shares issued and 2,100 2,100
outstanding)
Class B common stock (no par value, 100 shares authorized, none issued) - -
Additional paid-in-capital 11,510 8,510
Retained earnings 9,222 7,563
- ------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 22,832 18,173
- ------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 133,016 $ 119,578
==================================================================================================================
See accompanying notes to condensed consolidated financial statements.



2



INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)


THREE-MONTHS ENDED NINE-MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------------------
($ in thousands) 2004 2003 2004 2003
- -------------------------------------------------------------------------------------------------


REVENUES
Interest and fee income on mortgages $ 2,515 $ 2,409 $ 7,082 $ 6,778
Interest income on short-term investments 61 33 188 141
---------------------------------------------
Total interest and fee income 2,576 2,442 7,270 6,919
Service agreement income - related party (note 6) 1,212 615 3,068 1,599
Gain on early repayment of mortgages 70 47 359 180
Other income 40 44 173 136
- -------------------------------------------------------------------------------------------------
TOTAL REVENUES 3,898 3,148 10,870 8,834
- -------------------------------------------------------------------------------------------------

EXPENSES
Interest on debentures 1,781 1,568 5,124 4,543
Amortization of deferred debenture offering costs 295 243 857 691
Provision for loan losses 6 24 141 117
General and administrative 618 377 1,662 1,137
- -------------------------------------------------------------------------------------------------
TOTAL EXPENSES 2,700 2,212 7,784 6,488
- -------------------------------------------------------------------------------------------------

Income before income taxes 1,198 936 3,086 2,346
Provision for income taxes 554 427 1,427 1,068
- -------------------------------------------------------------------------------------------------
NET INCOME $ 644 $ 509 $ 1,659 $ 1,278
=================================================================================================
See accompanying notes to condensed consolidated financial statements.



3



INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(Unaudited)


NINE-MONTHS ENDED
SEPTEMBER 30,
---------------------
($ in thousands) 2004 2003
- --------------------------------------------------------------------


COMMON STOCK
- --------------------------------------------------------------------
Balance at beginning and end of period $ 2,100 $ 2,100
- --------------------------------------------------------------------

ADDITIONAL PAID-IN-CAPITAL
Balance at beginning of period 8,510 3,509
Contributions from Parent Company 3,000 4,001
- --------------------------------------------------------------------
Balance at end of period 11,510 7,510
- --------------------------------------------------------------------

RETAINED EARNINGS
Balance at beginning of period 7,563 5,804
Net income for the period 1,659 1,278
- --------------------------------------------------------------------
Balance at end of period 9,222 7,082
- --------------------------------------------------------------------

- --------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY AT END OF PERIOD $ 22,832 $ 16,692
====================================================================
See accompanying notes to condensed consolidated financial statements.



4



INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


NINE-MONTHS ENDED
SEPTEMBER 30,
-----------------------
($ in thousands) 2004 2003
- -----------------------------------------------------------------------------------------


OPERATING ACTIVITIES
Net income $ 1,659 $ 1,278
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 22 24
Provision for loan losses 141 117
Amortization of deferred debenture offering costs 857 691
Amortization of premiums, fees and discounts, net (25) (652)
Gain on early repayment of mortgage loans receivable (359) (180)
Increase in mortgage escrow funds payable 510 698
(Decrease) increase in debenture interest payable at maturity (2,065) 1,040
Change in all other assets and liabilities, net (31) 610
- -----------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 709 3,626
- -----------------------------------------------------------------------------------------

INVESTING ACTIVITIES
Principal repayments of mortgage loans receivable 46,565 44,013
Originations of mortgage loans receivable (66,311) (68,039)
Decrease in interest-earning time deposits - 2,000
Purchases of fixed assets, net (16) (9)
- -----------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (19,762) (22,035)
- -----------------------------------------------------------------------------------------

FINANCING ACTIVITIES
Proceeds from issuance of debentures, net of offering costs 19,958 14,832
Principal repayments of debentures (11,000) (1,400)
Capital contributions from Parent Company 3,000 4,001
- -----------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 11,958 17,433
- -----------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (7,095) (976)
Cash and cash equivalents at beginning of period 25,772 17,946
- -----------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,677 $ 16,970
=========================================================================================

SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest $ 7,189 $ 3,502
Income taxes 1,622 1,372
- -----------------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.



5

INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------

NOTE 1 - GENERAL

The condensed consolidated financial statements of Intervest Mortgage
Corporation and Subsidiaries (the "Company") in this report have not been
audited except for the information derived from the audited Consolidated Balance
Sheet as of December 31, 2003. The financial statements in this report should be
read in conjunction with the consolidated financial statements and related notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2003.

The condensed consolidated financial statements include the accounts of
Intervest Mortgage Corporation and its wholly owned subsidiaries, Intervest
Distribution Corporation and Intervest Realty Servicing Corporation. All
material intercompany accounts and transactions have been eliminated in
consolidation.

The Company is a wholly owned subsidiary of Intervest Bancshares Corporation
(the "Parent Company"). Officers of the Company are Directors of the Company and
are officers, principal shareholders and Directors of the Parent Company.

The Company is engaged in the real estate business, including the origination
and purchase of real estate mortgage loans, consisting of first mortgage loans
and junior mortgage loans. The Company's investment policy emphasizes the
investment in mortgage loans on income producing properties. The Company also
provides loan origination services to Intervest National Bank, a wholly owned
subsidiary of the Parent Company.

