Part I

Item 1

IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (Unaudited)

(In thousands, except for shares)

March 31,

December 31,

Assets:

2001

2000

Cash and cash equivalents

$ 119,388

$ 83,493

Interest-bearing deposits with financial institutions

61,783

36,400

Trading assets

177,814

154,921

Investment securities (Market value: $32,222 in 2001 and $37,163 in 2000) - Note 2

32,075

37,095

Loans held for sale

851,484

579,788

Loans and leases, net of unearned income - Note 3

1,317,161

1,234,922

Less: Allowance for loan and lease losses - Note 4

(13,622)

(13,129)

1,303,539

1,221,793

Servicing assets - Note 5

142,639

130,522

Accounts receivable

67,597

69,224

Accrued interest receivable

10,873

12,979

Premises and equipment

31,004

29,409

Other assets

68,173

66,805

Total assets

$2,866,369

$2,422,429

Liabilities and Shareholders' Equity:

Deposits

Noninterest-bearing

$ 411,838

$ 263,159

Interest-bearing

686,745

517,127

Certificates of deposit over $100,000

721,421

663,044

1,820,004

1,443,330

Short-term borrowings- Note 6

516,522

475,502

Long-term debt- Note 7

29,619

29,608

Other liabilities

154,869

136,897

Company-obligated mandatorily redeemable

preferred securities of subsidiary trust- Note 8

147,139

147,167

Total liabilities

2,668,153

2,232,504

Commitments and contingencies - Note 10

Shareholders' equity

Preferred stock, no par value - authorized

4,000,000 shares; issued 96,336 shares as of March 31, 2001 and

December 31, 2000

1,386

1,386

Common stock; no par value - authorized 40,000,000 shares;

issued 23,402,080 shares as of March 31, 2001 and December 31, 2000;

including 2,235,366 and 2,376,119 shares in treasury as of March 31,

2001 and December 31, 2000 respectively

29,965

29,965

Additional paid-in capital

4,065

4,331

Minority interest

922

1,055

Accumulated other comprehensive income net of deferred income tax

asset of ($456) and ($305) in 2001 and 2000, respectively.

(1,176)

(962)

Retained earnings

209,524

201,729

244,686

237,504

Less treasury stock, at cost

(46,470)

(47,579)

Total shareholders' equity

198,216

189,925

Total liabilities and shareholders' equity

$2,866,369

$2,422,429

The accompanying notes are an integral part of the consolidated financial statements.

IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (Unaudited)

Three Months Ended

March 31,

(In thousands, except for per share)

2001

2000

Interest income:

Loans and leases

$ 29,250

$ 20,210

Investment securities:

Taxable

1,243

929

Tax-exempt

62

63

Loans held for sale

22,856

12,140

Trading account

7,146

2,484

Federal funds sold

33

46

Total interest income

60,590

35,872

Interest expense:

Deposits

19,053

8,460

Short-term borrowings

8,151

6,550

Long-term debt

580

583

Preferred securities distribution

3,704

1,174

Total interest expense

31,488

16,767

Net interest income

29,102

19,105

Provision for loan and lease losses - Note 4

1,553

1,136

Net interest income after provision for

loan and lease losses

27,549

17,969

Other income:

Loan origination fees

13,703

10,088

Gain from sale of loans

32,893

16,029

Loan servicing fees

16,052

15,121

Amortization and impairment of servicing assets

7,535

6,101

Net loan administration income

8,517

9,020

Gain on sale of mortgage servicing assets

2,092

252

Trading gains (losses)

3,238

3,389

Other

1,608

11,360

Total other income

62,051

50,138

Other expense:

Salaries

41,283

25,955

Pension and other employee benefits

6,736

5,668

Office expense

3,642

3,269

Premises and equipment

7,428

6,057

Marketing and development

1,529

4,778

Other

14,207

8,209

Total other expense

74,825

53,936

Income before income taxes

14,775

14,171

Provision for income taxes

5,779

5,689

Income before cumulative effect of change in accounting principle

8,996

8,482

Cumulative effect of change in accounting principle, net of tax

175

-

Net income

$ 9,171

$ 8,482

Earnings per share of common stock available to shareholders:

Basic - Note 9

$ 0.44

$ 0.40

Diluted - Note 9

$ 0.41

$ 0.40

Dividends per share of common stock

$ 0.065

$ 0.06

The accompanying notes are an integral part of the consolidated financial statements.

IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)

FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000

Accumulated

Other

Compre-

Additional

Retained

hensive

Preferred

Common

Paid in

Treasury

Minority

Total

Earnings

Income

Stock

Stock

Capital

Stock

Interest

Balance at January 1, 2001

$189,925

$ 201,729

$ (962)

$ 1,386

$29,965

$ 4,331

$(47,579)

$1,055

Net income

9,171

9,171

Unrealized gain on investment

securities net of $43 tax liability

63

63

Foreign currency adjustment net of

$187 tax credit

(281)

(281)

Deferred compensation

4

4

Total comprehensive income

8,957

Cash dividends

(1,376)

(1,376)

Tax benefit on stock option exercises

1,590

1,590

Treasury stock:

Purchase of 90,120 shares

(2,138)

(2,138)

Sales of 230,873 shares

1,391

-

(1,856)

3,247

Minority Interest

(133)

(133)

Balance March 31, 2001

$198,216

$ 209,524

$ (1,176)

$ 1,386

$29,965

$ 4,065

$(46,470)

$ 922

Balance at January 1, 2000

$159,296

$ 171,101

$ (70)

$ -

$29,965

$ 4,250

$(45,950)

$ -

Net income

8,482

8,482

Unrealized loss on investment

securities net of $27 tax credit

(42)

(42)

Total comprehensive income

8,440

Cash dividends

(1,259)

(1,259)

Treasury stock:

Purchase of 198,253 shares

(3,052)

(3,052)

Sales of 29,169 shares

444

137

307

Issuance of 96,336 shares of preferred stock

1,387

1,387

Balance March 31, 2000

$165,256

$ 178,324

$ (112)

$ 1,387

$29,965

$ 4,387

$(48,695)

$ -

IRWIN FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

For the three months ended March 31,

2001

2000

(In thousands)

Net income

$ -

$ 8,482

Adjustments to reconcile net income to cash provided

by operating activities:

Depreciation and amortization

2,550

2,098

Amortization and impairment of servicing assets

7,535

6,101

Provision for loan and lease losses

1,553

1,136

Amortization of premiums, less accretion of discounts

(1)

(29)

Increase in loans held for sale

(271,696)

(32,405)

Gain on sale of mortgage servicing assets

(2,092)

(252)

Net increase in trading assets

(22,893)

(12,649)

Other, net

18,942

(11,714)

Net cash used by operating activities

(266,102)

(39,232)

Lending and investing activities:

Proceeds from maturities/calls of investment securities:

Held-to-maturity

3,270

543

Available-for-sale

2,000

15

Purchase of investment securities:

Held-to-maturity

(143)

(1)

Net increase in interest-bearing

deposits with financial institutions

(25,383)

(2,055)

Net increase in loans, excluding sales

(101,577)

(98,875)

Sale of loans

18,278

7,253

Additions to mortgage servicing assets

(19,903)

(11,641)

Proceeds from sale of mortgage servicing assets

2,343

1,491

Other, net

(3,132)

(2,987)

Net cash used by lending and investing activities

(124,247)

(106,257)

Financing activities:

Net increase in deposits

376,674

136,385

Net increase in short-term borrowings

41,020

23,411

Repayments of long-term debt

-

(211)

Issuance of preferred stock

-

1,387

Purchase of treasury stock

(2,138)

(3,052)

Proceeds from sale of stock for employee benefit plans

2,981

444

Dividends paid

(1,376)

(1,259)

Net cash provided by financing activities

417,161

157,105

Effect of exchange rate changes on cash

(88)

-

Net increase in cash and cash equivalents

26,724

11,616

Cash and cash equivalents at beginning of period

83,493

47,215

Cash and cash equivalents at end of period

$ 110,217

$ 58,831

Supplemental disclosures of cash flow information:

Cash paid during the period:

Interest

$ (5,543)

$ 15,777

Income taxes

$ 740

$ 15

The accompanying notes are an integral part of the consolidated financial statements.

