NICOLET BANKSHARES INC

Previous wording

•adverse results (including judgments, costs, fines, reputational harm, inability to obtain necessary approvals and / or other negative effects) from current or future litigation, regulatory proceedings, examinations, investigations, or similar matters or developments related thereto;

Current wording

•adverse results (including judgments, costs, fines, reputational harm, inability to obtain necessary approvals and / or other negative effects) from current or future litigation, legislation, regulatory proceedings, examinations, investigations, or similar matters or developments related thereto, such as potential effects of the federal One Big Beautiful Bill Act on us or our customers;

Previous wording

The following discussion is management’s analysis of Nicolet’s consolidated financial condition as of March 31, 2025 and December 31, 2024 and results of operations for the three-month periods ended March 31, 2025 and 2024. It should be read in conjunction with our audited consolidated financial statements included in Nicolet’s 2024 Annual Report on Form 10-K.

Current wording

The following discussion is management’s analysis of Nicolet’s consolidated financial condition as of June 30, 2025 and December 31, 2024 and results of operations for the three and six-month periods ended June 30, 2025 and 2024. It should be read in conjunction with our audited consolidated financial statements included in Nicolet’s 2024 Annual Report on Form 10-K.

Previous wording

(1) The adjusted net income and diluted EPS measures are non-GAAP financial measures that provide information that management believes is useful to investors in understanding our operating performance and trends, and also aids investors in the comparison of Nicolet’s financial performance to the financial performance of peer banks. See section “Non-GAAP Financial Measures” below for a reconciliation of these financial measures.

Current wording

(1) The adjusted net income and diluted EPS measures are non-GAAP financial measures that provide information that management believes is useful to investors in understanding our operating performance and trends and also aids investors in the comparison of our financial performance to the financial performance of peer banks. See section “Non-GAAP Financial Measures” below for a reconciliation of these financial measures.

Previous wording

(2) The ratios of tangible book value per common share, return on average tangible common equity, and tangible common equity to tangible assets are non-GAAP financial measures that exclude goodwill and other intangibles, net. These non-GAAP financial ratios have been included as management considers them to be useful metrics to analyze and evaluate our financial condition and capital strength. See section “Non-GAAP Financial Measures” below for a reconciliation of these financial measures.

Current wording

(2) The ratios of tangible book value per common share, return on average tangible common equity, and tangible common equity to tangible assets are non-GAAP financial measures that exclude goodwill and other intangibles, net. These financial ratios have been included as management considers them to be useful metrics with which to analyze and evaluate financial condition and capital strength. See “Non-GAAP Financial Measures” below for a reconciliation of these financial measures.

Previous wording

Management believes that the presentation of these non-GAAP financial measures (a) are important metrics used to analyze and evaluate our financial condition and capital strength and provide important supplemental information that contributes to a proper understanding of our operating performance and trends, (b) enables a more complete understanding of factors and trends affecting our business, and (c) allows investors to compare our financial performance to the financial performance of our peers and to evaluate our performance in a manner similar to management, the financial services industry, bank stock analysts, and bank regulators. Management uses non-GAAP measures as follows: in the preparation of our operating budgets, monthly financial performance reporting, and in our presentation to investors of our performance. However, we acknowledge that these non-GAAP financial measures have a number of limitations. Limitations associated with non-GAAP financial measures include the risk that persons might disagree as to the appropriateness of items comprising these measures and that different companies might calculate these measures differently. These disclosures should not be considered an alternative to our GAAP results. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is presented in the table above.

Current wording

Management believes that the presentation of these non-GAAP financial measures (a) are important metrics used to analyze and evaluate our financial condition and capital strength and provide important supplemental information that contributes to a proper understanding of our operating performance and trends, (b) enables a more complete understanding of factors and trends affecting our business, and (c) allows investors to compare our financial performance to the financial performance of our peers and to evaluate our performance in a manner similar to management, the financial services industry, bank stock analysts, and bank regulators. Management uses non-GAAP measures as follows: in the preparation of our operating budgets, monthly financial performance reporting, and in our presentation to investors of our performance. However, we acknowledge that these non-GAAP financial measures have a number of limitations. Limitations associated with non-GAAP financial measures include the risk that persons might disagree as to the appropriateness of items comprising these measures and that different companies might calculate these measures differently. These disclosures should not be considered an alternative to our GAAP results. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is presented in the table below.

