IFC Irwin Financial Corp

* Record Results in Commercial Segments COLUMBUS, Ind., Feb. 3 /PRNewswire-FirstCall/ -- Irwin Financial Corporation (NYSE:IFC), a bank holding company focusing on small business and mortgage banking today announced net income for the fourth quarter of 2005 of $6.5 million or $0.23 per diluted share. This compares with net income of $13.9 in the fourth quarter of 2004 and $18.5 million in the third quarter of 2005. Despite record net income from the Corporation's commercial segments, consolidated results were negatively affected by lower mortgage loan production and reduced gains on sales of mortgage loans and servicing rights (MSRs). For the year, net income totaled $19.0 million or $0.66 per share, a 71 percent year-over-year decline in earnings per share. Return on average equity was 5.0 and 4.0 percent, for the quarter and year, respectively. The Corporation is issuing a call notice today to redeem the securities underlying IFC Capital Trust III, from which $51.7 million of 8.75 percent convertible trust preferred securities (NYSE:IFC.NNYSE:CUSIPNYSE:#NYSE:449498203) were issued and remain outstanding. The shares will be redeemed on March 6, 2006, at their par value of $25 per share plus accrued interest through March 3, 2006. In lieu of redemption for cash, the trust preferred securities are convertible at the option of the holder into Irwin Financial Corporation common stock (NYSE:IFC) at any time up to 5:00 p.m. EST on March 3, 2006. If converted, each share of convertible trust preferred securities will be exchanged for 1.2610 shares of common stock, which equates to a common stock conversion price of $19.825/share. Finally, the Corporation today announced that it had completed the necessary restatement and amended filing of its interim financial statements included in the Corporation's Quarterly Reports on Form 10-Q for the first and second quarters of 2005 and the annual financial statements for the year ended December 31, 2004, included in the Corporation's Annual Report on Form 10-K. As previously reported, the restatements were necessitated by the determination, made in November 2005, that certain incentive servicing fees should be accounted for under SFAS 140, rather than SFAS 133 as the Corporation had been using. The restatements had the effect of reducing reported GAAP net income in each of the three reporting periods, but had no affect on operating cash flows. "Both Irwin Union Bank and Irwin Commercial Finance had record net income in 2005. We are very pleased with the continuing, steady progress we are making in these segments," said Will Miller, Chairman of Irwin Financial. "We believe those segments have positioned themselves for significant growth in attractive markets over the next decade," Miller said, "and that appropriately managed growth and investment in these businesses has the potential to create significant value for all our stakeholders. "Last week we announced a decision to consider strategic alternatives for our conventional first mortgage banking line of business, including the possible sale of Irwin Mortgage. We are making good progress in that evaluation. We believe the progress we made in 2005 will position us for creditworthy, profitable growth in the other three segments in 2006 and beyond," Miller concluded. Financial highlights for the period include: Consolidated Results. 4Q 4Q Percent 3Q Percent Full- Full- Percent Change Change Yr Yr Change $ in millions, 2005 2004 2005 2005 2004 except EPS Net Interest Income After Provision for Losses $62 $61 3% $64 (2)% $239 $238 0% Non-Interest Income 22 60 (63) 44 (48) 120 284 (58) Total Consolidated Net Revenues 85 121 (30) 107 (21) 360 521 (31) Non-Interest Expense 75 97 (23) 80 (6) 332 407 (19) Net Income 6.5 13.9 (54) 18.5 (65) 19.0 68.4 (72) Earning per Share (diluted) 0.23 0.47 (51) 0.61 (62) 0.66 2.28 (71) Loans and Leases 4,499 3,450 30 4,026 12 Mortgage Loans Held for Sale 1,294 891 45 1,565 (17) Deposits 3,899 