##### 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 1934

For the fiscal Year Ended December 31, 2005


or




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

For the transition period
from  to                         .


Commission file number 0-6835


IRWIN FINANCIAL CORPORATION


(Exact name of Corporation as Specified in its Charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Indiana                                                            |  | 35-1286807                              
|(State or Other Jurisdiction of
    Incorporation or Organization) |  | (I.R.S. Employer
    Identification No.)
|                                                                  
|500 Washington Street Columbus, Indiana                            |  | 47201                                   
|(Address of Principal Executive Offices)                           |  | (Zip Code)                              
|                                                                  
|(812) 376-1909                                                     |  | www.irwinfinancial.com                  
|(Corporations Telephone Number, Including Area Code)              |  | (Web Site)                              

Securities registered pursuant to Section 12(b) of the
Act: None


Securities registered pursuant to Section 12(g) of the
Act:


|                |  |                                                                                                                                        
|--------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------
|Title of Class: |  | Common Stock*                                                                                                                          
|Title of Class: |  | 8.75% Cumulative Convertible Trust Preferred Securities
    issued by IFC Capital Trust III and the guarantee with
    respect thereto.
|Title of Class  |  | 8.70% Cumulative Trust Preferred Securities issued by
    IFC Capital Trust VI and the guarantee with respect
    thereto.             

o þ


o þ


þ o


S-K 10-K 10-K. þ


12b-2


o þ o


12b-2 o þ








|  |                            
|- | ---------------------------
|* | Includes associated rights.

Documents Incorporated by Reference


|                                                                                                                                   |  |                                          
|---------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------
|Selected Portions of the Following Documents                                                                                       |  | Part of Form 10-K Into Which Incorporated
|                                                                                                                                   |  |                                          
|                                                                                                                                  
|Definitive Proxy Statement for Annual Meeting
    Shareholders to be held April 6, 2006
    Exhibit Index on Pages 119 through 122 |  | Part III                                 









---



##### 










FORM 10-K


TABLE OF CONTENTS


|                                                        |         |     |   |  |                                                                                                    |  |    
|------------------------------------------------------- | ------- | --- | - |  | -------------------------------------------------------------------------------------------------- |  | ---
|Part I                                                  |         |     |   |  |                                                                                                    | 
|                                                        | Item 1  |     |  |  | Business                                                                                           |  | 2  
|                                                        | Item 1A |     |  |  | Risk Factors                                                                                       |  | 12 
|                                                        | Item 2  |     |  |  | Properties                                                                                         |  | 17 
|                                                        | Item 3  |     |  |  | Legal Proceedings                                                                                  |  | 18 
|                                                        | Item 4  |     |  |  | Submission of Matters to a Vote of Security
    Holders                                            |  | 22 
|Part II                                                 |         |     |   |  |                                                                                                    | 
|                                                        | Item 5  |     |  |  | Market for Corporations Common Equity
    and Related Stockholder Matters                         |  | 23 
|                                                        | Item 6  |     |  |  | Selected Financial Data                                                                            |  | 24 
|                                                        | Item 7  |     |  |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations          |  | 26 
|                                                        | Item 7A |     |  |  | Quantitative and Qualitative Disclosures
    about Market Risk                                     |  | 74 
|                                                        | Item 8  |     |  |  | Financial Statements and Supplementary
    Data                                                    |  | 75 
|                                                        | Item 9  |     |  |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure           |  | 117
|                                                        | Item 9A |     |  |  | Controls and Procedures                                                                            |  | 117
|                                                        | Item 9B |     |  |  | Other Information                                                                                  |  | 117
|Part III                                                |         |     |   |  |                                                                                                    | 
|                                                        | Item 10 |     |  |  | Directors and Executive Officers of the
    Corporation                                            |  | 118
|                                                        | Item 11 |     |  |  | Executive Compensation                                                                             |  | 118
|                                                        | Item 12 |     |  |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters |  | 118
|                                                        | Item 13 |     |  |  | Certain Relationships and Related
    Transactions                                                 |  | 118
|                                                        | Item 14 |     |  |  | Principal Accountant Fees and Services                                                             |  | 118
|Part IV                                                 |         |     |   |  |                                                                                                    | 
|                                                        | Item 15 |     |  |  | Exhibits, Financial Statement Schedules                                                            |  | 119
|SIGNATURES                                              |         | 123
|Stock Purchase Agreement                               
|Shareholder Agreement Termination Agreement            
|Shareholder Agreement                                  
|2005 Stock Option Agreement                            
|2005 Notice of Stock Option Grant                      
|Amended and Restated Performance Unit Plan             
|Amended and Restated Performance Unit Plan             
|Performance Unit Plan                                  
|First Amendment to Limited Liability Company Agreement 
|Second Amendment to Limited Liability Company Agreement
|Computation of Earnings Per Share                      
|Computation of Ratio of Earnings to Fixed Charges      
|Code of Conduct                                        
|Subsidiaries                                           
|Consent of Independent Public Account Firm             
|302 Certification of Chief Executive Officer           
|302 Certification of Chief Financial Officer           
|906 Certification of Chief Executive Officer           
|906 Certification of Chief Financial Officer           



1



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##### Table of Contents






PART I







|        |         
|------- | --------
|Item 1. | Business

General








http://www.irwinfinancial.com.


10-K, 10-Q, 8-K, 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

2



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##### Table of Contents



| |   |                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | Indiana, as well as in Kalamazoo, Grandville (near Grand
    Rapids), Traverse City and Lansing, Michigan; Carson City and
    Las Vegas, Nevada; and Salt Lake City, Utah.                                                                                                                               
|
| |  | 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 Clayton, Missouri (near
    St. Louis); Louisville, Kentucky; Milwaukee Wisconsin;
    Phoenix, Arizona; and, Costa Mesa and Sacramento, California.





| |                   
| | ------------------
| | Commercial Finance





line-of






| |                    
| | -------------------
| | Home Equity Lending

loan-to loan-to






3



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| |                 
| | ----------------
| | Mortgage Banking







Customer Base




Competition






Financial Information About Geographic Areas




4



---



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Supervision and Regulation




| |        
| | -------
| | General













| |                                
| | -------------------------------
| | 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 $169 million qualified as Tier 1 capital as
    of December 31, 2005); and
|
| |  | minority interests in the common equity accounts of consolidated
    subsidiaries;                                                                                                                                     

5



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##### Table of Contents







| |   |                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------
| |  | goodwill;                                                                                                                             
|
| |  | credit-enhancing interest-only strips (certain amounts
    only); and                                                                 
|
| |  | specified intangible assets (including $0.8 million of
    disqualified Mortgage Servicing Assets (MSRs) as of
    December 31, 2005).





| |   |                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | allowance for loan and lease losses;                                                                                                                
|
| |  | perpetual preferred stock and related surplus;                                                                                                      
|
| |  | hybrid capital instruments (including Trust Preferred
    securities, of which $64 million qualified as Tier 2
    capital as of December 31, 2005);
|
| |  | 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.                                                                                    







| |          
| | ---------
| | Expansion





| |          
| | ---------
| | Dividends



6



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| |                           
| | --------------------------
| | Bank and Thrift Regulation











| |                                                    
| | ---------------------------------------------------
| | Mortgage Banking and Residential Lending Regulation





| |                     
| | --------------------
| | Capital Requirements

Bank Holding Company
Regulation  Minimum Capital Requirements.




7



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| |                              
| | -----------------------------
| | Insurance of Deposit Accounts









| |                     
| | --------------------
| | Dividend Limitations



clean-up


8



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| |                                 
| | --------------------------------
| | Interstate Banking and Branching

age-of






| |                       
| | ----------------------
| | Community Reinvestment



9



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| |                                       
| | --------------------------------------
| | Other Safety and Soundness Regulations





| |                  
| | -----------------
| | Brokered Deposits





| |                           
| | --------------------------
| | 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;

10



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| |   |                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.                         





Employees and Labor Relations




Executive Officers




Gregory F. Ehlinger


Jose M. Gonzalez


Robert H. Griffith


Theresa L. Hall


Bradley J. Kime


11



---



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Joseph R. LaLeggia


Jody A. Littrell


Jocelyn Martin-Leano


David S. Meyercord


Steven R. Schultz


Matthew F. Souza


Brett R. Vanderkolk


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.




loan-to


We may be adversely affected by interest rate changes.


mark-to lower-of




12



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| |                                       
| | --------------------------------------
| | 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.




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.




13



---



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loan-to




We have credit risk inherent in our asset portfolios.




Certain of our consumer mortgage products are not sold by
many financial institutions.




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.




14



---



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Our future success depends on our ability to compete
effectively in 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.










15



---



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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.








16



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|        |           
|------- | ----------
|Item 2. | Properties



Irwin Union Bank and Trust




Irwin Union Bank, F.S.B.




Irwin Commercial Finance Corporation




Irwin Home Equity




Irwin Mortgage




17



---



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|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings



| |                                         
| | ----------------------------------------
| | Culpepper v. Inland Mortgage Corporation









| |                                    
| | -----------------------------------
| | Silke v. Irwin Mortgage Corporation





| |                                      
| | -------------------------------------
| | Cohens v. Inland Mortgage Corporation



18



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| |                                                                                           
| | ------------------------------------------------------------------------------------------
| | Litigation in Connection with Loans Purchased from Community
    Bank of Northern Virginia



Hobson v. Irwin Union Bank and Trust Company Hobson Hobson Truth-in 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


19



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| |                                        
| | ---------------------------------------
| | Litigation Related to NorVergence, Inc.



Exquisite Caterers, LLC
et al. v. Popular Leasing et al. Exquisite Caterers Truth-in Exquisite Caterers Exquisite Caterers


Delanco Board of Education
et al. v. IFC Credit Corporation Exquisite Caterers,


Sterling Asset & Equity Corp.
et al. v. Preferred Capital, Inc. et al.


20



---



##### Table of Contents







(State of Florida v. Commerce Commercial
Leasing, LLC et al.)








| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Putkowski v. Irwin Home Equity Corporation and Irwin
    Union Bank and Trust Company



21



---



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| |                                                                                  
| | ---------------------------------------------------------------------------------
| | White v. Irwin Union Bank and Trust Company and Irwin
    Home Equity Corporation










|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders



22



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PART II







|        |                                                                           
|------- | --------------------------------------------------------------------------
|Item 5. | Market for Corporations Common Equity and Related
    Stockholder Matters



Stock Prices and Dividends:


|               |  |             |       |  |         |   |       |      |       |   |           |  |  |          |      |  |  |   |      | 
|-------------- |  | ----------- | ----- |  | ------- | - | ----- | ---- | ----- | - | --------- |  |  | -------- | ---- |  |  | - | ---- | 
|               |  | Price Range |       |  |         |   |       |      | Total |  
|               |  |             |       |  | Quarter |   |       | Cash |       |   | Dividends | 
|               |  | High        |       |  | Low     |   |       | End  |       |   | Dividends |  |  | For Year |     
|               |  |             |       |  |         |   |       |      |       |   |           |  |  |          |     
|2004           |  |             |       |  |         |   |       |      |       |   |           |  |  |          |      |  |  |   |      | 
|First quarter  |  | $           | 36.17 |  |         | $ | 26.63 |      |       | $ | 26.98     |  |  | $        | 0.08 |  |  |   |      | 
|Second quarter |  |             | 27.43 |  |         |   | 23.10 |      |       |   | 26.40     |  |  | $        | 0.08 |  |  |   |      | 
|Third Quarter  |  |             | 27.58 |  |         |   | 25.05 |      |       |   | 25.82     |  |  | $        | 0.08 |  |  |   |      | 
|Fourth Quarter |  |             | 28.85 |  |         |   | 23.80 |      |       |   | 28.39     |  |  | $        | 0.08 |  |  | $ | 0.32 | 
|2005           |  |             |       |  |         |   |       |      |       |   |           |  |  |          |      |  |  |   |      | 
|First quarter  |  | $           | 28.53 |  |         | $ | 22.11 |      |       | $ | 23.02     |  |  | $        | 0.10 |  |  |   |      | 
|Second quarter |  |             | 22.94 |  |         |   | 19.58 |      |       |   | 22.19     |  |  | $        | 0.10 |  |  |   |      | 
|Third Quarter  |  |             | 22.75 |  |         |   | 20.12 |      |       |   | 20.39     |  |  | $        | 0.10 |  |  |   |      | 
|Fourth Quarter |  |             | 23.32 |  |         |   | 19.68 |      |       |   | 21.42     |  |  | $        | 0.10 |  |  | $ | 0.40 | 



Sales of Unregistered Securities:




23



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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

Five-Year Selected Financial Data


|                           |                                                                   |                                              |   |            |      |  |   |            |      |  |      |            |      |      |   |            |      |  |   |            |      | 
|-------------------------- | ----------------------------------------------------------------- | -------------------------------------------- | - | ---------- | ---- |  | - | ---------- | ---- |  | ---- | ---------- | ---- | ---- | - | ---------- | ---- |  | - | ---------- | ---- | 
|                           |                                                                   | At or For Year Ended December 31,            |  
|                           |                                                                   |                                              |  
|                           |                                                                   | 2005                                         |   |            | 2004 |  |   | 2003       |      |  | 2002 |            |      | 2001 |  
|                           |                                                                   |                                              |   |            |      |  |   |            |      |  |      |            |      |      |  
|                           |                                                                   | (Dollars in thousands except per share data) |  
|For the year:              |                                                                   |                                              |   |            |      |  |   |            |      |  |      |            |      |      |   |            |      |  |   |           
|                           | Net revenues                                                      |                                              | $ | 359,524    |      |  | $ | 521,412    |      |  | $    | 530,445    |      |      | $ | 403,788    |      |  | $ | 387,019    |     
|                           | Noninterest expense                                               |                                              |   | 331,555    |      |  |   | 407,235    |      |  |      | 412,043    |      |      |   | 317,557    |      |  |   | 312,819    |     
|                           |                                                                   |                                              |   |            |      |  |   |            |      |  |      |            |      |      |  
|                           | Income before income taxes                                        |                                              |   | 27,969     |      |  |   | 114,177    |      |  |      | 118,402    |      |      |   | 86,231     |      |  |   | 74,200     |     
|                           | Provision for income taxes                                        |                                              |   | 8,982      |      |  |   | 45,732     |      |  |      | 45,585     |      |      |   | 33,398     |      |  |   | 28,859     |     
|                           |                                                                   |                                              |   |            |      |  |   |            |      |  |      |            |      |      |  
|                           | Income before cumulative effect of change in accounting principle |                                              |   | 18,987     |      |  |   | 68,445     |      |  |      | 72,817     |      |      |   | 52,833     |      |  |   | 45,341     |     
|                           |                                                                   |                                              |   |            |      |  |   |            |      |  |      |            |      |      |  
|                           | Cumulative effect of change in accounting principle, net of tax   |                                              |   |           |      |  |   |           |      |  |      |           |      |      |   | 495        |      |  |   | 175        |     
|                           |                                                                   |                                              |   |            |      |  |   |            |      |  |      |            |      |      |  
|                           | Net income                                                        |                                              | $ | 18,987     |      |  | $ | 68,445     |      |  | $    | 72,817     |      |      | $ | 53,328     |      |  | $ | 45,516     |     
|                           |                                                                   |                                              |   |            |      |  |   |            |      |  |      |            |      |      |  
|                           | Mortgage loan originations                                        |                                              | $ | 11,029,183 |      |  | $ | 13,093,082 |      |  | $    | 22,669,246 |      |      | $ | 11,411,875 |      |  | $ | 9,225,991  |     
|                           | Home equity loan originations                                     |                                              |   | 1,691,636  |      |  |   | 1,442,314  |      |  |      | 1,133,316  |      |      |   | 1,067,227  |      |  |   | 1,149,410  |     
|Common Share Data:         |                                                                   |                                              |   |            |      |  |   |            |      |  |      |            |      |      |   |            |      |  |   |           
|                           | Earnings per
    share:(1)                                        |                                              |   |            |      |  |   |            |      |  |      |            |      |      |   |            |      |  |   |            |     
|                           |                                                                   | Basic                                        |   | $          | 0.67 |  |   | $          | 2.42 |  |      | $          | 2.61 |      |   | $          | 1.99 |  |   | $          | 2.15 | 
|                           |                                                                   | Diluted                                      |   |            | 0.66 |  |   |            | 2.28 |  |      |            | 2.45 |      |   |            | 1.89 |  |   |            | 2.00 | 
|                           | Cash dividends per share                                          |                                              |   | 0.40       |      |  |   | 0.32       |      |  |      | 0.28       |      |      |   | 0.27       |      |  |   | 0.26       |     
|                           | Book value per share                                              |                                              |   | 17.90      |      |  |   | 17.61      |      |  |      | 15.36      |      |      |   | 12.98      |      |  |   | 10.81      |     
|                           | Dividend payout ratio                                             |                                              |   | 60.18      | %    |  |   | 13.24      | %    |  |      | 10.76      | %    |      |   | 14.01      | %    |  |   | 12.13      | %   
|                           | Weighted average shares  basic                                   |                                              |   | 28,518     |      |  |   | 28,274     |      |  |      | 27,915     |      |      |   | 26,823     |      |  |   | 21,175     |     
|                           | Weighted average shares  diluted                                 |                                              |   | 28,841     |      |  |   | 31,278     |      |  |      | 30,850     |      |      |   | 29,675     |      |  |   | 24,173     |     
|                           | Shares outstanding  end of period                                |                                              |   | 28,618     |      |  |   | 28,452     |      |  |      | 28,134     |      |      |   | 27,771     |      |  |   | 21,305     |     
|At year end:               |                                                                   |                                              |   |            |      |  |   |            |      |  |      |            |      |      |   |            |      |  |   |           
|                           | Assets                                                            |                                              | $ | 6,646,524  |      |  | $ | 5,235,820  |      |  | $    | 4,988,359  |      |      | $ | 4,910,392  |      |  | $ | 3,446,602  |     
|                           | Residual interests                                                |                                              |   | 22,116     |      |  |   | 56,101     |      |  |      | 71,491     |      |      |   | 157,514    |      |  |   | 199,071    |     
|                           | Loans held for sale                                               |                                              |   | 1,293,519  |      |  |   | 890,711    |      |  |      | 883,895    |      |      |   | 1,314,849  |      |  |   | 502,086    |     
|                           | Loans and leases                                                  |                                              |   | 4,498,829  |      |  |   | 3,450,440  |      |  |      | 3,161,054  |      |      |   | 2,815,276  |      |  |   | 2,137,822  |     
|                           | Allowance for loan and lease losses                               |                                              |   | 59,749     |      |  |   | 44,443     |      |  |      | 64,285     |      |      |   | 50,936     |      |  |   | 22,283     |     
|                           | Servicing assets                                                  |                                              |   | 295,754    |      |  |   | 367,032    |      |  |      | 380,123    |      |      |   | 174,935    |      |  |   | 228,624    |     
|                           | Deposits                                                          |                                              |   | 3,898,993  |      |  |   | 3,395,263  |      |  |      | 2,899,662  |      |      |   | 2,693,810  |      |  |   | 2,308,962  |     
|                           | Short-term borrowings                                             |                                              |   | 997,444    |      |  |   | 237,277    |      |  |      | 429,758    |      |      |   | 993,124    |      |  |   | 487,963    |     
|                           | Collateralized debt                                               |                                              |   | 668,984    |      |  |   | 547,477    |      |  |      | 590,131    |      |      |   | 391,425    |      |  |   |           |     
|                           | Other long-term
    debt(2)                                       |                                              |   | 270,160    |      |  |   | 270,172    |      |  |      | 270,184    |      |      |   | 30,070     |      |  |   | 30,000     |     
|                           | Trust preferred
    securities(2)                                 |                                              |   |           |      |  |   |           |      |  |      |           |      |      |   | 233,000    |      |  |   | 198,500    |     
|                           | Shareholders equity                                              |                                              |   | 512,334    |      |  |   | 501,185    |      |  |      | 432,260    |      |      |   | 360,555    |      |  |   | 231,665    |     
|                           | Managed mortgage banking servicing portfolio                      |                                              |   | 18,265,288 |      |  |   | 26,196,627 |      |  |      | 29,640,122 |      |      |   | 16,792,669 |      |  |   | 12,875,532 |     
|Selected Financial Ratios: |                                                                   |                                              |   |            |      |  |   |            |      |  |      |            |      |      |   |            |      |  |   |           
|Performance Ratios:        |                                                                   |                                              |   |            |      |  |   |            |      |  |      |            |      |      |   |            |      |  |   |           
|                           | Return on average assets                                          |                                              |   | 0.3        | %    |  |   | 1.3        | %    |  |      | 1.4        | %    |      |   | 1.3        | %    |  |   | 1.5        | %   
|                           | Return on average equity                                          |                                              |   | 4.0        |      |  |   | 14.5       |      |  |      | 18.4       |      |      |   | 16.7       |      |  |   | 21.8       |     
|                           | Net interest
    margin(3)                                        |                                              |   | 4.97       |      |  |   | 5.46       |      |  |      | 5.82       |      |      |   | 6.01       |      |  |   | 5.35       |     

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|                                    |                                                                                 |                                              |  |       |       |   |  |       |       |   |      |       |       |      |  |       |       |   |  |       |       |  
|----------------------------------- | ------------------------------------------------------------------------------- | -------------------------------------------- |  | ----- | ----- | - |  | ----- | ----- | - | ---- | ----- | ----- | ---- |  | ----- | ----- | - |  | ----- | ----- | -
|                                    |                                                                                 | At or For Year Ended December 31,            | 
|                                    |                                                                                 |                                              | 
|                                    |                                                                                 | 2005                                         |  |       | 2004  |   |  | 2003  |       |   | 2002 |       |       | 2001 | 
|                                    |                                                                                 |                                              |  |       |       |   |  |       |       |   |      |       |       |      | 
|                                    |                                                                                 | (Dollars in thousands except per share data) | 
|                                    | Noninterest income to
    revenues(4)                                           |                                              |  | 31.2  |       |   |  | 52.9  |       |   |      | 53.0  |       |      |  | 52.3  |       |   |  | 64.8  |      
|                                    | Efficiency
    ratio(5)                                                         |                                              |  | 85.8  |       |   |  | 76.0  |       |   |      | 71.3  |       |      |  | 70.9  |       |   |  | 78.1  |      
|                                    | Loans and leases and loans held for sale to
    deposits(6)                     |                                              |  | 110.4 |       |   |  | 91.4  |       |   |      | 94.1  |       |      |  | 89.9  |       |   |  | 79.1  |      
|                                    | Average interest-earning assets to average interest-bearing
    liabilities     |                                              |  | 125.5 |       |   |  | 132.4 |       |   |      | 132.2 |       |      |  | 121.7 |       |   |  | 117.2 |      
|Asset Quality Ratios:               |                                                                                 |                                              |  |       |       |   |  |       |       |   |      |       |       |      |  |       |       |   |  |      
|                                    | Allowance for loan and lease losses to:                                         |                                              |  |       |       |   |  |       |       |   |      |       |       |      |  |       |       |   |  |       |      
|                                    |                                                                                 | Total loans and leases                       |  |       | 1.3   | % |  |       | 1.3   | % |      |       | 2.0   | %    |  |       | 1.8   | % |  |       | 1.0   | %
|                                    |                                                                                 | Non-performing loans and leases              |  |       | 159.7 |   |  |       | 131.9 |   |      |       | 144.9 |      |  |       | 163.6 |   |  |       | 116.3 |  
|                                    | Net charge-offs to average loans and leases                                     |                                              |  | 0.3   |       |   |  | 0.7   |       |   |      | 1.1   |       |      |  | 0.7   |       |   |  | 0.7   |      
|                                    | Non-performing assets to total assets                                           |                                              |  | 0.8   |       |   |  | 0.9   |       |   |      | 1.1   |       |      |  | 0.8   |       |   |  | 0.7   |      
|                                    | Non-performing assets to total loans and leases and other real
    estate owned |                                              |  | 1.2   |       |   |  | 1.3   |       |   |      | 1.7   |       |      |  | 1.3   |       |   |  | 1.1   |      
|Ratio of Earnings to Fixed Charges: |                                                                                 |                                              |  |       |       |   |  |       |       |   |      |       |       |      |  |       |       |   |  |      
|                                    | Including deposit interest                                                      |                                              |  | 1.2   | x     |   |  | 2.2   | x     |   |      | 2.2   | x     |      |  | 1.9   | x     |   |  | 1.6   | x    
|                                    | Excluding deposit interest                                                      |                                              |  | 1.4   |       |   |  | 3.4   |       |   |      | 3.1   |       |      |  | 3.0   |       |   |  | 2.5   |      
|Capital Ratios:                     |                                                                                 |                                              |  |       |       |   |  |       |       |   |      |       |       |      |  |       |       |   |  |      
|                                    | Average shareholders equity to average assets                                  |                                              |  | 8.0   | %     |   |  | 9.0   | %     |   |      | 7.6   | %     |      |  | 8.0   | %     |   |  | 6.7   | %    
|                                    | Tier 1 capital ratio                                                            |                                              |  | 10.7  |       |   |  | 13.0  |       |   |      | 11.4  |       |      |  | 9.3   |       |   |  | 6.8   |      
|                                    | Tier 1 leverage ratio                                                           |                                              |  | 10.3  |       |   |  | 11.6  |       |   |      | 11.2  |       |      |  | 9.7   |       |   |  | 9.4   |      
|                                    | Total risk-based capital ratio                                                  |                                              |  | 13.1  |       |   |  | 15.9  |       |   |      | 15.1  |       |      |  | 13.2  |       |   |  | 10.8  |      






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Earnings per share of common stock 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 $1.97 basic and $1.87 diluted.
    Earnings per share of common stock before cumulative effect of
    change in accounting principle related to SFAS 133,
    Accounting for Derivative Instruments and Hedging
    Activities, for the year ended December 31, 2001 was
    $2.14 basic and $1.99 diluted.
|   
|(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.                                                                                                                                                                                                                                                                                                                                                                                                               

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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
    impact of implementing 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 success of our interest rate risk
    management strategies;                                                                              
| |  | staffing fluctuations in response to product demand;                                                                                                                                                                                                                                                         
| |  | the relative profitability of our lending operations;                                                                                                                                                                                                                                                        
| |  | the valuation and management of our residual, servicing, and
    derivative portfolios, including assumptions we embed in the
    valuation and short-term swings in the valuation of such
    portfolios due to quarter-end movements in secondary market
    interest rates, which are inherently volatile;
| |  | borrowers refinancing opportunities, which may affect the
    prepayment assumptions used in our valuation estimates and which
    may affect loan demand;                                                                                                                                                  
| |  | unanticipated deterioration in the credit quality of our loan
    and lease assets, including deterioration resulting from the
    effects of recent natural disasters;                                                                                                                                      
| |  | unanticipated deterioration or changes in estimates of the
    carrying value of our other assets, including securities;                                                                                                                                                                                     
| |  | difficulties in delivering products to the secondary market as
    planned;                                                                                                                                                                                                                                  
| |  | difficulties in expanding our businesses and obtaining funding
    as needed;                                                                                                                                                                                                                                
| |  | competition from other financial service providers for
    experienced managers as well as for customers;                                                                                                                                                                                                    
| |  | changes in the value of companies in which we invest;                                                                                                                                                                                                                                                        
| |  | changes in variable compensation plans related to the
    performance and valuation of lines of business where we tie
    compensation systems to
    line-of-business
    performance;                                                                                                                      

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| |   |                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | unanticipated outcomes in litigation;                                                                                                                                                                                                                                                                                            
| |  | legislative or regulatory changes, including changes in tax laws
    or regulations, changes in the interpretation of regulatory
    capital rules, changes in consumer or commercial lending rules,
    disclosure rules, or rules affecting corporate governance, and
    the availability of resources to address these rules;
| |  | changes in applicable accounting policies or principles or their
    application to our business or final audit adjustments;                                                                                                                                                                                                     
| |  | additional guidance and interpretation on accounting issues and
    details of the implementation of new accounting methods;                                                                                                                                                                                                     
| |  | the final outcome and implications of our consideration of
    strategic alternatives for our conventional, mortgage banking
    segment;                                                                                                                                                                                        
| |  | or governmental changes in monetary or fiscal policies.                                                                                                                                                                                                                                                                          



Strategy






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Identify market niches. We focus on product or market
    niches in financial serviceswhere our understanding of
    customer needs and ability to meet them create added value that
    permits us not to have to compete primarily on price. We
    dont believe it is necessary to be the largest or leading
    market share company in any of our product lines, but we do
    believe it is important that we are viewed as a preferred
    provider in niche segments of those product offerings.                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Hire exceptional management with niche expertise. We
    enter niches only when we have attracted senior managers who
    have proven track records in the niche for which they are
    responsible. Our structure allows the senior managers of each
    line of business to focus their efforts on understanding their
    customers and meeting the needs of the markets they serve. This
    structure also promotes accountability among managers of each
    enterprise. We attempt to create a mix of short-term and
    long-term incentives that provide these managers with the
    incentive to achieve creditworthy, profitable growthover
    the long term.                                                                                                                                                                                                                                                                            
|
| |  | Diversify capital and earnings risk. We diversifyour revenuesand allocate our capitalacross
    complementary lines of business and across different regions as
    a key part of our risk management. For example, our commercial
    bank has a different profile of customers in the Midwest and
    Western states. These economies have performed differently over
    the past five years due to differences in local economies. These
    differences have affected demand and credit quality of our
    products. In addition, our home equity segment lends to
    consumers on a national basis and there too, demand and credit
    quality has fluctuated depending, in part, on local market
    conditions. Our customers businesses and needs are
    cyclical, but when combined in an appropriate mix, we believe
    they provide sources of diversification and opportunities for
    growth in a variety of economic conditions.
|
| |  | Reinvest in new opportunities. We reinveston an
    ongoing basis in the development of new and existing
    opportunities. As a result of our attention to long-term value
    creation, we believe it is important at times to dampen
    short-term earnings growth by investing for future return. We
    are biased toward seeking new growth through organic expansion
    of existing lines of business. At times we will initiate a new
    line through a
    start-up, with highly
    qualified managers we select to focus on a single line of
    business. Over the past ten years, we have made only a few
    acquisitions. Those have typically not been in competitive
    bidding situations.                                                                                                                                                                                                                                     

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Critical Accounting Policies/ Management Judgments and
Accounting Estimates






| |                                       
| | --------------------------------------
| | Valuation of Mortgage Servicing Rights





| |                                    
| | -----------------------------------
| | Allowance for Loan and Lease Losses



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| |                                
| | -------------------------------
| | Valuation of Residual Interests

gain-on




| |                              
| | -----------------------------
| | Accounting for Deferred Taxes



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| |                         
| | ------------------------
| | Incentive Servicing Fees



Consolidated Overview


|                           |  |      |      |   |          |  |       |      |  |   |          |   |  |      |      |    |  |   |      |  
|-------------------------- |  | ---- | ---- | - | -------- |  | ----- | ---- |  | - | -------- | - |  | ---- | ---- | -- |  | - | ---- | -
|                           |  | 2005 |      |   | % Change |  |       | 2004 |  |   | % Change |   |  | 2003 |     
|                           |  |      |      |   |          |  |       |      |  |   |          |   |  |      |     
|Net income (millions)      |  | $    | 19.0 |   |          |  | (72.3 | )%   |  | $ | 68.4     |   |  |      | (6.0 | )% |  | $ | 72.8 |  
|Basic earnings per share   |  |      | 0.67 |   |          |  | (72.3 | )    |  |   | 2.42     |   |  |      | (7.3 | )  |  |   | 2.61 |  
|Diluted earnings per share |  |      | 0.66 |   |          |  | (71.1 | )    |  |   | 2.28     |   |  |      | (6.9 | )  |  |   | 2.45 |  
|Return on average equity   |  |      | 4.0  | % |          |  |      |      |  |   | 14.5     | % |  |      |     |    |  |   | 18.4 | %
|Return on average assets   |  |      | 0.3  | % |          |  |      |      |  |   | 1.3      | % |  |      |     |    |  |   | 1.4  | %

Consolidated Income Statement Analysis




| |           
| | ----------
| | Net Income

Noninterest Income


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| |                    
| | -------------------
| | Net Interest Income



