UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20222023
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                           to                          
Commission file number: 001-37700
NICOLET BANKSHARES, INC.
(Exact Name of Registrant as Specified in its Charter)
Wisconsin47-0871001
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
111 North Washington Street
Green Bay,Wisconsin54301
(Address of Principal Executive Offices) 
(Zip Code)
(920)430-1400
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareNICNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 31, 20222023 there were 14,676,91014,761,128 shares of $0.01 par value common stock outstanding.



Nicolet Bankshares, Inc.
Quarterly Report on Form 10-Q
September 30, 20222023
TABLE OF CONTENTS
PAGE
2


PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS:
NICOLET BANKSHARES, INC.
Consolidated Balance Sheets
(In thousands, except share and per share data)
September 30, 2022December 31, 2021September 30, 2023December 31, 2022
(Unaudited)(Audited)(Unaudited)(Audited)
AssetsAssetsAssets
Cash and due from banksCash and due from banks$118,537 $209,349 Cash and due from banks$109,414 $121,211 
Interest-earning depositsInterest-earning deposits319,745 385,943 Interest-earning deposits436,466 33,512 
Cash and cash equivalentsCash and cash equivalents438,282 595,292 Cash and cash equivalents545,880 154,723 
Certificates of deposit in other banksCertificates of deposit in other banks13,510 21,920 Certificates of deposit in other banks7,598 12,518 
Securities available for sale (“AFS”), at fair valueSecurities available for sale (“AFS”), at fair value949,597 921,661 Securities available for sale (“AFS”), at fair value793,826 917,618 
Securities held to maturity (“HTM”), at amortized costSecurities held to maturity (“HTM”), at amortized cost686,424 651,803 Securities held to maturity (“HTM”), at amortized cost 679,128 
Other investmentsOther investments79,279 44,008 Other investments58,367 65,286 
Loans held for saleLoans held for sale3,709 6,447 Loans held for sale6,500 1,482 
Other assets held for sale 199,833 
LoansLoans5,984,437 4,621,836 Loans6,239,257 6,180,499 
Allowance for credit losses - loans (“ACL-Loans”)Allowance for credit losses - loans (“ACL-Loans”)(60,348)(49,672)Allowance for credit losses - loans (“ACL-Loans”)(63,160)(61,829)
Loans, netLoans, net5,924,089 4,572,164 Loans, net6,176,097 6,118,670 
Premises and equipment, netPremises and equipment, net106,648 94,566 Premises and equipment, net117,744 108,956 
Bank owned life insurance (“BOLI”)Bank owned life insurance (“BOLI”)165,166 134,476 Bank owned life insurance (“BOLI”)168,223 165,137 
Goodwill and other intangibles, netGoodwill and other intangibles, net407,117 339,492 Goodwill and other intangibles, net396,208 402,438 
Accrued interest receivable and other assetsAccrued interest receivable and other assets122,095 113,375 Accrued interest receivable and other assets145,719 138,013 
Total assetsTotal assets$8,895,916 $7,695,037 Total assets$8,416,162 $8,763,969 
Liabilities and Stockholders’ EquityLiabilities and Stockholders’ EquityLiabilities and Stockholders’ Equity
Liabilities:Liabilities:Liabilities:
Noninterest-bearing demand depositsNoninterest-bearing demand deposits$2,477,507 $1,975,705 Noninterest-bearing demand deposits$2,020,074 $2,361,816 
Interest-bearing depositsInterest-bearing deposits4,918,395 4,490,211 Interest-bearing deposits5,162,314 4,817,105 
Total depositsTotal deposits7,395,902 6,465,916 Total deposits7,182,388 7,178,921 
Short-term borrowingsShort-term borrowings280,000 — Short-term borrowings 317,000 
Long-term borrowingsLong-term borrowings225,236 216,915 Long-term borrowings197,754 225,342 
Other liabilities held for sale 51,586 
Accrued interest payable and other liabilitiesAccrued interest payable and other liabilities56,315 68,729 Accrued interest payable and other liabilities61,559 70,177 
Total liabilitiesTotal liabilities7,957,453 6,803,146 Total liabilities7,441,701 7,791,440 
Stockholders’ Equity:Stockholders’ Equity:Stockholders’ Equity:
Common stockCommon stock147 140 Common stock147 147 
Additional paid-in capitalAdditional paid-in capital620,392 575,045 Additional paid-in capital626,348 621,988 
Retained earningsRetained earnings380,263 313,604 Retained earnings431,317 407,864 
Accumulated other comprehensive income (loss)Accumulated other comprehensive income (loss)(62,339)3,102 Accumulated other comprehensive income (loss)(83,351)(57,470)
Total stockholders’ equityTotal stockholders’ equity938,463 891,891 Total stockholders’ equity974,461 972,529 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$8,895,916 $7,695,037 Total liabilities and stockholders’ equity$8,416,162 $8,763,969 
Preferred shares authorized (no par value)Preferred shares authorized (no par value)10,000,000 10,000,000 Preferred shares authorized (no par value)10,000,000 10,000,000 
Preferred shares issued and outstandingPreferred shares issued and outstanding — Preferred shares issued and outstanding — 
Common shares authorized (par value $0.01 per share)Common shares authorized (par value $0.01 per share)30,000,000 30,000,000 Common shares authorized (par value $0.01 per share)30,000,000 30,000,000 
Common shares outstandingCommon shares outstanding14,673,197 13,994,079 Common shares outstanding14,757,565 14,690,614 
Common shares issuedCommon shares issued14,746,123 14,019,880 Common shares issued14,818,155 14,764,104 
See accompanying notes to unaudited consolidated financial statements.
3

ITEM 1. Financial Statements Continued:

NICOLET BANKSHARES, INC.
Consolidated Statements of Income
(In thousands, except share and per share data) (Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
September 30,
Nine Months Ended
September 30,
20222021202220212023202220232022
Interest income:Interest income:Interest income:
Loans, including loan feesLoans, including loan fees$63,060 $35,294 $167,313 $104,267 Loans, including loan fees$87,657 $63,060 $250,890 $167,313 
Investment securities:Investment securities:Investment securities:
TaxableTaxable5,350 2,061 15,612 5,935 Taxable4,351 5,350 13,445 15,612 
Tax-exemptTax-exempt1,181 517 2,503 1,582 Tax-exempt1,424 1,181 4,637 2,503 
Other interest incomeOther interest income1,127 869 2,734 2,140 Other interest income6,452 1,127 10,345 2,734 
Total interest incomeTotal interest income70,718 38,741 188,162 113,924 Total interest income99,884 70,718 279,317 188,162 
Interest expense:Interest expense:Interest expense:
DepositsDeposits4,638 2,444 9,240 7,799 Deposits34,964 4,638 89,241 9,240 
Short-term borrowingsShort-term borrowings594 — 622 — Short-term borrowings474 594 4,794 622 
Long-term borrowingsLong-term borrowings2,496 1,113 6,431 1,729 Long-term borrowings2,972 2,496 8,048 6,431 
Total interest expenseTotal interest expense7,728 3,557 16,293 9,528 Total interest expense38,410 7,728 102,083 16,293 
Net interest incomeNet interest income62,990 35,184 171,869 104,396 Net interest income61,474 62,990 177,234 171,869 
Provision for credit lossesProvision for credit losses8,600 6,000 9,650 6,500 Provision for credit losses450 8,600 3,990 9,650 
Net interest income after provision for credit lossesNet interest income after provision for credit losses54,390 29,184 162,219 97,896 Net interest income after provision for credit losses61,024 54,390 173,244 162,219 
Noninterest income:Noninterest income:Noninterest income:
Trust services fee income1,969 2,043 5,984 5,724 
Brokerage fee income3,040 3,154 9,716 8,938 
Wealth management fee incomeWealth management fee income6,057 5,009 17,439 15,700 
Mortgage income, netMortgage income, net1,728 4,808 7,186 17,637 Mortgage income, net2,020 1,728 5,308 7,186 
Service charges on deposit accountsService charges on deposit accounts1,589 1,314 4,602 3,541 Service charges on deposit accounts1,492 1,589 4,501 4,602 
Card interchange incomeCard interchange income3,012 2,299 8,543 6,492 Card interchange income3,321 3,012 9,685 8,543 
BOLI incomeBOLI income966 572 2,667 1,658 BOLI income1,090 966 3,363 2,667 
Deferred compensation plan asset market valuationsDeferred compensation plan asset market valuations(457)(571)988 (2,354)
LSR income, netLSR income, net1,108 (517)3,398 (1,042)
Asset gains (losses), netAsset gains (losses), net(46)(1,187)2,870 3,716 Asset gains (losses), net31 (46)(38,755)2,870 
Other incomeOther income742 993 1,506 3,594 Other income1,879 1,830 5,611 4,902 
Total noninterest incomeTotal noninterest income13,000 13,996 43,074 51,300 Total noninterest income16,541 13,000 11,538 43,074 
Noninterest expense:Noninterest expense:Noninterest expense:
PersonnelPersonnel24,136 16,927 65,008 49,127 Personnel23,944 24,136 72,172 65,008 
Occupancy, equipment and officeOccupancy, equipment and office7,641 5,749 21,476 13,939 Occupancy, equipment and office9,027 7,641 26,655 21,476 
Business development and marketingBusiness development and marketing2,281 1,654 6,169 3,853 Business development and marketing1,869 2,281 5,936 6,169 
Data processingData processing3,664 2,939 10,647 8,408 Data processing4,643 3,664 12,849 10,647 
Intangibles amortizationIntangibles amortization1,628 758 4,399 2,400 Intangibles amortization1,986 1,628 6,230 4,399 
FDIC assessmentsFDIC assessments480 480 1,440 1,555 FDIC assessments1,500 480 3,049 1,440 
Merger-related expenseMerger-related expense519 2,793 1,172 3,449 Merger-related expense 519 189 1,172 
Other expenseOther expense2,218 1,761 6,344 7,158 Other expense2,769 2,218 8,490 6,344 
Total noninterest expenseTotal noninterest expense42,567 33,061 116,655 89,889 Total noninterest expense45,738 42,567 135,570 116,655 
Income before income tax expenseIncome before income tax expense24,823 10,119 88,638 59,307 Income before income tax expense31,827 24,823 49,212 88,638 
Income tax expenseIncome tax expense6,313 2,295 21,979 14,960 Income tax expense14,669 6,313 18,357 21,979 
Net incomeNet income$18,510 $7,824 $66,659 $44,347 Net income$17,158 $18,510 $30,855 $66,659 
Earnings per common share:Earnings per common share:Earnings per common share:
BasicBasic$1.33 $0.75 $4.88 $4.39 Basic$1.16 $1.33 $2.10 $4.88 
DilutedDiluted$1.29 $0.73 $4.72 $4.22 Diluted$1.14 $1.29 $2.05 $4.72 
Weighted average common shares outstanding:Weighted average common shares outstanding:Weighted average common shares outstanding:
BasicBasic13,890,066 10,391,896 13,647,973 10,098,492 Basic14,740,319 13,890,066 14,715,588 13,647,973 
DilutedDiluted14,310,275 10,775,591 14,126,772 10,503,163 Diluted15,099,622 14,310,275 15,044,259 14,126,772 
See accompanying notes to unaudited consolidated financial statements.
4

ITEM 1. Financial Statements Continued:

NICOLET BANKSHARES, INC.
Consolidated Statements of Comprehensive Income (Loss)
(In thousands) (Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
September 30,
Nine Months Ended
September 30,
20222021202220212023202220232022
Net incomeNet income$18,510 $7,824 $66,659 $44,347 Net income$17,158 $18,510 $30,855 $66,659 
Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities AFS:Unrealized gains (losses) on securities AFS:Unrealized gains (losses) on securities AFS:
Net unrealized holding gains (losses)Net unrealized holding gains (losses)(26,162)(3,074)(89,630)(8,581)Net unrealized holding gains (losses)(21,645)(26,162)(12,244)(89,630)
Net realized (gains) losses included in incomeNet realized (gains) losses included in income 13 (15)13 Net realized (gains) losses included in income(11)— 337 (15)
Reclassification adjustment for securities transferred
from held to maturity to available for sale
Reclassification adjustment for securities transferred
from held to maturity to available for sale
 — (20,434)— 
Income tax (expense) benefitIncome tax (expense) benefit7,064 827 24,204 2,313 Income tax (expense) benefit3,574 7,064 6,460 24,204 
Total other comprehensive income (loss)Total other comprehensive income (loss)(19,098)(2,234)(65,441)(6,255)Total other comprehensive income (loss)(18,082)(19,098)(25,881)(65,441)
Comprehensive income (loss)Comprehensive income (loss)$(588)$5,590 $1,218 $38,092 Comprehensive income (loss)$(924)$(588)$4,974 $1,218 
See accompanying notes to unaudited consolidated financial statements.
5

ITEM 1. Financial Statements Continued:

NICOLET BANKSHARES, INC.
Consolidated Statements of Stockholders’ Equity
(In thousands) (Unaudited)
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
TotalCommon
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Balances at June 30, 2023Balances at June 30, 2023$147 $624,897 $417,863 $(65,269)$977,638 
Comprehensive income:Comprehensive income:
Net income, three months ended September 30, 2023Net income, three months ended September 30, 2023  17,158  17,158 
Other comprehensive income (loss)Other comprehensive income (loss)   (18,082)(18,082)
Stock-based compensation expenseStock-based compensation expense 1,399   1,399 
Cash dividends on common stock, $0.25 per shareCash dividends on common stock, $0.25 per share  (3,704) (3,704)
Exercise of stock options, netExercise of stock options, net (146)  (146)
Issuance of common stockIssuance of common stock 198   198 
Balances at September 30, 2023Balances at September 30, 2023$147 $626,348 $431,317 $(83,351)$974,461 
Balances at June 30, 2022Balances at June 30, 2022$134 $520,741 $361,753 $(43,241)$839,387 Balances at June 30, 2022$134 $520,741 $361,753 $(43,241)$839,387 
Comprehensive income:Comprehensive income:Comprehensive income:
Net income, three months ended September 30, 2022Net income, three months ended September 30, 2022  18,510  18,510 Net income, three months ended September 30, 2022— — 18,510 — 18,510 
Other comprehensive income (loss)Other comprehensive income (loss)   (19,098)(19,098)Other comprehensive income (loss)— — — (19,098)(19,098)
Issuance of common stock in acquisitionIssuance of common stock in acquisition13 98,136   98,149 Issuance of common stock in acquisition13 98,136 — — 98,149 
Stock-based compensation expenseStock-based compensation expense 1,329   1,329 Stock-based compensation expense— 1,329 — — 1,329 
Exercise of stock options, netExercise of stock options, net 1   1 Exercise of stock options, net— — — 
Issuance of common stockIssuance of common stock 185   185 Issuance of common stock— 185 — — 185 
Balances at September 30, 2022Balances at September 30, 2022$147 $620,392 $380,263 $(62,339)$938,463 Balances at September 30, 2022$147 $620,392 $380,263 $(62,339)$938,463 
Balances at June 30, 2021$98 $261,096 $289,475 $8,726 $559,395 
Balances at December 31, 2022Balances at December 31, 2022$147 $621,988 $407,864 $(57,470)$972,529 
Comprehensive income:Comprehensive income:Comprehensive income:
Net income, three months ended September 30, 2021— — 7,824 — 7,824 
Net income, nine months ended September 30, 2023Net income, nine months ended September 30, 2023  30,855  30,855 
Other comprehensive income (loss)Other comprehensive income (loss)— — — (2,234)(2,234)Other comprehensive income (loss)   (25,881)(25,881)
Issuance of common stock in acquisition23 179,411 — — 179,434 
Stock-based compensation expenseStock-based compensation expense— 1,826 — — 1,826 Stock-based compensation expense 4,829   4,829 
Cash dividends on common stock, $0.50 per shareCash dividends on common stock, $0.50 per share  (7,402) (7,402)
Exercise of stock options, netExercise of stock options, net160 — — 161 Exercise of stock options, net1 453   454 
Issuance of common stockIssuance of common stock— 163 — — 163 Issuance of common stock 598   598 
Purchase and retirement of common stockPurchase and retirement of common stock(2)(17,289)— — (17,291)Purchase and retirement of common stock(1)(1,520)  (1,521)
Balances at September 30, 2021$120 $425,367 $297,299 $6,492 $729,278 
Balances at September 30, 2023Balances at September 30, 2023$147 $626,348 $431,317 $(83,351)$974,461 
Balances at December 31, 2021Balances at December 31, 2021$140 $575,045 $313,604 $3,102 $891,891 Balances at December 31, 2021$140 $575,045 $313,604 $3,102 $891,891 
Comprehensive income:Comprehensive income:Comprehensive income:
Net income, nine months ended September 30, 2022Net income, nine months ended September 30, 2022  66,659  66,659 Net income, nine months ended September 30, 2022— — 66,659 — 66,659 
Other comprehensive income (loss)Other comprehensive income (loss)   (65,441)(65,441)Other comprehensive income (loss)— — — (65,441)(65,441)
Issuance of common stock in acquisitionIssuance of common stock in acquisition13 98,136   98,149 Issuance of common stock in acquisition13 98,136 — — 98,149 
Stock-based compensation expenseStock-based compensation expense 5,282   5,282 Stock-based compensation expense— 5,282 — — 5,282 
Exercise of stock options, netExercise of stock options, net1 2,077   2,078 Exercise of stock options, net2,077 — — 2,078 
Issuance of common stockIssuance of common stock 557   557 Issuance of common stock— 557 — — 557 
Purchase and retirement of common stockPurchase and retirement of common stock(7)(60,705)  (60,712)Purchase and retirement of common stock(7)(60,705)— — (60,712)
Balances at September 30, 2022Balances at September 30, 2022$147 $620,392 $380,263 $(62,339)$938,463 Balances at September 30, 2022$147 $620,392 $380,263 $(62,339)$938,463 
Balances at December 31, 2020$100 $273,390 $252,952 $12,747 $539,189 
Comprehensive income:
Net income, nine months ended September 30, 2021— — 44,347 — 44,347 
Other comprehensive income (loss)— — — (6,255)(6,255)
Issuance of common stock in acquisition23 179,411 — — 179,434 
Stock-based compensation expense— 5,222 — — 5,222 
Exercise of stock options, net1,385 — — 1,386 
Issuance of common stock— 395 — — 395 
Purchase and retirement of common stock(4)(34,436)— — (34,440)
Balances at September 30, 2021$120 $425,367 $297,299 $6,492 $729,278 
See accompanying notes to unaudited consolidated financial statements.
6

ITEM 1. Financial Statements Continued:

NICOLET BANKSHARES, INC.
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)(In thousands)Nine Months Ended September 30,(In thousands)Nine Months Ended September 30,
2022202120232022
Cash Flows From Operating Activities:Cash Flows From Operating Activities:Cash Flows From Operating Activities:
Net incomeNet income$66,659 $44,347 Net income$30,855 $66,659 
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation, amortization, and accretionDepreciation, amortization, and accretion16,994 9,301 Depreciation, amortization, and accretion13,163 16,994 
Provision for credit lossesProvision for credit losses9,650 6,500 Provision for credit losses3,990 9,650 
Increase in cash surrender value of life insuranceIncrease in cash surrender value of life insurance(2,551)(1,658)Increase in cash surrender value of life insurance(3,386)(2,551)
Stock-based compensation expenseStock-based compensation expense5,282 5,222 Stock-based compensation expense4,829 5,282 
Asset (gains) losses, netAsset (gains) losses, net(2,870)(3,716)Asset (gains) losses, net38,755 (2,870)
Gain on sale of loans held for sale, netGain on sale of loans held for sale, net(4,520)(16,289)Gain on sale of loans held for sale, net(3,230)(4,520)
Net change due to:Net change due to:Net change due to:
Proceeds from sale of loans held for saleProceeds from sale of loans held for sale188,093 503,405 Proceeds from sale of loans held for sale108,991 188,093 
Origination of loans held for saleOrigination of loans held for sale(182,962)(485,641)Origination of loans held for sale(111,883)(182,962)
Accrued interest receivable and other assetsAccrued interest receivable and other assets7,719 (6,721)Accrued interest receivable and other assets(3,263)7,719 
Accrued interest payable and other liabilitiesAccrued interest payable and other liabilities(14,145)(2,488)Accrued interest payable and other liabilities(8,618)(14,145)
Net cash provided by (used in) operating activitiesNet cash provided by (used in) operating activities87,349 52,262 Net cash provided by (used in) operating activities70,203 87,349 
Cash Flows From Investing Activities:Cash Flows From Investing Activities:Cash Flows From Investing Activities:
Net (increase) decrease in loansNet (increase) decrease in loans(537,001)10,406 Net (increase) decrease in loans(55,042)(537,001)
Net (increase) decrease in certificates of deposit in other banksNet (increase) decrease in certificates of deposit in other banks8,419 8,561 Net (increase) decrease in certificates of deposit in other banks4,920 8,419 
Purchases of securities AFSPurchases of securities AFS(8,623)(214,343)Purchases of securities AFS(20,220)(8,623)
Purchases of securities HTMPurchases of securities HTM(56,479)(20,996)Purchases of securities HTM (56,479)
Proceeds from sales of securities AFSProceeds from sales of securities AFS23,984 15,975 Proceeds from sales of securities AFS28,992 23,984 
Proceeds from sales of securities HTMProceeds from sales of securities HTM460,051 — 
Proceeds from calls and maturities of securities AFSProceeds from calls and maturities of securities AFS70,781 81,681 Proceeds from calls and maturities of securities AFS256,151 70,781 
Proceeds from calls and maturities of securities HTMProceeds from calls and maturities of securities HTM21,378 — Proceeds from calls and maturities of securities HTM2,916 21,378 
Purchases of other investmentsPurchases of other investments(30,327)(4,787)Purchases of other investments(12,934)(30,327)
Proceeds from sales of other investmentsProceeds from sales of other investments4,014 1,534 Proceeds from sales of other investments18,939 4,014 
Proceeds from redemption of BOLIProceeds from redemption of BOLI578 — Proceeds from redemption of BOLI312 578 
Net (increase) decrease in premises and equipmentNet (increase) decrease in premises and equipment(7,965)(6,894)Net (increase) decrease in premises and equipment(15,104)(7,965)
Net (increase) decrease in other real estate and other assetsNet (increase) decrease in other real estate and other assets9,785 1,046 Net (increase) decrease in other real estate and other assets1,211 9,785 
Net cash (paid) received in branch saleNet cash (paid) received in branch sale147,833 — Net cash (paid) received in branch sale 147,833 
Net cash (paid) received in business combinationNet cash (paid) received in business combination(28,221)394,868 Net cash (paid) received in business combination (28,221)
Net cash provided by (used in) investing activitiesNet cash provided by (used in) investing activities(381,844)267,051 Net cash provided by (used in) investing activities670,192 (381,844)
Cash Flows From Financing Activities:Cash Flows From Financing Activities:Cash Flows From Financing Activities:
Net increase (decrease) in depositsNet increase (decrease) in deposits68,428 199,698 Net increase (decrease) in deposits3,633 68,428 
Net increase (decrease) in short-term borrowingsNet increase (decrease) in short-term borrowings147,134 — Net increase (decrease) in short-term borrowings(317,000)147,134 
Proceeds from long-term borrowings 103,953 
Repayments of long-term borrowingsRepayments of long-term borrowings(20,000)(42,559)Repayments of long-term borrowings(28,000)(20,000)
Purchase and retirement of common stockPurchase and retirement of common stock(60,712)(34,440)Purchase and retirement of common stock(1,521)(60,712)
Cash dividends paid on common stockCash dividends paid on common stock(7,402)— 
Proceeds from issuance of common stockProceeds from issuance of common stock557 395 Proceeds from issuance of common stock598 557 
Proceeds from exercise of stock optionsProceeds from exercise of stock options2,078 1,386 Proceeds from exercise of stock options454 2,078 
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities137,485 228,433 Net cash provided by (used in) financing activities(349,238)137,485 
Net increase (decrease) in cash and cash equivalentsNet increase (decrease) in cash and cash equivalents(157,010)547,746 Net increase (decrease) in cash and cash equivalents391,157 (157,010)
Cash and cash equivalents:Cash and cash equivalents:Cash and cash equivalents:
BeginningBeginning595,292 802,859 Beginning154,723 595,292 
Ending *Ending *$438,282 $1,350,605 Ending *$545,880 $438,282 
Supplemental Disclosures of Cash Flow Information:Supplemental Disclosures of Cash Flow Information:Supplemental Disclosures of Cash Flow Information:
Cash paid for interestCash paid for interest$19,785 $9,320 Cash paid for interest$99,486 $19,785 
Cash paid for taxesCash paid for taxes25,660 24,116 Cash paid for taxes22,920 25,660 
Transfer of securities from HTM to AFSTransfer of securities from HTM to AFS177,727 — 
Transfer of loans and bank premises to other real estate ownedTransfer of loans and bank premises to other real estate owned432 302 Transfer of loans and bank premises to other real estate owned873 432 
Capitalized mortgage servicing rightsCapitalized mortgage servicing rights2,127 3,191 Capitalized mortgage servicing rights1,104 2,127 
Acquisitions:Acquisitions:Acquisitions:
Fair value of assets acquiredFair value of assets acquired$1,118,000 $1,556,000 Fair value of assets acquired$ $1,121,000 
Fair value of liabilities assumedFair value of liabilities assumed1,034,000 1,409,000 Fair value of liabilities assumed 1,034,000 
Net assets acquiredNet assets acquired84,000 147,000 Net assets acquired 87,000 
* There was no restricted cash in cash and cash equivalents at September 30, 2022, while cash and cash equivalents at September 30, 2021, included restricted cash of $1.9 million pledged as collateral on interest rate swaps. No reserve balance was required with the Federal Reserve Bank at either September 30, 20222023 or September 30, 2021.2022.
See accompanying notes to unaudited consolidated financial statements.
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NICOLET BANKSHARES, INC.
Notes to Unaudited Consolidated Financial Statements