3,395 15 4,130 (6) Shareholders' Equity 512 501 2 508 1 Total Risk-Based Capital Ratio 13.2% 15.9% 13.1% Return on Average Equity 5.0% 11.3% 14.6% 4.0% 14.5% Consolidated net revenues decreased on a sequential quarter basis largely due to reduced secondary market gains on mortgage loan sales, MSR impairment and the absence of mortgage servicing sales in the current period. Net interest income prior to loss provision increased $2 million on a sequential quarter basis (10 percent on an annualized basis) reflecting growth in our loan portfolio. The consolidated loan and lease portfolio was $4.5 billion as of December 31, 2005, a $0.5 billion increase as compared to the end of the third quarter. This growth reflects an increase of $125 million in commercial portfolios and a reclassification of approximately $400 million in home equity portfolio from held-for-sale to held-for-investment. An asset-backed financing was issued in January 2006 to provide permanent funding for the majority of these loans. Mortgage loans held for sale totaled $1.3 billion, down from $1.6 billion at the end of the third quarter, largely reflecting lower mortgage production and the reclassification noted above. Deposits totaled $3.9 billion at December 31, down $0.2 billion from September 30. The majority of the decline in deposits was attributable to the delivery in the fourth quarter of mortgage servicing rights and associated escrow deposits sold in the third quarter. Average core deposits increased to $2.5 billion during the fourth quarter, a 19 percent annualized growth over the third quarter. The Corporation had $512 million or $17.90 per share in common shareholders' equity as of December 31, 2005. At quarter end, Tier 1 Leverage Ratio and Total Risk-based Capital Ratio were 10.4 percent and 13.2 percent, respectively, compared to 10.3 percent and 13.1 percent as of September 30, 2005. Nonperforming assets (including other real estate owned of $15 million) were $54 million or 0.81 percent of total assets as of December 31, 2005, up from $50 million or 0.77 percent of total assets at the end of September. The on-balance sheet allowance for loan and lease losses totaled $60 million as of December 31, up $6 million from the end of the third quarter. The ratio of on-balance sheet allowance for loan and lease losses to nonperforming loans and leases was 160 percent at December 31, compared to 147 percent at September 30. The consolidated loan and lease loss provision totaled $9 million, compared with $6 million during the third quarter of 2005 and compared favorably to quarterly net charge-offs, which totaled $3 million. For the year, provision totaled $27 million, compared with net charge-offs of $11 million. Consolidated thirty-day and greater delinquencies increased modestly on a sequential quarter basis. The specific levels of 30-day and greater delinquencies, the ratio of charge-offs to average loans and leases, and the allowance for loan and lease losses to total loans and leases for principal credit-related portfolios are shown in the next table. Commercial Home Equity Commercial Banking Lending On- Finance December 31, 2005 Balance Sheet(1) Portfolio (in $Billions) $2.7 $1.5 $0.8 30-Day and Greater Delinquencies * December 31, 2005 0.13% 2.23% 0.66% * September 30, 2005 0.12 2.01 0.59 * June 30, 2005 0.15 1.70 0.54 * March 31, 2005 0.66 1.82 1.10 * December 31, 2004 0.11 1.93 0.70 Annualized Net Charge-offs * 4Q05 0.16% 0.26% 0.47% * 3Q05 0.09 0.36 0.58 * 2Q05 0.13 0.43 0.88 * 1Q05 0.07 0.15 0.88 * 4Q04 0.10 0.79 2.67 Allowance to Loans and Leases (1) * December 31, 2005 0.92% 2.40% 1.32% * September 30, 2005 0.93 2.89 1.37 * June 30, 2005 0.96 1.84 1.42 * March 31, 2005 1.00 2.05 1.58 * December 31, 2004 1.00 1.92 1.54 (1) Home Equity on -balance sheet Allowance to Loans and Leases relates to Loans Held for Investment portfolio only. The company updated estimates, reflected in allowance for loan and lease losses and other reserves, for losses in consumer