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

NOTE 2 - MORTGAGE LOANS RECEIVABLE

Mortgage loans receivable are summarized as follows:



At September 30, 2004 At December 31, 2003
($ in thousands) # of loans Amount # of loans Amount
- ----------------------------------------------------------------------------------------------------------

Residential multifamily mortgage loans receivable 57 $ 57,983 47 $ 48,039
Commercial real estate mortgage loans receivable 39 36,025 32 30,596
Land and land development loans receivable 6 16,155 3 11,782
- ----------------------------------------------------------------------------------------------------------
Mortgage loans receivable 102 110,163 82 90,417
Deferred loan fees and unamortized discount (1,245) (1,110)
- ----------------------------------------------------------------------------------------------------------
Mortgage loans receivable, net of fees and discount 108,918 89,307
Allowance for mortgage loan losses (332) (191)
- ----------------------------------------------------------------------------------------------------------
Mortgage loans receivable, net $ 108,586 $ 89,116
==========================================================================================================



6

INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------

NOTE 2 - MORTGAGE LOANS RECEIVABLE, CONTINUED

The following table shows scheduled contractual principal repayments of the
mortgage loans receivable portfolio at September 30, 2004:



($ in thousands)
- -------------------------------------------------------

For the three-months ended December 31, 2004 $ 6,029
For the year ended December 31, 2005 48,255
For the year ended December 31, 2006 26,958
For the year ended December 31, 2007 16,317
For the year ended December 31, 2008 1,264
Thereafter 11,340
- -------------------------------------------------------
$110,163
=======================================================


NOTE 3 - ALLOWANCE FOR MORTGAGE LOAN LOSSES

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



Quarter Ended Nine-Months Ended
September 30, September 30,
---------------------------------------

($ in thousands) 2004 2003 2004 2003
- -------------------------------------------------------------------------
Balance at beginning of period $ 326 $ 194 $ 191 $ 101
Provision charged to operations 6 24 141 117
- -------------------------------------------------------------------------
Balance at end of period $ 332 $ 218 $ 332 $ 218
=========================================================================


At September 30, 2004, one loan with a principal balance of $179,000 was on
nonaccrual status. This loan is considered impaired under the criteria of SFAS
No.114. This loan is a second mortgage where Intervest National Bank, an
affiliated Company, holds the first mortgage. The Company's recorded investment
in this loan is $183,000. The Company has commenced foreclosure proceedings
against the borrower and currently believes the estimated fair value of the
underlying properties is sufficient to provide for repayment of its recorded
investment. At December 31, 2003, two real estate loans with an aggregate
principal balance of $1,057,000 were on nonaccrual status and considered
impaired. During the quarter ended March 31, 2004, one of these loans was repaid
and the other was brought current and returned to accrual status. The loan that
was brought current in the quarter ended March 31, 2004, is the same loan that
has now been placed on nonaccrual status. The Company believes that a specific
valuation allowance was not required at any time for impaired loans. At
September 30, 2004 and December 31, 2003, there were no other impaired loans or
loans ninety days past due and still accruing interest.

Interest income that was not recorded on nonaccrual loans under their
contractual terms for the third quarter and first nine months of 2004 amounted
to $10,000, compared to $29,000 for the same periods of 2003. The average
balance of nonaccrual (impaired) loans for the quarter and nine months ended
September 30, 2004 was $119,000 and $40,000, respectively. The average balance
of impaired loans for the quarter and nine-months ended September 30, 2003 was
$1,058,000 and $343,000, respectively.

NOTE 4 - DEFERRED DEBENTURE OFFERING COSTS

Deferred debenture offering costs are summarized as follows:



At September 30, At December 31,
($ in thousands) 2004 2003
- ----------------------------------------------------------------------------

Deferred debenture offering costs $ 7,844 $ 7,209
Less accumulated amortization (4,308) (4,358)
- ----------------------------------------------------------------------------
Deferred debenture offering costs, net $ 3,536 $ 2,851
=============================================================================



7

INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------

NOTE 5 - SUBORDINATED DEBENTURES PAYABLE

The following table summarizes debentures payable.



At September 30, At December 31,
----------------- ----------------
($in thousands) 2004 2003
- --------------------------------------------------------------------------------------------------------------

Series 05/12/95 - interest at 2% above prime - due April 1, 2004 $ - $ 9,000
Series 10/19/95 - interest at 2% above prime - due October 1, 2004 9,000 9,000
Series 05/10/96 - interest at 2% above prime - due April 1, 2005 10,000 10,000
Series 10/15/96 - interest at 2% above prime - due October 1, 2005 5,500 5,500
Series 04/30/97 - interest at 1% above prime - due October 1, 2005 8,000 8,000
Series 11/10/98 - interest at 9% fixed - due January 1, 2005 2,600 2,600
Series 06/28/99 - interest at 8 1/2% fixed - due July 1, 2004 - 2,000
Series 06/28/99 - interest at 9% fixed - due July 1, 2006 2,000 2,000
Series 09/18/00 - interest at 8 1/2% fixed - due January 1, 2006 1,250 1,250
Series 09/18/00 - interest at 9% fixed - due January 1, 2008 1,250 1,250
Series 08/01/01 - interest at 7 1/2% fixed - due April 1, 2005 1,750 1,750
Series 08/01/01 - interest at 8% fixed - due April 1, 2007 2,750 2,750
Series 08/01/01 - interest at 8 1/2% fixed - due April 1, 2009 2,750 2,750
Series 01/17/02 - interest at 7 1/4% fixed - due October 1, 2005 1,250 1,250
Series 01/17/02 - interest at 7 1/2% fixed - due October 1, 2007 2,250 2,250
Series 01/17/02 - interest at 7 3/4% fixed - due October 1, 2009 2,250 2,250
Series 08/05/02 - interest at 7 1/4% fixed - due January 1, 2006 1,750 1,750
Series 08/05/02 - interest at 7 1/2% fixed - due January 1, 2008 3,000 3,000
Series 08/05/02 - interest at 7 3/4% fixed - due January 1, 2010 3,000 3,000
Series 01/21/03 - interest at 6 3/4% fixed - due July 1, 2006 1,500 1,500
Series 01/21/03 - interest at 7% fixed - due July 1, 2008 3,000 3,000
Series 01/21/03 - interest at 7 1/4% fixed - due July 1, 2010 3,000 3,000
Series 07/25/03 - interest at 6 1/2% fixed - due October 1, 2006 2,500 2,500
Series 07/25/03 - interest at 6 3/4% fixed - due October 1, 2008 3,000 3,000
Series 07/25/03 - interest at 7% fixed - due October 1, 2010 3,000 3,000
Series 11/28/03 - interest at 6 1/4% fixed - due April 1, 2007 2,000 -
Series 11/28/03 - interest at 6 1/2% fixed - due April 1, 2009 3,500 -
Series 11/28/03 - interest at 6 3/4% fixed - due April 1, 2011 4,500 -
Series 06/07/04 - interest at 6 1/4% fixed - due January 1, 2008 2,500 -
Series 06/07/04 - interest at 6 1/2% fixed - due January 1, 2010 4,000 -
Series 06/07/04 - interest at 6 3/4% fixed - due January 1, 2012 5,000 -
- -------------------------------------------------------------------------------------------------------------
$ 97,850 $ 87,350
=============================================================================================================


