Midland States Bancorp’s Strategic Decisions Boost Capital Ratios and Reduce Problem Loan Levels
Midland States Bancorp has made significant strides over the past year, focusing on restructuring its business lines and shifting its attention to its core community banking services. The bank’s CEO, Jeffrey Ludwig, has expressed optimism about the company’s position as we head into 2026, following the sale of its equipment finance portfolio.
As the last major step in the bank’s restructuring plans, the sale of a $545 million portfolio of equipment finance loans represents a significant milestone. This transition has been met with positive investor sentiment, as evidenced by a 24% increase in Midland States’ share price since the announcement, trading at $20.02 on Thursday afternoon.
Strategic Shifts and Portfolio Sales
The equipment finance portfolio was sold to North Mill Equipment Finance, a nonbank lender based in Norwalk, Connecticut. This follows the bank’s previous sales of consumer-loan portfolios in December 2024 and April 2025. Despite these sales resulting in reported losses, they were viewed as necessary steps in aligning the company’s strategy towards relationship banking.
“We made a strategic decision to move away from these sorts of out-of-market, more national businesses and really focus on the community bank group,” Ludwig said.
The results of this restructuring have been a smaller balance sheet, fewer problem loans, and improved capital ratios. This puts Midland States in a stronger financial position, with Ludwig adding, “Our capital is in a much better position, liquidity is in a better position, credit is getting cleaned up, and we’re investing in the community bank group. We feel like we’re doing all the right things to be a better-performing company.”
Challenges and Opportunities in Equipment Finance
However, the decision to exit the equipment finance business comes at a time when the sector appears to be experiencing growth. Rick Remiker, vice chairman at the equipment finance consulting firm Alta Group, notes that after a two-year slump following the 2023 liquidity crisis, growth resumed in 2025.
“Banks are into loan-growth mode again, and at the core, equipment finance, asset finance, is a loan-growth vehicle,” said Remiker. However, Midland States’ primary challenges were tied to trucking and transportation loans, leading to significant losses.
The bank eventually concluded that even strong-performing national equipment finance credits weren’t as valuable as their core commercial banking loans, leading to the decision to exit the equipment finance business. Remiker echoes this sentiment, stating that, “The further you get from your core retail and commercial customers, the better underwriting you better have, the better discipline you better have, or eventually in some type of an economic cycle, you’re going to run into problems.”
A Return to Core Banking Fundamentals
Midland States’ restructuring efforts have resulted in the bank forecasting a $20 million pretax loss on the asset sale during the fourth quarter. However, these efforts have expanded the bank’s ratio of tangible common equity to tangible assets and reduced the ratio of nonperforming assets to total assets.
The bank’s national lending strategy was profitable until 2023, with net income reaching $100 million in 2022. However, problem loans began to mount in 2023, leading to the decision to sell the consumer-lending portfolios in 2024 and 2025.
Despite these challenges, Ludwig is confident about the future, expressing satisfaction that the bank was able to pivot to a new strategy without diluting shareholders. “We decided to protect our shareholders, not dilute them and sort of methodically work through the problems,” he said.
With a renewed focus on its community bank business, Midland States Bancorp is poised to turn a new page in its corporate journey.
Source: Here
