COLUMBUS, Ind., Aug. 5 /PRNewswire-FirstCall/ -- -- Second quarter
loss declines to $57 million from losses of $94 million in the
first quarter of 2009 and $107 million in the second quarter of
2008. -- Improvement in credit quality trends leads the performance
improvement. -- The Corporation's depository subsidiaries remain
adequately capitalized Irwin Financial Corporation (NYSE:IFC),
today announced a loss of $57 million for the second quarter of
2009, or $1.92 per diluted share, principally due to credit
provisions and costs related to its strategic restructuring. This
loss is an improvement over the loss of $94 million in the first
quarter of 2009 and reflects a materially improved reduction in the
rate of credit portfolio deterioration. Irwin Union Bank and Trust
and Irwin Union Bank, FSB remained adequately capitalized at June
30. "In the second quarter, we saw a meaningful slow-down in new
problem credits. This encouraging sign suggests that our focus on
credit management is having a positive effect. Our consolidated
loan loss provision has fallen from $158 million in the second
quarter of 2008 to $64 million in the first quarter of 2009 to $45
million this quarter," said Will Miller, Chairman and CEO of Irwin
Financial. "Both of our banking subsidiaries remain adequately
capitalized. This was accomplished through the sale of
approximately $190 million of commercial loans and derecognition of
another $110 million of home equity loans during the second
quarter," Miller continued. "We continue to pursue the only
remaining step in our restructuring - raising additional capital.
We have been advised that Treasury is working on what they call
'Plan C,' which includes discussions with other banking agencies of
a new application of the TARP capital program to assist community
banks that have the ability to raise private capital. We continue
to have private capital lined up and under contract to enable us to
participate in such a program. Our private sector commitments to
invest $34 million in such a partnership have been extended to
year-end," Miller concluded. Financial highlights are presented in
the table below: $in millions, except EPS 2Q 2009 1Q 2009 Percent
2Q 2008 Percent Change Change ------------------------ -------
------- ------- ------- ------- Net Interest Income $14 $30 (53)%
$62 (77)% ------------------------ ------- ------- ------- -------
------- Provision for Losses (45) (64) 29% (158) 71%
------------------------ ------- ------- ------- ------- -------
Non-Interest Income 21 (11) N/M 7 223% ------------------------
------- ------- ------- ------- ------- Total Consolidated Net
Revenues (10) (44) 77% (89) 89% ------------------------ -------
------- ------- ------- ------- Non-Interest Expense 48 44 (8)% 44
(9)% ------------------------ ------- ------- ------- -------
------- Net Loss (57) (94) 39% (107) 46% ------------------------
------- ------- ------- ------- ------- Loss per Share (1.92)
(3.17) 39% (3.64) 47% ------------------------ ------- -------
------- ------- ------- Loan and Lease Portfolio 3,002 3,480 (14)%
5,455 (45)% ------------------------ ------- ------- -------
------- ------- Deposits 2,716 3,106 (13)% 3,505 (23)%
------------------------ ------- ------- ------- ------- -------
Shareholders' Equity (42) 17 N/M 330 N/M ------------------------
------- ------- ------- ------- ------- Total Risk-Based Capital
Ratio (1.2)% 1.5% 10.7% ------------------------ ------- -------
------- ------- ------- Net interest income for the three months
ended June 30, 2009, totaled $14 million, down 53 percent from the
first quarter 2009. This decline was driven by lower portfolio
balances and reduced net interest margins. Net interest margin
during the second quarter of 2009 was 2.28 percent down from 2.76
percent in the first quarter. The decline in margin in the second
quarter principally reflected derecognition of approximately $110
million of home equity loans and associated secured borrowings.
