UPDATE 2-Irwin Financial shares plunge on liquidity concerns

* Says has no realistic prospect to get required capital

* Company under cease and desist order

* Regulators question timing of recognizing of certain losses

* Has to submit amended report to FDIC

* Shares plummet as much as 49 pct

Sept 16 (Reuters) - Irwin Financial Corp (IFC.N) said it had "no realistic prospect" of boosting its capital to levels demanded by a U.S. regulatory cease and desist order.

The news nearly wiped out nearly half of Irwin's market value in early trade, but the shares later recovered to 53 cents, down 40 percent from Tuesday's close, in high volume.

The company along with its banking unit Irwin Union Bank & Trust Co received a cease and desist order from regulators, and the bank is currently classified as "undercapitalized" under regulatory capital standards.

The cease and desist order, from the Federal Reserve and the Indiana Department of Financial Institutions, requires the bank holding company to achieve a certain capital level and reduce reliance on certain types of deposits by Sept. 30.

Irwin said in a regulatory filing it was unlikely to achieve the required capital levels and fulfill the deposit requirements by the stipulated date.

In April, the company said its external auditors raised doubt about its ability to continue as a going concern. [ID:nBNG341823]

Irwin joins a growing list of banks, including Colonial BancGroup CBCGQ.PK, Guaranty Financial GFGF.PK and UCBH Holding Inc UCBH.O, to receive a cease and desist order from regulators.

In July, Irwin Union Bank, another unit of Irwin Financial, also received a cease and desist order from the Office of Thrift Supervision.

JUNE QUARTER LOSSES

Irwin Financial also said the Federal Reserve Bank of Chicago and the Indiana regulator have questioned the timing of recognizing certain loan losses.

The company declined to give details when contacted.

Irwin Union Bank & Trust Co has now been asked to submit certain amended second-quarter reports to the Federal Deposit Insurance Corporation in line with Chicago Fed's view of these losses, the parent company said.

For the June quarter, Irwin Financial had reported a loss of $57.2 million, sharply narrower than a year ago, and had reported that shareholders' equity had turned negative. Last month, the company put off a rights offering, citing its inability to participate in the government's capital assistance programs.

Shares of the Columbus, Indiana-based company have now lost nearly 90 percent of their value in the past year. (Reporting by Brenton Cordeiro and Prashant Mehra in Bangalore; Editing by Mike Miller)