IFC Irwin Financial Corp

Irwin Financial Corporation Announces Fourth Quarter and 2004 Annual Earnings * Fourth Quarter Net Income of $0.48 per Diluted Share; COLUMBUS, Ind., Jan. 25 /PRNewswire-FirstCall/ -- Irwin Financial Corporation (NYSE:IFC), a bank holding company focusing on mortgage banking, small business and home equity lending, today announced net income for the fourth quarter of 2004 of $14.4 million or $0.48 per diluted share. This compares with net income of $16.7 million or $0.56 per diluted share during the same period in 2003. For the year, net income totaled $69.9 million or $2.32 per diluted share, compared with $72.8 million or $2.45 per share during 2003. The decline is largely attributable to a reduction in net income from mortgage banking operations. Return on average equity totaled 11.7 percent and 14.8 percent in the fourth quarter and 2004, respectively, compared to 14.7 percent and 18.4 percent a year earlier. "Fourth quarter results were driven by a mixture of good performance in our commercial portfolios and very difficult market conditions in our first mortgage business," said Will Miller, Chairman and CEO. "For the entire year, the turn around in our home equity operations and improvements in commercial finance nearly offset the expected decline in first mortgage results, allowing us to come close to our target return on equity, but with modestly lower earnings than in 2003. "In the fourth quarter, we continued to see very good growth in our commercial portfolios, which grew at a 20 percent annualized rate during the quarter lifting total growth for the year, after a slow start, to 16 percent. Credit quality in our home equity portfolio continues to show marked improvement due to underwriting changes we have made over the past couple years. Our mortgage banking segment continues to struggle with excess capacity, both in our operation and in the industry. Our efforts to align our operations with lower origination demand are ongoing. Our mortgage banking results also suffered due to a significant and historically large unexpected compression between mortgage rates underlying our servicing portfolio and treasury- and swap-based rates which underlie our servicing asset derivatives book. This basis risk, which we previewed in October, was volatile during the quarter and, in fact, has continued thus far into the first quarter of 2005. "While we were surprised long-term interest rates did not rise significantly in 2004, we continue to believe that factors are in place in the economy for these rates to go up and, consequently, for the value of our mortgage servicing asset to increase in 2005. This anticipated increase in servicing values, coupled with portfolio growth and stable credit quality should enable us to increase earnings in 2005. However, as noted earlier, interest rate spreads between mortgages and swaps have continued to compress thus far in the first quarter in an unusual manner. If this persists, it may suppress our results in the short-run, including causing first quarter earnings to fall significantly below our expectations, although if mortgage interest rates rebound to levels anticipated by most market participants, we believe we can meet our long-term earnings objectives over multiple quarters." Financial highlights for the period include: Consolidated Results $ in millions, 4Q 4Q Percent 3Q Percent YTD YTD Percent except EPS 2004 2003 Change 2004 Change 2004 2003 Change Net Interest Income After Provision for Losses $61 $50 21% $64 (5)% $238 $224 6% Non-Interest Income 61 75 (19) 68 (11) 287 306 (6) Total Consolidated Net Revenues 121 125 (3) 132 (8) 525 530 (1) Non-Interest Expense 97 98 (1) 103 (5) 408 412 (1) Net Income 14 17 (14) 17 (15) 70 73 (4) Earning per Share (diluted) 0.48 0.56 (14) 0.57 (16) 2.32 2.45 (5) Loans and Leases 3,450 3,161 9 3,402 1 Mortgage Loans Held for Sale 891 884 1 971 (8) Deposits 3,395 2,900 17 3,486 (3) Shareholders' Equity 503 432 16 486 3 Total Risk-Based Capital Ratio 15.9% 15.1% 14.6% Return on Average Equity 11.7 14.7 14.1 14.8 18.4 Consolidated net revenues declined on both a sequential quarter basis and compared with the year earlier quarter. The majority of the declines in each period occurred in our consumer mortgage segments reflecting a combination of lower earning assets, reduced gains on secondary market activities, and