|                                     |                                                       |                        |                                    |           |          |           |        |         |         |         |         |       |      |          |         |           |      |           |   |         |         |         |          |       |      |      |         |           |   |           |   |         |         |         |  |       |      |      |  
|------------------------------------ | ----------------------------------------------------- | ---------------------- | ---------------------------------- | --------- | -------- | --------- | ------ | ------- | ------- | ------- | ------- | ----- | ---- | -------- | ------- | --------- | ---- | --------- | - | ------- | ------- | ------- | -------- | ----- | ---- | ---- | ------- | --------- | - | --------- | - | ------- | ------- | ------- |  | ----- | ---- | ---- | -
|                                     |                                                       | December 31,           |                                   
|                                     |                                                       |                        |                                   
|                                     |                                                       | 2005                   |                                    |           | 2004     |           |        | 2003    |        
|                                     |                                                       |                        |                                    |           |          |           |        |         |        
|                                     |                                                       | Average                |                                    |           |          |           | Yield/ |         |         | Average |         |       |      |          | Yield/  |           |      | Average   |   |         |         |         | Yield/   |      
|                                     |                                                       | Balance                |                                    |           | Interest |           |        | Rate    |         |         | Balance |       |      | Interest |         |           | Rate |           |   | Balance |         |         | Interest |       |      | Rate |        
|                                     |                                                       |                        |                                    |           |          |           |        |         |         |         |         |       |      |          |         |           |      |           |   |         |         |         |          |       |      |      |        
|                                     |                                                       | (Dollars in thousands) |                                   
|Assets                               |                                                       |                        |                                    |           |          |           |        |         |         |         |         |       |      |          |         |           |      |           |   |         |         |         |          |       |      |      |         |           |   |           |   |         |         |         |  |      
|Interest-earning assets:             |                                                       |                        |                                    |           |          |           |        |         |         |         |         |       |      |          |         |           |      |           |   |         |         |         |          |       |      |      |         |           |   |           |   |         |         |         |  |      
|                                     | Interest-bearing deposits with financial institutions |                        | $                                  | 80,508    |          |           | $      | 1,816   |         |         |         | 2.26  | %    |          | $       | 85,304    |      |           | $ | 794     |         |         |          | 0.93  | %    |      | $       | 74,216    |   |           | $ | 550     |         |         |  | 0.74  | %   
|                                     | Federal funds sold                                    |                        |                                    | 15,064    |          |           |        | 387     |         |         |         | 2.57  |      |          |         | 15,340    |      |           |   | 173     |         |         |          | 1.13  |      |      |         | 10,824    |   |           |   | 118     |         |         |  | 1.10  |     
|                                     | Residual interests                                    |                        |                                    | 39,942    |          |           |        | 6,948   |         |         |         | 17.40 |      |          |         | 67,544    |      |           |   | 12,509  |         |         |          | 18.52 |      |      |         | 108,351   |   |           |   | 20,651  |         |         |  | 19.06 |     
|                                     | Investment securities                                 |                        |                                    | 107,220   |          |           |        | 5,813   |         |         |         | 5.42  |      |          |         | 88,254    |      |           |   | 4,536   |         |         |          | 5.14  |      |      |         | 68,602    |   |           |   | 3,723   |         |         |  | 5.43  |     
|                                     | Loans held for sale                                   |                        |                                    | 1,217,367 |          |           |        | 94,324  |         |         |         | 7.75  |      |          |         | 1,034,032 |      |           |   | 80,003  |         |         |          | 7.74  |      |      |         | 1,237,963 |   |           |   | 104,350 |         |         |  | 8.43  |     
|                                     | Loans and leases, net of unearned
    income(1)       |                        |                                    | 3,890,077 |          |           |        | 312,970 |         |         |         | 8.05  |      |          |         | 3,324,333 |      |           |   | 246,288 |         |         |          | 7.41  |      |      |         | 3,168,776 |   |           |   | 241,592 |         |         |  | 7.62  |     
|                                     |                                                       |                        |                                    |           |          |           |        |         |         |         |         |       |      |          |         |           |      |           |   |         |         |         |          |       |      |      |        
|                                     |                                                       |                        | Total interest earning assets      |           |          | 5,350,178 |        |         | $       | 422,258 |         |       |      | 7.89     | %       |           |      | 4,614,807 |   |         | $       | 344,303 |          |       |      | 7.46 | %       |           |   | 4,668,732 |   |         | $       | 370,984 |  |       |      | 7.95 | %
|Noninterest-earning assets:          |                                                       |                        |                                    |           |          |           |        |         |         |         |         |       |      |          |         |           |      |           |   |         |         |         |          |       |      |      |         |           |   |           |   |         |         |         |  |      
|                                     | Cash and due from banks                               |                        |                                    | 109,837   |          |           |        |         |         |         |         |       |      |          |         | 104,115   |      |           |   |         |         |         |          |       |      |      |         | 103,581   |   |           |   |         |         |         |  |       |     
|                                     | Premises and equipment, net                           |                        |                                    | 30,543    |          |           |        |         |         |         |         |       |      |          |         | 31,219    |      |           |   |         |         |         |          |       |      |      |         | 32,644    |   |           |   |         |         |         |  |       |     
|                                     | Other assets                                          |                        |                                    | 572,028   |          |           |        |         |         |         |         |       |      |          |         | 582,978   |      |           |   |         |         |         |          |       |      |      |         | 440,164   |   |           |   |         |         |         |  |       |     
|                                     | Less allowance for loan and lease losses              |                        |                                    | (50,322   | )        |           |        |         |         |         |         |       |      |          |         | (56,311   | )    |           |   |         |         |         |          |       |      |      |         | (57,986   | ) |           |   |         |         |         |  |       |     
|                                     |                                                       |                        |                                    |           |          |           |        |         |         |         |         |       |      |          |         |           |      |           |   |         |         |         |          |       |      |      |        
|                                     |                                                       |                        | Total assets                       |           | $        | 6,012,264 |        |         |         |         |         |       |      |          |         |           | $    | 5,276,808 |   |         |         |         |          |       |      |      |         |           | $ | 5,187,135 |   |         |         |         |  |       |      |      |  
|                                     |                                                       |                        |                                    |           |          |           |        |         |         |         |         |       |      |          |         |           |      |           |   |         |         |         |          |       |      |      |        
|Liabilities and Shareholders Equity |                                                       |                        |                                    |           |          |           |        |         |         |         |         |       |      |          |         |           |      |           |   |         |         |         |          |       |      |      |         |           |   |           |   |         |         |         |  |      
|Interest-bearing liabilities:        |                                                       |                        |                                    |           |          |           |        |         |         |         |         |       |      |          |         |           |      |           |   |         |         |         |          |       |      |      |         |           |   |           |   |         |         |         |  |      
|                                     | Money market checking                                 |                        | $                                  | 479,621   |          |           | $      | 9,789   |         |         |         | 2.04  | %    |          | $       | 333,772   |      |           | $ | 4,487   |         |         |          | 1.34  | %    |      | $       | 169,674   |   |           | $ | 913     |         |         |  | 0.54  | %   
|                                     | Money market savings                                  |                        |                                    | 1,118,655 |          |           |        | 29,631  |         |         |         | 2.65  |      |          |         | 1,071,617 |      |           |   | 15,127  |         |         |          | 1.41  |      |      |         | 866,241   |   |           |   | 11,085  |         |         |  | 1.28  |     
|                                     | Regular savings                                       |                        |                                    | 119,349   |          |           |        | 1,547   |         |         |         | 1.30  |      |          |         | 60,800    |      |           |   | 873     |         |         |          | 1.44  |      |      |         | 62,756    |   |           |   | 1,249   |         |         |  | 1.99  |     
|                                     | Time deposits                                         |                        |                                    | 1,204,421 |          |           |        | 42,894  |         |         |         | 3.56  |      |          |         | 907,736   |      |           |   | 24,000  |         |         |          | 2.64  |      |      |         | 992,954   |   |           |   | 29,118  |         |         |  | 2.93  |     
|                                     | Short-term borrowings                                 |                        |                                    | 421,085   |          |           |        | 21,244  |         |         |         | 5.05  |      |          |         | 307,929   |      |           |   | 9,583   |         |         |          | 3.11  |      |      |         | 595,243   |   |           |   | 14,889  |         |         |  | 2.50  |     
|                                     | Collateralized debt                                   |                        |                                    | 629,503   |          |           |        | 25,587  |         |         |         | 4.06  |      |          |         | 534,660   |      |           |   | 15,259  |         |         |          | 2.85  |      |      |         | 578,656   |   |           |   | 15,369  |         |         |  | 2.66  |     
|                                     | Other long-term debt                                  |                        |                                    | 290,188   |          |           |        | 25,676  |         |         |         | 8.85  |      |          |         | 270,178   |      |           |   | 22,896  |         |         |          | 8.47  |      |      |         | 30,060    |   |           |   | 2,325   |         |         |  | 7.74  |     
|                                     | Trust preferred securities
    distributions(3)       |                        |                                    |          |          |           |        |        |         |         |         | n/a   |      |          |         |          |      |           |   |        |         |         |          | n/a   |      |      |         | 236,823   |   |           |   | 24,151  |         |         |  | 10.20 |     
|                                     |                                                       |                        |                                    |           |          |           |        |         |         |         |         |       |      |          |         |           |      |           |   |         |         |         |          |       |      |      |        
|                                     |                                                       |                        | Total interest-bearing liabilities |           | $        | 4,262,822 |        |         | $       | 156,368 |         |       |      | 3.67     | %       |           | $    | 3,486,692 |   |         | $       | 92,225  |          |       |      | 2.65 | %       |           | $ | 3,532,407 |   |         | $       | 99,099  |  |       |      | 2.81 | %
|Noninterest-bearing liabilities:     |                                                       |                        |                                    |           |          |           |        |         |         |         |         |       |      |          |         |           |      |           |   |         |         |         |          |       |      |      |         |           |   |           |   |         |         |         |  |      
|                                     | Demand deposits                                       |                        |                                    | 989,234   |          |           |        |         |         |         |         |       |      |          |         | 1,006,558 |      |           |   |         |         |         |          |       |      |      |         | 1,042,403 |   |           |   |         |         |         |  |       |     
|                                     | Other liabilities                                     |                        |                                    | 279,784   |          |           |        |         |         |         |         |       |      |          |         | 311,017   |      |           |   |         |         |         |          |       |      |      |         | 216,111   |   |           |   |         |         |         |  |       |     
|Shareholders equity                 |                                                       |                        | 480,424                            |           |          |           |        |         |         |         |         |       |      |          | 472,541 |           |      |           |   |         |         |         |          |       |      |      | 396,214 |           |   |           |   |         |         |         |  |      
|                                     |                                                       |                        |                                    |           |          |           |        |         |         |         |         |       |      |          |         |           |      |           |   |         |         |         |          |       |      |      |        
|                                     | Total liabilities and shareholders equity            |                        | $                                  | 6,012,264 |          |           |        |         |         |         |         |       |      |          | $       | 5,276,808 |      |           |   |         |         |         |          |       |      |      | $       | 5,187,135 |   |           |   |         |         |         |  |       |     
|                                     |                                                       |                        |                                    |           |          |           |        |         |         |         |         |       |      |          |         |           |      |           |   |         |         |         |          |       |      |      |        
|                                     |                                                       | Net interest income    |                                    |           |          |           |        | $       | 265,890 |         |         |       |      |          |         |           |      |           |   | $       | 252,078 |         |          |       |      |      |         |           |   |           |   | $       | 271,885 |         |  |       |      |     
|                                     |                                                       |                        |                                    |           |          |           |        |         |         |         |         |       |      |          |         |           |      |           |   |         |         |         |          |       |      |      |        
|                                     |                                                       | Net interest margin    |                                    |           |          |           |        |         |         |         |         |       | 4.97 | %        |         |           |      |           |   |         |         |         |          |       | 5.46 | %    |         |           |   |           |   |         |         |         |  |       | 5.82 | %   
|                                     |                                                       |                        |                                    |           |          |           |        |         |         |         |         |       |      |          |         |           |      |           |   |         |         |         |          |       |      |      |        






|    |                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------
|(1) | For purposes of these computations, nonaccrual loans are
    included in daily average loan amounts outstanding.
|   
|(2) | We do not show interest income on a tax equivalent basis because
    it is immaterial                           
|   
|(3) | These securities were re-classified beginning in 2004 to
    Other long-term debt.                            



31



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|                 |                                                       |                                 |   |        |                |  |   |         |        |  |        |        |        |      |   |         |         |   |   |         |         |   |   |         |         |  
|---------------- | ----------------------------------------------------- | ------------------------------- | - | ------ | -------------- |  | - | ------- | ------ |  | ------ | ------ | ------ | ---- | - | ------- | ------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                 |                                                       | For the Year Ended December 31, |  
|                 |                                                       |                                 |  
|                 |                                                       | 2005 Over 2004                  |   |        | 2004 Over 2003 | 
|                 |                                                       |                                 |   |        |                | 
|                 |                                                       | Volume                          |   |        | Rate           |  |   | Total   |        |  | Volume |        |        | Rate |   |         | Total   |  
|                 |                                                       |                                 |   |        |                |  |   |         |        |  |        |        |        |      |   |         |         |  
|                 |                                                       | (Dollars and thousands)         |  
|Interest Income  |                                                       |                                 |   |        |                |  |   |         |        |  |        |        |        |      |   |         |         |   |   |         |         |   |   |        
|                 | Loans and leases                                      |                                 | $ | 41,914 |                |  | $ | 24,768  |        |  | $      | 66,682 |        |      | $ | 11,860  |         |   | $ | (7,164  | )       |   | $ | 4,696   |        
|                 | Mortgage loans held for sale                          |                                 |   | 14,184 |                |  |   | 137     |        |  |        | 14,321 |        |      |   | (17,189 | )       |   |   | (7,158  | )       |   |   | (24,347 | )      
|                 | Investment securities                                 |                                 |   | 975    |                |  |   | 302     |        |  |        | 1,277  |        |      |   | 1,066   |         |   |   | (253    | )       |   |   | 813     |        
|                 | Residual interests                                    |                                 |   | (5,112 | )              |  |   | (449    | )      |  |        | (5,561 | )      |      |   | (7,777  | )       |   |   | (365    | )       |   |   | (8,142  | )      
|                 | Interest bearing deposits with financial institutions |                                 |   | (45    | )              |  |   | 1,067   |        |  |        | 1,022  |        |      |   | 82      |         |   |   | 162     |         |   |   | 244     |        
|                 | Federal funds sold                                    |                                 |   | (4     | )              |  |   | 218     |        |  |        | 214    |        |      |   | 50      |         |   |   | 5       |         |   |   | 55      |        
|                 |                                                       |                                 |   |        |                |  |   |         |        |  |        |        |        |      |   |         |         |  
|                 |                                                       | Total                           |   |        | 51,912         |  |   |         | 26,043 |  |        |        | 77,955 |      |   |         | (11,908 | ) |   |         | (14,773 | ) |   |         | (26,681 | )
|                 |                                                       |                                 |   |        |                |  |   |         |        |  |        |        |        |      |   |         |         |  
|Interest Expense |                                                       |                                 |   |        |                |  |   |         |        |  |        |        |        |      |   |         |         |   |   |         |         |   |   |        
|                 | Money market checking                                 |                                 |   | 1,961  |                |  |   | 3,341   |        |  |        | 5,302  |        |      |   | 883     |         |   |   | 2,691   |         |   |   | 3,574   |        
|                 | Money market savings                                  |                                 |   | 664    |                |  |   | 13,840  |        |  |        | 14,504 |        |      |   | 2,628   |         |   |   | 1,414   |         |   |   | 4,042   |        
|                 | Regular savings                                       |                                 |   | 841    |                |  |   | (167    | )      |  |        | 674    |        |      |   | (39     | )       |   |   | (337    | )       |   |   | (376    | )      
|                 | Time deposits                                         |                                 |   | 7,845  |                |  |   | 11,049  |        |  |        | 18,894 |        |      |   | (2,499  | )       |   |   | (2,619  | )       |   |   | (5,118  | )      
|                 | Short-term borrowings                                 |                                 |   | 3,522  |                |  |   | 8,139   |        |  |        | 11,661 |        |      |   | (7,187  | )       |   |   | 1,881   |         |   |   | (5,306  | )      
|                 | Collateralized debt                                   |                                 |   | 2,707  |                |  |   | 7,621   |        |  |        | 10,328 |        |      |   | (1,169  | )       |   |   | 1,059   |         |   |   | (110    | )      
|                 | Other long-term debt                                  |                                 |   | 1,695  |                |  |   | 1,085   |        |  |        | 2,780  |        |      |   | 18,575  |         |   |   | 1,996   |         |   |   | 20,571  |        
|                 | Trust preferred securities distribution               |                                 |   |       |                |  |   |        |        |  |        |       |        |      |   | (24,151 | )       |   |   |        |         |   |   | (24,151 | )      
|                 |                                                       |                                 |   |        |                |  |   |         |        |  |        |        |        |      |   |         |         |  
|                 |                                                       | Total                           |   |        | 19,235         |  |   |         | 44,908 |  |        |        | 64,143 |      |   |         | (12,959 | ) |   |         | 6,085   |   |   |         | (6,874  | )
|                 |                                                       |                                 |   |        |                |  |   |         |        |  |        |        |        |      |   |         |         |  
|                 | Net Interest Income                                   |                                 | $ | 32,677 |                |  | $ | (18,865 | )      |  | $      | 13,812 |        |      | $ | 1,051   |         |   | $ | (20,858 | )       |   | $ | (19,807 | )      
|                 |                                                       |                                 |   |        |                |  |   |         |        |  |        |        |        |      |   |         |         |  





| |                                    
| | -----------------------------------
| | Provision for Loan and Lease Losses





| |                   
| | ------------------
| | Noninterest Income



32



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##### Table of Contents





| |                    
| | -------------------
| | Noninterest Expense



Consolidated Balance Sheet Analysis






| |                    
| | -------------------
| | Loans Held For Sale







| |                 
| | ----------------
| | Loans and Leases



|                                       |                     |                        |           |          |           |   |           |         |           |   |           |         |           |      |           |         |           |   |           |         |           | 
|-------------------------------------- | ------------------- | ---------------------- | --------- | -------- | --------- | - | --------- | ------- | --------- | - | --------- | ------- | --------- | ---- | --------- | ------- | --------- | - | --------- | ------- | --------- | 
|                                       |                     | December 31,           |          
|                                       |                     |                        |          
|                                       |                     | 2005                   |           |          | 2004      |   |           | 2003    |           |   | 2002      |         |           | 2001 |          
|                                       |                     |                        |           |          |           |   |           |         |           |   |           |         |           |      |          
|                                       |                     | (Dollars in thousands) |          
|Commercial, financial and agricultural |                     | $                      | 2,016,253 |          |           | $ | 1,697,651 |         |           | $ | 1,503,619 |         |           | $    | 1,347,962 |         |           | $ | 1,055,307 |        
|Real estate construction               |                     |                        | 399,089   |          |           |   | 287,496   |         |           |   | 306,669   |         |           |      | 314,851   |         |           |   | 287,228   |        
|Real estate mortgage                   |                     |                        | 1,234,561 |          |           |   | 808,875   |         |           |   | 859,541   |         |           |      | 777,865   |         |           |   | 490,186   |        
|Consumer                               |                     |                        | 31,718    |          |           |   | 31,166    |         |           |   | 27,370    |         |           |      | 27,857    |         |           |   | 38,489    |        
|Commercial financing:                  |                     |                        |           |          |           |   |           |         |           |   |           |         |           |      |           |         |           |   |           |        
|                                       | Franchise financing |                        |           | 462,413  |           |   |           | 330,496 |           |   |           | 207,341 |           |      |           | 130,247 |           |   |           | 47,447  |          
|                                       | Domestic leasing    |                        |           | 237,968  |           |   |           | 174,035 |           |   |           | 157,072 |           |      |           | 161,464 |           |   |           | 185,080 |          
|                                       | Canadian leasing    |                        |           | 313,581  |           |   |           | 265,780 |           |   |           | 207,355 |           |      |           | 133,784 |           |   |           | 91,816  |          
|Unearned income:                       |                     |                        |           |          |           |   |           |         |           |   |           |         |           |      |           |         |           |   |           |        
|                                       | Franchise financing |                        |           | (125,474 | )         |   |           | (86,638 | )         |   |           | (56,837 | )         |      |           | (34,494 | )         |   |           | (11,497 | )        
|                                       | Domestic leasing    |                        |           | (33,267  | )         |   |           | (23,924 | )         |   |           | (22,038 | )         |      |           | (24,793 | )         |   |           | (32,686 | )        
|                                       | Canadian leasing    |                        |           | (38,013  | )         |   |           | (34,497 | )         |   |           | (29,038 | )         |      |           | (19,467 | )         |   |           | (13,548 | )        
|                                       |                     |                        |           |          |           |   |           |         |           |   |           |         |           |      |          
|                                       |                     | Total                  |           | $        | 4,498,829 |   |           | $       | 3,450,440 |   |           | $       | 3,161,054 |      |           | $       | 2,815,276 |   |           | $       | 2,137,822 | 
|                                       |                     |                        |           |          |           |   |           |         |           |   |           |         |           |      |          

33



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|                                       |                         |                        |         |           |            |   |         |            |           |   |           |         |           |   |           |           |           | 
|-------------------------------------- | ----------------------- | ---------------------- | ------- | --------- | ---------- | - | ------- | ---------- | --------- | - | --------- | ------- | --------- | - | --------- | --------- | --------- | 
|                                       |                         |                        |         | After One |            |   |         |            |          
|                                       |                         | Within                 |         |           | But Within |   |         | After Five |           |   |          
|                                       |                         | One Year               |         |           | Five Years |   |         | Years      |           |   | Total     |        
|                                       |                         |                        |         |           |            |   |         |            |           |   |           |        
|                                       |                         | (Dollars in thousands) |        
|Commercial, financial and agricultural |                         | $                      | 617,176 |           |            | $ | 967,361 |            |           | $ | 431,716   |         |           | $ | 2,016,253 |          
|Real estate construction               |                         |                        | 270,737 |           |            |   | 104,569 |            |           |   | 23,783    |         |           |   | 399,089   |          
|Real estate mortgage                   |                         |                        | 32,375  |           |            |   | 103,720 |            |           |   | 1,098,466 |         |           |   | 1,234,561 |          
|Consumer                               |                         |                        | 12,949  |           |            |   | 14,272  |            |           |   | 4,497     |         |           |   | 31,718    |          
|Commercial financing:                  |                         |                        |         |           |            |   |         |            |           |   |           |         |           |   |           |          
|                                       | Franchise financing     |                        |         | 22,363    |            |   |         | 55,456     |           |   |           | 259,120 |           |   |           | 336,939   |          
|                                       | Domestic leasing        |                        |         | 9,519     |            |   |         | 193,515    |           |   |           | 1,666   |           |   |           | 204,700   |          
|                                       | Canadian leasing        |                        |         | 14,371    |            |   |         | 243,878    |           |   |           | 17,320  |           |   |           | 275,569   |          
|                                       |                         |                        |         |           |            |   |         |            |           |   |           |        
|                                       |                         | Total                  |         | $         | 979,490    |   |         | $          | 1,682,771 |   |           | $       | 1,836,568 |   |           | $         | 4,498,829 | 
|                                       |                         |                        |         |           |            |   |         |            |           |   |           |        
|Loans due after one year with:         |                         |                        |         |           |            |   |         |            |           |   |           |         |           |   |           |          
|                                       | Fixed interest rates    |                        |         |           |            |   |         |            |           |   |           |         |           |   | $         | 1,909,172 |          
|                                       | Variable interest rates |                        |         |           |            |   |         |            |           |   |           |         |           |   |           | 1,610,167 |          
|                                       |                         |                        |         |           |            |   |         |            |           |   |           |        
|                                       |                         | Total                  |         |           |            |   |         |            |           |   |           |         |           |   |           | $         | 3,519,339 | 
|                                       |                         |                        |         |           |            |   |         |            |           |   |           |        



| |                                    
| | -----------------------------------
| | Allowance for Loan and Lease Losses



|                                                    |  |                        |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                    |  | December 31,           |        
|                                                    |  |                        |        
|                                                    |  | 2005                   |         |   | 2004 |   |         | 2003 | 
|                                                    |  |                        |         |   |      |   |         |      | 
|                                                    |  | (Dollars in thousands) |        
|Balance at beginning of year                        |  | $                      | 44,443  |   |      | $ | 64,285  |      |  | $ | 50,936  |  
|Provision for loan and lease losses                 |  |                        | 26,852  |   |      |   | 14,195  |      |  |   | 47,583  |  
|Charge-offs                                         |  |                        | (20,201 | ) |      |   | (28,180 | )    |  |   | (37,312 | )
|Recoveries                                          |  |                        | 8,960   |   |      |   | 5,335   |      |  |   | 3,420   |  
|Reduction due to sale of loans and leases and other |  |                        |        |   |      |   | (627    | )    |  |   | (234    | )
|Reduction due to reclassification of loans          |  |                        | (424    | ) |      |   | (10,808 | )    |  |   | (690    | )
|Foreign currency adjustment                         |  |                        | 119     |   |      |   | 243     |      |  |   | 582     |  
|                                                    |  |                        |         |   |      |   |         |      | 
|Balance at end of year                              |  | $                      | 59,749  |   |      | $ | 44,443  |      |  | $ | 64,285  |  
|                                                    |  |                        |         |   |      |   |         |      | 



34



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##### Table of Contents





| |                      
| | ---------------------
| | Investment Securities



|                                                 |       |                        |        |         |      |   |        |         |  |   |        |        | 
|------------------------------------------------ | ----- | ---------------------- | ------ | ------- | ---- | - | ------ | ------- |  | - | ------ | ------ | 
|                                                 |       | December 31,           |       
|                                                 |       |                        |       
|                                                 |       | 2005                   |        |         | 2004 |   |        | 2003    | 
|                                                 |       |                        |        |         |      |   |        |         | 
|                                                 |       | (Dollars in thousands) |       
|U.S. Treasury and government obligations         |       | $                      |       |         |      | $ | 3,556  |         |  | $ | 20,994 |       
|Obligations of states and political subdivisions |       |                        | 3,544  |         |      |   | 3,746  |         |  |   | 3,960  |       
|Mortgage-backed securities                       |       |                        | 28,331 |         |      |   | 31,556 |         |  |   | 2,039  |       
|Other                                            |       |                        | 72,896 |         |      |   | 69,364 |         |  |   | 65,532 |       
|                                                 |       |                        |        |         |      |   |        |         | 
|                                                 | Total |                        | $      | 104,771 |      |   | $      | 108,222 |  |   | $      | 92,525 | 
|                                                 |       |                        |        |         |      |   |        |         | 



|                                                 |                    |                        |       |            |            |   |     |                 |                |   |              |       |   |       |        |      |   |   |         |       | 
|------------------------------------------------ | ------------------ | ---------------------- | ----- | ---------- | ---------- | - | --- | --------------- | -------------- | - | ------------ | ----- | - | ----- | ------ | ---- | - | - | ------- | ----- | 
|                                                 |                    |                        |       |            |            |   |     | Mortgage-backed |                |   |             
|                                                 |                    |                        |       |            |            |   |     | Securities and  |                |   |             
|                                                 |                    |                        |       | After Five |            |   |     |                 | FHLB & Federal |   |              |      
|                                                 |                    | Within                 |       |            | But Within |   |     | After Ten       |                |   | Reserve Bank |       |   |      
|                                                 |                    | One Year               |       |            | Ten Years  |   |     | Years           |                |   | Stock        |       |   | Total |       
|                                                 |                    |                        |       |            |            |   |     |                 |                |   |              |       |   |       |       
|                                                 |                    | (Dollars in thousands) |      
|Obligations of states and political subdivisions |                    |                        |      |            |            |   | 530 |                 |                |   | 3,014        |       |   |       |       |      |   |   | 3,544   |      
|Other                                            |                    |                        | 3,199 |            |            |   |    |                 |                |   |             |       |   |       |       |      |   |   | 3,199   |      
|                                                 |                    |                        |       |            |            |   |     |                 |                |   |              |       |   |       |       
|                                                 | Total              |                        |       | 3,199      |            |   |     | 530             |                |   |              | 3,014 |   |       |        |     |   |   |         | 6,743 | 
|Mortgage-backed securities                       |                    |                        |       |            |            |   |     |                 |                |   |              |       |   |       | 28,331 |      |   |   | 28,331  |      
|FHLBI & Federal Reserve Bank stock               |                    |                        |       |            |            |   |     |                 |                |   |              |       |   |       | 69,697 |      |   |   | 69,697  |      
|                                                 |                    |                        |       |            |            |   |     |                 |                |   |              |       |   |       |       
|                                                 |                    | $                      | 3,199 |            |            | $ | 530 |                 |                | $ | 3,014        |       |   | $     | 98,028 |      |   | $ | 104,771 |      
|                                                 |                    |                        |       |            |            |   |     |                 |                |   |              |       |   |       |       
|Weighted Average Yield                           |                    |                        |       |            |            |   |     |                 |                |   |              |       |   |       |        |      |   |   |         |      
|                                                 | Held-to-maturity   |                        |       |           |            |   |     | 5.18            | %              |   |              | 5.35  | % |       |        | 4.98 | % |   |         |       | 
|                                                 | Available-for-sale |                        |       | 0.35       | %          |   |     |                |                |   |              |      |   |       |        | 4.65 | % |   |         |       | 





| |         
| | --------
| | Deposits



35



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##### Table of Contents







|                                 |                                             |                        |           |           |      |   |           |         |  |   |           |         | 
|-------------------------------- | ------------------------------------------- | ---------------------- | --------- | --------- | ---- | - | --------- | ------- |  | - | --------- | ------- | 
|                                 |                                             | December 31,           |          
|                                 |                                             |                        |          
|                                 |                                             | 2005                   |           |           | 2004 |   |           | 2003    | 
|                                 |                                             |                        |           |           |      |   |           |         | 
|                                 |                                             | (Dollars in thousands) |          
|Under 3 months                   |                                             | $                      | 419,574   |           |      | $ | 266,200   |         |  | $ | 284,095   |        
|3 to 6 months                    |                                             |                        | 230,024   |           |      |   | 117,339   |         |  |   | 60,786    |        
|6 to 12 months                   |                                             |                        | 231,397   |           |      |   | 91,276    |         |  |   | 98,746    |        
|after 12 months                  |                                             |                        | 341,851   |           |      |   | 169,796   |         |  |   | 252,743   |        
|                                 |                                             |                        |           |           |      |   |           |         | 
|                                 | Total Certificates of deposit over $100,000 |                        | $         | 1,222,846 |      |   | $         | 644,611 |  |   | $         | 696,370 | 
|                                 |                                             |                        |           |           |      |   |           |         | 
|Brokered deposits                |                                             | $                      | 638,007   |           |      | $ | 279,102   |         |  | $ | 339,417   |        
|                                 |                                             |                        |           |           |      |   |           |         | 
|Mortgage banking escrow deposits |                                             | $                      | 412,444   |           |      | $ | 680,812   |         |  | $ | 566,956   |        
|                                 |                                             |                        |           |           |      |   |           |         | 
|Demand deposits                  |                                             | $                      | 342,913   |           |      | $ | 295,195   |         |  | $ | 283,794   |        
|Money market accounts            |                                             |                        | 1,602,337 |           |      |   | 1,545,700 |         |  |   | 1,109,514 |        
|Savings and time deposits        |                                             |                        | 544,814   |           |      |   | 356,776   |         |  |   | 359,153   |        
|                                 |                                             |                        |           |           |      |   |           |         | 
|Commercial banking core deposits |                                             | $                      | 2,490,064 |           |      | $ | 2,197,671 |         |  | $ | 1,752,461 |        
|                                 |                                             |                        |           |           |      |   |           |         | 



| |                      
| | ---------------------
| | Short-Term Borrowings







| |                                        
| | ---------------------------------------
| | Collateralized and Other Long-Term Debt





36



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##### Table of Contents







| |        
| | -------
| | Capital





|                                       |                       |                          |           |      |         |   |           |      |         |   |           |      |         | 
|-------------------------------------- | --------------------- | ------------------------ | --------- | ---- | ------- | - | --------- | ---- | ------- | - | --------- | ---- | ------- | 
|                                       |                       | December 31,             |          
|                                       |                       |                          |          
|                                       |                       | 2005                     |           |      | 2004    |   |           | 2003 |        
|                                       |                       |                          |           |      |         |   |           |      |        
|                                       |                       | (Dollars in thousands)   |          
|Tier 1 capital                         |                       | $                        | 675,316   |      |         | $ | 637,875   |      |         | $ | 556,793   |     
|Tier 2 capital                         |                       |                          | 154,128   |      |         |   | 143,612   |      |         |   | 183,738   |     
|                                       |                       |                          |           |      |         |   |           |      |        
|                                       |                       | Total risk-based capital |           | $    | 829,444 |   |           | $    | 781,487 |   |           | $    | 740,531 | 
|                                       |                       |                          |           |      |         |   |           |      |        
|Risk-weighted assets                   |                       | $                        | 6,317,797 |      |         | $ | 4,908,012 |      |         | $ | 4,917,622 |     
|Risk-based ratios:                     |                       |                          |           |      |         |   |           |      |         |   |           |     
|                                       | Tier 1 capital        |                          |           | 10.7 | %       |   |           | 13.0 | %       |   |           | 11.4 | %      
|                                       | Total capital         |                          |           | 13.1 |         |   |           | 15.9 |         |   |           | 15.1 |        
|                                       | Tier 1 leverage ratio |                          |           | 10.3 |         |   |           | 11.6 |         |   |           | 11.2 |        
|Ending shareholders equity to assets  |                       |                          | 7.7       |      |         |   | 9.6       |      |         |   | 8.7       |     
|Average shareholders equity to assets |                       |                          | 8.0       |      |         |   | 9.0       |      |         |   | 7.6       |     

Other
Safety and Soundness Regulations




37



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##### Table of Contents





|                              |  |             |          |               |              |  |       |          |  |  |             |  |  |          |         |  |       |  |            |  |  |                                                                                            
|----------------------------- |  | ----------- | -------- | ------------- | ------------ |  | ----- | -------- |  |  | ----------- |  |  | -------- | ------- |  | ----- |  | ---------- |  |  | -------------------------------------------------------------------------------------------
|                              |  |             |          | Interest Rate |              |  |       |          |  |  |             |  | 
|                              |  |             |          | at            |              |  |       |          |  |  |             |  | 
|                              |  | Origination |          |               | December 31, |  |       | Maturity |  |  | $ Amount in |  |  |          |         | 
|Name                          |  | Date        |          |               | 2005         |  |       | Date     |  |  | thousands   |  |  | Dividend |         |  | Other
|                              |  |             |          |               |              |  |       |          |  |  |             |  |  |          |         |  |      
|IFC Capital Trust III
    (1) |  |             | Nov 2000 |               |              |  | 8.75  | %        |  |  | Sep 2030    |  |  | $        | 51,707  |  |       |  | quarterly  |  |  | conversion ratio of 1.261 shares of common stock to 1
    convertible preferred security   
|IFC Capital Trust IV          |  |             | Jul 2001 |               |              |  | 10.25 |          |  |  | Jul 2031    |  |  |          | 15,000  |  |       |  | semiannual |  |  |                                                                                            
|IFC Capital Trust V           |  |             | Nov 2001 |               |              |  | 9.95  |          |  |  | Nov 2031    |  |  |          | 30,000  |  |       |  | semiannual |  |  |                                                                                            
|IFC Capital Trust VI          |  |             | Oct 2002 |               |              |  | 8.70  |          |  |  | Sep 2032    |  |  |          | 34,500  |  |       |  | quarterly  |  |  |                                                                                            
|IFC Statutory Trust VII       |  |             | Nov 2003 |               |              |  | 7.43  |          |  |  | Nov 2033    |  |  |          | 50,000  |  |       |  | quarterly  |  |  | rate changes quarterly at three month LIBOR plus 290 basis
    points                      
|IFC 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 thereafter
|                              |  |             |          |               |              |  |       |          |  |  |             |  |  |          |         |  |      
|                              |  |             |          |               |              |  |       |          |  |  |             |  |  | $        | 232,957 |  |       |  |            |  |  |                                                                                            
|                              |  |             |          |               |              |  |       |          |  |  |             |  |  |          |         |  |      






|    |                                        
|--- | ---------------------------------------
|(1) | Call notice issued on February 6, 2006.

15-year








| |          
| | ---------
| | Inflation



38



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##### Table of Contents



Cash Flow Analysis




Earnings Outlook




Summary of Quarterly Financial Information


|                           |                                     |                        |   |         |         |  |   |         |      |  |         |         |       |   |   |         |       |  
|-------------------------- | ----------------------------------- | ---------------------- | - | ------- | ------- |  | - | ------- | ---- |  | ------- | ------- | ----- | - | - | ------- | ----- | -
|                           |                                     | 2005                   |  
|                           |                                     |                        |  
|                           |                                     | Fourth                 |   |         | Third   |  |   | Second  |      |  | First   |        
|                           |                                     | Quarter                |   |         | Quarter |  |   | Quarter |      |  | Quarter |        
|                           |                                     |                        |   |         |         |  |   |         |      |  |         |        
|                           |                                     | (Dollars in thousands) |  
|Summary Income Information |                                     |                        |   |         |         |  |   |         |      |  |         |         |       |   |   |        
|                           | Interest Income                     |                        | $ | 121,226 |         |  | $ | 115,322 |      |  | $       | 97,543  |       |   | $ | 88,166  |      
|                           | Interest expense                    |                        |   | (49,909 | )       |  |   | (45,807 | )    |  |         | (32,698 | )     |   |   | (27,953 | )    
|                           | Provision for loan and lease losses |                        |   | (8,916  | )       |  |   | (5,772  | )    |  |         | (8,872  | )     |   |   | (3,291  | )    
|                           | Non-interest
    income(2)          |                        |   | 22,476  |         |  |   | 43,555  |      |  |         | 18,413  |       |   |   | 36,041  |      
|                           | Non-interest expense                |                        |   | (74,802 | )       |  |   | (79,723 | )    |  |         | (79,916 | )     |   |   | (97,113 | )    
|                           | Income taxes                        |                        |   | (3,624  | )       |  |   | (9,082  | )    |  |         | 2,119   |       |   |   | 1,605   |      
|                           |                                     |                        |   |         |         |  |   |         |      |  |         |        
|                           | Net income                          |                        | $ | 6,451   |         |  | $ | 18,493  |      |  | $       | (3,411  | )     |   | $ | (2,545  | )    
|                           |                                     |                        |   |         |         |  |   |         |      |  |         |        
|                           | Earnings per share of common stock: |                        |   |         |         |  |   |         |      |  |         |         |       |   |   |         |      
|                           |                                     | Basic(1)               |   | $       | 0.23    |  |   | $       | 0.65 |  |         | $       | (0.12 | ) |   | $       | (0.09 | )
|                           |                                     | Diluted(1)             |   |         | 0.23    |  |   |         | 0.61 |  |         |         | (0.12 | ) |   |         | (0.09 | )

39



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##### Table of Contents



|                           |                                     |                        |   |         |         |  |   |          |      |  |         |          |      |  |   |          |      | 
|-------------------------- | ----------------------------------- | ---------------------- | - | ------- | ------- |  | - | -------- | ---- |  | ------- | -------- | ---- |  | - | -------- | ---- | 
|                           |                                     | 2004                   |  
|                           |                                     |                        |  
|                           |                                     | Fourth                 |   |         | Third   |  |   | Second   |      |  | First   |         
|                           |                                     | Quarter                |   |         | Quarter |  |   | Quarter  |      |  | Quarter |         
|                           |                                     |                        |   |         |         |  |   |          |      |  |         |         
|                           |                                     | (Dollars in thousands) |  
|Summary Income Information |                                     |                        |   |         |         |  |   |          |      |  |         |          |      |  |   |         
|                           | Interest Income                     |                        | $ | 89,439  |         |  | $ | 89,965   |      |  | $       | 85,096   |      |  | $ | 79,803   |     
|                           | Interest expense                    |                        |   | (26,480 | )       |  |   | (24,305  | )    |  |         | (20,840  | )    |  |   | (20,600  | )   
|                           | Provision for loan and lease losses |                        |   | (2,357  | )       |  |   | (1,898   | )    |  |         | (1,794   | )    |  |   | (8,146   | )   
|                           | Non-interest income                 |                        |   | 60,016  |         |  |   | 65,913   |      |  |         | 76,519   |      |  |   | 81,081   |     
|                           | Non-interest expense                |                        |   | (96,550 | )       |  |   | (102,492 | )    |  |         | (107,757 | )    |  |   | (100,436 | )   
|                           | Income taxes                        |                        |   | (10,132 | )       |  |   | (10,858  | )    |  |         | (12,942  | )    |  |   | (11,800  | )   
|                           |                                     |                        |   |         |         |  |   |          |      |  |         |         
|                           | Net income                          |                        | $ | 13,936  |         |  | $ | 16,325   |      |  | $       | 18,282   |      |  | $ | 19,902   |     
|                           |                                     |                        |   |         |         |  |   |          |      |  |         |         
|                           | Earnings per share of common stock: |                        |   |         |         |  |   |          |      |  |         |          |      |  |   |          |     
|                           |                                     | Basic(1)               |   | $       | 0.49    |  |   | $        | 0.58 |  |         | $        | 0.65 |  |   | $        | 0.71 | 
|                           |                                     | Diluted(1)             |   |         | 0.47    |  |   |          | 0.54 |  |         |          | 0.61 |  |   |          | 0.66 | 






|    |                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.

