Nicolet Bankshares, Inc. Announces Second Quarter 2021 Earnings

GREEN BAY, Wis., July 20, 2021 /PRNewswire/ -- Nicolet Bankshares, Inc. (NASDAQ: NCBS) ("Nicolet") announced second quarter 2021 net income of $18.3 million and earnings per diluted common share of $1.77, compared to $18.2 million and $1.75 for first quarter 2021, and $13.5 million and $1.28 for second quarter 2020, respectively. Annualized quarterly return on average assets was 1.62%, 1.64% and 1.26%, for second quarter 2021, first quarter 2021 and second quarter 2020, respectively.

Net income for the six months ended June 30, 2021 was $36.5 million and earnings per diluted common share was $3.52, compared to net income of $24.0 million and earnings per diluted common share of $2.25 for the first half of 2020. Annualized return on average assets was 1.63% and 1.23% for the first six months of 2021 and 2020, respectively.

"In the second quarter results, we see a focused effort by our team to work together, across all revenue lines, to serve our customers, communities, and each other. While most of the spotlight has been on our acquisition announcements, we understand and are executing on the most important part of our job - to run a high-performing, operationally excellent community bank," said Mike Daniels, President and CEO of Nicolet.

"The one constant at Nicolet has always been change. We had a busy quarter, with the title changes for Bob and me, two deal announcements, and our Subordinated Notes offering. In addition, while we were welcoming Phil to his new role as CFO, we needed to replace our accounting firm from Wipfli (where Phil was a partner) to BKD. I knew our team would respond well to these changes, and the numbers prove that," Daniels said. "All revenue lines continue to grow organically, and our value is resonating in the communities in which we operate."

"This second quarter was a strong quarter for us," commented Bob Atwell, Executive Chairman of Nicolet. "Seeing our customers thrive, watching our employees serving our customers so well, and being able to communicate these results to our shareholders, this is why we show up for work every day and fulfill our purpose."

The timing of Nicolet's acquisition of Advantage Community Bancshares, Inc. ("Advantage") on August 21, 2020, at 4% of then pre-merger assets, impacts financial comparisons. At consummation, Advantage added $172 million in assets, $88 million in loans, $1 million in core deposit intangible, $12 million in goodwill, $141 million in deposits and four branches.

Balance Sheet Review
At June 30, 2021, period end assets were $4.6 billion, an increase of $44 million (1%) from March 31, 2021, mostly in cash and cash equivalents (up $57 million to $792 million). Total loans decreased $26 million from March 31, 2021, including a $79 million decline in PPP loans, partly offset by growth of $53 million in the rest of the loan portfolio. Total deposits of $3.9 billion at June 30, 2021, increased $38 million (1%) from March 31, 2021, with a decrease of $11 million in brokered deposits (as brokered deposits mature without renewal given our liquid position) more than offset by a $49 million increase in customer core deposits. Total capital was $559 million at June 30, 2021, an increase of $9 million since March 31, 2021, mostly due to solid earnings, partly offset by share repurchase activity. Nicolet repurchased 157,418 shares at a total cost of $12.5 million, or an average per share cost of $79.11, during second quarter 2021.

During 2020, we originated 2,725 PPP loans totaling $351 million, bearing a 1% contractual rate, and earned a $12.3 million fee. During first half 2021, under the latest round of the SBA's program, Nicolet originated 2,205 PPP loans totaling $160 million and earned a $9.3 million fee. Of the total fees, $5.7 million was accreted into interest in 2020 and $7.7 million was accreted in first half 2021. At June 30, 2021, the net carrying value of all remaining PPP loans was $150 million, or 5% of total loans, for a net $79 million decrease from March 31, 2021 due to loan forgiveness. The PPP loan forgiveness continues to boost overall borrower equity in their businesses and meaningfully improves the credit quality of many commercial relationships.

Asset Quality
Nonperforming assets were $10 million at June 30, consisting of $7 million of nonaccrual loans and $3 million of other real estate owned (primarily closed bank branch properties yet to be sold), and representing 0.21% of total assets, down from $13 million or 0.28% at March 31, 2021, and down from $13 million or 0.29% at June 30, 2020. Since the prior quarter, the allowance for credit losses-loans remained level at $33 million, with negligible net charge-offs (0.01% of average loans, annualized) and continued improvement in asset quality metrics. At June 30, 2021, the allowance represented 1.15% of total loans, and represented 1.22% of total loans excluding the net carrying value of PPP loans.

Income Statement Review
Net income for second quarter 2021 was $18.3 million, consistent with net income of $18.2 million for first quarter 2021 and 36% stronger than net income of $13.5 million for second quarter 2020.

