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Replay available at http://www.irwinfinancial.com/ir-set.html
COLUMBUS, Indiana -- February 3, 2006 -- Irwin Financial Corporation (NYSE: IFC), a bank holding company focusing on small business and mortgage banking today announced net income for the fourth quarter of 2005 of $6.5 million or $0.23 per diluted share. This compares with net income of $13.9 in the fourth quarter of 2004 and $18.5 million in the third quarter of 2005. Despite record net income from the Corporation’s commercial segments, consolidated results were negatively affected by lower mortgage loan production and reduced gains on sales of mortgage loans and servicing rights (MSRs). For the year, net income totaled $19.0 million or $0.66 per share, a 71 percent year-over-year decline in earnings per share. Return on average equity was 5.0 and 4.0 percent, for the quarter and year, respectively. The Corporation is issuing a call notice today to redeem the securities underlying IFC Capital Trust III, from which $51.7 million of 8.75 percent convertible trust preferred securities (NYSE: IFC.N, CUSIP # 449498203) were issued and remain outstanding. The shares will be redeemed on March 6, 2006, at their par value of $25 per share plus accrued interest through March 3, 2006. In lieu of redemption for cash, the trust preferred securities are convertible at the option of the holder into Irwin Financial Corporation common stock (NYSE: IFC) at any time up to 5:00 p.m. EST on March 3, 2006. If converted, each share of convertible trust preferred securities will be exchanged for 1.2610 shares of common stock, which equates to a common stock conversion price of $19.825/share. Finally, the Corporation today announced that it had completed the necessary restatement and amended filing of its interim financial statements included in the Corporation’s Quarterly Reports on Form 10-Q for the first and second quarters of 2005 and the annual financial statements for the year ended December 31, 2004, included in the Corporation’s Annual Report on Form 10-K. As previously reported, the restatements were necessitated by the determination, made in November 2005, that certain incentive servicing fees should be accounted for under SFAS 140, rather than SFAS 133 as the Corporation had been using. The restatements had the effect of reducing reported GAAP net income in each of the three reporting periods, but had no affect on operating cash flows. “Both Irwin Union Bank and Irwin Commercial Finance had record net income in 2005. We are very pleased with the continuing, steady progress we are making in these segments,” said Will Miller, Chairman of Irwin Financial. “We believe those segments have positioned themselves for significant growth in attractive markets over the next decade,” Miller said, “and that appropriately managed growth and investment in these businesses has the potential to create significant value for all our stakeholders. “Last week we announced a decision to consider strategic alternatives for our conventional first mortgage banking line of business, including the possible sale of Irwin Mortgage. We are making good progress in that evaluation. We believe the progress we made in 2005 will position us for creditworthy, profitable growth in the other three segments in 2006 and beyond,” Miller concluded. Financial highlights for the period include: Financial highlights for the period include:
Consolidated Results.
4Q 4Q Percent 3Q Percent Full- Full- Percent
Change Change Yr Yr Change
$ in millions, 2005 2004 2005 2005 2004
except EPS
Net Interest Income
After Provision
for Losses $62 $61 3% $64 (2)% $239 $238 0%
Non-Interest Income 22 60 (63) 44 (48) 120 284 (58)
Total Consolidated
Net Revenues 85 121 (30) 107 (21) 360 521 (31)
Non-Interest Expense 75 97 (23) 80 (6) 332 407 (19)
Net Income 6.5 13.9 (54) 18.5 (65) 19.0 68.4 (72)
Earning per Share
(diluted) 0.23 0.47 (51) 0.61 (62) 0.66 2.28 (71)
Loans and Leases 4,499 3,450 30 4,026 12
Mortgage Loans
Held for Sale 1,294 891 45 1,565 (17)
Deposits 3,899 3,395 15 4,130 (6)
Shareholders'
Equity 512 501 2 508 1
Total Risk-Based
Capital Ratio 13.2% 15.9% 13.1%
Return on Average
Equity 5.0% 11.3% 14.6% 4.0% 14.5%
