KBRA Affirms Ratings for Nicolet Bankshares, Inc.

KBRA affirms the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for Green Bay, Wisconsin-based Nicolet Bankshares, Inc. (NYSE: NIC) (“the company”). KBRA also affirms the deposit and senior unsecured debt ratings of BBB+, the subordinated debt rating of BBB, and the short-term deposit and debt ratings of K2 for the subsidiary, Nicolet National Bank. The Outlook for all long-term ratings is Positive.

Key Credit Considerations

The ratings and Outlook are supported by the company’s strong core earnings over the years, most notably, outperforming peers since repositioning its balance sheet in early 2023. Throughout 2024 and into 2025, NIC has reported an ROA between 1.4%-1.5%, which benefits from a healthy NIM, low credit costs, and meaningful contribution from noninterest income (~20% of revenues) which come from predominantly durable sources, including a sizeable wealth management division.

The ratings also benefit from a strong deposit base with top three deposit market share across core WI and MI markets, which helps facilitate deposit costs that track below many peers. The company’s ability to consistently grow core deposits in recent periods is also viewed favorably. As such, NIC’s proportion of core deposits to total funding remains a credit strength.

Asset quality metrics have performed well through various cycles. NCOs have remained under 10 bps of total loans over the past decade, and the NPA ratio is similarly low compared to peers, despite episodic spikes which reflect loans acquired through M&A. In particular, we note that NPAs and credit migration within the agricultural loan portfolio, which is uniquely concentrated in large WI-based dairy operators (~20% of total loans), have demonstrated improvement since being acquired, in large part, through the 2021 County Bancorp transaction with NCOs remaining fairly muted.

Core capital ratios have historically run below those of some similarly rated and many higher rated peers, particularly during periods of M&A activity. With a CET1 ratio of 11.4% and a TCE ratio of 9.3% at 1Q25, the company has substantially narrowed the gap to similarly rated peers but remains somewhat below higher rated peers.

Rating Sensitivities

Given the Positive Outlook, a rating upgrade could occur over the medium term if the company maintains its strong financial performance. Ratings will be sensitive to earnings profile, risk management, and financial management as the company nears $10 billion in assets. A downgrade is unlikely, though material deterioration in asset quality or liquidity position, or significantly less conservative financial management could pressure the ratings.

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