SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K (Mark One) _x_ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (Fee Required) For the fiscal year ended December 31, 1995 or Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (No Fee Required) For the transition period from to ------- -------- Commission file number 0-6835 IRWIN FINANCIAL CORPORATION (Exact Name of Registrant as Specified in its Charter) Indiana 35-1286807 - ------- ---------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 500 Washington Street Columbus, Indiana 47201 (Address of Principal Executive Offices) (Zip Code) (812) 376-1020 -------------- (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Shares - -------------- (Title of Class) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x] The aggregate market value of the voting stock held by non- affiliates of the Registrant was $120,323,493.75 as of March 12, 1996. As of March 12, 1996, there were outstanding 5,670,586 common shares of the Registrant. DOCUMENTS INCORPORATED BY REFERENCE Selected Portions of Part of Form 10-K Into the Following Documents Which Incorporated - ----------------------- ----------------------- Annual Report to Shareholders Part I, Part II for the year ended December 31, 1995 Definitive Proxy Statement for Part III Annual Meeting of Shareholders to be held April 30, 1996 Exhibit Index on Pages 11 through 14 Page 1 Total Pages in This Filing: 124 ==== FORM 10-K TABLE OF CONTENTS Part I Item 1 - Business 3 Item 2 - Properties 7 Item 3 - Legal Proceedings 8 Item 4 - Submission of Matters to a Vote of Security Holders 8 Part II Item 5 - Market for Registrant's Common Equity and Related Security Holder Matters 8 Item 6 - Selected Financial Data 9 Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 8 - Financial Statements and Supplementary Data 9 Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 10 Part III Item 10 - Directors and Executive Officers of the Registrant 10 Item 11 - Executive Compensation 10 Item 12 - Security Ownership of Certain Beneficial Owners and Management 10 Item 13 - Certain Relationships and Related Transactions 10 Part IV Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K 11 Signatures 15 PART I Item 1 Business -------- General - ------- Irwin Financial Corporation (the "Registrant") is a diversified financial services company organized as an Indiana bank holding company in May, 1972. The Registrant's principal subsidiaries are Inland Mortgage Corporation ("Inland Mortgage"), a mortgage banking company; Irwin Union Bank and Trust Company ("Irwin Union Bank"), a commercial bank; Irwin Union Investor Services, Inc. ("Investor Services"), an investment and financial counseling company; Affiliated Capital Corp. ("Affiliated"), an equipment leasing company; Irwin Home Equity Corporation ("Home Equity"), a consumer home equity lending company; White River Capital Corporation, a small venture capital company; and Irwin Union Credit Insurance Corporation, a credit insurance company. Business of Subsidiaries - ------------------------ Inland Mortgage originates, purchases and services conventional or government agency backed (i.e., FHA and VA) residential mortgage loans. Substantially all mortgages are either insured by an agency of the federal government, or in the case of a conventional mortgage, meet requirements for resale to the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation. Periodically, Inland Mortgage sells loans to private investors pursuant to their requirements. Inland also originates a small amount of commercial mortgages. Inland Mortgage sells mortgage loans to institutional investors but may retain servicing rights to mortgage loans that it originates or purchases from correspondents. Inland Mortgage collects and accounts for the monthly payments on each loan serviced and pays the real estate taxes and insurance necessary to protect the integrity of the mortgage lien, for which it receives a servicing fee. Inland Mortgage operates 101 production and satellite offices in 27 states. During 1995, Inland Mortgage established offices in Flagstaff, Phoenix, Prescott, and Scottsdale, Arizona; Covina, Orange, Porterville, and Richmond, California; LaPorte, Indiana; Lexington, Kentucky; Baton Rouge, Louisiana; Cape May, New Jersey; Santa Fe, New Mexico; Las Vegas, Nevada; Tulsa, Oklahoma; Dallas, Houston, North Houston, and Plano, Texas; Bellevue and Orting, Washington. During 1995, Inland Mortgage closed offices in Hanford and Mill Valley, California; Colorado Springs and Woodland Park, Colorado; Floyds Knobs, Indiana; Troy, Michigan; Creve Coeur, Missouri; Anacortes, Washington. Irwin Union Bank, organized in 1871, is a full service commercial bank offering a wide variety of services to individual, business, institutional, and governmental customers. Irwin Union Bank's services include personal and commercial checking accounts, savings and time deposit accounts, personal and business loans, credit card services, money transfer, property and casualty insurance agency services, trust services, securities brokerage and safe deposit facilities. Irwin Union Bank is the largest of nine financial institutions operating in Bartholomew County, Indiana with eight locations throughout the county. Irwin Union Bank also has branch facilities in Seymour (Jackson County - 2), Shelbyville (Shelby County - 2), Bloomington (Monroe County), Franklin (Johnson County), and Greensburg (Decatur County), Indiana. The Greensburg branch was opened in 1995. One of the branch locations in Bartholomew County closed in 1995. Irwin Union Bank has two trust custodial offices in Indianapolis, Indiana. Investor Services engages in investment services activities including certificate of deposit placement services, consumer financial counseling services through its wholly owned subsidiary, Irwin Union Advisory Services, Inc., and securities brokerage services through its wholly owned subsidiary, Irwin Union Securities, Inc. Investor Services operates three offices in three states. Affiliated, acquired in 1990 and located in Northbrook, Illinois, is engaged in the small-ticket equipment leasing and commercial lending business. Affiliated offers non- recourse, non-operating, full payout leases and commercial lines of credit to physicians, medical clinics, veterinarians, dentists and chiropractors. Home Equity was formed in 1994 and is located in San Ramon, California. Home Equity originates and services home equity lines of credit. White River Capital Corporation ("White River"), a venture capital company, is located in Columbus, Indiana and currently holds one investment but has suspended making new investments. Irwin Union Credit Insurance Corporation is located in Columbus, Indiana and provides credit life insurance to consumer loan customers of Irwin Union Bank. No single part of the business of the Registrant is dependent upon a single customer or upon a very few customers and the loss of any one customer would not have a materially adverse effect upon the business of the Registrant. Inland Mortgage is registered as a Foreign Financial Institution in Mexico but has no foreign operations or export sales. Competition - ----------- Inland Mortgage originates and services residential first mortgage loans from 101 production and satellite offices in Arizona, California, Colorado, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Kentucky, Louisiana, , Minnesota, Missouri, Montana, New Jersey, New Mexico, Nevada, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Texas, Washington, Wisconsin and the Washington, D.C. metropolitan area, including offices in Maryland and Virginia. In each of these locations, competition for mortgage loans is vigorous, coming from other national, regional and local mortgage banking companies as well as commercial banks, savings banks and savings & loan associations. Inland Mortgage purchases mortgage loans from correspondents in these and other states as well. The commercial banking business for Irwin Union Bank in the Bartholomew, Decatur, Jackson, Johnson, Monroe and Shelby County areas is very competitive. Within these counties, in addition to the commercial banks, there are a number of savings banks, savings & loan associations and credit unions competing for deposits and loans. Irwin Union Bank also competes for the provision of banking services with banks located elsewhere in Indiana, primarily in southern Indiana, and with a number of nonbank companies located throughout the United States, including insurance companies, retailers, brokerage firms, companies offering money market accounts, and national credit card companies. As of December 31, 1995, Irwin Union Bank ranked first among commercial banking and savings bank institutions on the basis of Bartholomew County deposits. In addition to the above mentioned counties, Irwin Union Bank derives its business from several other counties in southern Indiana. In November, 1995, Irwin Union Bank opened an office in Greensburg, Indiana. Investor Services provides securities brokerage and financial counseling services to corporate and individual customers. Investor Services also offers on an agency basis, a brokered deposit program for clients who wish to invest in insured certificates of deposit and oversees other investor related services. Investor Services' primary competitors include branch offices of regional and national securities brokerage firms located in Bartholomew County as well as other regional and national financial institutions which operate similar cash management and financial counseling programs. Affiliated provides, primarily, medical equipment leasing and commercial credit services to medical clinics, small groups of physicians, individual practitioners, chiropractors, dentists and veterinarians. Affiliated's primary competitors include other equipment leasing companies with operations that are national in scope, banks and other financial institutions which offer commercial credit products. Such competitors may be headquartered anywhere in the country. Home Equity provides home equity lines of credit to private home owners in several states. Home Equity's primary competitors include banks, thrifts, credit unions and other home equity lenders with operations that are either national, regional or local in scope. Such competitors may be headquartered anywhere in the country. Supervision and Regulation - -------------------------- The Registrant is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended, and is registered with, regulated and examined by the Board of Governors of the Federal Reserve System (the "Board of Governors"). Subject to certain exceptions, a bank holding company is prohibited from acquiring direct or indirect ownership or control of more than five percent of the voting shares of any company which is not a bank and from engaging directly or indirectly in activities unrelated to banking or managing or controlling banks. One exception to this prohibition permits activities by a bank holding company or its subsidiary which the Board of Governors determines to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. The Board of Governors has adopted regulations prescribing those activities it presently regards as permissible which include the activities engaged in by Registrant and its subsidiaries. The Bank Holding Company Act, the Federal Reserve Act and the Federal Deposit Insurance Act also subject bank holding companies and their subsidiaries to certain restrictions on extensions of credit by subsidiary banks to the bank holding company or any of its subsidiaries, or investments in the securities thereof, and on the taking of such securities as collateral for loans to any borrower. Further, the Bank Holding Company Act and the regulations of the Board of Governors thereunder, prohibit a bank holding company and its subsidiaries from engaging in certain tie-in arrangements in connection with any extension of credit, sale or lease of any property or furnishing of services. In addition to the regulation of the Registrant, Irwin Union Bank is subject to extensive regulation and periodic examination, principally by the Indiana Department of Financial Institutions and the Federal Deposit Insurance Corporation. Inland Mortgage is subject to audit and examination oversight by the federal department of Housing and Urban Development as well as the Government National Mortgage Association, the Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation. The insurance subsidiary of the Registrant and the insurance subsidiary of Irwin Union Bank are dependent upon state licenses and upon franchise agreements with private corporations for their continued existence. The home equity subsidiary of the Registrant is also dependent upon state licenses for its ability to extend credit in certain states. Finally, the securities brokerage activities of Investor Services are regulated and examined by the Securities and Exchange Commission, the Indiana Securities Division, the securities divisions of the various states in which Investor Services operates, and the National Association of Securities Dealers. Employees and Labor Relations - ----------------------------- As of December 31, 1995, the Registrant and its subsidiaries had a total of 1,790 employees, including full-time and part- time employees. The Registrant continues a commitment of equal employment opportunity for all job applicants and staff members and management regards its relations with its employees as satisfactory. Further Information - ------------------- The following information responsive