5 /2H9  d 1$&%*3'IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES!'CONSOLIDATED BALANCE SHEET)'(IN THOUSANDS, EXCEPT FOR SHARES)^DECEMBER 31,^DECEMBER 31, ^1999 ^1998'ASSETS:C'Cash and due from banks....................................."$ 47,215"$ 68,942C'Federal funds sold.......................................... "-- "8,580 "---------- "----------> 'Cash and cash equivalents..............................  "47,215  "77,522C 'Interest-bearing deposits with financial institutions.......  "26,785  "18,441C 'Trading assets..............................................  "59,025  "32,148C 'Investment securities -- Note 3.............................  "37,508  "48,055C'Loans held for sale........................................."508,997"936,788C'Loans and leases, net of unearned income -- Note 4.........."733,424"556,991C'Less: Allowance for loan and lease losses -- Note 5........."(8,555)"(9,888)"----------"----------"724,869"547,103C'Servicing assets -- Note 6................................."138,500"117,129C'Accounts receivable......................................... "49,415 "71,087C'Accrued interest receivable................................. "8,430 "13,071C'Premises and equipment...................................... "23,368 "21,382C'Other assets................................................ "56,735 "63,453"----------"----------"$1,680,847"$1,946,179"=========="==========,'LIABILITIES AND SHAREHOLDERS' EQUITY:'DepositsA'Noninterest-bearing......................................."$ 218,402"$ 477,724A'Interest-bearing.........................................."411,400"389,516A'Certificates of deposit over $100........................."240,516"141,971 "---------- "----------!"870,318!"1,009,211C"'Short-term borrowings -- Note 9.............................""473,103""644,861C#'Long-term debt -- Note 10................................... #"29,784 #"2,839C$'Other liabilities...........................................$"100,275 $"96,036%"----------%"----------<&'Total liabilities....................................&"1,473,480&"1,752,947'"----------'"----------9('Company-obligated mandatorily redeemable preferredA)'securities of subsidiary trust -- Note 15................. )"48,071 )"47,999*'Shareholders' equity<+'Preferred stock, no par value -- authorized 4,000,000>,'shares; none issued.................................... ,"-- ,"--:-'Common stock; no par value -- authorized 40,000,000:.'shares; issued 23,402,080 shares as of December 31,>/'1999 and 1998; including 2,297,303 and 1,729,324 shares40'in treasury as of December 31, 1999 and 1998,>1'respectively........................................... 1"29,965 1"29,965C2'Additional paid-in capital.................................. 2"4,250 2"2,595A3'Net unrealized gain (loss) on investment securities net ofA4'deferred income tax liability/(asset) of ($47) in 1999 andA5'$57 in 1998............................................... 5"(70) 5"85C6'Retained earnings...........................................6"171,1016"142,2327"----------7"----------8"205,2468"174,877C9'Less treasury stock, at cost................................9"(45,950)9"(29,644):"----------:"----------C;'Total shareholders' equity..................................;"159,296;"145,233<"----------<"----------="$1,680,847="$1,946,179>"==========>"==========P@'The accompanying notes are an integral part of the consolidated financialA'statements.3C'IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES'D'CONSOLIDATED STATEMENT OF INCOME3E'(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)E^FOR THE YEAR ENDEDE^FOR THE YEAR ENDEDE^FOR THE YEAR ENDEDF^ DECEMBER 31,F^ DECEMBER 31,F^ DECEMBER 31, G^1999 G^1998 G^1997I'INTEREST INCOME:>J'Loans held for sale....................................J"$ 66,682J"$ 65,155J"$ 34,691>K'Loans and leases....................................... K"48,978 K"52,329 K"56,490>L'Trading account........................................ L"6,275 L"311 L"1,842M'Investment securities:;N'Taxable............................................. N"3,755 N"4,362 N"5,469;O'Tax-exempt.......................................... O"271 O"299 O"275>P'Federal funds sold..................................... P"652 P"731 P"674Q"--------Q"--------Q"--------6R'Total interest income..........................R"126,613R"123,187 R"99,441S"--------S"--------S"--------T'INTEREST EXPENSE:>U'Deposits............................................... U"25,220 U"23,369 U"19,963>V'Short-term borrowings.................................. V"28,425 V"35,106 V"23,788>W'Long-term debt......................................... W"1,149 W"814 W"831X"--------X"--------X"--------6Y'Total interest expense......................... Y"54,794 Y"59,289 Y"44,582Z"--------Z"--------Z"-------->['Net