NICOLET BANKSHARES, INC. ANNOUNCES SECOND QUARTER 2022 EARNINGS

• Net income of $24 million, consistent with prior quarter and 31% higher than second quarter 2021
• Net income of $48 million for first six months of 2022, compared to $37 million for first six months of 2021
• Earnings per diluted common share of $1.73 and $3.43 for the three and six months ended June 30
• Return on average assets of 1.32% and 1.31% for the three and six months ended June 30
• Return on average common equity and return on average tangible common equity of 11.48% and 19.21%, respectively, for second quarter 2022
• Regulatory approvals for Charter merger received

GREEN BAY, Wis., July 19, 2022 /PRNewswire/ -- Nicolet Bankshares, Inc. (NYSE: NIC) ("Nicolet" or the "Company") announced second quarter 2022 net income of $24 million and earnings per diluted common share of $1.73, compared to $24 million and $1.70 for first quarter 2022, and $18 million and $1.77 for second quarter 2021, respectively.  Annualized quarterly return on average assets was 1.32%, 1.30% and 1.62%, for second quarter 2022, first quarter 2022 and second quarter 2021, respectively.

Net income for the six months ended June 30, 2022 was $48 million and earnings per diluted common share was $3.43, compared to net income of $37 million and earnings per diluted common share of $3.52 for the first half of 2021.  Annualized return on average assets was 1.31% and 1.63% for the first six months of 2022 and 2021, respectively.

On March 29, 2022, the Company entered into a definitive merger agreement with Charter Bankshares, Inc. ("Charter") pursuant to which Charter will merge with and into Nicolet.  Nicolet expects to issue approximately 1.26 million shares of Nicolet common stock and $38.8 million in cash for the acquisition of Charter.  At March 31, 2022, Charter had total assets of $1.1 billion.  As of July 12, 2022, all regulatory approvals for the Charter merger had been received. The merger is expected to close in the third quarter of 2022, subject to customary closing conditions.

"Despite the potential distractions of rate hikes and inflationary pressures, our team has remained focused on serving our customers. This focus has resulted in strong fundamental performance, including good loan growth, across our core customer base," said Mike Daniels, President and CEO of Nicolet. "Our customers continue to show that they are smart and resilient as they have kept their balance sheets strong and remain on solid ground.  The partnership between our bankers and customers continues to create the shared success upon which Nicolet was founded."

"Our focus on asset quality and bringing back Ag loan participations have been executed well by our team.  Our credit quality remains very strong, and nonperforming assets and charge-offs have declined for the second consecutive quarter.  We also repurchased approximately $100 million in previously participated Ag loans this quarter which has helped us deliver on our strategies in the Ag sector.  The team has done a good job in a short time," Daniels added.

Executive Vice President Eric Witczak commented, "As with all our merger integrations, we remain as focused on the people side as we do the systems side.  We believe that we found some wonderful community-focused people, led by Paul Kohler, that will bring the Nicolet story to life in Western Wisconsin and Minnesota."  

The Company's financial performance and certain balance sheet line items were impacted by the timing and size of Nicolet's 2021 acquisitions, Mackinac Financial Corporation ("Mackinac") on September 3, 2021 and County Bancorp, Inc. ("County") on December 3, 2021. Certain income statement results, average balances and related ratios for 2021 include partial contributions from Mackinac and County, each from the respective acquisition date.  At acquisition, Mackinac added assets of $1.5 billion, loans of $0.9 billion, and deposits of $1.4 billion, while at acquisition County added assets of $1.4 billion, loans of $1.0 billion, and deposits of $1.0 billion.

At June 30, 2022, period end assets were $7.4 billion, an increase of $50 million (1%) from March 31, 2022, including strong loan growth, partly offset by lower cash and cash equivalents.  Total loans increased $295 million (6%) from March 31, 2022, with solid organic loan growth in agricultural, commercial and industrial, and residential first mortgage loans, as well as the repurchase of approximately $100 million previously participated agricultural loans.  Excluding the purchased agricultural loans, organic loan growth was 4% from March 31, 2022.  Total deposits of $6.3 billion at June 30, 2022, increased $55 million (1%) from March 31, 2022, primarily noninterest-bearing deposits. Total capital was $839 million at June 30, 2022, an increase of $3 million since March 31, 2022, with current quarter earnings partly offset by unfavorable changes in the fair value of available for sale securities and common stock repurchases. 

Nonperforming assets were $42 million and represented 0.56% of total assets at June 30, 2022, compared to $49 million or 0.68% at March 31, 2022.  The allowance for credit losses-loans was $51 million and represented 1.02% of total loans at June 30, 2022, compared to $50 million and 1.07% at March 31, 2022, reflecting strong loan growth, solid asset quality trends, and negligible net charge-offs.

Net income for second quarter 2022 was $24 million, consistent with net income of $24 million for first quarter 2022.

