##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 (Mark One)þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period endedMarch 31, 2006o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to.
 Commission File Number: 0-6835
 IRWIN FINANCIAL CORPORATION
 (Exact Name of Corporation as Specified in its Charter)
 Indiana
    
    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)
  R £
  £ R £
  £ R




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##### 



FORM 10-Q
 TABLE OF CONTENTS
  
 PAGENO.PART I
    
    FINANCIAL INFORMATIONItem 1
    
    Financial Statements
    
    3Item 2
    
    Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    20Item 3
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    57Item 4
    
    Controls and Procedures
    
    57PART II
    
    OTHER INFORMATIONItem 1
    
    Legal Proceedings
    
    57Item 6
    
    Exhibits
    
    59Signatures
    
    62302 Certification of Chief Executive Officer302 Certification of Chief Financial Officer906 Certification of Chief Executive Officer906 Certification of Chief Financial Officer
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION.
 
 Item 1. Financial Statements.
 IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
 March 31,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Assets:Cash and cash equivalents
    
    $
    143,942
    
    
    $
    155,486Interest-bearing deposits with financial institutions
    
    
    51,813
    
    
    
    43,150Residual interests
    
    
    14,397
    
    
    
    22,116Investment securities- held-to-maturity (Fair value: $4,407
at March 31, 2006 and $4,460 atDecember 31, 2005)
    
    
    4,430
    
    
    
    4,475Investment securities- available-for-sale
    
    
    99,863
    
    
    
    100,296Loans held for sale
    
    
    465,812
    
    
    
    513,554Loans and leases, net of unearned income  Note 3
    
    
    4,705,850
    
    
    
    4,477,943Less: Allowance for loan and lease losses  Note 4
    
    
    (63,923
    )
    
    
    (59,223
    )4,641,927
    
    
    
    4,418,720Servicing assets  Note 5
    
    
    35,575
    
    
    
    34,445Accounts receivable
    
    
    6,941
    
    
    
    9,741Accrued interest receivable
    
    
    21,695
    
    
    
    21,924Premises and equipment
    
    
    30,922
    
    
    
    29,721Other assets
    
    
    65,748
    
    
    
    62,394Assets held for sale  Note 2
    
    
    1,212,617
    
    
    
    1,230,502Total assets
    
    $
    6,795,682
    
    
    $
    6,646,524Liabilities and Shareholders Equity:DepositsNoninterest-bearing
    
    $
    797,348
    
    
    $
    754,778Interest-bearing
    
    
    1,934,030
    
    
    
    1,921,369Certificates of deposit over $100,000
    
    
    1,343,122
    
    
    
    1,222,8464,074,500
    
    
    
    3,898,993Short-term borrowings  Note 6
    
    
    743,160
    
    
    
    997,444Collateralized debt  Note 7
    
    
    914,320
    
    
    
    668,984Other long-term debt  Note 8
    
    
    249,363
    
    
    
    270,160Other liabilities
    
    
    286,646
    
    
    
    298,609Total liabilities
    
    
    6,267,989
    
    
    
    6,134,190Commitments and contingencies  Note 13Shareholders equityPreferred stock, no par value  authorized 4,000,000 shares; none issued
    
    
    
    
    
    
    Common stock, no par value  authorized 40,000,000 shares;
issued 29,714,995 shares as of March 31, 2006 and 29,612,080 as of
December 31, 2005, 993,643, shares in treasury as of December 31, 2005
    
    
    113,249
    
    
    
    112,000Deferred compensation
    
    
    
    
    
    
    (759
    )Accumulated other comprehensive income, net of deferred income tax
benefit of $12
thousand at March 31, 2006 and liability of $71 thousand as of December
31, 2005
    
    
    3,170
    
    
    
    3,448Retained earnings
    
    
    411,274
    
    
    
    418,784527,693
    
    
    
    533,473Less treasury stock, at cost
    
    
    
    
    
    
    (21,139
    )Total shareholders equity
    
    
    527,693
    
    
    
    512,334Total liabilities and shareholders equity
    
    $
    6,795,682
    
    
    $
    6,646,524
  3




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##### Table of Contents



IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
 For the Three Months Ended March 31,2006
    
    
    2005(Dollars in thousands, except per share)Interest income:Loans and leases
    
    $
    97,886
    
    
    $
    65,326Loans held for sale
    
    
    11,406
    
    
    
    8,215Residual interests
    
    
    523
    
    
    
    2,340Investment securities
    
    
    1,327
    
    
    
    1,230Federal funds sold
    
    
    26
    
    
    
    49Total interest income
    
    
    111,168
    
    
    
    77,160Interest expense:Deposits
    
    
    29,680
    
    
    
    14,674Short-term borrowings
    
    
    4,106
    
    
    
    1,431Collateralized debt
    
    
    11,111
    
    
    
    4,315Other long-term debt
    
    
    4,991
    
    
    
    4,250Total interest expense
    
    
    49,888
    
    
    
    24,670Net interest income
    
    
    61,280
    
    
    
    52,490Provision for loan and lease losses  Note 4
    
    
    9,193
    
    
    
    3,480Net interest income after provision for loan and lease losses
    
    
    52,087
    
    
    
    49,010Other income:Loan servicing fees
    
    
    8,108
    
    
    
    9,318Amortization of servicing assets  Note 5
    
    
    (6,476
    )
    
    
    (6,108
    )Recovery (impairment) of servicing assets  Note 5
    
    
    574
    
    
    
    (89
    )Net loan administration income
    
    
    2,206
    
    
    
    3,121Gain from sales of loans
    
    
    2,768
    
    
    
    9,551Trading gains
    
    
    227
    
    
    
    480Derivative gains, net
    
    
    2,768
    
    
    
    102Other
    
    
    5,493
    
    
    
    4,92513,462
    
    
    
    18,179Other expense:Salaries
    
    
    26,531
    
    
    
    28,994Pension and other employee benefits
    
    
    7,773
    
    
    
    7,378Office expense
    
    
    2,094
    
    
    
    1,989Premises and equipment
    
    
    4,995
    
    
    
    5,770Marketing and development
    
    
    668
    
    
    
    1,329Professional fees
    
    
    2,374
    
    
    
    3,410Other
    
    
    7,904
    
    
    
    6,56852,339
    
    
    
    55,438Income before income taxes from continuing operations
    
    
    13,210
    
    
    
    11,751Provision for income taxes
    
    
    4,734
    
    
    
    4,519Net income from continuing operations
    
    
    8,476
    
    
    
    7,232Loss from discontinued operations, net of $6,883 and $6,125 income tax benefit, respectively  Note 2
    
    
    (10,334
    )
    
    
    (9,777
    )Net loss
    
    $
    (1,858
    )
    
    $
    (2,545
    )Earnings per share from continuing operations:  Note 10Basic
    
    $
    0.29
    
    
    $
    0.25Diluted
    
    $
    0.29
    
    
    $
    0.25Earnings per share:  Note 10Basic
    
    $
    (0.06
    )
    
    $
    (0.09
    )Diluted
    
    $
    (0.07
    )
    
    $
    (0.09
    )Dividends per share
    
    $
    0.11
    
    
    $
    0.10
  4




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IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (Unaudited)
For the Three Months Ended March 31, 2006, and 2005
 Accumulated Other Comprehensive IncomeMinimum
    
    
    
    
    
    
    AdditionalRetained
    
    
    Foreign
    
    
    Unrealized Gain/Loss
    
    
    SERP
    
    
    Deferred
    
    
    Paid in
    
    
    Common
    
    
    TreasuryTotal
    
    
    Earnings
    
    
    Currency
    
    
    Securities
    
    
    Derivatives
    
    
    Liability
    
    
    Compensation
    
    
    Capital
    
    
    Stock
    
    
    Stock(Dollars in thousands)Balance at January 1, 2006
    
    $
    512,334
    
    
    $
    418,784
    
    
    $
    3,341
    
    
    $
    (373
    )
    
    $
    754
    
    
    $
    (274
    )
    
    $
    (759
    )
    
    $
    
    
    
    $
    112,000
    
    
    $
    (21,139
    )Net loss
    
    
    (1,858
    )
    
    
    (1,858
    )Unrealized loss on investment
securities net of $79 tax benefit
    
    
    (119
    )
    
    
    
    
    
    
    
    
    
    
    (119
    )Unrealized loss on derivative
net of $4 tax benefit
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )Foreign currency adjustment
    
    
    (153
    )
    
    
    
    
    
    
    (153
    )Other comprehensive income
    
    
    (278
    )Total comprehensive income
    
    
    (2,136
    )Deferred compensation
    
    
    (10
    )
    
    
    (769
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    759Cash dividends
    
    
    (3,268
    )
    
    
    (3,268
    )Tax benefit on stock option exercises
    
    
    319
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    319Stock option expense
    
    
    253
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    253Stock:Purchase of 48,303 shares
    
    
    (950
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (950
    )Sales/conversion of 1,144,861
shares  Note 8
    
    
    21,151
    
    
    
    (1,615
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (572
    )
    
    
    1,249
    
    
    
    22,089Balance at March 31, 2006
    
    $
    527,693
    
    
    $
    411,274
    
    
    $
    3,188
    
    
    $
    (492
    )
    
    $
    748
    
    
    $
    (274
    )
    
    $
    
    
    
    $
    
    
    
    $
    113,249
    
    
    $
    Balance at January 1, 2005
    
    $
    501,185
    
    
    $
    412,027
    
    
    $
    2,648
    
    
    $
    60
    
    
    $
    
    
    
    $
    (254
    )
    
    $
    (660
    )
    
    $
    383
    
    
    $
    112,000
    
    
    $
    (25,019
    )Net loss
    
    
    (2,545
    )
    
    
    (2,545
    )Unrealized loss on investment
securities net of $198 tax benefit
    
    
    (297
    )
    
    
    
    
    
    
    
    
    
    
    (297
    )Foreign currency adjustment
    
    
    (121
    )
    
    
    
    
    
    
    (121
    )Other comprehensive income
    
    
    (418
    )Total comprehensive income
    
    
    (2,963
    )Deferred compensation
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )Cash dividends
    
    
    (2,851
    )
    
    
    (2,851
    )Tax benefit on stock option exercises
    
    
    499
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    499Treasury stock:Purchase of 37,139 shares
    
    
    (908
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (908
    )Sales of 103,791 shares
    
    
    1,278
    
    
    
    (225
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (882
    )
    
    
    
    
    
    
    2,385Balance at March 31, 2005
    
    $
    496,221
    
    
    $
    406,406
    
    
    $
    2,527
    
    
    $
    (237
    )
    