lower net recovery of mortgage servicing impairment. Our total loan and lease portfolio of $3.5 billion as of December 31, 2004, was up only $49 million or 1 percent from the end of the third quarter. However, our commercial portfolios increased $129 million or 5 percent (20 percent on an annualized basis) during the period, whereas our second mortgage loan portfolio declined $78 million, principally due to run-off. Our first and second mortgage loans held for sale totaled $0.9 billion at quarter end, down 8 percent from September 30. Deposits totaled $3.4 billion at December 31, down modestly from September 30, but have increased 17 percent year-over-year. Average core deposits of $2.2 billion rose at an annualized rate of 23 percent during the fourth quarter and have increased $479 million or 28 percent during the past year as we continue to shift our funding focus to core deposits from wholesale sources. We had $503 million or $17.67 per share in common shareholders' equity as of December 31, 2004. At quarter end, our Tier 1 Leverage Ratio and Total Risk-based Capital Ratio were 11.6 percent and 15.9 percent, respectively, compared to 11.2 percent and 14.6 percent as of September 30, 2004. The Risk- based Capital Ratio rose principally as a result of on-going loan sales and run-off of higher-risk home equity loans. Our consolidated loan and lease loss provision totaled $2 million, unchanged from the third quarter of 2004. This provision reflects continued improvement in overall credit quality and in the credit profile of our newly underwritten loans. Nonperforming assets (including other real estate owned of $9 million) were $45 million or 0.86 percent of total assets as of December 31, 2004, up from $43 million or 0.79 percent of total assets at the end of September. Our on-balance sheet allowance for loan and lease losses totaled $44 million as of December 31, down $3 million from the end of September. The ratio of on-balance sheet allowance for loan and lease losses to nonperforming loans and leases totaled 132 percent at December 31, compared to 136 percent at September 30. The decline in the loan and lease allowance principally reflects improvements in the credit profile and introduction of recoveries into loss curve models in our home equity portfolio and the resolution of several small commercial credits, principally the charge-off of a series of single vendor-based leases in our commercial finance segment for which we had previously provided loss reserves. Net charge-offs totaled $6 million, up $1 million from the third quarter. The amount of 30-day and greater delinquencies, the ratio of charge-offs to average loans and leases, and the allowance for loans and lease losses to total loans and leases for our principal credit-related portfolios are shown below. In general, we are pleased with the recent credit performance of the portfolios and anticipate similar credit results in the near future. Home Equity Home Equity Commercial Lending On- Lending Off- Commercial Banking Balance Sheet(1) Balance Sheet(2) Finance 30-Day and Greater Delinquencies * December 31, 2004 0.11% 1.93% 11.71% 0.70% * September 30, 2004 0.24 1.87 10.78 0.95 * June 30, 2004 0.19 1.45 9.92 0.88 * March 31, 2004 0.29 2.46 8.65 0.86 * December 31, 2003 0.36 2.91 10.18 0.87 Annualized Charge-offs * 4Q04 0.10% 0.79% 4.48% 2.67% * 3Q04 0.11 0.68 3.19 1.47 * 2Q04 0.15 1.08 4.25 0.87 * 1Q04 0.24 2.61 6.28 1.12 * 4Q03 0.30 3.03 7.13 1.19 Allowance to Loans and Leases * December 31, 2004 1.00% 1.92% 3.40% 1.54% * September 30, 2004 1.02 1.97 5.97 2.05 * June 30, 2004 1.06 3.16 8.12 2.30 * March 31, 2004 1.10 4.08 10.25 2.29 * December 31, 2003 1.11 4.22 10.47 2.47 (1) Home Equity on -balance sheet Allowance to Loans and Leases relates to Loans Held for Investment portfolio only. (2) Off-balance sheet loans underlie our residual interests. These loans have been treated as sold under SFAS 140 and have a reserve methodology that reflects life-of-account loss expectations, whereas our policy for on-balance sheet loans requires that we hold loss reserve coverage sufficient for potential losses inherent in the portfolio at the balance sheet date. The figures for reserves in the column labeled "Home Equity Lending Off-Balance Sheet," therefore, are not balance sheet accounts of "allowance for loan and lease losses," but instead represent the