IRWIN FINANCIAL CORPORATION AMENDS ITS 10Q FILED FOR THE QUARTER ENDING
JUNE 30, 1995. THE AMENDED ENTRIES ARE FLAGGED WITH AN * AND AN
EXPLANATION FOLLOWS AT THE BOTTOM OF THE PAGE.
XXX PAGE 1 XXX
Part I. Financial Information
Item I. Financial Statements
<TABLE>
<CAPTION>
IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30, December 31,
1995 1994
------------ -------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 41,378,573 $ 36,840,452
Federal funds sold 10,000,000 14,000,000
------------ -------------
Cash and cash equivalents 51,378,573 50,840,452
Interest-bearing deposits with financial
institutions 9,932,488 12,164,206
Investment securities (Market
value: $64,675,736 in 1995 and
$76,387,652 in 1994) - Note 2 63,878,851 77,356,575
Mortgage loans held for sale - Note 3 342,906,262 154,964,484
Loans and leases, net of unearned
income - Note 4 371,383,935 308,411,082
Less: Allowance for possible loan and
lease losses - Note 5 (3,988,696) (3,863,223)
------------- -------------
367,395,239 304,547,859
Capitalized servicing, net of amortization 29,801,273 20,301,577
Accrued interest receivable 3,636,240 3,117,400
Premises and equipment 14,927,589 13,838,677
Other assets 30,790,024 22,539,270
------------- -------------
$914,646,539 $659,670,500
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $205,473,792 $154,081,893
Interest-bearing 290,260,173 264,361,775
Certificates of deposits over $100,000 48,000,429 21,474,306
------------- ------------
543,734,394 439,917,974
Short-term borrowings - Note 6 234,125,087* 93,981,072
Long-term debt - Note 7 21,836,245 24,029,410
Other liabilities 27,389,991 20,638,098
------------- -------------
Total liabilities 827,085,717 578,566,554
------------- ------------
Shareholders' equity
Preferred stock, no par value--authorized
50,000 shares; none issued 0 0
Common stock, no par value -- authorized
7,500,000 shares; issued 5,850,520
shares in 1995 and 1994; including
210,268 shares in treasury in 1995
and 220,732 in 1994. 29,965,287 29,965,287
Unrealized loss on investment securities (32,142) (279,063)
Retained earnings 63,567,800 57,080,536
------------- ----------
93,500,945 86,766,760
Less treasury stock, at cost 5,940,123 5,662,814
------------- -----------
Total shareholders' equity 87,560,822 81,103,946
------------- ------------
$914,646,539 $659,670,500
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements
Note: * Number was transposed
XXX PAGE 10 XXX
Listed below are the earnings by line of business for the quarter
and year to date, as compared to the similar periods in 1994:
<TABLE>
<CAPTION>
Three Months
Ended June 30,
1995 1994
---------- ----------
<S> <C> <C>
Mortgage banking $3,920,282 $3,447,114
Community banking 731,155 715,051*
Investor services 110,443 (22,670)
Equipment leasing (33,389) 347,092
Home equity lending (1,529,039) 0
Credit insurance (415) 11,685
Venture capital 0 0
Parent (including consolidating
entries) 1,053,408 (327,098)
---------- ----------
$4,252,445 $4,171,174
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Six Months
Ended June 30,
1995 1994
---------- ----------
<S> <C> <C>
Mortgage banking $8,567,379 $7,073,675
Community banking 1,552,924 1,292,733
Investor services 244,472 (48,497)
Equipment leasing (151,844) 552,683
Home equity lending (2,521,619) 0
Credit insurance 2,939 26,599
Venture capital 0 0
Parent (including consolidating
entries) 1,052,069 (536,625)
---------- ----------
$8,746,320 $8,360,568
========== ==========
</TABLE>
MORTGAGE BANKING
Selected Financial Data (shown in thousands):
<TABLE>
<CAPTION>
Three Months
Ended June 30,
1995 1994
------- -------
Selected Income Statement Data:
<S> <C> <C>
Net interest revenue $ 3,217 $ 3,332
Mortgage loan origination and
servicing righ income 12,825 7,974
Loan servicing fees 8,618 7,864
Gain on sale of servicing 898 4,403
Other income 120 137
Operating expense (19,040) (17,878)
-------- --------
Income before tax 6,638 5,832
Income tax (2,718) (2,385)
-------- --------
Net income $ 3,920 $ 3,447
======== ========
Mortgage loan originations $831,332 $871,901
======== ========
</TABLE>
<TABLE>
<CAPTION>
Six Months
Ended June 30,
1995 1994
------- -------
Selected Income Statement Data:
<S> <C> <C>
Net interest revenue $ 5,734 $ 6,456
Mortgage loan origination and
servicing right income 16,916 16,633
Loan servicing fees 17,383 15,464
Gain on sale of servicing 10,174 8,506
Other income 350 289
Operating expense (36,065) (35,381)
---------- -----------
Income before tax 14,492 11,967
Income tax (5,925) (4,893)*
----------- -----------
Net income $ 8,567 $ 7,074
========== ===========
Mortgage loan originations $1,308,209 $1,730,615
========== ===========
</TABLE>
Note: * Number was transposed
Note: * Replaced period with a comma
XXX PAGE 11 XXX
<TABLE>
<CAPTION>
SELECTED OPERATING DATA: June 30, December 31,
1995 1994
---------- -----------
<S> <C> <C>
Servicing portfolio $9,133,694* $8,818,502
Mortgage loans held for sale 278,793 67,373
Net capitalized servicing 29,801 20,302
</TABLE>
Net income for the second quarter was $3,920,282, up 13.7%
from the same period in 1994. Year to date, net income is $8,567,379,
compared to $7,073,675 in 1994.