    $
    
    
    
    $
    (254
    )
    
    $
    (679
    )
    
    $
    
    
    
    $
    112,000
    
    
    $
    (23,542
    )
  5




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##### Table of Contents



CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 For the Three Months Ended March 31,2006
    
    
    2005(Dollars in thousands)Income from continuing operations, net of taxes
    
    $
    8,476
    
    
    $
    7,232Loss from discontinued operations, net of taxes
    
    
    (10,334
    )
    
    
    (9,777
    )Net income
    
    
    (1,858
    )
    
    
    (2,545
    )Adjustments to reconcile net income to cash provided (used)
by operating activities:Depreciation, amortization, and accretion, net
    
    
    1,486
    
    
    
    3,109Amortization and impairment of servicing assets
    
    
    15,562
    
    
    
    (5,081
    )Provision for loan and lease losses
    
    
    9,240
    
    
    
    3,291Gain on sale of mortgage servicing assets
    
    
    
    
    
    
    (1,185
    )Gain from sales of loans and loans held for sale
    
    
    (18,117
    )
    
    
    (34,525
    )Originations and purchases of loans held for sale
    
    
    (2,565,909
    )
    
    
    (3,287,612
    )Proceeds from sales and repayments of loans held for sale
    
    
    2,622,218
    
    
    
    3,134,320Proceeds from sale of mortgage servicing assets
    
    
    
    
    
    
    10,171Net decrease in residuals
    
    
    8,383
    
    
    
    4,519Net decrease (increase) in accounts receivable
    
    
    30,036
    
    
    
    (3,510
    )Other, net
    
    
    (28,801
    )
    
    
    (31,231
    )Net cash provided (used) by operating activities
    
    
    72,240
    
    
    
    (210,279
    )Lending and investing activities:Proceeds from maturities/calls of investment securities:Held-to-maturity
    
    
    45
    
    
    
    1,293Available-for-sale
    
    
    913
    
    
    
    Purchase of investment securities:Available-for-sale
    
    
    (692
    )
    
    
    (1,480
    )Net increase in interest-bearing deposits
    
    
    (14,035
    )
    
    
    (21,273
    )Net increase in loans, excluding sales
    
    
    (353,095
    )
    
    
    (57,467
    )Proceeds from sale of loans
    
    
    122,635
    
    
    
    18,400Other, net
    
    
    (2,729
    )
    
    
    (1,234
    )Net cash used by lending and investing activities
    
    
    (246,958
    )
    
    
    (61,761
    )Financing activities:Net increase in deposits
    
    
    175,507
    
    
    
    375,152Net decrease in short-term borrowings
    
    
    (254,284
    )
    
    
    (12,577
    )Proceeds from issuance of long term debt
    
    
    31,500
    
    
    
    Repayments of long-term debt
    
    
    (32,112
    )
    
    
    (3
    )Proceeds from issuance of collateralized borrowings
    
    
    335,384
    
    
    
    35,448Repayments of collateralized borrowings
    
    
    (90,068
    )
    
    
    (67,347
    )Tax benefit on stock option exercises
    
    
    319
    
    
    
    Purchase of treasury stock for employee benefit plans
    
    
    (950
    )
    
    
    (908
    )Proceeds from sale of stock for employee benefit plans
    
    
    1,220
    
    
    
    1,278Dividends paid
    
    
    (3,268
    )
    
    
    (2,851
    )Net cash provided by financing activities
    
    
    163,248
    
    
    
    328,192Effect of exchange rate changes on cash
    
    
    (74
    )
    
    
    484Net (decrease) increase in cash and cash equivalents
    
    
    (11,544
    )
    
    
    56,636Cash and cash equivalents at beginning of period
    
    
    155,486
    
    
    
    97,101Cash and cash equivalents at end of period
    
    $
    143,942
    
    
    $
    153,737Supplemental disclosures of cash flow information:Cash flow during the period:Interest paid
    
    $
    54,685
    
    
    $
    26,436Income taxes paid
    
    $
    4,103
    
    
    $
    2,456Noncash transactions:Liability for loans held for sale eligible for repurchase  Note 1
    
    $
    1,150
    
    
    $
    1,766Other real estate owned
    
    $
    2,103
    
    
    $
    5,177Conversion of trust preferred to common stock
    
    $
    20,184
    
    
    $
    
  6




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Summary of Significant Accounting Policies
 Consolidation:
  Use of Estimates:
 Cash and Cash Equivalents Defined:
 Residual Interests:
 Allowance for Loan and Lease Losses:
  Servicing Assets:
 7




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##### Table of Contents



Incentive Servicing Fees:
 Income Taxes:
 Recent Accounting Developments:
  Reclassifications:
 8




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##### Table of Contents



Note 2  Discontinued Operations
  For the Three Months Ended March 31,2006
    
    
    2005(Dollars in thousands, except per share)Net revenues
    
    $
    9,193
    
    
    $
    25,774Noninterest expense
    
    
    (26,410
    )
    
    
    (41,676
    )Loss before income taxes
    
    
    (17,217
    )
    
    
    (15,902
    )Income taxes
    
    
    6,883
    
    
    
    6,125Net loss from discontinued operations
    
    $
    (10,334
    )
    
    $
    (9,777
    )
 March 31,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands, except per share)Loans held for sale
    
    $
    766,502
    
    
    $
    779,966Loans, net of allowance for loan loss
    
    
    19,046
    
    
    
    20,359Net servicing asset
    
    
    266,955
    
    
    
    261,309Accounts receivable
    
    
    74,656
    
    
    
    101,891Other assets
    
    
    85,458
    
    
    
    66,977Assets held for sale
    
    $
    1,212,617
    
    
    $
    1,230,502
  Note 3  Loans and Leases
  March 31,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Commercial, financial and agricultural
    
    $
    2,118,143
    
    
    $
    2,016,228Real estate-construction
    
    
    368,509
    
    
    
    379,831Real estate-mortgage
    
    
    1,335,664
    
    
    
    1,232,958Consumer
    
    
    27,462
    
    
    
    31,718Commercial financingFranchise financing
    
    
    491,847
    
    
    
    462,413Domestic leasing
    
    
    255,871
    
    
    
    237,968Canadian leasing
    
    
    320,246
    
    
    
    313,581Unearned
incomeFranchise financing
    
    
    (137,353
    )
    
    
    (125,474
    )Domestic leasing
    
    
    (35,911
    )
    
    
    (33,267
    )Canadian leasing
    
    
    (38,628
    )
    
    
    (38,013
    )Total
    
    $
    4,705,850
    
    
    $
    4,477,943
 9




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##### Table of Contents



Note 4  Allowance for Loan and Lease Losses
  March 31,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Balance at beginning of year
    
    $
    59,223
    
    
    $
    43,441Provision for loan and lease losses
    
    
    9,193
    
    
    
    27,307Charge-offs
    
    
    (7,257
    )
    
    
    (20,201
    )Recoveries
    
    
    2,757
    
    
    
    8,960Reduction due to reclassification or sale of loans
    
    
    (123
    )
    
    
    (403
    )Foreign currency adjustment
    
    
    130
    
    
    
    119Balance at end of period
    
    $
    63,923
    
    
    $
    59,223
 Note 5  Servicing Assets
  March 31,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Beginning balance
    
    $
    295,754
    
    
    $
    367,032Additions
    
    
    22,338
    
    
    
    74,731Amortization
    
    
    (19,876
    )
    
    
    (100,322
    )Recovery of impairment
    
    
    4,314
    
    
    
    19,625Reduction for servicing sales
    
    
    
    
    
    
    (65,312
    )302,530
    
    
    
    295,754Less servicing asset from discontinued operations
    
    
    266,955
    
    
    
    261,309Mortgage servicing asset from continuing operations
    
    $
    35,575
    
    
    $
    34,445
  March 31,
    
    
    December 31,2006
    
    
    2005Balance at beginning of year
    
    $
    27,243
    
    
    $
    54,134Recovery of impairment
    
    
    (4,314
    )
    
    
    (19,625
    )Reclass for sales of servicing and clean up calls
    
    
    (13
    )
    
    
    (154
    )Other than temporary impairment (1)
    
    
    
    
    
    
    (7,112
    )Balance at end of period
    
    
    22,916
    
    
    
    27,243Less valuation allowance from discontinued operations
    
    
    22,351
    
    
    
    26,091Valuation allowance from continuing operations
    
    $
    565
    
    
    $
    1,152
 
 (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 potentially reduced recovery of impairment
in future periods.
 10




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##### Table of Contents



Note 6  Short-Term Borrowings
  March 31,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Federal Home Loan Bank borrowings
    
    $
    271,780
    
    
    $
    641,785Drafts payable related to mortgage loan closings
    
    
    72,651
    
    
    
    64,278Lines of credit and other
    
    
    125,429
    
    
    
    1,081Federal funds
    
    
    273,300
    
    
    
    290,300Total
    
    $
    743,160
    
    
    $
    997,444Weighted average interest rate
    
    
    4.20
    %
    
    
    3.05
    %
    Note 7  Collateralized Debt
  11




---



##### Table of Contents



WeightedAverageInterest Rate atMarch 31,
    
    March 31,
    
    December 31,Maturity
    
    2006
    
    2006
    
    2005(Dollars in thousands)Commercial finance line of businessDomestic asset backed note
    
    5/2010
    
    
    4.5
    
    
    $
    11,075
    
    
    $
    13,600Canadian asset backed notes:Note 1
    
    revolving
    
    
    5.1
    
    
    
    37,282
    
    
    
    32,385Note 2
    
    4/2010
    
    
    3.9
    
    
    
    154,500
    
    
    
    155,544Note 3
    
    10/2009
    
    
    4.5
    
    
    
    12,965
    
    
    
    14,839Home equity line of business2004-1 asset backed notes:Variable rate senior note
    
    12/2024-12/2034
    
    
    4.9
    
    
    
    105,588
    
    
    
    132,692Variable rate subordinate note
    
    12/2034
    
    
    5.8
    
    
    
    24,775
    
    
    
    24,7752005-1 asset backed notes:Variable rate senior note
    
    6/2025-6/2035
    
    
    4.8
    
    
    
    113,116
    
    
    
    138,244Fixed rate senior note
    
    6/2035
    
    
    5.0
    
    
    
    94,129
    
    
    
    94,129Variable rate subordinate note
    
    6/2035
    
    
    6.4
    
    
    
    10,785
    
    
    
    10,785Fixed rate subordinate note
    
    6/2035
    
    
    5.6
    
    
    
