Management's Discussion and Analysis of Results of Operations
and Financial Condition

Irwin Financial Corporation

Five-Year Selected Financial Data

(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Financial Data For the Year:            1998       1997       1996        1995      1994

<S>                               <C>        <C>        <C>         <C>        <C>
Net revenues                        $300,918   $221,224   $195,448    $148,239  $116,908
Operating expenses                   245,436    174,573    158,160     115,790    86,844
Net income                            30,503     24,444     22,428      20,083    18,216
Mortgage loan closings             8,944,615  5,397,338  5,085,625   3,559,310 2,812,962
Return on average equity              22.84%     19.80%     20.58%      22.60%    23.91%
Return on average assets                1.85       1.94       1.95        2.28      2.43
Dividend payout ratio                  11.39      12.74      12.15       12.36     11.38
Per share:*
Net income - Basic                     $1.40      $1.10      $0.99       $0.89     $0.79
Net income - Diluted                    1.38       1.08       0.98        0.88      0.79
Cash dividends                          0.16       0.14       0.12        0.11      0.09
Book value                              6.70       5.82       5.23        4.38      3.60
Market value at
  December 31,                         27.20      20.94      12.38        9.97      6.69
At year end:
Assets                            $1,946,179 $1,496,794 $1,300,122  $1,037,541  $659,671
Deposits                           1,009,211    719,596    640,153     563,999   439,918
Loans held for sale                  936,788    528,739    446,898     378,658   154,964
Loans and leases, net                547,103    602,281    526,175     407,904   304,548
Shareholders' equity                 145,233    127,983    118,903      99,216    81,104
Owned mortgage servicing
  portfolio                       11,242,470 10,713,549 10,810,988  10,301,914 8,818,502
Equity to assets ratio                 7.46%      8.55%      9.15%       9.56%    12.29%
Risk-based capital ratio               12.25      14.85      12.88       14.49     19.18
Leverage ratio (Tier 1)                10.51      12.06       9.84       10.57     10.82
Averages:
Assets                            $1,650,384 $1,262,714 $1,151,535    $882,164  $748,981
Equity                               133,563    123,483    108,970      88,867    76,178
Shares outstanding* - Basic           21,732     22,326     22,716      22,560    23,094
Shares outstanding* - Diluted         22,139     22,722     23,030      22,860    23,278
</TABLE>
------------------------------------------------------------------------------
*Adjusted for stock splits

(In thousands, except for per share amounts)
Summary of Quarterly Financial Information                         1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                      Fourth     Third    Second     First
Summary Income Information                           Quarter   Quarter   Quarter   Quarter
-------------------------------------------------------------------------------

<S>                                                  <C>       <C>       <C>       <C>
Interest income                                      $29,441   $34,558   $31,944   $26,443
Interest expense                                      13,070    18,240    15,425    12,467
Provision for loan and lease losses                    1,350     1,951     1,056     1,638
Noninterest income                                    67,710    64,706    56,077    55,237
Noninterest expense                                   71,167    61,122    58,693    54,455
Income taxes                                           4,162     6,684     4,627     4,881
                                                     -------   -------   -------   -------
Net income                                             7,402    11,267     8,220     8,239
                                                     -------   -------   -------   -------
Distribution on company-obligated mandatorily
  redeemable preferred securities of subsidiary trust  1,102     1,174     1,174     1,175
                                                     -------   -------   -------   -------
Net income available to common shareholders           $6,300   $10,093    $7,046    $7,064
                                                     =======   =======   =======   =======
Earnings per share of common stock: Basic*             $0.29     $0.47     $0.32     $0.32
Diluted*                                               $0.29     $0.46     $0.32     $0.31
</TABLE>
                                                                   1997
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                      Fourth     Third    Second     First
Summary Income Information                           Quarter   Quarter   Quarter   Quarter
--------------------------------------------------------------------------------

<S>                                                  <C>       <C>       <C>       <C>
Interest income                                      $27,597   $26,237   $23,127   $22,480
Interest expense                                      12,989    11,705    10,032     9,856
Provision for loan and lease losses                    1,374     2,042     2,019       803
Noninterest income                                    44,270    46,439    43,299    38,595
Noninterest expense                                   44,758    45,454    43,585    40,776
Income taxes                                           5,404     4,989     3,851     3,490
                                                     -------   -------   -------   -------
Net income                                             7,342     8,486     6,939     6,150
                                                     -------   -------   -------   -------
Distribution on company-obligated mandatorily
  redeemable preferred securities of subsidiary trust  1,174     1,174     1,171       954
                                                     -------   -------   -------   -------
Net income available to common shareholders           $6,168    $7,312    $5,768    $5,196
                                                     =======   =======   =======   =======
Earnings per share of common stock: Basic*             $0.28     $0.33     $0.26     $0.23
Diluted*                                               $0.28     $0.33     $0.26     $0.23

</TABLE>
<TABLE>

                                                                    1996
-------------------------------------------------------------------------------
                                                       Fourth     Third    Second     First
Summary Income Information                            Quarter   Quarter   Quarter   Quarter
--------------------------------------------------------------------------------


<S>                                                  <C>       <C>       <C>       <C>
Interest income                                      $26,764   $23,062   $22,004   $19,815
Interest expense                                      12,230    10,591     9,886     8,918
Provision for loan and lease losses                    1,199     1,126     1,227     1,001
Noninterest income                                    38,970    38,176    38,339    34,496
Noninterest expense                                   41,152    40,346    40,707    35,955
Income taxes                                           4,244     3,672     3,495     3,449
                                                     -------   -------   -------   -------
Net income                                            $6,909    $5,503    $5,028    $4,988
                                                     =======   =======   =======   =======
Earnings per share of common stock: Basic*             $0.31     $0.24     $0.22     $0.22
Diluted*                                               $0.30     $0.24     $0.22     $0.22
</TABLE>
------------------------------------------------------------------------------

*Adjusted for stock splits



Total Net Revenues  ($Millions)
1990            $43.3
1991             60.0
1992             94.9
1993             119.4
1994             116.9
1995             148.2
1996             195.4
1997             221.2
1998             300.9



Net Income ($Millions)
1990            $4.6
1991             6.7
1992             12.9
1993             15.6
1994             18.2
1995             20.1
1996             22.4
1997             24.4
1998             30.5

Return on Average Equity (Percent)
1990            13.5%
1991            16.93
1992            26.51
1993            24.91
1994            23.91
1995            22.60
1996            20.58
1997            19.80
1998            22.84


Management's Discussion

Management's discussion and analysis should be read in
conjunction with the accompanying consolidated financial
statements, footnotes, and tables. Forward-looking
statements contained in the following discussion are based
on estimates and assumptions that are subject to significant
business, economic, and competitive uncertainties, many of
which are beyond the Corporation's control and are subject
to change. These uncertainties can affect actual results and
could cause actual results to differ materially from those
expressed in any forward-looking statements in this
discussion.

Consolidated Overview:

Irwin Financial Corporation earned record net income in
1998. A favorable interest rate environment led to strong
results at the Corporation's mortgage banking line of
business. That, coupled with continued growth at the
community bank, offset a decline in earnings at the home
equity line of business. Additionally, in the third quarter
of 1998, the Corporation sold the majority of the assets of
its equipment leasing line of business, generating a one-
time after-tax gain of $3.1 million.
   Net income for 1998 totaled $30.5 million, up 24.8% from
1997 and 36.0% from 1996. Basic earnings per share were
$1.40 in 1998, up from $1.10 in 1997 and  $0.99 in 1996.
Diluted earnings per share in 1998 were $1.38 compared to
$1.08 in 1997 and $0.98 in 1996. Return on average equity
for 1998 was 22.84% compared to 19.80% in 1997 and 20.58% in
1996. Return on average assets was 1.85%, compared to 1.94%
in 1997 and 1.95% in 1996.
   Excluding the aforementioned gain on the sale of leasing
assets, net income totaled $27.4 million. Basic earnings per
share were $1.26 and diluted earnings per share were $1.24
without the leasing gain. Return on average equity was
20.48%, and return on average assets was 1.66%.

Earnings By Line of Business:

Irwin Financial Corporation is comprised of three principal
lines of business:
- Mortgage banking
- Community banking
- Home equity lending
<TABLE>
<CAPTION>
Earnings:
(In thousands)                                     1998       1997        1996
-------------------------------------------------------------------------------
<S>                                             <C>        <C>         <C>
Mortgage Banking                                $28,853    $21,300     $20,422
Community Banking                                 6,509      5,587       4,254
Home Equity Lending                             (6,668)      1,710       (816)
Equipment Leasing (including gain on sale of
  assets in 1998)                                 2,898        151       (141)
Parent (including consolidating entries)        (1,089)    (4,304)     (1,291)
                                                -------   --------    --------
                                                $30,503    $24,444     $22,428
</TABLE>
-------------------------------------------------------------------------------

Business Profile:

Mortgage Banking
<TABLE>
<CAPTION>
Selected Financial Data
(In thousands)                           1998         1997        1996       1995        1994
--------------------------------------------------------------------------------
  <S>                              <C>          <C>         <C>        <C>        <C>
Selected Income Statement Data:
  Net interest income                 $26,244      $17,577     $17,178    $13,415     $12,942
  Provision for loan losses           (1,721)      (1,383)       (455)      (125)       (240)
  Loan origination fees                59,328       41,045      43,463     31,871      25,308
  Gain on sale of loans                44,124       21,613      25,541     18,020     2,219
  Loan servicing fees                  52,217       50,194      45,573     36,087      32,426
  Gain on sale of servicing            43,308       32,631      16,378     15,271      17,716
  Other income                          6,740        1,223         891        787        647
                                     --------     --------    --------   --------    --------
  Total net revenues                  230,240      162,900     148,569    115,326      91,018
  Operating expense                   182,194      126,610     114,474     83,344      64,571
                                     --------     --------    --------   --------    --------
  Income before taxes                  48,046       36,290      34,095     31,982      26,447
  Income taxes                         19,193       14,990      13,673     12,651      10,719
                                     --------     --------    --------   --------    --------
  Net income                          $28,853      $21,300     $20,422    $19,331     $15,728
                                     ========     ========    ========   ========    ========
Selected Balance Sheet Data
    at End of Period:
  Mortgage loans held for sale       $555,197     $435,123    $372,855   $309,262    $131,543
  Mortgage servicing assets           113,131       81,610      71,715     51,783      18,834
  Total assets                        877,904      698,391     555,486    445,129     216,180
  Short-term debt                     288,514      335,835     265,646    227,021      68,259
  Long-term debt                        2,839           54       4,914      2,300      2,605
  Shareholder's equity                104,696       81,058      66,182     55,811      50,805

Selected Operating Data:
  Mortgage loan originations       $8,944,615   $5,397,338  $5,085,625 $3,559,310 $2,812,962
  Servicing portfolio:
    Balance at December 31,        11,242,470   10,713,549  10,810,988 10,301,914   8,818,502
      Weighted average coupon
        rate                            7.56%        7.85%       7.83%      7.83%       7.59%
    Weighted average servicing
        fee                              0.43         0.40        0.38       0.38        0.38
  Servicing sold as a percent of
    production                           54.6         71.8        60.9       28.4        49.8
</TABLE>
--------------------------------------------------------------------------------

Overview & Strategy:

The mortgage banking line of business consists of Irwin
Mortgage Corporation and the related activities of Irwin
Union Bank and Trust. The business is headquartered in
Indianapolis and originates, sells, and services residential
mortgage loans throughout the U.S. It has offices in 28
states and ranks among the top 35 mortgage loan originators
in the country. The majority of the loans originated and
serviced are either government-insured through the Veterans'
Administration (VA) or Federal Housing Administration (FHA)
or 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 direct
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. Financing 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
cash flow and servicing portfolio management.

1998 Review:

Net income from mortgage banking was $28.9 million in 1998,
an increase of 35.5% over 1997 results of $21.3 million and
41.3% over 1996 results of $20.4 million. Return on average
equity was 31.8% in 1998 compared to 29.6% in 1997 and 33.4%
in 1996.

Mortgage Loan Originations:
(In thousands)                       1998          1997           1996
-------------------------------------------------------------------------
Total originations             $8,944,615    $5,397,338     $5,085,625
Percent retail loans                35.9%         36.6%          41.8%
Percent wholesale loans              59.7          57.2           52.4
Percent brokered                      4.4           6.2            5.8
Percent refinances                   49.5          22.5           19.0
-------------------------------------------------------------------------

   As a result of a low interest rate environment, the
mortgage banking line of business had record loan
originations in 1998. Loan originations of $8.9 billion were
up 65.7% from 1997 and 75.9% from 1996. Income from mortgage
loan originations totaled $59.3 million which was 44.5%
higher than 1997 and 36.5% over 1996. Refinances accounted
for 49.5% of 1998 loan closings, and because certain fees
are not collected for loan refinancings, loan origination
fees did not increase at the same rate as loan production in
1998.
   Gains from the sale of mortgage loans totaled $44.1
million in 1998, compared to $21.6 million in 1997 and $25.5
million in 1996. Higher loan production levels combined with
more favorable market pricing accounted for the 1998
increase.
   In early 1997, the mortgage bank entered into the
nonprime mortgage market which is comprised of borrowers who
do not qualify under the underwriting guidelines established
by the government-sponsored secondary market agencies for
conforming first mortgages. Total mortgage banking
originations include $173.5 million and $66.1 million of
nonprime loans in 1998 and 1997, respectively. These loans
are sold on a non-recourse, service-released basis to
private investors.

Mortgage Servicing:

Servicing Portfolio:
(Portfolio balances in billions)           1998         1997           1996
------------------------------------------------------------------------------
Beginning portfolio                       $10.7        $10.8          $10.3
Add:
  Loans originated                          3.2          2.0            2.1
  Loans purchased                           5.7          3.4            3.0
Deduct:
  Sale of servicing rights                (4.9)        (3.9)          (3.1)
  Run-off*                                (3.5)        (1.6)          (1.5)
                                       --------     --------       --------
Ending portfolio                          $11.2        $10.7          $10.8
                                       ========     ========       ========
Number of loans                         135,833      141,737        140,354
Average loan size                       $82,767      $82,902        $83,540
Percent GNMA                                65%          59%            51%
Percent FHLMC                                 5           11             15
Percent FNMA                                 13           19             16
Delinquency ratio:                         5.0%         6.0%           5.1%
Capitalized servicing as a percentage of
  servicing portfolio                      1.0%         0.8%           0.7%
-------------------------------------------------------------------------------
*Run-off is the reduction in principal balance of the
servicing portfolio due to regular principal payments made
by mortgagees and early repayment of an entire loan.

   The mortgage servicing portfolio was $11.2 billion at
December 31, 1998, up 4.9% from the same date in 1997 and
4.0% from 1996. The 1998 annual portfolio run-off rate was
27.6% compared with the 1997 rate of 12.3% and the 1996
rate of 10.7%. The following table sets forth certain
information regarding the interest rates of loans in the
servicing portfolio at December 31:
------------------------------------------------------------------


Servicing Portfolio by Interest Rate:

                             1998             1997        1996
Less than 7%                15.1%             8.4%        8.9%
7.00 - 7.99%                 52.7             42.5        44.3
8.00 - 8.99%                 27.6             42.6        38.7
9% or greater                 4.6              6.5         8.1
                           ------            -----       -----
  Total                      100%             100%        100%
------------------------------------------------------------------

    Mortgage servicing assets carried on the balance sheet
totaled $113.1 million at December 31, 1998, up from $81.6
million at the end of 1997 and $71.7 million at the end of
1996.
    The value of mortgage servicing assets must be adjusted
for impairment which could result from interest rate
changes. Although impairment write-offs caused by declining
interest rates would likely be accompanied by increased loan
origination fees, management has implemented hedging
alternatives from time to time to offset potential
impairment provisions. The company addresses its impairment
risk by the selective selling of servicing rights it
believes to be most at risk to refinancing. In 1998, it sold
$4.9 billion of servicing for this reason. In addition,
during 1998, the business purchased options on treasury
futures to offset the interest rate risk associated with
mortgage servicing assets. Gross impairment charges of $11.1
were recorded in 1998, up from $0.6 million in 1997 and
1996. Impairment charges in 1998 were partially offset by
income from the options on treasury futures which totaled
$4.3 million for the year. See page 67 for further
discussion of derivative instruments.

Servicing and Other Fees:

(In thousands)            1998          1997       1996
-----------------------------------------------------------
Servicing fees         $52,217       $50,194     $45,573
Other fees               2,422         1,223         891
                      --------       -------     -------
  Total                $54,639       $51,417     $46,464

-----------------------------------------------------------

   Servicing fee income is recognized by collecting fees
which normally range between 25 and 44 basis points annually
on the principal amount of the underlying mortgages. An
increase in the average portfolio combined with a change in
the portfolio mix to a higher percentage of government loans
positively affected servicing income which increased 4.0%
from 1997 and 14.6% from 1996.

Sale of Mortgage Servicing:

The mortgage banking business maintains the flexibility to
either sell servicing    assets for current cash flow or
retain servicing for future cash flow. The decision to sell
or retain servicing is based on current market conditions
balanced with the interest rate risk tolerance of the
business.
   Servicing for loans with principal balances totaling $4.9
billion was sold in 1998, generating a $43.3 million pre-tax
gain. This compares to servicing sales of $3.9 billion in
1997 that produced a $32.6 million pre-tax gain and $3.1
billion in 1996 that produced a $16.4 million pre-tax gain.
Had all servicing been retained, gains on sales of loans
would have been higher than what was recorded, but gains
from sales of servicing would have been reduced. Servicing
sales in 1998 represented 54.6% of 1998 originations versus
1997 sales which were 71.8% of that year's originations and
1996 sales which were 60.9% of originations.

Net Interest Income:

Net interest income is generated from the interest earned on
mortgage loans before they are sold to investors, less the
interest expense incurred on borrowings to fund the loans.
Net interest income totaled $26.2 million in 1998 compared
to $17.6 million in 1997 and $17.2 million in 1996. The 1998
increase resulted from the increased loan production during
the year.

Operating Expenses:
(In thousands, except for number of employees)     1998       1997       1996
--------------------------------------------------------------------------------
Salaries and employee benefits                 $101,477    $71,389     $66,153
Amortization of servicing assets                 23,002     15,243      14,245
Other expenses                                   57,715     39,978      34,076
                                              ---------   --------    --------
Total operating expenses                       $182,194   $126,610    $114,474
                                               ========   ========    ========
Number of employees at December 31,               1,752      1,411       1,474
--------------------------------------------------------------------------------

     Amorization of servicing assets increased 50.9% from
1997 and 61.5% from 1996. The increase corresponds with the
increase in servicing assets. Salaries and employee benefits
were up 42.1% from 1997 and 53.4% from 1996. Other operating
expenses were up 44.4% from 1997 and 69.4% from 1996. These
increases reflect the increased production activities
throughout 1998 and investments in technology.


Credit Quality:
(In thousands)                                     1998       1997        1996
--------------------------------------------------------------------------------
At December 31,
  Nonperforming loans                            $9,449     $3,784      $2,221
  Other real estate owned                         3,338      1,415       1,839
                                               --------    -------     -------
  Total nonperforming assets                    $12,787     $5,199      $4,060
                                               ========   ========     =======
  Allowance for loan losses                      $2,568     $1,606        $633
                                               ========   ========     =======
  Allowance for loan losses as a
    percentage of loans                            8.9%       6.0%        2.7%
For the year ended December 31,
  Provision for loan losses                      $1,721     $1,383        $455
--------------------------------------------------------------------------------

     Although most mortgages are either government-insured or
conform to the underwriting guidelines of the government-
sponsored agencies that support the secondary mortgage
market, the mortgage bank has credit risk on those loans that
do not qualify for government insurance or that must be
repurchased from agencies due to lack of conformity to
underwriting guidelines. In recent years, the government-
sponsored agencies which provide credit enhancement on the
loans underwritten by the mortgage bank have become more
stringent in their adherence to their right to seek recourse
from the originator of loans. In addition, during periods of
high origination volume, due to delays in gathering
documentation required for submission to the insuring
agencies, the mortgage bank experiences an increase in the
number of new loans which do not qualify for insurance prior
to the borrower's first 30-day delinquency. As such, the
mortgage bank has had an increase in the number of loans it
has repurchased from or been unable to submit to the agencies
and other investors. This increase has resulted in an
increase in the nonperforming loans and other real estate
owned at the mortgage bank. The mortgage bank seeks to cure
the underwriting defect in these loans and resell them to the
agencies or sell them to alternative investors.
     As a result of the increase in nonperforming loans in
1998, the allowance for loan losses and the provision for
loan losses have increased from previous years. In providing
for the loan loss allowance, management reviews each loan
individually to assess probable credit losses based on
information about the borrower and the underlying collateral.

1999 Outlook:

The mortgage bank expects the interest rate environment to
remain favorable for mortgage loan production in 1999.
However, it is anticipated that refinance activities will
decline slightly from levels experienced in 1998. Should
production levels decline in 1999, cost cutting strategies
will be implemented to keep expenses in line with revenues.
Additionally, the business will complete the rollout of
technology initiatives which are expected to enhance
efficiencies in the area of loan production.
     The business will continue to emphasize the growth of
its other lending activities in 1999, such as nonprime,
manufactured housing, and Internet originations. These
activities are expected to be an integral part of the overall
growth of the business in the coming year.

Employees:

As of December 31, 1998, the mortgage banking line of
business employed 1,752 people -- approximately 73% of the
Corporation's total employee base. Total employment expense
in 1998 was $101.5 million or 55.7% of operating expenses.


