Nicolet Bankshares, Inc. Announces First Quarter 2024 Results

• Well positioned to be opportunistic
  • Net income of $28 million or adjusted net income (non-GAAP) of $26 million for first quarter 2024, compared to net income of $31 million or adjusted net income (non-GAAP) of $28 million in prior quarter, and net loss of $9 million or adjusted net income (non-GAAP) of $22 million for first quarter 2023
  • Tangible common equity ratio increased to 8.33% for first quarter 2024
  • Credit quality remains strong with nonperforming assets stable at 0.33% of total assets and negligible net charge-offs
• Continued strong financial performance metrics for first quarter 2024
  • 17.07% Return on average tangible common equity
  • 1.33% Return on average assets
• Tangible book value per share increased to $44.91 for first quarter 2024

Nicolet Bankshares, Inc. (NYSE:NIC) ("Nicolet") announced first quarter 2024 net income of $28 million and earnings per diluted common share of $1.82, compared to net income of $31 million and earnings per diluted common share of $2.02 for fourth quarter 2024, and net loss of $9 million and loss per diluted common share of $0.61 for first quarter 2023.

Net income reflected certain non-core items and the related tax effect of each, including the first quarter 2023 balance sheet repositioning and third quarter 2023 change in Wisconsin state tax law, as well as gains / (losses) on other assets and investments in all periods. These non-core items positively impacted earnings per diluted common share $0.10 and $0.17 for first quarter 2024 and fourth quarter 2023, respectively, and negatively impacted earnings per diluted common share $2.06 for first quarter 2023.

"Our first quarter results show our focus on execution as we move throughout the year," said Mike Daniels, Chairman, President, and CEO of Nicolet. "We continue to maintain our relationship-based pricing discipline paired with our credit culture as our team consistently shows the value that we bring. We are encouraged by the results, and we will continue to challenge ourselves to manage both growth and efficiency."

Daniels continued, "Our strong core profitability has allowed us to build capital, which puts us in an enviable position of having significant options going forward. These options include organic growth, M&A, capital return to shareholders through share buybacks and dividends. While the M&A market remains slow, we are reviewing opportunities and participating in high-level discussions with potential partners, as we maintain our high degree of discipline with our M&A strategy. Our goal is always to partner with a franchise that makes Nicolet and the communities we serve better."

Nicolet's 2023 results were significantly impacted by the first quarter 2023 balance sheet repositioning, which included the sale of $500 million (par value) U.S. Treasury held to maturity securities for a pre-tax loss of $38 million or an after-tax loss of $28 million, with the net proceeds used to reduce FHLB borrowings and the remainder held in investable cash. In addition, in July 2023 a new Wisconsin tax law was signed which provided financial institutions with an exemption from state taxable income for interest, fees, and penalties earned on specific loans to existing Wisconsin-based business or agriculture purpose loans. This tax law change to Nicolet moving forward will be a reduction / elimination of State income taxes being expensed; however, it also required a $9.1 million valuation allowance to be established for the State-related deferred tax asset as of the effective date of the legislation. While both provided a drag to 2023 earnings, each also serve as a tailwind for first quarter 2024 and beyond.

Balance Sheet Review

At March 31, 2024, period end assets were $8.4 billion, down slightly ($22 million) from December 31, 2023, mostly lower cash balances, partly offset by growth in loans. Total loans increased $44 million (1%) from December 31, 2023, with growth in agricultural, commercial and industrial, and residential real estate loans. Total deposits of $7.2 billion at March 31, 2024, decreased $32 million from December 31, 2023, mostly noninterest-bearing demand deposits. Total capital was $1.1 billion at March 31, 2024, an increase of $25 million over December 31, 2023, with earnings partly offset by the quarterly common stock dividend.

Asset Quality

Nonperforming assets were $28 million and represented 0.33% of total assets at March 31, 2024, unchanged from December 31, 2023, and down from $41 million or 0.50% at March 31, 2023. The allowance for credit losses-loans was $64 million and represented 1.01% of total loans at March 31, 2024, compared to $64 million (or 1.00% of total loans) at December 31, 2023, and $62 million (or 1.00% of total loans) at March 31, 2023. Asset quality trends remain solid and loan net charge-offs were negligible.

Income Statement Review - Quarter

Net income was $28 million and adjusted net income (non-GAAP) was $26 million for first quarter 2024, compared to net income of $31 million and adjusted net income (non-GAAP) of $28 million for fourth quarter 2023.

