In the news release, Irwin Financial Corporation (NYSE: IFC)
Announces First Quarter 2009 Results, issued 11-May-2009 by Irwin
Financial Corporation over PR Newswire, we are advised by the
company that the two occurrences of the word "pre-tax" in the first
paragraph were used to explain that the Corporation is recording no
tax benefit from its operating losses, as a full valuation
adjustment has been recorded against certain deferred tax assets.
To clarify this, the Corporation is re-filing its release (shown
below), having deleted the word "pre-tax" in the opening paragraph
and explaining that the Corporation is not recording the potential
benefits of losses for federal or state tax purposes in either the
fourth quarter of 2008 or the first quarter of 2009. The complete,
corrected release follows: COLUMBUS, Ind., May 11
/PRNewswire-FirstCall/ -- Irwin Financial Corporation (NYSE:IFC),
today announced a loss of $94 million for the first quarter of
2009, or $3.17 per diluted share principally due to credit
provisions and costs related to its strategic restructuring. The
Corporation's first quarter loss compares to a loss of $104 million
in the fourth quarter of 2008. In neither period is the Corporation
applying the potential benefits of losses for federal or state tax
purposes. "In the first quarter, we completed another step in our
restructuring plan to re-focus our bank on small business and
community banking with the sale of our home equity servicing
assets. Our restructuring started two years ago with the sale of
our conforming mortgage business. Since that time we have completed
our exit from the national mortgage, equipment leasing, and home
equity segments, except for a liquidating portfolio of home equity
loans. With the transactions in March, we removed approximately
$700 million of these home equity loans and other assets. We
increased our deposits in the first quarter and both of our banking
subsidiaries remain adequately capitalized," said Will Miller,
Chairman and CEO of Irwin Financial. "We believe the home equity
sale is a very positive development for Irwin. We continue to
pursue the only remaining step in our restructuring--raising
additional capital," Miller continued. We have presented our
regulators with a proposal for a public-private partnership
approach to raising capital for banks with assets of less than $100
billion under the authority of the EESA (Emergency Economic
Stabilization Act of 2008). If accepted, we have capital lined up
to participate in such a program. Our private sector commitments to
invest $34 million in such a partnership remain in place," Miller
concluded. Financial highlights are presented in the table below:
Percent Percent $ in millions, except EPS 1Q 2009 4Q 2008 Change 1Q
2008 Change Net Interest Income $30 $32 (6)% $64 (53)% Provision
for Losses (64) (41) (56)% (45) (44)% Non-Interest Income (11) (5)
(133)% (4) (138)% Total Consolidated Net Revenues (44) (14) (229)%
15 (388)% Non-Interest Expense 44 48 (8)% 52 (14)% Net Loss (94)
(104) 10% (22) (323)% Earning (Loss) per Share from Continuing
Operations (diluted) (3.17) (3.54) 10% (0.77) (312)% Loan and Lease
Portfolio 3,480 4,353 (20)% 5,586 (38)% Deposits 3,106 3,018 3%
3,399 (9)% Shareholders' Equity 17 111 (85)% 436 (96)% Total
Risk-Based Capital Ratio 1.5% 6.6% (77)% 12.5% (88)% Net interest
income for the three months ended March 31, 2009, totaled $30
million, down 53 percent from the first quarter 2008 net interest
income of $64 million. This decline was driven by lower portfolio
balances and reduced net interest margins. Net interest margin for
the three months ended March 31, 2009, was 2.76 percent down from
4.44 percent for the same period in 2008. The decline in margin in
the first quarter of 2009 principally relates to slower repricing
of liability rates in the declining interest rate environment and
the cost of funds resulting from securitizing the majority of the
remainder of our home equity portfolio in the third quarter of
2008. In addition, we have been holding a larger-than-normal amount
of liquid assets during our restructuring. Noninterest loss during
the first quarter of 2009 totaled $11 million, compared to a loss
of $4 million for the first three months of 2008. The 2009 decline
is primarily a result of a mark-to-market on home equity loans and
a loss on the sale of home equity servicing rights. Noninterest
expenses for the three months ended March 31, 2009, totaled $44
million, down from $52 million for the same period in 2008 due