Irwin Mortgage Corporation Directors and Senior Officers

Directors:
          Rick L. McGuire     -  President--Irwin Mortgage Corporation
          William I. Miller      Chairman--Irwin Financial Corporation
          John A. Nash           President--Irwin Financial Corporation
          Thomas D. Washburn     Senior Vice President
                                 Irwin Financial Corporation
Senior   
Officers:
          T. Lester Acree        Senior Vice President
                                 Wholesale Loan Purchasing
          Kenneth R. Block       Senior Vice President
                                 Loan Production
          Katrina J. Crubaugh    Senior Vice President--Human Resources
          Robert H. Griffith,Jr. Senior Vice President and Legal Counsel
          Mark J. Lynch          Senior Vice President--Consumer Lending
          William M. Meyer       Senior Vice President--Loan Servicing
          Timothy L. Murphy      Senior Vice President--Finance
          Erik J. Sorensen       Senior Vice President--Secondary Marketing
          Scott G. Beer          First Vice President--Secondary Marketing
          Mark E. Braden         First Vice President--Information Technology
          Richard C. Cargill     First Vice President--Western Region
          Randall G. Chumley     First Vice President--Atlanta Branch
          Renee M. Gunderson     First Vice President--Underwriting/Closing 
                                 Post Closing
          Darla S. Habig         First Vice President--Loan Control
          Richard E. Hawkins     First Vice President--Investor Reporting
          Allan D. Karlander     First Vice President--Central Region
          Scott A. Korbin        First Vice President--South Atlantic Region
          Kimberly M. Krick      First Vice President--Orlando Branch
          John F. Macke          First Vice President--Management Information
          Rachelle E. Mikosz     First Vice President--Office Services
          Kevin M. Murphy        First Vice President--Accounting
          Diana M. Rossetter     First Vice President--Quality Control
          Sherri K. Sanford      First Vice President--Customer Service
          Debra J. Saviola       First Vice President--Wholesale Loan Purchasing
          Lyle E. Shearer        First Vice President--All Pacific Region
          Richard E. Skiles      First Vice President--Appraisals
          Nicholas Vracas        First Vice President--Mid-states Region
          Carla L. Wise          First Vice President--Default Administration


Business Profile:

Community Banking

<TABLE>
<CAPTION>
Selected Financial Data
(In thousands)                               1998        1997      1996       1995       1994
-------------------------------------------------------------------------------
Selected Income Statement Data:

  <S>                                    <C>         <C>       <C>        <C>        <C>
  Interest income                         $46,056     $41,115   $35,645    $31,965    $23,808
  Interest expense                         20,957      19,120    15,908     14,048      8,822
  Provision for loan and lease losses       1,820       2,201     2,284      2,038      1,344
                                         --------    --------  --------    -------   --------
  Net interest income after provision
    for loan and lease losses              23,279      19,794    17,453     15,879     13,642
  Noninterest income                       12,218       9,434     9,384      7,187      5,719
                                         --------    --------  --------    -------   --------
  Total net revenues                       35,497      29,228    26,837     23,066     19,361
  Operating expenses                       25,021      20,372    20,311     17,582     14,858
                                         --------    --------  --------    -------   --------
  Income before taxes                      10,476       8,856     6,526      5,484      4,503
  Income taxes                              3,967       3,269     2,272      1,845      1,453
                                         --------    --------  --------    -------   --------
  Net income                               $6,509      $5,587    $4,254     $3,639     $3,o50
                                         ========    ========  ========    =======   ========
Selected Balance Sheet Data at
  End of Period:

  Loans                                  $514,950    $410,272  $336,580   $310,083   $255,644
  Allowance for loan losses                 6,680       5,525     4,790      3,668      3,418
  Total assets                            607,992     539,233   503,507    440,035    370,462
  Deposits                                567,526     486,481   453,897    400,149    341,459
  Shareholders' equity                     46,990      38,390    33,967     28,722     24,686

Daily Averages:
  Assets                                 $567,116    $515,666  $459,893   $405,249   $344,691
  Deposits                                514,694     463,851   413,935    358,343    315,229
  Loans                                   462,319     370,313   329,658    284,713    231,592
  Allowance for loan losses                 6,308       5,332     4,367      3,566      3,048
  Shareholder's equity                     42,026      36,232    31,863     27,661     23,580
  Shareholder's equity to assets            7.41%       7.03%     6.93%      6.83%      6.84%
</TABLE>
-------------------------------------------------------------------------------

Overview & Strategy:

Community banking is conducted by Irwin Union Bank and Trust
Company which is headquartered in Columbus, Indiana. At
year-end 1998, it had 19 offices in 8 counties in Indiana.
It holds a major share of the market in Bartholomew County
where it has operated since 1871. Expansion into new markets
has occurred in recent years and has been on a de novo
basis. The community bank's strategy in these and other
possible new markets is to position itself with local
management and staff that can provide highly personalized,
flexible service. The objective is to deliver services in
the way customers would expect from a bank headquartered in
that market. This means that every effort is made to staff
the offices with local people and to give those people the
authority to make key customer decisions. Credit,
investment, trust, and insurance services are provided to
individual and corporate customers.

1998 Review:

Community banking net income in 1998 totaled $6.5 million,
up 16.5% from 1997 net income of $5.6 million and 53.0% from
1996 net income of $4.3 million. The return on average
equity was 15.49% in 1998 as compared to 15.42% in 1997 and
13.35% in 1996. Results in 1998 reflect the continued growth
and expansion efforts of the community bank into new
markets.

Net interest revenue:
(In thousands)                                1998        1997        1996
-----------------------------------------------------------------------------
Net interest revenue on a taxable
  equivalent basis*                        $25,367     $22,206     $20,095
Average interest earning assets            534,439     481,707     429,520
Net interest margin                          4.75%       4.61%       4.67%
-----------------------------------------------------------------------------
*Reflects what net interest revenue would be if all interest
income were subject to federal and state income taxes.

   Net interest revenue on a taxable equivalent basis
increased 14.2% from 1997 and 26.2% from 1996 to a total of
$25.4 million. Net interest revenue is the product of net
interest margin and average earning assets.
   Net interest margin was up for the year, coming in at
4.75% for 1998 compared to 4.61% in 1997 and 4.67% in 1996.
This improvement resulted from a change in mix of the
community bank's assets in 1998 to a lower percentage of
investments and federal funds sold and a higher percentage
of loans.

<TABLE>
<CAPTION>
Noninterest Income:
(In thousands)                                      1998          1997           1996
-------------------------------------------------------------------------------
<S>                                              <C>            <C>            <C>
Trust fees                                        $2,136        $2,178         $2,571
Service charges on deposit accounts                2,076         1,831          1,820
Insurance commissions, fees, and premiums          1,265         1,044          1,105
Gain from sale of loans                            1,346         1,088            909
Loan servicing fees                                1,745           972            690
Brokerage fees                                     1,050           757            736
Loan origination fees                                686           416            316
Other                                              1,914         1,148          1,237
                                                --------      --------       --------
Total noninterest income                         $12,218        $9,434         $9,384
</TABLE>
-------------------------------------------------------------------------------

   As a result of the community bank's expansion efforts,
noninterest income was up 29.5% from 1997 and 30.2% from
1996. During 1998, the community bank recorded $1.3 million
of gains on the sale of consumer, commercial, and mortgage
loans. This compares to $1.1 million in 1997 and $0.9
million recorded in 1996. The community bank retained the
right to service the sold loans, which contributed to
increased loan servicing fees in 1998. Other noninterest
income includes $222.4 thousand of securities gains which
were up from $56.1 thousand in 1997 and $9.0 thousand in
1996.

<TABLE>
<CAPTION>
Operating Expenses:
(In thousands, except for number of employees)      1998          1997          1996
-------------------------------------------------------------------------------

<S>                                              <C>           <C>            <C>
Salaries and employee benefits                   $14,142       $11,333        $10,916
Other expenses                                    10,879         9,039          9,395
                                                --------      --------       --------
Total operating expenses                         $25,021       $20,372        $20,311
                                                ========      ========       ========
Number of employees at December 31,                  353           339            304
</TABLE>
-------------------------------------------------------------------------------

   Operating expenses increased 22.8% from 1997 and 23.2%
from 1996. Costs associated with expanding new products and
markets contributed to the increase.

Balance Sheet:

   Total assets averaged $567.1 million in 1998 compared to
$515.7 million in 1997 and $459.9 million in 1996. Average earning
assets for the year were $534.4 million, up $52.7 million or 10.9%
from 1997 and up $104.9 million or 24.4% from 1996. The most
significant component of the 1998 increase was loans and
leases which were up $92.0 million on average in 1998 as a
result of the community bank's expansion efforts into new
markets. Average deposits were $514.7 million in 1998, 11.0%
higher than 1997 and 24.3% higher than 1996.
   The community bank's equity to assets ratio averaged
7.41% for the year, compared to 7.03% in 1997 and 6.93% in
1996.
<TABLE>
<CAPTION>
Credit Quality:
(In thousands)                                      1998          1997          1996
------------------------------------------------------------------------------

At December 31,
  <S>                                             <C>           <C>            <C>
  Nonperforming loans                             $1,858        $2,856         $3,434
  Other real estate owned                             48           413            400
                                                 -------       -------        -------
  Total nonperforming assets                      $1,906        $3,269         $3,834
                                                 =======       =======        =======
  Nonperforming assets as a percentage of
    total assets                                   0.31%         0.60%          0.76%
                                                 =======       =======        =======
  Allowance for loan losses                       $6,680        $5,525         $4,790
                                                 =======       =======        =======
  Allowance for loan losses as a percentage
    of loans                                       1.30%         1.35%          1.42%
                                                 =======       =======        =======
For the Year Ended December 31,
  Provision for loan losses                       $1,820        $2,201         $2,284
                                                 =======       =======        =======
  Net charge-offs                                   $592        $1,277         $1,107
</TABLE>
------------------------------------------------------------------------------

1999 Outlook:

During 1999, the community bank plans to continue its
expansion efforts into new markets, including markets
outside of Indiana. This expansion will be the first time
the community bank has operated beyond its home state. The
bank has developed a growth strategy for its small business
lending unit which includes the opening of offices in
Michigan and Missouri as well as other states yet to be
determined. The focus will be to provide personalized
banking services to small businesses in cities with good
growth potential and those affected by consolidation in the
banking industry.
   The community bank will continue to develop its
infrastructure to support growth and expansion plans.
Included is the implementation of new sales systems as well
as the centralization of certain processes.

Employees:

As of December 31, 1998, the community bank employed 353
people. Total employment expense in 1998 was $14.1 million
or 56.5% of total operating expenses.

Irwin Union Bank and Trust Company
Directors

     Robert H. Claxton                     Senior Vice President-Finance,
                                           Knauf Fiber Glass

     Claude E. Davis                       President,
                                           Irwin Union Bank and Trust Company

     John T. Hackett                       Managing General Partner,
                                           CID Equity Partners, L.P.

     Robert W. Haddad                      Chairman and President,
                                           Columbus Container, Inc.

     Carolyn A. Lickerman                  Homemaker

     William I. Miller                     Chairman,
                                           Irwin Financial Corporation

     John A. Nash                          President,
                                           Irwin Financial Corporation

     Charles A. Rau, M.D.                  Physician

     Albert H. Shumaker II                 President,
                                           Coca-Cola Bottling Company of
                                           Columbus

     John S. Spangler                      Chairman,
                                           Milestone Contractors, L.P.

     Christine M. Vujovich                 Vice President,
                                           Cummins Engine Company, Inc.

Irwin Union Bank and Trust Company
Senior Officers

Claude E. Davis            President
Bradley J. Kime            Executive Vice President
Kevin P. Barr              Senior Vice President and Chief Financial Officer
Richard S. Barbercheck     President--Decatur County
William S. Beitler         President--Shelby County
Debora L. Cox              Vice President--Operations
Bradley R. Davis           Vice President and Controller
Brian D. Hall              President--Monroe County
Carrie K. Houston          Senior Vice President--Human Resources
J. Kevin Johnson           President--Jackson County
Timothy J. Kilmartin       President--Kalamazoo
Mark C. Kugar              President--Hendricks County
Gary S. Martin             President--St. Louis
Timothy S. Massey          Senior Vice President--Indianapolis
Robert L. Phillips         President--Johnson County
William R. Redman          President--Hamilton County
Timothy P. Robinson        Vice President--Trust
Albert C. Roszczyk         Senior Vice President--Bartholomew County
William R. Shomaker        President--Irwin Union Insurance
Donald J. Stuart           President--Irwin Union Advisory Services
Mark R. Willis             President--Irwin Union Securities


Business Profile:

Home Equity Lending

<TABLE>
<CAPTION>
Selected Financial Data
(In thousands)                                   1998        1997        1996        1995
--------------------------------------------------------------------------------

<S>                                          <C>           <C>         <C>       <C>
Net interest income                            $4,780      $7,129      $7,755      $1,828
Provision for loan losses                       (513)     (1,404)       (983)       (363)
Gain on sale of loans                          18,604      15,908       7,798       2,985
Loan servicing fees                             3,323       2,145         710          13
Trading losses                                (2,952)     (1,961)           -           -
Other income                                    1,431         294         140          10
                                             --------    --------    --------    --------
  Total net revenues                           24,673      22,111      15,420       4,473
Operating expenses                             31,341      20,401      16,236       7,693
                                             --------    --------    --------    --------
Pre-tax income (loss)                        $(6,668)      $1,710      $(816)    $(3,220)
                                             ========    ========    ========    ========
Selected Balance Sheet Data at End of Period:
  Home equity loans net of loan
    loss allowance                             $7,832    $111,216    $117,588     $36,225
  Home equity loans held for sale             239,613           -           -           -
  Interest-only strips                         26,761      22,134      12,661       4,446
  Total assets                                311,974     165,242     145,113      50,845
  Short-term debt                             226,998     146,219     129,627      24,981
  Shareholders' equity                         40,272      10,936      13,221       5,538
Selected Operating Data:
Loan Volume:
  Lines of credit                             $98,855    $115,274     $80,724     $87,420
  Loans                                       290,818      99,244      88,396           -
Servicing portfolio:
  Balance at December 31,                     581,241     358,166     230,450      86,691
  Weighted average coupon rate:
    Lines of credit                            11.89%      12.96%      12.80%      13.61%
    Loans                                       11.86       13.97       14.08           -
</TABLE>
--------------------------------------------------------------------------------

Overview & Strategy:

The home equity line of business includes Irwin Home Equity
Corporation and the related activities of Irwin Union Bank
and Trust. Irwin Home Equity is located in San Ramon,
California, and was incorporated in late 1994. The company
began marketing home equity loans in early 1995 through
direct mail and telemarketing and currently markets in 29
states.
    The business has the option to either hold the loans in
portfolio or securitize and service them. If the loans are
held in portfolio, many costs incurred during the period to
produce the loans are expensed immediately, whereas the
revenue from the loans accrues over the lives of the loans.
Alternatively, if the loans are securitized and sold on the
secondary market to investors, a portion of the present
value of the future net revenues from the loans will be
recognized in the current period, helping to offset the
expenses incurred in producing the loans.

1998 Review:

The home equity lending business recorded a pre-tax loss of
$6.7 million in 1998 compared with pre-tax income of $1.7
million in 1997 and a pre-tax loss
of $0.8 million in 1996. Low interest rates throughout 1998
and competitive pressures caused increased loan prepayment
speeds. Additionally, unfavorable market conditions late in
1998 caused the business to delay the securitization of
loans produced in the last half of the year.
Loan Originations and Securitizations:
During 1998, the home equity lending business originated
$389.7 million of home equity loans, up 81.7% from 1997
volume of $214.5 million and 130.4% from 1996 volume of
$169.1 million.
    The business securitized $294.3 million of loans, or
75.5% of originations in 1998 which generated a pre-tax gain
of $18.6 million. These results compare with a $15.9 million
gain recognized in 1997 on the sale of $210.1 million of
loans, or 97.9% of originations, and a  $7.8 million gain
recognized in 1996 on the sale of $79.9 million of loans, or
47.3% of originations.

Servicing Portfolio:
(In thousands)                 1998         1997       1996
-----------------------------------------------------------------
Balance at December 31,    $581,241     $358,166   $230,450
Delinquency ratio              1.3%         1.5%       0.7%
-----------------------------------------------------------------
   The home equity lending business continues to service
loans it has securitized. The servicing portfolio, which
includes loans held on the balance sheet as well as
securitized loans, increased 62.3% from 1997 and 152.2% from
1996. The business earns a servicing fee equal to 1% of the
outstanding principal balance of the securitized loans.
Servicing fee income increased to $3.3 million in 1998 from
$2.1 million in 1997 and $0.7 million in 1996.
   The home equity lending business recognizes on its
balance sheet a servicing asset equal to the discounted cash
flows of future servicing income.
At December 31, 1998, net servicing assets totaled $3.1
million compared with $1.3 million at the end of 1997 and
$0.7 million at the end of 1996. Servicing asset
amortization and impairment expense totaled $0.8 million in
1998 and $0.3 million in 1997, the increase resulting from
the increase in the asset.
   When the home equity lending business securitizes loans,
the business recognizes an interest-only strip equal to the
discounted available future cash flows of the interest paid
by borrowers less servicing fees, expected losses, and
interest remitted to investors. The interest-only strip had
a balance of $26.8 million at December 31, 1998, compared
with $22.1 million at the same date in 1997 and $12.7
million in 1996. Interest-only strips are recorded on the
balance sheet as trading assets and are carried at their
market values. Market values are determined using
assumptions about the duration and performance of the
securitized loans. Included in these assumptions are
estimates of the lives of the loans, expected losses, and
appropriate discount rates. Management continually evaluates
these assumptions to determine the proper carrying values of
these items on the balance sheet. Adjustments to carrying
values are recorded as trading gains or losses. During 1998,
the home equity lending business recorded a trading loss of
$2.8 million compared with a trading loss  of $2.0 million
recorded in 1997. No adjustments were recorded in 1996.
   At the end of 1998, the home equity lending business
owned rights to excess interest in five securitizations. The
prepayment speeds, annual credit losses and discount rates
used in the calculation of carrying value for these interest-
only strips were as follows:

<TABLE>
<CAPTION>
                                         Constant        Annual
                                       Prepayment        Credit         Discount
Pool (Product Type)                    Rate (CPR)          Loss             Rate
-------------------------------------------------------------------------------
<C>    <C>                                    <C>         <C>                <C>
1995-2 (Line of credit)                       39%         1.00%              15%
1996-1 (Line of credit)                        43          0.64               15
1996-1 (Fixed rate second mortgages)           51          0.64               15
1997-1 (Line of credit)                        47          0.50               15
1997-1 (Fixed rate second mortgages)           46          0.50               15
1997-2 (Line of credit)                        44          0.50               15
1997-2 (Fixed rate second mortgages)           41          0.50               15
1998-1 (Line of credit)                        25          2.00               15
1998-1 (Fixed rate second mortgages)           27          0.50               15
1998-1 (Fixed rate first mortgages)            10          0.50               15
</TABLE>
--------------------------------------------------------------------------------

   A summary of assumptions in place at the end of 1998 and
the two previous years follows:

December 31,                       1998               1997          1996
----------------------------------------------------------------------------
CPR                             10%-51%            30%-40%           26%
Annual credit losses        0.50%-2.00%        0.50%-0.64%         .050%
Discount rate                       15%                15%           15%

Net Interest Income:

Net interest income before loan loss provision was $4.8
million in 1998, compared to $7.1 million in 1997 and $7.8
million in 1996. Included in interest income is income
earned on the interest-only strip, net of amortization
expense, which amounted to $0.4 million in 1998 compared to
$1.8 million in 1997 and $2.2 million in 1996. The decline
resulted from increases in prepayment speed assumptions
which caused the interest-only strip to amortize more
quickly.

<TABLE>
<CAPTION>
Operating Expenses:
(In thousands, except for number of employees)     1998          1997       1996
-------------------------------------------------------------------------------
<S>                                             <C>           <C>        <C>
Salaries and employee benefits                  $15,480       $11,175     $8,663
Marketing and development                         5,314         2,731      2,462
Other                                            10,547         6,495      5,111
                                               --------       -------    -------
Total operating expenses                        $31,341       $20,401    $16,236
                                               ========       =======    =======
Number of employees at December 31,                 266           189        159
</TABLE>
--------------------------------------------------------------------------------

Operating expenses increased 53.6% from 1997 and 93.0% from
1996. The increase results from growth of this business as
evidenced by the increase in loan production in 1998.

Balance Sheet:

The home equity lending business had $247.5 million of loans
and loans held for sale at December 31, 1998, compared to
$111.8 million at the end of 1997 and $118.2 million at the
end of 1996. During 1998, the business changed the
classification of the majority of loans on its balance sheet
to "held for sale" to reflect better management's intent to
securitize the loans. Loans held for sale are carried at the
lower of cost or market value, with market value reflecting
any expected loan losses. Loans that will not be securitized
are still classified as portfolio loans. The loan loss
allowance for portfolio loans totaled $39.4 thousand
December 31, 1998, compared to $563.5 thousand at the end of
1997 and $589.4 thousand at the end of 1996. The decrease
reflects the reduction of loans classified as portfolio
loans.
<TABLE>
<CAPTION>
Credit Quality:
(In thousands)                                     1998         1997        1996
--------------------------------------------------------------------------------
At December 31,
<S>                                                <C>          <C>         <C>
  Nonperforming assets                             $240         $535        $260
                                                =======      =======     =======
  Nonperforming assets as a percentage of
    total assets                                  0.08%        0.32%       0.18%
                                                =======      =======     =======
  Allowance for loan losses                         $39         $564        $589
                                                =======      =======     =======
  Allowance for loan losses as a percentage
    of loans                                      0.50%        0.50%       0.50%
                                                =======      =======     =======
For the year ended December 31,
  Provision for loan losses                        $513       $1,404        $983
                                                =======      =======     =======
  Net charge-offs                                    $-         $335         $37
</TABLE>
--------------------------------------------------------------------------------

1999 Outlook:

The change in the competitive environment for home equity
lending that took place in the second half of 1998 altered
the competitive landscape. There are fewer independent home
equity lenders, and some that remain are weaker. In
addition, management believes it is unlikely that there will
be as many new entrants as there were in the previous two
years. These factors should tend to reduce competitive
pressure on this line of business. Offsetting these trends
is consolidation which is producing larger competitors with
access to significant resources. Management believes that
its experience base and strategy will allow it to compete
effectively. In addition, consumer demand for home equity
loans is expected to remain high. A more stable interest
rate environment, combined with new product features that
include prepayment penalties, points, and fees, should
reduce the speed at which its loans and interest in sold
loans prepay. At year-end 1998, 40% of the company's
servicing portfolio had prepayment fees, compared with 2%
and 0% at the end of 1997 and 1996, respectively.
   The strategy for 1999 includes an increase in fee income,
including loan origination and prepayment fees. The business
will continue to explore new product market and distribution
channel opportunities in order to increase loan volume in
1999. In addition, there will be a significant effort to
improve operating efficiency and limit the growth of
expenses.