to Guide 3 promulgated under the Securities Exchange Act of 1934, is contained in the "Management's Discussion and Analysis of Financial Conditions and Results of Operations" section of the Annual Report to Shareholders for the year ending December 31, 1995 and is incorporated herein by reference: "Daily Average Consolidated Balance Sheet, Interest Rates and Interest Differential" (p. 80), "Investment Securities" (p. 68), "Short-Term Borrowings" (p. 69), "Summary of Net Interest Income Changes" (p. 65), "Deposits" (p. 68), "Loans and Leases" (p. 66), "Five-Year Selected Financial Data" (p. 32), and the discussion and tabular information under the caption "Credit Risk" on pages 72 to 76 of "Management's Discussion and Analysis of Financial Conditions and Results of Operations". Executive Officers of the Registrant - ------------------------------------ The Executive Officers of the Registrant are elected annually by the Board of Directors and serve for a term of one year or until their successors are elected and qualified. There are no arrangements or understandings between any Executive Officer and any other person pursuant to which the Officer was or is to be selected as an Officer. Robert P. Albert (45) is President of Affiliated Capital Corp. since February 28, 1990. Claude E. Davis (35) is President of Irwin Union Bank since January 2, 1996. He has been an officer since 1988. Elena Delgado (40) is President of Irwin Home Equity Corporation since September 4, 1994. From March through August, 1994 Ms. Delgado was an independent consultant to Irwin Financial Corporation. From 1990 to 1993 Ms. Delgado was Vice President, Second Mortgage Lending of First Deposit Corporation. Gregory F. Ehlinger (33) is Vice President and Treasurer of the Registrant since August of 1992. From 1988 to 1992, Mr. Ehlinger was employed by Irwin Management Company, Inc. (A private management company). From 1986 to 1988, Mr. Ehlinger attended the University of Virginia, Darden School of Business. David C. Fulton (66) retired from the Presidency of Inland Mortgage on December 31, 1995. He was an officer since 1985. Jose M. Gonzalez (37) is Vice President and Director of Internal Audit of the Registrant since October of 1995. From 1993 to 1995 Mr. Gonzalez was Senior Vice President, Audit & Compliance Services of Premier Bank and Trust. From 1991 to 1993 Mr. Gonzalez was Vice President and Senior Compliance Officer at First Empire State Corporation. From 1980 to 1991 Mr. Gonzalez was Vice President and Senior Auditing Officer at Southeast Banking Corporation. Theresa L. Hall (43) is Vice President of the Registrant, since 1988, and from 1984 to 1990 was Vice President-Human Resources of Irwin Union Bank. She has been an officer since 1980. Robert S. Kaspar (37) is President and Treasurer of Investor Services. From 1987 to 1989 Mr. Kaspar was Controller of the Registrant. From 1984 to 1987, Mr. Kaspar was Controller of Irwin Union Bank. He has been an officer since 1985. Rick L. McGuire, (43) is President of Inland Mortgage since January 1, 1996. He has been an officer since 1978. William I. Miller (39) is Chairman of the Board, since 1990, and has been a Director of the Registrant since 1985. Prior to 1990, he was President of Irwin Management Company, Inc. Mr. Miller continues to serve as Chairman of Tipton Lakes Company (a real estate development concern), and the non- executive Chairman of the Board of Irwin Management Company. John A. Nash (58) is Chairman of the Executive Committee, since 1990, and President, since 1985, of the Registrant. He has been an officer and Director of the Registrant since 1972. Michael F. Ryan (50) is Vice President-Community Relations of the Registrant since January 2, 1996. He was President of Irwin Union Bank from 1980-1995. He has been an officer since 1976. Matthew F. Souza (39) is Vice President and Secretary of the Registrant. He has been an officer since 1985. Marie C. Strack (33) is Vice President and Controller of the Registrant since May of 1992. From 1985 to 1992, Ms. Strack was employed by the public accounting firm of Coopers & Lybrand L.L.P., as Audit Manager. Thomas D. Washburn (49) is Senior Vice President and Chief Financial Officer, since 1980, of the Registrant. He has been an officer since 1976. From 1980 to 1987, Mr. Washburn was Senior Vice President of Irwin Union Bank. Item 2. Properties ---------- The location and general character of the materially important physical properties of the Registrant and its subsidiaries are as follows: The main office of Inland Mortgage, where administrative and servicing activities are centered, is located at 9265 Counselor's Row, Indianapolis, Indiana. Inland Mortgage also has loan production and satellite offices, including offices acquired on January 1, 1995, located in Flagstaff, Phoenix (3), Prescott, Mesa, Scottsdale, Tempe, and Tucson, Arizona; Antioch, Bakersfield, Concord, Covina, Fresno, Lake Forest, Long Beach, Montclair, Morgan Hill, Orange, Pasadena, Pleasanton, Porterville, Richmond, Sacramento, Salinas, San Francisco, San Mateo, Santa Rosa, Selma, Ventura, Visalia, Walnut Creek, Westlake Village, and Yuba City, California; Castle Rock, Denver, Englewood, and Fort Collins , Colorado; Bethany Beach and Newark, Delaware; Orlando, Florida; Atlanta, Georgia; Aiea, Honolulu, Kailua, and Maui, Hawaii; Decatur and Tinley Park, Illinois; Indianapolis (5), Ft. Wayne, Lafayette, LaPorte, South Bend, and Warsaw, Indiana; Lexington and Louisville, Kentucky; Baton Rouge, Louisiana; Columbia, Crofton, Rockville, and Towson, Maryland; Arden Hills, Bloomington, Burnsville, and Minneapolis, Minnesota; St. Louis, Missouri; Kalispell, Montana; Las Vegas, Nevada; Cape May, New Jersey; Santa Fe (2), New Mexico; Cary, Charlotte, Greensboro, and Raleigh, North Carolina; Dayton, Ohio; Tulsa, Oklahoma; Beaverton and Clackamas, Oregon; West Chester, Pennsylvania; Corpus Christi, Dallas, El Paso, Houston, North Houston, and Plano, Texas; Fredericksburg, Gloucester, Richmond, Springfield, Suffolk, and Woodbridge, Virginia; Bellevue, Battleground, Everett, Orting, Seattle, and Vancouver, Washington; and Madison, Wisconsin. All offices occupied by Inland Mortgage are leased. The main office of Irwin Union Bank is located in four connected buildings all at 500 Washington Street, Columbus, Indiana. These buildings and one branch building are owned in fee by Irwin Union Realty Corporation, a wholly-owned subsidiary of Irwin Union Bank, and are leased by Irwin Union Bank. Irwin Union Bank owns in fee three of its other thirteen relatively small branch banking premises. The other branch offices are leased. None of the properties owned by Irwin Union Bank are subject to any major encumbrances. The main office of Investor Services is located at 520 Washington Street, Columbus, Indiana, in a building owned in fee by Investor Services. This property is not subject to any major encumbrance. Investor Services has additional leased offices in Columbus, Indiana, Columbus, Ohio and Raleigh, North Carolina. The main office of Affiliated, where administrative and lease servicing activities are centered, is located at 707 Skokie Boulevard, Northbrook, Illinois. This office location is leased. The main office of Irwin Home Equity is located at 2400 Camino Ramon, Suite 375, San Ramon, California. This office location is leased. The main offices of the Registrant and of White River Capital Corporation and Irwin Union Credit Insurance Corporation are located at 500 Washington Street, Columbus, Indiana in space leased from Irwin Union Bank. Item 3. Legal Proceedings ----------------- As a part of the ordinary course of business, the Registrant and its subsidiary companies are parties to litigation involving claims to the ownership of funds in particular accounts, the collection of delinquent accounts, challenges to security interests in collateral, and foreclosure interests, that is incidental to their regular business activities. As of December 31, 1995, Inland Mortgage was a defendant to a class action lawsuit initiated in the state of Minnesota. The case is currently pending before a federal Multidistrict Litigation Panel in Chicago. Plaintiffs allege that they represent a nationwide class of persons who have or had mortgage escrow accounts allegedly improperly managed by Inland Mortgage. This case is among a series of class action cases commenced against a number of mortgage servicers in several states challenging the practices used in connection with the administration of escrow accounts for single family residential mortgages. The litigation is still at an early stage and it is impossible to predict the likelihood of an unfavorable outcome or to establish possible extent or amount of liability or potential loss exposure, if any, to which Inland Mortgage might be exposed. As of December 31, 1995, Inland Mortgage was a defendant to a class action lawsuit initiated in the state of Indiana. The case is currently pending before the Marion County Superior Court. Plaintiffs allege that lenders do not have the right to require borrowers to pay premiums for private mortgage insurance. This case is among a series of class action cases commenced against a number of mortgage lenders in several states challenging the right of mortgage lenders to collect private mortgage insurance payments from borrowers. The litigation is still at an early stage and it is impossible to predict the likelihood of an unfavorable outcome or to establish possible extent or amount of liability or potential loss exposure, if any, to which Inland Mortgage might be exposed. As of December 31, 1995, the Registrant, Home Equity and certain officers of Home Equity were defendants to a preliminary injunction action initiated in the State of California. The case is currently pending in the Superior Court of the State of California in and for the City and County of San Francisco. The plaintiff alleges that defendants misappropriated trade secrets of plaintiff due to the employment by Home Equity of former officers and employees of plaintiff. The litigation has not reached the preliminary injunction hearing stage and it is impossible to predict the likelihood of an unfavorable outcome or to establish possible extent or amount of liability or potential loss exposure, if any, to which Home Equity and the other named defendants might be exposed. Except as described above, there is no material pending litigation in which the Registrant or any of its subsidiaries is involved or of which any of their property is the subject. Furthermore, there is no pending legal proceeding that is adverse to the Registrant in which any director, officer or affiliate of the Registrant, or any associate of any such director or officer, is a party, or has a material interest. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- No matters were submitted during the fourth quarter of 1995, to a vote of security holders of the Registrant, through the solicitation of proxies or otherwise. PART II Item 5. Market for Registrant's Common Equity and Related --------------------------------------------------- Stockholder Matters - ------------------- The Common Stock of the Registrant is quoted on the National Association of Securities Dealers Automated Quotation System National Market System (NASDAQ-NMS - trading symbol, IRWN). The following table sets forth certain information regarding trading in, and cash dividends paid with respect to, the shares of the Registrant's Common Stock in each quarter of the two most recent calendar years. The Common Stock was approved for quotation in NASDAQ-NMS commencing on September 15, 1992. Accordingly, fourth quarter 1992 stock prices reflect high and low sale transactions. All other stock prices reflect interdealer quotations reported by NASDAQ prior to the commencement of National Market System trading, without retail mark-up, mark-down or conversion, and may not necessarily represent actual transactions. All data have been adjusted for stock splits. The approximate number of shareholders of record on March 12, 1996 was 1,443. Stock Prices and Dividends: High Low Quarter Cash Total $ $ End Dividend Dividends $ $ For Year $ 1994 First Quarter 25 1/2 21 3/4 22 3/4 0.090 Second Quarter 23 3/4 20 1/2 22 1/4 0.090 Third Quarter 28 21 27 1/4 0.090 Fourth Quarter 27 3/4 25 1/2 26 3/4 0.090 0.36 1995 First Quarter 31 3/4 27 1/2 31 0.110 Second Quarter 35 1/4 31 34 1/2 0.110 Third Quarter 36 1/2 34 1/2 35 1/2 0.110 Fourth Quarter 40 1/4 35 1/4 39 7/8 0.110 0.44 The Registrant expects to continue its policy of paying regular cash dividends, although there is no assurance as to future dividends because they are dependent on future earnings, capital requirements, and financial condition. On February 21, 1995, the Registrant's Board of Directors approved an increase in the Registrant's quarterly dividend to $.11 per share which dividend rate was unchanged as of December 31, 1995. Dividends paid by Irwin Union Bank to the Registrant are restricted by banking law. See Note 14 of Notes to the Consolidated Financial Statements in the attached Annual Report to Shareholders. Item 6. Selected Financial Data ----------------------- The information contained in the Annual Report to Shareholders for the year ended December 31, 1995, under the caption "Five-Year Selected Financial Data", is incorporated herein by reference in response to this item. Item 7. Management's Discussion and Analysis of Financial ------------------------------------------------- Condition and Results of Operations - ----------------------------------- The