percentage of undiscounted losses assumed in our residual valuation relative to the underlying loan balances supporting the residual interests. Segment Results Net income by line of business is shown below, with additional detail available in the segment summary tables at the end of this release and our in forthcoming Form 10-K. Net Income 4Q 4Q Percent 3Q Percent YTD YTD Percent ($ in millions) 2004 2003 Change 2004 Change 2004 2003 Change Mortgage Banking $1.0 $10.2 (91)% $4.1 (76)% $20.3 $78.1 (74)% Commercial Banking 6.7 5.4 24 5.5 22 23.4 22.5 4 Home Equity 6.4 1.4 350 8.3 (23) 30.2 (19.9) 252 Commercial Finance 1.1 2.0 (46) 1.1 (3) 3.2 1.8 79 Venture Capital (0.3) (0.3) 15 0.0 NM (0.4) (1.7) 77 Other Segments, Including Parent (0.5) (2.0) 77 (1.8) 74 (6.8) (8.0) 15 Consolidated Net Income 14.4 16.7 (14) 17.2 (16) 69.9 72.8 (4) * Mortgage banking net income declined 76 percent on a sequential quarter basis, principally as a result of servicing asset impairment and hedge costs of $14 million, compared with a net recovery of $5 million during the third quarter, and lower secondary marketing gains despite a sequential quarter increase in originations. The majority of the net impairment occurred as mortgage rates underlying our servicing portfolio declined approximately 5 basis points during the quarter, while intermediate-term swaptions used as hedges against rate declines increased in yield approximately 14 basis points. This inverse directional movement is unusual. The spread between mortgages and swaps is at a historic low given the current levels of interest rates. We continue to see compression between mortgage and swap rates thus far in the first quarter of 2005, but have maintained a derivative profile similar to that which we used in the fourth quarter as we believe intermediate- to long-term interest rates are likely to rise in 2005. At present, the dollar value of a one basis point change in mortgage interest rates equates to approximately a $1.6 million change in the value of our servicing asset. We have swap-based derivative positions with an approximate offsetting amount. However, our derivative position does not completely offset the interest rate driven potential change in value of our servicing rights as we wish to have derivative protection should rates unexpectedly decline. In addition, as discussed above, our swap- based derivative positions do not protect us from changes in the spread between mortgages and swap rates, or basis risk. Should this spread remain at the historically low levels seen in much of the fourth quarter and now continuing into the first quarter, it could have a significant negative impact on our first quarter results. At December 31, our mortgage servicing asset in this line of business had a carrying value of $319 million or 120 basis points of underlying loan balance, unchanged from the end of September. We originated $3.5 billion of mortgage loans during the quarter, recording net origination fees and gains on sales of $34 million, compared with $3.0 billion of originations and $39 million of gains during the third quarter. During the fourth quarter, we recorded $8 million of revenues related to a sale of $2 billion in servicing assets, a $7 million quarterly increase. Non-interest expense declined by $11 million or 20 percent on a sequential quarter basis as we continue to work on aligning our production operations with the current origination environment. During the quarter, we closed thirteen marginally profitable branches. The number of employees in this line of business declined approximately 196 or 10 percent during the quarter. For the year, this line of business had 500 fewer employees, a 27 percent reduction. Included in the non-interest expense reduction was approximately $5 million resulting from lower reserves for origination errors and agency repurchase obligations. This reduction was made to reflect refinements in our loss curve models and a reduction in pending repurchase requests. Net income totaled $20 million for the year, a 74 percent decline from the $78 million earned in 2003, reflecting a decline in mortgage originations from record levels last year. * Commercial banking net revenues increased six percent sequentially from the third quarter aided by loan growth and related increases in net interest income as well as lower personnel expenses. Net