Consolidated net revenues decreased on a sequential quarter basis largely due to reduced secondary market gains on mortgage loan sales, MSR impairment and the absence of mortgage servicing sales in the current period. Net interest income prior to loss provision increased $2 million on a sequential quarter basis (10 percent on an annualized basis) reflecting growth in our loan portfolio. The consolidated loan and lease portfolio was $4.5 billion as of December 31, 2005, a $0.5 billion increase as compared to the end of the third quarter. This growth reflects an increase of $125 million in commercial portfolios and a reclassification of approximately $400 million in home equity portfolio from held-for-sale to held-for-investment. An asset-backed financing was issued in January 2006 to provide permanent funding for the majority of these loans. Mortgage loans held for sale totaled $1.3 billion, down from $1.6 billion at the end of the third quarter, largely reflecting lower mortgage production and the reclassification noted above. Deposits totaled $3.9 billion at December 31, down $0.2 billion from September 30. The majority of the decline in deposits was attributable to the delivery in the fourth quarter of mortgage servicing rights and associated escrow deposits sold in the third quarter. Average core deposits increased to $2.5 billion during the fourth quarter, a 19 percent annualized growth over the third quarter. The Corporation had $512 million or $17.90 per share in common shareholders' equity as of December 31, 2005. At quarter end, Tier 1 Leverage Ratio and Total Risk-based Capital Ratio were 10.4 percent and 13.2 percent, respectively, compared to 10.3 percent and 13.1 percent as of September 30, 2005. Nonperforming assets (including other real estate owned of $15 million) were $54 million or 0.81 percent of total assets as of December 31, 2005, up from $50 million or 0.77 percent of total assets at the end of September. The on-balance sheet allowance for loan and lease losses totaled $60 million as of December 31, up $6 million from the end of the third quarter. The ratio of on-balance sheet allowance for loan and lease losses to nonperforming loans and leases was 160 percent at December 31, compared to 147 percent at September 30. The consolidated loan and lease loss provision totaled $9 million, compared with $6 million during the third quarter of 2005 and compared favorably to quarterly net charge-offs, which totaled $3 million. For the year, provision totaled $27 million, compared with net charge-offs of $11 million. Consolidated thirty-day and greater delinquencies increased modestly on a sequential quarter basis. The specific levels of 30-day and greater delinquencies, the ratio of charge-offs to average loans and leases, and the allowance for loan and lease losses to total loans and leases for principal credit-related portfolios are shown in the next table. Commercial Home Equity Commercial
Banking Lending On- Finance
December 31, 2005 Balance Sheet(1)
Portfolio (in $Billions) $2.7 $1.5 $0.8
30-Day and Greater Delinquencies
* December 31, 2005 0.13% 2.23% 0.66%
* September 30, 2005 0.12 2.01 0.59
* June 30, 2005 0.15 1.70 0.54
* March 31, 2005 0.66 1.82 1.10
* December 31, 2004 0.11 1.93 0.70
Annualized Net Charge-offs
* 4Q05 0.16% 0.26% 0.47%
* 3Q05 0.09 0.36 0.58
* 2Q05 0.13 0.43 0.88
* 1Q05 0.07 0.15 0.88
* 4Q04 0.10 0.79 2.67
Allowance to Loans and Leases (1)
* December 31, 2005 0.92% 2.40% 1.32%
* September 30, 2005 0.93 2.89 1.37
* June 30, 2005 0.96 1.84 1.42
* March 31, 2005 1.00 2.05 1.58
* December 31, 2004 1.00 1.92 1.54
(1) Home Equity on -balance sheet Allowance to Loans and Leases relates to
Loans Held for Investment portfolio only.
The company updated estimates, reflected in allowance for loan and lease losses and other reserves, for losses in consumer mortgage segments as a result of hurricanes Katrina and Rita. Total reserves for these potential losses now totals $1.2 million, compared to an estimate of $1.7 million as of September 30. Estimates involved the use of considerable judgment and assumptions about uncertain matters including the number of properties damaged, the extent of damage, and insurance recoveries. The company will continue to assess the financial impact of the hurricanes as more information becomes available. Segment Results Net income (loss) by line of business is shown below, with additional detail available in the segment summary tables at the end of this release and in the Corporation’s Form 10-K when it becomes available.