In the table above, prime represents the prime rate of JPMorganChase Bank, which
was 4.75% on September 30, 2004 and 4.00% on December 31, 2003. The floating
rate debentures have a maximum interest rate of 12%.

In July of 2004, the Company issued its Series 6/7/04 debentures in the
principal amount of $11,500,000. Net proceeds, after deferred offering costs,
amounted to $10,672,000. In January of 2004, the Company issued its Series
11/28/03 debentures in the principal amount of $10,000,000. Net proceeds, after
deferred offering costs, amounted to $9,252,000. On March 1, 2004, Intervest
Mortgage Corporation's Series 5/12/95 debentures due April 1, 2004 were redeemed
for $9,000,000 of principal and $2,749,000 of accrued interest. On May 1, 2004,
Intervest mortgage Corporation's Series 6/28/99 debentures due July 1, 2004 were
redeemed for $2,000,000 of principal and $980,000 of accrued interest.

Interest is paid quarterly on the Company's debentures except for the following:
$1,950,000 of Series 10/19/95; $1,980,000 of Series 5/10/96; all of 11/10/98,
6/28/99, 9/18/00; $770,000 of Series 8/01/01; $270,000 of Series 1/17/02;
$1,520,000 of Series 8/05/02; $1,750,000 of Series 11/28/03; and $1,910,000 of
Series 6/7/04 debentures, which accrue and compound interest quarterly, with
such interest due and payable at maturity. Any debenture holder of Series
10/19/95 and 5/10/96 whose interest accrues and is due at maturity may at any
time elect to receive the accrued interest and subsequently receive regular
payments of interest.


8

INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------

NOTE 5 - SUBORDINATED DEBENTURES PAYABLE, CONTINUED

The holders of Series 11/10/98 thru 9/18/00 and 1/17/02 thru 6/7/04 debentures
can require the Company repurchase the debentures for face amount plus accrued
interest each year (beginning October 1, 2005 for Series 1/17/02, January 1,
2006 for Series 8/05/02, July 1, 2006 for Series 1/21/03, October 1, 2006 for
Series 7/25/03, January 1, 2007 for Series 11/28/03 and January 1, 2008 for
Series 6/7/04) provided, however, in no calendar year will the Company be
required to purchase more than $100,000 in principal amount of each maturity, in
each series of debentures, on a non-cumulative basis.

The Company's debentures may be redeemed at its option at any time, in whole or
in part, for face value, except for Series 11/28/03 and Series 6/7/04.
Redemptions would be at a premium of 1% if they occurred prior to January 1,
2005 for the Series 11/28/03 debentures and prior to July 1, 2005 for the Series
6/7/04 debentures. All the debentures are unsecured and subordinate to all
present and future senior indebtedness, as defined in the indenture related to
each debenture.

The Company has filed a registration statement relating to an offering of
additional debentures. It is anticipated that debentures in an aggregate
principal amount of up to $14,000,000 will be issued in the fourth quarter of
2004.

Scheduled contractual maturities of debentures as of September 30, 2004 are
summarized as follows:



($ in thousands) Principal Accrued Interest
- ----------------------------------------------------------------------------

For the three-months ended December 31, 2004 $ 9,000 $ 3,455
For the year ended December 31, 2005 29,100 3,768
For the year ended December 31, 2006 9,000 1,716
For the year ended December 31, 2007 7,000 111
For the year ended December 31, 2008 12,750 622
Thereafter 31,000 315
- ----------------------------------------------------------------------------
$ 97,850 $ 9,987
============================================================================


NOTE 6 - RELATED PARTY TRANSACTIONS

From time to time, the Company participates with Intervest National Bank (a
wholly owned subsidiary of the Parent Company) in certain mortgage loans
receivable. The Company had no participations outstanding with Intervest
National Bank at September 30, 2004, compared to an outstanding balance of
$5,533,000 at December 31, 2003.

The Company has a service agreement, which renews each January 1 unless
terminated by either party, with Intervest National Bank with respect to
providing the bank with mortgage loan origination services. In connection with
this service agreement, the Company earned $1,212,000 and $3,068,000 for the
three-months and nine-months ended September 30, 2004, compared to $615,000 and
$1,599,000 for the same periods of 2003, respectively.