information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Annual Report to Shareholders for the year ended December 31, 1995, is incorporated herein by reference in response to this item. Item 8. Financial Statements and Supplementary Data ------------------------------------------- Consolidated financial statements of the Registrant and its subsidiaries are contained in the Annual Report to Shareholders for the year ending December 31, 1995, under the caption "1995 Financial Statements and Other Financial Information", and are incorporated herein by reference in response to this item. The financial statement schedules required under Regulation S-X are filed as "Financial Statement Schedules" pursuant to Item 14 hereof. Item 9. Changes in and Disagreements With Accountants on ----------------------------------------------- Accounting and Financial Disclosure - ----------------------------------- In connection with the audits of the Registrant for the two most recent fiscal years ended December 31, 1995, the Registrant has not changed its independent certified public accountants nor have there been any disagreements (as defined in Instruction 4 to Item 304 of Regulation S-K) with such accountants on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. PART III Item 10. Directors and Executive Officers of the Registrant -------------------------------------------------- The information contained in the proxy statement of the Registrant for the 1996 Annual Meeting of Shareholders under the caption "Election of Directors", on pages 4 through 6, inclusive, is incorporated herein by reference in response to this item. Item 11. Executive Compensation ---------------------- The information contained in the proxy statement of the Registrant for the 1996 Annual Meeting of Shareholders under the captions "Election of Directors - Outside Director Restricted Stock Compensation Plan", "Executive Compensation and Other Information" and "Board Compensation Committee Report on Executive Compensation" on pages 7 through 17, inclusive, is incorporated herein by reference in response to this item. Item 12. Security Ownership of Certain Beneficial Owners ----------------------------------------------- and Management - -------------- The information contained in the proxy statement of the Registrant for the 1996 Annual Meeting of Shareholders, under the captions "Voting Securities and Principal Holders" and "Security Ownership of Management", on pages 2 and 3, inclusive, is incorporated herein by reference in response to this item. Item 13. Certain Relationships and Related Transactions ---------------------------------------------- The information contained in the proxy statement of the Registrant for the 1996 Annual Meeting of Shareholders under the caption "Interest of Management in Certain Transactions" on pages 18 and 19, is incorporated herein by reference in response to this item. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form ------------------------------------------------------------- 8-K --- Page # a. Documents filed as a part of this Report: Form Annual 10-K Report 1. Financial Statements: -------------------- A. Irwin Financial Corporation and Subsidiaries: Report of Coopers & Lybrand L.L.P., Independent Accountants 17 Consolidated Statement of Income for the years ended December 31, 1995, 1994, and 1993 89 Consolidated Balance Sheet as of December 31, 1995, and 1994 90 Consolidated Statement of Changes in Shareholders' Equity for the years ended December 31, 1995, 1994 and 1993 91 Consolidated Statement of Cash Flows for the years ended December 31, 1995, 1994, and 1993 92 Notes to Consolidated Financial Statements 93 The above listed report, financial statements, and the notes thereto, set forth on pages 89 through 93 of the Registrant's 1995 Annual Report to Shareholders are incorporated herein by reference. 2. Financial Statement Schedules ----------------------------- Report of Independent Accountants, Coopers & Lybrand L.L.P. 17 Schedule I - Indebtedness to Related Parties 18 Schedules other than that listed above are omitted because they are not required or the information is included in the Notes to Consolidated Financial Statements. 3. Exhibits -------- A. Exhibits to Form 10-K Sequential Number Assigned Numbering in Regulation System Page S-K Item 601 Description of Exhibit Number of - ------------ ---------------------- Exhibit ------- (2) No exhibit. (3) (i) 3(a) Amended Articles of Incorporation, dated December 29, 1972. (Incorporated by reference to Exhibit 3(a) to Form 10-K Report for year ended December 31, 1985, File No. 0-6835.) 3(b) Articles of Amendment, dated March 30, 1973. (Incorporated by reference to Exhibit 3(b) to Form 10-K Report for year ended December 31, 1985, File No. 0-6835.) 3(c) Articles of Amendment, dated September 4, 1990. (Incorporated by reference to Exhibit 3(d) to Form 10-K Report for year ended December 31, 1990, File No. 0-6835.) 3(d) Articles of Amendment, dated April 30, 1992. (Incorporated by reference to Exhibit 3(d) to Form 10-K Report for year ended December 31, 1992, File No. 0-6835.) 3(e) Articles of Amendment, dated April 26, 1994. (Incorporated by reference to Exhibit 3(e) to Form 10-K Report for year ended December 31, 1994, File No. 0-6835.) (ii) 3(a) Code of By-Laws as 19 amended to date. (4) 4(a) Specimen stock certificate. (Incorporated by reference to Exhibit 4(a) to Form 10-K Report for year ended December 31, 1994, File No. 0-6835.) 4(b) Certain instruments defining the rights of the holders of long-term debt of the Registrant and certain of its subsidiaries, none of which authorize a total amount of indebtedness in excess of 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis, have not been filed as Exhibits. The Registrant hereby agrees to furnish a copy of any of these agreements to the Commission upon request. (9) No exhibit. (10) 10(a) Amended 1986 Stock Option Plan. (Incorporated by reference to Exhibit 10(b) to Form 10-K Report for year ended December 31, 1991, File No. 0- 6835.) 10(b) Amended and Restated Management Bonus Plan. (Incorporated by reference to Exhibit 19(a) to Form 10-K Report for year ended December 31, 1986, File No. 0- 6835.) 10(c) Long-Term Management Performance Plan. (Incorporated by reference to Exhibit 10(d) to Form 10-K Report for year ended December 31, 1986, File No. 0- 6835.) 10(d) Long-Term Incentive Plan - Summary of Terms. (Incorporated by reference to Exhibit 10(e) to Form 10-K Report for year ended December 31, 1986, File No. 0- 6835.) 10(e) Irwin Financial Corporation Employees' Stock Purchase Plan. (Incorporated by reference to Exhibit 10(f) to Form 10-K Report for year ended December 31, 1991, File No. 0- 6835.) 10(f) Employee Stock Purchase Plan II. (Incorporated by reference to Exhibit 10(f) to Form 10-K Report for year ended December 31, 1994, File No. 0- 6835.) 10(g) Amended Irwin Financial Corporation Outside Directors Restricted Stock Compensation Plan. (Incorporated by reference to Exhibit 10(g) to Form 10-K Report for year ended December 31, 1991, File No. 0- 6835.) 10(h) Irwin Financial Corporation 1992 Stock Option Plan. (Incorporated by reference to Exhibit 10(h) to Form 10-K report for year ended December 31, 1992, File No. 0- 6835.) 10(i) Amended Irwin Financial 34 Corporation Outside Director Restricted Stock Compensation Plan. (11) 11(a) Computation of Earnings 43 Per Share. (12) No exhibit. (13) 13(a) Registrant's 1995 Annual 44 Report to Shareholders. This exhibit contains such portions thereof that have been incorporated by reference into this Report. (16) No exhibit. (18) No exhibit. (21) 21(a) Subsidiaries of the 122 Registrant. (22) No exhibit. (23) 23(a) Consent of Independent 123 Accountants. (24) No exhibit. (27) Financial Data Schedule. 124 (28) No exhibit. (99) 99(a) Annual Report on Form 11- K for the Irwin Union Corporation Employees' Savings Plan for the year ending December 31, 1995.* 99(b) Annual Report on Form 11- K for the Inland Mortgage Corporation Employees' Savings Plan for the year ending December 31, 1995.* * To be filed by amendment pursuant to Rule 15d-21. b. Reports on Form 8-K ------------------- None. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 Date: March 25, 1996 By: William I. Miller ------------------------- William I. Miller, Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities on the dates indicated. Capacity with Signature Registrant Date --------- ---------- ---- Sally A. Dean Director March 25, 1996 - ----------------------- Sally A. Dean David W. Goodrich Director March 25, 1996 - ----------------------- David W. Goodrich John T. Hackett Director March 25, 1996 - ----------------------- John T. Hackett William H. Kling Director March 25, 1996 - ----------------------- William H. Kling John C. McGinty, Jr. Director March 25, 1996 - ----------------------- John C. McGinty, Jr. Irwin Miller Director March 25, 1996 - ----------------------- Irwin Miller William I. Miller Director, Chairman March 25, 1996 - ----------------------- of the Board William I. Miller (Principal Executive Officer) John A. Nash Director, Chairman March 25, 1996 - ----------------------- of the Executive John A. Nash Committee Lance R. Odden Director March 25, 1996 - ----------------------- Lance R. Odden James T. Sakai Director March 25, 1996 - ----------------------- James T. Sakai Theodore M. Solso Director March 25, 1996 - ----------------------- Theodore M. Solso Thomas D. Washburn Senior Vice March 25, 1996 - ----------------------- President Thomas D. Washburn (Principal Financial Officer) Marie C. Strack Vice President and March 25, 1996 - ----------------------- Controller Marie C. Strack (Principal Accounting Officer) CODE OF BY-LAWS IRWIN FINANCIAL CORPORATION ARTICLE 1 Definitions 8.21.90 1.01. Corporation. As used in this Code of By-Laws, the term "Corporation" means IRWIN FINANCIAL CORPORATION. 1.02. Act. As used in this Code of By-Laws, the term "Act" means The Indiana General Corporation Act. 1.03. Articles of Incorporation. As used in this Code of By-Laws, the term "Articles of Incorporation" means the Articles of Incorporation of the Corporation, as amended from time to time. 1.04. By-Laws. As used in this Code of By-Laws, the term "By-Laws" means the Code of By-Laws of the Corporation, as amended from time to time. ARTICLE 2 Identification 8.20.90 2.01. Name. The name of the Corporation is IRWIN FINANCIAL CORPORATION. 2.02. Principal Office and Resident Agent -- Power to Change. The post-office address of the principal office of the Corporation is 500 Washington Street, Columbus, Indiana 47201, and the post -office address of its Resident Agent in charge of such office is John A. Nash, 500 Washington Street, Columbus, Indiana 47201. The location of its principal office, or the designation of its Resident Agent, or both, may be changed at any time or from time to time, when authorized by the Board of Directors, by filling with the Secretary of State of the State of Indiana, on or before the day any such change is to take effect, or within five (5) days after the death of the Resident Agent or other unforeseen termination of his agency, a certificate signed by the President or a Vice President, and the Secretary or an Assistant Secretary, of the Corporation, and Verified under oath by one of such officers signing the same, stating the change to be made and reciting that such change is made pursuant to authorization by the Board of Directors. 2.03. Seal. The seal of the Corporation shall be circular in form and mounted upon a metal die, suitable for impressing the same upon paper. About the upper periphery of the seal shall appear the name of the Corporation, and about the lower periphery thereof the word "Indiana". In the center of the seal shall appear the words "Seal" or " Corporate Seal". 2.04. Fiscal Year. The fiscal year of the Corporation shall be the calendar year. ARTICLE 3 Shares 3.01. Consideration for Shares. The Board of Directors shall cause the Corporation to issue the Shares of the Corporation for such consideration as may be fixed by such Board pursuant to the provisions of the Articles of Incorporation. 3.02. Subscription for Shares. Subscriptions for Shares of Corporation shall be paid to the Treasurer at such time or times, in such installments or calls, and upon such terms, as shall be determined, from time to time, by the board of Directors. Any call made by the Board of Directors for payment on subscriptions shall be uniform as to all shares of the same class or to all Shares of the same series, as the case may be. 3.03. Payment for Shares. Subject to the provisions of the Articles of Incorporation, the consideration for the issuance of Shares of the Corporation may be paid, in whole or in part, in money, in other property, tangible or intangible, or in labor actually performed for, or services actually rendered to, the Corporation; provided, however, that the part of the surplus of the Corporation which is transferred to stated capital upon the issuance of Shares as a Share dividend shall be deemed to be the consideration for the issuance of such Shares. When payment of the consideration for which a Share was authorized to be issued shall have been received by the Corporation, or when surplus shall have been transferred to stated capital upon the issuance of a Share dividend, such Share shall be declared and taken to be fully paid and not liable to any further call or assessment, and the holder thereof shall not be liable for any further payments thereon. In the absence of actual fraud in the transaction, the judgment of the Board of Directors as to the value of such property, labor, or services received as consideration, or the value placed by the Board of Directors upon the corporate assets in the event of a Share dividend, shall be conclusive. Promissory notes, uncertified checks, or future services shall not be accepted in payment or part payment of any of the capital stock of the Corporation. 