UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                      .

Commission File Number: 0-6835

IRWIN FINANCIAL CORPORATION

(Exact Name of Corporation as Specified in its Charter)

Indiana		35-1286807
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

500 Washington Street Columbus, Indiana		47201
(Address of Principal Executive Offices)		(Zip Code)

(812) 376-1909		www.irwinfinancial.com
(Corporation’s Telephone Number, Including Area Code)		(Web Site)

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.

þ Yes o No

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)

þ Yes o No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes þ No

As of November 4, 2005, there were 28,609,806 outstanding common shares, no par value, of the Registrant.

 

 

FORM 10-Q
TABLE OF CONTENTS

				PAGE
				NO.
PART I		FINANCIAL INFORMATION
Item 1		Financial Statements		3
Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3		Quantitative and Qualitative Disclosures About Market Risk		62
Item 4		Controls and Procedures		62
PART II		OTHER INFORMATION
Item 1		Legal Proceedings		63
Item 6		Exhibits		65
		Signatues
2001 Stock Plan Form of Stock Option Agreement
2001 Stock Plan Form of Restricted Stock Agreement
Amended and Restated 2001 Stock Plan
2001 Stock Plan Form of Stock Option Agreement
Certification of Chief Executive Officer
Certification of Chief Financial Officer
Section 906 Certification of Chief Executive Officer
Section 906 Certification of Financial Officer

PART I. FINANCIAL INFORMATION.

Item 1. Financial Statements.

IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)

		September 30,				December 31,
		2005				2004
		(Dollars in thousands)
						(Restated)
Assets:
Cash and cash equivalents		$	147,346			$	97,101
Interest-bearing deposits with financial institutions			89,117				58,936
Residual interests			29,883				56,101
Investment securities- held-to-maturity (Fair value: $4,630 at September 30, 2005 and $4,952 at December 31, 2004)			4,630				4,942
Investment securities- available-for-sale			102,144				103,280
Loans held for sale			1,565,460				890,711
Loans and leases, net of unearned income — Note 3			4,025,815				3,450,440
Less: Allowance for loan and lease losses — Note 4			(53,896	)			(44,443	)
			3,971,919				3,405,997
Servicing assets — Note 5			302,373				367,032
Accounts receivable			129,811				122,131
Accrued interest receivable			21,487				15,428
Premises and equipment			31,142				30,240
Other assets			102,294				83,921
Total assets		$	6,497,606			$	5,235,820
Liabilities and Shareholders’ Equity:
Deposits
Noninterest-bearing		$	930,256			$	975,925
Interest-bearing			2,254,774				1,774,727
Certificates of deposit over $100,000			945,260				644,611
			4,130,290				3,395,263
Short-term borrowings — Note 6			548,344				237,277
Collateralized debt — Note 7			746,841				547,477
Other long-term debt			270,163				270,172
Other liabilities			293,589				284,445
Total liabilities			5,989,227				4,734,634
Commitments and contingencies — Note 11
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 29,612,080 shares as of September 30, 2005 and December 31, 2004, including 1,012,054 and 1,159,684, shares in treasury as of September 30, 2005 and December 31, 2004, respectively			112,000				112,000
Additional paid-in capital			—				383
Deferred compensation			(827	)			(660	)
Accumulated other comprehensive income, net of deferred income tax liability of $137 at September 30, 2005 and tax benefit of $129 as of December 31, 2004			3,505				2,454
Retained earnings			415,280				412,028
			529,958				526,205
Less treasury stock, at cost			(21,579	)			(25,019	)
Total shareholders’ equity			508,379				501,186
Total liabilities and shareholders’ equity		$	6,497,606			$	5,235,820

The accompanying notes are an integral part of the consolidated financial statements.

IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

		For the Three Months Ended September 30,
		2005				2004
		(Dollars in thousands, except per share)
Interest income:						(Restated)
Loans and leases		$	85,862			$	62,088
Loans held for sale			25,951				23,112
Residual interests			1,491				3,350
Investment securities			1,961				1,371
Federal funds sold			57				44
Total interest income			115,322				89,965
Interest expense:
Deposits			21,780				11,984
Short-term borrowings			7,031				2,796
Collateralized debt			8,549				3,782
Other long-term debt			8,447				5,743
Total interest expense			45,807				24,305
Net interest income			69,515				65,660
Provision for loan and lease losses — Note 4			5,772				1,898
Net interest income after provision for loan and lease losses			63,743				63,762
Other income:
Loan servicing fees			30,233				34,667
Amortization of servicing assets — Note 5			(25,868	)			(28,070	)
Recovery (impairment) of servicing assets — Note 5			35,634				(18,358	)
Net loan administration income (loss)			39,999				(11,761	)
Gain from sales of loans			24,648				48,626
Gain on sale of mortgage servicing assets			8,585				440
Trading gains			333				4,326
Derivative (losses) gains, net			(37,653	)			18,779
Other			7,643				5,503
			43,555				65,913
Other expense:
Salaries			41,009				53,986
Pension and other employee benefits			8,740				12,127
Office expense			3,453				4,008
Premises and equipment			8,191				10,096
Marketing and development			1,381				3,103
Professional fees			2,765				5,132
Other			14,184				14,040
			79,723				102,492
Income before income taxes			27,575				27,183
Provision for income taxes			9,082				10,858
Net income		$	18,493			$	16,325
Earnings per share: — Note 9
Basic		$	0.65			$	0.58
Diluted		$	0.61			$	0.54
Dividends per share		$	0.10			$	0.08

The accompanying notes are an integral part of the consolidated financial statements.

IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

		For the Nine Months Ended September 30,
		2005				2004
		(Dollars in thousands, except per share)
Interest income:						(Restated)
Loans and leases		$	223,294			$	181,759
Loans held for sale			66,117				59,397
Residual interests			5,824				9,893
Investment securities			5,513				3,733
Federal funds sold			284				82
Total interest income			301,032				254,864
Interest expense:
Deposits			54,578				31,532
Short-term borrowings			14,297				6,611
Collateralized debt			17,348				10,501
Other long-term debt			20,236				17,101
Total interest expense			106,459				65,745
Net interest income			194,573				189,119
Provision for loan and lease losses — Note 4			17,935				11,838
Net interest income after provision for loan and lease losses			176,638				177,281
Other income:
Loan servicing fees			99,407				101,570
Amortization of servicing assets — Note 5			(79,564	)			(89,413	)
Recovery of servicing assets — Note 5			17,759				6,210
Net loan administration income			37,602				18,367
Gain from sales of loans			80,711				140,669
Gain on sale of mortgage servicing assets			15,241				8,857
Trading gains			3,942				15,668
Derivative (losses) gains, net			(61,001	)			22,035
Other			21,514				17,917
			98,009				223,513
Other expense:
Salaries			129,541				158,602
Pension and other employee benefits			29,510				34,813
Office expense			10,768				12,950
Premises and equipment			27,103				30,890
Marketing and development			6,481				10,670
Professional fees			10,660				14,436
Other			42,690				48,325
			256,753				310,686
Income before income taxes			17,894				90,108
Provision for income taxes			5,358				35,599
Net income		$	12,536			$	54,509
Earnings per share: — Note 9
Basic		$	0.44			$	1.93
Diluted		$	0.44			$	1.81
Dividends per share		$	0.30			$	0.24

The accompanying notes are an integral part of the consolidated financial statements.

IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
For the Three Months Ended September 30, 2005 and 2004

										Accumulated
										Other								Additional
						Retained				Comprehensive				Deferred				Paid in				Common				Treasury
		Total				Earnings				Income (Loss)				Compensation				Capital				Stock				Stock
										(Dollars in thousands)
Balance at July 1, 2005 (Restated)		$	490,575			$	399,985			$	2,022			$	(677	)		$	—			$	112,000			$	(22,755	)
Net income			18,493				18,493
Unrealized loss on investment securities net of $61 tax benefit			(91	)							(91	)
Unrealized gain on interest rate hedge net of $394 tax liability			591								591
Foreign currency adjustment			983								983
Total comprehensive income			19,976
Deferred compensation			(150	)											(150	)
Cash dividends			(2,859	)			(2,859	)
Tax benefit on stock option exercises			89																89
Treasury stock:
Purchase of 6,544 shares			(137	)																							(137	)
Sales of 53,938 shares			885				(339	)											(89	)							1,313
Balance at September 30, 2005		$	508,379			$	415,280			$	3,505			$	(827	)		$	—			$	112,000			$	(21,579	)
Balance at July 1, 2004 (Restated)		$	469,384			$	386,308			$	71			$	(538	)		$	579			$	112,000			$	(29,036	)
Net income (Restated)			16,325				16,325
Unrealized gain on investment securities net of $142 tax liability			212								212
Foreign currency adjustment			527								527
Total comprehensive income (Restated)			17,064
Deferred compensation			22												22
Cash dividends			(2,266	)			(2,266	)
Tax benefit on stock option exercises			100																100
Treasury stock:
Purchase of 867 shares			(23	)																							(23	)
Sales of 52,342 shares			1,095																(122	)							1,217
Balance at September 30, 2004 (Restated)		$	485,376			$	400,367			$	810			$	(516	)		$	557			$	112,000			$	(27,842	)

The accompanying notes are an integral part of the consolidated financial statements.

IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

For the Nine Months Ended September 30, 2005 and 2004

										Accumulated
										Other								Additional
						Retained				Comprehensive				Deferred				Paid in				Common				Treasury
		Total				Earnings				Income (Loss)				Compensation				Capital				Stock				Stock
		(Dollars in thousands)
Balance at January 1, 2005 (Restated)		$	501,186			$	412,028			$	2,454			$	(660	)		$	383			$	112,000			$	(25,019	)
Net income			12,536				12,536
Unrealized loss on investment securities net of $148 tax benefit			(222	)							(222	)
Unrealized gain on interest rate hedge net of $413 tax liability			619								619
Foreign currency adjustment			654								654
Total comprehensive income			13,587
Deferred compensation			(167	)											(167	)
Cash dividends			(8,564	)			(8,564	)
Tax benefit on stock option exercises			616																616
Treasury stock:
Purchase of 50,923 shares			(1,198	)																							(1,198	)
Sales of 198,553 shares			2,919				(720	)											(999	)							4,638
Balance at September 30, 2005		$	508,379			$	415,280			$	3,505			$	(827	)		$	—			$	112,000			$	(21,579	)
Balance at January 1, 2004		$	432,260			$	352,647			$	182			$	(504	)		$	1,264			$	112,000			$	(33,329	)
Net income (Restated)			54,509				54,509
Unrealized gain on investment securities net of $93 tax liability			139								139
Unrealized gain on interest rate cap net of $131 tax liability			196								196
Foreign currency adjustment			293								293
Total comprehensive income (Restated)			55,137
Deferred compensation			(12	)											(12	)
Cash dividends			(6,789	)			(6,789	)
Tax benefit on stock option exercises			778																778
Treasury stock:
Purchase of 11,307 shares			(370	)																							(370	)
Sales of 212,026 shares			4,372																(1,485	)							5,857
Balance at September 30, 2004 (Restated)		$	485,376			$	400,367			$	810			$	(516	)		$	557			$	112,000			$	(27,842	)

The accompanying notes are an integral part of the consolidated financial statements.

IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

		For the Nine Months Ended September 30,
		2005				2004
		(Dollars in thousands)
						(Restated)
Net income		$	12,536			$	54,509
Adjustments to reconcile net income to cash used by operating activities: