##### 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 1934
 For the quarterly period ended March 31, 2009
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to.
 Commission File Number: 0-6835
 IRWIN FINANCIAL CORPORATION
 (Exact Name of Corporation as Specified in its Charter)
 Indiana
    
    35-1286807(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)500 Washington Street Columbus, Indiana
    
    47201(Address of Principal Executive Offices)
    
    (Zip Code)(812) 376-1909
    
    www.irwinfinancial.com(Corporations Telephone Number, Including Area Code)
    
    (Web Site)
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




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##### 



FORM 10-Q
TABLE OF CONTENTS
 PAGENO.PART I
    
    FINANCIAL INFORMATION
    
    
    4Item 1
    
    Financial Statements
    
    
    4Item 2
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    53Item 4
    
    Controls and Procedures
    
    
    53PART II
    
    OTHER INFORMATION
    
    
    54Item 1
    
    Legal Proceedings
    
    
    54Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    54Item 6
    
    Exhibits
    
    
    55Signatures
    
    
    59EX-2.6EX-31.1EX-31.2EX-32.1EX-32.2
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About Forward-looking Statements
   
    
    transactions involved in our strategic restructuring, including capital raising activities;
    
    our plans and strategies, including the expected results or costs and impact of implementing
or changing such plans and strategies;
    
    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 asset quality (particularly with regard to loans
or other exposures including loan repurchase risk, in sectors in which we deal in real
estate or residential mortgage lending), loan delinquencies, charge-offs, reserves, asset
valuations, regulatory capital levels, or financial performance measures;
    
    the expected effects on the Corporations balance sheet, profitability, liquidity, and
capital ratios of the strategic restructuring, our proposed
shareholder rights offer, the possible private placement of equity, the possible exchange of trust preferred securities
for common shares, and other elements of the completion of our capital plan;
    
    potential litigation developments and the anticipated impact of potential outcomes of
pending legal matters;
    
    predictions about conditions in the national or regional economies, housing markets,
industries associated with housing, mortgage markets, franchise restaurant finance or
mortgage industry;
    
    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.
   
    
    difficulties in completing our recapitalization plan, including the failure to raise
sufficient private investment through our proposed rights offer, possible private placement
of equity, or a possible exchange of trust preferred securities for common shares or by
other means, the failure of a sufficient number of shareholders to participate in the rights
offer or to exercise fully their rights, the failure to satisfy the conditions that require
the standby purchasers to exercise fully their subscription privileges, the failure to
receive assistance in substantially the form proposed to the U.S. Treasury and banking
regulators, or the failure to obtain any necessary regulatory approvals;
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
    
    potential further deterioration or effects of general economic conditions, particularly
in sectors relating to real estate and/or mortgage lending, small business lending, and
franchise restaurants finance;
    
    fluctuations in housing prices;
    
    potential effects related to the Corporations decision to suspend the payment of
dividends on its common, preferred and trust preferred securities;
    
    potential changes in direction, volatility and relative movement (basis risk) of interest
rates, which may affect consumer and commercial demand for our products and the management
and success of our interest rate risk management strategies;
    
    staffing fluctuations in response to product demand or the implementation of corporate
strategies that affect our work force and potential associated charges;
    
    the relative profitability of our lending and deposit operations;
    
    the valuation and management of our portfolios, including the use of external and
internal modeling assumptions we embed in the valuation of those portfolios and short-term
swings in the valuation of such portfolios;
    
    borrowers refinancing opportunities, which may affect the prepayment assumptions used in
our valuation estimates and which may affect loan demand;
    
    unanticipated deterioration in the credit quality or collectability of our loan and lease
assets, including deterioration resulting from the effects of natural disasters (including a
pandemic);
    
    difficulties in accurately estimating any future repurchases of residential mortgage,
home equity, or other loans or leases due to alleged violations of representations and
warranties we made when selling these loans and leases to the secondary market or in
securitizations;
    
    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 or retaining deposit or other
funding sources as needed, including the loss of public fund deposits or any actions that
may be taken by the state of Indiana and its political subdivisions;
    
    competition from other financial service providers for our staff and customers;
    
    changes in the value of our lines of business, subsidiaries, or companies in which we
invest;
    
    changes in variable compensation plans related to the performance and valuation of lines
of business where we tie compensation systems to line-of-business performance;
    
    unanticipated lawsuits or outcomes in litigation;
    
    legislative or regulatory changes, including changes in laws, rules or regulations that
affect tax, consumer or commercial lending, corporate governance and disclosure
requirements, and other laws, rules or regulations affecting the rights and responsibilities
of our Corporation, or our state-chartered bank or federal savings bank subsidiary;
    
    regulatory actions that impact our Corporation, bank or thrift, including the written
agreement the Corporation and its state-chartered bank subsidiary, Irwin Union Bank and
Trust Company, entered into with the Federal Reserve Bank of Chicago and the Indiana
Department of Financial Institutions on October 10, 2008, and the supervisory agreement the
Corporations federal savings bank subsidiary, Irwin Union Bank, F.S.B., entered into with
the Office of Thrift Supervision on the same day;
    
    changes in the interpretation and application of regulatory capital or other rules;
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
    
    the availability of resources to address changes in laws, rules or regulations or to
respond to regulatory actions;
    
    changes in applicable accounting policies or principles or their application to our
business or final audit adjustments, including additional guidance and interpretation on
accounting issues and details of the implementation of new accounting methods;
    
    the final disposition of the remaining assets and obligations of lines of business we
have exited or are exiting, including the mortgage banking segment, small ticket commercial
leasing segment and home equity segment; or
    
    governmental changes in monetary or fiscal policies.
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PART I. FINANCIAL INFORMATION.
  Item 1. Financial Statements.
 IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
 March 31,
    
    December 31,2009
    
    2008(Dollars in thousands)Assets:Cash and cash equivalents
    
    $
    271,917
    
    
    $
    233,698Interest-bearing deposits with financial institutions
    
    
    17,204
    
    
    
    26,023Residual interests
    
    
    9,123
    
    
    
    9,180Investment securities- held-to-maturity (Fair value: $17,465March 31, 2009 and $17,300 at December 31, 2008)  Note 2
    
    
    17,071
    
    
    
    17,258Investment securities- available-for-sale  Note 2
    
    
    30,730
    
    
    
    31,895Investment securities- other  Note 2
    
    
    56,460
    
    
    
    61,056Loans held for sale  Note 3
    
    
    148,651
    
    
    
    841,333Loans and leases, net of unearned income  Note 4
    
    
    3,331,522
    
    
    
    3,512,048Less: Allowance for loan and lease losses  Note 5
    
    
    (155,403
    )
    
    
    (137,015
    )3,176,119
    
    
    
    3,375,033Servicing assets  Note 6
    
    
    5,407
    
    
    
    18,116Accounts receivable
    
    
    20,219
    
    
    
    19,706Accrued interest receivable
    
    
    13,289
    
    
    
    19,673Premises and equipment
    
    
    31,628
    
    
    
    32,417Other assets
    
    
    231,306
    
    
    
    228,927Total assets
    
    $
    4,029,124
    
    
    $
    4,914,315Liabilities and Shareholders Equity:DepositsNoninterest-bearing
    
    $
    349,150
    
    
    $
    319,857Interest-bearing
    
    
    2,048,300
    
    
    
    2,082,809Certificates of deposit over $100,000
    
    
    708,158
    
    
    
    615,2693,105,608
    
    
    
    3,017,935Other borrowings  Note 8
    
    
    337,924
    
    
    
    512,012Collateralized debt  Note 9
    
    
    198,223
    
    
    
    912,792Other long-term debt
    
    
    233,868
    
    
    
    233,868Other liabilities
    
    
    136,470
    
    
    
    127,046Total liabilities
    
    
    4,012,093
    
    
    
    4,803,653Commitments and contingencies  Note 15Shareholders equityPreferred stock, no par value  authorized 4,000,000 shares:Noncumulative perpetual preferred stock - 15,000 issued;
    
    
    14,441
    
    
    
    14,441Common stock, no par value  authorized 200,000,000 shares; issued 29,929,638 and
29,913,008 as of March 31, 2009 and December 31, 2008; 329,251 and 389,520
shares in treasury as of March 31, 2009 and December 31, 2008, respectively
    
    
    116,923
    
    
    
    116,893Additional paid-in capital
    
    
    
    
    
    
    Accumulated other comprehensive loss, net of deferred income tax benefit of$5,503 and $5,258 as of March 31, 2009 and December 31, 2008
    
    
    (8,214
    )
    
    
    (7,988
    )Retained earnings
    
    
    (99,695
    )
    
    
    (5,079
    )23,455
    
    
    
    118,267Less treasury stock, at cost
    
    
    (6,424
    )
    
    
    (7,605
    )Total shareholders equity
    
    
    17,031
    
    
    
    110,662Total liabilities and shareholders equity
    
    $
    4,029,124
    
    
    $
    4,914,315
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IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
 For the Three Months Ended March 31,2009
    
    
    2008(Dollars in thousands, except per share)Interest income:Loans and leases
    
    $
    55,503
    
    
    $
    117,322Loans held for sale
    
    
    21,643
    
    
    
    166Residual interests
    
    
    23
    
    
    
    275Investment securities
    
    
    1,302
    
    
    
    2,289Federal funds sold
    
    
    
    
    
    
    38Total interest income
    
    
    78,471
    
    
    
    120,090Interest expense:Deposits
    
    
    18,890
    
    
    
    28,938Other borrowings
    
    
    4,310
    
    
    
    7,236Collateralized debt
    
    
    21,270
    
    
    
    15,170Other long-term debt
    
    
    3,895
    
    
    
    4,311Total interest expense
    
    
    48,365
    
    
    
    55,655Net interest income
    
    
    30,106
    
    
    
    64,435Provision for loan and lease losses  Note 5
    
    
    64,002
    
    
    
    44,520Net interest income after provision for loan and lease losses
    
    
    (33,896
    )
    
    
    19,915Other income:Loan servicing fees
    
    
    2,621
    
    
    
    2,458Amortization and impairment of servicing assets  Note 6
    
    
    (4,148
    )
    
    
    (4,219
    )Gain from sales of loans held for sale
    
    
    (10,335
    )
    
    
    6,831Loss from
sale of servicing assets
    
    
    (7,262
    )
    
    
    Trading gains (losses)
    
    
    112
    
    
    
    (1,057
    )Derivative losses, net
    
    
    (434
    )
    
    
    (957
    )Other than temporary impairment  Note 2
    
    
    (105
    )
    
    
    (13,157
    )Other
    
    
    8,955
    
    
    
    5,645(10,596
    )
    
    
    (4,456
    )Other expense:Salaries
    
    
    14,365
    
    
    
    22,629Pension and other employee benefits
    
    
    4,309
    
    
    
    7,708Office expense
    
    
    1,546
    
    
    
    2,212Premises and equipment
    
    
    6,820
    
    
    
    5,766Marketing and development
    
    
    977
    
    
    
    1,132Professional fees
    
    
    1,757
    
    
    
    2,098Other
    
    
    14,720
    
    
    
    10,40944,494
    
    
    
    51,954Loss before income taxes
    
    
    (88,986
    )
    