Employees:

As of December 31, 1998, the home equity business employed
266 people. Total employment expense in 1998 was $15.5
million or 49.4% of total operating expenses.

Irwin Home Equity Corporation
Directors and Senior Officers

Directors       Elena Delgado              President,
                                           Irwin Home Equity Corporation
                William I. Miller          Chairman,
                                           Irwin Financial Corporation
                John A. Nash               President,
                                           Irwin Financial Corporation
                Thomas D. Washburn         Senior Vice President,
                                           Irwin Financial Corporation
-------------------------------------------------------------------------
Senior Officers

                Elena Delgado              President
                Spencer J. Carlsen         Vice President--Production
                Edwin K. Corbin            Vice President--Finance
                J. Christopher Huseby      Vice President--Marketing
                                           and Business Development
                Sunita Liggin              Vice President--Human Resources
                Jocelyn Martin-Leano       Vice President--Operations Support
                Jack Nichols               Vice President--Information Services
                Fern P. Prosnitz           Vice President--Legal Counsel

Other Irwin Financial Businesses

In the third quarter of 1998, the Corporation sold the
majority of the assets of its equipment leasing line of
business. This line of business consisted of small-ticket
medical equipment leases. The decision to sell the assets
was based on the conclusion that the medical equipment
leasing operation would benefit strategically from being a
part of a company with broader health care leasing
activities. The sale excluded certain leases that the
Corporation intends to sell at a future date. These leases
totaled $4.4 million at December 31, 1998, net of a $600.0
thousand lease loss allowance.

A summary of results for this line of business follows:
<TABLE>
<CAPTION>
(In thousands)                                      1998        1997        1996
--------------------------------------------------------------------------------
<S>                                              <C>         <C>          <C>
Net interest revenue                              $4,534      $4,809      $4,413
Provision for lease losses                       (1,941)     (1,250)       (791)
Other income                                         602         713         418
                                                 -------     -------     -------
Total net revenues                                 3,195       4,272       4,040
Other expenses                                     3,686       4,121       4,181
                                                 -------     -------     -------
Income (loss) before gain on sale of assets        (491)         151       (141)
Gain on sale of assets                             5,241           -           -
                                                 -------     -------     -------
Income before income taxes                         4,750         151       (141)
Income taxes                                       1,852           -           -
                                                 -------     -------     -------
Net income                                        $2,898        $151      $(141)
</TABLE>
--------------------------------------------------------------------------------
   The Corporation continues to investigate new opportunites
in the equipment leasing industry and other niches in the
financial services industry.
   The results of parent company and other subsidiary
operations are summarized below:

<TABLE>
<CAPTION>
(In thousands)                                      1998        1997        1996
--------------------------------------------------------------------------------
<S>                                             <C>         <C>         <C>
Net revenues                                     $24,806     $20,329     $15,494
Operating expenses                               (6,702)     (6,030)     (5,636)
Tax credit                                         4,657         632         903
                                               ---------   ---------   ---------
                                                  22,761      14,931      10,761
Eliminations                                    (19,225)    (14,762)    (12,052)
                                               ---------   ---------   ---------
Income before preferred securities distribution    3,536         169     (1,291)
Preferred securities distribution                (4,625)     (4,473)           -
                                               ---------   ---------   ---------
Net income                                      $(1,089)    $(4,304)    $(1,291)
</TABLE>
--------------------------------------------------------------------------------

   Dividends from subsidiaries are recorded as parent
company revenues but are eliminated in determining
consolidated net income. Tax benefits resulting from the
operating losses generated by the home equity line of
business are recorded by the parent company. The parent
company will continue to do so until all of the losses
carried forward have been used.
   Each subsidiary pays taxes to the parent company at the
statutory rate. Subsidiaries also pay fees to the parent
company to cover direct and indirect services. In addition,
services are provided from one subsidiary to another. Inter-
company income and expenses are calculated on an arm's-
length, external market basis and are eliminated in
consolidation.
   In January 1997, the Corporation issued $50.0 million of
trust preferred securities through a trust created and
controlled by the Corporation. Distributions to security
holders totaled $4.6 million in 1998. See the section on
capital for further discussion of the trust preferred
securities.

Consolidated Income Statement Analysis:

Pre-tax income for 1998 totaled $50.9 million, up 20.6% from
1997 and 36.4% from 1996. The effective income tax rate was
40.0% in 1998, 42.0% in 1997, and 39.8% in 1996. Please see
Note 18 of Notes to the Consolidated Financial Statements
for more information on income taxes.
   The Corporation's return on average equity for 1998 was
22.84% compared to 19.80% in 1997 and 20.58% in 1996. The
return on average assets was 1.85% in 1998 compared to 1.94%
in 1997 and 1.95% in 1996.
   The Corporation has experienced a decline in its return
on average assets in recent years. An important factor in
the 1998 decline was that, because of capital market
volatility in 1998, the Corporation did not securitize as
great a percentage of its home equity loan production as it
did in the previous year. As a result, the Corporation
incurred production expenses without recognizing
securitization revenues at levels similar to previous years.
Additionally, these assets remained on the balance sheet
throughout the year.
   Net interest revenue for 1998 totaled $63.2 million, up
15.2% from 1997 and 26.3% from 1996. The increase was due to
increased lending volume at each of the lines of business.
The net interest margin was 4.37% in 1998 compared to 4.95%
in 1997 and 5.12% in 1996. The decline was primarily due to
increased mortgage production activities which caused the
Corporation to seek a greater proportion of its funding from
more expensive sources than had been done in previous years.
See page 68 for further analysis of the net interest margin.
   The following table sets forth, for the periods
indicated, a summary of the changes in interest income and
interest expense resulting from changes in volume and rates
for the major components of interest-earning assets and
interest-bearing liabilities on a fully taxable equivalent
basis:
<TABLE>
<CAPTION>
                                               1998 Over 1997                 1997 Over 1996
-------------------------------------------------------------------------------

                (In thousands)           Volume        Rate     Total   Volume      Rate    Total
-------------------------------------------------------------------------------

<S>            <C>                       <C>      <C>        <C>        <C>     <C>        <C>
Interest Income:
                Loans and leases         $1,562   $(5,747)   $(4,185)   $7,657  $(3,419)   $4,238
                Loans held
                for sale                 26,051       4,419    30,470    4,429     (681)    3,748
                Taxable investment
                securities                (137)     (3,013)   (3,150)      921     (885)       36
                Tax-exempt
                securities                   96        (81)        15     (95)        29     (66)
                Interest-bearing
                deposits
                with financial
                institutions               (85)       (209)     (294)      388        10      398
                Federal funds sold           47          10        57    (631)        15    (616)
                                        -------     -------   -------  -------  --------  -------
                Total                    27,534     (4,621)    22,913   12,669   (4,931)    7,738
                                        -------     -------   -------  -------  --------  -------
Interest Expense:
                Money market
                checking                    199           4       203      (3)        75       72
                Money market
                savings                    (82)         (2)      (84)     (58)        10     (48)
                Regular savings           (265)       (124)     (389)        7        21       28
                Time deposits             3,856       (209)     3,647    2,148        31    2,179
                Short-term
                borrowings               13,280     (2,020)    11,260    2,031     (358)    1,673
                Long-term debt             (35)          17      (18)    (907)      (40)    (947)
                                        -------     -------   -------  -------  --------  -------
                Total                    16,953     (2,334)    14,619    3,218     (261)    2,957
                                        -------     -------   -------  -------  --------  -------
                Net interest
                revenue                 $10,581    $(2,287)    $8,294   $9,451  $(4,670)   $4,781
</TABLE>
-------------------------------------------------------------------------------

Note: Variance not solely due to rate or volume is allocated
on the basis of the absolute relationship between volume
variances and rate variances.

   The consolidated provision for loan losses for 1998 was
$6.0 million, down 3.9% from 1997 and up 31.7% from 1996.
More information on this subject is contained in the section
on credit risk.
   Other income increased 41.2% in 1998 to $243.7 million,
compared to $172.6 million in 1997 and $150.0 million in
1996. The most significant increases came in the categories
related to mortgage banking activities which were previously
discussed on pages 29 through 32.
   Other expenses in 1998 totaled $245.4 million, up 40.6%
from 1997 and 55.2% from 1996. The 1998 increase in
consolidated other expense of $70.9 million was mostly due
to operating expenses associated with higher mortgage and
home equity loan production.

Consolidated Balance Sheet Analysis:

Total assets at year-end 1998 were $1.9 billion, up 30.0%
from 1997 and 49.7%  Sheet from 1996. However, changes in
the average balance sheet are a more accurate reflection of
the actual changes in the level of activity on the balance
sheet. Average assets were $1.7 billion in 1998, up 30.7%
from 1997 and 43.3% from 1996. The increase is due to
increased loans and loans held for sale as a result of the
increased production activities throughout the Corporation.
   The Corporation's commercial loans are extended primarily
to local regional businesses and to local farming
operations. The Corporation also extends credit to consumers
through installment loans and revolving credit arrangements.
The majority of the remaining portfolio consists of
residential mortgage loans (1-4 family dwellings) and
mortgage loans on commercial property. Loans by major
category at the end of the last five years were as follows:

<TABLE>
<CAPTION>
Loans by Category:

At December 31, (In thousands)        1998         1997      1996      1995      1994
-------------------------------------------------------------------------------
<S>                               <C>          <C>       <C>       <C>      <C>
Commercial, financial,
and agricultural                  $278,834     $212,095  $179,650  $150,312  $136,083
Real estate construction            97,253       73,279    48,991    36,126   21,960
Real estate mortgage               123,980      222,818   214,696   108,351    47,423
Consumer                            51,730       39,985    38,371    67,756    55,323
Direct lease financing               6,375       78,079    62,372    60,979   58,348
Unearned income                    (1,181)     (15,163)  (11,030)  (10,999)  (10,726)
                                  --------     --------  --------  --------  --------
Total                             $556,991     $611,093  $533,050  $412,525 $308,411
</TABLE>
-------------------------------------------------------------------------------

Maturity Distribution of Loans:
<TABLE>
<CAPTION>
                                                        After
                                                      One But
                                           Within      Within        After
At December 31, 1998 (In thousands)      One Year  Five Years   Five Years       Total
---------------------------------------------------------------------------------------

<S>                                       <C>         <C>         <C>         <C>
Commercial, financial, and agricultural   $77,727     $49,094     $152,013    $278,834
Real estate construction                   97,253           -            -      97,253
Real estate mortgage                       30,265      40,559       53,156     123,980
Consumer loans                              7,226      17,707       26,797      51,730
Direct lease financing                        249       4,945            -       5,194
                                                                              --------
   Total                                                                      $556,991
                                                                              ========
Loans due after one year with:
   Fixed interest rates                                                       $172,694
   Variable interest rates                                                     171,577
                                                                              --------
   Total                                                                      $344,271
</TABLE>
--------------------------------------------------------------------------------
   On average, trading and investment securities decreased
$0.7 million in 1998 to $81.2 million. The carrying value of
investments at December 31, 1998, includes $142.0 thousand
of unrealized gains on available-for-sale securities.

Maturity Distribution of Investment Securities:
<TABLE>
<CAPTION>
                                                                     After
                                                        After         Five
                                                      One But          But
                                           Within      Within       Within       After
                                              One        Five          Ten         Ten
At December 31, 1998 (In thousands)          Year       Years        Years       Years
-------------------------------------------------------------------------------

<S>                                        <C>         <C>          <C>        <C>
U.S. Treasury and Government
   obligations                             $9,234      $6,513            -     $18,507
Obligations of states and political
   subdivisions                               501       1,121        1,060       2,525
Mortgage-backed securities                      -         503        4,542       3,510
Other                                          39           -            -           -
                                          -------     -------      -------     -------
   Total                                   $9,774      $8,137       $5,602     $24,542
                                          =======     =======      =======     =======
Weighted Average Yield:
   Held-to-maturity                         6.82%       6.83%        7.53%       7.96%
   Available-for-sale                           -       6.74%        6.16%       6.86%
</TABLE>
--------------------------------------------------------------------------------

   Average yield represents the weighted average yield to
maturity. The yield on state and municipal obligations has
been calculated on a fully taxable equivalent basis,
assuming a 35% tax rate.
   Deposits averaged $878.6 million during 1998 compared to
$691.8 million in 1997 and $632.2 million in 1996. Demand
deposits were up 45.4% on average or $119.2 million from
1997. A significant portion of demand deposits is related to
deposits at Irwin Union Bank which are associated with
escrow accounts held on loans in the servicing portfolio of
Irwin Mortgage. These escrow accounts averaged $342.4
million in 1998.
   Maturities of certificates of deposit of $100 thousand or
more are set forth in the following table:

At December 31, (In thousands)         1998           1997            1996
------------------------------------------------------------------------------
Under 3 months                      $81,850        $60,379         $47,907
3 to 6 months                        17,107         10,123           5,127
6 to 12 months                       17,807         10,115           7,493
After 12 months                      25,207          5,411           5,977
                                   --------       --------        --------
  Total                            $141,971        $86,028         $66,504
-------------------------------------------------------------------------------
   Short-term borrowings averaged $568.8 million in 1998
compared to $365.0 million in 1997 and $334.3 million in
1996. The increase in 1998 is due to the increase in loan
closings in 1998.
   The following table shows the distribution of the
Corporation's short-term borrowings and the weighted average
rates at the end of each of the last three years. Also
provided are the maximum amount of borrowings and the
average amounts of borrowings as well as weighted average
interest rates for the last three years.
<TABLE>
<CAPTION>
                                   Repurchase
                                   Agreements
                                      &Drafts                       Federal
                                      Payable                          Home
                                   Related to                     Loan Bank
                                     Mortgage                    Borrowings       Lines
                                         Loan     Commercial      & Federal          of
(In thousands)                       Closings          Paper          Funds      Credit
-----------------------------------------------------------------------------

<S>                       <C>        <C>             <C>           <C>         <C>
Year Ended                1998       $172,126        $26,617       $266,000    $180,118
   December 31:           1997        240,659         16,375        142,650     112,591
                          1996        264,998         17,175         74,118     105,575
Weighted average          1998          5.43%          5.78%          4.93%       6.01%
   interest rates at      1997           5.88           6.00           6.18        6.87
   year-end:              1996           6.45           5.95           5.80        6.68
Maximum amount            1998       $301,849        $26,691       $316,200    $249,519
   outstanding at any     1997        274,363         16,375        142,650     151,111
   month's end:           1996        270,516         27,214        121,000     135,442
Average amount            1998       $218,342        $26,166       $115,479    $208,785
   outstanding during     1997        237,953         12,738         48,823      65,490
   the year:              1996        218,810         23,794         44,139      47,561
Weighted average          1998          5.84%          6.05%          5.63%      6.20%
   interest rate during   1997           5.82           6.01           6.00        6.65
   the year:              1996           5.66           6.02           5.80        6.80
</TABLE>
--------------------------------------------------------------------------------
 
Capital:

Shareholders' equity averaged $133.6 million in 1998, up
8.2% from 1997 and 22.6% from 1996. Year-end shareholders'
equity of $145.2 million represented book value per share of
$6.70 compared to $5.82 and $5.23 at December 31, 1997 and
1996, respectively.
   Prior to the adoption of a new mortgage banking
accounting standard in the second quarter of 1995, mortgage
banking accounting did not allow the full value of mortgage
servicing rights to be reflected on the balance sheet. Since
a portion of the Corporation's mortgage servicing portfolio
was generated prior to the adoption of the new accounting
standard, it represents economic value which is not recorded
on the balance sheet. The following table demonstrates the
estimated after-tax value of the servicing portfolio at
December 31:
<TABLE>
<CAPTION>
(In thousands)                              1998             1997          1996
-------------------------------------------------------------------------------
<S>                                  <C>              <C>            <C>
Total loans serviced                 $11,242,470      $10,713,549    $10,810,988
                                     -----------      -----------    -----------
Value (@ 1.3% in 1998 and 1.5% in
  1997 and 1996)                        $146,152         $160,703       $162,165
Less capitalized servicing               113,130           81,610         71,715
Tax liability (@ 40%)                     13,209           31,637         36,180
                                     -----------      -----------    -----------
Net value                                $19,813          $47,456        $54,270
                                     ===========      ===========    ===========
Per share of common stock                  $0.91            $2.16          $2.39
</TABLE>
--------------------------------------------------------------------------------

   With the implementation of the new accounting standard in
1995, this off-balance sheet value will decline over future
years and eventually be reduced to zero.
   Total book value per share, including the value of the
servicing portfolio, was $7.61 at December 31, 1998 compared
with $7.98 and $7.62 at December 31, 1997 and 1996,
respectively.
   Capital is a major focus of regulatory attention, with
both book and risk-based capital standards used as capital
adequacy measures. Unless an institution has adequate
capital in the opinion of the regulators, they may withhold
approval for new activities or force additions to capital.
Therefore, the Corporation considers both the regulators'
viewpoint and its own analysis of the capital structure and
leverage amounts that are consistent with underlying
business risks.

<TABLE>
<CAPTION>
(In thousands)                                   1998          1997         1996
--------------------------------------------------------------------------------
<S>                                        <C>           <C>            <C>
Tier 1 capital                               $191,806      $169,366     $117,416
Tier 2 capital                                 11,505        16,170        6,594
                                          -----------   -----------  -----------
Total risk-based capital                     $203,311      $185,536     $124,010
                                          ===========   ===========  ===========
Risk-weighted assets                       $1,649,227    $1,249,385     $962,459
                                          ===========   ===========  ===========
Risk-based ratios:
  Tier 1 capital                               11.63%        13.56%       12.20%
  Total capital                                 12.25         14.85        12.88
Tier 1 leverage ratio                           10.51         12.06         9.84
Ending shareholders' equity to assets            7.46          8.55         9.15
Average shareholders' equity to assets           8.09          9.78         9.46
</TABLE>
------------------------------------------------------------------------------

   At year-end 1998, the Corporation's total risk-adjusted
capital ratio was 12.25% compared to 10.0% which is
required in order to be considered well capitalized by the
regulators. The Corporation's ending equity to assets
ratio for 1998 was 7.46%. However, as previously
discussed, temporary conditions which existed at year end
make the average balance sheet ratio a more accurate
measure of capital. The Corporation's average equity to
assets for 1998 was 8.09%.
   In January 1997, the Corporation issued $50.0 million
of trust preferred securities through a trust created and
controlled by the Corporation. The securities, which are
publicly traded, were issued at $25 per share with a
cumulative dividend rate of 9.25%, payable quarterly. They
have an initial maturity of 30 years with a 19-year
extension option which the Corporation can exercise at any
point during the first 30 years. The securities are
callable at par after five years, or immediately, in the
event of an adverse tax development affecting the
Corporation's classification of the securities for federal
income tax purposes. The securities are not convertible
into common stock of the Corporation.

Stock Prices and Dividends:

The common stock of Irwin Financial 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
Corporation's common stock in each quarter of the three
most recent calendar years.
<TABLE>
<CAPTION>
                                                                             Total
                                                   Quarter       Cash      Dividends
1996                     *High         *Low          *End     *Dividends   *For Year
--------------------------------------------------------------------------------

<S>                     <C>            <C>           <C>          <C>       <C>
First quarter           $11 3/8        $9 7/8        $11          $0.030
Second quarter           11 1/8         9 4/5          9 4/5       0.030
Third quarter            10 4/5         9             10 5/8       0.030
Fourth quarter           12 3/8        10 5/8         12 3/8       0.030    $0.12

1997
--------------------------------------------------------------------------------
First quarter           $15 1/4        $12 1/8        $13 5/8      $0.035
Second quarter           14 3/4         12             14 3/4       0.035
Third quarter            18 5/8         14 3/8         18 5/8       0.035
Fourth quarter           21 1/2         18 1/4         21           0.035   $0.14

1998
--------------------------------------------------------------------------------
First quarter            $28 1/4       $19 1/2        $28 1/8      $0.040
Second quarter            30            25 1/8         29           0.040
Third quarter             37            20 1/2         24 5/8       0.040
Fourth quarter            31            20 1/8         27 1/5       0.040   $0.16
</TABLE>
*Adjusted for December 31, 1996, and May 27, 1998, two-
for-one stock splits.

   The Corporation 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 24, 1999, the Corporation's Board of Directors
approved an increase in the first quarter dividend to $0.05
per share, payable in March 1999.

Risk Management:

As a financial intermediary, Irwin Financial Corporation is
engaged in businesses which involve the assumption of
financial risks including:
- Credit risk
- Liquidity risk
- Interest rate risk
   Each line of business that assumes financial risk uses a
formal process to manage this risk. In all cases, the
objectives are to ensure that risk is contained within
prudent levels and that the Corporation is adequately
compensated for the level of risk assumed. The Chairman,
the President, and the Chief Financial Officer of the
parent company participate in each subsidiary's risk
management process.