income for this segment of $6.7 million increased $1.2 million from the prior quarter which was depressed due to one-time personnel expenses. Net interest margin was 3.81 percent during the quarter, up from 3.74 percent during the third quarter. Our loan portfolio grew to $2.2 billion, up $0.1 billion or 12 percent on an annualized basis from September 30. Credit quality continues to be strong. Thirty-day and greater delinquencies in this segment totaled 0.11 percent at December 31, compared with 0.24 percent at September 30. Our loan and lease loss provision of $0.8 million increased modestly during the quarter, but due to strong credit quality, totaled only $3 million during 2004, compared with $6 million in 2003. We anticipate our provision will increase modestly in 2005 as loan growth continues. Net income totaled $23 million for the year, a 4 percent increase from the $22 million earned in 2003. * Net income in our home equity segment totaled $6.4 million, down from $8.3 million during the third quarter. Loan originations totaled $335 million in the fourth quarter, down from $397 million in the third quarter, reflecting our decision to de-emphasize lower yielding loans due to competitive conditions. We sold $470 million of loans during the quarter, for a net gain on sale of $9 million. Included in this figure were $145 million of loans that were transferred as part of a sale of loans previously funded with a secured financing in the asset-backed market. During the third quarter, we transferred these loans and associated loan loss reserve to loans-held-for-sale classification; in the fourth quarter they were sold out of the loans-held-for-sale classification and a mortgage servicing asset of $1.2 million was recorded. Our residual asset totaled $52 million at December 31, down from $69 million at September 30, reflecting strong cash flows and clean-up calls of $4 million on certain residual loan pools that had paid-down to less than 10 percent of their original balance. We recorded $10 million in residual trading gains during the quarter, compared to $4 million during the third quarter, reflecting improved credit performance ($3 million better than anticipated in our September 30 models) and the inclusion of the assumption of continued solid loss recoveries, albeit at a rate less than we have experienced over the past year as we assume home price inflation and recoveries will subside. Recoveries on loans underlying our residuals totaled $2.5 million during the fourth quarter of 2004, compared with $1.8 million in the year earlier period. The decline in quarterly net income primarily related to increases in personnel costs for minority interests and short-term compensation costs related to improved annual performance in 2004 compared with 2003. At the end of 2004, we agreed to purchase the interests of minority owners; approximately one-quarter of the minority interests were purchased as of December 31 and we expect to purchase the remainder during the first half of 2005. Net income totaled $30 million, for the year, compared to a loss of $20 million in 2003, reflecting a dramatic improvement in credit quality this year. * Our commercial finance line of business earned $1.1 million in the fourth quarter, even with results in the third quarter. Loan and lease fundings reached a new quarterly high of $115 million. Our loan and lease portfolio in this segment now totals $625 million, a $65 million increase from September 30. Loan and lease loss provision increased $0.4 million from the third quarter and offset the positive affect of higher net interest income during the current period. Our thirty-day and greater delinquency ratio in this segment was 0.70 percent, compared with 0.95 percent at the end of the third quarter. Net interest margin was 5.58 percent, up from 5.25 percent during the third quarter. As noted above, our non-performing assets declined approximately 37 percent in this segment to $4 million, principally as a result of the charge-off of the bulk of our exposure to NorVergence-related credits, an exposure which we discussed in our September 30, 2004, Form 10-Q. Net income totaled $3 million for the year, a 79 percent increase from the $2 million earned in 2003. Our results reported here are unaudited. More complete details on operations of each of our lines of business will be available