Earnings by Line of Business






| |   |                    
| | - | -------------------
| |  | Commercial Banking 
|
| |  | Commercial Finance 
|
| |  | Home Equity Lending
|
| |  | Mortgage Banking   



|                   |                                         |                         |        |         |      |   |        |        |   |   |        |         |  
|------------------ | --------------------------------------- | ----------------------- | ------ | ------- | ---- | - | ------ | ------ | - | - | ------ | ------- | -
|                   |                                         | Year Ended December 31, |       
|                   |                                         |                         |       
|                   |                                         | 2005                    |        |         | 2004 |   |        | 2003   |  
|                   |                                         |                         |        |         |      |   |        |        |  
|                   |                                         | (Dollars in thousands)  |       
|Net income (loss): |                                         |                         |        |         |      |   |        |        |   |   |        |        
|                   | Commercial Banking                      |                         | $      | 27,379  |      |   | $      | 23,424 |   |   | $      | 22,477  |  
|                   | Commercial Finance                      |                         |        | 7,433   |      |   |        | 3,217  |   |   |        | 1,793   |  
|                   | Home Equity Lending                     |                         |        | 2,252   |      |   |        | 28,067 |   |   |        | (19,890 | )
|                   | Mortgage Banking                        |                         |        | (16,176 | )    |   |        | 20,266 |   |   |        | 78,100  |  
|                   | Other (including consolidating entries) |                         |        | (1,901  | )    |   |        | (6,529 | ) |   |        | (9,663  | )
|                   |                                         |                         |        |         |      |   |        |        |  
|                   |                                         | $                       | 18,987 |         |      | $ | 68,445 |        |   | $ | 72,817 |        
|                   |                                         |                         |        |         |      |   |        |        |  

40



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##### Table of Contents



Commercial Banking




|                                              |                                       |                         |   |            |         |  |   |            |         |  |      |           |        |      |   |           |        |  |   |           |        | 
|--------------------------------------------- | ------------------------------------- | ----------------------- | - | ---------- | ------- |  | - | ---------- | ------- |  | ---- | --------- | ------ | ---- | - | --------- | ------ |  | - | --------- | ------ | 
|                                              |                                       | Year Ended December 31, |  
|                                              |                                       |                         |  
|                                              |                                       | 2005                    |   |            | 2004    |  |   | 2003       |         |  | 2002 |           |        | 2001 |  
|                                              |                                       |                         |   |            |         |  |   |            |         |  |      |           |        |      |  
|                                              |                                       | (Dollars in thousands)  |  
|Selected Income Statement Data:               |                                       |                         |   |            |         |  |   |            |         |  |      |           |        |      |   |           |        |  |   |          
|                                              | Interest income                       |                         | $ | 183,052    |         |  | $ | 127,029    |         |  | $    | 112,679   |        |      | $ | 110,107   |        |  | $ | 104,514   |       
|                                              | Interest expense                      |                         |   | (72,294    | )       |  |   | (37,412    | )       |  |      | (33,663   | )      |      |   | (40,253   | )      |  |   | (53,515   | )     
|                                              |                                       |                         |   |            |         |  |   |            |         |  |      |           |        |      |  
|                                              |                                       | Net interest income     |   |            | 110,758 |  |   |            | 89,617  |  |      |           | 79,016 |      |   |           | 69,854 |  |   |           | 50,999 | 
|                                              | Provision for loan and lease losses   |                         |   | (5,286     | )       |  |   | (3,307     | )       |  |      | (5,913    | )      |      |   | (9,812    | )      |  |   | (7,900    | )     
|                                              | Other income                          |                         |   | 16,945     |         |  |   | 18,316     |         |  |      | 21,070    |        |      |   | 16,081    |        |  |   | 14,981    |       
|                                              |                                       |                         |   |            |         |  |   |            |         |  |      |           |        |      |  
|                                              |                                       | Total net revenue       |   |            | 122,417 |  |   |            | 104,626 |  |      |           | 94,173 |      |   |           | 76,123 |  |   |           | 58,080 | 
|                                              | Operating expense                     |                         |   | (77,062    | )       |  |   | (65,450    | )       |  |      | (56,699   | )      |      |   | (50,029   | )      |  |   | (43,482   | )     
|                                              |                                       |                         |   |            |         |  |   |            |         |  |      |           |        |      |  
|                                              |                                       | Income before taxes     |   |            | 45,355  |  |   |            | 39,176  |  |      |           | 37,474 |      |   |           | 26,094 |  |   |           | 14,598 | 
|                                              | Income taxes                          |                         |   | (17,976    | )       |  |   | (15,752    | )       |  |      | (14,997   | )      |      |   | (10,009   | )      |  |   | (5,680    | )     
|                                              |                                       |                         |   |            |         |  |   |            |         |  |      |           |        |      |  
|                                              |                                       | Net income              |   | $          | 27,379  |  |   | $          | 23,424  |  |      | $         | 22,477 |      |   | $         | 16,085 |  |   | $         | 8,918  | 
|                                              |                                       |                         |   |            |         |  |   |            |         |  |      |           |        |      |  
|Selected Balance Sheet Data at End of Period: |                                       |                         |   |            |         |  |   |            |         |  |      |           |        |      |   |           |        |  |   |          
|                                              | Assets                                |                         | $ | 3,162,398  |         |  | $ | 2,622,877  |         |  | $    | 2,203,965 |        |      | $ | 1,969,956 |        |  | $ | 1,648,294 |       
|                                              | Securities and short-term investments |                         |   | 340,811 (1 | )       |  |   | 327,664 (1 | )       |  |      | 107,668   |        |      |   | 44,433    |        |  |   | 43,278    |       
|                                              | Loans and leases                      |                         |   | 2,680,220  |         |  |   | 2,223,474  |         |  |      | 1,988,633 |        |      |   | 1,823,304 |        |  |   | 1,514,957 |       
|                                              | Allowance for loan and lease losses   |                         |   | (24,670    | )       |  |   | (22,230    | )       |  |      | (22,055   | )      |      |   | (20,725   | )      |  |   | (14,644   | )     
|                                              | Deposits                              |                         |   | 2,797,635  |         |  |   | 2,390,839  |         |  |      | 1,964,274 |        |      |   | 1,733,864 |        |  |   | 1,456,376 |       
|                                              | Shareholders equity                  |                         |   | 195,381    |         |  |   | 143,580    |         |  |      | 162,050   |        |      |   | 154,423   |        |  |   | 129,179   |       
|Daily Averages:                               |                                       |                         |   |            |         |  |   |            |         |  |      |           |        |      |   |           |        |  |   |          
|                                              | Assets                                |                         | $ | 3,025,717  |         |  | $ | 2,476,835  |         |  | $    | 2,119,944 |        |      | $ | 1,802,896 |        |  | $ | 1,402,589 |       
|                                              | Loans and leases                      |                         |   | 2,460,560  |         |  |   | 2,094,190  |         |  |      | 1,914,608 |        |      |   | 1,693,426 |        |  |   | 1,276,003 |       
|                                              | Allowance for loan and lease losses   |                         |   | (23,656    | )       |  |   | (22,304    | )       |  |      | (21,895   | )      |      |   | (17,823   | )      |  |   | (11,038   | )     
|                                              | Deposits                              |                         |   | 2,766,289  |         |  |   | 2,258,538  |         |  |      | 1,894,406 |        |      |   | 1,583,926 |        |  |   | 1,253,725 |       
|                                              | Shareholders equity                  |                         |   | 157,545    |         |  |   | 147,759    |         |  |      | 147,886   |        |      |   | 140,249   |        |  |   | 85,312    |       
|                                              | Shareholders equity to assets        |                         |   | 5.21       | %       |  |   | 5.97       | %       |  |      | 6.98      | %      |      |   | 7.78      | %      |  |   | 6.08      | %     






|    |                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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




Strategy




41



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##### Table of Contents







| |   |                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.                                                                                                               







|                    |       |                        |         |           |          |  |      |         |          |  |             |     |  |          |         |           |         |  |      |             |  |  |          |     |  |         |         |           |  |  |      |       |  |  |     |     | 
|------------------- | ----- | ---------------------- | ------- | --------- | -------- |  | ---- | ------- | -------- |  | ----------- | --- |  | -------- | ------- | --------- | ------- |  | ---- | ----------- |  |  | -------- | --- |  | ------- | ------- | --------- |  |  | ---- | ----- |  |  | --- | --- | 
|                    |       | December 31,           |        
|                    |       |                        |        
|                    |       | 2005                   |         |           | 2004     |  |      | 2003    |         
|                    |       |                        |         |           |          |  |      |         |         
|                    |       |                        |         | Weighted  |          |  |      |         | Weighted |  |             |     |  | Weighted |        
|                    |       | Loans                  |         |           | Percent  |  |      | Average |          |  | Loans       |     |  | Percent  |         |           | Average |  |      | Loans       |  |  | Percent  |     |  | Average |        
|Markets             |       | Outstanding            |         |           | of Total |  |      | Coupon  |          |  | Outstanding |     |  | of Total |         |           | Coupon  |  |      | Outstanding |  |  | of Total |     |  | Coupon  |        
|                    |       |                        |         |           |          |  |      |         |          |  |             |     |  |          |         |           |         |  |      |             |  |  |          |     |  |         |        
|                    |       | (Dollars in thousands) |        
|Indianapolis        |       | $                      | 560,775 |           |          |  | 20.9 | %       |          |  | 7.0         | %   |  | $        | 504,853 |           |         |  | 22.7 | %           |  |  | 5.9      | %   |  | $       | 477,432 |           |  |  | 24.0 | %     |  |  | 5.4 | %  
|Central and western |       |                        | 516,444 |           |          |  | 19.3 |         |          |  | 7.1         |     |  |          | 488,587 |           |         |  | 22.0 |             |  |  | 5.9      |     |  |         | 491,670 |           |  |  | 24.7 |       |  |  | 5.1 |    
|Southern Indiana    |       |                        | 454,236 |           |          |  | 16.9 |         |          |  | 6.5         |     |  |          | 445,981 |           |         |  | 20.1 |             |  |  | 5.8      |     |  |         | 420,519 |           |  |  | 21.1 |       |  |  | 5.6 |    
|Phoenix             |       |                        | 447,548 |           |          |  | 16.7 |         |          |  | 7.6         |     |  |          | 288,555 |           |         |  | 13.0 |             |  |  | 6.3      |     |  |         | 238,515 |           |  |  | 12.0 |       |  |  | 5.3 |    
|Las Vegas           |       |                        | 112,761 |           |          |  | 4.2  |         |          |  | 7.5         |     |  |          | 70,109  |           |         |  | 3.2  |             |  |  | 6.1      |     |  |         | 37,251  |           |  |  | 1.9  |       |  |  | 5.5 |    
|Other               |       |                        | 588,456 |           |          |  | 22.0 |         |          |  | 7.2         |     |  |          | 425,389 |           |         |  | 19.0 |             |  |  | 5.7      |     |  |         | 323,246 |           |  |  | 16.3 |       |  |  | 4.8 |    
|                    |       |                        |         |           |          |  |      |         |          |  |             |     |  |          |         |           |         |  |      |             |  |  |          |     |  |         |        
|                    | Total |                        | $       | 2,680,220 |          |  |      | 100.0   |          |  |             | 7.1 |  |          | $       | 2,223,474 |         |  |      | 100.0       |  |  |          | 5.9 |  |         | $       | 1,988,633 |  |  |      | 100.0 |  |  |     | 5.2 | 
|                    |       |                        |         |           |          |  |      |         |          |  |             |     |  |          |         |           |         |  |      |             |  |  |          |     |  |         |        

42



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##### Table of Contents



|                    |       |              |         |           |          |  |      |         |          |  |          |     |   |          |         |           |         |  |      |          |   |  |          |     |   |         |         |           |  |  |      |       |   |  |     |     |  
|------------------- | ----- | ------------ | ------- | --------- | -------- |  | ---- | ------- | -------- |  | -------- | --- | - | -------- | ------- | --------- | ------- |  | ---- | -------- | - |  | -------- | --- | - | ------- | ------- | --------- |  |  | ---- | ----- | - |  | --- | --- | -
|                    |       | December 31, |        
|                    |       |              |        
|                    |       | 2005         |         |           | 2004     |  |      | 2003    |         
|                    |       |              |         |           |          |  |      |         |         
|                    |       |              |         | Weighted  |          |  |      |         | Weighted |  |          |     |   | Weighted |        
|                    |       | Core         |         |           | Percent  |  |      | Average |          |  | Core     |     |   | Percent  |         |           | Average |  |      | Core     |   |  | Percent  |     |   | Average |        
|                    |       | Deposits     |         |           | of Total |  |      | Coupon  |          |  | Deposits |     |   | of Total |         |           | Coupon  |  |      | Deposits |   |  | of Total |     |   | Coupon  |        
|                    |       |              |         |           |          |  |      |         |          |  |          |     |   |          |         |           |         |  |      |          |   |  |          |     |   |         |        
|Indianapolis        |       | $            | 259,196 |           |          |  | 10.4 | %       |          |  | 2.1      | %   |   | $        | 278,785 |           |         |  | 12.7 | %        |   |  | 1.4      | %   |   | $       | 258,875 |           |  |  | 14.8 | %     |   |  | 1.1 | %  
|Central and western |       |              | 238,742 |           |          |  | 9.6  |         |          |  | 2.6      |     |   |          | 221,917 |           |         |  | 10.1 |          |   |  | 1.7      |     |   |         | 176,441 |           |  |  | 10.1 |       |   |  | 1.5 |    
|Southern Indiana    |       |              | 674,923 |           |          |  | 27.1 |         |          |  | 2.1      |     |   |          | 671,342 |           |         |  | 30.5 |          |   |  | 1.3      |     |   |         | 645,297 |           |  |  | 36.8 |       |   |  | 1.2 |    
|Phoenix             |       |              | 190,428 |           |          |  | 7.6  |         |          |  | 2.4      |     |   |          | 155,475 |           |         |  | 7.1  |          |   |  | 1.6      |     |   |         | 74,900  |           |  |  | 4.3  |       |   |  | 1.0 |    
|Las Vegas           |       |              | 413,541 |           |          |  | 16.6 |         |          |  | 3.5      |     |   |          | 287,910 |           |         |  | 13.1 |          |   |  | 2.0      |     |   |         | 210,437 |           |  |  | 12.0 |       |   |  | 1.0 |    
|Other               |       |              | 713,233 |           |          |  | 28.7 |         |          |  | 3.3      |     |   |          | 582,242 |           |         |  | 26.5 |          |   |  | 2.1      |     |   |         | 386,808 |           |  |  | 22.0 |       |   |  | 1.2 |    
|                    |       |              |         |           |          |  |      |         |          |  |          |     |   |          |         |           |         |  |      |          |   |  |          |     |   |         |        
|                    | Total |              | $       | 2,490,063 |          |  |      | 100.0   | %        |  |          | 2.7 | % |          | $       | 2,197,671 |         |  |      | 100.0    | % |  |          | 1.7 | % |         | $       | 1,752,758 |  |  |      | 100.0 | % |  |     | 1.2 | %
|                    |       |              |         |           |          |  |      |         |          |  |          |     |   |          |         |           |         |  |      |          |   |  |          |     |   |         |        

Net Income




Net Interest Income




|                                |  |                         |           |   |      |   |           |      |  |   |           |  
|------------------------------- |  | ----------------------- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                |  | Year Ended December 31, |          
|                                |  |                         |          
|                                |  | 2005                    |           |   | 2004 |   |           | 2003 | 
|                                |  |                         |           |   |      |   |           |      | 
|                                |  | (Dollars in thousands)  |          
|Net interest income             |  | $                       | 110,758   |   |      | $ | 89,617    |      |  | $ | 79,016    |  
|Average interest earning assets |  |                         | 2,914,352 |   |      |   | 2,392,049 |      |  |   | 2,046,658 |  
|Net interest margin             |  |                         | 3.80      | % |      |   | 3.75      | %    |  |   | 3.86      | %



Provision for Loan and Lease Losses




43



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##### Table of Contents



Noninterest Income




|                                         |  |                         |        |   |      |   |        |      |  |   |        |  
|---------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                         |  | Year Ended December 31, |       
|                                         |  |                         |       
|                                         |  | 2005                    |        |   | 2004 |   |        | 2003 | 
|                                         |  |                         |        |   |      |   |        |      | 
|                                         |  | (Dollars in thousands)  |       
|Service charges on deposit accounts      |  | $                       | 4,008  |   |      | $ | 5,071  |      |  | $ | 5,095  |  
|Gain from sales of loans                 |  |                         | 2,943  |   |      |   | 2,947  |      |  |   | 7,814  |  
|Trust fees                               |  |                         | 1,964  |   |      |   | 1,902  |      |  |   | 1,817  |  
|Insurance commissions, fees and premiums |  |                         | 1,827  |   |      |   | 2,143  |      |  |   | 2,009  |  
|Brokerage fees                           |  |                         | 1,452  |   |      |   | 1,465  |      |  |   | 1,264  |  
|Loan servicing fees                      |  |                         | 1,473  |   |      |   | 1,374  |      |  |   | 1,237  |  
|Amortization of servicing assets         |  |                         | (1,306 | ) |      |   | (1,559 | )    |  |   | (2,705 | )
|Recovery of servicing assets             |  |                         | 248    |   |      |   | 582    |      |  |   | 744    |  
|Other                                    |  |                         | 4,336  |   |      |   | 4,391  |      |  |   | 3,795  |  
|                                         |  |                         |        |   |      |   |        |      | 
|Total noninterest income                 |  | $                       | 16,945 |   |      | $ | 18,316 |      |  | $ | 21,070 |  
|                                         |  |                         |        |   |      |   |        |      | 



Operating Expenses




|                                       |  |                         |        |   |      |   |        |      |  |   |        |  
|-------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                       |  | Year Ended December 31, |       
|                                       |  |                         |       
|                                       |  | 2005                    |        |   | 2004 |   |        | 2003 | 
|                                       |  |                         |        |   |      |   |        |      | 
|                                       |  | (Dollars in thousands)  |       
|Salaries and employee benefits         |  | $                       | 47,934 |   |      | $ | 40,422 |      |  | $ | 34,853 |  
|Other expenses                         |  |                         | 29,128 |   |      |   | 25,028 |      |  |   | 21,846 |  
|                                       |  |                         |        |   |      |   |        |      | 
|Total operating expenses               |  | $                       | 77,062 |   |      | $ | 65,450 |      |  | $ | 56,699 |  
|                                       |  |                         |        |   |      |   |        |      | 
|Efficiency ratio                       |  |                         | 60.3   | % |      |   | 60.6   | %    |  |   | 56.7   | %
|Number of employees at year
    end(1) |  |                         | 586    |   |      |   | 525    |      |  |   | 493    |  






|    |                                
|--- | -------------------------------
|(1) | On a full time equivalent basis



Balance Sheet




44



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##### Table of Contents





Credit Quality




|                                         |  |                        |        |   |      |   |        |      |  |   |        |  
|---------------------------------------- |  | ---------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                         |  | December 31,           |       
|                                         |  |                        |       
|                                         |  | 2005                   |        |   | 2004 |   |        | 2003 | 
|                                         |  |                        |        |   |      |   |        |      | 
|                                         |  | (Dollars in thousands) |       
|Nonperforming loans                      |  | $                      | 19,483 |   |      | $ | 21,247 |      |  | $ | 25,614 |  
|Other real estate owned                  |  |                        | 7,892  |   |      |   | 1,533  |      |  |   | 995    |  
|                                         |  |                        |        |   |      |   |        |      | 
|Total nonperforming assets               |  | $                      | 27,375 |   |      | $ | 22,780 |      |  | $ | 26,609 |  
|                                         |  |                        |        |   |      |   |        |      | 
|Nonperforming assets to total assets     |  |                        | 0.87   | % |      |   | 0.87   | %    |  |   | 1.21   | %
|Allowance for loan losses                |  | $                      | 24,670 |   |      | $ | 22,230 |      |  | $ | 22,055 |  
|Allowance for loan losses to total loans |  |                        | 0.92   | % |      |   | 1.00   | %    |  |   | 1.11   | %
|For the Period Ended:                    |  |                        |        |   |      |   |        |      |  |   |        |  
|Provision for loan losses                |  | $                      | 5,286  |   |      | $ | 3,307  |      |  | $ | 5,913  |  
|Net charge-offs                          |  |                        | 2,847  |   |      |   | 3,133  |      |  |   | 4,583  |  
|Net charge-offs to average loans         |  |                        | 0.12   | % |      |   | 0.15   | %    |  |   | 0.24   | %



|                    |       |                        |        |        |             |   |        |             |  |   |        |        | 
|------------------- | ----- | ---------------------- | ------ | ------ | ----------- | - | ------ | ----------- |  | - | ------ | ------ | 
|                    |       | December 31,           |       
|                    |       |                        |       
|                    |       | 2005                   |        |        | 2004        |   |        | 2003        | 
|                    |       |                        |        |        |             |   |        |             | 
|                    |       | Loans                  |        |        | Loans       |   |        | Loans       | 
|Markets             |       | Outstanding            |        |        | Outstanding |   |        | Outstanding | 
|                    |       |                        |        |        |             |   |        |             | 
|                    |       | (Dollars in thousands) |       
|Indianapolis        |       | $                      | 3,256  |        |             | $ | 495    |             |  | $ | 1,337  |       
|Central and western |       |                        | 19,426 |        |             |   | 16,827 |             |  |   | 18,600 |       
|Southern Indiana    |       |                        | 1,095  |        |             |   | 1,143  |             |  |   | 2,383  |       
|Phoenix             |       |                        | 2,679  |        |             |   | 3,442  |             |  |   | 4,040  |       
|Las Vegas           |       |                        |       |        |             |   |       |             |  |   |       |       
|Other               |       |                        | 919    |        |             |   | 873    |             |  |   | 249    |       
|                    |       |                        |        |        |             |   |        |             | 
|                    | Total |                        | $      | 27,375 |             |   | $      | 22,780      |  |   | $      | 26,609 | 
|                    |       |                        |        |        |             |   |        |             | 

45



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##### Table of Contents



Commercial Finance


|                                              |                                                     |                                                                              |   |         |        |  |   |         |        |  |      |         |        |      |   |         |        |   |   |         |        |  
|--------------------------------------------- | --------------------------------------------------- | ---------------------------------------------------------------------------- | - | ------- | ------ |  | - | ------- | ------ |  | ---- | ------- | ------ | ---- | - | ------- | ------ | - | - | ------- | ------ | -
|                                              |                                                     | Year Ended December 31,                                                      |  
|                                              |                                                     |                                                                              |  
|                                              |                                                     | 2005                                                                         |   |         | 2004   |  |   | 2003    |        |  | 2002 |         |        | 2001 |  
|                                              |                                                     |                                                                              |   |         |        |  |   |         |        |  |      |         |        |      |  
|                                              |                                                     | (Dollars in thousands)                                                       |  
|Selected Income Statement Data:               |                                                     |                                                                              |   |         |        |  |   |         |        |  |      |         |        |      |   |         |        |   |   |        
|                                              | Net interest income                                 |                                                                              | $ | 33,683  |        |  | $ | 28,084  |        |  | $    | 22,766  |        |      | $ | 15,140  |        |   | $ | 9,481   |       
|                                              | Provision for loan and lease losses                 |                                                                              |   | (6,211  | )      |  |   | (6,798  | )      |  |      | (11,308 | )      |      |   | (8,481  | )      |   |   | (6,939  | )     
|                                              | Noninterest income                                  |                                                                              |   | 7,437   |        |  |   | 6,275   |        |  |      | 5,868   |        |      |   | 4,397   |        |   |   | 1,695   |       
|                                              |                                                     |                                                                              |   |         |        |  |   |         |        |  |      |         |        |      |  
|                                              |                                                     | Total net revenue                                                            |   |         | 34,909 |  |   |         | 27,561 |  |      |         | 17,326 |      |   |         | 11,056 |   |   |         | 4,237  |  
|                                              | Operating expense                                   |                                                                              |   | (22,224 | )      |  |   | (18,782 | )      |  |      | (15,072 | )      |      |   | (12,122 | )      |   |   | (8,424  | )     
|                                              |                                                     |                                                                              |   |         |        |  |   |         |        |  |      |         |        |      |  
|                                              |                                                     | Income (loss) before taxes                                                   |   |         | 12,685 |  |   |         | 8,779  |  |      |         | 2,254  |      |   |         | (1,066 | ) |   |         | (4,187 | )
|                                              | Income taxes                                        |                                                                              |   | (5,252  | )      |  |   | (5,562  | )      |  |      | (461    | )      |      |   | 513     |        |   |   | 1,309   |       
|                                              |                                                     |                                                                              |   |         |        |  |   |         |        |  |      |         |        |      |  
|                                              |                                                     | Income (loss) before cumulative effect of change in accounting
    principle |   |         | 7,433  |  |   |         | 3,217  |  |      |         | 1,793  |      |   |         | (553   | ) |   |         | (2,878 | )
|                                              | Cumulative effect of change in accounting principle |                                                                              |   |        |        |  |   |        |        |  |      |        |        |      |   | 495     |        |   |   |        |       
|                                              |                                                     |                                                                              |   |         |        |  |   |         |        |  |      |         |        |      |  
|                                              |                                                     | Net income (loss)                                                            |   | $       | 7,433  |  |   | $       | 3,217  |  |      | $       | 1,793  |      |   | $       | (58    | ) |   | $       | (2,878 | )
|                                              |                                                     |                                                                              |   |         |        |  |   |         |        |  |      |         |        |      |  
|Selected Balance Sheet Data at End of Period: |                                                     |                                                                              |   |         |        |  |   |         |        |  |      |         |        |      |   |         |        |   |   |        
|                                              | Total assets                                        |                                                                              | $ | 831,657 |        |  | $ | 636,604 |        |  | $    | 474,915 |        |      | $ | 343,384 |        |   | $ | 266,670 |       
|                                              | Loans and leases                                    |                                                                              |   | 817,208 |        |  |   | 625,140 |        |  |      | 463,423 |        |      |   | 345,844 |        |   |   | 264,827 |       
|                                              | Allowance for loan and lease losses                 |                                                                              |   | (10,756 | )      |  |   | (9,624  | )      |  |      | (11,445 | )      |      |   | (7,657  | )      |   |   | (4,587  | )     
|                                              | Shareholders equity                                |                                                                              |   | 71,568  |        |  |   | 55,993  |        |  |      | 44,255  |        |      |   | 29,236  |        |   |   | 18,741  |       
|Selected Operating Data:                      |                                                     |                                                                              |   |         |        |  |   |         |        |  |      |         |        |      |   |         |        |   |   |        
|                                              | Net charge-offs                                     |                                                                              | $ | 4,806   |        |  | $ | 8,235   |        |  | $    | 7,868   |        |      | $ | 5,401   |        |   | $ | 4,653   |       
|                                              | Net interest margin                                 |                                                                              |   | 4.80    | %      |  |   | 5.33    | %      |  |      | 5.63    | %      |      |   | 5.07    | %      |   |   | 4.64    | %     
|                                              | Total funding of loans and leases                   |                                                                              | $ | 451,754 |        |  | $ | 366,545 |        |  | $    | 272,685 |        |      | $ | 207,087 |        |   | $ | 190,716 |       

Overview




Strategy




Net Income




46



---



##### Table of Contents





Net Interest Income




|                                |  |                         |         |   |      |   |         |      |  |   |         |  
|------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                |  | Year Ended December 31, |        
|                                |  |                         |        
|                                |  | 2005                    |         |   | 2004 |   |         | 2003 | 
|                                |  |                         |         |   |      |   |         |      | 
|                                |  | (Dollars in thousands)  |        
|Net interest income             |  | $                       | 33,683  |   |      | $ | 28,084  |      |  | $ | 22,766  |  
|Average interest earning assets |  |                         | 701,423 |   |      |   | 526,754 |      |  |   | 404,089 |  
|Net interest margin             |  |                         | 4.80    | % |      |   | 5.33    | %    |  |   | 5.63    | %





Provision for Loan and Lease Losses




Noninterest Income




|                         |  |                         |       |   |      |   |       |      |  |   |       |  
|------------------------ |  | ----------------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                         |  | Year Ended December 31, |      
|                         |  |                         |      
|                         |  | 2005                    |       |   | 2004 |   |       | 2003 | 
|                         |  |                         |       |   |      |   |       |      | 
|                         |  | (Dollars in thousands)  |      
|Gain from sales of loans |  | $                       | 2,642 |   |      | $ | 1,796 |      |  | $ | 2,630 |  
|Derivative losses, net   |  |                         | (717  | ) |      |   | (536  | )    |  |   | (803  | )
|Other                    |  |                         | 5,512 |   |      |   | 5,015 |      |  |   | 4,041 |  
|                         |  |                         |       |   |      |   |       |      | 
|Total noninterest income |  | $                       | 7,437 |   |      | $ | 6,275 |      |  | $ | 5,868 |  
|                         |  |                         |       |   |      |   |       |      | 



47



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##### Table of Contents



Operating Expenses




|                                       |                          |                         |        |        |      |   |        |        |  |   |        |        | 
|-------------------------------------- | ------------------------ | ----------------------- | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                                       |                          | Year Ended December 31, |       
|                                       |                          |                         |       
|                                       |                          | 2005                    |        |        | 2004 |   |        | 2003   | 
|                                       |                          |                         |        |        |      |   |        |        | 
|                                       |                          | (Dollars in thousands)  |       
|Salaries and employee benefits         |                          | $                       | 17,531 |        |      | $ | 14,333 |        |  | $ | 11,606 |       
|Other                                  |                          |                         | 4,693  |        |      |   | 4,449  |        |  |   | 3,466  |       
|                                       |                          |                         |        |        |      |   |        |        | 
|                                       | Total operating expenses |                         | $      | 22,224 |      |   | $      | 18,782 |  |   | $      | 15,072 | 
|                                       |                          |                         |        |        |      |   |        |        | 
|Number of employees at year
    end(1) |                          |                         | 184    |        |      |   | 162    |        |  |   | 133    |       






|    |                                
|--- | -------------------------------
|(1) | On a full time equivalent basis



Credit Quality






|                                         |  |                        |        |   |      |   |       |      |  |   |        |  
|---------------------------------------- |  | ---------------------- | ------ | - | ---- | - | ----- | ---- |  | - | ------ | -
|                                         |  | December 31,           |       
|                                         |  |                        |       
|                                         |  | 2005                   |        |   | 2004 |   |       | 2003 | 
|                                         |  |                        |        |   |      |   |       |      | 
|                                         |  | (Dollars in thousands) |       
|Nonperforming loans                      |  | $                      | 3,700  |   |      | $ | 3,936 |      |  | $ | 4,083  |  
|Allowance for loan losses                |  |                        | 10,756 |   |      |   | 9,624 |      |  |   | 11,445 |  
|Allowance for loan losses to total loans |  |                        | 1.32   | % |      |   | 1.54  | %    |  |   | 2.47   | %
|For the Period Ended:                    |  |                        |        |   |      |   |       |      |  |   |        |  
|Provision for loan losses                |  | $                      | 6,211  |   |      | $ | 6,798 |      |  | $ | 11,308 |  
|Net charge-offs                          |  |                        | 4,806  |   |      |   | 8,235 |      |  |   | 7,868  |  
|Net charge-offs to average loans         |  |                        | 0.69   | % |      |   | 1.59  | %    |  |   | 1.97   | %

48



---



##### Table of Contents





|                         |                   |                        |         |      |      |   |         |      |  
|------------------------ | ----------------- | ---------------------- | ------- | ---- | ---- | - | ------- | ---- | -
|                         |                   | December 31,           |        
|                         |                   |                        |        
|                         |                   | 2005                   |         |      | 2004 |  
|                         |                   |                        |         |      |      |  
|                         |                   | (Dollars in thousands) |        
|Domestic franchise loans |                   | $                      | 336,939 |      |      | $ | 243,859 |     
|                         | Delinquency ratio |                        |         | 0.37 | %    |   |         | 0.35 | %
|Domestic leases          |                   | $                      | 204,701 |      |      | $ | 149,999 |     
|                         | Delinquency ratio |                        |         | 1.26 | %    |   |         | 1.09 | %
|Canadian
    leases(1)   |                   | $                      | 275,568 |      |      | $ | 231,282 |     
|                         | Delinquency ratio |                        |         | 0.53 | %    |   |         | 0.82 | %






|    |                 
|--- | ----------------
|(1) | In U.S. dollars.

49



---



##### Table of Contents



Home Equity Lending




|                                                           |                 |                         |           |           |         |   |           |         |         |   |           |         |        |      |           |         |        |   |           |         |         | 
|---------------------------------------------------------- | --------------- | ----------------------- | --------- | --------- | ------- | - | --------- | ------- | ------- | - | --------- | ------- | ------ | ---- | --------- | ------- | ------ | - | --------- | ------- | ------- | 
|                                                           |                 | Year Ended December 31, |          
|                                                           |                 |                         |          
|                                                           |                 | 2005                    |           |           | 2004    |   |           | 2003    |         |   | 2002      |         |        | 2001 |          
|                                                           |                 |                         |           |           |         |   |           |         |         |   |           |         |        |      |          
|                                                           |                 | (Dollars in thousands)  |          
|Selected Income Statement Data:                            |                 |                         |           |           |         |   |           |         |         |   |           |         |        |      |           |         |        |   |           |        
|Net interest income                                        |                 | $                       | 88,290    |           |         | $ | 98,983    |         |         | $ | 106,545   |         |        | $    | 94,068    |         |        | $ | 61,803    |        
|Provision for loan and lease losses                        |                 |                         | (15,811   | )         |         |   | (4,369    | )       |         |   | (29,575   | )       |        |      | (25,596   | )       |        |   | (2,320    | )      
|Noninterest income                                         |                 |                         | 33,667    |           |         |   | 67,847    |         |         |   | (19,525   | )       |        |      | 11,791    |         |        |   | 64,786    |        
|                                                           |                 |                         |           |           |         |   |           |         |         |   |           |         |        |      |          
|                                                           |                 | Total net revenues      |           |           | 106,146 |   |           |         | 162,461 |   |           |         | 57,445 |      |           |         | 80,263 |   |           |         | 124,269 | 
|Operating expenses                                         |                 |                         | (102,339  | )         |         |   | (114,779  | )       |         |   | (90,538   | )       |        |      | (78,588   | )       |        |   | (97,189   | )      
|                                                           |                 |                         |           |           |         |   |           |         |         |   |           |         |        |      |          
|Income (loss) before taxes                                 |                 |                         | 3,807     |           |         |   | 47,682    |         |         |   | (33,093   | )       |        |      | 1,675     |         |        |   | 27,080    |        
|Income taxes                                               |                 |                         | (1,555    | )         |         |   | (19,615   | )       |         |   | 13,203    |         |        |      | (670      | )       |        |   | (10,832   | )      
|                                                           |                 |                         |           |           |         |   |           |         |         |   |           |         |        |      |          
|Net income (loss)                                          |                 | $                       | 2,252     |           |         | $ | 28,067    |         |         | $ | (19,890   | )       |        | $    | 1,005     |         |        | $ | 16,248    |        
|                                                           |                 |                         |           |           |         |   |           |         |         |   |           |         |        |      |          
|Selected Balance Sheet Data:                               |                 |                         |           |           |         |   |           |         |         |   |           |         |        |      |           |         |        |   |           |        
|Total assets                                               |                 | $                       | 1,602,400 |           |         | $ | 992,979   |         |         | $ | 1,070,634 |         |        | $    | 939,494   |         |        | $ | 602,226   |        
|Home equity loans and lines of
    credit(1)               |                 |                         | 980,406   |           |         |   | 590,175   |         |         |   | 692,637   |         |        |      | 626,355   |         |        |   | 346,192   |        
|Allowance for loan losses                                  |                 |                         | (23,552   | )         |         |   | (11,330   | )       |         |   | (29,251   | )       |        |      | (21,689   | )       |        |   | (2,220    | )      
|Home equity loans held for sale                            |                 |                         | 513,231   |           |         |   | 227,740   |         |         |   | 202,627   |         |        |      | 75,540    |         |        |   |          |        
|Residual interests                                         |                 |                         | 15,580    |           |         |   | 51,542    |         |         |   | 70,519    |         |        |      | 157,065   |         |        |   | 199,071   |        
|Mortgage servicing assets                                  |                 |                         | 30,502    |           |         |   | 44,000    |         |         |   | 28,425    |         |        |      | 26,444    |         |        |   | 15,265    |        
|Short-term borrowings                                      |                 |                         | 920,636   |           |         |   | 359,902   |         |         |   | 368,640   |         |        |      | 201,328   |         |        |   | 138,527   |        
|Collateralized debt                                        |                 |                         | 452,615   |           |         |   | 352,625   |         |         |   | 460,535   |         |        |      | 391,425   |         |        |   |          |        
|Shareholders equity                                       |                 |                         | 151,677   |           |         |   | 136,260   |         |         |   | 128,555   |         |        |      | 155,831   |         |        |   | 135,493   |        
|Selected Operating Data:                                   |                 |                         |           |           |         |   |           |         |         |   |           |         |        |      |           |         |        |   |           |        
|Loan volume:                                               |                 |                         |           |           |         |   |           |         |         |   |           |         |        |      |           |         |        |   |           |        
|                                                           | Lines of credit |                         | $         | 436,451   |         |   | $         | 508,287 |         |   | $         | 324,094 |        |      | $         | 443,323 |        |   | $         | 317,579 |        
|                                                           | Loans           |                         |           | 1,255,185 |         |   |           | 934,027 |         |   |           | 809,222 |        |      |           | 623,903 |        |   |           | 831,830 |        
|Total managed portfolio balance                            |                 |                         | 1,593,509 |           |         |   | 1,147,137 |         |         |   | 1,513,289 |         |        |      | 1,830,339 |         |        |   | 2,064,542 |        
|Delinquency
    ratio(2)                                   |                 |                         | 3.0       | %         |         |   | 4.8       | %       |         |   | 5.9       | %       |        |      | 6.0       | %       |        |   | 5.1       | %      
|Total managed portfolio balance Including credit risk sold |                 | $                       | 3,058,842 |           |         | $ | 2,807,367 |         |         | $ | 2,568,356 |         |        | $    | 2,502,685 |         |        | $ | 2,317,975 |        
|Weighted average coupon rate:                              |                 |                         |           |           |         |   |           |         |         |   |           |         |        |      |           |         |        |   |           |        
|                                                           | Lines of credit |                         |           | 10.17     | %       |   |           | 9.18    | %       |   |           | 9.71    | %      |      |           | 10.79   | %      |   |           | 11.11   | %      
|                                                           | Loans           |                         |           | 10.18     |         |   |           | 11.87   |         |   |           | 12.07   |        |      |           | 13.50   |        |   |           | 13.38   |        
|Gain on sale of loans to loans sold                        |                 |                         | 2.39      |           |         |   | 2.24      |         |         |   | 3.81      |         |        |      | 4.70      |         |        |   | 8.47      |        
|Net home equity charge-offs to average managed portfolio   |                 |                         | 0.60      |           |         |   | 2.48      |         |         |   | 4.37      |         |        |      | 2.87      |         |        |   | 1.82      |        






|    |                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes $486 million, $361 million, $479 million
    and $392 million of collateralized loans at
    December 31, 2005, 2004, 2003 and 2002, respectively, as
    part of securitized financings.
|   
|(2) | Nonaccrual loans are included in the delinquency ratio.                                                                                                                                           

