By Boris Ladwig, The Republic
bladwig@therepublic.com
Irwin Financial Corp. reported a $54 million loss Monday as restructuring charges mounted and customers continued to struggle to pay back loans.
Net losses were three times as high as in the third quarter of 2007, but roughly half the loss recorded in the second quarter.
All three business segments reported losses for the secondstraight quarter.
The quarterly loss had no impact on employment in Bartholomew County, where IFC employs just over 300, a spokesman said.
After four consecutive years with declining earnings, including a $55 million loss last year, IFC this year announced it would change its business strategy and focus on small business and community banking.
The restructuring included selling a small-ticket leasing business and a failed attempt to sell $1 billion of its home equity portfolio.
"Despite economic head-winds, we made substantial progress on our strategic restructuring during the third quarter," said Chairman and Chief Executive Officer Will Miller.
Results by segment
Irwin Union Bank & Trust Co. lost $15.1 million in the third quarter, compared to a profit of $5 million a year earlier, as more customers, particularly in the commercial sector, struggled to pay back loans.
The bank saw a greater percentage of loans not being paid back and a greater number of loans with payments more than a month in arrears.
The commercial finance business lost $2 million, compared to a profit of $4 million a year earlier. IFC attributed the decline primarily to costs related to exiting the equipment leasing business.
The home equity business lost $24 million, three times the loss recorded a year earlier.
The segment recorded charges of $27 million related to loans not being paid back and $15 million related to IFC's plans to exit the home equity business.
"We believe that through our strategic restructuring we will return to profitability by simplifying our business and returning to the core principles that have driven our success for the past 137 years," Miller said.
As an example of the new focus, Miller said the corporation had expanded its loan portfolio in Columbus.
"We were pleased that Irwin Union Bank was the leading producer of consumer residential mortgage loans to our neighbors in the community during the third quarter, producing 44 percent more residential loan volume than the next-largest competitor locally," Miller said.
Rights offering
IFC also announced that it has secured another $6 million in commitments for its shareholder rights offering, through with the corporation hopes to raise $50 million.
A rights offering allows existing shareholders to purchase shares at a reduced price to retain their percentage of company ownership.
How many shares IFC will issue will depend on the price at which they will be sold. IFC expects to set the price during the middle of this month, provided that the Securities and Exchange Commission approves the registration statement IFC has filed.
If the corporation raises less than $50 million, Cummins Inc. will purchase up to $25 million of those shares, while the Miller family and former Cummins CEO Henry Schacht will obtain another $6 million.
Other investors have agreed to purchase another $6 million, Miller said.
Shares on Monday closed at $1.87, unchanged from their Friday's close.