The Company has interest-bearing and noninterest-bearing deposit accounts with
Intervest National Bank totaling $2,922,000 at September 30, 2004 and
$18,869,000 at December 31, 2003. The Company earned interest income of $28,000
and $102,000 from these deposits for the three-months and nine-months ended
September 30, 2004, compared to $27,000 and $51,000 for the same periods of
2003, respectively.

Intervest Securities Corporation (another wholly owned subsidiary of the Parent
Company) received commissions and fees from the Company in connection with the
placement of the Company's debentures. These fees aggregated $63,000 and $38,000
for the quarters ended September 30, 2004 and 2003, respectively. For the
nine-months ended September 30, 2004 and 2003, commissions and fees aggregating
$119,000 and $77,000, respectively, were paid to Intervest Securities
Corporation.


9

INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

- --------------------------------------------------------------------------------

NOTE 6 - RELATED PARTY TRANSACTIONS, CONTINUED

The Company paid fees of approximately $59,000 and $124,000 for the three-months
and nine-months ended September 30, 2004, respectively, and $27,000 and $137,000
for the three-months and nine-months ended September 30, 2003, respectively, for
legal services rendered by a law firm, a partner of which is a director of the
Company.

The Company paid commissions and fees in connection with the placement of its
debentures to a broker/dealer, a principal of which is a director of the
Company, of $258,000 and $364,000 during the three-months ending September 30,
2004 and 2003, respectively. For the nine-months ended September 30, 2004 and
2003, the Company paid such commissions and fees aggregating $679,000 and
$531,000, respectively.

NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS

In March 2004, the SEC issued Staff Accounting Bulletin No. 105, "Application of
Accounting Principles to Loan Commitments" (SAB 105). SAB 105 provides
recognition guidance for entities that issue loan commitments that are required
to be accounted for as derivative instruments. Currently, loan commitments that
the Company enters into would not be required to be accounted for as derivative
instruments under SAB 105.


10

INTERVEST MORTGAGE CORPORATION AND SUBSIDIARIES

REVIEW BY INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Eisner LLP, the Company's independent registered public accounting firm, has
made a limited review of the condensed consolidated financial statements as of
September 30, 2004, and for the three- and nine-month periods ended September
30, 2004 and September 30, 2003 presented in this document, in accordance with
the standards established by the Public Company Accounting Oversight Board.

Their report furnished pursuant to Article 10 of Regulation S-X is included
herein.


11

REVIEW 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 consolidated balance sheet of
Intervest Mortgage Corporation and Subsidiaries (the "Company") as of September
30, 2004, and the related condensed consolidated statements of operations for
each of the three-month and nine-month periods ended September 30, 2004 and 2003
and the related condensed consolidated statements of changes in stockholder's
equity and cash flows for the nine months ended September 30, 2004 and 2003.
These interim condensed consolidated 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 interim condensed consolidated financial statements for
them to be in conformity with accounting principles generally accepted in the
United States of America.

We have previously audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated balance
sheet of the Company as of December 31, 2003 and the related consolidated
statements of operations, changes in stockholder's equity and cash flows for the
year then ended (not presented herein), and in our report dated February 3,
2004, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the condensed
consolidated balance sheet as of December 31, 2003 is fairly stated in all
material respects in relation to the consolidated balance sheet from which it
has been derived.



/s/ Eisner LLP
- ----------------
New York, New York
October 20, 2004


12

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL
- -------

Intervest Mortgage Corporation and its wholly owned subsidiaries, Intervest
Distribution Corporation and Intervest Realty Servicing Corporation (hereafter
referred to as the "Company" on a consolidated basis), are engaged in the real
estate business, including the origination and purchase of real estate mortgage
loans, consisting of first mortgage and junior mortgage loans. The Company also
provides loan origination services to Intervest National Bank, a wholly owned
subsidiary of Intervest Bancshares Corporation.

Intervest Bancshares Corporation (which is a financial holding company and
hereafter referred to as the "Parent Company") owns 100% of the capital stock of
the Company. The Company's executive officers are directors of the Company and
are also officers, directors and principal shareholders of the Parent Company.
In addition to Intervest Mortgage Corporation, the Parent Company also owns
Intervest National Bank (a national bank with its headquarters and full-service
banking office in Rockefeller Center, New York, and four full-service banking
offices in Clearwater, Florida and one in South Pasadena, Florida) and Intervest
Securities Corporation (a broker/dealer that is an NASD and SIPC member firm
also located in Rockefeller Center, New York). Intervest Securities Corporation
participates as a selected dealer from time to time in the Company's offerings
of debentures.

The Company has historically invested primarily in short-term real estate
mortgage loans that mature within approximately five years and are secured by
income producing real property. The properties to be mortgaged are inspected by
representatives of the Company and mortgage loans are made only on those type of
properties where management is knowledgeable as to operating income and expense.
The Company generally relies upon management in connection with the valuation of
properties. From time to time, however, it may engage independent appraisers
and other agents to assist in determining the value of income-producing
properties underlying mortgages, in which case the costs associated with such
services are generally paid by the mortgagee. The Company does not finance new
construction. While the Company has not previously made acquisitions of real
property, it may also, from time to time, acquire interests in real property,
including fee interests.

The Company's mortgage portfolio is composed predominantly of mortgages on
multi-family residential properties, many of which are subject to applicable
rent control and rent stabilization statutes and regulations. In both cases,
any increases in rent are subject to specific limitations. As such, the general
movement of real estate values does not affect properties of the nature of those
constituting the most significant portion of the Company's mortgage portfolio in
the same manner as other income-producing properties.

The prepayment of mortgage loans tends to increase during periods of declining
interest rates and tends to decrease during periods of increasing interest
rates. Certain of the Company's mortgages include prepayment provisions, and
others prohibit prepayment of indebtedness entirely.