    52,127
    
    
    
    52,127Unamortized premium/discount
    
    
    
    
    
    
    
    
    (120
    )
    
    
    (136
    )2006-1 asset backed notes:Variable rate senior note
    
    9/2035
    
    
    4.8
    
    
    
    177,300
    
    
    Fixed rate senior note
    
    9/2035
    
    
    5.5
    
    
    
    96,561
    
    
    Fixed rate lockout senior note
    
    9/2035
    
    
    5.6
    
    
    
    24,264
    
    
    Unamortized premium/discount
    
    
    
    
    
    
    
    
    (27
    )
    
    Total
    
    
    
    
    
    
    
    $
    914,320
    
    
    $
    668,984
 Note 8  Long-term Debt
  12




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##### Table of Contents



Note 9  Employee Retirement Plans
  For the Three Months Ended March 31,2006
    
    2005(Dollars in thousands)Service cost
    
    $
    995
    
    
    $
    681Interest cost
    
    
    487
    
    
    
    416Expected return on plan assets
    
    
    (603
    )
    
    
    (446
    )Amortization of prior service cost
    
    
    9
    
    
    
    9Amortization of actuarial loss
    
    
    260
    
    
    
    164Net periodic benefit cost
    
    $
    1,148
    
    
    $
    824
  Note 10  Earnings Per Share
  DilutedBasic Earnings
    
    Effect of
    
    EarningsPer Share
    
    Stock Options
    
    Per Share(Dollars in thousands, except per share amounts)Period ended March 31, 2006Net income available to common shareholders:From Continuing Operations
    
    $
    8,476
    
    
    $
    (70
    )
    
    $
    8,406From Discontinued Operations
    
    
    (10,334
    )
    
    
    
    
    
    
    (10,334
    )Total Net Income for All Operations
    
    
    (1,858
    )
    
    
    (70
    )
    
    
    (1,928
    )Shares
    
    
    28,939
    
    
    
    208
    
    
    
    29,147Per-share from Continuing Operations
    
    $
    0.29
    
    
    $
    
    
    
    $
    0.29Per-share amount for All Operations
    
    $
    (0.06
    )
    
    $
    (0.01
    )
    
    $
    (0.07
    )Period ended March 31, 2005Net income available to common shareholders:From Continuing Operations
    
    $
    7,232
    
    
    $
    
    
    
    $
    7,232From Discontinued Operations
    
    
    (9,777
    )
    
    
    
    
    
    
    (9,777
    )Total Net Income for All Operations
    
    
    (2,545
    )
    
    
    
    
    
    
    (2,545
    )Shares
    
    
    28,462
    
    
    
    329
    
    
    
    28,791Per-share from Continuing Operations
    
    $
    0.25
    
    
    $
    
    
    
    $
    0.25Per-share amount for All Operations
    
    $
    (0.09
    )
    
    $
    
    
    
    $
    (0.09
    )
  Note 11  Equity Based Compensation
  13




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##### Table of Contents



2006WeightedNumber of
    
    
    average grantShares
    
    
    date fair valueUnvested at the
beginning of the year
    
    
    41,726
    
    
    $
    22.45Awarded
    
    
    6,537
    
    
    
    20.65Vested
    
    
    
    
    
    
    Forfeited
    
    
    (515
    )
    
    
    25.84Unvested at the end of the period
    
    
    47,748
    
    
    
    22.17
   For
the Three Months EndedMarch 31,2006
    
    
    2005Risk-free interest rates
    
    
    4.36
    %
    
    
    3.94
    %Dividend yield
    
    
    1.87
    
    
    
    1.75Expected volatility
    
    
    35
    
    
    
    35Expected lives (in years)
    
    
    6
    
    
    
    6
 14




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##### Table of Contents



2006WeightedWeighted
    
    averageaverage
    
    remaining
    
    Aggregate IntrinsicNumber of
    
    exercise
    
    contractual
    
    Value as ofShares
    
    price
    
    term
    
    3/31/2006Outstanding at the
beginning of the year
    
    
    2,441,771
    
    
    $
    20.55Granted
    
    
    8,200
    
    
    
    21.42Exercised
    
    
    (109,460
    )
    
    
    12.53CancelledForfeited
    
    
    (8,701
    )
    
    
    20.46Expired
    
    
    (3,590
    )
    
    
    24.60Outstanding
at the end of the period
    
    
    2,328,220
    
    
    
    20.92
    
    
    
    6.26
    
    
    $
    2,096,013Exercisable at the end of the period
    
    
    2,044,479
    
    
    
    20.95
    
    
    
    5.87
    
    
    $
    2,096,013
  For the Three MonthsEnded March 31,2006Impact ofEquity-BasedAs Reported
    
    Compensation(Dollars in thousands)Net income from Continuing Operations before taxes
    
    $
    13,210
    
    
    $
    (384
    )Net income from Continuing Operations
    
    
    8,476
    
    
    
    (230
    )Net loss before taxes
    
    
    (4,007
    )
    
    
    (403
    )Net loss
    
    
    (1,858
    )
    
    
    (242
    )Basic earnings (loss) per shareFrom Continuing Operations
    
    
    0.29
    
    
    
    (0.01
    )From All Operations
    
    
    (0.06
    )
    
    
    (0.01
    )Diluted earnings (loss) per shareFrom Continuing Operations
    
    
    0.29
    
    
    
    (0.01
    )From All Operations
    
    
    (0.07
    )
    
    
    (0.01
    )
 15




---



##### Table of Contents



For the Three MonthsEnded March 31,2005(Dollars in thousands)Net income from continuing operations as reported
    
    $
    7,232Equity based compensation expense included in net
earnings, net of tax
    
    
    81Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects
    
    
    (612
    )Net income from continuing operations pro forma
    
    
    6,701Net loss from discontinued operations
    
    
    (9,777
    )Pro forma net loss
    
    $
    (3,076
    )Basic earnings per share from continuing operationsAs reported
    
    $
    0.25Pro forma
    
    $
    0.24Basic loss per shareAs reported
    
    $
    (0.09
    )Pro forma
    
    $
    (0.11
    )Diluted earnings per share continuing operationsAs reported
    
    $
    0.25Pro forma
    
    $
    0.23Diluted loss per shareAs reported
    
    $
    (0.09
    )Pro forma
    
    $
    (0.11
    )
 Note 12  Industry Segment Information
  16




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##### Table of Contents



ConsolidatedCommercial
    
    Commercial
    
    Home Equity
    
    Mortgage
    
    
    
    
    
    
    
    
    
    Discontinued
    
    ContinuingBanking
    
    Finance
    
    Lending
    
    Banking
    
    Other
    
    Consolidated
    
    Operations
    
    Operations(Dollars in thousands)For the Three
Months Ended March 31, 2006Net interest income
    
    $
    26,511
    
    
    $
    8,910
    
    
    $
    26,837
    
    
    $
    12,132
    
    
    $
    (15,069
    )
    
    $
    59,321
    
    
    $
    7,234
    
    
    $
    52,087Intersegment interest
    
    
    1,875
    
    
    
    (382
    )
    
    
    (9,721
    )
    
    
    (4,898
    )
    
    
    13,126
    
    
    
    
    
    
    
    
    
    
    
    Other revenue
    
    
    4,186
    
    
    
    2,149
    
    
    
    7,387
    
    
    
    1,529
    
    
    
    170
    
    
    
    15,421
    
    
    
    1,959
    
    
    
    13,462Intersegment revenues
    
    
    82
    
    
    
    
    
    
    
    
    
    
    
    430
    
    
    
    (512
    )
    
    
    
    
    
    
    
    
    
    
    Total net revenues
    
    
    32,654
    
    
    
    10,677
    
    
    
    24,503
    
    
    
    9,193
    
    
    
    (2,285
    )
    
    
    74,742
    
    
    
    9,193
    
    
    
    65,549Other expense
    
    
    20,787
    
    
    
    5,672
    
    
    
    21,854
    
    
    
    26,354
    
    
    
    4,082
    
    
    
    78,749
    
    
    
    26,410
    
    
    
    52,339Intersegment expenses
    
    
    684
    
    
    
    265
    
    
    
    917
    
    
    
    56
    
    
    
    (1,922
    )
    
    
    
    
    
    
    
    
    
    
    Income (loss) before taxes
    
    
    11,183
    
    
    
    4,740
    
    
    
    1,732
    
    
    
    (17,217
    )
    
    
    (4,445
    )
    
    
    (4,007
    )
    
    
    (17,217
    )
    
    
    13,210Income taxes
    
    
    4,421
    
    
    
    1,849
    
    
    
    698
    
    
    
    (6,883
    )
    
    
    (2,234
    )
    
    
    (2,149
    )
    
    
    (6,883
    )
    
    
    4,734Net income (loss)
    
    $
    6,762
    
    
    $
    2,891
    
    
    $
    1,034
    
    
    $
    (10,334
    )
    
    $
    (2,211
    )
    
    $
    (1,858
    )
    
    $
    (10,334
    )
    
    $
    8,476Assets at March 31, 2006
    
    $
    3,189,066
    
    
    $
    875,405
    
    
    $
    1,651,316
    
    
    $
    1,280,237
    
    
    $
    (199,182
    )
    
    $
    6,796,842For the Three
Months Ended March 31, 2005Net interest income
    
    $
    24,392
    
    
    $
    5,937
    
    
    $
    25,011
    
    
    $
    9,806
    
    
    $
    (8,224
    )
    
    $
    56,922
    
    
    $
    7,912
    
    
    $
    49,010Intersegment interest
    
    
    (832
    )
    
    
    (435
    )
    
    
    (4,949
    )
    
    
    (1,894
    )
    
    
    8,110
    
    
    
    
    
    
    
    
    
    
    
    Other revenue
    
    
    4,315
    
    
    
    1,908
    
    
    
    12,524
    
    
    
    17,838
    
    
    
    (544
    )
    
    
    36,041
    
    
    
    17,862
    
    
    
    18,179Intersegment revenues
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    (90
    )
    
    
    
    
    
    
    
    
    
    
    Total net revenues
    
    
    27,941
    
    
    
    7,410
    
    
    
    32,586
    
    
    
    25,774
    
    
    
    (748
    )
    
    
    92,963
    
    
    
    25,774
    
    
    
    67,189Other expense
    
    
    18,326
    
    
    
    5,993
    
    
    
    28,440
    
    
    
    41,637
    
    
    
    2,718
    
    
    
    97,114
    
    
    
    41,676
    
    
    
    55,438Intersegment expenses
    
    
    429
    
    
    
