##### Table of Contents



UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, DC 20549
  FORM 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal Year Ended
    December 31, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE  SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to          .   Commission file number 0-6835
  IRWIN FINANCIAL
    CORPORATION
 (Exact name of Corporation as
    Specified in its Charter)
  Indiana(State or Other Jurisdiction
    of
    Incorporation or Organization)

35-1286807(I.R.S. Employer
    Identification No.)500 Washington Street Columbus,
    Indiana(Address of Principal
    Executive Offices)

47201(Zip Code)(812) 376-1909(Corporations
    Telephone Number, Including Area Code)

www.irwinfinancial.com(Web
    Site)   Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Class:

Common Stock*Title of Class:

8.70% Cumulative Trust
    Preferred Securities issued by IFC Capital Trust VI and the
    guarantee with respect thereto.  Securities registered pursuant to Section 12(g) of the
    Act: None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 o þ o
  Rule 12b-2 o þ
      *
    Includes associated rights.  Documents
    Incorporated by Reference
  Selected Portions of the Following Documents

Part of
    Form 10-K
    Into Which IncorporatedDefinitive Proxy Statement for Annual MeetingShareholders to be held May 9, 2007Exhibit Index on Pages 117 through 120

Part III




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##### 



FORM 10-K
    TABLE OF CONTENTS
  
  Part IItem 1



Business

2Item 1A



Risk
    Factors

11Item 1B



Unresolved Staff
    Comments

16Item 2



Properties

16Item 3



Legal
    Proceedings

17Item 4



Submission of
    Matters to a Vote of Security Holders

20Part IIItem 5



Market for
    -Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities

21Item 6



Selected Financial
    Data

22Item 7



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

24Item 7A



Quantitative and
    Qualitative Disclosures about Market Risk

68Item 8



Financial
    Statements and Supplementary Data

68Item 9



Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure

114Item 9A



Controls and
    Procedures

114Item 9B



Other
    Information

115Part IIIItem 10



Directors,
    Executive Officers, and Corporate Governance

116Item 11



Executive
    Compensation.

116Item 12



Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters

116Item 13



Certain
    Relationships and Related Transactions, and Director
    Independence

116Item 14



Principal
    Accountant Fees and Services

116Part IVItem 15



Exhibits and
    Financial Statement Schedules

117SIGNATURES

121Restated Articles of IncorporationCode of By-lawsSpecimen Common Stock CertificateAmended and Restated 2001 Stock PlanAmended and Restated Performance Unit PlanSupplemental Performance UnitComputation of Earnings Per ShareComputation of ratio of Earnings to Fixed ChargesCode of ConductSubsidiariesConsent of Independent Registered Public Accounting FirmConsent of Indepedent Registered Public Accounting Firm302 Certification of Chief Executive Officer302 Certification of Chief Financial Officer906 Certification of Chief Executive Officer906 Certification of Chief Financial Officer   1




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##### Table of Contents



PART I  Item 1.
    Business  General
        http://www.irwinfinancial.com.
  Form 10-K, Form 10-Q, Form 8-K, Form 10-K.
  Major
    Lines of Business
  Commercial
    Banking
    
    Irwin Union Bank and Trust Company  organized
    in 1871, is a full service Indiana state-chartered commercial
    bank with offices currently located throughout nine counties in
    central and southern Indiana, as well as in Michigan (Grandville
    (near Grand Rapids), Kalamazoo, Lansing and Traverse City);
    Nevada (Carson City and Las Vegas); and Utah (Salt Lake City). 2




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
    Irwin Union Bank, F.S.B.  is a full-service
    federal savings bank that began operations in December 2000.
    Currently we have offices located in Arizona (Mesa and Phoenix);
    California (Costa Mesa and Sacramento); Kentucky (Louisville);
    Missouri (Clayton (near St. Louis)); Nevada (Reno); New
    Mexico (Albuquerque); and Wisconsin (Milwaukee); We opened the
    Mesa, Reno and Albuquerque branches during 2006.    Commercial
    Finance
      line-of-business
    Home
    Equity Lending
  loan-to-value loan-to-value
     3




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##### Table of Contents



Discontinuance
    of Mortgage Banking
    Customer
    Base
    Competition
      Employees
    and Labor Relations
    Financial
    Information About Geographic Areas
    Supervision
    and Regulation
  General
     4




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and/or
    Bank
    Holding Company Regulation
    Minimum
    Capital Requirements
      
    common stockholders equity;
    qualifying noncumulative perpetual preferred stock;
    qualifying cumulative perpetual preferred stock (subject to some
    limitations, and including our Trust Preferred securities,
    of which $178 million qualified as Tier 1 capital as
    of December 31, 2006); and
    minority interests in the common equity accounts of consolidated
    subsidiaries;    
    Accumulated net gains (losses) on cash flow hedges and increase
    (decrease) recorded in accumulated other comprehensive income
    (AOCI) for defined benefit postretirement plans under
    FAS 158
    goodwill;
    credit-enhancing interest-only strips (certain amounts
    only); and
    specified intangible assets.    
    allowance for loan and lease losses;
    perpetual preferred stock and related surplus;
    hybrid capital instruments (including Trust Preferred
    securities, of which $20 million qualified as Tier 2
    capital as of December 31, 2006);
    unrealized holding gains on equity securities;
    perpetual debt and mandatory convertible debt securities;
    term subordinated debt, including related surplus; and
    intermediate-term preferred stock, including related securities. 5




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Expansion
    Dividends
        Bank
    and Thrift Regulation
       6




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Capital
    Requirements
  Bank Holding Company
    Regulation  Minimum Capital Requirements.
          Insurance
    of Deposit Accounts
   7




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Dividend
    Limitations
    clean-up (clean-up)
      Interstate
    Banking and Branching
  age-of-bank
 8




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Community
    Reinvestment
    Other
    Safety and Soundness Regulations
    Brokered
    Deposits
   9




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Anti-Money
    Laundering Laws
    Compliance
    with Consumer Protection Laws
      
    require lenders to disclose credit terms in meaningful and
    consistent ways;
    prohibit discrimination against an applicant in any consumer or
    business credit transaction;
    prohibit discrimination in housing-related lending activities;
    require certain lenders to collect and report applicant and
    borrower data regarding loans for home purchases or improvement
    projects;
    require lenders to provide borrowers with information regarding
    the nature and cost of real estate settlements;
    prohibit certain lending practices and limit escrow account
    amounts with respect to real estate transactions; and
    prescribe possible penalties for violations of the requirements
    of consumer protection statutes and regulations.     10




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Executive
    Officers
    Gregory F. Ehlinger
  Bradley J. Kime
  Joseph R. LaLeggia
  Jocelyn Martin-Leano
  Matthew F. Souza
  Thomas D. Washburn
  Item 1A.
    Risk
    Factors  An investment in our securities involves a number of risks.
    We urge you to read all of the information contained in this
    Report on
    Form 10-K.
    In addition, we urge you to consider carefully the following
    factors in evaluating an investment in our common shares.
  Risks
    Relating to General Economic Conditions and Interest
    Rates.
  We may be adversely affected by a general deterioration in
    economic conditions.
   11




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loan-to-value
  We may be adversely affected by interest rate changes.
  mark-to-market lower-of-cost-or-market
          Risks
    Relating to an Investment in Us.
  We have recently had financial performance below that of
    peers and have lost money in two of the past four quarters.
    We may need additional capital in the future and adequate
    financing may not be available to us on acceptable terms, or at
    all.
   12




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Our operations may be adversely affected if we are unable to
    secure adequate funding; our use of wholesale funding sources
    and securitizations exposes us to potential liquidity risk.
    loan-to-value and/or
    We have regulatory restrictions on our ability to receive
    dividends from bank subsidiaries.
    We have credit risk inherent in our asset portfolios.
    Certain of our consumer mortgage products are not sold by
    many financial institutions.
   13




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The generally accepted accounting principals (GAAP) for our
    activities have evolved in a meaningful manner in the past
    decade and we expect continued change.
    We rely heavily on our management team and key personnel, and
    the unexpected loss of key managers and personnel may affect our
    operations adversely.
    Ownership of our common stock is concentrated in persons
    affiliated with us.
    Our future success depends on our ability to compete
    effectively in a highly competitive financial services
    industry.
    Our shareholder rights plan, provisions in our restated
    articles of incorporation, our by-laws, and Indiana law may
    delay or prevent an acquisition of us by a third party.
     14




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We are the defendant in class actions and other lawsuits that
    could subject us to material liability.
  Legal
    Proceedings
  Our business may be affected adversely by the highly
    regulated environment in which we operate.
      and/or
 15




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Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Irwin
    Union Bank and Trust
    Irwin
    Union Bank, F.S.B.
    Irwin
    Commercial Finance Corporation
   16




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Irwin
    Home Equity
    Irwin
    Mortgage
    Item 3.
    Legal
    Proceedings  Culpepper v.
    Inland Mortgage Corporation
        Silke v.
    Irwin Mortgage Corporation
   17




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Cohens v.
    Inland Mortgage Corporation
  re-file
  Litigation
    in Connection with Loans Purchased from Community Bank of
    Northern Virginia
    Hobson v. Irwin Union Bank and Trust Company Hobson Hobson Truth-in-Lending Hobson
  Kossler v. Community Bank of Northern Virginia Kossler Kossler Kossler
  Hobson Kossler Hobson Hobson
  Hobson Kossler Hobson Hobson Kossler
  (Chatfield v.
    Irwin Union Bank and Trust Company, et al. Ransom v. Irwin Union Bank and Trust Company,
    et al.)
 18




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##### Table of Contents



Hobson, Chatfield Ransom.
  Hobson, Chatfield Ransom Kossler Kessler v. RFC,
    et al Kessler Kessler Kessler Kessler Kessler
  Putkowski v.
    Irwin Home Equity Corporation and Irwin Union Bank and Trust
    Company
    White v.
    Irwin Union Bank and Trust Company and Irwin Home Equity
    Corporation
  (White v. Irwin Union Bank & Trust,
    et al.).
   19




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Item 4.
    Submission
    of Matters to a Vote of Security Holders   20




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PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder
    Matters, and Issuer Purchases of Equity
    Securities.    Stock
    Prices and Dividends:
  TotalPrice Range


Quarter


Cash


DividendsHigh


Low


End


Dividends


For Year2005First quarter


28.53



22.11



23.02


$
0.10Second quarter


22.94



19.58



22.19


$
0.10Third Quarter


22.75



20.12



20.39


$
0.10Fourth Quarter


23.32



19.68



21.42


$
0.10


$
0.402006First quarter


21.96



19.10



19.33


$
0.11Second quarter


21.20



17.92



19.39


$
0.11Third Quarter


20.25



18.08



19.56


$
0.11Fourth Quarter


23.00



19.34



22.63


$
0.11


$
0.44     Sales of
    Unregistered Securities:
    Issuer
    Purchases of Equity Securities:
    Total Number of Shares


Approximate Dollars ValueTotal Number


Average


Purchase as Part of


of Shares that May Yet Beof Shares


Price Paid


Publicly Announced Plan


Purchased under the PlanCalendar Month

Purchased


per Share


or Program


or ProgramOctober


1,231


$
19.55



n/a



n/aNovember


13,275


$
22.51



n/a



n/aDecember


444


$
22.41



n/a



n/aDecember


133,424


$
22.51



133,424


$
46,996,061Total


148,374


$
22.49



133,424  21




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##### Table of Contents



Item 6.
    Selected
    Financial Data  Five-Year
    Selected Financial Data
    At or For Year Ended December 31,2006


2005


2004


2003


2002(Dollars in thousands except per share data)For the year:Net revenues

$
266,959


$
260,881


$
283,994


$
135,175


$
158,118Noninterest expense


210,688



204,039



203,778



144,637



142,690Income (loss) before income taxes


56,271



56,842



80,216



(9,462
)


15,428Provision for income taxes


18,870



20,595



31,492



(5,321
)


5,765Income (loss) before cumulative
    effect of change in accounting principle and discontinued
    operations


37,401



36,247



48,724



(4,141
)


9,663Cumulative effect of change in
    accounting principle, net of tax


















495Net income (loss) from continuing


37,401



36,247



48,724



(4,141
)


10,158(Loss) income from discontinued
    operations


(35,674
)


(17,260
)


19,721



76,958



43,170Net income

$
1,727


$
18,987


$
68,445


$
72,817


$
53,328Common Share Data:Earnings per share from continuing
    operations:(1)Basic

$
1.27


$
1.27


$
1.72


$
(0.15
)

$
0.38Diluted


1.25



1.26



1.64



(0.15
)


0.38Cash dividends per share


0.44



0.40



0.32



0.28



0.27Book value per common share


17.30



17.90



17.61



15.36



12.98Dividend payout
    ratio(7)


759.12
%


60.18
%


13.24
%


10.76
%


14.01
%Weighted average
    shares  basic


29,501



28,518



28,274



27,915



26,823Weighted average
    shares  diluted


29,690



28,841



31,278



28,240



27,065Shares outstanding  end
    of period


29,736



28,618



28,452



28,134



27,771At year end:Assets

$
6,237,958


$
6,646,524


$
5,235,820


$
4,988,359


$
4,910,392Residual interests


10,320



22,116



56,101



71,491



157,514Loans held for sale


237,510



513,554



227,880



204,535



75,540Loans and leases


5,238,193



4,477,943



3,440,689



3,147,094



2,798,006Allowance for loan and lease losses


74,468



59,223



43,441



63,005



50,320Servicing assets


31,949



34,445



47,807



31,949



28,537Deposits


3,551,516



3,898,993



3,395,263



2,899,662



2,693,810Short-term borrowings


602,443



997,444



237,277



429,758



993,124Collateralized debt


1,173,012



668,984



547,477



590,131



391,425Other long-term
    debt(2)


233,889



270,160



270,172



270,184



30,070Trust preferred
    securities(2)


















233,000Shareholders equity


530,502



512,334



501,185



432,260



360,555 22




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At or For Year Ended December 31,2006


2005


2004


2003


2002(Dollars in thousands except per share data)Selected Financial
    Ratios:Performance Ratios on
    continuing operations:Return on average assets


0.6
%


0.6
%


0.9
%


(0.1
)%


0.3
%Return on average equity


7.1



7.5



10.3



(1.1
)


3.2Net interest
    margin(3)


4.71



4.97



5.46



5.82



6.01Noninterest income to
    revenues(4)


14.8



19.7



28.6



(10.7
)


13.9Efficiency
    ratio(5)


69.8



70.8



68.3



79.4



70.7Loans and leases and loans held
    for sale to
    deposits(6)


117.3



108.0



80.7



87.1



89.9Average interest-earning assets to
    average interest-bearing liabilities


119



126



132



132



122Asset Quality Ratios:Allowance for loan and lease
    losses to:Total loans and leases


1.4
%


1.3
%


1.3
%


2.0
%


1.8
%Non-performing loans and leases


199



158



129



142



162Net charge-offs to average loans
    and leases


0.5



0.3



0.7



1.1



0.7Non-performing assets to total
    assets


0.9



0.8



0.9



1.1



0.8Non-performing assets to total
    loans and leases and other real estate owned


1.0



1.2



1.3



1.7



1.3Ratio of Earnings to Fixed
    Charges:Including deposit interest


1.2
x


1.4
x


2.0
x


0.9
x


1.2xExcluding deposit interest


1.5



2.1



3.3



0.8



1.5Capital Ratios:Average shareholders equity
    to average assets


8.1
%


8.0
%


9.0
%


7.6
%


8.0
%Tier 1 capital ratio


11.4



10.7



13.0



11.4



9.3Tier 1 leverage ratio


11.5



10.3



11.6



11.2



9.7Total risk-based capital ratio


13.4



13.1



15.9



15.1



13.2     (1)
    
    Earnings per share of common stock from continuing operations
    before cumulative effect of change in accounting principle
    related to SFAS 142, Goodwill and Other Intangible
    Assets, for the year ended December 31, 2002 was
    $0.36 basic and $0.36 diluted. Diluted earnings per share from
    continuing operations for all years except 2004 do not contain
    the effect of convertible trust preferred stock because they
    were antidilutive.(2)
    
    Beginning at December 31, 2003, the Trusts holding trust
    preferred securities were no longer consolidated in accordance
    with FASB Interpretation No. 46, Consolidation of
    Variable Interest Entities. See Collateralized and
    Other Long-Term Debt and footnote 1 to the
    consolidated financial statements for further discussion.(3)
    
    Net interest income divided by average interest-earning assets.(4)
    
    Revenues consist of net interest income plus noninterest income.(5)
    
    Noninterest expense divided by net interest income plus
    noninterest income.(6)
    
    Excludes first (but not second) mortgage loans held for sale and
    loans collateralizing secured financings.(7)
    
    Dividends paid divided by earnings from total operations. 23




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Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  About
    Forward-looking Statements
      
    our projected revenues, earnings or earnings per share, as well
    as managements short-term and long-term performance goals;
    projected trends or potential changes in our asset quality, loan
    delinquencies, charge-offs, reserves, asset valuations, capital
    ratios or financial performance measures;
    our plans and strategies, including the expected results or
    costs and impact of implementing or changing such plans and
    strategies;
    potential litigation developments and the anticipated impact of
    potential outcomes of pending legal matters;
    the anticipated effects on results of operations or financial
    condition from recent developments or events; and
    any other projections or expressions that are not historical
    facts.      
    potential changes in direction, volatility and relative movement
    (basis risk) of interest rates, which may affect consumer demand
    for our products and the management and success of our interest
    rate risk management strategies;
    competition from other financial service providers for
    experienced managers as well as for customers;
    staffing fluctuations in response to product demand or the
    implementation of corporate strategies that affect our work
    force;
    the relative profitability of our lending operations;
    the valuation and management of our portfolios, including the
    use of external and internal modeling assumptions we embed in
    the valuation of those portfolios and short-term swings in
    valuation of such portfolios;
    borrowers refinancing opportunities, which may affect the
    prepayment assumptions used in our valuation estimates and which
    may affect loan demand;
    unanticipated deterioration in the credit quality of our loan
    and lease assets, including deterioration resulting from the
    effects of natural disasters;
    unanticipated deterioration or changes in estimates of the
    carrying value of our other assets, including securities; 24




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
    difficulties in delivering products to the secondary market as
    planned;
    difficulties in expanding our businesses and obtaining funding
    sources as needed;
    changes in the value of our lines of business, subsidiaries, or
    companies in which we invest;
    changes in variable compensation plans related to the
    performance and valuation of lines of business where we tie
    compensation systems to
    line-of-business
    performance;
    unanticipated outcomes in litigation;
    legislative or regulatory changes, including changes in laws,
    rules or regulations that affect tax, consumer or commercial
    lending, corporate governance and disclosure requirements, and
    other laws, rules or regulations affecting the rights and
    responsibilities of our Corporation, bank or thrift;
    regulatory actions that impact our Corporation, bank or thrift,
    including the memorandum of understanding entered into as of
    March 1, 2007 between Irwin Union Bank and Trust and the
    Federal Reserve Bank of Chicago;
    changes in the interpretation of regulatory capital or other
    rules;
    the availability of resources to address changes in laws, rules
    or regulations or to respond to regulatory actions;
    changes in applicable accounting policies or principles or their
    application to our business or final audit adjustments,
    including additional guidance and interpretation on accounting
    issues and details of the implementation of new accounting
    methods;
    the final outcome and implications of the sale and
    discontinuance of operations for our conventional mortgage
    banking segment; or
    governmental changes in monetary or fiscal policies.    Strategy
      Identify market niches.
  Attract, develop and retain exceptional management
    with niche expertise.
 25




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Diversify capital and earnings
    risk.
  Reinvest for growth. start-up,
  Create and maintain risk management systems
    appropriate to our size, scale and
    scope.
      
