IFC Irwin Financial Corp

Irwin Financial Corporation Announces Third Quarter Earnings * Net Income of $0.57 per Diluted Share; * ROAE of 14.1 Percent and ROAA of 1.2 Percent; * 36 Percent Annualized Core Deposit Growth; * 21 Percent Annualized Growth in Commercial Credit Portfolios COLUMBUS, Ind., Oct. 29 /PRNewswire-FirstCall/ -- Irwin Financial Corporation (NYSE:IFC), a bank holding company focusing on mortgage banking, small business and home equity lending, today announced net income for the third quarter of 2004 of $17.2 million or $0.57 per diluted share. This compares with net income of $31.1 million or $1.03 per diluted share during the same period in 2003. The decline is largely attributable to a significant deterioration in market conditions for mortgage banking operations. Year-to- date earnings have totaled $55.5 million or $1.84 per diluted share, compared with $56.1 million or $1.89 per share during the same period in 2003. "Conditions in the first mortgage market in the third quarter prevented our balanced revenue model from performing as well as we would like it to in the near term. The decline in mortgage interest rates during the quarter was not sufficient to improve originations or margins meaningfully. At the same time, the decline in rates reduced the value of our servicing portfolio in a manner that is atypical during a period of slowing production. On the positive side, we continued to see good growth in commercial lending and core deposits, as well as significantly increased year-over-year profitability in our home equity and commercial finance lines of business driven principally by improvements in credit quality. These portfolio businesses, which are another important part of our balanced revenue model and are central to our future profitability, enabled us to produce more balanced results for the third quarter, notwithstanding difficult conditions in first mortgage banking markets," said Will Miller, Chairman and CEO. "The interest rate environment in the third quarter was particularly difficult for mortgage banking," Miller continued, "with two 25-basis point Fed Funds rate increases during the quarter combined with a drop in longer- term mortgage rates of about 40 basis points. We have been actively working to align our mortgage production operations with the current rate environment. "We are no longer confident interest rates will rise in the fourth quarter as much as we previously expected, based on economists' forecasts and the forward yield curves earlier in the year. If interest rates do not rise, we expect our revenues and thus net income, will be lower in the fourth quarter than in the third and our net income for the year will be below the results we produced in 2003. As I noted, however, we believe we are in a transitory period for mortgage banking. We expect servicing values and margins in the business will normalize in the long run as we and other mortgage companies adjust our cost structures to lower production levels. We expect these improvements, coupled with the good growth we have had in our credit portfolios in 2004, should cause net income in 2005 to return to levels commensurate with our historic performance." Financial highlights for the period include: Consolidated Results 3Q 3Q Percent 2Q Percent $ in millions, except EPS 2004 2003 Change 2004 Change Net Interest Income After Provision for Losses $64 $61 5% $62 2% Non-Interest Income 68 105 -35 76 -11 Total Consolidated Net Revenues 132 166 -20 139 -5 Non-Interest Expense 102 114 -10 108 -5 Net Income 17 31 -45 18 -4 Earning per Share (diluted) 0.57 1.03 -45 0.60 -5 Loans and Leases 3,402 3,139 8 3,203 6 Mortgage Loans Held for Sale 971 1,020 -5 1,196 -19 Deposits 3,486 3,019 15 3,361 4 Shareholders' Equity 486 414 17 469 4 Total Risk-Based Capital Ratio 14.6% 14.8% 14.8% Return on Average Equity 14.1 30.4 15.4 As noted in the table above, net revenues declined on both a sequential quarter basis and compared with the year earlier quarter. The majority of the declines in each period occurred in our mortgage banking segment. On a sequential quarter basis, mortgage banking revenues dropped $6 million or 9 percent, principally reflecting reduced recovery of mortgage servicing impairment, net of hedge costs. Our loan and lease portfolio totaled $3.4 billion as of September 30, 2004, up $200 million or 6 percent from the end of the second quarter, and eight percent from a year earlier. Our first and second mortgage loans held for sale totaled $1.0 billion at quarter end, down 19 percent from June 30. Deposits totaled $3.5 billion at September 30, up 15 percent from a year earlier. Average core deposits of $2.1 billion rose at an annualized rate of 36 percent during the third quarter and have increased $437 million or 26 percent during the past year. We had $486 million or $17.16 per share in common shareholders' equity as of September 30, 2004. At quarter end, our Tier 1 Leverage Ratio and Total Risk-based Capital Ratio were 11.2 percent and 14.6 percent, respectively, compared to 11.5 percent and 14.8 percent as of June 30, 2004. Our consolidated loan and lease loss provision totaled $2 million, unchanged from the second quarter of 2004. Our provision, reflected continued improvement in overall credit quality and a $3.5 million reversal in loss provision related to a reclassification at fair value of a $150 million portfolio of home equity loans to held-for-sale status, pending an October secondary market delivery. Absent this re-classification, provision in the third quarter would have been $5 million, compared to actual charge-offs of $4 million. Nonperforming assets (including other real estate owned of $6 million) were $43 million or 0.79 percent of total assets as of September 30, 2004, up from $40 million or 0.74 percent of total assets at the end of June. The increase principally reflects a series of single vendor-based leases in our commercial finance segment on which we believe we are adequately reserved. Our on-balance sheet allowance for loan and lease losses totaled $48 million as of September 30, down $6 million from the end of June. The allowance declined during the quarter largely as a result of the re-classification of home equity loans to loans held for sale where they are now carried at fair value. The ratio of on-balance sheet allowance for loan and lease losses to nonperforming loans and leases totaled 136 percent at September 30, compared to 163 percent at June 30. Net charge-offs totaled $4 million, unchanged from the second quarter. The amount of 30-day and greater delinquencies which rose slightly in all on balance sheet credit portfolios -- more rapidly in our older, off balance sheet portfolio, the ratio of charge-offs to average loans and leases, and the allowance for loans and lease losses to total loans and leases for our principal credit-related portfolios are shown below: Home Equity Home Equity Commercial Lending On- Lending Off- Commercial Banking Balance Sheet Balance Sheet(1) Finance 30-Day and Greater Delinquencies * September 30, 2004 0.24% 1.87% 10.78% 0.95% * June 30, 2004 0.19 1.45 9.92 0.88 * March 31, 2004 0.29 2.46 8.65 0.86 * December 31, 2003 0.36 2.91 10.18 0.87 * September 30, 2003 0.72 3.29 9.55 1.10 Annualized Charge- offs * 3Q04 0.11% 0.68% 3.19% 1.47% * 2Q04 0.15 1.08 4.25 0.87 * 1Q04 0.24 2.61 6.28 1.12 * 4Q03 0.30 3.03 7.13 1.19 * 3Q03 0.20 2.45 6.23 1.97 Allowance to Loans and Leases * September 30, 2004 1.02% 1.97% 5.97% 2.05% * June 30, 2004 1.06 3.16 8.12 2.30 * March 31, 2004 1.10 4.08 10.25 2.29 * December 31, 2003 1.11 4.22 10.47 2.47 * September 30, 2003 1.12 4.17 11.16 2.51 (1). Off-balance sheet loans underlie our residual interests. These loans have been treated as sold under SFAS 140 and have a reserve