The Generally Accepted Accounting Principle (GAAP)
which covers accounting for mortgage servicing rights -- Statement of
Financial Accounting Standards No. 65 (SFAS 65) -- was amended by the
Financial Accounting Standards Board during the second quarter of 1995.
The new standard, SFAS 122, has been adopted by the Corporation for
results beginning April 1, 1995.
SFAS 65 treated Originated Mortgage Servicing Rights
(OMSRs) created through the Corporation's retail network differently
from Purchased Mortgage Servicing Rights (PMSRs) originated
through the Corporation's wholesale network. Under SFAS 65, expenses
arising from OMSRs were recognized immediately, whereas certain costs
relating to PMSRs were capitalized and then amortized as the revenue from
the servicing rights was recognized. SFAS 122 eliminates the
distinction between OMSRs and PMSRs. SFAS 122 requires the recognition
of all Mortgage Servicing Rights (MSRs) originated or purchased by
the Corporation as assets based on their fair market value at the
time of their origination. The MSR asset will be amortized over the
life of the servicing right.
SFAS 122 prohibits the restatement of results for prior
periods to reflect the new accounting. Accordingly, the Corporation's 1994
mortgage banking activities reported in the financial statements were
accounted for under the original FAS 65. A summary of the impact of
the change in the accounting standards to mortgage banking net income
in the second quarter of 1995 is as follows (in thousands):
<TABLE>
<S> <C>
Increase in gain from sales of loans $6,229
Increase in amortization of mortgage
servicing rights (140)
Increase in provision for impairment of
mortgage servicing rights (210)
Increase in income tax expense (2,352)
-------
Increase to net income $3,527
=======
</TABLE>
Mortgage loan originations of $831.3 million (including
$53.7 million of brokered loans) were 4.7% below the second quarter
of 1994. For the year, originations totaled $1.3 billion, down 24.4%
from 1994. Refinances accounted for 5.6% of loan production in the
second quarter of 1995 and 4.8% year to date. This compares to 11.4% and
22.8%, respectively, in 1994. Mortgage loan and servicing right
origination income, excluding the effect of SFAS 122, was down 14.7% in
the
Note: * Typographical error
XXX PAGE 13 XXX
COMMUNITY BANKING
Selected Financial Data (shown in thousands):
<TABLE>
<CAPTION>
Three Months
Ended June 30,
1995 1994
-------- --------
Selected Income Statement Data:
<S> <C> <C>
Net interest revenue $4,309 $3,718
Provision for loan and lease losses (400) (194)
Other income 939 784
Operating expense (3,779) (3,280)
------- -------
Income before tax 1,069 1,028
Income tax (338) (313)
------- -------
Net income $ 731 $ 715
======= =======
</TABLE>
<TABLE>
<CAPTION>
Six Months
Ended June 30,
1995 1994
-------- --------
Selected Income Statement Data:
<S> <C> <C>
Net interest revenue $8,480 $7,073
Provision for loan and lease losses (833) (427)
Other income 1,755 1,594
Operating expense (7,069)* (6,326)
------- -------
Income before tax 2,333 1,914
Income tax (780) (621)
------- -------
Net income $1,553 $1,293
======= =======
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
Selected Balance Sheet Data: 1995 1994
--------- ---------
<S> <C> <C>
Cash and investments $125,261 $104,676
Loans and leases 284,222* 255,719
Allowance for loan and lease
losses (3,285) (3,417)
All other assets 13,537 13,046
--------- ---------
Total assets $419,735 $370,024
========= =========
Interest-bearing deposits $301,089 $274,319
Noninterest-bearing deposits 68,623 66,283
All other liabilities 22,923 3,738
--------- --------
Total liabilities $392,635 $344,340
========= ========
Shareholder's equity $ 27,100 $ 25,684
========= ========
</TABLE>
Community banking activities are conducted by Irwin
Union Bank through locations in five counties in south-central Indiana.
Net income was up modestly in the second quarter to $731.2
thousand from $715.1 thousand. Year to date, net income improved $260.2
thousand from 1994, or 20.1%. The provision for loan and lease losses
increased 106.2% to $400.0 thousand in the second quarter
compared with a provision of $194.0 thousand a year earlier. Year to
date, the provision for loan and lease losses totaled $833.0 thousand,
compared to $427.0 thousand in 1994. This increased provision
reflects growth in the loan and lease portfolios which have increased 23.7%
year-over-year and net charge-offs of $425.9 thousand during the second
quarter of 1995.