    The conventional first mortgage industry becoming commoditized,
    making larger lenders more competitive.
    The volatility of production and mortgage servicing rights
    (MSRs) valuations increasing, as interest rates traded in a
    narrow range for a prolonged period of time, reflecting what we
    believe is the end of a long-term decline in interest rates.
    The relatively large size of IMC compared to the rest of the
    company causing this volatility to have more of an impact on our
    consolidated results than mortgage operations in other
    similar-sized banking companies.        Earnings
    Outlook
   26




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Critical
    Accounting Policies/Management Judgments and Accounting
    Estimates
  and/or
  Valuation
    of Mortgage Servicing Rights
  other-than-temporary
 27




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loan-to-value
  Allowance
    for Loan and Lease Losses
    and/or
    Accounting
    for Deferred Taxes
   28




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Incentive
    Servicing Fees
    Consolidated
    Overview
  2006


% Change


2005


% Change


2004Net income from continuing
    operations (millions)

$
37.4



3.2
%

$
36.2



(25.6
)%

$
48.7Net income (millions)


1.7



(90.9
)


19.0



(72.3
)


68.4Basic earnings per share from
    continuing operations


1.27



0.0



1.27



(26.2
)


1.72Basic earnings per share


0.06



(91.0
)


0.67



(72.3
)


2.42Diluted earnings per share from
    continuing operations


1.25



(0.8
)


1.26



(23.2
)


1.64Diluted earnings per share


0.05



(92.4
)


0.66



(71.1
)


2.28Return on average equity from
    continuing operations


7.1
%






7.5
%






10.3
%Return on average assets from
    continuing operations


0.6
%






0.6
%






0.9
%     Consolidated
    Income Statement Analysis
  Net
    Income from Continuing Operations
    Net
    Interest Income from Continuing Operations
   29




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December 31,2006


2005


2004Average





Yield/


Average





Yield/


Average





Yield/Balance


Interest


Rate


Balance


Interest


Rate


Balance


Interest


Rate(Dollars in thousands)AssetsInterest-earning assets:Interest-bearing deposits with
    financial institutions

$
72,110


$
2,925



4.06
%

$
80,508


$
1,816



2.26
%

$
85,304


$
794



0.93
%Federal funds sold


30,419



1,527



5.02



15,064



387



2.57



15,340



173



1.13Residual interests


13,512



1,536



11.37



39,942



6,948



17.40



67,544



12,509



18.52Investment securities


117,164



5,816



4.96



107,220



5,813



5.42



88,254



4,536



5.14Loans held for sale


865,061



73,708



8.52



1,217,367



94,324



7.75



1,034,032



80,003



7.74Loans and leases, net of unearned
    income(1)


4,872,487



437,900



8.99



3,890,077



312,970



8.05



3,324,333



246,288



7.41Total interest earning assets


5,970,753


$
523,412



8.77
%


5,350,178


$
422,258



7.89
%


4,614,807


$
344,303



7.46
%Noninterest-earning assets:Cash and due from banks


111,382











109,837











104,115Premises and equipment, net


34,349











30,543











31,219Other assets


470,845











572,028











582,978Less allowance for loan and lease
    losses


(67,383
)










(50,322
)










(56,311
)Total assets

$
6,519,946










$
6,012,264










$
5,276,808Liabilities and
    Shareholders EquityInterest-bearing liabilities:Money market checking

$
355,378


$
8,490



2.39
%

$
479,621


$
9,789



2.04
%

$
333,772


$
4,487



1.34
%Money market savings


1,169,465



48,673



4.16



1,118,655



29,631



2.65



1,071,617



15,127



1.41Regular savings


131,182



2,481



1.89



119,349



1,547



1.30



60,800



873



1.44Time deposits


1,558,128



72,576



4.66



1,204,421



42,894



3.56



907,736



24,000



2.64Short-term borrowings


543,719



33,663



6.19



421,085



21,244



5.05



307,929



9,583



3.11Collateralized debt


1,005,959



53,720



5.34



629,503



25,587



4.06



534,660



15,259



2.85Other long-term debt


246,948



22,486



9.11



290,188



25,676



8.85



270,178



22,896



8.47Total interest-bearing liabilities


5,010,779


$
242,089



4.83
%


4,262,822


$
156,368



3.67
%


3,486,692


$
92,225



2.65
%Noninterest-bearing liabilities:Demand deposits


756,624











989,234











1,006,558Other liabilities


226,379











279,784











311,017Shareholders equity


526,164











480,424











472,541Total liabilities and
    shareholders equity

$
6,519,946










$
6,012,264










$
5,276,808Net interest income





$
281,323










$
265,890










$
252,078Net interest income to average
    interest earning assets










4.71
%










4.97
%










5.46
%Net interest income from
    discontinued operations






23,884











34,423











39,064Net interest income from continuing
    operations





$
257,439










$
231,467










$
213,014     (1)
    
    For purposes of these computations, nonaccrual loans are
    included in daily average loan amounts outstanding.   30




---



##### Table of Contents



For the Year Ended December 31,2006 Over 2005


2005 Over 2004Volume


Rate


Total


Volume


Rate


Total(Dollars and thousands)Interest IncomeLoans and leases

$
79,038


$
45,892


$
124,930


$
41,914


$
24,768


$
66,682Mortgage loans held for sale


(27,297
)


6,681



(20,616
)


14,184



137



14,321Investment securities


539



(536
)


3



975



302



1,277Residual interests


(4,598
)


(814
)


(5,412
)


(5,112
)


(449
)


(5,561
)Interest bearing deposits with
    financial institutions


(189
)


1,298



1,109



(45
)


1,067



1,022Federal funds sold


396



744



1,140



(4
)


218



214Total


47,889



53,265



101,154



51,912



26,043



77,955Interest ExpenseMoney market checking


(2,536
)


1,237



(1,299
)


1,961



3,341



5,302Money market savings


1,346



17,696



19,042



664



13,840



14,504Regular savings


153



781



934



841



(167
)


674Time deposits


12,596



17,086



29,682



7,845



11,049



18,894Short-term borrowings


6,187



6,232



12,419



3,522



8,139



11,661Collateralized debt


15,302



12,831



28,133



2,707



7,621



10,328Other long-term debt


(3,826
)


636



(3,190
)


1,695



1,085



2,780Total


29,222



56,499



85,721



19,235



44,908



64,143Net Interest Income

$
18,667


$
(3,234
)

$
15,433


$
32,677


$
(18,865
)

$
13,812     Provision
    for Loan and Lease Losses from Continuing Operations
    Noninterest
    Income from Continuing Operations
  year-over-year
  Noninterest
    Expense from Continuing Operations
   31




---



##### Table of Contents



Consolidated
    Balance Sheet Analysis
    Investment
    Securities
    2006


2005


2004(Dollars in thousands)U.S. Treasury and government
    obligations

$
13,730


$
12,571


$
3,556Obligations of states and
    political subdivisions


3,545



3,544



3,746Mortgage-backed securities


45,187



28,331



31,556Other


65,968



72,896



69,364Total

$
128,430


$
117,342


$
108,222     Mortgage-backedSecurities andAfter One


After Five





FHLBI & FederalWithin


But Within


But Within


After Ten


Reserve BankOne Year


Five Years


Ten Years


Years


Stock


Total(Dollars in thousands)U.S. Treasury and government
    obligations

$
2,277


$
11,453


$



$



$



$
13,730Obligations of states and
    political subdivisions










620



2,925







3,545Other


3,380



















3,380Total


5,657



11,453



620



2,925







20,655Mortgage-backed securities


















45,187



45,187FHLB & Federal Reserve
    Bank stock


















62,588



62,588$
5,657


$
11,453


$
620


$
2,925


$
107,775


$
128,430Weighted Average YieldHeld-to-maturity


3.23
%


3.59
%


5.20
%


5.35
%


5.54
%Available-for-sale


4.22
%














5.06
%   available-for-sale
  Loans
    Held For Sale
   32




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##### Table of Contents



Loans and
    Leases
      December 31,2006


2005


2004


2003


2002(Dollars in thousands)Commercial, financial and
    agricultural

$
2,249,988


$
2,016,253


$
1,697,651


$
1,503,619


$
1,347,962Real estate construction


377,601



379,831



279,863



296,180



299,105Real estate mortgage


1,522,616



1,232,933



806,757



856,070



776,341Consumer


31,581



31,718



31,166



27,370



27,857Commercial financing:Franchise financing


699,969



462,413



330,496



207,341



130,247Domestic leasing


296,056



237,968



174,035



157,072



161,464Canadian leasing


358,783



313,581



265,780



207,355



133,784Unearned income:Franchise financing


(211,480
)


(125,474
)


(86,638
)


(56,837
)


(34,494
)Domestic leasing


(42,782
)


(33,267
)


(23,924
)


(22,038
)


(24,793
)Canadian leasing


(44,139
)


(38,013
)


(34,497
)


(29,038
)


(19,467
)Total

$
5,238,193


$
4,477,943


$
3,440,689


$
3,147,094


$
2,798,006     After OneWithin


But Within


After FiveOne Year


Five Years


Years


Total(Dollars in thousands)Commercial, financial and
    agricultural

$
713,580


$
988,360


$
548,048


$
2,249,988Real estate construction


265,446



104,797



7,358



377,601Real estate mortgage


68,466



153,615



1,300,535



1,522,616Consumer


19,185



11,555



841



31,581Commercial financing:Franchise financing


688



83,815



403,986



488,489Domestic leasing


11,681



240,048



1,545



253,274Canadian leasing


16,943



279,372



18,329



314,644Total

$
1,095,989


$
1,861,562


$
2,280,642


$
5,238,193Loans due after one year with:Fixed interest rates













$
2,624,491Variable interest rates














1,517,713Total













$
4,142,204  33




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##### Table of Contents



Allowance
    for Loan and Lease Losses
    December 31,2006


2005


2004(Dollars in thousands)Balance at beginning of year

$
59,223


$
43,441


$
63,005Provision for loan and lease losses


35,101



27,307



14,473Charge-offs


(30,810
)


(20,201
)


(28,180
)Recoveries


11,208



8,960



5,335Reduction due to sale of loans and
    leases and other










(627
)Reduction due to reclassification
    of loans


(246
)


(403
)


(10,808
)Foreign currency adjustment


(8
)


119



243Balance at end of period

$
74,468


$
59,223


$
43,441     Deposits
     34




---



##### Table of Contents



December 31,2006


2005


2004(Dollars in thousands)Under 3 months

$
404,684


$
419,574


$
266,2003 to 6 months


202,466



230,024



117,3396 to 12 months


230,561



231,397



91,276after 12 months


270,070



341,851



169,796Total Certificates of deposit

$
1,107,781


$
1,222,846


$
644,611Brokered deposits

$
541,903


$
638,007


$
279,102Mortgage banking escrow deposits
    over $100,000

$
324,913


$
412,444


$
680,812Demand deposits


364,434



342,913



295,195Money market accounts


1,442,034



1,602,337



1,545,700Savings and time deposits


593,571



544,814



356,776Commercial banking core deposits

$
2,400,039


$
2,490,064


$
2,197,671   Short-Term
    Borrowings
        Collateralized
    and Other Long-Term Debt
    Other
    Long-Term Debt
   35




---



##### Table of Contents



Capital
      December 31,2006


2005


2004(Dollars in thousands)Tier 1 capital

$
712,403


$
675,316


$
637,875Tier 2 capital


125,351



154,128



143,612Total risk-based capital

$
837,754


$
829,444


$
781,487Risk-weighted assets

$
6,258,927


$
6,317,797


$
4,908,012Risk-based ratios:Tier 1 capital


11.4
%


10.7
%


13.0
%Total capital


13.4



13.1



15.9Tier 1 leverage ratio


11.5



10.3



11.6Ending shareholders equity
    to assets


8.5



7.7



9.6Average shareholders equity
    to assets


8.1



8.0



9.0   Other
    Safety and Soundness Regulations
   36




---



##### Table of Contents



Interest RateatOrigination

December 31,


Maturity

$ AmountName

Date

2006


Date

in thousands


Dividend

OtherIFC Capital Trust VI

Oct 2002


8.70


Sep 2032

$
34,500


quarterlyIFC Statutory Trust VII

Nov 2003


8.26


Nov 2033


50,000


quarterly

rate changes quarterly at three
    month LIBOR plus 290 basis pointsIFC Capital Trust VIII

Aug 2005


5.96


Aug 2035


51,750


quarterly

fixed rate for 5 years,
    variable rate of 3 month LIBOR plus 153 basis points
    thereafterIFC Capital Trust IX

Apr 2006


6.69


Apr 2036


31,500


quarterly

fixed rate for 5 years,
    variable rate of 3 month LIBOR plus 149 basis points
    thereafterIFC Capital Trust X

Dec 2006


6.53


Dec 2036


15,000


quarterly

fixed rate for 5 years,
    variable rate of 3 month LIBOR plus 175 basis points
    thereafterIFC Capital Trust XI

Dec 2006


7.09


Mar 2037


15,000


quarterly

floating rate of 3 month LIBOR
    plus 174 basis$
197,750   15-year
    free-up
   37




---



##### Table of Contents



Inflation
    Cash Flow
    Analysis
    Earnings
    by Line of Business
    
    Commercial Banking
    Commercial Finance
    Home Equity Lending 38




---



##### Table of Contents



Year Ended December 31,2006


2005


2004(Dollars in thousands)Net income (loss):Commercial Banking

$
30,860


$
27,379


$
23,424Commercial Finance


12,600



7,433



3,217Home Equity Lending


1,538



2,252



28,067Other (including consolidating
    entries)


(7,597
)


(817
)


(5,984
)Income from continuing operations


37,401



36,247



48,724Discontinued operations


(35,674
)


(17,260
)


19,721$
1,727


$
18,987


$
68,445  39




---



##### Table of Contents



Commercial
    Banking
    Year Ended December 31,2006


2005


2004


2003


2002(Dollars in thousands)Selected Income Statement
    Data:Interest income

$
229,193


$
183,052


$
127,029


$
112,679


$
110,107Interest expense


(104,467
)


(72,294
)


(37,412
)


(33,663
)


(40,253
)Net interest income


124,726



110,758



89,617



79,016



69,854Provision for loan and lease losses


(5,734
)


(5,286
)


(3,307
)


(5,913
)


(9,812
)Other income


18,173



16,945



18,316



21,070



16,081Total net revenue


137,165



122,417



104,626



94,173



76,123Operating expense


(88,932
)


(77,062
)


(65,450
)


(56,699
)


(50,029
)Income before taxes


48,233



45,355



39,176



37,474



26,094Income taxes


(17,373
)


(17,976
)


(15,752
)


(14,997
)


(10,009
)Net income

$
30,860


$
27,379


$
23,424


$
22,477


$
16,085Selected Balance Sheet Data at
    End of Period:Assets

$
3,103,547


$
3,162,398


$
2,622,877


$
2,203,965


$
1,969,956Securities and short-term
    investments


55,116



340,811
(1)