Net Income(loss) 4Q 4Q Percent 3Q Percent Full- Full- Percent
($ in millions) Change Change Yr Yr Change
2005 2004 2005 2005 2004
Commercial Banking $8.7 $6.7 29 $7.6 13 $27.4 $23.4 17
Commercial Finance 2.8 1.1 156 2.5 9 7.4 3.2 131
Mortgage Banking (2.6) 1.0 NM 5.9 NM (16.2) 20.3 NM
Home Equity (1.5) 6.0 NM 2.2 NM 2.3 28.1 (92)
Other Segments,
Including Parent (1.0)(0.8) (25) 0.2 NM (1.9) (6.5) 71
Consolidated Net
Income 6.5 13.9 (54) 18.5 (65) 19.0 68.4 (72)
Commercial banking earned net income of $8.7 million, a $1.1 million increase over the third quarter of 2005 and an increase of $1.9 million from the fourth quarter of 2004. The quarterly net income is a record for this segment. The improvements reflect increases in net interest income from loan portfolio growth. Net income for the year was $27.4 million, again, a record for this segment. The segment’s compound annual growth in net income has been 19 and 31 percent, respectively over the past three and five years. The commercial banking segment continued to have good loan growth. Loans outstanding as of December 31, 2005, totaled $2.7 billion, representing a $0.1 billion or 10 percent annualized growth since September 30. Net interest margin was 3.81 percent during the quarter, down modestly from 3.83 percent during the third quarter. Credit quality continues to be strong. As noted in the table above, thirty-day and greater delinquencies were 0.13 percent as of December 31, compared to 0.12 percent at September 30. The commercial banking segment’s loan and lease loss provision of $1.4 million during the fourth quarter was unchanged from the third quarter and compared favorably to net charge-offs of $1.1 million. The commercial finance line of business earned $2.8 million in the fourth quarter, a $0.2 million increase as compared to the third quarter of 2005. Loan and lease fundings totaled $139 million during the quarter compared to $119 million in the third quarter. Both the net income and the level of loan originations were quarterly records for the segment. Net income for the year was $7.4 million, also a record for this segment which was a start-up in 2000. The segment’s loan and lease portfolio now totals $0.8 billion, representing a $0.1 billion or 38 percent annualized growth since September 30. Net interest income totaled $9.2 million, a $0.2 million sequential quarter increase. Gain on sales of loans totaled $0.3 million, compared to $1.5 million in the prior quarter. Net interest margin decreased to 4.65 percent from 4.95 percent during the third quarter, reflecting competitive conditions in the leasing channel. The loan and lease loss provision in this segment totaled $1.4 million during the quarter, unchanged from the prior quarter, reflecting continued loan and lease growth and stable credit quality. Net charge-offs declined to $0.9 million, as compared to $1.1 million in the prior quarter. The thirty-day and greater delinquency ratio in this segment increased slightly to 0.66 percent at December 31, from 0.59 percent on September 30. Mortgage banking recorded a net loss of $2.6 million, compared to net income of $5.9 million in the third quarter and earnings in the prior year period of $1.0 million. The decline results principally from lower loan production, lower secondary market loan and servicing sales, and net impairment of MSRs. The segment recorded a net loss for the year of $16.2 million Loan production of $2.4 billion decreased 26 percent as compared to originations of $3.2 billion in the third quarter. In addition, net margins reflected in the gain on sale of loans continue to show signs of intense price competition. The segment had no bulk MSR