NICOLET BANKSHARES INC

Nicolet Bankshares, Inc. operates as a registered bank and financial holding company under the Bank Holding Company Act of 1956, as amended, and under the bank holding company laws of the State of Wisconsin. The company conducts its primary operations through its wholly owned subsidiary, Nicolet National Bank, a commercial bank organized in 2000 as a national bank under the laws of the United States. At December 31, 2025, Nicolet had total assets of $9.2 billion ¹, loans of $6.8 billion ², deposits of $7.7 billion ³ and total stockholders' equity of $1.3 billion ⁴. The financial services industry is highly competitive, and Nicolet competes for loans, deposits and wealth management or financial services in all its principal markets. Competitors include other bank and nonbank institutions, internet-based banks, credit unions, savings and loan associations, consumer finance companies, trust companies, money market and other mutual funds, securities brokerage houses, investment counseling firms, mortgage companies, insurance companies or other commercial entities that offer financial services products. Many competitors may enjoy competitive advantages including greater financial resources, fewer regulatory requirements, broader geographic presence, more accessible branches or more advanced technology to deliver products or services, more favorable pricing alternatives and lower origination or operating costs.

Nicolet believes its competitive pricing, personalized service and community engagement enable it to effectively compete in its markets. The company employs seasoned banking and wealth management professionals with experience in its market areas and who are active in their communities. Nicolet believes its emphasis on meeting customer needs in a relationship-focused manner, combined with local decision making on extensions of credit, distinguishes it from its competitors, particularly in the case of large financial institutions. Nicolet believes it further distinguishes itself by providing a range of products and services characteristic of a large financial institution while providing the personalized service and convenience characteristic of a local, community bank. The company was founded upon five core values (Be Real, Be Responsive, Be Personal, Be Memorable, and Be Entrepreneurial) which create a distinct competitive positioning in the markets within which it operates. Nicolet's mission is to be the lead community bank within the communities it serves, while its vision is to optimize the long-term return to its customers and communities, employees and shareholders (the '3 Circles').

Nicolet's principal business is banking, consisting of lending and deposit gathering, as well as ancillary banking-related products and services, to businesses and individuals of the communities it serves, and the operational support to deliver, fund and manage such banking products and services. Additionally, trust, brokerage and other investment management services predominantly for individuals and retirement plan services for business customers are offered. Nicolet's profitability is significantly dependent upon net interest income (interest income earned on loans and other interest-earning assets such as investments, net of interest expense on deposits and other borrowed funds), and noninterest income sources (including but not limited to service charges on deposits, trust and brokerage fees, card interchange income, and mortgage income from sales of residential mortgages into the secondary market), offset by the level of the provision for credit losses, noninterest expense (largely employee compensation and overhead expenses tied to processing and operating the Bank's business), and income taxes. Nicolet delivers its products and services principally through 57 bank branch locations at year-end 2025 ⁵ (and an additional 57 branch locations following the consummation of the MidWest One acquisition), online banking, mobile banking and an interactive website.

Nicolet offers a variety of loans, deposits and related services to business customers (especially small and medium-sized businesses and professional concerns), including but not limited to: business checking and other business deposit products and cash management services, international banking services, business loans, lines of credit, commercial real estate financing, construction loans, agricultural real estate or production loans, and letters of credit, as well as retirement plan services. Similarly, Nicolet offers a variety of banking products and services to consumers, including but not limited to: residential mortgage loans and mortgage refinancing, home equity loans and lines of credit, residential construction loans, personal loans, checking, savings and money market accounts, various certificates of deposit and individual retirement accounts, safe deposit boxes, and personal brokerage, trust and fiduciary services. Nicolet also provides online services including commercial, retail and trust online banking, automated bill payment, mobile banking deposits and account access, remote deposit capture, and other services such as wire transfers, debit cards, credit cards, pre-paid gift cards, direct deposit, and official bank checks. Lending is critical to Nicolet's balance sheet and earnings potential, and the company seeks creditworthy borrowers principally within the geographic area of its branch locations. As a community bank with experienced commercial, agricultural, and residential mortgage lenders, its primary lending function is to make loans in the following categories: commercial-related loans, consisting of commercial, industrial, and business loans and lines; owner-occupied commercial real estate; agricultural production and AG real estate; commercial real estate investment loans; construction and land development loans; residential real estate loans, consisting of residential first lien mortgages, residential junior lien mortgages, home equity loans and lines of credit, and residential construction loans; and other loans (mainly consumer in nature).