Net interest income was $55 million for second quarter 2022, up slightly ($1 million) from first quarter 2022, reflecting strong loan volumes and one additional day in the quarter, though still pressured on rates from competitive pricing and the lag in repricing to current market interest rates.  Average interest-earning assets of $6.6 billion were down $132 million from first quarter 2022.  Average loans of $4.8 billion grew $150 million over first quarter 2022, including both organic loan growth and the repurchase of previously participated agricultural loans, while other interest-earning assets were down $279 million, mostly cash, and average investments were minimally changed.  Average interest-bearing liabilities of $4.4 billion decreased $258 million from first quarter 2022, primarily average interest-bearing deposits due to a reduction in retail deposits. 

The net interest margin for second quarter 2022 was 3.34%, up 11bps from 3.23% for first quarter 2022. The yield on interest-earning assets increased 13bps (to 3.61%) largely due to the change in mix of interest-earning assets, which shifted to 73% loans, 24% investments, and 3% other interest-earning assets (mostly cash) for second quarter 2022 compared to 70% loans, 23% investments, and 7% other interest-earning assets for first quarter 2022.   The cost of funds increased 5bps (to 0.40%) for second quarter 2022, attributable mainly to the repricing of deposits and funding in the higher interest rate environment.

Noninterest income was $14 million for second quarter 2022, down $2 million (11%) compared to first quarter 2022.  Net mortgage income of $2 million was down $1 million from first quarter 2022, primarily due to lower gains on sales from declining secondary market volumes. Trust services fee income and brokerage fee income combined decreased $0.7 million (12%) from first quarter 2022, mostly from unfavorable market-related declines.  Card interchange income grew $0.4 million (14%) over first quarter 2022 on higher volume and activity. Other noninterest income was down $0.6 million between the sequential quarters mostly due to an $0.8 million unfavorable change in the fair value of nonqualified deferred compensation plan assets from recent market declines, partly offset by $0.2 million higher net loan servicing revenue.  Both quarters also included net asset gains primarily related to sales of other real estate owned (mostly closed bank branch locations). 

Noninterest expense of $37 million decreased $1 million (3%) from first quarter 2022. Personnel expense decreased $1.5 million (7%) from first quarter 2022, largely due to the offsetting change to the nonqualified deferred compensation plan liabilities and lower health claim experience, partly offset by higher salary expense from the increase in hourly pay or base salary effective at the end of March 2022, which benefitted 67% of our employee base.  Non-personnel expenses increased $0.5 million (3%), largely due to $0.5 million higher merger-related expense, $0.2 million higher marketing (timing of marketing campaigns and community support), and $0.2 million higher data processing (volume-based),  partly offset by a $0.3 million decline in other noninterest expense from lower costs to carry closed bank branches given the recent sales. 

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 in Northeast and Central Wisconsin, Northern Michigan and the upper peninsula of Michigan. More information can be found at www.nicoletbank.com.

This communication contains non-GAAP financial measures, such as non-GAAP net income, non-GAAP earnings per  diluted common share, tangible book value per common share, return on average tangible common equity, and tangible common equity to tangible assets, where 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.

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 Nicolet's prospects and pipelines looking strong and business focus moving forward, as well as certain plans, expectations, goals, the expected closing date of the Charter merger as well as the projections and benefits relating to the proposed merger between Nicolet and Charter, 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 with respect to its proposed merger with Charter, that may cause actual results or outcomes to differ materially from those anticipated include, but are not limited to: (1) the possibility that the proposed merger will not be completed due to the failure to satisfy one or more of the closing conditions of the merger; (2) the possibility that any of the anticipated benefits of the proposed merger will not be realized or will not be realized within the expected time period; (3) the risk that integration of Charter's operations with those of Nicolet will be materially delayed or will be more costly or difficult than expected; (4) the parties' inability to meet expectations regarding the timing of the proposed merger; (5) changes to tax legislation and their potential effects on the accounting for the proposed merger; (6) diversion of management's attention from ongoing business operations and opportunities due to the proposed merger; (7) the challenges of integrating and retaining key employees; (8) the effect of the announcement of the proposed merger on Nicolet's, Charter's or the combined company's respective customer and employee relationships and operating results; (9) the possibility that the proposed merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events; (10) dilution caused by Nicolet's issuance of additional shares of Nicolet common stock in connection with the proposed merger; (11) the magnitude and duration of the COVID pandemic and its impact on the global economy and financial market conditions and Nicolet's business, results of operations and financial condition; (12) changes in consumer demand for financial services; (13) general competitive, economic, political and market conditions and fluctuations; and additional risks that are discussed in Nicolet's SEC filings.  Please refer to Nicolet's 2021 Annual Report on Form 10-K, as well as its 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.

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.

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SOURCE Nicolet Bankshares, Inc.