General business equipment financier m2 Equipment Finance has stopped originating loans and leases as its parent company looks to reallocate capital to lower-risk divisions.
Moline, Ill.-based QCR Holdings, the parent company of m2 Equipment Finance, announced the move in a Sept. 5 release. QCR intends to close the equipment financing subsidiary and use the savings for higher earning assets, Chief Executive Larry J. Helling stated in the release.
“We expect that this change will improve our profitability, increase liquidity, reduce our credit losses and allow the company to allocate capital to assets with higher risk-adjusted returns,” he stated. “We will focus our efforts on business units with more opportunity to build client relationships with greater deposit gathering potential.”
Waukesha, Wis.-based m2 Equipment Finance’s allowance for credit losses rose to 3.9% in the second quarter, up from 3.5% in Q2 2023, according to QCR Holdings’ July 25 earnings release. M2’s assets increased to $359 million in Q2, up 11.2% year over year, while total loans and leases increased to $363.9 million in Q2, up 10.8% YoY.
In the meantime, m2 will reduce staff and continue servicing its $360 million equipment finance portfolio, according to the release. The company anticipates a three-year amortization period for most of the remaining portfolio.
“While m2 has been an important contributor to our company over the past 19 years, market dynamics have continued to evolve, and it became clear that m2 would not achieve our expected returns over the long term,” Helling said. “We are extremely grateful to our m2 colleagues for their dedication to serving clients and their contribution to the overall success of QCR Holdings.”
The company expects to see one-time restructuring expenses of about $2.1 million and an approximate goodwill write-down of $400,000 this quarter, according to the release. QCR anticipates earning back $2.5 million over the next two quarters.
QCR Holdings and m2 Equipment Finance did not respond to requests for comment.
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