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Overview




Strategy


loan-to loan-to loan-to






51



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Portfolio Mix




|                              |                                |                        |         |           |            |  |       |        |          |  |        |       |   |            |         |           |        |  |       |        |   |  |       |       |  
|----------------------------- | ------------------------------ | ---------------------- | ------- | --------- | ---------- |  | ----- | ------ | -------- |  | ------ | ----- | - | ---------- | ------- | --------- | ------ |  | ----- | ------ | - |  | ----- | ----- | -
|                              |                                | December 31,           |        
|                              |                                |                        |        
|                              |                                | 2005                   |         |           | 2004       | 
|                              |                                |                        |         |           |            | 
|                              |                                |                        |         | Weighted  |            |  |       |        | Weighted | 
|                              |                                |                        |         | Average   |            |  |       |        | Average  | 
|                              |                                | Amount                 |         |           | % of Total |  |       | Coupon |          |  | Amount |       |   | % of Total |         |           | Coupon | 
|                              |                                |                        |         |           |            |  |       |        |          |  |        |       |   |            |         |           |        | 
|                              |                                | (Dollars in thousands) |        
|Home Equity portfolio         |                                |                        |         |           |            |  |       |        |          |  |        |       |   |            |         |           |        |  |       |        |   |  |       |      
|Loans<  = 100% CLTV           |                                | $                      | 494,462 |           |            |  | 31.03 | %      |          |  | 7.90   | %     |   | $          | 182,817 |           |        |  | 15.94 | %      |   |  | 9.79  | %    
|Lines of credit<  = 100% CLTV |                                |                        | 327,164 |           |            |  | 20.53 |        |          |  | 8.77   |       |   |            | 384,547 |           |        |  | 33.52 |        |   |  | 7.82  |      
|                              |                                |                        |         |           |            |  |       |        |          |  |        |       |   |            |         |           |        | 
|Total<  = 100% CLTV           |                                |                        | 821,626 |           |            |  | 51.56 |        |          |  | 8.24   |       |   |            | 567,364 |           |        |  | 49.46 |        |   |  | 8.46  |      
|                              |                                |                        |         |           |            |  |       |        |          |  |        |       |   |            |         |           |        | 
|Loans> 100% CLTV              |                                |                        | 582,536 |           |            |  | 36.56 |        |          |  | 12.31  |       |   |            | 349,791 |           |        |  | 30.49 |        |   |  | 13.27 |      
|Lines of credit> 100% CLTV    |                                |                        | 142,315 |           |            |  | 8.93  |        |          |  | 13.10  |       |   |            | 175,082 |           |        |  | 15.26 |        |   |  | 11.70 |      
|                              |                                |                        |         |           |            |  |       |        |          |  |        |       |   |            |         |           |        | 
|Total> 100% CLTV              |                                |                        | 724,851 |           |            |  | 45.49 |        |          |  | 12.47  |       |   |            | 524,873 |           |        |  | 45.75 |        |   |  | 12.75 |      
|First mortgages               |                                |                        | 36,377  |           |            |  | 2.28  |        |          |  | 7.10   |       |   |            | 36,694  |           |        |  | 3.20  |        |   |  | 7.18  |      
|Other                         |                                |                        | 10,655  |           |            |  | 0.67  |        |          |  | 14.03  |       |   |            | 18,206  |           |        |  | 1.59  |        |   |  | 13.88 |      
|                              |                                |                        |         |           |            |  |       |        |          |  |        |       |   |            |         |           |        | 
|                              | Total managed
    portfolio(1) |                        | $       | 1,593,509 |            |  |       | 100.00 | %        |  |        | 10.18 | % |            | $       | 1,147,137 |        |  |       | 100.00 | % |  |       | 10.46 | %
|                              |                                |                        |         |           |            |  |       |        |          |  |        |       |   |            |         |           |        | 






|    |                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We define our Managed Portfolio as the portfolio of
    loans ($1.6 billion) that we service and on which we carry
    credit risk. At December 31, 2005, we also serviced another
    $1.5 billion of loans for which the credit risk is held by
    others.



|                                     |       |              |           |       |      |   |           |       |  
|------------------------------------ | ----- | ------------ | --------- | ----- | ---- | - | --------- | ----- | -
|                                     |       | December 31, |          
|                                     |       |              |          
|State                                |       | 2005         |           |       | 2004 |  
|                                     |       |              |           |       |      |  
|California                           |       |              | 11.4      | %     |      |   | 15.4      | %    
|Michigan                             |       |              | 8.5       |       |      |   | 6.0       |      
|Florida                              |       |              | 6.9       |       |      |   | 7.4       |      
|Colorado                             |       |              | 6.2       |       |      |   | 4.7       |      
|Ohio                                 |       |              | 5.8       |       |      |   | 5.3       |      
|All other states                     |       |              | 61.2      |       |      |   | 61.2      |      
|                                     |       |              |           |       |      |  
|                                     | Total |              |           | 100.0 | %    |   |           | 100.0 | %
|                                     |       |              |           |       |      |  
|Total managed portfolio in thousands |       | $            | 1,593,509 |       |      | $ | 1,147,137 |      

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|                                |       |                    |           |       |      |   |           |       |  
|------------------------------- | ----- | ------------------ | --------- | ----- | ---- | - | --------- | ----- | -
|                                |       | For the Year Ended |          
|                                |       | December 31,       |          
|                                |       |                    |          
|State                           |       | 2005               |           |       | 2004 |  
|                                |       |                    |           |       |      |  
|California                      |       |                    | 15.2      | %     |      |   | 16.1      | %    
|Florida                         |       |                    | 8.2       |       |      |   | 6.2       |      
|Michigan                        |       |                    | 7.1       |       |      |   | 5.5       |      
|Arizona                         |       |                    | 5.6       |       |      |   | 2.4       |      
|Colorado                        |       |                    | 5.5       |       |      |   | 5.8       |      
|All other states                |       |                    | 58.4      |       |      |   | 64.0      |      
|                                |       |                    |           |       |      |  
|                                | Total |                    |           | 100.0 | %    |   |           | 100.0 | %
|                                |       |                    |           |       |      |  
|Total originations in thousands |       | $                  | 1,691,636 |       |      | $ | 1,442,314 |      

Securitizations






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | As off balance sheet, SFAS 140, structures
    where both the loans and securitization liabilities are off
    balance sheet. We record a gain on sale of loans at the time of
    securitization, retain a residual interest and record subsequent
    trading gains/losses throughout the life of the loans as our
    assumptions of future performance change. We engaged in such
    securitizations from 1995 through 2001. We are considering the
    use of gain-on-sale
    accounting again in 2006 on a limited basis in order to align
    regulatory and economic capital requirements. The internally
    imposed limitations relate to credit quality and
    loan-to-value ratios of
    the underlying loans (e.g., loans must meet certain minimum FICO
    scores and combined
    loan-to-values will not
    exceed 100%) as well as a limitation that the amount of
    residuals we will have as a percentage of capital at Irwin Union
    Bank and Trust will not exceed 15% of the Banks
    Tier 1 capital. Such treatment would result in the creation
    of new residual interests.
|
| |  | As on balance sheet structures (secured financings)
    where the loans are left on balance sheet and the securitization
    liabilities are brought on balance sheet as collateralized debt.
    We then report net interest income on an accrual basis over the
    life of the loans. We have used these structures since 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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Net Income




Net Revenue








|                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|----------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                          |  | Year Ended December 31, |        
|                                          |  |                         |        
|                                          |  | 2005                    |         |   | 2004 |   |         | 2003 | 
|                                          |  |                         |         |   |      |   |         |      | 
|                                          |  | (Dollars in thousands)  |        
|Net interest income                       |  | $                       | 88,290  |   |      | $ | 98,983  |      |  | $ | 106,545 |  
|Provision for loan losses                 |  |                         | (15,811 | ) |      |   | (4,369  | )    |  |   | (29,575 | )
|Gain on sales of loans                    |  |                         | 17,849  |   |      |   | 29,180  |      |  |   | 26,069  |  
|Loan servicing fees                       |  |                         | 38,206  |   |      |   | 29,774  |      |  |   | 21,835  |  
|Amortization of servicing assets          |  |                         | (29,708 | ) |      |   | (19,863 | )    |  |   | (13,894 | )
|Recovery (impairment) of servicing assets |  |                         | 643     |   |      |   | 1,148   |      |  |   | (1,684  | )
|Trading gains (losses)                    |  |                         | 2,399   |   |      |   | 25,176  |      |  |   | (52,209 | )
|Other income                              |  |                         | 4,278   |   |      |   | 2,432   |      |  |   | 358     |  
|                                          |  |                         |         |   |      |   |         |      | 
|Total net revenue                         |  | $                       | 106,146 |   |      | $ | 162,461 |      |  | $ | 57,445  |  
|                                          |  |                         |         |   |      |   |         |      | 









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Operating Expenses




|                                       |                          |                         |        |         |      |   |        |         |  |   |        |        | 
|-------------------------------------- | ------------------------ | ----------------------- | ------ | ------- | ---- | - | ------ | ------- |  | - | ------ | ------ | 
|                                       |                          | Year Ended December 31, |       
|                                       |                          |                         |       
|                                       |                          | 2005                    |        |         | 2004 |   |        | 2003    | 
|                                       |                          |                         |        |         |      |   |        |         | 
|                                       |                          | (Dollars in thousands)  |       
|Salaries and employee benefits         |                          | $                       | 64,432 |         |      | $ | 75,649 |         |  | $ | 52,074 |       
|Other                                  |                          |                         | 37,907 |         |      |   | 39,130 |         |  |   | 38,464 |       
|                                       |                          |                         |        |         |      |   |        |         | 
|                                       | Total operating expenses |                         | $      | 102,339 |      |   | $      | 114,779 |  |   | $      | 90,538 | 
|                                       |                          |                         |        |         |      |   |        |         | 
|Number of employees at year
    end(1) |                          |                         | 615    |         |      |   | 642    |         |  |   | 663    |       






|    |                                 
|--- | --------------------------------
|(1) | On a full time equivalent basis.

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Home Equity Servicing








56



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|                                                                           |  |                        |           |   |      |   |           |  
|-------------------------------------------------------------------------- |  | ---------------------- | --------- | - | ---- | - | --------- | -
|                                                                           |  | December 31,           |          
|                                                                           |  |                        |          
|                                                                           |  | 2005                   |           |   | 2004 |  
|                                                                           |  |                        |           |   |      |  
|                                                                           |  | (Dollars in thousands) |          
|Managed Portfolio                                                          |  |                        |           |   |      |   |           |  
|Total Loans                                                                |  | $                      | 1,593,509 |   |      | $ | 1,147,137 |  
|30 days past due                                                           |  |                        | 3.04      | % |      |   | 4.76      | %
|90 days past due                                                           |  |                        | 1.10      |   |      |   | 1.60      |  
|Net Chargeoff Rate                                                         |  |                        | 0.60      |   |      |   | 2.48      |  
|Unsold Loans                                                               |  |                        |           |   |      |   |           |  
|Total
    Loans(1)                                                         |  | $                      | 1,480,224 |   |      | $ | 814,595   |  
|30 days past due                                                           |  |                        | 2.23      | % |      |   | 1.93      | %
|90 days past due                                                           |  |                        | 0.86      |   |      |   | 0.78      |  
|Net Chargeoff Rate                                                         |  |                        | 0.31      |   |      |   | 1.28      |  
|Loan Loss Reserve                                                          |  | $                      | 23,552    |   |      | $ | 11,330    |  
|Owned Residual                                                             |  |                        |           |   |      |   |           |  
|Total Loans                                                                |  | $                      | 113,286   |   |      | $ | 332,542   |  
|30 days past due                                                           |  |                        | 13.60     | % |      |   | 11.71     | %
|90 days past due                                                           |  |                        | 4.32      |   |      |   | 3.61      |  
|Net Chargeoff Rate                                                         |  |                        | 2.14      |   |      |   | 5.00      |  
|Residual Undiscounted Losses                                               |  | $                      | 930       |   |      | $ | 11,323    |  
|Credit Risk Sold, Potential Incentive Servicing Fee Retained
    Portfolio |  |                        |           |   |      |   |           |  
|Total Loans                                                                |  | $                      | 972,775   |   |      | $ | 1,023,585 |  
|30 days past due                                                           |  |                        | 4.30      | % |      |   | 3.11      | %
|90 days past due                                                           |  |                        | 1.74      |   |      |   | 1.10      |  






|    |                                  
|--- | ---------------------------------
|(1) | Excludes deferred fees and costs.

30-day


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Mortgage Banking




|                                                                                 |                          |                                |            |            |      |   |            |            |      |   |            |            |      |      |            |            |      |   |           |            |      |  
|-------------------------------------------------------------------------------- | ------------------------ | ------------------------------ | ---------- | ---------- | ---- | - | ---------- | ---------- | ---- | - | ---------- | ---------- | ---- | ---- | ---------- | ---------- | ---- | - | --------- | ---------- | ---- | -
|                                                                                 |                          | Year Ended December 31,        |           
|                                                                                 |                          |                                |           
|                                                                                 |                          | 2005                           |            |            | 2004 |   |            | 2003       |      |   | 2002       |            |      | 2001 |           
|                                                                                 |                          |                                |            |            |      |   |            |            |      |   |            |            |      |      |           
|                                                                                 |                          | (Dollars in thousands)         |           
|Selected Income Statement Data:                                                  |                          |                                |            |            |      |   |            |            |      |   |            |            |      |      |            |            |      |   |           |           
|Net interest income                                                              |                          | $                              | 36,766     |            |      | $ | 40,825     |            |      | $ | 72,311     |            |      | $    | 41,545     |            |      | $ | 30,261    |           
|Recovery of (provision for) loan loss                                            |                          |                                | 455        |            |      |   | 278        |            |      |   | (664       | )          |      |      | (354       | )          |      |   | 31        |           
|Noninterest income                                                               |                          |                                | 65,263     |            |      |   | 197,971    |            |      |   | 326,000    |            |      |      | 207,177    |            |      |   | 185,251   |           
|                                                                                 |                          |                                |            |            |      |   |            |            |      |   |            |            |      |      |           
|                                                                                 | Total net revenue        |                                |            | 102,484    |      |   |            | 239,074    |      |   |            | 397,647    |      |      |            | 248,368    |      |   |           | 215,543    |     
|Operating expense                                                                |                          |                                | (129,551   | )          |      |   | (204,205   | )          |      |   | (267,880   | )          |      |      | (175,277   | )          |      |   | (153,706  | )         
|                                                                                 |                          |                                |            |            |      |   |            |            |      |   |            |            |      |      |           
|                                                                                 | Income before taxes      |                                |            | (27,067    | )    |   |            | 34,869     |      |   |            | 129,767    |      |      |            | 73,091     |      |   |           | 61,837     |     
|Income taxes                                                                     |                          |                                | 10,891     |            |      |   | (14,603    | )          |      |   | (51,667    | )          |      |      | (28,548    | )          |      |   | (23,912   | )         
|                                                                                 |                          |                                |            |            |      |   |            |            |      |   |            |            |      |      |           
|Net (loss) income before cumulative effect of change in
    accounting principle |                          |                                | (16,176    | )          |      |   | 20,266     |            |      |   | 78,100     |            |      |      | 44,543     |            |      |   | 37,925    |           
|Cumulative effect of change in accounting principle                              |                          |                                |           |            |      |   |           |            |      |   |           |            |      |      |           |            |      |   | 175       |           
|                                                                                 |                          |                                |            |            |      |   |            |            |      |   |            |            |      |      |           
|                                                                                 | Net (loss) income        |                                | $          | (16,176    | )    |   | $          | 20,266     |      |   | $          | 78,100     |      |      | $          | 44,543     |      |   | $         | 38,100     |     
|                                                                                 |                          |                                |            |            |      |   |            |            |      |   |            |            |      |      |           
|Selected Balance Sheet Data at End of Period:                                    |                          |                                |            |            |      |   |            |            |      |   |            |            |      |      |            |            |      |   |           |           
|Total assets                                                                     |                          | $                              | 1,306,041  |            |      | $ | 1,238,136  |            |      | $ | 1,258,641  |            |      | $    | 1,631,406  |            |      | $ | 926,946   |           
|Mortgage loans held for sale                                                     |                          |                                | 779,966    |            |      |   | 662,832    |            |      |   | 679,360    |            |      |      | 1,239,309  |            |      |   | 502,086   |           
|Mortgage servicing assets                                                        |                          |                                | 261,309    |            |      |   | 319,225    |            |      |   | 348,174    |            |      |      | 146,398    |            |      |   | 211,201   |           
|Deposits                                                                         |                          |                                | 412,444    |            |      |   | 680,812    |            |      |   | 567,047    |            |      |      | 581,425    |            |      |   | 360,523   |           
|Short-term borrowing                                                             |                          |                                | 467,470    |            |      |   | 133,150    |            |      |   | 214,877    |            |      |      | 809,921    |            |      |   | 385,640   |           
|Shareholders equity                                                             |                          |                                | 125,888    |            |      |   | 123,265    |            |      |   | 122,671    |            |      |      | 100,069    |            |      |   | 63,150    |           
|Shareholders equity to assets                                                   |                          |                                | 9.64       | %          |      |   | 9.96       | %          |      |   | 9.75       | %          |      |      | 6.13       | %          |      |   | 6.81      | %         
|Selected Operating Data:                                                         |                          |                                |            |            |      |   |            |            |      |   |            |            |      |      |            |            |      |   |           |           
|Mortgage loan originations                                                       |                          | $                              | 11,029,183 |            |      | $ | 13,093,082 |            |      | $ | 22,669,246 |            |      | $    | 11,411,875 |            |      | $ | 9,225,991 |           
|Servicing sold as a % of originations                                            |                          |                                | 121.4      | %          |      |   | 74.2       | %          |      |   | 6.2        | %          |      |      | 31.1       | %          |      |   | 29.9      | %         
|Servicing portfolio:                                                             |                          |                                |            |            |      |   |            |            |      |   |            |            |      |      |            |            |      |   |           |           
|                                                                                 | Balance at end of period |                                | $          | 18,265,288 |      |   | $          | 26,196,627 |      |   | $          | 29,640,122 |      |      | $          | 16,792,669 |      |   | $         | 12,875,532 |     
|                                                                                 |                          | Weighted average coupon rate   |            |            | 5.79 | % |            |            | 5.75 | % |            |            | 5.83 | %    |            |            | 6.59 | % |           |            | 7.23 | %
|                                                                                 |                          | Weighted average servicing fee |            |            | 0.35 |   |            |            | 0.35 |   |            |            | 0.33 |      |            |            | 0.37 |   |           |            | 0.45 |  



| |         
| | --------
| | Overview





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Net Income






|                        |  |                         |            |   |      |   |            |      |  |   |            |  
|----------------------- |  | ----------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                        |  | Year Ended December 31, |           
|                        |  |                         |           
|                        |  | 2005                    |            |   | 2004 |   |            | 2003 | 
|                        |  |                         |            |   |      |   |            |      | 
|                        |  | (Dollars in thousands)  |           
|Total originations      |  | $                       | 11,029,183 |   |      | $ | 13,093,082 |      |  | $ | 22,669,246 |  
|Percent retail loans    |  |                         | 10         | % |      |   | 20         | %    |  |   | 26         | %
|Percent wholesale loans |  |                         | 49         |   |      |   | 34         |      |  |   | 42         |  
|Percent correspondent   |  |                         | 37         |   |      |   | 35         |      |  |   | 28         |  
|Percent
    brokered(1) |  |                         | 4          |   |      |   | 11         |      |  |   | 4          |  
|Percent refinances      |  |                         | 47         |   |      |   | 52         |      |  |   | 67         |  






|    |                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Brokered loans are loans we originate for which we receive loan
    origination fees, but which are funded, closed and owned by
    unrelated third parties.



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| |            
| | -----------
| | Net Revenue



|                                          |                   |                         |         |         |      |   |         |         |  |   |          |         | 
|----------------------------------------- | ----------------- | ----------------------- | ------- | ------- | ---- | - | ------- | ------- |  | - | -------- | ------- | 
|                                          |                   | Year Ended December 31, |        
|                                          |                   |                         |        
|                                          |                   | 2005                    |         |         | 2004 |   |         | 2003    | 
|                                          |                   |                         |         |         |      |   |         |         | 
|                                          |                   | (Dollars in thousands)  |        
|Selected Income Statement Data:           |                   |                         |         |         |      |   |         |         |  |   |          |        
|Net interest income                       |                   | $                       | 36,766  |         |      | $ | 40,825  |         |  | $ | 72,311   |        
|Provision for loan losses                 |                   |                         | 455     |         |      |   | 278     |         |  |   | (664     | )      
|Gain on sales of loans                    |                   |                         | 75,267  |         |      |   | 151,172 |         |  |   | 327,864  |        
|Servicing fees                            |                   |                         | 86,930  |         |      |   | 104,500 |         |  |   | 83,124   |        
|Amortization expense                      |                   |                         | (69,308 | )       |      |   | (95,721 | )       |  |   | (118,920 | )      
|Recovery (impairment) of servicing assets |                   |                         | 18,734  |         |      |   | (4,204  | )       |  |   | 45,456   |        
|Gain (loss) on derivatives                |                   |                         | (67,587 | )       |      |   | 18,889  |         |  |   | (21,307  | )      
|Gain (loss) on sales of servicing assets  |                   |                         | 14,412  |         |      |   | 16,681  |         |  |   | (305     | )      
|Other income                              |                   |                         | 6,815   |         |      |   | 6,654   |         |  |   | 10,088   |        
|                                          |                   |                         |         |         |      |   |         |         | 
|                                          | Total net revenue |                         | $       | 102,484 |      |   | $       | 239,074 |  |   | $        | 397,647 | 
|                                          |                   |                         |         |         |      |   |         |         | 







| |   |                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------
| |  | the valuation of newly-created mortgage servicing rights;                                                                 
|
| |  | net loan origination fees which are recognized when loans are
    pooled and sold into the secondary mortgage market; and,
|
| |  | changes in fair value of forward contracts and interest rate
    lock commitments.                                        









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| |                   
| | ------------------
| | Operating Expenses



|                                       |                          |                         |        |         |      |   |        |         |  |   |         |         | 
|-------------------------------------- | ------------------------ | ----------------------- | ------ | ------- | ---- | - | ------ | ------- |  | - | ------- | ------- | 
|                                       |                          | Year Ended December 31, |       
|                                       |                          |                         |       
|                                       |                          | 2005                    |        |         | 2004 |   |        | 2003    | 
|                                       |                          |                         |        |         |      |   |        |         | 
|                                       |                          | (Dollars in thousands)  |       
|Salaries and employee benefits         |                          | $                       | 53,879 |         |      | $ | 77,209 |         |  | $ | 81,589  |        
|Incentive and commission pay           |                          |                         | 15,490 |         |      |   | 41,230 |         |  |   | 79,956  |        
|Other expenses                         |                          |                         | 60,182 |         |      |   | 85,766 |         |  |   | 106,335 |        
|                                       |                          |                         |        |         |      |   |        |         | 
|                                       | Total operating expenses |                         | $      | 129,551 |      |   | $      | 204,205 |  |   | $       | 267,880 | 
|                                       |                          |                         |        |         |      |   |        |         | 
|Number of employees at year
    end(1) |                          |                         | 895    |         |      |   | 1,675  |         |  |   | 2,175   |        






|    |                                 
|--- | --------------------------------
|(1) | On a full time equivalent basis.



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| |                   
| | ------------------
| | Mortgage Servicing



|                                                                                       |                                |                         |         |      |      |   |         |      |   |   |         |      |  
|-------------------------------------------------------------------------------------- | ------------------------------ | ----------------------- | ------- | ---- | ---- | - | ------- | ---- | - | - | ------- | ---- | -
|                                                                                       |                                | Year Ended December 31, |        
|                                                                                       |                                |                         |        
|                                                                                       |                                | 2005                    |         |      | 2004 |   |         | 2003 |  
|                                                                                       |                                |                         |         |      |      |   |         |      |  
|                                                                                       |                                | (Portfolio in billions) |        
|Beginning servicing portfolio                                                          |                                | $                       | 26.2    |      |      | $ | 29.6    |      |   | $ | 16.8    |     
|                                                                                       | Mortgage loan
    closings(1)  |                         |         | 10.6 |      |   |         | 11.7 |   |   |         | 21.9 |  
|                                                                                       | Bulk sales of servicing rights |                         |         | (6.2 | )    |   |         | (4.0 | ) |   |         |     |  
|                                                                                       | Flow sales of servicing rights |                         |         | (6.8 | )    |   |         | (4.2 | ) |   |         | (0.6 | )
|                                                                                       | Run-off(2)                     |                         |         | (5.5 | )    |   |         | (6.9 | ) |   |         | (8.5 | )
|                                                                                       |                                |                         |         |      |      |   |         |      |  
|Ending servicing portfolio                                                             |                                | $                       | 18.3    |      |      | $ | 26.2    |      |   | $ | 29.6    |     
|                                                                                       |                                |                         |         |      |      |   |         |      |  
|Number of loans (end of period)                                                        |                                |                         | 142,956 |      |      |   | 205,463 |      |   |   | 229,983 |     
|Average loan size                                                                      |                                | $                       | 127,769 |      |      | $ | 127,500 |      |   | $ | 128,880 |     
|Weighted average coupon                                                                |                                |                         | 5.79    | %    |      |   | 5.75    | %    |   |   | 5.83    | %   
|Percent Government National Mortgage Association (GNMA) and
    state housing programs |                                |                         | 26      |      |      |   | 30      |      |   |   | 26      |     
|Percent conventional and other                                                         |                                |                         | 74      |      |      |   | 70      |      |   |   | 74      |     
|Delinquency ratio                                                                      |                                |                         | 5.4     |      |      |   | 4.6     |      |   |   | 4.6     |     
|Mortgage servicing assets to related servicing portfolio
    (3)                       |                                |                         | 1.41    |      |      |   | 1.20    |      |   |   | 1.19    |     






|    |                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes brokered loans that are closed, funded and owned by
    unrelated third parties.                                                                                                                                   
|   
|(2) | Run-off is primarily the reduction in principal balance of the
    servicing portfolio due to regular principal payments made by
    mortgagees and early repayments of entire loans.                                       
|   
|(3) | For this calculation, deferred service release premiums on
    warehouse loans are excluded from mortgage servicing assets and
    loans held for sale (i.e. warehouse loans) are excluded from the
    servicing portfolio.





Parent and Other




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Risk Management






| |   |                   
| | - | ------------------
| |  | Credit risk       
|
| |  | Liquidity risk    
|
| |  | Interest rate risk
|
| |  | Operational risk  







Credit Risk.






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|                                                                          |                                              |                                       |                   |        |       |        |           |        |       |        |           |        |       |        |           |       |       |        |           |       |       |       | 
|------------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------- | ----------------- | ------ | ----- | ------ | --------- | ------ | ----- | ------ | --------- | ------ | ----- | ------ | --------- | ----- | ----- | ------ | --------- | ----- | ----- | ----- | 
|                                                                          |                                              | At or For the Year Ended December 31, |                  
|                                                                          |                                              |                                       |                  
|                                                                          |                                              | 2005                                  |                   |        | 2004  |        |           | 2003   |       |        | 2002      |        |       | 2001   |          
|                                                                          |                                              |                                       |                   |        |       |        |           |        |       |        |           |        |       |        |          
|                                                                          |                                              | (Dollars in thousands)                |                  
|Loans and leases outstanding at end of period, net of unearned
    income |                                              | $                                     | 4,498,829         |        |       | $      | 3,450,440 |        |       | $      | 3,161,054 |        |       | $      | 2,815,276 |       |       | $      | 2,137,822 |      
|                                                                          |                                              |                                       |                   |        |       |        |           |        |       |        |           |        |       |        |          
|Average loans and leases for the period, net of unearned income           |                                              | $                                     | 3,890,077         |        |       | $      | 3,324,333 |        |       | $      | 3,168,776 |        |       | $      | 2,620,428 |       |       | $      | 1,533,261 |      
|                                                                          |                                              |                                       |                   |        |       |        |           |        |       |        |           |        |       |        |          
|Allowance for possible loan and lease losses:                             |                                              |                                       |                   |        |       |        |           |        |       |        |           |        |       |        |           |       |       |        |           |      
|Balance beginning of period                                               |                                              | $                                     | 44,443            |        |       | $      | 64,285    |        |       | $      | 50,936    |        |       | $      | 22,283    |       |       | $      | 13,129    |      
|Charge-offs:                                                              |                                              |                                       |                   |        |       |        |           |        |       |        |           |        |       |        |           |       |       |        |           |      
|                                                                          | Commercial, financial and agricultural loans |                                       |                   | 2,976  |       |        |           | 3,262  |       |        |           | 4,263  |       |        |           | 3,666 |       |        |           | 1,638 |      
|                                                                          | Real estate mortgage loans                   |                                       |                   | 10,656 |       |        |           | 15,381 |       |        |           | 23,522 |       |        |           | 7,130 |       |        |           | 600   |      
|                                                                          | Consumer loans                               |                                       |                   | 723    |       |        |           | 351    |       |        |           | 765    |       |        |           | 800   |       |        |           | 1,489 |      
|                                                                          | Commercial Financing:                        |                                       |                   |        |       |        |           |        |       |        |           |        |       |        |           |       |       |        |           |       |      
|                                                                          |                                              | Franchise financing                   |                   |        | 870   |        |           |        | 88    |        |           |        | 146   |        |           |       | 19    |        |           |       |      |      
|                                                                          |                                              | Domestic leasing                      |                   |        | 2,190 |        |           |        | 6,581 |        |           |        | 6,026 |        |           |       | 5,139 |        |           |       | 3,624 |      
|                                                                          |                                              | Canadian leasing                      |                   |        | 2,786 |        |           |        | 2,517 |        |           |        | 2,590 |        |           |       | 1,476 |        |           |       | 2,402 |      
|                                                                          |                                              |                                       |                   |        |       |        |           |        |       |        |           |        |       |        |          
|                                                                          |                                              |                                       | Total charge-offs |        |       | 20,201 |           |        |       | 28,180 |           |        |       | 37,312 |           |       |       | 18,230 |           |       |       | 9,753 | 
|                                                                          |                                              |                                       |                   |        |       |        |           |        |       |        |           |        |       |        |          

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|                                                          |                                              |                                       |                  |        |       |        |         |        |       |        |         |        |       |        |         |        |       |        |        |        |       |        | 
|--------------------------------------------------------- | -------------------------------------------- | ------------------------------------- | ---------------- | ------ | ----- | ------ | ------- | ------ | ----- | ------ | ------- | ------ | ----- | ------ | ------- | ------ | ----- | ------ | ------ | ------ | ----- | ------ | 
|                                                          |                                              | At or For the Year Ended December 31, |                 
|                                                          |                                              |                                       |                 
|                                                          |                                              | 2005                                  |                  |        | 2004  |        |         | 2003   |       |        | 2002    |        |       | 2001   |        
|                                                          |                                              |                                       |                  |        |       |        |         |        |       |        |         |        |       |        |        
|                                                          |                                              | (Dollars in thousands)                |                 
|Recoveries:                                               |                                              |                                       |                  |        |       |        |         |        |       |        |         |        |       |        |         |        |       |        |        |       
|                                                          | Commercial, financial and agricultural loans |                                       |                  | 767    |       |        |         | 318    |       |        |         | 77     |       |        |         | 435    |       |        |        | 144    |      
|                                                          | Real estate mortgage loans                   |                                       |                  | 7,068  |       |        |         | 3,899  |       |        |         | 2,198  |       |        |         | 1,002  |       |        |        |       |      
|                                                          | Consumer loans                               |                                       |                  | 85     |       |        |         | 169    |       |        |         | 248    |       |        |         | 252    |       |        |        | 193    |      
|                                                          | Commercial Financing:                        |                                       |                  |        |       |        |         |        |       |        |         |        |       |        |         |        |       |        |        |        |      
|                                                          |                                              | Franchise financing                   |                  |        | 25    |        |         |        |      |        |         |        |      |        |         |        |      |        |        |        |      |       
|                                                          |                                              | Domestic leasing                      |                  |        | 583   |        |         |        | 626   |        |         |        | 448   |        |         |        | 523   |        |        |        | 334   |       
|                                                          |                                              | Canadian leasing                      |                  |        | 432   |        |         |        | 323   |        |         |        | 449   |        |         |        | 658   |        |        |        | 877   |       
|                                                          |                                              |                                       |                  |        |       |        |         |        |       |        |         |        |       |        |        
|                                                          |                                              |                                       | Total recoveries |        |       | 8,960  |         |        |       | 5,335  |         |        |       | 3,420  |         |        |       | 2,870  |        |        |       | 1,548  | 
|                                                          |                                              |                                       |                  |        |       |        |         |        |       |        |         |        |       |        |        
|Net charge-offs                                           |                                              |                                       | (11,241          | )      |       |        | (22,845 | )      |       |        | (33,892 | )      |       |        | (15,360 | )      |       |        | (8,205 | )     
|Reduction due to sale of loans                            |                                              |                                       | (424             | )      |       |        | (627    | )      |       |        | (234    | )      |       |        |        |        |       |        | (6     | )     
|Reduction due to reclassification of loans                |                                              |                                       |                 |        |       |        | (10,808 | )      |       |        | (690    | )      |       |        |        |        |       |        |       |       
|Foreign currency adjustment                               |                                              |                                       | 119              |        |       |        | 243     |        |       |        | 582     |        |       |        | 17      |        |       |        | (140   | )     
|Provision charged to expense                              |                                              |                                       | 26,852           |        |       |        | 14,195  |        |       |        | 47,583  |        |       |        | 43,996  |        |       |        | 17,505 |       
|                                                          |                                              |                                       |                  |        |       |        |         |        |       |        |         |        |       |        |        
|Balance end of year                                       |                                              | $                                     | 59,749           |        |       | $      | 44,443  |        |       | $      | 64,285  |        |       | $      | 50,936  |        |       | $      | 22,283 |       
|                                                          |                                              |                                       |                  |        |       |        |         |        |       |        |         |        |       |        |        
|Allowance for possible loan and lease losses by category: |                                              |                                       |                  |        |       |        |         |        |       |        |         |        |       |        |         |        |       |        |        |       
|                                                          | Commercial, financial and agricultural loans |                                       | $                | 19,927 |       |        | $       | 18,126 |       |        | $       | 20,571 |       |        | $       | 17,942 |       |        | $      | 11,198 |      
|                                                          | Real estate mortgage loans                   |                                       |                  | 24,079 |       |        |         | 12,332 |       |        |         | 31,445 |       |        |         | 23,150 |       |        |        | 2,872  |      
|                                                          | Consumer loans                               |                                       |                  | 4,879  |       |        |         | 4,242  |       |        |         | 809    |       |        |         | 2,067  |       |        |        | 2,309  |      
|                                                          | Commercial Financing:                        |                                       |                  |        |       |        |         |        |       |        |         |        |       |        |         |        |       |        |        |        |      
|                                                          |                                              | Franchise financing                   |                  |        | 4,118 |        |         |        | 3,728 |        |         |        | 2,158 |        |         |        | 1,327 |        |        |        | 204   |       
|                                                          |                                              | Domestic leasing                      |                  |        | 3,144 |        |         |        | 2,926 |        |         |        | 6,285 |        |         |        | 4,626 |        |        |        | 4,323 |       
|                                                          |                                              | Canadian leasing                      |                  |        | 3,602 |        |         |        | 3,089 |        |         |        | 3,017 |        |         |        | 1,824 |        |        |        | 1,377 |       
|                                                          |                                              |                                       |                  |        |       |        |         |        |       |        |         |        |       |        |        
|                                                          |                                              |                                       | Totals           |        | $     | 59,749 |         |        | $     | 44,443 |         |        | $     | 64,285 |         |        | $     | 50,936 |        |        | $     | 22,283 | 
|                                                          |                                              |                                       |                  |        |       |        |         |        |       |        |         |        |       |        |        

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|                                                                       |                                              |                                       |     |    |      |  |     |      |   |  |      |    |   |      |     |    |   |  |     |    |   | 
|---------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------- | --- | -- | ---- |  | --- | ---- | - |  | ---- | -- | - | ---- | --- | -- | - |  | --- | -- | - | 
|                                                                       |                                              | At or For the Year Ended December 31, |    
|                                                                       |                                              |                                       |    
|                                                                       |                                              | 2005                                  |     |    | 2004 |  |     | 2003 |   |  | 2002 |    |   | 2001 |    
|                                                                       |                                              |                                       |     |    |      |  |     |      |   |  |      |    |   |      |    
|                                                                       |                                              | (Dollars in thousands)                |    
|Percent of loans and leases to total loans and leases by
    category: |                                              |                                       |     |    |      |  |     |      |   |  |      |    |   |      |     |    |   |  |     |   
|                                                                       | Commercial, financial and agricultural loans |                                       |     | 42 | %    |  |     | 49   | % |  |      | 47 | % |      |     | 48 | % |  |     | 49 | %
|                                                                       | Real estate mortgage loans                   |                                       |     | 39 |      |  |     | 32   |   |  |      | 37 |   |      |     | 39 |   |  |     | 36 |  
|                                                                       | Consumer loans                               |                                       |     | 1  |      |  |     | 1    |   |  |      | 1  |   |      |     | 1  |   |  |     | 2  |  
|                                                                       | Commercial Financing:                        |                                       |     |    |      |  |     |      |   |  |      |    |   |      |     |    |   |  |     |    |  
|                                                                       |                                              | Franchise financing                   |     |    | 7    |  |     |      | 7 |  |      |    | 5 |      |     |    | 3 |  |     |    | 2 | 
|                                                                       |                                              | Domestic leasing                      |     |    | 5    |  |     |      | 4 |  |      |    | 4 |      |     |    | 5 |  |     |    | 7 | 
|                                                                       |                                              | Canadian leasing                      |     |    | 6    |  |     |      | 7 |  |      |    | 6 |      |     |    | 4 |  |     |    | 4 | 
|Ratios:                                                                |                                              |                                       |     |    |      |  |     |      |   |  |      |    |   |      |     |    |   |  |     |   
|Net charge-offs to average loans and leases                            |                                              |                                       | 0.3 | %  |      |  | 0.7 | %    |   |  | 1.1  | %  |   |      | 0.7 | %  |   |  | 0.7 | % 
|Allowance for possible loan losses to loans and leases
    outstanding |                                              |                                       | 1.3 | %  |      |  | 1.3 | %    |   |  | 2.0  | %  |   |      | 1.8 | %  |   |  | 1.0 | % 







|                                             |                     |                        |     |    |      |   |     |      |  |   |       |     |  |      |       |     |  |   |       |       | 
|-------------------------------------------- | ------------------- | ---------------------- | --- | -- | ---- | - | --- | ---- |  | - | ----- | --- |  | ---- | ----- | --- |  | - | ----- | ----- | 
|                                             |                     | December 31,           |    
|                                             |                     |                        |    
|                                             |                     | 2005                   |     |    | 2004 |   |     | 2003 |  |   | 2002  |     |  | 2001 |      
|                                             |                     |                        |     |    |      |   |     |      |  |   |       |     |  |      |      
|                                             |                     | (Dollars in thousands) |    
|Accruing loans past due 90 days or more:     |                     |                        |     |    |      |   |     |      |  |   |       |     |  |      |       |     |  |   |       |      
|Commercial, financial and agricultural loans |                     | $                      |    |    |      | $ |    |      |  | $ | 4,172 |     |  | $    | 30    |     |  | $ | 1,146 |      
|Real estate mortgages                        |                     |                        | 222 |    |      |   | 219 |      |  |   |      |     |  |      |      |     |  |   |      |      
|Consumer loans                               |                     |                        | 233 |    |      |   | 426 |      |  |   | 226   |     |  |      | 688   |     |  |   | 157   |      
|Commercial financing:                        |                     |                        |     |    |      |   |     |      |  |   |       |     |  |      |       |     |  |   |       |      
|                                             | Franchise financing |                        |     |   |      |   |     |     |  |   |       | 151 |  |      |       | 43  |  |   |       |      | 
|                                             | Domestic leasing    |                        |     | 73 |      |   |     |     |  |   |       | 8   |  |      |       | 177 |  |   |       | 1,624 | 
|                                             | Canadian leasing    |                        |     | 71 |      |   |     | 12   |  |   |       | 70  |  |      |       | 143 |  |   |       | 68    | 
|                                             |                     |                        |     |    |      |   |     |      |  |   |       |     |  |      |      
|                                             |                     |                        | 599 |    |      |   | 657 |      |  |   | 4,627 |     |  |      | 1,081 |     |  |   | 2,995 |      
|                                             |                     |                        |     |    |      |   |     |      |  |   |       |     |  |      |      