At December 31, 2025, the loan portfolio was 77% commercial-based and 23% retail-based. Total loans were $6.8 billion ⁶ at December 31, 2025, an increase of $210 million ⁷ (3%) from December 31, 2024. Agricultural and commercial and industrial loans represented the largest segments of Nicolet's loan portfolio, at 21% ⁸ and 20% ⁹, respectively, of the total loan portfolio. The next largest segments were CRE investment and residential first mortgage, with each representing 17% ¹⁰ of the total loan portfolio. The loan portfolio is widely diversified and included the following industries: manufacturing, wholesaling, paper, packaging, food production and processing, agriculture, forest products, hospitality, retail, service, and businesses supporting the general building industry. Wealth management fee income was $29.6 million ¹¹ for 2025, up $2.2 million ¹² (8%) from 2024, including favorable market-related changes, as well as growth in accounts and assets under management. Mortgage income, net was $12.1 million ¹³ for 2025, up $1.9 million ¹⁴ (18%) between the years, mostly due to higher secondary market volumes and the related gains on sales. Service charges on deposit accounts were $8.0 million ¹⁵, up $0.8 million ¹⁶ (11%) over 2024, on growth in both accounts and account analysis fees. Card interchange income grew $0.9 million ¹⁷ (7%) to $14.6 million ¹⁸ in 2025 largely due to higher volume and activity.

On February 13, 2026, Nicolet completed the merger with MidWest One Financial Group, Inc., a bank and financial holding company under the Bank Holding Company Act, and its wholly owned subsidiary, MidWest One Bank, an Iowa state non-member bank headquartered in Iowa City, Iowa. At December 31, 2025, MidWest One had total assets of approximately $6 billion ¹⁹, including total loans of approximately $5 billion ²⁰, and total deposits of approximately $5 billion ²¹. The acquisition doubled the branch footprint to over 100 locations, expanded the footprint to the state of Iowa, increased presence in Western Wisconsin, and significantly increased market share in the greater Twin Cities market. During 2025, Nicolet repurchased more than 646,000 shares ²² in the open market, increased the dividend by 14% ²³, and the Board declared quarterly cash dividends totaling $1.24 ²⁴ per share on its common stock in 2025. At December 31, 2025, approximately $19 million ²⁵ remained available under the common stock repurchase program, or approximately 158,900 shares ²⁶ of common stock (based on the closing stock price of $121.30 ²⁷ on December 31, 2025). On January 20, 2026, Nicolet's board increased the amount authorized under the program by $60 million ²⁸ and the program has no expiration date. The Bank paid dividends to the Parent Company of $120 million ²⁹ during 2025.

Nicolet announced record net income of $151 million ³⁰ for the year ended December 31, 2025, and earnings per diluted common share of $9.78 ³¹, compared to net income of $124 million ³² and earnings per diluted common share of $8.05 ³³ for 2024. At December 31, 2025, Nicolet had total assets of $9.2 billion ³⁴, an increase of $388 million ³⁵ (4%) from December 31, 2024. Total loans of $6.8 billion ³⁶ at December 31, 2025, increased $210 million ³⁷ (3%) from December 31, 2024, while total deposits of $7.7 billion ³⁸ increased $327 million ³⁹ (4%) from December 31, 2024. Total stockholders' equity was $1.3 billion ⁴⁰ at December 31, 2025, an increase of $85 million ⁴¹ since December 31, 2024, with solid earnings and favorable movements in the securities portfolio market valuation, partly offset by payment of the quarterly common stock dividend and common stock repurchases. Nonperforming assets were $32 million ⁴² and represented 0.35% ⁴³ of total assets at December 31, 2025, compared to $29 million ⁴⁴ or 0.33% ⁴⁵ at year-end 2024. The allowance for credit losses-loans was $69 million ⁴⁶ (1.01% ⁴⁷ of loans) at December 31, 2025, compared to $66 million ⁴⁸ (1.00% ⁴⁹ of loans) at December 31, 2024. Return on average assets was 1.68% ⁵⁰ for 2025, return on average common equity was 12.58% ⁵¹, and return on average tangible common equity was 18.53% ⁵².

Management stated that the primary focus will always remain on running a growing, highly profitable community bank that matters to the communities it serves, but following close behind will be what is expected to be the successful integration of MidWest One. The legal closing of the merger was February 13, 2026 – only 113 days from the announcement. However, unlike each of the past acquisitions completed, the core system integration is purposely delayed by approximately six months. Due to the size of this acquisition, as well as working with Fiserv (the core processor), the decision was made to delay the systems conversion of MidWest One until late summer 2026. Until then, MidWest One locations will continue to operate under the same name, but as a division of Nicolet National Bank. Once the systems conversion is complete, all MidWest One locations will carry the Nicolet Bank name and banner. Management noted that additional M&A is unlikely in 2026 as the focus is on MidWest One.