Previous wording

Nicolet recognized a net income of $33 million (or earnings per diluted common share of $2.08) for first quarter 2025, compared to net income of $34 million (or earnings per diluted common share of $2.19) for fourth quarter 2024, and net income of $28 million (or earnings per diluted common share of $1.82) for first quarter 2024.

Current wording

Net income was $69 million (or earnings per diluted common share of $4.42) for the six months ended June 30, 2025, compared to net income of $57 million (or earnings per diluted common share of $3.74) for the six months ended June 30, 2024.

Previous wording

•Noninterest income was $18.2 million for first quarter 2025, $1.2 million lower than first quarter 2024, largely due to changes in asset gains (losses). Noninterest income excluding net asset gains (losses) for first quarter 2025 was $18.6 million, a $1.1 million (6%) increase over first quarter 2024. For additional information regarding noninterest income, see “INCOME STATEMENT ANALYSIS — Noninterest Income.”

Current wording

•Noninterest income was $39 million for the first six months of 2025, minimally changed from the first six months of 2024. Excluding net asset gains (losses), noninterest income for the first six months of 2025 was $39 million, a $3 million increase over the first six months of 2024. For additional information regarding noninterest income, see “Income Statement Analysis — Noninterest Income.”

Previous wording

•Noninterest expense was $47.8 million for first quarter 2025, an increase of $0.6 million (1%) over first quarter 2024. Personnel costs were minimally changed, while non-personnel expenses combined increased $0.6 million compared to first quarter 2024. For additional information regarding noninterest expense, see “INCOME STATEMENT ANALYSIS — Noninterest Expense.”

Current wording

•Noninterest expense was $98 million, $4 million (4%) higher than the first six months of 2024. Personnel costs increased $3 million, while non-personnel expenses combined increased $1 million (2%) from the comparable 2024 period. For additional information regarding noninterest expense, see “Income Statement Analysis — Noninterest Expense.”

Previous wording

•At March 31, 2025, loans were $6.7 billion, an increase of $119 million (2%) from December 31, 2024, mostly in commercial and industrial loans. For additional information regarding loans, see “BALANCE SHEET ANALYSIS — Loans.”

Current wording

•At June 30, 2025, loans were $6.8 billion, an increase of $213 million from December 31, 2024, mostly in commercial and industrial loans. On average, loans grew $324 million (5%) over the first six months of 2024. For additional information regarding loans, see “Balance Sheet Analysis — Loans.”

Previous wording

(2)Nonaccrual loans and loans held for sale are included in the daily average loan balances outstanding.

Current wording

(1)Nonaccrual loans and loans held for sale are included in the daily average loan balances outstanding.

Previous wording

(1)The change in interest due to both rate and volume has been allocated in proportion to the relationship of dollar amounts of change in each.

Current wording

(1)The change in interest due to both rate and volume has been allocated in proportion to the relationship of dollar amount of change in each.

Previous wording

At the beginning of 2024, the Federal Funds range was 5.25% to 5.50%. The Federal Reserve decreased short-term interest rates a total of 100 bps during the second half of 2024, resulting in a Federal Funds range of 4.25% to 4.50% at December 31, 2024. There were no changes to the Federal Funds range during first quarter 2025.

Current wording

At the beginning of 2024, the Federal Funds range was 5.25% to 5.50%. The Federal Reserve decreased short-term interest rates a total of 100 bps during the second half of 2024, resulting in a Federal Funds range of 4.25% to 4.50% at December 31, 2024. There were no changes to the Federal Funds range during the first half of 2025.

Previous wording

Tax-equivalent net interest income was $72 million for the three months ended March 31, 2025, an increase of $8 million (13%) over the three months ended March 31, 2024. The $8 million increase in tax-equivalent net interest income was attributable to favorable rates (which added $6 million to net interest income), as well as favorable volumes.

Current wording

Tax-equivalent net interest income was $147 million for the six months ended June 30, 2025, an increase of $18 million (14%) over the six months ended June 30, 2024. The $18 million increase in tax-equivalent net interest income was attributable to both favorable rates and favorable volumes, which added $12 million and $6 million to net interest income, respectively.