methodology that reflects life-of-account loss expectations, whereas our policy for on- balance sheet loans requires that we hold loss reserve coverage sufficient for potential losses inherent in the portfolio at the balance sheet date. The figures for reserves in the column labeled "Home Equity Lending Off-Balance Sheet," therefore, are not balance sheet accounts of "allowance for loan and lease losses," but instead represent the percentage of undiscounted losses assumed in our residual valuation relative to the underlying loan balances supporting the residual interests. Segment Results Net income 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 Form 10-Q. 3Q 3Q Percent 2Q Percent Net Income ($ in millions) 2004 2003 Change 2004 Change Mortgage Banking $4.1 $25.0 -84% $5.5 -27% Commercial Banking 5.5 6.0 -8 5.8 -4 Home Equity 8.3 2.6 216 8.9 -7 Commercial Finance 1.1 0.0 NM 1.3 -16 Venture Capital 0.0 0.1 -56 -0.2 NM Other Segments, Including Parent -1.8 -2.6 32 -3.4 47 Consolidated Net Income 17.2 31.1 -45 17.9 -4 * Mortgage banking net income declined 27 percent on a sequential quarter basis, reflecting continued low margins from difficult competitive conditions and lower recovery of servicing impairment valuation allowance, net of hedge costs. During the quarter, we recorded $5 million of revenues related to impairment, net of gains on servicing asset-related derivatives, compared to $14 million in the second quarter. Our mortgage servicing asset in this line of business had a carrying value of $345 million at September 30 or 120 basis points of underlying loan balance, compared with 125 basis points at the end of June. * Commercial banking net revenues increased four percent sequentially from the second quarter, reflecting loan growth. Net income, however, declined by $0.3 million from the prior quarter due principally to personnel expenses related to increased incentive compensation due to higher return on equity, new market expansion in Milwaukee and proposed expansion in Sacramento, and additional support staff. Net interest margin was 3.74 percent during the quarter, up from 3.64 percent during the second quarter. We believe margins in this line of business should increase modestly for the remainder of the year, given current forecasts for short-term interest rates. As noted in the table above, thirty-day and greater delinquencies in our commercial banking line of business portfolio continue to be modest, totaling 0.24 percent at September 30, compared with 0.19 percent at June 30. * Our home equity line of business continues to see improving credit quality. Earnings totaled $8.3 million during the quarter. Loan originations totaled $397 million, down slightly from $404 million in the second quarter. We sold $405 million of loans during the quarter, for a net gain on sale of $8 million. This gain was lower than we have experienced in recent quarters due to product mix and loan yields. Our residual asset totaled $69 million at September 30, down from $73 million at June 30. Actual cash flows from our residuals during the third quarter totaled $12 million, a $4 million positive variance primarily due to actual losses lower than our June 30 loss projections. This positive cash flow contributed to a $4 million trading gain for the residual asset this quarter. In addition, as noted above, we re- classified loans from held-for-investment, pending October delivery, which required a market-value based adjustment to our allowance for loan losses. This market value adjustment had the effect of increasing net income by $2 million. * Our commercial finance line of business earned $1.1 million in the third quarter, compared to $1.3 million in the second quarter. Reduced secondary market sales of franchise finance loans accounted for the bulk of the sequential quarter decline. Loan and lease fundings reached a new quarterly high of $91 