In announcing a fifth consecutive quarterly loss Wednesday, Irwin Financial Corp. in Columbus, Ind., said it would consider exiting its troublesome home equity business.

On a conference call with analysts, Will Miller, Irwin's chairman and chief executive officer, put a positive spin on the company's $22 million loss, calling it "a modest improvement" over the fourth-quarter loss of $26 million.

"We are moving in the right direction," Miller said.

He said the $6 billion-asset company has stopped originating home equity loans and second mortgages for its portfolio and is making only government-insured and conventional first mortgages that can be sold into the secondary market.
Irwin also hired Stifel, Nicolaus & Co.  and Milestone Advisors  to help explore ways to reduce its overall home equity exposure, including selling loans, spinning off assets, or recapitalizing.

The goal is to refocus on small-business customers and return to profitability, possibly by the third quarter, Miller said.

Christopher McGratty, an analyst at KBW 's Keefe, Bruyette & Woods , said Irwin is doing what it needs to do to get back on track.

"If we step back and say 'What's been driving the losses,' it's home equity,"  McGratty said. "So they're addressing their most troubled business segment."
The first-quarter loan-loss provision jumped 92% from a year earlier but fell 30% from the fourth quarter, to $45 million.

Irwin said the provision decreased from the fourth quarter because home equity delinquencies fell 12 basis points, to 5.66% of the portfolio.

However, the company also said home equity chargeoffs increased 194 basis points, to 6.56% of the portfolio.

Miller said that Irwin had to take an $8 million after-tax charge, because of an "other than temporary" impairment on securities, and that its results, excluding the charge, reflect notable progress in reducing its losses.

He also said Irwin suspended dividends and reduced assets to improve capital in the quarter.

Irwin’s already-battered stock sank further Wednesday, losing 19.4%, to close at $4.89. The shares have lost about 65% of their value in the past year.

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