Credit Risk:

The assumption of credit risk is a key source of earnings
for the community banking and home equity lending lines of
business. In addition, the mortgage banking business
assumes some credit risk despite the fact that its
mortgages are typically insured. The credit risk in the
loan portfolios of the community bank and the home equity
lending business has the most potential to have a
significant effect on consolidated financial performance.
   The community bank and home equity lending business
manage credit risk through the use of lending policies,
credit analysis and approval procedures, periodic loan
reviews, and personal contact with borrowers. Loans over a
certain size are reviewed by a loan committee prior to
approval.
   An allowance for loan losses is established as an
estimate of the probable credit losses on the loans held by
the Corporation. A specific allowance is determined by
evaluating those loans which are either substandard or have
the potential to become substandard. In general, commerical
loans, mortgage loans, and leases are evaluated
individually. Consumer loans, including home equity loans,
are generally evaluated as a group. A specific allowance is
set at a level which management considers sufficient to
cover probable losses on these loans. A general allowance
is determined by analyzing historical loss experience by
loan type and then adjusting these loss factors for current
conditions not reflected in prior experience. The allowance
for loan losses is an estimate which is based on
management's judgement combined with a quantitative process
of evaluation and analysis.
   Loans and leases that are determined by management to be
uncollectible are charged against the allowance. The
allowance is increased by provisions against income and
recoveries of loans and leases previously charged off. The
table on page 60 analyzes the consolidated allowance for
loan and lease losses over the past five years.
   Net charge-offs in 1998 were $1.9 million, down 25.5%
from 1997 and up 9.1% from 1996. The ratio of net charge-
offs to average loans and leases was 0.33% compared to
0.46% in 1997 and 0.36% in 1996. The provision for loan and
lease losses was $6.0 million, 308.5% of net charge-offs.
The coverage ratio was 239.3% in 1997 and 255.6% in 1996.
At year end, the allowance for loan losses was 1.78% of
outstanding loans and leases compared to 1.44% in 1997 and
1.29% in 1996. This increase in the allowance for loan
losses is the result of an increase in nonperforming loans
experienced in 1998.
   Total nonperforming loans and leases at year end were
$11.9 million compared to $7.7 million at the end of 1997
and $7.2 million at the end of 1996. Nonperforming loans
and leases as a percent of total loans and leases were
2.13% at year-end 1998 compared to 1.26% in 1997 and 1.35%
in 1996. Other real estate owned totaled $3.5 million at
December 31, 1998, up from $1.8 million in 1997 and $2.2 in
1996. Total nonperforming assets were $15.4 million or
0.79% of total assets at December 31, 1998, as compared to
$9.5 million or 0.64% at year-end 1997 and $9.4 million or
0.72% at the end of 1996. The increase in nonperforming
assets occurred primarily at the Corporation's mortgage
banking line of business as previously discussed on page 33.


<TABLE>
<CAPTION>
Analysis of Allowance for Loan and Lease Losses
               (In Thousands)                       1998        1997     1996     1995      1994
--------------------------------------------------------------------------------

               Loans and leases outstanding at
               end of period, net of unearned
<S>                                             <C>         <C>      <C>      <C>      <C>
               income                           $556,991    $611,093 $533,050 $412,525 $308,411
                                                ========   ========= ======== ========  ========
               Average loans and leases for the
               period, net of unearned income   $585,025    $569,325 $496,729 $369,220  $279,389
                                                ========   ========= ======== ========  ========
Allowance      Balance beginning of period        $8,812      $6,875   $5,033   $4,174    $3,293
for loan and
lease losses:

Charge-offs:   Commercial, financial, and
               agricultural loans                    246         800      495      845       266
               Real estate mortgage loans            232         356       37        2         -
               Consumer loans                        761         734      959      953       543
               Lease financing                     1,263       1,255      883      690       757
                                                --------    -------- -------- --------  --------
               Total charge-offs                   2,502       3,145    2,374    2,490    1,566
                                                --------    -------- -------- --------  --------
Recoveries:    Commercial, financial, and
               agricultural loans                     14          32      133        2       34
               Real estate mortgage loans              -           1        -        -         -
               Consumer loans                        362         246      214      197      180
               Lease financing                       183         259      246      191       195
                                                --------    -------- -------- --------  --------
               Total recoveries                      559         538      593      390      409
                                                --------    -------- -------- --------  --------
               Net charge-offs                   (1,943)     (2,607)  (1,781)  (2,100)   (1,157)
               Reduction due to sale of loans    (2,976)     (1,694)    (930)    (239)         -
               Provision charged to expense        5,995       6,238    4,553    3,198     2,038
                                                --------    -------- -------- --------  --------
               Balance end of period              $9,888      $8,812   $6,875   $5,033  $4,174
                                                ========   ========= ======== ========  ========
Allowance for  By category of loans and leases
loan and       Commercial, financial, and
lease losses:  agricultural loans                 $5,899      $5,118   $3,676   $2,349    $2,586
               Real estate mortgage loans          2,774       2,170      281      413       311
               Consumer loans                        615         446    1,974    1,420       767
               Lease financing                       600       1,078      944      851       510
                                                --------    -------- -------- --------  --------
               Total                              $9,888      $8,812   $6,875   $5,033    $4,174
                                                ========   ========= ======== ========  ========
Ratios:        Net charge-offs to average loans
               and leases                          0.33%       0.46%    0.36%    0.57%     0.41%
               Allowance for possible loan losses
               to average loans and leases         1.69%       1.55%    1.38%    1.36%     1.38%
               Allowance for possible loan losses to
               loans and leases outstanding        1.78%       1.44%    1.29%    1.22%     1.25%
</TABLE>
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Nonperforming Assets
                       (In thousands)                     1998     1997     1996    1995      1994
--------------------------------------------------------------------------------

<S>                    <S>                              <C>       <C>      <C>     <C>      <C>
Accruing loans past
due 90 days or more:   Commercial, financial, and
                       agricultural loans                 $252     $382     $256    $418     $113
                       Real estate mortgages               291      534      234       -         -
                       Consumer loans                       89       86      205     202        93
                                                      -------- -------- ----------------  --------
                                                           632    1,002      695     620      206
                                                      -------- -------- ----------------  --------
Nonaccrual loans and   Commercial, financial, and
leases:                agricultural loans                1,052      777    2,739     670     1,523
                       Real estate mortgages             9,570    5,333    2,481     848       947
                       Consumer loans                      174       63        -       -        -
                       Lease financing receivables         426      506    1,261     415      363
                                                      -------- -------- ----------------  --------
                                                        11,222    6,679    6,481   1,933     2,833
                                                      -------- -------- ----------------  --------
                       Total nonperforming loans and
                       leases                           11,854    7,681    7,176   2,553     3,039
                                                      -------- -------- ----------------  --------
                       Other real estate owned           3,506    1,828    2,239     295      489
                                                      -------- -------- ----------------  --------
                       Total nonperforming assets      $15,360   $9,509   $9,415  $2,848   $3,528
                                                      ======== ======== ================  ========
                       Nonperforming loans and leases
                       to total loans and leases         2.13%    1.26%    1.35%   0.62%     0.90%
                                                      ======== ======== ================  ========
                       Nonperforming assets to total
                       assets                            0.79%    0.64%    0.72%   0.27%     0.50%
</TABLE>
--------------------------------------------------------------------------------

Loans which are past due 90 days or more are placed on nonaccrual status
unless, in management's opinion, there is sufficient collateral value
to offset both principal and interest.

<TABLE>
<CAPTION>
Renegotiated and Nonaccrual Loans
(In thousands)                                     1998         1997        1996
-------------------------------------------------------------------------------
<S>                                                 <C>         <C>       <C>
Interest which would have been recorded under
original terms
Renegotiated                                          $-          $-          $-
Nonaccrual                                           323         302         356
                                                   -----       -----       -----
                                                     323         302         356
                                                   -----       -----       -----
Interest income actually recorded
Renegotiated                                           -           -           -
Nonaccrual                                            47          36         150
                                                   -----       -----       -----
                                                      47          36         150
                                                   -----       -----       -----
Reduction in interest income                        $276        $266      $206
</TABLE>
--------------------------------------------------------------------------------
    No loan concentrations existed of more than 10% of
total loans to borrowers engaged in similar activities
that would be similarly affected by economic or other
conditions.
    Generally, the accrual of income is discontinued
when the full collection of principal or interest is in
doubt, or when the payment of principal or interest has
become contractually 90 days past due unless the
obligation is both well secured and in the process of
collection.

Liquidity:

Liquidity is the availability of funds to meet the
daily requirements of the business. For financial
institutions, demand for funds comes principally from
extensions of credit and withdrawal of deposits.
Liquidity is provided by asset maturities or sales and
through short-term borrowings.
    The objectives of liquidity management are to
ensure that funds will be available to meet demands and
that funds are available at a reasonable cost. As with
other forms of financial risk, liquidity is managed
separately at each of the Corporation's lines of
business.
    Since loans are less marketable than securities,
the ratio of total loans to total deposits is the
traditional measure of liquidity for banks and bank
holding companies. At year-end 1998, this ratio stood
at 55.2%. The Corporation is able to maintain this
position of high liquidity without a substantial
sacrifice in the form of a lower net interest margin
due to the position in mortgage loans held for sale.
These loans carry an interest rate equal to the current
market rate for mortgage loans. However, liquidity is
significantly improved since nearly all mortgage loans
held for sale are in the process of being securitized
and sold. The holding period for an individual loan
typically does not exceed 90 days.

Interest Rate Risk:

Interest rate risk refers to the potential for changes
in market rates of interest to cause changes in net
interest income and in the market value of assets and
liabilities.
   The Asset-Liability Management Committee of the
community bank monitors the repricing structure of both
assets and liabilities over various time horizons.
Exposure to changes in interest rates is evaluated by
modeling the repricing characteristics of the community
bank's portfolio under multiple rate scenarios. Rate
sensitivity at the community bank can typically be
managed by controlling the maturity of loans,
securities, and deposits. The community bank may also
use financial futures or interest rate swaps from time
to time. Formal policies approved by the community
bank's Board of Directors ensure that exposure to
changes in net interest revenues is maintained within
acceptable levels.
   The mortgage banking business assumes a form of
interest rate sensitivity by entering into commitments
to extend loans to borrowers at a fixed price for a
limited period of time. Loans are also held temporarily
until a pool is formed. The mortgage bank buys
commitments to deliver loans at a fixed price to manage
risk. The policy at the home equity lending business is
to match-fund all loan assets. The mortgage bank and
the home equity company are also exposed to interest
rate risk through their ownership of servicing assets.
As discussed in the analysis of each line of business
earlier in this report, the companies also manage their
risk using a variety of techniques including:
maintaining a strong production operation which offsets
the interest rate risk, selective sales of the
servicing rights, and the use of financial hedges.  In
some cases, the Corporation uses internal hedges to
allow for the risk characteristics of one line of
business to offset those of another line.
   The following table shows in summary form the
Corporation's interest rate sensitivity based on
expected interest rate repricing intervals for the
balance sheet as of December 31, 1998, (a "gap"
analysis). Fixed rate assets and liabilities are
analyzed based on their expected maturities which
reflect estimated prepayment characteristics, rather
than their maximum contractual maturities. For example,
the majority of 30-year adjustable rate residential
mortgages held in the portfolio of Irwin Union Bank are
included in the "3 months to 1 year" category since
that is the time frame over which the assets will
reprice. Some items, such as certain deposit accounts,
especially those associated with the escrows on
mortgage servicing assets, are non-interest bearing,
but will vary in balance due to interest rate changes.
Since the Corporation relies on such accounts in its
operations and would need to replace them with "at
market" liabilities should the non-interest bearing
ones be unavailable, they are included in the gap table
and in simulations based on their expected maturities
over interest rate cycles.
   As the table shows, the consolidated one-year gap at
December 31, 1998, was a positive $135.0 million. This
compares to a positive gap of $143.0 million at
December 31, 1997.
<TABLE>
<CAPTION>
Interest Sensitivity

                                  Within   3 Months      1 to 5    Over 5
  (In thousands)                3 Months  to 1 Year       Years     Years        Total
------------------------------------------------------------------------------

<S>                            <C>           <C>        <C>       <C>        <C>
Assets:
Interest-bearing deposits
  with banks                     $17,472       $772        $197        $-      $18,441
Federal funds sold                 8,580          -           -         -        8,580
Taxable investment
  securities and trading assets   42,839     16,538      12,528     3,091       74,996
Tax-exempt investment
  securities                           -        500         832     3,875        5,207
Loans held for sale              734,481     50,639     103,016    48,652      936,788
Loans, net of unearned
  income                         328,301     19,624      99,572   109,494      556,991
                               ---------  ---------   --------- ---------    ---------
Total interest-earning
  assets                       1,131,673     88,073     216,145   165,112    1,601,003
                               ---------  ---------   --------- ---------    ---------
Liabilities:
Non-interest bearing
  deposits                        16,492     41,398     190,178   229,656      477,724
Money market checking             47,349          -      53,888    14,138      115,375
Money market savings               1,685          -       5,539         -        7,224
Regular savings                   21,242      1,835       9,785     7,560       40,422
Time deposits                    221,551     90,097      56,430       388      368,466
Short-term borrowings            516,428    126,649       1,784         -      644,861
Long-term debt                         -          -       2,839    50,000       52,839
                               ---------  ---------   --------- ---------    ---------
Total interest-bearing
  liabilities                    824,747    259,979     320,443   301,742    1,706,911
Interest rate swaps                    -          -          -          -            -
                               ---------  ---------   --------- ---------    ---------
Interest sensitivity gap         306,926  (171,906)   (104,298) (136,630)    (105,908)
                               ---------  ---------   --------- ---------    ---------
Cumulative interest
  sensitivity gap               $306,926   $135,020     $30,722 $(105,908)  $(105,908)
</TABLE>
-------------------------------------------------------------------------------

   Since the gap was positive at December 31, 1998, it
means that the Corporation's net interest income was
positioned to benefit from rising rates, or to be
harmed by declining rates. While traditional interest
rate risk focuses on the changes in net interest income
due to interest rate changes, the Corporation engages
in other activities which are also affected by interest
rate changes. Principal among these are mortgage loan
origination and servicing. Through the use of
simulations using regression modeling, option-adjusted
valuation techniques for estimating expected customer
behavior, and Monte-Carlo based cash flow simulation,
the Corporation attempts to analyze and mitigate total
interest rate risk, that associated with both net
interest income and non-interest income. For example,
if interest rates decline, management expects an
increase in mortgage loan origination income and a
decline in the value of mortgage servicing assets.
Management attempts to monitor this exposure to
traditional interest rate risk as well as interest rate
influences on production and servicing value in a
comprehensive manner.
   The following table shows management's estimate of
the present value of interest-sensitive assets and
liabilities, as well as off-balance sheet financial
contracts as of December 31, 1998, at then current
interest rates as well as simulated rates 1.0% and 2.0%
above and below those interest rates. It does not take
into account the book values of the Corporation's non-
interest sensitive assets and liabilities, such as
cash, accounts receivable, and fixed assets, the value
of which is not directly determined by interest rates.

<TABLE>
<CAPTION>
Present Value   (In thousands)
December 31, 1998                           -2%        -1%   Current        +1%        +2%
--------------------------------------------------------------------------------

<S>                                   <C>       <C>                  <C>         <C>
Interest Sensitive Assets:
Interest-bearing deposits with banks    $18,528    $18,512  $18,495    $18,479     $18,463
Federal funds sold                        8,651      8,651    8,651      8,651      8,651
Taxable investment securities            80,556     78,210   76,873     76,069     75,554
Tax-exempt investment securities          5,727      5,513    5,309      5,115     4,930
Loans held for sale                     974,732    970,182  965,055    959,305     952,905
Mortgage servicing rights               41,930      77,595  117,728    152,402     174,714
Loans, net of unearned income          624,196    612,499   601,338    591,228     581,262
                                      ---------  --------- ---------  ---------  ---------
Total Interest Sensitive Assets       1,754,320 1,771,162 1,793,449   1,811,249  1,816,479
                                      ---------  --------- ---------  ---------  ---------
Interest Sensitive Liabilities:
Non-interest bearing deposits           486,091   483,042   480,168    477,458     474,898
Money market checking                   122,395   122,317   122,239    122,162     122,084
Money market savings                      6,509     6,504     6,499      6,494       6,489
Regular savings                          98,965    98,886    98,808     98,730      98,653
Time deposits                           295,576   292,831   290,152    287,566     285,123
Short-term borrowings                   637,654   637,272   636,890    636,512     636,134
Long-term debt                           70,887    65,220    60,750     57,199      54,344
                                      ---------  --------- ---------   ---------  ---------
Total interest sensitive liabilities  1,718,077 1,706,072 1,695,506  1,686,121   1,677,725
                                      ---------  --------- ---------  ---------  ---------
Interest sensitive off-balance
  sheet items                           14,423     13,690      5,347     1,027       1,484
                                      ---------  --------- ---------  ---------  ---------
Net sensitivity as of
  December 31, 1998                     $50,666    $78,780  $103,290  $126,155    $140,238
                                      =========  ========= =========  =========  =========
Potential change                      $(52,624)  $(24,510)        $-   $22,865     $36,948
                                      =========  ========= =========  =========  =========
Net sensitivity as of
  December 31, 1997                   $(12,165)     $6,895   $28,911    $47,188    $55,873
                                      =========  ========= =========  =========  =========
  Potential change                    $(41,076)  $(22,016)        $-    $18,277    $26,962
</TABLE>
------------------------------------------------------------------------------

   As previously noted, the analysis is based on
discounted cash flows over the remaining estimated lives
of the financial instruments. The total measurement of
the Corporation's exposure to interest rate risk as
presented in the table may not be representative of the
actual values which might result from a higher or lower
rate environment. Such environments would likely result
in different lending and borrowing strategies by the
Corporation, designed in part to further mitigate the
effect on the value of, and the net earnings generated
from, the Corporation's net assets from any change in
interest rates.
   The figures suggest, based on balance sheet and off-
balance sheet financial assets, that the present value
of the Corporation's interest-sensitive assets and
liabilities would decline in a falling rate environment
and increase in a rising rate environment. The magnitude
and direction of the present value rate sensitivity is
largely unchanged from 1997.
   As previously noted, this present value sensitivity
analysis does not account for potential earnings the
Corporation would recognize due to strategic initiatives
it would undertake if the interest rate scenarios model
occurred, nor does it reflect activities not
traditionally measured as financial assets or
liabilities. Principal among these activities for the
Corporation would be the change in mortgage loan
production and the earnings stream the Corporation
derives therefrom.

Derivative Financial Instruments:

The Corporation manages its interest rate risk on
mortgage loans held for sale  using mandatory
commitments to sell the loans at a future date. Changes
in the economic value of mortgage servicing assets are
offset using options on treasury futures. At December
31, 1998, these options had a fair value of $4.8 million
and a net notional amount (which does not represent the
amount at risk) of $0, consisting of $750.0 million of
long positions and $750.0 million of short positions.
Changes in the value of interest-only strips are offset
using interest rate caps which had a fair value of
$540.1 thousand at December 31, 1998, and a notional
amount of $65.6 million. Options on treasury futures and
interest rate caps are classified as trading assets on
the balance sheet and carried at their market values.
Adjustments to market values are recorded as net trading
gains or losses on the income statement. In 1998, the
Corporation recorded $4.2 million of net trading gains
related to these derivative products. No gains or losses
were reported in 1997.

Daily Average Consolidated Balance Sheet,
Interest Rates and Interest Differential
<TABLE>
<CAPTION>
                             For the year ended December 31,                           1998
                                                                            Average            Yield/
                             (In thousands)                                 Balance Interest   Rate
--------------------------------------------------------------------------------

<S>                          <S>                                         <C>          <C>     <C>
Assets:
Interest-earning assets:     Interest-bearing deposits with banks           $15,462     $707  4.57%
                             Federal funds sold                              13,317      731  5.49
                             Taxable investment securities                   75,908    3,159  4.16
                             Tax-exempt investment securities (1)             5,291      453  8.56
                             Loans held for sale                            758,640   65,160  8.59
                             Loans and leases, net of unearned
                             income (1) (2)                                 585,025   52,444   8.96
                                                                          --------- -------- ------
                             Total interest-earning assets                1,453,643  122,654  8.44%
                                                                          --------- -------- ======
Noninterest-earning assets:  Cash and due from banks                         50,754
                             Premises and equipment, net                     18,944
                             Other assets                                   135,693
                             Less allowance for possible loan and
                             lease losses                                   (8,650)
                                                                         ----------
                             Total assets                                $1,650,384
                                                                         ==========
Liabilities and Shareholders'
Equity:
Interest-bearing liabilities:
                             Money market checking                          $89,158   $1,845   2.07%
                             Money market savings                             7,281      197   2.70
                             Regular savings                                 45,414    1,500   3.30
                             Time deposits                                  355,431   19,798   5.57
                             Short-term borrowings                          568,772   35,048   6.16
                             Long-term debt                                  10,245      814   7.94
                                                                          --------- -------- ------
                             Total interest-bearing liabilities           1,076,301   59,202  5.50%
                                                                          --------- -------- ======
Noninterest-bearing          Demand deposits                                381,343
liabilities:                 Other liabilities                               59,177
                             Shareholders' equity                           133,563
                                                                         ----------
                             Total liabilities and shareholders' equity  $1,650,384
                                                                         ==========
                             Net interest income                                    $63,452
                                                                                    ========
                             Net interest income to average interest-earning
                             assets                                                           4.37%
</TABLE>
-------------------------------------------------------------------------------

Notes:            (1) Interest is reported on a fully taxable equivalent
                      basis. The prevailing federal income tax rate was        
                      35% in 1998 and 1997 and 34.5% in 1996.
                  (2) For purposes of these computations, nonaccrual loans
                      are included in daily average loan amounts outstanding.