million. Our thirty-day and greater delinquency ratio in this portfolio was 0.95 percent, compared with 0.88 percent at the end of the second quarter. Net interest margin was 5.25 percent, down from 5.62 percent during the second quarter principally reflecting changes in yields and product mix. More complete details on operations of each of our lines of business can be found in our Form 10-Q, which is being filed today with the SEC. About Irwin Financial Irwin(R) Financial Corporation (http://www.irwinfinancial.com/ ) is an interrelated group of specialized financial services companies organized as a bank holding company, with a history tracing to 1871. The Corporation, through its major subsidiaries -- Irwin Mortgage Corporation, Irwin Union Bank, Irwin Home Equity Corporation, Irwin Commercial Finance, and Irwin Ventures -- 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, 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 portfolio; and * any other statements that are not historical facts. We undertake no obligation to update publicly any of these statements in light of future events, except as required in subsequent periodic reports we file with the Securities and Exchange Commission. Actual future results may differ materially from what is projected due to a variety of factors including: potential changes in, 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 servicing and derivatives portfolios, including short-term swings in 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 assets; unanticipated deterioration in or changes in estimates of the carrying value of our other assets, difficulties in delivering loans 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 have compensation systems tied 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 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 governmental changes in monetary or fiscal policies. IRWIN FINANCIAL CORPORATION Selected Consolidated Financial Highlights ($'s in thousands, except per share data) Q3-2004 Q3-2003 $ Change % Change Q2-2004 Net Interest Income $65,660 $75,633 ($9,973) (13.2) $64,256 Provision for Loan and Lease Losses (1,898) (14,778) 12,880 87.2 (1,794) Noninterest Income 67,935 104,663 (36,728) (35.1) 76,106 Total Net Revenues 131,697 165,518 (33,821) (20.4) 138,568 Noninterest Expense 102,492 114,406 (11,914) (10.4) 107,855 Income before Income Taxes 29,205 51,112 (21,907) (42.9) 30,713 Income Taxes 12,011 19,994 (7,983) (39.9) 12,769 Net Income $17,194 $31,118 (13,924) (44.7) $17,944 Dividends on Common Stock $2,266 $1,959 $307 15.7 $2,262 Diluted Earnings Per Share (31,266 Weighted Average Shares Outstanding) $0.57 $1.03 (0.46) (44.7) $0.60 Basic Earnings Per Share (28,293 Weighted Average Shares Outstanding) 0.61 1.11 (0.50) (45.0) 0.64 Dividends Per Common Share 0.08 0.07 0.01 14.3 0.08 Net Charge-Offs $4,470 $8,524 ($4,054) (47.6) $4,460 Performance Ratios - Quarter to Date: Return on Average Assets 1.2% 2.2% 1.4% Return on Average Equity 14.1% 30.4% 15.4% YTD-2004 YTD-2003 $ Change % Change Net Interest Income $189,119 $211,986 ($22,867) (10.8) Provision for Loan and Lease Losses (11,838) (37,655) 25,817 68.6 Noninterest Income 226,397 230,996 (4,599) (2.0) Total Net Revenues 403,678 405,327 (1,649) (0.4) Noninterest Expense 310,686 313,700 (3,014) (1.0) Income before Income Taxes 92,992 91,627 1,365 1.5 Income Taxes 37,513 35,505 2,008 5.7 Net Income $55,479 $56,122 (643) (1.1) Dividends on Common Stock $6,788 $5,865 $923 15.7 Diluted Earnings Per Share (31,256 Weighted Average Shares Outstanding) $1.84 $1.89 (0.05) (2.6) Basic Earnings Per Share (28,244 Weighted Average Shares Outstanding) 1.96 2.01 (0.05) (2.5) Dividends Per Common Share 0.24 0.21 0.03 14.3 Net Charge-Offs $17,089 $24,347 ($7,258) (29.8) Performance Ratios - Year to Date: Return on Average Assets 1.4% 1.4% Return on Average Equity 15.9% 19.6% September 30, September 