Midland States ceases equipment financing after Q3

Midland States Bancorp, Beacon Financial and Banc of California slashed their equipment finance portfolios in the third quarter, while First Citizens BancShares ramped up equipment leasing. 

Midland equipment loans fall 26% 

Midland States Bancorp’s equipment finance loans dropped 26.1% year over year to $326.9 million in Q3, and equipment finance leases fell 25.5% YoY to $311 million, according to its Oct. 30 earnings release. 

The Effingham, Ill.-based company ceased equipment finance originations effective Sept. 30, to “further reduce our exposure to higher-risk asset classes,” Chief Executive Jeffrey Ludwig stated in the release.  

Midland has been steadily pulling back from equipment and specialty vehicle segments since 2023 as part of its “credit clean-up.” The company has repeatedly cited credit issues “primarily in the trucking industry,” reflecting the yearslong freight recession. 

In fact, trucking industry woes contributed to $5 million in equipment finance charge-offs for Midland in Q3, according to the release. Its total Q3 net charge-offs for Midland declined 44.8% YoY to $12.3 million. 

The bank’s provision for credit losses increased 11.6% YoY to $20 million, including “$15 million of provision in our equipment finance portfolio,” Ludwig said. 

“Given our current outlook and the allowance held against this portfolio, we believe we are appropriately reserved for future credit losses,” he said. 

Beacon nonperforming equipment loans jump 12.3% 

Boston-based Beacon Financial, created by the merger of Brookline Bancorp and Berkshire Hills Bancorp, reported $1.2 billion in equipment finance loans at the end of Q3, down 10.6% YoY, according to its Oct. 29 earnings statement. Nonperforming equipment finance loans rose 12.3% YoY to $41.8 million. 

The company’s provision for credit losses soared to $87.5 million from $4.8 million in Q3 of 2024, reflecting costs associated with the merger and accounting for troubled equipment assets tied to Brookline subsidiary Eastern Funding, according to the release. 

Net charge-offs surged 316.4% YoY to $15.9 million, and they could continue to rise largely due to troubled assets in the Eastern Funding portfolio, Chief Credit Officer Mark Meiklejohn said during Beacon’s earnings call. 

Banc of Cal equipment leases drop 11% 

Banc of California’s equipment finance portfolio decreased 2.2% YoY to $632 million, according to its Oct. 22 earnings presentation. 

The Los Angeles-based lender reported $632 million in equipment leases, down 10.8% YoY. Equipment lease income declined 39.9% YoY to $10.3 million. 

It is unclear if the company is pulling back from a specific equipment segment, although it continues to offer equipment financing for industries including construction, material handling, transportation, mining and manufacturing. 

First Citizens equipment lease income up 3% 

Raleigh, N.C.-based First Citizens reported a 2.8% YoY rise in equipment lease operating income to $9.4 billion in Q3, according to its Oct. 23 earnings supplement. 

Rental income on leasing equipment jumped 4.2% YoY to $273 million, and net gain on sales of leasing equipment dropped 40% YoY to $3 million. 

While the company is experiencing stress in its equipment finance portfolio, “we continue to see signs of improvement and trending toward long-term expectations,” Chief Financial Officer Craig Nix said during the company’s earnings call.  

“We have taken steps to mitigate future losses through tightening underwriting as well as increasing collection staff to work through earlier vintages,” he said. 

Stress in First Citizens’ equipment and commercial real estate portfolios contributed to a 96.6% YoY surge in net charge-offs to $234 million, Nix said. 

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