primarily to reduction in personnel costs related to our
restructuring initiatives. Consolidated loans and loans held for
sale declined both on a sequential quarter and year over year basis
due primarily to restructuring and decisions to reduce the
Corporation's assets to enhance capital ratios and liquidity during
the restructuring. Loans held for sale declined from $841 million
at year-end to $149 million at March 31, principally reflecting the
derecognition of the home equity assets noted above. The loan
portfolio declined during the first quarter by $181 million, to
$3.3 billion. Most of this decline was in the commercial banking
line of business. The allowance for loan and lease losses (ALLL)
totaled $155 million as of March 31, 2009, up from $137 million at
the end of 2008. This increase was necessitated by an increase in
watch and non-performing credits, principally at the commercial
bank. Consolidated ALLL to Loans totaled 4.65 percent as of March
31, compared with 3.90 percent at year end. Nonperforming assets
increased 8 percent on a sequential quarter basis, totaling $237
million or 5.9 percent of total assets as of March 31, 2009, up
from $220 million at December 31, 2008, primarily reflecting
increases in non-performing commercial real estate loans. The
consolidated provision for loan and lease losses during the first
quarter of 2009 was $64 million, compared to $45 million for the
same period in 2008. The increase in our provision reflects
continued deterioration in our portfolios due to softening in the
economy and real estate markets. Deposits totaled $3.1 billion at
March 31, up $88 million or 2.9 percent from $3.0 billion at the
end of 2008. This week, the Corporation will file for a federal tax
refund, which it expects to add approximately $75 million to
liquidity in the second quarter. The Corporation had $17 million in
shareholders' equity as of March 31, compared to $111 million or
$3.26 per share at December 31, 2008. The Corporation has
agreements with a group of investors to invest $34 million in the
form of standby commitments in connection with its planned rights
offering to shareholders or outright in a private placement under
certain conditions. All of these investors have extended their
commitments to July 31 while the Corporation awaits a response to
its proposal to receive an equity investment from the US Treasury.
The Corporation has two depositories which hold the majority of its
assets and which hold the Corporation's deposits. The Corporation's
lead bank subsidiary, Irwin Union Bank and Trust (the "Bank"), had
$285 million of regulatory capital at March 31 and had a total risk
based capital ratio of 8.7 percent, a Tier 1 capital ratio of 6.5
percent, and a Tier 1 leverage ratio of 5.0 percent and remains
classified as "adequately capitalized" at March 31. Regulations
limit the amount of loan loss reserves a bank can include in its
regulatory capital base, even though these reserves have been set
aside to absorb future charge-offs. At March 31, 2009, the Bank had
$95 million of loss reserves over and above what is included in its
regulatory capital, which is approximately 32 percent of the
capital that does count in its total risk based capital ratio. As
of March 31, the Corporation's Tier 1 Leverage Ratio, Tier 1
Capital Ratio and Total Risk-based Capital Ratio were 0.6 percent,
0.8 percent and 1.5 percent, requiring a regulatory classification
of the holding company as "undercapitalized," the same as it was at
year end 2008. The Corporation's regulatory ratios are
substantially below those of the Bank due to differences in the
composition of capital in the two entities. The Corporation's other
depository subsidiary, Irwin Union Bank, F.S.B. had $53 million of
capital for a total risk based capital ratio of 11.0 percent, a
Tier 1 capital ratio of 9.8 percent, and a Tier 1 leverage ratio of
8.5 percent. It also remains classified as "adequately
capitalized." Segment Results Pre-tax income (loss) by line of
business is shown below. Percent Net Income(loss) before tax 1Q
2009 4Q 2008 Change 1Q 2008 ($ in millions) Commercial Banking
($35) ($27) (28)% $1 Commercial Finance (3) (4) 26% 7 Franchise
Finance (2) (0) (339)% 8 Small ticket Leasing (exiting) (1) (4) 66%
(1) Home Equity (42) (18) (137)% (27) Subtotal, Operating Segments
(80) (49) (63)% (18) Other Segments, Including Parent (9) (13) 31%
(18) Income taxes 5 42 (89)% (14) Consolidated Net Income (Loss)
(94) (104) 10% (22) The commercial banking segment had a pre-tax