Previous wording

Average interest-earning assets increased $450 million (6%) to $8.1 billion over the comparable 2024 period, due primarily to loan growth. Between the comparable three-month periods, average loans increased $311 million (5%), mainly from organic loan growth. Average investment securities were minimally changed (up $1 million) between the comparable three-month periods, while other interest-earning assets increased $137 million (mostly cash). The mix of average interest-earning assets was 83% loans, 11% investments and 6% other interest-earning assets (mostly cash) for first quarter 2025, compared to 84%, 12% and 4%, respectively, for first quarter 2024.

Current wording

Average interest-earning assets increased $429 million (6%) to $8.1 billion over the comparable 2024 period, due primarily to loan growth. Between the comparable six-month periods, average loans increased $324 million (5%), from organic loan growth. Average investment securities were minimally changed (up $10 million) between the comparable six-month periods, while other interest-earning assets increased $94 million (mostly cash). The mix of average interest-earning assets was unchanged between the comparable six-month periods, and was comprised of 84% loans, 11% investments and 5% other interest-earning assets (mostly cash).

Previous wording

Average interest-bearing liabilities were $6.0 billion for the first three months of 2025, an increase of $443 million (8%) over the first three months of 2024. Average interest-bearing core deposits increased $337 million and average brokered deposits increased $110 million between the comparable three-month periods, reflecting growth in higher cost deposit products and a shift in funding strategy. Wholesale funding decreased $4 million between the comparable three-month periods. The mix of average interest-bearing liabilities was 84% core deposits, 13% brokered deposits and 3% wholesale funding for first quarter 2025, compared to 85%, 12%, and 3%, respectively, for first quarter 2024.

Current wording

Average interest-bearing liabilities were $6.0 billion for the first six months of 2025, an increase of $378 million (7%) over the first six months of 2024, due primarily to deposit growth. Average interest-bearing core deposits increased $337 million and average brokered deposits increased $47 million between the comparable six-month periods, reflecting growth in higher cost deposit products and a shift in funding strategy. Wholesale funding decreased $5 million between the comparable six-month periods. The mix of average interest-bearing liabilities was also unchanged between the comparable six-month periods, and was comprised of 84% core deposits, 13% brokered deposits and 3% wholesale funding.

Previous wording

The interest rate spread increased 35 bps between the comparable three-month periods, mostly from the repricing of new and renewed loans. The loan yield improved 19 bps to 6.08% between the comparable three-month periods, largely due to the repricing of new and renewed loans, and the yield on investment securities increased 34 bps to 3.14%, while the yield on other interest-earning assets (mostly cash) decreased 76 bps to 4.58%, consistent with the Federal Reserve interest rate cuts in 2024. The cost of interest-bearing liabilities decreased 18 bps to 2.83% for the first three months of 2025, mostly due to lower deposit costs. As a result, the tax-equivalent net interest margin was 3.58% for first quarter 2025, a 25 bps increase over 3.33% for first quarter 2024.

Current wording

The interest rate spread increased 36 bps between the comparable six-month periods, mostly from the repricing of new and renewed loans, as the loan yield improved 17 bps to 6.15% between the comparable six-month periods. The yield on investment securities increased 32 bps to 3.21%, while the yield on other interest-earning assets (mostly cash) decreased 75 bps to 4.57%, consistent with the Federal Reserve interest rate cuts in 2024. The cost of interest-bearing liabilities decreased 21 bps to 2.84% for the first half of 2025, mostly due to lower deposit costs. As a result, the tax-equivalent net interest margin was 3.65% for the first half of 2025, a 28 bps increase over 3.37% for the first half of 2024.

Previous wording

Tax-equivalent interest income was $113 million for the first three months of 2025, up $9 million from the comparable period of 2024, comprised of $3 million higher average rates and $6 million higher average volume. Interest income on loans increased $7 million over first quarter 2024, due to both higher rates and loan growth. Interest expense was minimally changed at approximately $42 million for both first quarter periods, with the higher interest expense from deposit growth largely offset by lower deposit rates.

Current wording

Tax-equivalent interest income was $231 million for the first half of 2025, up $17 million from the comparable period of 2024, comprised of $12 million higher average volume and $5 million higher average rates. Interest income on loans increased $15 million over the first half of 2024, due to both loan growth and higher rates. Interest expense was minimally changed at approximately $84 million for both first half periods, with the higher interest expense from deposit growth largely offset by lower deposit rates.