NOTES TO THE FINANCIAL STATEMENTS (Unaudited)

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: The interim financial data as of March 31, 2001 and for the three month periods ended March 31, 2001 and March 31, 2000 is unaudited; however, in the opinion of Management, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. The accompanying financial statements should be read in conjunction with the financial statements and related notes included with the Corporation's Annual Report on Form 10-K for the year ended December 31, 2000.

Reclassifications: Certain amounts in the 2000 consolidated financial statements have been reclassified to conform to the 2001 presentation.

Foreign Currency: Assets and liabilities denominated in Canadian dollars are translated into U. S. dollars at rates prevailing on the balance sheet date; income and expenses are translated at average rates of exchange for the period. Unrealized foreign currency translation gains and losses (net of related income taxes) are recorded in accumulated other comprehensive income in shareholders' equity.

Loans Held for Sale: Loans held for sale are stated at the lower of cost or market as of the balance sheet date.

Derivatives: On January 1, 2001, the Corporation adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." This standard obligates the Corporation to record all derivatives at fair value and permits the Corporation to designate derivative instruments as being used to hedge changes in fair value or changes in cash flows. Changes in the fair value of derivatives that offset changes in cash flows of a hedged item are recorded initially in other comprehensive income. Amounts recorded in other comprehensive income are subsequently reclassified into earnings during the same period the hedged item affects earnings. If a derivative qualifies as a fair value hedge, then changes in the fair value of the hedging derivative are recorded in earnings and are offset by changes in fair value attributable to the hedged risk of the hedged item. Any portion of the changes in the fair value of derivatives designated as a hedge that is deemed ineffective is recorded in earnings along with changes in the fair value of derivatives with no hedge designation.

The Corporation enters into forward contracts to protect it from interest rate fluctuations from the date of loan commitment until the loans are sold. However, the Corporation has not designated these transactions as hedges to qualify for hedge accounting treatment, and therefore, the Corporation is required to mark the derivatives to market every accounting period.

The initial application of SFAS No. 133 resulted in a cumulative change in accounting principle net of income taxes of $175,000, did not have a significant impact on other comprehensive income, and had the following impact on the Company's assets and liabilities as of January 1, 2001 (in millions):

Increase in fair value of derivatives classified as assets .... $ 1.3

Increase in fair value of derivatives classified as liabilities... $ 1.0

The adoption of SFAS No. 133 resulted in the recognition of derivative-related assets, and derivative-related liabilities.

Commitments to originate loans: The Company enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (rate lock commitments). Rate lock commitments on loans that are intended to be sold are considered to be derivatives and are therefore recorded at fair value with changes in fair value recorded in earnings. For purposes of determining their fair value, the Company performs a net present value analysis of the anticipated cash flows associated with the rate lock commitments. Included in the net present value analysis are anticipated cash flows associated with the retained servicing of the loans. Rate lock commitments expose the Company to interest rate risk. The Company manages this risk by acquiring forward sales contracts.

Hedges of loans held for sale: Loans held for sale expose the Company to interest rate risk. The Company manages the interest rate risk associated with loans held for sale by entering into forward sales agreements.

