North Mill acquires Midland equipment finance portfolio for $502M

North Mill Equipment Finance has acquired Midland State Bank’s equipment finance portfolio for $502 million in cash following Midland’s exit from the space. 

The portfolio includes $599 million in loan and lease outstandings as of Oct. 31, or $565 million net of credit loss allowances, plus $21 million in operating leases, according to today’s Midland States Bank release. Midland expects to record an estimated fourth-quarter pre-tax loss of $20 million on the sale. 

Midland retained about $75 million of assets, reducing total loans and leases by roughly $545 million, Eric Lemke, chief financial officer of Midland States Bank, told Equipment Finance News. 

“North Mill was selected as our partner in this transaction after a process that included other parties,” he said. “We retained $75 million as these loans and leases were serviced by other outside parties and our intent is to allow the portfolio to pay off.” 

In addition, several Midland employees will join North Mill, North Mill Chief Executive David Lee said in the release.  

Moving forward 

The deal, which closed Nov. 28, marks a major step in Midland’s shift back to core community banking, Lemke said. 

“We are excited about this transaction as it allows us to improve our capital ratios and focus on our core community bank and wealth management platforms,” he said. “We are continuing to have discussions as to how best to utilize our stock buyback plan after this transaction.” 

The bank plans to use most of the proceeds to retire about $350 million of high-cost wholesale funding, which will strengthen liquidity and capital ratios while supporting long-term balance sheet simplification, according to the release. The portfolio sale removes credit uncertainty tied largely to the trucking sector, which contributed to the lender ceasing originations effective Sept. 30. 

Meanwhile, strong banking and capital markets relationships enabled North Mill to complete the transaction relatively quickly, North Mill’s Lee said. North Mill raised $30 million through corporate notes in November following a $525 million asset-backed securitization in August. 

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