3.04. Certificates for Shares. Each Shareholder of the Corporation shall be entitled to a certificate, signed by the President or a vice-president, and the Secretary or an Assistant Secretary of the Corporation stating the name of the registered holder, the number of Shares represented thereby and the kind and class thereof, the par value of each Share have been fully paid and are nonassessable. If such certificate is countersigned by the written signature or a registrar other than the Corporation of its employee, the signatures of the transfer agent and the officers of the Corporation may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of its issue. Such certificates shall be in such form as the board of Directors may, from time to time, by resolution approve. 3.05. Transfer of Shares. The Shares of the Corporation shall be transferable only on the books of the Corporation upon surrender of the certificate or certificates representing the same, provided: 3.051. Endorsement. The certificate is properly endorsed by the registered holder or his duly authorized attorney; 3.052. Witnessing. The endorsement or endorsements are witnessed by one witness unless this requirement is waived in writing upon the form of endorsement by the President, a Vice- President, or the Secretary of the Corporation; 3.053. Adverse Claims. The Corporation has no notice of any adverse claims or has discharged any duty to inquire into any such claims; and 3.054. Collection and Taxes. Any applicable law related to the collection of taxes has been complied with. 3.06. Lost, Stolen, or Destroyed Certificates. The Corporation may issue a new certificate for Shares of the Corporation in the place of any certificate theretofore issued where the holder of record of the certificate: 3.061. Claim. Makes proof in affidavit form that it has been lost, destroyed, or wrongfully taken; 3.062. Timely Request. Timely Requests the issue of a new certificate before the Corporation has notice that the certificate has been acquired by a purchaser for value in good faith and without notice of any adverse claim; 3.063. Bond. Gives a bond in such form, and with such surety or sureties, with fixed or open penalty, as the Corporation may direct, to indemnify the Corporation against any claim that may be made on account of the alleged loss, destruction, or theft of the certificates; and 3.064. Other Requirements. Satisfies any other reasonable requirements imposed by the Corporation for the transfer or for a new certificate. When a certificate has been lost, apparently destroyed, or wrongfully taken and the holder of record fails to notify the Corporation within a reasonable time after he has notice of it, and the Corporation registers a transfer of Shares represented by the Certificate before receiving such notification, the holder of record is precluded from making any claim against the Corporation for the transfer or for a new certificate. 3.07. Closing of Books or Fixing of Record Dates. For the purpose of determining Shareholders entitled to receive payment of any dividend or in order to make a determination of Shareholders for any other proper purpose, except as otherwise provided in section 4.069 of these By- Laws, the Board of Directors may provide that the share transfer books shall be closed for a stated period, but not to exceed, in any case, fifty (50) days, or may fix in advance a record date for such purpose, such date in any case not to be more than fifty (50) days prior to the date in which the action requiring such determination of Shareholders, is to be taken. If the share transfer books are not closed and no record date is fixed for the determination of Shareholders entitled to receive payment of a dividend, the end of the day on which the resolution of the Board of Directors declaring such dividend is adopted shall be the record date for such determination. ARTICLE 4 Meetings of Shareholders 4.01. Place of Meetings. All meetings of Shareholders of the Corporation shall be held at such place, within or without the State of Indiana, as may be specified in the respective notices or waivers of notice thereof, or proxies to represent Shareholders thereat. 12.20.94 4.02. Annual Meeting. The annual meeting of the Shareholders for the election of Directors and for the transaction of such other business as may properly come before the meeting, shall be on or before the last day of May of each year, the date to be set by the Board of Directors of the Corporation. Failure to hold the annual meeting at the designated time shall not work any forfeiture or a dissolution of the Corporation. 4.03. Special Meeting. Special meetings of the Shareholders may be called by the President, by the Board of Directors, or by Shareholders holding of record not less than one-fourth (1/4/) of all of the Shares outstanding and entitled by the Articles of Incorporation to vote on the business proposed to be transacted thereat. 4.04. Notice of Meetings. A written or printed notice, stating the place, day and hour of the meeting, and in case of a special meeting, or when required by any other provision of the Act, or the Articles of Incorporation, or By-Laws, the purpose or purposes for which the meeting is called, shall be delivered or mailed by the Secretary, or by the officers or persons calling the meeting, to each Shareholder of record entitled by the Articles of Incorporation and by the Act to vote as such meeting, at such address as appears upon the records of the Corporation, at least ten (10) days before the date of the meeting. Notice of any such meeting may be waived in writing by any Shareholder, if the waiver sets forth in reasonable detail the purpose or purposes for which the meeting is called, and the time and place thereof. Attendance at any meeting in person, or by proxy when the instrument of proxy sets forth in reasonable detail the purpose for which the meeting is called, shall constitute a waiver of notice of such meeting. Each Shareholder, who has in the manner above provided waived notice of a Shareholders' meeting, or who personally attends a Shareholders' meeting, or is represented thereat by a proxy authorized to appear by an instrument of proxy complying with the requirements above set forth, shall be conclusively presumed to have been given due notice of such meeting. 4.05. Addresses of Shareholders. The address of any Shareholder appearing upon the records of the Corporation shall be deemed to be (i) the latest address of such Shareholder appearing on the records maintained by the transfer agent or registrar, as the case may be, for the class of Shares held by such Shareholder, if the Corporation has a transfer agent or registrar for such class of Shares and the Board of Directors has provided in the resolutions appointing the transfer agent or registrar that notices of change of address shall be given to one of such agents by Shareholders of such class; or (i) the latest address of such Shareholder appearing on the records maintained by the Secretary for the class of Shares held by such Shareholder, if the Corporation has no transfer agent or registrar for such class of Shares but the resolutions appointing the transfer agent or registrar for such class of Shares but the resolutions appointing the transfer agent or registrar do not provide that notice of change of address shall be given to one of such agents by Shareholders of such class of Shares. 4.06. Voting at Meetings. 4.061. Common Shares. Except as otherwise provided by law or by the provisions of the Articles of the Incorporation, every holder of Common Shares of the Corporation shall have the right, at every Shareholders' meeting, to one vote for each Common Share standing in his name on the books of the Corporation. Cumulative voting shall not be permitted. 4.062. Prohibition Against Voting Certain Shares. No Share shall be voted at any meeting upon which any installment is due and unpaid or which belongs to the Corporation. 4.063. Voting of Shares Owned by Other Corporations. Shares of the Corporation standing in the name of another corporation may be voted by such officer, agent or proxy as the board of directors of such other corporation may appoint, or as the by-laws of such other corporations may prescribe. 4.064. Voting of Shares owned by Fiduciaries. Shares held by fiduciaries may be voted by the fiduciaries in such manner as the instrument or order appointing such fiduciaries may direct. In the absence of such direction or the inability of the fiduciaries to act in accordance therewith, the following provisions shall apply: 4.0641. Joint Fiduciaries. Where Shares are held jointly by three (3) or more fiduciaries, such Shares shall be voted in accordance with the majority. 4.0642. Equally Divided Fiduciaries. Where the fiduciaries, or majority of them, cannot agree, or where they are equally divided, upon the question of voting such Shares, any court of general equity jurisdiction may, upon petition filed by any of such fiduciaries, or by any party in interest, direct the voting of such Shares as it may deem for the best interests of the beneficiaries, and such Shares shall be voted in accordance with such direction. 4.0643. Proxy of Fiduciary. The general proxy of a fiduciary shall be given the same weight and effect as the general proxy of an individual or corporation. 4.065. Voting of Pledged Shares. Shares that are pledged may, unless otherwise provided in the agreement of pledge, be voted by the Shareholder pledging the same until the Shares shall have been transferred to the pledgee on the books of the Corporation, and thereafter they may be voted by the pledgee. 4.066. Proxies. A Shareholder may vote, either in person or by proxy executed in writing by the Shareholder, or a duly authorized attorney- in-fact. No proxy shall be valid after eleven (11) months from the date of its execution, unless a longer time is expressly provided therein. 4.067. Quorum. At any meeting of the Shareholders, a majority of the Common Shares outstanding and entitled to vote, represented in person or by proxy, shall constitute a quorum. 4.068. Voting Lists. The officer or agent having charge of the share transfer books shall make, at least five (5) days before each election of directors, a complete list of the Shareholders entitled by the Articles of Incorporation to vote at such election, arranged in alphabetical order, with the address and number of Shares so entitled to vote held by each, which list shall be on file at the principal office of the Corporation and subject to inspection by any Shareholder. Such list shall be produced and kept open at the time and place of election and subject to the inspection of any Shareholder during the holding of such election. The original share register or transfer book or duplicate thereof, kept in the State of Indiana, Shall be the examine such list, or share register or transfer book, or to vote at any meeting of the Shareholders. 4.069. Fixing of Record Date to Determine Shareholders Entitled to Vote. For the purpose of determining Shareholders entitled to vote at any meeting of Shareholders or any adjournment thereof, the Board of Directors, may fix in advance a date as the record date for any such determination of Shareholders, such date in any case to be not more than fifty (50) days prior to the date of such meeting. In the absence of such a determination by the Board of Directors, such date shall be ten (10) days prior to the date of such meeting. Any person who acquires title to a Share after the record date shall upon written request to the Shareholder of record be entitled to receive from the Shareholder of record a proxy, with power of substitution, to vote that Share. 4.07. Taking Action by Consent. Any action which may be taken at a meeting of the Shareholders, may be taken without a meeting if, prior to such action, a consent in writing, setting forth the action so taken, shall be signed by all of the Shareholders entitled to vote with respect to the subject matter thereof, and such written consent is filed with the minutes of the proceedings of the Shareholders. 4.08. Order of Business. The order of business at annual meetings, and so far as practicable, at all other meetings of Shareholders shall be: Proof of due notice of meeting; Reading and disposal of any unapproved minutes; Annual reports of officers and committees; Election of directors; New business; Adjournment ARTICLE 5 The Board of Directors 2.21.95 5.01. Election and Qualification. At the first annual meeting of the Shareholders, and at each annual meeting thereafter, directors shall be elected by the Shareholders entitled by the Articles of Incorporation to elect directors, for a term of one year; and they shall hold office until their respective successors are chosen and qualified. The Board shall consist of eleven (11) directors. Directors need not be Shareholders of the Corporation. At least a majority of the director of the directors shall be citizens of the United States. The number of directors may be increased or decreased from time to time by amendment to the By-Laws, but no decrease shall have the effect of shortening the term of any incumbent director. 