The Company's profitability depends on its net interest income, which is the
difference between interest income generated from its mortgage loans and the
interest expense, inclusive of amortization of offering costs, incurred on its
debentures, and service fee income from its affiliate, Intervest National Bank.
The Company's profitability is also affected by its noninterest income and
expenses, provision for loan losses and income taxes. Noninterest income
consists of fee income from providing mortgage loan origination and other
services to Intervest National Bank as well as loan service charges and
prepayment income generated from the Company's loan portfolio. Noninterest
expense consists mainly of compensation and benefits expense, occupancy
expenses, professional fees, insurance expense and other operating expenses.

The Company's profitability is significantly affected by general economic and
competitive conditions, changes in market interest rates, government policies
and actions of regulatory authorities. Since the properties underlying the
Company's mortgages are concentrated in the New York City area, the economic
conditions in that area also have an impact on the Company's operations.
Additionally, terrorist acts, such as those that occurred on September 11, 2001,


13

and armed conflicts, such as the recent Gulf War, and natural disasters, such as
hurricanes, may have an adverse impact on economic conditions.

COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
- --------------------------------------------------------------------------------

Total assets at September 30, 2004 increased to $133,016,000, from $119,578,000
at December 31, 2003. The increase reflected a $19,746,000 increase in mortgage
loans outstanding, partially offset by a $7,095,000 decrease in cash and cash
equivalents. The net increase in assets was funded by a $10,500,000 net increase
in subordinated debentures outstanding, a $3,000,000 increase in paid-in-capital
and a $1,659,000 increase in retained earnings, all of which were partially
offset by a $2,065,000 decrease in subordinated debenture interest payable.

Cash and cash equivalents amounted to $18,677,000 at September 30, 2004,
compared to $25,772,000 at December 31, 2003. The decrease reflected a lower
level of balances maintained in money market accounts and short-term commercial
paper investments, partially offset by a higher level of noninterest-bearing
funds, most of which was used on October 1, 2004 to repay maturing subordinated
debentures and related accrued interest.

Mortgage loans receivable, net of unearned income and allowance for mortgage
loan losses, amounted to $108,586,000 at September 30, 2004, compared to
$89,116,000 at December 31, 2003. The increase was due to new mortgage loan
originations exceeding repayments during the period.

Deferred subordinated debenture offering costs, net of accumulated amortization,
increased to $3,536,000 at September 30, 2004, from $2,851,000 at December 31,
2003. The increase was primarily due to incremental costs associated with the
issuance in 2004 of Series 11/28/03 and Series 6/7/04 subordinated debentures,
which was partially offset by normal amortization.

Total liabilities at September 30, 2004 increased to $110,184,000, from
$101,405,000 at December 31, 2003 largely due to a higher level of subordinated
debentures outstanding and mortgage escrow funds payable.

Subordinated debentures outstanding at September 30, 2004 increased to
$97,850,000, from $87,350,000 at December 31, 2003. The increase was due to the
issuance of Series 11/28/03 and 6/7/04 debentures with a principal amount of
$10,000,000 and $11,500,000, respectively. These increases were partially offset
by the redemption of Series 5/12/95 and Series 6/28/99 subordinated debentures
in the principal amount of $9,000,000 and $2,000,000, respectively, plus accrued
interest of $2,749,000 and $980,000, respectively.

Subordinated debentures interest payable decreased to $9,987,000 at September
30, 2004, from $12,052,000 at December 31, 2003, primarily due to the payment of
accrued interest as noted above, partially offset by the accrual of interest on
the balance of the subordinated debentures outstanding.

Mortgage escrow funds increased to $2,181,000 at September 30, 2004, from
$1,671,000 at December 31, 2003. The increase was primarily due to new escrow
funds resulting from a higher level of mortgage loans receivable. 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.

Stockholder's equity increased to $22,832,000 at September 30, 2004, from
$18,173,000 at year-end 2003. The increase was due to capital contributions of
$3,000,000 from the Parent Company during the period and net income of
$1,659,000 for the nine-months ended September 30, 2004.

COMPARISON OF RESULTS OF OPERATIONS FOR THE QUARTERS ENDED SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
AND 2003
- ---------

The Company recorded net income of $644,000 for the third quarter of 2004,
compared to net income of $509,000 for the third quarter of 2003. This increase
was primarily the result of a higher level of service agreement income and an
increase in interest income on mortgage loans, which was partially offset by an
increase in subordinated debentures interest expense and a higher level of
general and administrative expenses.


14

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.



For the Three-Months Ended September 30,
----------------------------------------
2004 2003
--------------------------------- ---------------------------------
Average Interest Annual Average Interest Annual
($ in thousands) Balance Inc./Exp. Yield/Rate Balance Inc./Exp. Yield/Rate
- -----------------------------------------------------------------------------------------------------------------

Assets
Mortgage loans receivable $110,115 $ 2,515 9.09% $ 99,019 $ 2,409 9.65%
Short-term investments 15,004 61 1.61 8,677 33 1.49
- -----------------------------------------------------------------------------------------------------------------
Total interest-earning assets 125,119 $ 2,576 8.19% 107,696 $ 2,442 8.99%
- -----------------------------------------------------------------------------------------------------------------
Noninterest-earning assets 4,078 3,345
- -----------------------------------------------------------------------------------------------------------------
Total assets $129,197 $111,041
- -----------------------------------------------------------------------------------------------------------------

Liabilities and Stockholders' Equity
Debentures and accrued interest payable $104,901 $ 2,076 7.87% $ 94,175 $ 1,811 7.63%
Noninterest-bearing liabilities 2,285 1,815
Stockholder's equity 22,011 15,051
- -----------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $129,197 $111,041
- -----------------------------------------------------------------------------------------------------------------
Net interest income $ 500 $ 631
- -----------------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin $ 20,218 1.59% $ 13,521 2.33%
- -----------------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
to total interest-bearing liabilities 1.19x 1.14x
- -----------------------------------------------------------------------------------------------------------------


Net interest and dividend income from money market accounts is a significant
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 $500,000 in the third quarter of 2004, compared
to $631,000 in the third quarter of 2003. The decrease in net interest income
was due to a lower net interest margin, partially offset by growth in the
Company's total interest-earning assets. The decrease in the margin was due to
the Company's yield on interest-earning assets decreasing without and offsetting
decrease in its cost of subordinated debentures. The growth in average assets
consisted of new mortgage loans of $11,096,000 and a $6,356,000 increase in
short-term investments, which were funded primarily by new subordinated
debentures of $10,726,000 and a $6,960,000 increase in average stockholders'
equity.