in our audited Annual Report on Form 10-K, which we anticipate filing with the SEC on or about March 9, 2005. Sarbanes Oxley Act Section 404 Although we have not fully completed our self-assessment of internal controls over financial reporting as of December 31, 2004, as required by Section 404 of the Sarbanes Oxley Act of 2002, management currently believes, based on the information available to us as of the date of this release, that we will be able to state affirmatively that we have effective controls over such financial reporting when our review is completed and reported upon when we file our Annual Report on Form 10-K. About Irwin Financial Irwin(R) Financial Corporation (http://www.irwinfinancial.com/) is an interrelated group of specialized financial services companies organized as a bank holding company, with a history tracing to 1871. The Corporation, through its major subsidiaries -- Irwin Mortgage Corporation, Irwin Union Bank, Irwin Home Equity Corporation, and Irwin Commercial Finance -- provides a broad range of financial services to consumers and small businesses in selected markets in the United States and Canada. About Forward-Looking Statements This press release contains forward-looking statements and estimates that are based on management's expectations, estimates, projections, and assumptions. These statements and estimates include but are not limited to earnings estimates and projections of financial performance and profitability, and projections of business strategies and future activities. These statements involve inherent risks and uncertainties that are difficult to predict and are not guarantees of future performance. Words that convey our beliefs, views, expectations, assumptions, estimates, forecasts, outlook and projections or similar language, or that indicate events we believe could, would, should, may or will occur (or might not occur) or are likely (or unlikely) to occur, and similar expressions, are intended to identify forward- looking statements, which may include, among other things: * statements and assumptions relating to projected growth in our earnings, projected loan originations, and the relative performance of our lines of business; * statements and assumptions relating to projected trends or potential changes in our asset quality, loan delinquencies, charge-offs, reserves and asset valuations, including valuations of our servicing portfolio; and * any other statements that are not historical facts. We undertake no obligation to update publicly any of these statements in light of future events, except as required in subsequent periodic reports we file with the Securities and Exchange Commission. Actual future results may differ materially from what is projected due to a variety of factors including: potential changes in, volatility and relative movement (basis risk) of interest rates, which may affect consumer demand for our products and the success of our interest rate risk management strategies; staffing fluctuations in response to product demand; the relative profitability of our lending operations; the valuation and management of our servicing and derivatives portfolios, including assumptions we embed in the valuation and short-term swings in the valuation of such portfolios due to quarter-end movements in secondary market interest rates which are inherently volatile; borrowers' refinancing opportunities, which may affect the prepayment assumptions used in our valuation estimates and which may affect loan demand; unanticipated deterioration in the credit quality of our loan assets; unanticipated deterioration in or changes in estimates of the carrying value of our other assets, difficulties in delivering loans to the secondary market as planned; difficulties in expanding our business and obtaining funding as needed; competition from other financial service providers for experienced managers as well as for customers; changes in the value of companies in which we invest; changes in variable compensation plans related to the performance and valuation of lines of business where we have compensation systems tied to line of business performance; unanticipated outcomes in litigation; legislative or regulatory changes, including changes in tax laws or regulations, changes in the interpretation of regulatory capital rules, changes in consumer or commercial lending rules