Irwin Financial Corporation Announces Expected Loss in First Quarter 2007
April 13 2007 - 9:15AM
PR Newswire (US)
- Secondary Market Disruption for Consumer Mortgages COLUMBUS,
Ind., April 13 /PRNewswire-FirstCall/ -- Irwin Financial
Corporation (NYSE:IFC), a bank holding company focusing on small
business and consumer mortgage lending, today announced that it
expects to report a loss from operations for the first quarter of
2007 due to the effects of conditions in the consumer mortgage
market and a single impaired commercial credit in Michigan. "We
have had two disappointments during the first quarter. While this
is not a pleasant way to start the year, we believe both issues are
essentially one-time events. In aggregate, the other aspects of the
business are running close to our 2007 plans," said Will Miller,
Chairman and CEO of Irwin Financial. * "First, as we noted in our
10-K filing in March, the rapid and dramatic changes in the
condition of the secondary markets for consumer mortgages during
February and March will cause us to report a loss in our home
equity operations. The credit quality of our traditional portfolio
loans is holding up well; in fact, delinquencies in the managed
portfolio have declined since year-end. "However, due to the
turmoil in the secondary markets, product guidelines have been
rapidly changing. As a result, we originated and sold fewer loans,
and realized lower margins on sale, than we had originally planned.
Our working assumption is that these secondary market conditions
are likely to last for some time, and as such, we moved
approximately $170 million into portfolio from held-for-sale
classification. This transfer will add to our credit and
provisioning costs during the first quarter. * "Second, we will be
taking a charge-off on a commercial credit in Michigan where we
discovered what appears to be misrepresentations about collateral
for the loan," Miller concluded. The Corporation's capital and
liquidity remain strong, making it possible to reduce its secondary
market transactions while the mortgage market finds a new
equilibrium. The Corporation's home equity segment has made a
number of process improvements so that loans originated for sale
meet fast-changing investor guidelines. In addition, it has taken
the recent reduction in competition as an opportunity to tighten
guidelines on loans to be held in portfolio. The Corporation
believes this transition in the market, while painful in the
short-term, will improve competitive conditions for
well-capitalized originators with strong servicing operations in
the long run. The impaired loan in the commercial banking segment
totals $4.7 million. The Corporation currently believes the
borrower will be unable to repay the majority of the loan as we
recently discovered what we believe were misrepresentations about
collateral offered for the loan. As such, the Corporation will take
a charge-off of $4.2 million related specifically to this loan
during the first quarter. With the exception of this loan, credit
quality in the Corporation's two commercial portfolios declined
modestly during the first quarter, but is still consistent with its
historic experiences. As a result of the expected loss at the home
equity segment and the credit impairment in the commercial banking
segment, the Corporation expects to incur a loss in a range from $5
to $10 million during the first quarter. The Corporation currently
does not believe that these two isolated events should have a
material impact on results in future quarters, although conditions
in the consumer mortgage market have been difficult to predict.
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
small businesses and consumers in selected markets in the United
States and Canada. About Forward-Looking Statements This press
release contains forward-looking statements that are based on
management's expectations, estimates, projections, and assumptions.
These statements 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. We qualify any forward-looking
statements entirely by these cautionary factors. Investors are
cautioned that the Corporation has not yet closed its books and
records for the first quarter. 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 management and success of our
interest rate risk management strategies; staffing fluctuations in
response to product demand or the implementation of corporate
strategies that affect our work force; the relative profitability
of our lending operations; the valuation and management of our
portfolios, including the use of external and internal modeling
assumptions we embed in the valuation of those portfolios and
short- term swings in the valuation of such portfolios; 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 or
collectibility of our loan and lease assets, including
deterioration resulting from the effects of natural disasters;
unanticipated deterioration 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
sources as needed; competition from other financial service
providers for experienced managers as well as for customers;
changes in the value of our lines of business, subsidiaries or
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 laws, rules or regulations that
affect tax, consumer or commercial lending, corporate governance
and disclosure requirements, regulatory capital and other laws or
regulations affecting the rights and responsibilities of our
Corporation, bank or thrift; regulatory actions that impact our
Corporation, including the memorandum of understanding entered into
as of March 1, 2007 between our subsidiary bank and the Federal
Reserve Bank of Chicago; changes in applicable accounting policies
or principles or their application to our businesses or final audit
adjustments; the availability of resources to address legislative,
regulatory or policy changes or to respond to regulatory actions;
additional guidance and interpretation on accounting issues and
details of the implementation of new accounting methods; the final
disposition of our remaining assets and obligations of our
discontinued 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. DATASOURCE: Irwin Financial Corporation
CONTACT: Suzie Singer, Corporate Communications, +1-812-376-1917;
Greg Ehlinger, Chief Financial Officer, +1-812-379-7603, both of
Irwin Financial Corporation Web site:
http://www.irwinfinancial.com/
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