Trading Assets: Trading assets are stated at fair value. Unrealized gains and losses are included in earnings. Included in trading assets are interest-only strips. When the Corporation sells receivables in securitizations of residential mortgage loans, it retains interest-only strips, one or more subordinated tranches, servicing rights, and in some cases a cash reserve account, all of which are retained interests in the securitized receivables. Gain or loss on the sale of the receivables depends in part on the previous carrying amount of the financial assets involved in the transfer, allocated between the assets sold and the retained interests based on their relative fair value at the date of transfer. To obtain fair value, quoted market prices are used if available. However, quotes are generally not available for retained interests, so the Corporation generally estimates fair value based on the present value of expected cash flows using management's best estimates of the key assumptions that market participants would use - prepayment speeds, credit losses, forward yield curves, and discount rates commensurate with the risks involved. Adjustments to carrying values are recorded as trading gains or losses.

Recent Accounting Developments: In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140, which replaces SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," provides accounting and reporting standards for securitizations and other transfers of assets. The Standard is based on the application of a financial components approach that focuses on control, and provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The Standard requires disclosure of information about securitized assets, including principal outstanding of securitized and other managed assets, accounting policies, key assumptions related to the determination of the fair value of retained interests, delinquencies and credit losses. The accounting requirements of the Standard are effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001, and must be applied prospectively.

The disclosures related to securitization transactions are required for fiscal years ending after December 15, 2000, and comparative disclosures for prior periods are not required. The Corporation does not expect the impact of the accounting requirements of the Standard to be material to its financial position or results of operations in future periods.

NOTE 2 - INVESTMENT SECURITIES

The carrying amounts of investment securities, including net unrealized gain of $96 thousand and loss of $9 thousand on available-for-sale securities at March 31, 2001 and December 31, 2000, respectively, are summarized as follows:

March 31

December 31,

(In thousands)

2001

2000

Held-to-maturity, at amortized cost

US Treasury and Government obligations

$ 18,623

$ 21,006

Obligations of states and political subdivisions

4,472

4,586

Mortgage-backed securities

1,920

2,059

Corporate obligations

133

--

Total held-to-maturity

25,148

27,651

Available-for-sale, at fair value

US Treasury and Government obligations

3,052

4,993

Mortgage-backed securities

3,139

3,093

Other

736

1,358

Total Available-for-sale

6,927

9,444

Total investments

$ 32,075

$ 37,095

Securities which the Corporation has the positive intent and ability to hold until maturity are classified as "held-to-maturity" and are stated at cost adjusted for amortization of premium and accretion of discount. Securities that might be sold prior to maturity are classified as "available-for-sale" and are stated at fair value. Unrealized gains and losses on available-for-sale securities, net of the future tax impact, are reported as a separate component of shareholders' equity until realized.

NOTE 3 - LOANS AND LEASES

Loans and leases are summarized as follows:

March 31,

December 31,

(In thousands)

2001

2000

Commercial, financial and agricultural

$ 742,276

$ 677,066

Real estate-construction

221,030

220,485

Real estate-mortgage

135,706

122,301

Consumer

44,640

56,785

Direct financing leases

Domestic

135,081

116,867

Canadian

73,538

72,864

Unearned income

Domestic

(24,822)

(21,570)

Canadian

(10,288)

(9,876)

$1,317,161

$1,234,922

NOTE 4 - ALLOWANCE FOR LOAN AND LEASE LOSSES

Changes in the allowance for loan and lease losses are summarized as follows:

March 31,

March 31,

(In thousands)

2001

2000

Balance at beginning of period

$ 13,129

$ 8,555

Provision for loan and lease losses

1,553

1,136

Reduction due to sale of loans

(6)

-

Foreign currency adjustment

(44)

-

Recoveries

249

77

Charge-offs

(1,259)

(354)

Balance at end of period

$ 13,622

$ 9,414

NOTE 5- SERVICING ASSETS

Included on the consolidated balance sheet at March 31, 2001 and December 31, 2000 are $142.6 million and $130.5 million, respectively, of servicing assets. These amounts relate to the principal balances of loans serviced by the Corporation for investors. Although they are not generally held for sale, there is an active secondary market for servicing assets. The Corporation has periodically sold servicing assets.