mortgage segments as a result of hurricanes Katrina and Rita. Total reserves for these potential losses now totals $1.2 million, compared to an estimate of $1.7 million as of September 30. Estimates involved the use of considerable judgment and assumptions about uncertain matters including the number of properties damaged, the extent of damage, and insurance recoveries. The company will continue to assess the financial impact of the hurricanes as more information becomes available. Segment Results Net income (loss) by line of business is shown below, with additional detail available in the segment summary tables at the end of this release and in the Corporation's Form 10-K when it becomes available. Net Income(loss) 4Q 4Q Percent 3Q Percent Full- Full- Percent ($ in millions) Change Change Yr Yr Change 2005 2004 2005 2005 2004 Commercial Banking $8.7 $6.7 29 $7.6 13 $27.4 $23.4 17 Commercial Finance 2.8 1.1 156 2.5 9 7.4 3.2 131 Mortgage Banking (2.6) 1.0 NM 5.9 NM (16.2) 20.3 NM Home Equity (1.5) 6.0 NM 2.2 NM 2.3 28.1 (92) Other Segments, Including Parent (1.0)(0.8) (25) 0.2 NM (1.9) (6.5) 71 Consolidated Net Income 6.5 13.9 (54) 18.5 (65) 19.0 68.4 (72) Commercial banking earned net income of $8.7 million, a $1.1 million increase over the third quarter of 2005 and an increase of $1.9 million from the fourth quarter of 2004. The quarterly net income is a record for this segment. The improvements reflect increases in net interest income from loan portfolio growth. Net income for the year was $27.4 million, again, a record for this segment. The segment's compound annual growth in net income has been 19 and 31 percent, respectively over the past three and five years. The commercial banking segment continued to have good loan growth. Loans outstanding as of December 31, 2005, totaled $2.7 billion, representing a $0.1 billion or 10 percent annualized growth since September 30. Net interest margin was 3.81 percent during the quarter, down modestly from 3.83 percent during the third quarter. Credit quality continues to be strong. As noted in the table above, thirty-day and greater delinquencies were 0.13 percent as of December 31, compared to 0.12 percent at September 30. The commercial banking segment's loan and lease loss provision of $1.4 million during the fourth quarter was unchanged from the third quarter and compared favorably to net charge-offs of $1.1 million. The commercial finance line of business earned $2.8 million in the fourth quarter, a $0.2 million increase as compared to the third quarter of 2005. Loan and lease fundings totaled $139 million during the quarter compared to $119 million in the third quarter. Both the net income and the level of loan originations were quarterly records for the segment. Net income for the year was $7.4 million, also a record for this segment which was a start-up in 2000. The segment's loan and lease portfolio now totals $0.8 billion, representing a $0.1 billion or 38 percent annualized growth since September 30. Net interest income totaled $9.2 million, a $0.2 million sequential quarter increase. Gain on sales of loans totaled $0.3 million, compared to $1.5 million in the prior quarter. Net interest margin decreased to 4.65 percent from 4.95 percent during the third quarter, reflecting competitive conditions in the leasing channel. The loan and lease loss provision in this segment totaled $1.4 million during the quarter, unchanged from the prior quarter, reflecting continued loan and lease growth and stable credit quality. Net charge-offs declined to $0.9 million, as compared to $1.1 million in the prior quarter. The thirty- day and greater delinquency ratio in this segment increased slightly to 0.66 percent at December 31, from 0.59 percent on September 30. Mortgage banking recorded a net loss of $2.6 million, compared to net income of $5.9 million in the third quarter and earnings in the prior year period of $1.0 million. The decline results principally from lower loan production, lower