327,664
(1)


107,668



44,433Loans and leases


2,901,029



2,680,220



2,223,474



1,988,633



1,823,304Allowance for loan and lease losses


(27,113
)


(24,670
)


(22,230
)


(22,055
)


(20,725
)Deposits


2,635,380



2,797,635



2,390,839



1,964,274



1,733,864Shareholders equity


241,556



195,381



143,580



162,050



154,423Daily Averages:Assets

$
3,143,439


$
3,025,717


$
2,476,835


$
2,119,944


$
1,802,896Loans and leases


2,797,853



2,460,560



2,094,190



1,914,608



1,693,426Allowance for loan and lease losses


(26,175
)


(23,656
)


(22,304
)


(21,895
)


(17,823
)Deposits


2,826,446



2,766,289



2,258,538



1,894,406



1,583,926Shareholders equity


218,076



157,545



147,759



147,886



140,249Shareholders equity to assets


6.95
%


5.21
%


5.97
%


6.98
%


7.78
%     (1)
    
    Includes $317 million and $293 million of
    inter-company investments in 2005 and 2004, respectively, the
    result of excess liquidity at the commercial banking line of
    business related to deposit growth in excess of its asset
    deployment needs. The funds have been redeployed in earning
    assets at our other lines of business.  Overview
   40




---



##### Table of Contents



Commercial
    Banking Strategy
    
    the market is a metropolitan area with attractive business
    demographics and diversification displaying evidence of
    sustainable growth;
    recent banking merger and acquisition activity has occurred in
    the market and management believes that the acquirer is viewed
    by customers as an outsider
    and/or not
    responsive to local small business needs; and
    we are able to attract experienced, senior banking staff from
    the new market to manage our operation there.      Portfolio
    Characteristics
    December 31,2006


2005


2004Weighted








Weighted








WeightedLoans


Percent


Average


Loans


Percent


Average


Loans


Percent


AverageMarkets

Outstanding


of Total


Coupon


Outstanding


of Total


Coupon


Outstanding


of Total


Coupon(Dollars in thousands)Indianapolis

$
561,343



19.3
%


7.6
%

$
560,775



20.9
%


7.0
%

$
504,853



22.7
%


5.9
%Central and Western Michigan


519,348



17.9



7.7



516,444



19.3



7.1



488,587



22.0



5.9Southern Indiana


475,051



16.4



7.2



454,236



16.9



6.5



445,981



20.1



5.8Phoenix


452,919



15.6



7.9



447,548



16.7



7.6



288,555



13.0



6.3Las Vegas


154,218



5.3



8.1



112,761



4.2



7.5



70,109



3.2



6.1Other


738,150



25.5



7.9



588,456



22.0



7.2



425,389



19.0



5.7Total

$
2,901,029



100.0



7.7
%

$
2,680,220



100.0



7.1
%

$
2,223,474



100.0



5.9
%   41




---



##### Table of Contents



December 31,2006


2005


2004Weighted








Weighted








WeightedCore


Percent


Average


Core


Percent


Average


Core


Percent


AverageMarkets

Deposits


of Total


Coupon


Deposits


of Total


Coupon


Deposits


of Total


CouponIndianapolis

$
259,835



10.8
%


2.4
%

$
259,196



10.4
%


2.1
%

$
278,785



12.7
%


1.4
%Central and Western Michigan


231,666



9.7



3.4



238,742



9.6



2.6



221,917



10.1



1.7Southern Indiana


630,060



26.3



2.8



674,923



27.1



2.1



671,342



30.5



1.3Phoenix


179,502



7.5



3.4



190,428



7.6



2.4



155,475



7.1



1.6Las Vegas


467,708



19.5



4.1



413,541



16.6



3.5



287,910



13.1



2.0Other


631,268



26.2



3.5



713,233



28.7



3.3



582,242



26.5



2.1Total

$
2,400,039



100.0
%


3.3
%

$
2,490,063



100.0
%


2.7
%

$
2,197,671



100.0
%


1.7
%   Net
    Income
    Net
    Interest Income
    Year Ended December 31,2006


2005


2004(Dollars in thousands)Net interest income

$
124,726


$
110,758


$
89,617Average interest earning assets


3,028,527



2,914,352



2,392,049Net interest margin


4.12
%


3.80
%


3.75
%     Provision
    for Loan and Lease Losses
   42




---



##### Table of Contents



Noninterest
    Income
    Year Ended December 31,2006


2005


2004(Dollars in thousands)Service charges on deposit accounts

$
4,307


$
4,008


$
5,071Gain from sales of loans


2,328



2,943



2,947Trust fees


1,971



1,964



1,902Insurance commissions, fees and
    premiums


1,955



1,827



2,143Brokerage fees


1,369



1,452



1,465Loan servicing fees


1,523



1,473



1,374Amortization of servicing assets


(1,140
)


(1,306
)


(1,559
)Recovery of servicing assets






248



582Other


5,860



4,336



4,391Total noninterest income

$
18,173


$
16,945


$
18,316     Operating
    Expenses
    Year Ended December 31,2006


2005


2004(Dollars in thousands)Salaries and employee benefits

$
53,111


$
47,934


$
40,422Other expenses


35,821



29,128



25,028Total operating expenses

$
88,932


$
77,062


$
65,450Efficiency ratio


62.2
%


60.3
%


60.6
%Number of employees at period
    end(1)


585



586



525     (1)
    
    On a full time equivalent basis    Balance
    Sheet
   43




---



##### Table of Contents



Credit
    Quality
    December 31,2006


2005


2004(Dollars in thousands)Nonperforming loans

$
14,455


$
19,483


$
21,247Other real estate owned


4,423



7,892



1,533Total nonperforming assets

$
18,878


$
27,375


$
22,780Nonperforming assets to total
    assets


0.61
%


0.87
%


0.87
%Allowance for loan losses

$
27,113


$
24,670


$
22,230Allowance for loan losses to total
    loans


0.93
%


0.92
%


1.00
%For the Period Ended:Provision for loan losses

$
5,734


$
5,286


$
3,307Net charge-offs


3,291



2,847



3,133Net charge-offs to average loans


0.13
%


0.12
%


0.15
%     December 31,Markets

2006


2005


2004Indianapolis


0.24
%


0.58
%


0.10
%Central and Western Michigan


2.72



3.76



3.40Southern Indiana


0.14



0.24



0.26Phoenix


0.52



0.60



1.19Las Vegas


0.00



0.00



0.00Other


0.06



0.16



0.21Total


0.65
%


1.02
%


1.02
%  44




---



##### Table of Contents



Commercial
    Finance
  Year Ended December 31,2006


2005


2004


2003


2002(Dollars in thousands)Selected Income Statement
    Data:Net interest income

$
42,545


$
33,683


$
28,084


$
22,766


$
15,140Provision for loan and lease losses


(6,701
)


(6,211
)


(6,798
)


(11,308
)


(8,481
)Noninterest income


8,018



7,437



6,275



5,868



4,397Total net revenue


43,862



34,909



27,561



17,326



11,056Operating expense


(23,955
)


(22,224
)


(18,782
)


(15,072
)


(12,122
)Income (loss) before taxes


19,907



12,685



8,779



2,254



(1,066
)Income taxes


(7,307
)


(5,252
)


(5,562
)


(461
)


513Income (loss) before cumulative
    effect of change in accounting principle


12,600



7,433



3,217



1,793



(553
)Cumulative effect of change in
    accounting principle


















495Net income (loss)

$
12,600


$
7,433


$
3,217


$
1,793


$
(58
)Selected Balance Sheet Data at
    End of Period:Total assets

$
1,073,552


$
831,657


$
636,604


$
474,915


$
343,384Loans and leases


1,056,406



817,208



625,140



463,423



345,844Allowance for loan and lease losses


(13,525
)


(10,756
)


(9,624
)


(11,445
)


(7,657
)Shareholders equity


88,587



71,568



55,993



44,255



29,236Selected Operating
    Data:Net charge-offs

$
3,678


$
4,806


$
8,235


$
7,868


$
5,401Net interest margin


4.55
%


4.80
%


5.33
%


5.63
%


5.07
%Total funding of loans and leases

$
595,319


$
451,524


$
366,545


$
272,685


$
207,087   Overview
    Commercial
    Finance Strategy
   45




---



##### Table of Contents



Net
    Income
    Net
    Interest Income
    Year Ended December 31,2006


2005


2004(Dollars in thousands)Net interest income

$
42,545


$
33,683


$
28,084Average interest earning assets


936,519



701,423



526,754Net interest margin


4.55
%


4.80
%


5.33
%       Provision
    for Loan and Lease Losses
    Noninterest
    Income
    Year Ended December 31,2006


2005


2004(Dollars in thousands)Gain from sales of loans

$
2,563


$
2,642


$
1,796Derivative losses, net


(263
)


(717
)


(536
)Other


5,718



5,512



5,015Total noninterest income

$
8,018


$
7,437


$
6,275    46




---



##### Table of Contents



Operating
    Expenses
    Year Ended December 31,2006


2005


2004(Dollars in thousands)Salaries and employee benefits

$
21,597


$
17,531


$
14,333Other


2,358



4,693



4,449Total operating expenses

$
23,955


$
22,224


$
18,782Efficiency ratio


47.4
%


54.0
%


54.7
%Number of employees at period
    end(1)


202



184



162     (1)
    
    On a full time equivalent basis    Portfolio
    Characteristics
    December 31,2006


2005(Dollars in thousands)Domestic franchise loans

$
488,489


$
336,939Weighted average coupon


8.79
%


8.39
%Delinquency ratio


0.16



0.37Domestic leases

$
253,274


$
204,701Weighted average coupon


10.32
%


10.37
%Delinquency ratio


1.72



1.26Canadian
    leases(1)

$
314,644


$
275,569Weighted average coupon


9.13
%


9.38
%Delinquency ratio


0.36



0.53     (1)
    
    In U.S. dollars.  Credit
    Quality
     47




---



##### Table of Contents



December 31,2006


2005


2004(Dollars in thousands)Nonperforming loans

$
5,374


$
3,700


$
3,936Allowance for loan losses


13,525



10,756



9,624Allowance for loan losses to total
    loans


1.28
%


1.32
%


1.54
%For the Period Ended:Provision for loan losses

$
6,701


$
6,211


$
6,798Net charge-offs


3,678



4,806



8,235Net charge-offs to average loans


0.40
%


0.69
%


2.67
%  48




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##### Table of Contents



Home
    Equity Lending
    Year Ended December 31,2006


2005


2004


2003


2002(Dollars in thousands)Selected Income Statement
    Data:Net interest income

$
96,068


$
88,290


$
98,983


$
106,545


$
94,068Provision for loan and lease losses


(22,659
)


(15,811
)


(4,369
)


(29,575
)


(25,596
)Noninterest income


15,186



33,667



67,847



(19,525
)


11,791Total net revenues


88,595



106,146



162,461



57,445



80,263Operating expenses


(85,967
)


(102,339
)


(114,779
)


(90,538
)


(78,588
)Income (loss) before taxes


2,628



3,807



47,682



(33,093
)


1,675Income taxes


(1,090
)


(1,555
)


(19,615
)


13,203



(670
)Net income (loss)

$
1,538


$
2,252


$
28,067


$
(19,890
)

$
1,005Selected Balance Sheet
    Data:Total assets

$
1,617,219


$
1,602,400


$
992,979


$
1,070,634


$
939,494Home equity loans and lines of
    credit(1)


1,280,497



980,406



590,175



692,637



626,355Allowance for loan losses


(33,614
)


(23,552
)


(11,330
)


(29,251
)


(21,689
)Home equity loans held for sale


236,636



513,231



227,740



202,627



75,540Residual interests


2,760



15,580



51,542



70,519



157,065Mortgage servicing assets


28,231



30,502



44,000



28,425



26,444Short-term borrowings


446,163



920,636



359,902



368,640



201,328Collateralized debt


948,939



452,615



352,625



460,535



391,425Shareholders equity


155,791



151,677



136,260



128,555



155,831Selected Operating
    Data:Loan volume:Lines of credit

$
150,306


$
436,451


$
508,287


$
324,094


$
443,323Loans


853,527



1,255,185



934,027



809,222



623,903Total managed portfolio balance


1,708,975



1,593,509



1,147,137



1,513,289



1,830,339Delinquency
    ratio(2)


3.2
%


3.0
%


4.8
%


5.9
%


6.0
%Total managed portfolio balance
    Including credit risk sold


2,853,726



3,058,842



2,807,367



2,568,356



2,502,685Weighted average coupon rate:Lines of credit


11.13
%


10.17
%


9.18
%


9.71
%


10.79
%Loans


10.75



10.18



11.87



12.07



13.50(Loss) gain on sale of loans to
    loans sold


(0.39
)


2.39



2.24



3.81



4.70Net home equity charge-offs to
    average managed portfolio


1.00



0.60



2.48



4.37



2.87     (1)
    
    Includes $1.1 billion, $0.5 billion,
    $0.4 billion, $0.5 billion and $0.4 billion of
    loans at December 31, 2006, 2005, 2004, 2003, and 2002,
    respectively, that collateralize securitized financings.(2)
    
    Nonaccrual loans are included in the delinquency ratio. 49




---



##### Table of Contents



Overview
    Strategy
  loan-to-value loan-to-value
  Production
    and Portfolio Characteristics
  loan-to-value
    December 31,


December 31,2006


2005Weighted








WeightedAverage








AverageAmount


% of Total


Coupon


Amount


% of Total


Coupon(Dollars in thousands)Home Equity PortfolioLoans
    £ 100% CLTV

$
536,387



31.39
%


9.10
%

$
494,462



31.03
%


7.90
%Lines of credit
    £ 100% CLTV


319,415



18.69



9.96



327,164



20.53



8.77First mortgages
    £ 100% CLTV


44,727



2.62



7.37



36,377



2.28



7.10Total
    £ 100% CLTV


900,529



52.70



9.32



858,003



53.84



8.20Loans > 100% CLTV


677,119



39.62



12.36



582,536



36.56



12.31Lines of credit > 100% CLTV


101,683



5.95



14.55



142,315



8.93



13.10First mortgages > 100% CLTV


22,916



1.34



8.48











Total > 100% CLTV


801,718



46.91



12.53



724,851



45.49



12.47Other


6,728



0.39



15.03



10,655



0.67



14.03Total managed
    portfolio(1)

$
1,708,975



100.00
%


10.85
%

$
1,593,509



100.00
%


10.18
%     (1)
    
    We define our Managed Portfolio as the portfolio of
    loans ($1.7 billion) that we service and on which we carry
    credit risk. At December 31, 2006, we also serviced another
    $1.1 billion of loans for which the credit risk is held by
    others. 50




---



##### Table of Contents



Year Ended December 31,Product

2006


2005(Funding amount in thousands)First mortgage loansFunding Amount

$
76,499


$
108,929Weighted Average Disposable Income


4,944



5,755Weighted Average FICO score


689



689Weighted Average Coupon


8.24
%


6.94
%First mortgage loans up to 110%Funding Amount

$
23,163


$
Weighted Average Disposable Income


5,886



Weighted Average FICO score


707



Weighted Average Coupon


8.50
%


Home equity loans up to 100% CLTVFunding Amount

$
440,207


$
634,031Weighted Average Disposable Income


6,238



5,196Weighted Average FICO score


703



722Weighted Average Coupon


10.87
%


7.45
%Home equity loans up to 125% CLTVFunding Amount

$
313,658


$
512,224Weighted Average Disposable Income


4,382



4,278Weighted Average FICO score


698



689Weighted Average Coupon


12.55
%


11.86
%Home equity lines of credit up to
    100% CLTVFunding Amount

$
134,574


$
391,275Weighted Average Disposable Income


6,272



6,151Weighted Average FICO score


693



701Weighted Average Coupon


9.67
%


7.58
%Home equity lines of credit up to
    125% CLTVFunding Amount

$
15,732


$
45,176Weighted Average Disposable Income


4,988



4,517Weighted Average FICO score


690



698Weighted Average Coupon


15.08
%


11.93
%All ProductsFunding Amount

$
1,003,833


$
1,691,636Weighted Average Disposable Income


5,389



5,117Weighted Average FICO score


699



704Weighted Average Coupon


11.04
%


8.90
%  51




---



##### Table of Contents



December 31,State

2006


2005California


10.2
%


11.4
%Michigan


7.8



8.5Florida


7.8



6.9Colorado


7.0



6.2Ohio


6.2



5.8All other states


61.0



61.2Total


100.0
%


100.0
%Total managed portfolio in
    thousands

$
1,708,975


$
1,593,509     December 31,State

2006


2005Florida


14.0
%


8.2
%California


8.3



15.2Colorado


6.5



5.5Arizona


5.9



5.6Ohio


5.1



4.1All other states


60.2



61.4Total


100.0
%


100.0
%   Net
    Income
    Net
    Revenue
      Year ended December 31,2006


2005Total originations

$
1,003,833


$
1,691,636Percent correspondent


27
%


17
%Percent retail loans


16



40Percent brokered


32



23Percent other


25



20  52




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##### Table of Contents



Year Ended December 31,2006


2005


2004(Dollars in thousands)Net interest income

$
96,068


$
88,290


$
98,983Provision for loan losses


(22,659
)


