Irwin Financial Corporation (NYSE:IFC) said early Friday that it expects to report a loss from operations for the first quarter of 2007 due largely to the effects of conditions in the consumer mortgage market. "We have had two disappointments during the first quarter. While this is not a pleasant way to start the year, we believe both issues are essentially one-time events. In aggregate, the other aspects of the business are running close to our 2007 plans," said Will Miller, chairman and CEO of Irwin Financial. "First, as we noted in our 10-K filing in March, the rapid and dramatic changes in the condition of the secondary markets for consumer mortgages during February and March will cause us to report a loss in our home equity operations," Miller said.
Miller noted that the problem wasn't tied to delinquencies in the company's loan portfolio, but to the fact that investors in the secondary markets weren't as willing to purchase the company's loans for securitization. "Our working assumption is that these secondary market conditions are likely to last for some time, and as such, we moved approximately $170 million into portfolio from held-for-sale classification," he said. "This transfer will add to our credit and provisioning costs during the first quarter." Miller also noted the company will be hit by a bad commercial loan in Michigan, where the he said Irwin fell victim to "misrepresentations about collateral for the loan." The company said its capital and liquidity remain strong -- a common refrain as a growing number of mortgage lenders run into trouble -- and said that its home equity segment has made a number of process improvements so that loans originated for sale better meet fast-changing investor guidelines. As a result of the expected loss at the home equity segment and the credit impairment in the commercial banking segment, Irwin said it expects to incur a loss in a range from $5 to $10 million during the first quarter. The company reported a $10.6 million profit during the fourth quarter of 2006. The company said in a press statement that it currently does not believe that these two events, which it characterized as "isolated," should have a material impact on results in future quarters, although conditions in the consumer mortgage market have been difficult to predict. For more information, visit http://www.irwinfinancial.com.
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