Irwin Financial Corporation Announces Consideration of Strategic Alternatives for Conventional First Mortgage Operations and Pro
January 25 2006 - 8:15AM
PR Newswire (US)
COLUMBUS, Ind., Jan. 25 /PRNewswire-FirstCall/ -- Irwin Financial
Corporation (NYSE:IFC), a bank holding company focusing on small
business and mortgage banking today announced that it is
considering strategic alternatives for the conventional first
mortgage business, including the potential sale of Irwin Mortgage.
The Corporation has engaged JPMorgan as its financial advisor in
this process. "Irwin Financial Corporation has grown rapidly over
the past twenty years and continues to see significant growth
opportunities. In particular, our two commercial lines of business
are growing very well, earning attractive, stable and predictable
rates of return. We expect that their results in 2005 will show
record net income for each of these two segments," said Will
Miller, Chairman of Irwin Financial. "However, over the past five
years we have seen significant changes in the market for
conventional first mortgages," Miller continued. "The customer
experience has changed through technological advances, borrower
sophistication and the apparent willingness of large lenders to
price using aggressive assumptions about the value of cross selling
opportunities. In addition, while we have enjoyed nearly 25 years
of a long-term decline in interest rates, that is unlikely to
repeat in the foreseeable horizon. Finally, our conventional
mortgage operations, particularly our servicing activities have
grown to a size where we believe they can be managed and grown more
effectively within another organization. These factors have led us
to make the strategic decision that the conventional first mortgage
banking business is no longer a good fit with IFC. "The commercial
segments of our business (Irwin Union Bank and Irwin Commercial
Finance) are strong performers and on the consumer side, Irwin Home
Equity has developed strengths in mortgage credit evaluation,
administration, and servicing that will permit us to serve niches
within the mortgage market that have more consistent margins and
less volatility. Our Corporation has successfully created
start-ups, grown acquisitions, and exited lines of business before
when they were no longer a good strategic fit. We have had a very
good run with our colleagues at Irwin Mortgage, but need to make
changes in our strategies in reaction to changes in the
environment. This is a strategic change to help the Corporation to
continue to enjoy creditworthy, profitable growth in the
long-term," Miller concluded. Due to reduced operating margins in
both its mortgage banking segments and servicing right impairment
in its first mortgage segment, the Corporation expects net income
for the fourth quarter of 2005 to be substantially less than its
earlier guidance that quarterly income would be approximately equal
to the $0.48 per share earned in the fourth quarter of 2004. The
two mortgage segments are each expected to have a small net loss
for the quarter. Notwithstanding disappointing results for its
mortgage segments, management believes the Corporation's commercial
banking and finance segments will have combined to report record
quarterly net income for the fourth quarter of 2005 as a result of
good credit quality and net interest income in the commercial
portfolios. These are estimates, made prior to final compilation of
financial results. The Corporation plans to report fourth quarter
2005 results shortly. About Irwin Financial Irwin(R) Financial
Corporation (http://www.irwinfinancial.com/ ) is a bank holding
company with a history tracing to 1871. The Corporation, through
its principal lines of business -- 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,
net interest and margins, 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 and residual portfolios and
incentive servicing fees; * statements about strategic changes in
connection with our conventional first mortgage business; and * any
other statements that are not historical facts. We qualify any
forward-looking statements entirely by these cautionary factors.
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 residual, 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 and lease assets, including
deterioration resulting from the effects of recent natural
disasters; unanticipated deterioration in or changes in estimates
of the carrying value of our other assets, including securities;
difficulties in delivering products to the secondary market as
planned; challenges we may experience as a result of strategic
actions taken in connection with our mortgage banking business;
difficulties in expanding our other businesses 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 tie compensation systems 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; additional input and consultations on the incentive
servicing fee accounting issue and details of the implementation of
the new accounting method; or governmental changes in monetary or
fiscal policies. We undertake no obligation to update publicly any
of these statements in light of future events, except as required
in subsequent reports we file with the Securities and Exchange
Commission. The Corporation will host a conference call to discuss
today's announcement at 1:00 p.m. EST. Greg Ehlinger, Senior Vice
President and CFO, and Will Miller, CEO, of Irwin Financial
Corporation, will be the speakers on the call. The toll-free number
for the call is (866) 868.1109; please tell the operator you would
like to join the Irwin Financial call, confirmation #13691702. A
replay of the call will be available on the Irwin Financial
Corporation website at http://www.irwinfinancial.com/ir-set.html .
First Call Analyst: FCMN Contact: DATASOURCE: Irwin Financial
Corporation CONTACT: Susan Matthews, Media, +1-317-590-3202, Suzie
Singer, Corporate Communications, +1-812-376-1917, or Greg
Ehlinger, Chief Financial Officer, +1-812-379-7603, all of Irwin
Financial Corporation Web site: http://www.irwinfinancial.com/
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