(15,811
)


(4,369
)Gain (loss) on sales of loans


(2,386
)


17,849



29,180Loan servicing fees


31,322



38,206



29,774Amortization of servicing assets


(19,887
)


(29,708
)


(19,863
)Recovery of servicing assets


647



643



1,148Trading gains


1,005



2,399



25,176Derivative gains


3,136



1,367



1,518Other income


1,349



2,911



914Total net revenue

$
88,595


$
106,146


$
162,461              53




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##### Table of Contents



clean-up
    Operating
    Expenses
    Year Ended December 31,2006


2005


2004(Dollars in thousands)Salaries and employee benefits

$
51,335


$
64,432


$
75,649Other


34,632



37,907



39,130Total operating expenses

$
85,967


$
102,339


$
114,779Number of employees at period
    end(1)


492



615



642     (1)
    
    On a full time equivalent basis.    Home
    Equity Servicing
      Net Revenues
 54




---



##### Table of Contents



December 31,2006


2005(Dollars in thousands)Managed PortfolioTotal Loans

$
1,708,975


$
1,593,50930 days past due


3.16
%


3.04
%90 days past due


1.19



1.10Net Chargeoff Rate


1.00



0.60Unsold LoansTotal
    Loans(1)

$
1,515,881


$
1,480,22430 days past due


3.54
%


2.23
%90 days past due


1.32



0.86Net Chargeoff Rate


1.07



0.31Loan Loss Reserve

$
33,614


$
23,552Owned ResidualTotal Loans

$
193,094


$
113,28630 days past due


0.20
%


13.60
%90 days past due


0.18



4.32Net Chargeoff Rate


0.42



2.14Residual Undiscounted Losses

$
430


$
930Credit Risk Sold, Potential
    Incentive Servicing Fee Retained PortfolioTotal Loans

$
627,838


$
972,77530 days past due


5.40
%


4.30
%90 days past due


2.30



1.74     (1)
    
    Excludes deferred fees and costs.  Mortgage
    Banking  (discontinued operations)
    For the Year Ended December 31,2006


2005


2004(Dollars in thousands)Net revenues

$
37,982


$
98,643


$
237,418Other expense


(97,488
)


(127,516
)


(203,457
)(Loss) gain before income taxes


(59,506
)


(28,873
)


33,961Income taxes


23,832



11,613



(14,240
)Net (loss) income from
    discontinued operations

$
(35,674
)

$
(17,260
)

$
19,721   55




---



##### Table of Contents



December 31,2006


2005(Dollars in thousands)Loans, net of allowance and loans
    held for sale

$
48,555


$
800,325Net servicing asset


385



261,309Other assets


7,633



27,004Assets held for sale

$
56,573


$
1,088,638             Parent
    and Other
     56




---



##### Table of Contents



Risk
    Management
    
    Credit risk
    Liquidity risk
    Market risk (including interest rate and foreign exchange risk)
    Operational risk
    Compliance risk    best-in-class
       57




---



##### Table of Contents



Credit
    Risk
  and/or
       58




---



##### Table of Contents



At or For the Year Ended December 31,2006


2005


2004


2003


2002(Dollars in thousands)Loans and leases outstanding at
    end of period, net of unearned income

$
5,238,193


$
4,477,943


$
3,440,689


$
3,147,094


$
2,798,006Average loans and leases for the
    period, net of unearned income

$
4,854,368


$
3,875,394


$
3,312,785


$
3,151,325


$
2,606,851Allowance for possible loan and
    lease losses:Balance beginning of period

$
59,223


$
43,441


$
63,005


$
50,320


$
22,020Charge-offs:Commercial, financial and
    agricultural loans


3,503



2,976



3,262



4,263



3,666Real estate mortgage loans


21,418



10,656



15,381



23,522



7,130Consumer loans


328



723



351



765



800Commercial Financing:Franchise financing


481



870



88



146



19Domestic leasing


2,709



2,190



6,581



6,026



5,139Canadian leasing


2,371



2,786



2,517



2,590



1,476Total charge-offs


30,810



20,201



28,180



37,312



18,230Recoveries:Commercial, financial and
    agricultural loans


576



767



318



77



435Real estate mortgage loans


8,595



7,068



3,899



2,198



1,002Consumer loans


154



85



169



248



252Commercial Financing:Franchise financing


35



25











Domestic leasing


923



583



626



448



523Canadian leasing


925



432



323



449



658Total recoveries


11,208



8,960



5,335



3,420



2,870Net charge-offs


(19,602
)


(11,241
)


(22,845
)


(33,892
)


(15,360
)Reduction due to sale of loans






(403
)


(627
)


(234
)


Reduction due to reclassification
    of loans


(246
)






(10,808
)


(690
)


Foreign currency adjustment


(8
)


119



243



582



17Provision charged to expense


35,101



27,307



14,473



46,919



43,643Balance end of period

$
74,468


$
59,223


$
43,441


$
63,005


$
50,320 59




---



##### Table of Contents



At or For the Year Ended December 31,2006


2005


2004


2003


2002(Dollars in thousands)Allowance for possible loan and
    lease losses by category:Commercial, financial and
    agricultural loans

$
25,593


$
19,927


$
18,126


$
20,571


$
17,942Real estate mortgage loans


33,840



23,553



11,330



30,165



22,534Consumer loans


1,510



4,879



4,242



809



2,067Commercial Financing:Franchise financing


5,769



4,118



3,728



2,158



1,327Domestic leasing


4,326



3,144



2,926



6,285



4,626Canadian leasing


3,430



3,602



3,089



3,017



1,824Totals

$
74,468


$
59,223


$
43,441


$
63,005


$
50,320Percent of loans and leases to
    total loans and leases by category:Commercial, financial and
    agricultural loans


43
%


53
%


49
%


47
%


48
%Real estate mortgage loans


36



28



32



37



39Consumer loans


1



1



1



1



1Commercial Financing:Franchise financing


9



7



7



5



3Domestic leasing


5



5



4



4



5Canadian leasing


6



6



7



6



4Ratios:Net charge-offs to average loans
    and
    leases(1)


0.4
%


0.3
%


0.7
%


1.1
%


0.7
%Allowance for possible loan losses
    to loans and leases outstanding


1.4
%


1.3
%


1.3
%


2.0
%


1.8
%      60




---



##### Table of Contents



December 31,2006


2005


2004


2003


2002(Dollars in thousands)Accruing loans past due
    90 days or more:Commercial, financial and
    agricultural loans

$



$



$



$
4,172


$
30Real estate mortgages


















Consumer loans


73



455



645



226



688Commercial financing:Franchise financing














151



43Domestic leasing


83



73







8



177Canadian leasing


236



71



12



70



143392



599



657



4,627



1,081Nonaccrual loans and
    leases:Commercial, financial and
    agricultural loans


13,296



17,693



20,394



20,447



13,798Real estate mortgages


18,125



14,237



8,510



14,663



11,308Consumer loans


696



1,335



208



769



454Commercial financing:Franchise financing


791



720



1,193



552



Domestic leasing


2,495



1,383



1,029



1,364



3,415Canadian leasing


1,768



1,452



1,702



1,943



1,07737,171



36,820



33,036



39,738



30,052Total nonperforming loans and
    leases


37,563



37,419



33,693



44,365



31,133Nonperforming Loans held for Sale
    not guaranteed


5,564



965



2,066



1,695



1,201Other real estate owned


15,170



15,226



9,427



6,431



5,272Total nonperforming assets

$
58,297


$
53,610


$
45,186


$
52,491


$
37,606Nonperforming loans and leases to
    total loans and leases


0.7
%


0.8
%


1.0
%


1.4
%


1.1
%Nonperforming assets to total
    assets


0.9
%


0.8
%


0.9
%


1.1
%


0.8
%      December 31,


December 31,2006


2005(In millions) Commercial banking

$
19


$
27 Commercial finance


5



4 Home equity lending


23



17 Mortgage banking


11



6    61




---



##### Table of Contents



Liquidity
    Risk
        Payments Due by PeriodOne Year


Over One to


Over Three to


AfterTotal


or Less


Three Years


Five Years


Five Years(Dollars in thousands)Deposits with contractual maturity

$
1,323,477


$
1,013,910


$
229,499


$
69,283


$
10,785Deposits without a stated maturity


2,228,039



2,228,039











Short-term borrowings


602,443



376,609



89,160



88,765



47,909Collateralized debt


1,174,021



401,891



424,525



216,383



131,222Other long-term debt


233,889



35,581



51,554



101,290



45,464Operating leases


50,283



10,968



18,005



13,841



7,469Total

$
5,612,152


$
4,066,998


$
812,743


$
489,562


$
242,849   and/or
    clean-up
 62




---



##### Table of Contents



clean-up
              
    Warehouse lines of credit to fund primarily home equity loans:
    none outstanding on a $300 million borrowing facility, of
    which $150 million is committed
    Lines of credit with correspondent banks, including fed funds
    lines: $31 million outstanding out of $225 million
    available but not committed
    Lines of credit with non-correspondent banks: $200 million
    outstanding
    Warehouse lines of credit and conduits to fund Canadian
    sourced small ticket leases: $218 million outstanding on
    $335 million of borrowing facilities 63




---



##### Table of Contents



Market
    Risk (including Interest Rate and Foreign Exchange
    Risk)
    mark-to-market
    loan-to-value mark-to-market lower-of-cost
    mark-to-market
      
    The net asset value sensitivities do not necessarily represent
    the changes in the lines of business net asset value that
    would actually occur under the given interest rate scenarios, as
    sensitivities do not reflect changes in value of the companies
    as a going concern, nor consider potential rebalancing or other
    management actions that might be taken in the future under
    asset/liability management as interest rates change. 64




---



##### Table of Contents




    The information in the tables below both as of December 31,
    2006 and 2005 exclude the interest rate sensitivity of our first
    mortgage subsidiary due to our recent sale of substantially all
    its interest-sensitive assets and its status as a discontinued
    operation. Note that these tables only include the market values
    and sensitivities of interest-sensitive assets and liabilities.
    The tables below show modeled changes in interest rates for
    individual asset classes. Asset classes in our portfolio have
    interest rate sensitivity tied to different underlying indices
    or instruments. While the rate sensitivity of individual asset
    classes presented below is our best estimate of changes in value
    due to interest rate changes, the total potential
    change figures are subject to basis risk between value
    changes of individual assets and liabilities which have not been
    included in the model.
    Few of the asset classes shown react to interest rate changes in
    a linear fashion. That is, the point estimates we have made at
    Current and +/−2% and
    +/−1% are appropriate estimates at those
    amounts of rate change, but it may not be accurate to
    interpolate linearly between those points. This is most evident
    in products that contain optionality in payment timing or
    pricing such as mortgage servicing or nonmaturity transaction
    deposits.
    Finally, the tables show theoretical outcomes for dramatic
    changes in interest rates which do not consider potential
    rebalancing or repositioning of hedges.  Economic
    Value Change Method
  Present Value at December 31, 2006Change in Interest Rates of:−2%


−1%


Current


+1%


+2%(In thousands)Interest Sensitive
    AssetsLoans and other assets

$
5,574,807


$
5,505,787


$
5,431,769


$
5,355,326


$
5,279,017Loans held for sale


243,288



240,781



237,859



233,649



228,501Mortgage servicing rights


29,029



33,136



37,370



41,826



44,971Residual interests


9,944



10,104



10,320



10,177



10,337Interest sensitive financial
    derivatives


(8,062
)


(4,146
)


(42
)


3,801



8,328Total interest sensitive assets


5,849,006



5,785,662



5,717,276



5,644,779



5,571,154Interest Sensitive
    LiabilitiesDeposits


(3,487,828
)


(3,464,471
)


(3,441,892
)


(3,414,930
)


(3,385,762
)Short-term
    borrowings(1)


(856,749
)


(839,682
)


(824,775
)


(811,195
)


(798,805
)Long-term debt


(1,197,526
)


(1,187,806
)


(1,173,118
)


(1,158,418
)


(1,146,220
)Total interest sensitive
    liabilities


(5,542,103
)


(5,491,959
)


(5,439,785
)


(5,384,543
)


(5,330,787
)Net market value as of
    December 31, 2006

$
306,903


$
293,703


$
277,491


$
260,236


$
240,367Change from current

$
29,412


$
16,212


$



$
(17,255
)

$
(37,124
)Net market value as of
    December 31, 2005

$
409,652


$
414,090


$
400,317


$
377,687


$
353,231Potential change

$
9,335


$
13,773


$



$
(22,630
)

$
(47,086
)     (1)
    
    Includes certain debt which is categorized as
    collateralized debt in other sections of this
    document. 65




---



##### Table of Contents



GAAP-Based
    Value Change Method
  Present Value at December 31, 2006Change in Interest Rates of:−2%


−1%


Current


+1%


+2%(In thousands)Interest Sensitive
    AssetsLoans and other
    assets(1)

$



$



$



$



$
Loans held for sale


237,510



237,510



237,510



233,300



228,152Mortgage servicing rights


25,306



29,518



31,949



32,381



32,383Residual interests


9,944



10,104



10,320



10,177



10,337Interest sensitive financial
    derivatives


(8,062
)


(4,146
)


(42
)


3,801



8,328Total interest sensitive assets


264,698



272,986



279,737



279,659



279,200Interest Sensitive
    LiabilitiesDeposits(1)


















Short-term
    borrowings(1)


















Long-term
    debt(1)


















Total interest sensitive
    liabilities(1)


















Net market value as of
    December 31, 2006

$
264,698


$
272,986


$
279,737


$
279,659


$
279,200Potential change

$
(15,039
)

$
(6,751
)

$



$
(78
)

$
(537
)Net market value as of
    December 31, 2005

$
547,531


$
556,247


$
564,387


$
560,897


$
555,312Potential change

$
(16,856
)

$
(8,140
)

$



$
(3,490
)

$
(9,075
)     (1)
    
    Value does not change in GAAP presentation.  Off-Balance
    Sheet Instruments
      Derivative
    Financial Instruments
   66




---



##### Table of Contents



Operational
    and Compliance Risk.
          best-in-class
  Regulatory
    Environment
     67




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk    Item 8.
    Financial
    Statements and Supplementary Data  Managements
    Report on Internal Control Over Financial Reporting
    Internal
    Control  Integrated Framework
      /s/  William
    I. MillerWilliam
    I. Miller

/s/  Gregory
    F. EhlingerGregory
    F. EhlingerChairman and

Senior Vice President andChief Executive Officer

Chief Financial Officer  68




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  The Board of
    Directors and Shareholders of
             
    69




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                 
    70




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
        
   
  71




---



##### Table of Contents



IRWIN
    FINANCIAL CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
  December 31,


December 31,2006


2005(Dollars in thousands)Assets:Cash and cash
    equivalents  Notes 1 and 4

$
145,765


$
155,417Interest-bearing deposits with
    financial institutions


53,106



44,430Residual interests 
    Note 5


10,320



22,116Investment securities-
    held-to-maturity
    (Fair value: $17,893 and $17,031 at December 31, 2006 and
    2005)  Note 6


18,066



17,046Investment securities-
    available-for-sale 
    Note 6


110,364



100,296Loans held for sale


237,510



513,554Loans and leases, net of unearned
    income  Note 7


5,238,193



4,477,943Less: Allowance for loan and lease
    losses  Note 8


(74,468
)


(59,223
)5,163,725



4,418,720Servicing assets 
    Note 9


31,949



34,445Accounts receivable 
    Note 2


208,585



111,633Accrued interest receivable


26,470



23,936Premises and equipment 
    Note 10


36,211



29,721Other assets


139,314



86,572Assets held for sale 
    Note 2


56,573



1,088,638Total assets

$
6,237,958


$
6,646,524Liabilities and
    Shareholders Equity:DepositsNoninterest-bearing

$
687,626


$
754,778Interest-bearing


1,756,109



1,921,369Certificates of deposit over
    $100,000


1,107,781



1,222,8463,551,516



3,898,993Short-term borrowings 
    Note 12


602,443



997,444Collateralized debt 
    Note 13


1,173,012



668,984Other long-term debt 
    Note 14


233,889



270,160Other liabilities


146,596



210,773Liabilities held for
    sale  Note 2






87,836Total liabilities


5,707,456



6,134,190Commitments and
    contingencies  Notes 15, 16, 17 and 18Shareholders equityPreferred stock, no par
    value  authorized 4,000,000 shares; none issued






Non cumulative perpetual preferred
    stock, no par value  15,000 shares authorized and
    issued


14,518



Common stock, no par
    value  authorized 40,000,000 shares; issued
    29,879,773 shares and 29,612,080 as of December 31,
    2006 and 2005; 143,543 and 993,643 shares in treasury as of
    December 31, 2006 and 2005


116,192



112,000Additional paid-in capital


1,583



Deferred compensation






(759
)Accumulated other comprehensive
    (loss) income, net of deferred income tax benefit of $4,813 and
    liability of $71 as of December 31, 2006 and 2005


(4,364
)


3,448Retained earnings


405,835



418,784533,764



533,473Less treasury stock, at cost


(3,262
)


(21,139
)Total shareholders equity


530,502



512,334Total liabilities and
    shareholders equity

$
6,237,958


$
6,646,524    72




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##### Table of Contents



IRWIN
    FINANCIAL CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF INCOME
  For the Year Ended December 31,2006