30, June 30, 2004 2003 $ Change % Change 2004 Loans Held for Sale $971,357 $1,020,082 ($48,725) (4.8) $1,196,130 Loans and Leases in Portfolio 3,401,643 3,139,335 262,308 8.4 3,203,279 Allowance for Loan and Lease Losses (47,796) (64,145) 16,349 25.5 (53,837) Total Assets 5,415,571 5,059,183 356,388 7.0 5,425,172 Total Deposits 3,486,457 3,019,275 467,182 15.5 3,361,264 Shareholders' Equity 486,347 414,454 71,893 17.3 469,486 Shareholders' Equity available to Common Shareholders (per share) 17.16 14.81 2.35 15.9 16.60 Average Equity/Average Assets (YTD) 9.0% 7.3% 9.6% Tier I Capital $621,127 $534,729 $86,398 16.2 $614,003 Tier I Leverage Ratio 11.2% 9.3% 11.5% Total Risk-based Capital Ratio 14.6% 14.8% 14.8% Nonperforming Assets to Total Assets 0.79% 0.90% 0.74% Mortgage Banking Q3-2004 Q3-2003 $ Change Net Interest Income $10,202 $24,326 ($14,124) Recovery of (Provision for) Loan Losses 67 (191) 258 Gain on Sales of Loans 39,351 80,775 (41,424) Gain on Sale of Servicing 440 7 433 Loan Servicing Fees, Net of Amortization Expense 3,583 (7,283) 10,866 Recovery of Servicing Assets, Net of Hedging 4,858 14,225 (9,367) Other Revenues 1,421 3,034 (1,613) Total Net Revenues 59,922 114,893 (54,971) Salaries, Pension, and Other Employee Expense 30,958 45,239 (14,281) Other Expenses 21,950 28,971 (7,021) Income Before Income Taxes 7,014 40,683 (33,669) Income Taxes 2,963 15,648 (12,685) Net Income $4,051 $25,035 ($20,984) Total Mortgage Loan Originations: $2,973,889 $7,049,363 ($4,075,474) Percent retail 20% 25% Percent wholesale 31% 38% Percent brokered 13% 3% Percent correspondent 36% 34% Refinancings as a Percentage of Total Originations 40% 73% YTD-2004 YTD-2003 $ Change Net Interest Income $30,646 $61,294 ($30,648) Recovery of (Provision for) Loan Losses 457 (221) 678 Gain on Sales of Loans 117,003 283,514 (166,511) Gain on Sale of Servicing 8,857 7 8,850 Loan Servicing Fees, Net of Amortization Expense 3,656 (31,839) 35,495 Recovery of Servicing Assets, Net of Hedging 28,538 856 27,682 Other Revenues 5,312 8,028 (2,716) Total Net Revenues 194,469 321,639 (127,170) Salaries, Pension, and Other Employee Expense 92,140 131,058 (38,918) Other Expenses 69,954 80,238 (10,284) Income Before Income Taxes 32,375 110,343 (77,968) Income Taxes 13,077 42,427 (29,350) Net Income $19,298 $67,916 ($48,618) Total Mortgage Loan Originations: $9,632,196 $19,764,326 ($10,132,130) Percent retail 21% 26% Percent wholesale 35% 43% Percent brokered 11% 3% Percent correspondent 33% 28% Refinancings as a Percentage of Total Originations 52% 73% September 30, September 30, 2004 2003 $ Change Owned Servicing Portfolio Balance $28,531,292 $28,497,923 $33,369 Weighted average interest rate 5.70% 5.86% Delinquency ratio (30+ days): 3.99% 4.11% Conventional 2.46% 1.82% Government 7.05% 8.52% Loans Held for Sale $670,361 $922,874 ($252,513) Servicing Asset 345,185 295,102 50,083 Mortgage Banking % Change Q2-2004 Net Interest Income (58.1) $11,781 Recovery of (Provision for) Loan Losses 134.8 284 Gain on Sales of Loans (51.3) 34,870 Gain on Sale of Servicing nm 1,928 Loan Servicing Fees, Net of Amortization Expense 149.2 1,484 Recovery of Servicing Assets, Net of Hedging (65.8) 13,512 Other Revenues (53.2) 2,052 Total Net Revenues (47.8) 65,911 Salaries, Pension, and Other Employee Expense (31.6) 31,654 Other Expenses (24.2) 25,062 Income Before Income Taxes (82.8) 9,194 Income Taxes (81.1) 3,680 Net Income (83.8) $5,515 Total Mortgage Loan Originations: (57.8) $3,727,591 Percent retail 20% Percent wholesale 33% Percent brokered 11% Percent correspondent 36% Refinancings as a Percentage of Total Originations 54% % Change Net Interest Income (50.0) Recovery of (Provision for) Loan Losses 306.8 Gain on Sales of Loans (58.7) Gain on Sale of Servicing nm Loan Servicing Fees, Net of Amortization Expense 111.5 Recovery of Servicing Assets, Net of Hedging nm Other Revenues (33.8) Total Net Revenues (39.5) Salaries, Pension, and Other Employee Expense (29.7) Other Expenses (12.8) Income Before Income Taxes (70.7) Income Taxes (69.2) Net Income (71.6) Total Mortgage Loan Originations: (51.3) Percent retail Percent wholesale Percent brokered Percent correspondent Refinancings as a Percentage of Total Originations June 30, % Change 2004 Owned Servicing Portfolio Balance 0.1 $28,844,599 Weighted average interest rate 5.70% Delinquency ratio (30+ days): 3.34% Conventional 1.98% Government 6.20% Loans Held for Sale (27.4) $735,278 Servicing Asset 17.0 365,775 Home Equity Lending Q3-2004 Q3-2003 $ Change % Change Q2-2004 Residual Asset Interest Income $3,350 $4,131 ($781) (18.9) $3,285 Net Interest Income - Unsold Loans and Other 23,017 22,524 493 2.2 22,874 Recovery of (provision for) Loan Losses 232 (10,728) 10,960 102.2 706 Trading Gains (Losses) 4,310 (1,376) 5,686 413.1 6,688 Gain on Sales of Loans, Including Points and Fees 8,438 8,108 330 4.1 3,035 Servicing Income, net 2,058 1,694 364 21.5 2,313 Other Revenues 1,485 (335) 1,820 543.3 2,797 Total Net Revenues 42,890 24,018 18,872 78.6 41,698 Salaries, Pension, and Other Employee Expense 18,627 12,593 6,034 47.9 17,865 Other Expense 10,423 7,063 3,360 47.6 8,990 Income Before Income Taxes 13,840 4,362 9,478 217.3 14,843 Income Taxes 5,581 1,745 3,836 219.8 5,945 Net Income $8,259 $2,617 $5,642 215.6 $8,898 Loan Volume $396,776 $267,615 $129,161 48.3 $403,822 Loans Sold 405,120 217,789 187,331 86.0 223,956 Net Charge-offs (Loans Held for Investment) 1,906 5,442 (3,536) (65.0) 2,626 YTD-2004 YTD-2003 $ Change % Change Residual Asset Interest Income $9,893 $17,100 ($7,207) (42.1) Net Interest Income - Unsold Loans and Other 67,328 64,189 3,139 4.9 Provision for Loan Losses (4,961) (23,578) 18,617 79.0 Trading Gains (Losses) 15,640 (52,296) 67,936 129.9 Gain on Sales of Loans, Including Points and Fees 20,163 18,358 1,805 9.8 Servicing Income, net 7,435 4,238 3,197 75.4 Other Revenues 5,543 317 5,226 nm Total Net Revenues 121,041 28,328 92,713 327.3 Salaries, Pension, and Other Employee Expense 52,618 38,318 14,300 37.3 Other Expense 28,673 25,528 3,145 12.3 Income Before Income Taxes 39,750 (35,518) 75,268 211.9 Income Taxes 15,960 (14,207) 30,167 212.3 Net Income $23,790 ($21,311) $45,101 211.6 Loan Volume $1,107,476 $845,120 $262,356 31.0 Loans Sold 831,508 546,091 285,417 52.3 Net Charge-offs (Loans Held for Investment) 10,225 14,636 (4,411) (30.1) September 30, September 30, June 30, 2004 2003 $ Change % Change 2004 Home Equity Loans Held for Sale $300,171 $94,280 $205,891 218.4 $460,118 Home Equity Loans Held for Investment 668,633 728,220 (59,587) (8.2) 598,021 Allowance for Loan and Lease Losses (13,179) (30,370) 17,191 56.6 (18,902) Residual Asset 68,584 78,208 (9,624) (12.3) 73,219 Servicing Asset 40,356 29,097 11,259 38.7 28,122 Managed Portfolio 1,395,721 1,539,623 (143,902) (9.3) 1,543,457 Delinquency Ratio (30+ days) 4.59% 6.19% 4.16% Commercial Banking Q3-2004 Q3-2003 $ Change % Change Q2-2004 Net Interest Income $23,367 $20,116 $3,251 16.2 $21,191 Provision for Loan and Lease Losses (607) (1,500) 893 59.5 (750) Other Revenues 3,889 5,744 (1,855) (32.3) 5,061 Total Net Revenues 26,649 24,360 2,289 9.4 25,502 Salaries, Pension, and Other Employee Expense 11,124 8,498 2,626 30.9 9,665 Other Expenses 6,289 5,818 471 8.1 6,201 Income Before Income Taxes 9,236 10,044 (808) (8.0) 9,636 Income Taxes 3,719 4,071 (352) (8.6) 3,867 Net Income $5,517 $5,973 ($456) (7.6) $5,769 Net Charge-offs $611 $994 ($383) (38.5) $787 Net Interest Margin 3.74% 3.82% 3.64% YTD-2004 YTD-2003 $ Change % Change Net Interest Income $65,104 $58,582 $6,522 11.1 Provision for Loan and Lease Losses (2,557) (4,413) 1,856 42.1 Other Revenues 13,726 16,517 (2,791) (16.9) Total Net Revenues 76,273 70,686 5,587 7.9 Salaries, Pension, and Other Employee Expense 30,111 26,139 3,972 15.2 