Previous wording

The provision for credit losses was $1.5 million for the three months ended March 31, 2025, compared to $0.8 million for the three months ended March 31, 2024, with the increase for both periods attributable to growth and changes in the underlying loan portfolio.

Current wording

The provision for credit losses was $2.6 million for the six months ended June 30, 2025, compared to $2.1 million for the six months ended June 30, 2024, with the increase for both periods attributable to growth and changes in the underlying loan portfolio.

Previous wording

Noninterest income was $18.2 million for first quarter 2025, $1.2 million lower than first quarter 2024, largely due to changes in asset gains (losses). Noninterest income excluding net asset gains (losses) for first quarter 2025 was $18.6 million, a $1.1 million (6%) increase over first quarter 2024.

Current wording

Noninterest income was $38.9 million for the first half of 2025, $0.2 million lower than the first half of 2024, largely due to changes in asset gains (losses). Noninterest income excluding net asset gains (losses) for the first half of 2025 was $39.4 million, a $2.9 million (8%) increase over the first half of 2024.

Previous wording

Wealth management fee income was $7.0 million, up $0.5 million (8%) from the first three months of 2024, including favorable market-related changes, as well as growth in accounts and assets under management.

Current wording

Wealth management fee income was $13.8 million, up $0.6 million (5%) from the first six months of 2024, including favorable market-related changes, as well as growth in accounts and assets under management.

Previous wording

Mortgage income includes net gains received from the sale of residential real estate loans into the secondary market, capitalized mortgage servicing rights (“MSR”), servicing fees net of MSR amortization, fair value marks on the mortgage interest rate lock commitments and forward commitments (“mortgage derivatives”), and MSR valuation changes, if any. Net mortgage income of $1.9 million, increased $0.6 million (41%) between the comparable three-month periods, mostly due to higher secondary market volumes and the related gains on sales. See also Note 6, “Goodwill and Other Intangibles and Servicing Rights” of the Notes to Unaudited Consolidated Financial Statements under Part I, Item 1, for additional disclosures on the MSR asset.

Current wording

Mortgage income includes net gains received from the sale of residential real estate loans into the secondary market, capitalized mortgage servicing rights (“MSR”), servicing fees net of MSR amortization, fair value marks on the mortgage interest rate lock commitments and forward commitments (“mortgage derivatives”), and MSR valuation changes, if any. Net mortgage income of $4.8 million, increased $0.8 million (21%) between the comparable six-month periods, mostly due to higher secondary market volumes and the related gains on sales. See also Note 6, “Goodwill and Other Intangibles and Servicing Rights” of the Notes to Unaudited Consolidated Financial Statements under Part I, Item 1, for additional disclosures on the MSR asset.

Previous wording

Services charges on deposit accounts were $2.0 million, up $0.4 million (28%) from the first three months of 2024, on growth in both accounts and account analysis fees.

Current wording

Services charges on deposit accounts were $4.0 million, up $0.6 million (17%) from the first six months of 2024, on growth in both accounts and account analysis fees.

Previous wording

Other income of $1.8 million for the three months ended March 31, 2025 was down $0.7 million from the comparable 2024 period, largely due to card incentive income.

Current wording

Other income of $3.4 million for the six months ended June 30, 2025 was down $0.9 million from the comparable 2024 period, largely due to card incentive income.

Previous wording

Net asset losses of $0.4 million for the first three months of 2025 were mostly due to unfavorable fair value marks on equity securities. Net asset gains of $1.9 million for the first three months of 2024 were primarily attributable to a $1.0 million gain on sale of an investment security and a $0.9 million gain on the early extinguishment of Nicolet subordinated notes.

Current wording

Net asset losses of $0.6 million for the first six months of 2025 were mostly due to unfavorable fair value marks on equity securities. Net asset gains of $2.5 million for the first six months of 2024 were primarily attributable to gains of $1.6 million on sales of investments and a $0.9 million gain on the early extinguishment of Nicolet subordinated notes.

Previous wording

Noninterest expense was $47.8 million for first quarter 2025, an increase of $0.6 million (1%) over first quarter 2024. Personnel costs were minimally changed, while non-personnel expenses combined increased $0.6 million compared to first quarter 2024.

Current wording

Noninterest expense was $97.7 million for the first half of 2025, an increase of $3.7 million (4%) over the first half of 2024. Personnel costs increased $2.8 million (5%), while non-personnel expenses combined increased $0.9 million (2%) compared to the first half of 2024.