2005


2004(Dollars in thousands, except per share)Interest income:Loans and leases

$
435,952


$
312,034


$
245,615Loans held for sale


34,372



43,540



30,759Residual interests


1,536



6,948



12,509Investment securities


8,741



7,629



5,330Federal funds sold


1,527



387



173Total interest income


482,128



370,538



294,386Interest expense:Deposits


132,221



83,861



44,487Short-term borrowings


19,482



9,521



3,765Collateralized debt


53,720



25,587



15,259Other long-term debt


19,266



20,102



17,861Total interest expense


224,689



139,071



81,372Net interest income


257,439



231,467



213,014Provision for loan and lease
    losses  Note 8


35,101



27,307



14,473Net interest income after provision
    for loan and lease losses


222,338



204,160



198,541Other income:Loan servicing fees


32,844



39,678



32,057Amortization of servicing
    assets  Note 9


(21,027
)


(31,014
)


(21,422
)Recovery of servicing
    assets  Note 9


646



891



1,729Net loan administration income


12,463



9,555



12,364Gain from sales of loans


1,766



22,860



33,741Trading gains


1,282



3,105



25,209Derivative gains (losses), net


3,820



(2,100
)


(2,247
)Other


25,290



23,301



16,38644,621



56,721



85,453Other expense:Salaries


107,864



110,463



117,034Pension and other employee benefits


27,602



25,812



23,877Office expense


9,130



8,587



7,694Premises and equipment


22,748



21,286



21,290Marketing and development


3,041



4,373



5,183Professional fees


10,738



10,414



11,141Other


29,565



23,104



17,559210,688



204,039



203,778Income before income taxes from
    continuing operations


56,271



56,842



80,216Provision for income taxes


18,870



20,595



31,492Net income from continuing
    operations


37,401



36,247



48,724(Loss) income from discontinued
    operations, net of $23,832 and $11,613 income tax benefit and
    $14,240 income tax expense, respectively  Note 2


(35,674
)


(17,260
)


19,721Net income

$
1,727


$
18,987


$
68,445Earnings per share from
    continuing operations: 
    Note 22Basic

$
1.27


$
1.27


$
1.72Diluted

$
1.25


$
1.26


$
1.64Earnings per share: 
    Note 22Basic

$
0.06


$
0.67


$
2.42Diluted

$
0.05


$
0.66


$
2.28Dividends per share

$
0.44


$
0.40


$
0.32    73




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##### Table of Contents



IRWIN
    FINANCIAL CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
  Accumulated Other Comprehensive IncomeUnrealized


Unrealized


Defined





AdditionalRetained


Foreign


Gain/loss


Gain/loss


Benefit


Deferred


Paid in


Common


Preferred


TreasuryTotal


Earnings


Currency


Securities


Derivatives


Plans


Compensation


Capital


Stock


Stock


Stock(Dollars in thousands)Balance at January 1, 2004

$
432,260


$
352,647


$
805


$
(24
)

$
(242
)

$
(357
)

$
(504
)

$
1,264


$
112,000


$



$
(33,329
)Net income


68,445



68,445Unrealized gain on investment
    securities net of $68 tax liability


84











84Unrealized gain on interest rate
    cap


242















242Foreign currency adjustment


1,843







1,843Minimum SERP liability net of $69
    tax liability


103



















103Other comprehensive income


2,272Total comprehensive income


70,717Deferred compensation


(156
)






















(156
)Cash dividends


(9,065
)


(9,065
)Tax benefit on stock option
    exercises


1,044



























1,044Treasury stock:Purchase of 12,718 shares


(407
)






































(407
)Sales of 330,812 shares


6,792



























(1,925
)










8,717Balance at December 31, 2004

$
501,185


$
412,027


$
2,648


$
60


$



$
(254
)

$
(660
)

$
383


$
112,000


$



$
(25,019
)Net income


18,987



18,987Unrealized loss on investment
    securities net of $290 tax benefit


(433
)










(433
)Unrealized gain on interest rate
    cap


754















754Foreign currency adjustment


693







693Minimum SERP liability net of $13
    tax benefit


(20
)


















(20
)Other comprehensive income


994Total comprehensive income


19,981Deferred compensation


(99
)






















(99
)Cash dividends


(11,426
)


(11,426
)Tax benefit on stock option
    exercises


617



























617Treasury stock:Purchase of 51,056 shares


(1,201
)






































(1,201
)Sales of 217,097 shares


3,277



(804
)






















(1,000
)










5,081Balance at December 31, 2005

$
512,334


$
418,784


$
3,341


$
(373
)

$
754


$
(274
)

$
(759
)

$



$
112,000


$



$
(21,139
)Net income


1,727



1,727Unrealized gain on investment
    securities net of $19 tax liability


29











29Unrealized loss on interest rate
    swap


(784
)














(784
)Foreign currency adjustment


(457
)






(457
)Defined benefit retirement plans:Minimum pension and SERP liability,
    net of $61 tax liability


91



















91Other comprehensive income


(1,221
)Total comprehensive income


(606
)Adoption of FAS 158, net of
    $4,460 tax benefit  Note 1


(6,691
)


















(6,691
)Adoption of FAS 123R


























759



50











(809
)Cash dividends


(13,110
)


(13,110
)Tax benefit on stock option
    exercises


535



























535Stock option expense


1,742



























1,742Conversion of Trust Preferred
    shares to 1,013,938 shares of common stock


20,248



(1,058
)


























1,805







19,501Sales of 15,000 shares of
    preferred stock


14,518



































14,518Sales of 177,181 shares of
    common stock


2,387































2,387Treasury stock:Purchase of 200,604 shares


(4,363
)






































(4,363
)Sales of 147,097 shares


2,296



(508
)






















(744
)










3,548Balance at December 31, 2006

$
530,502


$
405,835


$
2,884


$
(344
)

$
(30
)

$
(6,874
)

$



$
1,583


$
116,192


$
14,518


$
(3,262
)    74




---



##### Table of Contents



IRWIN
    FINANCIAL CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  For the Years Ended December 31,2006


2005


2004(Dollars in thousands)Income from continuing operations

$
37,401


$
36,247


$
48,724(Loss) income from discontinued
    operations


(35,674
)


(17,260
)


19,721Net income


1,727



18,987



68,445Adjustments to reconcile net
    income to cash provided (used) by operating
    activities:Depreciation, amortization, and
    accretion, net


10,141



11,602



8,987Amortization and impairment of
    servicing assets


61,370



80,697



119,617Provision for loan and lease losses


35,288



26,852



14,195Deferred income tax


(109,018
)


(23,789
)


12,185Loss (gain) on sale of mortgage
    servicing assets


17,961



(14,412
)


(16,681
)Gain from sales of loans held for
    sale


(39,754
)


(98,127
)


(184,913
)Originations and purchases of loans
    held for sale


(7,237,809
)


(12,883,903
)


(14,780,501
)Proceeds from sales and repayments
    of loans held for sale


8,207,596



12,502,574



14,814,198Proceeds from sale of mortgage
    servicing assets


267,094



79,724



52,844Net decrease in residuals


13,332



33,986



15,390Net (increase) decrease in accounts
    receivable


(96,952
)


10,246



(60,086
)Other, net


(100,215
)


4,315



(48,074
)Net cash provided (used) by
    operating activities


1,030,761



(251,248
)


15,606Investing activities:Proceeds from maturities/calls of
    investment securities:Held-to-maturity


2,313



461



118,063Available-for-sale


13,112



5,801



1,583Purchase of investment securities:Held-to-maturity


(4,114
)






(98,395
)Available-for-sale


(23,197
)


(3,599
)


(36,791
)Net (increase) decrease in
    interest-bearing deposits


(1,976
)


(3,985
)


22,230Net increase in loans, excluding
    sales


(820,664
)


(1,115,391
)


(367,303
)Proceeds from sale of loans


55,147



57,625



45,592Other, net


(11,376
)


(8,331
)


(5,642
)Net cash used by investing
    activities


(790,755
)


(1,067,419
)


(320,663
)Financing activities:Net (decrease) increase in deposits


(347,477
)


503,730



495,601Net (decrease) increase in
    short-term borrowings


(395,001
)


760,167



(192,481
)Repayments of long-term debt


(14
)


(12
)


(12
)Proceeds related to issuance of
    collateralized debt


931,406



472,515



514,223Repayments of collateralized debt


(427,373
)


(351,049
)


(554,445
)Net proceeds related to the
    issuance of trust preferred securities


61,500



51,750



Redemption related to trust
    preferred securities


(77,509
)


(51,750
)


Proceeds from the sale of
    noncumulative perpetual preferred stock


14,518







Purchase of treasury stock for
    employee benefit plans


(4,363
)


(1,201
)


(407
)Proceeds from sale of stock for
    employee benefit plans


7,740



3,277



7,836Dividends paid


(13,110
)


(11,426
)


(9,065
)Net cash provided (used) by
    financing activities


(249,683
)


1,376,001



261,250Effect of exchange rate changes on
    cash


(44
)


1,051



98Net decrease (increase) in cash and
    cash equivalents


(9,721
)


58,385



(43,709
)Cash and cash equivalents at
    beginning of period


155,486



97,101



140,810Cash and cash equivalents at end of
    period

$
145,765


$
155,486


$
97,101Supplemental disclosures of cash
    flow information:Cash flow during the period:Interest paid

$
239,934


$
146,005


$
93,319Income taxes paid

$
93,687


$
19,171


$
15,184Noncash transactions:Liability for loans held for sale
    eligible for repurchase

$
87,837


$
19,581


$
47,692Other real estate owned

$
11,675


$
16,236


$
5,899Conversion of trust preferred stock
    to common stock

$
20,248


$



$
    75




---



##### Table of Contents



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  Note 1 
    Summary of Significant Accounting Policies
  Consolidation:
    Use of Estimates:
  Foreign Currency:
  Cash and Cash Equivalents:
  Investment Securities: held-to-maturity available-for-sale available-for-sale
  Residual Interests:
  Loans Held For Sale:
 76




---



##### Table of Contents



Loans:
  Direct Financing Leases:
  Allowance for Loan and Lease Losses:
      Servicing Assets:
   77




---



##### Table of Contents



Incentive Servicing Fees:
  Derivative Instruments:
      Premises and Equipment:
  Other Assets:
  Income Taxes:
  Recent Accounting Developments:
 78




---



##### Table of Contents



Note 2 
    Discontinued Operations
     79




---



##### Table of Contents



For the Year Ended December 31,2006


2005


2004(Dollars in thousands)Net revenues

$
37,983


$
98,643


$
237,418Other expense


(97,489
)


(127,516
)


(203,457
)(Loss) gain before income taxes


(59,506
)


(28,873
)


33,961Income taxes


23,832



11,613



(14,240
)Net (loss) income from
    discontinued operations

$
(35,674
)

$
(17,260
)

$
19,721   December 31,2006


2005(Dollars in thousands)Loans, net of allowance and loans
    held for sale

$
48,555


$
800,325Net servicing asset


385



261,309Other assets


7,633



27,004Assets held for sale

$
56,573


$
1,088,638   Note 3 
    Restructuring
      Year EndedDecember 31, 2006(Dollars in thousands)Salaries

$
3,596Other expense


1,969Total

$
5,565  80




---



##### Table of Contents



Note 4 
    Restrictions on Cash and Dividends
      clean-up (clean-up)
  Note 5 
    Sales of Receivables
    gain-on-sale clean-up
 81




---



##### Table of Contents



Home Equity Loans and Lines of Credit(Dollars in thousands)Balance sheet carrying value of
    residual interests  fair value

$
2,760Weighted-average life (in years)


1.91Prepayment speed assumptions
    (annual rate)


35.47
%Impact on fair value of 10%
    adverse change

$
(150
)Impact on fair value of 25%
    adverse change


(350
)Expected credit losses (annual
    rate)


0.94
%Impact on fair value of 10%
    adverse change

$
(60
)Impact on fair value of 25%
    adverse change


(120
)Residual cash flows discount rate
    (annual rate)


18.00
%Impact on fair value of 10%
    adverse change

$
(90
)Impact on fair value of 25%
    adverse change


(200
)       2006


2005


2004(Dollars in thousands)Proceeds from new security activity

$
227,519


$



$
Servicing fees received


2,371



4,386



5,763Net cash flows received on
    residual interests


16,803



37,245



61,958Other cash flows paid


(11,462
)


(9,640
)


(8,705
)Total

$
235,231


$
31,991


$
59,016       Total Principal Amount


Delinquent Principal Over





Credit Lossesof Loans at


30 Days at


Delinquency


on ManagedDecember 31, 2006


December 31,
    2006(2)


Percentage


Portfolio(Dollars in thousands)Managed loans comprised of:Loans held for investment

$
1,280,050


$
43,062



3.4
%

$
12,597Loans held for sale


235,831



10,555



4.5



2,873Reps and warranties


N/A



N/A



N/A



64Loans securitized, servicing and
    residual
    retained(1)


193,094



378



0.2



750Total managed portfolio

$
1,708,975


$
53,995



3.2
%

$
16,284     (1)
    
    Represents the principal amount of the loans.(2)
    
    Nonaccrual loans included in delinquencies. 82




---



##### Table of Contents



Note 6 
    Investment Securities
    Gross


GrossAmortized


Unrealized


Unrealized


Fair


CarryingCost


Gains


Losses


Value


Value(Dollars in thousands)Held-to-Maturity:U.S. Treasury and government
    obligations

$
13,730


$



$
(156
)

$
13,574


$
13,730Obligations of states and
    political subdivisions


3,545











3,545



3,545Mortgage-backed securities


791



2



(19
)


774



791Total
    held-to-maturity


18,066



2



(175
)


17,893



18,066Available-for-Sale:Mortgage-backed securities


44,907



44



(555
)


44,396



44,396Other


66,031







(63
)


65,968



65,968Total
    available-for-sale


110,938



44



(618
)


110,364



110,364Total investment securities

$
129,004


$
46


$
(793
)

$
128,257


$
128,430     Gross


GrossAmortized


Unrealized


Unrealized


Fair


CarryingCost


Gains


Losses


Value


Value(Dollars in thousands)Held-to-Maturity:U.S. Treasury and government
    obligations

$
12,571


$



$



$
12,571


$
12,571Obligations of states and
    political subdivisions


3,544



1







3,545



3,544Mortgage-backed securities


931



6



(22
)


915



931Total
    held-to-maturity


17,046



7



(22
)


17,031



17,046Available-for-Sale:Mortgage-backed securities


27,924







(524
)


27,400



27,400Other


72,995







(99
)


72,896



72,896Total
    available-for-sale


100,919







(623
)


100,296



100,296Total investment securities

$
117,965


$
7


$
(645
)

$
117,327


$
117,342   available-for-sale
 83




---



##### Table of Contents



available-for-sale
  Securities with Unrealized Lossesless than 12 Months


12 Months or More


TotalGross





Gross





GrossFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Losses


Value


Losses


Value


Losses(Dollars in thousands)Mortgage backed securities

$
11,312


$
(33
)

$
20,860


$
(522
)

$
32,172


$
(555
)Other securities


3,380



(63
)










3,380



(63
)Total securities with unrealized
    losses

$
14,692


$
(96
)

$
20,860


$
(522
)

$
35,552


$
(618
)   other-than-temporary,
  available-for-sale
  other-than-temporarily
    Amortized


FairCost


Value(Dollars in thousands)Held-to-Maturity:Due within one year

$
2,277


$
2,256Due after one years through five
    years


11,453



11,318Due after five years through ten
    years


620



620Due after ten years


2,925



2,92517,275



17,119Mortgage-backed securities


791



77418,066



17,893Available-for-Sale:Due in one year or less


3,443



3,380Mortgage-backed securities


44,907



44,396FHLB & Federal Reserve
    Bank stock


62,588



62,588110,938



110,364Total investment securities

$
129,004


$
128,257  84




---



##### Table of Contents



Note 7 
    Loans and Leases
    December 31,2006


2005(Dollars in thousands)Commercial, financial and
    agricultural

$
2,249,988


$
2,016,253Real estate-construction


377,601



379,831Real estate-mortgage


1,522,616



1,232,933Consumer


31,581



31,718Commercial financingFranchise financing


699,969



462,413Domestic leasing


296,056



237,968Canadian leasing


358,783



313,581Unearned incomeFranchise financing


(211,480
)


(125,474
)Domestic leasing


(42,782
)


(33,267
)Canadian leasing


(44,139
)


(38,013
)Total

$
5,238,193


$
4,477,943           loan-to-value loan-to-value loan-to-value
 85




---



##### Table of Contents



December 31,2006


2005(Dollars in thousands)Minimum lease payments receivable

$
644,118


$
542,981Initial direct costs


10,721



8,568Less unearned income


(86,921
)


(71,280
)Less allowance for lease losses


(7,756
)


(6,638
)Net investment in leases financing

$
560,162


$
473,631   Note 8 
    Allowance for Loan and Lease Losses and Nonperforming Loans and
    Leases
    December 31,2006


2005


2004(Dollars in thousands)Balance at beginning of year

$
59,223


$
43,441


$
63,005Provision for loan and lease losses


35,101



27,307



14,473Charge-offs


(30,810
)


(20,201
)


(28,180
)Recoveries


11,208



8,960



5,335Reduction due to sale of loans and
    leases and other






(403
)