interest income.................................... ["71,819 ["63,898 ["54,859>\'Provision for loan and lease losses -- Note 5.......... \"4,443 \"5,995 \"6,238]"--------]"--------]"--------=^'Net interest income after provision for loan and lease;_'losses.............................................. _"67,376 _"57,903 _"48,621`"--------`"--------`"--------a'OTHER INCOME:>b'Loan origination fees.................................. b"47,007 b"60,013 b"41,370>c'Gain from sales of loans............................... c"68,851 c"75,201 c"39,210>d'Loan servicing fees.................................... d"60,581 d"57,284 d"53,257>e'Amortization and impairment of servicing asset.........e"(15,702)e"(35,388)e"(16,355)f"--------f"--------f"-------->g'Net loan administration income......................... g"44,879 g"21,896 g"36,902>h'Gain on sale of servicing assets....................... h"37,801 h"43,308 h"32,631>i'Trading gains (losses).................................i"(8,296) i"1,366i"(1,961)>j'Gain from sale of leasing assets....................... j"-- j"5,241 j"-->k'Other.................................................. k"13,827 k"11,832 k"8,696l"--------l"--------l"--------m"204,069m"218,857m"156,848n"--------n"--------n"--------o'OTHER EXPENSE:>p'Salaries...............................................p"114,303p"120,338 p"86,533>q'Pension and other employee benefits.................... q"18,402 q"16,757 q"13,724>r'Office expense......................................... r"13,181 r"12,865 r"10,583>s'Premises and equipment................................. s"24,052 s"20,214 s"16,621>t'Marketing and development.............................. t"8,962 t"11,735 t"7,697>u'Other.................................................. u"35,211 u"39,297 u"23,660v"--------v"--------v"--------w"214,111w"221,206w"158,818x"--------x"--------x"--------@y'Income before income taxes............................... y"57,334 y"55,554 y"46,651@z'Provision for income taxes............................... z"19,481 z"20,354 z"17,734{"--------{"--------{"-------- |"37,853 |"35,200 |"28,917?}'Distribution on company-obligated mandatorily redeemable>~'preferred securities of subsidiary trust............... ~"4,697 ~"4,697 ~"4,473"--------"--------"--------@'Net income available to common shareholders.............."$ 33,156"$ 30,503"$ 24,444"========"========"========6'Earnings per share of common stock available to'shareholders:>'Basic -- Note 17......................................."$ 1.54"$ 1.40"$ 1.10"========"========"========>'Diluted -- Note 17....................................."$ 1.51"$ 1.38"$ 1.08"========"========"========>'Dividends per share of common stock...................."$ 0.20"$ 0.16"$ 0.14"========"========"========P'The accompanying notes are an integral part of the consolidated financial'statements.3'IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES3'STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY2'FOR THE THREE YEARS ENDED DECEMBER 31, 1999^NET UNREALIZED^GAIN (LOSS)^ADDITIONAL^RETAINED^ON INVESTMENT ^COMMON^PAID IN^TREASURY ^TOTAL^EARNINGS^SECURITIES ^STOCK^CAPITAL ^STOCK('Balance at January 1, 1997......."$118,902"$ 94,084 "$ 56"$29,965 "$ --"$ (5,203)'Comprehensive Income&'Net Income..................... "24,444&'Other Comprehensive Income..... "(1)#'Total....................... "24,443"'Cash dividends -- $0.14 per&'share*........................."(3,114)"(3,114)''Tax benefit on exercise of stock&'options........................ "576 "576$'Purchase of 940,082 shares of&'treasury stock*................"(14,412)"(14,412)!'Sales of 204,238 shares of&'treasury stock*................ "1,588 "204 "1,384"--------"-------- "-----"------- "------"--------('Balance December 31, 1997........"127,983"115,414 "55 "29,965 "780"(18,231)"--------"-------- "-----"------- "------"--------'Comprehensive Income&'Net Income..................... "30,503&'Other Comprehensive Income..... "30#'Total....................... "30,533"'Cash dividends -- $0.16 per&'share*........................."(3,473)"(3,473)''Tax benefit on exercise of stock&'options........................ "1,027 "1,027$'Purchase of 496,455 shares of&'treasury stock*................"(12,593)"(12,593)!'Sales of 164,411 shares of&'treasury stock*................ "1,756 "(212) "788 "1,180"--------"-------- "-----"------- "------"--------('Balance December 31, 1998........"145,233"142,232 "85 "29,965 "2,595"(29,644)"--------"-------- "-----"------- "------"--------'Comprehensive Income&'Net Income..................... "33,156&'Other Comprehensive Income..... "(155)#'Total....................... "33,001"'Cash dividends -- $0.20 per&'share.........................."(4,287)"(4,287)''Tax benefit on exercise of stock&'options........................ "1,055 "1,055$'Purchase of 800,052 shares of&'treasury stock................."(18,314)"(18,314)!'Sales of 232,073 shares of&'treasury stock................. "2,608 "600 "2,008"--------"-------- "-----"------- "------"--------('Balance December 31, 1999........"$159,296"$171,101 "$ (70)"$29,965 "$4,250"$(45,950)"========"======== "====="======= "======"========A'* Adjusted for the two-for-one stock split on May 27, 1998P'The accompanying notes are an integral part of the consolidated financial'statements.3'IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES+'CONSOLIDATED STATEMENT OF CASH FLOWS'(IN THOUSANDS)^DECEMBER 31,^DECEMBER 31,^DECEMBER 31, ^1999 ^1998 ^1997B'NET INCOME................................................."$ 33,156"$ 30,503"$ 24,444B'Adjustments to reconcile net income to cash provided (used)'by operating activities:@'Depreciation and amortization............................ "7,390 "5,802 "3,910@'Amortization and impairment of servicing assets.......... "15,702 "35,388 "16,355@'Provision for loan and lease losses...................... "4,443 "5,995 "6,238@'Amortization of premiums, less accretion of discounts.... "1,145 "3,210 "1,716@'Decrease (increase) in loans held for sale..............."427,791"(408,049)"(81,841)@'Gain on sale of servicing asset.........................."(37,801)"(43,308)"(32,631)@'Net increase in trading assets..........................."(26,877)"(10,015)"(9,472)@'Other, net............................................... "35,387"(23,663)"(21,823)"---------"---------"---------='Net cash provided (used) by operating activities......"460,336"(404,137)"(93,104)"---------"---------"---------('LENDING AND INVESTING ACTIVITIES:?'Proceeds from maturities/calls of investment securities:@'Held-to-maturity......................................... "12,058 "10,645 "6,542@'Available-for-sale....................................... "159 "280 "7,5344'Proceeds from sales of investment securities:@'Available-for-sale....................................... "3,118 "6,000 "26,309)'Purchase of investment securities:@'Held-to-maturity......................................... "(34)"(8,932)"(3,868)@'Available-for-sale......................................."(5,899)"(4,051)"(20,315)?'Net increase in interest-bearing deposits with financial@'institutions............................................."(8,344) "(201)"(6,897)B'Net increase in loans, excluding sales....................."(205,137)"(131,632)"(414,205)B'Sale of loans.............................................. "22,928"175,574"331,861B'Sale of leasing assets..................................... "-- "5,241 "--B'Additions to mortgage servicing assets....................."(84,653)"(165,910)"(84,781)B'Proceeds from sale of mortgage servicing assets............ "85,380"138,635 "90,734B'Other, net................................................."(6,520)"(4,148)"(5,930)"---------"---------"---------8'Net cash provided (used) by lending and investing='activities............................................"(186,944) "21,501"(73,016)"---------"---------"---------'FINANCING ACTIVITIES:B'Net (decrease) increase in deposits........................"(138,893)"289,615 "27,897B'Net (decrease) increase in short-term borrowings..........."(171,758)"132,586 "50,409B'Repayments of long-term debt..............................."(3,055)"(11,871)"(10,563)B'Proceeds from long-term debt............................... "30,000 "7,614 "51,546A'Sale of company-obligated manditorily redeemable preferred@'securities of subsidiary trust........................... "-- "-- "47,927B'Purchase of treasury stock................................."(18,314)"(12,593)"(14,412)B'Proceeds from sale of stock for employee benefit plans..... "2,608 "1,756 "1,588B'Dividends paid............................................."(4,287)"(3,473)"(3,114)"---------"---------"---------@'Net cash provided (used) by financing activities........."(303,699)"403,634"151,278"---------"---------"---------B'Net increase (decrease) in cash and cash equivalents......."(30,307) "20,998"(14,842)B'Cash and cash equivalents at beginning of year............. "77,522 "56,524 "71,366"---------"---------"---------B'Cash and cash equivalents at end of year..................."$ 47,215"$ 77,522"$ 56,524"========="========="=========9'SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:#'Cash paid during the period:@'Interest................................................."$ 52,456"$ 58,689"$ 45,554"========="========="=========@ 'Income taxes............................................. "$ 14,328 "$ 18,947 "$ 9,912 "========= "========= "=========P 'The accompanying notes are an integral part of the consolidated financial 'statements.