Note 1 – Basis of Presentation
General
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated balance sheets, statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows of Nicolet Bankshares, Inc. (the “Company” or “Nicolet”) and its subsidiaries, as of and for the periods presented, and all such adjustments are of a normal recurring nature. All material intercompany transactions and balances have been eliminated. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the entire year.
These interim consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission and, therefore, certain information and footnote disclosures normally presented in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been omitted or abbreviated. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022.
Critical Accounting Policies and Estimates
Preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, assumptions, and assumptionsjudgments that affect the amounts reported in the consolidated financial statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Estimates are used in accounting for, among other items, the allowance for credit losses, valuation of loans in acquisition transactions, useful lives for depreciation and amortization, fair value of financial instruments, impairment calculations, valuation of deferred tax assets, uncertain income tax positions and contingencies. Estimates thatThese estimates are particularly susceptiblebased on management’s knowledge of historical experience, current information, and other factors deemed to significant change for the Company include the determination of the allowance for credit losses, the determination and assessment of deferred tax assets and liabilities, and the valuation of loans acquired in acquisition transactions; therefore, these are critical accounting policies.be relevant; accordingly, as this information changes, actual results could differ from those estimates. Factors that may cause sensitivity to the aforementioned estimates include but are not limited to: external market factors such as market interest rates and employment rates, changes to operating policies and procedures, changes in applicable banking or tax regulations, and changes to deferred tax estimates. ActualNicolet considers accounting estimates to be critical to reported financial results may ultimately differif the accounting estimate requires management to make assumptions about matters that are highly uncertain and different estimates that are reasonably likely to occur from period to period, could have a material impact on the financial statements. The accounting estimates although management does not generally believe such differences would materially affectwe consider to be critical include business combinations and the consolidated financial statements in any individual reporting period presented.valuation of loans acquired, the determination of the allowance for credit losses, and income taxes.
There have been no material changes or developments with respect to the assumptions or methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022.

FutureRecent Accounting Pronouncements Adopted
In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings (“TDRs”) and Vintage Disclosures. This ASU eliminateseliminated the accounting guidance for TDRs by creditors while enhancingand enhanced the disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower ismodifications to borrowers experiencing financial difficulty. The ASU also requires public business entities to expand the vintage disclosures to include gross charge-offs by year of origination. The updated guidance is effective for fiscal years beginning after December 15, 2022, with early adoption permitted.2022. Adoption of this amendment isASU did not expected to have a material impact on the Company’s consolidated financial statements; though,however, it will resultresulted in new disclosures. See Note 6 for the new disclosures.
Future Accounting Pronouncements
In March 2023, the FASB issued ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. This ASU permits reporting entities to elect to account for tax equity investments, regardless of the tax credit program for which the income tax credits are received, using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognizes the net amortization and income tax credits and other income tax benefits in the income statement as a component of income tax expense. A reporting entity makes an accounting policy election to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments. This ASU also requires specific disclosures of gross charge-offs by year of originationinvestments that generate income tax credits and onother income tax benefits from a tax credit program for which the types of loan modificationsentity has elected to borrowers experiencing financial difficulties. Current TDR disclosures will be also removed.apply the proportional amortization method. The updated guidance is effective for fiscal years beginning after December 15, 2023.

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In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. It provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The updatedIn December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which defers the sunset date of the original guidance is effective for all entities as of March 12, 2020 throughfrom December 31, 2022.2022 to December 31, 2024. The Company continues to work through the cessation of LIBOR, including the modification of its loans and other financial instruments with attributes that are either directly or indirectly influenced by LIBOR. The Company expects to utilize the reference rate reform transition guidance, as applicable, and does not expect such adoption to have a material impact on its consolidated financial statements or financial disclosures. The Company will continue to assess the impact as the reference rate transition approaches June 30, 2023.

Reclassifications
Certain amounts in the 20212022 consolidated financial statements have been reclassified to conform to the 20222023 presentation. These reclassifications were not material and did not impact previously reported net income or comprehensive income.
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Note 2 – Acquisitions
Completed Acquisitions:Acquisition
Charter Bankshares, Inc. (“Charter”): On August 26, 2022, Nicolet completed its merger with Charter, pursuant to the Agreement and Plan of Merger dated March 29, 2022, (the “Charter Merger Agreement”), at which time Charter merged with and into Nicolet, and Charter Bank, the wholly owned bank subsidiary of Charter, was merged with and into Nicolet National Bank (the “Bank”), the wholly owned bank subsidiary of Nicolet.

Pursuant to the Charter Merger Agreement, each share of Charter common stock issued and outstanding immediately prior to the effective time of In the merger, was converted into the right to receiveCharter stockholders received 15.458 shares of Nicolet common stock and $475 in cash.cash for each share of Charter owned. As a result, Nicolet issued approximately 1.26 million shares of Nicolet common stock for stock consideration of $98 million and cash consideration of $39 million, for a total purchase price of $137 million. With the Charter merger, Nicolet expanded to Western Wisconsin and Minnesota.

A summary of the assets acquired and liabilities assumed in the Charter transaction, as of the acquisition date, including the purchase price allocation was as follows.

(In millions, except share data)(In millions, except share data)Acquired from CharterFair Value AdjustmentsEstimated Fair Value(In millions, except share data)Acquired from CharterFair Value AdjustmentsEstimated Fair Value
Assets Acquired:Assets Acquired:Assets Acquired:
Cash and cash equivalentsCash and cash equivalents$10 $— $10 Cash and cash equivalents$10 $— $10 
Investment securitiesInvestment securities218 — 218 Investment securities218 — 218 
LoansLoans848 (21)827 Loans848 (21)827 
ACL-LoansACL-Loans(9)(2)ACL-Loans(9)(2)
Premises and equipmentPremises and equipment10 Premises and equipment10 
BOLIBOLI29 — 29 BOLI29 — 29 
Core deposit intangibleCore deposit intangible— 19 19 Core deposit intangible— 19 19 
Other assetsOther assetsOther assets10 
Total assets Total assets$1,110 $$1,118  Total assets$1,110 $11 $1,121 
Liabilities Assumed:Liabilities Assumed:Liabilities Assumed:
DepositsDeposits$869 $$870 Deposits$869 $$870 
BorrowingsBorrowings161 — 161 Borrowings161 — 161 
Other liabilitiesOther liabilities— Other liabilities— 
Total liabilities Total liabilities$1,033 $$1,034  Total liabilities$1,033 $$1,034 
Net assets acquiredNet assets acquired$84 Net assets acquired$87 
Purchase Price:Purchase Price:Purchase Price:
Nicolet common stock issued (in shares)Nicolet common stock issued (in shares)1,262,360 Nicolet common stock issued (in shares)1,262,360 
Value of Nicolet common stock considerationValue of Nicolet common stock consideration$98 Value of Nicolet common stock consideration$98 
Cash consideration paidCash consideration paid39 Cash consideration paid39 
Total purchase price Total purchase price$137  Total purchase price$137 
Preliminary goodwill$53 
GoodwillGoodwill$50 

The Company purchased loans through the acquisition of Charter for which there was, at the date of acquisition, more than insignificant deterioration of credit quality since origination (purchased credit deteriorated loans or “PCD” loans). The carrying amount of these loans at acquisition was as follows.

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(In thousands)August 26, 2022
Purchase price of PCD loans at acquisition$24,031 
Allowance for credit losses on PCD loans at acquisition1,709 
Par value of PCD acquired loans at acquisition$25,740 

The Company accounted for the Charter acquisition under the acquisition method of accounting, and thus, the financial position and results of operations of Charter prior to the consummation date were not included in the accompanying consolidated financial statements. The accounting required assets purchased and liabilities assumed to be recorded at their respective estimated fair values at the date of acquisition. The estimated fair value was determined with the assistance of third party
9


valuations, appraisals, and third party advisors. Goodwill arising as a result of the Charter acquisition is not deductible for tax purposes.

County Bancorp, Inc. (“County”): On December 3, 2021, Nicolet completed its merger with County, pursuant to the Agreement and Plan of Merger dated June 22, 2021 (the “County Merger Agreement”), at which time County merged with and into Nicolet, and Investors Community Bank, the wholly owned bank subsidiary of County, was merged with and into the Bank.

Pursuant to the County Merger Agreement, each share of County common stock issued and outstanding immediately prior to the effective time of the merger was converted into the right to receive, at the election of the shareholder, either cash of $37.18 or 0.48 shares of Nicolet common stock, subject to proration procedures such that 1,237,000 shares of County common stock were exchanged for cash, and the remaining shares were exchanged for Nicolet common stock. As a result, Nicolet issued approximately 2.4 million shares of Nicolet common stock for stock consideration of $176 million and cash consideration of $48 million, or a total purchases price of $224 million. With the County merger, Nicolet became the premier agriculture lender throughout Wisconsin.

A summary of the assets acquired and liabilities assumed in the County transaction, as of the acquisition date, including the purchase price allocation was as follows.

(In millions, except share data)Acquired from CountyFair Value AdjustmentsEstimated Fair Value
Assets Acquired:
Cash and cash equivalents$20 $— $20 
Investment securities301 (1)300 
Loans1,015 (1)1,014 
ACL-Loans(11)(3)
Premises and equipment21 (4)17 
BOLI33 — 33 
Core deposit intangible— 
Loan servicing rights20 — 20 
Other assets(2)
     Total assets$1,405 $$1,412 
Liabilities Assumed:
Deposits$1,027 $$1,030 
Borrowings218 219 
Other liabilities— 
     Total liabilities$1,253 $$1,257 
Net assets acquired$155 
Purchase Price:
Nicolet common stock issued (in shares)2,366,243 
Value of Nicolet common stock consideration$176 
Cash consideration paid48 
    Total purchase price$224 
Write-off prior investment in County(1)
Goodwill$70 

The Company purchased loans through the acquisition of County for which there was, at the date of acquisition, more than insignificant deterioration of credit quality since origination (PCD loans). The carrying amount of these loans at acquisition was as follows.

(In thousands)December 3, 2021
Purchase price of PCD loans at acquisition$64,948 
Allowance for credit losses on PCD loans at acquisition3,262 
Par value of PCD acquired loans at acquisition$68,210 

The Company accounted for the County acquisition under the acquisition method of accounting, and thus, the financial position and results of operations of County prior to the consummation date were not included in the accompanying consolidated
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financial statements. The accounting required assets purchased and liabilities assumed to be recorded at their respective estimated fair values at the date of acquisition. The estimated fair value was determined with the assistance of third party valuations, appraisals, and third party advisors. Goodwill arising as a result of the County acquisition is not deductible for tax purposes.

Mackinac Financial Corporation (“Mackinac”): On September 3, 2021, Nicolet completed its merger with Mackinac, pursuant to the terms of the Agreement and Plan of Merger dated April 12, 2021 (the “Mackinac Merger Agreement”), at which time Mackinac merged with and into Nicolet, and mBank, the wholly owned bank subsidiary of Mackinac, was merged with and into the Bank.

Pursuant to the Mackinac Merger Agreement, Mackinac shareholders received fixed consideration of 0.22 shares of Nicolet common stock and $4.64 in cash for each share of Mackinac common stock owned, resulting in the issuance of approximately 2.3 million shares of Nicolet common stock for stock consideration of $180 million and cash consideration of $49 million, or a total purchase price of $229 million. The Mackinac merger expanded Nicolet prominently into Northern Michigan and the Upper Peninsula of Michigan, and added to Nicolet’s presence in upper northeastern Wisconsin.

A summary of the assets acquired and liabilities assumed in the Mackinac transaction, as of the acquisition date, including the purchase price allocation was as follows.

(In millions, except share data)Acquired from MackinacFair Value AdjustmentsEstimated Fair Value
Assets Acquired:
Cash and cash equivalents$448 $— $448 
Investment securities104 — 104 
Loans930 10 940 
ACL-Loans(6)(2)
Premises and equipment24 (3)21 
BOLI16 — 16 
Goodwill20 (20)— 
Other intangibles
Other assets25 (3)22 
     Total assets$1,565 $(9)$1,556 
Liabilities Assumed:
Deposits$1,365 $$1,366 
Borrowings28 29 
Other liabilities13 14 
     Total liabilities$1,406 $$1,409 
Net assets acquired$147 
Purchase Price:
Nicolet common stock issued (in shares)2,337,230 
Value of Nicolet common stock consideration$180 
Cash consideration paid49 
    Total purchase price$229 
Write-off prior investment in Mackinac(2)
Goodwill$84 

The Company purchased loans through the acquisition of Mackinac for which there was, at the date of acquisition, more than insignificant deterioration of credit quality since origination (PCD loans). The carrying amount of these loans at acquisition was as follows.

(In thousands)September 3, 2021
Purchase price of PCD loans at acquisition$10,605 
Allowance for credit losses on PCD loans at acquisition1,896 
Par value of PCD acquired loans at acquisition$12,501 

The Company accounted for the Mackinac acquisition under the acquisition method of accounting, and thus, the financial position and results of operations of Mackinac prior to the consummation date were not included in the accompanying
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consolidated financial statements. The accounting required assets purchased and liabilities assumed to be recorded at their respective estimated fair values at the date of acquisition. The estimated fair value was determined with the assistance of third party valuations, appraisals, and third party advisors. Goodwill arising as a result of the Mackinac acquisition is not deductible for tax purposes.

Summary Unaudited Pro Forma Information: The following unaudited pro forma information is presented for illustrative purposes only, and gives effect to the acquisitions of County and Mackinac as if the acquisitions had occurred on January 1, 2021, the beginning of the earliest period presented. The pro forma information should not be relied upon as being indicative of the historical results of operations the companies would have had if the acquisitions had occurred before such periods or the future results of operations that the companies will experience as a result of the mergers. The pro forma information, although helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the benefits of expected cost savings, opportunities to earn additional revenue, the impact of restructuring and merger-related expenses, or other factors that may result as a consequence of the mergers and, accordingly, does not attempt to predict or suggest future results.

Three Months EndedNine Months Ended
(In thousands, except per share data)September 30, 2021September 30, 2021
Total revenue, net of interest expense$84,802 $241,287 
Net income$16,470 $62,243 
Diluted earnings per common share$1.06 $4.09 

Note 3 – Earnings per Common Share
Basic earnings per common share are calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common share are calculated by dividing net income by the weighted average number of shares adjusted for the dilutive effect of common stock awards (outstanding stock options and unvested restricted stock), if any. Presented below are the calculations for basic and diluted earnings per common share.
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
(In thousands, except per share data)(In thousands, except per share data)2022202120222021(In thousands, except per share data)2023202220232022
Net incomeNet income$18,510 $7,824 $66,659 $44,347 Net income$17,158 $18,510 $30,855 $66,659 
Weighted average common shares outstandingWeighted average common shares outstanding13,890 10,392 13,648 10,098 Weighted average common shares outstanding14,740 13,890 14,716 13,648 
Effect of dilutive common stock awardsEffect of dilutive common stock awards420 384 479 405 Effect of dilutive common stock awards360 420 328 479 
Diluted weighted average common shares outstandingDiluted weighted average common shares outstanding14,310 10,776 14,127 10,503 Diluted weighted average common shares outstanding15,100 14,310 15,044 14,127 
Basic earnings per common share*Basic earnings per common share*$1.33 $0.75 $4.88 $4.39 Basic earnings per common share*$1.16 $1.33 $2.10 $4.88 
Diluted earnings per common share*Diluted earnings per common share*$1.29 $0.73 $4.72 $4.22 Diluted earnings per common share*$1.14 $1.29 $2.05 $4.72 
*Cumulative quarterly per share performance may not equal annual per share totals due to the effects of the amount and timing of capital increases. When computing earnings per share for an interim period, the denominator is based on the weighted average shares outstanding during the interim period, and not on an annualized weighted average basis. Accordingly, the sum of the earnings per share data for the quarters will not necessarily equal the year to date earnings per share data.
For the three and nine months ended September 30, 2022 and 2021, respectively,2023, options to purchase approximately 0.1 million and 0.2 million shares, arerespectively, were excluded from the calculation of diluted earnings per common share as the effect of their exercise would have been anti-dilutive. For the three and nine months ended September 30, 2022, and 2021, respectively, options to purchase approximately 0.2 million and 0.1 million shares, arerespectively, were excluded from the calculation of diluted earnings per common share as the effect of their exercise would have been anti-dilutive.

Note 4 – Stock-Based Compensation
The Company may grant stock options and restricted stock under its stock-based compensation plans to certain officers, employees and directors. These plans are administered by a committee of the Board of Directors, and at September 30, 2022,2023, approximately 0.7 million shares were available for grant under these stock-based compensation plans.
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A Black-Scholes model is utilized to estimate the fair value of stock option grants, while the market price of the Company’s stock at the date of grant is used to estimate the fair value of restricted stock awards. The weighted average assumptions used in the Black-Scholes model for valuing stock option grants for the nine months ended September 30, 2022 and 2021 were as follows.
Nine Months Ended September 30,Nine Months Ended September 30,
2022202120232022
Dividend yieldDividend yield— %— %Dividend yield1.6 %— %
Expected volatilityExpected volatility30 %30 %Expected volatility30 %30 %
Risk-free interest rateRisk-free interest rate3.03 %1.16 %Risk-free interest rate3.74 %3.03 %
Expected average lifeExpected average life7 years7 yearsExpected average life7 years7 years
Weighted average per share fair value of optionsWeighted average per share fair value of options$30.99 $26.55 Weighted average per share fair value of options$20.94 $30.99 
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A summary of the Company’s stock option activity is summarized below.
Stock OptionsStock OptionsOption Shares
Outstanding
Weighted
Average
Exercise Price
Weighted Average
Remaining
Life (Years)
Aggregate
Intrinsic Value
(in thousands)
Stock OptionsOption Shares
Outstanding
Weighted
Average
Exercise Price
Weighted Average
Remaining
Life (Years)
Aggregate
Intrinsic Value
(in thousands)
Outstanding - December 31, 20211,833,246 $57.69 
Outstanding - December 31, 2022Outstanding - December 31, 20221,853,064 $59.79 
GrantedGranted132,929 81.04 Granted7,000 64.36 
Exercise of stock options *Exercise of stock options *(65,661)41.26 Exercise of stock options *(115,179)40.02 
ForfeitedForfeited(8,500)77.62 Forfeited(25,000)84.98 
Outstanding - September 30, 20221,892,014 $59.81 6.2$24,920 
Exercisable - September 30, 20221,207,585 $50.84 4.9$24,324 
Outstanding - September 30, 2023Outstanding - September 30, 20231,719,885 $60.76 5.3$20,354 
Exercisable - September 30, 2023Exercisable - September 30, 20231,260,942 $55.09 4.5$20,217 
* The terms of the stock option agreements permit having a number of shares of stock withheld, the fair market value of which as of the date of exercise is sufficient to satisfy the exercise price and/or tax withholding requirements. For the nine months ended September 30, 2022, 6,0732023, 54,517 such shares were withheld by the Company.
Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock options. The intrinsic value of options exercised for the nine months ended September 30, 20222023 and 20212022 was approximately $3.3$3.7 million and $1.7$3.3 million, respectively.
A summary of the Company’s restricted stock activity is summarized below.
Restricted StockWeighted Average Grant
Date Fair Value
Restricted Shares
Outstanding
Outstanding - December 31, 2021$71.42 25,801 
Granted75.99 60,852 
Vested *71.51 (13,127)
Forfeited56.01 (600)
Outstanding - September 30, 2022$75.34 72,926 
* The terms of the restricted stock agreements permit the surrender of shares to the Company upon vesting in order to satisfy applicable tax withholding requirements at the minimum statutory withholding rate, and accordingly, 465 shares were surrendered during the nine months ended September 30, 2022.
Restricted StockWeighted Average Grant
Date Fair Value
Restricted Shares
Outstanding
Outstanding - December 31, 2022$76.49 73,490 
Granted55.65 11,674 
Vested66.40 (24,574)
Outstanding - September 30, 2023$76.57 60,590 
The Company recognized approximately $4.6$4.2 million and $4.5$4.6 million of stock-based compensation expense (included in personnel on the consolidated statements of income) for the nine months ended September 30, 20222023 and 2021,2022, respectively, associated with its common stock awards granted to officers and employees. In addition, duringfor the nine months ended September 30, 2022,2023, the Company recognized approximately $0.7$0.6 million of director expense (included in other expense on the consolidated statements of income) for restricted stock grants totaling 8,85211,674 shares with immediate vesting to directors, while duringfor the first nine months of 2021,ended September 30, 2022, the Company recognized approximately $0.7 million of director expense for restricted stock grants totaling 9,5958,852 shares with immediate vesting to directors, in each case representing the annual stock retainer fee paid to external board members for that year. As of September 30, 2022,2023, there was approximately $19.9$14.0 million of unrecognized compensation cost related to equity award grants, which is expected to be recognized over the remaining vesting period of approximately fourthree years. The Company recognized a tax benefit of approximately $0.4$0.5 million and $0.3$0.4 million for the nine months ended September 30, 20222023 and 2021,2022, respectively, for the tax impact of stock option exercises and vesting of restricted stock.
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Note 5 – Securities and Other Investments
Securities
Securities are classified as AFS or HTM on the consolidated balance sheets at the time of purchase. AFS securities include those securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity, and are carried at fair value on the consolidated balance sheets. HTM securities include those securities which the Company has both the positive intent and ability to hold to maturity, and are carried at amortized cost on the consolidated balance sheets. Premiums and discounts on investment securities are amortized or accreted into interest income over the estimated life of the related securities using the effective interest method.