secondary market loan and servicing sales, and net impairment of MSRs. The segment recorded a net loss for the year of $16.2 million Loan production of $2.4 billion decreased 26 percent as compared to originations of $3.2 billion in the third quarter. In addition, net margins reflected in the gain on sale of loans continue to show signs of intense price competition. The segment had no bulk MSR sales in the quarter which led to a sequential quarter decline in revenues of $9.4 million associated with this activity. The segment's servicing portfolio totaled $18.3 billion at December 31, 2005, down $0.2 and $7.9 billion, respectively compared with September 30, 2005, and December 31, 2004. The line of business recorded net impairment of MSRs of $6.1 million during the fourth quarter, largely reflecting a basis mismatch in its hedge and MSR portfolio. During the quarter, mortgage rates underlying the bulk of the rate risk in the servicing portfolio rose by approximately 7 basis points, whereas rates underlying hedge instruments rose by approximately 16 basis points. The home equity segment lost $1.5 million during the fourth quarter, compared with net income of $2.2 million during the third quarter. The decline in net income was principally due to reduced margins on secondary market loan sales and increased provision, reflecting loan portfolio growth. Credit quality continues to meet management's expectations. The segment earned $2.3 million for the year. Loan originations totaled $318 million in the fourth quarter, down 28 percent from $444 million in the third quarter and compared to loan sales of $164 million during the quarter. The decline in production reflects a refinement to loan pricing policies and reductions in portfolio acquisitions. As noted above, the company reclassified approximately $400 million from loans-held-for-sale to loans-held-for-investment during the quarter. Due in part to this reclassification, the line of business increased its loan loss provision on a sequential quarter basis from $3.1 million in the third quarter to $6.1 million in the fourth quarter. Approximately $2.8 million of the fourth quarter provision related to the change in loan classification noted above and approximately $2.9 million was related to reserve increases for bankruptcy filings which rose in October in advance of federal bankruptcy law changes. The company recorded revenues from cash collections of $0.5 million on incentive servicing fees, down from $0.9 million in the third quarter of 2005. The parent and other consolidating entities lost $1.0 million during the fourth quarter, compared to a loss of $0.8 million in the fourth quarter of 2004. For the year, these entities lost $1.9 million, compared with a loss of $6.5 million in 2004. 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 Union Bank, Irwin Commercial Finance, Irwin Home Equity Corporation and Irwin Mortgage Corporation, - 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; 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 direction, 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; 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 tie compensation systems to line of business performance; unanticipated outcomes in litigation; unanticipated difficulty or delay in redeeming the trust preferred securities; 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 guidance and interpretation on accounting issues and details of the implementation of new accounting methods; the final outcome and implications of our consideration of strategic alternatives for our conventional mortgage banking segment, 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 review results Monday, February 6, at 1:00 p.m. EST. Greg Ehlinger, Senior Vice President and CFO, Will Miller, CEO, and Jody Littrell, Vice President and Controller, of Irwin Financial Corporation, will be the speakers on the call. The toll-free number for the call is (800) 559-2403; please tell the operator you