Irwin Financial Corporation Announces Steps to Strengthen Capital and Updates Home Equity Asset Transaction
October 01 2008 - 8:15AM
PR Newswire (US)
COLUMBUS, Ind., Oct. 1 /PRNewswire-FirstCall/ -- Today, Irwin
Financial Corporation (NYSE:IFC) announced plans to strengthen its
capital base. "We are planning on raising approximately $50 million
of new capital to help assure that our subsidiary banks continue to
maintain sufficient capital to meet regulatory standards and to
address credit exposures in the current and continuing economic
weakness while we complete our strategic restructuring to refocus
the Corporation on small business and community banking," said Will
Miller, the Chairman and CEO. "We are asking our shareholders to
authorize an increase in the amount of common stock the Corporation
can issue. With the flexibility this will provide, we intend to
raise new capital through an offering to our existing shareholders
of rights to purchase additional common stock. We are in
discussions with several investors who have expressed an interest
in making a commitment to purchase common stock if not purchased by
our shareholders in the rights offering. The exact timing and
terms, including the size of this standby commitment, have not yet
been determined. We are also exploring the possibility of
exchanging some of our outstanding trust preferred securities for
common stock in order to increase our core (or Tier 1) capital,
thus strengthening the composition of our capital base. "The
previously announced agreement to transfer mortgage servicing
rights to Roosevelt Management Company associated with the sale of
home equity residuals was not approved on time by the third parties
whose consent to the transfer was required," Mr. Miller continued.
"This resulted in the rescission of the residuals sale agreement.
The rescission means we will retain the related home equity loans
of approximately $1 billion that were on our balance sheet as of
June 30. Due to their securitization structures, the net loss
exposure on these loans is limited to less than $100 million
pretax. The amount of pretax exit costs that we otherwise would
have incurred in the third quarter will be significantly lower as
well. The rescission does not effect the securitization with
Roosevelt of approximately $275 million of loans during the third
quarter; the retained risk on those loans remains unchanged.
Through August, the delinquency trends in the home equity portfolio
continue to exhibit expected weakness due to current economic
conditions, but are in a similar range as we reported as of June
30. "We remain committed to our strategic restructuring to refocus
the Corporation on small business and community banking," Mr.
Miller noted. "The new capital will provide additional protection
from potential deterioration in our home equity and commercial real
estate loan portfolios during this time of financial market and
economic uncertainty. We completed our sale of small ticket leasing
operations in the third quarter. The home equity business has been
downsized to a servicing-only platform consistent with our
liquidating portfolio strategy. We expect to have smaller exit
costs in a liquidating portfolio than we would have had in an asset
sale. Each of these actions will support our return to
profitability. "An important part of our strategy to maintain
liquidity and remain well- capitalized has been active balance
sheet management. Reflecting our completed sales of nearly $750
million of small ticket leasing assets, our balance sheet has been
reduced over 10% in the third quarter to provide more flexibility
in this difficult environment. "Going forward, we will remain
focused on returning to profitability, serving all of our
stakeholders well, and completing our strategic restructuring," Mr.
Miller concluded. Irwin Financial expects to release its third
quarter 2008 results and pro forma results that reflect the effect
of these transactions when it files its next Form 10-Q. This press
release does not constitute or form a part of any offer to sell, or
solicitation of an offer to purchase or exchange, securities in any
jurisdiction in which such offer, solicitation or sale is unlawful.
Securities may not be offered or sold absent registration under the
Securities Act of 1933 or any applicable state laws or pursuant to
an applicable exemption from the registration requirements of the
Securities Act or applicable state laws. About Irwin Financial
Irwin(R) Financial Corporation (http://www.irwinfinancial.com/) is
a bank holding company with a history tracing to 1871. The
Corporation provides a broad range of banking services to small
businesses and consumers in selected markets. About Forward-Looking
Statements This press release contains forward-looking statements
that are based on management's expectations, estimates,
projections, and assumptions. These statements and estimates
include but are not limited to projections of financial
performance, profitability, 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 about: -- our efforts to raise
capital and reduce our remaining home equity exposure; -- the
effects of these efforts on our balance sheet, liquidity, capital
and profitability; -- our expectations about remaining
well-capitalized; and -- any other statements that are not
historical facts. We qualify any forward-looking statements
entirely by these and the following cautionary factors. Actual
future results may differ materially from what is projected due to
a variety of factors including: difficulties in raising capital and
in the possible exchange of trust preferred securities for common
stock, including the failure of shareholders to approve measures
that would facilitate the Corporation's plans and the failure of a
standby commitment for the capital raising; difficulty in obtaining
the expected treatment for the restructuring transactions on our
balance sheet; difficulty in further reducing the Corporation's
home equity assets, including a failure to obtain the necessary
regulatory approvals or third-party consents, higher than
anticipated costs in removing the assets, or unanticipated
regulatory constraints; potential deterioration or effects of
general economic conditions, particularly in sectors relating to
real estate and/or mortgage lending or small business- based
manufacturing; fluctuations in housing prices; potential effects
related to the Corporation's decision to suspend the payment of
dividends on its common, preferred and trust preferred securities;
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 and deposit 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
collectability of our loan and lease assets, including
deterioration resulting from the effects of natural disasters;
difficulties in accurately estimating any future repurchases of
residential mortgage or other loans or leases due to alleged
violations of representations and warranties we made marketing
sales or securitizations; 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 or retaining deposit or other funding sources as needed,
including the loss of public fund deposits should we become less
than well-capitalized; 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 lawsuits or 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, and other laws, rules or
regulations affecting the rights and responsibilities of our
Corporation, bank or thrift; regulatory actions that impact our
Corporation, bank or thrift; changes in the interpretation and
application of regulatory capital or other rules; the availability
of resources to address changes in laws, rules or regulations or to
respond to regulatory actions; changes in applicable accounting
policies or principles or their application to our businesses or
final audit adjustments, including additional guidance and
interpretation on accounting issues and details of the
implementation of new accounting methods; the final disposition of
the remaining assets and obligations of lines of business we have
exited or are exiting, including the mortgage banking segment,
small-ticket commercial leasing, and home equity; 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: Media: Susan Matthews, +1-317-590-3202, or
Suzie Singer, Corporate Communications of Irwin Financial
Corporation, +1-812-376-1917 Web site:
http://www.irwinfinancial.com/
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