5.02. Vacancies. Any vacancy occurring in the Board of Directors caused by resignation, death or other incapacity, or increase in the number of directors may be filled by a majority vote of the remaining members of the Board of Directors, until the next annual or special meeting of the Shareholders or, at the discretion of the Board of Directors, such vacancy may be filled by vote of the Shareholders at a special meeting called for the purpose. Until any such vacancy is so filled, the existing directors shall constitute the Board of Directors. Shareholders shall be notified of any increase in the number of directors and the name, address, principle occupation, and other pertinent information about any director elected by the Board of Directors to fill any vacancy. 5.03. Annual Meeting. The Board of Directors shall meet each year after the annual meeting of Shareholders (either within or without the State of Indiana), for the purpose of organization, election of officers and consideration of any other business that may properly be brought before the meeting. The time of this meeting shall be no later than the first regular or special meeting of the Board of Directors, at which a quorum shall be present, held after the annual meeting of Shareholders. No additional notice of any kind to either old or new members of the Board of Directors shall be necessary. 5.04. Regular Meetings. Regular meetings of the Board of Directors may be held with notice by letter, telegram, cable, radiogram, telephone, or radiophone, or without any notice whatever, and at such place and times, as may be fixed from time to time by resolution of the Board of Directors. 5.05. Special Meetings. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board, President or any Vice- President, and shall be called on the written request of one- fourth (1/4) of the directors. Notice of such a special meeting shall be sent by the Secretary or an Assistant Secretary to each director at his residence or usual place of business by letter, telegram, cable or radiogram, delivered for transmission not later than the second day immediately preceding the day for the meeting, or by word of mouth, telephone, or radiophone received not later than during the day immediately preceding the day for the meeting. In lieu of such notice, a director may sign a written waiver of notice either before the time of the meeting, at the time of the meeting, or after the time of the meeting. Neither the business to be transacted at, nor the purpose of, any meeting of the Board of Directors need be specified in the notice or waiver of notice of the meeting. Any meeting of the Board of Directors for which notice is required shall be a legal meeting, without notice thereof having been given, if all the directors, who have not waived notice thereof in writing, shall be present in person. 5.06. Place of Meetings. The directors may hold their meetings, have one or more offices, and keep the books of the Corporation, except as may be provided by law, within or without the State of Indiana, at any office or offices of the Corporation, or at any other place, as they may form time to time by resolution determine. If the resolution of the Board of Directors calling a regular meeting or the written request calling a special meeting expressly provides, a meeting of the Board of Directors may be held by conference telephone call or any other medium which allows each director to participate in discussions and to hear the views of the other directors. If a meeting is held, the directors connected to the conference telephone call or other medium shall be counted as present for the purpose of determining a quorum. 5.07. Quorum. One-third (1/3) of the actual number of directors elected and qualified, from time to time, shall be necessary to constitute a quorum for the transaction of any business except the filling of vacancies, and the act of a majority of the directors present at a meeting, at which a quorum is present, shall be the act of the Board of Directors, unless the act of a greater number is required by the Act, by the Articles of Incorporation, or by the By-Laws. A director who is present at a meeting of the Board of Directors at which action on any corporate matter is taken, shall be conclusively presumed to have assented to the action taken, unless (i) his dissent shall be affirmatively stated by him at and before the adjournment of such meeting (in which event the fact of such dissent shall be entered by the secretary of the meeting in the minutes of the meeting, or (ii) he shall forward such dissent by registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. The right of dissent provided for by either clause (i) or clause (ii) of the immediately preceding sentence shall not be available, in respect of any matter acted upon at any meeting, to a director who voted at the meeting in favor of such matter and did not change his vote prior to the time that the result of the vote on such matter was announced by the chairman of such meeting. 5.08. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if prior to such action a written consent to such action is signed by all members of the Board of such committees as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee. 5.09. Removal. Any or all of the directors may be removed, with or without cause, at a meeting of the Shareholders called expressly for that purpose by a vote of the holders of a majority of the Shares then entitled to vote at an election of directors. 5.10. Powers of Directors. The Board of Directors shall exercise all the powers of the Corporation, subject to the restrictions imposed by law, by the Articles of Incorporation, or by these By-Laws. 5.11. Dividends. The Board of Directors shall have power, subject to any restrictions contained in the Articles of Incorporation, to declare and pay dividends upon the outstanding Shares of the Corporation, out of the unreserved and unrestricted capital and earned surplus of the Corporation. Dividends may be paid in cash, in property, or in Shares of the Corporation, but no dividend payable in cash or property shall be paid out of surplus due to or arising from unrealized appreciation in value or from revaluation of assets. 5.12. Compensation of Directors. The Board of Directors is empowered and authorized to fix and determine the compensation of directors as directors, and any additional compensation for such additional services any such directors may perform for the Corporation. 5.13. Resignation. A director may resign at any time by filing his written resignation with the Chairman of the Board, the President or the Secretary of the Corporation, or with the Board of Directors, and such resignation shall become effective upon such filing. 5.14. Reliance on Corporation Records. Each Director shall be fully protected in relying in good faith upon the books of account and records of the Corporation or upon statements prepared by any of its officers or employees. ARTICLE 6 Executive Committee 6.01. Designation of Executive Committee. The Board of Directors may, by resolution adopted by a majority of the actual number of directors elected and qualified, from time to time, designate two (2) or more of its number to constitute an executive committee which committee to the extent provided in such resolution, shall have and exercise all of the authority of the Board of Directors but the designation of such committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it or him by law. No member of the executive committee shall continue to be a member thereof after he ceases to be a director of the Corporation. The Board of Directors shall have the power at any time to increase or diminish the number of members of the executive committee, to fill vacancies thereon, to change any member thereof, ant to change the functions or terminate the existence thereof. 6.02. Powers of the Executive Committee. During the intervals between meetings of the Board of Directors, and subject to such limitations as may be required by law or by resolution of the Board of Directors, the executive committee shall have and may exercise all of the powers of the Board of Directors in the management of the business and affairs of the Corporation, including power to authorize the seal of the Corporation to affixed to all papers which may require it . The executive committee may also from time to time formulate and recommend to the Board of Directors for approval general policies regarding the management of the business and affairs of the Corporation. All minutes of the meetings of the executive committee shall be submitted to the next succeeding meeting of the Board of Directors for approval; but the Corporation upon authorization by the executive committee prior to the time at which the same should have been, or were, submitted as above provided. The executive committee shall not have the authority of the Board of Directors in reference to amending the Articles of Incorporation, adopting an agreement or plan of merger or consolidation, proposing a Special Corporate Transaction as defined in the Act, recommending to the Shareholders a voluntary dissolution of the Corporation or a revocation thereof, or amending these By-Laws. 6.03. Procedure; Meetings; Quorum. The chairman of the executive committee of the Corporation shall, if present, act as chairman at all meetings of the executive committee, and the Secretary of the Corporation shall, if present, act as secretary of the meeting. In case of the absence from any meeting of the executive committee of the chairman of the executive committee or the Secretary of the Corporation, the executive committee shall appoint a chairman or secretary, as the case may be, of the meeting. The executive committee shall keep a record of its acts and proceedings. Regular meetings of the executive committee, of which no notice shall be held on such days and at such places as shall be fixed by resolution adopted by majority of the executive committee shall be called at the request of any member of the executive committee. Written notice of each special meeting of the executive committee shall be sent by the Secretary or an Assistant Secretary to each member of the executive committee at his residence or usual place of business by letter, telegram, cable or radiogram, delivered for transmission not later than during the day immediately preceding the day for the meeting, or by word any such meeting need not be given to any member of the executive committee who has waived such notice either before or after such meeting, or who shall be present at the meeting. Any meeting of the executive committee shall be a legal meeting, without notice thereof having been given, if all members of the executive committee who have not waived notice thereof in writing or by telegram, cable or radiogram shall be present in person. Neither the business to be transacted at, nor the purpose of, any meeting of the executive committee need be specified in the notice or waiver of notice of the meeting. The executive committee may hold its meetings within or without the State of Indiana, as it may from time to time by resolution determine. If the resolution of the executive committee calling a regular meeting or the written request calling a special meeting expressly provides, a meeting of the executive committee may be held by the conference telephone call or any other medium which allows each member to participate in discussion and to hear the views of the other members. If a meeting is held, the members connected to the conference telephone call or other medium shall be counted as present for the purpose of determining a quorum. A majority of the executive committee, from time to time, shall be necessary to constitute a quorum for the transaction of any business, and the act of a majority of the members present shall be the act of the executive committee. The members of the executive committee shall act only as a committee, and the individual member shall have no power as such. The Board of Directors may vote to the members of the executive committee a reasonable fee as compensation for attendance at meetings of such committee. 6.04. Other Committees. From time to time the Board of Directors, by the affirmative vote of a majority of the actual number of directors elected and qualified, may appoint, form among their number, other committees for any purpose or purposes, and each such committee shall have such powers as shall be conferred by the resolution of appointment. 6.05. Audit Committee. The Board of Directors shall by resolution adopted by a majority of the actual number of directors elected and qualified, from time to time, designate two or more of its members who are not officers, to constitute an Audit Committee of the Board of Directors. The Audit Committee shall have, and may exercise the authority of the Board of Directors to the extent provided in such resolutions, as to matters relating to the appointment of independent certified public accountants, the reliability of financial statements, the adequacy of financial controls, the conduct of audits. And such investigations of other financial or operational matters related to the Company as the Board of Directors shall direct. The Audit related recommendations to the Board, (which reports may be relied upon by members of the Board of Directors who are not members of the Audit Committee's designated authority, if the director reasonably feels the Committee merits confidence and has no knowledge concerning the matter in question that would cause such reliance to be unwarranted). A member of the Board of Directors who is not a member of the Audit Committee shall not be liable for any action taken by the Committee if the member has acted in good faith and in a manner reasonably believed to be in the best interests of the Corporation. ARTICLE 7 The Officers 7.01. Number. The officers of the Corporation shall consist of the Chairman of the Board of Directors, if elected, the president, one or more Vice- Presidents, if elected, (to be classified as determined by the Board of Directors, as Executive Vice-Presidents, Senior Vice-Presidents, Vice Presidents or Assistant Vice Presidents), the Treasurer, the Secretary, and such other officers (included a controller) and assistants as the board of Directors may appoint. Any two or more offices may be held by the same person, except that the duties of the 7.02. Election, Term of Office and Qualifications. The officers shall be chosen annually by the Board of Directors. Each officers shall hold office until his successor is chosen and qualified, or until his death, or until he shall have resigned, or shall have been removed in the manner hereinafter provided. 