sales in the quarter which led to a sequential quarter decline in revenues of $9.4 million associated with this activity. The segment’s servicing portfolio totaled $18.3 billion at December 31, 2005, down $0.2 and $7.9 billion, respectively compared with September 30, 2005, and December 31, 2004. The line of business recorded net impairment of MSRs of $6.1 million during the fourth quarter, largely reflecting a basis mismatch in its hedge and MSR portfolio. During the quarter, mortgage rates underlying the bulk of the rate risk in the servicing portfolio rose by approximately 7 basis points, whereas rates underlying hedge instruments rose by approximately 16 basis points. The home equity segment lost $1.5 million during the fourth quarter, compared with net income of $2.2 million during the third quarter. The decline in net income was principally due to reduced margins on secondary market loan sales and increased provision, reflecting loan portfolio growth. Credit quality continues to meet management’s expectations. The segment earned $2.3 million for the year. Loan originations totaled $318 million in the fourth quarter, down 28 percent from $444 million in the third quarter and compared to loan sales of $164 million during the quarter. The decline in production reflects a refinement to loan pricing policies and reductions in portfolio acquisitions. As noted above, the company reclassified approximately $400 million from loans-held-for-sale to loans-held-for-investment during the quarter. Due in part to this reclassification, the line of business increased its loan loss provision on a sequential quarter basis from $3.1 million in the third quarter to $6.1 million in the fourth quarter. Approximately $2.8 million of the fourth quarter provision related to the change in loan classification noted above and approximately $2.9 million was related to reserve increases for bankruptcy filings which rose in October in advance of federal bankruptcy law changes. The company recorded revenues from cash collections of $0.5 million on incentive servicing fees, down from $0.9 million in the third quarter of 2005. The parent and other consolidating entities lost $1.0 million during the fourth quarter, compared to a loss of $0.8 million in the fourth quarter of 2004. For the year, these entities lost $1.9 million, compared with a loss of $6.5 million in 2004. About Irwin Financial Irwin® Financial Corporation (http://www.irwinfinancial.com) is a bank holding company with a history tracing to 1871. The Corporation, through its principal lines of business — Irwin Union Bank, Irwin Commercial Finance, Irwin Home Equity Corporation and Irwin Mortgage Corporation , — provides a broad range of financial services to consumers and small businesses in selected markets in the United States and Canada. About Forward-Looking Statements This press release contains forward-looking statements and estimates that are based on management’s expectations, estimates, projections, and assumptions. These statements and estimates include but are not limited to earnings estimates and projections of financial performance and profitability, and projections of business strategies and future activities. These statements involve inherent risks and uncertainties that are difficult to predict and are not guarantees of future performance. Words that convey our beliefs, views, expectations, assumptions, estimates, forecasts, outlook and projections or similar language, or that indicate events we believe could, would, should, may or will occur (or might not occur) or are likely (or unlikely) to occur, and similar expressions, are intended to identify forward-looking statements, which may include, among other things:
