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Irwin On Brink of Failure

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Irwin Financial Corp.’s bank subsidiary has consented to a seizure by federal regulators.

The Columbus, Ind.-based firm made the disclosure in a Securities and Exchange Commission filing today.

Subsidiary Irwin Union Bank, F.S.B., “has consented to the appointment by the Office of Thrift Supervision of a conservator or receiver of Irwin Union Bank, F.S.B., should the OTS determine to make such an appointment,” the filing said. The order was dated Sept. 17.

On Tuesday, Irwin disclosed that it faced a cease-and-desist order by the Board of Governors of the Federal Reserve System. The order requires Irwin to boost its level of capital.

“The corporation and Irwin Union Bank and Trust Corp. believe that there is no realistic prospect of achieving the required capital levels by the date required,” Tuesday’s filing indicated.

Irwin noted in an SEC filing Wednesday that it was advised the Federal Reserve Bank of Chicago and the Indiana Department of Financial Institutions disagreed with its timing of loan-loss recognition, and the bank would be required to submit restated financials to the Federal Deposit Insurance Corporation.

“The savings association is experiencing severe supervisory and/or financial problems that the board of directors of the savings association has concluded that the savings association is unlikely to be able to resolve successfully without federal intervention and the appointment of a conservator or receiver,” yesterday’s order states. “The board has made a determination that it is in the best interest of the savings association to consent to the appointment of a conservator or receiver and to enter into the consent.”

The FDIC would become receiver in the event that the OTS seizes the bank, which itself is based in Louisville, Ky.

The ailing institution began unloading real estate lending operations in September 2006, when it sold substantially all its conforming first mortgage loan production assets to Freedom Mortgage Corp. It agreed to sell its conforming mortgage servicing portfolio the following month for around $261 million.

Irwin Mortgage Corp.’s servicing operations were acquired by New Century Financial Corp. in January 2007, while a $1 billion home-equity loan portfolio was unloaded last year.

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