IFC Irwin Financial Corp

* Solid Results in Commercial Segments * Credit Quality Remains Strong - Delinquencies Decline in Each Segment * Mortgage Segment Results Accounted for as a Discontinued Operation * 16 Percent Year-over-Year Increase in EPS from Continuing Operations COLUMBUS, Ind., May 10 /PRNewswire-FirstCall/ -- Irwin Financial Corporation (NYSE:IFC), a bank holding company focusing on small business and consumer mortgage lending today announced net income from continuing operations for the first quarter of 2006 of $8.5 million or $0.29 per diluted share. This compares with diluted earnings per share from continuing operations of $0.25 and $0.29 million, respectively, in the first and fourth quarters of 2005. Return on equity from continuing operations was 6.6 percent, compared to 5.8 percent in the year-earlier period. In the first quarter of 2006, the Corporation announced that it was examining its strategic alternatives for the mortgage banking line of business, including the possible sale of Irwin Mortgage. It has since narrowed the focus to exiting this segment and is pursuing a sale of the business. As a result this segment is now reported as "Discontinued Operations." While the conventional mortgage segment continues to operate in a business-as-usual mode, the Corporation is engaged in discussions with potential purchasers, but has not reached a sale agreement. These discontinued operations recorded an after-tax loss of $10.3 million in the first quarter of 2006, compared with an after-tax loss of $9.8 million in the year-earlier period, reflecting mortgage servicing right (MSR) hedge losses in excess of GAAP-based MSR impairment reversal. Including the discontinued operations, the Corporation recorded a net loss of $1.9 million or $0.07 per diluted share, compared to a $2.5 million loss in the year earlier period. "Irwin Union Bank and Irwin Commercial Finance again recorded very good earnings in the first quarter -- another quarterly record in the case of commercial finance. The steady progress of both segments in expanding market share with good loan growth and credit quality reinforces the decision made earlier this year to focus our resources and capital on the growth of these two lines of business and our home equity segment," said Will Miller, Chairman of Irwin Financial. "By reallocating our resources to these segments, we believe we can create significant value. "Last month, we announced a meaningful step to improve the performance of our home equity segment. Our decision to restructure this segment to focus on the two channels which have been consistently profitable for us -- broker and correspondent -- and to de-emphasize the higher-cost retail channel should show meaningful positive effect by late in the second quarter. Both this initiative and our decision to exit conventional first mortgage banking were difficult for our management teams at home equity and mortgage banking. Nonetheless, I believe they are the right steps to help return Irwin Financial to a more predictable and sustainable path of long-term success in small business and consumer lending," Miller concluded. Financial highlights for continuing operations (commercial banking, commercial finance, and home equity lending) for the period include: $ in millions, except EPS 1Q 2006 1Q 2005 Percent 4Q 2005 Percent Change Change Net Interest Income After Provision for Losses $52 $49 6% $54 (3)% Non-Interest Income 13 18 (26) 8 63 Total Consolidated Net Revenues 66 67 (2) 62 6 Non-Interest Expense 52 55 (6) 48 8 Net Income From Continuing Operations 8.5 7.2 17 8.6 (1) Earning per Share (diluted) 0.29 0.25 16 0.29 - Loans and Leases 4,706 3,477 35 4,478 5 Mortgage Loans Held for Sale 466 327 43 514 (9) Deposits 4,074 3,770 8 3,899 5 Shareholders' Equity 528 496 6 512 3 Total Risk-Based Capital Ratio 12.7% 15.0% 13.1% Return on Average Equity 6.6% 5.8% 6.6% Consolidated net revenues for continuing operations increased six percent on a sequential quarter basis, although revenues were down modestly as compared to a year earlier due to lower secondary market gains on sales of