<TABLE>
<CAPTION>
                        1997                                        1996
--------------------------------------------------------------------------------
<C>                 <S>            <C>            <C>           <S>                <C>
  Average                          Yield/            Average                  Yield/
  Balance           Interest        Rate             Balance    Interest       Rate

   $16,887            $1,001        5.93%            $10,282        $603       5.87%
    12,454               674        5.41              24,370       1,290       5.29
    77,590             6,309        8.13              67,654       6,273       9.27
     4,336               438       10.10               5,348         504       9.43
   433,275            34,691        8.01             379,027      30,943       8.16
   569,325            56,629        9.95             496,729      52,391      10.55
 ---------       -----------     -------          ----------     -------     -------
 1,113,867            99,742       8.95%             983,410      92,004      9.36%
 ---------       -----------     =======          ----------     -------     =======
    34,347                                            38,309
    18,568                                            17,425
   103,682                                           118,115
   (7,750)                                           (5,724)
 ---------                                        ----------
$1,262,714                                        $1,151,535
==========                                        ==========

   $79,549            $1,643       2.07%             $79,704      $1,571      1.97%
    10,267               280        2.73              12,455         328       2.63
    52,843             1,889        3.57              52,657       1,861       3.53
   286,934            16,151        5.63             248,694      13,972       5.62
   365,005            23,788        6.52             334,304      22,115       6.62
    10,698               831        7.77              21,840       1,778       8.14
 ---------       -----------     -------          ----------     -------     -------
   805,296            44,582       5.54%             749,654      41,625      5.55%
 ---------       -----------     =======          ----------     -------     =======

   262,190                                           238,673
    71,745                                            54,238
   123,483                                           108,970
 ---------                                        ----------
$1,262,714                                        $1,151,535
 =========                                        ==========

                     $55,160                                     $50,379
                 ===========                                     =======
                                   4.95%                           5.12%
</TABLE>
----------------------------------------------------------------------------
Year 2000 Readiness:

The Corporation is actively addressing its exposure to
the Year 2000 issue and has four teams focusing on the
issue (one at each of its three principal operating
entities and at the parent company). The Corporation has
developed a seven-stage project plan to achieve Year
2000 readiness by June 30, 1999 that includes: (i) an
awareness campaign throughout the Corporation to raise
the level of importance and attention beyond that of a
typical "information technology" issue; (ii) assessment
of the Corporation's Year 2000 problem, including
contract review, a technical audit and an estimation of
remediation costs; (iii) remediation of non-compliant
systems through repairs, upgrades or replacements of
computer programs and chips; (iv) testing of the
Corporation's systems for Year 2000 compliance; (v)
development of contingency plans to continue processes
in the event of Year 2000 readiness failure by the
Corporation or parties on whom it is dependent; (vi)
implementation of the remediated systems; and (vii)
auditing after January 1, 2000, of the completed
processes for post-Year 2000 compliance. The Corporation
has engaged a leading technology consulting firm to
increase its level of confidence that the methods and
standards it employs to address the Year 2000 issue are
appropriate and comprehensive. The entire project is
overseen by a Year 2000 Steering Committee which
includes the Corporation's Chairman, President, and
those in charge of Information Technology (IT) at each
entity.

Scope:

The Corporation has developed a technology strategy that
primarily uses systems developed by third parties and
has very few internally developed applications.
Consequently, the Corporation's principal focus is on
assuring Year 2000 compliance from its commercial
application vendors and other third-party service
providers. In those instances where the Corporation
believes a vendor may not be compliant in a timely
manner, the Corporation is taking additional steps to
address its needs with alternative systems, including
replacement of existing vendor's systems. The project
plan has addressed computer hardware and software as
well as environmental systems used in the Corporation's
work places to address readiness of both direct and
indirect process support systems (i.e., IT and non-IT
systems).
   An initial step in the implementation of the Year
2000 methodology involved the identification of all
possible technologies that utilize date logic. To ensure
completeness, the Corporation provided education and
awareness to affected stakeholders. Once this step was
completed, the Corporation engaged in a comprehensive
inventory to identify technologies that utilize date
logic by both business process and critical need.

Progress:

The Corporation is currently in varying stages of the
remediation, testing, implementation, and contingency
planning steps of its project and is generally on target
to meet the milestones necessary to achieve Year 2000
readiness by June 30, 1999. However, as noted in the
graphs below which illustrate current project progress
against the work plan for each of the Corporation's
principal entities, there have been delays in the
testing phase of the project. In general, this is the
result of delays brought upon by reliance on third
parties who are late in their delivery of remediated
programs and/or test documentation. The Corporation is
paying close attention to this issue as it is
approaching the point where it would not have time to
change vendors if these issues are not resolved. When
certain elements of the project plan are unexpectedly
delayed (such as testing which is dependent on
remediation efforts), the Corporation has accelerated
progress on other areas of the project. For example, for
certain systems, testing is behind schedule while for
other systems implementation is ahead of schedule.

Costs:

The Year 2000 project has required a reallocation of
business resources from other areas of the Corporation.
However, to date, the consolidated cost of the project
has not been material to the overall financial results
of operations, liquidity, or capital, nor does the
Corporation believe it will be material throughout the
duration of the project. Additionally, the Corporation
does not believe that the reallocation of resources
necessary to address the Year 2000 issue has resulted in
a material adverse change in the Corporation's ability
to address other information technology projects
critical to the Corporation's growth. The Corporation
has incurred and expensed approximately $1.5 million pre-
tax on the Year 2000 project since its inception. These
costs have been funded through operating cash flows. The
total cost of the project over the period 1997 to 2000
is anticipated to be in the range of $3.3 million pre-
tax, excluding incentive stock-based compensation valued
at approximately $311 thousand at the time of grant. The
Corporation cannot guarantee that the current estimate
of $3.3 million will be adequate to complete the
project. If the costs increase significantly beyond the
current estimate, they could have a material adverse
effect on the Corporation's financial results. The graph
below illustrates the amounts expensed on the project to
date (excluding the cost of options which are not
expensed under GAAP) and on a pro forma basis through
1999 and contains forward-looking estimates.

Graph:  Consolidated Project Expense
(In millions (Pre-tax))
     1997--Actual        $ 119
     1998--Actual         1340
     1999 *              1,863
     
* Estimate as of December 31, 1998.
 
Risks:

Financial services require exact calculations and prompt
delivery. If the Corporation's products are not accurate
and timely, there is increased exposure to risks such as
client service failure, regulatory compliance problems
and disruption of third party operations. The
Corporation expects to implement the necessary changes
to ensure that its internal operations are Year 2000
compliant prior to December 31, 1999. To achieve this
goal, the Corporation is reliant upon its information
system vendors to provide Year 2000 compliant systems
sufficiently before December 31, 1999, to allow ample
time to test the systems. The Corporation cannot
guarantee that all of its key suppliers will achieve
Year 2000 compliance in a timely manner. The failure of
the Corporation's vendors to successfully address the
Year 2000 issue in a timely manner could have a
materially adverse effect on the Corporation's ability
to successfully address its Year 2000 issue. Certain of
the Corporation's vendors are already late in delivering
remediated programs or test documentation. In addition,
if the Year 2000 issue adversely affects the
Corporation's customers, there could be a material
adverse effect on the Corporation's ability to collect
and service outstanding loans. Finally, even if the
Corporation's internal operations and customers are Year
2000 compliant, the Corporation's operations can be
materially adversely affected if agencies and third
parties with which the Corporation interacts fail to
address the Year 2000 issue successfully.

Contingency Plans:

The Corporation has not completed its assessment of the
probability or cost of potential Year 2000 system
failures, nor has it completed step five of its project
plan, contingency planning. Therefore, it is difficult
at this time to accurately estimate the cost to the
Corporation of Year 2000 failures by third parties or
the Corporation itself. Any of the failures mentioned
above could have a material adverse effect on the
financial condition and results of operations of the
Corporation.
   Additional detail on the Year 2000 project at the
Corporation's parent company and each of its principal
subsidiaries is shown below.

Irwin Financial Corporation (parent company)

The operations of the parent company largely are
intended to further the Corporation's strategic
development, allocation of capital, planning for
entering or exiting lines of business, certain support
services for its operating companies, and external
relations. There are few direct, ongoing revenue-
producing interactions with end customers of the
Corporation. Nonetheless, the services of the parent
company are of sufficient size and importance to the
overall condition of the Corporation that a separate
project team is in place to assure Year 2000 readiness
of its systems and operating environment.


Scope:

As with the Corporation's overall project plan, the
parent company's plan included an assessment of computer
hardware and software as well as environmental systems.
The principal risk of failure to be Year 2000 compliant
at the parent company lies in the failure or delay in
providing its services to its constituents in a timely
manner. In most cases, such failure would lead to
increases in expenses, rather than in ultimate failure
to deliver the service.
   Like the other units of the Corporation, the parent
company has developed a technology strategy that
primarily uses systems developed by third parties and
has very few internally developed applications.
Consequently, the parent company's principal focus is on
assuring Year 2000 compliance from its commercial
application vendors and other third-party service
providers.

Progress:

The progress of this team in meeting the seven-stage
requirements of its project plan to achieve Year 2000
readiness by June 30, 1999 is shown on the next page.

Graph:  Irwin Financial Parent Project Plan Status
As of December 31, 1998
(Percent Completed)
                                                            Projected Actual
               Target Completion *      Actual Completion   Completion Date
Post-2000 Audit          0                        0         During 2000 and 2001
Implementation           50                       50        2Q99
Contingency Planning     10                       10        On-going
Testing                  85                       80        1Q99
Remediation              100                      100       Done
Assessment               100                      100       Done
Awareness                100                      100       Done

* Target is original plan to achieve Year 2000 Readiness by June 30, 1999.

Costs:

The parent company has expended approximately $136
thousand pre-tax since inception on the Year 2000
project. The graph below indicates the amounts expensed
on the project to date and on a pro forma basis through
1999.
 
Graph:  Irwin Financial Parent Project Expenses
 (In millions (Pre-tax))
     
     1997--Actual        $33
     1998--Actual        103
     1999 *              115
     
*  Estimate as of December 31, 1998.

Risks:

The consequence of failure to achieve Year 2000
compliance at the parent company is likely to be
increased labor expense as certain automated procedures
are performed with additional human intervention. If
such failures caused the parent company to miss
deadlines for required filings, the company could face
fines or penalties for late reporting of regulatory
items. The company does not believe these risks pose a
material monetary risk.

Contingency Plans:

At this time the parent company cannot accurately
estimate the exact manner in which it would address
likely worst case scenarios, nor the financial or
operational impact of such scenarios.

Irwin Mortgage Corporation

Irwin Mortgage Corporation (IMC) is principally engaged
in the business of originating, selling, and servicing
mortgage loans. Its net income is dependent on
information technology and support systems which allow
the efficient production and servicing of loans.

Scope:

IMC has had teams addressing Year 2000 readiness
since August of 1997, and it has adopted the same seven-
phase plan to achieve readiness used by the Corporation
as discussed above. IMC participates with the
Corporation's Steering Committee and has specific
internal personnel whose time is dedicated solely to the
Year 2000 project. In addition, IMC has partnered with
the local office of a national IT consulting firm that
has assisted with staff augmentation and technical
expertise in the areas of code renovation and testing
applications. IMC has kept abreast of Year 2000 issues
by participating in local Year 2000 user groups and
national Year 2000 seminars.
   IMC is dependent on third parties in three principal
areas.

1. IMC has developed a technology strategy that
primarily uses systems developed by third parties and
has very few internally developed applications.

2. IMC depends on several key business partners to
successfully conduct operations (e.g., government
sponsored enterprises, investors, title companies,
mortgage brokers).

3. IMC needs a properly operating infrastructure (i.e.
power, communications, transportation) in order to
effectively conduct business.
   Consequently, IMC is focusing its Year 2000 readiness
efforts on working with each of these groups.
As with the Corporation's overall project plan, IMC's
plan includes computer hardware, software, and
environmental systems. IMC owns none of the properties
in which it conducts business, so the principal focus of
the environmental systems review has been to work with
the management companies of the facilities it leases.
Additionally, the company has worked with various user
groups to address the Year 2000 issue with public
service providers on which it depends.

Progress:

At present, IMC is generally on schedule with its
existing plan to achieve Year 2000 readiness by June 30,
1999. The first three phases of the plan (awareness,
assessment, and renovation) have been completed.

Graph:  Irwin Mortgage Project Plan Status
As of December 31, 1998
(Percent Completed)
                                                       Projected Actual
               Target Completion * Actual Completion   Completion Date
Post-2000 Audit          0              0              During 2000 and 2001
Implementation           50             80             2Q99
Contingency Planning     10             20             On-going
Testing                  75             65             1Q99
Remediation              100            100            Done
Assessment               100            100            Done
Awareness                100            100            Done

* Target is original plan to achieve Year 2000 readiness by June 30,1999.
 
Costs:

IMC has expended approximately $1.1 million pre-tax
since inception on the Year 2000 project. The graph
below indicates the amounts expensed in the project to
date and on a pro forma basis through 1999.

Graph:  Irwin Mortgage Project Expenses
(In millions (Pre-tax))
     1997--Actual        $40
     1998--Actual      1,046
     1999 *            1,370
     
* Estimate as of December 31, 1998.


Risks:

Failure to be Year 2000 compliant could cause the
malfunctioning of the loan origination or servicing
systems.
   If there were a failure within the loan origination
system that prevented IMC from closing mortgage loans,
the company could be adversely affected through delayed
or failed loan closings. This failure would reduce
current revenues and/or would increase the cost to
originate loans as more processes are performed with
alternative, less efficient processes. The company
intends to develop contingency plans which should allow
a certain amount of production to continue, thus
mitigating the loss of revenues.
   Another risk to the company could involve a failure
of one or more components in the loan servicing system.
The loan servicing system is a high-volume,
transactional system that makes logic decisions based on
dates (both current and future). For example, if the
payment posting module of the system fails, the company
may be unable to remit payments and information to IMC's
investors. The cost associated with this problem
includes fines for late reporting that could range from
a few hundred dollars to cease and desist orders that
could cost IMC all revenue related to an individual
investor's servicing portfolio.

Contingency Plans:

The company is in the early stages of its contingency
planning efforts. Its approach is to review the most
important business processes that were identified in the
assessment phase and work with the key personnel to
develop alternative plans in case the Year 2000
readiness efforts fail. As these plans are developed,
the company will be better able to quantify the dollar
costs of non-compliance.

Irwin Union Bank

Irwin Union Bank and Trust (the Bank) is engaged in
providing consumer and commercial banking, trust,
insurance, and brokerage services throughout central and
south central Indiana. The Year 2000 technology
compliance issue poses a significant challenge to the
organization as technology has been integrated with all
major business processes. The methodology is based on
the Corporation's seven-stage implementation plan.
Consistent with the Corporation's goal to be Year 2000
ready by June 30, 1999, the Bank is scheduled to
complete all Year 2000 technology testing by the end of
March 1999.

Scope:

Recognizing the impact of non-compliance, the Bank
began a formalized compliance program in 1997. The Bank
has adopted the same seven-phase plan to achieve
readiness used by the Corporation as discussed above.
The Bank participates with the Corporation's Steering
Committee. The Bank's plan includes computer hardware,
software, and environmental systems.
   The Bank's applications are primarily commercial, off-
the-shelf applications, including its core banking
technologies, facility controls, and desktop
applications. In addition, the Bank utilizes third-party
providers for retail brokerage and trust/employee
benefits account processing. Finally, the Bank has two
internally developed technologies, those for certificate
of deposit servicing and insurance originations that
require remediation due to non-compliance.

Progress:

The Bank involved over 25 staff members to
participate in Year 2000 technology discussions, vendor
appraisals, and compliance testing. A multi-level
testing strategy has been deployed within the Bank.
Depending on the level of vendor and third party
testing, the Bank has determined whether additional
testing is warranted. For those applications that were
certified by either a third party or vendor, the Bank
has requested and reviewed the test results and scripts.
An exception to this policy of reviewing the testing
procedures of others was deemed necessary for those
applications that were critical to the Bank's continued
operation. These "Hot List" technologies were, or are
currently in process of being, tested by the Bank staff
using either proxy testing, vendor scripts, or actual
date scenario testing with internally developed scripts.
   The testing procedures for third party providers are
more challenging for the Bank to assess Year 2000
compliance. The Bank has two critical technologies that
are provided through a service bureau environment:
retail brokerage and trust/employee benefits account
processing. The vendors of these services are both
industry-leading providers who have committed
significant resources to ensure Year 2000 compliance.
The providers have documented their efforts to the Bank
through ongoing disclosure of testing plans and results.
Both vendors targeted December 1998 for full compliance
and intend to complete on-site client testing within the
first quarter of 1999.
   The Bank's progress against each stage of its plan is
shown below.

Graph:  Irwin Union Bank Project Plan Status
As of December 31, 1998
Percent Completed
                                                       Projected Actual
               Target Completion * Actual Completion   Completion Date
Post-2000 Audit          0              0              During 2000 and 2001
Implementation           25             50             2Q99
Contingency Planning     30             80             On-going
Testing                  55             25             1Q99
Remediation              80             75             1Q99
Assessment               100            100            Done
Awareness                100            100            Done

* Target is original plan to achieve Year 2000 readiness by June 20, 1999.


   As noted on the previous graph, the Bank is behind on
testing due to its reliance on third parties on which it
is dependent for remediated applications. Conversely,
the Bank is ahead of schedule in implementation, having
taken advantage of delays in areas such as testing and
remediation to make additional implementation progress.

Costs:

The focus on commercial, off-the-shelf applications has
allowed the Bank to avoid major programming costs that
are required with proprietary systems. However, the
impact of testing existing systems has added significant
time requirements to the Bank's IT department. In 1998,
the Bank added a fifth IT professional to allow the
department to continue support of its 350 users while
conducting Year 2000 activities. In addition, the Bank
has incurred expense in the replacement and repair of
specific non-compliant systems. To date, expenditures
for the Year 2000 effort have totaled $165 thousand as
shown in the graph below.

Irwin Union Bank Project Expenses
(In millions (Pre-tax))
     
     1997--Actual        $46
     1998--Actual        119
     1999 *              165
     
* Estimate as of December 31, 1998.


Risks:

The impact of specific technologies utilized by the Bank
not being Year 2000 compliant could be significant,
although the risk has not yet been quantified by the
Bank. The inability to process, reconcile, and report
customer account information could create concern for
the safety and security of the customer funds. However,
customer funds which are eligible for FDIC insurance
will continue to be insured against loss regardless of
any Year 2000 disruption.

Contingency Plans:

The Bank's contingency planning approach identifies core
processes and corresponding critical activities to
develop alternative approaches to accomplishing the
desired outputs. The Bank has formed teams comprised of
the departmental managers and members of the IT
department to evaluate the impact of technology non-
compliance for each critical process. The IT manager of
the Bank is responsible for collecting the contingency
plans and ensuring completeness. At present, the Bank is
approximately 80% complete with completion targeted for
the second quarter of 1999.

Irwin Home Equity

The primary products of Irwin Home Equity (IHE) are
second mortgage and line of credit loans secured by real
estate. Since IHE relies on third-party processors and
off-the-shelf software, its efforts are mainly directed
to the testing of these applications. Principal
remediation efforts, therefore, have been the
responsibility of its vendors.

Scope:

The company's Year 2000 project plan was developed
within the guidelines set forth by the Corporation to
achieve Year 2000 readiness by June 30, 1999.
When compiling the plan, all functions of the
organization were considered, including computer
software, hardware, data communications, environmental
facilities, third party vendors, and other companies
with whom data is exchanged. IHE's team to manage the
Year 2000 effort consists of individuals representing
senior management, information systems, networks, loan
origination, loan servicing, accounting, and finance. In
addition, telecommunications, building, and office
services personnel are involved in various phases of the
project. A full-time project manager oversees the
effort.

Progress:

The company identified its mission-critical applications
and is proceeding on schedule with testing of those
modules first. Applications were considered mission
critical if they have an impact on customers or could
have a negative impact on the continued operation of the
company.
   The company has completed the installation of the
remediated versions of software for the majority of its
mission-critical applications and certain non-critical
software. Installation dates have been scheduled for the
remediated version of its loan origination system and
conversion to a new loan servicing system.
   The progress of the IHE Year 2000 team in meeting the
requirements of its project plan to achieve Year 2000 readiness
by June 30, 1999, is shown below.

Graph:  Irwin Home Equity Project Plan Status
As of December 31, 1998
(Percent Completed)
                                                       Projected Actual
               Target Completion * Actual Completion   Completion Date
Post-2000 Audit          0              0              During 2000 and 2001
Implementation           80             80             2Q99
Contingency Planning     10             10             On-going
Testing                  70             60             1Q99
Remediation              100            80             1Q99
Assessment               100            100            Done
Awareness                100            100            Done

* Target is original plan to achieve Year 2000 readiness by June 30, 1999.


Costs:

Few direct Year 2000 costs have been expended to date,
since all software and hardware upgrades were planned as
part of the normal business plan. Year 2000 costs have
largely been limited to internal staff time. Costs
directly associated with the Year 2000 remediation have
thus far totaled $72 thousand. Those costs and
anticipated future costs for the project are displayed
on the next page.

Graph:  Irwin Home Equity Project Expenses
(In millions (Pre-tax))
     
     1997--Actual        $   -
     1998--Actual         72.3
     1999 *              213.4
     
* Estimate as of December 31, 1998.


Risks:

As a result of IHE's dependence on third-party
providers, there is no assurance that all vendors will
achieve Year 2000 compliance in a timely manner. For
instance, should the loan origination system be
unavailable due to software problems or environmental
outages, the closing and funding processes would be
delayed. The loan servicing system could be unavailable,
requiring manual payment or billing methods to be
implemented, thereby incurring increased expenses. The
company anticipates that any Year 2000 failure would
lead principally to increased expenses rather than
failure to perform the origination, servicing, and
support functions of the company.

Contingency Plans:

IHE is in the early stages of its contingency planning
phase for Year 2000. It has determined that the most
likely worst case scenario would be environmental in
nature (lack of power, telephone, data center
communications). As contingency planning progresses, the
company will complete a detailed plan addressing the
potential impact a Year 2000 compliance failure by it or
its service providers could have on the company.