    
    (36,495
    )Provision for income taxes  Note 7
    
    
    4,847
    
    
    
    (14,329
    )Net loss
    
    $
    (93,833
    )
    
    $
    (22,166
    )Loss per share:  Note 10Basic
    
    $
    (3.17
    )
    
    $
    (0.76
    )Diluted
    
    $
    (3.17
    )
    
    $
    (0.77
    )Dividends per share
    
    $
    
    
    
    $
    
 
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##### Table of Contents



IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (Unaudited)
For the Three Months Ended March 31, 2009, and 2008
 Accumulated Other Comprehensive lossDefined
    
    
    Additional
    
    
    
    
    
    
    PerpetualRetained
    
    
    Foreign
    
    
    Unrealized Gain/Loss
    
    
    Benefit
    
    
    Paid in
    
    
    Common
    
    
    Preferred
    
    
    TreasuryTotal
    
    
    Earnings
    
    
    Currency
    
    
    Securities
    
    
    Derivatives
    
    
    Plans
    
    
    Capital
    
    
    Stock
    
    
    Stock
    
    
    Stock(Dollars in thousands)Balance at January 1, 2009
    
    $
    110,662
    
    
    $
    (5,079
    )
    
    $
    89
    
    
    $
    (1,712
    )
    
    $
    (191
    )
    
    $
    (6,174
    )
    
    $
    
    
    
    $
    116,893
    
    
    $
    14,441
    
    
    $
    (7,605
    )Net loss
    
    
    (93,833
    )
    
    
    (93,833
    )Unrealized loss on investment
securities net of $121 tax benefit
    
    
    (181
    )
    
    
    
    
    
    
    
    
    
    
    (181
    )Unrealized gain on derivatives
net of $4 tax liability
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Foreign currency adjustment
    
    
    (50
    )
    
    
    
    
    
    
    (50
    )Other comprehensive loss
    
    
    (226
    )Total comprehensive loss
    
    
    (94,059
    )Stock compensation expense
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300Stock:Purchase of 9,223 shares
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )Sales of 86,122 shares
    
    
    148
    
    
    
    (783
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (300
    )
    
    
    30
    
    
    
    
    
    
    
    1,201Balance at March 31, 2009
    
    $
    17,031
    
    
    $
    (99,695
    )
    
    $
    39
    
    
    $
    (1,893
    )
    
    $
    (186
    )
    
    $
    (6,174
    )
    
    $
    
    
    
    $
    116,923
    
    
    $
    14,441
    
    
    $
    (6,424
    )Balance at January 1, 2008
    
    $
    459,300
    
    
    $
    337,524
    
    
    $
    9,158
    
    
    $
    (1,445
    )
    
    $
    (1,576
    )
    
    $
    (5,105
    )
    
    $
    2,557
    
    
    $
    116,542
    
    
    $
    14,441
    
    
    $
    (12,796
    )Net loss
    
    
    (22,166
    )
    
    
    (22,166
    )Unrealized gain on investment
securities net of $29 tax liability
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    44Unrealized loss on derivatives
net of $743 tax benefit
    
    
    (1,114
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,114
    )Foreign currency adjustment
    
    
    (1,434
    )
    
    
    
    
    
    
    (1,434
    )Other comprehensive loss
    
    
    (2,504
    )Total comprehensive loss
    
    
    (24,670
    )Stock compensation expense
    
    
    1,147
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,147Stock:Purchase of 835 shares
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )Sales of 34,388 shares
    
    
    235
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (477
    )
    
    
    
    
    
    
    
    
    
    
    712Balance at March 31, 2008
    
    $
    436,006
    
    
    $
    315,358
    
    
    $
    7,724
    
    
    $
    (1,401
    )
    
    $
    (2,690
    )
    
    $
    (5,105
    )
    
    $
    3,227
    
    
    $
    116,542
    
    
    $
    14,441
    
    
    $
    (12,090
    )
 
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CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 For the Three Months ended March 31,2009
    
    
    2008(Dollars in thousands)Net Loss
    
    $
    (93,833
    )
    
    $
    (22,166
    )Adjustments to reconcile net loss to cash provided
by operating activities:Depreciation, amortization, and accretion, net
    
    
    3,880
    
    
    
    2,604Other than temporary impairment
    
    
    105
    
    
    
    13,157Amortization and impairment of servicing assets
    
    
    4,148
    
    
    
    4,219Provision for loan and lease losses
    
    
    64,002
    
    
    
    44,520Loss (gain) from sales of loans held for sale
    
    
    10,335
    
    
    
    (6,831
    )Loss from
sale of servicing assets
    
    
    7,262
    
    
    
    Originations and purchases of loans held for sale
    
    
    (83,581
    )
    
    
    (64,436
    )Proceeds from sales and repayments of loans held for sale
    
    
    109,498
    
    
    
    130,272Net decrease in residuals
    
    
    192
    
    
    
    1,348Net (increase) decrease in accounts receivable
    
    
    (6,674
    )
    
    
    5,381Other, net
    
    
    2,960
    
    
    
    (19,999
    )Net cash provided by operating activities
    
    
    18,294
    
    
    
    88,069Investing activities:Proceeds from maturities/calls of investment securities:Held-to-maturity
    
    
    1,766
    
    
    
    1,132Available-for-sale
    
    
    5,542
    
    
    
    685Purchase of investment securities:Held-to-maturity
    
    
    (1,730
    )
    
    
    (451
    )Available-for-sale
    
    
    (42
    )
    
    
    (187
    )Net decrease (increase) in interest-bearing deposits
    
    
    8,819
    
    
    
    (7,844
    )Net decrease in loans, excluding sales
    
    
    122,003
    
    
    
    27,251Other, net
    
    
    (564
    )
    
    
    (1,869
    )Net cash provided by investing activities
    
    
    135,794
    
    
    
    18,717Financing activities:Net increase in deposits
    
    
    87,673
    
    
    
    73,505Net decrease in other borrowings
    
    
    (174,088
    )
    
    
    (128,166
    )Proceeds from issuance of collateralized debt
    
    
    
    
    
    
    96,415Repayments of collateralized debt
    
    
    (29,561
    )
    
    
    (123,444
    )Payments on long term debt
    
    
    
    
    
    
    (3
    )Purchase of treasury stock for employee benefit plans
    
    
    (20
    )
    
    
    (6
    )Proceeds from sale of stock for employee benefit plans
    
    
    148
    
    
    
    235Net cash used by financing activities
    
    
    (115,848
    )
    
    
    (81,464
    )Effect of exchange rate changes on cash
    
    
    (21
    )
    
    
    (505
    )Net increase in cash and cash equivalents
    
    
    38,219
    
    
    
    24,817Cash and cash equivalents at beginning of period
    
    
    233,698
    
    
    
    78,212Cash and cash equivalents at end of period
    
    $
    271,917
    
    
    $
    103,029Supplemental disclosures of cash flow information:Cash flow during the period:Interest paid
    
    $
    44,157
    
    
    $
    50,740Income taxes paid
    
    $
    175
    
    
    $
    2,216Noncash transactions:Derecognition of loans held for sale, other assets and collateralized debt
    
    $
    682,026
    
    
    $
    Other real estate owned
    
    $
    10,428
    
    
    $
    1,225
  7




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Summary of Significant Accounting Policies
 Consolidation:
  Capital, Liquidity, and Going Concern Considerations:
     8




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Use of Estimates:
 Basis of Presentation:
 Recent
Accounting Developments:
  9




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Note 2  Investment Securities
  March 31,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Held-to-Maturity:U.S. Treasury and
government obligations
    
    $
    13,019
    
    
    $
    13,054Obligations of states
and political subdivisions
    
    
    3,200
    
    
    
    3,320Mortgage-backed securities
    
    
    852
    
    
    
    884Total held-to-maturity
    
    
    17,071
    
    
    
    17,258Available-for-Sale:Mortgage-backed securities
    
    
    18,980
    
    
    
    20,114Other
    
    
    11,750
    
    
    
    11,781Total available-for-sale
    
    
    30,730
    
    
    
    31,895Federal Home Loan Bank and Federal Reserve Bank stock
    
    
    56,460
    
    
    
    61,056Total investment securities
    
    $
    104,261
    
    
    $
    110,209
  11




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Securities with unrealized losses at March 31, 2009less than 12 months
    
    12 months or more
    
    TotalGross
    
    
    
    
    
    Gross
    
    
    
    
    
    GrossFair
    
    unrealized
    
    Fair
    
    unrealized
    
    Fair
    
    unrealizedvalue
    
    losses
    
    value
    
    losses
    
    value
    
    losses(Dollars in thousands)Mortgage backed securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Other securities
    
    
    
    
    
    
    
    
    
    
    11,750
    
    
    
    (3,501
    )
    
    
    11,750
    
    
    
    (3,501
    )Total securities with unrealized losses
    
    $
    
    
    
    $
    
    
    
    $
    11,750
    
    
    $
    (3,501
    )
    
    $
    11,750
    
    
    $
    (3,501
    )Securities with unrealized losses at March 31, 2008less than 12 months
    
    12 months or more
    
    TotalGross
    
    
    
    
    
    Gross
    
    
    
    
    
    GrossFair
    
    unrealized
    
    Fair
    
    unrealized
    
    Fair
    
    unrealizedvalue
    
    losses
    
    value
    
    losses
    
    value
    
    losses(Dollars in thousands)Mortgage backed securities
    
    $
    
    
    
    $
    
    
    
    $
    3,890
    
    
    $
    (8
    )
    
    $
    3,890
    
    
    $
    (8
    )Other securities
    
    
    
    
    
    
    
    
    
    
    15,072
    
    
    
    (168
    )
    
    
    15,072
    
    
    
    (168
    )Total securities with unrealized losses
    
    $
    
    
    
    $
    
    
    
    $
    18,962
    
    
    $
    (176
    )
    
    $
    18,962
    
    
    $
    (176
    )
    Note 3  Loans and Leases Held for Sale
  12




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##### Table of Contents



Note 4  Loans and Leases
  March 31,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Commercial, financial and agricultural
    
    $
    1,752,387
    
    
    $
    1,862,877Real estate-construction & land development
    
    
    429,156
    
    
    
    466,598Real estate-mortgage
    
    
    488,497
    
    
    
    523,837Consumer
    
    
    21,995
    
    
    
    24,022Commercial financing
Franchise financing
    
    
    919,657
    
    
    
    922,429Domestic leasing
    
    
    10,380
    
    
    
    11,305Unearned income
Franchise financing
    
    
    (289,429
    )
    
    
    (297,600
    )Domestic leasing
    
    
    (1,121
    )
    
    
    (1,420
    )Total
    
    $
    3,331,522
    
    
    $
    3,512,048
   Note 5  Allowance for Loan and Lease Losses
  March 31,
    
    March 31,2009
    
    2008And the Three
    
    And the ThreeMonths Then Ended
    
    Months Then Ended(Dollars in thousands)Balance at beginning of year
    
    $
    137,015
    
    
    $
    144,855Provision for loan and lease losses
    
    
    64,002
    
    
    
    44,520Charge-offs
    
    
    (46,453
    )
    
    
    (31,794
    )Recoveries
    
    
    839
    
    
    