(627
)Reduction due to reclassification
    of loans


(246
)






(10,808
)Foreign currency adjustment


(8
)


119



243Balance at end of period

$
74,468


$
59,223


$
43,441       December 31,2006


2005(Dollars in thousands)Impaired loans with valuation
    reserve

$
10,893


$
14,714Impaired loans with no valuation
    reserve


3,476



4,300Total impaired loans

$
14,369


$
19,014Valuation reserve on impaired loans

$
3,086


$
3,684    86




---



##### Table of Contents



December 31,2006


2005(Dollars in thousands)Accruing loans past due
    90 days or more

$
392


$
599Nonaccrual loans and leases


37,171



36,820Total nonperforming loans and
    leases

$
37,563


$
37,419   Note 9 
    Servicing Assets
    December 31,2006


2005(Dollars in thousands)Beginning balance

$
295,754


$
367,032Additions


83,005



74,479Amortization


(61,699
)


(100,322
)Recovery of servicing asset


329



19,625Reduction for servicing sales


(285,055
)


(65,060
)Ending balance


32,334



295,754Less servicing asset from
    discontinued operations

$
385


$
261,309Mortgage servicing asset from
    continuing operations

$
31,949


$
34,445     December 31,2006


2005


2004(Dollars in thousands)Balance at beginning of year

$
27,243


$
54,134


$
76,869(Recovery of) impairment of
    servicing asset


(329
)


(19,625
)


2,474Reclass for sales of servicing


(26,431
)


(154
)


(18,210
)Other than temporary
    impairment(1)






(7,112
)


(6,999
)Balance at end of year


483



27,243



54,134Less valuation allowance from
    discontinued operations






26,091



51,936Valuation allowance from
    continuing operations

$
483


$
1,152


$
2,198     (1)
    
    Other than temporary impairment was recorded to reflect our view
    that the originally recorded value of certain servicing rights
    and subsequent impairment associated with those rights is
    unlikely to be recovered in market value. There was no related
    direct impact on net income as this other than temporary
    impairment affected only balance sheet accounts. However, the
    write-down will result in a reduction of amortization expense
    and reduced recovery of impairment in future periods.   87




---



##### Table of Contents



Fair Value of mortgage servicing
    assets

$
37,755Constant prepayment speed


28.39
%Impact on fair value of 10%
    adverse change

$
(1,385
)Impact on fair value of 20%
    adverse change


(2,590
)Discount rate


11.69
%Impact on fair value of 10%
    adverse change

$
(636
)Impact on fair value of 20%
    adverse change


(1,220
)       2006


2005Prepayment rates:


3-39
%


9-31
%Discount rates:


9-15
%


9-14
%   Note 10 
    Premises and Equipment
    December 31,2006


2005


Useful Lives(Dollars in thousands)Land

$
3,584


$
2,630



n/aBuilding and leasehold improvements


28,931



25,705



7-40 yearsFurniture and equipment


52,786



45,675



3-10 years85,301



74,010Less accumulated depreciation


(49,090
)


(44,289
)Total

$
36,211


$
29,721     Note 11 
    Lease Obligations
   88




---



##### Table of Contents



(Dollars in thousands)Year Ended December 31,2007

$
10,9682008


9,7292009


8,2762010


7,3472011


6,494Thereafter


7,469Total minimum rental payments

$
50,283   Note 12 
    Short-Term Borrowings
    December 31,2006


2005(Dollars in thousands)Federal Home Loan Bank
    borrowings

$
371,693


$
641,785Drafts payable related to mortgage
    loan closings


250



64,278Lines of credit and other






1,081Federal funds


230,500



290,300Total

$
602,443


$
997,444Weighted average interest rate


4.49
%


3.05
%         Note 13 
    Collateralized Debt
   89




---



##### Table of Contents



WeightedAverageInterest Rate atDecember 31,


December 31,


December 31,Maturity


2006


2006


2005(Dollars in thousands)Commercial finance line of
    businessDomestic asset backed note


5/2010



6.2
%

$
5,797


$
13,600Canadian asset backed notes:Note 1


revolving



5.4



30,611



32,385Note 2


1/1/2012



4.4



179,508



155,544Note 3


10/2009



4.5



8,157



14,839Home equity line of
    business2004-1
    asset backed notes:Variable rate senior note


12/2024-12/2034



5.7



50,072



132,692Variable rate subordinate note


12/2034



6.5



24,775



24,7752005-1
    asset backed notes:Variable rate senior note


6/2025-6/2035



5.5



40,972



138,244Fixed rate senior note


6/2035



5.0



94,129



94,129Variable rate subordinate note


6/2035



7.1



10,785



10,785Fixed rate subordinate note


6/2035



5.6



52,127



52,127Unamortized premium/discount










(90
)


(136
)2006-1
    asset backed notes:Variable rate senior note


9/2035



5.5



102,252



Fixed rate senior note


9/2035



5.5



96,561



Fixed rate lockout senior note


9/2035



5.6



24,264



Unamortized premium/discount










(19
)


2006-2
    asset backed notes:Variable rate senior note


2/2036



5.4



136,386



Fixed rate senior note


2/2036



6.3



80,033



Fixed rate lockout senior note


2/2036



6.2



21,348



Unamortized premium/discount










(21
)


2006-3
    asset backed notes:Variable rate senior note


1/2037-9/2037



5.4



130,326



Fixed rate senior note


9/2037



5.9



67,050



Fixed rate lockout senior note


9/2037



5.9



18,000



Unamortized premium/discount










(11
)


Total









$
1,173,012


$
668,984     Note 14 
    Other Long-Term Debt
   90




---



##### Table of Contents



InterestRate at





Subordinated DebtOrigination


December 31,


Maturity


December 31,Name

Date


2006


Date


2006


2005


Other(Dollars in thousands)IFC Capital Trust III


Nov 2000



8.75
%


Sep 2030


$



$
53,268


initial conversion ratio of
    1.261 shares of common stock to 1 convertible preferred
    security, currently callable at 10% premiumIFC Capital Trust IV


Jul 2001



10.25



Jul 2031







15,464IFC Capital Trust V


Nov 2001



9.95



Nov 2031







30,928IFC Capital Trust VI


Oct 2002



8.70



Sep 2032



35,567



35,567IFC Statutory Trust VII


Nov 2003



8.26



Nov 2033



51,547



51,547


rate changes quarterly at three
    month LIBOR plus 290 basis pointsIFC Capital Trust VIII


Aug 2005



5.96



Aug 2035



53,351



53,351


fixed rate for 5 years,
    variable rate of 3 month LIBOR plus 153 basis points
    thereafterIFC Capital Trust IX


Mar 2006



6.69



Mar 2036



32,475






fixed rate for 5 years,
    variable rate of 3 month LIBOR plus 149 basis points
    thereafterIFC Capital Trust X


Dec 2006



6.53



Dec 2036



15,464






fixed rate for 5 years,
    variable rate of 3 month LIBOR plus 175 basis points
    thereafterIFC Capital Trust XI


Dec 2006



7.09



Mar 2037



15,464






variable rate of 3 month LIBOR
    plus 174 basis points$
203,868


$
240,125   Note 15 
    Commitments and Contingencies
  Culpepper v.
    Inland Mortgage Corporation
   91




---



##### Table of Contents



Silke v.
    Irwin Mortgage Corporation
    Cohens v.
    Inland Mortgage Corporation
    Litigation
    in Connection with Loans Purchased from Community Bank of
    Northern Virginia
    Hobson v. Irwin Union Bank and Trust Company Hobson Hobson Truth-in-Lending
 92




---



##### Table of Contents



Hobson
  Kossler v. Community Bank of Northern Virginia Kossler Kossler Kossler
  Hobson Kossler Hobson Hobson
  Hobson Kossler Hobson Hobson Kossler
  (Chatfield v.
    Irwin Union Bank and Trust Company, et al. Ransom v. Irwin Union Bank and Trust Company,
    et al.)
  Hobson, Chatfield Ransom.
  Hobson, Chatfield Ransom Kossler Kessler v. RFC,
    et al Kessler Kessler Kessler Kessler Kessler
 93




---



##### Table of Contents



Putkowski v.
    Irwin Home Equity Corporation and Irwin Union Bank and Trust
    Company
    White v.
    Irwin Union Bank and Trust Company and Irwin Home Equity
    Corporation
  (White v. Irwin Union Bank & Trust,
    et al.).
    Note 16 
    Financial Instruments With Off-Balance Sheet Risk
     94




---



##### Table of Contents



Note 17 
    Derivative Financial Instruments
        marked-to-market
  2006-1, 2006-2 2006-3 marked-to-market
  2005-1
 95




---



##### Table of Contents



Note 18 
    Guarantees
    and/or
  agreed-upon 60-180 days
     96




---



##### Table of Contents



Note 19 
    Regulatory Matters
       97




---



##### Table of Contents



Adequately


WellActual


Capitalized


CapitalizedAmount


Ratio


Amount


Ratio


Amount


Ratio(Dollars in thousands)As of December 31,
    2006Total Capital (to Risk-Weighted
    Assets):Irwin Financial Corporation

$
837,754



13.4
%

$
500,714



8.0
%

$
625,893



10.0
%Irwin Union Bank and Trust


738,206



12.8


$
461,943



8.0


$
577,429



10.0Irwin Union Bank, F.S.B


59,157



11.3


$
42,028



8.0


$
52,535



10.0Tier I Capital (to
    Risk-Weighted Assets):Irwin Financial Corporation


712,403



11.4



250,357



4.0



375,536



6.0Irwin Union Bank and Trust


636,506



11.0



230,971



4.0



346,457



6.0Irwin Union Bank, F.S.B


55,820



10.6



N/A







31,521



6.0Tier I Capital (to Average
    Assets):Irwin Financial Corporation


712,403



11.5



247,919



4.0



309,899



5.0Irwin Union Bank and Trust


636,506



11.1



229,605



4.0



287,006



5.0Core Capital (to Adjusted Tangible
    Assets) Irwin Union Bank, F.S.B.


55,820



11.1



20,162



4.0



25,203



5.0Tangible Capital (to Tangible
    Assets) Irwin Union Bank, F.S.B.


55,804



11.1



7,516



1.5



N/AAs of December 31,
    2005Total Capital (to Risk-Weighted
    Assets):Irwin Financial Corporation

$
829,444



13.1
%

$
505,424



8.0
%

$
631,780



10.0
%Irwin Union Bank and Trust


716,228



12.3



465,721



8.0



582,151



10.0Irwin Union Bank, F.S.B.


54,795



12.5



35,186



8.0



43,983



10.0Tier I Capital (to
    Risk-Weighted Assets):Irwin Financial Corporation


675,316



10.7



252,712



4.0



379,068



6.0Irwin Union Bank and Trust


628,688



10.8



232,861



4.0



349,291



6.0Irwin Union Bank, F.S.B.


52,340



11.9



N/A







26,390



6.0Tier I Capital (to Average
    Assets):Irwin Financial Corporation


675,316



10.3



261,216



4.0



326,520



5.0Irwin Union Bank and Trust


628,688



10.4



241,878



4.0



302,347



5.0Core Capital (to Adjusted Tangible
    Assets) Irwin Union Bank, F.S.B.


52,340



10.3



20,262



4.0



25,327



5.0Tangible Capital (to Tangible
    Assets) Irwin Union Bank, F.S.B.


52,340



10.3



7,598



1.5



N/A   Note 20 
    Fair Values of Financial Instruments
    Cash and cash equivalents:
  Interest-bearing deposits with financial institutions,
    Deposit liabilities, Short-term borrowings, and Long-term and
    collateralized debt:
 98




---



##### Table of Contents



Loans and leases and loans held for sale:
  Residual interests:
  Servicing assets:
  Investment securities:
  Derivative instruments:
      2006


2005Carrying


Estimated Fair


Carrying


Estimated FairAmount


Value


Amount


Value(Dollars in thousands)Financial assets:Cash and cash equivalents

$
145,765


$
145,765


$
155,417


$
155,417Interest-bearing deposits with
    financial institutions


53,106



53,037



44,430



44,119Residual Interests


10,320



10,320



22,116



22,116Investment securities


128,430



128,257



117,342



117,327Loans held for sale


237,510



237,859



513,554



516,576Loans and leases, net of unearned
    discount


5,238,193



5,259,341



4,477,943



4,465,889Servicing asset


31,949



37,370



34,445



40,110Derivatives


3,055



3,055



12,787



12,787Financial
    liabilities:Deposits


3,551,516



3,441,892



3,898,993



3,804,199Short-term borrowings


602,443



604,590



997,444



994,542Collateralized debt


1,173,012



1,156,032



668,984



646,427Other long-term debt


233,889



237,271



270,160



274,636Derivatives


612



612



14,679



14,679      99




---



##### Table of Contents



Note 21 
    Equity Based Compensation
          December 31, 2006WeightedNumber of


Average GrantShares


Date Fair ValueUnvested at the beginning of the
    year


41,726


$
22.45Awarded


66,128



20.51Vested


(18,963
)


21.16Forfeited


(4,210
)


26.12Unvested at the end of the year


84,681


$
21.04      100




---



##### Table of Contents



For the Year Ended December 31,2006


2005


2004Risk-free interest rates


4.92
%


3.94
%


4.42
%Dividend yield


2.40
%


1.75
%


1.00
%Expected volatility


32
%


35
%


40
%Expected lives (in years)


6



6



6.5     2006WeightedWeighted


Average


AggregateAverage


Remaining


IntrinsicNumber of


Exercise


Contractual


Value As ofShares


Price


Term


12/31/2006(In thousands)Outstanding at the beginning of
    the year


2,441,771


$
20.55Granted


435,553



18.33Exercised


(246,878
)


15.31Canceled


(177,801
)


23.86Outstanding at the of the year


2,452,645



20.44



6.21


$
6,507Exercisable at the end of the year


1,970,597


$
20.77



5.53


$
4,781     For the Year EndedDecember 31, 2006Impact of AdoptingAs Reported


SFAS 123(R)(Dollars in thousands, except per share amounts)Net income from Continuing
    Operations before taxes

$
56,271


$
(1,799
)Net income from Continuing
    Operations


37,401



(1,079
)Net income


1,727



(1,117
)Basic earnings per shareFrom Continuing Operations

$
1.27


$
(0.04
)From All Operations


0.06



(0.04
)Diluted earnings per shareFrom Continuing Operations

$
1.25


$
(0.04
)From All Operations


0.05



(0.04
)     101




---



##### Table of Contents



Years Ended December 31,2005


2004(Dollars in thousands, except per share amounts)Net income from continuing
    operations as reported

$
36,247


$
48,724Equity based compensation expense
    included in net earnings, net of tax


59



94Deduct: Total stock-based employee
    compensation expense determined under fair value based method
    for all awards, net of related tax effects


(2,966
)


(2,672
)Net income from continuing
    operations pro forma


33,340



46,146Net (loss) income from
    discontinued operations


(17,260
)


19,721Pro forma net income

$
16,080


$
65,867Basic earnings per share from
    continuing operationsAs reported

$
1.27


$
1.72Pro forma


1.17



1.63Basic earnings per shareAs reported

$
0.67


$
2.42Pro forma


0.56



2.33Diluted earnings per share
    continuing operationsAs reported

$
1.26


$
1.64Pro forma


1.16



1.56Diluted earnings per shareAs reported

$
0.66


$
2.28Pro forma


0.56



2.19  102




---



##### Table of Contents



Note 22 
    Earnings Per Share
    Basic


Effect of


Effect of


DilutedEarnings


Restricted Stock


Convertible


EarningsPer Share


and Stock Options


Shares


Per Share(In thousands, except per share amounts)Year ended December 31,2006Net income available to common
    shareholders:From continuing operations

$
37,401


$
(303
)

$



$
37,098From discontinued operations


(35,674
)










(35,674
)Total net income from all
    operations

$
1,727


$
(303
)





$
1,424Shares


29,501



189







29,690Per-share amount:For continuing operations

$
1.27


$
(0.02
)

$



$
1.25For all operations

$
0.06


$
(0.01
)

$



$
0.052005Net income available to common
    shareholders:From continuing operations

$
36,247


$



$



$
36,247From discontinued operations


(17,260
)










(17,260
)Total net income from all
    operations

$
18,987


$



$



$
18,987Shares


28,518



323







28,841Per-share amount:For continuing operations

$
1.27


$
(0.01
)

$



$
1.26For all operations

$
0.67


$
(0.01
)

$



$
0.662004Net income available to common
    shareholders:From continuing operations

$
48,724


$



$
2,712


$
51,436From discontinued operations


19,721











19,721Total net income from all
    operations

$
68,445


$



$
2,712


$
71,157Shares


28,274



397



2,607



31,278Per-share amount:For continuing operations

$
1.72


$
(0.03
)

$
(0.05
)

$
1.64For all operations

$
2.42


$
(0.03
)

$
(0.11
)

$
2.28     Note 23 
    Income Taxes
   103




---



##### Table of Contents



2006


2005


2004(Dollars in thousands)Current:Federal

$
18,915


$
18,464


$
19,574State


5,809



5,208



5,591Foreign


1,695



1,287



3,63926,419



24,959



28,804Deferred:Federal


(6,199
)


(3,485
)


2,457State


(1,476
)


(831
)