We qualify any forward-looking statements entirely by these cautionary factors. Actual future results may differ materially from what is projected due to a variety of factors including: potential changes in direction, volatility and relative movement (basis risk) of interest rates, which may affect consumer demand for our products and the success of our interest rate risk management strategies; staffing fluctuations in response to product demand; the relative profitability of our lending operations; the valuation and management of our residual, servicing and derivatives portfolios, including assumptions we embed in the valuation and short-term swings in the valuation of such portfolios due to quarter-end movements in secondary market interest rates which are inherently volatile; borrowers’ refinancing opportunities, which may affect the prepayment assumptions used in our valuation estimates and which may affect loan demand; unanticipated deterioration in the credit quality of our loan and lease assets, including deterioration resulting from the effects of recent natural disasters; unanticipated deterioration in or changes in estimates of the carrying value of our other assets, including securities; difficulties in delivering products to the secondary market as planned; difficulties in expanding our business and obtaining funding as needed; competition from other financial service providers for experienced managers as well as for customers; changes in the value of companies in which we invest; changes in variable compensation plans related to the performance and valuation of lines of business where we tie compensation systems to line of business performance; unanticipated outcomes in litigation; unanticipated difficulty or delay in redeeming the trust preferred securities; legislative or regulatory changes, including changes in tax laws or regulations, changes in the interpretation of regulatory capital rules, changes in consumer or commercial lending rules or rules affecting corporate governance, and the availability of resources to address these rules; changes in applicable accounting policies or principles or their application to our businesses or final audit adjustments; additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; the final outcome and implications of our consideration of strategic alternatives for our conventional mortgage banking segment, or governmental changes in monetary or fiscal policies. We undertake no obligation to update publicly any of these statements in light of future events, except as required in subsequent reports we file with the Securities and Exchange Commission. The Corporation will host a conference call to review results Monday, February 6, at 1:00 p.m. EST. Greg Ehlinger, Senior Vice President and CFO, Will Miller, CEO, and Jody Littrell, Vice President and Controller, of Irwin Financial Corporation, will be the speakers on the call. The toll-free number for the call is (800) 559-2403; please tell the operator you would like to join the Irwin Financial call, confirmation #13796786. A replay of the call will be available on the Irwin Financial Corporation website at http://www.irwinfinancial.com/ir-set.html. ### IRWIN FINANCIAL CORPORATION
Selected Consolidated Financial Highlights
($'s in thousands, except per share data)
Unaudited
Q4-2005 Q4-2004 $ Change % Change Q3-2005
(Restated)
Net Interest Income $71,317 $62,959 $8,358 13.3 $69,515
Provision for Loan
and Lease Losses (8,916) (2,357) (6,559) (278.3) (5,772)
Noninterest Income 22,476 60,016 (37,540) (62.5) 43,555
Total Net Revenues 84,877 120,618 (35,741) (29.6) 107,298