    1,607Reduction due to reclassification to loans and leases held for sale
    
    
    
    
    
    
    (461
    )Foreign currency adjustment
    
    
    
    
    
    
    (129
    )Balance at end of period
    
    $
    155,403
    
    
    $
    158,598
  13




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##### Table of Contents



March 31,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Accruing loans past due 90 days or more
    
    $
    21,728
    
    
    $
    3,031Nonaccrual loans and leases
    
    
    186,101
    
    
    
    165,154Total nonperforming loans and leases
    
    $
    207,829
    
    
    $
    168,185
 Note 6  Servicing Assets
    March 31,
    
    
    March 31,2009
    
    
    2008And the Three Months
    
    
    And the Year ThenThen Ended
    
    
    Ended(Dollars in thousands)Beginning balance
    
    $
    14,804
    
    
    $
    19,724Sale of servicing asset
    
    $
    (9,194
    )
    
    $
    Changes in fair value:Due to changes in valuation inputs or assumptions (1)
    
    
    (2,700
    )
    
    
    (2,590
    )Other changes in fair value (2)
    
    
    (600
    )
    
    
    (1,270
    )Balance at the end of the period
    
    $
    2,310
    
    
    $
    15,864
 
 (1)
    
    Principally reflects changes in discount rates and prepayment speed assumptions, primarily
due to changes in interest rates and refinance opportunities.(2)
    
    Represents changes due to realization of expected cash flows.  14




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##### Table of Contents



March 31,
    
    
    March 31,2009
    
    
    2008And the Three Months
    
    
    And the Year ThenThen Ended
    
    
    Ended(Dollars in thousands)Beginning balance
    
    $
    3,312
    
    
    $
    3,510Additions
    
    
    700
    
    
    
    328Sales
    
    
    (68
    )
    
    
    Amortization
    
    
    (990
    )
    
    
    (339
    )Recovery
(impairment)
    
    
    143
    
    
    
    (20
    )Balance at the end of the period
    
    $
    3,097
    
    
    $
    3,479
 Note 7  Income taxes
  Three Months EndedMarch 31,2009
    
    2008(Dollars in thousands)Income taxes computed at the statutory rate
    
    $
    (31,145
    )
    
    $
    (12,774
    )Increase (decrease) resulting from:Nontaxable interest from investment securities and loans
    
    
    (18
    )
    
    
    (30
    )Nontaxable income from bank owned life insurance
    
    
    39
    
    
    
    (191
    )State tax, net of federal benefit
    
    
    (2,950
    )
    
    
    (1,367
    )Foreign operations
    
    
    7
    
    
    
    73Reserve adjustment(1)
    
    
    134
    
    
    
    156Federal tax credits
    
    
    (326
    )
    
    
    (273
    )Other items  net
    
    
    236
    
    
    
    77Valuation allowance
    
    
    38,870
    
    
    
    Income tax provision (benefit)
    
    $
    4,847
    
    
    $
    (14,329
    )
 
 (1)
    
    Tax reserves are adjusted as we align our tax liability to a level commensurate with our
current identified tax exposures.  15




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##### Table of Contents



Note 8  Other borrowings
  March 31,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Federal Home Loan Bank borrowings
    
    $
    337,924
    
    
    $
    487,012Federal funds
    
    
    
    
    
    
    25,000Total
    
    $
    337,924
    
    
    $
    512,012Weighted average interest rate
    
    
    4.75
    %
    
    
    4.48
    %
   Note 9  Collateralized Debt
   WeightedAverageInterest Rate atContractual
    
    March 31,
    
    March 31,
    
    December 31,Maturity
    
    2009
    
    2009
    
    2008(Dollars in thousands)Home equity line of business2004-1 variable rate asset backed notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,9632005-1 variable and fixed rate asset backed notes
    
    
    6/2025-6/2035
    
    
    
    4.3
    
    
    
    114,571
    
    
    
    119,5832006-1 variable and fixed rate asset backed notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    139,1172006-2 variable and fixed rate asset backed notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    156,9022006-3 variable and fixed rate asset backed notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141,8392007-1 variable and fixed rate asset backed notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    215,4352008-1 variable and fixed rate asset backed notes(1)
    
    
    9/2048
    
    
    
    6.7
    
    
    
    6,216
    
    
    
    6,7452008-2 fixed rate asset backed notes(1)
    
    
    9/2048
    
    
    
    19.0
    
    
    
    71,086
    
    
    
    72,7492008-3 fixed rate asset backed notes(1)
    
    
    9/2048
    
    
    
    19.4
    
    
    
    6,350
    
    
    
    7,459Total
    
    
    
    
    
    
    
    
    
    $
    198,223
    
    
    $
    912,792
 
 (1)
    
    Shown at fair value in accordance with SFAS No. 159. 16




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##### Table of Contents



Note 10  Earnings Per Share
  Three Months ended March 31, 2009Basic
    
    
    
    
    
    DilutedNet
    
    Preferred
    
    Earnings
    
    Effect of
    
    EarningsLoss
    
    Dividends
    
    Per Share
    
    Stock Options
    
    Per Share(Dollars in thousands, except per share amounts)Net loss allocable to common shareholders:
    
    $
    (93,833
    )
    
    $
    
    
    
    $
    (93,833
    )
    
    $
    
    
    
    $
    (93,833
    )Shares
    
    
    
    
    
    
    
    
    
    
    29,578
    
    
    
    
    
    
    
    29,578Per-share amount
    
    
    
    
    
    
    
    
    
    $
    (3.17
    )
    
    $
    
    
    
    $
    (3.17
    )Three Months ended March 31, 2008Basic
    
    
    
    
    
    DilutedNet
    
    Preferred
    
    Earnings
    
    Effect of
    
    EarningsLoss
    
    Dividends
    
    Per Share
    
    Stock Options
    
    Per Share(Dollars in thousands, except per share amounts)Net loss allocable to common shareholders:
    
    $
    (22,166
    )
    
    $
    
    
    
    $
    (22,166
    )
    
    $
    (363
    )
    
    $
    (22,529
    )Shares
    
    
    
    
    
    
    
    
    
    
    29,249
    
    
    
    
    
    
    
    29,249Per-share amount
    
    
    
    
    
    
    
    
    
    $
    (0.76
    )
    
    $
    (0.01
    )
    
    $
    (0.77
    )
  Note 11  Employee Retirement Plans
  Employee Pension Plan
 For the Three Months Ended March 31,2009
    
    
    2008(Dollars in thousands)Service cost
    
    $
    87
    
    
    $
    1,167Interest cost
    
    
    624
    
    
    
    683Expected return on plan assets
    
    
    (457
    )
    
    
    (657
    )Amortization of prior service cost
    
    
    
    
    
    
    9Amortization of actuarial loss
    
    
    133
    
    
    
    71Net pension cost
    
    $
    387
    
    
    $
    1,273
 Supplemental Executive Retirement Plan
 17




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##### Table of Contents



For the Three Months Ended March 31,2009
    
    
    2008(Dollars in thousands)Service cost
    
    $
    
    
    
    $
    22Interest cost
    
    
    83
    
    
    
    81Amortization of prior service cost
    
    
    
    
    
    
    3Net SERP cost
    
    $
    83
    
    
    $
    106
  Note 12  Fair Value
  
    
    Level 1  Quoted prices for identical instruments in active markets.
    
    Level 2  Quoted prices for similar instruments in active markets; quoted prices for identical
or similar instruments in markets that are not active; and model-derived valuations in which all
significant inputs and significant value drivers are observable in active markets.
    
    Level 3  Model derived valuations in which one or more significant inputs or significant value
drivers are unobservable.
  Level 1
    
    Level 2
    
    Level 3
    
    Total(Dollars in thousands)AssetsResidual interests
    
    $
    
    
    
    $
    
    
    
    $
    9,123
    
    
    $
    9,123Investment securities  available-for-sale
    
    
    
    
    
    
    19,752
    
    
    
    10,978
    
    
    
    30,730Servicing assets
    
    
    
    
    
    
    
    
    
    
    2,310
    
    
    
    2,310Total assets
    
    $
    
    
    
    $
    19,752
    
    
    $
    22,411
    
    
    $
    42,163LiabilitiesCollateralized debt
    
    $
    
    
    
    $
    
    
    
    $
    83,652
    
    
    $
    83,652Derivatives
    
    
    
    
    
    
    8,284
    
    
    
    
    
    
    
    8,284Total liabilities
    
    $
    
    
    
    $
    8,284
    
    
    $
    83,652
    
    
    $
    91,936
   18




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##### Table of Contents



Net realized/unrealized
    
    
    Purchases,gain(losses) included in
    
    
    issuances and
    
    
    
    
    
    
    Unrealized gainsJanuary 1, 2009
    
    
    earnings(1) (2)
    
    
    settlements
    
    
    March 31, 2009
    
    
    (losses) still held(3)(Dollars in thousands)AssetsResidual interests
    
    $
    9,180
    
    
    $
    (57
    )
    
    $
    
    
    
    $
    9,123
    
    
    $
    (57
    )Investment securities  available-for-sale
    
    
    12,091
    
    
    
    (970
    )
    
    
    (143
    )
    
    
    10,978
    
    
    
    (970
    )Servicing assets
    
    
    14,804
    
    
    
    (3,300
    )
    
    
    (9,194
    )
    
    
    2,310
    
    
    
    Total assets
    
    $
    36,075
    
    
    $
    (4,327
    )
    
    $
    (9,337
    )
    
    $
    22,411
    
    
    $
    (1,027
    )LiabilitiesCollateralized debt
    
    
    86,953
    
    
    
    (3,301
    )
    
    
    
    
    
    
    83,652
    
    
    
    Total liabilities
    
    $
    86,953
    
    
    $
    (3,301
    )
    
    $
    
    
    
    $
    83,652
    
    
    $
    
  1
    
    Unrealized gains (losses) on residual interests are recorded in Trading gains (losses) on
the statement of income2
    
    Unrealized gains (losses) on servicing assets are recorded in Amortization and impairment of
servicing assets on the statement of income3
    
    Represents the amount of total gains or losses for the period, included in earnings,
attributable to the change in unrealized gains (losses) relating to assets classified as Level
3 that are still held at March 31, 2009  Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total(Dollars in thousands)AssetsLoans held for investment (1)
    
    
    
    
    
    
    
    
    
    
    122,660
    
    
    
    122,660Loans held for sale
    
    
    
    
    
    
    111,339
    
    
    
    37,312
    
    
    
    148,651Mortage servicing assets
    
    
    
    
    
    
    
    
    
    
    3,097
    
    
    
    3,097Total assets
    
    $
    
    
    
    $
    111,339
    
    
    $
    163,069
    
    
    $
    274,408
 
 (1)
    
    Represents the carrying amount of impaired loans (i.e., unpaid principal balance less
specific loan loss reserves) with impairment calculated based on appraised collateral values Note 13  Derivatives
   19




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##### Table of Contents



Asset Derivatives
    
    Liability DerivativesMarch 31,
    
    March 31,2009
    
    2008
    
    2009
    
    2008Balance
    
    
    
    
    
    BalanceSheet
    
    
    