Mortgage Servicing Asset:

March 31,

December 31,

(In thousands)

2001

2000

Beginning Balance

$ 130,522

$ 138,500

Additions

19,903

57,165

Amortization and impairment

(7,535)

(39,529)

Reduction for servicing sales

(251)

(25,614)

$ 142,639

$ 130,522

NOTE 6- SHORT-TERM BORROWINGS

Short-term borrowings are summarized as follows:

March 31,

December 31,

(In thousands)

2001

2000

Federal funds and Federal Home Loan Bank borrowings

$ 103,000

$ 173,000

Lines of credit and other

127,827

226,599

Repurchase agreements and drafts payable related to

mortgage loan closings

270,630

64,557

Commercial paper

15,065

11,346

Total

$ 516,522

$ 475,502

Repurchase agreements at March 31, 2001 and December 31, 2000, include $98.9 million and $0.1 million respectively, in mortgage loans sold under agreements to repurchase which are used to fund mortgage loans sold prior to sale in the secondary market. These repurchase agreements are collateralized by mortgage loans held for sale.

Drafts payable related to mortgage loan closings totaled $171.7 million and $64.5 million at March 31, 2001 and December 31, 2000, respectively. These borrowings are related to mortgage closings at the end of the period which have not been presented to banks for payment. When presented for payment these borrowings will be funded internally or by borrowing from the lines of credit.

The Corporation has lines of credit available to fund mortgage loans held for sale. Interest on the lines of credit is payable monthly at variable rates ranging from 5.7% to the lender's prime rate at March 31, 2001.

NOTE 7 -- LONG-TERM DEBT

Long-term debt at March 31, 2001 consists of a note payable of $30.0 million with an interest rate of 7.58% that will mature on July 7, 2014. The note is shown on the balance sheet net of capitalized issuance costs.

NOTE 8 -- COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES

OF SUBSIDIARY TRUST

In January 1997, the Corporation issued $50.0 million of trust preferred securities through IFC Capital Trust I, a trust created and controlled by the Corporation. The securities were issued at $25 per share with a cumulative dividend rate of 9.25% payable quarterly. They have an initial maturity of 30 years with a 19-year extension option. The securities are callable at par after five years from issuance, or immediately, in the event of an adverse tax development affecting the Corporation's classification of the securities for federal income tax purposes. They are not convertible into common stock of the Corporation. The securities are shown on the balance sheet net of capitalized issuance costs. The sole assets of IFC Capital Trust I are subordinated debentures of the Corporation with a principal balance of $51.5 million, an interest rate of 9.25% and an initial maturity of 30 years with a 19-year extension option.

In November 2000, the Corporation issued $51.75 million of trust preferred securities through IFC Capital Trust II and $51.75 million of convertible trust preferred securities through IFC Capital Trust III, trusts created and controlled by the Corporation. The securities were issued at $25 per share with cumulative dividend rates of 10.5% and 8.75%, respectively, payable quarterly. They have an initial maturity of 30 years. The trust preferred securities of Capital Trust II are not convertible into common stock of the Corporation. The convertible trust preferred securities of Capital Trust III have an initial conversion ratio of 1.261 shares of common stock for each convertible preferred security (equivalent to an initial conversion price of $19.825 per share of common stock). The securities are shown on the balance sheet net of capitalized issuance costs. The sole assets of IFC Capital Trust II and III are subordinated debentures of the Corporation with principal balances of $53.35 million each, interest rates of 10.5% and 8.75%, respectively, and on initial maturity of 30 years.

NOTE 9 -- EARNINGS PER SHARE

Earnings per share calculations are summarized as follows:

Basic

Effect of

Effect of

Effect of

Diluted

Earnings

Stock

Preferred

Convertible

Earnings

(In thousands, except share data)

Per Share

Options

shares

Shares

Per Share

Three months ended March 31, 2001

Net income before cumulative effect of change in accounting principle

$ 8,996

$ -

$ -

$ 700

$ 9,696

Shares

21,065