Net interest income was $63 million for first quarter 2024, down $1 million from fourth quarter 2023. Interest income increased $1 million mostly due to the repricing of new and renewed loans in a rising interest rate environment, partly offset by lower investable cash balances, while interest expense increased $2 million due to higher average rates on seasonal deposits. The net interest margin for first quarter 2024 was 3.26%, down 4 bps from 3.30% for fourth quarter 2023. The yield on interest-earning assets increased 12 bps (to 5.44%) mostly due to higher average rates from the repricing of the loan portfolio, while the cost of funds increased 11 bps (to 3.01%) for first quarter 2024, attributable mainly to higher cost seasonal deposits.

Noninterest income of $19 million for first quarter 2024 decreased $5 million from fourth quarter 2023, mostly due to the change in net asset gains. First quarter 2024 included net gains of $2 million due to a $1 million gain on sale of an investment security and a $1 million gain on the early extinguishment of subordinated debt, while fourth quarter 2023 included net gains of $6 million from the $9 million pre-tax gain on the sale of Nicolet's member interest in UFS, LLC, partly offset by a $3 million loss on the sale of certain securities. Excluding the net asset gains (losses), noninterest income for first quarter 2024 was $18 million, a $1 million decrease from fourth quarter 2023, mostly due to changes in the fair value of nonqualified deferred compensation plan assets.

Noninterest expense of $47 million for first quarter 2024 decreased $3 million from fourth quarter 2023. Personnel expense was minimally changed with higher salaries and incentives substantially offset by lower health insurance and a decrease in the fair value of nonqualified deferred compensation plan liabilities. Non-personnel expenses decreased $3 million (12%) between the sequential quarters, mostly lower data processing from an early contract termination charge in fourth quarter 2023.

About Nicolet Bankshares, Inc.

Nicolet Bankshares, Inc. is the bank holding company of Nicolet National Bank, a growing, full-service, community bank providing services ranging from commercial, agricultural and consumer banking to wealth management and retirement plan services. Founded in Green Bay in 2000, Nicolet National Bank operates branches primarily in Wisconsin, Michigan, and Minnesota. More information can be found at www.nicoletbank.com.

Use of Non-GAAP Financial Measures

This communication contains non-GAAP financial measures, such as non-GAAP adjusted net income, non-GAAP adjusted earnings per diluted common share, tangible book value per common share, return on average tangible common equity, and tangible common equity to tangible assets. Management believes such measures to be helpful to management, investors and others in understanding Nicolet's results of operations or financial position. When non-GAAP financial measures are used, the comparable GAAP financial measures, as well as the reconciliation of the non-GAAP measures to the GAAP financial measures, are provided. See "Reconciliation of Non-GAAP Financial Measures (Unaudited)" below. The non-GAAP net income measure and related reconciliation provide information useful to investors in understanding the operating performance and trends of Nicolet and also aid investors in comparing Nicolet's financial performance to the financial performance of peer banks. Management considers non-GAAP financial ratios to be critical metrics with which to analyze and evaluate financial condition and capital strengths. While non-GAAP financial measures are frequently used by stakeholders in the evaluation of a corporation, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analyses of results as reported under GAAP.

Forward Looking Statements "Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995

Certain statements contained in this communication, which are not statements of historical fact, constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements generally can be identified by words or phrases such as, without limitation, "anticipate," "believe," "aim," "can," "conclude," "continue," "could," "estimate," "expect," "foresee," "goal," "intend," "may," "might," "outlook," "possible," "plan," "predict," "project," "potential," "seek," "should," "target," "will," "will likely," "would," or the negative of these terms or other comparable terminology, as well as similar expressions, and in this press release include our statements about potential M&A, share buyback, and dividend activity.

Forward-looking statements are not historical facts but instead express only management's beliefs regarding future results or events, many of which, by their nature, are inherently uncertain and outside of management's control. It is possible that actual results and outcomes may differ, possibly materially, from the anticipated results or outcomes indicated in these forward-looking statements. Risks, uncertainties and other factors that could cause the actual results to differ materially from the statements, include, but are not limited to future legislative changes to the taxes imposed upon Nicolet, potential expansion into other jurisdictions that impose different or higher taxes and our ability to generate loans that qualify for the Wisconsin tax reduction / elimination. Additional factors which could affect the forward looking statements can be found in Nicolet's 2023 Annual Report on Form 10-K, as well subsequent filings with the SEC and are available on the SEC's website at www.sec.gov.

Any forward-looking statements included in this press release are made as of the date hereof and are based on information available to management at that time. Except as required by law, Nicolet disclaims any obligation to update or revise any forward-looking statement contained in this press release to reflect new information or events or circumstances that occur after the date the forward-looking statements were made.