    Sheet
    
    Fair
    
    Balance Sheet
    
    Fair
    
    Balance Sheet
    
    FairLocation
    
    Fair Value
    
    Location
    
    Value
    
    Location
    
    Value
    
    Location
    
    Value(In thousands)
    
    (In thousands)Derivatives designated as hedging instruments under Statement 133Interest rate contracts
    
    Other assets
    
    $
    
    
    
    Other assets
    
    $
    
    
    
    Other Liabilities
    
    $
    
    
    
    Other Liabilities
    
    $
    969Derivatives not designated as hedging instruments under Statement 133Interest rate contracts
    
    Other assets
    
    $
    6
    
    
    Other assets
    
    $
    1,821
    
    
    Other Liabilities
    
    $
    8,290
    
    
    Other Liabilities
    
    $
    10,217Foreign exchange contracts
    
    Other assets
    
    
    
    
    
    Other assets
    
    
    2,264
    
    
    Other Liabilities
    
    
    
    
    
    Other Liabilities
    
    
    Total
    
    
    
    $
    6
    
    
    
    
    $
    4,085
    
    
    
    
    $
    8,290
    
    
    
    
    $
    10,217Total derivatives
    
    
    
    $
    6
    
    
    
    
    $
    4,085
    
    
    
    
    $
    8,290
    
    
    
    
    $
    11,186
  20




---



##### Table of Contents



Location of Gain or (Loss)
    
    Amount of Gain or (Loss)Amount of Gain or (Loss)
    
    Reclassified from Accumulated
    
    Reclassified from AccumulatedDerivatives In Statement 133 Cash Flow
    
    Recognized in OCI on Derivative
    
    OCI Into Income (Effective
    
    OCI Into Income (EffectiveHedging Relationships
    
    (Effective Portion)
    
    Portion)
    
    Portion)2009
    
    2008
    
    
    
    2009
    
    2008(In Thousands)
    
    
    
    (In Thousands)Interest rate contracts
    
    $
    
    
    
    $
    414
    
    
    Interest Expense
    
    $
    5
    
    
    $
    1,528
 Amount of Gain or (Loss)Recognized in Income on DerivativesDerivatives Not Designated as Hedging
    
    Location of Gain or (Loss)
    
    2009
    
    2008Instruments under Statement 133
    

Recognized in Income on Derivatives
    
    (In Thousands)Interest rate contracts
    
    Derivative gain (loss)
    
    $
    (430
    )
    
    $
    (2,932
    )Foreign exchange contracts
    
    
    
    
    
    
    
    
    
    
    1,976Interest rate contracts
    
    Gain on sale of loans
    
    
    5
    
    
    
    (14
    )Total
    
    
    
    
    
    $
    (425
    )
    
    $
    (970
    )
  Note 14  Industry Segment Information
    21




---



##### Table of Contents



Commercial
    
    Commercial
    
    HomeBanking
    
    Finance
    
    Equity
    
    Other
    
    Consolidated(Dollars in thousands)For the Three Months Ended March 31, 2009Net interest income
    
    $
    24,382
    
    
    $
    13,130
    
    
    $
    8,279
    
    
    $
    (15,685
    )
    
    
    $     30,106Intersegment interest
    
    
    (1,944
    )
    
    
    (7,849
    )
    
    
    (3,581
    )
    
    
    13,374
    
    
    
    Provision for loan and lease losses
    
    
    (37,608
    )
    
    
    (5,531
    )
    
    
    (20,863
    )
    
    
    
    
    
    
    (64,002
    )Other revenue
    
    
    4,499
    
    
    
    678
    
    
    
    (14,594
    )
    
    
    (1,179
    )
    
    
    (10,596
    )Intersegment revenues
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    (9
    )
    
    
    Total net revenues
    
    
    (10,671
    )
    
    
    428
    
    
    
    (30,750
    )
    
    
    (3,499
    )
    
    
    (31,583
    )Other expense
    
    
    22,977
    
    
    
    3,202
    
    
    
    11,403
    
    
    
    6,912
    
    
    
    44,494Intersegment expenses
    
    
    1,002
    
    
    
    178
    
    
    
    308
    
    
    
    (1,488
    )
    
    
    Income (loss) before taxes
    
    
    (34,650
    )
    
    
    (2,952
    )
    
    
    (42,461
    )
    
    
    (8,923
    )
    
    
    (88,986
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,847Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $    (93,833
    )Assets at March 31, 2009
    
    $
    2,745,688
    
    
    $
    676,644
    
    
    $
    351,214
    
    
    $
    255,578
    
    
    
    $4,029,124Commercial
    
    Commercial
    
    HomeBanking
    
    Finance
    
    Equity
    
    Other
    
    Consolidated(Dollars in thousands)For the Three Months Ended March 31, 2008Net interest income
    
    $
    31,583
    
    
    $
    25,539
    
    
    $
    28,005
    
    
    $
    (20,692
    )
    
    
    $     64,435Intersegment interest
    
    
    (3,761
    )
    
    
    (11,599
    )
    
    
    (4,624
    )
    
    
    19,984
    
    
    
    Provision for loan and lease losses
    
    
    (6,580
    )
    
    
    (4,656
    )
    
    
    (33,285
    )
    
    
    1
    
    
    
    (44,520
    )Other revenue
    
    
    4,667
    
    
    
    6,288
    
    
    
    (2,960
    )
    
    
    (12,451
    )
    
    
    (4,456
    )Intersegment revenues
    
    
    
    
    
    
    
    
    
    
    42
    
    
    
    (42
    )
    
    
    Total net revenues
    
    
    25,909
    
    
    
    15,572
    
    
    
    (12,822
    )
    
    
    (13,200
    )
    
    
    15,459Other expense
    
    
    23,594
    
    
    
    7,681
    
    
    
    13,419
    
    
    
    7,260
    
    
    
    51,954Intersegment expenses
    
    
    1,037
    
    
    
    446
    
    
    
    592
    
    
    
    (2,075
    )
    
    
    Income (loss) before taxes
    
    
    1,278
    
    
    
    7,445
    
    
    
    (26,833
    )
    
    
    (18,385
    )
    
    
    (36,495
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,329
    )Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $    (22,166
    )Assets at March 31, 2008
    
    $
    3,088,222
    
    
    $
    1,281,596
    
    
    $
    1,411,521
    
    
    $
    275,728
    
    
    
    $6,057,067
 Note 15  Commitments and Contingencies
 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
 22




---



##### Table of Contents



Kossler Kossler
 Hobson Kossler Hobson Hobson
 Hobson Kossler Hobson Hobson Kossler
 Hobson Kossler Kessler v.
RFC, et al Kessler Kessler Kessler Kessler Kessler Kessler Kessler
 (Chatfield v. Irwin Union Bank and Trust Company, et al.) Hobson Kossler
  Hobson Kossler
 Litigation in Connection with Loans Purchased from Freedom Mortgage Corporation.
 Irwin Union Bank, et
al. v. Freedom Mortgage Corp.
 23




---



##### Table of Contents



Freedom Mortgage
Corporation v. Irwin Financial Corporation et al.
  Homer v. Sharp
  EverBank v. Irwin Mortgage Corporation and Irwin Union Bank -and Trust Company  Demand for Arbitration
   24




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Strategy
      Strategic Positioning Once Restructuring is Complete
    25




---



##### Table of Contents



Outlook
  Critical Accounting Policies
  Consolidated Overview
 For the Three Months EndedMarch 31,2009
    
    2008
    
    % ChangeNet loss (in thousands)
    
    $
    (93,833
    )
    
    $
    (22,166
    )
    
    
    (265
    )%Basic earnings per share
    
    
    (3.17
    )
    
    
    (0.76
    )
    
    
    (261
    )Diluted earnings per share
    
    
    (3.17
    )
    
    
    (0.77
    )
    
    
    (256
    )Return on average equity
    
    
    (458.5
    )%
    
    
    (20.0
    )%
    
    
    (1,877
    )Return on average assets
    
    
    (8.0
    )%
    
    
    (1.5
    )%
    
    
    (360
    )
 Consolidated Income Statement Analysis
 26




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##### Table of Contents



Net Loss
  Net Interest Income
  27




---



##### Table of Contents



For the Three Months Ended March 31,2009
    
    
    2008Annualized
    
    
    
    
    
    
    
    
    
    
    AnnualizedAverage
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(Dollars in thousands)AssetsInterest-earning assets:Interest-bearing deposits with financial institutions
    
    $
    24,187
    
    
    $
    101
    
    
    
    1.69
    %
    
    $
    42,644
    
    
    $
    466
    
    
    
    4.40
    %Federal funds sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,538
    
    
    
    38
    
    
    
    2.76
    %Residual interests
    
    
    9,111
    
    
    
    23
    
    
    
    1.02
    %
    
    
    11,722
    
    
    
    275
    
    
    
    9.44
    %Investment securities
    
    
    108,408
    
    
    
    1,201
    
    
    
    4.49
    %
    
    
    139,215
    
    
    
    1,823
    
    
    
    5.27
    %Loans held for sale
    
    
    803,480
    
    
    
    21,643
    
    
    
    10.92
    %
    
    
    9,112
    
    
    
    166
    
    
    
    7.33
    %Loans and leases, net of unearned income(1)
    
    
    3,470,780
    
    
    
    55,503
    
    
    
    6.49
    %
    
    
    5,624,289
    
    
    
    117,322
    
    
    
    8.39
    %Total interest earning assets
    
    
    4,415,966
    
    
    $
    78,471
    
    
    
    7.21
    %
    
    
    5,832,520
    
    
    $
    120,090
    
    
    
    8.28
    %Noninterest-earning assets:Cash and due from banks
    
    
    199,656
    
    
    
    
    
    
    
    
    
    
    
    78,666Premises and equipment, net
    
    
    32,172
    
    
    
    
    
    
    
    
    
    
    
    38,172Other assets
    
    
    268,058
    
    
    
    
    
    
    
    
    
    
    
    254,725Less allowance for loan and lease losses
    
    
    (136,983
    )
    
    
    
    
    
    
    
    
    
    
    (149,299
    )Total assets
    
    $
    4,778,869
    
    
    
    
    
    
    
    
    
    
    $
    6,054,784Liabilities and Shareholders EquityInterest-bearing liabilities:Money market checking
    
    $
    360,391
    
    
    $
    411
    
    
    
    0.46
    %
    
    $
    319,110
    
    
    $
    1,271
    
    
    
    1.60
    %Money market savings
    
    
    449,298
    
    
    
    823
    
    
    
    0.74
    %
    
    
    1,042,507
    
    
    
    7,593
    
    
    
    2.93
    %Regular savings
    
    
    132,169
    
    
    
    653
    
    
    
    2.00
    %
    
    
    116,275
    
    
    
    526
    
    
    
    1.82
    %Time deposits
    
    
    1,821,483
    
    
    
    17,003
    
    
    
    3.79
    %
    
    
    1,656,355
    
    
    
    19,548
    
    
    
    4.75
    %Other borrowings
    
    
    366,635
    
    
    
    4,310
    
    
    
    4.77
    %
    
    
    643,544
    
    
    
    7,236
    
    
    
    4.52
    %Collateralized debt
    
    
    894,020
    
    
    
    21,270
    
    
    
    9.65
    %
    
    
    1,213,801
    
    
    