The amortized cost and fair value of securities AFS and HTM are summarized as follows.
September 30, 2022September 30, 2023
(in thousands)(in thousands)Amortized CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated Fair ValueFair Value as % of Total(in thousands)Amortized CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated Fair Value
Securities AFS:Securities AFS:Securities AFS:
U.S. Treasury securitiesU.S. Treasury securities$42,190 $— $4,686 $37,504 
U.S. government agency securitiesU.S. government agency securities$194,295 $— $9,532 $184,763 19 %U.S. government agency securities8,293 74 8,221 
State, county and municipalsState, county and municipals454,740 32 42,908 411,864 43 %State, county and municipals387,259 69 45,998 341,330 
Mortgage-backed securitiesMortgage-backed securities239,430 25,996 213,435 23 %Mortgage-backed securities355,906 — 49,497 306,409 
Corporate debt securitiesCorporate debt securities146,528 — 6,993 139,535 15 %Corporate debt securities111,245 — 10,883 100,362 
Total securities AFSTotal securities AFS$1,034,993 $33 $85,429 $949,597 100 %Total securities AFS$904,893 $71 $111,138 $793,826 
Securities HTM:
U.S. government agency securities$506,952 $65 $38,590 $468,427 74 %
State, county and municipals39,121 3,363 35,759 %
Mortgage-backed securities140,351 — 16,898 123,453 20 %
Total securities HTM$686,424 $66 $58,851 $627,639 100 %
December 31, 2021December 31, 2022
(in thousands)(in thousands)Amortized CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated Fair ValueFair Value as % of Total(in thousands)Amortized CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated Fair Value
Securities AFS:Securities AFS:Securities AFS:
U.S. Treasury securitiesU.S. Treasury securities$192,116 $— $8,286 $183,830 
U.S. government agency securitiesU.S. government agency securities$192,506 $$1,235 $191,277 21 %U.S. government agency securities2,133 — 33 2,100 
State, county and municipalsState, county and municipals311,717 3,222 2,202 312,737 34 %State, county and municipals433,733 123 35,668 398,188 
Mortgage-backed securitiesMortgage-backed securities270,017 3,090 1,845 271,262 29 %Mortgage-backed securities227,650 10 26,728 200,932 
Corporate debt securitiesCorporate debt securities143,172 3,459 246 146,385 16 %Corporate debt securities140,712 8,147 132,568 
Total securities AFSTotal securities AFS$917,412 $9,777 $5,528 $921,661 100 %Total securities AFS$996,344 $136 $78,862 $917,618 
Securities HTM:Securities HTM:Securities HTM:
U.S. Treasury securitiesU.S. Treasury securities$497,648 $— $35,722 $461,926 
U.S. government agency securitiesU.S. government agency securities$508,810 $— $2,740 $506,070 78 %U.S. government agency securities8,744 46 — 8,790 
State, county and municipalsState, county and municipals42,876 10 173 42,713 %State, county and municipals34,874 — 3,349 31,525 
Mortgage-backed securitiesMortgage-backed securities100,117 89 595 99,611 15 %Mortgage-backed securities137,862 — 16,751 121,111 
Total securities HTMTotal securities HTM$651,803 $99 $3,508 $648,394 100 %Total securities HTM$679,128 $46 $55,822 $623,352 
On March 7, 2023, Nicolet executed the sale of $500 million (par value) U.S. Treasury held to maturity securities for a pre-tax loss of $38 million or an after-tax loss of $28 million. Proceeds from the sale were used to reduce existing FHLB borrowings with the remainder held in investable cash. As a result of the sale of securities previously classified as held to maturity, the remaining unsold portfolio of held to maturity securities, with a book value of $177 million, was reclassified to available for sale with a carrying value of approximately $157 million. The unrealized loss on this portfolio of $20 million (at the time of reclassification) increased the balance of accumulated other comprehensive loss $15 million, net of the deferred tax effect, and is subject to future market changes.
12



Proceeds and realized gains or losses from the sale of AFS and HTM securities were as follows.
Nine Months Ended September 30,
(in thousands)20232022
Securities AFS:
Gross gains$268 $20 
Gross losses(605)(5)
Gains (losses) on sales of securities AFS, net$(337)$15 
Proceeds from sales of securities AFS$28,992 $23,984 
Securities HTM:
Gross gains$— $— 
Gross losses(37,723)— 
Gains (losses) on sales of securities HTM, net$(37,723)$— 
Proceeds from sales of securities HTM$460,051 $— 
All mortgage-backed securities included in the tables abovesecurities portfolio were issued by U.S. government agencies and corporations. Investment securities with a carrying value of $786$345 million and $277$883 million, as of September 30, 20222023 and December 31, 2021,2022, respectively, were pledged as collateral to secure public deposits and borrowings, as applicable, and for liquidity or other purposes as required by regulation. Accrued interest on investment securities totaled $7 million at September 30, 2022 and $5 million at both September 30, 2023 and December 31, 2021,2022, and is included in accrued interest receivable and other assets on the consolidated balance sheets.

14



The following table presents gross unrealized losses and the related estimated fair value of investment securities for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time individual securities have been in a continuous unrealized loss position.
September 30, 2022September 30, 2023
Less than 12 months12 months or moreTotalLess than 12 months12 months or moreTotal
($ in thousands)($ in thousands)Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Number of
Securities
($ in thousands)Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Number of
Securities
Securities AFS:Securities AFS:Securities AFS:
U.S. Treasury securitiesU.S. Treasury securities$— $— $37,504 $4,686 $37,504 $4,686 
U.S. government agency securitiesU.S. government agency securities$73,427 $3,649 $111,307 $5,883 $184,734 $9,532 18 U.S. government agency securities5,396 32 1,798 42 7,194 74 10 
State, county and municipalsState, county and municipals325,212 29,803 66,031 13,105 391,243 42,908 906 State, county and municipals66,415 5,460 263,740 40,538 330,155 45,998 710 
Mortgage-backed securitiesMortgage-backed securities163,160 17,180 49,315 8,816 212,475 25,996 384 Mortgage-backed securities19,959 268 286,450 49,229 306,409 49,497 451 
Corporate debt securitiesCorporate debt securities123,488 5,218 11,668 1,775 135,156 6,993 94 Corporate debt securities3,336 223 92,607 10,660 95,943 10,883 67 
TotalTotal$685,287 $55,850 $238,321 $29,579 $923,608 $85,429 1,402 Total$95,106 $5,983 $682,099 $105,155 $777,205 $111,138 1,242 
Securities HTM:
U.S. government agency securities$459,059 $38,590 $— $— $459,059 $38,590 
State, county and municipals25,308 2,663 4,495 700 29,803 3,363 58 
Mortgage-backed securities117,168 15,696 6,285 1,202 123,453 16,898 106 
Total$601,535 $56,949 $10,780 $1,902 $612,315 $58,851 170 
December 31, 2021December 31, 2022
Less than 12 months12 months or moreTotalLess than 12 months12 months or moreTotal
($ in thousands)($ in thousands)Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Number of
Securities
($ in thousands)Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Number of
Securities
Securities AFS:Securities AFS:Securities AFS:
U.S. Treasury securitiesU.S. Treasury securities$448 $14 $183,382 $8,272 $183,830 $8,286 
U.S. government agency securitiesU.S. government agency securities$190,432 $1,235 $— $— $190,432 $1,235 11 U.S. government agency securities2,083 32 17 2,100 33 
State, county and municipalsState, county and municipals103,950 2,119 1,777 83 105,727 2,202 132 State, county and municipals277,546 18,041 86,569 17,627 364,115 35,668 812 
Mortgage-backed securitiesMortgage-backed securities137,561 1,616 6,068 229 143,629 1,845 159 Mortgage-backed securities102,108 11,320 95,614 15,408 197,722 26,728 376 
Corporate debt securitiesCorporate debt securities23,267 246 — — 23,267 246 13 Corporate debt securities114,887 6,186 12,938 1,961 127,825 8,147 90 
TotalTotal$455,210 $5,216 $7,845 $312 $463,055 $5,528 315 Total$497,072 $35,593 $378,520 $43,269 $875,592 $78,862 1,296 
Securities HTM:Securities HTM:Securities HTM:
U.S. government agency securities$505,938 $2,740 $— $— $505,938 $2,740 
U.S. Treasury securitiesU.S. Treasury securities$— $— $461,926 $35,722 $461,926 $35,722 
State, county and municipalsState, county and municipals30,898 173 — — 30,898 173 46 State, county and municipals17,591 1,594 11,654 1,755 29,245 3,349 58 
Mortgage-backed securitiesMortgage-backed securities69,333 595 — — 69,333 595 72 Mortgage-backed securities68,108 8,029 53,003 8,722 121,111 16,751 106 
TotalTotal$606,169 $3,508 $— $— $606,169 $3,508 127 Total$85,699 $9,623 $526,583 $46,199 $612,282 $55,822 170 
Quarterly,
13


During first quarter 2023, the Company evaluates securities AFSrecognized provision expense of $2.3 million related to the expected credit loss on its Signature Bank sub debt investment (acquired in unrealized loss positions to determine whetheran acquisition), and immediately charged-off the impairment is due to credit-related factors or noncredit-related factors. In making this evaluation, management considers the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. As of September 30, 2022 and December 31, 2021, no allowance for credit losses on securities AFS was recognized.full investment. The Company does not consider its remaining securities AFS with unrealized losses to be attributable to credit-related factors, as the unrealized losses in each category have occurred as a result of changes in noncredit-related factors such as changes in interest rates, market spreads and market conditions subsequent to purchase, not credit deterioration. Furthermore, the Company does not have the intent to sell any of these AFS securities AFS and believes that it is more likely than not that we will not have to sell any such securities before a recovery of cost.
The Company also evaluates securities HTM quarterly to determine whether an As of September 30, 2023 and December 31, 2022, no allowance for credit losses is necessary. In making this determination, management considerson AFS securities was recognized.
The Company evaluated the factsHTM securities and circumstances of the underlying investment securities.determined no allowance for credit losses was necessary at December 31, 2022. The U.S. Treasury and U.S. government agency securities include U.S. Treasury Notes which are guaranteed by the U.S. government. For the state, county and municipal securities, management considersconsidered issuer bond ratings, historical loss rates by bond ratings, whether issuers continue to make timely principal and interest payments per the contractual terms of the investment securities, internal forecasts, and whether or not such investment securities provide insurance, other credit enhancement, or are pre-refunded by the issuers. For the mortgage-backed securities, all such securities were issued by U.S. government agencies and corporations,
15


which are currently explicitly or implicitly guaranteed by the U.S. government and have a long history of no credit losses. Therefore, management determined no allowance for credit losses was necessary for the securities HTM.
The amortized cost and fair value of investment securities by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties; as this is particularly inherent in mortgage-backed securities, these securities are not included in the maturity categories below.
As of September 30, 2022Securities AFSSecurities HTM
(in thousands)Amortized CostFair ValueAmortized CostFair Value
Due in less than one year$220,008 $214,856 $5,032 $5,022 
Due in one year through five years189,795 180,208 510,548 471,106 
Due after five years through ten years233,100 206,362 26,740 24,404 
Due after ten years152,660 134,736 3,753 3,654 
795,563 736,162 546,073 504,186 
Mortgage-backed securities239,430 213,435 140,351 123,453 
Total investment securities$1,034,993 $949,597 $686,424 $627,639 
Proceeds and realized gains or losses from the sale of AFS securities were as follows.
Nine Months Ended September 30,
(in thousands)20222021
Gross gains$20 $
Gross losses(5)(17)
Gains (losses) on sales of securities AFS, net$15 $(13)
Proceeds from sales of securities AFS *$23,984 $15,975 
* Includes proceeds of $21 million recognized on the sale of securities AFS upon acquisition of Charter for which no gain or loss was recognized in the income statement as the securities were marked to fair value through purchase accounting.

As of September 30, 2023Securities AFS
(in thousands)Amortized CostFair Value
Due in less than one year$65,155 $64,470 
Due in one year through five years162,719 147,803 
Due after five years through ten years207,337 177,658 
Due after ten years113,776 97,486 
548,987 487,417 
Mortgage-backed securities355,906 306,409 
Total investment securities$904,893 $793,826 
Other Investments
Other investments include “restricted” equity securities, equity securities with readily determinable fair values, and private company securities. As a member of the Federal Reserve Bank System and the Federal Home Loan Bank (“FHLB”) System, Nicolet is required to maintain an investment in the capital stock of these entities. These equity securities are “restricted” in that they can only be sold back to the respective institutions or another member institution at par. Therefore, they are less liquid than other exchange traded equity securities. As no ready market exists for these stocks, and they have no quoted market value, these investments are carried at cost. Also included are investments in other private companies that do not have quoted market prices, which are carried at cost less impairment charges, if any. The carrying value of other investments are summarized as follows.
September 30, 2022December 31, 2021
(in thousands)AmountAmount
Federal Reserve Bank stock$34,722 $20,973 
Federal Home Loan Bank (“FHLB”) stock22,939 10,545 
Equity securities with readily determinable fair values4,482 5,660 
Other investments17,136 6,830 
Total other investments$79,279 $44,008 

September 30, 2023December 31, 2022
(in thousands)AmountAmount
Federal Reserve Bank stock$33,050 $32,219 
Federal Home Loan Bank (“FHLB”) stock9,674 18,625 
Equity securities with readily determinable fair values3,893 4,376 
Other investments11,750 10,066 
Total other investments$58,367 $65,286 
1614



Note 6 – Loans, Allowance for Credit Losses - Loans, and Credit Quality
The loan composition is summarized as follows.
September 30, 2022December 31, 2021September 30, 2023December 31, 2022
(in thousands)(in thousands)Amount% of
Total
Amount% of
Total
(in thousands)Amount% of
Total
Amount% of
Total
Commercial & industrialCommercial & industrial$1,268,252 21 %$1,042,256 23 %Commercial & industrial$1,237,789 20 %$1,304,819 21 %
Owner-occupied commercial real estate (“CRE”)Owner-occupied commercial real estate (“CRE”)954,933 16 787,189 17 Owner-occupied commercial real estate (“CRE”)971,397 16 954,599 15 
AgriculturalAgricultural1,017,498 17 794,728 17 Agricultural1,108,261 18 1,088,607 18 
CRE investmentCRE investment1,132,951 19 818,061 18 CRE investment1,130,938 18 1,149,949 19 
Construction & land developmentConstruction & land development306,446 213,035 Construction & land development326,747 318,600 
Residential constructionResidential construction101,286 70,353 Residential construction76,289 114,392 
Residential first mortgageResidential first mortgage970,384 16 713,983 15 Residential first mortgage1,136,748 18 1,016,935 16 
Residential junior mortgageResidential junior mortgage176,428 131,424 Residential junior mortgage195,432 177,332 
Retail & otherRetail & other56,259 50,807 Retail & other55,656 55,266 
LoansLoans5,984,437 100 %4,621,836 100 %Loans6,239,257 100 %6,180,499 100 %
Less allowance for credit losses - Loans (“ACL-Loans”)Less allowance for credit losses - Loans (“ACL-Loans”)60,348 49,672 Less allowance for credit losses - Loans (“ACL-Loans”)63,160 61,829 
Loans, netLoans, net$5,924,089 $4,572,164 Loans, net$6,176,097 $6,118,670 
Allowance for credit losses - Loans to loansAllowance for credit losses - Loans to loans1.01 %1.07 %Allowance for credit losses - Loans to loans1.01 %1.00 %
Commercial and industrial loans included less than $1 million and $25 million of PPP loans at September 30, 2022 and December 31, 2021, respectively. Accrued interest on loans totaled $14$19 million and $11$15 million at September 30, 20222023 and December 31, 2021,2022, respectively, and is included in accrued interest receivable and other assets on the consolidated balance sheets.
Allowance for Credit Losses - Loans:
The majority of the Company’s loans, commitments, and letters of credit have been granted to customers in the Company’s market area. Although the Company has a diversified loan portfolio, the credit risk in the loan portfolio is largely influenced by general economic conditions and trends of the counties and markets in which the debtors operate, and the resulting impact on the operations of borrowers or on the value of underlying collateral, if any.
A roll forward of the allowance for credit losses - loans is summarized as follows.
Three Months EndedNine Months EndedYear EndedThree Months EndedNine Months EndedYear Ended
(in thousands)(in thousands)September 30, 2022September 30, 2021September 30, 2022September 30, 2021December 31, 2021(in thousands)September 30, 2023September 30, 2022September 30, 2023September 30, 2022December 31, 2022
Beginning balanceBeginning balance$50,655 $32,561 $49,672 $32,173 $32,173 Beginning balance$62,811 $50,655 $61,829 $49,672 $49,672 
ACL on PCD loans acquiredACL on PCD loans acquired1,709 1,896 1,709 1,896 5,159 ACL on PCD loans acquired— 1,709 — 1,709 1,937 
Provision for credit lossesProvision for credit losses8,200 4,000 9,100 4,500 12,500 Provision for credit losses450 8,200 1,650 9,100 10,950 
Charge-offsCharge-offs(300)(107)(442)(436)(513)Charge-offs(346)(300)(1,091)(442)(1,033)
RecoveriesRecoveries84 49 309 266 353 Recoveries245 84 772 309 303 
Net (charge-offs) recoveriesNet (charge-offs) recoveries(216)(58)(133)(170)(160)Net (charge-offs) recoveries(101)(216)(319)(133)(730)
Ending balanceEnding balance$60,348 $38,399 $60,348 $38,399 $49,672 Ending balance$63,160 $60,348 $63,160 $60,348 $61,829 
1715


The following tables present the balance and activity in the ACL-Loans by portfolio segment.
Nine Months Ended September 30, 2022Nine Months Ended September 30, 2023
(in thousands)(in thousands)Commercial
& industrial
Owner-
occupied
CRE
AgriculturalCRE
investment
Construction & land
development
Residential
construction
Residential
first mortgage
Residential
junior
mortgage
Retail
& other
Total(in thousands)Commercial
& industrial
Owner-
occupied
CRE
AgriculturalCRE
investment
Construction & land
development
Residential
construction
Residential
first mortgage
Residential
junior
mortgage
Retail
& other
Total
ACL-Loans *
ACL-LoansACL-Loans
Beginning balanceBeginning balance$12,613 $7,222 $9,547 $8,462 $1,812 $900 $6,844 $1,340 $932 $49,672 Beginning balance$16,350 $9,138 $9,762 $12,744 $2,572 $1,412 $6,976 $1,846 $1,029 $61,829 
ACL on PCD loans1,408 156 — 38 — 93 12 — 1,709 
ProvisionProvision621 1,356 847 3,004 603 446 1,415 517 291 9,100 Provision(1,518)48 2,467 46 96 (484)336 295 364 1,650 
Charge-offsCharge-offs(152)(36)— — — — (65)— (189)(442)Charge-offs(403)(301)(66)— — — — (96)(225)(1,091)
RecoveriesRecoveries103 — — 169 — — 21 309 Recoveries518 241 — — — — 772 
Net (charge-offs) recoveriesNet (charge-offs) recoveries(49)(36)— 169 — — (58)(168)(133)Net (charge-offs) recoveries115 (60)(63)— — — (96)(218)(319)
Ending balanceEnding balance$14,593 $8,698 $10,394 $11,673 $2,417 $1,346 $8,294 $1,878 $1,055 $60,348 Ending balance$14,947 $9,126 $12,166 $12,790 $2,668 $928 $7,315 $2,045 $1,175 $63,160 
As % of ACL-LoansAs % of ACL-Loans24 %15 %17 %19 %%%14 %%%100 %As % of ACL-Loans24 %14 %19 %20 %%%12 %%%100 %
*The PPP loans are fully guaranteed by the SBA; thus, no ACL-Loans has been allocated to these loans.
Year Ended December 31, 2021Year Ended December 31, 2022
(in thousands)(in thousands)Commercial
& industrial
Owner-
occupied
CRE
AgriculturalCRE
investment
Construction
& land
development
Residential
construction
Residential
first
mortgage
Residential
junior
mortgage
Retail &
other
 
Total
(in thousands)Commercial
& industrial
Owner-
occupied
CRE
AgriculturalCRE
investment
Construction
& land
development
Residential
construction
Residential
first
mortgage
Residential
junior
mortgage
Retail &
other
 
Total
ACL-Loans *
ACL-LoansACL-Loans
Beginning balanceBeginning balance$11,644 $5,872 $1,395 $5,441 $984 $421 $4,773 $1,086 $557 $32,173 Beginning balance$12,613 $7,222 $9,547 $8,462 $1,812 $900 $6,844 $1,340 $932 $49,672 
ACL on PCD loansACL on PCD loans723 1,045 2,585 415 103 — 272 13 5,159 ACL on PCD loans1,408 384 — 38 — 93 12 — 1,937 
ProvisionProvision196 305 5,615 2,608 725 479 1,892 237 443 12,500 Provision2,415 2,087 215 4,075 758 512 96 493 299 10,950 
Charge-offsCharge-offs(242)— (48)(4)— — (113)— (106)(513)Charge-offs(190)(555)— — — — (65)— (223)(1,033)
RecoveriesRecoveries292 — — — — 20 35 353 Recoveries104 — — 169 — — 21 303 
Net (charge-offs) recoveriesNet (charge-offs) recoveries50 — (48)(2)— — (93)(71)(160)Net (charge-offs) recoveries(86)(555)— 169 — — (57)(202)(730)
Ending balanceEnding balance$12,613 $7,222 $9,547 $8,462 $1,812 $900 $6,844 $1,340 $932 $49,672 Ending balance$16,350 $9,138 $9,762 $12,744 $2,572 $1,412 $6,976 $1,846 $1,029 $61,829 
As % of ACL-LoansAs % of ACL-Loans25 %14 %19 %17 %%%14 %%%100 %As % of ACL-Loans26 %15 %16 %21 %%%11 %%%100 %
The ACL-Loans represents management’s estimate of expected credit losses in the Company’s loan portfolio at the balance sheet date. To assess the appropriateness of the ACL-Loans, management applies an allocation methodology which focuses on evaluation of qualitative and environmental factors, including but not limited to: (i) evaluation of facts and issues related to specific loans; (ii) management’s ongoing review and grading of the loan portfolio; (iii) consideration of historical loan loss and delinquency experience on each portfolio segment; (iv) trends in past due and nonperforming loans; (v) the risk characteristics of the various loan segments; (vi) changes in the size and character of the loan portfolio; (vii) concentrations of loans to specific borrowers or industries; (viii) existing economic conditions; (ix) the fair value of underlying collateral; and (x) other qualitative and quantitative factors which could affect expected credit losses. Assessing these numerous factors involves significant judgment.
Management allocates the ACL-Loans by pools of risk within each loan portfolio segment. The allocation methodology consists of the following components. First, a specific reserve is established for individually evaluated credit-deteriorated loans, which management defines as nonaccrual credit relationships over $250,000, collateral dependent loans, purchased credit deteriorated loans, and other loans with evidence of credit deterioration. The specific reserve in the ACL-Loans for these credit deteriorated loans is equal to the aggregate collateral or discounted cash flow shortfall. Management allocates the ACL-Loans with historical loss rates by loan segment. The loss factors are measured on a quarterly basis and applied to each loan segment based on current loan balances and projected for their expected remaining life. Next, management allocates the ACL-Loans using the qualitative factors mentioned above. Consideration is given to those current qualitative or environmental factors that are likely to cause estimated credit losses as of the evaluation date to differ from the historical loss experience of each loan segment. Lastly, management considers reasonable and supportable forecasts to assess the collectability of future cash flows.
Allowance for Credit Losses-Unfunded Commitments:
In addition to the ACL-Loans, the Company has established an ACL-Unfunded commitments, classified in accrued interest payable and other liabilities on the consolidated balance sheets. This reserve is maintained at a level that management believes is sufficient to absorb losses arising from unfunded loan commitments, and is determined quarterly based on methodology similar to the methodology for determining the ACL-Loans. The reserve for unfunded commitments was $3.0 million at both September 30, 20222023 and $2.4 million at December 31, 2021.