would like to join the Irwin Financial call, confirmation #13796786. A replay of the call will be available on the Irwin Financial Corporation website at http://www.irwinfinancial.com/ir-set.html. IRWIN FINANCIAL CORPORATION Selected Consolidated Financial Highlights ($'s in thousands, except per share data) Unaudited Q4-2005 Q4-2004 $ Change % Change Q3-2005 (Restated) Net Interest Income $71,317 $62,959 $8,358 13.3 $69,515 Provision for Loan and Lease Losses (8,916) (2,357) (6,559) (278.3) (5,772) Noninterest Income 22,476 60,016 (37,540) (62.5) 43,555 Total Net Revenues 84,877 120,618 (35,741) (29.6) 107,298 Noninterest Expense 74,802 96,550 (21,748) (22.5) 79,723 Income before Income Taxes 10,075 24,068 (13,993) (58.1) 27,575 Income Taxes 3,624 10,132 (6,508) (64.2) 9,082 Net Income $6,451 $13,936 ($7,485) (53.7) $18,493 Dividends on Common Stock $2,862 $2,276 $586 25.7 $2,859 Diluted Earnings Per Share (31,488 Weighted Average Shares Outstanding) $0.23 $0.47 ($0.24) (51.1) $0.61 Basic Earnings Per Share (28,572 Weighted Average Shares Outstanding) 0.23 0.49 ($0.26) (53.1) 0.65 Dividends Per Common Share 0.10 0.08 0.02 25.0 0.10 Net Charge-Offs $2,980 $5,757 ($2,777) (48.2) $2,865 Performance Ratios - Quarter to Date: Return on Average Assets 0.4% 1.0% 1.1% Return on Average Equity 5.0% 11.3% 14.6% YTD-2005 YTD-2004 $ Change % Change (Restated) Net Interest Income $265,890 $252,078 $13,812 5.5 Provision for Loan and Lease Losses (26,852) (14,195) (12,657) (89.2) Noninterest Income 120,486 283,528 (163,042) (57.5) Total Net Revenues 359,524 521,411 (161,887) (31.0) Noninterest Expense 331,555 407,235 (75,680) (18.6) Income before Income Taxes 27,969 114,176 (86,207) (75.5) Income Taxes 8,982 45,732 (36,750) (80.4) Net Income $18,987 $68,444 ($49,457) (72.3) Dividends on Common Stock $11,426 $9,065 $2,361 26.0 Diluted Earnings Per Share (28,841 Weighted Average Shares Outstanding) $0.66 $2.28 (1.62) (71.1) Basic Earnings Per Share (28,518 Weighted Average Shares Outstanding) 0.67 2.42 (1.75) (72.3) Dividends Per Common Share 0.40 0.32 0.08 25.0 Net Charge-Offs $11,241 $22,845 ($11,604) (50.8) Performance Ratios - Year to Date: Return on Average Assets 0.3% 1.3% Return on Average Equity 4.0% 14.5% December 31, December 31, September 30, 2005 2004 $ Change %Change 2005 (Restated) Loans Held for Sale $1,293,519 $890,711 $402,808 45.2 $1,565,460 Loans and Leases in Portfolio 4,498,829 3,450,440 1,048,389 30.4 4,025,815 Allowance for Loan and Lease Losses (59,749) (44,443) (15,306) (34.4) (53,896) Total Assets 6,646,524 5,235,820 1,410,704 26.9 6,497,606 Total Deposits 3,898,993 3,395,264 503,729 14.8 4,130,290 Shareholders' Equity 512,334 501,185 11,149 2.2 508,379 Shareholders' Equity available to Common Shareholders (per share) 17.90 17.61 0.29 1.6 17.78 Average Equity/ Average Assets (YTD) 8.0% 9.0% 8.6% Tier I Capital $675,500 $637,875 $37,625 5.9 $663,393 Tier I Leverage Ratio 10.4% 11.6% 10.3% Total Risk-based Capital Ratio 13.2% 15.9% 13.1% Nonperforming Assets to Total Assets 0.81% 0.86% 0.77% COMMERCIAL BANKING Q4-2005 Q4-2004 $ Change % Change Q3-2005 Net Interest Income $30,582 $24,513 $6,069 24.8 $28,639 Provision for Loan and Lease Losses (1,350) (750) (600) (80.0) (1,361) Other Revenues 4,317 4,590 (273) (6.0) 4,442 Total Net Revenues 33,549 28,353 5,196 18.3 31,720 Salaries, Pension, and Other Employee Expense 11,727 10,311 1,416 13.7 11,897 Other Expenses 7,446 6,778 668 9.9 7,394 Income Before Income Taxes 14,376 11,264 3,112 27.6 12,429 Income Taxes 5,714 4,544 1,170 25.8 4,795 Net Income $8,662 $6,720 $1,942 28.9 $7,634 Net Charge-offs $1,102 $565 $537 95.1 $590 Net Interest Margin 3.81% 3.81% 3.83% YTD-2005 YTD-2004 $ Change % Change Net Interest Income $110,758 $89,617 $21,141 23.6 Provision for Loan and Lease Losses (5,286) (3,307) (1,979) (59.8) Other Revenues 16,945 18,316 (1,371) (7.5) Total Net Revenues 122,417 104,626 17,791 17.0 Salaries, Pension, and Other Employee Expense 47,934 40,422 7,512 18.6 Other