loans. Non-interest operating expenses increased eight percent on a sequential quarter basis due principally to increases in employment taxes, pension and other long-term benefits, but were six percent lower than a year earlier. The consolidated loan and lease portfolio was $4.7 billion as of March 31, 2006, a $0.2 billion or 22 percent annualized increase as compared to the end of the fourth quarter. This growth reflects approximately equal increases in both our commercial and home equity portfolios. Home equity mortgage loans held for sale totaled $464 million, down modestly from $513 million at the end of the fourth quarter. Deposits totaled $4.1 billion at March 31, 2006, up $0.2 billion from December 31, 2005, as certain public fund deposits which had been allowed to run-off as of year-end were replaced to fund loan growth. We elected not to raise deposit rates as aggressively as some competitors in the face of greater price-based competition. As a result, core deposit balances averaged $2.4 billion during the quarter, down 3 percent from the fourth quarter of 2005. The Corporation had $528 million or $17.76 per share in common shareholders' equity as of March 31, 2006. At quarter end, Tier 1 Leverage Ratio and Total Risk-based Capital Ratio were 10.5 percent and 12.7 percent, respectively, compared to 10.3 percent and 13.1 percent as of December 31, 2005. During the quarter, the Corporation called $52 million of convertible trust preferred stock (IFC Capital Trust III). Approximately $20 million was converted to common stock. The remainder was redeemed and refinanced into Tier-1 eligible, 30-year, non-convertible trust preferred stock with a coupon set for the first five years at 6.69 percent, thereafter floating at 3-month LIBOR plus 1.49 percent (IFC Capital Trust IX). The new securities are callable at par after five years. Nonperforming assets (including other real estate owned of $17 million) were $55 million or 0.80 percent of total assets as of March 31, 2006, relatively unchanged from $54 million or 0.81 percent of total assets at the end of December. The on-balance sheet allowance for loan and lease losses totaled $64 million as of March 31, up $5 million from the end of the fourth quarter. The ratio of on-balance sheet allowance for loan and lease losses to nonperforming loans and leases was 177 percent at March 31, compared to 160 percent at December 31. The consolidated loan and lease loss provision totaled $9.2 million, up slightly from the fourth quarter of 2005 and compared favorably to quarterly net charge-offs, which totaled $4.5 million. Consolidated thirty-day and greater delinquencies decreased on a sequential quarter basis in each of our three product lines. The specific levels of 30-day and greater delinquencies, the ratio of charge-offs to average loans and leases, and the allowance for loan and lease losses to total loans and leases for principal credit-related portfolios are shown in the next table. Commercial Home Equity Lending Commercial Banking On Balance Sheet Finance March 31, 2006 Portfolio ($ in Billions) $2.8 $1.5 $0.9 30-Day and Greater Delinquencies - March 31, 2006 0.10% 1.90% 0.47% - December 31, 2005 0.13 2.23 0.66 - September 30, 2005 0.12 2.01 0.59 - June 30, 2005 0.15 1.70 0.54 - March 31, 2005 0.66 1.82 1.10 Annualized Net Charge-offs - 1Q06 0.09% 0.84% 0.35% - 4Q05 0.16 0.26 0.47 - 3Q05 0.09 0.36 0.58 - 2Q05 0.13 0.43 0.88 - 1Q05 0.07 0.15 0.88 Allowance to Loans and Leases (1) - March 31, 2006 0.92% 2.49% 1.31% - December 31, 2005 0.92 2.40 1.32 - September 30, 2005 0.93 2.89 1.37 - June 30, 2005 0.96 1.84 1.42 - March 31, 2005 1.00 2.05 1.58 (1) Home Equity on balance sheet Allowance to Loans and Leases relates to Loans Held for Investment portfolio only. Segment Results Net income (loss) by line of business is shown below, with additional detail available in the segment summary tables at the end of this release and in the Corporation's Form 10-Q for the period ended March 31, 2006. Net Income(loss) 1Q 2006 1Q 2005 Percent 4Q 2005 Percent ($ in millions) Change Change Commercial Banking $6.8 $5.5 24% $8.7 (22)% Commercial