7.03. Removal. Any officer may be removed, either with or without cause, at any time, by the vote of a majority of the actual number of directors elected and qualified, from time to time, at any regular or special meeting of the Board of Directors. 7.04. Resignations. Any officer may resign at any time by giving written notice to the Board of Directors, or the President or the Secretary. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 7.05. Vacancies. Any vacancy in any office because of death, resignation, removal or any other cause may be filled for the unexpired portion of the term in the manner prescribed in the By-Laws for election or appointment to such office. 7.06. The Chairman of the Board. The Chairman of the Board, if elected, who shall be chosen from among the directors, shall preside at all meetings of the Board of Directors and the Shareholders and shall perform such other duties as the Board of Directors may from time to time assign to him. 7.07. The President. The President shall be chief executive and administrative officer of the Corporation. In the absence of the Chairman of the Board he shall preside at all meetings o f the Shareholders and at meetings of the Board of Directors. He shall exercise such duties as customarily pertain to the office of the President and shall have general and active supervision over the property, business and affairs of the Corporation and over its several Officers. He may appoint officers, agents or employees other than those appointed by the Board of Directors and shall perform such other duties as may be prescribed from time to time by the Board of Directors or by the By-Laws. 7.08. The Vice-Presidents. The Vice- Presidents (including Executive Vice-Presidents, Senior Vice- Presidents and Assistant Vice-Presidents) shall have such powers and perform such duties as the Board of directors may from time to time prescribe or as the President may from time to time delegate to them. At the request of the President, one such officer may, in the case of the absence or inability to act of the President, temporarily act in his place. In case of the death of the President, or in the case of his absence or inability to act without having designated an officer to act temporarily in his place, the officer so to perform the duties of the President shall be designated by the Chairman of the Board. 7.09. The Secretary. The Secretary shall have the custody and care of the Corporate seal, records, minutes and share books of the Corporation. He shall attend all meetings of the Shareholders and of the Board of Directors, and shall keep, or cause to be kept in a book provided for the purpose, a true and complete record of the proceedings of such meetings, and shall perform a like duty for all standing committees appointed by the Board of Directors, when of required. He shall attend to the giving and serving of all notices of the Corporation, shall file and take charge of all papers and documents belonging to the Corporation and shall perform such other duties as these By- Laws may require or the Board of Directors may prescribe. 7.10. The Treasurer. The Treasurer shall be the financial officers of the Corporation; shall have charge and custody of, and such funds in the name of the Corporation in such banks, trust companies or other depositaries as shall be selected by the Board of Directors; shall receive, and give receipts for , moneys due and payable to the Corporation from any source whatsoever; and, in general, shall perform all duties as, from time to time, may be assigned to him by the Board of Directors or by the President. The Treasurer shall render to the President and the Board of Directors, whenever the same shall be required, and account of all of his transactions as Treasurer and of the financial condition of the Corporation. 7.11. The Controller. The Controller, if a controller is elected, shall be responsible to the Board of Directors and the President for all financial control and internal audit of the Corporation and its subsidiaries. He shall perform such other duties as may be assigned to him by the Board of Directors or the President. 7.12. The Assistant Secretaries. The Assistant Secretaries, as directed by the President or the Board of Directors, shall perform the duties of the Secretary during the absence or inability of the Secretary to perform such duties, or any of them. They shall perform such other duties as the President or the Board may prescribe. 7.13. The Assistant Treasurers. The Assistant Treasurers as directed by the President or the Board of Directors, shall perform the duties of the Treasurer during the absence or inability of the Treasurer to perform such duties as the President and the Board may prescribe. 7.14. Other Offices. The Board of Directors may create such other offices as it may from time to time deem desirable with such duties as it may determine. ARTICLE 8 Corporate Acts 8.01. Execution of Deeds, Contracts, etc. All deeds and mortgages made by the Corporation and all other written contracts and agreements to which the Corporation shall be a party shall be (i) executed in its name by the Chairman of the Board, the President or a Vice President and (ii) attested by any officer of the Corporation other than the officer executing the document. 8.02. Execution of Checks, Notes, etc. All checks, drafts, notes, bonds, bills of exchange and orders for the payment of money by the Corporation as the Board of Directors from time to time may authorize and direct. 8.03. Execution of Certain Securities. All assignments or endorsements of stock certificates, registered bonds, or other securities owned by the Corporation shall, unless, otherwise directed by the Board of Directors, or unless otherwise required by law, be (I) signed by the Chairman of the Board, the President or a Vice President and (ii) attested by any officer of the Corporation other than the officer signing the security. The Board of Directors may, however, authorize any one of such officers to sign any of such instruments, for and on behalf of the Corporation, without the necessity of counter-signatures; may designate officers or employees of the Corporation, other than those named above, who may, in the name of the Corporation, sign such instruments; and may authorize the use of facsimile signatures of any of such persons. 8.04. Voting of Shares Owned by Corporation. Subject always to the further orders and directions of the Board of Directors, any share or shares issued by any other corporation and owned or controlled by the Corporation may be voted at any shareholders' meeting of such other corporation by the Chairman of the Board, or in his absence by any Vice-President of the Corporation who may be present. Whenever, in the judgment of the Chairman of he Board or, in his absence, the President, it is desirable for the Corporation to execute a proxy or give a shareholders' consent in respect to any share or shares issued by any other corporation and owned by the Corporation, such proxy or consent shall be executed in the name of the Corporation by the Chairman of the Board, the President or a Vice- President of the Corporation and shall be attested by the Secretary or an Assistant Secretary of the corporate seal. Any person or persons designated in the manner above stated as the proxy or proxies of the Corporation shall have full right, power and authority to vote the share or shares issued by such other corporation and owned by the Corporation, the same as such share or shares might be voted by the Corporation. ARTICLE 9 Amendments The power to make, alter, amend or repeal these By-Laws is vested in the Board of Directors, but the affirmative vote of a majority of the actual number of directors elected and qualified from time to time, shall be necessary to effect any alteration, amendment or repeal of these By-Laws. ARTICLE 10 Miscellaneous 4.26.90 10.01. Control Share Opt-Out. Chapter 42 of the Indiana Business Corporation Law, as amended (the "IBCL"), shall not apply to " control share acquisitions" (as defined in the IBCL) of shares of the Corporation. IRWIN FINANCIAL CORPORATION OUTSIDE DIRECTOR RESTRICTED STOCK COMPENSATION PLAN (Adopted February 21, 1989 by the Board of Directors; approved by shareholders April 18, 1989; amended by the Board of Directors effective May 1, 1992 and restated to include shares resulting from stock splits September 8, 1989 and December 30, 1991; amended by the Board of Directors effective November 15, 1994, and restated to include shares resulting from stock splits September 2, 1992 and September 2, 1993, and to conform with changes to Section 16 of the Securities Exchange Act of 1934.) 1. Purpose. The purpose of this Plan is to encourage ownership of the Common Shares of Irwin Financial Corporation by Outside Directors of the Corporation and its subsidiary companies in order to provide such Outside Directors with a more direct and proprietary interest in the welfare and success of the Company and to encourage their continuation as directors of the Company. The Plan is further intended to increase the incentive to promote the welfare of the Company by those who are primarily responsible for shaping and carrying out the long-term plans and objectives of the Company, thereby furthering and securing the Company's continued growth and financial success. 2 Definitions. The following terms shall have the meaning hereinafter set forth: (a) "Affiliate" means a corporation which is a parent or subsidiary corporation of the Company. (b) "Board of Directors" means the board of directors of the Company as it shall exist from time to time. (c) "Common Shares" means the Common Shares, $5.00 par value, of the Company. (d) "Company" means Irwin Financial Corporation, an Indiana Corporation. (e) "Election" means an election by an Outside Director to receive a grant of Common Shares under the Plan as further described in paragraph 6(c) hereof. (f) "Market Value" means the average of the bid and asked prices, or the average of the high and low sale prices, as the case may be, on the last trading day prior to the effective date of an Election, or on such other date as may be designated by the Plan Committee, as reported by the National Association of Securities Dealers, Inc. or, if not so reported, by such other source as the Plan Committee shall designate. (g) "Nominating Committee" means the Nominating Committee of the Board of Directors of the Company. (h) "Outside Director" means any director of the Company or an Affiliate who is not employed by the Company or any Affiliate in any capacity. (i) "Plan" means this Irwin Financial Corporation Outside Director Restricted Stock Compensation Plan. (j) "Plan Committee" means the individual or group of individuals responsible for administration of the Plan. (k) "Plan Year" means the twelve month period commencing July 1 and ending on June 30 of each year or such other dates as may be established by the Plan Committee from time to time. (l) "Director Fees" means the amount payable to an Outside Director for services over a period of time fixed by the Plan Committee including any per meeting or attendance fee paid to an Outside Director. (m) "Secretary" means the Secretary of the Company. 3. Administration. The Plan shall be administered by the Plan Committee. The Plan Committee shall have the power to interpret and construe the provisions of the Plan, and such interpretation or construction shall be final and binding. The Plan Committee may prescribe, amend and rescind rules and regulations relative to the Plan or its construction or interpretation. The initial Plan Committee shall have one member which is the Secretary. The Plan Committee shall not be liable for any action or determination made in good faith. 4. Participation. All those persons who are Outside Directors shall be eligible to participate in the Plan. Persons who are elected as Outside Directors subsequent to the adoption of the Plan shall be eligible to participate in the Plan with respect to the first Plan Year beginning after such person's election. 5. Shares. The shares to be issued to Outside Directors pursuant to the Plan shall be the Company's authorized, but unissued, or reacquired Common Shares. The total number of the Common Shares which may be issued under the Plan shall not exceed One hundred thirty five thousand (135,000) shares in the aggregate, except as such number of shares shall be adjusted in accordance with the provisions set forth in paragraph 6(h) hereof. In the event any common Shares represented by certificates held by the Secretary pursuant to the Plan revert to the Company for any reason prior to the end of the period during which shares may be issued under the Plan, such Common Shares may again be issued under the Plan. During the term of the Plan, the Company shall reserve and keep available a sufficient number of Common Shares to satisfy its obligations hereunder. 