586Foreign


126



(48
)


(355
)(7,549
)


(4,364
)


2,688Income tax expense:Federal


12,716



14,979



22,031State


4,333



4,377



6,177Foreign


1,821



1,239



3,284$
18,870


$
20,595


$
31,492     2006


2005


2004(Dollars in thousands)Income taxes computed at the
    statutory rate

$
19,695


$
19,895


$
28,076Increase (decrease) resulting from:Nontaxable interest from
    investment securities and loans


(124
)


(117
)


(107
)State tax, net of federal benefit


2,816



2,845



4,015Foreign operations


(673
)


183



1,860Reserve
    release(1)


(611
)


(1,870
)


(2,832
)Federal tax credits


(2,113
)


(507
)


(190
)Other items-net


(120
)


166



670$
18,870


$
20,595


$
31,492     (1)
    
    Tax reserves are released as we align our tax liability to a
    level commensurate with our current identified tax exposures. 104




---



##### Table of Contents



December 31,2006


2005(Dollars in thousands)Deferred tax assets:Reserve for credit losses

$
37,728


$
31,527Deferred compensation


1,601



1,740Retirement benefits


2,427



691Leasing


1,071



870Mark to market


1,402



4,155Capital loss
    carryforward(1)


3,511



224Other, net


3,656



51,396



39,207Deferred tax
    liabilities:Mortgage servicing


(11,513
)


(108,744
)Deferred origination fees and costs


(5,688
)


(4,055
)Other, net






(1,231
)(17,201
)


(114,030
)Net deferred tax asset (liability)

$
34,195


$
(74,823
)     (1)
    
    As of December 31, 2006, we have $3.5 million (after
    tax) of US capital loss carryforwards which expire in 2008
    ($0.2 million), 2010 ($0.7 million) and 2011
    ($2.6 million)  Note 24 
    Employee Retirement Plans
         105




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##### Table of Contents



Pension Benefits


SERP BenefitsDecember 31,


December 31,2006


2005


2006


2005(Dollars in thousands)


(Dollars in thousands)Change in benefit obligation:Projected benefit obligation at
    January 1,

$
36,063


$
29,348


$
7,882


$
6,463Service cost


3,723



2,856



235



257Interest cost


2,077



1,741



377



404Actuarial loss


459



2,962



(950
)


988Benefits paid


(879
)


(844
)


(230
)


(230
)Benefit obligation at
    December 31,


41,443



36,063



7,314



7,882Change in plan assets:Fair value plan assets at
    January 1,


28,699



24,407







Actual return on plan assets


4,114



2,197







Benefits paid


(879
)


(844
)


(230
)


(230
)Employer contributions






2,939



230



230Fair value plan assets at
    December 31,


31,934



28,699







Funded status at December 31,

$
(9,509
)

$
(7,364
)

$
(7,314
)

$
(7,882
)Amounts recognized in Balance
    sheet consist of:Other liabilities

$
(9,509
)





$
(7,314
)     Employee
    pension plan
  2006


2005


2004(Dollars in thousands)Service cost

$
3,723


$
2,856


$
2,127Interest cost


2,077



1,741



1,488Expected return on plan assets


(2,252
)


(1,912
)


(1,605
)Amortization of prior service cost


37



37



37Amortization of actuarial loss


871



687



638Net pension cost

$
4,456


$
3,409


$
2,685   Supplemental
    Executive Retirement Plan
  2006


2005


2004(Dollars in thousands)Service cost

$
235


$
257


$
207Interest cost


377



404



365Transition obligation


11



11



10Amortization of prior service cost


1



1



1Amortization of actuarial loss


97



167



103Net pension cost

$
721


$
840


$
686    106




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##### Table of Contents



Pension Benefits


SERP BenefitsYear Ending December 31,


Year Ending December 31,2006


2005


2006


2005(Dollars in thousands)


(Dollars in thousands)Amounts not yet reflected in
    net periodic benefit cost and included in accumulated other
    comprehensive income:Transition obligation

$







$
(16
)Prior service cost


(236
)






(34
)Accumulated loss


(9,175
)






(1,995
)Accumulated other comprehensive
    income

$
(9,411
)

$



$
(2,045
)

$
(457
)Cumulative employer contributions
    in excess of net periodic benefit cost


(98
)


4,358



(5,269
)


(4,778
)Net amount recognized in statement
    of financial position

$
(9,509
)

$
4,358


$
(7,314
)

$
(5,235
)Change in accumulated other
    comprehensive incomeAdditional minimum liability

$
(541
)

$



$



$
(519
)Intangible asset offset


236



N/A






$
62Accumulated other comprehensive
    income


(305
)










(457
)Net increase to accumulated other
    comprehensive income due to FAS 158

$
(9,106
)





$
(2,045
)   Weighted
    average assumptions:
  Pension


SERPBenefits


Benefits2006


2005


2006


2005To determine benefit obligations
    at December 31,Discount rate


5.75
%


5.50
%


5.75
%


5.50
%Rate of average compensation
    increases


4.18
%


4.18
%


4.25
%


4.25
%To Determine net periodic benefit
    cost at January 1,Discount rate


5.50
%


5.75
%


5.50
%


5.75
%Expected rate of return on plan
    assets


8.00
%


8.00
%


N/A



N/ARate of average compensation
    increases


4.18
%


4.18
%


4.25
%


4.25
%   Pension Benefits


SERP BenefitsDecember 31,


December 31,2006


2005


2006


2005(Dollars in thousands)


(Dollars in thousands)Projected benefit obligation

$
41,443


$
36,063


$
7,314


$
7,882Accumulated benefit obligation


32,573



28,322



5,238



5,297Fair value of assets


31,934



28,699







    107




---



##### Table of Contents



Plan
    Assets
    Percentage of Plan Assets


Target AllocationAsset Category

2006


2005


2007Equity securitiesDomestic


57
%


50
%


50-65
%International


14



23



15-25
%Corporate bonds


25



16



15-25
%Cash equivalents


4



11



0-10
%100
%


100
%       Cash
    Flows
      Pension


SERPBenefits


BenefitsExpected benefit payments (in
    thousands):2007

$
864


$
2302008


989



2252009


1,197



2192010


1,458



2142011


1,660



233Years
    2012-2016


11,440



1,826   Note 25 
    Industry Segment Information
   108




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##### Table of Contents



ConsolidatedCommercial


Commercial


Home Equity





Continuing


DiscontinuedBanking


Finance


Lending


Other


Operations


Operations


Consolidated(Dollars in thousands)2006Net interest income

$
113,844


$
65,387


$
108,133


$
(65,026
)

$
222,338


$
23,698


$
246,036Intersegment interest


5,148



(29,543
)


(34,724
)


59,119











Other revenue


18,173



8,018



14,738



3,692



44,621



14,285



58,906Intersegment revenues










448



(448
)










Total net revenues


137,165



43,862



88,595



(2,663
)


266,959



37,983



304,942Other expense


86,170



22,838



83,035



18,645



210,688



97,489



308,177Intersegment expenses


2,762



1,117



2,932



(6,811
)










Income (loss) before taxes


48,233



19,907



2,628



(14,497
)


56,271



(59,506
)


(3,235
)Income taxes


17,373



7,307



1,090



(6,900
)


18,870



(23,832
)


(4,962
)Net income (loss)

$
30,860


$
12,600


$
1,538


$
(7,597
)

$
37,401


$
(35,674
)

$
1,727Assets at December 31,

$
3,103,547


$
1,073,552


$
1,617,219


$
443,640










$
6,237,9582005Net interest income

$
95,131


$
29,392


$
104,645


$
(25,008
)

$
204,160


$
34,878


$
239,038Intersegment interest


10,341



(1,920
)


(32,166
)


23,745











Other revenue


16,686



7,437



33,667



(1,069
)


56,721



63,765



120,486Intersegment revenues


259











(259
)










Total net revenues


122,417



34,909



106,146



(2,591
)


260,881



98,643



359,524Other expense


75,347



21,453



99,119



8,120



204,039



127,516



331,555Intersegment expenses


1,715



771



3,220



(5,706
)










Income (loss) before taxes


45,355



12,685



3,807



(5,005
)


56,842



(28,873
)


27,969Income taxes


17,976



5,252



1,555



(4,188
)


20,595



(11,613
)


8,982Net income (loss)

$
27,379


$
7,433


$
2,252


$
(817
)

$
36,247


$
(17,260
)

$
18,987Assets at December 31,

$
3,162,398


$
831,657


$
1,602,400


$
1,050,069










$
6,646,5242004Net interest income

$
84,318


$
21,286


$
110,601


$
(17,664
)

$
198,541


$
39,342


$
237,883Intersegment interest


1,992







(15,987
)


13,995











Other revenue


17,749



6,275



67,847



(6,418
)


85,453



198,076



283,529Intersegment revenues


567











(567
)










Total net revenues


104,626



27,561



162,461



(10,654
)


283,994



237,418



521,412Other expense


63,656



18,091



111,856



10,175



203,778



203,457



407,235Intersegment expenses


1,794



691



2,923



(5,408
)










Income (loss) before taxes


39,176



8,779



47,682



(15,421
)


80,216



33,961



114,177Income taxes


15,752



5,562



19,615



(9,437
)


31,492



14,240



45,732Net income (loss)

$
23,424


$
3,217


$
28,067


$
(5,984
)

$
48,724


$
19,721


$
68,445Assets at December 31,

$
2,622,877


$
636,604


$
992,979


$
983,360










$
5,235,820  109




---



##### Table of Contents



Note 26 
    Irwin Financial Corporation (Parent Only) Financial
    Information
    Condensed
    Balance Sheets
  December 31,2006


2005(Dollars in thousands)Assets:Cash and short-term investments

$
839


$
284Investment in bank subsidiaries


689,654



679,447Investments in non-bank
    subsidiaries


3,793



(33,300
)Loans to bank subsidiaries


64,618



65,640Loans to non-bank subsidiaries






72,091Other assets


10,953



19,778$
769,857


$
803,940Liabilities:Short-term borrowings

$



$
19,157Long-term debt


233,868



270,125Other liabilities


5,487



2,324239,355



291,606Shareholders
    equity:Preferred Stock


14,518



Common stock


116,192



112,000Other shareholders equity


399,792



400,334530,502



512,334$
769,857


$
803,940  110




---



##### Table of Contents



Condensed
    Statements of Income
  For the Year Ended December 31,2006


2005


2004(Dollars in thousands)Income:Dividends from non-bank
    subsidiaries

$
348


$
1,417


$
Dividends from bank subsidiary


15,000



50,000



66,000Interest income


3,443



4,218



7,142Other


11,249



15,615



10,36930,040



71,250



83,511Expenses:Interest expense


20,082



23,983



24,101Salaries and benefits


11,416



9,973



9,555Other


5,754



6,191



6,58437,252



40,147



40,240(Loss) income before income taxes
    and equity in undistributed income of subsidiaries


(7,212
)


31,103



43,271Income tax benefit, less amounts
    charged to subsidiaries


(10,230
)


(9,900
)


(12,686
)3,018



41,003



55,957Equity in undistributed income of
    subsidiaries


(1,291
)


(22,016
)


12,488Net income

$
1,727


$
18,987


$
68,445  111




---



##### Table of Contents



Condensed
    Statements of Cash Flows
  For the Year Ended December 31,2006


2005


2004(Dollars in thousands)Net income

$
1,727


$
18,987


$
68,445Adjustments to reconcile net
    income to cash provided by operating activities:Equity in undistributed income of
    subsidiaries


1,291



22,016



(12,488
)Depreciation and amortization


2,853



2,652



727(Decrease) increase in taxes
    payable


(8,800
)


(11,442
)


18,316(Increase) decrease in interest
    receivable


(25
)


661



(247
)Decrease in interest payable


(506
)


(176
)


(62
)Net change in other assets and
    other liabilities


14,600



(8,847
)


2,725Net cash provided by operating
    activities


11,140



23,851



77,416Lending and investing activities:Net (increase) decrease in loans
    to subsidiaries


1,022



(2,289
)


(46,046
)Investments in subsidiaries






(5,081
)


(15,575
)Net (purchases) sales of premises
    and equipment


(339
)


15



(189
)Net cash provided (used) by
    lending and investing activities


683



(7,355
)


(61,810
)Financing activities:Net decrease in borrowings






(9,024
)


(17,680
)Net proceeds related to the
    issuance of trust preferred stock


61,500



51,750



Redemption related to trust
    preferred stock


(77,509
)


(51,750
)


Proceeds from the sale of
    noncumulative perpetual preferred stock


14,518







Purchase of treasury stock


(4,363
)


(1,201
)


(407
)Proceeds from sale of stock for
    employee benefit plans


7,740



3,277



7,836Dividends paid


(13,110
)


(11,426
)


(9,065
)Net cash used by financing
    activities


(11,224
)


(18,374
)


(19,316
)Net (decrease) increase in cash
    and cash equivalents


599



(1,878
)


(3,710
)Effect of exchange rate changes on
    cash


(44
)


1,051



98Cash and cash equivalents at
    beginning of year


284



1,111



4,723Cash and cash equivalents at end
    of year

$
839


$
284


$
1,111Supplemental disclosures of cash
    flow information:Cash paid during the year:Interest

$
20,588


$
24,159


$
24,039Income tax payments

$
92,783


$
14,920


$
9,954Non cash transactions:Conversion of trust preferred to
    common stock

$
20,248


$



$
  112




---



##### Table of Contents



Note 27 
    Summary of Quarterly Financial Information (Unaudited)
  2006Fourth


Third


Second


FirstQuarter


Quarter


Quarter


Quarter(Dollars in thousands)Summary Income InformationInterest income

$
129,264


$
123,788


$
117,609


$
111,467Interest expense


(62,571
)


(58,491
)


(53,737
)


(49,889
)Provision for loan and lease losses


(9,946
)


(9,135
)


(6,826
)


(9,193
)Non-interest income


14,232



7,347



9,046



13,996Non-interest expense


(55,717
)


(50,864
)


(51,295
)


(52,814
)Income taxes


(4,615
)


(3,550
)


(5,828
)


(4,877
)Net income from continuing
    operations

$
10,647


$
9,095


$
8,969


$
8,690Net loss from discontinued
    operations

$
(5,726
)

$
(13,302
)

$
(6,098
)

$
(10,548
)Net income (loss)

$
4,921


$
(4,207
)

$
2,871


$
(1,858
)Earnings per share of common stock
    from continuing operations:Basic(1)

$
0.36


$
0.31


$
0.30


$
0.30Diluted(1)


0.35



0.30



0.30



0.30Earnings (loss) per share of
    common stock:Basic(1)

$
0.17


$
(0.14
)

$
0.10


$
(0.06
)Diluted(1)


0.16



(0.14
)


0.09



(0.07
)   2005Fourth


Third


Second


FirstQuarter


Quarter


Quarter


Quarter(Dollars in thousands)Summary Income InformationInterest income

$
107,526


$
99,784


$
85,584


$
77,645Interest expense


(44,219
)


(40,852
)


(29,331
)


(24,670
)Provision for loan and lease losses


(8,905
)


(5,955
)


(8,966
)


(3,480
)Non-interest income


8,345



13,515



15,764



19,899Non-interest expense


(48,067
)


(48,167
)


(52,747
)


(55,860
)Income taxes


(5,454
)


(5,347
)


(4,561
)


(5,233
)Net income from continuing
    operations

$
9,226


$
12,978


$
5,743


$
8,301Net (loss) income from
    discontinued operations

$
(2,775
)

$
5,515


$
(9,154
)

$
(10,846
)Net income (loss)

$
6,451


$
18,493


$
(3,411
)

$
(2,545
)Earnings per share of common stock
    from continuing operations:Basic(1)

$
0.32


$
0.45


$
0.20


$
0.29Diluted(1)


0.32



0.45



0.20



0.29Earnings (loss) per share of
    common stock:Basic(1)

$
0.23


$
0.65


$
(0.12
)

$
(0.09
)Diluted(1)


0.23



0.64



(0.12
)


(0.09
)     (1)
    
    Our quarterly earnings per share are based on actual quarterly
    data and may not add up exactly to
    year-to-date
    earnings per share due to rounding and the impact of
    antidilutive shares. 113




---



##### Table of Contents



Form 10-Q
  RECLASSIFIED
    QUARTERLY FINANCIAL INFORMATION
  For the Quarter EndedMarch 31, 2005


June 30, 2005


September 30, 2005As
    reported(1)


As reclassified


As
    reported(1)


As reclassified


As
    reported(1)


As reclassified(Dollars in thousands)Net revenues

$
69,887


$
69,394


$
64,833


$
63,051


$
67,725


$
66,492Other expense


(55,860
)


(55,860
)


(53,549
)


(52,747
)


(48,969
)


(48,167
)Income before income taxes


14,027



13,534



11,284



10,304



18,756



18,325Income taxes


(5,430
)


(5,233
)


(4,953
)


(4,561
)


(5,520
)


(5,347
)Net income from continuing
    operations


8,597



8,301



6,331



5,743



13,236



12,978Net (loss) income from
    discontinued operations


(11,142
)


(10,846
)


(9,742
)


(9,154
)


5,257



5,515Net (loss) income

$
(2,545
)

$
(2,545
)

$
(3,411
)

$
(3,411
)

$
18,493


$
18,493Earnings per shareBasic from continuing operations

$
0.30


$
0.29


$
0.22


$
0.20


$
0.46


$
0.45Basic


(0.09
)


(0.09
)


(0.12
)


(0.12
)


0.65



0.65Diluted from continuing operations


0.30



0.29



0.22



0.20



0.46



0.45Diluted


(0.09
)


(0.09
)


(0.12
)


(0.12
)


0.64



0.64     (1)
    
    As reported in our third quarter 2006
    Form 10-Q  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures.  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(b) 15d-15(b) Rule 13a-15(e) 15d-15(e).
 114




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##### Table of Contents



Managements
    Report on Internal Control Over Financial Reporting
    Changes
    in Internal Control Over Financial Reporting
  Rule 13a-15(d) 15d-15(d), Rules 13a-15(f) 15d-15(f)
  Item 9B.
    Other
    Information   115




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##### Table of Contents



PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance.  Form 10-K.
    