Management identified four priorities for 2025: (1) funding organic growth, (2) share repurchases, (3) increased dividends, and (4) M&A. All four of those priorities were accomplished in 2025, including growth in the balance sheet by 4% ⁵³, repurchasing more than 646,000 shares ⁵⁴ in the open market, increasing the dividend by 14% ⁵⁵, and capping off the year with the announced acquisition of MidWest One. The MidWest One acquisition doubled the branch footprint to over 100 locations, expanded the footprint to the state of Iowa, increased presence in Western Wisconsin, and significantly increased market share in the greater Twin Cities market. Additionally, MidWest One answered the '$10 billion question' that management has been asked for the past several years. MidWest One, and its size ($6 billion ⁵⁶), allows Nicolet to leap over the $10 billion threshold, thus realizing many of the operating efficiencies that may allow Nicolet the ability to retain its top quartile, if not top decile profitability going forward. Since organic growth will likely remain in the mid-single digits, management anticipates building capital very quickly.

Management noted that the impact of the MidWest One acquisition will certainly cause some additional noise in financial results in 2026. The combination of merger accounting, one-time expenses, and some of the cost savings being delayed due to the systems integration mean the reported financial results may vary each quarter. However, management remains optimistic that core results (which remove the M&A noise) will continue to place the company in the top quartile of publicly traded banks in the country. Personnel costs increased $7 million ⁵⁷ (6%) in 2025, reflecting merit increases and higher incentive compensation commensurate with current year earnings. Non-personnel expenses combined increased $3 million ⁵⁸ (3%) from 2024. Intangible amortization decreased $1 million ⁵⁹ (17%) between the years, due to lower amortization from the aging intangibles.

Nicolet had 986 total employees ⁶⁰ as of December 31, 2025. In 2025, employees reported more than 20,000 total volunteer hours ⁶¹ with local organizations of their choice. Through employee monetary donations to the Nicolet Foundation (matched by Nicolet), Nicolet's employee-run allocations committee awarded more than $180,000 ⁶² to local non-profits identified by employees and selected by a committee of employees. In 2025, 16% ⁶³ of all job opportunities were filled by internal mobility. Nicolet has also experienced almost a 2% ⁶⁴ reduction in turnover compared to the prior year. The company invested in a range of formal and informal development opportunities, and in 2025 employees completed 8,525 ⁶⁵ hours of training, compared to 3,997 ⁶⁶ hours in 2024.

The Board approved a common stock repurchase program which authorized, with subsequent modifications, the use of up to $336 million ⁶⁷ to repurchase outstanding shares of common stock. At December 31, 2025, approximately $19 million ⁶⁸ remained available under this common stock repurchase program, or approximately 158,900 shares ⁶⁹ of common stock (based on the closing stock price of $121.30 ⁷⁰ on December 31, 2025). On January 20, 2026, Nicolet's board increased the amount authorized under the program by $60 million ⁷¹ and the program has no expiration date. The Board declared quarterly cash dividends totaling $1.24 ⁷² per share on common stock in 2025. The Parent Company had $188 million ⁷³ in cash at December 31, 2025. During 2025, the Bank paid dividends to the Parent Company of $120 million ⁷⁴.

The U.S. economy continued to demonstrate resilience through 2025, although growth moderated from the unexpectedly strong performance of 2024. Based on all indications, real GDP grew at just under 2% ⁷⁵ in 2025, reflecting a slight slowdown but still indicating a stable expansionary environment. Heading into 2026, GDP is expected to grow at a slightly slower pace than 2025, which is supported by tax policy, consumer spending, and productivity from advancements in artificial intelligence. Employment conditions softened somewhat in 2025, but the labor market remained fundamentally healthy. Nationwide unemployment is projected to rise only slightly in 2026 and stay below levels historically associated with recessionary conditions. Unemployment in core markets in the Upper Midwest continue to remain below nationwide levels, which is driven by a strong base in manufacturing and healthcare, as well as a stronger labor participation rate than the rest of the country. Consumer spending in 2025 decelerated from 2024's robust pace, influenced by higher borrowing costs and pockets of consumer caution, yet remained a key contributor to growth. Business investment continued to benefit from productivity gains—particularly in artificial intelligence and automation—though firms grew more selective amid policy uncertainty and tariff-related cost pressures. After cutting rates three times in the back half of 2024, the Federal Reserve entered 2025 with a more cautious posture. Market expectations early in the year centered on several additional 25 or 50 bps cuts; however, firmer inflation readings and policy volatility—particularly around trade—led the Federal Reserve to signal a more measured approach, cutting rates by 25 bps three times during the year. At this point, the market is expecting two 25 bps rate cuts in 2026. However, stubbornly high inflation and continued strong consumer spending weigh against potentially higher unemployment and slower GDP growth. Additionally, a new Fed Chairman is expected to be appointed in May, which may also have a significant influence on interest rate policy.