Finance 2.9 0.7 315 2.8 4 Home Equity 1.0 2.0 (49) (1.5) 169 Other Segments, Including Parent (1) (2.2) (1.0) (126) (1.3) (64) Net Income from Continuing Operations 8.5 7.2 17 8.6 (1) Loss from Discontinued Operations -- Mortgage Banking (1) (10.3) (9.8) (6) (2.1) (383) Consolidated Net Loss (1.9) (2.5) 27 6.5 (129) (1) First quarter and fourth quarter 2005 presentation has been adjusted from a year earlier to reflect SFAS 144 limitations on inter-company allocation charges. Commercial banking earned net income of $6.8 million, a $1.3 million increase over the first quarter of 2005, but a $1.9 million decrease compared with the fourth quarter of 2005. The year-over-year improvements reflect increases in net interest income from loan portfolio growth, while the sequential quarter decline reflects reduced spread income from lower excess liquidity and normal first quarter increases in employment taxes, pension expense and other long-term benefits. The commercial banking segment continued to have strong loan growth. Loans outstanding as of March 31, 2006, totaled $2.8 billion, representing a $0.1 billion or 14 percent annualized growth during the quarter and have grown 21 percent over the past year. Net interest margin was 3.98 percent during the quarter, up from 3.81 percent during the fourth quarter and 3.75 percent a year ago as excess liquidity sold internally during 2005 was redeployed during the first quarter into loan assets in this segment. Management expects similarly strong net interest margin in the second quarter. Credit quality continues to be a positive for this segment. As noted in the table above, thirty-day and greater delinquencies were 0.10 percent as of March 31, compared to 0.13 percent at December 31. The commercial banking segment's loan and lease loss provision of $1.5 million during the quarter compared favorably to net charge-offs of $0.6 million. The commercial finance line of business earned $2.9 million in the first quarter of 2006, $2.2 million and $0.1 million increases as compared to the first and fourth quarter of 2005, respectively. Net income was another quarterly record for this segment. Loan and lease fundings totaled $120 million during the quarter compared to $83 million in the year earlier period. The segment's loan and lease portfolio now totals $0.9 billion, representing a $0.2 billion or a 33 percent increase over the past year. Net interest income totaled $9.7 million, a $0.5 million sequential quarter increase. Net interest margin increased modestly to 4.67 percent, as compared to 4.65 percent in the prior quarter. The loan and lease loss provision in this segment totaled $1.2 million during the quarter, down from $1.4 million during the prior quarter, reflecting continued improvement in credit quality. Net charge-offs declined to $0.7 million, as compared to $0.9 million in the prior quarter and $1.4 million a year earlier. The thirty-day and greater delinquency ratio in this segment decreased to 0.47 percent at March 31, from 0.66 percent on December 31. The home equity segment earned $1.0 million during the first quarter, compared with a loss of $1.5 million during the fourth quarter and earnings of $2.0 million in the first quarter of 2005. Improved servicing fee income, due to incentive servicing fees, and hedge gains resulted in the sequential improvement in net income. Credit quality continues to meet management's expectations. Loan originations totaled $284 million in the first quarter, down 11 percent from $318 million in the fourth quarter, and also down from $430 million a year earlier. The decline in volume was primarily in the retail channel. In April, we announced our intention to restructure the retail channel significantly due to its higher origination costs and lower lead-to- close pull through rates as compared to the segment's broker and correspondent channels. This restructuring is expected to result in a one-time charge of approximately $3 million pre-tax in the second quarter. Notwithstanding this one-time charge, management expects underlying profitability to be sufficient for the segment to be profitable