Previous wording

Occupancy, equipment and office expense was $9.3 million for the three months ended March 31, 2025, up $0.4 million (4%) from the comparable period in 2024, due to higher occupancy expense and software costs.

Current wording

Occupancy, equipment and office expense was $18.4 million for the six months ended June 30, 2025, up $0.8 million (5%) from the comparable period in 2024, mostly due to additional expense for software and technology solutions.

Previous wording

Data processing expense was $4.5 million, up $0.3 million (6%) between the comparable three-month periods, mostly due to volume-based increases in core and brokerage processing charges.

Current wording

Data processing expense was $9.2 million, up $0.7 million (8%) between the comparable six-month periods, mostly due to volume-based increases in core and card processing charges.

Previous wording

Intangibles amortization decreased $0.3 million between the comparable three-month periods due to lower amortization from the aging intangibles.

Current wording

Intangibles amortization decreased $0.6 million between the comparable six-month periods due to lower amortization from the aging intangibles.

Previous wording

Income tax expense was $7.6 million (effective tax rate of 18.8%) for the first three months of 2025, compared to income tax expense of $6.5 million (effective tax rate of 19.1%) for the comparable period of 2024. The change in income tax expense was mostly due to the lower pretax earnings in 2024.

Current wording

Income tax expense was $16.3 million (effective tax rate of 19.2%) for the first six months of 2025, compared to income tax expense of $14.0 million (effective tax rate of 19.7%) for the comparable period of 2024. The change in income tax expense was mostly due to the higher pretax earnings in 2025.

Previous wording

At March 31, 2025, period end assets were $9.0 billion, an increase of $178 million (2%) from December 31, 2024, mostly from loan growth. Total loans increased $119 million (2%) from December 31, 2024, mostly in commercial and industrial loans. Total deposits were $7.6 billion at March 31, 2025, an increase of $169 million (2%) from December 31, 2024, including a $107 million increase in brokered deposits and a $62 million increase in customer (core) deposits. Total stockholders’ equity was $1.2 billion at March 31, 2025, an increase of $10 million over December 31, 2024, with solid earnings and favorable movements in the securities portfolio market valuation partly offset by common stock repurchases and the quarterly common stock dividend.

Current wording

At June 30, 2025, period end assets were $8.9 billion, an increase of $134 million (2%) from December 31, 2024, mostly from loan growth. Total loans increased $213 million (3%) from December 31, 2024, mostly in commercial and industrial loans. Total deposits were $7.5 billion at June 30, 2025, an increase of $138 million (2%) from December 31, 2024, including an $8 million increase in brokered deposits and a $130 million increase in customer (core) deposits. Total stockholders’ equity was $1.2 billion at June 30, 2025, an increase of $17 million over December 31, 2024, with solid earnings and favorable movements in the securities portfolio market valuation partly offset by common stock repurchases and the quarterly common stock dividend.

Previous wording

As noted in Table 6 above, the loan portfolio at March 31, 2025, was 77% commercial-based and 23% retail-based. Commercial-based loans are considered to have more inherent risk of default than retail-based loans, in part because of the broader list of factors that could impact a commercial borrower negatively. In addition, the commercial balance per borrower is typically larger than that for retail-based loans, implying higher potential losses on an individual customer basis. Credit risk on commercial-based loans is largely influenced by general economic conditions and the resulting impact on a borrower’s operations or on the value of underlying collateral, if any.

Current wording

As noted in Table 6 above, the loan portfolio at June 30, 2025, was 76% commercial-based and 24% retail-based. Commercial-based loans are considered to have more inherent risk of default than retail-based loans, in part because of the broader list of factors that could impact a commercial borrower negatively. In addition, the commercial balance per borrower is typically larger than that for retail-based loans, implying higher potential losses on an individual customer basis. Credit risk on commercial-based loans is largely influenced by general economic conditions and the resulting impact on a borrower’s operations or on the value of underlying collateral, if any.

Previous wording

Total loans of $6.7 billion at March 31, 2025, increased $119 million (2%) from December 31, 2024, mostly in commercial and industrial loans. At March 31, 2025, commercial and industrial loans represented the largest segment of Nicolet’s loan portfolio at 21% of the total portfolio, followed by agricultural loans at 20% of the 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. The following chart provides the industry distribution of our commercial loan portfolio at March 31, 2025.