1998 Financial Statements
Irwin Financial Corporation and Subsidiaries

Management Report on Responsibility for Financial Reporting

The management of Irwin Financial Corporation and its
subsidiaries has the responsibility of preparing the
accompanying financial statements and for their integrity
and objectivity. The statements were prepared in
conformity with generally accepted accounting principles
and are not misstated due to material fraud or error. The
financial statements include amounts that are based on
management's best estimates and judgments. Management also
prepared the other information in the annual report and is
responsible for its accuracy and consistency with the
financial statements.
   The Corporation's financial statements have been
audited by PricewaterhouseCoopers LLP, independent
certified public accountants elected by the shareholders.
Management has made available to PricewaterhouseCoopers
all the Corporation's financial records and related data,
as well as the minutes of stockholders' and directors'
meetings. Furthermore, management believes that all
representations made to PricewaterhouseCoopers during its
audit were valid and appropriate.
   Management of the Corporation has established and
maintains a system of internal control that provides
reasonable assurance as to the integrity and reliability
of the financial statements, the protection of assets from
unauthorized use or disposition, and the prevention and
detection of fraudulent financial reporting. Assessments
of the system of internal control are based on criteria
for effective internal control over financial reporting
described in "Internal Control-Integrated Framework"
issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Management continually monitors the
system of internal control for compliance. The Corporation
maintains a strong internal auditing program that
independently assesses the effectiveness of the internal
controls and recommends possible improvements 
thereto. In addition, as part of its audit of the
Corporation's financial statements, PricewaterhouseCoopers
completed an assessment of selected internal accounting
controls to establish a basis for reliance thereon in
determining the nature, timing, and extent of audit tests
to be applied. Management has considered the internal
auditor's and PricewaterhouseCoopers' recommendations
concerning the Corporation's system of internal control
and has taken actions to respond appropriately to these
recommendations that we believe are cost effective in the
circumstances. Management believes that the Corporation's
system of internal control is adequate to accomplish the
objectives discussed herein.
   Management also recognizes its responsibility for
fostering a strong ethical climate so that the
Corporation's affairs are conducted according to the
highest standards of personal and corporate conduct. This
responsibility is characterized and reflected in the
Corporation's Guiding Philosopy, which is publicized
throughout the Corporation. This responsibility is also
reflected in the individual Codes of Conduct of each major
operating subsidiary of the Corporation, which are
publicized throughout each respective subsidiary. These
Codes of Conduct address, among other things, the
necessity of ensuring open communication within the
Corporation; potential conflicts of interests; compliance
with all domestic and foreign laws, including those
related to financial disclosures; and a confidentiality of
proprietary information. The Corporation maintains a
systematic program to assess compliance with these
policies.

John A. Nash, President
Thomas D. Washburn, Chief Financial Officer

Report of PricewaterhouseCoopers LLP  Independent Accountants

To the Shareholders and Board of Directors
Irwin Financial Corporation
Columbus, Indiana

In our opinion, the accompanying consolidated balance
sheets and the related consolidated statements of income,
of shareholders' equity and of cash flows present fairly,
in all material respects, the financial position of Irwin
Financial Corporation and its subsidiaries (the "Company")
at December 31, 1998 and 1997, and the consolidated
results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998,
in conformity with generally accepted accounting
principles. These financial statements are the
responsibility of the Company's management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted
auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating
the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion
expressed above.

PricewaterhouseCoopers LLP
Cincinnati, Ohio
January 21, 1999

Consolidated Statement of Income
<TABLE>
<CAPTION>
For year ended December 31, 1998
<S>                                                              <C>          <C>        <C>
                  (In thousands, except for per share amounts)      1998         1997       1996

Interest income:  Loans held for sale                            $65,160      $34,691    $30,943
                  Loans and leases                                52,329       56,490     52,203
                  Investment securities:
                  Taxable                                          3,867        7,311      6,876
                  Tax-exempt                                         299          275        333
                  Federal funds sold                                 731          674      1,290
                                                             -----------     --------   --------
                  Total interest income                          122,386       99,441     91,645
                                                             -----------     --------   --------
Interest expense: Deposits                                        23,340       19,963     17,732
                  Short-term borrowings                           35,048       23,788     22,115
                  Long-term debt                                     814          831      1,778
                                                             -----------     --------   --------
                  Total interest expense                          59,202       44,582     41,625
                                                             -----------     --------   --------
                  Net interest income                             63,184       54,859     50,020
                  Provision for loan and lease losses - Note 5     5,995        6,238      4,553
                  Net interest income after provision for
                  loan and lease losses                           57,189       48,621     45,467
                                                             -----------     --------   --------
Other income:     Loan origination income                         60,013       41,370     43,779
                  Gain on sale of loans                           64,074       38,610     34,248
                  Loan servicing fees                             57,284       53,257     46,877
                  Gain on sale of servicing assets                43,308       32,631     16,378
                  Trading gains (losses)                           1,366      (1,961)          -
                  Gain from sale of leasing assets                 5,241            -          -
                  Other                                           12,443        8,696      8,699
                                                             -----------     --------   --------
                                                                 243,729      172,603    149,981
                                                             -----------     --------   --------
Other expense:    Salaries                                       120,780       86,533     79,017
                  Employee benefits                               16,757       13,724     12,579
                  Office expense                                  12,868       10,583     10,387
                  Premises and equipment                          20,216       16,621     13,903
                  Amortization of servicing assets                24,267       15,755     14,331
                  Marketing and development                       11,789        7,697      7,365
                  Other                                           38,759       23,660     20,578
                                                             -----------     --------   --------
                                                                 245,436      174,573    158,160
                                                             -----------     --------   --------
                  Income before income taxes                      55,482       46,651     37,288
                  Income taxes                                    20,354       17,734     14,860
                                                             -----------     --------   --------
                                                                  35,128       28,917     22,428
                  Distribution on company-obligated
                  mandatorily redeemable preferred
                  securities of subsidiary trust - Note 15         4,625        4,473          -
                                                             -----------     --------   --------
                  Net income available to common shareholders    $30,503      $24,444    $22,428
                                                             -----------     --------   --------
Earnings per      Basic - Note 17                                  $1.40        $1.10      $0.99
share of common                                               ===========     ========   ========
stock:            Diluted - Note 17                                $1.38        $1.08      $0.98
                                                             ===========     ========   ========
                  Dividends per share of common stock              $0.16        $0.14      $0.12
                                                             ===========     ========   ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Consolidated Balance Sheet

December 31, 1998    (In thousands, except for shares)                        1998          1997
------------------------------------------------------------------------------
<S>                  <S>                                             <C>             <C>
Assets:              Cash and due from banks                               $68,942       $56,524
                     Federal funds sold                                      8,580            -
                                                                       -----------    ----------
                     Cash and cash equivalents                              77,522        56,524
                     Interest-bearing deposits with financial institutions  18,441        18,240
                     Trading assets                                         32,148        22,133
                     Investment securities - Note 3                         48,055        55,208
                     Loans held for sale                                   936,788       528,739
                     Loans and leases, net of unearned income - Note 4     556,991       611,093
                     Less: Allowance for loan and
                     lease losses - Note 5                                 (9,888)       (8,812)
                                                                           547,103       602,281
                     Servicing assets - Note 6                             117,129        83,044
                     Accounts receivable                                    71,087        54,261
                     Accrued interest receivable                            13,071        14,779
                     Premises and equipment - Note 7                        21,382        21,040
                     Other assets                                           63,453        40,545
                                                                       -----------    ----------
                                                                        $1,946,179    $1,496,794
                                                                       ===========    ==========
Liabilities and
Shareholders' Equity:
                     Deposits
                     Noninterest-bearing                                  $477,724      $287,556
                     Interest-bearing                                      389,516       346,012
                     Certificates of deposit over $100                     141,971        86,028
                                                                       -----------    ----------
                                                                         1,009,211      719,596
                     Short-term borrowings - Note 9                        644,861       512,275
                     Long-term debt - Note 10                                2,839         7,096
                     Other liabilities                                      96,036        81,917
                                                                       -----------    ----------
                     Total liabilities                                   1,752,947   1,320,884
                                                                       ===========    ==========
                     Company-obligated mandatorily redeemable preferred
                     securities of subsidiary trust - Note 15               47,999        47,927
                     Shareholders' equity
                     Preferred stock, no par value -
                     authorized 50,000 shares; none issued                       -             -
                     Common stock; no par value -
                     authorized 40,000,000 shares; issued
                     23,402,080 shares in 1998 and 1997; including
                     1,729,324 and 1,401,280 shares in treasury in
                     1998 and 1997, respectively                            29,965      29,965
                     Additional paid-in capital                              2,595           780
                     Net unrealized gain on investment securities
                     net of deferred income taxes of $57 in 1998
                     and $31 in 1997.                                           85            55
                     Retained earnings                                     142,232       115,414
                                                                       -----------    ----------
                                                                          174,877       146,214
                     Less treasury stock, at cost                         (29,644)      (18,231)
                     Total shareholders' equity                           145,233       127,983
                                                                       -----------    ----------
                                                                       $1,946,179    $1,496,794
                                                                       ===========    ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial 
statements.


Consolidated Statement of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
                                                        Net Unrealized
                                                           Gain (Loss)            Additional
(In thousands, except share                     Retained on Investment    Common   Paid-In  Treasury
and per share amounts)                  Total   Earnings    Securities     Stock   Capital     Stock
--------------------------------------------------------------------------------

<S>                                  <C>        <C>            <C>       <C>       <C>     <C>
Balance at January 1, 1996            $99,216    $74,648       $(10)     $29,965       $-   $(5,387)
                                     --------   --------     -------   ---------   ------   --------
Comprehensive Income: Note 1
  Net income                           22,428          -           -           -        -          -
Other Comprehensive Income                  -         66           -           -        -          -
    Total                              22,494          -           -           -        -          -
Cash dividends - $.012 per share*     (2,726)    (2,726)           -           -        -          -
Tax benefit on exercise of
  stock options                           516                                         516
Purchase of 178,875 shares of
  treasury stock*                     (1,931)          -           -           -        -    (1,931)
Sale of 256,736 shares of
  treasury stock*                       1,333      (266)           -           -    (516)      2,115
                                     --------   --------     -------   ---------   ------   --------
Balance at December 31, 1996          118,902     94,084          56      29,965        -    (5,203)
                                     ========   ========     =======   =========   ======   ========
Comprehensive Income: Note 1
Net income                                        24,444           -           -        -         -
Other Comprehensive Income                             -         (1)           -        -         -
  Total                                24,443          -           -           -        -         -
Cash dividends - $.014 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)
Sale of 204,238 shares of
  treasury stock*                       1,588          -           -           -      204     1,384
                                     --------   --------     -------   ---------   ------  --------
Balance at December 31, 1997          127,983    115,414          55      29,965      780   (18,231)
                                     ========   ========     =======   =========   ======  ========
Comprehensive Income: Note 1
Net income                                        30,503           -           -        -         -
Other Comprehensive Income                  -         30           -           -
  Total                                30,533          -           -           -        -         -
Cash dividends - $.016 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)
Sale of 168,411 shares of
  treasury stock*                       1,756      (212)           -           -      788     1,180
                                     --------   --------     -------   ---------   ------  --------
Balance at December 31, 1998         $145,233   $142,232         $85     $29,965   $2,595  $(29,644)
                                     ========   ========     =======   =========   ======  ========
</TABLE>
*Adjusted for the two-for-one stock splits December 30,1996 and May 27 ,1998.
The accompanying notes are an integral part of the consolidated financial
statements.

Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
                     For the year ended December 31, 1998             1998       1997         1996
-------------------------------------------------------------------------------
                     Net Income                                    $30,503    $24,444      $22,428
-------------------------------------------------------------------------------
<S>                 <C>                                          <C>        <C>          <C>
Adjustments to       Depreciation and amortization                   5,802      3,910        5,398
reconcile net        Amortization and impairment of
income to cash       servicing assets                               36,498     16,355       14,969
provided by          Provision for loan and lease losses             5,995      6,238        4,553
operating            Amortization of premiums, less accretion
activities:             of discounts                                 3,210      1,716        1,589
                     Increase in loans held for sale             (408,049)   (81,841)     (66,442)
                     Gain on sale of mortgage servicing           (43,308)   (32,631)     (16,378)
                     Net increase in trading assets               (10,015)    (9,472)     (12,661)
                     Other, net                                   (24,773)   (21,823)      (9,064)
                                                                ----------  ---------   ----------
                     Net cash used by operating
                     activities                                  (404,137)   (93,104)     (55,608)
                                                                ----------  ---------   ----------
Lending and          Proceeds from maturities/calls of
investing activities:                               investment securities:
                     Held-to-maturity                               10,645      6,542        5,045
                     Available-for-sale                                280      7,534       29,741
                     Proceeds from sales of available-for-sale
                     securities                                      6,000     26,309        2,028
                     Purchase of investment securities:
                     Held-to-maturity                              (8,932)    (3,868)     (14,286)
                     Available-for-sale                            (4,051)   (20,315)     (36,371)
                     Net increase in interest-bearing
                     deposits with financial institutions            (201)    (6,897)      (3,406)
                     Net increase in loans, excluding sales      (131,632)  (414,205)    (258,412)
                     Sale of loans                                 175,574    331,861      139,410
                     Gain on sale of leasing assets                  5,241          -            -
                     Additions to servicing assets               (165,910)   (84,781)     (81,045)
                     Proceeds from sale of servicing assets        138,635     90,734       65,163
                     Other, net                                    (4,148)    (5,930)      (5,651)
                                                                ----------  ---------   ----------
                     Net cash provided (used) by lending
                     and investing activities                       21,501   (73,016)    (157,784)
                                                                ----------  ---------   ----------
Financing activities:Net increase in deposits                      289,615       79,443  76,154
                     Net increase in short-term borrowings         132,586     50,409      151,604
                     Repayment of long-term debt                  (11,871)   (10,563)     (12,772)
                     Proceeds from long-term debt                    7,614          -        8,840
                     Sale of company-obligated manditorily
                     redeemable preferred securities of
`                    subsidiary trust                                    -    -47,927          -           
                     Purchase of treasury stock                   (12,593)   (14,412)      (1,931)
                     Proceeds from sale of stock for employee
                     benefit plans                                   1,756      1,588        1,332
                     Dividends paid                                (3,473)    (3,114)      (2,726)
                                                                ----------  ---------   ----------
                     Net cash provided by
                     financing activities                          403,634    151,278      220,501
                                                                ----------  ---------   ----------
                     Net increase (decrease) in cash and
                     cash equivalents                               20,998   (14,842)        7,109
                     Cash and cash equivalents at beginning
                     of year                                       $56,524     71,366       64,257
                                                                ----------  ---------   ----------
                     Cash and cash equivalents at end of year      $77,522    $56,524      $71,366
                                                                ==========  =========   ==========
Supplemental         Cash paid during the period:
disclosures of cash  Interest                                      $58,689    $45,554      $41,248
                                                                ==========  =========   ==========
flow information:    Income taxes                                  $18,947     $9,912       $6,230
                                                                ==========  =========   ==========

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

Notes to Consolidated Financial Statements

Note 1: Summary of Significant Accounting Policies

Consolidation: Irwin Financial Corporation and its
subsidiaries (the Corporation) provide financial services
throughout the United States. The Corporation is engaged in the
mortgage banking, community banking, and home equity
lending lines of business. Intercompany balances and
transactions have been eliminated in consolidation.

Use of Estimates: The preparation of financial statements
in conformity with generally accepted accounting
principles requires the Corporation to make estimates and
assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.

Trading Assets: Trading assets are stated at fair value.
Unrealized gains and losses are included in earnings.
Gains and losses are based on the adjusted cost of the
specific asset.

Securities: Those securities which the Corporation has the
positive intent and ability to hold until maturity are
classified as "held-to-maturity" and are stated at cost
adjusted for amortization of premium and accretion of
discount. Securities that might be sold prior to maturity
are classified as "available-for-sale" and are stated at
fair value. Unrealized gains and losses, net of the future
tax impact, are reported as a separate component of
shareholders' equity until realized. Investment gains and
losses are based on the adjusted cost of the specific
security.

Loans Held for Sale: Loans held for sale are carried at
the lower of cost or market, determined on an aggregate
basis.

Loans: Loan origination fees and costs are deferred and
the net amounts are amortized as an adjustment to yield.
When loans are sold, deferred fees and costs are included
with outstanding principal balances to determine gains or
losses. Interest income on loans is computed daily based
on the principal amount of loans outstanding. The accrual
of interest income is discontinued when a loan becomes 90
days past due as to principal or interest. Management may
elect to continue the accrual of interest when the
estimated net realizable value of collateral is sufficient
to cover the principal balance and accrued interest.

Direct Financing Leases: Interest and service charges, net
of initial direct costs, are deferred and reported as
income in decreasing amounts over the life of the lease,
which averages three to four years, so as to provide an
approximate constant yield on the outstanding principal
balance.

Allowance for Loan and Lease Losses: The allowance for
loan and lease losses is maintained at a level considered
adequate to provide for future loan and lease losses and
is based on management's evaluation of expected losses in
the portfolio. Loans are considered impaired if it is
probable that the Corporation will be unable to collect
the scheduled payments of principal or interest when due
according  to the contractual terms of the loan agreement.
The measurement of impaired loans is generally based on
the present value of expected future cash flows discounted
at the historical effective interest rate, except that all
collateral-dependent loans are measured for impairment
based on the fair value of the collateral.

Loan Securitizations: In 1997 the Corporation adopted
Statement of Financial Accounting Standards No 125,
"Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" (SFAS No. 125).
This standard established the accounting treatment to be
used for the securitization of all financial assets. The
adoption of this standard did not have a material effect
on the Corporation's financial position or results of
operations in 1997.

When the Corporation securitizes loans, it retains
servicing assets and interest-only strips. SFAS No. 125
requires that a portion of the cost of originating a loan
be allocated to the servicing asset and interest-only
strip based on their fair values relative to the loan as a
whole.

To determine the fair value of the servicing assets, the
Corporation uses the market prices under comparable
servicing sale contracts, when available, or alternatively
uses a valuation model that calculates the present value
of future cash flows to determine the fair value of the
servicing assets. In using this valuation method, the
Corporation incorporates assumptions that it is believed
market participants would use in estimating future net
servicing income which include estimates of the cost of
servicing per loan, the discount rate, float value, an
inflation rate, ancillary income per loan, prepayment
speeds, and default rates. Servicing assets are amortized
over the estimated lives of the related loans, which are
grouped based on loan characteristics, in proportion to
estimated net servicing income.

Servicing assets are recorded at the lower of their cost
or fair value. In determining servicing value impairment
at the end of the year, the servicing portfolio was
disaggregated into its predominant risk characteristics.
The Corporation has determined those risk characteristics
to be interest rate, loan type and investor type. These
segments of the portfolio were valued, using market prices
under comparable servicing sale contracts, when available,
or alternatively, using the same model as was used to
originally determine the fair value at origination, using
current market assumptions. The calculated value was then
compared with the book value of each segment to determine
the required reserve for impairment. It is reasonably
possible that a change in the impairment reserve will
occur in the near term. No reasonable estimate can be made
of the range of amounts of loss or gain.

Gains and losses on the sale of servicing assets are
recognized when the related sales contracts have been
executed, an adequate down payment has been received from
the buyer, and legal title and substantially all risks and
rewards of ownership have passed to the buyer. Gains and
losses are determined as the difference between the net
sales proceeds and the carrying value of the servicing
assets.

In the fourth quarter of 1998, the Corporation adopted
Statement of Financial Accounting Standards No. 134,
"Accounting for Mortgage-Backed Securities Retained after
the Securitization of Mortgage Loans Held for Sale by a
Mortgage Banking Enterprise" (SFAS No. 134). The adoption
of this standard had no effect on the Corporation's
financial position or results of operations in 1998. Under
the provisions of SFAS No. 134, the Corporation carries
interest-only strips at fair value. To determine the fair
value, the Corporation uses a valuation model that
calculates the present value of future cash flows. In
using this valuation method, the Corporation incorporates
assumptions that it is believed market participants would
use in estimating future cash flows. Such assumptions
include estimates of credit losses, prepayment speeds,
forward yield curves, and discount rates commensurate with
risks involved. Changes in the fair value of interest-only
strips are included in the Corporation's earnings as they
occur.

Derivative Instruments: The Corporation uses derivative
instruments to offset changes in the value of servicing
assets and interest-only strips. Derivative instruments
on the Corporation's balance sheet are classified as
trading assets and carried at market value. Changes in
market value are recorded as trading gains or losses on
the income statement. The Corporation uses forward
contracts to reduce its interest rate exposure
associated with mortgage banking activities.

On June 15, 1998, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133). The
Corporation will adopt SFAS No. 133 on January 1, 2000.
SFAS No. 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives will be
recorded each period in current earnings or other
comprehensive income, depending on whether a derivative
is designated as part of a hedge transaction and, if it
is, the type of hedge transaction. The Corporation does
not expect the adoption of this standard to have a
material effect on its financial position or results of
operations.

Premises and Equipment: Premises and equipment are
recorded at cost. Depreciation is determined by the
straight-line method.

Earnings Per Share: In 1997 the Corporation adopted
Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (SFAS No. 128). Under this
standard, earnings per share are calculated as "basic"
and "diluted" based on the weighted average number of
common shares outstanding during the year. Previous year
earnings per share calculations have been restated to
reflect the adoption of SFAS No. 128.

Income Taxes: A consolidated tax return is filed for all
eligible entities. Deferred income taxes are computed
using the liability method which establishes a deferred
tax asset or liability based on temporary differences
between the tax basis of an asset and liability and the
basis recorded in the financial statements.
Rehabilitation tax credits and low-income housing tax
credits are recorded as a reduction to the provision for
federal income taxes in the year the eligible buildings
are placed in service.

Cash and Cash Equivalents Defined: For purposes of the
statement of cash flows, the Corporation considers cash
and due from banks to be cash equivalents.

Comprehensive Income: On January 1, 1998, the
Corporation adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income."
This statement established standards for reporting
comprehensive income in financial statements.
Comprehensive income is defined as the change in equity
during a period from transactions and other events from
nonowner sources.

Reclassifications: Certain amounts in the 1997 and 1996
consolidated financial statements have been reclassified
to conform to the 1998 presentation.