    Our Code of Conduct (our code of business conduct and ethics),
    which is applicable to our directors, officers, and employees,
    including our Chief Executive Officer (principal executive
    officer), our Chief Financial Officer (principal financial
    officer) and our Controller (principal accounting officer). Our
    Code of Conduct is filed as Exhibit 14.1 to this Report on
    Form 10-K.
    Amendments to or waivers for executive officers or directors
    from our Code of Conduct will be posted on our website.
    Our Audit Committee Charter, which is Appendix A to our
    Proxy Statement.
    Our Risk Management Committee Charter.
    Our Compensation Committee Charter.
    Our Governance (nominating) Committee Charter.    Item 11.
    Executive
    Compensation.    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence.    Item 14.
    Principal
    Accountant Fees and Services.   116




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##### Table of Contents



PART IV Item 15.  Exhibits
    and Financial Statement Schedules.                          Form 10-K
  ExhibitNumber

Description of Exhibit2
.1

Asset Purchase Agreement by and
    among Irwin Financial Corporation, Irwin Mortgage Corporation
    and Freedom Mortgage Corporation dated as of August 7,
    2006. (Incorporated by reference to Exhibits 2.1 and 2.2 of
    Form 8-K
    filed October 2, 2006, File No. 001-16691.)3
.1

Restated Articles of Incorporation
    of Irwin Financial Corporation, as amended December 20,
    2006.3
.2

Code of By-laws of Irwin Financial
    Corporation, as amended, February 15, 2007.4
.1

Specimen Common Stock Certificate.4
.2

Certain instruments defining the
    rights of the holders of long-term debt of Irwin Financial
    Corporation and certain of its subsidiaries, none of which
    authorize a total amount of indebtedness in excess of 10% of the
    total assets of the Corporation and its subsidiaries on a
    consolidated basis, have not been filed as Exhibits. The
    Corporation hereby agrees to furnish a copy of any of these
    agreements to the Commission upon request.4
.3

Rights Agreement, dated as of
    March 1, 2001, between Irwin Financial Corporation and
    Irwin Union Bank and Trust. (Incorporated by reference to
    Exhibit 4.1 to
    Form 8-A
    filed March 2, 2001, File No.
    000-06835.)4
.4

Appointment of Successor Rights
    Agent dated as of May 11, 2001 between Irwin Financial
    Corporation and National City Bank. (Incorporated by reference
    to Exhibit 4.5 to
    Form S-8
    filed on September 7, 2001, File
    No. 333-69156.)10
.1

*Irwin Financial Corporation 1992
    Stock Option Plan. (Incorporated by reference to
    Exhibit 10(h) to
    Form 10-K
    Report for year ended December 31, 1992, File No.
    000-06835.)10
.2

*Irwin Financial Corporation 1997
    Stock Option Plan. (Incorporated by reference to Exhibit 10
    to
    Form 10-Q
    Report for period ended June 30, 1997, File No. 000-06835.)10
.3

*Amendment to Irwin Financial
    Corporation 1997 Stock Option Plan. (Incorporated by reference
    to Exhibit 10(i) to
    Form 10-Q
    Report for period ended June 30, 1997, File No. 000-06835.)10
.4

*Irwin Financial Corporation
    Amended and Restated 2001 Stock Plan, as amended
    November 28, 2006.10
.5

*Irwin Financial Corporation 2001
    Stock Plan Form of Stock Option Agreement. (Incorporated by
    reference to Exhibit 99.1 of the
    Corporations 8-K
    Current Report, dated May 9, 2005, File No.
    001-16691.) 117




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##### Table of Contents



ExhibitNumber

Description of Exhibit10
.6

*Irwin Financial Corporation 2001
    Stock Plan Form of Restricted Stock Agreement (Incorporated by
    reference to Exhibit 99.2 of the
    Corporations 8-K
    Current Report, dated May 9, 2005, File No.
    001-16691.)10
.7

*Irwin Financial Corporation 2001
    Stock Plan Form of Stock Option Agreement (Canada) (Incorporated
    by reference to Exhibit 10.8 of the
    Corporations 10-Q
    Report for period ended September 30, 2005, File No.
    001-16691.)10
.8

*Irwin Financial Corporation 1999
    Outside Director Restricted Stock Compensation Plan.
    (Incorporated by reference to Exhibit 2 to the
    Corporations proxy statement for its 2004 Annual Meeting,
    filed with the Commission on March 18, 2004, File No.
    001-16691.)10
.9

*Employee Stock Purchase
    Plan III. (Incorporated by reference to Exhibit 10(a)
    to
    Form 10-Q
    Report for period ended June 30, 1999, File No. 000-06835.)10
.10

*Long-Term Management Performance
    Plan. (Incorporated by reference to Exhibit 10(a) to
    Form 10-K
    Report for year ended December 31, 1986, File No.
    000-06835.)10
.11

*Long-Term Incentive Plan-Summary
    of Terms. (Incorporated by reference to Exhibit 10(a) to
    Form 10-K
    Report for year ended December 31, 1986, File No.
    000-06835.)10
.12

*Inland Mortgage Corporation
    Long-Term Incentive Plan. (Incorporated by reference to Exhibit
    10(j) to
    Form 10-K
    Report for year ended December 31, 1995, File No.
    000-06835.)10
.13

*Amended and Restated Management
    Bonus Plan. (Incorporated by reference to Exhibit 10(a) to
    Form 10-K
    Report for year ended December 31, 1986, File No.
    000-06835.)10
.14

*Limited Liability Company
    Agreement of Irwin Ventures LLC. (Incorporated by reference to
    Exhibit 10(a) to
    Form 10-Q/A
    Report for period ended March 31, 2001, File No. 000-06835.)10
.15

*Limited Liability Company
    Agreement of Irwin Ventures Co-Investment Fund LLC, effective as
    of April 20, 2001. (Incorporated by reference to
    Exhibit 10.17 to
    Form S-1/A
    filed February 14, 2002,
    File No. 333-69586.)10
.16

*Promissory Note dated
    January 30, 2002 from Elena Delgado to Irwin Financial
    Corporation. (Incorporated by reference to Exhibit 10.19 to
    Form S-1/A
    filed February 14, 2002, File No.
    333-69586.)10
.17

*Consumer Pledge Agreement dated
    January 30, 2002 between Elena Delgado and Irwin Financial
    Corporation. (Incorporated by reference to Exhibit 10.20 to
    Form S-1/A
    filed February 14, 2002,
    File No. 333-69586.)10
.18

*Redemption and Loan Repayment
    Agreement dated December 22, 2004 between Irwin Financial
    Corporation, Irwin Home Equity Corporation and Elena Delgado.
    (Incorporated by reference to Exhibit 10.15 of
    Form 10-K
    Report for year ended December 31, 2004, File No.
    001-16691.)10
.19

*Irwin Home Equity Corporation
    Amendment and Restatement of Shareholder Agreement dated
    December 22, 2004 between Irwin Home Equity Corporation,
    Irwin Financial Corporation and Elena Delgado. (Incorporated by
    reference to Exhibit 10.16 of
    Form 10-K
    Report for year ended December 31, 2004, File No.
    001-16691.)10
.20

*Deferred Compensation Agreement
    dated December 22, 2004 between Irwin Home Equity
    Corporation, Irwin Financial Corporation and Elena Delgado.
    (Incorporated by reference to Exhibit 10.17 of
    Form 10-K
    Report for year ended December 31, 2004, File No.
    001-16691.)10
.21

*Tax
    Gross-up
    Agreement dated December 22, 2004 between Irwin Financial
    Corporation and Elena Delgado as Shareholder. (Incorporated
    by reference to Exhibit 10.18 of
    Form 10-K
    Report for year ended December 31, 2004, File No.
    001-16691.)10
.22

*Amendment No. 1 to Irwin
    Home Equity Corporation Amendment and Restatement of Shareholder
    Agreement dated April 7, 2005 between Irwin Home Equity
    Corporation, Irwin Financial Corporation and Elena Delgado.
    (Incorporated by reference to Exhibit 10.19 of
    Form 10-Q
    Report for the quarter ended March 31, 2005, File No.
    001-16691.)10
.23

*Amendment No. 1 to the
    Deferred Compensation Agreement dated April 7, 2005 between
    Irwin Home Equity Corporation, Irwin Financial Corporation and
    Elena Delgado. (Incorporated by reference to Exhibit 10.20
    of
    Form 10-Q
    Report for the quarter ended March 31, 2005, File No.
    001-16691.) 118




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##### Table of Contents



ExhibitNumber

Description of Exhibit10
.24

*Amendment No. 2 to the
    Deferred Compensation Agreement dated November 15, 2005
    between Irwin Home Equity Corporation, Irwin Financial
    Corporation and Elena Delgado. (Incorporated by reference to
    Exhibit 99.1 of
    Form 8-K
    Current Report dated November 18, 2005, File No. 001-16691.)10
.25

*Election to Terminate the
    Deferred Compensation Agreement dated November 15, 2005
    between Irwin Home Equity Corporation, Irwin Financial
    Corporation and Elena Delgado. (Incorporated by reference to
    Exhibit 99.2 of
    Form 8-K
    Current Report dated November 18, 2005, File No. 001-16691.)10
.26

*Irwin Financial Corporation
    Amended and Restated Short Term Incentive Plan effective
    January 1, 2006. (Incorporated by reference to
    Exhibit 10.27 of
    Form 10-Q
    Report for the quarter ended June 30 2006, File No.
    001-16691.)10
.27

*Irwin Commercial Finance Amended
    and Restated Short Term Incentive Plan effective January 1,
    2006. (Incorporated by reference to Exhibit 10.28 of
    Form 10-Q
    for the quarter ended June 30, 2006, File No. 001-16691.)10
.28

*Irwin Home Equity Amended and
    Restated Short Term Incentive Plan effective January 1,
    2006. (Incorporated by reference to Exhibit 10.29 of
    Form 10-Q
    for the quarter ended June 30, 2006, File No. 001-16691.)10
.29

*Irwin Mortgage Corporation
    Amended and Restated Short Term Incentive Plan effective
    January 1, 2002. (Incorporated by reference to
    Exhibit 6 of the Corporations proxy statement for its
    2004 Annual Meeting, filed with the Commission on March 18,
    2004, File No. 001-16691.)10
.30

*Irwin Union Bank and Trust
    Company Amended and Restated Short Term Incentive Plan effective
    January 1, 2006. (Incorporated by reference to
    Exhibit 10.31 of
    Form 10-Q
    Report for the quarter ended June 30, 2006, File No.
    001-16691.)10
.31

*Onset Capital Corporation
    Employment Agreement. (Incorporated by reference to
    Exhibit 10.26 to
    Form 10-Q
    Report for period ended June 30, 2002, File No. 000-06835.)10
.32

*Irwin Financial Corporation
    Restated Supplemental Executive Retirement Plan for Named
    Executives. (Incorporated by reference to Exhibit 10.27 to
    Form 10-Q
    Report for period ended June 30, 2002, File No. 000-06835.)10
.33

*Irwin Financial Corporation
    Supplemental Executive Retirement Plan for Named Executives.
    (Incorporated by reference to Exhibit 10.28 to
    Form 10-Q
    Report for period ended June 30, 2002, File No. 000-06835.)10
.34

*Stock Purchase Agreement by and
    between Onset Holdings Inc. and Irwin International Corporation
    dated December 23, 2005. (Incorporated by reference to
    Exhibit 10.36 of
    Form 10-K
    Report for period ended December 31, 2005, File No.
    001-16691.).10
.35

*Shareholder Agreement Termination
    Agreement by and between Irwin Commercial Finance Canada
    Corporation and Irwin International Corporation dated
    December 23, 2005. (Incorporated by reference to
    Exhibit 10.37 of
    Form 10-K
    Report for period ended December 31, 2005, File No.
    001-16691.)10
.36

*Irwin Commercial Finance
    Corporation Shareholder Agreement dated December 23, 2005.
    (Incorporated by reference to Exhibit 10.38 of
    Form 10-K
    Report for period ended December 31, 2005, File No.
    001-16691.)10
.37

*Irwin Commercial Finance
    Corporation 2005 Stock Option Agreement Grant of Option to
    Joseph LaLeggia dated December 23, 2005. (Incorporated
    by reference to Exhibit 10.39 of
    Form 10-K
    Report for period ended December 31, 2005, File No.
    001-16691.)10
.38

*Irwin Commercial Finance
    Corporation 2005 Notice of Stock Option Grant to Joseph LaLeggia
    dated December 23, 2005. . (Incorporated by reference to
    Exhibit 10.40 of
    Form 10-K
    Report for period ended December 31, 2005, File No.
    001-16691.)10
.39

*Irwin Union Bank Amended and
    Restated Performance Unit Plan. (Incorporated by reference to
    Exhibit 10.41 of
    Form 10-K
    Report for period ended December 31, 2005, File No.
    001-16691.)10
.40

*Irwin Commercial Finance Amended
    and Restated Performance Unit Plan. (Incorporated by reference
    to Exhibit 10.42 of
    Form 10-K
    Report for period ended December 31, 2005, File No.
    001-16691.)10
.41

*First Amendment to the Irwin
    Commercial Finance Amended and Restated Performance Unit Plan,
    dated October 31, 2006. 119




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##### Table of Contents



ExhibitNumber

Description of Exhibit10
.42

*Irwin Home Equity Corporation
    Performance Unit Plan. (Incorporated by reference to Exhibit
    10.43 of
    Form 10-K
    Report for period ended December 31, 2005, File No.
    001-16691.)10
.43

*First Amendment to Limited
    Liability Company Agreement of Irwin Ventures LLC. (Incorporated
    by reference to Exhibit 10.44 of
    Form 10-K
    Report for period ended December 31, 2005, File No.
    001-16691.)10
.44

*Second Amendment to Limited
    Liability Company Agreement of Irwin Ventures Co-Investment Fund
    LLC. (Incorporated by reference to Exhibit 10.45 of
    Form 10-K
    Report for period ended December 31, 2005, File No.
    001-16691.)10
.45

*Supplemental Performance Unit
    Grant-Jocelyn Martin-Leano, dated February 6, 2007.11
.1

Computation of Earnings Per Share.12
.1

Computation of Ratio of Earnings
    to Fixed Charges.14
.1

Code of Conduct.21
.1

Subsidiaries of Irwin Financial
    Corporation.23
.1

Consent of Independent Registered
    Public Accounting Firm.23
.2

Consent of Independent Registered
    Public Accounting Firm.31
.1

Certification pursuant to
    18 U.S.C. Section 302 of the Sarbanes-Oxley Act of
    2002 by the Chief Executive Officer.31
.2

Certification pursuant to
    18 U.S.C. Section 302 of the Sarbanes-Oxley Act of
    2002 by the Chief Financial Officer.32
.1

Certification of the Chief
    Executive Officer under Section 906 of the Sarbanes-Oxley
    Act of 2002.32
.2

Certification of the Chief
    Financial Officer under Section 906 of the Sarbanes-Oxley
    Act of 2002.     *
    
    Indicates management contract or compensatory plan or arrangement 120




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##### Table of Contents



SIGNATURES      By:
    /s/  William
    I. Miller  William I. Miller
 Chairman of the Board and Chief
    Executive Officer
   Form 10-K
  Signature

Capacity with Corporation

Date/s/  Sally
    A. DeanSally
    A. Dean

Director

March 5, 2007/s/  David
    W. GoodrichDavid
    W. Goodrich

Director

March 5, 2007/s/  R.
    David HooverR.
    David Hoover

Director

March 5, 2007/s/  William
    H. KlingWilliam
    H. Kling

Director

March 5, 2007/s/  Brenda
    J. LauderbackBrenda
    J. Lauderback

Director

March 5, 2007/s/  John
    C. Mcginty, JrJohn
    C. McGinty, Jr

Director

March 5, 2007/s/  William
    I. MillerWilliam
    I. Miller

Director, Chairman of the Board
    and Chief Executive Officer (principal executive officer)

March 5, 2007/s/  Lance
    R. OddenLance
    R. Odden

Director

March 5, 2007/s/  Marita
    ZuraitisMarita
    Zuraitis

Director

March 5, 2007/s/  Gregory
    F. EhlingerGregory
    F. Ehlinger

Senior Vice President and Chief
    Financial Officer(principal financial officer)

March 5, 2007/s/  Jody
    A. LittrellJody
    A. Littrell

First Vice President and
    Controller(principal accounting officer)

March 5, 2007  121