in the second quarter. In the second half of the year, we expect this segment's annualized expense run-rate will decline by approximately $15 million due to cost reductions related to the restructurings. Thirty-day and greater delinquencies on the segment's on-balance sheet portfolio declined to 1.90 percent from 2.23 percent at year end. Loan loss provision totaled $6.6 million, up from $6.1 million in the fourth quarter. Approximately $2.9 million of the current period provision related to the acquisition of seasoned loans in conjunction with clean-up calls of previous asset-backed securitizations. Net charge-offs were approximately $3.2 million during the first quarter, compared to $0.9 million during the fourth quarter. This increase reflects losses incurred from the increase in bankruptcy filings during the fourth quarter as well as shifting product mix, loan seasoning, and normal seasonality. Notwithstanding the increase in bankruptcy-related charge-offs, the percentage of our customers who have taken personal bankruptcy but remain current on their obligation to us, remains at a historically high level. The parent and other consolidating entities lost $2.2 million during the first quarter, compared to a loss of $1.0 million in the first quarter of 2005. The increased loss related principally to $1.1 million write-off of debt issuance costs associated with IFC Capital Trust III which was called during the first quarter. Finally, adoption of SFAS 123R resulted in an increase in consolidated expense of approximately $250 thousand during the first quarter. Due to timing of stock option vesting and new option issuance, this expense is expected to increase to an average of $500 thousand for each of the remaining quarters in 2006. Discontinued Operation--Conventional Mortgage Segment As noted above, in the first quarter of 2006 the Corporation announced that it was examining its strategic alternatives for the mortgage banking line of business, including the possible sale of Irwin Mortgage. It has since narrowed the focus to exiting this segment and is pursuing a sale of the business. Although final disposition plans have not been concluded, in conformity with SFAS 144 these operations are now being reported as "Discontinued Operations." Due to the status of the sales efforts, no costs associated with exit or disposal activities as contemplated under SFAS 146 were accrued during the first quarter of 2006. In the event such a liability is required based on ultimate disposition economics, it would be recorded at the time such a liability is incurred. Mortgage banking discontinued operations recorded a net loss of $10.3 million, compared to a net loss $2.1 million and $9.8 million in the fourth quarter and first quarter of 2005, respectively. The loss in the current period reflects net MSR hedge losses in excess of accounting based impairment reversal in the rising rate environment experienced in the quarter. The hedge structures employed during the first quarter of 2006, which were designed concurrent with the decision to exit the segment, were intended to hedge the economic rather than accounting value of the portfolio in order to optimize potential sale proceeds. The ultimate outcome of this strategic change in hedging approach will be determined by final portfolio sale proceeds. Loan production of $2.2 billion decreased 5 percent as compared to originations of $2.4 billion in the fourth quarter. The ratio of gains on sale of loans to loans sold in the secondary market was 0.68 percent. This was a modest increase as compared to the fourth quarter, but continues to indicate signs of intense price competition. The segment had no bulk MSR sales in the quarter and its servicing portfolio totaled $18.4 billion at March 31, up modestly from $18.3 billion at December 31, 2005. Thirty-day and greater delinquencies on the portfolio declined to 4.02 percent, from 5.41 percent at year end. 