6. Operation of the Plan. The Plan shall operate in accordance with and subject to the following terms and conditions: (a) Establishment of Director Fees. The Nominating Committee shall establish the Director Fees for the next succeeding Plan Year or Plan Years on or before the date of the first regular meeting of the Board of Directors of the Company in any calendar year and shall notify each Outside Director of the amount so established. Such Director Fees shall be a fixed dollar amount which shall be payable for one year's service by an Outside Director. Such Director Fees shall be inclusive of any attendance, committee meeting or other fee determined by the Nominating Committee to be payable to Outside Directors. (b) Medium and Time of Payment. The Director Fees for each year shall be payable, at the election of the Outside Director, either (i) in United States dollars in quarterly installments in the second month of each calendar quarter in arrears in cash, by check, or in such other manner as the Company and the Outside Director may agree, or (ii) in the form of a grant of Common Shares in a number, at a time, and subject to the terms and conditions set forth in this Plan. The Plan Committee may, in its sole discretion, require that each Outside Director who elects to receive payment of his or her Director Fees for any Plan Year in the form of a grant of Common Shares shall receive at the same time an additional grant of Common Shares in payment of the Director Fees to become due to such Outside Director for one or more subsequent Plan Years. In that event, the dollar amount of the Director Fees for purposes of paragraph 6(d)(i) hereof, shall be an amount equal to the Director Fees established by the Nominating Committee for the first Plan Year multiplied by the total number of Plan Years included by the Plan Committee in the issuance of Common Shares for that Plan Year. (c) Election to Receive Common Shares. Each Outside Director shall elect the form of payment of the Director Fees due to such Outside Director for each Plan Year by delivering a written election form to the Plan Committee at least six months prior to the last day of the Plan Year immediately preceding the Plan Year to which such election applies. Each Election made hereunder shall be irrevocable and shall be effective on the first day of the next succeeding Plan Year. The Plan Committee, in its sole discretion, may permit Outside Directors to make an Election later than six months prior to the last day of any Plan Year; provided, however, that any such late Election shall not be effective until the first business day following the expiration of six months after the date the late Election is made. Each Election shall be effective only for the Plan Year to which such Election relates; provided, however, than an Election to receive a grant of Common Shares relating to more than one Plan Year is effective and irrevocable for all Plan Years included in the grant and no Outside Director making such an Election shall be required to entitled to make a new election until the first Plan Year following the expiration of the Plan Years included in the grant. (d) Determination of Number of Common Shares. The number of Common Shares to be issued to any Outside Director who makes a timely Election shall be that whole number of shares determined by dividing (i) the dollar amount of the Director Fees by (ii) the Market Value of one Common Share. No fractional shares shall be issued under the Plan and cash shall be paid in lieu thereof based upon the Market Value of one Common Share. (e) Issuance of Certificates; Delivery to Outside Director. (i) As soon as practicable after the first day of each Plan Year, the Plan Committee shall cause the Company to issue a share certificate in the name of each Outside Director who timely elected to receive his or her Director Fees for such Plan Year or other grant period in Common Shares; provided, however, that if requested by an Outside Director at the time the Election is made, the share certificate may be issued jointly to the Outside Director and any other person or persons. Each certificate shall represent the number of Common Shares which the named Outside Director is entitled to receive as determined in accordance with paragraph 6(d) hereof. Each certificate shall be delivered to the Secretary who shall hold the certificate for the benefit of the Outside Director for a period of two (2) years, or, if the Common Shares were issued pursuant to a grant covering more than two years, then until all Common Shares relating to such grant are vested and have survived applicable restriction periods. At the expiration of such holding period, the Secretary shall deliver the certificates to each Outside Director for whom they are held. (ii) Certificates representing Common Shares issued in the name of an Outside Director shall be delivered by the Secretary to the Outside Director as soon as practicable following the expiration of the holding period as described in paragraph 6(e)(i) hereof. However, if the certificates were issued in payment of a Director Fees relating to more than one Plan Year the certificates delivered to the Outside Director at the expiration of the holding period shall represent only those Common Shares as to which the Outside Director is vested on the date of delivery. (f) Forfeiture. Common Shares granted to an Outside Director with respect to a single Plan Year shall be forfeitable by the Outside Director until the end of that Plan Year. Common Shares granted to an Outside Director with respect to more than one Plan Year shall vest and become nonforfeitable in equal installments at the end of each Plan Year included in the grant; provided, however, that at the time of making an Election to receive a grant of Common Shares relating to more than one Plan Year, the Outside Director may also elect to defer vesting of all of the Common Shares granted until the expiration of the last Plan Year included in the multi-year grant, which election shall be irrevocable. (g) Cessation of Service as a Director. In the event any Outside Director ceases to serve as a director of the Company or any Affiliate, all Common Shares that have not vested as of the effective date of the cessation of service shall immediately revert to the Company. Upon the effective date of a cessation of service, the Outside Director shall be entitled to delivery of certificates representing all vested Common Shares held for him or her by the Secretary. Notwithstanding the foregoing, if any cessation of service is due to retirement with the consent of the Company or is due to permanent and total disability, the Outside Director shall be entitled to delivery of certificates representing Common Shares attributable to the Director Fees paid for the Plan Year in which the Cessation of service occurs at the end of the two-year period specified in paragraph 6(e) hereof; and if the Outside Director shall die while serving as a director of the Company or an Affiliate, or following a cessation of service due to retirement with the consent of the Company or permanent and total disability but prior to receiving the certificates held by the Secretary as described above, the Outside Director's personal representative shall be entitled to delivery of such certificates at such time as they otherwise would have been delivered to the Outside Director. Whether a cessation of service is a retirement with the consent of the Company or due to permanent and total disability, and whether an authorized leave of absence or absence on military or government service shall be deemed to constitute cessation of service for the purposes of the Plan, shall be determined by the Plan Committee in its sole discretion, which determination shall be final and conclusive. (h) Recapitalization. The aggregate number of Common Shares which may be issued hereunder shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding Common Shares resulting from a subdivision or consolidation of shares of the Company or any other capital adjustment of the Company, the payment of a share dividend, a share split or any other increase or decrease in the Common Shares effected without receipt of consideration by the Company. In the event that, prior to the delivery by the Company of certificates representing Common Shares held by the Secretary pursuant to paragraph 6(e) hereof, there shall be a capital reorganization or reclassification of the capital of the Company resulting in a substitution of other shares for the Common Shares, there shall be substituted the number of substitute shares which would have been issued in exchange for the Common Shares then held by the Company if such Common shares had been then issued and outstanding and held by the Outside Director. (i) Merger, Dissolution. If the Company shall be a party to any merger or consolidation in which it is not the surviving corporation, or in the event of a dissolution or liquidation of the Company, any certificates for Common Shares held by the Secretary pursuant to paragraph 6(e) hereof shall be delivered to the Outside Directors for whom such Common Shares are held at such a time and in such a manner as to permit the Outside Directors to participate with respect to such shares in any consideration received by shareholders of the Company in such merger, consolidation, liquidation or dissolution. (j) Nonassignability. No right to receive shares pursuant to an Election shall be assignable or transferable except by will or under the laws of descent and distribution. During the lifetime of an Outside Director, Common Shares to be issued under the Plan shall be issued only to such Outside Director as set forth in paragraph 6(e) hereof. (k) Issuance of Shares and Compliance with Securities Laws. The Company may postpone the issuance and/or delivery of certificates representing Common Shares until (i) the admission of such shares to listing on any stock exchange on which shares of the Company of the same class are then listed and (ii) the completion of such registration or other qualification of such shares under any state or Federal law, rule or regulation or the rules and regulations of any exchange upon which the Common Shares are traded as the Company shall determine to be necessary or advisable, which registration or other qualification the Company shall use its best efforts to complete. Any person acquiring Common Shares pursuant to the Plan may be required to make such representations and furnish such information as may, in the opinion of counsel for the Company, be appropriate to permit the Company, in light of the existence or non-existence with respect to such shares of an effective registration under the Securities Act of 1933, as amended, or any similar state statute, to issue the shares in compliance with the provisions of those or any comparable acts. Certificates representing Common Shares issued pursuant to the Plan may bear such legends or other statements concerning restrictions on the transferability of the shares as the Company may determine to be necessary or advisable to comply with applicable securities laws. (l) Rights as a Shareholder. (i) An Outside Director shall have no rights as a shareholder with respect to Common Shares he/she has elected to receive under the Plan until the date of issuance of a certificate representing such shares in the name of the Outside Director. Upon the issuance of the certificate, the Outside Director shall have the power to vote all Common Shares represented thereby on all matters presented to a vote of the shareholders of the Company and shall be entitled to receive all dividends and other distributions declared or paid by the Company with respect to such Common Shares. No adjustment will be made for dividends or other rights for which the record date is prior to the date such certificate is used. (ii) An Outside Director shall have no right to sell, convey, transfer, mortgage, pledge, hypothecate, encumber or otherwise dispose of any Common Shares issued pursuant to the Plan during the time when certificates representing such Common shares are held by the Secretary; provided, however, that such Common Shares may be sold during such time to the Company or to any director of the Company or an Affiliate. 7. Term of Plan. The Plan shall become effective upon the receipt of approval by the holders of majority of the issued and outstanding Common Shares voting in person or by proxy at a duly held shareholder's meeting; provided, however, that the Plan shall become effective only if approved by such shareholders within twelve (12) months before or after the date the Plan is adopted by the Board of Directors. The Plan shall terminate ten (10) years after the later of the date the Plan is adopted by the Board of Directors or the date the Plan is approved by the shareholders, or on such earlier date as the Board of Directors may determine. No Common Shares shall be issued under the Plan after such termination date. 8. Amendment of the Plan. The Board of Directors of the Company, except any members participating in the Plan, may from time to time, alter, amend, suspend or discontinue the Plan with respect to any Common shares for which certificates have not been issued; provided, however, that the Board of Directors may not, without further approval by the holders of a majority of the issued and outstanding Common Shares of the Company: (a) increase the maximum number of common shares which may be issued under the Plan (other than to reflect a stock split or stock dividend); (b) change the class of shares which maybe issued under the Plan; (c) change the designation of the persons or class of persons eligible to receive Common Shares under the Plan; or (d) change the provisions of paragraph l(f) concerning the Market Value. 