    15,170
    
    
    
    5.03
    %Other long-term debt
    
    
    233,868
    
    
    
    3,895
    
    
    
    6.75
    %
    
    
    233,871
    
    
    
    4,311
    
    
    
    7.41
    %Total interest-bearing liabilities
    
    $
    4,257,864
    
    
    $
    48,365
    
    
    
    4.61
    %
    
    $
    5,225,463
    
    
    $
    55,655
    
    
    
    4.28
    %Noninterest-bearing liabilities:Demand deposits
    
    
    312,585
    
    
    
    
    
    
    
    
    
    
    
    299,915Other liabilities
    
    
    125,415
    
    
    
    
    
    
    
    
    
    
    
    78,454Shareholders equity
    
    
    83,005
    
    
    
    
    
    
    
    
    
    
    
    450,952Total liabilities and shareholders equity
    
    $
    4,778,869
    
    
    
    
    
    
    
    
    
    
    $
    6,054,784Net interest income
    
    
    
    
    
    $
    30,106
    
    
    
    
    
    
    
    
    
    
    $
    64,435Net interest
income to average interest earning assets
    
    
    
    
    
    
    
    
    
    
    2.76
    %
    
    
    
    
    
    
    
    
    
    
    4.44
    %
  (1)
    
    For purposes of these computations, nonaccrual loans are included in daily average loan
amounts outstanding. Provision for Loan and Lease Losses
  28




---



##### Table of Contents



Noninterest Income
  Noninterest Expense
  Income Tax Provision
   Consolidated Balance Sheet Analysis
  Residual Interests
  Investment Securities
  29




---



##### Table of Contents



March 31,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)U.S. Treasury and government obligations
    
    $
    13,019
    
    
    $
    13,054Obligations of states and political subdivisions
    
    
    3,200
    
    
    
    3,320Mortgage-backed securities
    
    
    19,832
    
    
    
    20,998Other
    
    
    11,750
    
    
    
    11,781Total
    
    
    47,801
    
    
    
    49,153Federal Home Loan Bank and Federal Reserve Bank stock
    
    
    56,460
    
    
    
    61,056Total
    
    $
    104,261
    
    
    $
    110,209
      Loans Held For Sale
  Loans and Leases
  30




---



##### Table of Contents



March 31,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Commercial, financial and agricultural
    
    $
    1,752,387
    
    
    $
    1,862,877Real estate-construction & land development
    
    
    429,156
    
    
    
    466,598Real estate-mortgage
    
    
    488,497
    
    
    
    523,837Consumer
    
    
    21,995
    
    
    
    24,022Commercial financingFranchise financing
    
    
    919,657
    
    
    
    922,429Domestic leasing
    
    
    10,380
    
    
    
    11,305Unearned incomeFranchise financing
    
    
    (289,429
    )
    
    
    (297,600
    )Domestic leasing
    
    
    (1,121
    )
    
    
    (1,420
    )Total
    
    $
    3,331,522
    
    
    $
    3,512,048
 Allowance for Loan and Lease Losses
  March 31,
    
    March 31,2009
    
    2008And the Three
    
    And the ThreeMonths Then Ended
    
    Months Then Ended(Dollars in thousands)Balance at beginning of year
    
    $
    137,015
    
    
    $
    144,855Provision for loan and lease losses
    
    
    64,002
    
    
    
    44,520Charge-offs
    
    
    (46,453
    )
    
    
    (31,794
    )Recoveries
    
    
    839
    
    
    
    1,607Reduction due to reclassification to loans and leases held for sale
    
    
    
    
    
    
    (461
    )Foreign currency adjustment
    
    
    
    
    
    
    (129
    )Balance at end of period
    
    $
    155,403
    
    
    $
    158,598
  Deposits
  Other Borrowings
   31




---



##### Table of Contents



Collateralized and Other Long-Term Debt
   Repurchase Liability
     32




---



##### Table of Contents



Repurchase Analysis
 2007
    
    2008
    
    1Q 2009
    
    TotalVintage
    
    MillionsPre-2002
    
    $
    0.3
    
    
    $
    0.4
    
    
    $
    
    
    
    $
    0.72002
    
    
    1.0
    
    
    
    0.1
    
    
    
    
    
    
    
    1.12003
    
    
    1.0
    
    
    
    1.2
    
    
    
    
    
    
    
    2.22004
    
    
    0.5
    
    
    
    1.8
    
    
    
    
    
    
    
    2.32005
    
    
    5.5
    
    
    
    2.7
    
    
    
    0.3
    
    
    
    8.52006
    
    
    17.9
    
    
    
    3.7
    
    
    
    
    
    
    
    21.62007
    
    
    1.1
    
    
    
    0.7
    
    
    
    
    
    
    
    1.8Totals
    
    $
    27.3
    
    
    $
    10.6
    
    
    $
    0.3
    
    
    $
    38.2Non-EPD
    
    
    48
    %
    
    
    99
    %
    
    
    100
    %
    
    
    62
    %
 Capital
   33




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##### Table of Contents



To Be WellCapitalized Under
    
    For CapitalActual
    
    
    
    
    
    Prompt Corrective
    
    AdequacyAmount
    
    Ratio
    
    Action Provisions
    
    PurposesAs of March 31, 2009
    
    (Dollars in thousands)Total Capital (to Risk-Weighted Assets):Irwin Financial Corporation
    
    $
    61,280
    
    
    
    1.5
    %
    
    
    N/A
    
    
    
    8.0
    %Irwin Union Bank and Trust
    
    
    284,989
    
    
    
    8.7
    
    
    
    10.0
    %
    
    
    8.0Irwin Union Bank, F.S.B.
    
    
    53,366
    
    
    
    11.0
    
    
    
    10.0
    
    
    
    8.0Tier I Capital (to Risk-Weighted Assets):Irwin Financial Corporation
    
    
    30,640
    
    
    
    0.8
    
    
    
    N/A
    
    
    
    4.0Irwin Union Bank and Trust
    
    
    212,508
    
    
    
    6.5
    
    
    
    6.0
    
    
    
    4.0Irwin Union Bank, F.S.B.
    
    
    47,318
    
    
    
    9.8
    
    
    
    6.0
    
    
    
    N/ATier I Capital (to Average Assets):Irwin Financial Corporation
    
    
    30,640
    
    
    
    0.6
    
    
    
    N/A
    
    
    
    4.0Irwin Union Bank and Trust
    
    
    212,508
    
    
    
    5.0
    
    
    
    5.0
    
    
    
    4.0Core Capital (to Adjusted Tangible Assets)Irwin Union Bank, F.S.B.
    
    
    47,318
    
    
    
    8.8
    
    
    
    5.0
    
    
    
    4.0As of December 31, 2008
    
    (Dollars in thousands)Total Capital (to Risk-Weighted Assets):Irwin Financial Corporation
    
    $
    309,726
    
    
    
    6.6
    %
    
    
    N/A
    
    
    
    8.0
    %Irwin Union Bank and Trust
    
    
    385,136
    
    
    
    9.3
    
    
    
    10.0
    %
    
    
    8.0Irwin Union Bank, F.S.B.
    
    
    57,232
    
    
    
    11.2
    
    
    
    10.0
    
    
    
    8.0Tier I Capital (to Risk-Weighted Assets):Irwin Financial Corporation
    
    
    154,863
    
    
    
    3.3
    
    
    
    N/A
    
    
    
    4.0Irwin Union Bank and Trust
    
    
    302,397
    
    
    
    7.3
    
    
    
    6.0
    
    
    
    4.0Irwin Union Bank, F.S.B.
    
    
    50,839
    
    
    
    9.9
    
    
    
    6.0
    
    
    
    N/ATier I Capital (to Average Assets):Irwin Financial Corporation
    
    
    154,863
    
    
    
    3.1
    
    
    
    N/A
    
    
    
    4.0Irwin Union Bank and Trust
    
    
    302,397
    
    
    
    6.7
    
    
    
    5.0
    
    
    
    4.0Core Capital (to Adjusted Tangible Assets)Irwin Union Bank, F.S.B.
    
    
    50,839
    
    
    
    8.2
    
    
    
    5.0
    
    
    
    4.0
     34




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##### Table of Contents



Cash Flow Analysis
  Earnings by Line of Business
  
    
    Commercial Banking
    
    Commercial Finance
    
    Home Equity
  Three Months EndedMarch 31,2009
    
    2008(Dollars in thousands)Pretax
results:Commercial Banking
    
    $
    (34,650
    )
    
    $
    1,278Commercial Finance
    
    
    (2,952
    )
    
    
    7,445Home Equity
    
    
    (42,461
    )
    
    
    (26,834
    )Other (including consolidating entries)
    
    
    (8,923
    )
    
    
    (18,385
    )Net loss before taxes
    
    
    (88,986
    )
    
    
    (36,496
    )Income tax provision (benefit)
    
    
    4,847
    
    
    
    (14,330
    )Net loss
    
    $
    (93,833
    )
    
    $
    (22,166
    )
 35




---



##### Table of Contents



Commercial Banking
  Three Months Ended March 31,2009
    
    
    2008(Dollars in thousands)Selected Income Statement Data:Interest income
    
    $
    34,910
    
    
    $
    49,726Interest expense
    
    
    (12,472
    )
    
    
    (21,904
    )Net interest income
    
    
    22,438
    
    
    
    27,822Provision for loan and lease losses
    
    
    (37,608
    )
    
    
    (6,580
    )Other income
    
    
    4,499
    
    
    
    4,667Total net revenue
    
    
    (10,671
    )
    
    
    25,909Operating expense
    
    
    (23,979
    )
    
    
    (24,631
    )(Loss) income before taxes
    
    
    (34,650
    )
    
    
    1,278
 March 31,
    
    December 31,2009
    
    2008(Dollars in thousands)Selected Balance Sheet Data at End of Period:Assets
    
    $
    2,745,688
    
    
    $
    2,870,877Securities and short-term investments
    
    
    38,324
    
    
    
    39,181Loans and leases
    
    
    2,426,532
    
    
    
    2,583,067Allowance for loan and lease losses
    
    
    (86,622
    )
    
    
    (72,598
    )Deposits
    
    
    2,115,455
    
    
    
    1,974,086Shareholders equity
    
    
    187,574
    
    
    
    208,093Daily Averages:Assets
    
    $
    2,776,256
    
    
    $
    3,011,280Securities and short-term investments
    
    
    38,808
    
    
    
    38,574Loans and leases
    
    
    2,525,417
    
    
    
    2,843,182Allowance for loan and lease losses
    
    
    (76,934
    )
    
    
    (52,592
    )Deposits
    
    
    2,052,568
    
    
    
    2,407,206Shareholders equity
    
    
    205,648
    
    
    
    228,261Shareholders equity to assets
    
    
    7.41
    %
    
    
    7.58
    %
  Portfolio Characteristics
   36




---



##### Table of Contents



March 31,
    
    December 31,2009
    
    2008Loans
    
    Percent
    
    Loans
    
    PercentMarkets
    
    Outstanding
    
    of Total
    
    Outstanding
    
    of Total(Dollars in thousands)Indianapolis
    
    $
    403,403
    
    
    
    16.6
    %
    
    $
    432,034
    
    
    