or rules affecting corporate governance, and the availability of resources to address these rules; changes in applicable accounting policies or principles or their application to our businesses or final audit adjustments; or governmental changes in monetary or fiscal policies. For further information, contact: Suzie Singer, Corporate Communications 812.376.1917 Greg Ehlinger, CFO 812.379.7603 Conference call, 1:00 P.M., EST January 25, 2005 888.545.0687 Replay through January 27, 2005 (passcode: 10780679#) 877.213.9653 IRWIN FINANCIAL CORPORATION Selected Consolidated Financial Highlights - Unaudited ($'s in thousands, except per share data) Q4-2004 Q4-2003 $ Change % Change Q3-2004 Net Interest Income $62,959 $59,899 $3,060 5.1 $65,660 Provision for Loan and Lease Losses (2,357) (9,928) 7,571 76.3 (1,898) Noninterest Income 60,661 75,147 (14,486) (19.3) 68,033 Total Net Revenues 121,263 125,118 (3,855) (3.1) 131,795 Noninterest Expense 97,360 98,343 (983) (1.0) 102,590 Income before Income Taxes 23,903 26,775 (2,872) (10.7) 29,205 Income Taxes 9,479 10,080 (601) (6.0) 12,011 Net Income $14,424 $16,695 ($2,271) (13.6) $17,194 Dividends on Common Stock $2,276 $1,969 $307 15.6 $2,266 Diluted Earnings Per Share (31,278 Weighted Average Shares Outstanding) $0.48 $0.56 ($0.08) (14.3) $0.57 Basic Earnings Per Share (28,274 Weighted Average Shares Outstanding) 0.51 0.60 ($0.09) (15.0) 0.61 Dividends Per Common Share 0.08 0.07 0.01 14.3 0.08 Net Charge-Offs $5,757 $9,554 ($3,797) (39.7) $4,470 Performance Ratios - Quarter to Date: Return on Average Assets 1.0% 1.3% 1.2% Return on Average Equity 11.7% 14.7% 14.1% YTD-2004 YTD-2003 $ Change % Change Net Interest Income $252,078 $271,885 ($19,807) (7.3) Provision for Loan and Lease Losses (14,195) (47,583) 33,388 70.2 Noninterest Income 287,058 306,143 (19,085) (6.2) Total Net Revenues 524,941 530,445 (5,504) (1.0) Noninterest Expense 408,045 412,043 (3,998) (1.0) Income before Income Taxes 116,896 118,402 (1,506) (1.3) Income Taxes 46,992 45,585 1,407 3.1 Net Income $69,904 $72,817 ($2,913) (4.0) Dividends on Common Stock $9,065 $7,832 $1,233 15.7 Diluted Earnings Per Share (31,256 Weighted Average Shares Outstanding) $2.32 $2.45 (0.13) (5.3) Basic Earnings Per Share (28,244 Weighted Average Shares Outstanding) 2.47 2.61 (0.14) (5.4) Dividends Per Common Share 0.32 0.28 0.04 14.3 Net Charge-Offs $22,845 $33,901 ($11,056) (32.6) Performance Ratios - Year to Date: Return on Average Assets 1.3% 1.4% Return on Average Equity 14.8% 18.4% December 31, December 31, September 30, 2004 2003 $ Change % Change 2004 Loans Held for Sale $890,711 $883,895 $6,816 0.8 $971,357 Loans and Leases in Portfolio 3,450,440 3,161,054 289,386 9.2 3,401,643 Allowance for Loan and Lease Losses (44,443) (64,285) 19,842 30.9 (47,796) Total Assets 5,239,341 4,988,359 250,982 5.0 5,415,571 Total Deposits 3,395,264 2,899,662 495,602 17.1 3,486,457 Shareholders' Equity 502,644 432,260 70,384 16.3 486,347 Shareholders' Equity available to Common Shareholders (per share) 17.67 15.36 2.31 15.0 17.16 Average Equity/Average Assets (YTD) 9.0% 7.6% 9.0% Tier I Capital $641,079 $556,793 $84,286 15.1 $621,127 Tier I Leverage Ratio 11.6% 11.2% 11.2% Total Risk-based Capital Ratio 15.9% 15.1% 14.6% Nonperforming Assets to Total Assets 0.86% 1.05% 0.79% MORTGAGE BANKING Q4-2004 Q4-2003 $ Change % Change Q3-2004 Net Interest Income $10,179 $11,017 ($838) (7.6) $10,202 Recovery of (Provision for) Loan Losses (178) (443) 265 59.8 67 Gain on Sales of Loans 34,169 44,349 (10,180) (23.0) 39,351 Gain on Sale of Servicing 7,824 (312) 8,136 nm 440 Loan Servicing Fees, Net of Amortization Expense 5,123 (3,957) 9,080 229.5 3,583 Recovery (Impairment) of Servicing Assets, Net of Hedging (13,853) 23,293 (37,146) (159.5) 4,858 Other Revenues 1,341 2,061 (720) (34.9) 1,421 Total Net Revenues 44,605 76,008 (31,403) (41.3) 59,922 Salaries, Pension, and Other Employee Expense 26,299 30,488 (4,189) (13.7) 30,958 Other Expenses 15,813 26,096 (10,283) (39.4) 21,950 Income Before Income Taxes 2,493 19,424 (16,931) (87.2) 7,014 Income Taxes 1,526 9,240 (7,714) (83.5) 2,963 Net Income $967 $10,184 ($9,217) (90.5) $4,051 Total Mortgage Loan Originations: $3,460,886 $2,904,921 $555,965 19.1 $2,973,889 Percent retail 16% 27% 20% Percent wholesale 30% 40% 31% Percent brokered 11% 8% 13% Percent correspondent 43% 25% 36% Refinancings as a