66



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|                                                         |                                                  |                                      |        |        |        |  |        |       |        |  |        |       |        |      |        |       |        |  |        |       |        | 
|-------------------------------------------------------- | ------------------------------------------------ | ------------------------------------ | ------ | ------ | ------ |  | ------ | ----- | ------ |  | ------ | ----- | ------ | ---- | ------ | ----- | ------ |  | ------ | ----- | ------ | 
|                                                         |                                                  | December 31,                         |       
|                                                         |                                                  |                                      |       
|                                                         |                                                  | 2005                                 |        |        | 2004   |  |        | 2003  |        |  | 2002   |       |        | 2001 |       
|                                                         |                                                  |                                      |        |        |        |  |        |       |        |  |        |       |        |      |       
|                                                         |                                                  | (Dollars in thousands)               |       
|Nonaccrual loans and leases:                             |                                                  |                                      |        |        |        |  |        |       |        |  |        |       |        |      |        |       |        |  |        |      
|Commercial, financial and agricultural loans             |                                                  |                                      | 17,693 |        |        |  | 20,394 |       |        |  | 20,447 |       |        |      | 13,798 |       |        |  | 5,066  |      
|Real estate mortgages                                    |                                                  |                                      | 14,237 |        |        |  | 8,590  |       |        |  | 14,663 |       |        |      | 11,308 |       |        |  | 8,115  |      
|Consumer loans                                           |                                                  |                                      | 1,335  |        |        |  | 128    |       |        |  | 769    |       |        |      | 454    |       |        |  | 708    |      
|Commercial financing:                                    |                                                  |                                      |        |        |        |  |        |       |        |  |        |       |        |      |        |       |        |  |        |      
|                                                         | Franchise financing                              |                                      |        | 720    |        |  |        | 1,193 |        |  |        | 552   |        |      |        |      |        |  |        |      |       
|                                                         | Domestic leasing                                 |                                      |        | 1,383  |        |  |        | 1,029 |        |  |        | 1,364 |        |      |        | 3,415 |        |  |        | 1,180 |       
|                                                         | Canadian leasing                                 |                                      |        | 1,452  |        |  |        | 1,702 |        |  |        | 1,943 |        |      |        | 1,077 |        |  |        | 1,088 |       
|                                                         |                                                  |                                      |        |        |        |  |        |       |        |  |        |       |        |      |       
|                                                         |                                                  |                                      | 36,820 |        |        |  | 33,036 |       |        |  | 39,738 |       |        |      | 30,052 |       |        |  | 16,157 |      
|                                                         |                                                  |                                      |        |        |        |  |        |       |        |  |        |       |        |      |       
|                                                         |                                                  | Total nonperforming loans and leases |        |        | 37,419 |  |        |       | 33,693 |  |        |       | 44,365 |      |        |       | 31,133 |  |        |       | 19,152 | 
|                                                         |                                                  |                                      |        |        |        |  |        |       |        |  |        |       |        |      |       
|                                                         | Nonperforming loans held for sale not guaranteed |                                      |        | 965    |        |  |        | 2,066 |        |  |        | 1,695 |        |      |        | 1,201 |        |  |        | 1,562 |       
|                                                         | Other real estate owned                          |                                      |        | 15,226 |        |  |        | 9,427 |        |  |        | 6,431 |        |      |        | 5,272 |        |  |        | 4,388 |       
|                                                         |                                                  |                                      |        |        |        |  |        |       |        |  |        |       |        |      |       
|                                                         |                                                  | Total nonperforming assets           |        | $      | 53,610 |  |        | $     | 45,186 |  |        | $     | 52,491 |      |        | $     | 37,606 |  |        | $     | 25,102 | 
|                                                         |                                                  |                                      |        |        |        |  |        |       |        |  |        |       |        |      |       
|Nonperforming loans and leases to total loans and leases |                                                  |                                      | 0.8    | %      |        |  | 1.0    | %     |        |  | 1.4    | %     |        |      | 1.1    | %     |        |  | 0.9    | %    
|                                                         |                                                  |                                      |        |        |        |  |        |       |        |  |        |       |        |      |       
|Nonperforming assets to total assets                     |                                                  |                                      | 0.8    | %      |        |  | 0.9    | %     |        |  | 1.1    | %     |        |      | 0.8    | %     |        |  | 0.7    | %    
|                                                         |                                                  |                                      |        |        |        |  |        |       |        |  |        |       |        |      |       





|                      |  |               |      |  |              |   |      | 
|--------------------- |  | ------------- | ---- |  | ------------ | - | ---- | 
|                      |  | December 31,  |      |  | December 31, |  
|                      |  | 2005          |      |  | 2004         |  
|                      |  |               |      |  |              |  
|                      |  | (In millions) |     
| Commercial banking  |  | $             | 27.4 |  |              | $ | 22.8 | 
| Commercial finance  |  |               | 3.7  |  |              |   | 3.9  | 
| Home equity lending |  |               | 17.1 |  |              |   | 10.0 | 
| Mortgage banking    |  |               | 5.5  |  |              |   | 8.5  | 





Liquidity Risk.




67



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|                                   |       |                        |           |           |          |   |           |            |  |       |            |           |  |   |         |         | 
|---------------------------------- | ----- | ---------------------- | --------- | --------- | -------- | - | --------- | ---------- |  | ----- | ---------- | --------- |  | - | ------- | ------- | 
|                                   |       | Payments Due by Period |          
|                                   |       |                        |          
|                                   |       |                        |           | Less than |          |   | One to    |            |  | After |           
|                                   |       | Total                  |           |           | One Year |   |           | Five Years |  |       | Five Years |          
|                                   |       |                        |           |           |          |   |           |            |  |       |            |          
|                                   |       | (Dollars in thousands) |          
|Deposits with contractual maturity |       | $                      | 1,404,219 |           |          | $ | 672,488   |            |  | $     | 723,234    |           |  | $ | 8,497   |        
|Deposits without a stated maturity |       |                        | 2,494,774 |           |          |   | 2,494,774 |            |  |       |           |           |  |   |        |        
|Short-term borrowings              |       |                        | 997,444   |           |          |   | 907,444   |            |  |       | 40,000     |           |  |   | 50,000  |        
|Collateralized debt                |       |                        | 669,120   |           |          |   | 326,602   |            |  |       | 342,518    |           |  |   |        |        
|Other long-term debt               |       |                        | 270,160   |           |          |   | 35        |            |  |       |           |           |  |   | 270,125 |        
|Operating leases                   |       |                        | 74,763    |           |          |   | 15,996    |            |  |       | 45,410     |           |  |   | 13,357  |        
|                                   |       |                        |           |           |          |   |           |            |  |       |            |          
|                                   | Total |                        | $         | 5,910,480 |          |   | $         | 4,417,339  |  |       | $          | 1,151,162 |  |   | $       | 341,979 | 
|                                   |       |                        |           |           |          |   |           |            |  |       |            |          





clean-up




68



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| |   |                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Warehouse lines of credit to fund first mortgages and home
    equity loans: none outstanding on a $300 million borrowing
    facility, of which $150 million is committed
|
| |  | Warehouse borrowing facilities to fund first mortgage loans:
    none outstanding on a $100 million committed borrowing
    facility                                      
|
| |  | Lines of credit with correspondent banks, including fed funds
    lines: $30 million outstanding out of $225 million
    available but not committed                      
|
| |  | Line of credit with a correspondent bank collateralized by
    mortgage servicing rights: none outstanding out of
    $50 million committed borrowing facility            
|
| |  | Warehouse lines of credit to fund Canadian sourced small ticket
    leases: $203 million outstanding on $293 million of
    borrowing facilities                          

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| |   |                                                                                           
| | - | ------------------------------------------------------------------------------------------
| |  | Committed warehouse sale facility: $105 million unsettled
    on a $600 million facility  
|
| |  | Uncommitted warehouse sale facility: $0.1 million unsettled
    on a $150 million facility
|
| |  | Investor warehouse sale facility: $60 million unsettled                                   

Interest Rate Risk.


mark-to










| |   |                                                              
| | - | -------------------------------------------------------------
| |  | the type of risk we are trying to mitigate;                  
|
| |  | offsetting factors elsewhere in the Corporation;             
|
| |  | the level of current capital above our target minimums;      
|
| |  | time remaining in the quarter (i.e., days until quarter end);

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| |   |                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | current level of derivative gain or loss relative to accounting
    and economic basis;                                                                                   
|
| |  | basis risk: the degree to which the interest rates underlying
    our derivative instruments might not move parallel to the
    interest rate driving our asset valuation;
|
| |  | convexity: the degree to which asset values, or risk management
    derivative instrument values, do not change in a linear fashion
    as interest rates change; and     
|
| |  | volatility: the level of volatility in market interest rates and
    the related impact on our asset values and derivatives
    instrument values.                        















mark-to








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Specifically, the volume of derivative contracts entered into to
    manage the risk of MSRs fluctuates from quarter to quarter and
    within a given quarter, depending upon market conditions, the
    size of our MSR portfolio and various additional factors. We
    monitor derivative positions frequently and rebalance them as
    needed. Therefore, our derivative positions, shown in the table
    below as of December 31, 2005, may or may not be
    representative of our risk position during the succeeding
    quarter. Additionally, it is unlikely that the volume of
    derivative positions would remain constant over large
    fluctuations in interest rates, although the tables below assume
    they do. MSR risk management derivative contracts appear under
    the category Interest Sensitive Financial
    Derivatives in the tables below.

71



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 has 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 good 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 options 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, 2005 |           
|                                         |  | Change in Interest Rates of:       |           
|                                         |  |                                    |           
|                                         |  | -2%                                |            |   | -1% |   |            | Current |  |   | +1%        |   |  | +2% |           
|                                         |  |                                    |            |   |     |   |            |         |  |   |            |   |  |     |           
|                                         |  | (In Thousands)                     |           
|Interest Sensitive Assets                |  |                                    |            |   |     |   |            |         |  |   |            |   |  |     |            |   |  |   |            |  
|Loans and other assets                   |  | $                                  | 4,769,630  |   |     | $ | 4,722,891  |         |  | $ | 4,670,904  |   |  | $   | 4,616,581  |   |  | $ | 4,562,997  |  
|Loans held for sale                      |  |                                    | 1,307,026  |   |     |   | 1,301,252  |         |  |   | 1,292,218  |   |  |     | 1,280,416  |   |  |   | 1,267,320  |  
|Mortgage servicing rights                |  |                                    | 150,273    |   |     |   | 243,628    |         |  |   | 327,717    |   |  |     | 391,707    |   |  |   | 429,837    |  
|Residual interests                       |  |                                    | 22,649     |   |     |   | 22,414     |         |  |   | 22,126     |   |  |     | 22,001     |   |  |   | 21,881     |  
|Interest sensitive financial derivatives |  |                                    | 45,765     |   |     |   | 23,695     |         |  |   | 782        |   |  |     | (27,784    | ) |  |   | (58,329    | )
|                                         |  |                                    |            |   |     |   |            |         |  |   |            |   |  |     |           
|Total interest sensitive assets          |  |                                    | 6,295,343  |   |     |   | 6,313,880  |         |  |   | 6,313,747  |   |  |     | 6,282,921  |   |  |   | 6,223,706  |  
|Interest Sensitive Liabilities           |  |                                    |            |   |     |   |            |         |  |   |            |   |  |     |            |   |  |   |            |  
|Deposits                                 |  |                                    | (3,858,753 | ) |     |   | (3,830,434 | )       |  |   | (3,809,352 | ) |  |     | (3,790,151 | ) |  |   | (3,773,538 | )
|Short-term
    borrowings(1)             |  |                                    | (1,189,210 | ) |     |   | (1,178,550 | )       |  |   | (1,173,039 | ) |  |     | (1,169,063 | ) |  |   | (1,165,394 | )
|Long-term debt                           |  |                                    | (740,091   | ) |     |   | (730,752   | )       |  |   | (719,463   | ) |  |     | (707,510   | ) |  |   | (691,866   | )
|                                         |  |                                    |            |   |     |   |            |         |  |   |            |   |  |     |           
|Total interest sensitive liabilities     |  |                                    | (5,788,054 | ) |     |   | (5,739,736 | )       |  |   | (5,701,854 | ) |  |     | (5,666,724 | ) |  |   | (5,630,798 | )
|Net market value as of December 31, 2005 |  | $                                  | 507,289    |   |     | $ | 574,144    |         |  | $ | 611,893    |   |  | $   | 616,197    |   |  | $ | 592,908    |  
|                                         |  |                                    |            |   |     |   |            |         |  |   |            |   |  |     |           
|Change from current                      |  | $                                  | (104,604   | ) |     | $ | (37,749    | )       |  | $ |           |   |  | $   | 4,304      |   |  | $ | (18,985    | )
|                                         |  |                                    |            |   |     |   |            |         |  |   |            |   |  |     |           
|Net market value as of December 31, 2004 |  | $                                  | 464,835    |   |     | $ | 495,091    |         |  | $ | 574,825    |   |  | $   | 581,006    |   |  | $ | 474,480    |  
|                                         |  |                                    |            |   |     |   |            |         |  |   |            |   |  |     |           
|Potential change                         |  | $                                  | (109,990   | ) |     | $ | (79,734    | )       |  | $ |           |   |  | $   | 6,181      |   |  | $ | (100,345   | )
|                                         |  |                                    |            |   |     |   |            |         |  |   |            |   |  |     |           






|    |                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------
|(1) | Includes certain debt which is categorized as
    collateralized debt in other sections of this
    document.

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GAAP-Based Value Change Method


|                                            |  |                                    |           |   |     |   |           |         |  |   |           |  |  |     |           |   |  |   |           |  
|------------------------------------------- |  | ---------------------------------- | --------- | - | --- | - | --------- | ------- |  | - | --------- |  |  | --- | --------- | - |  | - | --------- | -
|                                            |  | Present Value at December 31, 2005 |          
|                                            |  | Change in Interest Rates of:       |          
|                                            |  |                                    |          
|                                            |  | -2%                                |           |   | -1% |   |           | Current |  |   | +1%       |  |  | +2% |          
|                                            |  |                                    |           |   |     |   |           |         |  |   |           |  |  |     |          
|                                            |  | (In thousands)                     |          
|Interest Sensitive Assets                   |  |                                    |           |   |     |   |           |         |  |   |           |  |  |     |           |   |  |   |           |  
|Loans and other
    assets(1)               |  | $                                  |          |   |     | $ |          |         |  | $ |          |  |  | $   |          |   |  | $ |          |  
|Loans held for sale                         |  |                                    | 1,293,519 |   |     |   | 1,293,519 |         |  |   | 1,293,519 |  |  |     | 1,281,717 |   |  |   | 1,268,621 |  
|Mortgage servicing rights                   |  |                                    | 146,087   |   |     |   | 236,991   |         |  |   | 295,754   |  |  |     | 317,304   |   |  |   | 324,736   |  
|Residual interests                          |  |                                    | 22,639    |   |     |   | 22,404    |         |  |   | 22,116    |  |  |     | 21,991    |   |  |   | 21,871    |  
|Interest sensitive financial derivatives    |  |                                    | 45,773    |   |     |   | 23,699    |         |  |   | 782       |  |  |     | (27,787   | ) |  |   | (58,337   | )
|                                            |  |                                    |           |   |     |   |           |         |  |   |           |  |  |     |          
|Total interest sensitive assets             |  |                                    | 1,508,018 |   |     |   | 1,576,613 |         |  |   | 1,612,171 |  |  |     | 1,593,225 |   |  |   | 1,556,891 |  
|Interest Sensitive Liabilities              |  |                                    |           |   |     |   |           |         |  |   |           |  |  |     |           |   |  |   |           |  
|Deposits(1)                                 |  |                                    |          |   |     |   |          |         |  |   |          |  |  |     |          |   |  |   |          |  
|Short-term
    borrowings(1)                |  |                                    |          |   |     |   |          |         |  |   |          |  |  |     |          |   |  |   |          |  
|Long-term
    debt(1)                       |  |                                    |          |   |     |   |          |         |  |   |          |  |  |     |          |   |  |   |          |  
|                                            |  |                                    |           |   |     |   |           |         |  |   |           |  |  |     |          
|Total interest sensitive
    liabilities(1) |  |                                    |          |   |     |   |          |         |  |   |          |  |  |     |          |   |  |   |          |  
|Net market value as of December 31, 2005    |  | $                                  | 1,508,018 |   |     | $ | 1,576,613 |         |  | $ | 1,612,171 |  |  | $   | 1,593,225 |   |  | $ | 1,556,891 |  
|                                            |  |                                    |           |   |     |   |           |         |  |   |           |  |  |     |          
|Potential change                            |  | $                                  | (104,153  | ) |     | $ | (35,558   | )       |  | $ |          |  |  | $   | (18,946   | ) |  | $ | (55,280   | )
|                                            |  |                                    |           |   |     |   |           |         |  |   |           |  |  |     |          
|Net market value as of December 31, 2004    |  | $                                  | 1,177,394 |   |     | $ | 1,218,843 |         |  | $ | 1,314,396 |  |  | $   | 1,221,554 |   |  | $ | 1,060,818 |  
|                                            |  |                                    |           |   |     |   |           |         |  |   |           |  |  |     |          
|Potential change                            |  | $                                  | (137,002  | ) |     | $ | (95,553   | )       |  | $ |          |  |  | $   | (92,842   | ) |  | $ | (253,578  | )
|                                            |  |                                    |           |   |     |   |           |         |  |   |           |  |  |     |          






|    |                                            
|--- | -------------------------------------------
|(1) | Value does not change in GAAP presentation.

Operational risk.






73



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Sarbanes-Oxley








| |                              
| | -----------------------------
| | Off-Balance Sheet Instruments







| |                                 
| | --------------------------------
| | Derivative Financial Instruments








|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market
    Risk



74



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|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data



| |                                                                
| | ---------------------------------------------------------------
| | Management Report on Responsibility for Financial
    Reporting







|                                                                                    |  |                                                                                                     
|----------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------
|                                                                                   
|/s/ William I. MillerWilliam I. Miller
    Chairman and
    Chief Executive Officer |  | /s/ Gregory F. EhlingerGregory F. Ehlinger
    Senior Vice President and
    Chief Financial Officer

75



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM







Consolidated financial statements




Internal control over financial reporting


Internal Control  Integrated Framework Internal Control 
Integrated Framework












76



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IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


|                                                                                                      |                                                                                                                                                                                                                                          |                                            |           |           |           |   |           |           |           |  
|----------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | --------- | --------- | --------- | - | --------- | --------- | --------- | -
|                                                                                                      |                                                                                                                                                                                                                                          | December 31,                               |          
|                                                                                                      |                                                                                                                                                                                                                                          |                                            |          
|                                                                                                      |                                                                                                                                                                                                                                          | 2005                                       |           |           | 2004      |  
|                                                                                                      |                                                                                                                                                                                                                                          |                                            |           |           |           |  
|                                                                                                      |                                                                                                                                                                                                                                          | (Dollars in thousands)                     |          
|Assets:                                                                                               |                                                                                                                                                                                                                                          |                                            |           |           |           |   |           |          
|Cash and cash equivalents  Note 2                                                                    |                                                                                                                                                                                                                                          | $                                          | 155,486   |           |           | $ | 97,101    |          
|Interest-bearing deposits with financial institutions                                                 |                                                                                                                                                                                                                                          |                                            | 62,921    |           |           |   | 58,936    |          
|Residual interests  Note 3                                                                           |                                                                                                                                                                                                                                          |                                            | 22,116    |           |           |   | 56,101    |          
|Investment securities  held-to-maturity (Fair value:
    $4,460 in 2005 and $4,952 in 2004)  Note 4 |                                                                                                                                                                                                                                          |                                            | 4,475     |           |           |   | 4,942     |          
|Investment securities  available-for-sale 
    Note 4                                               |                                                                                                                                                                                                                                          |                                            | 100,296   |           |           |   | 103,280   |          
|Loans held for sale                                                                                   |                                                                                                                                                                                                                                          |                                            | 1,293,519 |           |           |   | 890,711   |          
|                                                                                                      | Loans and leases, net of unearned income  Note 5                                                                                                                                                                                        |                                            |           | 4,498,829 |           |   |           | 3,450,440 |          
|                                                                                                      | Less: Allowance for loan and lease losses  Note 6                                                                                                                                                                                       |                                            |           | (59,749   | )         |   |           | (44,443   | )        
|                                                                                                      |                                                                                                                                                                                                                                          |                                            |           |           |           |  
|                                                                                                      |                                                                                                                                                                                                                                          |                                            | 4,439,080 |           |           |   | 3,405,997 |          
|Servicing assets  Note 7                                                                             |                                                                                                                                                                                                                                          |                                            | 295,754   |           |           |   | 367,032   |          
|Accounts receivable                                                                                   |                                                                                                                                                                                                                                          |                                            | 111,633   |           |           |   | 122,131   |          
|Accrued interest receivable                                                                           |                                                                                                                                                                                                                                          |                                            | 23,935    |           |           |   | 15,428    |          
|Premises and equipment  Note 8                                                                       |                                                                                                                                                                                                                                          |                                            | 31,249    |           |           |   | 30,240    |          
|Other assets                                                                                          |                                                                                                                                                                                                                                          |                                            | 106,060   |           |           |   | 83,921    |          
|                                                                                                      |                                                                                                                                                                                                                                          |                                            |           |           |           |  
|                                                                                                      |                                                                                                                                                                                                                                          | Total assets                               |           | $         | 6,646,524 |   |           | $         | 5,235,820 |  
|                                                                                                      |                                                                                                                                                                                                                                          |                                            |           |           |           |  
|                                                                                                     
|Liabilities and Shareholders Equity:                                                                 |                                                                                                                                                                                                                                          |                                            |           |           |           |   |           |          
|Deposits                                                                                              |                                                                                                                                                                                                                                          |                                            |           |           |           |   |           |          
|                                                                                                      | Noninterest-bearing                                                                                                                                                                                                                      |                                            | $         | 754,778   |           |   | $         | 975,925   |          
|                                                                                                      | Interest-bearing                                                                                                                                                                                                                         |                                            |           | 1,921,369 |           |   |           | 1,774,727 |          
|                                                                                                      | Certificates of deposit over $100,000                                                                                                                                                                                                    |                                            |           | 1,222,846 |           |   |           | 644,611   |          
|                                                                                                      |                                                                                                                                                                                                                                          |                                            |           |           |           |  
|                                                                                                      |                                                                                                                                                                                                                                          |                                            | 3,898,993 |           |           |   | 3,395,263 |          
|Short-term borrowings  Note 10                                                                       |                                                                                                                                                                                                                                          |                                            | 997,444   |           |           |   | 237,277   |          
|Collateralized debt  Note 11                                                                         |                                                                                                                                                                                                                                          |                                            | 668,984   |           |           |   | 547,477   |          
|Other long-term debt  Note 12                                                                        |                                                                                                                                                                                                                                          |                                            | 270,160   |           |           |   | 270,172   |          
|Other liabilities                                                                                     |                                                                                                                                                                                                                                          |                                            | 298,609   |           |           |   | 284,446   |          
|                                                                                                      |                                                                                                                                                                                                                                          |                                            |           |           |           |  
|                                                                                                      |                                                                                                                                                                                                                                          | Total liabilities                          |           |           | 6,134,190 |   |           |           | 4,734,635 |  
|                                                                                                      |                                                                                                                                                                                                                                          |                                            |           |           |           |  
|Commitments and contingencies  Note 13,
    Note 14 and Note 15                                      |                                                                                                                                                                                                                                          |                                            |           |           |           |   |           |          
|Shareholders equity                                                                                  |                                                                                                                                                                                                                                          |                                            |           |           |           |   |           |          
|                                                                                                      | Preferred stock, no par value  authorized
    4,000,000 shares; none issued                                                                                                                                                             |                                            |           |          |           |   |           |          |          
|                                                                                                      | Common stock, no par value  authorized
    40,000,000 shares; issued 29,612,080 shares as of
    December 31, 2005 and 2004, including 993,643 and
    1,159,684, shares in treasury as of December 31, 2005 and
    2004, respectively |                                            |           | 112,000   |           |   |           | 112,000   |          
|                                                                                                      | Additional paid-in capital                                                                                                                                                                                                               |                                            |           | 0         |           |   |           | 383       |          
|                                                                                                      | Deferred compensation                                                                                                                                                                                                                    |                                            |           | (759      | )         |   |           | (660      | )        
|                                                                                                      | Accumulated other comprehensive income, net of deferred income
    tax liability of $71 and benefit of $129 as of December 31,
    2005 and 2004, respectively                                                                           |                                            |           | 3,448     |           |   |           | 2,454     |          
|                                                                                                      | Retained earnings                                                                                                                                                                                                                        |                                            |           | 418,784   |           |   |           | 412,027   |          
|                                                                                                      |                                                                                                                                                                                                                                          |                                            |           |           |           |  
|                                                                                                      |                                                                                                                                                                                                                                          |                                            | 533,473   |           |           |   | 526,204   |          
|                                                                                                      |                                                                                                                                                                                                                                          | Less treasury stock, at cost               |           |           | (21,139   | ) |           |           | (25,019   | )
|                                                                                                      |                                                                                                                                                                                                                                          |                                            |           |           |           |  
|                                                                                                      |                                                                                                                                                                                                                                          | Total shareholders equity                 |           |           | 512,334   |   |           |           | 501,185   |  
|                                                                                                      |                                                                                                                                                                                                                                          |                                            |           |           |           |  
|                                                                                                      |                                                                                                                                                                                                                                          | Total liabilities and shareholders equity |           | $         | 6,646,524 |   |           | $         | 5,235,820 |  
|                                                                                                      |                                                                                                                                                                                                                                          |                                            |           |           |           |  



77



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##### Table of Contents



IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF INCOME


|                                                              |                                |                                 |          |        |         |   |          |        |         |   |          |        |         | 
|------------------------------------------------------------- | ------------------------------ | ------------------------------- | -------- | ------ | ------- | - | -------- | ------ | ------- | - | -------- | ------ | ------- | 
|                                                              |                                | For the Year Ended December 31, |         
|                                                              |                                |                                 |         
|                                                              |                                | 2005                            |          |        | 2004    |   |          | 2003   |        
|                                                              |                                |                                 |          |        |         |   |          |        |        
|                                                              |                                | (Dollars in thousands,          |         
|                                                              |                                | except per share)               |         
|Interest income:                                              |                                |                                 |          |        |         |   |          |        |         |   |          |       
|Loans and leases                                              |                                | $                               | 312,970  |        |         | $ | 246,288  |        |         | $ | 241,592  |       
|Loans held for sale                                           |                                |                                 | 94,324   |        |         |   | 80,003   |        |         |   | 104,350  |       
|Residual interests                                            |                                |                                 | 6,948    |        |         |   | 12,509   |        |         |   | 20,651   |       
|Investment securities                                         |                                |                                 | 7,629    |        |         |   | 5,330    |        |         |   | 4,273    |       
|Federal funds sold                                            |                                |                                 | 387      |        |         |   | 173      |        |         |   | 118      |       
|                                                              |                                |                                 |          |        |         |   |          |        |        
|                                                              |                                | Total interest income           |          |        | 422,258 |   |          |        | 344,303 |   |          |        | 370,984 | 
|                                                              |                                |                                 |          |        |         |   |          |        |        
|Interest expense:                                             |                                |                                 |          |        |         |   |          |        |         |   |          |       
|Deposits                                                      |                                |                                 | 83,861   |        |         |   | 44,487   |        |         |   | 42,365   |       
|Short-term borrowings                                         |                                |                                 | 21,244   |        |         |   | 9,583    |        |         |   | 14,889   |       
|Collateralized debt                                           |                                |                                 | 25,587   |        |         |   | 15,259   |        |         |   | 15,369   |       
|Other long-term debt                                          |                                |                                 | 25,676   |        |         |   | 22,896   |        |         |   | 2,325    |       
|Preferred securities distribution                             |                                |                                 |         |        |         |   |         |        |         |   | 24,151   |       
|                                                              |                                |                                 |          |        |         |   |          |        |        
|                                                              |                                | Total interest expense          |          |        | 156,368 |   |          |        | 92,225  |   |          |        | 99,099  | 
|                                                              |                                |                                 |          |        |         |   |          |        |        
|Net interest income                                           |                                |                                 | 265,890  |        |         |   | 252,078  |        |         |   | 271,885  |       
|Provision for loan and lease losses  Note 6                  |                                |                                 | 26,852   |        |         |   | 14,195   |        |         |   | 47,583   |       
|                                                              |                                |                                 |          |        |         |   |          |        |        
|Net interest income after provision for loan and lease losses |                                |                                 | 239,038  |        |         |   | 237,883  |        |         |   | 224,302  |       
|Other income:                                                 |                                |                                 |          |        |         |   |          |        |         |   |          |       
|Loan servicing fees                                           |                                |                                 | 126,609  |        |         |   | 136,557  |        |         |   | 106,966  |       
|Amortization of servicing assets  Note 7                     |                                |                                 | (100,322 | )      |         |   | (117,143 | )      |         |   | (135,519 | )     
|Recovery (impairment) of servicing assets 
    Note 7        |                                |                                 | 19,625   |        |         |   | (2,474   | )      |         |   | 44,516   |       
|                                                              |                                |                                 |          |        |         |   |          |        |        
|                                                              | Net loan administration income |                                 |          | 45,912 |         |   |          | 16,940 |         |   |          | 15,963 |        
|Gain from sales of loans                                      |                                |                                 | 98,127   |        |         |   | 184,913  |        |         |   | 364,644  |       
|Gains (loss) on sale of mortgage servicing assets             |                                |                                 | 14,412   |        |         |   | 16,681   |        |         |   | (271     | )     
|Trading gains (loss)                                          |                                |                                 | 3,105    |        |         |   | 25,209   |        |         |   | (52,242  | )     
|Derivative (losses) gains, net                                |                                |                                 | (69,688  | )      |         |   | 16,643   |        |         |   | (44,142  | )     
|Other                                                         |                                |                                 | 28,618   |        |         |   | 23,143   |        |         |   | 22,191   |       
|                                                              |                                |                                 |          |        |         |   |          |        |        
|                                                              |                                |                                 | 120,486  |        |         |   | 283,529  |        |         |   | 306,143  |       
|Other expense:                                                |                                |                                 |          |        |         |   |          |        |         |   |          |       
|Salaries                                                      |                                |                                 | 167,490  |        |         |   | 213,826  |        |         |   | 225,348  |       
|Pension and other employee benefits                           |                                |                                 | 36,377   |        |         |   | 45,037   |        |         |   | 42,079   |       
|Office expense                                                |                                |                                 | 14,094   |        |         |   | 17,677   |        |         |   | 21,804   |       
|Premises and equipment                                        |                                |                                 | 35,330   |        |         |   | 41,558   |        |         |   | 41,746   |       
|Marketing and development                                     |                                |                                 | 8,196    |        |         |   | 13,799   |        |         |   | 15,132   |       
|Professional fees                                             |                                |                                 | 13,800   |        |         |   | 19,356   |        |         |   | 12,417   |       
|Other                                                         |                                |                                 | 56,268   |        |         |   | 55,982   |        |         |   | 53,517   |       
|                                                              |                                |                                 |          |        |         |   |          |        |        
|                                                              |                                |                                 | 331,555  |        |         |   | 407,235  |        |         |   | 412,043  |       
|                                                              |                                |                                 |          |        |         |   |          |        |        
|Income before income taxes                                    |                                |                                 | 27,969   |        |         |   | 114,177  |        |         |   | 118,402  |       
|Provision for income taxes                                    |                                |                                 | 8,982    |        |         |   | 45,732   |        |         |   | 45,585   |       
|                                                              |                                |                                 |          |        |         |   |          |        |        
|Net income                                                    |                                | $                               | 18,987   |        |         | $ | 68,445   |        |         | $ | 72,817   |       
|                                                              |                                |                                 |          |        |         |   |          |        |        
|Earnings per share:  Note 20                                 |                                |                                 |          |        |         |   |          |        |         |   |          |       
|                                                              | Basic                          |                                 | $        | 0.67   |         |   | $        | 2.42   |         |   | $        | 2.61   |        
|                                                              |                                |                                 |          |        |         |   |          |        |        
|                                                              | Diluted                        |                                 | $        | 0.66   |         |   | $        | 2.28   |         |   | $        | 2.45   |        
|                                                              |                                |                                 |          |        |         |   |          |        |        
|Dividends per share                                           |                                | $                               | 0.40     |        |         | $ | 0.32     |        |         | $ | 0.28     |       
|                                                              |                                |                                 |          |        |         |   |          |        |        