    16.7
    %Central and Western Michigan
    
    
    377,710
    
    
    
    15.6
    
    
    
    393,528
    
    
    
    15.2Southern Indiana
    
    
    400,484
    
    
    
    16.5
    
    
    
    425,529
    
    
    
    16.5Phoenix
    
    
    392,705
    
    
    
    16.2
    
    
    
    426,719
    
    
    
    16.5Las Vegas
    
    
    150,069
    
    
    
    6.2
    
    
    
    174,502
    
    
    
    6.8Sacramento
    
    
    103,307
    
    
    
    4.3
    
    
    
    111,346
    
    
    
    4.3Other
    
    
    598,854
    
    
    
    24.6
    
    
    
    619,409
    
    
    
    24.0Total
    
    $
    2,426,532
    
    
    
    100.0
    %
    
    $
    2,583,067
    
    
    
    100.0
    %
 Core
    
    Percent
    
    Core
    
    PercentDeposits
    
    of Total
    
    Deposits
    
    of TotalIndianapolis
    
    $
    278,188
    
    
    
    15.4
    %
    
    $
    249,524
    
    
    
    14.0
    %Central and Western Michigan
    
    
    209,755
    
    
    
    11.6
    
    
    
    209,986
    
    
    
    11.8Southern Indiana
    
    
    700,397
    
    
    
    38.8
    
    
    
    672,545
    
    
    
    37.8Phoenix
    
    
    113,048
    
    
    
    6.3
    
    
    
    120,284
    
    
    
    6.8Las Vegas
    
    
    90,863
    
    
    
    5.0
    
    
    
    96,061
    
    
    
    5.4Sacramento
    
    
    49,543
    
    
    
    2.7
    
    
    
    55,568
    
    
    
    3.1Other
    
    
    362,285
    
    
    
    20.2
    
    
    
    375,061
    
    
    
    21.1Total
    
    $
    1,804,079
    
    
    
    100.0
    %
    
    $
    1,779,029
    
    
    
    100.0
    %
 Pretax
Results
  Net Interest Income
 37




---



##### Table of Contents



Three Months Ended March 31,2009
    
    2008(Dollars in thousands)Net interest income
    
    $
    22,438
    
    
    $
    27,822Average interest earning assets
    
    
    2,566,182
    
    
    
    2,973,285Net interest margin
    
    
    3.55
    %
    
    
    3.76
    %
  Provision for Loan and Lease Losses
  Noninterest Income
  Three Months Ended March 31,2009
    
    
    2008(Dollars in thousands)Trust fees
    
    $
    530
    
    
    $
    581Service charges on deposit accounts
    
    
    1,036
    
    
    
    1,084Insurance commissions, fees and premiums
    
    
    468
    
    
    
    561Gain from sales of loans
    
    
    1,459
    
    
    
    601Loan servicing fees
    
    
    339
    
    
    
    336Amortization and impairment of servicing assets
    
    
    (624
    )
    
    
    (315
    )Brokerage fees
    
    
    305
    
    
    
    370Other
    
    
    986
    
    
    
    1,449Total noninterest income
    
    $
    4,499
    
    
    $
    4,667
 Operating Expenses
  38




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##### Table of Contents



Three Months Ended March 31,2009
    
    
    2008(Dollars in thousands)Salaries and employee benefits
    
    $
    11,123
    
    
    $
    14,160Other expenses
    
    
    12,856
    
    
    
    10,471Total operating expenses
    
    $
    23,979
    
    
    $
    24,631Efficiency ratio
    
    
    89.0
    %
    
    
    75.8
    %Number of employees at period end(1)
    
    
    444
    
    
    
    514
 
 (1)
    
    On a full time equivalent basis.  Balance Sheet
  Credit Quality
   March 31,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Nonperforming loans
    
    $
    168,939
    
    
    $
    129,953Other real estate owned
    
    
    22,166
    
    
    
    13,377Total nonperforming assets
    
    $
    191,105
    
    
    $
    143,330Nonperforming assets to total assets
    
    
    6.96
    %
    
    
    4.99
    %Allowance for loan losses
    
    $
    86,622
    
    
    $
    72,598Allowance for loan losses to total loans
    
    
    3.57
    %
    
    
    2.81
    %
 Three Months Ended March 31,2009
    
    2008For the Period Ended:Provision for loan losses
    
    $
    37,608
    
    
    $
    6,580Net charge-offs
    
    
    23,584
    
    
    
    1,969Net charge-offs to average loans (annualized)
    
    
    3.74
    %
    
    
    1.36
    %
 39




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##### Table of Contents



Commercial Finance
  Three Months Ended March 31,2009
    
    
    2008(Dollars in thousands)Selected Income Statement Data:Net interest income
    
    $
    5,281
    
    
    $
    13,940Provision for loan and lease losses
    
    
    (5,531
    )
    
    
    (4,656
    )Noninterest income
    
    
    678
    
    
    
    6,288Total net revenue
    
    
    428
    
    
    
    15,572Operating expense
    
    
    (3,380
    )
    
    
    (8,127
    )(Loss) income before taxes
    
    
    (2,952
    )
    
    
    7,445Selected Operating Data:Net charge-offs
    
    $
    2,654
    
    
    $
    2,736Net charge-offs to average loans (annualized)
    
    
    1.62
    %
    
    
    0.68
    %Net interest margin
    
    
    3.13
    %
    
    
    4.44
    %Total funding of loans and leases
    
    $
    28,017
    
    
    $
    142,559
 March 31,
    
    December 31,2009
    
    2008(Dollars in thousands)Selected Balance Sheet Data at End of Period:Total assets
    
    $
    676,644
    
    
    $
    676,399Loans and leases
    
    
    639,487
    
    
    
    634,714Allowance for loan and lease losses
    
    
    (11,458
    )
    
    
    (8,581
    )Shareholders equity
    
    
    31,565
    
    
    
    33,395
 Overview
  Portfolio Characteristics
    40




---



##### Table of Contents



March 31,
    
    December 31,2009
    
    2008California
    
    
    15.1
    %
    
    
    14.7
    %Texas
    
    
    10.5
    
    
    
    11.0New York
    
    
    8.6
    
    
    
    9.0New Jersey
    
    
    7.8
    
    
    
    7.1All other states
    
    
    58.0
    
    
    
    58.2Total
    
    
    100.0
    %
    
    
    100.0
    %Total Franchise Portfolio in thousands
    
    $
    661,543
    
    
    $
    624,829
  March 31,
    
    December 31,2009
    
    2008(Dollars in thousands)Domestic franchise loans
    
    $
    661,543
    
    
    $
    624,829Weighted average coupon
    
    
    8.30
    %
    
    
    8.95
    %Delinquency ratio
    
    
    3.79
    
    
    
    3.65
 Pretax
Results
  Net Interest Income
  Three Months March 31,2009
    
    2008(Dollars in thousands)Net interest income
    
    $
    5,281
    
    
    $
    13,940Average interest earning assets
    
    
    684,095
    
    
    
    1,261,482Net interest margin
    
    
    3.13
    %
    
    
    4.44
    %
   Provision for Loan and Lease Losses
  Noninterest Income
  41




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##### Table of Contents



Three Months Ended March 31,2009
    
    
    2008(Dollars in thousands)Gain from sales of loans
    
    $
    
    
    
    $
    5,829Derivative losses, net
    
    
    
    
    
    
    (1,117
    )Other
    
    
    678
    
    
    
    1,576Total noninterest income
    
    $
    678
    
    
    $
    6,288
  Operating Expenses
  Three Months Ended March 31,2009
    
    
    2008(Dollars in thousands)Salaries and employee benefits
    
    $
    2,013
    
    
    $
    5,134Other
    
    
    1,367
    
    
    
    2,993Total operating expenses
    
    $
    3,380
    
    
    $
    8,127Efficiency ratio
    
    
    56.72
    %
    
    
    38.34
    %Number of employees at period end (1)
    
    
    66
    
    
    
    209
 
 (1)
    
    On a full time equivalent basis.  Credit Quality
   March 31,
    
    December 31,2009
    
    2008(Dollars in thousands)Nonperforming loans
    
    $
    16,969
    
    
    $
    16,117Allowance for loan losses
    
    
    11,458
    
    
    
    8,581Allowance for loan losses to total loans
    
    
    1.79
    %
    
    
    1.35
    %
 Three Months Ended March 31,2009
    
    2008(Dollars in thousands)Provision for loan losses
    
    $
    5,531
    
    
    $
    4,656Net charge-offs
    
    
    2,654
    
    
    
    3,472Net charge-offs to average loans
    
    
    1.62
    %
    
    
    2.08
    %
 42




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##### Table of Contents



Home Equity Portfolio
  Three Months Ended March 31,2009
    
    
    2008(Dollars in thousands)Selected Income Statement Data:Net interest income
    
    $
    4,698
    
    
    $
    23,381Provision for loan and lease losses
    
    
    (20,863
    )
    
    
    (33,285
    )Noninterest income
    
    
    (14,585
    )
    
    
    (2,918
    )Total net revenues
    
    
    (30,758
    )
    
    
    (12,822
    )Operating expenses
    
    
    (11,711
    )
    
    
    (14,011
    )Loss before taxes
    
    
    (42,461
    )
    
    
    (26,833
    )
 March 31,
    
    December 31,2009
    
    2008(Dollars in thousands)Selected Balance Sheet Data:Total assets
    
    $
    351,214
    
    
    $
    1,106,305Home equity loans and lines of credit(1)
    
    
    265,258
    
    
    
    294,020Allowance for loan losses
    
    
    (57,108
    )
    
    
    (55,621
    )Home equity loans held for sale
    
    
    111,339
    
    
    
    803,688Mortgage servicing assets
    
    
    2,310
    
    
    
    15,096Short-term borrowings
    
    
    87,661
    
    
    
    76,701Collateralized debt
    
    
    198,223
    
    
    
    912,792Shareholders equity
    
    
    108,436
    
    
    
    139,064Selected Operating Data:Weighted average coupon rate:Lines of credit
    
    
    7.56
    %
    
    
    8.12
    %Loans
    
    
    10.62
    
    
    
    11.07
 
 (1)
    
    Includes $0.4 billion and $1.1 billion of collateralized loans at March 31, 2009 and December
31, 2008, as part of securitized financings.  Portfolio
  Pretax
Results
  43




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##### Table of Contents



Net Revenue
   Three Months Ended March 31,2009
    
    
    2008(Dollars in thousands)Net interest income
    
    $
    4,698
    
    
    $
    23,381Provision for loan losses
    
    
    (20,863
    )
    
    
    (33,285
    )(Loss) gain on sales of loans
    
    
    (11,766)
    
    
    
    548Loss on sale
of servicing assets
    
    
    (7,262
    )
    
    
    Loan servicing fees
    
    
    2,284
    
    
    
    2,163Amortization and impairment of servicing assets
    
    
    (3,524
    )
    
    
    (3,904
    )Derivative losses
    
    
    (33
    )
    
    
    (1
    )Other income
    
    
    5,716
    
    
    
    (1,724
    )Total net revenue
    
    $
    (30,750
    )
    