Percentage of Total Originations 52% 51% 40% YTD-2004 YTD-2003 $ Change % Change Net Interest Income $40,825 $72,311 ($31,486) (43.5) Recovery of (Provision for) Loan Losses 278 (664) 942 141.9 Gain on Sales of Loans 151,172 327,864 (176,692) (53.9) Gain on Sale of Servicing 16,681 (305) 16,986 nm Loan Servicing Fees, Net of Amortization Expense 8,779 (35,796) 44,575 124.5 Recovery of Servicing Assets, Net of Hedging 14,686 24,149 (9,463) (39.2) Other Revenues 6,653 10,088 (3,435) (34.1) Total Net Revenues 239,074 397,647 (158,573) (39.9) Salaries, Pension, and Other Employee Expense 118,439 161,546 (43,107) (26.7) Other Expenses 85,766 106,334 (20,568) (19.3) Income Before Income Taxes 34,869 129,767 (94,898) (73.1) Income Taxes 14,603 51,667 (37,064) (71.7) Net Income $20,266 $78,100 ($57,834) (74.1) Total Mortgage Loan Originations: $13,093,082 $22,669,246 ($9,576,164) (42.2) Percent retail 20% 26% Percent wholesale 34% 42% Percent brokered 11% 4% Percent correspondent 35% 28% Refinancings as a Percentage of Total Originations 52% 67% December 31, December 31, September 30, 2004 2003 $ Change % Change 2004 Owned Servicing Portfolio Balance $26,196,627 $29,640,122 ($3,443,495) (11.6) $28,531,292 Weighted average interest rate 5.75% 5.83% 5.70% Delinquency ratio (30+ days): 4.59% 4.58% 3.99% Conventional 2.94% 2.23% 2.46% Government 7.43% 9.17% 7.05% Loans Held for Sale $662,832 $679,360 ($16,528) (2.4) $670,361 Servicing Asset 319,225 348,174 (28,949) (8.3) 345,185 COMMERCIAL BANKING Q4-2004 Q4-2003 $ Change % Change Q3-2004 Net Interest Income $24,513 $20,434 $4,079 20.0 $23,367 Provision for Loan and Lease Losses (750) (1,500) 750 50.0 (607) Other Revenues 4,590 4,553 37 0.8 3,889 Total Net Revenues 28,353 23,487 4,866 20.7 26,649 Salaries, Pension, and Other Employee Expense 10,311 8,714 1,597 18.3 11,124 Other Expenses 6,778 5,798 980 16.9 6,289 Income Before Income Taxes 11,264 8,975 2,289 25.5 9,236 Income Taxes 4,544 3,562 982 27.6 3,719 Net Income $6,720 $5,413 $1,307 24.1 $5,517 Net Charge-offs $565 $1,476 ($911) (61.7) $611 Net Interest Margin 3.81% 3.74% 3.74% YTD-2004 YTD-2003 $ Change % Change Net Interest Income $89,617 $79,016 $10,601 13.4 Provision for Loan and Lease Losses (3,307) (5,913) 2,606 44.1 Other Revenues 18,316 21,070 (2,754) (13.1) Total Net Revenues 104,626 94,173 10,453 11.1 Salaries, Pension, and Other Employee Expense 40,422 34,853 5,569 16.0 Other Expenses 25,028 21,846 3,182 14.6 Income Before Income Taxes 39,176 37,474 1,702 4.5 Income Taxes 15,752 14,997 755 5.0 Net Income $23,424 $22,477 $947 4.2 Net Charge-offs $3,133 $4,583 ($1,450) (31.6) Net Interest Margin 3.75% 3.86% December 31, December 31, September 30, 2004 2003 $ Change % Change 2004 Securities and Short-Term Investments $327,664 $107,668 $219,996 204.3 $358,109 Loans and Leases 2,223,474 1,988,633 234,841 11.8 2,159,976 Allowance for Loan and Lease Losses (22,230) (22,055) (175) (0.8) (22,045) Interest-Bearing Deposits 2,095,644 1,680,480 415,164 24.7 2,123,975 Noninterest-Bearing Deposits 295,195 283,794 11,401 4.0 286,300 Delinquency Ratio (30+ days): 0.11% 0.34% 0.24% HOME EQUITY LENDING Q4-2004 Q4-2003 $ Change % Change Q3-2004 Residual Asset Interest Income $2,615 $3,551 ($936) (26.4) $3,350 Net Interest Income - Unsold Loans and Other 19,146 21,705 (2,559) (11.8) 23,017 Recovery of (provision for) Loan Losses 592 (5,998) 6,590 109.9 232 Trading Gains (Losses) 9,536 87 9,449 nm 4,310 Gain on Sales of Loans, Including Points and Fees 9,017 7,711 1,306 16.9 8,438 Servicing Income, net 2,675 2,019 656 32.5 2,058 Other Revenues 1,360 43 1,317 nm 1,485 Total Net Revenues 44,941 29,118 15,823 54.3 42,890 Salaries, Pension, and Other Employee Expense 23,031 13,756 9,275 67.4 18,627 Other Expense 10,457 12,936 (2,479) (19.2) 10,423 Income Before Income Taxes 11,453 2,426 9,027 372.1 13,840 Income Taxes 5,064 1,005 4,059 403.9 5,581 Net Income $6,389 $1,421 $4,968 349.6 $8,259 Loan Volume $334,838 $288,197 $46,641 16.2 $396,776 Loans Sold 469,683 137,803 331,880 240.8 405,120 Net Charge-offs (Loans Held for Investment) 1,257 6,688 (5,431) (81.2) 1,906 YTD-2004 YTD-2003 $ Change % Change Residual Asset Interest Income $12,509 $20,651 ($8,142) (39.4) Net Interest Income - Unsold Loans and Other 86,474 85,894 580 0.7 Provision for Loan Losses (4,369) (29,575) 25,206 85.2 Trading Gains (Losses) 25,176 (52,209) 77,385 