Expenses 29,128 25,028 4,100 16.4 Income Before Income Taxes 45,355 39,176 6,179 15.8 Income Taxes 17,976 15,752 2,224 14.1 Net Income $27,379 $23,424 $3,955 16.9 Net Charge-offs $2,847 $3,133 ($286) (9.1) Net Interest Margin 3.80% 3.75% December 31, December 31, September 30, 2005 2004 $Change %Change 2005 Securities and Short- Term Investments $340,811 $327,664 $13,147 4.0 $421,395 Loans and Leases 2,680,220 2,223,474 456,746 20.5 2,618,692 Allowance for Loan and Lease Losses (24,670) (22,230) (2,440) (11.0) (24,421) Interest-Bearing Deposits 2,454,722 2,095,644 359,078 17.1 2,552,463 Noninterest-Bearing Deposits 342,913 295,195 47,718 16.2 364,272 Delinquency Ratio (30+ days): 0.13% 0.11% 0.12% COMMERCIAL FINANCE Q4-2005 Q4-2004 $ Change %Change Q3-2005 Net Interest Income $9,183 $7,392 $1,791 24.2 $8,959 Provision for Loan and Lease Losses (1,410) (2,021) 611 30.2 (1,481) Gain on Sales of Loans 329 $392 (63) (16.1) 1,530 Derivative (Losses) Gains, net (185) $39 (224) (574.3) (227) Other Revenues 1,721 1,407 314 22.3 1,010 Total Net Revenues 9,638 7,209 2,429 33.7 9,791 Salaries, Pension, and Other Employee Expense 4,495 3,848 647 16.8 4,680 Other Expenses 482 758 (276) (36.4) 733 Income Before Income Taxes 4,661 2,603 2,058 79.0 4,378 Income Taxes 1,891 1,521 370 24.3 1,840 Net Income $2,770 $1,082 $1,688 155.9 $2,538 Net Charge-Offs $937 $3,932 ($2,995) (76.2) $1,052 Loans Sold 7,513 9,313 (1,800) (19.3) 19,804 Net Interest Margin 4.65% 4.95% 4.95% Total Fundings of Loans and Leases $138,544 $115,344 $23,200 20.1 $119,345 YTD-2005 YTD-2004 $ Change % Change Net Interest Income $33,683 $28,084 $5,599 19.9 Provision for Loan and Lease Losses (6,211) (6,798) 587 8.6 Gain on Sales of Loans 2,642 1,796 846 47.1 Derivative Losses, net (717) (536) (181) (33.8) Other Revenues 5,512 5,016 496 9.9 Total Net Revenues 34,909 27,562 7,347 26.7 Salaries, Pension, and Other Employee Expense 17,531 14,333 3,198 22.3 Other Expenses 4,693 4,450 243 5.5 Income Before Income Taxes 12,685 8,779 3,906 44.5 Income Taxes 5,252 5,562 (310) (5.6) Net Income $7,433 $3,217 $4,216 131.1 Net Charge-Offs $4,806 $8,235 ($3,429) (41.6) Loans Sold 41,745 36,810 4,935 13.4 Net Interest Margin 4.80% 5.33% Total Fundings of Loans and Leases $451,524 $366,545 $84,979 23.2 December 31, December 31, September 30, 2005 2004 $Change %Change 2005 Investment in Loans and Leases $817,208 $625,140 $192,068 30.7 $754,214 Allowance for Loan and Lease Losses (10,756) (9,624) (1,132) (11.8) (10,366) Delinquency ratio (30+ days) 0.66% 0.70% 0.59% MORTGAGE BANKING Q4-2005 Q4-2004 $ Change % Change Q3-2005 Net Interest Income $8,714 $10,179 ($1,465) (14.4) $11,304 Recovery of (Provision for) Loan Losses (12) (178) 166 93.3 183 Gain on Sales of Loans 14,774 34,169 (19,395) (56.8) 18,518 Gain on Sale of Servicing (829) 7,824 (8,653) (110.6) 8,585 Loan Servicing Fees, Net of Amortization Expense 5,350 5,123 227 4.4 2,341 (Impairment) Recovery of Servicing Assets, Net of Hedging (6,145) (13,853) 7,708 55.6 (869) Other Revenues 1,066 1,341 (275) (20.5) 1,866 Total Net Revenues 22,918 44,605 (21,687) (48.6) 41,928 Salaries, Pension, and Other Employee Expense 13,222 26,299 (13,077) (49.7) 16,236 Other Expenses 14,044 15,813 (1,769) (11.2) 15,861 Income (Loss) Before Income Taxes (4,348) 2,493 (6,841) (274.4) 9,831 Income Taxes (1,728) 1,526 (3,254) (213.2) 3,967 Net Income (Loss) ($2,620) $967 ($3,587) (370.9) $5,864 Total Mortgage Loan Originations: $2,369,567 $3,460,886 ($1,091,319) (31.5) $3,203,536 Percent retail 6% 16% 8% Percent wholesale 57% 30% 54% Percent brokered 1% 11% 1% Percent correspondent 36% 43% 37% Refinancings as a Percentage of Total Originations 45% 52% 46% YTD-2005 YTD-2004 $ Change % Change Net Interest Income $36,766 $40,825 ($4,059) (9.9) Recovery of (Provision for) Loan Losses 455 278 177 63.7 Gain on Sales of Loans 75,267 151,172 (75,905) (50.2) Gain on Sale of Servicing 14,412 16,681 (2,269) (13.6) Loan Servicing Fees, Net of Amortization Expense 17,622 8,779 