The banking sector entered 2025 with renewed optimism. This bullish sentiment largely carried through 2025, though volatility persisted as policy details evolved. Credit losses did rise in 2025, particularly among institutions with heavy commercial real estate exposure or concentrations in large urban markets. However, these pressures remained contained and did not pose systemic risk. Banks with diversified portfolios and limited investment CRE exposure, or that operate in non-major metro markets—such as Nicolet—were comparatively unaffected. Regulatory reform discussions gained momentum, with expectations of reduced compliance burdens and lower operating costs across the industry. M&A activity, which had been subdued for several years, began to accelerate as both regulatory signals and market conditions improved. Overall, the banking industry enters 2026 with improved sentiment, healthier balance sheets, robust capital levels, and a more favorable policy backdrop than in the years immediately following the regional banking stresses of years prior.

The current Presidential administration has stated its intention to scrutinize the United States' trade relationships with its economic partners, indicated an interest in renegotiating trade agreements, and stated a willingness to implement tariffs with some of the United States' trade partners which could lead to trade wars. These statements by the administration have signaled a change in the United States' economic policies, and it is not clear which policies, if any, will be implemented and what effect these policies may have on the local, national, and global economy. Trade wars and tariffs can affect the economy and stock prices in the United States and can impact the costs of goods paid by customers, which can affect deposit levels and concentration, the demand for loans and other products and services and the ability of customers to repay outstanding loans. Inflationary pressures present a potential threat to results of operations and financial condition. The United States generally and the regions in which Nicolet operates specifically have within the past few years experienced, for the first time in decades, significant inflationary pressures, evidenced by higher gas prices, higher food prices and other consumer items. While inflationary pressures lessened during 2025, the effects of inflation continue to present a risk to borrowers and customers.

Nicolet faces significant credit risk from its commercial-related lending, which comprised approximately 77% ⁷⁶ of the loan portfolio at December 31, 2025. These loans, which include commercial and industrial, owner-occupied CRE, agricultural, CRE investment, and construction and land-development loans, are typically larger than residential or consumer loans and are made to small to medium-sized businesses that may be more severely impacted during economic downturns. The company is also exposed to geographic concentration risk as its loans are heavily concentrated in Wisconsin, Michigan and Minnesota, and the core industries in its market area include manufacturing, wholesaling, paper, packaging, food production and processing, agriculture, forest products, hospitality, retail, service, and businesses supporting the general building industry. A material decline in any of these sectors could negatively impact financial results. Additionally, the company faces interest rate risk, as a considerable amount of profitability is dependent on net interest income, and a flat or inverted yield curve may reduce net interest margin. As of December 31, 2025, approximately 32% ⁷⁷ of deposits were uninsured, which may expose the company to enhanced liquidity risk in times of financial distress, as uninsured depositors historically have been more likely to withdraw their deposits. The company also faces risks related to the integration of the MidWest One acquisition, including the risk that integration will be materially delayed or will be more costly or difficult than expected.

Management's message to shareholders emphasized that 2025 was a year of optionality for the Company, with the financial performance of the core franchise placing Nicolet among the top decile of banks in the country, as measured by return on average assets and return on tangible common equity. The priorities laid out a year ago, in no particular order, included (1) funding organic growth, (2) share repurchases, (3) increased dividends, and (4) M&A, and management stated that all four of those priorities were accomplished in 2025, including growth in the balance sheet by 4% ⁷⁸, repurchasing more than 646,000 shares ⁷⁹ in the open market, increasing the dividend by 14% ⁸⁰, and capping off the year with the announced acquisition of MidWest One. Management noted that the MidWest One acquisition marked a pivotal moment for Nicolet, doubling the branch footprint to over 100 locations, expanding the footprint to the state of Iowa, increasing presence in Western Wisconsin, and significantly increasing market share in the greater Twin Cities market. Management stated that as the company heads into 2026, the primary focus will always remain on running a growing, highly profitable community bank that matters to the communities it serves, but following close behind will be what is expected to be the successful integration of MidWest One. Management emphasized that the Board and executive management understand the importance of ensuring the integration efforts with MidWest One are successful, noting that one of the primary reasons why Nicolet carries the premium valuation it does is because it has been so successful with past acquisitions – financially, culturally, and strategically. Management stated that the MidWest One merger is easily the largest Nicolet has completed in its 25 year history, and that taking time to ensure a successful integration is paramount to future growth and success as a company. Management noted that additional M&A is unlikely in 2026 as the focus is on MidWest One, but that the Board still needs to decide how to allocate capital, or to simply let it build, with share repurchases and increased dividends being two considerations. Management stated that the Board and executive management believe that the intrinsic value of Nicolet is higher than the current share price, and as a result, believe repurchasing stock is an effective way of deploying capital to benefit existing shareholders.