    193
    
    
    
    727
    
    
    
    841
    
    
    
    (2,190
    )
    
    
    
    
    
    
    
    
    
    
    Income (loss) before taxes
    
    
    9,186
    
    
    
    1,224
    
    
    
    3,419
    
    
    
    (16,704
    )
    
    
    (1,276
    )
    
    
    (4,151
    )
    
    
    (15,902
    )
    
    
    11,751Income taxes
    
    
    3,717
    
    
    
    528
    
    
    
    1,374
    
    
    
    (6,446
    )
    
    
    (779
    )
    
    
    (1,606
    )
    
    
    (6,125
    )
    
    
    4,519Net income (loss)
    
    $
    5,469
    
    
    $
    696
    
    
    $
    2,045
    
    
    $
    (10,258
    )
    
    $
    (497
    )
    
    $
    (2,545
    )
    
    $
    (9,777
    )
    
    $
    7,232Assets at March 31, 2005
    
    $
    2,894,662
    
    
    $
    657,679
    
    
    $
    1,055,478
    
    
    $
    1,368,894
    
    
    $
    (424,932
    )
    
    $
    5,551,781
 
 (1)
    
    The amounts in the table above do not perfectly correspond with the amounts in our
line of business reporting of the mortgage banking line of business for 2005. On the income
statement accounts, the 2005 mortgage banking segment results include a management fee charged by
the parent to the mortgage banking business totaling $0.5 million, net of tax. Under Emerging
Issues Task Force statement number 87-24 (EITF 87-24), corporate overhead charges must be
reclassified out of the discontinued operations presentation. As a result of EITF 87-24, there
were no management fee charges to the mortgage bank during 2006. In addition, the assets held for
sale category above does not agree with the mortgage banks total assets under segment reporting
as certain assets will not or cannot be included in the future sale including Federal Home Loan
Bank of Indianapolis (FHLBI) stock, FHLBI lender risk account and cash. Note 13  Commitments and Contingencies
 Culpepper v. Inland Mortgage Corporation
 th
  17




---



##### Table of Contents



th th
  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 Hobson
 Kossler v. Community Bank of Northern Virginia Kossler Kossler Kossler
 Hobson Kossler Hobson Hobson
 Hobson Kossler
 18




---



##### Table of Contents



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. Exquisite Caterers Exquisite Caterers Exquisite Caterers Exquisite
Caterers
  19




---



##### Table of Contents



Putkowski v. Irwin Home Equity Corporation and Irwin Union Bank and Trust Company
 th
 White v. Irwin Union Bank and Trust Company and Irwin Home Equity Corporation
 th
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 About Forward-looking Statements
   20




---



##### Table of Contents




    
    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 management and 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 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 sources as needed;
    
    competition from other financial service providers for experienced managers as well as for customers;
    
    changes in the value of companies in which we invest;
    
    changes in variable compensation plans related to the performance and valuation of lines
of business where we tie compensation systems to line-of-business performance;
    
    unanticipated outcomes in litigation;
 21




---



##### Table of Contents




    
    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,
including sale or discontinuance of operations 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 creates 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 capital
across 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, building a diversified portfolio where demand and credit quality fluctuate
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.
  22




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##### Table of Contents



Critical Accounting Policies
  Consolidated Overview
  For the Three Months EndedMarch 31,2006
    
    2005
    
    % ChangeNet income from continuing operations(thousands)
    
    $
    8,476
    
    
    $
    7,232
    
    
    
    17.2
    %Net income (thousands)
    
    
    (1,858
    )
    
    
    (2,545
    )
    
    
    27.0Basic earnings per share from continuing operations
    
    
    0.29
    
    
    
    0.25
    
    
    
    16.0Basic earnings per share
    
    
    (0.06
    )
    
    
    (0.09
    )
    
    
    33.3Diluted earnings per share from continuing operations
    
    
    0.29
    
    
    
    0.25
    
    
    
    16.0Diluted earnings per share
    
    
    (0.07
    )
    
    
    (0.09
    )
    
    
    22.2Return on average equity from continuing operations
    
    
    6.6
    %
    
    
    5.8
    %Return on average assets from continuing operations
    
    
    0.5
    %
    
    
    0.5
    %
 Consolidated Income Statement Analysis
 Net Income From Continuing Operations
  Net Interest Income From Continuing Operations
  23




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##### Table of Contents



For the Three Months Ended March 31,2006
    
    
    2005Annualized
    
    
    
    
    
    
    
    
    
    
    AnnualizedAverage
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(Dollars in thousands)AssetsInterest-earning assets:Interest-bearing deposits with financial institutions
    
    $
    78,254
    
    
    $
    617
    
    
    
    3.20
    %
    
    $
    64,886
    
    
    $
    278
    
    
    
    1.74
    %Federal funds sold
    
    
    2,774
    
    
    
    26
    
    
    
    3.80
    %
    
    
    8,143
    
    
    
    49
    
    
    
    2.44
    %Residual interests
    
    
    18,797
    
    
    
    664
    
    
    
    14.33
    %
    
    
    53,201
    
    
    
    2,340
    
    
    
    17.84
    %Investment securities(1)
    
    
    107,016
    
    
    
    868
    
    
    
    3.29
    %
    
    
    108,054
    
    
    
    1,437
    
    
    
    5.39
    %Loans held for sale
    
    
    1,236,739
    
    
    
    25,228
    
    
    
    8.27
    %
    
    
    1,013,964
    
    
    
    18,571
    
    
    
    7.43
    %Loans and leases, net of unearned income(2)
    
    
    4,628,111
    
    
    
    98,095
    
    
    
    8.60
    %
    
    
    3,474,331
    
    
    
    65,491
    
    
    
    7.64
    %Total interest earning assets
    
    
    6,071,691
    
    
    $
    125,498
    
    
    
    8.38
    %
    
    
    4,722,579
    
    
    $
    88,166
    
    
    
    7.57
    %Noninterest-earning assets:Cash and due from banks
    
    
    106,670
    
    
    
    
    
    
    
    
    
    
    
    102,426Premises and equipment, net
    
    
    31,485
    
    
    
    
    
    
    
    
    
    
    
    30,003Other assets
    
    
    516,073
    
    
    
    
    
    
    
    
    
    
    
    602,884Less allowance for loan and lease losses
    
    
    (61,960
    )
    
    
    
    
    
    
    
    
    
    
    (44,955
    )Total assets
    
    $
    6,663,959
    
    
    
    
    
    
    
    
    
    
    $
    5,412,937Liabilities and Shareholders EquityInterest-bearing liabilities:Money market checking
    
    $
    428,978
    
    
    $
    2,489
    
    
    
    2.35
    %
    
    $
    469,674
    
    
    $
    2,120
    
    
    
    1.83
    %Money market savings
    
    
    1,143,100
    
    
    
    10,771
    
    
    
    3.82
    %
    
    
    1,113,345
    
    
    
    5,499
    
    
    
    2.00
    %Regular savings
    
    
    137,560
    
    
    
    548
    
    
    
    1.62
    %
    
    
    61,728
    
    
    
    210
    
    
    
    1.38
    %Time deposits
    
    
    1,529,061
    
    
    
    15,874
    
    
    
    4.21
    %
    
    
    923,920
    
    
    
    6,845
    
    
    
    3.00
    %Short-term borrowings
    
    
    718,464
    
    
    
    10,156
    
    
    
    5.73
    %
    
    
    290,668
    
    
    
    3,108
    
    
    
    4.34
    %Collateralized debt
    
    
    892,633
    
    
    
    11,111
    
    
    
    5.05
    %
    
    
    520,738
    
    
    
    4,315
    
    
    
    3.36
    %Other long-term debt
    
    
    264,723
    
    
    
    5,988
    
    
    
    9.17
    %
    
    
    270,171
    
    
    
    5,856
    
    
    
    8.79
    %Total interest-bearing liabilities
    
    $
    5,114,519
    
    
    $
    56,937
    
    
    
    4.51
    %
    
    $
    3,650,244
    
    
    $
    27,953
    
    
    
    3.11
    %Noninterest-bearing liabilities:Demand deposits
    
    
    744,113
    
    
    
    
    
    
    
    
    
    
    
    966,653Other liabilities
    
    
    286,812
    
    
    
    
    
    
    
    
    
    
    
    292,407Shareholders equity
    
    
    518,515
    
    
    
    
    
    
    
    
    
    
    
    503,633Total liabilities and shareholders equity
    
    $
    6,663,959
    
    
    
    
    
    
    
    
    
    
    $
    5,412,937Net interest income
    
    
    
    
    
    $
    68,561
    
    
    
    
    
    
    
    
    
    
    $
    60,213Net interest income to average
interest earning assets
    
    
    
    
    
    
    
    
    
    
    4.58
    %
    
    
    
    
    
    
    
    
    
    
    5.17
    %Net interest income from discontinued operations
    
    
    
    
    
    
    7,281
    
    
    
    
    
    
    
    
    
    
    
    7,723Net interest income from continuing operations
    
    
    
    
    
    $
    61,280
    
    
    
    
    
    
    
    
    
    
    $
    52,490
 
 (1)
    
    We do not show interest income on a tax equivalent basis because it is immaterial.(2)
    
    For purposes of these computations, nonaccrual loans are included in daily average loan amounts
outstanding. 24




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##### Table of Contents



Provision for Loan and Lease Losses From Continuing Operations
  Noninterest Income From Continuing Operations
  Noninterest Expense From Continuing Operations
  Income Tax Provision From Continuing Operations
  Consolidated Balance Sheet Analysis
  Investment Securities
  March 31,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)U.S. Treasury and government obligations
    
    $
    
    
    
    $
    Obligations of states and political subdivisions
    
    
    3,544
    
    
    
    3,544Mortgage-backed securities
    
    
    27,719
    
    
    
    28,331Other
    
    
    73,030
    
    
    
    72,896Total
    
    $
    104,293
    
    
    $
    104,771
  Loans Held For Sale
  25




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##### Table of Contents



Loans and Leases
  March 31,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Commercial, financial and agricultural
    
    $
    2,118,143
    
    
    $
    2,016,228Real estate-construction
    
    
    368,509
    
    
    
    379,831Real estate-mortgage
    
    
    1,335,664
    
    
    
    1,232,958Consumer
    
    
    27,462
    
    
    
    31,718Commercial financingFranchise financing
    
    
    491,847
    
    
    
    462,413Domestic leasing
    
    
    255,871
    
    
    
    237,968Canadian leasing
    
    
    320,246
    
    
    