18


2022.
Provision for Credit Losses:
The provision for credit losses is determined by the Company as the amount to be added to the ACL loss accounts for various types of financial instruments including loans, investment securities, and off-balance sheet credit exposures after net charge-offs have been deducted to bring the ACL to a level that, in management’s judgment, is necessary to absorb expected credit losses over the lives of the respective financial instruments. See Note 5 for additional information regarding the ACL related to investment securities. The following table presents the components of the provision for credit losses.
Three Months EndedNine Months EndedYear Ended
(in thousands)September 30, 2022September 30, 2021September 30, 2022September 30, 2021December 31, 2021
Provision for credit losses on:
Loans$8,200 $4,000 $9,100 $4,500 $12,500 
Unfunded Commitments400 2,000 550 2,000 2,400 
Investment securities— — — — — 
Total$8,600 $6,000 $9,650 $6,500 $14,900 
16


Three Months EndedNine Months EndedYear Ended
(in thousands)September 30, 2023September 30, 2022September 30, 2023September 30, 2022December 31, 2022
Provision for credit losses on:
Loans$450 $8,200 $1,650 $9,100 $10,950 
Unfunded commitments— 400 — 550 550 
Investment securities— — 2,340 — — 
Total$450 $8,600 $3,990 $9,650 $11,500 
Collateral Dependent Loans:
A loan is considered to be collateral dependent when, based upon management’s assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. For collateral dependent loans, expected credit losses are based on the estimated fair value of the collateral at the balance sheet date, with consideration for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. The following tables present collateral dependent loans by portfolio segment and collateral type, including those loans with and without a related allowance allocation.
September 30, 2022Collateral Type
September 30, 2023September 30, 2023Collateral Type
(in thousands)(in thousands)Real EstateOther Business AssetsTotalWithout an AllowanceWith an AllowanceAllowance Allocation(in thousands)Real EstateOther Business AssetsTotalWithout an AllowanceWith an AllowanceAllowance Allocation
Commercial & industrialCommercial & industrial$— $3,032 $3,032 $1,443 $1,589 $661 Commercial & industrial$— $3,402 $3,402 $2,351 $1,051 $230 
Owner-occupied CREOwner-occupied CRE5,205 — 5,205 3,526 1,679 297 Owner-occupied CRE4,827 — 4,827 4,827 — — 
AgriculturalAgricultural13,974 6,439 20,413 16,900 3,513 205 Agricultural7,629 5,811 13,440 8,530 4,910 123 
CRE investmentCRE investment2,196 — 2,196 404 1,792 242 CRE investment942 — 942 552 390 19 
Construction & land developmentConstruction & land development685 — 685 685 — — Construction & land development— — — — — — 
Residential construction— — — — — — 
Residential first mortgageResidential first mortgage91 — 91 91 — — Residential first mortgage686 — 686 686 — — 
Residential junior mortgageResidential junior mortgage— — — — — — Residential junior mortgage— — — — — — 
Retail & other— — — — — — 
Total loansTotal loans$22,151 $9,471 $31,622 $23,049 $8,573 $1,405 Total loans$14,084 $9,213 $23,297 $16,946 $6,351 $372 

December 31, 2021Collateral Type
December 31, 2022December 31, 2022Collateral Type
(in thousands)(in thousands)Real EstateOther Business AssetsTotalWithout an AllowanceWith an AllowanceAllowance Allocation(in thousands)Real EstateOther Business AssetsTotalWithout an AllowanceWith an AllowanceAllowance Allocation
Commercial & industrialCommercial & industrial$— $2,296 $2,296 $1,842 $454 $258 Commercial & industrial$— $3,475 $3,475 $1,927 $1,548 $595 
Owner-occupied CREOwner-occupied CRE3,537 — 3,537 1,315 2,222 552 Owner-occupied CRE4,907 — 4,907 4,699 208 53 
AgriculturalAgricultural19,637 8,518 28,155 25,310 2,845 841 Agricultural13,758 6,458 20,216 14,358 5,858 261 
CRE investmentCRE investment3,000 — 3,000 1,684 1,316 407 CRE investment2,713 — 2,713 979 1,734 212 
Construction & land developmentConstruction & land development1,038 — 1,038 655 383 211 Construction & land development670 — 670 670 — — 
Residential construction— — — — — — 
Residential first mortgageResidential first mortgage473 — 473 473 — — Residential first mortgage91 — 91 91 — — 
Residential junior mortgage— — — — — — 
Retail & other— — — — — — 
Total loansTotal loans$27,685 $10,814 $38,499 $31,279 $7,220 $2,269 Total loans$22,139 $9,933 $32,072 $22,724 $9,348 $1,121 


1917


Past Due and Nonaccrual Loans:
The following tables present past due loans by portfolio segment.
September 30, 2022September 30, 2023
(in thousands)(in thousands)30-89 Days Past
Due (accruing)
90 Days & Over or nonaccrualCurrentTotal(in thousands)30-89 Days Past
Due (accruing)
90 Days & Over or nonaccrualCurrentTotal
Commercial & industrialCommercial & industrial$954 $3,052 $1,264,246 $1,268,252 Commercial & industrial$281 $5,192 $1,232,316 $1,237,789 
Owner-occupied CREOwner-occupied CRE513 5,806 948,614 954,933 Owner-occupied CRE76 5,602 965,719 971,397 
AgriculturalAgricultural— 20,646 996,852 1,017,498 Agricultural151 13,458 1,094,652 1,108,261 
CRE investmentCRE investment27 3,343 1,129,581 1,132,951 CRE investment240 1,100 1,129,598 1,130,938 
Construction & land developmentConstruction & land development— 794 305,652 306,446 Construction & land development23 177 326,547 326,747 
Residential constructionResidential construction557 — 100,729 101,286 Residential construction— — 76,289 76,289 
Residential first mortgageResidential first mortgage1,621 4,309 964,454 970,384 Residential first mortgage1,710 3,812 1,131,226 1,136,748 
Residential junior mortgageResidential junior mortgage249 277 175,902 176,428 Residential junior mortgage67 92 195,273 195,432 
Retail & otherRetail & other138 99 56,022 56,259 Retail & other729 74 54,853 55,656 
Total loansTotal loans$4,059 $38,326 $5,942,052 $5,984,437 Total loans$3,277 $29,507 $6,206,473 $6,239,257 
Percent of total loansPercent of total loans0.1 %0.6 %99.3 %100.0 %Percent of total loans0.1 %0.5 %99.4 %100.0 %
December 31, 2021December 31, 2022
(in thousands)(in thousands)30-89 Days Past
Due (accruing)
90 Days & Over or nonaccrualCurrentTotal(in thousands)30-89 Days Past
Due (accruing)
90 Days & Over or nonaccrualCurrentTotal
Commercial & industrialCommercial & industrial$94 $1,908 $1,040,254 $1,042,256 Commercial & industrial$210 $3,328 $1,301,281 $1,304,819 
Owner-occupied CREOwner-occupied CRE— 4,220 782,969 787,189 Owner-occupied CRE833 5,647 948,119 954,599 
AgriculturalAgricultural108 28,367 766,253 794,728 Agricultural20 20,416 1,068,171 1,088,607 
CRE investmentCRE investment114 4,119 813,828 818,061 CRE investment— 3,832 1,146,117 1,149,949 
Construction & land developmentConstruction & land development— 1,071 211,964 213,035 Construction & land development— 771 317,829 318,600 
Residential constructionResidential construction246 — 70,107 70,353 Residential construction— — 114,392 114,392 
Residential first mortgageResidential first mortgage2,592 4,132 707,259 713,983 Residential first mortgage3,628 3,780 1,009,527 1,016,935 
Residential junior mortgageResidential junior mortgage23 243 131,158 131,424 Residential junior mortgage236 224 176,872 177,332 
Retail & otherRetail & other115 94 50,598 50,807 Retail & other261 82 54,923 55,266 
Total loansTotal loans$3,292 $44,154 $4,574,390 $4,621,836 Total loans$5,188 $38,080 $6,137,231 $6,180,499 
Percent of total loansPercent of total loans0.1 %0.9 %99.0 %100.0 %Percent of total loans0.1 %0.6 %99.3 %100.0 %

The following table presents nonaccrual loans by portfolio segment.
September 30, 2022December 31, 2021September 30, 2023December 31, 2022
(in thousands)(in thousands)Nonaccrual Loans% of TotalNonaccrual Loans% of Total(in thousands)Nonaccrual Loans% of TotalNonaccrual Loans% of Total
Commercial & industrialCommercial & industrial$3,052 %$1,908 %Commercial & industrial$5,192 17 %$3,328 %
Owner-occupied CREOwner-occupied CRE5,806 15 4,220 10 Owner-occupied CRE5,602 19 5,647 15 
AgriculturalAgricultural20,646 54 28,367 64 Agricultural13,458 46 20,416 53 
CRE investmentCRE investment3,343 4,119 CRE investment1,100 3,832 10 
Construction & land developmentConstruction & land development794 1,071 Construction & land development177 771 
Residential constructionResidential construction— — — — Residential construction— — — — 
Residential first mortgageResidential first mortgage4,309 11 4,132 Residential first mortgage3,812 13 3,780 10 
Residential junior mortgageResidential junior mortgage277 243 Residential junior mortgage92 — 224 
Retail & otherRetail & other99 — 94 — Retail & other74 — 82 — 
Nonaccrual loansNonaccrual loans$38,326 100 %$44,154 100 %Nonaccrual loans$29,507 100 %$38,080 100 %
Percent of total loansPercent of total loans0.6 %0.9 %Percent of total loans0.5 %0.6 %

2018


Credit Quality Information:
The following tables present total loans by risk categories and gross charge-offs by year of origination. Loans acquired from Charter, Mackinac and CountyAcquired loans have been included in the September 30, 2022 and December 31, 2021 tables based upon the actual origination date.
September 30, 2022Amortized Cost Basis by Origination Year
September 30, 2023September 30, 2023Amortized Cost Basis by Origination Year
(in thousands)(in thousands)20222021202020192018PriorRevolvingRevolving to TermTOTAL(in thousands)20232022202120202019PriorRevolvingRevolving to TermTOTAL
Commercial & industrialCommercial & industrialCommercial & industrial
Grades 1-4Grades 1-4$254,713 $246,195 $108,418 $76,355 $52,099 $83,341 $349,324 $— $1,170,445 Grades 1-4$152,385 $254,446 $184,778 $73,488 $53,351 $96,269 $334,059 $— $1,148,776 
Grade 5Grade 57,187 7,423 11,052 2,084 2,734 4,344 18,807 — 53,631 Grade 55,350 10,296 6,779 2,908 1,246 7,364 24,477 — 58,420 
Grade 6Grade 6158 1,649 675 638 453 11,972 14,718 — 30,263 Grade 6— 591 612 194 1,028 1,850 — 4,279 
Grade 7Grade 7552 352 3,384 2,666 802 1,149 5,008 — 13,913 Grade 74,444 4,600 2,653 2,372 1,952 7,205 3,088 — 26,314 
TotalTotal$262,610 $255,619 $123,529 $81,743 $56,088 $100,806 $387,857 $— $1,268,252 Total$162,179 $269,933 $194,822 $78,962 $56,553 $111,866 $363,474 $— $1,237,789 
Current period gross charge-offsCurrent period gross charge-offs$— $(77)$(114)$— $— $(197)$(15)$— $(403)
Owner-occupied CREOwner-occupied CREOwner-occupied CRE
Grades 1-4Grades 1-4$128,054 $189,922 $111,622 $104,840 $93,619 $269,617 $7,952 $— $905,626 Grades 1-4$101,687 $157,461 $186,745 $98,057 $90,223 $277,024 $3,114 $— $914,311 
Grade 5Grade 52,868 4,750 2,824 2,826 3,875 14,325 172 — 31,640 Grade 5949 3,754 9,854 5,362 1,481 15,158 212 — 36,770 
Grade 6Grade 6— — — 2,388 — 887 — — 3,275 Grade 6— — 348 1,545 605 150 — — 2,648 
Grade 7Grade 7440 414 6,244 377 85 6,832 — — 14,392 Grade 7— 218 1,024 6,916 354 8,861 295 — 17,668 
TotalTotal$131,362 $195,086 $120,690 $110,431 $97,579 $291,661 $8,124 $— $954,933 Total$102,636 $161,433 $197,971 $111,880 $92,663 $301,193 $3,621 $— $971,397 
Current period gross charge-offsCurrent period gross charge-offs$— $— $— $— $— $(301)$— $— $(301)
AgriculturalAgriculturalAgricultural
Grades 1-4Grades 1-4$238,387 $154,364 $93,529 $26,185 $20,967 $135,426 $195,784 $— $864,642 Grades 1-4$72,777 $282,254 $136,796 $80,960 $23,694 $144,223 $252,202 $— $992,906 
Grade 5Grade 512,109 15,525 2,823 2,028 1,504 42,561 23,090 — 99,640 Grade 52,809 11,201 6,003 725 384 33,751 14,316 — 69,189 
Grade 6Grade 649 1,491 31 33 — 5,322 425 — 7,351 Grade 6— 134��1,114 — 51 2,293 207 — 3,799 
Grade 7Grade 77,072 2,651 863 2,024 3,655 20,388 9,212 — 45,865 Grade 73,851 6,898 6,455 492 1,865 14,764 8,042 — 42,367 
TotalTotal$257,617 $174,031 $97,246 $30,270 $26,126 $203,697 $228,511 $— $1,017,498 Total$79,437 $300,487 $150,368 $82,177 $25,994 $195,031 $274,767 $— $1,108,261 
Current period gross charge-offsCurrent period gross charge-offs$— $— $— $— $— $(66)$— $— $(66)
CRE investmentCRE investmentCRE investment
Grades 1-4Grades 1-4$167,931 $228,709 $195,020 $141,749 $79,790 $261,027 $13,890 $— $1,088,116 Grades 1-4$27,123 $183,799 $247,563 $172,237 $117,114 $294,916 $11,445 $— $1,054,197 
Grade 5Grade 5784 1,664 5,252 3,131 983 24,997 — — 36,811 Grade 52,802 7,859 14,857 8,634 10,066 21,927 49 — 66,194 
Grade 6Grade 6— — — 1,183 2,029 1,078 206 — 4,496 Grade 6— — — — — 1,357 65 — 1,422 
Grade 7Grade 7— — — 73 249 2,991 215 — 3,528 Grade 7— 55 21 — 1,043 8,006 — — 9,125 
TotalTotal$168,715 $230,373 $200,272 $146,136 $83,051 $290,093 $14,311 $— $1,132,951 Total$29,925 $191,713 $262,441 $180,871 $128,223 $326,206 $11,559 $— $1,130,938 
Current period gross charge-offsCurrent period gross charge-offs$— $— $— $— $— $— $— $— $— 
Construction & land developmentConstruction & land developmentConstruction & land development
Grades 1-4Grades 1-4$82,695 $139,561 $15,958 $9,979 $27,553 $14,936 $14,361 $— $305,043 Grades 1-4$37,180 $153,809 $88,212 $9,610 $5,288 $28,329 $2,070 $— $324,498 
Grade 5Grade 540 — — 513 — 22 — — 575 Grade 5— 26 127 1,275 508 89 — — 2,025 
Grade 6Grade 6— — — — — — — — — Grade 6— — — — — — — — — 
Grade 7Grade 734 — — — — 794 — — 828 Grade 747 — — — — 92 85 — 224 
TotalTotal$82,769 $139,561 $15,958 $10,492 $27,553 $15,752 $14,361 $— $306,446 Total$37,227 $153,835 $88,339 $10,885 $5,796 $28,510 $2,155 $— $326,747 
Current period gross charge-offsCurrent period gross charge-offs$— $— $— $— $— $— $— $— $— 
Residential constructionResidential constructionResidential construction
Grades 1-4Grades 1-4$61,266 $32,309 $1,490 $125 $338 $664 $5,094 $— $101,286 Grades 1-4$35,996 $32,539 $5,279 $1,101 $125 $1,209 $40 $— $76,289 
Grade 5Grade 5— — — — — — — — — Grade 5— — — — — — — — — 
Grade 6Grade 6— — — — — — — — — Grade 6— — — — — — — — — 
Grade 7Grade 7— — — — — — — — — Grade 7— — — — — — — — — 
TotalTotal$61,266 $32,309 $1,490 $125 $338 $664 $5,094 $— $101,286 Total$35,996 $32,539 $5,279 $1,101 $125 $1,209 $40 $— $76,289 
Current period gross charge-offsCurrent period gross charge-offs$— $— $— $— $— $— $— $— $— 
Residential first mortgageResidential first mortgageResidential first mortgage
Grades 1-4Grades 1-4$261,535 $266,465 $151,436 $73,915 $32,871 $167,038 $2,595 $$955,858 Grades 1-4$125,176 $377,475 $256,628 $134,035 $59,281 $168,739 $614 $$1,121,951 
Grade 5Grade 5928 1,349 1,006 2,147 2,295 418 — — 8,143 Grade 5— 1,296 1,259 1,262 2,538 2,684 — — 9,039 
Grade 6Grade 6— — — 717 — — — — 717 Grade 6— — — — — — — — — 
Grade 7Grade 7— 332 211 410 225 4,488 — — 5,666 Grade 7— 150 467 485 1,074 3,582 — — 5,758 
TotalTotal$262,463 $268,146 $152,653 $77,189 $35,391 $171,944 $2,595 $$970,384 Total$125,176 $378,921 $258,354 $135,782 $62,893 $175,005 $614 $$1,136,748 
Current period gross charge-offsCurrent period gross charge-offs$— $— $— $— $— $— $— $— $— 
Residential junior mortgageResidential junior mortgageResidential junior mortgage
Grades 1-4Grades 1-4$7,864 $4,875 $5,314 $3,227 $1,745 $3,439 $144,053 $5,293 $175,810 Grades 1-4$12,538 $7,607 $3,915 $4,360 $2,848 $4,110 $153,322 $6,446 $195,146 
Grade 5Grade 5— — — — — 144 — — 144 Grade 5— — — — — — — — — 
Grade 6Grade 6— — — — — — — — — Grade 6— — — — — — — — — 
Grade 7Grade 7— 209 — 27 — 86 152 — 474 Grade 7— 32 202 — — 14 38 — 286 
TotalTotal$7,864 $5,084 $5,314 $3,254 $1,745 $3,669 $144,205 $5,293 $176,428 Total$12,538 $7,639 $4,117 $4,360 $2,848 $4,124 $153,360 $6,446 $195,432 
Current period gross charge-offsCurrent period gross charge-offs$— $— $— $— $— $(96)$— $— $(96)
Retail & otherRetail & otherRetail & other
Grades 1-4Grades 1-4$11,363 $9,873 $4,751 $3,677 $1,220 $24,608 $667 $— $56,159 Grades 1-4$7,281 $8,932 $6,202 $2,925 $2,045 $4,042 $24,107 $— $55,534 
Grade 5Grade 5— — — — — — — — — Grade 5— — 18 — — — — — 18 
Grade 6Grade 6— — — — — — — — — Grade 6— — — — — — — — — 
Grade 7Grade 7— — 16 30 52 — — 100 Grade 7— — 26 10 67 — — 104 
TotalTotal$11,363 $9,873 $4,767 $3,679 $1,250 $24,660 $667 $— $56,259 Total$7,281 $8,932 $6,246 $2,935 $2,046 $4,109 $24,107 $— $55,656 
Current period gross charge-offsCurrent period gross charge-offs$(6)$(1)$— $(1)$— $(52)$(165)$— $(225)
Total loansTotal loans$1,246,029 $1,310,082 $721,919 $463,319 $329,121 $1,102,946 $805,725 $5,296 $5,984,437 Total loans$592,395 $1,505,432 $1,167,937 $608,953 $377,141 $1,147,253 $833,697 $6,449 $6,239,257 