Net interest income was $35.6 million for second quarter 2021, $1.9 million (6%) higher than $33.6 million for first quarter 2021, comprised of $1.4 million higher interest income and $0.5 million lower interest expense. Between the sequential quarters, the $1.9 million higher net interest income included favorable volume variances (up $0.9 million), positive rate changes (up $0.7 million), and one additional earning day (up $0.3 million).

Average interest-earning assets of $4.1 billion were up $20 million from first quarter 2021, with higher average loans (up $43 million, mostly from strong loan growth outpacing forgiveness on PPP loans) and growth in investments (up $9 million), offset by reductions in other interest-earning assets (down $33 million, mostly cash). Average interest-bearing liabilities of $2.7 billion decreased $79 million from first quarter 2021, mostly in brokered deposits (down $63 million).

The net interest margin for second quarter 2021 was 3.45%, up 14bps from 3.31% for first quarter 2021, as the yield on interest-earning assets increased 9bps (to 3.72%) and the cost of funds favorably declined 6bps (to 0.41%), while the contribution from net free funds fell 1bp. Loans yielded 4.85% for second quarter 2021, up 5bps from first quarter 2021, with total PPP loans yielding 9.35% (up 170bps over first quarter, aided mostly by accelerating fee accretion in line with loan forgiveness), while all other loans earned 4.50% (down 7bps from the prior quarter, pressured by new or renewed loans in the low rate environment). The cost of funds of 0.41% for second quarter 2021 declined 6bps on a sequential quarter basis, attributable mainly to the timing of prudent pricing actions on core interest-bearing deposits (down 5bps to 0.26% for second quarter 2021).

Noninterest income was $20.2 million for second quarter 2021, up $3.1 million (18%) compared to first quarter 2021. Excluding net asset gains (losses), noninterest income was $16.0 million, down $0.4 million (3%) from first quarter 2021. Net mortgage income of $5.6 million remains strong, though continues to slow from the record levels experienced in 2020. Trust services fee income and brokerage fee income combined increased $0.3 million (7%) over first quarter 2021. Net asset gains were $4.2 million (comprised primarily of market gains on an equity investment initial public offering during the quarter), compared to net asset gains of $0.7 million in first quarter 2021 (comprised primarily of market gains on equity securities). All remaining noninterest income categories combined increased $0.9 million from first quarter 2021 largely due to higher card interchange income and the favorable resolution of an early lease termination.

Noninterest expense of $30.7 million increased $4.7 million (18%) from first quarter 2021. Personnel expense increased $2.0 million (13%) from first quarter 2021, largely from higher equity and other incentives commensurate with the strong earnings. All non-personnel expenses combined increased $2.7 million (25%) over first quarter 2021, largely due to a $2 million contract termination charge, as well as $0.5 million for the annual Board equity retainer and higher professional costs related to the recently announced acquisitions and new subordinated notes issuance.

On April 12, 2021, we entered into a definitive merger agreement with Mackinac Financial Corporation ("Mackinac" (NASDAQ: MFNC)) pursuant to which Mackinac will merge with and into Nicolet, expanding Nicolet prominently into Northern Michigan and the Upper Peninsula of Michigan. Mackinac shareholders will receive fixed consideration of 0.22 shares of Nicolet common stock and $4.64 in cash for each share owned (approximating a 20% cash and 80% stock split), subject to provisions provided for in the merger agreement. At March 31, 2021, Mackinac had total assets of $1.5 billion, loans of $1.1 billion, deposits of $1.3 billion and equity of $170 million. On July 15, 2021, the shareholders of both Mackinac and Nicolet approved the merger at special meetings of their respective shareholders held on that date. As of July 19, 2021, Nicolet received all regulatory approvals for the Mackinc merger. The merger is expected to close in the third quarter of 2021, subject to other customary closing conditions.

On June 22, 2021, we entered into a definitive merger agreement with County Bancorp, Inc. ("County" (NASDAQ: ICBK)) pursuant to which County will merge with and into Nicolet, to become the premiere agriculture lender throughout Wisconsin. Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, County shareholders will have the right to receive for each share of County common stock, at the election of each holder and subject to proration, either $37.18 in cash or 0.48 shares of Nicolet common stock. County shareholder elections will be prorated to ensure the total consideration will consist of approximately 20% cash and approximately 80% common stock. At March 31, 2021, County had total assets of $1.5 billion, loans of $1.0 billion, deposits of $1.1 billion and equity of $166 million. The merger is expected to close in the fourth quarter of 2021, subject to customary closing conditions, including approval by regulators and shareholders of both County and Nicolet.

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 and consumer banking to wealth management and retirement plan services. Founded in Green Bay in 2000, Nicolet National Bank operates branches in Northeast and Central Wisconsin and the upper peninsula of Michigan. More information can be found at www.nicoletbank.com.