    313,581Unearned incomeFranchise financing
    
    
    (137,353
    )
    
    
    (125,474
    )Domestic leasing
    
    
    (35,911
    )
    
    
    (33,267
    )Canadian leasing
    
    
    (38,628
    )
    
    
    (38,013
    )Total
    
    $
    4,705,850
    
    
    $
    4,477,943
 Allowance for Loan and Lease Losses
  March 31,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Balance at beginning of year
    
    $
    59,223
    
    
    $
    43,441Provision for loan and lease losses
    
    
    9,193
    
    
    
    27,307Charge-offs
    
    
    (7,257
    )
    
    
    (20,201
    )Recoveries
    
    
    2,757
    
    
    
    8,960Reduction due to reclassification or sale of loans
    
    
    (123
    )
    
    
    (403
    )Foreign currency adjustment
    
    
    130
    
    
    
    119Balance at end of period
    
    $
    63,923
    
    
    $
    59,223
 Assets Held for Sale
  Deposits
  26




---



##### Table of Contents



Short-Term Borrowings
    Collateralized and Other Long-Term Debt
   Capital
  27




---



##### Table of Contents



March 31,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Tier 1 capital
    
    $
    699,523
    
    
    $
    675,316Tier 2 capital
    
    
    132,596
    
    
    
    154,128Total risk-based capital
    
    $
    832,119
    
    
    $
    829,444Risk-weighted assets
    
    $
    6,443,860
    
    
    $
    6,317,797Risk-based ratios:Tier 1 capital
    
    
    10.9
    %
    
    
    10.7
    %Total capital
    
    
    12.9
    
    
    
    13.1Tier 1 leverage ratio
    
    
    10.5
    
    
    
    10.3Ending shareholders equity to assets
    
    
    7.8
    
    
    
    7.7Average shareholders equity to assets
    
    
    7.8
    
    
    
    8.0
  Cash Flow Analysis
  Earnings Outlook
  Earnings by Line of Business
  
    
    Commercial Banking
    
    Commercial Finance
    
    Home Equity Lending
    
    Mortgage Banking
 
 28




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##### Table of Contents



Three Months EndedMarch 31,2006
    
    
    2005(Dollars in thousands)Net income (loss):Commercial Banking
    
    $
    6,762
    
    
    $
    5,469Commercial Finance
    
    
    2,891
    
    
    
    696Home Equity Lending
    
    
    1,034
    
    
    
    2,045Mortgage Banking
    
    
    (10,334
    )
    
    
    (10,258
    )Other (including consolidating entries)
    
    
    (2,211
    )
    
    
    (497
    )Net loss
    
    
    (1,858
    )
    
    
    (2,545
    )Discontinued Operations
    
    
    (10,334
    )
    
    
    (9,777
    )Net Income from Continuing Operations
    
    $
    8,476
    
    
    $
    7,232
 Commercial Banking
  Three Months Ended March 31,2006
    
    
    2005(Dollars in thousands)Selected Income Statement Data:Interest income
    
    $
    53,485
    
    
    $
    38,048Interest expense
    
    
    (23,623
    )
    
    
    (13,488
    )Net interest income
    
    
    29,862
    
    
    
    24,560Provision for loan and lease losses
    
    
    (1,476
    )
    
    
    (1,000
    )Other income
    
    
    4,268
    
    
    
    4,381Total net revenue
    
    
    32,654
    
    
    
    27,941Operating expense
    
    
    (21,471
    )
    
    
    (18,755
    )Income before taxes
    
    
    11,183
    
    
    
    9,186Income taxes
    
    
    (4,421
    )
    
    
    (3,717
    )Net income
    
    $
    6,762
    
    
    $
    5,469
 March 31,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Selected Balance Sheet Data at End of Period:Assets
    
    $
    3,189,066
    
    
    $
    3,162,398Securities and short-term investments
    
    
    282,665
    
    
    
    340,811

(1)Loans and leases
    
    
    2,766,534
    
    
    
    2,680,220Allowance for loan and lease losses
    
    
    (25,554
    )
    
    
    (24,670
    )Deposits
    
    
    2,903,327
    
    
    
    2,797,635Shareholders equity
    
    
    201,485
    
    
    
    195,381Daily Averages:Assets
    
    $
    3,143,656
    
    
    $
    3,025,717Securities and short-term investments
    
    
    311,128
    
    
    
    453,361Loans and leases
    
    
    2,728,127
    
    
    
    2,460,560Allowance for loan and lease losses
    
    
    (25,351
    )
    
    
    (23,656
    )Deposits
    
    
    2,850,881
    
    
    
    2,766,289Shareholders equity
    
    
    197,721
    
    
    
    157,545
 
 (1)
    
    Includes $361 million of inter-company investments at December 31, 2005 that are eliminated in
consolidation and are the result of excess liquidity at the commercial banking line of business due
to deposit growth in excess of its asset deployment needs. The funds were redeployed in earning
assets at our other lines of business. There were no such inter-company investments at March 31,
2006. 29




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##### Table of Contents



Overview
   March 31,
    
    
    December 31,2006
    
    
    2005Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedLoans
    
    
    Percent
    
    
    Average
    
    
    Loans
    
    
    Percent
    
    
    AverageMarkets
    
    Outstanding
    
    
    of Total
    
    
    Coupon
    
    
    Outstanding
    
    
    of Total
    
    
    Coupon(Dollars in thousands)Indianapolis
    
    $
    552,555
    
    
    
    20.0
    %
    
    
    7.3
    %
    
    $
    560,775
    
    
    
    20.9
    %
    
    
    7.0
    %Western and Central Michigan
    
    
    531,797
    
    
    
    19.2
    
    
    
    7.5
    
    
    
    516,444
    
    
    
    19.3
    
    
    
    7.1Southern Indiana
    
    
    460,480
    
    
    
    16.6
    
    
    
    6.8
    
    
    
    454,236
    
    
    
    16.9
    
    
    
    6.5Phoenix
    
    
    465,840
    
    
    
    16.8
    
    
    
    7.7
    
    
    
    447,548
    
    
    
    16.7
    
    
    
    7.6Las Vegas
    
    
    112,580
    
    
    
    4.1
    
    
    
    7.8
    
    
    
    112,761
    
    
    
    4.2
    
    
    
    7.5Other
    
    
    643,282
    
    
    
    23.3
    
    
    
    7.5
    
    
    
    588,456
    
    
    
    22.0
    
    
    
    7.2Total
    
    $
    2,766,534
    
    
    
    100
    %
    
    
    7.4
    %
    
    $
    2,680,220
    
    
    
    100
    %
    
    
    7.1
    %
 Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedCore
    
    
    Percent
    
    
    Average
    
    
    Core
    
    
    Percent
    
    
    AverageDeposits
    
    
    of Total
    
    
    Coupon
    
    
    Deposits
    
    
    of Total
    
    
    CouponIndianapolis
    
    $
    244,429
    
    
    
    9.7
    %
    
    
    2.2
    %
    
    $
    259,196
    
    
    
    10.4
    %
    
    
    2.1
    %Western and Central Michigan
    

    
    217,412
    
    
    
    8.6
    
    
    
    2.7
    
    
    
    238,742
    
    
    
    9.6
    
    
    
    2.6Southern Indiana
    
    
    692,461
    
    
    
    27.4
    
    
    
    2.4
    
    
    
    674,923
    
    
    
    27.1
    
    
    
    2.1Phoenix
    
    
    199,889
    
    
    
    7.9
    
    
    
    2.6
    
    
    
    190,428
    
    
    
    7.6
    
    
    
    2.4Las Vegas
    
    
    417,958
    
    
    
    16.6
    
    
    
    3.8
    
    
    
    413,541
    
    
    
    16.6
    
    
    
    3.5Other
    
    
    750,548
    
    
    
    29.8
    
    
    
    3.5
    
    
    
    713,233
    
    
    
    28.7
    
    
    
    3.3Total
    
    $
    2,522,697
    
    
    
    100.0
    %
    
    
    3.0
    %
    
    $
    2,490,063
    
    
    
    100.0
    %
    
    
    2.7
    %
 Net Income
  30




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##### Table of Contents



Net Interest Income
  Three Months Ended March 31,2006
    
    
    2005(Dollars in thousands)Net interest income
    
    $
    29,862
    
    
    $
    24,560Average interest earning assets
    
    
    3,039,589
    
    
    
    2,658,100Net interest margin
    
    
    3.98
    %
    
    
    3.75
    %
  Provision for Loan and Lease Losses
  Noninterest Income
  Three Months Ended March 31,2006
    
    
    2005(Dollars in thousands)Trust fees
    
    $
    491
    
    
    $
    533Service charges on deposit accounts
    
    
    959
    
    
    
    996Insurance commissions, fees and premiums
    
    
    649
    
    
    
    533Gain from sales of loans
    
    
    429
    
    
    
    808Loan servicing fees
    
    
    386
    
    
    
    354Amortization of servicing assets
    
    
    (242
    )
    
    
    (318
    )Recovery of servicing assets
    
    
    
    
    
    
    214Derivative losses
    
    
    
    
    
    
    (158
    )Brokerage fees
    
    
    308
    
    
    
    301Other
    
    
    1,288
    
    
    
    1,118Total noninterest income
    
    $
    4,268
    
    
    $
    4,381
  31




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##### Table of Contents



Operating Expenses
  Three
Months EndedMarch 31,2006
    
    
    2005(Dollars in thousands)Salaries and employee benefits
    
    $
    13,488
    
    
    $
    11,947Other expenses
    
    
    7,983
    
    
    
    6,808Total operating expenses
    
    $
    21,471
    
    
    $
    18,755Efficiency ratio
    
    
    62.9
    %
    
    
    64.8
    %Number of employees at period end(1)
    
    
    597
    
    
    
    547
 
 (1)
    
    On a full time equivalent basis.  Balance Sheet
  Credit Quality
  March 31,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Nonperforming loans
    
    $
    17,421
    
    
    $
    19,483Other real estate owned
    
    
    8,765
    
    
    
    7,892Total nonperforming assets
    
    $
    26,186
    
    
    $
    27,375Nonperforming assets to total assets
    
    
    0.82
    %
    
    
    0.87
    %Allowance for loan losses
    
    $
    25,554
    
    
    $
    24,670Allowance for loan losses to total loans
    
    
    0.92
    %
    
    
    0.92
    %Delinquency ratio
    
    
    0.10
    
    
    
    0.13
 March 31,2006
    
    
    2005For the Period Ended:Provision for loan losses
    
    $
    1,476
    
    
    $
    1,000Net charge-offs
    
    
    591
    
    
    