78



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##### Table of Contents



IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
EQUITY


|                                      |                                                                   |                            |                            |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |   |  | 
|------------------------------------- | ----------------------------------------------------------------- | -------------------------- | -------------------------- | -------- | -------- | -------------------------------------- | ------- | ---------- | - | --------- | ---------- | ----- | --------- | ----------- | ---- | ---- | --------- | - | ---------- | ------------ | - | ------- | ------- | --- | ------ | ----- | ---- | -------- | ----- | - | ----- | ------ | - | - | ------- |  |  | - | ------- | ------ | - |  | 
|                                      |                                                                   |                            |                            |          |          | Accumulated Other Comprehensive Income |         |            |   |           |            |       |           |             |     
|                                      |                                                                   |                            |                            |          |          |                                        |         |            |   |           |            |       |           |             |     
|                                      |                                                                   |                            |                            |          |          |                                        |         | Unrealized |   |           | Unrealized |       |           | Minimum     |      |      |           |   | Additional |              |   |         |         |    
|                                      |                                                                   |                            |                            | Retained |          |                                        | Foreign |            |   | Gain/Loss |            |       | Gain/Loss |             |      | SERP |           |   | Deferred   |              |   | Paid in |         |     | Common |       |      | Treasury |      
|                                      |                                                                   | Total                      |                            |          | Earnings |                                        |         | Currency   |   |           | Securities |       |           | Derivatives |      |      | Liability |   |            | Compensation |   |         | Capital |     |        | Stock |      |          | Stock |  
|                                      |                                                                   |                            |                            |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |  
|                                      |                                                                   | (Dollars in thousands)     |                           
|Balance at January 1, 2003            |                                                                   | $                          | 360,555                    |          |          | $                                      | 287,662 |            |   | $         | (331       | )     |           | $           | 1    |      |           | $ | (173       | )            |   | $       | (639    | )   |        | $     | (240 | )        |       | $ | 3,606 |        |   | $ | 112,000 |  |  | $ | (41,331 | )     
|                                      | Net income                                                        |                            |                            | 72,817   |          |                                        |         | 72,817     |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |  
|                                      | Unrealized gain on investment securities net of $17 tax benefit   |                            |                            | (25      | )        |                                        |         |            |   |           |            |       |           |             |      | (25  | )         |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |  
|                                      | Unrealized gain on interest rate cap net of $46 tax benefit       |                            |                            | (69      | )        |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            | (69          | ) |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |  
|                                      | Foreign currency adjustment                                       |                            |                            | 1,136    |          |                                        |         |            |   |           |            | 1,136 |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |  
|                                      | Minimum SERP liability net of $188 tax liability                  |                            |                            | 282      |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         | 282 |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |  
|                                      |                                                                   |                            |                            |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |  
|                                      |                                                                   |                            | Other comprehensive income |          |          | 1,324                                  |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |   |  | 
|                                      |                                                                   |                            |                            |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |  
|                                      |                                                                   | Total comprehensive income |                            |          | 74,141   |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |   | 
|Deferred compensation                 |                                                                   |                            | (264                       | )        |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       | (264 | )        |       |   |       |        |   |   |         |  |  |   |         |       
|Cash dividends                        |                                                                   |                            | (7,832                     | )        |          |                                        | (7,832  | )          |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |       
|Tax benefit on stock option exercises |                                                                   |                            | 2,032                      |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   | 2,032 |        |   |   |         |  |  |   |         |       
|Treasury stock:                       |                                                                   |                            |                            |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |       
|                                      | Purchase of 170,940 shares                                        |                            |                            | (4,201   | )        |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         | (4,201 | )
|                                      | Sales of 533,785 shares                                           |                            |                            | 7,829    |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       | (4,374 | ) |   |         |  |  |   |         | 12,203 |  
|                                      |                                                                   |                            |                            |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |  
|Balance at December 31, 2003          |                                                                   | $                          | 432,260                    |          |          | $                                      | 352,647 |            |   | $         | 805        |       |           | $           | (24  | )    |           | $ | (242       | )            |   | $       | (357    | )   |        | $     | (504 | )        |       | $ | 1,264 |        |   | $ | 112,000 |  |  | $ | (33,329 | )     
|                                      |                                                                   |                            |                            |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |  
|Net income                            |                                                                   |                            | 68,445                     |          |          |                                        | 68,445  |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |       
|                                      | Unrealized gain on investment securities net of $68 tax liability |                            |                            | 84       |          |                                        |         |            |   |           |            |       |           |             |      | 84   |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |  
|                                      | Unrealized gain on interest rate cap net of $149 tax liability    |                            |                            | 242      |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            | 242          |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |  
|                                      | Foreign currency adjustment                                       |                            |                            | 1,843    |          |                                        |         |            |   |           |            | 1,843 |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |  
|                                      | Minimum SERP liability net of $69 tax liability                   |                            |                            | 103      |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         | 103 |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |  
|                                      |                                                                   |                            |                            |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |  
|                                      |                                                                   |                            | Other comprehensive income |          |          | 2,272                                  |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |   |  | 
|                                      |                                                                   |                            |                            |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |  
|                                      |                                                                   | Total comprehensive income |                            |          | 70,717   |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |   | 
|Deferred compensation                 |                                                                   |                            | (156                       | )        |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       | (156 | )        |       |   |       |        |   |   |         |  |  |   |         |       
|Cash dividends                        |                                                                   |                            | (9,065                     | )        |          |                                        | (9,065  | )          |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |       
|Tax benefit on stock option exercises |                                                                   |                            | 1,044                      |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   | 1,044 |        |   |   |         |  |  |   |         |       
|Treasury stock:                       |                                                                   |                            |                            |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |       
|                                      | Purchase of 12,718 shares                                         |                            |                            | (407     | )        |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         | (407   | )
|                                      | Sales of 330,812 shares                                           |                            |                            | 6,792    |          |                                        |         |           |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       | (1,925 | ) |   |         |  |  |   |         | 8,717  |  
|                                      |                                                                   |                            |                            |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |  
|Balance at December 31, 2004          |                                                                   | $                          | 501,185                    |          |          | $                                      | 412,027 |            |   | $         | 2,648      |       |           | $           | 60   |      |           | $ |           |              |   | $       | (254    | )   |        | $     | (660 | )        |       | $ | 383   |        |   | $ | 112,000 |  |  | $ | (25,019 | )     
|                                      |                                                                   |                            |                            |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |  
|                                      | Net income                                                        |                            |                            | 18,987   |          |                                        |         | 18,987     |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |  
|                                      | Unrealized gain on investment securities net of $290 tax benefit  |                            |                            | (433     | )        |                                        |         |            |   |           |            |       |           |             |      | (433 | )         |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |  
|                                      | Unrealized gain on interest rate cap net of $503 tax liability    |                            |                            | 754      |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            | 754          |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |  
|                                      | Foreign currency adjustment                                       |                            |                            | 693      |          |                                        |         |            |   |           |            | 693   |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |  
|                                      | Minimum SERP liability net of $13 tax benefit                     |                            |                            | (20      | )        |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         | (20 | )      |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |  
|                                      |                                                                   |                            |                            |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |  
|                                      |                                                                   |                            | Other comprehensive income |          |          | 994                                    |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |   |  | 
|                                      |                                                                   |                            |                            |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |  
|                                      |                                                                   | Total comprehensive income |                            |          | 19,981   |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |        |   | 
|Deferred compensation                 |                                                                   |                            | (99                        | )        |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       | (99  | )        |       |   |       |        |   |   |         |  |  |   |         |       
|Cash dividends                        |                                                                   |                            | (11,426                    | )        |          |                                        | (11,426 | )          |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |       
|Tax benefit on stock option exercises |                                                                   |                            | 617                        |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   | 617   |        |   |   |         |  |  |   |         |       
|Treasury stock:                       |                                                                   |                            |                            |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         |       
|                                      | Purchase of 51,056 shares                                         |                            |                            | (1,201   | )        |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       |        |   |   |         |  |  |   |         | (1,201 | )
|                                      | Sales of 217,097 shares                                           |                            |                            | 3,277    |          |                                        |         | (804       | ) |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |   |       | (1,000 | ) |   |         |  |  |   |         | 5,081  |  
|                                      |                                                                   |                            |                            |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |  
|Balance at December 31, 2005          |                                                                   | $                          | 512,334                    |          |          | $                                      | 418,784 |            |   | $         | 3,341      |       |           | $           | (373 | )    |           | $ | 754        |              |   | $       | (274    | )   |        | $     | (759 | )        |       | $ |      |        |   | $ | 112,000 |  |  | $ | (21,139 | )     
|                                      |                                                                   |                            |                            |          |          |                                        |         |            |   |           |            |       |           |             |      |      |           |   |            |              |   |         |         |     |        |       |      |          |       |  



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IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                         |                                                                        |                                  |             |            |      |   |             |          |   |   |             |          |  
|---------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | -------------------------------- | ----------- | ---------- | ---- | - | ----------- | -------- | - | - | ----------- | -------- | -
|                                                                                         |                                                                        | For the Years Ended December 31, |            
|                                                                                         |                                                                        |                                  |            
|                                                                                         |                                                                        | 2005                             |             |            | 2004 |   |             | 2003     |  
|                                                                                         |                                                                        |                                  |             |            |      |   |             |          |  
|                                                                                         |                                                                        | (Dollars in thousands)           |            
|Net income                                                                               |                                                                        | $                                | 18,987      |            |      | $ | 68,445      |          |   | $ | 72,817      |         
|Adjustments to reconcile net income to cash provided (used)
    by operating activities: |                                                                        |                                  |             |            |      |   |             |          |   |   |             |         
|Depreciation, amortization, and accretion, net                                           |                                                                        |                                  | 11,602      |            |      |   | 8,987       |          |   |   | 9,433       |         
|Amortization and impairment of servicing assets                                          |                                                                        |                                  | 80,697      |            |      |   | 119,617     |          |   |   | 91,003      |         
|Provision for loan and lease losses                                                      |                                                                        |                                  | 26,852      |            |      |   | 14,195      |          |   |   | 47,583      |         
|Deferred income tax                                                                      |                                                                        |                                  | (23,789     | )          |      |   | 12,185      |          |   |   | 43,259      |         
|(Gain) loss on sale of mortgage servicing assets                                         |                                                                        |                                  | (14,412     | )          |      |   | (16,681     | )        |   |   | 271         |         
|Gain from sales of loans held for sale                                                   |                                                                        |                                  | (98,127     | )          |      |   | (184,913    | )        |   |   | (364,644    | )       
|Originations and purchases of loans held for sale                                        |                                                                        |                                  | (12,883,903 | )          |      |   | (14,780,501 | )        |   |   | (24,393,534 | )       
|Proceeds from sales and repayments of loans held for sale                                |                                                                        |                                  | 12,502,574  |            |      |   | 14,814,198  |          |   |   | 25,005,632  |         
|Proceeds from sale of mortgage servicing assets                                          |                                                                        |                                  | 79,724      |            |      |   | 52,844      |          |   |   | 89          |         
|Net decrease in residuals                                                                |                                                                        |                                  | 33,986      |            |      |   | 15,390      |          |   |   | 86,023      |         
|Net decrease (increase) in accounts receivable                                           |                                                                        |                                  | 10,246      |            |      |   | (60,086     | )        |   |   | (6,118      | )       
|Other, net                                                                               |                                                                        |                                  | 4,315       |            |      |   | (48,074     | )        |   |   | 5,097       |         
|                                                                                         |                                                                        |                                  |             |            |      |   |             |          |  
|                                                                                         | Net cash (used) provided by operating activities                       |                                  |             | (251,248   | )    |   |             | 15,606   |   |   |             | 596,911  |  
|                                                                                         |                                                                        |                                  |             |            |      |   |             |          |  
|Lending and investing activities:                                                        |                                                                        |                                  |             |            |      |   |             |          |   |   |             |         
|Proceeds from maturities of investment securities:                                       |                                                                        |                                  |             |            |      |   |             |          |   |   |             |         
|                                                                                         | Held-to-maturity                                                       |                                  |             | 461        |      |   |             | 118,063  |   |   |             | 682      |  
|                                                                                         | Available-for-sale                                                     |                                  |             | 5,801      |      |   |             | 1,583    |   |   |             | 78,886   |  
|Purchase of investment securities:                                                       |                                                                        |                                  |             |            |      |   |             |          |   |   |             |         
|                                                                                         | Held-to-maturity                                                       |                                  |             |           |      |   |             | (98,395  | ) |   |             | (21,333  | )
|                                                                                         | Available-for-sale                                                     |                                  |             | (3,599     | )    |   |             | (36,791  | ) |   |             | (82,868  | )
|Net (increase) decrease in interest-bearing deposits                                     |                                                                        |                                  | (3,985      | )          |      |   | 22,230      |          |   |   | (46,748     | )       
|Net increase in loans, excluding sales                                                   |                                                                        |                                  | (1,115,391  | )          |      |   | (367,303    | )        |   |   | (422,569    | )       
|Proceeds from sale of loans                                                              |                                                                        |                                  | 57,625      |            |      |   | 45,592      |          |   |   | 45,454      |         
|Other, net                                                                               |                                                                        |                                  | (8,331      | )          |      |   | (5,642      | )        |   |   | (7,484      | )       
|                                                                                         |                                                                        |                                  |             |            |      |   |             |          |  
|                                                                                         | Net cash used by lending and investing activities                      |                                  |             | (1,067,419 | )    |   |             | (320,663 | ) |   |             | (455,980 | )
|                                                                                         |                                                                        |                                  |             |            |      |   |             |          |  
|Financing activities:                                                                    |                                                                        |                                  |             |            |      |   |             |          |   |   |             |         
|Net increase in deposits                                                                 |                                                                        |                                  | 503,730     |            |      |   | 495,601     |          |   |   | 205,851     |         
|Net increase (decrease) in short-term borrowings                                         |                                                                        |                                  | 760,167     |            |      |   | (192,481    | )        |   |   | (563,366    | )       
|Repayments of long-term debt                                                             |                                                                        |                                  | (12         | )          |      |   | (12         | )        |   |   | (11         | )       
|Proceeds from issuance of collateralized debt                                            |                                                                        |                                  | 472,515     |            |      |   | 514,223     |          |   |   | 443,989     |         
|Repayments of collateralized debt                                                        |                                                                        |                                  | (351,049    | )          |      |   | (554,445    | )        |   |   | (242,327    | )       
|Proceeds from the issuance of trust preferred securities                                 |                                                                        |                                  | 51,750      |            |      |   |            |          |   |   | 50,000      |         
|Redemption of trust preferred securities                                                 |                                                                        |                                  | (51,750     | )          |      |   |            |          |   |   | (50,000     | )       
|Purchase of treasury stock for employee benefit plans                                    |                                                                        |                                  | (1,201      | )          |      |   | (407        | )        |   |   | (4,201      | )       
|Proceeds from sale of stock for employee benefit plans                                   |                                                                        |                                  | 3,277       |            |      |   | 7,836       |          |   |   | 9,777       |         
|Dividends paid                                                                           |                                                                        |                                  | (11,426     | )          |      |   | (9,065      | )        |   |   | (7,832      | )       
|                                                                                         |                                                                        |                                  |             |            |      |   |             |          |  
|                                                                                         | Net cash provided (used) by financing activities                       |                                  |             | 1,376,001  |      |   |             | 261,250  |   |   |             | (158,120 | )
|                                                                                         |                                                                        |                                  |             |            |      |   |             |          |  
|Effect of exchange rate changes on cash                                                  |                                                                        |                                  | 1,051       |            |      |   | 98          |          |   |   | 228         |         
|                                                                                         |                                                                        |                                  |             |            |      |   |             |          |  
|Net decrease in cash and cash equivalents                                                |                                                                        |                                  | 58,385      |            |      |   | (43,709     | )        |   |   | (16,961     | )       
|Cash and cash equivalents at beginning of period                                         |                                                                        |                                  | 97,101      |            |      |   | 140,810     |          |   |   | 157,771     |         
|                                                                                         |                                                                        |                                  |             |            |      |   |             |          |  
|Cash and cash equivalents at end of period                                               |                                                                        | $                                | 155,486     |            |      | $ | 97,101      |          |   | $ | 140,810     |         
|                                                                                         |                                                                        |                                  |             |            |      |   |             |          |  
|Supplemental disclosures of cash flow information:                                       |                                                                        |                                  |             |            |      |   |             |          |   |   |             |         
|Cash flow during the period:                                                             |                                                                        |                                  |             |            |      |   |             |          |   |   |             |         
|                                                                                         | Interest paid                                                          |                                  | $           | 146,005    |      |   | $           | 93,319   |   |   | $           | 102,459  |  
|                                                                                         |                                                                        |                                  |             |            |      |   |             |          |  
|                                                                                         | Income taxes paid                                                      |                                  | $           | 19,171     |      |   | $           | 15,184   |   |   | $           | 43,007   |  
|                                                                                         |                                                                        |                                  |             |            |      |   |             |          |  
|Noncash transactions:                                                                    |                                                                        |                                  |             |            |      |   |             |          |   |   |             |         
|                                                                                         | Liability for loans held for sale eligible for
    repurchase  Note 1 |                                  | $           | 19,581     |      |   | $           | 47,692   |   |   | $           | 115,948  |  
|                                                                                         |                                                                        |                                  |             |            |      |   |             |          |  
|                                                                                         | Other real estate owned                                                |                                  | $           | 16,236     |      |   | $           | 5,899    |   |   | $           | 4,828    |  
|                                                                                         |                                                                        |                                  |             |            |      |   |             |          |  
|                                                                                         | Conversion of trust preferred and preferred stock to common stock      |                                  | $           |           |      |   | $           |         |   |   | $           | 83       |  
|                                                                                         |                                                                        |                                  |             |            |      |   |             |          |  



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|         |                                           
|-------- | ------------------------------------------
|Note 1  | Summary of Significant Accounting Policies

Consolidation:


Use of Estimates:


Foreign Currency:


Investment Securities: held-to


Residual Interests: gain-on




Loans Held For Sale:


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Loans:


Direct Financing Leases:


Allowance for Loan and Lease Losses:






Servicing Assets:




82



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Incentive Servicing Fees:


Derivative Instruments:






Premises and Equipment:


Other Assets:


Income Taxes:


Cash and Cash Equivalents:


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Stock-Based Employee Compensation:


|                                                                                                                                                    |             |                        |        |      |      |   |        |      |  |   |        |      | 
|--------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ---------------------- | ------ | ---- | ---- | - | ------ | ---- |  | - | ------ | ---- | 
|                                                                                                                                                    |             | 2005                   |        |      | 2004 |   |        | 2003 | 
|                                                                                                                                                    |             |                        |        |      |      |   |        |      | 
|                                                                                                                                                    |             | (Dollars in thousands) |       
|Net income as reported                                                                                                                              |             | $                      | 18,987 |      |      | $ | 68,445 |      |  | $ | 72,817 |     
|Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards, net of
    related tax effects |             |                        | (2,907 | )    |      |   | (2,578 | )    |  |   | (2,683 | )   
|                                                                                                                                                    |             |                        |        |      |      |   |        |      | 
|Pro forma net income                                                                                                                                |             | $                      | 16,080 |      |      | $ | 65,867 |      |  | $ | 70,134 |     
|                                                                                                                                                    |             |                        |        |      |      |   |        |      | 
|Basic earnings per share                                                                                                                            |             |                        |        |      |      |   |        |      |  |   |        |     
|                                                                                                                                                    | As reported |                        | $      | 0.67 |      |   | $      | 2.42 |  |   | $      | 2.61 | 
|                                                                                                                                                    | Pro forma   |                        | $      | 0.56 |      |   | $      | 2.33 |  |   | $      | 2.51 | 
|Diluted earnings per share                                                                                                                          |             |                        |        |      |      |   |        |      |  |   |        |     
|                                                                                                                                                    | As reported |                        | $      | 0.66 |      |   | $      | 2.28 |  |   | $      | 2.45 | 
|                                                                                                                                                    | Pro forma   |                        | $      | 0.56 |      |   | $      | 2.19 |  |   | $      | 2.36 | 





Recent Accounting Developments:




|         |                                   
|-------- | ----------------------------------
|Note 2  | Restrictions on Cash and Dividends



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|         |                     
|-------- | --------------------
|Note 3  | Sales of Receivables



gain-on


85



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|                                                                    |  |                                       |        |  
|------------------------------------------------------------------- |  | ------------------------------------- | ------ | -
|                                                                    |  | Home Equity Loans and Lines of Credit |       
|                                                                    |  |                                       |       
|                                                                    |  | (Dollars in thousands)                |       
|Balance sheet carrying value of residual interests 
    fair value |  | $                                     | 15,580 |  
|Weighted-average life (in years)                                    |  |                                       | 0.33   |  
|Prepayment speed assumptions (annual rate)                          |  |                                       | 39.56  | %
|Impact on fair value of 10% adverse change                          |  | $                                     | (220   | )
|Impact on fair value of 25% adverse change                          |  |                                       | (180   | )
|Expected credit losses (annual rate)                                |  |                                       | 6.31   | %
|Impact on fair value of 10% adverse change                          |  | $                                     | (220   | )
|Impact on fair value of 25% adverse change                          |  |                                       | (560   | )
|Residual cash flows discount rate (annual rate)                     |  |                                       | 18.00  | %
|Impact on fair value of 10% adverse change                          |  | $                                     | (60    | )
|Impact on fair value of 25% adverse change                          |  |                                       | (160   | )



gain-on


|                                                     |       |                        |        |        |      |   |        |        |  |   |        |        | 
|---------------------------------------------------- | ----- | ---------------------- | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                                                     |       | December 31,           |       
|                                                     |       |                        |       
|                                                     |       | 2005                   |        |        | 2004 |   |        | 2003   | 
|                                                     |       |                        |        |        |      |   |        |        | 
|                                                     |       | (Dollars in thousands) |       
|Servicing fees received                              |       | $                      | 4,386  |        |      | $ | 5,763  |        |  | $ | 8,686  |       
|Net cash flows received on residual
    interests(1) |       |                        | 37,245 |        |      |   | 61,958 |        |  |   | 55,272 |       
|Other cash flows paid                                |       |                        | (9,640 | )      |      |   | (8,705 | )      |  |   | (1,878 | )     
|                                                     |       |                        |        |        |      |   |        |        | 
|                                                     | Total |                        | $      | 31,991 |      |   | $      | 59,016 |  |   | $      | 62,080 | 
|                                                     |       |                        |        |        |      |   |        |        | 






|    |                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Cash flows received on residual interests are net of
    $2.1 million in 2003 used to over-collateralize the trusts.
    There was no overcollateralization in 2004 or 2005.



|                                                          |  |                        |           |                        |                            |   |        |             |  |               |            |   |  |   |       | 
|--------------------------------------------------------- |  | ---------------------- | --------- | ---------------------- | -------------------------- | - | ------ | ----------- |  | ------------- | ---------- | - |  | - | ----- | 
|                                                          |  | Total Principal Amount |           |                        | Delinquent Principal Over  |   |        |             |  | Credit Losses |           
|                                                          |  | of Loans at            |           |                        | 30 Days for the Year Ended |   |        | Delinquency |  |               | on Managed |  
|                                                          |  | December 31, 2005      |           |                        | 12/31/2005(2)              |   |        | Percentage  |  |               | Portfolio  |  
|                                                          |  |                        |           |                        |                            |   |        |             |  |               |            |  
|                                                          |  |                        |           | (Dollars in thousands) |                            |   |       
|Managed loans comprised of:                               |  |                        |           |                        |                            |   |        |             |  |               |            |   |  |   |       | 
|Loans held for investment                                 |  | $                      | 978,782   |                        |                            | $ | 27,347 |             |  |               | 2.8        | % |  | $ | 3,588 | 
|Loans held for sale                                       |  |                        | 501,442   |                        |                            |   | 5,632  |             |  |               | 1.1        |   |  |   |      | 
|Loans securitized, servicing and residual
    retained(1) |  |                        | 113,285   |                        |                            |   | 15,410 |             |  |               | 13.6       |   |  |   | 4,733 | 
|                                                          |  |                        |           |                        |                            |   |        |             |  |               |            |  
|Total managed portfolio                                   |  | $                      | 1,593,509 |                        |                            | $ | 48,389 |             |  |               | 3.0        | % |  | $ | 8,321 | 
|                                                          |  |                        |           |                        |                            |   |        |             |  |               |            |  

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|    |                                              
|--- | ---------------------------------------------
|(1) | Represents the principal amount of the loans.
|   
|(2) | Nonaccrual loans included in delinquencies.  

Note 4  Investment Securities




|                                                 |                             |                        |        |         |            |  |       |            |  |  |       |      |   |          |        |         |  |  |        |         | 
|------------------------------------------------ | --------------------------- | ---------------------- | ------ | ------- | ---------- |  | ----- | ---------- |  |  | ----- | ---- | - | -------- | ------ | ------- |  |  | ------ | ------- | 
|                                                 |                             |                        |        | Gross   |            |  | Gross |            |  |  |       |     
|                                                 |                             | Amortized              |        |         | Unrealized |  |       | Unrealized |  |  | Fair  |      |   | Carrying |       
|                                                 |                             | Cost                   |        |         | Gains      |  |       | Losses     |  |  | Value |      |   | Value    |       
|                                                 |                             |                        |        |         |            |  |       |            |  |  |       |      |   |          |       
|                                                 |                             | (Dollars in thousands) |       
|Held-to-Maturity:                                |                             |                        |        |         |            |  |       |            |  |  |       |      |   |          |        |         |  |  |        |        
|Obligations of states and political subdivisions |                             |                        | 3,544  |         |            |  | 1     |            |  |  |      |      |   |          | 3,545  |         |  |  | 3,544  |        
|Mortgage-backed securities                       |                             |                        | 931    |         |            |  | 6     |            |  |  | (22   | )    |   |          | 915    |         |  |  | 931    |        
|                                                 |                             |                        |        |         |            |  |       |            |  |  |       |      |   |          |       
|                                                 | Total held-to-maturity      |                        |        | 4,475   |            |  |       | 7          |  |  |       | (22  | ) |          |        | 4,460   |  |  |        | 4,475   | 
|                                                 |                             |                        |        |         |            |  |       |            |  |  |       |      |   |          |       
|Available-for-Sale:                              |                             |                        |        |         |            |  |       |            |  |  |       |      |   |          |        |         |  |  |        |        
|Mortgage-backed securities                       |                             |                        | 27,924 |         |            |  |      |            |  |  | (524  | )    |   |          | 27,400 |         |  |  | 27,400 |        
|Other                                            |                             |                        | 72,995 |         |            |  |      |            |  |  | (99   | )    |   |          | 72,896 |         |  |  | 72,896 |        
|                                                 |                             |                        |        |         |            |  |       |            |  |  |       |      |   |          |       
|                                                 | Total available-for-sale    |                        |        | 100,919 |            |  |       |           |  |  |       | (623 | ) |          |        | 100,296 |  |  |        | 100,296 | 
|                                                 |                             |                        |        |         |            |  |       |            |  |  |       |      |   |          |       
|                                                 | Total investment securities |                        | $      | 105,394 |            |  | $     | 7          |  |  | $     | (645 | ) |          | $      | 104,756 |  |  | $      | 104,771 | 
|                                                 |                             |                        |        |         |            |  |       |            |  |  |       |      |   |          |       



|                                                 |                             |                        |        |         |            |   |       |            |  |   |       |     |   |          |        |         |  |   |        |         | 
|------------------------------------------------ | --------------------------- | ---------------------- | ------ | ------- | ---------- | - | ----- | ---------- |  | - | ----- | --- | - | -------- | ------ | ------- |  | - | ------ | ------- | 
|                                                 |                             |                        |        | Gross   |            |   | Gross |            |  |   |       |    
|                                                 |                             | Amortized              |        |         | Unrealized |   |       | Unrealized |  |   | Fair  |     |   | Carrying |       
|                                                 |                             | Cost                   |        |         | Gains      |   |       | Losses     |  |   | Value |     |   | Value    |       
|                                                 |                             |                        |        |         |            |   |       |            |  |   |       |     |   |          |       
|                                                 |                             | (Dollars in thousands) |       
|Held-to-Maturity:                                |                             |                        |        |         |            |   |       |            |  |   |       |     |   |          |        |         |  |   |        |        
|U.S. Treasury and government obligations         |                             | $                      | 161    |         |            | $ |      |            |  | $ | (1    | )   |   | $        | 160    |         |  | $ | 161    |        
|Obligations of states and political subdivisions |                             |                        | 3,746  |         |            |   | 4     |            |  |   |      |     |   |          | 3,750  |         |  |   | 3,746  |        
|Mortgage-backed securities                       |                             |                        | 1,035  |         |            |   | 7     |            |  |   |      |     |   |          | 1,042  |         |  |   | 1,035  |        
|                                                 |                             |                        |        |         |            |   |       |            |  |   |       |     |   |          |       
|                                                 | Total held-to-maturity      |                        |        | 4,942   |            |   |       | 11         |  |   |       | (1  | ) |          |        | 4,952   |  |   |        | 4,942   | 
|                                                 |                             |                        |        |         |            |   |       |            |  |   |       |     |   |          |       
|Available-for-Sale:                              |                             |                        |        |         |            |   |       |            |  |   |       |     |   |          |        |         |  |   |        |        
|U.S. Treasury and government obligations         |                             |                        | 3,330  |         |            |   | 65    |            |  |   |      |     |   |          | 3,395  |         |  |   | 3,395  |        
|Mortgage-backed securities                       |                             |                        | 30,453 |         |            |   | 68    |            |  |   |      |     |   |          | 30,521 |         |  |   | 30,521 |        
|Other                                            |                             |                        | 69,396 |         |            |   |      |            |  |   | (32   | )   |   |          | 69,364 |         |  |   | 69,364 |        
|                                                 |                             |                        |        |         |            |   |       |            |  |   |       |     |   |          |       
|                                                 | Total available-for-sale    |                        |        | 103,179 |            |   |       | 133        |  |   |       | (32 | ) |          |        | 103,280 |  |   |        | 103,280 | 
|                                                 |                             |                        |        |         |            |   |       |            |  |   |       |     |   |          |       
|                                                 | Total investment securities |                        | $      | 108,121 |            |   | $     | 144        |  |   | $     | (33 | ) |          | $      | 108,232 |  |   | $      | 108,222 | 
|                                                 |                             |                        |        |         |            |   |       |            |  |   |       |     |   |          |       



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|                           |                                         |                                   |        |        |                   |   |      |       |       |   |            |       |  |       |     |      |            |   |        |        |  |   |      |      |  
|-------------------------- | --------------------------------------- | --------------------------------- | ------ | ------ | ----------------- | - | ---- | ----- | ----- | - | ---------- | ----- |  | ----- | --- | ---- | ---------- | - | ------ | ------ |  | - | ---- | ---- | -
|                           |                                         | Securities with Unrealized Losses |       
|                           |                                         |                                   |       
|                           |                                         | Less than 12 Months               |        |        | 12 Months or More |   |      | Total |      
|                           |                                         |                                   |        |        |                   |   |      |       |      
|                           |                                         |                                   |        | Gross  |                   |   |      |       | Gross |   |            |       |  | Gross |    
|                           |                                         | Fair                              |        |        | Unrealized        |   |      | Fair  |       |   | Unrealized |       |  | Fair  |     |      | Unrealized |  
|                           |                                         | Value                             |        |        | Losses            |   |      | Value |       |   | Losses     |       |  | Value |     |      | Losses     |  
|                           |                                         |                                   |        |        |                   |   |      |       |       |   |            |       |  |       |     |      |            |  
|                           |                                         | (Dollars in thousands)            |       
|Mortgage backed securities |                                         | $                                 | 24,720 |        |                   | $ | (442 | )     |       | $ | 2,680      |       |  | $     | (82 | )    |            | $ | 27,400 |        |  | $ | (524 | )   
|Other securities           |                                         |                                   | 1,050  |        |                   |   | (35  | )     |       |   | 2,149      |       |  |       | (64 | )    |            |   | 3,199  |        |  |   | (99  | )   
|                           |                                         |                                   |        |        |                   |   |      |       |       |   |            |       |  |       |     |      |            |  
|                           | Total securities with unrealized losses |                                   | $      | 25,770 |                   |   | $    | (477  | )     |   | $          | 4,829 |  |       | $   | (146 | )          |   | $      | 30,599 |  |   | $    | (623 | )
|                           |                                         |                                   |        |        |                   |   |      |       |       |   |            |       |  |       |     |      |            |  









|                                  |                                        |                        |         |         |       |  |         |         | 
|--------------------------------- | -------------------------------------- | ---------------------- | ------- | ------- | ----- |  | ------- | ------- | 
|                                  |                                        | Amortized              |         |         | Fair  | 
|                                  |                                        | Cost                   |         |         | Value | 
|                                  |                                        |                        |         |         |       | 
|                                  |                                        | (Dollars in thousands) |        
|Held-to-Maturity:                 |                                        |                        |         |         |       |  |         |        
|                                  | Due after five years through ten years |                        | $       | 530     |       |  | $       | 531     | 
|                                  | Due after ten years                    |                        |         | 3,014   |       |  |         | 3,014   | 
|                                  |                                        |                        |         |         |       | 
|                                  |                                        |                        | 3,544   |         |       |  | 3,545   |        
|Mortgage-backed securities        |                                        |                        | 931     |         |       |  | 915     |        
|                                  |                                        |                        |         |         |       | 
|                                  |                                        |                        | 4,475   |         |       |  | 4,460   |        
|                                  |                                        |                        |         |         |       | 
|Available-for-Sale:               |                                        |                        |         |         |       |  |         |        
|                                  | Due in one year or less                |                        |         | 3,298   |       |  |         | 3,199   | 
|Mortgage-backed securities        |                                        |                        | 27,924  |         |       |  | 27,400  |        
|FHLB & Federal Reserve Bank stock |                                        |                        | 69,697  |         |       |  | 69,697  |        
|                                  |                                        |                        |         |         |       | 
|                                  |                                        |                        | 100,919 |         |       |  | 100,296 |        
|                                  |                                        |                        |         |         |       | 
|                                  | Total investment securities            |                        | $       | 105,394 |       |  | $       | 104,756 | 
|                                  |                                        |                        |         |         |       | 

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Note 5  Loans and Leases




|                                       |       |                        |           |           |          |   |           |           |         |  
|-------------------------------------- | ----- | ---------------------- | --------- | --------- | -------- | - | --------- | --------- | ------- | -
|                                       |       | December 31,           |          
|                                       |       |                        |          
|                                       |       | 2005                   |           |           | 2004     |  
|                                       |       |                        |           |           |          |  
|                                       |       | (Dollars in thousands) |          
|Commercial, financial and agricultural |       | $                      | 2,016,253 |           |          | $ | 1,697,651 |          
|Real estate-construction               |       |                        | 399,089   |           |          |   | 287,496   |          
|Real estate-mortgage                   |       |                        | 1,234,561 |           |          |   | 808,875   |          
|Consumer                               |       |                        | 31,718    |           |          |   | 31,166    |          
|Commercial financing                   |       |                        |           |           |          |   |           |          
|                                       |       | Franchise financing    |           |           | 462,413  |   |           |           | 330,496 |  
|                                       |       | Domestic leasing       |           |           | 237,968  |   |           |           | 174,035 |  
|                                       |       | Canadian leasing       |           |           | 313,581  |   |           |           | 265,780 |  
|Unearned income                        |       |                        |           |           |          |   |           |          
|                                       |       | Franchise financing    |           |           | (125,474 | ) |           |           | (86,638 | )
|                                       |       | Domestic leasing       |           |           | (33,267  | ) |           |           | (23,924 | )
|                                       |       | Canadian leasing       |           |           | (38,013  | ) |           |           | (34,497 | )
|                                       |       |                        |           |           |          |  
|                                       | Total |                        | $         | 4,498,829 |          |   | $         | 3,450,440 |        
|                                       |       |                        |           |           |          |  









loan-to loan-to loan-to


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|                                  |                          |                        |         |         |      |   |         |         | 
|--------------------------------- | ------------------------ | ---------------------- | ------- | ------- | ---- | - | ------- | ------- | 
|                                  |                          | December 31,           |        
|                                  |                          |                        |        
|                                  |                          | 2005                   |         |         | 2004 |  
|                                  |                          |                        |         |         |      |  
|                                  |                          | (Dollars in thousands) |        
|Minimum lease payments receivable |                          | $                      | 551,549 |         |      | $ | 439,815 |        
|Less unearned income              |                          |                        | (71,280 | )       |      |   | (58,421 | )      
|Less allowance for lease losses   |                          |                        | (6,638  | )       |      |   | (5,896  | )      
|                                  |                          |                        |         |         |      |  
|                                  | Net investment in leases |                        | $       | 473,631 |      |   | $       | 375,498 | 
|                                  |                          |                        |         |         |      |  

Note 6  Allowance for Loan and Lease Losses
and Nonperforming Loans and Leases




|                                                    |  |                        |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                    |  | December 31,           |        
|                                                    |  |                        |        
|                                                    |  | 2005                   |         |   | 2004 |   |         | 2003 | 
|                                                    |  |                        |         |   |      |   |         |      | 
|                                                    |  | (Dollars in thousands) |        
|Balance at beginning of year                        |  | $                      | 44,443  |   |      | $ | 64,285  |      |  | $ | 50,936  |  
|Provision for loan and lease losses                 |  |                        | 26,852  |   |      |   | 14,195  |      |  |   | 47,583  |  
|Charge-offs                                         |  |                        | (20,201 | ) |      |   | (28,180 | )    |  |   | (37,312 | )
|Recoveries                                          |  |                        | 8,960   |   |      |   | 5,335   |      |  |   | 3,420   |  
|Reduction due to sale of loans and leases and other |  |                        |        |   |      |   | (627    | )    |  |   | (234    | )
|Reduction due to reclassification of loans          |  |                        | (424    | ) |      |   | (10,808 | )    |  |   | (690    | )
|Foreign currency adjustment                         |  |                        | 119     |   |      |   | 243     |      |  |   | 582     |  
|                                                    |  |                        |         |   |      |   |         |      | 
|Balance at end of period                            |  | $                      | 59,749  |   |      | $ | 44,443  |      |  | $ | 64,285  |  
|                                                    |  |                        |         |   |      |   |         |      | 





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|                                         |                      |                        |        |        |      |   |        |        | 
|---------------------------------------- | -------------------- | ---------------------- | ------ | ------ | ---- | - | ------ | ------ | 
|                                         |                      | December 31,           |       
|                                         |                      |                        |       
|                                         |                      | 2005                   |        |        | 2004 |  
|                                         |                      |                        |        |        |      |  
|                                         |                      | (Dollars in thousands) |       
|Impaired loans with valuation reserve    |                      | $                      | 14,714 |        |      | $ | 9,623  |       
|Impaired loans with no valuation reserve |                      |                        | 4,300  |        |      |   | 10,771 |       
|                                         |                      |                        |        |        |      |  
|                                         | Total impaired loans |                        | $      | 19,014 |      |   | $      | 20,394 | 
|                                         |                      |                        |        |        |      |  
|Valuation reserve on impaired loans      |                      | $                      | 3,684  |        |      | $ | 4,584  |       
|                                         |                      |                        |        |        |      |  





|                                        |                                      |                        |        |        |      |   |        |        | 
|--------------------------------------- | ------------------------------------ | ---------------------- | ------ | ------ | ---- | - | ------ | ------ | 
|                                        |                                      | December 31,           |       
|                                        |                                      |                        |       
|                                        |                                      | 2005                   |        |        | 2004 |  
|                                        |                                      |                        |        |        |      |  
|                                        |                                      | (Dollars in thousands) |       
|Accruing loans past due 90 days or more |                                      | $                      | 599    |        |      | $ | 657    |       
|Nonaccrual loans and leases             |                                      |                        | 36,820 |        |      |   | 33,036 |       
|                                        |                                      |                        |        |        |      |  
|                                        | Total nonperforming loans and leases |                        | $      | 37,419 |      |   | $      | 33,693 | 
|                                        |                                      |                        |        |        |      |  

Note 7  Servicing Assets




|                                            |  |                        |          |   |      |   |          |  
|------------------------------------------- |  | ---------------------- | -------- | - | ---- | - | -------- | -
|                                            |  | December 31,           |         
|                                            |  |                        |         
|                                            |  | 2005                   |          |   | 2004 |  
|                                            |  |                        |          |   |      |  
|                                            |  | (Dollars in thousands) |         
|Beginning balance                           |  | $                      | 367,032  |   |      | $ | 380,123  |  
|Additions                                   |  |                        | 74,731   |   |      |   | 142,689  |  
|Amortization                                |  |                        | (100,322 | ) |      |   | (117,143 | )
|Recovery of (impairment of) servicing asset |  |                        | 19,625   |   |      |   | (2,474   | )
|Reduction for servicing sales               |  |                        | (65,312  | ) |      |   | (36,163  | )
|                                            |  |                        |          |   |      |  
|                                            |  | $                      | 295,754  |   |      | $ | 367,032  |  
|                                            |  |                        |          |   |      |  

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|                                                 |  |                        |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------ |  | ---------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                 |  | December 31,           |        
|                                                 |  |                        |        
|                                                 |  | 2005                   |         |   | 2004 |   |         | 2003 | 
|                                                 |  |                        |         |   |      |   |         |      | 
|                                                 |  | (Dollars in thousands) |        
|Balance at beginning of year                     |  | $                      | 54,134  |   |      | $ | 76,869  |      |  | $ | 159,865 |  
|(Recovery) impairment of servicing asset         |  |                        | (19,625 | ) |      |   | 2,474   |      |  |   | (44,516 | )
|Reclass for sales of servicing and cleanup calls |  |                        | (154    | ) |      |   | (18,210 | )    |  |   |        |  
|Other than temporary
    impairment(1)           |  |                        | (7,112  | ) |      |   | (6,999  | )    |  |   | (38,480 | )
|                                                 |  |                        |         |   |      |   |         |      | 
|Balance at end of year                           |  | $                      | 27,243  |   |      | $ | 54,134  |      |  | $ | 76,869  |  
|                                                 |  |                        |         |   |      |   |         |      | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.



|                                             |  |   |         |  
|-------------------------------------------- |  | - | ------- | -
|Carrying amount of mortgage servicing assets |  | $ | 295,754 |  
|Constant prepayment speed                    |  |   | 12.87   | %
|Impact on fair value of 10% adverse change   |  | $ | (7,129  | )
|Impact on fair value of 20% adverse change   |  |   | (13,451 | )
|Discount rate                                |  |   | 10.34   | %
|Impact on fair value of 10% adverse change   |  | $ | (4,583  | )
|Impact on fair value of 20% adverse change   |  |   | (8,875  | )





|                  |                         |      |  |             |      |  |  |             |  
|----------------- | ----------------------- | ---- |  | ----------- | ---- |  |  | ----------- | -
|                  |                         | 2005 |  |             | 2004 | 
|                  |                         |      |  |             |      | 
|Prepayment rates: |                         |      |  |             |      |  |  |            
|                  | Mortgage
    banking(1) |      |  | 8.51- 16.31 | %    |  |  | 5.10- 11.12 | %
|                  | Home equity lending     |      |  | 30.10-31.32 |      |  |  | 16.59-46.67 |  
|                  | Commercial banking      |      |  | 8.51-16.31  |      |  |  | 5.10-11.12  |  
|Discount rates:   |                         |      |  |             |      |  |  |            
|                  | Mortgage
    banking(1) |      |  | 9.00- 14.00 | %    |  |  | 8.50- 14.00 | %
|                  | Home equity lending     |      |  | 12.00       |      |  |  | 12.00       |  
|                  | Commercial banking      |      |  | 9.00-14.00  |      |  |  | 8.50-14.00  |  






|    |                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------
|(1) | The mortgage banking component of consolidated servicing assets
    was 88% and 87% at December 31, 2005 and 2004, respectively.

