Magazine article American Banker

Irwin Tops Expectations on Better Credit Quality

Magazine article American Banker

Irwin Tops Expectations on Better Credit Quality

Article excerpt

Irwin Financial Corp. on Monday reported first-quarter earnings that handily beat Wall Street expectations on improved credit quality and a successful hedging strategy.

Like many other lenders, the $5.1 billion-asset Columbus, Ind., company had to digest a sharp drop in mortgage revenues, but profits rose 72%, to $20.3 million. Earnings per share of 67 beat the analysts' average estimate by 17 cents, according to Thomson First Call.

The big jump in profits was partly fueled by Irwin's home equity business, which swung to a profit of $6.6 million, from a loss of $9.5 million a year earlier, because of improved credit quality.

Irwin tightened its lending standards in late 2002, but Gregory Ehlinger, its chief financial officer, said Monday that the credit improvements were a result of an improving economy rather than tighter underwriting standards.

"We believe we can handle the [economic] environment this year, which is the opposite of last year's," Mr. Ehlinger said on a conference call with investors. Mortgage origination volume is likely to remain low, but credit quality and income from mortgage servicing will improve, he said.

Joseph A. Stieven, an analyst at Stifel, Nicolaus & Co. Inc., said he expected improvements in credit quality, but not to the degree Irwin presented Monday. "We were hoping to see a general trend" of improvements, "but not in every line of business."

The delinquency ratio in Irwin's sizable on-balance-sheet home equity portfolio fell 20 basis points from a year earlier and 45 basis points from the fourth quarter, to 2.46%. The off-balance-sheet portfolio's ratio improved 60 basis points from a year earlier and 153 basis points from the fourth quarter, to 8.65%.

Losses in the $1.5 billion managed home equity portfolio fell almost 15%, to $5.7 million, while commercial loan losses fell 20. …

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