Note 2:  Restrictions on Cash and Interest-Bearing Deposits with
Financial Institutions

Irwin Union Bank and Trust Company is required to
maintain a reserve balance with the Federal Reserve
Bank. The amount of the reserve balance at December 31,
1998 was $149.7 thousand. Additionally, the Corporation
is required to maintain reserve funds in connection with
its loan securitization activities. Included in interest-
bearing deposits with financial institutions at December
31, 1998, is $671.6 thousand of these reserve funds.

Note 3:  Investment Securities

The amortized cost, fair value, and carrying value of investments held at December 31,
1998 are as follows:

</TABLE>
<TABLE>
<CAPTION>
                                         Gross       Gross
                                     Amortized   Unrealized  Unrealized      Fair   Carrying
December 31, 1998                         Cost        Gains      Losses     Value      Value
---------------------------------------------------------------------------------------------------
(In thousands)

<S>                                    <C>             <C>         <C>    <C>        <C>
Held-to-Maturity:
U.S. Treasury and
Government obligations                 $32,158         $235          $-   $32,393    $32,158
Obligations of states and
political subdivisions                   5,207          117           -     5,324      5,207
Mortgage-backed securities               4,424          130           -     4,554      4,424
                                      --------      -------       -----   -------   --------
Total held-to-maturity                  41,789          482           -    42,271     41,789
                                      --------      -------       -----   -------   --------
Available-for-Sale:
U.S. Treasury and
Government obligations                   2,051           46         (1)     2,096      2,096
Mortgage-backed securities               4,074           57           -     4,131      4,131
Other                                        -           39           -        39         39
                                      --------      -------       -----   -------   --------
Total available-for-sale                 6,125          142         (1)     6,266      6,266
                                      --------      -------       -----   -------   --------
Total investments                      $47,914         $624        $(1)   $48,537    $48,055
                                      ========      =======       =====   =======   ========
</TABLE>
The amortized cost, fair value, and carrying value of investments held at 
December 31,1997 are as follows:
<TABLE>
<CAPTION>
                                      Gross         Gross
                                  Amortized     Unrealized   Unrealized       Fair   Carrying
December 31, 1997                      Cost          Gains       Losses      Value      Value
---------------------------------------------------------------------------------------------------
(In thousands)
<S>                                 <C>               <C>          <C>     <C>        <C>
Held-to-Maturity:
U.S. Treasury and
Government obligations              $35,733           $204           $-    $35,937    $35,733
Obligations of states and
political subdivisions                4,814            286          (5)      5,095      4,814
Mortgage-backed securities            5,968            202            -      6,170      5,968
                                    -------         ------        -----   --------   --------
Total held-to-maturity               46,515            692          (5)     47,202     46,515
                                    -------         ------        -----   --------   --------
Available-for-Sale:
U.S. Treasury and
Government obligations                6,010             43            -      6,053      6,053
Mortgage-backed securities            2,606             13          (1)      2,618      2,618
Other                                     -             22            -         22         22
                                    -------         ------        -----   --------   --------
Total available-for-sale              8,616             78          (1)      8,693      8,693
                                    -------         ------        -----   --------   --------
Total investments                   $55,131           $770         $(6)    $55,895    $55,208
                                    =======         ======        =====   ========   ========
</TABLE>
The amortized cost and estimated value of debt
securities at December 31, 1998, by contractual
maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or
without call or prepayment penalties.

                                        Amortized       Fair
(In thousands)                               Cost      Value
-------------------------------------------------------------------
Held-to-Maturity:
Due in one year or less                    $9,683     $9,814
Due after one year through five years       5,590      5,732
Due after five years through ten years      1,060      1,104
Due after ten years                        21,032     21,067
                                         --------   --------
                                           37,365     37,717
Mortgage-backed securities                  4,424      4,554
                                         --------   --------
                                           41,789     42,271
                                         --------   --------
Available-for-Sale:
Due in one year or less                        52         91
Due after one year through five years       1,999      2,044
                                         --------   --------
                                            2,051      2,135
Mortgage-backed securities                  4,074      4,131
                                         --------   --------
                                            6,125      6,266
                                         --------   --------
  Total investments                       $47,914    $48,537
                                         ========   ========

Investment securities amounting to $8.0 million were
pledged as collateral for borrowings and for other
purposes on December 31, 1998. During 1998, 1997 and
1996, sales of "available for sale" investments with
proceeds of $6.0 million, $26.3 million, and $2.0
million resulted in a gross gains of $58.9 thousand and
$56.1 thousand, and gross loss of $9.0 thousand,
respectively. Additionally in 1998, 1997, and 1996,
"held-to-maturity" investments totaling $2.8 million,
$7.0 million, and $1.5 million, respectively, were
called. Calls in 1998 resulted in a gross gain of $54.3
thousand. Calls in 1997 and 1996 were at par. Gains and
losses on investment securities are recorded as other
income.

Note 4:  Loans and Leases
<TABLE>
<CAPTION>
Loans and leases are summarized as follows:

December 31,                                          1998                  1997
------------------------------------------------------------------------------------
(In thousands)

<S>                                               <C>                   <C>
Commercial, financial, and agricultural           $278,834              $212,095
Real estate-construction                            97,253                73,279
Real estate-mortgage                               123,980               222,818
Consumer                                            51,730                39,985
Direct financing leases                              6,375                78,079
Unearned income                                    (1,181)              (15,163)
                                                 ---------             ---------
    Total                                         $556,991              $611,093
                                                 =========              ========
</TABLE>
Commercial loans are extended primarily to local
regional businesses and to local farming operations in
the market area of Irwin Union Bank. The Corporation
also provides consumer loans to the customers in that
market. Real estate loans and direct financing leases
are extended throughout the United States.

The Bank, in the normal course of business, makes loans
to directors, officers, and organizations and
individuals with which they are associated. Such loans
amounted to approximately $1.7 million and $1.9 million
at December 31, 1998 and 1997, respectively. During
1998, $24.3 million of new loans were made and
repayments totaled $26.5 million.

Note 5:  Allowance for Loan and Lease Losses

Changes in the allowance for loan and lease losses are summarized below:
<TABLE>
<CAPTION>
December 31,                                       1998         1997        1996
-------------------------------------------------------------------------------------
(In thousands)
<S>                                             <C>          <C>         <C>
Balance at beginning of year                     $8,812       $6,875      $5,033
Provision for loan and lease losses               5,995        6,238       4,553
Reduction due to sale of loans and leases       (2,976)      (1,694)       (930)
Recoveries                                          559          538         593
Charge-offs                                     (2,502)      (3,145)     (2,374)
                                               --------     --------    --------
Balance at end of year                           $9,888       $8,812      $6,875
                                               ========     ========    ========
</TABLE>
At December 31, 1998, 1997 and 1996, the recorded
investment in loans for which impairment has been
recognized in accordance with SFAS No. 114 and SFAS No.
118 totaled $1.6 million, $2.7 million, and $4.3
million, respectively. These loans had a corresponding
valuation allowance of $0.5 million, $0.7 million and
$1.2 million determined based on the fair value of the
loans' collateral. The Corporation recognized $102.9
thousand, $155.4 thousand, and $356.9 thousand of
interest income on these loans in 1998, 1997, and 1996,
respectively.

Note 6:  Servicing Assets

Included on the consolidated balance sheet at December
31,1998 and 1997 are $117.1 million and $83.0 million,
respectively, of capitalized servicing assets. These
amounts relate to the principal balances of loans
serviced by the Corporation for investors which
totaled $11.8 billion, $11.1 billion, and $11.0 billion
at December 31, 1998, 1997, and 1996, respectively.

The estimated fair value of servicing assets was $121.7
million at December 31, 1998. Carrying value
approximated fair value at December 31, 1997.

The Corporation has established a valuation allowance to
record servicing assets at their fair market value.
Changes in the allowance are summarized below:
<TABLE>
<CAPTION>
December 31,                                         1998          1997          1996
------------------------------------------------------------------------------------------
(In thousands)

<S>                                               <C>              <C>          <C>
Balance at beginning of year                         $600            $-          $909
Valuation changes during the period                11,120           600         (255)
Reductions due to sales of servicing assets             -             -         (654)
                                                ---------       -------       -------
Balance at end of year                            $11,720          $600            $-
                                                =========       =======        ======
</TABLE>
Note 7:  Premises and Equipment

Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
December 31,                                        1998           1997    Useful lives
-------------------------------------------------------------------------------
(In thousands)
<S>                                             <C>          <C>                    <S>
Land                                              $1,734         $1,651             n/a
Building and leasehold improvements               13,231         13,375      7-40 years
Furniture and equipment                           29,693         27,368      3-10 years
                                                --------       --------
                                                  44,658         42,394
Less accumulated depreciation                   (23,276)       (21,354)
                                                --------       --------
  Total                                          $21,382        $21,040
                                                ========       ========
</TABLE>
Note 8:  Lease Obligations

At December 31, 1998, the Corporation and its
subsidiaries leased certain branch locations and office
equipment used in its operations.

Operating lease rental expense was $13.7 million in
1998, $11.2 million in 1997, and $8.7 million in 1996.
The future minimum rental payments required under
noncancellable operating leases with initial or
remaining terms of one year or more are summarized as
follows:

Year ended December 31 (In thousands):
1999                                                            $7,301
2000                                                             6,258
2001                                                             4,894
2002                                                             2,486
2003                                                               483
Thereafter                                                         254
                                                              --------
Total minimum rental payments                                  $21,676
                                                              ========

Note 9:  Short-Term Borrowings

Short-term borrowings are summarized as follows:
<TABLE>
<CAPTION>
December 31,                                               1998             1997
------------------------------------------------------------------------------------
(In thousands)

<S>                                                    <C>              <C>
Repurchase agreements and drafts payable related to
  mortgage loan closings                               $172,126         $240,659
Commercial paper                                         26,617           16,375
Federal funds                                           266,000          142,650
Lines of credit                                         180,118          112,591
                                                      ---------        ---------
  Total                                                $644,861         $512,275
                                                      =========        =========
Weighted average interest rate                            5.34%            6.17%
</TABLE>
Repurchase agreements at December 31, 1998 and 1997
include $29.8 million and $141.9 million in mortgages
sold under agreements to repurchase, which are used to
fund mortgages prior to sale in the secondary market.
These repurchase agreements are collateralized by
mortgage loans held for sale.

Drafts payable related to mortgage loan closings totaled
$142.3 million and $93.6 million at December 31, 1998
and 1997. These borrowings are related to mortgage
closings at the end of December which have not been
presented to the banks for payment. When presented for
payment, these borrowings will be funded internally or
by borrowing from the lines of credit.

Commercial paper includes $18.8 million and $10.8
million at December 31, 1998 and 1997, respectively,
payable to a company owned by a significant shareholder
and director of the Corporation.

The Corporation has lines of credit available of $312.8
million to fund loan originations and operations.
Interest on the lines of credit is payable monthly or
quarterly with rates ranging from 4.82% to 8.06%.

Note 10:  Long-Term Debt

Long-term debt at December 31, 1998 consists of a note
payable with a variable interest rate averaging 7.94%
and maturing on July 1, 2002. Long-term debt as of
December 31, 1997 of $7.1 million consisted of various
notes payable at annual interest rates ranging from 6.3%
to 9.6% and maturity dates through April 3o, 2002.

Maturities of long-term debt are as follows:
(In thousands)
1999                                                              $730
2000                                                               788
2001                                                               853
2002                                                               468
                                                               -------
  Total                                                         $2,839
                                                               =======

Note 11 : Commitments and Contingencies

In the normal course of business, Irwin Financial
Corporation and its subsidiaries are subject to various
claims and other pending and possible legal actions.

As of December 31, 1998, Irwin Mortgage Corporation
(IMC) was a defendant to class action lawsuits relating
to the following: IMC's administration of mortgage
escrow accounts, IMC's right to require its borrowers to
pay premiums for private mortgage insurance, IMC's right
to pay broker fees to mortgage brokers, and IMC's
participation in a housing opportunity program.

As of December 31, 1998, Irwin Leasing Corporation (ILC)
and Irwin Financial Corporation were defendants in a
class action lawsuit alleging misrepresentations by a
manufacturer of certain equipment financed by ILC.

At present, it is not possible for the Corporation to
predict the likelihood of an unfavorable outcome or to
establish the possible extent or amount of liability or
potential exposure with respect to the litigation.

Note 12:  Financial Instruments with Off-Balance Sheet Risk

The Corporation is party to certain financial
instruments with off-balance sheet risk in the normal
course of business to meet the financial needs of its
customers and to reduce its own exposure to fluctuations
in interest rates. These financial instruments include
loan commitments, standby letters of credit, and forward
commitments relating to mortgage banking activities.
Those instruments involve, to varying degrees, elements
of credit and interest rate risk in excess of the
amounts recognized in the consolidated balance sheet.

The Corporation's exposure to credit loss, in the event
of nonperformance by the other party to the financial
instrument for commitments to extend credit and standby
letters of credit, is represented by the contractual
amount of those instruments. The collateral pledged for
standby letters of credit and commitments varies but may
include accounts receivable, inventory, property, plant,
and equipment, and residential real estate. Total
outstanding commitments to extend credit at December 31,
1998, were $394.8 million. These loan commitments
include $126.1 million of floating rate loan commitments
and $268.7 million of fixed rate loan commitments
related to commercial and mortgage banking activities.
The Corporation had approximately $14.2 million and
$15.1 million in irrevocable standby letters of credit
outstanding at December 31, 1998 and 1997, respectively.

Forward commitments are used in mortgage banking
activities to offset the interest rate risk associated
with mortgage loan commitments and loans held for sale.
The contract amount for forward contracts does not
represent exposure to credit loss. Forward commitments
related to mortgage banking activities were $810.5
million and $407.9 million at December 31, 1998 and
1997, respectively.

Derivative instruments are used to offset changes in the
value of servicing assets against the effects of
increased prepayment activity that generally results
from declining interest rates. To the extent that
interest rates increase, the value of servicing assets
increases while the value of these instruments declines.
The Corporation's servicing asset derivative instruments
consist entirely of long and short call options on U.S.
Treasury futures. At December 31, 1998, the carrying
value of these options was $4.8 million and the net
notional amount was $0, consisting of $750.0 million of
long positions and $750.0 million of short positions,
all of which related to 1998 additions and no
dispositions.

Derivative instruments are also used to offset changes
in the value of interest-only strips. Interest rate caps
are used when interest is received on fixed rate
securitized loans and the resulting security pays
interest at a variable rate. As interest rates change,
the values of the interest-only strips and interest rate
caps move in opposite directions. At December 31, 1998,
the carrying value of the interest rate caps was $540.1
thousand and the notional amount was $65.6 million, all
of which related to 1998 additions and no dispositions.

In 1998 the Corporation recorded $4.2 million of net
trading gains related to derivative instruments. The
Corporation is not exposed to loss on derivative
instruments beyond its initial outlay to acquire them.
There can be no assurance that the Corporation's
derivative instruments will generate gains in the
future.

Note 13:  Regulatory Matters

The Corporation and its bank subsidiary, Irwin Union
Bank (IUB), are subject to various regulatory capital
requirements administered by the federal and state
banking agencies. Under capital adequacy guidelines, the
Corporation and IUB must meet specific capital
guidelines that involve quantitative measures of their
assets, liabilities, and certain off-balance sheet items
as calculated under regulatory accounting practices. The
Corporation's and IUB's capital amounts and
classification are also subject to qualitative
judgements by the regulators about components, risk
weightings, and other factors.

Quantitative measures established by regulation to
ensure capital adequacy require the Corporation to
maintain minimum amounts and ratios (set forth in the
table below) of total and Tier 1 capital (as defined in
the regulations) to risk-weighted assets (as defined),
and Tier 1 capital to average assets (as defined).
Management believes, as of December 31, 1998, that the
Corporation and IUB meet all capital adequacy
requirements to which they are subject.

As of December 31, 1998 the Corporation and IUB were
categorized as well capitalized under the regulatory
framework for prompt corrective action. To be
categorized as well capitalized the Corporation and IUB
must significantly exceed minimum total risk-based, Tier
1 risk-based, and Tier 1 capital to average assets
ratios. There have been no conditions or events that
management believes have changed this category.

The Corporation's and IUB's actual capital amounts and
ratios are presented in the following table:
<TABLE>
<CAPTION>
      
                                                      Adequately           Well
                                          Actual            Capitalized         Capitalized
(In thousands)                     Amount     Ratio         Amount  Ratio       Amount   Ratio
---------------------------------------------------------------------------------------------------
<S>                              <C>           <C>        <C>         <C>     <C>         <C>
As of December 31, 1998:
Total Capital (to Risk-
Weighted Assets)
Irwin Financial Corporation      $203,311      12.3%      $132,742    8.0%    $165,927    10.0%
Irwin Union Bank                  111,935      10.1         88,712    8.0      110,890    10.0
Tier 1 Capital (to Risk-
Weighted Assets)
Irwin Financial Corporation       191,806      11.6         66,371    4.0       99,556     6.0
Irwin Union Bank                  105,215       9.5         44,356    4.0       66,534     6.0
Tier 1 Capital (to
Average Assets)
Irwin Financial Corporation       191,806      10.5         73,032    4.0       91,290     5.0
Irwin Union Bank                  105,215       7.9         53,162    4.0       66,452     5.0

                                                             Adequately               Well
                                          Actual            Capitalized            Capitalized
(In thousands)                     Amount     Ratio         Amount  Ratio       Amount   Ratio
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of December 31, 1997:

<S>                              <C>          <C>          <C>       <C>      <C>        <C>
Total Capital (to Risk-
Weighted Assets)
Irwin Financial Corporation      $185,536      14.9%       $99,951    8.0%    $124,939    10.0%
Irwin Union Bank                   72,150      10.3         55,949    8.0       69,936    10.0
Tier 1 Capital (to Risk-
Weighted Assets)
Irwin Financial Corporation       169,366      13.6         49,975    4.0       74,963     6.0
Irwin Union Bank                   65,549       9.4         27,974    4.0       41,961     6.0
Tier 1 Capital (to
Average Assets)
Irwin Financial Corporation       169,366      12.1         56,192    4.0       70,240     5.0
Irwin Union Bank                   65,549       7.3         36,088    4.0       45,110     5.0

As of December 31, 1996:

Total Capital (to Risk-
Weighted Assets)
Irwin Financial Corporation      $124,010     12.9%        $76,997   8.0%      $96,246   10.0%
Irwin Union Bank                   62,479      11.0         45,842    8.0       57,302    10.0
Tier 1 Capital (to Risk-
Weighted Assets)
Irwin Financial Corporation       117,416      12.2         38,498    4.0       57,748     6.0
Irwin Union Bank                   56,697      10.0         22,921    4.0       34,381     6.0
Tier 1 Capital (to
Average Assets)
Irwin Financial Corporation       117,416       9.8         47,741    4.0       59,676     5.0
Irwin Union Bank                   56,697       6.9         31,775    4.0       39,719     5.0
</TABLE>
Note 14:  Fair Value of Financial Instruments

Fair value estimates, methods and assumptions are set
forth below for the Corporation's financial instruments:

Cash and cash equivalents: The carrying amounts reported
in the balance sheet for cash and cash equivalents
approximate those assets' fair values.

Interest-bearing deposits with financial institutions:
The carrying amounts reported in the balance sheet for
interest-bearing deposits with financial institutions
approximate those assets' fair values.

Trading assets: The carrying amounts reported in the
balance sheet for trading assets approximate those
assets' fair values.

Investment securities: Fair values for investment
securities were based on quoted market prices when
available. For securities which had no quoted market
prices, fair values were estimated by discounting future
cash flows using current rates on similar securities.

Loans: For variable rate loans that reprice frequently
and with no significant change in credit risk, fair
values were based on carrying values. The fair values of
commercial, consumer, real estate-mortgage, and real
estate-construction loans were estimated using
discounted cash flow analyses, using interest rates
currently being offered for loans with similar terms to
borrowers with similar credit quality and for the same
remaining maturities.

Deposit liabilities: The fair value of demand deposits,
including interest and non-interest checking, passbook
savings, and certain types of money market accounts,
were assumed to be equal to the amount payable on demand
at the reporting date. The carrying amounts for variable-
rate money market accounts and certificates of deposit
approximate their fair values at the reporting date.
Fair values for fixed-rate certificates of deposit were
estimated using a discounted cash flow calculation that
applies interest rates currently being offered on
certificates with similar remaining maturities.

Short-term borrowings: For variable-rate short-term
borrowings that reprice frequently, fair values were
based on carrying values.

Long-term debt: The fair values of variable-rate long-
term debt, which reprices frequently, were based on
carrying values. For fixed-rate long-term debt, fair
values were estimated using discounted cash flow
analyses, based on current incremental borrowing rates
for similar types of borrowing arrangements.

Company-obligated mandatorily redeemable preferred
securities of subsidiary trust: Fair values were
estimated by discounting future cash flows using the
current rate offered on similar securities.

Forward contract commitments: The unrealized gains and
losses of forward contract commitments is based on the
difference between the settlement values of those
commitments and the quoted market values of the
underlying securities.