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Note 8  Premises and Equipment




|                                    |       |                        |         |        |      |   |         |              |  |  |            |  | 
|----------------------------------- | ----- | ---------------------- | ------- | ------ | ---- | - | ------- | ------------ |  |  | ---------- |  | 
|                                    |       | December 31,           |        
|                                    |       |                        |        
|                                    |       | 2005                   |         |        | 2004 |   |         | Useful Lives | 
|                                    |       |                        |         |        |      |   |         |              | 
|                                    |       | (Dollars in thousands) |        
|Land                                |       | $                      | 2,630   |        |      | $ | 2,630   |              |  |  | n/a        | 
|Building and leasehold improvements |       |                        | 26,389  |        |      |   | 24,975  |              |  |  | 7-40 years | 
|Furniture and equipment             |       |                        | 51,295  |        |      |   | 53,659  |              |  |  | 3-10 years | 
|                                    |       |                        |         |        |      |   |         |              | 
|                                    |       |                        | 80,314  |        |      |   | 81,264  |              |  |  |            | 
|Less accumulated depreciation       |       |                        | (49,065 | )      |      |   | (51,024 | )            |  |  |            | 
|                                    |       |                        |         |        |      |   |         |              | 
|                                    | Total |                        | $       | 31,249 |      |   | $       | 30,240       |  |  |            |  | 
|                                    |       |                        |         |        |      |   |         |              | 



Note 9  Lease Obligations






|                        |            |                               |   |        |        | 
|----------------------- | ---------- | ----------------------------- | - | ------ | ------ | 
|                        |            | (Dollars in thousands)        |  
|Year Ended December 31, |            |                               |   |       
|                        | 2006       |                               | $ | 15,996 |       
|                        | 2007       |                               |   | 13,875 |       
|                        | 2008       |                               |   | 12,435 |       
|                        | 2009       |                               |   | 10,514 |       
|                        | 2010       |                               |   | 9,293  |       
|                        | Thereafter |                               |   | 13,421 |       
|                        |            |                               |  
|                        |            | Total minimum rental payments |   | $      | 75,534 | 
|                        |            |                               |  

Note 10  Short-Term Borrowings




|                                                 |  |                        |         |   |      |   |         |  
|------------------------------------------------ |  | ---------------------- | ------- | - | ---- | - | ------- | -
|                                                 |  | December 31,           |        
|                                                 |  |                        |        
|                                                 |  | 2005                   |         |   | 2004 |  
|                                                 |  |                        |         |   |      |  
|                                                 |  | (Dollars in thousands) |        
|Federal Home Loan Bank borrowings                |  | $                      | 641,785 |   |      | $ | 71,826  |  
|Drafts payable related to mortgage loan closings |  |                        | 64,278  |   |      |   | 53,254  |  
|Lines of credit and other                        |  |                        | 1,081   |   |      |   | 2,197   |  
|Federal funds                                    |  |                        | 290,300 |   |      |   | 110,000 |  
|                                                 |  |                        |         |   |      |  
|Total                                            |  | $                      | 997,444 |   |      | $ | 237,277 |  
|                                                 |  |                        |         |   |      |  
|Weighted average interest rate                   |  |                        | 3.05    | % |      |   | 1.64    | %



93



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Note 11  Collateralized Debt






|                                    |                                |                        |        |                  |              |  |              |      |  |   |        |         |         |   |        |         |         | 
|----------------------------------- | ------------------------------ | ---------------------- | ------ | ---------------- | ------------ |  | ------------ | ---- |  | - | ------ | ------- | ------- | - | ------ | ------- | ------- | 
|                                    |                                |                        |        | Interest Rate at |              |  | December 31, |     
|                                    |                                | Contractual            |        |                  | December 31, |  |              |      | 
|                                    |                                | Maturity               |        |                  | 2005         |  |              | 2005 |  |   | 2004   |        
|                                    |                                |                        |        |                  |              |  |              |      |  |   |        |        
|                                    |                                | (Dollars in thousands) |       
|Commercial finance line of business |                                |                        |        |                  |              |  |              |      |  |   |        |         |         |   |        |        
|Domestic asset backed note          |                                |                        | 5/2010 |                  |              |  | 4.5          | %    |  | $ | 13,600 |         |         | $ | 29,050 |        
|Canadian asset backed notes:        |                                |                        |        |                  |              |  |              |      |  |   |        |         |         |   |        |        
|                                    | Note 1                         |                        |        | revolving        |              |  |              | 3.7  |  |   |        | 32,385  |         |   |        | 48,801  |        
|                                    | Note 2                         |                        |        | 4/2010           |              |  |              | 3.4  |  |   |        | 155,544 |         |   |        | 95,288  |        
|                                    | Note 3                         |                        |        | 10/2009          |              |  |              | 4.5  |  |   |        | 14,839  |         |   |        | 21,713  |        
|Home equity line of business        |                                |                        |        |                  |              |  |              |      |  |   |        |         |         |   |        |        
|2004-1 asset backed notes:          |                                |                        |        |                  |              |  |              |      |  |   |        |         |         |   |        |        
|                                    | Variable rate senior note      |                        |        | 12/2024-12/2034  |              |  |              | 4.5  |  |   |        | 132,692 |         |   |        | 327,850 |        
|                                    | Variable rate subordinate note |                        |        | 12/2034          |              |  |              | 5.4  |  |   |        | 24,775  |         |   |        | 24,775  |        
|2005-1 asset backed notes:          |                                |                        |        |                  |              |  |              |      |  |   |        |         |         |   |        |        
|                                    | Variable rate senior note      |                        |        | 6/2025-6/2035    |              |  |              | 4.4  |  |   |        | 138,244 |         |   |        |        |        
|                                    | Fixed rate senior note         |                        |        | 6/2035           |              |  |              | 5.0  |  |   |        | 94,129  |         |   |        |        |        
|                                    | Variable rate subordinate note |                        |        | 6/2035           |              |  |              | 6.0  |  |   |        | 10,785  |         |   |        |        |        
|                                    | Fixed rate subordinate note    |                        |        | 6/2035           |              |  |              | 5.6  |  |   |        | 52,127  |         |   |        |        |        
|Unamortized premium/discount        |                                |                        |        |                  |              |  |              |      |  |   | (136   | )       |         |   |       |        
|                                    |                                |                        |        |                  |              |  |              |      |  |   |        |        
|                                    |                                | Total                  |        |                  |              |  |              |      |  |   |        | $       | 668,984 |   |        | $       | 547,477 | 
|                                    |                                |                        |        |                  |              |  |              |      |  |   |        |        



94



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Note 12  Other Long-Term Debt




|                        |  |                        |          |                  |              |  |       |                   |              |  |          |  |  |      |         |  |       |   |         |  |  |                                                                                         |  | 
|----------------------- |  | ---------------------- | -------- | ---------------- | ------------ |  | ----- | ----------------- | ------------ |  | -------- |  |  | ---- | ------- |  | ----- | - | ------- |  |  | --------------------------------------------------------------------------------------- |  | 
|                        |  |                        |          |                  |              |  |       | Subordinated Debt |              |  |         
|                        |  |                        |          | Interest Rate at |              |  |       |                   | December 31, |  |          | 
|                        |  | Origination            |          |                  | December 31, |  |       | Maturity          |              |  |          |  |  |     
|Name                    |  | Date                   |          |                  | 2005         |  |       | Date              |              |  | 2005     |  |  | 2004 |         |  | Other |  
|                        |  |                        |          |                  |              |  |       |                   |              |  |          |  |  |      |         |  |       |  
|                        |  | (Dollars in thousands) |         
|Capital Trust II        |  |                        | Nov 2000 |                  |              |  | 10.50 | %                 |              |  | Sep 2030 |  |  | $    |        |  |       | $ | 53,351  |  |  |                                                                                         |  | 
|IFC Capital Trust III   |  |                        | Nov 2000 |                  |              |  | 8.75  |                   |              |  | Sep 2030 |  |  |      | 53,268  |  |       |   | 53,268  |  |  | conversion ratio of 1.261 shares of common stock to 1 convertible preferred security   
|IFC Capital Trust IV    |  |                        | Jul 2001 |                  |              |  | 10.25 |                   |              |  | Jul 2031 |  |  |      | 15,464  |  |       |   | 15,464  |  |  |                                                                                         |  | 
|IFC Capital Trust V     |  |                        | Nov 2001 |                  |              |  | 9.95  |                   |              |  | Nov 2031 |  |  |      | 30,928  |  |       |   | 30,928  |  |  |                                                                                         |  | 
|IFC Capital Trust VI    |  |                        | Oct 2002 |                  |              |  | 8.70  |                   |              |  | Sep 2032 |  |  |      | 35,567  |  |       |   | 35,567  |  |  |                                                                                         |  | 
|IFC Statutory Trust VII |  |                        | Nov 2003 |                  |              |  | 7.43  |                   |              |  | Nov 2033 |  |  |      | 51,547  |  |       |   | 51,547  |  |  | rate changes quarterly at three month LIBOR plus 290 basis points                      
|IFC Capital Trust VIII  |  |                        | Aug 2005 |                  |              |  | 5.96  |                   |              |  | Aug 2035 |  |  |      | 53,351  |  |       |   |        |  |  | fixed rate for 5 years, variable rate of 3 month LIBOR plus 153 basis points thereafter
|                        |  |                        |          |                  |              |  |       |                   |              |  |          |  |  |      |         |  |       |  
|                        |  |                        |          |                  |              |  |       |                   |              |  |          |  |  | $    | 240,125 |  |       | $ | 240,125 |  |  |                                                                                         |  | 
|                        |  |                        |          |                  |              |  |       |                   |              |  |          |  |  |      |         |  |       |  

Note 13  Commitments and Contingencies


Culpepper v. Inland Mortgage Corporation






95



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| |                                    
| | -----------------------------------
| | 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 Hobson


Kossler v. Community Bank of Northern Virginia Kossler


96



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##### Table of Contents



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




| |                                        
| | ---------------------------------------
| | Litigation Related to NorVergence, Inc.



Exquisite Caterers, LLC
et al. v. Popular Leasing et al.


97



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##### Table of Contents



Exquisite Caterers Truth-in Exquisite Caterers Exquisite Caterers


Delanco Board of Education
et al. v. IFC Credit Corporation Exquisite Caterers


Sterling Asset & Equity Corp.
et al. v. Preferred Capital, Inc. et al.




(State of


98



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##### Table of Contents



Florida v. Commerce Commercial Leasing, LLC
et al.).








| |                                                                                      
| | -------------------------------------------------------------------------------------
| | 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



99



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Note 14  Financial Instruments With
Off-Balance Sheet Risk






Note 15  Derivative Financial Instruments






marked-to




100



---



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marked-to








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We deliver Canadian dollar fixed rate leases into a commercial
    paper conduit. To lessen the repricing mismatch between fixed
    rate CAD-denominated leases and floating rate CAD commercial
    paper, a series of amortizing CAD interest rate swaps have been
    executed. As of December 31, 2005, the commercial paper
    conduit was providing $155 million of variable rate
    funding. In total, our interest rate swaps were effectively
    converting $148 million of this funding to a fixed interest
    rate. The losses on these swaps for the years ended
    December 31, 2005 and 2004 were $0.9 million and
    $0.6 million, respectively.                                                                                                                                                                                                                                                                                                                    
|
| |  | In the case of U.S. dollar fixed rate leases funded via a
    commercial paper conduit, this funding mismatch is partially
    mitigated by a combination of amortizing interest rate caps and
    Eurodollar futures contracts. The interest rate caps have a
    strike price of 5% and provide protection against an increase in
    short-term interest rates. As of December 31, 2005, the
    notional value and 2005 loss on the interest rate caps were
    $8 million and $3 thousand, respectively. As of
    December 31, 2004, the notional value and 2004 loss on the
    interest rate caps were $26 million and $43 thousand,
    respectively. As of December 31, 2005, the total notional
    amount and gain for the year on the Eurodollar futures were
    $10 million and $0.1 million, respectively. As of
    December 31, 2004, the total notional amount and gain for
    the year on the Eurodollar futures were $95 million and $40
    thousand, respectively.





101



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marked-to


Note 16  Guarantees












102



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##### Table of Contents









Note 17  Regulatory Matters






Other Safety and Soundness
Regulations


103



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|                                                                        |                             |                        |        |            |             |  |      |             |   |  |        |         |  |        |     |     |       |  |        |         |  |  |     |      |  
|----------------------------------------------------------------------- | --------------------------- | ---------------------- | ------ | ---------- | ----------- |  | ---- | ----------- | - |  | ------ | ------- |  | ------ | --- | --- | ----- |  | ------ | ------- |  |  | --- | ---- | -
|                                                                        |                             |                        |        | Adequately |             |  | Well |            
|                                                                        |                             | Actual                 |        |            | Capitalized |  |      | Capitalized |  
|                                                                        |                             |                        |        |            |             |  |      |             |  
|                                                                        |                             | Amount                 |        |            | Ratio       |  |      | Amount      |   |  | Ratio  |         |  | Amount |     |     | Ratio | 
|                                                                        |                             |                        |        |            |             |  |      |             |   |  |        |         |  |        |     |     |       | 
|                                                                        |                             | (Dollars in thousands) |       
|As of December 31, 2005                                                 |                             |                        |        |            |             |  |      |             |   |  |        |         |  |        |     |     |       |  |        |         |  |  |     |     
|Total 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 |  |  |     | 10.0 |  
|                                                                        | Irwin Union Bank, F.S.B.    |                        |        | 54,795     |             |  |      | 12.5        |   |  |        | 35,186  |  |        |     | 8.0 |       |  |        | 43,983  |  |  |     | 10.0 |  
|Tier I Capital (to Risk-Weighted Assets):                               |                             |                        |        |            |             |  |      |             |   |  |        |         |  |        |     |     |       |  |        |         |  |  |     |     
|                                                                        | Irwin Financial Corporation |                        |        | 675,316    |             |  |      | 10.7        |   |  |        | 252,712 |  |        |     | 4.0 |       |  |        | 379,068 |  |  |     | 6.0  |  
|                                                                        | Irwin Union Bank and Trust  |                        |        | 628,688    |             |  |      | 10.8        |   |  |        | 232,861 |  |        |     | 4.0 |       |  |        | 349,291 |  |  |     | 6.0  |  
|                                                                        | Irwin Union Bank, F.S.B.    |                        |        | 52,340     |             |  |      | 11.9        |   |  |        | N/A     |  |        |     |     |       |  |        | 26,390  |  |  |     | 6.0  |  
|Tier I Capital (to Average Assets):                                     |                             |                        |        |            |             |  |      |             |   |  |        |         |  |        |     |     |       |  |        |         |  |  |     |     
|                                                                        | Irwin Financial Corporation |                        |        | 675,316    |             |  |      | 10.3        |   |  |        | 261,216 |  |        |     | 4.0 |       |  |        | 326,520 |  |  |     | 5.0  |  
|                                                                        | Irwin Union Bank and Trust  |                        |        | 628,688    |             |  |      | 10.4        |   |  |        | 241,878 |  |        |     | 4.0 |       |  |        | 302,347 |  |  |     | 5.0  |  
|Core Capital (to Adjusted Tangible Assets) Irwin Union Bank,
    F.S.B. |                             |                        | 52,340 |            |             |  | 10.3 |             |   |  | 20,262 |         |  |        | 4.0 |     |       |  | 25,327 |         |  |  | 5.0 |     
|Tangible Capital (to Tangible Assets) Irwin Union Bank,
    F.S.B.      |                             |                        | 52,340 |            |             |  | 10.3 |             |   |  | 7,598  |         |  |        | 1.5 |     |       |  | N/A    |         |  |  |     |     
|As of December 31, 2004                                                 |                             |                        |        |            |             |  |      |             |   |  |        |         |  |        |     |     |       |  |        |         |  |  |     |     
|Total Capital (to Risk-Weighted Assets):                                |                             |                        |        |            |             |  |      |             |   |  |        |         |  |        |     |     |       |  |        |         |  |  |     |     
|                                                                        | Irwin Financial Corporation |                        | $      | 781,487    |             |  |      | 15.9        | % |  | $      | 392,641 |  |        |     | 8.0 | %     |  | $      | 490,801 |  |  |     | 10.0 | %
|                                                                        | Irwin Union Bank and Trust  |                        |        | 644,345    |             |  |      | 14.6        |   |  |        | 352,500 |  |        |     | 8.0 |       |  |        | 440,625 |  |  |     | 10.0 |  
|                                                                        | Irwin Union Bank, F.S.B.    |                        |        | 40,880     |             |  |      | 14.3        |   |  |        | 22,922  |  |        |     | 8.0 |       |  |        | 28,652  |  |  |     | 10.0 |  
|Tier I Capital (to Risk-Weighted Assets):                               |                             |                        |        |            |             |  |      |             |   |  |        |         |  |        |     |     |       |  |        |         |  |  |     |     
|                                                                        | Irwin Financial Corporation |                        |        | 637,875    |             |  |      | 13.0        |   |  |        | 196,320 |  |        |     | 4.0 |       |  |        | 294,481 |  |  |     | 6.0  |  
|                                                                        | Irwin Union Bank and Trust  |                        |        | 571,372    |             |  |      | 13.0        |   |  |        | 176,250 |  |        |     | 4.0 |       |  |        | 264,375 |  |  |     | 6.0  |  
|                                                                        | Irwin Union Bank, F.S.B.    |                        |        | 39,636     |             |  |      | 13.8        |   |  |        | N/A     |  |        |     |     |       |  |        | 17,191  |  |  |     | 6.0  |  
|Tier I Capital (to Average Assets):                                     |                             |                        |        |            |             |  |      |             |   |  |        |         |  |        |     |     |       |  |        |         |  |  |     |     
|                                                                        | Irwin Financial Corporation |                        |        | 637,875    |             |  |      | 11.6        |   |  |        | 222,094 |  |        |     | 4.0 |       |  |        | 277,618 |  |  |     | 5.0  |  
|                                                                        | Irwin Union Bank and Trust  |                        |        | 571,372    |             |  |      | 11.3        |   |  |        | 202,986 |  |        |     | 4.0 |       |  |        | 253,732 |  |  |     | 5.0  |  
|Core Capital (to Adjusted Tangible Assets) Irwin Union Bank,
    F.S.B. |                             |                        | 39,636 |            |             |  | 10.6 |             |   |  | 14,984 |         |  |        | 4.0 |     |       |  | 18,730 |         |  |  | 5.0 |     
|Tangible Capital (to Tangible Assets) Irwin Union Bank,
    F.S.B.      |                             |                        | 39,636 |            |             |  | 10.6 |             |   |  | 5,619  |         |  |        | 1.5 |     |       |  | N/A    |         |  |  |     |     

Note 18  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:


104



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Loans and leases and loans held for sale:


Residual interests:


Servicing assets:


Investment securities:


Derivative instruments:






|                                                      |  |                        |           |  |                |   |           |          |  |   |                |  |  |   |           | 
|----------------------------------------------------- |  | ---------------------- | --------- |  | -------------- | - | --------- | -------- |  | - | -------------- |  |  | - | --------- | 
|                                                      |  | 2005                   |           |  | 2004           |  
|                                                      |  |                        |           |  |                |  
|                                                      |  | Carrying               |           |  | Estimated Fair |   |           | Carrying |  |   | Estimated Fair | 
|                                                      |  | Amount                 |           |  | Value          |   |           | Amount   |  |   | Value          | 
|                                                      |  |                        |           |  |                |   |           |          |  |   |                | 
|                                                      |  | (Dollars in thousands) |          
|Financial assets:                                     |  |                        |           |  |                |   |           |          |  |   |                |  |  |   |           | 
|Cash and cash equivalents                             |  | $                      | 155,486   |  |                | $ | 155,486   |          |  | $ | 97,101         |  |  | $ | 97,101    | 
|Interest-bearing deposits with financial institutions |  |                        | 62,921    |  |                |   | 62,489    |          |  |   | 58,936         |  |  |   | 58,755    | 
|Residual interests                                    |  |                        | 22,116    |  |                |   | 22,116    |          |  |   | 56,101         |  |  |   | 56,101    | 
|Investment securities                                 |  |                        | 104,771   |  |                |   | 104,756   |          |  |   | 108,222        |  |  |   | 108,232   | 
|Loans held for sale                                   |  |                        | 1,293,519 |  |                |   | 1,295,803 |          |  |   | 890,711        |  |  |   | 895,840   | 
|Loans and leases, net of unearned discount            |  |                        | 4,498,829 |  |                |   | 4,486,826 |          |  |   | 3,450,440      |  |  |   | 3,480,603 | 
|Servicing assets                                      |  |                        | 295,754   |  |                |   | 327,075   |          |  |   | 367,032        |  |  |   | 371,887   | 
|Derivatives                                           |  |                        | 12,787    |  |                |   | 12,787    |          |  |   | 6,400          |  |  |   | 6,400     | 
|Financial liabilities:                                |  |                        |           |  |                |   |           |          |  |   |                |  |  |   |           | 
|Deposits                                              |  |                        | 3,898,993 |  |                |   | 3,804,199 |          |  |   | 3,395,263      |  |  |   | 3,337,705 | 
|Short-term borrowings                                 |  |                        | 997,444   |  |                |   | 994,542   |          |  |   | 237,277        |  |  |   | 237,312   | 
|Collateralized debt                                   |  |                        | 668,984   |  |                |   | 646,427   |          |  |   | 547,477        |  |  |   | 529,383   | 
|Other long-term debt                                  |  |                        | 270,160   |  |                |   | 274,636   |          |  |   | 270,172        |  |  |   | 280,674   | 
|Derivatives                                           |  |                        | 14,679    |  |                |   | 14,679    |          |  |   | 996            |  |  |   | 996       | 



105



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Note 19  Shareholders Equity












|                                         |           |           |           |          |                |   |       |           |          |  |                |          |   |           |       |       |                |  |           |          |   |   |       |       | 
|---------------------------------------- | --------- | --------- | --------- | -------- | -------------- | - | ----- | --------- | -------- |  | -------------- | -------- | - | --------- | ----- | ----- | -------------- |  | --------- | -------- | - | - | ----- | ----- | 
|                                         |           | 2005      |           |          | 2004           |   |       | 2003      |         
|                                         |           |           |           |          |                |   |       |           |         
|                                         |           |           |           | Weighted |                |   |       |           | Weighted |  |                |          |   | Weighted  |      
|                                         |           | Number of |           |          | Average        |   |       | Number of |          |  | Average        |          |   | Number of |       |       | Average        | 
|                                         |           | Shares    |           |          | Exercise Price |   |       | Shares    |          |  | Exercise Price |          |   | Shares    |       |       | Exercise Price | 
|                                         |           |           |           |          |                |   |       |           |          |  |                |          |   |           |       |       |                | 
|Outstanding at the beginning of the year |           |           | 2,228,331 |          |                | $ | 20.08 |           |          |  | 2,170,791      |          |   | $         | 19.28 |       |                |  | 2,083,156 |          |   | $ | 17.22 |      
|                                         | Granted   |           |           | 399,475  |                |   |       | 20.53     |          |  |                | 374,501  |   |           |       | 24.44 |                |  |           | 574,421  |   |   |       | 22.36 | 
|                                         | Exercised |           |           | (117,814 | )              |   |       | 10.56     |          |  |                | (249,175 | ) |           |       | 19.15 |                |  |           | (420,118 | ) |   |       | 13.30 | 
|                                         | Canceled  |           |           | (68,221  | )              |   |       | 22.58     |          |  |                | (67,786  | ) |           |       | 21.75 |                |  |           | (66,668  | ) |   |       | 19.18 | 
|                                         |           |           |           |          |                |   |       |           |          |  |                |          |   |           |       |       |                | 
|Outstanding at the of the year           |           |           | 2,441,771 |          |                |   | 20.55 |           |          |  | 2,228,331      |          |   |           | 20.08 |       |                |  | 2,170,791 |          |   |   | 19.28 |      
|                                         |           |           |           |          |                |   |       |           |          |  |                |          |   |           |       |       |                | 
|Exercisable at the end of the year       |           |           | 2,137,488 |          |                | $ | 20.53 |           |          |  | 1,609,867      |          |   | $         | 19.27 |       |                |  | 1,428,465 |          |   | $ | 18.70 |      
|                                         |           |           |           |          |                |   |       |           |          |  |                |          |   |           |       |       |                | 

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|                         |  |                     |           |          |                     |  |      |                |  |   |                   |  |  |                |           |  |  |   |       | 
|------------------------ |  | ------------------- | --------- | -------- | ------------------- |  | ---- | -------------- |  | - | ----------------- |  |  | -------------- | --------- |  |  | - | ----- | 
|                         |  | OPTIONS OUTSTANDING |           |          | OPTIONS EXERCISABLE | 
|                         |  |                     |           |          |                     | 
|                         |  |                     |           | Weighted |                     |  |      |                | 
|                         |  | Number              |           |          | Average             |  |      | Weighted       |  |   | Number            |  |  | Weighted       |          
|                         |  | Outstanding as of   |           |          | Remaining           |  |      | Average        |  |   | Exercisable as of |  |  | Average        |          
|Range of Exercise Prices |  | December 31, 2005   |           |          | Contractual Life    |  |      | Exercise Price |  |   | December 31, 2005 |  |  | Exercise Price |          
|                         |  |                     |           |          |                     |  |      |                |  |   |                   |  |  |                |          
|$10.66 - 15.65           |  |                     | 500,620   |          |                     |  | 4.46 |                |  | $ | 14.63             |  |  |                | 500,620   |  |  | $ | 14.63 | 
|$15.81 - 20.47           |  |                     | 636,703   |          |                     |  | 7.43 |                |  |   | 19.22             |  |  |                | 364,144   |  |  |   | 18.32 | 
|$20.47 - 22.46           |  |                     | 659,628   |          |                     |  | 6.73 |                |  |   | 22.07             |  |  |                | 640,816   |  |  |   | 22.09 | 
|$22.63 - 25.68           |  |                     | 500,006   |          |                     |  | 6.57 |                |  |   | 24.09             |  |  |                | 487,294   |  |  |   | 24.07 | 
|$25.84 - 31.44           |  |                     | 144,814   |          |                     |  | 4.91 |                |  |   | 27.67             |  |  |                | 144,614   |  |  |   | 27.66 | 
|                         |  |                     |           |          |                     |  |      |                |  |   |                   |  |  |                |          
|$10.66 - 31.44           |  |                     | 2,441,771 |          |                     |  | 6.30 |                |  | $ | 20.55             |  |  |                | 2,137,488 |  |  | $ | 20.53 | 
|                         |  |                     |           |          |                     |  |      |                |  |   |                   |  |  |                |          

Note 20  Earnings Per Share




|                        |                                             |                                          |   |        |           |  |   |             |   |  |           |       |   |  |   |        | 
|----------------------- | ------------------------------------------- | ---------------------------------------- | - | ------ | --------- |  | - | ----------- | - |  | --------- | ----- | - |  | - | ------ | 
|                        |                                             | Basic                                    |   |        | Effect of |  |   | Effect of   |   |  | Diluted   |      
|                        |                                             | Earnings                                 |   |        | Stock     |  |   | Convertible |   |  | Earnings  |      
|                        |                                             | Per Share                                |   |        | Options   |  |   | Shares      |   |  | Per Share |      
|                        |                                             |                                          |   |        |           |  |   |             |   |  |           |      
|                        |                                             | (In thousands, except per share amounts) |  
|Year ended December 31, |                                             |                                          |   |        |           |  |   |             |   |  |           |       |   |  |   |       
|2005                    |                                             |                                          |   |        |           |  |   |             |   |  |           |       |   |  |   |       
|                        | Net income available to common shareholders |                                          | $ | 18,987 |           |  | $ |            |   |  | $         |      |   |  | $ | 18,987 | 
|                        | Shares                                      |                                          |   | 28,518 |           |  |   | 323         |   |  |           |      |   |  |   | 28,841 | 
|                        |                                             |                                          |   |        |           |  |   |             |   |  |           |      
|                        | Per-share amount                            |                                          | $ | 0.67   |           |  | $ | (0.01       | ) |  | $         |      |   |  | $ | 0.66   | 
|                        |                                             |                                          |   |        |           |  |   |             |   |  |           |      
|2004                    |                                             |                                          |   |        |           |  |   |             |   |  |           |       |   |  |   |       
|                        | Net income available to common shareholders |                                          | $ | 68,445 |           |  | $ |            |   |  | $         | 2,712 |   |  | $ | 71,157 | 
|                        | Shares                                      |                                          |   | 28,274 |           |  |   | 397         |   |  |           | 2,607 |   |  |   | 31,278 | 
|                        |                                             |                                          |   |        |           |  |   |             |   |  |           |      
|                        | Per-share amount                            |                                          | $ | 2.42   |           |  | $ | (0.03       | ) |  | $         | (0.11 | ) |  | $ | 2.28   | 
|                        |                                             |                                          |   |        |           |  |   |             |   |  |           |      
|2003                    |                                             |                                          |   |        |           |  |   |             |   |  |           |       |   |  |   |       
|                        | Net income available to common shareholders |                                          | $ | 72,817 |           |  | $ |            |   |  | $         | 2,715 |   |  | $ | 75,532 | 
|                        | Shares                                      |                                          |   | 27,915 |           |  |   | 325         |   |  |           | 2,610 |   |  |   | 30,850 | 
|                        |                                             |                                          |   |        |           |  |   |             |   |  |           |      
|                        | Per-share amount                            |                                          | $ | 2.61   |           |  | $ | (0.03       | ) |  | $         | (0.13 | ) |  | $ | 2.45   | 
|                        |                                             |                                          |   |        |           |  |   |             |   |  |           |      



Note 21  Income Taxes




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|                    |         |                        |         |         |      |   |        |        |   |   |        |        |  
|------------------- | ------- | ---------------------- | ------- | ------- | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                    |         | 2005                   |         |         | 2004 |   |        | 2003   |  
|                    |         |                        |         |         |      |   |        |        |  
|                    |         | (Dollars in thousands) |        
|Current:            |         |                        |         |         |      |   |        |        |   |   |        |       
|                    | Federal |                        | $       | 24,760  |      |   | $      | 23,530 |   |   | $      | (254   | )
|                    | State   |                        |         | 6,724   |      |   |        | 6,378  |   |   |        | 384    |  
|                    | Foreign |                        |         | 1,287   |      |   |        | 3,639  |   |   |        | 2,196  |  
|                    |         |                        |         |         |      |   |        |        |  
|                    |         |                        | 32,771  |         |      |   | 33,547 |        |   |   | 2,326  |       
|                    |         |                        |         |         |      |   |        |        |  
|Deferred:           |         |                        |         |         |      |   |        |        |   |   |        |       
|                    | Federal |                        |         | (19,171 | )    |   |        | 10,126 |   |   |        | 36,627 |  
|                    | State   |                        |         | (4,570  | )    |   |        | 2,414  |   |   |        | 8,732  |  
|                    | Foreign |                        |         | (48     | )    |   |        | (355   | ) |   |        | (2,100 | )
|                    |         |                        |         |         |      |   |        |        |  
|                    |         |                        | (23,789 | )       |      |   | 12,185 |        |   |   | 43,259 |       
|                    |         |                        |         |         |      |   |        |        |  
|Income tax expense: |         |                        |         |         |      |   |        |        |   |   |        |       
|                    | Federal |                        |         | 5,589   |      |   |        | 33,656 |   |   |        | 36,373 |  
|                    | State   |                        |         | 2,154   |      |   |        | 8,792  |   |   |        | 9,116  |  
|                    | Foreign |                        |         | 1,239   |      |   |        | 3,284  |   |   |        | 96     |  
|                    |         |                        |         |         |      |   |        |        |  
|                    |         | $                      | 8,982   |         |      | $ | 45,732 |        |   | $ | 45,585 |       
|                    |         |                        |         |         |      |   |        |        |  



|                                            |                                                          |                        |       |        |      |   |        |        |   |   |        |        |  
|------------------------------------------- | -------------------------------------------------------- | ---------------------- | ----- | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                                            |                                                          | 2005                   |       |        | 2004 |   |        | 2003   |  
|                                            |                                                          |                        |       |        |      |   |        |        |  
|                                            |                                                          | (Dollars in thousands) |      
|Income taxes computed at the statutory rate |                                                          | $                      | 9,789 |        |      | $ | 39,962 |        |   | $ | 41,441 |       
|Increase (decrease) resulting from:         |                                                          |                        |       |        |      |   |        |        |   |   |        |       
|                                            | Nontaxable interest from investment securities and loans |                        |       | (117   | )    |   |        | (107   | ) |   |        | (115   | )
|                                            | State tax, net of federal benefit                        |                        |       | 1,400  |      |   |        | 5,714  |   |   |        | 5,926  |  
|                                            | Foreign operations                                       |                        |       | 183    |      |   |        | 1,860  |   |   |        | (1,112 | )
|                                            | Reserve
    release(1)                                   |                        |       | (1,870 | )    |   |        | (2,832 | ) |   |        | (1,173 | )
|                                            | Other items-net                                          |                        |       | (403   | )    |   |        | 1,135  |   |   |        | 618    |  
|                                            |                                                          |                        |       |        |      |   |        |        |  
|                                            |                                                          | $                      | 8,982 |        |      | $ | 45,732 |        |   | $ | 45,585 |       
|                                            |                                                          |                        |       |        |      |   |        |        |  






|    |                                                                                                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | During 2005, we released $1.9 million in tax reserves at
    the parent company to align our tax liability to a level
    commensurate with our currently identified tax exposures. The
    majority of the reserves related to our 2001 tax returns. The
    statute on these returns expired during the third quarter of
    2005 triggering the reversal of these reserves.