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 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 our estimated expenses; * statements about the discontinued operations and efforts to sell our conventional mortgage banking segment; 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; 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, disclosure 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 intention to sell 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 on Wednesday, May 10, at 1:00 p.m. EDT. Greg Ehlinger, Senior Vice President and CFO, Will Miller, CEO, and Jody Littrell, First Vice President and Controller, of Irwin Financial Corporation, will be the speakers on the call. The toll- free number for the call is (888) 867-5802; please tell the operator you would like to join the Irwin Financial call, confirmation #14609295. 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) Q1-2006 Q1-2005 $ Change % Change Q4-2005 Net Interest Income $61,280 $52,490 $8,790 16.7 $62,604 Provision for Loan and Lease Losses (9,193) (3,480) (5,713) (164.2) (8,905) Noninterest Income 13,462 18,179 (4,717) (25.9) 8,260 Total Net Revenues 65,549 67,189 (1,640) (2.4) 61,959 Noninterest Expense 52,339 55,438 (3,099) (5.6) 48,338 Income from Continuing Operations before Income Taxes 13,210 11,751 1,459 12.4 13,621 Income Taxes on Continuing Operations 4,734 4,519 215 4.8 5,031 Net Income from Continuing Operations 8,476 7,232 1,244 17.2 8,590 Loss from Discontinued Operations, Net of Tax (10,334) (9,777) (557) (5.7) (2,139) Net Income (Loss) ($1,858) ($2,545) $687 27.0 $6,451 Dividends on Common Stock $3,268 $2,851 $417 14.6 $2,862 Diluted Earnings Per Share (29,147 Weighted Average Shares Outstanding) From Continuing Operations $0.29 $0.25 0.04 16.0 $0.29 From All Operations ($0.07) ($0.09) 0.02 22.2 0.23 Basic Earnings Per Share (28,939 Weighted Average Shares Outstanding) From Continuing Operations 0.29 0.25 0.04 16.0 0.30 From All Operations (0.06) (0.09) 0.03 33.3 0.23 Dividends Per Common Share 0.11 0.10 0.01 10.0 0.10 Net Charge-Offs $4,500 $2,115 $2,385 112.8 $2,980 Performance Ratios - Quarter to Date: Return on Average Assets from Continuing Operations 0.5% 0.5% 0.5% Return on Average Equity from Continuing Operations 6.6% 5.8% 6.6% March 31, March 31, December 31, 2006 2005 $ Change % Change 2005 Loans Held for Sale $465,812 $326,562 $139,250 42.6 $513,554 Loans and Leases in Portfolio 4,705,850 3,477,435 1,228,415 35.3 4,477,943 Allowance for Loan and Lease Losses (63,923) (44,628) (19,295) (43.2) (59,223) Assets held for sale IMC 1,212,617 1,232,647 (20,030) (1.6) 1,210,730 Total Assets 6,795,682 5,551,781 1,243,901 22.4 6,646,524 Total Deposits 4,074,500 3,770,414 304,086 8.1 3,898,993 Shareholders' Equity 527,693 496,221 31,472 6.3 512,334 Shareholders' Equity available to Common Shareholders (per share) 17.76 17.40 0.36 2.1 17.90 Average Equity/Average Assets 7.8% 9.3% 8.0% Tier I Capital $699,523 $657,468 $42,055 6.4 $675,316 Tier I Leverage Ratio 10.5% 12.0% 10.3% Total Risk-based Capital Ratio 12.9% 15.0% 13.1% Nonperforming Assets to Total Assets 0.80% 0.75% 0.81% COMMERCIAL BANKING Q1-2006 Q1-2005 $ Change % Change Q4-2005 Net Interest Income $29,862 $24,560 $5,302 21.6 $30,582 Provision for Loan and Lease Losses (1,476) (1,000) (476) (47.6) (1,350) Other Revenues 4,268 4,381 (113) (2.6) 4,317 Total Net Revenues 32,654 27,941 4,713 16.9 33,549 Salaries, Pension, and Other Employee Expense 13,488 11,947 1,541 12.9 11,727 Other Expenses 7,983 6,808 1,175 17.3 7,446 Income Before Income Taxes 11,183 9,186 1,997 21.7 14,376 Income Taxes 4,421 3,717 704 18.9 5,714 Net Income $6,762 $5,469 $1,293 23.6 $8,662 Net Charge-offs $591 $412 $179 43.5 $1,102 Net Interest Margin 3.98% 3.75% 3.81% March 31, March 31, December 31, 2006 2005 $ Change % Change 2005 Securities and Short-Term Investments $282,665 $493,251 ($210,586) (42.7) $340,811 Loans and Leases 2,766,534 2,279,907 486,626 21.3 2,680,220 Allowance for Loan and Lease Losses (25,554) (22,819) (2,735) (12.0) (24,670) Interest-Bearing Deposits 2,537,639 2,352,569 185,070 7.9 2,454,722 Noninterest-Bearing Deposits 365,688 331,888 33,800 10.2 342,913 Delinquency Ratio (30+ days): 0.10% 0.66% 0.13% COMMERCIAL FINANCE Q1-2006 Q1-2005 $ Change % Change Q4-2005 Net Interest Income $9,692 $7,612 $2,080 27.3 $9,183 Provision for Loan and Lease Losses (1,164) (2,110) 946 44.8 (1,410) Other Revenues 2,149 1,908 241 12.6 1,865 Total Net Revenues 10,677 7,410 3,267 44.1 9,638 Salaries, Pension, and Other Employee Expense 5,166 3,948 1,218 30.9 4,495 Other Expenses 771 2,238 (1,467) (65.5) 482 Income Before Income Taxes 4,740 1,224 3,516 287.3 4,661 Income Taxes 1,849 528 1,321 250.2 1,891 Net Income (Loss) $2,891 $696 $2,195 315.4 $2,770 Net Charge-Offs $747 $1,368 ($621) (45.4) $937 Loans sold 12,074 12,400 (326) (2.6) 7,513 Net Interest Margin 4.67% 4.85% 4.65% Total Fundings of Loans and Leases $120,082 $83,362 $36,720 44.0 $138,544 March 31, March 31, December 31, 2006 2005 $ Change % Change 2005 Investment in Loans and Leases $856,073 $644,020 $212,053 32.9 $817,208 Allowance for Loan and Lease Losses (11,180) (10,186) (994) (9.8) (10,756) Weighted Average Coupon 8.89% 9.06% 8.88% Delinquency ratio (30+ days) 0.47% 1.10% 0.66% HOME EQUITY LENDING Q1-2006 Q1-2005 $ Change % Change Q4-2005 Net Interest Income 23,669 20,433 3,236 15.8 23,264 (Provision for) Recovery of Loan Losses (6,553) (371) (6,182) (1666.3) (6,146) Gain on Sales of Loans, Including Points and Fees 1,933 8,268 (6,335) (76.6) 1,986 Servicing Income, net 2,061 2,743 (682) (24.9) 776 Other Revenues 3,393 1,513 1,880 124.3 717 Total Net Revenues 24,503 32,586 (8,083) (24.8) 20,597 Salaries, Pension, and Other Employee Expense 13,600 19,248 (5,648) (29.3) 14,239 Other Expense 9,171 9,919 (748) (7.5) 8,832 Income Before Income Taxes 1,732 3,419 (1,687) (49.3) (2,474) Income Taxes 698 1,374 (676) (49.2) (981) Net Income $1,034 $2,045 ($1,011) (49.4) ($1,493) Loan Volume $284,375 $429,614 ($145,239) (33.8) $318,134 Percent retail 24.8% 40.2% 47.1% Percent brokered 25.6 24.3 29.4 Percent correspondent 31.3 19.2 19.9 Percent other 18.3 16.3 3.6 Loans Sold 140,243 322,054 (181,811) (56.5) 164,462 Net Charge-offs (Loans Held for Investment) 3,162 336 2,826 841.1 937 March 31, March 31, December 31, 2006 2005 $ Change % Change 2005 Home Equity Loans Held for Sale $464,490 $325,719 $138,771 42.6 $513,231 Home Equity Loans Held for Investment 1,083,273 553,310 529,963 95.8 980,406 Allowance for Loan and Lease Losses (26,944) (11,364) (15,580) (137.1) (23,552) Residual Asset 7,900 45,900 (38,000) (82.8) 15,580 Servicing Asset 31,679 46,765 (15,086) (32.3) 30,502 Managed Portfolio 1,621,286 1,159,076 462,210 39.9 1,593,509 Delinquency Ratio (30+ days) 2.29% 3.69% 3.04% MORTGAGE BANKING - DISCONTINUED OPERATIONS Q1-2006 Q1-2005 $ Change % Change Q4-2005 Net Interest Income $7,281 $7,723 ($442) (5.7) $8,714 Recovery of (Provision for) Loan Losses (47) 189 (236)(124.9) (12) Gain on Sales of Loans 15,349 24,973 (9,624) (38.5) 14,774 Gain on Sale of Servicing (23) 1,185 (1,208)(101.9) (829) Loan Servicing Fees, Net of Amortization Expense 4,120 4,415 (295) (6.7) 5,350 Impairment of Servicing Assets, Net of Hedging (18,219) (14,895) (3,324) (22.3) (6,145) Other Revenues 732 2,184 (1,452) (66.5) 1,066 Total Net Revenues 9,193 25,774 (16,581) (64.3) 22,918 Salaries, Pensions, and Other Employee Expense 14,375 23,868 (9,493) (39.8) 13,222 Other Expenses 12,035 18,610 (6,575) (35.3) 14,044 Income Before Income Taxes (17,217) (16,704) (513) (3.1) (4,348) Income Taxes (6,883) (6,446) (437) (6.8) (1,728) Net Income $10,334) ($10,258) ($76) (0.7) ($2,620) Total Mortgage Loan Originations: $2,245,676 $2,812,411 ($566,735) (20.2) $2,369,567 Percent retail 5% 16% 6% Percent wholesale 57% 36% 57% Percent brokered 1% 11% 1% Percent correspondent 37% 37% 36% Total Originations 46% 54% 45% March 31, March 31, December 31, 2006 2005 $ Change % Change 2005 Owned Servicing Portfolio Balance $18,388,160 $24,458,656 ($6,070,496) (24.8) $18,265,288 Weighted average interest rate 5.84% 5.72% 5.79% Delinquency ratio (30+ days): 4.02% 3.46% 5.41% Conventional 2.78% 2.01% 3.75% Government 6.37% 5.67% 8.63% Loans held for sale $766,502 $727,310 39,192 5.4 $779,966 Servicing Asset 266,955 336,555 (69,600) (20.7) 261,309 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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