During the third quarter of 2004, the Company continued to operate in a
refinancing environment where higher rate loans were paid off and lower rate
loans were originated for portfolio. This contributed to a reduction in net
interest income, the effects of which were partially offset by an increase in
gain on the early repayment of loans. In addition, a debenture offering that
closed in July 2004 temporarily increased the Company's short-term investments
and its interest expense.

In a low interest rate environment, the yield on interest-earning assets
decreased 80 basis points to 8.19% in the 2004 quarter due to lower rates on new
mortgage loans originated as well as prepayments of higher-yielding loans,
partially offset by higher yields earned on certain floating rate loans indexed
to prime and short-term investments. On each of June 30, 2004, August 10, 2004
and September 21, 2004, the prime rate increased by 25 basis points. On
September 30, 2004, the prime rate was 4.75 %.

The cost of subordinated debentures increased 24 basis points to 7.87% in the
2004 quarter primarily due to: the repayment of a lower rate Series 5/12/95
floating-rate subordinated debentures in the first quarter of 2004; the


15

issuance of Series 7/25/03, Series 11/28/03 and Series 6/7/04 subordinated
debentures at slightly higher fixed interest rates and the effect of higher
rates paid on the remaining floating-rate subordinated debentures. The
floating-rate subordinated debentures are indexed to the JPMorgan Chase Bank
prime rate in effect in the beginning of the quarter, which increased by a total
of 25 basis points from the third quarter of 2003. These increases were
partially offset by the maturity of a portion of the Series 6/28/99 and the
Series 9/18/00 subordinated debentures which were at higher rates.

Service agreement income, which is a significant source of the Company's
revenues, was $1,212,000 for the third quarter of 2004, compared to $615,000 in
the same period of 2003. The increase of $597,000 was the result of increased
loan origination services provided to Intervest National Bank.

Gain on early repayment of mortgages increased to $70,000 for the quarter ended
September 30, 2004 from $47,000 for the quarter ended September 30, 2003. The
increase of $23,000 was mostly due to a higher level of loans being repaid prior
to maturity. Gain on early repayment consists largely of the recognition of
unearned fees associated with such loans at the time of payoff and the receipt
of prepayment penalties and interest in certain cases.

The provision for loan losses was $6,000 for the third quarter of 2004, compared
to $24,000 in the same period of 2003. The lower provision was primarily due to
a $1,377,000 increase in loans outstanding in the third quarter of 2004,
compared to a $6,347,000 increase in loans outstanding in the third quarter of
2003.

General and administrative expenses increased $241,000 to $618,000 for the
quarter ended September 30, 2004, from $377,000 for the same period of 2003. The
increase was primarily the result of a $101,000 increase in occupancy expenses,
an $88,000 increase in salaries and employee benefits expense and a $37,500
management fee paid to the Parent Company .

Occupancy expenses increased due to the payment of additional rent on the
Company's new office space. The lease on the Company's former space expired in
September of 2004 and the Company's obligation to pay approximately $22,000 per
month on that space also ended in September 2004.

Salaries and employee benefits expense increased due to an increase in staff, a
higher cost of employee benefits, bonus payments and normal salary increases.
The Company had 17 fulltime employees at September 30, 2004 versus 14 at
September 30, 2003.

During the third quarter of 2004, the Company commenced paying a management fee
to the Parent Company of $37,500 per quarter. There was no such fee in the third
quarter of 2003.

The provision for income taxes for the quarter ended September 30, 2004 amounted
to $554,000, compared to $427,000 for the quarter ended September 30, 2003. The
Company's effective tax rate was approximately 46% for both periods. The
Company files consolidated Federal, New York State and New York City income tax
returns with its Parent Company.

COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
AND 2003
- ---------

The Company recorded net income of $1,659,000 for the first nine months of 2004,
compared to net income of $1,278,000 for the first nine months 2003. This
increase was primarily the result of: a higher level of service agreement
income, an increase in interest income on mortgage loans and an increase in gain
on early repayment of mortgages. These increases were partially offset by an
increase in interest expense on subordinated debentures and a higher level of
general and administrative expenses.

The following table provides information on: average assets, liabilities and
stockholders' equity; yields earned on interest-earning assets; and rates paid
on interest-bearing liabilities for 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


16

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.