Current wording

Total loans of $6.8 billion at June 30, 2025, increased $213 million (3%) from December 31, 2024, mostly in commercial and industrial loans. At June 30, 2025, commercial and industrial loans and agricultural loans represented the largest segments of Nicolet’s loan portfolio, with each at 20% of the total portfolio. The next largest segments were CRE investment and residential first mortgage, with each representing 18% 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. The following chart provides the industry distribution of our commercial loan portfolio at June 30, 2025.

Previous wording

At March 31, 2025, the ACL-Loans was $67 million (representing 1.00% of period end loans), compared to $66 million (or 1.00% of period end loans) at December 31, 2024 and $64 million (or 1.01% of period end loans) at March 31, 2024. The components of the ACL-Loans are detailed further in Table 8 below.

Current wording

At June 30, 2025, the ACL-Loans was $68 million and represented 1.00% of period end loans, compared to $66 million (or 1.00% of period end loans) at December 31, 2024 and $65 million (or 1.00% of period end loans) at June 30, 2024. The components of the ACL-Loans are detailed further in Table 8 below.

Previous wording

Nonperforming loans are considered one indicator of potential future loan losses. Nonperforming loans are defined as nonaccrual loans and loans 90 days or more past due but still accruing interest. Loans are generally placed on nonaccrual status when contractually past due 90 days or more as to interest or principal payments. Additionally, whenever management becomes aware of facts or circumstances that may adversely impact the collectability of principal or interest on loans, it is management’s practice to place such loans on nonaccrual status immediately. Nonperforming assets include nonperforming loans and other real estate owned (“OREO”). At March 31, 2025, nonperforming assets were $29 million and represented 0.33% of total assets, unchanged from December 31, 2024, and $28 million or 0.33% of total assets at March 31, 2024.

Current wording

Nonperforming loans are considered one indicator of potential future loan losses. Nonperforming loans are defined as nonaccrual loans and loans 90 days or more past due but still accruing interest. Loans are generally placed on nonaccrual status when contractually past due 90 days or more as to interest or principal payments. Additionally, whenever management becomes aware of facts or circumstances that may adversely impact the collectability of principal or interest on loans, it is management’s practice to place such loans on nonaccrual status immediately. Nonperforming assets include nonperforming loans and other real estate owned (“OREO”). At June 30, 2025, nonperforming assets were $29 million and represented 0.32% of total assets, down slightly from 0.33% of total assets at December 31, 2024, and 0.34% of total assets at June 30, 2024.

Previous wording

The level of potential problem loans is another predominant factor in determining the relative level of risk in the loan portfolio and in determining the appropriate level of the ACL-Loans. Potential problem loans are generally defined by management to include loans rated as Substandard by management but that are in performing status; however, there are circumstances present which might adversely affect the ability of the borrower to comply with present repayment terms. The decision of management to include performing loans in potential problem loans does not necessarily mean that Nicolet expects losses to occur, but that management recognizes a higher degree of risk associated with these loans. The loans that have been reported as potential problem loans are predominantly commercial-based loans covering a diverse range of businesses and real estate property types. Potential problem loans were $70 million (1% of loans) and $68 million (1% of loans) at March 31, 2025 and December 31, 2024, respectively. Potential problem loans require heightened management review given the pace at which a credit may deteriorate, the potential duration of asset quality stress, and uncertainty around the magnitude and scope of economic stress that may be felt by Nicolet’s customers and on the underlying real estate or collateral values.

Current wording

The level of potential problem loans is another predominant factor in determining the relative level of risk in the loan portfolio and in determining the appropriate level of the ACL-Loans. Potential problem loans are generally defined by management to include loans rated as Substandard by management but that are in performing status; however, there are circumstances present which might adversely affect the ability of the borrower to comply with present repayment terms. The decision of management to include performing loans in potential problem loans does not necessarily mean that Nicolet expects losses to occur, but that management recognizes a higher degree of risk associated with these loans. The loans that have been reported as potential problem loans are predominantly commercial-based loans covering a diverse range of businesses and real estate property types. Potential problem loans were $77 million (1% of loans) and $68 million (1% of loans) at June 30, 2025 and December 31, 2024, respectively. Potential problem loans require heightened management review given the pace at which a credit may deteriorate, the potential duration of asset quality stress, and uncertainty around the magnitude and scope of economic stress that may be felt by Nicolet’s customers and on the underlying real estate or collateral values.

Previous wording

Total deposits of $7.6 billion at March 31, 2025, increased $169 million (2%) from December 31, 2024. Core deposit balances of $6.7 billion at March 31, 2025, increased $62 million from December 31, 2024, while brokered deposits increased $107 million. Compared to March 31, 2024, total deposits increased $406 million, including a $332 million increase in core deposits and a $74 million increase in brokered deposits. The deposit composition is presented in Table 10 below.

Current wording

Total deposits of $7.5 billion at June 30, 2025, increased $138 million (2%) from December 31, 2024. Core deposit balances of $6.8 billion at June 30, 2025, increased $130 million from December 31, 2024, while brokered deposits increased $8 million. Compared to June 30, 2024, total deposits increased $301 million, including a $350 million increase in core deposits and a $49 million decrease in brokered deposits. The deposit composition is presented in Table 10 below.

Previous wording

Total estimated uninsured deposits were $2.3 billion (representing 30% of total deposits) at March 31, 2025, compared to $2.2 billion (representing 30% of total deposits) at December 31, 2024.

Current wording

Total estimated uninsured deposits were $2.3 billion (representing 31% of total deposits) at June 30, 2025, compared to $2.2 billion (representing 30% of total deposits) at December 31, 2024.

Previous wording

Liquidity management refers to the ability to ensure that adequate liquid funds are available to meet the current and future cash flow obligations arising in the daily operations of the Company. These cash flow obligations include the ability to meet the commitments to borrowers for extensions of credit, accommodate deposit cycles and trends, fund capital expenditures, pay dividends to stockholders (if any), and satisfy other operating expenses. The Company’s most liquid assets are cash and due from banks and interest-earning deposits, which totaled $572 million and $536 million at March 31, 2025 and December 31, 2024, respectively. Balances of these liquid assets are dependent on our operating, investing, and financing activities during any given period.

Current wording

Liquidity management refers to the ability to ensure that adequate liquid funds are available to meet the current and future cash flow obligations arising in the daily operations of the Company. These cash flow obligations include the ability to meet the commitments to borrowers for extensions of credit, accommodate deposit cycles and trends, fund capital expenditures, pay dividends to stockholders (if any), and satisfy other operating expenses. The Company’s most liquid assets are cash and due from banks and interest-earning deposits, which totaled $423 million and $536 million at June 30, 2025 and December 31, 2024, respectively. Balances of these liquid assets are dependent on our operating, investing, and financing activities during any given period.

Previous wording

The $36 million increase in cash and cash equivalents since year-end 2024 included $42 million net cash provided by operating activities (mostly earnings) and $133 million net cash provided by financing activities (mostly higher deposit balances), partly offset by $138 million net cash used in investing activities (mostly to fund loan growth). As of March 31, 2025, management believed that adequate liquidity existed to meet all projected cash flow obligations.

Current wording

The $113 million decrease in cash and cash equivalents since year-end 2024 included $81 million net cash provided by operating activities (mostly earnings), $238 million net cash used in investing activities (mostly to fund loan growth) and $44 million net cash provided by financing activities (with deposit growth offset by repayments of borrowings and common stock repurchases). As of June 30, 2025, management believed that adequate liquidity existed to meet all projected cash flow obligations.

Previous wording

Nicolet’s primary sources of funds include the core deposit base, repayment and maturity of loans, investment securities calls, maturities, and sales, and procurement of brokered deposits or other wholesale funding. At March 31, 2025, approximately 50% of the investment securities portfolio was pledged as collateral to secure public deposits and borrowings, as applicable, and for liquidity or other purposes as required by regulation. Liquidity sources available to the Company at March 31, 2025, are presented in Table 11 below.

Current wording

Nicolet’s primary sources of funds include the core deposit base, repayment and maturity of loans, investment securities calls, maturities, and sales, and procurement of brokered deposits or other wholesale funding. At June 30, 2025, approximately 51% of the investment securities portfolio was pledged as collateral to secure public deposits and borrowings, as applicable, and for liquidity or other purposes as required by regulation. Liquidity sources available to the Company at June 30, 2025, are presented in Table 11 below.