9. No Right to Reelection. Neither the adoption of the Plan, the issuance of any Common Shares hereunder, nor any other action taken relating to the Plan shall impose any obligation on the Company or any Affiliate or the board of directors of either to nominate any Outside Director for reelection as a director by the shareholders of the Company or any Affiliate. 10. Withholdings. The Company shall have the right to require the Outside Director to remit to the Company amounts sufficient to satisfy any applicable withholding requirements set forth in the Internal Revenue Code of 1986, as amended, or under state or local law relating to Common Shares issued to the Outside Director. The Company shall have the right, to the extent permitted by law, to deduct from any payment of any kind otherwise due to an Outside Director who receives Common Shares under the Plan any federal, state or local taxes of any kind required by law to be withheld with respect to such Common Shares. An Outside Director may elect to reduce the number of Common shares to be received by him under the Plan in order to satisfy any federal, state or local withholding obligation. Exhibit 11 (a) IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES EXHIBIT 11(a) - COMPUTATION OF EARNINGS PER SHARE Year Ended December 31, 1995 1994 1993 - ---------------------------------------------------------------------------- PRIMARY SHARES OUTSTANDING: Average number of shares outstanding 5,639,935 5,773,517 5,772,553 Assumed exercise of stock options 103,193 109,589 87,138 ----------- ----------- ----------- Total shares 5,743,128 5,883,106 5,859,691 =========== =========== =========== NET INCOME $20,083,202 $18,215,539 $15,588,361 =========== =========== =========== PRIMARY EARNINGS PER SHARE $3.50 $3.10 $2.66 ===== ===== ===== FULLY DILUTED SHARES OUTSTANDING: Average number of shares outstanding 5,639,935 5,773,517 5,772,553 Assumed exercise of stock options (Note 1) 116,470 117,303 90,053 ----------- ----------- ----------- Total shares 5,756,405 5,890,820 5,862,606 =========== =========== =========== NET INCOME $20,083,202 $18,215,539 $15,588,361 =========== =========== =========== FULLY DILUTED EARNINGS PER SHARE $3.49 $3.09 $2.66 ===== ===== ===== (1) The dilutive effect of stock options is based on the Treasury Stock method using the higher of the average market price for the year or the year-end market price. 1995 Annual Report to Shareholders as referenced in this Report Table of Contents Management's Discussion and Analysis of Results of Operations and Financial Condition: 32 Five-Year Selected Financial Data and Graphs 35 Overview 36 Mortgage Banking 46 Community Banking 52 Investor Services 56 Home Equity Lending 60 Equipment Leasing 64 Other Irwin Financial Businesses 64 Consolidated Income Statement Analysis 66 Consolidated Balance Sheet Analysis 70 Capital 72 Risk Management 72 Credit Risk 77 Liquidity 77 Interest Rate Sensitivity 79 Effects of Inflation Financial Statements: 87 Report of Management 88 Report of Independent Public Accountants 89 Consolidated Statement of Income 90 Consolidated Balance Sheet 91 Consolidated Statement of Changes in Shareholders' Equity 92 Consolidated Statement of Cash Flows 93 Notes to Financial Statements PAGE 31 Five-Year Selected Financial Data (In thousands) 1995 1994 1993 1992 1991 For the year: Net Revenues $148,364 $116,908 $119,366 $ 94,934 $ 60,005 Other Operating Expense 115,915 86,844 93,803 73,811 49,216 Net Income 20,083 18,216 15,588 12,866 6,651 Mortgage Loan Closings 3,559,310 2,812,962 4,273,933 3,441,347 1,926,841 Return on Average Equity 22.60% 23.91% 24.91% 26.51% 16.93% Return on Average Assets 2.28 2.43 2.15 1.97 1.30 Dividend Payout Ratio 12.36 11.38 11.12 8.88 13.52 Per share: Net Income $3.50 $3.10 $2.66 $2.23 $1.17 Cash Dividends 0.44 0.36 0.30 0.20 0.16 Book Value 17.51 14.41 12.06 9.64 7.53 Market Value at December 31, 39.88 26.75 25.00 23.00 8.00 At year end: Assets $1,038,307 $659,671 $881,864 $602,465 $598,024 Deposits 563,999 439,918 500,370 389,323 337,927 Mortgage Loans Held for Sale 378,658 154,964 370,755 218,080 264,740 Loans and Leases, Net 407,904 304,548 252,823 207,138 178,507 Shareholders' Equity 99,216 81,104 70,093 55,343 42,478 Mortgage Servicing Portfolio 10,301,914 8,818,502 7,922,299 5,470,505 2,990,808 Equity to Assets Ratio 9.56% 12.29% 7.95% 9.19% 7.10% Risk-based Capital Ratio 14.49 19.18 15.68 16.46 13.24 Leverage Ratio (Tier one) 10.57 10.82 9.63 8.48 8.05 Averages: Assets $882,164 $748,981 $725,846 $651,517 $512,498 Equity 88,867 76,178 62,586 48,539 39,295 Shares Outstanding 5,743 5,883 5,860 5,767 5,670 PAGE 32 TOTAL NET REVENUES: 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- (In Millions) 148.4 116.9 119.4 94.9 60.0 NET INCOME: (In Millions) 20.1 18.2 15.6 12.9 6.7 RETURN ON AVERAGE EQUITY (Percent) 22.60% 23.91% 24.91% 26.51% 16.93% PAGE 33 RETURN ON AVERAGE ASSETS: 1995 1994 1993 1992 1991 ----- ---- ---- ---- ---- (Percent) 2.28% 2.43% 2.15% 1.97% 1.30% INLAND MORTGAGE LOAN CLOSINGS: (Billions) 3.6 2.8 4.3 3.4 1.9 INLAND MORTGAGE SERVICING PORTFOLIO: (Billions) 10.3 8.8 7.9 5.5 3.0 PAGE 34 Consolidated Overview: Irwin Financial Corporation earned record net income in 1995. This performance was helped significantly by a favorable operating environment for mortgage banking during the second half of the year. Long-term interest rates, which by the end of the year were at two-year lows, enabled the Corporation's mortgage bank to originate $3.6 billion during the year. The Corporation's mortgage bank also benefited from the implementation of a new accounting standard which changed the way mortgage servicing rights are valued. Also contributing to the Corporation's record results was strong loan growth in community banking. These increases were offset somewhat by the Corporation's investment in its new home equity lending business, a loss at its equipment leasing business, and expansion of the mortgage bank's loan production system. Earnings By Line of Business: Net income for 1995 totaled $20,083,202, up 10.3% from 1994 and 28.8% from 1993. Net income per share in 1995 was $3.50, compared to $3.10 in 1994 and $2.66 in 1993. Return on average equity for 1995 was 22.60%, compared to 23.91% in 1994 and 24.91% in 1993. Return on average assets was 2.28% compared to 2.43% in 1994 and 2.15% in 1993. Irwin Financial Corporation is comprised of six lines of business: + Mortgage banking + Community banking + Investor services + Home equity lending + Equipment leasing + Credit insurance To provide an effective report on the Corporation's operations, the results of the activities of Irwin Union Bank which provide funding and invest in assets generated by other Irwin Financial companies have been included with the results of the other asset- generating companies. These combined figures are reported as the results of each line of business. Results for previous years have been restated to conform to the 1995 presentation. Earnings: (In thousands) 1995 1994 1993 ----- ----- ----- Mortgage Banking $19,331 $15,728 $13,641 Community Banking 3,501 2,741 2,274 Investor Services 271 68 380 Home Equity Lending (3,220) - - Equipment Leasing (334) 873 552 Credit Insurance 44 55 51 Parent(including consolidating entries) 490 (1,249) (1,310) ------- ------- ------- $20,083 $18,216 $15,588 PAGE 35 Management's Discussion (continued) Business Profile: Mortgage Banking Selected Financial Data (In thousands) 1995 1994 1993 1992 1991 ----- ----- ----- ----- ----- Selected Income Statement Data: Net interest income $13,290 $12,702 $15,067 $15,203 $ 8,208 Loan origination fees 31,871 25,308 37,605 28,548 14,608 Gain on sale of loans 18,020 2,219 14,225 10,337 2,876 Loan servicing fees 36,087 32,426 24,428 15,135 8,887 Gain on sale of servicing 15,271 17,716 2,979 5,133 8,046 Other income 787 647 550 448 270 ------- ------- ------- ------- ------- Total net revenues 115,326 91,018 94,854 74,804 42,895 Operating expense 83,344 64,571 72,140 54,309 33,225 ------- ------- ------- ------- ------- Income before tax 31,982 26,447 22,714 20,495 9,670 Tax 12,651 10,719 9,073 8,178 4,122 ------- ------- ------- ------- ------- Net income $19,331 $15,728 $13,641 $12,317 $5,548 ======= ======= ======= ======= ======= Selected Balance Sheet Data at End of Period: Mortgage loans held for sale $309,262 $131,543 $318,453 $179,583 $233,836 Mortgage servicing rights 51,783 18,834 11,505 10,156 8,045 Total assets 445,129 216,180 452,365 214,411 262,553 Short-term debt 227,021 68,259 215,014 77,731 122,083 Long-term debt 2,300 2,605 2,934 1,178 972 Shareholders' equity $55,811 $53,637 $42,355 $31,105 $20,506 Selected Operating Data: Mortgage loan originations $3,559,310 $2,812,962 $4,273,933 $3,441,347$1,926,841 Servicing portfolio: Balance at December 31 10,301,914 8,818,502 7,922,299 5,470,505 2,990,808 Weighted average coupon rate 7.83% 7.59% 7.51% 8.37% 9.22% Servicing fee 0.38 0.38 0.37 0.36 0.36 Servicing sold as a percent of production 28.4 49.8 5.6 12.3 37.1 PAGE 36 Overview & Strategy: The mortgage banking line of business consists of Inland Mortgage Corporation and the related funding activities of Irwin Union Bank and Trust. The business is headquartered in Indianapolis, Indiana and originates, packages, sells, and services residential mortgage loans throughout the U.S. Inland Mortgage has offices in 27 states, ranks among the top 30 mortgage loan originators in the country and is in the top 50 in servicing volume. Essentially all of the loans originated and serviced are either government- insured through the Veterans' Administration (VA) or Federal Housing Administration (FHA) or are conventional loans which conform to the underwriting guidelines of the two principal government-sponsored agencies which support the secondary mortgage markets, the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC). Mortgage loans are originated through both branches (retail) and third party sources (wholesale). Potential borrowers are identified principally through relationships maintained with housing intermediaries including realtors and home builders. Loans are funded on a short-term basis through credit facilities provided by commercial banks including Irwin Union Bank. Repurchase agreements with investment banks are also used. Individual loans are pooled, securitized, and sold into the secondary mortgage market. Servicing rights are periodically sold for a variety of reasons including accounting income, cash flow, and servicing portfolio management. Over the past five years, servicing rights have been retained on a total of 76.3% of the loans originated. 1995 Review: Net income from mortgage banking was $19.3 million in 1995, an increase of 22.9% over 1994 results of $15.7 million, and 41.7% over 1993 results of $13.6 million. Accounting Change: 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. PAGE 37 The new rules require the recognition of all originated or purchased Mortgage Servicing Rights (MSRs) as assets based on their fair market value at the time of their origination. The MSR asset is amortized over the life of the servicing right. Prior to the adoption of SFAS 122, GAAP treated Originated Mortgage Servicing Rights (OMSRs) created through the retail network differently from Purchased Mortgage Servicing Rights (PMSRs) originated through the wholesale network. The old rules required the immediate recognition of expenses arising from OMSRs, 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. The Corporation has previously reported an estimate of its "economic earnings," a calculation which adjusted earnings for the different treatment of OMSRs and PMSRs. Economic income reflected GAAP earnings plus an estimate of the unrecorded value of mortgage servicing rights created during a period. While the new accounting standard is not identical to the calculation of economic income, they are similar in that both estimate and recognize in current income the value of mortgage servicing rights. Under SFAS 122, the value of servicing rights originated after March 31, 1995 is reflected in GAAP net income and as an on- balance sheet asset. The value of servicing rights originated before this date and accounted for under the old rules will continue to be an off-balance sheet addition to net worth, as long as these mortgages remain part of the servicing portfolio. The change in accounting standards in 1995 resulted in an increase in after-tax revenues of approximately $11.8 million. Since SFAS 122 does not permit the restatement of prior periods to reflect the new accounting change, all results through March 31, 1995 have been reported under the old rules of SFAS 65. Therefore, it is difficult to compare 1995 results of operations to those recorded in 1994. Mortgage Closings: (In thousands) 1995 1994 1993 ----- ----- ----- Total closings $3,559,310 $2,812,962 $4,273,933 Percent retail loans 50.3% 56.6% 61.6% Percent wholesale loans 42.5 42.9 38.2 Percent brokered 7.2 0.5 0.2 PAGE 38 The steady