Midland States Bancorp’s wholly owned subsidiary, Midland States Bank, completed a $502 million cash sale of its equipment finance portfolio to an affiliate of North Mill Equipment Finance LLC on December 1, 2025. The portfolio, valued at $599 million in outstanding loans and leases as of October 31, 2025 (or $565 million net of credit‑loss allowances), also included $21 million of operating leases. The bank will retain roughly $75 million of loans and leases, leaving a net reduction of about $545 million in total loans and leases.
The transaction is expected to generate a pre‑tax loss of approximately $20 million in the fourth quarter of 2025, largely driven by transaction‑related expenses and a one‑time write‑down of the portfolio’s allowance for credit losses. Proceeds of $502 million will be used primarily to retire $350 million of high‑cost wholesale funding, thereby reducing the bank’s funding costs and improving its capital ratios.
Strategically, the divestiture aligns with Midland States Bancorp’s focus on core community banking and wealth‑management businesses. By shedding a higher‑risk asset class, the bank is de‑risking its balance sheet and positioning itself for sustainable growth. Management notes that the sale strengthens the capital position and is expected to be accretive to capital while remaining neutral to earnings over the long term.
In context, the sale follows a period of earnings volatility. Midland’s Q3 2025 net income fell to $5.3 million from $18.2 million in Q3 2024, and the bank posted a $54.8 million net loss in Q4 2024. The pre‑tax loss on the sale is therefore a short‑term hit, but the reduction in wholesale funding and the cleaner balance sheet are viewed as long‑term benefits.
The retained $75 million of loans and leases includes a mix of commercial and consumer equipment finance contracts that the bank plans to manage as part of its core portfolio. Employees from the sold division have been offered positions with North Mill Equipment Finance, ensuring continuity for customers and staff.
"This transaction is a prudent step forward in sharpening our focus on community banking and wealth management," said CEO Jeffrey G. Ludwig. "It strengthens our balance sheet, reduces exposure to higher‑risk asset classes, and positions us well for continued growth in our core markets."
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