KBRA Upgrades Ratings for Nicolet Bankshares, Inc.

KBRA upgrades the senior unsecured debt rating to BBB+ from BBB, upgrades the subordinated debt rating to BBB from BBB-, and upgrades the short-term debt rating to K2 from K3 for Green Bay, Wisconsin-based Nicolet Bankshares, Inc. (NYSE: NIC) ("the company"). In addition, KBRA upgrades the deposit and senior unsecured debt ratings to A- from BBB+ and upgrades the subordinated debt rating to BBB+ from BBB for its main subsidiary, Nicolet National Bank ("the bank"). Moreover, KBRA affirms the short-term deposit and debt ratings of K2 for the bank. The Outlook for all long-term ratings is revised to Stable from Positive following the upgrade.

Key Credit Considerations

The rating upgrade is supported by the company’s consistently strong core earnings, particularly since 2023. Following a 1.67% reported ROA in 2025, core ROA of 1.67% remained meaningfully above peer median in 1H26, excluding one-time expenses associated with the acquisition of MidWestOne Financial Group, Inc. ("MidWestOne") which closed in 1Q26. Earnings benefit from a healthy NIM, historically low credit costs, and meaningful fee income derived predominantly from durable sources, including a sizeable wealth management business.

The ratings also benefit from a strong, relationship-based deposit franchise and conservative funding profile. Core deposits represent approximately 90% of total funding, while loan-to-deposit and loan-to-core deposit ratios remain favorable at 87% and 96%, respectively. The MidWestOne acquisition meaningfully expanded and geographically diversified the deposit franchise, while NIC maintains strong market positions across its core Upper Midwest footprint and limited reliance on wholesale funding.

Asset quality has remained strong through various credit cycles, supported by conservative underwriting and historically negligible loss content. NCOs have averaged ~3 bps over the past decade and remained well below peers in 1H26. While NPAs and criticized/classified loans increased following the MidWestOne acquisition, the increase largely reflects acquired credits rather than broader deterioration in legacy NIC. The transaction also improved portfolio diversification, reducing the agricultural loan concentration to 16% of loans from 21% for legacy Nicolet, while reserve coverage remains comparatively strong.

Core capital provides an adequate buffer for NIC’s risk profile, although regulatory capital remains below higher-rated peers. The MidWestOne acquisition reduced CET1 to 10.8% and TCE to 9.1% at 2Q26, though both remain substantially above historical troughs. Strong internal capital generation and management’s demonstrated ability to rebuild capital following acquisitions should support gradual accretion, while comparatively modest CRE concentrations and historically low credit losses provide additional comfort.

Rating Sensitivities

Further positive rating movement is unlikely in the near- to medium-term given the upgrade. Over the longer term, further geographic and revenue diversification, consistently above-peer capitalization, and continued strong profitability and asset quality would be viewed positively. Conversely, material deterioration in asset quality, earnings, funding quality, or core capitalization could pressure the ratings.

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