Noninterest Expense 74,802 96,550 (21,748) (22.5) 79,723
Income before Income
Taxes 10,075 24,068 (13,993) (58.1) 27,575
Income Taxes 3,624 10,132 (6,508) (64.2) 9,082
Net Income $6,451 $13,936 ($7,485) (53.7) $18,493
Dividends on Common
Stock $2,862 $2,276 $586 25.7 $2,859
Diluted Earnings
Per Share (31,488
Weighted Average
Shares Outstanding) $0.23 $0.47 ($0.24) (51.1) $0.61
Basic Earnings Per
Share (28,572 Weighted
Average Shares
Outstanding) 0.23 0.49 ($0.26) (53.1) 0.65
Dividends Per Common
Share 0.10 0.08 0.02 25.0 0.10
Net Charge-Offs $2,980 $5,757 ($2,777) (48.2) $2,865
Performance Ratios -
Quarter to Date:
Return on Average Assets 0.4% 1.0% 1.1%
Return on Average Equity 5.0% 11.3% 14.6%
YTD-2005 YTD-2004 $ Change % Change
(Restated)
Net Interest Income $265,890 $252,078 $13,812 5.5
Provision for Loan
and Lease Losses (26,852) (14,195) (12,657) (89.2)
Noninterest Income 120,486 283,528 (163,042) (57.5)
Total Net
Revenues 359,524 521,411 (161,887) (31.0)
Noninterest Expense 331,555 407,235 (75,680) (18.6)
Income before
Income Taxes 27,969 114,176 (86,207) (75.5)
Income Taxes 8,982 45,732 (36,750) (80.4)
Net Income $18,987 $68,444 ($49,457) (72.3)
Dividends on
Common Stock $11,426 $9,065 $2,361 26.0
Diluted Earnings
Per Share (28,841
Weighted Average
Shares Outstanding) $0.66 $2.28 (1.62) (71.1)
Basic Earnings Per
Share (28,518
Weighted Average
Shares Outstanding) 0.67 2.42 (1.75) (72.3)
Dividends Per
Common Share 0.40 0.32 0.08 25.0
Net Charge-Offs $11,241 $22,845 ($11,604) (50.8)
Performance Ratios -
Year to Date:
Return on Average Assets 0.3% 1.3%
Return on Average Equity 4.0% 14.5%
December 31, December 31, September 30,
2005 2004 $ Change %Change 2005
(Restated)
Loans Held for Sale $1,293,519 $890,711 $402,808 45.2 $1,565,460
Loans and Leases
in Portfolio 4,498,829 3,450,440 1,048,389 30.4 4,025,815
Allowance for Loan
and Lease Losses (59,749) (44,443) (15,306) (34.4) (53,896)
Total Assets 6,646,524 5,235,820 1,410,704 26.9 6,497,606
Total Deposits 3,898,993 3,395,264 503,729 14.8 4,130,290
Shareholders' Equity 512,334 501,185 11,149 2.2 508,379
Shareholders' Equity
available to Common
Shareholders
(per share) 17.90 17.61 0.29 1.6 17.78
Average Equity/
Average Assets (YTD) 8.0% 9.0% 8.6%
Tier I Capital $675,500 $637,875 $37,625 5.9 $663,393
Tier I Leverage Ratio 10.4% 11.6% 10.3%
Total Risk-based
Capital Ratio 13.2% 15.9% 13.1%
Nonperforming
Assets to Total Assets 0.81% 0.86% 0.77%
COMMERCIAL BANKING
Q4-2005 Q4-2004 $ Change % Change Q3-2005
Net Interest Income $30,582 $24,513 $6,069 24.8 $28,639
Provision for Loan and
Lease Losses (1,350) (750) (600) (80.0) (1,361)
Other Revenues 4,317 4,590 (273) (6.0) 4,442
Total Net Revenues 33,549 28,353 5,196 18.3 31,720
Salaries, Pension, and
Other Employee Expense 11,727 10,311 1,416 13.7 11,897
Other Expenses 7,446 6,778 668 9.9 7,394
Income Before Income
Taxes 14,376 11,264 3,112 27.6 12,429
Income Taxes 5,714 4,544 1,170 25.8 4,795
Net Income $8,662 $6,720 $1,942 28.9 $7,634
Net Charge-offs $1,102 $565 $537 95.1 $590
Net Interest Margin 3.81% 3.81% 3.83%
YTD-2005 YTD-2004 $ Change % Change
Net Interest Income $110,758 $89,617 $21,141 23.6
Provision for Loan and
Lease Losses (5,286) (3,307) (1,979) (59.8)
Other Revenues 16,945 18,316 (1,371) (7.5)
Total Net Revenues 122,417 104,626 17,791 17.0
Salaries, Pension, and
Other Employee Expense 47,934 40,422 7,512 18.6
Other Expenses 29,128 25,028 4,100 16.4
Income Before Income Taxes 45,355 39,176 6,179 15.8
Income Taxes 17,976 15,752 2,224 14.1
Net Income $27,379 $23,424 $3,955 16.9
Net Charge-offs $2,847 $3,133 ($286) (9.1)
Net Interest Margin 3.80% 3.75%
December 31, December 31, September 30,
2005 2004 $Change %Change 2005
Securities and Short-