loss of $35 million during the first quarter, as compared to a
pre-tax loss of $27 million in the fourth quarter of 2008,
primarily due to increased credit provisions. The commercial
banking segment's loan portfolio declined six percent to $2.4
billion, resulting from low credit demand and our efforts to manage
the balance sheet until our recapitalization is complete. Net
interest margin decreased modestly to 3.55 percent as of March 31,
down from 3.57 percent at the end of 2008, reflecting competitive
conditions and an increase in nonaccrual loans. Credit quality in
the commercial banking portfolio continued to show the effects of
weak housing and commercial real estate markets. Thirty-day and
greater delinquencies rose to 4.46 percent at March 31, compared to
2.96 percent at year end. Non-performing loans increased to $169
million or 7.0 percent of the loan portfolio as of March 31, 2009.
To address this increase, we have focused senior commercial bank
staff on managing past due and troubled credits and, early in the
second quarter, are seeing tangible progress in their work to
reduce these troubled credits situations. The first quarter loan
loss provision was $38 million. Charge-offs in the first quarter
declined to $24 million from $27 million in the fourth quarter. The
commercial finance line of business had a pre-tax loss of $3.0
million in the first quarter of 2009, as compared to a pre-tax loss
of $4.0 million in the fourth quarter of 2008, primarily due to
credit costs and loan loss provisions. The franchise finance
channel lost $1.7 million pre-tax and the wind-down of the domestic
small ticket portfolio added approximately $1.3 million pre-tax to
the segment's loss. The franchise finance loan and lease portfolio
totaled $662 million as of March 31, compared to $657 million at
year end 2008. Reflecting capital market conditions, there were no
loan sales or participations during the quarter. The underlying
quick service and casual dining industry revenues showed signs of
bottoming out and, in some instances, beginning to recover from the
recession during the first quarter; nonetheless, our provision for
the segment remained elevated at $4.8 million, unchanged from the
prior quarter. Thirty-day and greater delinquencies were 3.9
percent at quarter end, compared to 3.4 percent at December 31,
2008. Non-performing loans totaled $15 million or 2.3 percent, up
slightly from $14 million and 2.2 percent the end of 2008. The home
equity segment incurred a pre-tax loss of $42 million during the
first quarter compared to a pre-tax loss of $18 million during the
fourth quarter of 2008. The loss was negatively affected by a
provision of $21 million on the unsold portfolio and non-interest
expense of $12 million. On March 31, we sold mortgage servicing
rights and certain platform assets related to securitized home
equity loans to Green Tree Servicing LLC, removing approximately
$700 million of our home equity assets and related assets as well
as a similar amount of collateralized debt from our balance sheet.
Transition of the servicing operations was completed on May 1.
Non-interest expense in future quarters is expected to decline
significantly with the wind-down of this line of business. Thirty
day and greater delinquencies on the total portfolio decreased from
10.41 percent at December 31, 2008, to 10.08 percent on March 31
and our allowance for loan losses totaled $57 million at March 31
or 21.5 percent of the portfolio. All but $34 million of the
remaining portfolio is permanently match funded. The parent and
other consolidating entities lost $9 million before tax in the
first quarter of 2009, compared to a loss of $13 million in the
fourth quarter of 2008. The loss was primarily due to restructuring
costs and expenses. 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 our branches in the Midwest and Southwest and to restaurant
franchisees nationwide. About Forward-looking Statements This press
release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. We intend such forward-looking
statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. We are including this statement for
purposes of invoking these safe harbor provisions. Forward-looking
statements are based on management's expectations, estimates,
projections, and assumptions. 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 will not or might not
occur) or are likely (or unlikely) to occur, and similar
expressions, are intended to identify forward-looking statements.