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 federal securities law. Such statements include, but are not limited to, statements about Nicolet's business plans, objectives, expectations and intentions, including without limitation the continuing organic growth of Nicolet's revenue lines, as well as certain plans, expectations, goals, projections and benefits relating to the proposed merger between Nicolet and Mackinac, as well as the proposed merger between Nicolet and County, all of which are subject to numerous assumptions, risks and uncertainties. Words or phrases such as "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, are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

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. In addition to factors disclosed in reports filed by Nicolet with the SEC, risks and uncertainties, including but not limited to risks and uncertainties for Nicolet, Mackinac, County, and the combined companies with respect to the proposed mergers, that may cause actual results or outcomes to differ materially from those anticipated include, but are not limited to: (1) the possibility that any of the anticipated benefits of either or both of the proposed mergers will not be realized or will not be realized within the expected time period; (2) the risk that integration of Mackinac's operations and / or County's operations with those of Nicolet will be materially delayed or will be more costly or difficult than expected; (3) the parties' inability to meet expectations regarding the timing of the proposed mergers; (4) changes to tax legislation and their potential effects on the accounting for the mergers; (5) the inability to complete the proposed merger with County due to the failure of Nicolet's or County's shareholders to approve and adopt the merger agreement between Nicolet and County; (6) the failure to satisfy other conditions to completion of the proposed mergers, including receipt of required regulatory and other approvals; (7) the failure of the proposed mergers to close for any other reason; (8) diversion of management's attention from ongoing business operations and opportunities due to the proposed mergers; (9) the challenges of integrating and retaining key employees of Mackinac, County, and / or Nicolet after the mergers; (10) the effect of the announcements of the proposed mergers on Nicolet's, Mackinac's, County's, and / or the combined companies' respective customer and employee relationships and operating results; (11) the possibility that the proposed mergers may be more expensive to complete than anticipated, including as a result of unexpected factors or events; (12) dilution caused by Nicolet's issuance of additional shares of Nicolet common stock in connection with the proposed mergers; (13) the magnitude and duration of the COVID pandemic and its impact on the global economy and financial market conditions and the business, results of operations and financial condition of Nicolet, Mackinac, County, and the combined companies; (14) changes in consumer demand for financial services; and (15) general competitive, economic, political and market conditions and fluctuations. Please refer to each of Nicolet's, Mackinac's, and County's Annual Report on Form 10-K for the year ended December 31, 2020, as well as their other filings with the SEC, for a more detailed discussion of risks, uncertainties and factors that could cause actual results to differ from those discussed in the forward-looking statements.

The COVID pandemic is adversely affecting us, our customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. Continued deterioration in general business and economic conditions or turbulence in domestic financial markets could adversely affect Nicolet's revenues and the values of its assets and liabilities, lead to a tightening of credit, and increase stock price volatility. In addition, the COVID pandemic may result in changes to statutes, regulations, or regulatory policies or practices that could affect Nicolet in substantial and unpredictable ways.

All forward-looking statements included in this communication are made as of the date hereof and are based on information available to management at that time. Except as required by law, Nicolet does not assume any obligation to update any forward-looking statement to reflect events or circumstances that occur after the date the forward-looking statements were made.

Important Information and Where to Find It
This communication relates to the proposed merger transaction involving Nicolet and County. In connection with the proposed merger, Nicolet and County will file a joint proxy statement-prospectus on Form S-4 and other relevant documents concerning the merger with the Securities and Exchange Commission (the "SEC"). BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT-PROSPECTUS AND ANY OTHER DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED MERGER OR INCORPORATED BY REFERENCE IN THE JOINT PROXY STATEMENT-PROSPECTUS BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT NICOLET, COUNTY, AND THE PROPOSED MERGER. When available, the joint proxy statement-prospectus will be delivered to shareholders of Nicolet and County. Investors may obtain copies of the joint proxy statement-prospectus and other relevant documents (as they become available) free of charge at the SEC's website (www.sec.gov). Copies of the documents filed with the SEC by Nicolet will be available free of charge on Nicolet's website at www.nicoletbank.com. Copies of the documents filed with the SEC by County will be available free of charge on County's website at Investors.ICBK.com/documents.

Nicolet, County and certain of their directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from the shareholders of Nicolet and the shareholders of County in connection with the proposed merger. Information about the directors and executive officers of Nicolet and County will be included in the joint proxy statement-prospectus for the proposed transaction filed with the SEC. Information about the directors and executive officers of Nicolet is also included in the proxy statement for its 2021 annual meeting of shareholders, which was filed with the SEC on March 2, 2021. Information about the directors and executive officers of County is also included in the proxy statement for its 2021 annual meeting of shareholders, which was filed with the SEC on April 5, 2021. Additional information regarding the interests of such participants and other persons who may be deemed participants in the transaction will be included in the joint proxy statement-prospectus and the other relevant documents filed with the SEC when they become available.

No Offer or Solicitation
This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.