    $
    (12,822
    )
       Operating Expenses
  44




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##### Table of Contents



Three Months Ended March 31,2009
    
    
    2008(Dollars in thousands)Salaries and employee benefits
    
    $
    3,003
    
    
    $
    7,803Other
    
    
    8,708
    
    
    
    6,208Total operating expenses
    
    $
    11,711
    
    
    $
    14,011Number of employees at period end (1)
    
    
    120
    
    
    
    292
 
 (1)
    
    On a full time equivalent basis.  Home Equity Servicing and Credit Quality
   March 31,
    
    December 31,2009
    
    2008Loan Portfolio
    
    (Dollars in thousands)Total Loans
    
    $
    376,597
    
    
    $
    1,097,70830 days past due
    
    
    11.97
    %
    
    
    11.31
    %90 days past due
    
    
    6.54
    
    
    
    4.88
  Parent and Other
  45




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##### Table of Contents



Risk Management
  
    
    Credit risk
    
    Liquidity risk
    
    Market risk (including interest rate and foreign exchange risk)
    
    Operational risk
    
    Compliance risk
     Credit Risk
  46




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47




---



##### Table of Contents



March 31,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Accruing loans past due 90 days or more:Commercial, financial and
agricultural loans
    
    $
    21,643
    
    
    $
    2,964Real estate mortgages
    
    
    
    
    
    
    41Consumer loans
    
    
    85
    
    
    
    2621,728
    
    
    
    3,031Nonaccrual loans and leases:Commercial, financial and
agricultural loans
    
    
    141,785
    
    
    
    124,670Real estate mortgages
    
    
    24,930
    
    
    
    22,387Consumer loans
    
    
    2,417
    
    
    
    1,930Commercial financing:Franchise financing
    
    
    14,711
    
    
    
    13,814Domestic leasing
    
    
    2,258
    
    
    
    2,353186,101
    
    
    
    165,154Total nonperforming
loans and leases
    
    
    207,829
    
    
    
    168,185Other real estate owned & other
    
    
    29,315
    
    
    
    51,786Total nonperforming assets
    
    $
    237,144
    
    
    $
    219,971Nonperforming loans and leases to total
loans and leases
    
    
    6.2
    %
    
    
    4.8
    %Nonperforming assets to total
assets
    
    
    5.9
    %
    
    
    4.5
    %
  48




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##### Table of Contents



March 31,2009
    
    Commercial banking
    
    $
    191
    
    Commercial finance
    
    
    18
    
    Home Equity Lending
    
    
    26
    
    Parent and other
    
    
    2
  Liquidity Risk
       49




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##### Table of Contents




    
    Lines of credit with correspondent banks, including fed funds lines: none outstanding out of
$35 million available but not committed
    
    Lines of credit with non-correspondent banks: none outstanding
  Market Risk (including Interest Rate and Foreign Exchange Risk)
      50




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##### Table of Contents




    
    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 consider potential rebalancing or other management actions that might be taken
in the future under asset/liability management as interest rates change.
    
    The tables below show modeled changes in interest rates for individual asset classes.
Asset classes in our portfolio have interest rate sensitivity tied to different underlying
indices or instruments. While the rate sensitivity of individual asset classes presented
below is our best estimate of changes in value due to interest rate changes, the total
potential change figures are subject to basis risk between value changes of individual
assets and liabilities which have not been included in the model.
    
    Few of the asset classes shown react to interest rate changes in a linear fashion. That
is, the point estimates we have made at Current and +/-2% and +/-1% are appropriate
estimates at those amounts of rate change, but it may not be accurate to interpolate
linearly between those points. This is most evident in products that contain optionality in
payment timing or pricing such as mortgage servicing or nonmaturity transaction deposits.
    
    Finally, the tables show theoretical outcomes for dramatic changes in interest rates
which do not consider potential rebalancing or repositioning of hedges and balance sheet
mix. Normal fluctuations in non-interest sensitive assets and liabilities can cause
fluctuations in interest-sensitive assets and liabilities that can cause the market value of
equity to fluctuate from year to year.
 Economic Value Change Method
 Present Value at March 31, 2009Change in Interest Rates of:-2%
    
    
    -1%
    
    
    Current
    
    
    +1%
    
    
    +2%(In Thousands)Interest Sensitive AssetsLoans and other assets
    
    $
    3,934,603
    
    
    $
    3,865,922
    
    
    $
    3,798,791
    
    
    $
    3,738,190
    
    
    $
    3,681,707Loans held for sale
    
    
    148,969
    
    
    
    147,576
    
    
    
    146,264
    
    
    
    145,038
    
    
    
    143,895Mortgage servicing rights
    
    
    1,983
    
    
    
    2,203
    
    
    
    3,030
    
    
    
    4,242
    
    
    
    4,992Interest sensitive financial derivatives
    
    
    (6,110
    )
    
    
    (5,510
    )
    
    
    (8,102
    )
    
    
    (6,029
    )
    
    
    (3,414
    )Total interest sensitive assets
    
    
    4,079,445
    
    
    
    4,010,191
    
    
    
    3,939,983
    
    
    
    3,881,441
    
    
    
    3,827,180Interest Sensitive LiabilitiesDeposits
    
    
    (3,127,639
    )
    
    
    (3,081,695
    )
    
    
    (3,035,652
    )
    
    
    (2,987,937
    )
    
    
    (2,940,175
    )Short-term borrowings
    
    
    (400,406
    )
    
    
    (392,869
    )
    
    
    (384,531
    )
    
    
    (376,571
    )
    
    
    (368,968
    )Long-term debt (1)
    
    
    (460,843
    )
    
    
    (453,479
    )
    
    
    (445,408
    )
    
    
    (438,393
    )
    
    
    (432,108
    )Total interest sensitive liabilities
    
    
    (3,988,888
    )
    
    
    (3,928,043
    )
    
    
    (3,865,591
    )
    
    
    (3,802,901
    )
    
    
    (3,741,251
    )Net market value as of March 31, 2009
    
    $
    90,557
    
    
    $
    82,148
    
    
    $
    74,392
    
    
    $
    78,540
    
    
    $
    85,929Change from current
    
    $
    16,165
    
    
    $
    7,756
    
    
    $
    
    
    
    $
    4,148
    
    
    $
    11,537Net market value as of December 31, 2008
    
    $
    75,245
    
    
    $
    81,825
    
    
    $
    88,492
    
    
    $
    100,883
    
    
    $
    120,677Change from current
    
    $
    (13,247
    )
    
    $
    (6,667
    )
    
    $
    
    
    
    $
    12,391
    
    
    $
    32,185
 
 (1)
    
    Includes certain debt which is categorized as collateralized borrowings in other sections
of this document 51




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##### Table of Contents



GAAP-Based Value Change Method
 Present Value at March 31, 2009Change in Interest Rates of:-2%
    
    
    -1%
    
    
    Current
    
    
    +1%
    
    
    +2%(In Thousands)Interest Sensitive AssetsLoans and other assets
    
    $
    7,456
    
    
    $
    7,239
    
    
    $
    7,022
    
    
    $
    6,808
    
    
    $
    6,603Loans held for sale
    
    
    148,969
    
    
    
    147,576
    
    
    
    146,264
    
    
    
    145,038
    
    
    
    143,895Mortgage servicing rights
    
    
    1,983
    
    
    
    2,203
    
    
    
    3,030
    
    
    
    4,242
    
    
    
    4,992Interest sensitive financial derivatives
    
    
    (6,110
    )
    
    
    (5,510
    )
    
    
    (8,102
    )
    
    
    (6,029
    )
    
    
    (3,414
    )Total interest sensitive assets
    
    
    152,298
    
    
    
    151,508
    
    
    
    148,214
    
    
    
    150,059
    
    
    
    152,076Interest Sensitive LiabilitiesDeposits(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term borrowings(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Long-term debt(1)
    
    
    (86,049
    )
    
    
    (84,836
    )
    
    
    (83,651
    )
    
    
    (82,495
    )
    
    
    (81,359
    )Total interest sensitive liabilities
    
    
    (86,049
    )
    
    
    (84,836
    )
    
    
    (83,651
    )
    
    
    (82,495
    )
    
    
    (81,359
    )Net market value as of March 31, 2009
    
    $
    66,249
    
    
    $
    66,672
    
    
    $
    64,563
    
    
    $
    67,564
    
    
    $
    70,717Change from current
    
    $
    1,686
    
    
    $
    2,109
    
    
    $
    
    
    
    $
    3,001
    
    
    $
    6,154Net market value as of December 31, 2008
    
    $
    (33,965
    )
    
    $
    (32,891
    )
    
    $
    (31,992
    )
    
    $
    (28,412
    )
    
    $
    (23,845
    )Change from current
    
    $
    (1,973
    )
    
    $
    (899
    )
    
    $
    
    
    
    $
    3,580
    
    
    $
    8,147
 
 (1)
    
    Value does not change in GAAP presentation Off-Balance Sheet Instruments
   Derivative Financial Instruments
  Operational and Compliance Risk
 52




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##### Table of Contents



Regulatory Environment
   
 Item 3. Quantitative and Qualitative Disclosures about Market Risk.
  
 Item 4. Controls and Procedures.
   53




---



##### Table of Contents



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, 2008, we
experienced developments as noted in the litigation described below. For a full description of the
litigation, see Note 15, Commitments and Contingencies, in the Notes to the Financial Statements,
Part I, Item 1 of this Report.
 Litigation in Connection with Loans Purchased from Community Bank of Northern Virginia Hobson v. Irwin Union Bank and Trust Company Kossler v. Community Bank of Northern
Virginia); (Chatfield v. Irwin Union Bank and Trust Company, et al.), Chatfield
 Chatfield
 EverBank v. Irwin Mortgage Corporation and Irwin Union Bank and Trust CompanyDemand for
Arbitration
   
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  54




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##### Table of Contents



Item 6. Exhibits.
 ExhibitNumber
    
    Description of Exhibit2.1
    
    Asset Purchase Agreement by and among Irwin Financial Corporation, Irwin Mortgage Corporation and Freedom
Mortgage Corporation dated as of August 7, 2006. (Incorporated by reference to Exhibits 2.1 and 2.2 of Form 8-K
filed October 2, 2006, File No. 001-16691.)2.2
    
    Asset Purchase Agreement dated as of the 21st day of July, 2008, by and among EQ Acquisitions 2003, Inc.,
Equilease Financial Services, Inc., Irwin Commercial Finance Corporation, Equipment Finance, and Irwin Union
Bank and Trust Company. (Incorporated by reference to Exhibit 2.2 of Form 10-Q Report for quarter ended
September 30, 2008, and filed November 10, 2008, File No. 001-16691.)2.3
    
    Letter Amendment to Asset Purchase Agreement dated July 21, 2008 by and among Irwin Commercial Finance
Corporation, Equipment Finance, Irwin Union Bank and Trust Company, EQ Acquisitions 2003, Inc., and Equilease
Financial Services, Inc. dated July 30, 2008. (Incorporated by reference to Exhibit 2.3 of Form 10-Q Report for
quarter ended September 30, 2008, and filed November 10, 2008, File No. 001-16691.)2.4
    