    412Net charge-offs to average loans
    
    
    0.09
    %
    
    
    0.07
    %
 32




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##### Table of Contents



March 31,
    
    December 31,2006
    
    2005MarketsIndianapolis
    
    
    0.57
    %
    
    
    0.58
    %Western and Central Michigan
    
    
    3.49
    %
    
    
    3.76
    %Southern Indiana
    
    
    0.81
    %
    
    
    0.24
    %Phoenix
    
    
    0.58
    %
    
    
    0.60
    %Las Vegas
    
    
    0.00
    %
    
    
    0.00
    %Other
    
    
    0.12
    %
    
    
    0.16
    %Total
    
    
    0.95
    %
    
    
    1.02
    %
 Commercial Finance
  Three
Months EndedMarch 31,2006
    
    2005(Dollars in thousands)Selected Income Statement Data:Net interest income
    
    $
    9,692
    
    
    $
    7,612Provision for loan and lease losses
    
    
    (1,164
    )
    
    
    (2,110
    )Noninterest income
    
    
    2,149
    
    
    
    1,908Total net revenue
    
    
    10,677
    
    
    
    7,410Operating expense
    
    
    (5,937
    )
    
    
    (6,186
    )Income before taxes
    
    
    4,740
    
    
    
    1,224Income taxes
    
    
    (1,849
    )
    
    
    (528
    )Net income
    
    $
    2,891
    
    
    $
    696Selected Operating Data:Net charge-offs
    
    $
    747
    
    
    $
    1,368Net interest margin
    
    
    4.67
    %
    
    
    4.85
    %Total funding of loans and leases
    
    $
    120,082
    
    
    $
    83,362Loans sold
    
    
    12,074
    
    
    
    12,403
 March 31,
    
    December 31,2006
    
    2005(Dollars in thousands)Selected Balance Sheet Data at End of Period:Total assets
    
    $
    875,405
    
    
    $
    831,657Loans and leases
    
    
    856,073
    
    
    
    817,208Allowance for loan and lease losses
    
    
    (11,180
    )
    
    
    (10,756
    )Shareholders equity
    
    
    71,884
    
    
    
    71,568
 Overview
   33




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##### Table of Contents



Net Income
  Net Interest Income
  Three Months March 31,2006
    
    
    2005(Dollars in thousands)Net interest income
    
    $
    9,692
    
    
    $
    7,612Average interest earning assets
    
    
    841,260
    
    
    
    635,996Net interest margin
    
    
    4.67
    %
    
    
    4.85
    %
   Provision for Loan and Lease Losses
  Noninterest Income
  Three Months Ended March 31,2006
    
    
    2005(Dollars in thousands)Gain from sales of loans
    
    
    754
    
    
    
    679Derivative losses, net
    
    
    (53
    )
    
    
    (146
    )Other
    
    
    1,448
    
    
    
    1,375Total noninterest income
    
    $
    2,149
    
    
    $
    1,908
  34




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##### Table of Contents



Operating Expenses
  Three Months Ended March 31,2006
    
    
    2005(Dollars in thousands)Salaries and employee benefits
    
    $
    5,166
    
    
    $
    3,948Other
    
    
    771
    
    
    
    2,238Total operating expenses
    
    $
    5,937
    
    
    $
    6,186Number of employees at period end (1)
    
    
    177
    
    
    
    172
 
 (1)
    
    On a full time equivalent basis.  Credit Quality
   March 31,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Nonperforming loans
    
    $
    4,780
    
    
    $
    3,700Allowance for loan losses
    
    
    11,180
    
    
    
    10,756Allowance for loan losses to total loans
    
    
    1.31
    %
    
    
    1.32
    %
 March 31,2006
    
    
    2005(Dollars in thousands)For the Period Ended:Provision for loan losses
    
    $
    1,164
    
    
    $
    2,110Net charge-offs
    
    
    747
    
    
    
    1,368Annualized net charge-offs to average loans
    
    
    0.36
    %
    
    
    0.88
    %
 35




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##### Table of Contents



March 31,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Domestic franchise loans
    
    $
    354,494
    
    
    $
    336,939Weighted average coupon
    
    
    7.79
    %
    
    
    7.82
    %Delinquency ratio
    
    
    0.19
    
    
    
    0.37Domestic leases
    
    $
    219,961
    
    
    $
    204,701Weighted average coupon
    
    
    10.77
    %
    
    
    10.72
    %Delinquency ratio
    
    
    1.03
    
    
    
    1.26Canadian leases (1)
    
    $
    281,618
    
    
    $
    275,568Weighted average coupon
    
    
    8.84
    %
    
    
    8.80
    %Delinquency ratio
    
    
    0.36
    
    
    
    0.53
 
 (1)
    
    In U.S. dollars. 
 36




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##### Table of Contents



Home Equity Lending
  Three Months Ended March 31,2006
    
    
    2005(Dollars in thousands)Selected Income Statement Data:Net interest income
    
    $
    23,669
    
    
    $
    20,433Provision for loan and lease losses
    
    
    (6,553
    )
    
    
    (371
    )Noninterest income
    
    
    7,387
    
    
    
    12,524Total net revenues
    
    
    24,503
    
    
    
    32,586Operating expenses
    
    
    (22,771
    )
    
    
    (29,167
    )Income before taxes
    
    
    1,732
    
    
    
    3,419Income taxes
    
    
    (698
    )
    
    
    (1,374
    )Net income
    
    $
    1,034
    
    
    $
    2,045Selected Operating Data:Loan volume:Lines of credit
    
    $
    63,303
    
    
    $
    92,326Loans
    
    
    221,072
    
    
    
    337,288Net home equity charge-offs to average
managed portfolio
    
    
    1.01
    %
    
    
    0.87
    %Gain on sale of loans to loans sold
    
    
    1.38
    %
    
    
    2.57
    %
 March 31,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Selected Balance Sheet Data:Total assets
    
    $
    1,651,316
    
    
    $
    1,602,400Home equity loans and lines of credit(1)
    
    
    1,083,273
    
    
    
    980,406Allowance for loan losses
    
    
    (26,944
    )
    
    
    (23,552
    )Home equity loans held for sale
    
    
    464,490
    
    
    
    513,231Residual interests
    
    
    7,900
    
    
    
    15,580Mortgage servicing assets
    
    
    31,679
    
    
    
    30,502Short-term borrowings
    
    
    749,106
    
    
    
    920,636Collateralized debt
    
    
    698,497
    
    
    
    452,615Shareholders equity
    
    
    150,995
    
    
    
    151,677Selected Operating Data:Total managed portfolio balance
    
    
    1,621,286
    
    
    
    1,593,509Delinquency ratio(2)
    
    
    2.3
    %
    
    
    3.0
    %Weighted average coupon rate:Lines of credit
    
    
    10.57
    %
    
    
    10.17
    %Loans
    
    
    10.37
    
    
    
    10.18
 
 (1)
    
    Includes $758 million and $486 million of collateralized loans at March 31,2006 and December
31, 2005, respectively, as part of securitized financings.(2)
    
    Nonaccrual loans are included in the delinquency ratio. Overview
   37




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##### Table of Contents



WeightedAverageAmount
    
    
    % of Total
    
    
    Coupon(Dollars in thousands)Home equity loans < 100% CLTV
    
    $
    490,722
    
    
    
    30.27
    %
    
    
    8.30
    %Home equity lines of credit < 100% CLTV
    
    
    350,573
    
    
    
    21.62
    
    
    
    9.29Total < 100% CLTV
    
    
    841,295
    
    
    
    51.89
    
    
    
    8.71Home equity loans > 100% CLTV
    
    
    599,813
    
    
    
    37.00
    
    
    
    12.27Home equity lines of credit > 100% CLTV
    
    
    133,414
    
    
    
    8.23
    
    
    
    13.68Total > 100% CLTV
    
    
    733,227
    
    
    
    45.23
    
    
    
    12.53First mortgages
    
    
    37,157
    
    
    
    2.29
    
    
    
    7.11Other (including discontinued products)
    
    
    9,607
    
    
    
    0.59
    
    
    
    14.28Total
    
    $
    1,621,286
    
    
    
    100.00
    %
    
    
    10.43
    %
 
 (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 March 31, 2006, we also serviced another $1.7 billion of loans
for which the credit risk is held by others. 38




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##### Table of Contents



Three Months Ended March 31,Product
    
    2006
    
    
    2005(Funding amount in thousands)First mortgage loansFunding Amount
    
    
    9,202
    
    
    
    31,726Weighted Average Disposable Income
    
    
    4,460
    
    
    
    4,576Weighted Average FICO score
    
    
    702
    
    
    
    689Weighted Average Coupon
    
    
    8.04
    %
    
    
    6.51
    %Home equity loans up to 100% CLTVFunding Amount
    
    
    112,229
    
    
    
    140,663Weighted Average Disposable Income
    
    
    5,466
    
    
    
    5,478Weighted Average FICO score
    
    
    705
    
    
    
    724Weighted Average Coupon
    
    
    9.81
    %
    
    
    7.08
    %Home equity loans up to 125% CLTVFunding Amount
    
    
    99,641
    
    
    
    164,900Weighted Average Disposable Income
    
    
    4,297
    
    
    
    4,215Weighted Average FICO score
    
    
    696
    
    
    
    689Weighted Average Coupon
    
    
    12.26
    %
    
    
    11.78
    %Home equity lines of credit up to 100% CLTVFunding Amount
    
    
    58,515
    
    
    
    79,618Weighted Average Disposable Income
    
    
    6,583
    
    
    
    6,052Weighted Average FICO score
    
    
    700
    
    
    
    691Weighted Average Coupon
    
    
    8.95
    %
    
    
    7.41
    %Home equity lines of credit up to 125% CLTVFunding Amount
    
    
    4,788
    
    
    
    12,708Weighted Average Disposable Income
    
    
    5,115
    
    
    
    4,590Weighted Average FICO score
    
    
    700
    
    
    
    697Weighted Average Coupon
    
    
    14.16
    %
    
    
    11.44
    %All ProductsFunding Amount
    
    
    284,375
    
    
    
    429,614Weighted Average Disposable Income
    
    
    5,246
    
    
    
    5,086Weighted Average FICO score
    
    
    701
    
    
    
    701Weighted Average Coupon
    
    
    10.50
    %
    
    
    9.03
    %
 Net Income
  Net Revenue
   39




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##### Table of Contents



For the Three Months Ended March 31,2006
    
    
    2005(Dollars in thousands)Total originations
    
    $
    284,375
    
    
    $
    429,614Percent correspondent
    
    
    31
    %
    
    
    19
    %Percent retail loans
    
    
    25
    
    
    