2119


December 31, 2021Amortized Cost Basis by Origination Year
December 31, 2022December 31, 2022Amortized Cost Basis by Origination Year
(in thousands)(in thousands)20212020201920182017PriorRevolvingRevolving to TermTOTAL(in thousands)20222021202020192018PriorRevolvingRevolving to TermTOTAL
Commercial & industrialCommercial & industrialCommercial & industrial
Grades 1-4Grades 1-4$282,369 $146,131 $99,702 $69,478 $50,557 $71,247 $288,115 $— $1,007,599 Grades 1-4$317,394 $226,065 $101,374 $68,884 $50,189 $77,589 $360,978 $— $1,202,473 
Grade 5Grade 51,685 1,905 4,369 5,809 4,860 2,097 8,408 — 29,133 Grade 59,938 5,902 10,811 1,530 3,986 4,562 20,617 — 57,346 
Grade 6Grade 6598 54 16 687 67 91 391 — 1,904 Grade 61,459 2,283 629 511 402 11,653 14,047 — 30,984 
Grade 7Grade 7— 440 692 337 976 743 432 — 3,620 Grade 7556 293 3,211 2,990 775 1,070 5,121 — 14,016 
TotalTotal$284,652 $148,530 $104,779 $76,311 $56,460 $74,178 $297,346 $— $1,042,256 Total$329,347 $234,543 $116,025 $73,915 $55,352 $94,874 $400,763 $— $1,304,819 
Current period gross charge-offsCurrent period gross charge-offs$(38)$(41)$(2)$— $(109)$— $— $— $(190)
Owner-occupied CREOwner-occupied CREOwner-occupied CRE
Grades 1-4Grades 1-4$154,578 $94,300 $105,226 $92,128 $75,583 $202,816 $6,945 $— $731,576 Grades 1-4$151,391 $190,313 $105,156 $100,606 $91,479 $252,574 $6,734 $— $898,253 
Grade 5Grade 57,753 3,019 6,529 2,543 2,515 13,905 656 — 36,920 Grade 55,241 3,192 4,287 2,163 4,791 14,632 348 — 34,654 
Grade 6Grade 6— — 1,642 — 20 805 — — 2,467 Grade 6— — 763 2,361 — 877 — — 4,001 
Grade 7Grade 7— 3,124 1,914 — 3,526 6,672 990 — 16,226 Grade 7227 706 6,344 616 — 9,798 — — 17,691 
TotalTotal$162,331 $100,443 $115,311 $94,671 $81,644 $224,198 $8,591 $— $787,189 Total$156,859 $194,211 $116,550 $105,746 $96,270 $277,881 $7,082 $— $954,599 
Current period gross charge-offsCurrent period gross charge-offs$— $— $— $— $— $(555)$— $— $(555)
AgriculturalAgriculturalAgricultural
Grades 1-4Grades 1-4$128,404 $87,844 $28,416 $22,887 $36,298 $86,104 $235,743 $— $625,696 Grades 1-4$275,208 $145,272 $85,413 $25,463 $19,687 $130,849 $249,033 $— $930,925 
Grade 5Grade 514,796 4,183 2,391 915 3,912 48,373 26,778 — 101,348 Grade 513,295 18,178 2,694 1,992 517 43,927 21,199 — 101,802 
Grade 6Grade 638 38 36 — 86 1,049 85 — 1,332 Grade 6115 1,457 28 33 — 5,258 429 — 7,320 
Grade 7Grade 73,284 3,971 3,490 4,201 7,215 31,672 12,519 — 66,352 Grade 77,165 2,632 720 1,977 4,611 19,948 11,507 — 48,560 
TotalTotal$146,522 $96,036 $34,333 $28,003 $47,511 $167,198 $275,125 $— $794,728 Total$295,783 $167,539 $88,855 $29,465 $24,815 $199,982 $282,168 $— $1,088,607 
Current period gross charge-offsCurrent period gross charge-offs$— $— $— $— $— $— $— $— $— 
CRE investmentCRE investmentCRE investment
Grades 1-4Grades 1-4$192,274 $139,127 $136,306 $56,148 $65,026 $162,991 $11,289 $— $763,161 Grades 1-4$205,930 $229,252 $192,527 $134,301 $79,649 $248,595 $11,383 $— $1,101,637 
Grade 5Grade 511,081 3,001 6,497 3,945 6,726 17,527 — — 48,777 Grade 5567 1,649 3,578 4,266 3,086 24,897 — — 38,043 
Grade 6Grade 6— — — — — — — — — Grade 6— — — 1,170 2,396 2,483 206 — 6,255 
Grade 7Grade 7— — 456 141 1,352 3,943 231 — 6,123 Grade 7— — 121 299 245 3,140 209 — 4,014 
TotalTotal$203,355 $142,128 $143,259 $60,234 $73,104 $184,461 $11,520 $— $818,061 Total$206,497 $230,901 $196,226 $140,036 $85,376 $279,115 $11,798 $— $1,149,949 
Current period gross charge-offsCurrent period gross charge-offs$— $— $— $— $— $— $— $— $— 
Construction & land developmentConstruction & land developmentConstruction & land development
Grades 1-4Grades 1-4$81,891 $72,415 $12,547 $19,511 $1,184 $11,274 $10,943 $— $209,765 Grades 1-4$104,804 $140,727 $12,188 $9,747 $23,811 $13,138 $13,235 $— $317,650 
Grade 5Grade 5640 — 521 919 — 119 — — 2,199 Grade 537 — — 14 — 95 — — 146 
Grade 6Grade 6— — — — — — — — — Grade 6— — — — — — — — — 
Grade 7Grade 7— — — — 17 1,054 — — 1,071 Grade 733 — — — — 771 — — 804 
TotalTotal$82,531 $72,415 $13,068 $20,430 $1,201 $12,447 $10,943 $— $213,035 Total$104,874 $140,727 $12,188 $9,761 $23,811 $14,004 $13,235 $— $318,600 
Current period gross charge-offsCurrent period gross charge-offs$— $— $— $— $— $— $— $— $— 
Residential constructionResidential constructionResidential construction
Grades 1-4Grades 1-4$58,352 $9,998 $155 $344 $1,072 $380 $— $— $70,301 Grades 1-4$92,417 $16,774 $966 $123 $336 $229 $3,547 $— $114,392 
Grade 5Grade 5— — 52 — — — — — 52 Grade 5— — — — — — — — — 
Grade 6Grade 6— — — — — — — — — Grade 6— — — — — — — — — 
Grade 7Grade 7— — — — — — — — — Grade 7— — — — — — — — — 
TotalTotal$58,352 $9,998 $207 $344 $1,072 $380 $— $— $70,353 Total$92,417 $16,774 $966 $123 $336 $229 $3,547 $— $114,392 
Current period gross charge-offsCurrent period gross charge-offs$— $— $— $— $— $— $— $— $— 
Residential first mortgageResidential first mortgageResidential first mortgage
Grades 1-4Grades 1-4$256,082 $152,932 $168,705 $22,568 $20,147 $82,479 $1,840 $$704,757 Grades 1-4$318,628 $272,011 $147,857 $68,975 $31,208 $162,153 $2,080 $$1,002,915 
Grade 5Grade 5713 529 3,094 — — 1,508 — — 5,844 Grade 51,494 758 997 1,803 2,272 465 — — 7,789 
Grade 6Grade 6— — — — — — — — — Grade 6— — — 711 — — — — 711 
Grade 7Grade 7— — 560 225 73 2,524 — — 3,382 Grade 7154 329 188 349 197 4,303 — — 5,520 
TotalTotal$256,795 $153,461 $172,359 $22,793 $20,220 $86,511 $1,840 $$713,983 Total$320,276 $273,098 $149,042 $71,838 $33,677 $166,921 $2,080 $$1,016,935 
Current period gross charge-offsCurrent period gross charge-offs$— $— $— $— $— $(65)$— $— $(65)
Residential junior mortgageResidential junior mortgageResidential junior mortgage
Grades 1-4Grades 1-4$3,194 $3,139 $3,021 $1,501 $512 $1,969 $115,817 $1,426 $130,579 Grades 1-4$10,119 $4,580 $5,207 $3,151 $1,573 $3,409 $142,784 $5,762 $176,585 
Grade 5Grade 5— — 29 — — — 439 — 468 Grade 5— — — — — 143 165 — 308 
Grade 6Grade 6— — — — — — — — — Grade 6— — — — — — — — — 
Grade 7Grade 7— — 172 — 23 44 138 — 377 Grade 7— 206 — — — 24 209 — 439 
TotalTotal$3,194 $3,139 $3,222 $1,501 $535 $2,013 $116,394 $1,426 $131,424 Total$10,119 $4,786 $5,207 $3,151 $1,573 $3,576 $143,158 $5,762 $177,332 
Current period gross charge-offsCurrent period gross charge-offs$— $— $— $— $— $— $— $— $— 
Retail & otherRetail & otherRetail & other
Grades 1-4Grades 1-4$13,676 $6,886 $5,826 $2,053 $1,882 $20,102 $275 $— $50,700 Grades 1-4$12,318 $8,957 $4,221 $3,188 $1,035 $24,950 $492 $— $55,161 
Grade 5Grade 5— — — — — — — — — Grade 5— 23 — — — — — — 23 
Grade 6Grade 6— — — — — — — — — Grade 6— — — — — — — — — 
Grade 7Grade 7— 24 19 — 62 — — 107 Grade 7— 23 22 30 — — 82 
TotalTotal$13,676 $6,910 $5,828 $2,072 $1,882 $20,164 $275 $— $50,807 Total$12,318 $9,003 $4,243 $3,190 $1,065 $24,955 $492 $— $55,266 
Current period gross charge-offsCurrent period gross charge-offs$— $(1)$(6)$(1)$— $— $(215)$— $(223)
Total loansTotal loans$1,211,408 $733,060 $592,366 $306,359 $283,629 $771,550 $722,034 $1,430 $4,621,836 Total loans$1,528,490 $1,271,582 $689,302 $437,225 $322,275 $1,061,537 $864,323 $5,765 $6,180,499 

2220


The following tables present total loans by risk categories.
September 30, 2022
(in thousands)Grades 1- 4Grade 5Grade 6Grade 7Total
Commercial & industrial$1,170,445 $53,631 $30,263 $13,913 $1,268,252 
Owner-occupied CRE905,626 31,640 3,275 14,392 954,933 
Agricultural864,642 99,640 7,351 45,865 1,017,498 
CRE investment1,088,116 36,811 4,496 3,528 1,132,951 
Construction & land development305,043 575 — 828 306,446 
Residential construction101,286 — — — 101,286 
Residential first mortgage955,858 8,143 717 5,666 970,384 
Residential junior mortgage175,810 144 — 474 176,428 
Retail & other56,159 — — 100 56,259 
Total loans$5,622,985 $230,584 $46,102 $84,766 $5,984,437 
Percent of total93.9 %3.9 %0.8 %1.4 %100.0 %
December 31, 2021
(in thousands)Grades 1- 4Grade 5Grade 6Grade 7Total
Commercial & industrial$1,007,599 $29,133 $1,904 $3,620 $1,042,256 
Owner-occupied CRE731,576 36,920 2,467 16,226 787,189 
Agricultural625,696 101,348 1,332 66,352 794,728 
CRE investment763,161 48,777 — 6,123 818,061 
Construction & land development209,765 2,199 — 1,071 213,035 
Residential construction70,301 52 — — 70,353 
Residential first mortgage704,757 5,844 — 3,382 713,983 
Residential junior mortgage130,579 468 — 377 131,424 
Retail & other50,700 — — 107 50,807 
Total loans$4,294,134 $224,741 $5,703 $97,258 $4,621,836 
Percent of total92.9 %4.9 %0.1 %2.1 %100.0 %

An internal loan review function rates loans using a grading system based on different risk categories. Loans with a Substandard grade are considered to have a greater risk of loss and may be assigned allocations for loss based on specific review of the weaknesses observed in the individual credits. Such loans are monitored by the loan review function to help ensure early identification of any deterioration. A description of the loan risk categories used by the Company follows.
Grades 1-4, Pass: Credits exhibit adequate cash flows, appropriate management and financial ratios within industry norms and/or are supported by sufficient collateral. Some credits in these rating categories may require a need for monitoring but elements of concern are not severe enough to warrant an elevated rating.
Grade 5, Watch: Credits with this rating are adequately secured and performing but are being monitored due to the presence of various short-term weaknesses which may include unexpected, short-term adverse financial performance, managerial problems, potential impact of a decline in the entire industry or local economy and delinquency issues. Loans to individuals or loans supported by guarantors with marginal net worth or collateral may be included in this rating category.
Grade 6, Special Mention: Credits with this rating have potential weaknesses that, without the Company’s attention and correction may result in deterioration of repayment prospects. These assets are considered Criticized Assets. Potential weaknesses may include adverse financial trends for the borrower or industry, repeated lack of compliance with Company requests, increasing debt to net worth, serious management conditions and decreasing cash flow.
Grade 7, Substandard: Assets with this rating are characterized by the distinct possibility the Company will sustain some loss if deficiencies are not corrected. All foreclosures, liquidations, and nonaccrual loans are considered to be categorized in this rating, regardless of collateral sufficiency.

23


Troubled Debt RestructuringsModifications to Borrowers Experiencing Financial Difficulty:
Loans are considered troubled debt restructurings if concessions have been grantedOn January 1, 2023, the Company adopted ASU 2022-02, which eliminated the accounting guidance for TDRs by creditors and enhanced the disclosure requirements for certain loan modifications to borrowers who are experiencing financial difficulties.difficulty. The following table presents the loan compositionamortized cost of nonaccrualloans that were both experiencing financial difficulty and performing TDRs.were modified during the nine months ended September 30, 2023, aggregated by portfolio segment and type of modification.
September 30, 2022December 31, 2021
(in thousands)(in thousands)PerformingNonaccrualTotalPerformingNonaccrualTotal(in thousands)Payment DelayTerm ExtensionInterest Rate ReductionTerm Extension & Interest Rate ReductionTotal% of Total Loans
Commercial & industrialCommercial & industrial$— $223 $223 $— $197 $197 Commercial & industrial$433 $— $87 $— $520 0.04 %
Owner-occupied CREOwner-occupied CRE— 2,639 2,639 3,466 2,888 6,354 Owner-occupied CRE— — — — — — %
AgriculturalAgricultural— 14,181 14,181 — 16,835 16,835 Agricultural107 — — — 107 0.01 %
CRE investmentCRE investment— 299 299 918 — 918 CRE investment— — — — — — %
Construction & land developmentConstruction & land development— 75 75 — 308 308 Construction & land development— — — — — — %
Residential first mortgageResidential first mortgage— 13 13 913 15 928 Residential first mortgage— — — — — — %
Residential junior mortgage— — — 146 — 146 
TotalTotal$— $17,430 $17,430 $5,443 $20,243 $25,686 Total$540 $— $87 $— $627 0.01 %
The followingloans presented in the table presentsabove have had more than insignificant payment delays (which the numberCompany has defined as payment delays in excess of three months). These modified loans are closely monitored by the Company to understand the effectiveness of its modification efforts, and such loans generally remain in nonaccrual status pending a sustained period of performance in accordance with the modified in a TDR, pre-modification loan balance, and post-modification loan balance by loan composition.terms.
 September 30, 2022December 31, 2021
($ in thousands)Number of LoansPre-Modification BalanceCurrent BalanceNumber of LoansPre-Modification BalanceCurrent Balance
Commercial & industrial$240 $223 $200 $197 
Owner-occupied CRE5,138 2,639 6,913 6,354 
Agricultural26 16,237 14,181 31 17,228 16,835 
CRE investment301 299 919 918 
Construction & land development533 75 533 308 
Residential first mortgage17 13 931 928 
Residential junior mortgage— — — 166 146 
Total36 $22,466 $17,430 44 $26,890 $25,686 
TDR concessions may include payment schedule modifications, interest rate concessions, maturity date extensions, bankruptcies, or some combination of these concessions. There were no loans which were classified as troubled debt restructurings during the previous twelve months that subsequently defaulted during 2021 or through September 30, 2022. As of September 30, 2022,2023, there were no loans made to borrowers experiencing financial difficulty that were modified during the current period and subsequently defaulted, and there were no commitments to lend additional funds to debtors whose terms have beensuch debtors.
Troubled Debt Restructuring Disclosures Prior to Adoption of ASU 2022-02:
As of December 31, 2022, the Company had restructured loans totaling $18 million, with a pre-modification balance of $24 million, all of which were also reflected as nonaccrual loans. There were no restructured loans modified in troubled debt restructurings.
during 2022 that subsequently defaulted, and there were no commitments to lend additional funds to such debtors.

21



Note 7 – Goodwill and Other Intangibles and Servicing Rights
Management periodically reviews the carrying value of its intangible assets to determine if any impairment has occurred, in which case an impairment charge would be recorded as an expense in the period of impairment, or whether changes in circumstances have occurred that would require a revision to the remaining useful life that would affect expense prospectively. In making such determination, management evaluates whether there are any adverse qualitative factors indicating that an impairment may exist, as well as the performance on an undiscounted basis, of the underlying operations or assets which give rise to the intangible. Management also regularly monitors economic factors for potential impairment indications on the value of our franchise, stability of deposits, and the wealth client base, underlying our goodwill core deposit intangible, and customer list intangibles,other intangibles. Management concluded no impairment was indicated for the nine months ended September 30, 2023 and determined no impairments were indicated.the year ended December 31, 2022. A summary of goodwill and other intangibles was as follows.
(in thousands)September 30, 2022December 31, 2021
Goodwill$369,849 $317,189 
Core deposit intangibles34,791 19,445 
Customer list intangibles2,477 2,858 
    Other intangibles37,268 22,303 
Goodwill and other intangibles, net$407,117 $339,492 
24


(in thousands)September 30, 2023December 31, 2022
Goodwill$367,387 $367,387 
Core deposit intangibles26,842 32,701 
Customer list intangibles1,979 2,350 
    Other intangibles28,821 35,051 
Goodwill and other intangibles, net$396,208 $402,438 
Goodwill: A summary of goodwill was as follows. During 2022, goodwill increased due to the Charter acquisition, while during 2021, goodwill increased due to the acquisitions of Mackinac and County. See Note 2 for additional information on the Company’s acquisitions.acquisition.
Nine Months EndedYear EndedNine Months EndedYear Ended
(in thousands)(in thousands)September 30, 2022December 31, 2021(in thousands)September 30, 2023December 31, 2022
Goodwill:Goodwill:Goodwill:
Goodwill at beginning of yearGoodwill at beginning of year$317,189 $163,151 Goodwill at beginning of year$367,387 $317,189 
AcquisitionsAcquisitions52,660 154,038 Acquisitions— 49,970 
Purchase accounting adjustmentPurchase accounting adjustment— 228 
Goodwill at end of periodGoodwill at end of period$369,849 $317,189 Goodwill at end of period$367,387 $367,387 
Other intangible assets: Other intangible assets, consisting of core deposit intangibles and customer list intangibles, are amortized over their estimated finite lives. A summary of other intangible assets was as follows. During 2022, core deposit intangibles increased due to the Charter acquisition, while during 2021, core deposit intangibles increased due to the acquisitions of Mackinac and County. See Note 2 for additional information on the Company’s acquisitions.acquisition.
Nine Months EndedYear EndedNine Months EndedYear Ended
(in thousands)(in thousands)September 30, 2022December 31, 2021(in thousands)September 30, 2023December 31, 2022
Core deposit intangibles:Core deposit intangibles:Core deposit intangibles:
Gross carrying amountGross carrying amount$60,724 $41,360 Gross carrying amount$60,724 $60,724 
Accumulated amortizationAccumulated amortization(25,933)(21,915)Accumulated amortization(33,882)(28,023)
Net book valueNet book value$34,791 $19,445 Net book value$26,842 $32,701 
Additions during the periodAdditions during the period$19,364 $13,595 Additions during the period$— $19,364 
Amortization during the periodAmortization during the period$4,018 $2,987 Amortization during the period$5,859 $6,108 
Customer list intangibles:Customer list intangibles:Customer list intangibles:
Gross carrying amountGross carrying amount$5,523 $5,523 Gross carrying amount$5,523 $5,523 
Accumulated amortizationAccumulated amortization(3,046)(2,665)Accumulated amortization(3,544)(3,173)
Net book valueNet book value$2,477 $2,858 Net book value$1,979 $2,350 
Amortization during the periodAmortization during the period$381 $507 Amortization during the period$371 $508 
22


Mortgage servicing rights (“MSR”): Mortgage servicing rights are amortized in proportion to and over the period of estimated net servicing income, and assessed for impairment at each reporting date, with the amortization recorded in mortgage income, net, in the consolidated statements of income. Mortgage servicing rights are carried at the lower of the initial capitalized amount, net of accumulated amortization, or estimated fair value, and are included in other assets in the consolidated balance sheets. A summary of the changes in the mortgage servicing rights asset was as follows.
Nine Months EndedYear Ended
(in thousands)September 30, 2022December 31, 2021
Mortgage servicing rights asset:
MSR asset at beginning of year$13,636 $10,230 
Capitalized MSR2,127 4,329 
MSR asset acquired— 1,322 
Amortization during the period(2,145)(2,245)
MSR asset at end of period$13,618 $13,636 
Valuation allowance at beginning of year$(1,200)$(1,000)
Additions— (500)
Reversals700 300 
Valuation allowance at end of period$(500)$(1,200)
MSR asset, net$13,118 $12,436 
Fair value of MSR asset at end of period$16,740 $15,599 
Residential mortgage loans serviced for others$1,649,187 $1,583,577 
Net book value of MSR asset to loans serviced for others0.80 %0.79 %
The Company periodically evaluates its mortgage servicing rights asset for impairment. At each reporting date, impairment is assessed based on estimated fair value using estimated prepayment speeds of the underlying mortgage loans serviced and stratification based on the risk characteristics of the underlying loans (predominantly loan type and note interest rate). See Note 9 for additional information on the fair valueA summary of the MSR asset.changes in the mortgage servicing rights asset was as follows.
Nine Months EndedYear Ended
(in thousands)September 30, 2023December 31, 2022
Mortgage servicing rights asset:
MSR asset at beginning of year$13,080 $13,636 
Capitalized MSR1,104 2,327 
Amortization during the period(2,248)(2,883)
MSR asset at end of period$11,936 $13,080 
Valuation allowance at beginning of year$(500)$(1,200)
Reversals500 700 
Valuation allowance at end of period$— $(500)
MSR asset, net$11,936 $12,580 
Fair value of MSR asset at end of period$15,847 $17,215 
Residential mortgage loans serviced for others$1,610,318 $1,637,109 
Net book value of MSR asset to loans serviced for others0.74 %0.77 %
Loan servicing rights (“LSR”): The Company acquired an LSR asset in connection with its acquisition of County on December 3, 2021 (see Note 2 for additional information on the County acquisition). The LSR asset was $13 million at September 30, 2022, and related to approximately $553 million of unpaid principal balances of loans serviced for others. The LSR assetwhich will
25


be amortized on an accelerated basis over the estimated remaining loan service period as theperiod. The Company does not expect to add new loans to this servicing portfolio. See Note 9 for additional information on the fair valueA summary of the changes in the LSR asset.asset were as follows.
Nine Months EndedYear Ended
(in thousands)September 30, 2023December 31, 2022
Loan servicing rights asset:
LSR asset at beginning of year$11,039 $20,055 
Amortization during the period(1,656)(9,016)
LSR asset at end of period$9,383 $11,039 
Agricultural loans serviced for others$502,901 $538,392 
The following table shows the estimated future amortization expense for amortizing intangible assets and the servicing assets. The projections are based on existing asset balances, the current interest rate environment and estimated prepayment speeds as of September 30, 2022.2023. The actual amortization expense the Company recognizes in any given period may be significantly different depending upon acquisition or sale activities, changes in interest rates, prepayment speeds, market conditions, regulatory requirements and events or circumstances that indicate the carrying amount of an asset may not be recoverable.
(in thousands)(in thousands)Core deposit
intangibles
Customer list
intangibles
MSR assetLSR asset(in thousands)Core deposit
intangibles
Customer list
intangibles
MSR assetLSR asset
Year ending December 31,Year ending December 31,Year ending December 31,
2022 (remaining three months)$2,091 $126 $386 $2,004 
20237,589 483 2,735 6,345 
2023 (remaining three months)2023 (remaining three months)$1,730 $112 $687 $552 
202420246,298 449 2,635 3,673 20246,298 449 2,661 1,962 
202520255,161 449 1,884 1,020 20255,161 449 1,978 1,717 
202620263,983 249 1,394 — 20263,983 249 1,457 1,472 
202720273,218 166 1,394 — 20273,218 166 1,457 1,227 
202820282,622 166 1,456 981 
ThereafterThereafter6,451 555 3,190 — Thereafter3,830 388 2,240 1,472 
TotalTotal$34,791 $2,477 $13,618 $13,042 Total$26,842 $1,979 $11,936 $9,383 