    Asset Purchase Agreement dated as of the 23rd day of July, 2008 by and among Roynat Inc. and Irwin Commercial
Finance Canada Corporation and Onset Alberta Ltd. and Irwin Union Bank and Trust Company. (Incorporated by
reference to Exhibit 2.4 of Form 10-Q Report for quarter ended September 30, 2008, and filed November 10, 2008,
File No. 001-16691.)2.5
    
    Amended and Restated Asset Purchase Agreement dated as of July 31, 2008 among Roosevelt Management Company LLC,
Navigator Mortgage Loan Trust 2008, Wells Fargo Bank, N.A. and Irwin Union bank and Trust Company. (Incorporated
by reference to Exhibit 2.5 of Form 10-Q Report for quarter ended September 30, 2008, and filed November 10,
2008, File No. 001-16691.)2.6
    
    Asset Purchase Agreement dated as
of the 31st day of March, 2009 by and among Green Tree Servicing LLC, Irwin Union Bank and Trust Company and Irwin Home Equity Corporation.3.1
    
    Restated Articles of Incorporation of Irwin Financial Corporation, as amended November 3, 2008. (Incorporated by
reference to Exhibit 3.1 of Form 10-Q Report for quarter ended September 30, 2008, and filed November 10, 2008,
File No. 001-16691.)3.2
    
    Code of By-laws of Irwin Financial Corporation, as amended November 28, 2007. (Incorporated by reference to
Exhibit 3.2 of Form 10-Q Report for quarter ended September 30, 2008, and filed November 10, 2008, File No.
001-16691.)4.1
    
    Specimen Common Stock Certificate. (Incorporated by reference to Exhibit 4.1 of Form 10-K filed March 9, 2007,
File No. 001-16691.)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 of 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 of Form S-8 filed on September 7, 2001, File No.
333-69156.)10.1
    
    *Irwin Financial Corporation 1997 Stock Option Plan. (Incorporated by reference to Exhibit 10 of Form 10-Q
Report for quarter ended September 30, 1997, and filed August 12, 1997, File No. 000-06835.)10.2
    
    *Amendment Number One to Irwin Financial Corporation 1997 Stock Option Plan. (Incorporated by reference to
Exhibit 10(l) to Form 10-K405 Report for the period ended December 31, 1997, filed March 30, 1998, File No.
000-06835.)10.3
    
    *Irwin Union Bank and Trust Company Business Development Board Compensation Program. (Incorporated by reference
to Form S-8 filed on July 19, 2000, File No. 333-41740.)10.4
    
    *Irwin Union Bank and Trust Company Business Development Board Compensation Program as amended November 28,
2006. (Incorporated by reference to Exhibit 10.4 of the Form 10-K Report for the period ended December 31, 2007,
filed March 14, 2008, File No. 001-16691.)
 55




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.5
    
    *Irwin Financial Corporation Amended and Restated 2001 Stock Plan, as amended and restated May 10, 2007.
(Incorporated by reference to Exhibit 99.1 of Form 8-K filed May 16, 2007, File No. 001-16691.)10.6
    
    *Amendment Number One to the Irwin Financial Corporation Amended and Restated 2001 Stock Plan. (Incorporated by
reference to Exhibit 10.1 of Form 8-K filed February 11, 2008, File No. 001-16691.)10.7
    
    *Irwin Financial Corporation 2001 Stock Plan Form of Stock Option Agreement and Notice of Stock Option Grant.
(Incorporated by reference to Exhibit 99.1 of the Corporations 8-K Current Report, filed May 9, 2005, File No.
001-16691.)10.8
    
    *Irwin Financial Corporation 2001 Stock Plan Form of Restricted Stock Agreement and Notice of Restricted Stock
Award. (Incorporated by reference to Exhibit 99.2 of the Corporations 8-K Current Report, filed May 9, 2005,
File No. 001-16691.)10.9
    
    *Irwin Financial Corporation 2001 Stock Plan Form of Stock Option Agreement (Canada) (Incorporated by reference
to Exhibit 10.8 of the Corporations 10-Q Report for the quarter ended September 30, 2005, File No. 001-16691.)10.10
    
    *Irwin Financial Corporation 2001 Stock Plan Form of Restricted Stock Agreement (with Performance Criteria) and
Notice of Restricted Stock Award with Performance Criteria. (Incorporated by reference to Exhibit 99.2 of Form
8-K, filed May 16, 2007, File No. 001-16691.)10.11
    
    *Irwin Financial Corporation 2001 Stock Plan Form of Restricted Stock Unit Agreement (with Performance Criteria)
and Notice of Restricted Stock Unit Award with Performance Criteria. (Incorporated by reference to Exhibit 10.2
of Form 8-K, filed February 11, 2008, File No. 001-16691.)10.12
    
    *Irwin Financial Corporation 2001 Stock Plan Form of Restricted Stock Unit Agreement (No Performance Criteria)
and Notice of Restricted Stock Unit Award. (Incorporated by reference to Exhibit 10.12 of the Form 10-K Report
for the period ended December 31, 2007, filed March 14, 2008, File No. 001-16691.)10.13
    
    *Irwin Financial Corporation 1999 Outside Director Restricted Stock Compensation Plan. (Incorporated by
reference to Exhibit 2 of the Corporations 2004 Proxy Statement for the Annual Meeting of Shareholders, filed
March 18, 2004, File No. 001-16691.)10.14
    
    *Amendment Number One to the Irwin Financial Corporation 1999 Outside Director Restricted Stock Compensation
Plan, as amended December 4, 2008, and effective January 1, 2005. (Incorporated by reference to Exhibit 10.14
of Form 10-K Report for period ended December 31, 2008 and filed March 31, 2009, File No. 001-16691.)10.15
    
    *Employee Stock Purchase Plan III. (Incorporated by reference to Exhibit 10(a) to Form 10-Q Report for the
quarter ended September 30, 1999, File No. 000-06835.)10.16
    
    *Employee Stock Purchase Plan III Amendment One effective September 21, 2001 and Amendment Two effective
September 17, 2008. (Incorporated by reference to Exhibit 10.16 of Form 10-K Report for period ended December
31, 2008 and filed March 31, 2009, File No. 001-16691.)10.17
    
    *Irwin Financial Corporation and Affiliates Amended and Restated Short Term Incentive Plan effective May 8,
2008. (Incorporated by reference to Exhibit 10.17 of Form 10-K Report for period ended December 31, 2008 and
filed March 31, 2009, File No. 001-16691.)10.18
    
    *Onset Capital Corporation Employment Agreement. (Incorporated by reference to Exhibit 10.26 to Form 10-Q Report
for the quarter ended September 30, 2002, File No. 000-06835.)10.19
    
    *Irwin Financial Corporation Amended and Restated Supplemental Executive Retirement Plan for [Named Executive],
effective January 1, 2005, and as amended December 4, 2008. (Incorporated by reference to Exhibit 10.19 of Form
10-K Report for period ended December 31, 2008 and filed March 31, 2009, File No. 001-16691.)10.20
    
    *Amendment One to the Irwin Financial Corporation Supplemental Executive Retirement Plan for [Named Executive],
effective January 1, 2009. (Incorporated by reference to Exhibit 10.20 of Form 10-K Report for period ended
December 31, 2008 and filed March 31, 2009, File No. 001-16691.)10.21
    
    *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.)
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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.22
    
    *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.)10.23
    
    *Irwin Commercial Finance Corporation First Amended and Restated Shareholder Agreement dated May 15, 2007.
(Incorporated by reference to Exhibit 10.41 of Form 10-Q Report for the quarter ended June 30, 2007, File No.
001-16691.)10.24
    
    *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.)10.25
    
    *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.)10.26
    
    *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.)10.27
    
    *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.)10.28
    
    *First Amendment to the Irwin Commercial Finance Amended and Restated Performance Unit Plan, dated October 31,
2006. (Incorporated by reference to Exhibit 10.41 of Form 10-K report for the period ended December 31, 2006,
File No. 001-16691.)10.29
    
    *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.)10.30
    
    *Supplemental Performance Unit Grant-Jocelyn Martin-Leano, dated February 6, 2007. (Incorporated by reference to
Exhibit 10.45 of Form 10-K filed March 9, 2007, File No. 001-16691.)10.31
    
    *Irwin Financial Corporation Amended and Restated 2007 Performance Unit Plan. (Incorporated by reference to
Exhibit 10.31 of Form 10-K Report for period ended December 31, 2008 and filed March 31, 2009, File No.
001-16691.)10.32
    
    *Agreement General Release and Covenant Not to Sue between Irwin Financial Corporation, and Thomas D. Washburn
executed December 5, 2007. (Incorporated by reference to Exhibit 99.1 of Form 8-K filed December 13, 2007, File
No. 001-16691.)10.33
    
    *Amendment to 2005 Stock Option Agreement between Irwin Commercial Finance Corporation and Joseph R. LaLeggia,
dated July 28, 2008. (Incorporated by reference to Exhibit 10.41 of Form 10-Q Report for quarter ended September
30, 2008, and filed November 10, 2008, File No. 001-16691.)10.34
    
    *Letter setting forth the Redemption Agreement between Irwin Commercial Finance Corporation and Joseph R.
LaLeggia, dated July 29, 2008. (Incorporated by reference to Exhibit 10.42 of Form 10-Q Report for quarter ended
September 30, 2008, and filed November 10, 2008, File No. 001-16691.)10.35
    
    *Retention Incentive Agreement by and among Irwin Home Equity Corporation, Irwin Financial Corporation and
Jocelyn Martin-Leano dated September 10, 2008. (Incorporated by reference to Exhibit 10.43 of Form 10-Q Report
for quarter ended September 30, 2008, and filed November 10, 2008, File No. 001-16691.)10.36
    
    Standby Purchase Agreement, dated as of October 13, 2008, by and between Irwin Financial Corporation and Cummins
Inc. (Incorporated by reference to Exhibit 10.1 of Form 8-K filed October 14, 2008, File No. 001-16691).10.37
    
    Written Agreement by and among Irwin Financial Corporation, Irwin Union Bank and Trust Company, the Federal
Reserve Bank of Chicago, and the Indiana Department of Financial Institutions, dated October 10, 2008.
(Incorporated by reference to Exhibit 10.2 of Form 8-K filed October 14, 2008, File No. 001-16691).10.38
    
    Supervisory Agreement by and between Irwin Union Bank, F.S.B. and the Office of Thrift Supervision, dated
October 10, 2008. (Incorporated by reference to Exhibit 10.3 of Form 8-K filed October 14, 2008, File No.
001-16691).
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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.39
    
    Extension of Standby Purchase Agreement between Irwin Financial Corporation and Cummins Inc. dated March 5,
2009. (Incorporated by reference to Exhibit 10.20 of Form 10-K Report for period ended December 31, 2008 and
filed March 31, 2009, File No. 001-16691.)11.1
    
    Computation of Earnings Per Share is included in the Notes 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. 58




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##### Table of Contents



SIGNATURES
  DATE: May 8, 2009
    
    IRWIN FINANCIAL CORPORATIONBy:
    
    /s/ Gregory F. Ehlinger

GREGORY F. EHLINGERCHIEF FINANCIAL OFFICERBy:
    
    /s/ Jody A. Littrell

JODY A. LITTRELLCORPORATE CONTROLLER(Chief Accounting Officer)
 59