Note: * Replaced period with a comma
Note: * Typographical error
XXX PAGE 17 XXX
The increase in assets was accompanied by an increase
in deposits of $103.8 million or 23.6%. A portion of
noninterest bearing deposits is associated with escrow accounts held
on loans in the servicing portfolio of Inland Mortgage. These escrow
accounts totaled $149.2 million at June 30, 1995, up from $88.8 million at
December 31, 1994.
Shareholders' equity grew to $87,560,822, or $15.52 per
share, a 8.0% increase over the $81,103,946, or $14.41 per share at
the end of 1994. Irwin Financial's equity to assets ratio ended the
quarter at 9.57%, compared to 12.29% at the end of 1994.
The mortgage loan servicing portfolio represents
substantial economic value which is not recorded on the balance sheet.
The following table demonstrates the estimated after-tax value
for the current quarter as well as the past two year ends.
<TABLE>
<CAPTION>
(In thousands) June 30,1995 Dec. 31,1994 Dec. 31, 1993
------------ ------------ -------------
<S> <C> <C> <C>
Servicing portfolio balance $9,133,694 $8,818,502 $7,922,299
---------- ---------- ----------
Value @1.5% $ 137,005 $ 132,278 $ 118,834
---------- ---------- ----------
Less: capitalized servicing 29,801 20,301* 13,299*
Tax liability at 40% 42,882 44,790 42,214
---------- ---------- ----------
Net value $ 64,322 $ 67,187 $ 63,321
========== ========== ==========
Per share of common stock $ 11.40 $ 11.93 $ 10.90
========== ========== ==========
</TABLE>
CREDIT RISK
The assumption of credit risk is a key source of
earnings for the community banking, home equity lending, and equipment
leasing businesses. In addition, the mortgage banking business
assumes some credit risk despite the fact that the mortgages are typically
secured.
The community banking and home equity lending businesses
manage credit risk through the use of lending policies, credit
analysis and approval procedures, and personal contact with the borrowers.
Loans over a certain size are reviewed prior to approval by a Loan
Committee. The equipment leasing business manages credit risk in a
similar manner through the use of lending policies, credit analysis
procedures, and personal contact with lessees.
Management reviews various ratios as measurements of
asset quality; however, the two most significant areas are
delinquent loan and lease ratios and the adequacy of the allowance for
possible loan and lease losses.
The adequacy of the allowance for possible loan and lease losses
is critical to the fair valuation of net loans and leases recorded on
the Corporation's balance.
Note: * Typographical error.
XXX PAGE 19 XXX
LIQUIDITY
Liquidity is the availability of funds to meet the daily
requirements of the business. For financial institutions,
demand for funds comes principally from extensions of credit and
withdrawal of deposits. Liquidity is provided by asset maturities,
sales of investment securities, or short-term borrowings. Seasonal
fluctuations in deposit levels and loan demand require
differing levels of liquidity at various times during the year.
Liquidity measures are formally reviewed by management monthly, and
they continue to show adequate liquidity in all areas of the
organization.
INTEREST RATE SENSITIVITY
Interest rate sensitivity refers to the potential for
changes in market rates of interest to cause changes in net interest
income. Since net interest income is the major source of income, it
is extremely important that potential changes are managed
prudently. The following table presents the consolidated interest rate
sensitivity, or gap, as of June 30, 1995.
<TABLE>
<CAPTION>
Within Three Months After
Three Months to One Year One Year
----------- ----------- --------
(In Thousands)
Interest-earning assets:
<S> <C> <C> <C>
Interest-bearing deposits
with banks $ 3,841 $ 4,995 $ 1,096
Federal funds sold 10,000 0 0
Taxable investment securities 11,561 13,026 32,105
Tax-exempt investment securities 295 761 6,130
Mortgages held for sale 342,906 0 0
Loans, net of unearned income 179,277* 36,690 155,417
-------- -------- --------
Total interest-earning assets 547,880* 55,472 194,748
-------- -------- --------
Interest-bearing liabilities:
Money Market checking 17,135 0 51,404
Money Market savings 15,247 0 9,742
Regular savings 36,648 2,226 21,049
Time deposits 93,652 42,493 48,664
Short-term borrowings 233,640 485 0
Long-term debt 1,928 5,146 14,762
-------- -------- --------
Total interest-bearing
liabilities 398,250 50,350 145,621
-------- -------- --------
Interest sensitivity gap 149,630 5,122 49,127
-------- -------- --------
Cumlative interest sensitivity
gap $149,630 $154,752 $203,879
======== ======== ========
</TABLE>
Note: * Carried over wrong number from previous quarter column.
XXX PAGE 21 XXX
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
IRWIN FINANCIAL CORPORATION
By: s/Thomas D. Washburn
________________________
Thomas D. Washburn
Chief Financial Officer
By: s/Marie C. Strack
_________________________
Marie C. Strack
Corporate Controller
(Chief Accounting Officer)