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|                          |                                          |                        |          |          |      |  |          |          |  
|------------------------- | ---------------------------------------- | ---------------------- | -------- | -------- | ---- |  | -------- | -------- | -
|                          |                                          | December 31,           |         
|                          |                                          |                        |         
|                          |                                          | 2005                   |          |          | 2004 | 
|                          |                                          |                        |          |          |      | 
|                          |                                          | (Dollars in thousands) |         
|Deferred tax assets:      |                                          |                        |          |          |      |  |          |         
|                          | Deferred securitization income           |                        | $        | 242      |      |  | $        |         |  
|                          | Allowance for loan and lease losses      |                        |          | 30,292   |      |  |          | 24,247   |  
|                          | Deferred compensation                    |                        |          | 1,740    |      |  |          | 8,929    |  
|                          | Retirement benefits                      |                        |          | 300      |      |  |          | 331      |  
|                          | Leasing                                  |                        |          | 4,223    |      |  |          | 3,295    |  
|                          | Mark to market                           |                        |          | 4,077    |      |  |          | 4,746    |  
|                          | Capital loss carryforward (expires 2008) |                        |          | 224      |      |  |          | 227      |  
|                          | Other, net                               |                        |          | 1,219    |      |  |          | 1,541    |  
|                          |                                          |                        |          |          |      | 
|                          |                                          |                        | 42,317   |          |      |  | 43,316   |         
|                          |                                          |                        |          |          |      | 
|Deferred tax liabilities: |                                          |                        |          |          |      |  |          |         
|                          | Mortgage servicing                       |                        |          | (108,744 | )    |  |          | (134,414 | )
|                          | Deferred securitization income           |                        |          |         |      |  |          | (1,433   | )
|                          | Deferred origination fees and costs      |                        |          | (3,376   | )    |  |          | (1,525   | )
|                          | Fixed assets                             |                        |          | (5,020   | )    |  |          | (4,556   | )
|                          |                                          |                        |          |          |      | 
|                          |                                          |                        | (117,140 | )        |      |  | (141,928 | )       
|                          |                                          |                        |          |          |      | 
|                          | Net deferred tax liability               |                        | $        | (74,823  | )    |  | $        | (98,612  | )
|                          |                                          |                        |          |          |      | 

Note 22  Employee Retirement Plans








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|                                     |                                               |                        |        |        |      |   |        |        |  
|------------------------------------ | --------------------------------------------- | ---------------------- | ------ | ------ | ---- | - | ------ | ------ | -
|                                     |                                               | December 31,           |       
|                                     |                                               |                        |       
|                                     |                                               | 2005                   |        |        | 2004 |  
|                                     |                                               |                        |        |        |      |  
|                                     |                                               | (Dollars in thousands) |       
|Change in benefit obligation:        |                                               |                        |        |        |      |   |        |       
|Benefit obligation at January 1,     |                                               | $                      | 29,348 |        |      | $ | 24,321 |       
|Service cost                         |                                               |                        | 2,856  |        |      |   | 2,127  |       
|Interest cost                        |                                               |                        | 1,741  |        |      |   | 1,488  |       
|Actuarial loss                       |                                               |                        | 2,962  |        |      |   | 2,040  |       
|Benefits paid                        |                                               |                        | (844   | )      |      |   | (628   | )     
|                                     |                                               |                        |        |        |      |  
|Benefit obligation at December 31,   |                                               |                        | 36,063 |        |      |   | 29,348 |       
|                                     |                                               |                        |        |        |      |  
|Change in plan assets:               |                                               |                        |        |        |      |   |        |       
|Fair value plan assets at January 1, |                                               |                        | 24,407 |        |      |   | 20,552 |       
|Actual return on plan assets         |                                               |                        | 2,197  |        |      |   | 2,383  |       
|Benefits paid                        |                                               |                        | (844   | )      |      |   | (628   | )     
|Employer contributions               |                                               |                        | 2,939  |        |      |   | 2,100  |       
|                                     |                                               |                        |        |        |      |  
|                                     | Fair value plan assets at December 31,        |                        |        | 28,699 |      |   |        | 24,407 |  
|                                     |                                               |                        |        |        |      |  
|                                     | Funded status                                 |                        |        | (7,364 | )    |   |        | (4,941 | )
|Unrecognized prior service cost      |                                               |                        | 273    |        |      |   | 310    |       
|Unrecognized net actuarial loss      |                                               |                        | 11,449 |        |      |   | 9,459  |       
|                                     |                                               |                        |        |        |      |  
|                                     | Net amount recognized as prepaid pension cost |                        | $      | 4,358  |      |   | $      | 4,828  |  
|                                     |                                               |                        |        |        |      |  





|                                   |                  |                        |        |       |      |   |        |       |  |   |        |       | 
|---------------------------------- | ---------------- | ---------------------- | ------ | ----- | ---- | - | ------ | ----- |  | - | ------ | ----- | 
|                                   |                  | 2005                   |        |       | 2004 |   |        | 2003  | 
|                                   |                  |                        |        |       |      |   |        |       | 
|                                   |                  | (Dollars in thousands) |       
|Service cost                       |                  | $                      | 2,856  |       |      | $ | 2,127  |       |  | $ | 1,395  |      
|Interest cost                      |                  |                        | 1,741  |       |      |   | 1,488  |       |  |   | 1,295  |      
|Expected return on plan assets     |                  |                        | (1,912 | )     |      |   | (1,605 | )     |  |   | (1,252 | )    
|Amortization of prior service cost |                  |                        | 37     |       |      |   | 37     |       |  |   | 37     |      
|Amortization of actuarial loss     |                  |                        | 687    |       |      |   | 638    |       |  |   | 684    |      
|                                   |                  |                        |        |       |      |   |        |       | 
|                                   | Net pension cost |                        | $      | 3,409 |      |   | $      | 2,685 |  |   | $      | 2,159 | 
|                                   |                  |                        |        |       |      |   |        |       | 



|                                                                    |                                       |      |  |      |      |  |  |      |  
|------------------------------------------------------------------- | ------------------------------------- | ---- |  | ---- | ---- |  |  | ---- | -
|                                                                    |                                       | 2005 |  |      | 2004 | 
|                                                                    |                                       |      |  |      |      | 
|To determine benefit obligations at December 31,                    |                                       |      |  |      |      |  |  |     
|                                                                    | Discount rate                         |      |  | 5.50 | %    |  |  | 5.75 | %
|                                                                    | Rate of average compensation increase |      |  | 4.18 |      |  |  | 3.83 |  
|To determine net periodic cost for the years ended
    December 31, |                                       |      |  |      |      |  |  |     
|                                                                    | Discount rate                         |      |  | 5.75 | %    |  |  | 6.00 | %
|                                                                    | Return on plan assets                 |      |  | 8.00 |      |  |  | 8.00 |  
|                                                                    | Rate of average compensation increase |      |  | 4.18 |      |  |  | 3.83 |  



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Plan Assets




|                  |               |               |     |    |                   |  |     |      |   |  |       |       |  
|----------------- | ------------- | ------------- | --- | -- | ----------------- |  | --- | ---- | - |  | ----- | ----- | -
|                  |               | Percentage of |     |    |                  
|                  |               | Plan Assets   |     |    |                  
|                  |               |               |     |    | Target Allocation | 
|Asset Category    |               | 2005          |     |    | 2004              |  |     | 2006 |  
|                  |               |               |     |    |                   |  |     |      |  
|Equity securities |               |               |     |    |                   |  |     |      |   |  |       |      
|                  | Domestic      |               |     | 50 | %                 |  |     | 51   | % |  |       | 50-65 | %
|                  | International |               |     | 23 |                   |  |     | 23   |   |  |       | 15-25 | %
|Corporate bonds   |               |               | 16  |    |                   |  | 17  |      |   |  | 15-25 | %    
|Cash equivalents  |               |               | 11  |    |                   |  | 9   |      |   |  | 0-10  | %    
|                  |               |               |     |    |                   |  |     |      |  
|                  |               |               | 100 | %  |                   |  | 100 | %    |   |  |       |      
|                  |               |               |     |    |                   |  |     |      |  





Cash Flows






|                |  |   |       | 
|--------------- |  | - | ----- | 
|2006            |  | $ | 753   | 
|2007            |  |   | 818   | 
|2008            |  |   | 963   | 
|2009            |  |   | 1,154 | 
|2010            |  |   | 1,369 | 
|Years 2011-2015 |  |   | 9,668 | 

Note 23  Industry Segment Information




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|                       |                            |                        |           |         |            |   |         |             |  |   |           |         |  |       |           |         |              |   |          |         |   |   |           |         | 
|---------------------- | -------------------------- | ---------------------- | --------- | ------- | ---------- | - | ------- | ----------- |  | - | --------- | ------- |  | ----- | --------- | ------- | ------------ | - | -------- | ------- | - | - | --------- | ------- | 
|                       |                            | Commercial             |           |         | Commercial |   |         | Home Equity |  |   | Mortgage  |         |  |       |           |        
|                       |                            | Banking                |           |         | Finance    |   |         | Lending     |  |   | Banking   |         |  | Other |           |         | Consolidated |  
|                       |                            |                        |           |         |            |   |         |             |  |   |           |         |  |       |           |         |              |  
|                       |                            | (Dollars in thousands) |          
|2005                   |                            |                        |           |         |            |   |         |             |  |   |           |         |  |       |           |         |              |   |          |         |   |   |           |        
|Net interest income    |                            | $                      | 95,131    |         |            | $ | 29,392  |             |  | $ | 104,645   |         |  | $     | 46,670    |         |              | $ | (36,800  | )       |   | $ | 239,038   |        
|Intersegment interest  |                            |                        | 10,341    |         |            |   | (1,920  | )           |  |   | (32,166   | )       |  |       | (9,449    | )       |              |   | 33,194   |         |   |   |          |        
|Other revenue          |                            |                        | 16,686    |         |            |   | 7,437   |             |  |   | 33,667    |         |  |       | 64,833    |         |              |   | (2,137   | )       |   |   | 120,486   |        
|Intersegment revenues  |                            |                        | 259       |         |            |   |        |             |  |   |          |         |  |       | 430       |         |              |   | (689     | )       |   |   |          |        
|                       |                            |                        |           |         |            |   |         |             |  |   |           |         |  |       |           |         |              |  
|                       | Total net revenues         |                        |           | 122,417 |            |   |         | 34,909      |  |   |           | 106,146 |  |       |           | 102,484 |              |   |          | (6,432  | ) |   |           | 359,524 | 
|Other expense          |                            |                        | 75,347    |         |            |   | 21,453  |             |  |   | 99,119    |         |  |       | 126,127   |         |              |   | 9,509    |         |   |   | 331,555   |        
|Intersegment expenses  |                            |                        | 1,715     |         |            |   | 771     |             |  |   | 3,220     |         |  |       | 3,424     |         |              |   | (9,130   | )       |   |   |          |        
|                       |                            |                        |           |         |            |   |         |             |  |   |           |         |  |       |           |         |              |  
|                       | Income (loss) before taxes |                        |           | 45,355  |            |   |         | 12,685      |  |   |           | 3,807   |  |       |           | (27,067 | )            |   |          | (6,811  | ) |   |           | 27,969  | 
|Income taxes           |                            |                        | 17,976    |         |            |   | 5,252   |             |  |   | 1,555     |         |  |       | (10,891   | )       |              |   | (4,910   | )       |   |   | 8,982     |        
|                       |                            |                        |           |         |            |   |         |             |  |   |           |         |  |       |           |         |              |  
|                       | Net income (loss)          |                        | $         | 27,379  |            |   | $       | 7,433       |  |   | $         | 2,252   |  |       | $         | (16,176 | )            |   | $        | (1,901  | ) |   | $         | 18,987  | 
|                       |                            |                        |           |         |            |   |         |             |  |   |           |         |  |       |           |         |              |  
|Assets at December 31, |                            | $                      | 3,162,398 |         |            | $ | 831,657 |             |  | $ | 1,602,400 |         |  | $     | 1,306,041 |         |              | $ | (255,972 | )       |   | $ | 6,646,524 |        
|                       |                            |                        |           |         |            |   |         |             |  |   |           |         |  |       |           |         |              |  
|2004                   |                            |                        |           |         |            |   |         |             |  |   |           |         |  |       |           |         |              |   |          |         |   |   |           |        
|Net interest income    |                            | $                      | 84,318    |         |            | $ | 21,286  |             |  | $ | 110,601   |         |  | $     | 42,120    |         |              | $ | (20,442  | )       |   | $ | 237,883   |        
|Intersegment interest  |                            |                        | 1,992     |         |            |   |        |             |  |   | (15,987   | )       |  |       | (1,017    | )       |              |   | 15,012   |         |   |   |          |        
|Other revenue          |                            |                        | 17,749    |         |            |   | 6,275   |             |  |   | 67,847    |         |  |       | 197,954   |         |              |   | (6,296   | )       |   |   | 283,529   |        
|Intersegment revenues  |                            |                        | 567       |         |            |   |        |             |  |   |          |         |  |       | 17        |         |              |   | (584     | )       |   |   |          |        
|                       |                            |                        |           |         |            |   |         |             |  |   |           |         |  |       |           |         |              |  
|                       | Total net revenues         |                        |           | 104,626 |            |   |         | 27,561      |  |   |           | 162,461 |  |       |           | 239,074 |              |   |          | (12,310 | ) |   |           | 521,412 | 
|Other expense          |                            |                        | 63,656    |         |            |   | 18,091  |             |  |   | 111,856   |         |  |       | 200,693   |         |              |   | 12,939   |         |   |   | 407,235   |        
|Intersegment expenses  |                            |                        | 1,794     |         |            |   | 691     |             |  |   | 2,923     |         |  |       | 3,512     |         |              |   | (8,920   | )       |   |   |          |        
|                       |                            |                        |           |         |            |   |         |             |  |   |           |         |  |       |           |         |              |  
|                       | Income (loss) before taxes |                        |           | 39,176  |            |   |         | 8,779       |  |   |           | 47,682  |  |       |           | 34,869  |              |   |          | (16,329 | ) |   |           | 114,177 | 
|Income taxes           |                            |                        | 15,752    |         |            |   | 5,562   |             |  |   | 19,615    |         |  |       | 14,603    |         |              |   | (9,800   | )       |   |   | 45,732    |        
|                       |                            |                        |           |         |            |   |         |             |  |   |           |         |  |       |           |         |              |  
|                       | Net income (loss)          |                        | $         | 23,424  |            |   | $       | 3,217       |  |   | $         | 28,067  |  |       | $         | 20,266  |              |   | $        | (6,529  | ) |   | $         | 68,445  | 
|                       |                            |                        |           |         |            |   |         |             |  |   |           |         |  |       |           |         |              |  
|Assets at December 31, |                            | $                      | 2,622,877 |         |            | $ | 636,604 |             |  | $ | 992,979   |         |  | $     | 1,238,136 |         |              | $ | (254,776 | )       |   | $ | 5,235,820 |        
|                       |                            |                        |           |         |            |   |         |             |  |   |           |         |  |       |           |         |              |  

112



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|                       |                            |                        |           |        |            |   |         |             |  |   |           |         |   |       |           |         |              |   |         |         |   |   |           |         | 
|---------------------- | -------------------------- | ---------------------- | --------- | ------ | ---------- | - | ------- | ----------- |  | - | --------- | ------- | - | ----- | --------- | ------- | ------------ | - | ------- | ------- | - | - | --------- | ------- | 
|                       |                            | Commercial             |           |        | Commercial |   |         | Home Equity |  |   | Mortgage  |         |   |       |           |        
|                       |                            | Banking                |           |        | Finance    |   |         | Lending     |  |   | Banking   |         |   | Other |           |         | Consolidated |  
|                       |                            |                        |           |        |            |   |         |             |  |   |           |         |   |       |           |         |              |  
|                       |                            | (Dollars in thousands) |          
|2003                   |                            |                        |           |        |            |   |         |             |  |   |           |         |   |       |           |         |              |   |         |         |   |   |           |        
|Net interest income    |                            | $                      | 78,785    |        |            | $ | 12,180  |             |  | $ | 84,875    |         |   | $     | 80,169    |         |              | $ | (31,707 | )       |   | $ | 224,302   |        
|Intersegment interest  |                            |                        | (5,683    | )      |            |   | (722    | )           |  |   | (7,905    | )       |   |       | (8,522    | )       |              |   | 22,832  |         |   |   |          |        
|Other revenue          |                            |                        | 21,071    |        |            |   | 5,868   |             |  |   | (19,525   | )       |   |       | 326,000   |         |              |   | (27,271 | )       |   |   | 306,143   |        
|Intersegment revenues  |                            |                        |          |        |            |   |        |             |  |   |          |         |   |       |          |         |              |   |        |         |   |   |          |        
|                       |                            |                        |           |        |            |   |         |             |  |   |           |         |   |       |           |         |              |  
|                       | Total net revenues         |                        |           | 94,173 |            |   |         | 17,326      |  |   |           | 57,445  |   |       |           | 397,647 |              |   |         | (36,146 | ) |   |           | 530,445 | 
|Other expense          |                            |                        | 55,196    |        |            |   | 14,539  |             |  |   | 87,771    |         |   |       | 265,118   |         |              |   | (10,581 | )       |   |   | 412,043   |        
|Intersegment expenses  |                            |                        | 1,503     |        |            |   | 533     |             |  |   | 2,767     |         |   |       | 2,762     |         |              |   | (7,565  | )       |   |   |          |        
|                       |                            |                        |           |        |            |   |         |             |  |   |           |         |   |       |           |         |              |  
|                       | Income (loss) before taxes |                        |           | 37,474 |            |   |         | 2,254       |  |   |           | (33,093 | ) |       |           | 129,767 |              |   |         | (18,000 | ) |   |           | 118,402 | 
|Income taxes           |                            |                        | 14,997    |        |            |   | 461     |             |  |   | (13,203   | )       |   |       | 51,667    |         |              |   | (8,337  | )       |   |   | 45,585    |        
|                       |                            |                        |           |        |            |   |         |             |  |   |           |         |   |       |           |         |              |  
|                       | Net income (loss)          |                        | $         | 22,477 |            |   | $       | 1,793       |  |   | $         | (19,890 | ) |       | $         | 78,100  |              |   | $       | (9,663  | ) |   | $         | 72,817  | 
|                       |                            |                        |           |        |            |   |         |             |  |   |           |         |   |       |           |         |              |  
|Assets at December 31, |                            | $                      | 2,203,965 |        |            | $ | 474,915 |             |  | $ | 1,070,634 |         |   | $     | 1,258,641 |         |              | $ | (19,796 | )       |   | $ | 4,988,359 |        
|                       |                            |                        |           |        |            |   |         |             |  |   |           |         |   |       |           |         |              |  

Note 24  Irwin Financial Corporation (Parent
Only) Financial Information




Condensed Balance Sheets


|                      |                                                  |                        |         |         |      |   |         |         | 
|--------------------- | ------------------------------------------------ | ---------------------- | ------- | ------- | ---- | - | ------- | ------- | 
|                      |                                                  | December 31,           |        
|                      |                                                  |                        |        
|                      |                                                  | 2005                   |         |         | 2004 |  
|                      |                                                  |                        |         |         |      |  
|                      |                                                  | (Dollars in thousands) |        
|Assets:               |                                                  |                        |         |         |      |   |         |        
|                      | Cash and short-term investments                  |                        | $       | 284     |      |   | $       | 1,111   | 
|                      | Investment in bank subsidiary                    |                        |         | 679,447 |      |   |         | 624,168 | 
|                      | Investments in non-bank subsidiaries             |                        |         | (33,300 | )    |   |         | 32,279  | 
|                      | Loans to bank subsidiaries                       |                        |         | 65,640  |      |   |         | 82,629  | 
|                      | Loans to non-bank subsidiaries                   |                        |         | 72,091  |      |   |         | 52,813  | 
|                      | Other assets                                     |                        |         | 19,778  |      |   |         | 25,976  | 
|                      |                                                  |                        |         |         |      |  
|                      |                                                  | $                      | 803,940 |         |      | $ | 818,976 |        
|                      |                                                  |                        |         |         |      |  
|Liabilities:          |                                                  |                        |         |         |      |   |         |        
|                      | Short-term borrowings with non-bank subsidiaries |                        | $       | 19,157  |      |   | $       | 28,181  | 
|                      | Long-term debt                                   |                        |         | 270,125 |      |   |         | 270,125 | 
|                      | Other liabilities                                |                        |         | 2,324   |      |   |         | 19,485  | 
|                      |                                                  |                        |         |         |      |  
|                      |                                                  |                        | 291,606 |         |      |   | 317,791 |        
|                      |                                                  |                        |         |         |      |  
|Shareholders equity: |                                                  |                        |         |         |      |   |         |        
|                      | Common stock                                     |                        |         | 112,000 |      |   |         | 112,000 | 
|                      | Other shareholders equity                       |                        |         | 400,334 |      |   |         | 389,185 | 
|                      |                                                  |                        |         |         |      |  
|                      |                                                  |                        | 512,334 |         |      |   | 501,185 |        
|                      |                                                  |                        |         |         |      |  
|                      |                                                  | $                      | 803,940 |         |      | $ | 818,976 |        
|                      |                                                  |                        |         |         |      |  

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Condensed Statements of Income


|                                                                                  |                                      |                                 |         |        |      |   |         |        |  |   |         |        | 
|--------------------------------------------------------------------------------- | ------------------------------------ | ------------------------------- | ------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ | 
|                                                                                  |                                      | For the Year Ended December 31, |        
|                                                                                  |                                      |                                 |        
|                                                                                  |                                      | 2005                            |         |        | 2004 |   |         | 2003   | 
|                                                                                  |                                      |                                 |         |        |      |   |         |        | 
|                                                                                  |                                      | (Dollars in thousands)          |        
|Income:                                                                           |                                      |                                 |         |        |      |   |         |        |  |   |         |       
|                                                                                  | Dividends from non-bank subsidiaries |                                 | $       | 1,417  |      |   | $       |       |  |   | $       | 686    | 
|                                                                                  | Dividends from bank subsidiary       |                                 |         | 50,000 |      |   |         | 66,000 |  |   |         |       | 
|                                                                                  | Interest income                      |                                 |         | 4,218  |      |   |         | 7,142  |  |   |         | 4,964  | 
|                                                                                  | Other                                |                                 |         | 15,615 |      |   |         | 10,369 |  |   |         | 7,721  | 
|                                                                                  |                                      |                                 |         |        |      |   |         |        | 
|                                                                                  |                                      |                                 | 71,250  |        |      |   | 83,511  |        |  |   | 13,371  |       
|                                                                                  |                                      |                                 |         |        |      |   |         |        | 
|Expenses:                                                                         |                                      |                                 |         |        |      |   |         |        |  |   |         |       
|                                                                                  | Interest expense                     |                                 |         | 23,983 |      |   |         | 24,101 |  |   |         | 28,917 | 
|                                                                                  | Salaries and benefits                |                                 |         | 9,973  |      |   |         | 9,555  |  |   |         | 6,491  | 
|                                                                                  | Other                                |                                 |         | 6,191  |      |   |         | 6,584  |  |   |         | 5,056  | 
|                                                                                  |                                      |                                 |         |        |      |   |         |        | 
|                                                                                  |                                      |                                 | 40,147  |        |      |   | 40,240  |        |  |   | 40,464  |       
|                                                                                  |                                      |                                 |         |        |      |   |         |        | 
|Income before income taxes and equity in undistributed income of
    subsidiaries |                                      |                                 | 31,103  |        |      |   | 43,271  |        |  |   | (27,093 | )     
|Income tax benefit, less amounts charged to subsidiaries                          |                                      |                                 | (9,900  | )      |      |   | (12,686 | )      |  |   | (13,081 | )     
|                                                                                  |                                      |                                 |         |        |      |   |         |        | 
|                                                                                  |                                      |                                 | 41,003  |        |      |   | 55,957  |        |  |   | (14,012 | )     
|Equity in undistributed income of subsidiaries                                    |                                      |                                 | (22,016 | )      |      |   | 12,488  |        |  |   | 86,829  |       
|                                                                                  |                                      |                                 |         |        |      |   |         |        | 
|Net income                                                                        |                                      | $                               | 18,987  |        |      | $ | 68,445  |        |  | $ | 72,817  |       
|                                                                                  |                                      |                                 |         |        |      |   |         |        | 

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Condensed Statements of Cash Flows


|                                                                                  |                                                        |                                               |                                                              |         |        |         |        |         |        |         |        |         |        |         |  
|--------------------------------------------------------------------------------- | ------------------------------------------------------ | --------------------------------------------- | ------------------------------------------------------------ | ------- | ------ | ------- | ------ | ------- | ------ | ------- | ------ | ------- | ------ | ------- | -
|                                                                                  |                                                        | For the Year Ended December 31,               |                                                             
|                                                                                  |                                                        |                                               |                                                             
|                                                                                  |                                                        | 2005                                          |                                                              |         | 2004   |         |        | 2003    |       
|                                                                                  |                                                        |                                               |                                                              |         |        |         |        |         |       
|                                                                                  |                                                        | (Dollars in thousands)                        |                                                             
|Net income                                                                        |                                                        | $                                             | 18,987                                                       |         |        | $       | 68,445 |         |        | $       | 72,817 |        
|Adjustments to reconcile net income to cash provided by
    operating activities: |                                                        |                                               |                                                              |         |        |         |        |         |        |         |        |        
|                                                                                  | Equity in undistributed income of subsidiaries         |                                               |                                                              | 22,016  |        |         |        | (12,488 | )      |         |        | (86,829 | )     
|                                                                                  | Depreciation and amortization                          |                                               |                                                              | 2,652   |        |         |        | 727     |        |         |        | 2,529   |       
|                                                                                  | (Decrease) increase in taxes payable                   |                                               |                                                              | (11,442 | )      |         |        | 18,316  |        |         |        | (13,778 | )     
|                                                                                  | Decrease (increase) in interest receivable             |                                               |                                                              | 661     |        |         |        | (247    | )      |         |        | 1,208   |       
|                                                                                  | (Decrease) increase in interest payable                |                                               |                                                              | (176    | )      |         |        | (62     | )      |         |        | 53      |       
|                                                                                  |                                                        |                                               | Net change in other assets and other liabilities             |         |        | (8,847  | )      |         |        | 2,725   |        |         |        | (11,277 | )
|                                                                                  |                                                        |                                               |                                                              |         |        |         |        |         |       
|                                                                                  | Net cash provided (used) by operating activities       |                                               |                                                              | 23,851  |        |         |        | 77,416  |        |         |        | (35,277 | )     
|                                                                                  |                                                        |                                               |                                                              |         |        |         |        |         |       
|Lending and investing activities:                                                 |                                                        |                                               |                                                              |         |        |         |        |         |        |         |        |        
|                                                                                  | Net (increase) decrease in loans to subsidiaries       |                                               |                                                              | (2,289  | )      |         |        | (46,046 | )      |         |        | 22,518  |       
|                                                                                  | Investments in subsidiaries                            |                                               |                                                              | (5,081  | )      |         |        | (15,575 | )      |         |        | (10,286 | )     
|                                                                                  | Net (purchases) sales of premises and equipment        |                                               |                                                              | 15      |        |         |        | (189    | )      |         |        | (121    | )     
|                                                                                  |                                                        |                                               |                                                              |         |        |         |        |         |       
|                                                                                  |                                                        |                                               | Net cash (used) provided by lending and investing activities |         |        | (7,355  | )      |         |        | (61,810 | )      |         |        | 12,111  |  
|                                                                                  |                                                        |                                               |                                                              |         |        |         |        |         |       
|Financing activities:                                                             |                                                        |                                               |                                                              |         |        |         |        |         |        |         |        |        
|                                                                                  | Net (decrease) increase in borrowings                  |                                               |                                                              | (9,024  | )      |         |        | (17,680 | )      |         |        | 28,252  |       
|                                                                                  | Proceeds from long-term debt                           |                                               |                                                              | 51,750  |        |         |        |        |        |         |        | 51,547  |       
|                                                                                  | Payments of long-term debt                             |                                               |                                                              | (51,750 | )      |         |        |        |        |         |        | (51,629 | )     
|                                                                                  | Purchase of treasury stock                             |                                               |                                                              | (1,201  | )      |         |        | (407    | )      |         |        | (4,201  | )     
|                                                                                  | Proceeds from sale of stock for employee benefit plans |                                               |                                                              | 3,277   |        |         |        | 7,836   |        |         |        | 9,777   |       
|                                                                                  | Dividends paid                                         |                                               |                                                              | (11,426 | )      |         |        | (9,065  | )      |         |        | (7,832  | )     
|                                                                                  |                                                        |                                               |                                                              |         |        |         |        |         |       
|                                                                                  |                                                        |                                               | Net cash (used) provided by financing activities             |         |        | (18,374 | )      |         |        | (19,316 | )      |         |        | 25,914  |  
|                                                                                  |                                                        |                                               |                                                              |         |        |         |        |         |       
|                                                                                  | Net (decrease) increase in cash and cash equivalents   |                                               |                                                              | (1,878  | )      |         |        | (3,710  | )      |         |        | 2,748   |       
|                                                                                  | Effect of exchange rate changes on cash                |                                               |                                                              | 1,051   |        |         |        | 98      |        |         |        | 228     |       
|                                                                                  | Cash and cash equivalents at beginning of year         |                                               |                                                              | 1,111   |        |         |        | 4,723   |        |         |        | 1,747   |       
|                                                                                  |                                                        |                                               |                                                              |         |        |         |        |         |       
|                                                                                  | Cash and cash equivalents at end of year               |                                               | $                                                            | 284     |        |         | $      | 1,111   |        |         | $      | 4,723   |       
|                                                                                  |                                                        |                                               |                                                              |         |        |         |        |         |       
|Supplemental disclosures of cash flow information:                                |                                                        |                                               |                                                              |         |        |         |        |         |        |         |        |        
|                                                                                  | Cash paid during the year:                             |                                               |                                                              |         |        |         |        |         |        |         |        |         |       
|                                                                                  |                                                        | Interest                                      |                                                              | $       | 24,159 |         |        | $       | 24,039 |         |        | $       | 27,709 |        
|                                                                                  |                                                        |                                               |                                                              |         |        |         |        |         |       
|                                                                                  |                                                        | Income tax payments                           |                                                              | $       | 14,920 |         |        | $       | 9,954  |         |        | $       | 42,971 |        
|                                                                                  |                                                        |                                               |                                                              |         |        |         |        |         |       
|                                                                                  | Non cash transactions:                                 |                                               |                                                              |         |        |         |        |         |        |         |        |         |       
|                                                                                  |                                                        | Conversion of trust preferred to common stock |                                                              | $       |       |         |        | $       |       |         |        | $       | 83     |        
|                                                                                  |                                                        |                                               |                                                              |         |        |         |        |         |       

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Note 25  Subsequent Event






116



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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of Disclosure Controls and Procedures


13a-15(e)).


Managements Report on Internal Control Over Financial
Reporting




Internal
Control  Integrated Framework


10-K.


Changes in Internal Control Over Financial Reporting


13a-15(f) 15d-15(f)









|         |                  
|-------- | -----------------
|Item 9B. | Other Information





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PART III







|         |                                                    
|-------- | ---------------------------------------------------
|Item 10. | Directors and Executive Officers of the Corporation

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 attached 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 and Risk Management Committee Charter, which is
    Appendix A to our Proxy Statement.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | 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






Item 14. Principal Accountants Fees and
Services.




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PART IV







|         |                                        
|-------- | ---------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules







| |                                                            
| | -----------------------------------------------------------
| | Management Report on Responsibility for Financial Reporting
|
| | Report of Independent Registered Public Accounting Firm    
|
| | Irwin Financial Corporation and Subsidiaries               



| |                                                              
| | -------------------------------------------------------------
| | Consolidated Balance Sheets for the years ended 2005 and 2004



| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | Consolidated Statements of Income for the years ended 2005, 2004
    and 2003                          
|
| | Consolidated Statements of Changes in Shareholders Equity
    for the years ended 2005, 2004, and 2003
|
| | Consolidated Statements of Cash Flows for the years ended 2005,
    2004, and 2003                     



| |                                           
| | ------------------------------------------
| | Notes to Consolidated Financial Statements





| |     
| | ----
| | None

10-K


|        |    |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | -- | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|Number  |    | Description of Exhibit
|        |    |                       
|        | 3  | .1                     |  | Restated Articles of Incorporation of Irwin Financial
    Corporation, as amended April 7, 2005. (Incorporated by
    reference to Exhibit 3.1 of Form 10-Q Report for the
    quarter ended March 31, 2005, File No. 001-16691.)                                                                                                                                                                                                                                            
|        | 3  | .2                     |  | Code of By-laws of Irwin Financial Corporation, as amended,
    May 4, 2005. (Incorporated by reference to Exhibit 3.2
    of Form 10-Q Report for the quarter ended June 30,
    2005, File No. 001-16691.)                                                                                                                                                                                                                                                                 
|        | 4  | .1                     |  | Specimen Common Stock Certificate (Incorporated by reference to
    Exhibit 4(a) to Form 10-K report for year ended
    December 31, 1994, File No. 0-06835.)                                                                                                                                                                                                                                                                                                                
|        | 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, 1994, 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.)                                                                                                                                                                                                                                                                           

119



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|        |    |                        |  |                                                                                                                                                                                                                                                                                                                                           
|------- | -- | ---------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|Number  |    | Description of Exhibit
|        |    |                       
|        | 10 | .4                     |  | *Irwin Financial Corporation Amended and Restated 2001 Stock
    Plan. (Incorporated by reference to Exhibit 1 to the
    Corporations proxy statement for its 2004 Annual Meeting,
    filed with the Commission on March 18, 2004, File
    No. 001-16691.)                                                                            
|        | 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.)                                                                                                                      
|        | 10 | .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 Amended and Restated 2001 Stock
    Plan revised August 24, 2005 (Incorporated by reference to
    Exhibit 10.7 of the Corporations 10-Q Report for
    period ended September 30, 2005, File No. 001-16691.)                                                                                               
|        | 10 | .8                     |  | *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 | .9                     |  | *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 | .10                    |  | *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 | .11                    |  | *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 | .12                    |  | *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 | .13                    |  | *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 | .14                    |  | *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 | .15                    |  | *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 | .16                    |  | *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 | .17                    |  | *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 | .18                    |  | *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 | .19                    |  | *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 | .20                    |  | *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 | .21                    |  | *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.)                                                     

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|        |    |                        |  |                                                                                                                                                                                                                                                                                                                                                              
|------- | -- | ---------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|Number  |    | Description of Exhibit
|        |    |                       
|        | 10 | .22                    |  | *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 | .23                    |  | *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 | .24                    |  | *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.)                                                 
|        | 10 | .25                    |  | *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 | .26                    |  | *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 | .27                    |  | *Irwin Financial Corporation Amended and Restated Short Term
    Incentive Plan effective January 1, 2002. (Incorporated by
    reference to Exhibit 3 to the Corporations proxy
    statement for its 2004 Annual Meeting, filed with the Commission
    on March 18, 2004, File No. 001-16691.)                                                           
|        | 10 | .28                    |  | *Irwin Commercial Finance Amended and Restated Short Term
    Incentive Plan. (Incorporated by reference to Exhibit 4 of
    the Corporations proxy statement for its 2004 Annual
    Meeting, filed with the Commission on March 18, 2004, File
    No. 001-16691.)                                                                                        
|        | 10 | .29                    |  | *Irwin Home Equity Amended and Restated Short Term Incentive
    Plan. (Incorporated by reference to Exhibit 5 to 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 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 | .31                    |  | *Irwin Union Bank and Trust Company Amended and Restated Short
    Term Incentive Plan effective January 1, 2002.
    (Incorporated by reference to Exhibit 7 to the
    Corporations proxy statement for its 2004 Annual Meeting,
    filed with the Commission on March 18, 2004, File
    No. 001-16691.)                                                
|        | 10 | .32                    |  | *Irwin Capital Holdings Short Term Incentive Plan effective
    January 1, 2002. (Incorporated by reference to
    Exhibit 10.25 to Form 10-Q Report for period ended
    March 31, 2002, File No. 000-06835.)                                                                                                                                               
|        | 10 | .33                    |  | *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 | .34                    |  | *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 | .35                    |  | *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 | .36                    |  | *Stock Purchase Agreement by and between Onset Holdings Inc. and
    Irwin International Corporation dated December 23, 2005.                                                                                                                                                                                                                                
|        | 10 | .37                    |  | *Shareholder Agreement Termination Agreement by and between
    Irwin Commercial Finance Canada Corporation and Irwin
    International Corporation dated December 23, 2005.                                                                                                                                                                                 
|        | 10 | .38                    |  | *Irwin Commercial Finance Corporation Shareholder Agreement
    dated December 23, 2005.                                                                                                                                                                                                                                                                     

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|        |    |                        |  |                                                                                                                                      
|------- | -- | ---------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|Number  |    | Description of Exhibit
|        |    |                       
|        | 10 | .39                    |  | *Irwin Commercial Finance Corporation 2005 Stock Option
    Agreement Grant of Option to Joseph LaLeggia dated
    December 23, 2005.
|        | 10 | .40                    |  | *Irwin Commercial Finance Corporation 2005 Notice of Stock
    Option Grant to Joseph LaLeggia dated December 23, 2005.              
|        | 10 | .41                    |  | *Irwin Union Bank Amended and Restated Performance Unit Plan                                                                         
|        | 10 | .42                    |  | *Irwin Commercial Finance Amended and Restated Performance Unit
    Plan                                                             
|        | 10 | .43                    |  | *Irwin Home Equity Corporation Performance Unit Plan                                                                                 
|        | 10 | .44                    |  | *First Amendment to Limited Liability Company Agreement of Irwin
    Ventures LLC                                                    
|        | 10 | .45                    |  | *Second Amendment to Limited Liability Company Agreement of
    Irwin Ventures Co-Investment Fund LLC                                
|        | 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.                                                                            
|        | 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

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SIGNATURES






| |                            
| | ---------------------------
| | IRWIN FINANCIAL CORPORATION



| |     |                      
| | --- | ---------------------
| | By: | /s/ William I. Miller

| |                                                  
| | -------------------------------------------------
| |                                                  
| | William I. Miller                                
| | Chairman of the Board and Chief Executive Officer

10-K


|                                                 |  |                                                                                              |  |               |  | 
|------------------------------------------------ |  | -------------------------------------------------------------------------------------------- |  | ------------- |  | 
|Signature                                        |  | Capacity with Corporation                                                                    |  | Date         
|                                                 |  |                                                                                              |  |              
|                                                
|/s/ Sally A. DeanSally A. Dean                   |  | Director                                                                                     |  | March 3, 2006
|                                                
|/s/ David W. GoodrichDavid W. Goodrich           |  | Director                                                                                     |  | March 3, 2006
|                                                
|/s/ R. David HooverR. David Hoover               |  | Director                                                                                     |  | March 3, 2006
|                                                
|/s/ William H. KlingWilliam H. Kling             |  | Director                                                                                     |  | March 3, 2006
|                                                
|/s/ Brenda J.
    LauderbackBrenda J. Lauderback |  | Director                                                                                     |  | March 3, 2006
|                                                
|/s/ John C. McGinty, JrJohn C. McGinty, Jr       |  | Director                                                                                     |  | March 3, 2006
|                                                
|                                                
|/s/ William I. MillerWilliam I. Miller           |  | Director, Chairman of the Board
    and Chief Executive Officer(principal executive officer) |  | March 3, 2006
|                                                
|/s/ Lance R. OddenLance R. Odden                 |  | Director                                                                                     |  | March 3, 2006
|                                                
|/s/ Theodore M. SolsoTheodore M. Solso           |  | Director                                                                                     |  | March 3, 2006
|                                                
|/s/ Marita ZuraitisMarita Zuraitis               |  | Director                                                                                     |  | March 3, 2006
|                                                
|                                                
|/s/ Gregory F. EhlingerGregory F. Ehlinger       |  | Senior Vice President and Chief
    Financial Officer(principal financial officer)           |  | March 3, 2006
|                                                
|                                                
|/s/ Jody A. LittrellJody A. Littrell             |  | Vice President and Controller(principal accounting officer)                                  |  | March 3, 2006

123