The estimated fair values of the Corporation's financial
instruments at December 31 are as follows:
<TABLE>
<CAPTION>
                                                 1998                      1997
                                     Carrying      Estimated       Carrying      Estimated
(In thousands)                         Amount     Fair Value         Amount     Fair Value
----------------------------------------------------------------------------------------------
<S>                                  <C>            <C>            <C>            <C>
Financial assets:
Cash and cash equivalents             $77,522        $77,522        $56,524        $56,524
Interest-bearing deposits with
  financial institutions               18,441         18,441         18,240         18,240
Trading assets                         32,148         32,148         22,133         22,133
Investment securities                  48,055         48,537         55,208         55,895
Loans held for sale                   936,788        959,300        528,739        530,207
Loans, net of allowance for
  loan losses                        $542,509       $542,631       $539,931       $540,785
</TABLE>

<TABLE>
<CAPTION>
                                                 1998                      1997
                                     Carrying      Estimated       Carrying      Estimated
                                       Amount     Fair Value         Amount     Fair Value
----------------------------------------------------------------------------------------------
Financial liabilities:
<S>                                <C>            <C>              <C>            <C>
Deposits                           $1,009,211     $1,009,349       $719,596       $719,669
Short-term borrowings                 644,861        644,861        512,275        512,275
Long-term debt                          2,839          2,839          7,096          7,138
Company-obligated mandatorily
  redeemable preferred securities
  of subsidiary trust                  50,000         57,757         50,000         55,038
Forward contract commitments               $-         $(551)             $-         $(396)
</TABLE>

The fair value estimates consider relevant market
information when available. Because no market exists for
a significant portion of the Corporation's financial
instruments, fair value estimates are determined
judgmentally and consider various factors, including
current economic conditions and risk characteristics of
certain financial instruments. Changes in factors, or
the weight assumed for the various factors, could
significantly affect the estimated values.

The fair value estimates are presented for existing on-
and off-balance sheet financial instruments without
attempting to estimate the value of the Corporation's
long-term relationships with depositors and the benefit
that results from the low cost funding provided by
deposit liabilities. In addition, significant assets
which were not considered financial instruments and were
therefore not a part of the fair value estimates include
lease receivables, servicing assets, and premises and
equipment.

Note 15:  Company-Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust

In January 1997, the Corporation issued $50.0 million of
trust preferred securities through IFC Capital Trust I,
a trust created and controlled by the Corporation. The
securities were issued at $25 per share with a
cumulative dividend rate of 9.25%, payable quarterly.
They have an initial maturity of 30 years with a 19-year
extension option. The securities are callable at par
after five years, or immediately, in the event of an
adverse tax development affecting the Corporation's
classification of the securities for federal income tax
purposes. They are not convertible into common stock of
the Corporation. The securities are shown on the balance
sheet net of capitalized issuance costs.

The sole assets of IFC Capital Trust I are
subordinated debentures of the Corporation with a
principal balance of $51.5 million, an interest rate of
9.25% and an initial maturity of 30 years with a 19-year
extension option.

Note 16:  Shareholders' Equity

The board of directors of the Corporation approved a two-
for-one stock split May 27, 1998 and December 30, 1996.
Previously reported shares and per share data have been
changed to reflect these splits. The shareholders of the
Corporation previously approved an increase in common
shares authorized from 7,500,000 to 40,000,000 as of
April 30, 1996.

The Corporation has a stock plan to compensate directors
of the Corporation with the Corporation's common stock,
if so elected, in lieu of cash for their annual retainer
fee and meeting fees. The number of shares issued under
the plan is based on the current market value of the
Corporation's common stock. The Corporation also has an
employee stock purchase plan for all qualified
employees. The plan provides for employees to purchase
common stock through payroll deduction at approximately
85% of the current market value.

The Corporation has three stock option plans
(established in 1997, 1992, and 1986) which provide for
the issuance of 4,280,000 shares of non-qualified and
incentive stock options. The exercise price of each
option, which has a ten year life and a vesting period
of four years beginning the year granted, is equal to
the market price of the Corporation's stock on the grant
date. Vested outstanding stock options have been
considered as common stock equivalents in the
computation of diluted earnings per share.

Activity in the above plans for 1998, 1997 and 1996 is
summarized as follows (adjusted for the two-for-one
stock splits on December 30, 1996 and May 27, 1998):
<TABLE>
<CAPTION>
                                 1998                    1997                    1996
                                       Weighted                Weighted            Weighted
                                        average                average              average
                            Number     exercise    Number      exercise  Number    exercise
                         of shares        price  of shares     price   of shares      price
-----------------------------------------------------------------------------------------------

<S>                      <C>              <C>    <C>            <C>    <C>            <C>
Outstanding at the
beginning of
the year                 1,231,220        $7.40  1,246,600      $5.83  1,237,600      $4.60
Granted                    133,710        27.23    178,220      13.69    209,400      10.66
Exercised                (103,880)         4.74  (187,400)       2.89  (175,896)       2.51
Cancelled                  (4,000)        15.92    (6,200)       9.62   (24,504)       8.93
                       -----------               ---------            ----------
Outstanding at the
end of year              1,257,050         9.71  1,231,220       7.40  1,246,600       5.83
                       ===========               =========            ==========
Exercisable at the
end of year              1,014,420        $7.48    948,506      $6.16    922,600      $4.82
                       ===========               =========            ==========
Available for
future grants            1,560,878               1,694,588               472,808
                       ===========               =========            ==========
</TABLE>

The Corporation has not recognized compensation cost for
the three non-qualified and incentive stock option plans
or the employee stock purchase plan. Had compensation
cost been determined based on the fair value at the
grant dates, the Corporation's net income and earnings
per share would have been reduced to the pro forma
amounts indicated as follows:
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
                                       1998                1997                  1996
------------------------------------------------------------------------------------------

<S>                                 <C>                 <C>                   <C>
Net income
  As reported                       $30,503             $24,444               $22,428
  Pro forma                          29,746              23,913                22,071
Basic earnings per share
  As reported                         $1.40               $1.10                 $0.99
  Pro forma                            1.37                1.07                  0.97
Diluted earnings per share
  As reported                         $1.38               $1.08                 $0.98
  Pro forma                            1.34                1.06                  0.97
</TABLE>
-------------------------------------------------------------------------------

The fair value of each option was estimated to be
$12.25, $6.35 and $4.57 on the date of the grant using
the binomial option-pricing model with the following
assumptions for 1998, 1997 and 1996, respectively: risk
free interest rates of 5.85%, 6.89% and 6.75%; dividend
yield of 1.00% for 1998 and 1997, and 1.25% for 1996;
and volatility of 0.250 for 1998 and 1997, and 0.228 for
1996. As of December 31, 1998, 1,253,050 options were
outstanding under these plans with exercise prices that
range between $1.26 and $28.56 and a remaining weighted
average contractual life of 5.83 years.

Note 17 :  Earnings Per Share

Earnings per share calculations are summarized as follows:
<TABLE>
<CAPTION>
                                         Basic Earnings       Effects of     Diluted Earnings
(In thousands, except per share amounts)      Per Share     Stock Options           Per Share
---------------------------------------------------------------------------------------------------
1998:
<S>                                             <C>               <C>                <C>
Net income                                      $30,503                $-            $30,503
Shares                                           21,732               407              22,139
                                              ---------         ---------            --------
Per-Share Amount                                  $1.40           $(0.02)               $1.38
                                              =========         =========            ========
1997:
Net income                                      $24,444                $-             $24,444
Shares                                           22,326               396              22,722
                                              ---------         ---------            --------
Per-Share Amount                                  $1.09           $(0.01)               $1.08
                                              =========         =========            ========
1996:
Net income                                      $22,428                $-             $22,428
Shares                                           22,716               314              23,030
                                              ---------         ---------            --------
Per-Share Amount                                  $0.99           $(0.02)               $0.97
                                              =========         =========            ========
</TABLE>
The Board of Directors of the Corporation approved a two-
for-one stock split effective May 27, 1998 and December
30, 1996. Previously reported per share data have been
adjusted to reflect these splits.

Note 18 :  Income Taxes

Income tax expense is summarized as follows:

(In thousands)                  1998            1997              1996
---------------------------------------------------------------------------
Current:
Federal                       $6,963          $8,086            $4,980
State                          2,048           2,268             1,574
                             -------        --------          --------
                               9,011          10,354             6,554
                             -------        --------          --------
Deferred:
Federal                        9,256           6,162             6,750
State                          2,087           1,218             1,555
                             -------        --------          --------
                              11,343           7,380             8,305
                             -------        --------          --------
Income tax expense:
Federal                       16,219          14,248            11,730
State                          4,135           3,486             3,130
                             -------        --------          --------
                             $20,354         $17,734           $14,860
                             =======        ========          ========

The Corporation's net deferred tax liability, which is
included in other liabilities on the consolidated
balance sheet, consisted of the following:

December 31,                                   1998               1997
--------------------------------------------------------------------------
(In thousands)

Mortgage servicing                        $(13,170)          $(31,025)
Lease financing income                        3,188            (5,654)
Deferred securitization income              (2,664)              (555)
Loan and lease loss reserve                   1,625              6,313
Deferred origination fees and costs         (2,274)            (1,454)
Deferred compensation                           596              2,626
Fixed assets                                   (46)            (1,085)
Other, net                                     (36)              (978)
                                         ----------         ----------
Net deferred tax liability                $(12,781)          $(31,812)
                                         ==========         ==========

A reconciliation of income tax expense to the amount
computed by applying the statutory income tax rate to
income before income taxes is summarized as follows:
<TABLE>
<CAPTION>
(In thousands)                                               1998         1997        1996
-----------------------------------------------------------------------------------------------
<S>                                                       <C>          <C>         <C>
Income taxes computed at the statutory rate               $17,800      $14,762     $12,864
Increase (decrease) resulting from:
  Nontaxable interest from investment
    securities and loans                                    (484)        (198)       (231)
  State franchise tax, net of federal benefit               2,810        2,330       2,076
  Change in deferred tax asset or liability
    resulting from tax rate change                              -          292         191
Other items - net                                             228          548        (40)
                                                         --------     --------    --------
                                                          $20,354      $17,734     $14,860
                                                         ========     ========    ========
</TABLE>
Note 19:  Employee Retirement Plan

The Corporation has a defined benefit plan covering
eligible employees of adopting subsidiaries. The
benefits are based on years of service and the
employees' compensation during their employment.
Contributions are intended to provide not only for
benefits attributed to service to date but also for
those expected to be earned in the future.

Plan assets are primarily invested in corporate and U.S.
bonds, mutual funds, and cash equivalents. The mutual
funds are invested primarily in common stocks and bonds.

The following table sets forth amounts recognized in the
Corporation's balance sheet:

December 31,                                       1998          1997
--------------------------------------------------------------------------
(In thousands)

Funded status                                       $31            $68
Unrecognized prior service cost                     136            155
Unrecognized net actuarial loss                     164            455
                                                 ------        -------
Prepaid pension cost                               $331           $678
                                                 ======        =======
Weighted average assumptions:
  Discount rate                                   6.75%          7.00%
  Return on plan assets                           9.00%          9.00%
  Rate of compensation increase                   3.75%          4.00%

A reconciliation of the change in projected benefit
obligation and plan assets is presented below:
                                                   1998          1997
-------------------------------------------------------------------------
(In thousands)

Benefit obligation at January 1,                 $9,046         $7,748
Service cost                                        568            475
Interest cost                                       622            566
Actuarial loss                                      192            493
Benefits paid                                     (245)          (236)
                                                -------        -------
Benefit obligation at December 31,              $10,183         $9,046
                                                =======        =======
Fair value of plan assets at January 1,          $9,114         $8,161
Return on plan assets                             1,345            974
Employer contributions                                -            215
Benefits paid                                     (245)          (236)
                                                 ------        -------
Fair value of plan assets at December 31,       $10,214         $9,114
                                                =======        =======

The net pension cost for 1998, 1997, and 1996 included
the following components:
<TABLE>
<CAPTION>
                                                   1998           1997          1996
-----------------------------------------------------------------------------------------
<S>                                               <C>            <C>          <C>
Service cost                                       $568           $475          $444
Interest cost                                       622            566           519
Return on plan assets                             (863)          (745)         (631)
Amortization of transition obligation                 -           (83)        (130)
Amortization of prior service cost                   20             20           20
Amortization of actuarial loss                        -              -           20
                                                -------        -------       -------
Net pension cost                                   $347           $233          $242
                                                =======        =======       =======
</TABLE>
Note 20:  Irwin Financial Corporation (Parent Only) Financial Information

The condensed financial statements of the parent
company as of December 31, 1998 and 1997, and for the
three years ended December 31, 1998 are presented
below:

Condensed Balance Sheet
(In thousands)

December 31,                                               1998         1997
--------------------------------------------------------------------------------
Assets:
Cash and short-term investments                            $799         $744
Investment in bank subsidiary                           105,807       65,673
Investments in non-bank subsidiaries                     81,308       69,901
Loans to non-bank subsidiaries                           60,221       97,688
Other assets                                             16,305        2,615
                                                      ---------    ---------
                                                       $264,440     $236,621
                                                      =========    =========
Liabilities:                                        
Short-term borrowings                                  $118,513     $103,722
Other liabilities                                           694        4,916
                                                      ---------    ---------
                                                        119,207      108,638
                                                      ---------    ---------
Shareholders' equity:
Common stock                                             29,965       29,965
Other shareholders' equity                              115,268       98,018
                                                      ---------    ---------
                                                        145,233      127,983
                                                      ---------    ---------
                                                       $264,440     $236,621

<TABLE>
<CAPTION>
Condensed Statement of Income  
(In thousands)

For the year ended December 31,                                   1998      1997      1996
-----------------------------------------------------------------------------------------------
<S>                 <S>                                       <C>        <C>       <C>
Income:             Cash dividends from non-bank
                    subsidiaries                               $18,331   $10,062   $10,053
                    Cash dividends from bank subsidiary          1,000     4,750     2,000
                    Interest income                              5,348     5,666     2,376
                    Other                                        3,002     2,219     2,507
                                                              --------  --------   -------
                                                                27,681    22,697    16,936
                                                              --------  --------   -------
Expenses:           Interest expense                             7,825     7,210     2,065
                    Salaries and benefits                        4,548     4,009     3,429
                    Other                                        2,056     1,799     1,963
                                                              --------  --------   -------
                                                                14,429    13,018     7,457
                                                              --------  --------   -------
                    Income before income taxes and equity in
                        undistributed income of subsidiaries    13,252     9,679     9,479
                    Income taxes (credits), less amounts
                        charged to subsidiaries               (14,079)   (2,590)   (2,666)
                                                              --------  --------   -------
                                                                27,331    12,269    12,145
                    Equity in undistributed income of
                        subsidiaries                             3,172    12,175    10,283
                                                              --------  --------   -------
                    Net income                                 $30,503   $24,444   $22,428
                                                              ========  ========   =======
</TABLE>
<TABLE>
<CAPTION>
Condensed Statement of Cash Flows
(In thousands)

                          For the year ended December 31,                 1998     1997       1996
--------------------------------------------------------------------------------------------------------
<S>                       <C>                                          <C>      <C>        <C>
                           Net income                                  $30,503   $24,444    $22,428
Adjustments to reconcile   Equity in undistributed income of
net income to cash provided    subsidiaries                             (3,172)  (12,175)   (10,283)
by operating activities:   Depreciation and amortization                   209       160         89
                           Increase (decrease) in taxes payable        (17,244)    1,046        315
                           Increase (decrease) in interest receivable      217      (314)       (39)
                           Increase (decrease) in interest payable          (4)      146        164
                           Net change in other assets and other
                           liabilities                                    1,529   (2,321)     1,393
                                                                       -------- --------   --------
                             Net cash provided by operating activities   12,038   10,986     14,067
                                                                       -------- --------   --------
Lending and investing      Net decrease (increase) in loans to
activities:                   subsidiaries                              37,467  (51,571)    (8,603)
                           Investments in subsidiaries                 (48,550)  (5,858)   (11,500)
                           Net additions to premises and equipment      (1,381)     (42)       (22)
                                                                       -------- --------   --------
                             Net cash used by lending and
                               investing activities                    (12,464) (57,471)   (20,125)
                                                                       -------- --------   --------
Financing activities:      Net increase in borrowings                    14,791   62,547      9,732
                           Payments to acquire treasury stock          (12,593) (14,411)    (1,931)
                           Proceeds from sale for employee
                             benefit plans                                1,756    1,588      1,332
                           Dividends paid                               (3,473)  (3,114)    (2,726)
                                                                       -------- --------   --------
                              Net cash provided by financing
                               activities                                   481   46,610      6,407
                                                                       -------- --------   --------
                           Net increase in cash and cash equivalents         55      125        349
                           Cash and cash equivalents at beginning
                             of year                                        744      619        270
                                                                       -------- --------   --------
                           Cash and cash equivalents at end of year        $799     $744       $619
                                                                       ======== ========   ========
Supplemental disclosures   Cash paid during the year:
of cash flow information:  Interest                                      $7,503   $7,064     $1,900
                                                                       ======== ========   ========
                           Income taxes                                 $18,947   $9,912     $6,230
                                                                       ======== ========   ========

</TABLE>
Note 21:  Industry Segment Information

The Corporation has three principal segments that
provide a broad range of financial services throughout
the United States. The mortgage banking line of
business originates, sells and services residential
first mortgage loans. The community banking line of
business provides local banking services. The home
equity lending line of business originates and services
home equity loans via direct mail and telemarketing.The
Corporation's other segments include equipment leasing
and the parent company. The accounting policies of each
segment are the same as those described in the "Summary
of Significant Accounting Policies."

Below is a summary of each segment's revenues, net income, and assets for 1998, 
1997, and 1996:
<TABLE>
<CAPTION>
                                Mortgage     Community    Home Equity
(In thousands)                   Banking       Banking        Lending      Other Consolidated
---------------------------------------------------------------------------------------------------
1998:
<S>                             <C>           <C>            <C>        <C>        <C>
Net interest income              $37,088       $13,797       $(3,260)     $9,564      $57,189
Intersegment interest           (12,565)         9,482          7,527    (4,444)            -
Other revenue                    205,487        12,063         19,151      1,787      238,488
Gain on sale of leases                 -             -              -      5,241        5,241
Intersegment revenues                230           155          1,255    (1,640)            -
                                --------      --------       --------   --------   ----------
Total net revenues               230,240        35,497         24,673     10,508      300,918
Other expense                    180,384        22,820         27,896     14,336      245,436
Intersegment expenses              1,810         2,201          3,445    (7,456)            -
                                --------      --------       --------   --------   ----------
Net income before taxes           48,046        10,476        (6,668)      3,628       55,482
Taxes                             19,193         3,967              -    (2,806)       20,354
                                --------      --------       --------   --------   --------
Net income                        28,853         6,509        (6,668)      6,434       35,128
Distribution on preferred
securities                             -             -              -      4,625        4,625
                                --------      --------       --------   --------   --------
Net income                       $28,853        $6,509       $(6,668)     $1,809      $30,503
                                --------      --------       --------   --------   ----------
Assets at December 31,          $877,904      $607,992       $311,974   $148,309   $1,946,179
                                ========      ========       ========   ========   ==========
1997:
Net interest  income             $19,325       $19,678         $7,379     $2,239      $48,621
Intersegment interest            (3,131)           116        (1,654)      4,669            -
Other revenue                    146,655         9,076         16,386        486      172,603
Intersegment revenues                 51           358              -      (409)            -
                                --------      --------       --------    -------   ---------
Total net revenues               162,900        29,228         22,111      6,985      221,224
Other expense                    125,005        19,674         20,372      9,522      174,573
Intersegment expenses              1,605           698             29    (2,332)            -
                                --------      --------       --------    -------   -----------
Net income before taxes           36,290         8,856          1,710      (205)       46,651
Taxes                             14,990         3,269              -      (525)       17,734
                                --------      --------       --------    -------   ---------
Net income                        21,300         5,587          1,710        320       28,917
Distribution on preferred
securities                             -             -              -      4,473        4,473
                                --------      --------       --------    -------   -----------
Net income                       $21,300        $5,587         $1,710   $(4,153)      $24,444
                                ========      ========       ========   ========   ==========
Assets at December 31,          $698,391      $539,233       $165,242    $93,928   $1,496,794
                                ========      ========       ========   ========   ==========
1996:
Net interest income              $18,164       $17,400         $7,340     $2,563      $45,467
Intersegment  interest           (1,441)            53          (568)      1,956            -
Other revenue                    131,749         9,250          8,648        334      149,981
Intersegment revenues                 97           134              -      (231)            -
                                --------      --------       --------    --------   ----------
Total net revenues               148,569        26,837         15,420      4,622      195,448
Other expense                    112,447        19,678         16,236      9,799      158,160
Intersegment expenses              2,027           633              -    (2,660)            -
                                --------      --------       --------    -------    -----------
Net income before taxes           34,095         6,526          (816)    (2,517)       37,288
Taxes                             13,673         2,272              -    (1,085)       14,860
                                --------      --------       --------   --------    ----------
Net income                       $20,422        $4,254         $(816)   $(1,432)      $22,428
                                ========      ========       ========   ========    ==========
Assets at December 31,          $555,486      $503,507       $145,113    $96,016   $1,300,122
                                ========      ========       ========    =======   ===========
</TABLE>
Irwin Financial Corporation
Directors

Sally Abrams Dean            Consultant,
                             Retired Senior Vice President,
                             Dillon, Read &Co. Inc.

David W. Goodrich            President-Indianapolis Operations
                             Colliers Turley Martin Tucker

John T. Hackett              Managing General Partner,
                             CID Equity Partners, L.P.

William H. Kling             President,
                             Minnesota Public Radio

Brenda J. Lauderback         Former President,
                             Footwear Wholesale Group,
                             Nine West Group

John C. McGinty, Jr.         President,
                             Peregrine Associates, Inc.

Irwin Miller                 Former Chairman,
                             Cummins Engine Company, Inc.

William I. Miller            Chairman,
                             Irwin Financial Corporation

John A. Nash                 President,
                             Irwin Financial Corporation

Lance R. Odden               President and Headmaster,
                             The Taft School

Theodore M. Solso            President and Chief Operating Officer,
                             Cummins Engine Company, Inc.


Irwin Financial Corporation
Senior Officers

William I. Miller        Chairman
John A. Nash             President
Thomas D. Washburn       Senior Vice President and Chief Financial Officer
Marie S. Ameis           Vice President and Controller
Gregory F. Ehlinger      Vice President and Treasurer
Jose M. Gonzalez         Vice President--Internal Audit
Theresa L. Hall          Vice President--Human Resources
Ellen Z. Mufson          Vice President--Legal
Michael F. Ryan          Vice President--Community Development
Matthew F. Souza         Vice President and Secretary