    40Percent brokered (1)
    
    
    26
    
    
    
    24Percent other
    
    
    18
    
    
    
    16
   Three Months Ended March 31,2006
    
    
    2005(Dollars in thousands)Net interest income
    
    $
    23,669
    
    
    $
    20,433Provision for loan losses
    
    
    (6,553
    )
    
    
    (371
    )Gain on sales of loans
    
    
    1,933
    
    
    
    8,268Loan servicing fees
    
    
    7,722
    
    
    
    8,835Amortization of servicing assets
    
    
    (6,235
    )
    
    
    (5,789
    )Recovery (impairment) of servicing assets
    
    
    574
    
    
    
    (303
    )Derivative gains
    
    
    2,907
    
    
    
    577Other income
    
    
    486
    
    
    
    936Total net revenue
    
    $
    24,503
    
    
    $
    32,586
     40




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##### Table of Contents



Operating Expenses
  Three Months Ended March 31,2006
    
    
    2005(Dollars in thousands)Salaries and employee benefits
    
    $
    13,600
    
    
    $
    19,248Other
    
    
    9,171
    
    
    
    9,919Total operating expenses
    
    $
    22,771
    
    
    $
    29,167Number of employees at period end (1)
    
    
    611
    
    
    
    651
 
 (1)
    
    On a full time equivalent basis.  Home Equity Servicing
    41




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##### Table of Contents



March 31,
    
    
    December 31,
    
    
    March 31,2006
    
    
    2005
    
    
    2005(Dollars in thousands)Managed PortfolioTotal Loans
    
    $
    1,621,286
    
    
    $
    1,593,509
    
    
    $
    1,159,07630 days past due
    
    
    2.29
    %
    
    
    3.04
    %
    
    
    3.69
    %90 days past due
    
    
    0.93
    
    
    
    1.10
    
    
    
    1.44Annualized QTD Net Chargeoff Rate
    
    
    1.01
    
    
    
    0.35
    
    
    
    0.87Unsold LoansTotal Loans (1)
    
    $
    1,538,370
    
    
    $
    1,480,224
    
    
    $
    872,84730 days past due
    
    
    1.90
    %
    
    
    2.23
    %
    
    
    1.82
    %90 days past due
    
    
    0.80
    
    
    
    0.86
    
    
    
    0.75Annualized QTD Net Chargeoff Rate
    
    
    0.84
    
    
    
    0.26
    
    
    
    0.15Loan Loss Reserve
    
    $
    26,944
    
    
    $
    23,552
    
    
    $
    11,364Owned ResidualTotal Loans
    
    $
    82,917
    
    
    $
    113,286
    
    
    $
    286,22930 days past due
    
    
    9.64
    %
    
    
    13.60
    %
    
    
    9.38
    %90 days past due
    
    
    3.25
    
    
    
    4.32
    
    
    
    3.53Annualized QTD Net Chargeoff Rate
    
    
    3.62
    
    
    
    1.34
    
    
    
    2.98Residual Undiscounted Losses
    
    $
    430
    
    
    $
    930
    
    
    $
    7,260Credit Risk Sold, Potential Incentive
Servicing Fee Retained PortfolioTotal Loans
    
    $
    871,348
    
    
    $
    972,775
    
    
    $
    919,83030 days past due
    
    
    3.42
    %
    
    
    4.30
    %
    
    
    2.87
    %90 days past due
    
    
    1.36
    
    
    
    1.74
    
    
    
    1.17
 
 (1)
    
    Excludes deferred fees and costs.  42




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##### Table of Contents



Mortgage Banking
   Three Months Ended March 31,2006
    
    
    2005(Dollars in thousands)Selected Income Statement Data:Net interest income
    
    $
    7,281
    
    
    $
    7,723(Provision
for)  recovery of loan loss
    
    
    (47
    )
    
    
    189Noninterest income
    
    
    1,959
    
    
    
    17,862Total net revenue
    
    
    9,193
    
    
    
    25,774Operating expense
    
    
    (26,410
    )
    
    
    (42,478
    )Income before taxes
    
    
    (17,217
    )
    
    
    (16,704
    )Income taxes
    
    
    6,883
    
    
    
    6,446Net income
    
    $
    (10,334
    )
    
    $
    (10,258
    )Selected Operating Data:Mortgage loan originations
    
    $
    2,245,676
    
    
    $
    2,812,411Servicing sold as a % of originations
    
    
    58
    %
    
    
    109
    %
 March 31,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Selected Balance Sheet Data at End of Period:Total assets
    
    $
    1,279,078
    
    
    $
    1,306,041Mortgage loans held for sale
    
    
    766,502
    
    
    
    779,966Mortgage servicing assets
    
    
    266,955
    
    
    
    261,309Deposits
    
    
    433,673
    
    
    
    412,444Short-term borrowing
    
    
    420,781
    
    
    
    467,470Shareholders equity
    
    
    139,640
    
    
    
    125,888Selected Operating Data:Servicing portfolio:Balance at end of period
    
    
    18,388,160
    
    
    
    18,265,288Weighted average coupon rate
    
    
    5.84
    %
    
    
    5.79
    %Weighted average servicing fee
    
    
    0.35
    
    
    
    0.35
 Overview
    Net Income
  43




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##### Table of Contents



Net Revenue
  Three Months Ended March 31,2006
    
    
    2005(Dollars in thousands)Selected Income Statement Data:Net interest income
    
    $
    7,281
    
    
    $
    7,723(Provision for) recovery of loan losses
    
    
    (47
    )
    
    
    189Gain on sales of loans
    
    
    15,349
    
    
    
    24,973Servicing fees
    
    
    17,520
    
    
    
    25,625Amortization expense
    
    
    (13,400
    )
    
    
    (21,210
    )Recovery of impairment on servicing assets
    
    
    3,740
    
    
    
    32,489Loss on derivatives
    
    
    (21,959
    )
    
    
    (47,384
    )(Loss) gain on sales of servicing assets
    
    
    (23
    )
    
    
    1,185Other income
    
    
    732
    
    
    
    2,184Total net revenue
    
    $
    9,193
    
    
    $
    25,774
   
    
    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.
     44




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45




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##### Table of Contents



Operating Expenses
  Three Months Ended March 31,2006
    
    2005(Dollars in thousands)Salaries and employee benefits
    
    $
    12,467
    
    
    $
    17,181Incentive and commission pay
    
    
    1,908
    
    
    
    6,687Other expenses
    
    
    12,035
    
    
    
    18,610Total operating expenses
    
    $
    26,410
    
    
    $
    42,478Number of employees at period end (1)
    
    
    835
    
    
    
    1,222
 
 (1)
    
    On a full time equivalent basis  Mortgage Servicing
  Three Months Ended
    
    Year EndedMarch 31,
    
    December 31,2006
    
    2005(Portfolio in billions)Beginning servicing portfolio
    
    $
    18.3
    
    
    $
    26.2Mortgage loan closings(1)
    
    
    2.2
    
    
    
    10.6Bulk sales of servicing rights
    
    
    
    
    
    
    (6.2
    )Flow sales of servicing rights
    
    
    (1.3
    )
    
    
    (6.8
    )Run-off(2)
    
    
    (0.8
    )
    
    
    (5.5
    )Ending servicing portfolio
    
    $
    18.4
    
    
    $
    18.3Number of loans (end of period)
    
    
    144,742
    
    
    
    142,956Average loan size
    
    $
    127,041
    
    
    $
    127,769Weighted average coupon
    
    
    5.84
    %
    
    
    5.79
    %Percent Government National Mortgage Association(GNMA) and state housing programs
    
    
    26
    
    
    
    26Percent conventional and other
    
    
    74
    
    
    
    74Delinquency ratio
    
    
    4.0
    
    
    
    5.4Mortgage servicing assets to related servicing portfolio(3)
    
    
    1.43
    
    
    
    1.41
 
 (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.  46




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##### Table of Contents



Parent and Other
   Risk Management
  
    
    Credit risk
    
    Liquidity risk
    
    Interest rate risk
    
    Operational risk
    Credit Risk
   47




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##### Table of Contents



48




---



##### Table of Contents



March 31,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Accruing loans past due 90 days or more:Real estate mortgages
    
    $
    
    
    
    $
    222Consumer loans
    
    
    1
    
    
    
    233Commercial financingDomestic leasing
    
    
    123
    
    
    
    73Foreign leasing
    
    
    5
    
    
    
    71129
    
    
    
    599Nonaccrual loans and leases:Commercial, financial and
agricultural loans
    
    
    15,605
    
    
    
    17,693Real estate mortgages
    
    
    14,602
    
    
    
    14,237Consumer loans
    
    
    1,336
    
    
    
    1,335Commercial financingFranchise financing
    
    
    1,782
    
    
    
    720Domestic leasing
    
    
    1,166
    
    
    
    1,383Foreign leasing
    
    
    1,704
    
    
    
    1,45236,195
    
    
    
    36,820Total nonperforming
loans and leases
    
    
    36,324
    
    
    
    37,419Nonperforming
loans held for sale not guaranteed
    
    
    1,373
    
    
    
    965Other real estate owned
    
    
    16,888
    
    
    
    15,226Total nonperforming assets
    
    $
    54,585
    
    
    $
    53,610Nonperforming loans and leases to total
loans and leases
    
    
    0.8
    %
    
    
    0.8
    %Nonperforming assets to total
assets
    
    
    0.8
    %
    
    
    0.8
    %
   March 31,2006
    
    Commercial banking
    
    $
    26
    
    Commercial finance
    
    
    5
    
    Home equity ending
    
    
    17
    
    Mortgage banking (discontinued operations)
    
    
    7
  Liquidity Risk
  49




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##### Table of Contents



50




---



##### Table of Contents




    
    Warehouse lines of credit to fund primarily home equity loans: $123 million outstanding
on a $300 million borrowing facility, of which $150 million is committed
    
    Warehouse borrowing facilities to fund first mortgage loans: $44 million outstanding on a
$100 million committed borrowing facility
    
    Lines of credit with correspondent banks, including fed funds lines.$38 million
outstanding out of $225 million available but not committed
    
    Fed funds lines with non-correspondent banks in which $235 million were outstanding
    
    Warehouse lines of credit and conduits to fund Canadian sourced small ticket leases: $205
million outstanding on $334 million of borrowing facilities
  
    
    Committed warehouse sale facility: $186 million unsettled on a $600 million facility
    
    Uncommitted warehouse sale facility: none unsettled on a $150 million facility
    
    Investor warehouse sale facility: $77 million unsettled
 51




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##### Table of Contents



Interest Rate Risk
      
    
    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);
    
    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.
  52




---



##### Table of Contents



1.
    