These may include, among other things, statements and assumptions
about: -- transactions involved in our strategic restructuring; --
the expected timing of receipt of tax refunds; -- the outcome of
our proposal for a public-private partnership in raising capital,
as well as other aspects of our capital-raising plans, including
the possible exchange of trust preferred securities for equity or
other method of increasing equity; -- our expectations regarding
the decline of non-interest expense in home equity as we wind down
that business; -- revenue trends in the quick service and casual
dining industry; and -- any other projections or expressions 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 our forward-looking
statements and we qualify all forward looking statements by various
risks and uncertainties we face, as well as the assumptions
underlying the statements, including, but not limited to, the
following cautionary factors: -- difficulties in completing our
recapitalization plan, including the failure to raise sufficient
private investment through our proposed rights offer or a possible
exchange of trust preferred securities for our equity or by other
means, the failure of a sufficient number of shareholders to
participate in a rights offer or to exercise fully their rights,
the failure to satisfy the conditions that require the standby
purchasers to exercise fully their subscription privileges, the
failure to receive assistance in substantially the form proposed to
the U.S. Treasury and banking regulators, or the failure to obtain
any necessary regulatory approvals; -- action that could delay
receipt of our expected tax refund; -- potential further
deterioration or effects of general economic conditions,
particularly in sectors relating to real estate and/or mortgage
lending, small business lending, and franchise restaurants finance;
-- 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 and commercial 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 and potential associated
charges; -- 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 (including a pandemic); --
difficulties in accurately estimating any future repurchases of
residential mortgage, home equity, or other loans or leases due to
alleged violations of representations and warranties we made when
selling these loans and leases to the secondary market or in
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 businesses and
obtaining or retaining deposit or other funding sources as needed,
including the loss of public fund deposits or any actions that may
be taken by the state of Indiana and its political subdivisions; --
competition from other financial service providers for our staff
and 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, or our
state-chartered bank or federal savings bank subsidiary; --
regulatory actions that impact our Corporation, bank or thrift,
including the written agreement the Corporation and its
state-chartered bank subsidiary, Irwin Union Bank and Trust
Company, entered into with the Federal Reserve Bank of Chicago and
the Indiana Department of Financial Institutions on October 10,
2008, and the supervisory agreement the Corporation's federal
savings bank subsidiary, Irwin Union Bank, F.S.B., entered into
with the Office of Thrift Supervision on the same day; -- 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 business 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 segment and home
equity segment; or -- governmental changes in monetary or fiscal
policies. In addition, our past results of operations do not
necessarily indicate our future results. 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 Monday, May 11, at 1:00 p.m.
EDT. Greg Ehlinger, CFO, Will Miller, CEO, and Jody Littrell, FVP
and Controller, of Irwin Financial Corporation, will be the
speakers on the call. The toll-free number for the call is (800)
640-9765; please tell the operator you would like to join the Irwin
Financial call, confirmation #24514599. A replay of the call will
be available on the Irwin Financial Corporation website at:
http://www.irwinfinancial.com/investors/index_ir.htm. DATASOURCE:
Irwin Financial Corporation CONTACT: Media: Susan Matthews,
+1-317-590-3202, Suzie Singer, Corporate Communications,
+1-812-376-1917, both for Irwin Financial Corporation; Conference
Call, 1:00 PM EDT, May 11, 2009, +1-800-640-9765, Confirmation
#24514599 Web Site: http://www.irwinfinancial.com/
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