COLUMBUS, Ind. ( TheStreet) -- Irwin Financial ( IFC) says there's "no realistic prospect" of meeting capital and liquidity requirements set by regulators in a cease-and-desist order on Tuesday.

The Columbus, Ind.-based lender also said regulators disagreed with the way it recognized certain loan losses in its financial results, demanding that subsidiary Irwin Union Bank and Trust amend its second-quarter regulatory filing. Irwin Financial shares dropped 44% to 50 cents.

Irwin Financial said it had "negative $42 million in shareholders' equity" in the second quarter, when it reported its 10th straight loss. The company had $3.4 billion in total assets as of June 30.

Irwin Union Bank and Trust and fellow subsidiary, Irwin Union Bank FSB, were adequately capitalized as of June 30. However, the second-quarter restatement might cause Irwin Union Bank and Trust's capital to fall short of regulatory minimums. Its total risk-based capital ratio was 8.25% in its second-quarter filing, only slightly higher than the 8% requirement to be considered adequately capitalized.

Similar expressions of doubt preceded the recent failures of Corus Bankshares ( CORS) and Colonial Bank.

-- Reported by Philip van Doorn in Jupiter Fla.
Philip W. van Doorn joined TheStreet.com Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a Bachelor of Science in business administration from Long Island University.