    Provide adequate hedge coverage for falling rates;2.
    
    minimize premium costs to establish hedge positions;3.
    
    provide a moderate amount of net impairment recapture if interest rates rise;4.
    
    when near or above the MSR LOCOM cap, maintain an acceptable range over which interest
rates may rise without causing hedge losses to significantly exceed accounting gains.
      
    
    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 or management actions that might be taken in the future under asset/liability
management as interest rates change.
    
    The information in the tables below both as of 3/31/06 and 12/31/05 exclude the interest
rate sensitivity of our first mortgage subsidiary. Note that these tables only include the
market values and sensitivities of interest-sensitive assets and liabilities.
    
    The tables below show modeled changes in interest rates for individual asset classes.
Asset classes in our portfolio have interest rate sensitivity tied to different underlying
indices or instruments. While the rate sensitivity of individual asset classes presented
below is our best estimate of changes in value due to interest rate changes, the total
potential change figures are subject to basis risk between value changes of individual
assets and liabilities which 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 optionality in
payment timing or pricing such as mortgage servicing or nonmaturity transaction deposits.
 53




---



##### Table of Contents




    
    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 March 31, 2006Change in Interest Rates of:-2%
    
    
    -1%
    
    
    Current
    
    
    +1%
    
    
    +2%(In Thousands)Interest Sensitive AssetsLoans and other assets
    
    $
    5,166,843
    
    
    $
    5,115,372
    
    
    $
    5,058,819
    
    
    $
    4,994,663
    
    
    $
    4,935,852Loans held for sale
    
    
    478,601
    
    
    
    474,641
    
    
    
    467,663
    
    
    
    458,365
    
    
    
    447,851Mortgage servicing rights
    
    
    33,910
    
    
    
    37,950
    
    
    
    42,460
    
    
    
    46,959
    
    
    
    48,890Residual interests
    
    
    8,146
    
    
    
    8,019
    
    
    
    7,900
    
    
    
    7,786
    
    
    
    7,652Interest sensitive financial derivatives
    
    
    (17,597
    )
    
    
    (7,660
    )
    
    
    2,726
    
    
    
    13,691
    
    
    
    24,609Total interest sensitive assets
    
    
    5,669,903
    
    
    
    5,628,322
    
    
    
    5,579,568
    
    
    
    5,521,464
    
    
    
    5,464,854Interest Sensitive LiabilitiesDeposits
    
    
    (3,565,090
    )
    
    
    (3,536,980
    )
    
    
    (3,516,936
    )
    
    
    (3,498,460
    )
    
    
    (3,482,491
    )Short-term borrowings (1)
    
    
    (713,938
    )
    
    
    (710,567
    )
    
    
    (708,109
    )
    
    
    (705,747
    )
    
    
    (703,457
    )Long-term debt
    
    
    (919,065
    )
    
    
    (910,377
    )
    
    
    (897,750
    )
    
    
    (879,761
    )
    
    
    (861,920
    )Total interest sensitive liabilities
    
    
    (5,198,093
    )
    
    
    (5,157,924
    )
    
    
    (5,122,795
    )
    
    
    (5,083,968
    )
    
    
    (5,047,868
    )Net market value as of March 31, 2006
    
    $
    471,810
    
    
    $
    470,398
    
    
    $
    456,773
    
    
    $
    437,496
    
    
    $
    416,986Change from current
    
    $
    15,037
    
    
    $
    13,625
    
    
    $
    
    
    
    $
    (19,277
    )
    
    $
    (39,787
    )Net market value as of December 31, 2005
    
    $
    409,652
    
    
    $
    414,090
    
    
    $
    400,317
    
    
    $
    377,687
    
    
    $
    353,231Potential change
    
    $
    9,335
    
    
    $
    13,773
    
    
    $
    
    
    
    $
    (22,630
    )
    
    $
    (47,086
    )
 
 (1)
    
    Includes certain debt which is categorized as collateralized borrowings in other sections
of this document GAAP-Based Value Change Method
 Present Value at March 31, 2006Change in Interest Rates of:-2%
    
    
    -1%
    
    
    Current
    
    
    +1%
    
    
    +2%(In Thousands)Interest Sensitive AssetsLoans and other assets (1)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Loans held for sale
    
    
    465,812
    
    
    
    465,812
    
    
    
    465,812
    
    
    
    456,514
    
    
    
    445,999Mortgage servicing rights
    
    
    28,938
    
    
    
    32,880
    
    
    
    35,575
    
    
    
    39,202
    
    
    
    40,782Residual interests
    
    
    8,146
    
    
    
    8,019
    
    
    
    7,900
    
    
    
    7,786
    
    
    
    7,652Interest sensitive financial derivatives
    
    
    (15,422
    )
    
    
    (5,485
    )
    
    
    4,901
    
    
    
    15,866
    
    
    
    26,784Total interest sensitive assets
    
    
    487,474
    
    
    
    501,226
    
    
    
    514,188
    
    
    
    519,368
    
    
    
    521,217Interest Sensitive LiabilitiesDeposits (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term borrowings (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Long-term debt (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total interest sensitive liabilities (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net market value as of March 31, 2006
    
    $
    487,474
    
    
    $
    501,226
    
    
    $
    514,188
    
    
    $
    519,368
    
    
    $
    521,217Potential change
    
    $
    (26,714
    )
    
    $
    (12,962
    )
    
    $
    
    
    
    $
    5,180
    
    
    $
    7,029Net market value as of December 31, 2005
    
    $
    547,531
    
    
    $
    556,247
    
    
    $
    564,387
    
    
    $
    560,897
    
    
    $
    555,312Potential change
    
    $
    (16,856
    )
    
    $
    (8,140
    )
    
    $
    
    
    
    $
    (3,490
    )
    
    $
    (9,075
    )
 
 (1)
    
    Value does not change in GAAP presentation 54




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##### Table of Contents



Operational Risk
      Off-Balance Sheet Instruments
   55




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##### Table of Contents



Derivative Financial Instruments
        56




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##### Table of Contents




    
    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
March 31, 2006, the commercial paper conduit was providing $152 million of variable rate
funding. In total, our interest rate swaps were effectively converting $154 million of this
funding to a fixed interest rate. The losses on these swaps for the three months ended March
31, 2006 and 2005 were $0.1 million and $0.3 million, respectively.
   
 Item 3. Quantitative and Qualitative Disclosures about Market Risk.
  
 Item 4. Controls and Procedures.
 Disclosure
Controls and Procedures 
 Internal
Control Over Financial Reporting 
 
 PART II. Other Information.
 
 Item 1. Legal Proceedings.
 Since the time we filed our Report on Form 10-K for the year ended December 31, 2005, we
experienced developments as noted in the litigation described below. For a full description of the
litigation, see Note 13, Commitments and Contingencies, in the Notes to Consolidated Financial
Statements, Part I, Item 1, of this Report.
 Silke v. Irwin Mortgage Corporation
  57




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##### Table of Contents



Litigation Related to NorVergence, Inc.
 Exquisite Caterers, LLC et al. v. Popular Leasing et al., Exquisite Caterers
 Putkowski v. Irwin Home Equity Corporation and Irwin Union Bank and Trust Company
 th
 White v. Irwin Union Bank and Trust Company and Irwin Home Equity Corporation
 th
  58




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##### Table of Contents



Item 6. Exhibits.
 ExhibitNumber
    
    Description of Exhibit3.1
    
    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.)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.)10.9
    
    *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.)
 59




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.16
    
    *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.)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.)
 60




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.35
    
    *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. (Incorporated by reference to Exhibit 10.36 of Form 10-K Report for
period ended December 31, 2005, File No. 001-16691.)10.37
    
    *Shareholder Agreement Termination Agreement by and between Irwin Commercial Finance Canada
Corporation and Irwin International Corporation dated December 23, 2005. (Incorporated by
reference to Exhibit 10.37 of Form 10-K Report for period ended December 31, 2005, File No.
001-16691.)10.38
    
    *Irwin Commercial Finance Corporation Shareholder Agreement dated December 23, 2005.
(Incorporated by reference to Exhibit 10.38 of Form 10-K Report for period ended December 31,
2005, File No. 001-16691.)10.39
    
    *Irwin Commercial Finance Corporation 2005 Stock Option Agreement Grant of Option to Joseph
LaLeggia dated December 23, 2005. (Incorporated by reference to Exhibit 10.39 of Form 10-K
Report for period ended December 31, 2005, File No. 001-16691.)10.40
    
    *Irwin Commercial Finance Corporation 2005 Notice of Stock Option Grant to Joseph LaLeggia dated
December 23, 2005. (Incorporated by reference to Exhibit 10.40 of Form 10-K Report for period
ended December 31, 2005, File No. 001-16691.)10.41
    
    *Irwin Union Bank Amended and Restated Performance Unit Plan. (Incorporated by reference to
Exhibit 10.41 of Form 10-K Report for period ended December 31, 2005, File No. 001-16691.)10.42
    
    *Irwin Commercial Finance Amended and Restated Performance Unit Plan. (Incorporated by
reference to Exhibit 10.42 of Form 10-K Report for period ended December 31, 2005, File No.
001-16691.)10.43
    
    *Irwin Home Equity Corporation Performance Unit Plan. (Incorporated by reference to Exhibit
10.43 of Form 10-K Report for period ended December 31, 2005, File No. 001-16691.)10.44
    
    *First Amendment to Limited Liability Company Agreement of Irwin Ventures LLC. (Incorporated by
reference to Exhibit 10.44 of Form 10-K Report for period ended December 31, 2005, File No.
001-16691.)10.45
    
    *Second Amendment to Limited Liability Company Agreement of Irwin Ventures Co-Investment Fund
LLC. (Incorporated by reference to Exhibit 10.45 of Form 10-K Report for period ended December
31, 2005, File No. 001-16691.)11.1
    
    Computation of Earnings Per
Share is included in the footnotes to the financial statements.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. 
 61




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##### Table of Contents



SIGNATURES
   DATE:May 9, 2006
    IRWIN FINANCIAL CORPORATIONBy:
    /s/ Gregory F. EhlingerGREGORY F. EHLINGER
CHIEF FINANCIAL OFFICER By:
    /s/ Jody A. LittrellJODY A. LITTRELLCORPORATE CONTROLLER
(Chief Accounting Officer) 62