Other Expenses 18,250 16,048 2,202 13.7 Income Before Income Taxes 27,912 28,499 (587) (2.1) Income Taxes 11,208 11,435 (227) (2.0) Net Income $16,704 $17,064 ($360) (2.1) Net Charge-offs $2,567 $3,107 ($540) (17.4) Net Interest Margin 3.72% 3.90% September 30, September 30, June 30, 2004 2003 $ Change % Change 2004 Securities and Short- Term Investments $358,109 $94,603 $263,507 278.5 $313,580 Loans and Leases 2,159,976 1,968,078 191,898 9.8 2,081,788 Allowance for Loan and Lease Losses (22,045) (22,031) (14) (0.1) (22,049) Interest-Bearing Deposits 2,123,975 1,685,907 438,068 26.0 1,938,282 Noninterest-Bearing Deposits 286,300 266,331 19,969 7.5 341,896 Delinquency Ratio (30+ days): 0.24% 0.72% 0.19% Commercial Finance Q3-2004 Q3-2003 $ Change % Change Q2-2004 Net Interest Income $7,058 $5,685 $1,373 24.2 $6,881 Provision for Loan and Lease Losses (1,589) (2,388) 799 33.5 (2,034) Other Revenues 1,366 1,181 185 15.7 2,622 Total Net Revenues 6,835 4,478 2,357 52.6 7,469 Salaries, Pension, and Other Employee Expense 3,646 2,808 838 29.8 3,477 Other Expenses 1,268 1,021 247 24.2 1,588 Income Before Income Taxes 1,921 649 1,272 196.0 2,404 Income Taxes 810 603 207 34.3 1,087 Net Income $1,111 $46 $1,065 nm $1,317 Net Charge-Offs $1,958 $2,034 ($76) (3.7) $1,051 Loans Sold 3,863 3,302 561 17.0 15,939 Net Interest Margin 5.25% 5.44% 5.62% Total Fundings of Loans and Leases $90,966 $61,679 $29,287 47.5 $88,586 % YTD-2004 YTD-2003 $ Change Change Net Interest Income $20,692 $15,890 $4,802 30.2 Provision for Loan and Lease Losses (4,777) (9,321) 4,544 48.8 Other Revenues 4,437 4,678 (241) (5.2) Total Net Revenues 20,352 11,247 9,105 81.0 Salaries, Pension, and Other Employee Expense 10,486 8,266 2,220 26.9 Other Expenses 3,691 2,945 746 25.3 Income Before Income Taxes 6,175 36 6,139 nm Income Taxes 4,040 251 3,789 nm Net Income (Loss) $2,135 ($215) $2,350 nm Net Charge-Offs $4,303 $6,505 ($2,202) (33.9) Loans Sold 27,497 24,109 3,388 14.1 Net Interest Margin 5.53% 5.45% Total Fundings of Loans and Leases $251,204 $185,588 $65,616 35.4 September 30, September 30, June 30, 2004 2003 $ Change % Change 2004 Investment in Loans and Leases $559,801 $422,932 $136,868 32.4 $510,308 Allowance for Loan and Lease Losses (11,488) (10,635) (853) (8.0) (11,738) Weighted Average Yield 8.98% 9.72% 9.10% Delinquency ratio (30+ days) 0.95% 1.10% 0.88% Venture Capital Q3-2004 Q3-2003 $ Change % Change Q2-2004 Net Interest Income ($3) ($2) ($1) (50.0) ($2) Mark to Market Adjustment on Investments 0 0 0 na (350) Other Revenues 149 444 (295) (66.4) 179 Total Net Revenues 146 442 (296) (67.0) (173) Operating Expenses 99 329 (230) (69.6) 117 Income (Loss) Before Income Taxes 47 113 (66) (58.4) (290) Income Tax Expense (Benefit) 18 48 (30) (62.5) (112) Net Income (Loss) $29 $65 (36) (55.4) ($178) YTD-2004 YTD-2003 $ Change % Change Net Interest Income ($6) $7 (13) (185.7) Mark to Market Adjustment on Investments (341) (2,421) 2,080 85.9 Other Revenues 477 523 (46) (8.8) Total Net Revenues 130 (1,891) 2,021 106.9 Operating Expenses 345 440 (95) (21.6) Income (Loss) Before Income Taxes (215) (2,331) 2,116 90.8 Income Tax Expense (Benefit) (83) (932) 849 91.1 Net (Loss) ($132) ($1,399) 1,267 90.6 September 30, September 30, June 30, 2004 2003 $ Change % Change 2004 Investment in Portfolio Companies (cost) $14,717 $14,571 146 1.0 $14,592 Mark to Market Adjustment (11,418) (10,543) (875) (8.3) (11,418) Carrying Value - Portfolio Companies $3,299 $4,028 ($729) (18.1) $3,174 DATASOURCE: Irwin Financial Corporation CONTACT: Suzie Singer, Corporate Communications, +1-812-376-1917, or Greg Ehlinger, CFO, +1-812-379-7603, both of Irwin Financial Corporation; Conference call, 1:00 P.M., EDT October 29, 2004, +1-866-406-3487; Replay through 11/02/2004 (passcode: 10089249#), +1-877-213-9653 Web site: http://www.irwinfinancial.com/

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