23


Note 8 – Short and Long-Term Borrowings
Short-Term Borrowings:
Short-term borrowings include any borrowing with an original maturity of one year or less. AtThe Company did not have any short-term borrowings outstanding at September 30, 2023. At December 31, 2022, short-term borrowings included $280$317 million of short-term FHLB advances, comprised of $80$117 million due in October 2022January 2023 at a weighted average rate of 2.70%4.29% and $200 million due in September 2023 at a weighted average rate of 4.30%. The Company did not have any outstanding short-term borrowings at December 31, 2021.
Long-Term Borrowings:
Long-term borrowings include any borrowing with an original maturity greater than one year. The components of long-term borrowings were as follows.
(in thousands)(in thousands)September 30, 2022December 31, 2021(in thousands)September 30, 2023December 31, 2022
FHLB advancesFHLB advances$33,000 $25,000 FHLB advances$5,000 $33,000 
Junior subordinated debenturesJunior subordinated debentures39,512 38,885 Junior subordinated debentures40,344 39,720 
Subordinated notesSubordinated notes152,724 153,030 Subordinated notes152,410 152,622 
Total long-term borrowingsTotal long-term borrowings$225,236 $216,915 Total long-term borrowings$197,754 $225,342 
FHLB Advances: The Federal Home Loan Bank (“FHLB”) advances bearadvance bears a fixed rates, requirerate, requires interest-only monthly payments, and havehas a maturity dates through February 2030.date of March 2025. The weighted average rate of the FHLB advances was 1.09%1.55% at September 30, 20222023 and 0.59%1.09% at December 31, 2021.2022.
Junior Subordinated Debentures: Each of the junior subordinated debentures was issued to an underlying statutory trust (the “statutory trusts”), which issued trust preferred securities and common securities and used the proceeds from the issuance of the common and the trust preferred securities to purchase the junior subordinated debentures of the Company. The debentures represent the sole asset of the statutory trusts. All of the common securities of the statutory trusts are owned by the Company. The statutory trusts are not included in the consolidated financial statements. The net effect of all the documents entered into with respect to the trust preferred securities is that the Company, through payments on its debentures, is liable for the distributions and other payments required on the trust preferred securities. Interest on all debentures is current. Any applicable discounts (initially recorded to carry an acquired debenture at its then estimated fair value) are being accreted to interest expense over the remaining life of the debenture. All the junior subordinated debentures are currently callable and may be redeemed in part or in full, at par, plus any accrued but unpaid interest. At September 30, 20222023 and December 31, 2021,2022, approximately $38$39 million and $37$38 million, respectively, of trust preferred securities qualify as Tier 1 capital.

Subordinated Notes (the “Notes”): In July 2021, the Company completed the private placement of $100 million in fixed-to-floating rate subordinated notes due in 2031, with a fixed annual rate of 3.125% for the first five years, and will reset quarterly thereafter to the then current three-month Secured Overnight Financing Rate (“SOFR”) plus 237.5 basis points. The Notes due in 2031 are redeemable beginning July 15, 2026 and quarterly thereafter on any interest payment date.
26


In December 2021, Nicolet assumed two subordinated note issuances at a premium as the result of the Countyan acquisition. One issuance was $30 million in fixed-to-floating rate subordinated notes due in 2028, with a fixed annual interest rate of 5.875% for the first five years, and will reset quarterly thereafter to the then current three-month SOFR, as adjusted for the LIBOR to SOFR spread adjustment, plus 2.88%. The Company intends to redeem these notes on the next interest payment date in fourth quarter 2023. The second issuance was $22 million in fixed-to-floating rate subordinated notes due in 2030, with a fixed annual interest rate of 7.00% for the first five years, and will reset quarterly thereafter to the then current SOFR plus 687.5 basis points. The Notes due in 2028 are redeemable beginning June 1, 2023, and quarterly thereafter on any interest payment date, while the Notes due in 2030 are redeemable beginning June 30, 2025, and quarterly thereafter on any interest payment date. All Notes qualify as Tier 2 capital for regulatory purposes.purposes, and are discounted in accordance with regulations when the debt has five years or less remaining to maturity.
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The following table shows the breakdown of junior subordinated debentures and subordinated notes.
As of September 30, 2022As of December 31, 2021As of September 30, 2023As of December 31, 2022
(in thousands)(in thousands)Maturity
Date
Interest
 Rate
Par
Unamortized Premium /(Discount) / Debt Issue Costs (1)

Carrying
Value
Interest
 Rate

Carrying
Value
(in thousands)Maturity
Date
Interest
 Rate
Par
Unamortized Premium /(Discount) / Debt Issue Costs (1)

Carrying
Value
Interest
 Rate

Carrying
Value
Junior Subordinated Debentures:Junior Subordinated Debentures:Junior Subordinated Debentures:
Mid-Wisconsin Statutory Trust I (2)
Mid-Wisconsin Statutory Trust I (2)
12/15/20354.72 %$10,310 $(2,625)$7,685 1.63 %$7,537 
Mid-Wisconsin Statutory Trust I (2)
12/15/20357.10 %$10,310 $(2,429)$7,881 6.20 %$7,734 
Baylake Capital Trust II (3)
Baylake Capital Trust II (3)
9/30/20365.02 %16,598 (3,233)13,365 1.57 %13,187 
Baylake Capital Trust II (3)
9/30/20367.01 %16,598 (2,997)13,601 6.08 %13,424 
First Menasha Statutory Trust (4)
First Menasha Statutory Trust (4)
3/17/20346.32 %5,155 (498)4,657 3.01 %4,624 
First Menasha Statutory Trust (4)
3/17/20348.46 %5,155 (454)4,701 7.53 %4,668 
County Bancorp Statutory Trust II (5)
County Bancorp Statutory Trust II (5)
9/15/20354.82 %6,186 (948)5,238 1.73 %5,061 
County Bancorp Statutory Trust II (5)
9/15/20357.20 %6,186 (792)5,394 6.30 %5,277 
County Bancorp Statutory Trust III (6)
County Bancorp Statutory Trust III (6)
6/15/20364.98 %6,186 (1,006)5,180 1.89 %5,121 
County Bancorp Statutory Trust III (6)
6/15/20367.36 %6,186 (850)5,336 6.46 %5,219 
Fox River Valley Capital Trust (7)
Fox River Valley Capital Trust (7)
5/30/20336.40 %3,610 (223)3,387 6.40 %3,355 
Fox River Valley Capital Trust (7)
5/30/20336.40 %3,610 (179)3,431 6.40 %3,398 
TotalTotal$48,045 $(8,533)$39,512 $38,885 Total$48,045 $(7,701)$40,344 $39,720 
Subordinated Notes:Subordinated Notes:Subordinated Notes:
Subordinated Notes due 2031Subordinated Notes due 20317/15/20313.13 %$100,000 $(785)$99,215 3.13 %$99,057 Subordinated Notes due 20317/15/20313.13 %$100,000 $(576)$99,424 3.13 %$99,267 
County Subordinated Notes due 2028County Subordinated Notes due 20286/1/20285.88 %30,000 189 30,189 5.88 %30,402 County Subordinated Notes due 20286/1/20288.56 %30,000 — 30,000 5.88 %30,119 
County Subordinated Notes due 2030County Subordinated Notes due 20306/30/20307.00 %22,400 920 23,320 7.00 %23,571 County Subordinated Notes due 20306/30/20307.00 %22,400 586 22,986 7.00 %23,236 
TotalTotal$152,400 $324 $152,724 $153,030 Total$152,400 $10 $152,410 $152,622 
(1) Represents the remaining unamortized premium or discount on debt issuances assumed in acquisitions, and represents the unamortized debt issue costs for the debt issued directly by Nicolet.
(2) The debentures, assumed in April 2013 as the result of an acquisition, have a floating rate of three-month LIBORSOFR plus 1.43%, adjusted quarterly. *
(3) The debentures, assumed in April 2016 as a result of an acquisition, have a floating rate of three-month LIBORSOFR plus 1.35%, adjusted quarterly. *
(4) The debentures, assumed in April 2017 as the result of an acquisition, have a floating rate of three-month LIBORSOFR plus 2.79%, adjusted quarterly. *
(5) The debentures, assumed in December 2021 as the result of an acquisition, have a floating rate of three-month LIBORSOFR plus 1.53%, adjusted quarterly. *
(6) The debentures, assumed in December 2021 as the result of an acquisition, have a floating rate of three-month LIBORSOFR plus 1.69%, adjusted quarterly. *
(7) The debentures, assumed in December 2021 as the result of an acquisition, have a floating rate of 5-year LIBORswap rate plus 3.40%, which resets every five years.
* The floating rate on this debenture was originally based on three-month LIBOR. Effective with the cessation of LIBOR, the floating rate on this debenture is now based on three-month CME Term SOFR, plus the spread adjustment of 0.26161%.

Note 9 – Commitments and Contingencies
The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, financial guarantees, and standby letters of credit. Such commitments may involve, to varying degrees, elements of credit risk in excess of amounts recognized on the consolidated balance sheets. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and issuing letters of credit as they do for on-balance sheet financial instruments. See Note 6 for information on the allowance for credit losses-unfunded commitments.
A summary of the contract or notional amount of the Company’s exposure to off-balance sheet risk was as follows.
(in thousands)September 30, 2023December 31, 2022
Commitments to extend credit$1,810,068 $1,850,601 
Financial standby letters of credit18,235 26,530 
Performance standby letters of credit15,814 9,375 
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract, and predominantly included commercial lines of credit with a term of one year or less. The commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.
Financial and performance standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Financial standby letters of credit are issued specifically to facilitate commerce and typically result in the commitment being drawn on when the underlying transaction is consummated between the customer and the third party, while performance standby letters of credit generally are contingent upon the failure of the customer to perform according to the
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terms of the underlying contract with the third party. Both of these guarantees are primarily issued to support public and private borrowing arrangements and, generally, have terms of one year or less. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company holds collateral, which may include accounts receivable, inventory, property, equipment, and income-producing properties, supporting those commitments if deemed necessary. In the event the customer does not perform in accordance with the terms of the agreement with the third-party, the Company would be required to fund the commitment. The maximum potential amount of future payments the Company could be required to make is represented by the contractual amount. If the commitment is funded, the Company would be entitled to seek recovery from the customer.
Interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans held for sale are considered derivative instruments (“mortgage derivatives”) and the contractual amounts were $16 million and $17 million, respectively, at September 30, 2023. In comparison, interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans held for sale totaled $9 million and $9 million, respectively, at December 31, 2022. The net fair value of these mortgage derivatives combined was a net gain of $0.2 million and $0.1 million at September 30, 2023 and December 31, 2022, respectively.
Nicolet is party to various pending and threatened claims and legal proceedings arising in the normal course of business activities, some of which may involve claims for substantial amounts. Although Nicolet has developed policies and procedures to minimize legal noncompliance and the impact of claims and other proceedings and endeavored to procure reasonable amounts of insurance coverage, litigation and regulatory actions present an ongoing risk. With respect to all such claims, Nicolet continuously assesses its potential liability based on the allegations and evidence available. If the facts indicate that it is probable that Nicolet will incur a loss and the amount of such loss can be reasonably estimated, Nicolet will establish an accrual for the probable loss. For matters where a loss is not probable, or the amount of the loss cannot be reasonably estimated, Nicolet does not establish an accrual.
Future developments could result in an unfavorable outcome for or resolution of any one or more of the legal proceedings in which Nicolet is a defendant, which may be material to Nicolet’s business or consolidated results of operations or financial condition for a particular fiscal period or periods. Although it is not possible to predict the outcome of any of these legal proceedings or the range of possible loss, if any, based on the most recent information available, advice of counsel and available insurance coverage, if applicable, management believes that any liability resulting from such proceedings would not have a material adverse effect on our financial position or results of operations.

Note 910 – Fair Value Measurements
Fair value represents the estimated price at which an orderly transaction to sell an asset or transfer a liability would take place between market participants at the measurement date under current market conditions (i.e., an exit price concept), and is a market-based measurement versus an entity-specific measurement. The Company records and/or discloses certain financial instruments on a fair value basis. These financial assets and financial liabilities are measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the observability of the assumptions used to determine fair value. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs that reflect assumptions of the reporting entity about how market participants would price the asset or liability based on the best information available under the circumstances. The three fair value levels are:
Level 1 – quoted market prices in active markets for identical assets or liabilities that a company has the ability to access at the measurement date
Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly
Level 3 – significant unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity
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In instances where the fair value measurement is based on inputs from different levels, the level within which the entire fair value measurement will be categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. This assessment of the significance of an input requires management judgment.
26


Recurring basis fair value measurements:
The following table presents the balances of assets and liabilities measured at fair value on a recurring basis for the periods presented.
(in thousands)(in thousands)Fair Value Measurements Using(in thousands)Fair Value Measurements Using
Measured at Fair Value on a Recurring Basis:Measured at Fair Value on a Recurring Basis:TotalLevel 1Level 2Level 3Measured at Fair Value on a Recurring Basis:TotalLevel 1Level 2Level 3
September 30, 2022
September 30, 2023September 30, 2023
U.S. Treasury securitiesU.S. Treasury securities$37,504 $— $37,504 $— 
U.S. government agency securitiesU.S. government agency securities$184,763 $— $184,763 $— U.S. government agency securities8,221 — 8,221 — 
State, county and municipalsState, county and municipals411,864 — 410,021 1,843 State, county and municipals341,330 — 339,949 1,381 
Mortgage-backed securitiesMortgage-backed securities213,435 — 212,453 982 Mortgage-backed securities306,409 — 305,438 971 
Corporate debt securitiesCorporate debt securities139,535 — 134,214 5,321 Corporate debt securities100,362 — 97,064 3,298 
Securities AFSSecurities AFS$949,597 $— $941,451 $8,146 Securities AFS$793,826 $— $788,176 $5,650 
Other investments (equity securities)Other investments (equity securities)$4,482 $4,482 $— $— Other investments (equity securities)$3,893 $3,893 $— $— 
Derivative assetsDerivative assets— — — — Derivative assets$186 $— $— $186 
Derivative liabilitiesDerivative liabilities— — — — Derivative liabilities$— $— $— $— 
December 31, 2021
December 31, 2022December 31, 2022
U.S. Treasury securitiesU.S. Treasury securities$183,830 $— $183,830 $— 
U.S. government agency securitiesU.S. government agency securities$191,277 $— $191,277 $— U.S. government agency securities2,100 — 2,100 — 
State, county and municipalsState, county and municipals312,737 — 310,316 2,421 State, county and municipals398,188 — 396,315 1,873 
Mortgage-backed securitiesMortgage-backed securities271,262 — 270,260 1,002 Mortgage-backed securities200,932 — 199,951 981 
Corporate debt securitiesCorporate debt securities146,385 — 141,743 4,642 Corporate debt securities132,568 — 127,269 5,299 
Securities AFSSecurities AFS$921,661 $— $913,596 $8,065 Securities AFS$917,618 $— $909,465 $8,153 
Other investments (equity securities)Other investments (equity securities)$5,660 $5,660 $— $— Other investments (equity securities)$4,376 $4,376 $— $— 
Derivative assetsDerivative assets1,064 — 1,064 — Derivative assets$60 $— $— $60 
Derivative liabilitiesDerivative liabilities1,064 — 1,064 — Derivative liabilities$10 $— $— $10 
The following is a description of the valuation methodologies used by the Company for the assets and liabilities measured at fair value on a recurring basis, noted in the tables above.
Securities AFS: Where quoted market prices on securities exchanges are available, the investments are classified as Level 1. Level 1 investments primarily include exchange-traded equity securities. If quoted market prices are not available, fair value is generally determined using prices obtained from independent pricing vendors who use pricing models (with typical inputs including benchmark yields, reported trades for similar securities, issuer spreads or relationship to other benchmark quoted securities), or discounted cash flows, and are classified as Level 2. Examples of these investments include U.S. Treasury securities, U.S. government agency securities, mortgage-backed securities, obligations of state, county and municipals, and certain corporate debt securities. Finally, in certain cases where there is limited activity or less transparency around inputs to the estimated fair value, investments are classified within Level 3 of the hierarchy. Examples of these include private corporate debt securities, which are primarily trust preferred security investments, as well as certain municipal bonds and mortgage-backed securities. At September 30, 20222023 and December 31, 2021,2022, it was determined that carrying value was the best approximation of fair value for these Level 3 securities, based primarily on the internal analysis on these securities.
Derivatives: The derivative assets and liabilities include interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans held for sale, which are considered derivative instruments (“mortgage derivatives”). The fair value of interest rate lock commitments are determined using the projected sale price of individual loans based on changes in the market interest rates, projected pull-through rates (the probability that an interest rate lock commitment will ultimately result in an originated loan), the reduction in the value of the applicant’s option due to the passage of time, and the remaining origination costs to be incurred based on management’s estimate of market costs. The fair value of forward commitments are determined using quoted prices of to-be-announced securities in active markets, or benchmarked to such securities. The derivative assets and liabilities is determined using a discounted cash flow analysisare classified with Level 3 of the expected cash flows of each derivative, which considers the contractual terms of the underlying derivative financial instrument and observable market-based inputs, such as interest rate curves.hierarchy.
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The following table presents the changes in Level 3 securities AFS measured at fair value on a recurring basis.
Nine Months EndedYear Ended
Level 3 Fair Value Measurements:September 30, 2022December 31, 2021
Balance at beginning of year$8,065 $3,130 
Acquired balance750 4,935 
Maturities / Paydowns(442)— 
Unrealized gain / (loss)(227)— 
Balance at end of period$8,146 $8,065 
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(in thousands)Nine Months EndedYear Ended
Level 3 Fair Value Measurements:September 30, 2023December 31, 2022
Balance at beginning of year$8,153 $8,065 
Acquired balance— 750 
Maturities / Paydowns(2,469)(451)
Unrealized gain / (loss)(34)(211)
Balance at end of period$5,650 $8,153 
Nonrecurring basis fair value measurements:
The following table presents the Company’s assets measured at fair value on a nonrecurring basis, aggregated by level in the fair value hierarchy within which those measurements fall.
(in thousands)(in thousands)Fair Value Measurements Using(in thousands)Fair Value Measurements Using
Measured at Fair Value on a Nonrecurring Basis:Measured at Fair Value on a Nonrecurring Basis:TotalLevel 1Level 2Level 3Measured at Fair Value on a Nonrecurring Basis:TotalLevel 1Level 2Level 3
September 30, 2022
September 30, 2023September 30, 2023
Collateral dependent loansCollateral dependent loans$30,217 $— $— $30,217 Collateral dependent loans$22,925 $— $— $22,925 
Other real estate owned (“OREO”)Other real estate owned (“OREO”)2,134 — — 2,134 Other real estate owned (“OREO”)2,031 — — 2,031 
MSR assetMSR asset13,118 — — 13,118 MSR asset11,936 — — 11,936 
LSR asset13,042 — — 13,042 
December 31, 2021
December 31, 2022December 31, 2022
Collateral dependent loansCollateral dependent loans$36,230 $— $— $36,230 Collateral dependent loans$30,951 $— $— $30,951 
OREOOREO11,955 — — 11,955 OREO1,975 — — 1,975 
MSR assetMSR asset12,436 — — 12,436 MSR asset12,580 — — 12,580 
LSR asset20,055 — — 20,055 
The following is a description of the valuation methodologies used by the Company for the items noted in the table above. For collateral dependent loans, the estimated fair value is based upon the present value of expected future cash flows discounted at the loan’s effective interest rate, the estimated fair value of the underlying collateral with consideration for estimated selling costs if satisfaction of the loan depends on the sale of the collateral, or the estimated liquidity of the note. For OREO, the fair value is based upon the estimated fair value of the underlying collateral adjusted for the expected costs to sell. To estimate the fair value of the MSR asset, the underlying serviced loan pools are stratified by interest rate tranche and term of the loan, and a valuation model is used to calculate the present value of the expected future cash flows for each stratum. The servicing valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as costs to service, a discount rate, ancillary income, default rates and losses, and prepayment speeds. Although some of these assumptions are based on observable market data, other assumptions are based on unobservable estimates of what market participants would use to measure fair value.
Financial instruments:
The carrying amounts and estimated fair values of the Company’s financial instruments are shown below.
September 30, 2022
September 30, 2023September 30, 2023
(in thousands)(in thousands)Carrying
Amount
Estimated
Fair Value
Level 1Level 2Level 3(in thousands)Carrying
Amount
Estimated
Fair Value
Level 1Level 2Level 3
Financial assets:Financial assets:Financial assets:
Cash and cash equivalentsCash and cash equivalents$438,282 $438,282 $438,282 $— $— Cash and cash equivalents$545,880 $545,880 $545,880 $— $— 
Certificates of deposit in other banksCertificates of deposit in other banks13,510 13,409 — 13,409 — Certificates of deposit in other banks7,598 7,519 — 7,519 — 
Securities AFSSecurities AFS949,597 949,597 — 941,451 8,146 Securities AFS793,826 793,826 — 788,176 5,650 
Securities HTM686,424 627,639 — 627,639 — 
Other investments, including equity securitiesOther investments, including equity securities79,279 79,279 4,482 58,910 15,887 Other investments, including equity securities58,367 58,367 3,893 43,973 10,501 
Loans held for saleLoans held for sale3,709 3,770 — 3,770 — Loans held for sale6,500 6,641 — 6,641 — 
Loans, netLoans, net5,924,089 5,638,877 — — 5,638,877 Loans, net6,176,097 5,908,160 — — 5,908,160 
MSR assetMSR asset13,118 16,740 — — 16,740 MSR asset11,936 15,847 — — 15,847 
LSR assetLSR asset13,042 13,042 — — 13,042 LSR asset9,383 9,383 — — 9,383 
Accrued interest receivableAccrued interest receivable21,542 21,542 21,542 — — Accrued interest receivable24,166 24,166 24,166 — — 
Financial liabilities:Financial liabilities:Financial liabilities:
DepositsDeposits$7,395,902 $7,390,443 $— $— $7,390,443 Deposits$7,182,388 $7,164,174 $— $— $7,164,174 
Short-term borrowingsShort-term borrowings280,000 280,000 — 280,000 — Short-term borrowings— — — — — 
Long-term borrowingsLong-term borrowings225,236 220,616 — 33,104 187,512 Long-term borrowings197,754 190,738 — 4,736 186,002 
Accrued interest payableAccrued interest payable3,533 3,533 3,533 — — Accrued interest payable7,028 7,028 7,028 — — 
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December 31, 2021
December 31, 2022December 31, 2022
(in thousands)(in thousands)Carrying
Amount
Estimated
Fair Value
Level 1Level 2Level 3(in thousands)Carrying
Amount
Estimated
Fair Value
Level 1Level 2Level 3
Financial assets:Financial assets:Financial assets:
Cash and cash equivalentsCash and cash equivalents$595,292 $595,292 $595,292 $— $— Cash and cash equivalents$154,723 $154,723 $154,723 $— $— 
Certificates of deposit in other banksCertificates of deposit in other banks21,920 22,236 — 22,236 — Certificates of deposit in other banks12,518 12,407 — 12,407 — 
Securities AFSSecurities AFS921,661 921,661 — 913,596 8,065 Securities AFS917,618 917,618 — 909,465 8,153 
Securities HTMSecurities HTM651,803 648,394 — 648,394 — Securities HTM679,128 623,352 — 623,352 — 
Other investments, including equity securitiesOther investments, including equity securities44,008 44,008 5,660 32,110 6,238 Other investments, including equity securities65,286 65,286 4,376 52,093 8,817 
Loans held for saleLoans held for sale6,447 6,616 — 6,616 — Loans held for sale1,482 1,529 — 1,529 — 
Loans, netLoans, net4,572,164 4,606,851 — — 4,606,851 Loans, net6,118,670 5,863,570 — — 5,863,570 
MSR assetMSR asset12,436 15,599 — — 15,599 MSR asset12,580 17,215 — — 17,215 
LSR assetLSR asset20,055 20,055 — — 20,055 LSR asset11,039 11,039 — — 11,039 
Accrued interest receivableAccrued interest receivable15,277 15,277 15,277 — — Accrued interest receivable21,275 21,275 21,275 — — 
Financial liabilities:Financial liabilities:Financial liabilities:
DepositsDeposits$6,465,916 $6,463,064 $— $— $6,463,064 Deposits$7,178,921 $7,172,779 $— $— $7,172,779 
Short-term borrowingsShort-term borrowings317,000 317,000 317,000 — — 
Long-term borrowingsLong-term borrowings216,915 216,092 — 25,097 190,995 Long-term borrowings225,342 220,513 — 33,001 187,512 
Accrued interest payableAccrued interest payable3,078 3,078 3,078 — — Accrued interest payable4,265 4,265 4,265 — — 
The valuation methodologies for the financial instruments disclosed in the above table are described in Note 18, Fair Value Measurements, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022.