For the Nine-Months Ended September 30,
---------------------------------------
2004 2003
--------------------------------- ---------------------------------
Average Interest Annual Average Interest Annual
($ in thousands) Balance Inc./Exp. Yield/Rate Balance Inc./Exp. Yield/Rate
- -----------------------------------------------------------------------------------------------------------------


Assets
Mortgage loans receivable $101,202 $ 7,082 9.35% $ 88,618 $ 6,778 10.23%
Short-term investments 18,138 188 1.38 12,715 141 1.48
- -----------------------------------------------------------------------------------------------------------------
Total interest-earning assets 119,340 $ 7,270 8.14% 101,333 $ 6,919 9.13%
- -----------------------------------------------------------------------------------------------------------------
Noninterest-earning assets 4,781 3,591
- -----------------------------------------------------------------------------------------------------------------
Total assets $124,121 $104,924
- -----------------------------------------------------------------------------------------------------------------

Liabilities and Stockholders' Equity
Debentures and accrued interest payable $101,377 $ 5,981 7.88% $ 89,917 $ 5,234 7.78%
Noninterest-bearing liabilities 2,471 1,711
Stockholder's equity 20,273 13,296
- -----------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $124,121 $104,924
- -----------------------------------------------------------------------------------------------------------------
Net interest income $ 1,289 $ 1 ,685
- -----------------------------------------------------------------------------------------------------------------
Net interest-earning assets/margin $ 17,963 1.44% $ 11,416 2.22%
- -----------------------------------------------------------------------------------------------------------------
Ratio of total interest-earning assets
to total interest-bearing liabilities 1.18x 1.13x
- -----------------------------------------------------------------------------------------------------------------


Net interest and dividend income from money market accounts is a significant
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 $1,289,000 in the first nine months of 2004,
compared to $1,685,000 in the first nine months of 2003. The decrease in net
interest income was due to a lower net interest margin, partially offset by
growth in the Company's total interest-earning assets. The decrease in the
margin was due to the Company's yield on interest-earning assets decreasing
without an offsetting decrease in its cost of subordinated debentures. The
growth in average assets consisted of new mortgage loans of $12,584,000 and a
$5,452,000 increase in short-term investments, which were funded primarily by
new subordinated debentures of $11,460,000 and a $6,977,000 increase in average
stockholders' equity.

During the first nine months of 2004, the Company continued to operate in a
refinancing environment where higher rate loans were paid off and lower rate
loans were originated for portfolio. This contributed to a reduction in net
interest income, the effects of which were partially offset by an increase in
gain on the early repayment of loans. In addition, debenture offerings closed in
January 2004 and July 2004 temporarily increased the Company's short-term
investments and its interest expense.

In a low interest rate environment, the yield on interest-earning assets
decreased 99 basis points to 8.14% due to lower rates on new mortgage loans
originated, prepayments of higher-yielding loans and lower yields earned on
short-term investments, offset somewhat by higher yields earned on certain
floating rate loans indexed to prime. On June 30, 2004, August 10, 2004 and
September 21, 2004, the prime rate increased by 25 basic points.

The cost of subordinated debentures increased 10 basis points to 7.88% primarily
due the issuance of Series 7/25/03, Series 11/28/03 and Series 6/7/04
subordinated debentures at slightly higher fixed interest rates and the
repayment of lower rate Series 5/12/95 floating-rate subordinated debentures in
the first quarter of 2004. The increase in prime during 2004 also increased
interest expense on the remaining floating-rate subordinated debentures in the
third quarter of 2004.


17

Service agreement income, which is a significant source of the Company's
revenues, was $3,068,000 for the first nine months of 2004, compared to
$1,599,000 in the same period of 2003. The increase of $1,469,000 was the result
of increased loan origination services provided to Intervest National Bank.

Gain on early repayment of mortgages increased to $359,000 for the first nine
months of 2004, from $180,000 for the first nine months of 2003. The increase of
$179,000 was mostly due to additional penalty interest and fees collected on
loans that were repaid prior to maturity in the 2004 period, compared to 2003.

The provision for loan losses was $141,000 for the first nine months of 2004,
compared to $117,000 in the same period of 2003. The increase was primarily due
to a five basis point increase in the amount of allowance maintained on the loan
portfolio in the first nine months of 2004, compared to the first six months of
2003, as well as an increase in loans outstanding during 2004.

General and administrative expenses increased $525,000 to $1,662,000 for the
first nine months of 2004, from $1,137,000 for the same period of 2003 primarily
due to an increase in salaries and employee benefits expenses, occupancy
expenses, a management fee paid to the Parent company and directors fees.

Salaries and employee benefits expense increased due to an increase in staff, a
higher cost of employee benefits, bonus payments and normal salary increases.
The Company had 17 fulltime employees at September 30, 2004 versus 14 at
September 30, 2003.

Occupancy expenses increased to the payment of additional rent on the Company's
new office space. The lease on the Company's former space expired in September
of 2004 and the Company's obligation to pay approximately $22,000 per month on
that space also ended in September 2004.

During the third quarter of 2004, the Company commenced paying a management fee
to the Parent Company of $37,500 per quarter. There was no such fee in the third
quarter of 2003.

Director expenses increased due to higher fees paid to directors for each board
and committee meeting attended beginning in June 2003.

The provision for income taxes for the first nine months of 2004 amounted to
$1,427,000, compared to $1,068,000 for the first nine months of 2003. The
Company's effective tax rate was approximately 46% for both periods. The Company
files consolidated Federal, New York State and New York City income tax returns
with its Parent Company.

LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------

The Company manages its liquidity position on a daily basis to assure that funds
are available to meet operations, loan and investment funding commitments and
the repayment of borrowed funds. The Company's principal sources of funds have
consisted of borrowings (through the issuance of its subordinated debentures),
mortgage repayments and cash flow generated from ongoing operations. For
information about the cash flows from the Company's operating, investing and
financing activities, see the condensed consolidated statements of cash flows in
this report.

At September 30, 2004, the Company had commitments outstanding to lend
approximately $8,500,000. If all these commitments were to close, they would be
funded by the combination of cash on hand and from the scheduled maturities of
existing loans.

During the first nine-months of 2004, the Company received capital contributions
of $3,000,000 from the Parent Company.