Noninterest income during the second quarter of 2009 totaled $21
million, compared to a loss of $11 million during the first
quarter. The second quarter improvement reflects increases in SFAS
159 fair value adjustments that lowered the carrying value of
certain liabilities in the current quarter compared with negative
marks-to-market on home equity loans and servicing rights during
the first quarter. Noninterest expenses for the three months ended
June 30, 2009, totaled $48 million, up from $44 million in the
first quarter due primarily to higher FDIC premiums. 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. The loan portfolio
totaled $3.0 billion as of June 30, 2009, compared to $3.5 billion
at March 31. The allowance for loan and lease losses (ALLL) totaled
$148 million as of June 30, 2009, down in total dollars from $155
million at the end of the first quarter due to the decrease in
loans on our balance sheet, but up as a percentage of the loan
portfolio to 5.44 percent as of June 30, compared with 4.65 percent
at March 31,. Credit quality deterioration, particularly the pace
of loans entering delinquency and non-performance status, showed
signs of slowing during the second quarter. The decrease in ALLL
dollars was reflective of portfolio seasoning, an increase in
charge-offs of loans more than 180 days past due, and the
reclassification of approximately $200 million of commercial loans
to held-for-sale status. The relative improvement in credit quality
trends was reflected in the consolidated provision for loan and
lease losses which totaled $45 million during the second quarter of
2009, compared to $64 million during the first quarter and $158
million in the second quarter of 2008. Thirty-day and greater
delinquencies totaled 3.96 percent as of June 30, 2009, down from
4.82 percent as of March 31. 2Q 2009 1Q 2009
----------------------------- ------------------------------- 30+
ALLL to ALLL to LLP to 30+ ALLL to ALLL to LLP to DPD Loans NPLs
C/Os DPD Loans NPLs C/Os --- ------ ------ ------ --- ------ ------
------ Commercial Banking 3.57% 4.15% 47% 95% 4.46% 3.57% 51% 159%
-------- ------ ------ ---- ---- ------ ------ ---- ---- Commercial
Finance 1.45% 2.27% 48% 390% 3.79% 1.79% 68% 208% -------- ------
------ ---- ---- ------ ------ ---- ---- Home Equity 13.74% 22.04%
338% 79% 10.08% 21.53% 261% 108% -------- ------ ------ ---- ----
------ ------ ---- ---- Total 3.96% 5.44% 68% 98% 4.82% 4.65% 75%
140% -------- ------ ------ ---- ---- ------ ------ ---- ----
Deposits totaled $2.7 billion at June 30, down $390 million from
March 31, principally reflecting run-off of brokered CDs and the
reduction in the use of public funds (down $287 million). Although
each of its banking subsidiaries was adequately capitalized, the
Corporation had negative $42 million in shareholders' equity as of
June 30. The Corporation's equity--which has no immediate impact on
its subsidiary banks as they are not reliant on the Corporation for
funding--reflects losses in recent periods, combined with $148
million of non-cash charges for potential loan losses and $179
million for valuation reserves for deferred tax assets at June 30.
The completion of our recapitalization plan, which includes both
raising additional equity and conversion of debt into common stock,
would restore the Corporation to positive equity and provide a
significant pick-up in total regulatory capital as $228 million of
currently ineligible capital will again be eligible for inclusion
under regulatory capital formulas. The Corporation's subsidiary
Irwin Union Bank and Trust Company had equity and total regulatory
capital of $157 and $226 million respectively. Irwin Union Bank,
F.S.B had equity and regulatory capital of $41 and $47 million,
respectively, as of June 30, 2009. These subsidiaries hold the vast
majority of consolidated assets and hold the Corporation's
deposits. The capital ratios of both subsidiaries will also
increase when the recapitalization is completed. The Corporation
has agreements with a group of investors in the form of standby
commitments to invest $34 million 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 December 31, 2009, while the Corporation
awaits a response to its proposal to receive an equity investment
from the U.S. Treasury. Additionally, potential changes in tax loss
carryback provisions which the Corporation has been advised are
again under consideration in Congress, would positively impact the
Corporation's equity position. If the legislation were passed to
extend the carry back period to five years for tax years 2008 and
2009 as was previously proposed, the resulting increase in the
Corporation's equity would be approximately $45 million. Segment
Results Quarterly results by segment are shown below. Net
Income/(loss) ($in millions) 2Q 2009 1Q 2009 Percent 2Q 2008 Change
---------------------------------- ------- ------- ------- -------
Commercial Banking (PBT) ($28) ($35) 18% ($15)
---------------------------------- ------- ------- ------- -------
Commercial Finance (PBT) (0) (3) 86% (39)
---------------------------------- ------- ------- ------- -------
Home Equity (PBT) (22) (42) 49% (74)
---------------------------------- ------- ------- ------- -------
Subtotal, Operating Segments (PBT) (50) (80) 37% (128)
---------------------------------- ------- ------- ------- -------
Other Segments, Including Parent (8) (9) 11% (5)
---------------------------------- ------- ------- ------- -------
Income taxes (1) 5 NM (27) ----------------------------------
------- ------- ------- ------- Consolidated Net Income (Loss)
($57) ($94) 39% (107) ---------------------------------- -------
------- ------- ------- The commercial banking segment had a
pre-tax loss of $28 million during the second quarter, as compared
to a pre-tax loss of $35 million in the first quarter of 2009,
primarily due to reduced credit provisions. The commercial banking
segment's loan portfolio decreased to $2.1 billion, resulting from
our efforts to manage the balance sheet until our recapitalization
is complete, and specifically due to $187 million of asset sales in
June. In addition, $50 million of the portfolio has been moved into
"held-for-sale" classification, due to pending third quarter sales.
Net interest margin decreased modestly to 3.45 percent during the
second quarter, down from 3.55 percent during the first quarter.