148.2 Gain on Sales of Loans, Including Points and Fees 29,180 26,069 3,111 11.9 Servicing Income, net 10,109 6,257 3,852 61.6 Other Revenues 6,903 358 6,545 nm Total Net Revenues 165,982 57,445 108,537 188.9 Salaries, Pension, and Other Employee Expense 75,649 52,074 23,575 45.3 Other Expense 39,130 38,464 666 1.7 Income Before Income Taxes 51,203 (33,093) 84,296 254.7 Income Taxes 21,023 (13,203) 34,226 259.2 Net Income $30,180 ($19,890) $50,070 251.7 Loan Volume $1,442,314 $1,133,316 $308,998 27.3 Loans Sold 1,301,191 683,894 617,297 90.3 Net Charge-offs (Loans Held for Investment) 11,482 21,324 (9,842) (46.2) December 31, December 31, September 30, 2004 2003 $ Change % Change 2004 Home Equity Loans Held for Sale $227,740 $202,627 $25,113 12.4 $300,171 Home Equity Loans Held for Investment 590,175 692,637 (102,462) (14.8) 668,633 Allowance for Loan and Lease Losses (11,330) (29,251) 17,921 61.3 (13,179) Residual Asset 51,542 70,519 (18,977) (26.9) 68,584 Servicing Asset 44,000 28,425 15,575 54.8 40,356 Managed Portfolio 1,147,137 1,513,289 (366,152) (24.2) 1,395,721 Delinquency Ratio (30+ days) 4.76% 5.87% 4.59% COMMERCIAL FINANCE Q4-2004 Q4-2003 $ Change % Change Q3-2004 Net Interest Income $7,392 $6,876 $516 7.5 $7,058 Provision for Loan and Lease Losses (2,021) (1,987) (34) (1.7) (1,589) Other Revenues 1,838 1,189 649 54.6 1,366 Total Net Revenues 7,209 6,078 1,131 18.6 6,835 Salaries, Pension, and Other Employee Expense 3,848 3,340 508 15.2 3,646 Other Expenses 1,569 521 1,048 201.2 1,268 Income (Loss) Before Income Taxes 1,792 2,217 (425) (19.2) 1,921 Income Taxes 710 211 499 236.5 810 Net Income (Loss) $1,082 $2,006 ($924) (46.1) $1,111 Net Charge-Offs $3,932 $1,363 $2,569 188.5 $1,958 Loans Sold 9,313 12,240 (2,927) (23.9) 3,863 Net Interest Margin 5.58% 5.95% 5.25% Total Fundings of Loans and Leases $115,344 $87,097 $28,247 32.4 $90,966 YTD-2004 YTD-2003 $ Change % Change Net Interest Income $28,084 $22,766 $5,318 23.4 Provision for Loan and Lease Losses (6,798) (11,308) 4,510 39.9 Other Revenues 6,275 5,868 407 6.9 Total Net Revenues 27,561 17,326 10,235 59.1 Salaries, Pension, and Other Employee Expense 14,333 11,606 2,727 23.5 Other Expenses 5,260 3,466 1,794 51.8 Income (Loss) Before Income Taxes 7,968 2,254 5,714 253.5 Income Taxes 4,751 461 4,290 930.6 Net Income (Loss) $3,217 $1,793 $1,424 79.4 Net Charge-Offs $8,235 $7,868 $367 4.7 Loans Sold 36,810 36,382 428 1.2 Net Interest Margin 5.33% 5.63% Total Fundings of Loans and Leases $366,545 $272,685 $93,860 34.4 December 31, December 31, September 30, 2004 2003 $ Change % Change 2004 Investment in Loans and Leases $625,140 $463,423 $161,717 34.9 $559,801 Allowance for Loan and Lease Losses (9,624) (11,445) 1,821 15.9 (11,488) Weighted Average Yield 8.93% 9.41% 8.98% Delinquency ratio (30+days) 0.70% 0.87% 0.95% VENTURE CAPITAL Q4-2004 Q4-2003 $ Change % Change Q3-2004 Net Interest Income ($5) ($1) ($4) (400.0) ($3) Mark to Market Adjustment on Investments (511) (534) 23 4.3 0 Other Revenues 180 148 32 21.6 149 Total Net Revenues (336) (387) 51 13.2 146 Operating Expenses 95 108 (13) (12.0) 99 Income (Loss) Before Income Taxes (431) (495) 64 12.9 47 Income Tax Expense (Benefit) (166) (185) 19 10.3 18 Net Income (Loss) ($265) ($310) $45 14.5 $29 YTD-2004 YTD-2003 $ Change % Change Net Interest Income ($11) $5 ($16) (320.0) Mark to Market Adjustment on Investments (852) (2,954) 2,102 71.2 Other Revenues 657 671 (14) (2.1) Total Net Revenues (206) (2,278) 2,072 91.0 Operating Expenses 439 548 (109) (19.9) Income (Loss) Before Income Taxes (645) (2,826) 2,181 77.2 Income Tax Expense (Benefit) (248) (1,118) 870 77.8 Net Income (Loss) ($397) ($1,708) $1,311 76.8 December 31, December 31, September 30, 2004 2003 $ Change % Change 2004 Investment in Portfolio Companies (cost) $14,717 $14,601 $116 0.8 $14,717 Mark to Market Adjustment (11,929) (11,077) (852) (7.7) (11,418) Carrying Value - Portfolio Companies $2,788 $3,524 ($736) (20.9) $3,299 DATASOURCE: Irwin Financial Corporation CONTACT: Suzie Singer, Corporate Communications, +1-812-376-1917, or Greg Ehlinger, CFO, +1-812-379-7603, both of Irwin Financial Corporation; Conference call, 1:00 P.M., EST January 25, 2005 +1-888-545-0687 Replay through January 27, 2005 (passcode: 10780679#) +1-877-213-9653 Web site: http://www.irwinfinancial.com/

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