The Company considers its current liquidity and sources of funds sufficient to
satisfy its outstanding lending commitments and its maturing liabilities. For
the three months ending December 31, 2004, the Company is required to


18

pay $9,000,000 principal and $3,455,000 of accrued interest on maturing
subordinated debentures. The Company expects to repay these subordinated
debentures and related accrued interest from cash on hand.

The Company has filed a registration statement related to an offering of
additional subordinated debentures. It is anticipated that subordinated
debentures in an aggregate principal amount of up to $14,000,000 will be issued
in the fourth quarter of 2004.

ASSET AND LIABILITY MANAGEMENT
- ---------------------------------

Interest rate risk arises from differences in the repricing of assets and
liabilities within a given time period. The primary objective of the Company's
asset/liability management strategy is to limit, within its established
guidelines, the adverse impact of changes in interest rates on the Company's net
interest income and capital.

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. The
Company's one-year interest rate sensitivity gap was a positive $56,654,000, or
43% of total assets, at September 30, 2004, compared to a positive $43,996,000,
or 37%, at December 31, 2003. The increase was primarily due to the origination
of new floating-rate mortgage loans as well as existing mortgage loans migrating
into the less than one-year maturity time frame. The new loans were funded by
the repayment of existing mortgage loans as well as proceeds from the issuance
of subordinated debentures with terms of greater than one year. 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 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. For a further discussion of interest rate risk and gap analysis,
including the assumptions used in preparing the gap table, see the Company's
2003 Annual Report on Form 10-K, pages 10 and 11. The Company does not engage in
trading or hedging activities, nor does it invest in interest rate derivatives
or enter into interest rate swaps.

The table that follows summarizes the Company's interest-earning assets and
interest-bearing liabilities as of September 30, 2004, that are scheduled to
mature or reprice within the periods shown.



0-3 4-12 Over 1-4 Over 4
($in thousands) Months Months Years Years Total
- ---------------------------------------------------------------------------------------

Floating-rate loans (1) $78,514 $ - $ - $ - $ 78,514
Fixed-rate loans (1) 5,366 10,880 11,714 3,689 31,649
- ---------------------------------------------------------------------------------------
Total loans 83,880 10,880 11,714 3,689 110,163
Short-term investments 5,932 - - - 5,932
- ---------------------------------------------------------------------------------------
Total rate-sensitive assets $89,812 $10,880 $ 11,714 $ 3,689 $116,095
- ---------------------------------------------------------------------------------------

Debentures payable (1) $32,500 $ 4,350 $ 27,000 $ 34,000 $ 97,850
Accrued interest on debentures 5,409 1,808 2,455 315 9,987
- ---------------------------------------------------------------------------------------
Total rate-sensitive liabilities $37,909 $ 6,158 $ 29,455 $ 34,315 $107,837
- ---------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------
GAP (repricing differences) $51,903 $ 4,722 $ (17,741) $(30,626) $ 8,258
- ---------------------------------------------------------------------------------------
Cumulative GAP $51,903 $56,625 $ 38,884 $ 8,258 $ 8,258
- ---------------------------------------------------------------------------------------
Cumulative GAP to total assets 39.0% 42.6% 29.2% 6.2% 6.2%
- ---------------------------------------------------------------------------------------


Significant assumptions used in preparing the preceding gap table follow:

(1) Floating-rate loans and subordinated debentures payable 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.


19


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss from adverse changes in market prices and
interest rates. The Company's market risk arises primarily from interest rate
risk inherent in its lending and debenture-issuance activities. The Company has
not engaged in and accordingly has no risk related to trading accounts,
commodities or foreign exchange. The measurement of market risk associated with
financial instruments is meaningful only when all related and offsetting on-and
off-balance sheet transactions are aggregated, and the resulting net positions
are identified. Disclosures about the fair value of financial instruments as of
December 31, 2003, which reflect changes in market prices and rates, can be
found in note 12 of the notes to consolidated financial statements included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2003.
Management believes that there have been no significant changes in the Company's
market risk exposure since December 31, 2003.

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

a) Evaluation of disclosure controls and procedures. The Company maintains
-----------------------------------------------------
controls and procedures designed to ensure that information required to be
disclosed in the reports that the Company files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the Securities and Exchange
Commission. Based upon his evaluation of those controls and procedures performed
within 90 days of the filing date of this report, the Principal Executive and
Principal Financial Officer of the Company concluded that the
Company's disclosure controls and procedures were adequate.

b) Changes in internal controls. The Company made no significant changes in
------------------------------
its internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation of those controls by the
Principal Executive and Principal Financial Officer.


20

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
Not Applicable

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) Not Applicable
(b) Not Applicable
(c) Not Applicable
(d) Not Applicable
(e) 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
(a) In November 2004, the Company entered into an employment agreement with
John H Hoffmann, which is filed herein as Exhibits 10.2.

(b) Not applicable

ITEM 6. EXHIBITS
The following exhibits are filed as part of this report:

4.23- Form of Indenture between the Company and The Bank of New York dated as
of June 1, 2004.

10.0- Amendment to employment agreement between the Company and Jerome Dansker
dated as of July 1, 2004.

10.1- Mortgage Servicing Agreement dated April 1, 2002, as supplemented on
October 21, 2004 for the purpose of clarification of the intent of the
original agreement between the Company and Intervest National Bank.

10.2- Employment Agreement between the Company and John H. Hoffmann dated as of
November 10, 2004.

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

32.0- Certification of the principal executive and 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: November 10, 2004 By: /s/ Lowell S. Dansker
---------------------------------
Lowell S. Dansker, Vice Chairman,
President and Treasurer
(Principal Executive and
Financial Officer )

Date: November 10, 2004 By: /s/ Lawrence G. Bergman
---------------------------------
Lawrence G. Bergman,
Vice President and Secretary


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