Term Investments $340,811 $327,664 $13,147 4.0 $421,395
Loans and Leases 2,680,220 2,223,474 456,746 20.5 2,618,692
Allowance for Loan and
Lease Losses (24,670) (22,230) (2,440) (11.0) (24,421)
Interest-Bearing
Deposits 2,454,722 2,095,644 359,078 17.1 2,552,463
Noninterest-Bearing
Deposits 342,913 295,195 47,718 16.2 364,272
Delinquency Ratio
(30+ days): 0.13% 0.11% 0.12%
COMMERCIAL FINANCE
Q4-2005 Q4-2004 $ Change %Change Q3-2005
Net Interest Income $9,183 $7,392 $1,791 24.2 $8,959
Provision for Loan and
Lease Losses (1,410) (2,021) 611 30.2 (1,481)
Gain on Sales of Loans 329 $392 (63) (16.1) 1,530
Derivative (Losses)
Gains, net (185) $39 (224) (574.3) (227)
Other Revenues 1,721 1,407 314 22.3 1,010
Total Net Revenues 9,638 7,209 2,429 33.7 9,791
Salaries, Pension, and
Other Employee Expense 4,495 3,848 647 16.8 4,680
Other Expenses 482 758 (276) (36.4) 733
Income Before Income Taxes 4,661 2,603 2,058 79.0 4,378
Income Taxes 1,891 1,521 370 24.3 1,840
Net Income $2,770 $1,082 $1,688 155.9 $2,538
Net Charge-Offs $937 $3,932 ($2,995) (76.2) $1,052
Loans Sold 7,513 9,313 (1,800) (19.3) 19,804
Net Interest Margin 4.65% 4.95% 4.95%
Total Fundings of Loans
and Leases $138,544 $115,344 $23,200 20.1 $119,345
YTD-2005 YTD-2004 $ Change % Change
Net Interest Income $33,683 $28,084 $5,599 19.9
Provision for Loan and
Lease Losses (6,211) (6,798) 587 8.6
Gain on Sales of Loans 2,642 1,796 846 47.1
Derivative Losses, net (717) (536) (181) (33.8)
Other Revenues 5,512 5,016 496 9.9
Total Net Revenues 34,909 27,562 7,347 26.7
Salaries, Pension, and
Other Employee Expense 17,531 14,333 3,198 22.3
Other Expenses 4,693 4,450 243 5.5
Income Before Income
Taxes 12,685 8,779 3,906 44.5
Income Taxes 5,252 5,562 (310) (5.6)
Net Income $7,433 $3,217 $4,216 131.1
Net Charge-Offs $4,806 $8,235 ($3,429) (41.6)
Loans Sold 41,745 36,810 4,935 13.4
Net Interest Margin 4.80% 5.33%
Total Fundings of Loans
and Leases $451,524 $366,545 $84,979 23.2
December 31, December 31, September 30,
2005 2004 $Change %Change 2005
Investment in
Loans and
Leases $817,208 $625,140 $192,068 30.7 $754,214
Allowance for
Loan and
Lease Losses (10,756) (9,624) (1,132) (11.8) (10,366)
Delinquency ratio
(30+ days) 0.66% 0.70% 0.59%
MORTGAGE BANKING
Q4-2005 Q4-2004 $ Change % Change Q3-2005
Net Interest
Income $8,714 $10,179 ($1,465) (14.4) $11,304
Recovery of
(Provision for)
Loan Losses (12) (178) 166 93.3 183
Gain on Sales
of Loans 14,774 34,169 (19,395) (56.8) 18,518
Gain on Sale
of Servicing (829) 7,824 (8,653) (110.6) 8,585
Loan Servicing
Fees, Net of
Amortization
Expense 5,350 5,123 227 4.4 2,341
(Impairment)
Recovery of
Servicing
Assets, Net of
Hedging (6,145) (13,853) 7,708 55.6 (869)
Other Revenues 1,066 1,341 (275) (20.5) 1,866
Total Net
Revenues 22,918 44,605 (21,687) (48.6) 41,928
Salaries,
Pension, and
Other Employee
Expense 13,222 26,299 (13,077) (49.7) 16,236
Other Expenses 14,044 15,813 (1,769) (11.2) 15,861
Income (Loss)
Before Income
Taxes (4,348) 2,493 (6,841) (274.4) 9,831
Income Taxes (1,728) 1,526 (3,254) (213.2) 3,967
Net Income
(Loss) ($2,620) $967 ($3,587) (370.9) $5,864
Total Mortgage
Loan
Originations: $2,369,567 $3,460,886 ($1,091,319) (31.5) $3,203,536
Percent
retail 6% 16% 8%
Percent
wholesale 57% 30% 54%
Percent
brokered 1% 11% 1%
Percent
correspondent 36% 43% 37%
Refinancings as a
Percentage of Total
Originations 45% 52% 46%
YTD-2005 YTD-2004 $ Change % Change
Net Interest Income $36,766 $40,825 ($4,059) (9.9)
Recovery of
(Provision for)
Loan Losses 455 278 177 63.7
Gain on Sales of Loans 75,267 151,172 (75,905) (50.2)
Gain on Sale of
Servicing 14,412 16,681 (2,269) (13.6)
Loan Servicing Fees,
Net of Amortization
Expense 17,622 8,779 8,843 100.7