Note 1011Other Assets and Other Liabilities Held for SaleSubsequent Event
On September 7, 2021,October 2, 2023, Nicolet entered into a Purchase and Assumption Agreement (the “Birmingham Agreement”) with Banksold its member interest in UFS, LLC, for proceeds of Ann Arbor to sell Nicolet’s Birmingham, Michigan branch, including legacy mBank’s asset-based lending team (the “Birmingham Sale”). Pursuant to the terms of the Birmingham Agreement, Bank of Ann Arbor agreed to assume certain deposit liabilities and to acquire certain loans, as well as cash, personal property and other fixed assets associated with the Birmingham branch. The combined loan and deposit balances of the Birmingham branch (excluding certain loans and deposits not subject to the Birmingham Agreement) were approximately $199$10 million and $51 million, respectively, asa pre-tax gain of December 31, 2021. The Birmingham Sale closedapproximately $9 million. This gain on January 21, 2022.sale will be realized during fourth quarter 2023.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Nicolet Bankshares, Inc. (the “Company” or “Nicolet”) is a bank holding company headquartered in Green Bay, Wisconsin. Nicolet provides a diversified range of traditional banking and wealth management services to individuals and businesses in its market area and through the branch offices of its banking subsidiary, Nicolet National Bank (the “Bank”), in Wisconsin, Michigan, and Minnesota. In this Quarterly Report on Form 10-Q, unless the context indicates otherwise, all references to “we,” “us” and “our” refer to the Company.
Forward-Looking Statements
Statements made in this document and in any documents that are incorporated by reference which are not purely historical are forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, including any statements regarding descriptions of management’s plans, objectives, or goals for future operations, products or services, and forecasts of its revenues, earnings, or other measures of performance. Forward-looking statements are based on current management expectations and, by their nature, are subject to risks and uncertainties. These statements are neither statements of historical fact nor assurance of future performance and generally may be identified by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “estimate,” “should,” “will,” “intend,” or similar expressions. Forward-looking statements include discussions of strategy, financial projections, guidance and estimates (including their underlying assumptions), statements regarding plans, objectives, expectations or consequences of various transactions or events, and statements about our future performance, operations, products and services, and should be viewed with caution. Shareholders should note that many factors, some of which are discussed elsewhere in this document, could affect the future financial results of Nicolet and could cause those results to differ materially from those implied or anticipated by the statements. Except as required by law, we expressly disclaim any obligations to publicly update any forward-looking statements whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise. Important factors, many of which are beyond Nicolet’s control, that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements, in addition to those described in detail under Item 1A, “Risk Factors” of Nicolet’s 20212022 Annual Report on Form 10-K include, but are not necessarily limited to the following:
operating, legal and regulatory risks, including the effects of legislative or regulatory developments affecting the financial industry generally or Nicolet specifically;
our ability to maintain liquidity, primarily through deposits, in light of recent events in the banking industry;
economic, market, political and competitive forces affecting Nicolet’s banking and wealth management businesses;
changes in interest rates, monetary policy and general economic conditions, which may impact Nicolet’s net interest income;
potential difficulties in identifying and integrating the operations of future acquisition targets with those of Nicolet;
the impact of purchase accounting with respect to our merger activities, or any change in the assumptions used regarding the assets purchased and liabilities assumed to determine their fair value;
cybersecurity risks and the vulnerability of our network and online banking portals, and the systems or parties with whom we contract, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches that could adversely affect our business and financial performance or reputation;
changes in accounting standards, rules and interpretations and the related impact on Nicolet’s financial statements;
compliance or operational risks related to new products, services, ventures, or lines of business, if any, that Nicolet may pursue or implement;
changes in monetary and tax policies;
changes occurring in business conditions and inflation;
our ability to attract and retain key personnel;
examinations by our regulatory authorities, including the possibility that the regulatory authorities may, among other things, require us to increase our allowance for credit losses, write-down assets, or take other actions;
risks associated with actual or potential information gatherings, investigations or legal proceedings by customers, regulatory agencies or others;
the potential effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as inflation and recessions, weather events, natural disasters, epidemics and pandemics, (including COVID-19), warterrorist activities, wars or terrorist activities,other foreign conflicts, disruptions in our customers’ supply chains, disruptions in transportation, essential utility outages or trade disputes and related tariffs;
each of the factors and risks under Item 1A, “Risk Factors” of Nicolet’s 20212022 Annual Report on Form 10-K and in subsequent filings we make with the SEC; and
risks related to our merger with Charter, including:
possible negative impact on our stock price and future business and financial results;
unexpected costs associated with the merger;
diversion of management’s attention from ongoing business operations and opportunities;
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possible inability to achieve expected synergies and operating efficiencies in the merger within the expected timeframes or at all;
the impact of, or problems arising from the integration of the two companies;
the outcome of litigation or of matters before regulatory agencies, whether currently existing or commencing in the future, including litigation related to the merger;
potential adverse reactions or changes to business or employee relationships, including those resulting from the completion of the merger; and
current or future adverse legislation or regulation.
the risk that Nicolet’s analysis of these risks and forces could be incorrect and/or that the strategies developed to address them could be unsuccessful.
These factors should be considered in evaluating the forward-looking statements, and you should not place undue reliance on such statements.

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Overview
The following discussion is management’s analysis of the consolidated financial condition as of September 30, 20222023 and December 31, 20212022 and results of operations for the three and nine-month periods ended September 30, 20222023 and 2021.2022. It should be read in conjunction with Nicolet’s audited consolidated financial statements included in Nicolet’s 20212022 Annual Report on Form 10-K.

Our financial performance and certain balance sheet line items were impacted by the timing and size of our 2021 acquisitions of Mackinac Financial Corporation (“Mackinac”) on September 3, 2021 and County Bancorp, Inc. (“County”) on December 3, 2021, as well as our 2022 acquisition of Charter Bankshares, Inc. (“Charter”) on August 26, 2022. Certain income statement results, average balances and related ratios include partial contributions from Mackinac, County, and Charter each from the respective acquisition date. Additional information on our acquisition activity is included in Note 2, “Acquisitions”“Acquisition” in the Notes to Unaudited Consolidated Financial Statements, under Part I, Item 1.

Economic Outlook and Recent Industry Developments
Growth inFor year-to-date 2023, economic activitygrowth remains stronger than expected, driven by spending within the consumer sector. The labor market remains strong with competitive compensation and low unemployment. Consumer spending has been stronger than expected the past few quarters with continued demand for goods and services, combined with labor shortages, supply chain complicationsservices; however, consumer sentiment is beginning to wane from mounting pressures of higher interest rates, declining savings, rising cost of food and geopolitical matters, have contributed to rising inflation. In response, theenergy, and increasing credit card debt.

The Federal Reserve has raisedtightened monetary policy to combat inflation by aggressively raising interest rates from a target range of 0.00%-0.25% in early March 2022 to 3.00%-3.25%5.25%-5.50% at the end of September 2022.2023, and inflation has slowed from the start of the year, but remains higher than the Fed’s target of 2%. Inflation could remain in the 2.5% - 3.0% range, or just above the Fed target, for a period time due to the tight labor markets and de-globalization of supply chains. All these factors are indicating a slowing in economic activity is the most likely scenario for the U.S. economy leading into 2024.

These macroeconomic challenges are fueling additional concerns within the banking sector. During first quarter 2023, the banking industry experienced significant volatility with high-profile bank failures and industry wide concerns related to liquidity, deposit outflows, unrealized securities losses, and eroding consumer confidence in the banking system. The banking world remains challenging amidst tightening credit conditions, indications of declining asset quality, slowing economic demand, interest rate risk management, and potential for higher capital requirements, which further complicates the current economic outlook. In addition, the Federal Reserve has signaled that it anticipates additional increases inongoing geopolitical issues have the target range are likely to mitigate the hardships caused by the ongoing Russia-Ukraine conflict, continued supply chain disruptions, and increased inflationary pressure. The tightening of the Federal Reserve’s monetary policies, including these increases in the target range and the tapering of the Federal Reserve’s balance sheet, combined with ongoingpotential for further economic and political instability, increases the risk of an economic recession. While forecasts vary, many economists are projecting that U.S. economic growth will slow and inflation will remain elevated in the coming quarters, potentially resulting in a contraction of the U.S. gross domestic output by 2023, if not earlier. The timing and impact of inflation and rising interest rates on our business and related financial results will depend on future developments, which are highly uncertain and difficult to predict.disruptions.


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Table 1: Earnings Summary and Selected Financial DataTable 1: Earnings Summary and Selected Financial DataTable 1: Earnings Summary and Selected Financial Data
At or for the Three Months EndedAt or for the Nine Months EndedAt or for the Three Months EndedAt or for the Nine Months Ended
(In thousands, except per share data)(In thousands, except per share data)9/30/20226/30/20223/31/202212/31/20219/30/20219/30/20229/30/2021(In thousands, except per share data)9/30/20236/30/20233/31/202312/31/20229/30/20229/30/20239/30/2022
Results of operations:Results of operations:Results of operations:
Net interest incomeNet interest income$62,990 $55,084 $53,795 $53,559 $35,184 $171,869 $104,396 Net interest income$61,474 $59,039 $56,721 $68,092 $62,990 $177,234 $171,869 
Provision for credit lossesProvision for credit losses8,600 750 300 8,400 6,000 9,650 6,500 Provision for credit losses450 450 3,090 1,850 8,600 3,990 9,650 
Noninterest incomeNoninterest income13,000 14,131 15,943 16,064 13,996 43,074 51,300 Noninterest income16,541 16,841 (21,844)14,846 13,000 11,538 43,074 
Noninterest expenseNoninterest expense42,567 36,538 37,550 39,408 33,061 116,655 89,889 Noninterest expense45,738 44,957 44,875 43,989 42,567 135,570 116,655 
Income before income tax expense24,823 31,927 31,888 21,815 10,119 88,638 59,307 
Income tax expense6,313 7,942 7,724 5,510 2,295 21,979 14,960 
Net income$18,510 $23,985 $24,164 $16,305 $7,824 $66,659 $44,347 
Earnings per common share ("EPS"):       
Income (loss) before income tax expenseIncome (loss) before income tax expense31,827 30,473 (13,088)37,099 24,823 49,212 88,638 
Income tax expense (benefit)Income tax expense (benefit)14,669 7,878 (4,190)9,498 6,313 18,357 21,979 
Net income (loss)Net income (loss)$17,158 $22,595 $(8,898)$27,601 $18,510 $30,855 $66,659 
Earnings (loss) per common share ("EPS"):Earnings (loss) per common share ("EPS"):      
BasicBasic$1.33 $1.79 $1.77 $1.29 $0.75 $4.88 $4.39 Basic$1.16 $1.54 $(0.61)$1.88 $1.33 $2.10 $4.88 
DilutedDiluted$1.29 $1.73 $1.70 $1.25 $0.73 $4.72 $4.22 Diluted$1.14 $1.51 $(0.61)$1.83 $1.29 $2.05 $4.72 
Common Shares:Common Shares:       Common Shares:
Basic weighted averageBasic weighted average13,890 13,402 13,649 12,626 10,392 13,648 10,098 Basic weighted average14,740 14,711 14,694 14,685 13,890 14,716 13,648 
Diluted weighted averageDiluted weighted average14,310 13,852 14,215 13,049 10,776 14,127 10,503 Diluted weighted average15,100 14,960 14,694 15,110 14,310 15,044 14,127 
Outstanding (period end)Outstanding (period end)14,673 13,407 13,457 13,994 11,952 14,673 11,952 Outstanding (period end)14,758 14,718 14,698 14,691 14,673 14,758 14,673 
Period-End Balances:Period-End Balances:       Period-End Balances:       
LoansLoans$5,984,437 $4,978,654 $4,683,315 $4,621,836 $3,533,198 $5,984,437 $3,533,198 Loans$6,239,257 $6,222,776 $6,223,732 $6,180,499 $5,984,437 $6,239,257 $5,984,437 
Allowance for credit losses - loansAllowance for credit losses - loans60,348 50,655 49,906 49,672 38,399 60,348 38,399 Allowance for credit losses - loans63,160 62,811 62,412 61,829 60,348 63,160 60,348 
Total assetsTotal assets8,895,916 7,370,252 7,320,212 7,695,037 6,407,820 8,895,916 6,407,820 Total assets8,416,162 8,482,628 8,192,354 8,763,969 8,895,916 8,416,162 8,895,916 
DepositsDeposits7,395,902 6,286,266 6,231,120 6,465,916 5,428,774 7,395,902 5,428,774 Deposits7,182,388 7,198,604 6,928,579 7,178,921 7,395,902 7,182,388 7,395,902 
Stockholders’ equity (common)Stockholders’ equity (common)938,463 839,387 836,310 891,891 729,278 938,463 729,278 Stockholders’ equity (common)974,461 977,638 961,792 972,529 938,463 974,461 938,463 
Book value per common shareBook value per common share63.96 62.61 62.15 63.73 61.01 63.96 61.01 Book value per common share66.03 66.42 65.44 66.20 63.96 66.03 63.96 
Tangible book value per common share (2)
Tangible book value per common share (2)
36.21 37.49 37.03 39.47 38.43 36.21 38.43 
Tangible book value per common share (2)
39.18 39.37 38.20 38.81 36.21 39.18 36.21 
Financial Ratios: (1)
Financial Ratios: (1)
       
Financial Ratios: (1)
       
Return on average assetsReturn on average assets0.93 %1.32 %1.30 %0.96 %0.59 %1.18 %1.24 %Return on average assets0.81 %1.10 %(0.42)%1.26 %0.93 %0.49 %1.18 %
Return on average common equityReturn on average common equity8.25 11.48 11.38 8.24 5.10 10.32 10.43 Return on average common equity6.92 9.37 (3.72)11.47 8.25 4.24 10.32 
Return on average tangible common equity (2)
Return on average tangible common equity (2)
13.93 19.21 18.75 13.19 7.62 17.25 15.41 
Return on average tangible common equity (2)
11.62 15.95 (6.34)19.85 13.93 7.18 17.25 
Stockholders' equity to assetsStockholders' equity to assets10.55 11.39 11.42 11.59 11.38 10.55 11.38 Stockholders' equity to assets11.58 11.53 11.74 11.10 10.55 11.58 10.55 
Tangible common equity to tangible assets (2)
Tangible common equity to tangible assets (2)
6.26 7.15 7.14 7.51 7.48 6.26 7.48 
Tangible common equity to tangible assets (2)
7.21 7.17 7.21 6.82 6.26 7.21 6.26 
Reconciliation of Non-GAAP Financial Measures:Reconciliation of Non-GAAP Financial Measures:Reconciliation of Non-GAAP Financial Measures:
Adjusted net income reconciliation (3)
Net income (GAAP)$18,510 $23,985 $24,164 $16,305 $7,824 $66,659 $44,347 
Adjusted net income (loss) reconciliation (3)
Adjusted net income (loss) reconciliation (3)
Net income (loss) (GAAP)Net income (loss) (GAAP)$17,158 $22,595 $(8,898)$27,601 $18,510 $30,855 $66,659 
Adjustments:Adjustments:Adjustments:
Provision expense related to merger8,000 — — 8,400 6,000 8,000 6,000 
Provision expense (4)
Provision expense (4)
— — 2,340 — 8,000 2,340 8,000 
Assets (gains) losses, netAssets (gains) losses, net46 (1,603)(1,313)(465)1,187 (2,870)(3,716)Assets (gains) losses, net(31)318 38,468 (260)46 38,755 (2,870)
Merger-related expenseMerger-related expense519 555 98 2,202 2,793 1,172 3,449 Merger-related expense— 26 163 492 519 189 1,172 
Branch closure expense— — — — 944 — 944 
Adjustments subtotalAdjustments subtotal8,565 (1,048)(1,215)10,137 10,924 6,302 6,677 Adjustments subtotal(31)344 40,971 232 8,565 41,284 6,302 
Tax on Adjustments (25% effective tax rate)2,141 (262)(304)2,534 2,731 1,576 1,669 
Adjustments, net of tax6,424 (786)(911)7,603 8,193 4,727 5,008 
Tax on Adjustments (5)
Tax on Adjustments (5)
(6)86 10,243 58 2,141 8,050 1,576 
Tax - Wisconsin tax law change (5)
Tax - Wisconsin tax law change (5)
6,151 — — — — 9,118 — 
Adjusted net income (Non-GAAP)Adjusted net income (Non-GAAP)$24,934 $23,199 $23,253 $23,908 $16,017 $71,386 $49,355 Adjusted net income (Non-GAAP)$23,284 $22,853 $21,830 $27,775 $24,934 $73,207 $71,386 
Adjusted diluted EPS (Non-GAAP)Adjusted diluted EPS (Non-GAAP)$1.74 $1.67 $1.64 $1.83 $1.49 $5.05 $4.70 Adjusted diluted EPS (Non-GAAP)$1.54 $1.53 $1.45 $1.84 $1.74 $4.87 $5.05 
Tangible Assets:Tangible Assets:Tangible Assets:
Total assetsTotal assets$8,895,916 $7,370,252 $7,320,212 $7,695,037 $6,407,820 Total assets$8,416,162 $8,482,628 $8,192,354 $8,763,969 $8,895,916 
Goodwill and other intangibles, netGoodwill and other intangibles, net407,117 336,721 338,068 339,492 269,954 Goodwill and other intangibles, net396,208 398,194 400,277 402,438 407,117 
Tangible assetsTangible assets$8,488,799 $7,033,531 $6,982,144 $7,355,545 $6,137,866 Tangible assets$8,019,954 $8,084,434 $7,792,077 $8,361,531 $8,488,799 
Tangible Common Equity:Tangible Common Equity:Tangible Common Equity:
Stockholders’ equity (common)Stockholders’ equity (common)$938,463 $839,387 $836,310 $891,891 $729,278 Stockholders’ equity (common)$974,461 $977,638 $961,792 $972,529 $938,463 
Goodwill and other intangibles, netGoodwill and other intangibles, net407,117 336,721 338,068 339,492 269,954 Goodwill and other intangibles, net396,208 398,194 400,277 402,438 407,117 
Tangible common equityTangible common equity$531,346 $502,666 $498,242 $552,399 $459,324 Tangible common equity$578,253 $579,444 $561,515 $570,091 $531,346 
Average Tangible Common Equity:Average Tangible Common Equity:       Average Tangible Common Equity:       
Stockholders’ equity (common)Stockholders’ equity (common)$890,205 $837,975 $861,319 $784,666 $608,946 $863,272 $568,390 Stockholders’ equity (common)$983,133 $967,142 $970,108 $954,970 $890,205 $973,509 $863,272 
Goodwill and other intangibles, netGoodwill and other intangibles, net363,211 337,289 338,694 294,051 201,748 346,488 183,632 Goodwill and other intangibles, net397,052 399,080 401,212 403,243 363,211 399,100 346,488 
Average tangible common equityAverage tangible common equity$526,994 $500,686 $522,625 $490,615 $407,198 $516,784 $384,758 Average tangible common equity$586,081 $568,062 $568,896 $551,727 $526,994 $574,409 $516,784 
Note: Numbers may not sum due to rounding.
(1) Income statement-related ratios for partial-year periods are annualized.
(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 section “Non-GAAP Financial Measures” below.
(3) The adjusted net income measure is a non-GAAP financial measure that provides 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.
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(4) Provision expense for 2023 is attributable to the expected loss on our investment in Signature Bank sub debt, and the provision expense for 2022 is attributable to the Day 2 allowance from the acquisition of Charter.
(5) The effective tax rate for periods prior to July 1, 2023, effective date of the Wisconsin tax law change (as detailed below in Performance Summary), assumed an effective tax rate of 25%, and periods subsequent to the effective date assumed an effective tax rate of 19.5%.