The commercial finance segment had a pre-tax loss of $0.4 million
in the second quarter of 2009, as compared to a pre-tax loss of
$3.0 million in the first quarter of 2009. The quarterly loss was
primarily due to elevated loan loss provisions. The commercial
finance loan portfolio totaled $428 million as of June 30, compared
to $639 million at March 31, 2009. At June 30, 2009, an additional
$228 million of loans were held-for-sale. Net interest margin
decreased modestly to 3.02 percent during the second quarter, down
from 3.13 percent during the first quarter. The home equity segment
incurred a pre-tax loss of $22 million during the second quarter
compared to a pre-tax loss of $42 million during the first quarter
of 2009. The loss was primarily due to a provision of $14 million
on the unsold portfolio, funding costs on loans securitized in the
third quarter of 2008, and non-interest expense of $15 million,
which was up from the first quarter due to one-time wind-down
costs. During the quarter, the Corporation completed derecognition
of the last of the asset-backed securities funded loan portfolio
which totaled approximately $110 million and the associated debt of
a like amount. The parent and other consolidating entities lost $8
million before tax in the second quarter of 2009, compared to a
loss of $9 million in the first quarter of 2009. The loss was
primarily due to restructuring costs and expenses and allocation of
FDIC insurance premiums to the consolidated Treasury department. In
summary, the loss of $57 million for the second quarter of 2009
principally reflected continued weakness in certain borrowers'
credit quality and costs related to strategic restructuring. This
loss is an improvement over the loss of $94 million in the first
quarter of 2009 and reflects a materially improved reduction in the
rate of deterioration of the credit portfolio. About Irwin
Financial Irwin 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,
including capital raising and de-leveraging activities; -- our
plans and strategies, including the expected results or costs and
impact of implementing or changing such plans and strategies; --
our projected revenues, earnings or earnings per share, as well as
management's short-term and long-term performance goals; --
projected trends or potential changes in asset quality
(particularly with regard to loans or other exposures including
loan repurchase risk, in sectors in which we deal in real estate or
residential mortgage lending), loan delinquencies, charge-offs,
reserves, asset valuations, regulatory capital levels, or financial
performance measures; -- the expected effects on the Corporation's
balance sheet, profitability, liquidity, equity position and
capital ratios (including regulatory capital ratios of the
Corporation's bank subsidiaries) of the strategic restructuring,
including the proposed shareholder rights offer, the possible
private placement of equity, the possible extension of the U.S.
Treasury's TARP capital program to assist community banks having
the ability to raise private capital and the Corporation's possible
participation in such a program, the possible exchange of trust
preferred securities for common shares, asset sales undertaken to
de-lever the balance sheet, and other elements of the completion of
our recapitalization plan; -- predictions about conditions in the
national or regional economies, housing markets, commercial real
estate development, industries associated with housing, mortgage
markets, franchise restaurant finance or mortgage industry, as well
as our assessment of the impact of such conditions on credit
quality trends and the success of our credit management activities
in response to such trends; -- the potential impact on the
Corporation's equity position of planned, proposed or pending
legislative developments that may extend or otherwise amend
existing tax loss carryback provisions of the Internal Revenue
Code; -- 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; -- the
anticipated effects on results of operations or financial condition
from recent developments or events; 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, possible private placement of equity, or a possible exchange
of term, mezzanine debt and/or trust preferred securities for
common shares 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, the
failure to complete in a timely manner anticipated asset sales to
de-lever the balance sheet and provide additional liquidity, or the
failure to obtain any necessary regulatory approvals; -- potential
further deterioration or effects of general economic conditions,
particularly in sectors relating to real estate and/or real estate
lending and small business lending; -- 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, and reductions in value resulting from changes in
ratings by rating agencies; -- 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, including companies that have recently purchased our
assets, for our staff and customers; -- changes in the value of our
segments, subsidiaries, or companies in which we invest; --
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 Stipulation to the Issuance of an Order to Cease and
Desist that the Corporation's federal savings bank subsidiary,
Irwin Union Bank, F.S.B., entered into with the Office of Thrift
Supervision on July 24, 2009; -- 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 segments 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 August 5, at 11:00 a.m. EDT. 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 #25134211. A replay
of the call will be available on the Irwin Financial Corporation
website at: http://www.irwinfinancial.com/investors/index_ir.htm.
For further information contact: Susan Matthews, Media 317.590.3202
Suzie Singer, Corporate Communications 812.376.1917 Conference
Call, 11:00 AM EDT, August 5, 2009 888.867.8502 Confirmation
#25134211 DATASOURCE: Irwin Financial Corporation CONTACT: Susan
Matthews, Media +1-317-590-3202, or Suzie Singer, Corporate
Communications, +1-812-376-1917, both of Irwin Financial
Corporation Web Site: http://www.irwinfinancial.com/
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