(Impairment) Recovery
of Servicing Assets,
Net of Hedging (48,853) 14,686 (63,539) (432.7)
Other Revenues 6,815 6,653 162 2.4
Total Net Revenues 102,484 239,074 (136,590) (57.1)
Salaries, Pension,
and Other Employee
Expense 69,369 118,439 (49,070) (41.4)
Other Expenses 60,182 85,766 (25,584) (29.8)
Income (Loss)
Before Income Taxes (27,067) 34,869 (61,936) (177.6)
Income Taxes (10,891) 14,603 (25,494) (174.6)
Net Income (Loss) ($16,176) $20,266 ($36,442) (179.8)
Total Mortgage
Loan
Originations: $11,029,183 $13,093,082 ($2,063,899) (15.8)
Percent retail 10% 20%
Percent wholesale 49% 34%
Percent brokered 4% 11%
Percent correspondent 37% 35%
Refinancings as a
Percentage of Total
Originations 47% 52%
December 31, December 31, September 30,
2005 2004 $ Change % Change 2005
Owned Servicing
Portfolio
Balance $18,265,288 $26,196,627 ($7,931,339) (30.3) $18,451,674
Weighted
average
interest
rate 5.79% 5.75% 5.73%
Delinquency
ratio
(30+ days): 5.41% 4.59% 4.70%
Conventional 3.75% 2.94% 3.18%
Government 8.63% 7.43% 8.24%
Loans Held
for Sale $779,966 $662,832 $117,134 17.7 $757,527
Servicing
Asset 261,309 319,225 (57,916) (18.1) 259,549
HOME EQUITY LENDING
Q4-2005 Q4-2004 $ Change % Change Q3-2005
(Restated)
Residual Asset
Interest Income $871 $2,615 ($1,744) (66.7) $1,260
Net Interest Income
- Unsold Loans
and Other 22,393 19,146 3,247 17.0 22,140
Recovery of
(provision for)
Loan Losses (6,146) 593 (6,739) (1136.4) (3,113)
Trading Gains (720) 9,536 (10,256) (107.5) 324
Gain on Sales of
Loans, Including
Points and Fees 1,986 9,017 (7,031) (78.0) 3,734
Servicing Income, net 776 2,675 (1,899) (71.0) 2,549
Other Revenues 1,437 723 714 98.8 1,218
Total Net Revenues 20,597 44,305 (23,708) (53.5) 28,112
Salaries,
Pension, and
Other Employee
Expense 14,239 23,031 (8,792) (38.2) 15,701
Other Expense 8,832 10,458 (1,626) (15.5) 8,671
Income Before
Income Taxes (2,474) 10,816 (13,290) (122.9) 3,740
Income Taxes (981) 4,809 (5,790) (120.4) 1,503
Net Income ($1,493) $6,007 ($7,500) (124.9) $2,237
Loan Volume $318,134 $334,838 ($16,704) (5.0) $443,606
Loans Sold 164,162 469,683 (305,521) (65.0) 150,730
Net Charge-offs
(Loans Held for
Investment) 937 1,257 (320) (25.5) 1,222
YTD-2005 YTD-2004 $ Change % Change
(Restated)
Residual Asset
Interest Income $6,465 $12,509 ($6,044) (48.3)
Net Interest
Income - Unsold
Loans and Other 81,825 86,474 (4,649) (5.4)
Provision for
Loan Losses (15,811) (4,369) (11,442) (261.9)
Trading Gains 2,399 25,176 (22,777) (90.5)
Gain on Sales of
Loans, Including
Points and Fees 17,849 29,180 (11,331) (38.8)
Servicing Income, net 9,141 11,058 (1,917) (17.3)
Other Revenues 4,278 2,433 1,845 75.8
Total Net
Revenues 106,146 162,461 (56,315) (34.7)
Salaries,
Pension, and
Other Employee
Expense 64,432 75,649 (11,217) (14.8)
Other Expense 37,907 39,130 (1,223) (3.1)
Income Before
Income Taxes 3,807 47,682 (43,875) (92.0)
Income Taxes 1,555 19,615 (18,060) (92.1)
Net Income $2,252 $28,067 ($25,815) (92.0)
Loan Volume $1,691,636 $1,442,314 $249,322 17.3
Loans Sold 748,233 1,301,191 (552,958) (42.5)
Net Charge-offs
(Loans Held for
Investment) 3,588 11,482 (7,894) (68.8)
December 31, December 31, September 30,
2005 2004 $Change %Change 2005
Home Equity Loans
Held for Sale $513,231 $227,740 $285,491 125.4 $807,673
Home Equity Loans
Held for
Investment 980,406 590,175 390,231 66.1 635,435
Allowance for Loan
and Lease Losses (23,552) (11,330) (12,222) (107.9) (18,343)
Residual Asset 15,580 51,542 (35,962) (69.8) 23,720
Servicing Asset 30,502 44,000 (13,498) (30.7) 38,950
Managed Portfolio 1,593,509 1,147,137 446,372 38.9 1,577,238
Delinquency
Ratio
(30+ days) 3.04% 4.76% 2.92%
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