8,843 100.7 (Impairment) Recovery of Servicing Assets, Net of Hedging (48,853) 14,686 (63,539) (432.7) Other Revenues 6,815 6,653 162 2.4 Total Net Revenues 102,484 239,074 (136,590) (57.1) Salaries, Pension, and Other Employee Expense 69,369 118,439 (49,070) (41.4) Other Expenses 60,182 85,766 (25,584) (29.8) Income (Loss) Before Income Taxes (27,067) 34,869 (61,936) (177.6) Income Taxes (10,891) 14,603 (25,494) (174.6) Net Income (Loss) ($16,176) $20,266 ($36,442) (179.8) Total Mortgage Loan Originations: $11,029,183 $13,093,082 ($2,063,899) (15.8) Percent retail 10% 20% Percent wholesale 49% 34% Percent brokered 4% 11% Percent correspondent 37% 35% Refinancings as a Percentage of Total Originations 47% 52% December 31, December 31, September 30, 2005 2004 $ Change % Change 2005 Owned Servicing Portfolio Balance $18,265,288 $26,196,627 ($7,931,339) (30.3) $18,451,674 Weighted average interest rate 5.79% 5.75% 5.73% Delinquency ratio (30+ days): 5.41% 4.59% 4.70% Conventional 3.75% 2.94% 3.18% Government 8.63% 7.43% 8.24% Loans Held for Sale $779,966 $662,832 $117,134 17.7 $757,527 Servicing Asset 261,309 319,225 (57,916) (18.1) 259,549 HOME EQUITY LENDING Q4-2005 Q4-2004 $ Change % Change Q3-2005 (Restated) Residual Asset Interest Income $871 $2,615 ($1,744) (66.7) $1,260 Net Interest Income - Unsold Loans and Other 22,393 19,146 3,247 17.0 22,140 Recovery of (provision for) Loan Losses (6,146) 593 (6,739) (1136.4) (3,113) Trading Gains (720) 9,536 (10,256) (107.5) 324 Gain on Sales of Loans, Including Points and Fees 1,986 9,017 (7,031) (78.0) 3,734 Servicing Income, net 776 2,675 (1,899) (71.0) 2,549 Other Revenues 1,437 723 714 98.8 1,218 Total Net Revenues 20,597 44,305 (23,708) (53.5) 28,112 Salaries, Pension, and Other Employee Expense 14,239 23,031 (8,792) (38.2) 15,701 Other Expense 8,832 10,458 (1,626) (15.5) 8,671 Income Before Income Taxes (2,474) 10,816 (13,290) (122.9) 3,740 Income Taxes (981) 4,809 (5,790) (120.4) 1,503 Net Income ($1,493) $6,007 ($7,500) (124.9) $2,237 Loan Volume $318,134 $334,838 ($16,704) (5.0) $443,606 Loans Sold 164,162 469,683 (305,521) (65.0) 150,730 Net Charge-offs (Loans Held for Investment) 937 1,257 (320) (25.5) 1,222 YTD-2005 YTD-2004 $ Change % Change (Restated) Residual Asset Interest Income $6,465 $12,509 ($6,044) (48.3) Net Interest Income - Unsold Loans and Other 81,825 86,474 (4,649) (5.4) Provision for Loan Losses (15,811) (4,369) (11,442) (261.9) Trading Gains 2,399 25,176 (22,777) (90.5) Gain on Sales of Loans, Including Points and Fees 17,849 29,180 (11,331) (38.8) Servicing Income, net 9,141 11,058 (1,917) (17.3) Other Revenues 4,278 2,433 1,845 75.8 Total Net Revenues 106,146 162,461 (56,315) (34.7) Salaries, Pension, and Other Employee Expense 64,432 75,649 (11,217) (14.8) Other Expense 37,907 39,130 (1,223) (3.1) Income Before Income Taxes 3,807 47,682 (43,875) (92.0) Income Taxes 1,555 19,615 (18,060) (92.1) Net Income $2,252 $28,067 ($25,815) (92.0) Loan Volume $1,691,636 $1,442,314 $249,322 17.3 Loans Sold 748,233 1,301,191 (552,958) (42.5) Net Charge-offs (Loans Held for Investment) 3,588 11,482 (7,894) (68.8) December 31, December 31, September 30, 2005 2004 $Change %Change 2005 Home Equity Loans Held for Sale $513,231 $227,740 $285,491 125.4 $807,673 Home Equity Loans Held for Investment 980,406 590,175 390,231 66.1 635,435 Allowance for Loan and Lease Losses (23,552) (11,330) (12,222) (107.9) (18,343) Residual Asset 15,580 51,542 (35,962) (69.8) 23,720 Servicing Asset 30,502 44,000 (13,498) (30.7) 38,950 Managed Portfolio 1,593,509 1,147,137 446,372 38.9 1,577,238 Delinquency Ratio (30+ days) 3.04% 4.76% 2.92% First Call Analyst: FCMN Contact: sue.elliott@irwinfinancial.com DATASOURCE: Irwin Financial Corporation CONTACT: Suzie Singer, Corporate Communications, +1-812-376-1917, or Greg Ehlinger, Chief Financial Officer, +1-812-379-7603, both of Irwin Financial Corporation Web site: http://www.irwinfinancial.com/

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