Non-GAAP Financial Measures
We identify “tangible book value per common share,” “return on average tangible common equity,” “tangible common equity to tangible assets” “adjusted net income,” and “adjusted diluted earnings per common share” as “non-GAAP financial measures.” In accordance with the SEC’s rules, we identify certain financial measures as non-GAAP financial measures if such financial measures exclude or include amounts in the most directly comparable measures calculated and presented in accordance with generally accepted accounting principles (“GAAP”) in effect in the United States in our statements of income, balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures, ratios or statistical measures calculated using exclusively financial measures calculated in accordance with GAAP.
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.
Performance Summary
Net income was $66.7$31 million (or earnings per diluted common share of $2.05) for the nine months ended September 30, 2023, compared to net income of $67 million (or earnings per diluted common share of $4.72) for the nine months ended September 30, 2022, comparedwith 2023 significantly impacted by the first quarter balance sheet repositioning (detailed below).
In July 2023, Wisconsin’s Governor signed the Wisconsin state budget, retroactive to $44.3January 1, 2023, which included language that provides financial institutions with an exemption from state taxable income for interest, fees, and penalties earned on loans to existing Wisconsin-based business or agriculture purpose loans that are $5 million or less in balance on January 1, 2023, and to new loans that meet the criteria. The impact to Nicolet moving forward will be a reduction / elimination of State income taxes being expensed, resulting in an estimated effective tax rate of 19.5% (compared to a 25% effective tax rate previously). However, the elimination of Wisconsin state income tax expense will also cause a valuation allowance to be established for the state-related deferred tax assets as of the effective date of the legislation, requiring a one-time $9.1 million charge to state income tax expense in the third quarter.

Net income reflected non-core items and the related tax effect of each, including the first quarter U.S. Treasury securities sale loss (balance sheet repositioning), change in Wisconsin tax law, expected loss (provision expense) on the Signature Bank sub debt investment (acquired in an acquisition), merger-related expenses, Day 2 credit provision expense required under the CECL model, as well as gains / (losses) on other assets and investments. These non-core items negatively impacted earnings per diluted common share $2.82 for the nine months ended September 30, 2021. Earnings2023 and negatively impacted earnings per diluted common share was $4.72$0.33 for the first nine months ended September 30, 2022.

On March 7, 2023, Nicolet executed the sale of 2022, compared$500 million (par value) U.S. Treasury held to $4.22maturity securities for a pre-tax loss of $38 million or an after-tax loss of $28 million to reposition the first nine monthsbalance sheet for future growth. The $500 million portfolio yielded approximately 88 bps with scheduled maturities in 2024 and 2025 (or average duration of 2021.2 years). Proceeds from the sale were used to reduce existing FHLB borrowings with the remainder held in investable cash. The following table summarizes the estimated annual impact of this balance sheet repositioning.
Sale Metrics$ in ThousandsAssumptions
Loss on sale of U.S.Treasury securities$(37,723)Sale of $500 million U.S. Treasury securities yielding 88 bps
Lost interest from U.S. Treasury securities$(4,380)Assumes $500 million at 88 bps
Lower interest expense on FHLB borrowings17,128 Assumes $377 million at 456 bps (at time of sale)
Interest income from investable cash3,905 Assumes $83 million at 465 bps (at time of sale)
Projected net impact from repositioning$16,653 
Estimated earn back (in years)2.26
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As a result of the sale of securities previously classified as held to maturity, the remaining unsold portfolio of held to maturity securities, with a book value of $177 million, was reclassified to available for sale with a carrying value of approximately $157 million. The unrealized loss on this portfolio of $20 million (at the time of reclassification) increased the balance of accumulated other comprehensive loss $15 million, net of the deferred tax effect, and is subject to future market changes.

Net interest income was $171.9$177 million for the first nine months of 2022,2023, up $67.5$5 million (65%(3%) over the first nine months of 2021.2022. Interest income grew $74.2$91 million attributable to favorable loan volumes (mostly higher loan volumes)(partly from the Charter acquisition), partly offset by net unfavorableas well as favorable rates (asfrom new and renewed loans reprice at varying intervals to reflect the recent Federal Reservein a rising interest rate increases).environment and higher rates on investment securities and investable cash. Interest expense increased $6.8$86 million between the comparable nine-month periods mostly from the largerhigher average funding base.costs. Net interest margin was 3.07% for the nine months ended September 30, 2023, compared to 3.36% for the nine months ended September 30, 2022, compared to 3.22% for the nine months ended September 30, 2021.2022. For additional information regarding net interest income, see “Income Statement Analysis — Net Interest Income.”
Noninterest income was $43.1$12 million for the first nine months of 2022, down $8.22023, a $32 million (16%)unfavorable change from the comparable 20212022 period, primarily due to lowerthe balance sheet repositioning (noted above). Excluding net mortgage income.asset gains (losses), noninterest income for the first nine months of 2023 was $50 million, a $10 million increase over the first nine months of 2022. For additional information regarding noninterest income, see “Income Statement Analysis — Noninterest Income.”
Noninterest expense was $116.7$136 million, $26.8$19 million (30%(16%) higher than the first nine months of 2021.2022. Personnel costs increased $15.9$7 million, and non-personnel expenses combined increased $10.9$12 million (27%(23%) over the comparable 20212022 period. For additional information regarding noninterest expense, see “Income Statement Analysis — Noninterest Expense.”
Nonperforming assets were $40$32 million, representing 0.45%0.37% of total assets at September 30, 2022,2023, compared to 0.73%$40 million or 0.46% of total assets at December 31, 2021 and 0.33% at September 30, 2021.2022. The reduction in nonperforming assets was due to the sale of select nonaccrual loans. For additional information regarding nonperforming assets, see “Balance Sheet Analysis – Nonperforming Assets.”
At September 30, 2022,2023, assets were $8.9$8.4 billion, up $1.2 billion (16%down $348 million (4%) from December 31, 2021, largely2022, mostly due to the Charter acquisition, which added total assetssale of $1.1 billion at acquisition. Total assets increased $2.5 billion (39%) from September 30, 2021, mainly due to the acquisitionsinvestment securities as part of Charter and County.our balance sheet repositioning, partly offset by higher investable cash balances. For additional balance sheet discussion see “Balance Sheet Analysis.”
At September 30, 2022,2023, loans were $6.0$6.2 billion, an increase of $1.4 billion (29%)up $59 million from December 31, 2021, including the Charter acquisition (which added2022, with growth in residential mortgage loans of $827 million at acquisition) and solid organicpartly offset by slowing commercial loan growth. Total loans were $2.5 billion (69%) higher than September 30, 2021, largely due to the acquisitions of Charter and County.demand. On average, loans grew $2.1$1.2 billion (70%(25%) over the first nine months of 2021.2022. For additional information regarding loans, see “Balance Sheet Analysis — Loans.”
Total deposits were $7.4of $7.2 billion at September 30, 2022, an increase of $930 million (14%)2023, were minimally changed from December 31, 2021, including the Charter acquisition (which added2022, with growth in time deposits of $870 million at acquisition) and higher brokered deposits. Total deposits were $2.0 billion (36%) higher than September 30, 2021, largely due to the Chartermoney market accounts partly offset by lower demand and County
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acquisitions.savings account balances. Year-to-date average deposits were $2.3 billion (57%$644 million (10%) higher than the first nine months of 2021.2022. For additional information regarding deposits, see “Balance Sheet Analysis – Deposits.”

INCOME STATEMENT ANALYSIS
Net Interest Income
Tax-equivalent net interest income is a non-GAAP measure, but is a preferred industry measurement of net interest income (and its use in calculating a net interest margin) as it enhances the comparability of net interest income arising from taxable and tax-exempt sources. The tax-equivalent adjustments bring tax-exempt interest to a level that would yield the same after-tax income by applying the effective Federal corporate tax rates to the underlying assets. Tables 2 and 3 present information to facilitate the review and discussion of selected average balance sheet items, tax-equivalent net interest income, interest rate spread and net interest margin.

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Table 2: Average Balance Sheet and Net Interest Income Analysis - Tax-Equivalent Basis
For the Nine Months Ended September 30,For the Nine Months Ended September 30,
2022202120232022
(in thousands)(in thousands)Average
Balance
InterestAverage
Yield/Rate
Average
Balance
InterestAverage
Yield/Rate
(in thousands)Average
Balance
InterestAverage
Yield/Rate
Average
Balance
InterestAverage
Yield/Rate
ASSETSASSETSASSETS
Interest-earning assetsInterest-earning assetsInterest-earning assets
Commercial PPP Loans$6,433 $1,391 28.51 %$173,463 $11,123 8.46 %
All other commercial-based loans4,143,934 138,881 4.42 %2,222,290 75,845 4.50 %
Retail-based loans825,065 27,141 4.39 %528,895 17,357 4.38 %
Total loans, including loan fees (1)(2)
Total loans, including loan fees (1)(2)
4,975,432 167,413 4.45 %2,924,648 104,325 4.71 %
Total loans, including loan fees (1)(2)
$6,223,396 $251,019 5.33 %$4,975,432 $167,413 4.45 %
Investment securities:Investment securities:Investment securities:
TaxableTaxable1,389,540 15,612 1.50 %418,897 5,935 1.89 %Taxable924,829 13,445 1.94 %1,389,540 15,612 1.50 %
Tax-exempt (2)
Tax-exempt (2)
202,011 3,661 2.42 %140,691 2,252 2.13 %
Tax-exempt (2)
252,933 6,130 3.23 %202,011 3,661 2.42 %
Total investment securitiesTotal investment securities1,591,551 19,273 1.62 %559,588 8,187 1.95 %Total investment securities1,177,762 19,575 2.22 %1,591,551 19,273 1.62 %
Other interest-earning assetsOther interest-earning assets251,983 2,734 1.44 %829,382 2,140 0.34 %Other interest-earning assets266,753 10,345 5.13 %251,983 2,734 1.44 %
Total non-loan earning assetsTotal non-loan earning assets1,843,534 22,007 1.59 %1,388,970 10,327 0.99 %Total non-loan earning assets1,444,515 29,920 2.75 %1,843,534 22,007 1.59 %
Total interest-earning assetsTotal interest-earning assets6,818,966 $189,420 3.67 %4,313,618 $114,652 3.51 %Total interest-earning assets7,667,911 $280,939 4.85 %6,818,966 $189,420 3.67 %
Other assets, netOther assets, net731,928 452,047 Other assets, net737,088 731,928 
Total assetsTotal assets$7,550,894 $4,765,665 Total assets$8,404,999 $7,550,894 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilitiesInterest-bearing liabilitiesInterest-bearing liabilities
SavingsSavings$854,307 $827 0.13 %$595,385 $272 0.06 %Savings$845,079 $7,387 1.17 %$854,307 $827 0.13 %
Interest-bearing demandInterest-bearing demand1,010,372 2,647 0.35 %681,079 2,114 0.41 %Interest-bearing demand900,802 9,677 1.44 %1,010,372 2,647 0.35 %
Money market accounts (“MMA”)Money market accounts (“MMA”)1,502,038 2,132 0.19 %889,022 363 0.05 %Money market accounts (“MMA”)1,848,921 36,223 2.62 %1,502,038 2,132 0.19 %
Core time depositsCore time deposits556,970 1,240 0.30 %318,477 2,165 0.91 %Core time deposits771,041 16,656 2.89 %556,970 1,240 0.30 %
Total interest-bearing core depositsTotal interest-bearing core deposits3,923,687 6,846 0.23 %2,483,963 4,914 0.26 %Total interest-bearing core deposits4,365,843 69,943 2.14 %3,923,687 6,846 0.23 %
Brokered depositsBrokered deposits450,311 2,394 0.71 %284,738 2,885 1.35 %Brokered deposits619,870 19,298 4.16 %450,311 2,394 0.71 %
Total interest-bearing depositsTotal interest-bearing deposits4,373,998 9,240 0.28 %2,768,701 7,799 0.38 %Total interest-bearing deposits4,985,713 89,241 2.39 %4,373,998 9,240 0.28 %
Wholesale fundingWholesale funding239,362 7,053 3.91 %79,882 1,729 2.87 %Wholesale funding343,827 12,842 4.93 %239,362 7,053 3.91 %
Total interest-bearing liabilitiesTotal interest-bearing liabilities4,613,360 16,293 0.47 %2,848,583 9,528 0.45 %Total interest-bearing liabilities5,329,540 102,083 2.56 %4,613,360 16,293 0.47 %
Noninterest-bearing demand depositsNoninterest-bearing demand deposits2,034,865 1,307,222 Noninterest-bearing demand deposits2,067,265 2,034,865 
Other liabilitiesOther liabilities39,397 41,470 Other liabilities34,685 39,397 
Stockholders’ equityStockholders’ equity863,272 568,390 Stockholders’ equity973,509 863,272 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$7,550,894 $4,765,665 Total liabilities and stockholders’ equity$8,404,999 $7,550,894 
Interest rate spreadInterest rate spread3.20 %3.06 %Interest rate spread2.29 %3.20 %
Net free fundsNet free funds0.16 %0.16 %Net free funds0.78 %0.16 %
Tax-equivalent net interest income and net interest marginTax-equivalent net interest income and net interest margin$173,127 3.36 %$105,124 3.22 %Tax-equivalent net interest income and net interest margin$178,856 3.07 %$173,127 3.36 %
Tax-equivalent adjustmentTax-equivalent adjustment$1,258 $728 Tax-equivalent adjustment$1,622 $1,258 
Net interest incomeNet interest income$171,869 $104,396 Net interest income$177,234 $171,869 
(1)Nonaccrual loans and loans held for sale are included in the daily average loan balances outstanding.
(2)The yield on tax-exempt loans and tax-exempt investment securities is computed on a tax-equivalent basis using a federal tax rate of 21% and adjusted for the disallowance of interest expense.

35



Table 2: Average Balance Sheet and Net Interest Income Analysis - Tax-Equivalent Basis (Continued)
For the Three Months Ended September 30,For the Three Months Ended September 30,
2022202120232022
(in thousands)(in thousands)Average
Balance
InterestAverage
Yield/Rate
Average
Balance
InterestAverage
Yield/Rate
(in thousands)Average
Balance
InterestAverage
Yield/Rate
Average
Balance
InterestAverage
Yield/Rate
ASSETSASSETSASSETS
Interest-earning assetsInterest-earning assetsInterest-earning assets
Commercial PPP Loans$605 $0.93 %$109,318 $2,310 8.27 %
All other commercial-based loans4,484,746 52,673 4.60 %2,378,480 26,759 4.40 %
Retail-based loans905,907 10,421 4.60 %588,624 6,242 4.24 %
Total loans, including loan fees (1)(2)
Total loans, including loan fees (1)(2)
5,391,258 63,095 4.60 %3,076,422 35,311 4.51 %
Total loans, including loan fees (1)(2)
$6,230,336 $87,701 5.54 %$5,391,258 $63,095 4.60 %
Investment securities:Investment securities:Investment securities:
TaxableTaxable1,391,330 5,350 1.54 %472,598 2,061 1.74 %Taxable733,286 4,351 2.37 %1,391,330 5,350 1.54 %
Tax-exempt (2)
Tax-exempt (2)
234,123 1,639 2.80 %139,272 744 2.14 %
Tax-exempt (2)
229,321 1,884 3.29 %234,123 1,639 2.80 %
Total investment securitiesTotal investment securities1,625,453 6,989 1.72 %611,870 2,805 1.83 %Total investment securities962,607 6,235 2.59 %1,625,453 6,989 1.72 %
Other interest-earning assetsOther interest-earning assets144,409 1,127 3.09 %1,046,476 869 0.33 %Other interest-earning assets483,952 6,452 5.23 %144,409 1,127 3.09 %
Total non-loan earning assetsTotal non-loan earning assets1,769,862 8,116 1.83 %1,658,346 3,674 0.88 %Total non-loan earning assets1,446,559 12,687 3.47 %1,769,862 8,116 1.83 %
Total interest-earning assetsTotal interest-earning assets7,161,120 $71,211 3.91 %4,734,768 $38,985 3.24 %Total interest-earning assets7,676,895 $100,388 5.15 %7,161,120 $71,211 3.91 %
Other assets, netOther assets, net695,011 511,425 Other assets, net740,561 695,011 
Total assetsTotal assets$7,856,131 $5,246,193 Total assets$8,417,456 $7,856,131 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilitiesInterest-bearing liabilitiesInterest-bearing liabilities
SavingsSavings$899,503 $488 0.22 %$662,260 $100 0.06 %Savings$804,730 $2,520 1.24 %$899,503 $488 0.22 %
Interest-bearing demandInterest-bearing demand990,891 1,148 0.46 %711,442 685 0.38 %Interest-bearing demand843,893 3,228 1.52 %990,891 1,148 0.46 %
MMAMMA1,540,610 1,309 0.34 %962,538 135 0.06 %MMA1,873,545 13,032 2.76 %1,540,610 1,309 0.34 %
Core time depositsCore time deposits543,444 408 0.30 %329,012 630 0.76 %Core time deposits969,690 8,848 3.62 %543,444 408 0.30 %
Total interest-bearing core depositsTotal interest-bearing core deposits3,974,448 3,353 0.33 %2,665,252 1,550 0.23 %Total interest-bearing core deposits4,491,858 27,628 2.44 %3,974,448 3,353 0.33 %
Brokered depositsBrokered deposits468,010 1,285 1.09 %284,164 894 1.25 %Brokered deposits651,745 7,336 4.47 %468,010 1,285 1.09 %
Total interest-bearing depositsTotal interest-bearing deposits4,442,458 4,638 0.41 %2,949,416 2,444 0.33 %Total interest-bearing deposits5,143,603 34,964 2.70 %4,442,458 4,638 0.41 %
Wholesale fundingWholesale funding287,751 3,090 4.25 %143,615 1,113 3.08 %Wholesale funding241,689 3,446 5.58 %287,751 3,090 4.25 %
Total interest-bearing liabilitiesTotal interest-bearing liabilities4,730,209 7,728 0.65 %3,093,031 3,557 0.46 %Total interest-bearing liabilities5,385,292 38,410 2.83 %4,730,209 7,728 0.65 %
Noninterest-bearing demand depositsNoninterest-bearing demand deposits2,200,789 1,499,052 Noninterest-bearing demand deposits2,012,974 2,200,789 
Other liabilitiesOther liabilities34,928 45,164 Other liabilities36,057 34,928 
Stockholders’ equityStockholders’ equity890,205 608,946 Stockholders’ equity983,133 890,205 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$7,856,131 $5,246,193 Total liabilities and stockholders’ equity$8,417,456 $7,856,131 
Interest rate spreadInterest rate spread3.26 %2.78 %Interest rate spread2.32 %3.26 %
Net free fundsNet free funds0.22 %0.16 %Net free funds0.84 %0.22 %
Tax-equivalent net interest income and net interest marginTax-equivalent net interest income and net interest margin$63,483 3.48 %$35,428 2.94 %Tax-equivalent net interest income and net interest margin$61,978 3.16 %$63,483 3.48 %
Tax-equivalent adjustmentTax-equivalent adjustment$493 $244 Tax-equivalent adjustment$504 $493 
Net interest incomeNet interest income$62,990 $35,184 Net interest income$61,474 $62,990 
(1)Nonaccrual loans and loans held for sale are included in the daily average loan balances outstanding.
(2)The yield on tax-exempt loans and tax-exempt investment securities is computed on a tax-equivalent basis using a federal tax rate of 21% and adjusted for the disallowance of interest expense.

36


Table 3: Volume/Rate Variance - Tax-Equivalent Basis
For the Three Months Ended
September 30, 2022
Compared to September 30, 2021:
For the Nine Months Ended
 September 30, 2022
Compared to September 30, 2021:
For the Three Months Ended
September 30, 2023
Compared to September 30, 2022:
For the Nine Months Ended
 September 30, 2023
Compared to September 30, 2022:
Increase (Decrease) Due to Changes inIncrease (Decrease) Due to Changes inIncrease (Decrease) Due to Changes inIncrease (Decrease) Due to Changes in
(in thousands)(in thousands)VolumeRate
Net (1)
VolumeRate
Net (1)
(in thousands)VolumeRate
Net (1)
VolumeRate
Net (1)
Interest-earning assetsInterest-earning assetsInterest-earning assets
Commercial PPP Loans$(1,220)$(1,089)$(2,309)$(18,046)$8,314 $(9,732)
All other commercial-based loans24,677 1,237 25,914 77,726 (14,690)63,036 
Retail-based loans3,562 617 4,179 9,667 117 9,784 
Total loans (2)
Total loans (2)
27,019 765 27,784 69,347 (6,259)63,088 
Total loans (2)
$10,704 $13,902 $24,606 $46,562 $37,044 $83,606 
Investment securities:Investment securities:Investment securities:
TaxableTaxable2,871 418 3,289 9,228 449 9,677 Taxable(1,442)443 (999)(3,073)906 (2,167)
Tax-exempt (2)
Tax-exempt (2)
615 280 895 1,081 328 1,409 
Tax-exempt (2)
(34)279 245 1,056 1,413 2,469 
Total investment securitiesTotal investment securities3,486 698 4,184 10,309 777 11,086 Total investment securities(1,476)722 (754)(2,017)2,319 302 
Other interest-earning assetsOther interest-earning assets(454)712 258 (343)937 594 Other interest-earning assets4,100 1,225 5,325 160 7,451 7,611 
Total non-loan earning assets Total non-loan earning assets3,032 1,410 4,442 9,966 1,714 11,680  Total non-loan earning assets2,624 1,947 4,571 (1,857)9,770 7,913 
Total interest-earning assetsTotal interest-earning assets$30,051 $2,175 $32,226 $79,313 $(4,545)$74,768 Total interest-earning assets$13,328 $15,849 $29,177 $44,705 $46,814 $91,519 
Interest-bearing liabilitiesInterest-bearing liabilitiesInterest-bearing liabilities
SavingsSavings$47 $341 $388 $155 $400 $555 Savings$(57)$2,089 $2,032 $(9)$6,569 $6,560 
Interest-bearing demandInterest-bearing demand305 158 463 901 (368)533 Interest-bearing demand(194)2,274 2,080 (318)7,348 7,030 
MMAMMA125 1,049 1,174 385 1,384 1,769 MMA342 11,381 11,723 602 33,489 34,091 
Core time depositsCore time deposits278 (500)(222)1,047 (1,972)(925)Core time deposits554 7,886 8,440 651 14,765 15,416 
Total interest-bearing core depositsTotal interest-bearing core deposits755 1,048 1,803 2,488 (556)1,932 Total interest-bearing core deposits645 23,630 24,275 926 62,171 63,097 
Brokered depositsBrokered deposits516 (125)391 1,239 (1,730)(491)Brokered deposits680 5,371 6,051 1,213 15,691 16,904 
Total interest-bearing depositsTotal interest-bearing deposits1,271 923 2,194 3,727 (2,286)1,441 Total interest-bearing deposits1,325 29,001 30,326 2,139 77,862 80,001 
Wholesale fundingWholesale funding1,395 582 1,977 4,735 589 5,324 Wholesale funding(360)716 356 3,472 2,317 5,789 
Total interest-bearing liabilitiesTotal interest-bearing liabilities2,666 1,505 4,171 8,462 (1,697)6,765 Total interest-bearing liabilities965 29,717 30,682 5,611 80,179 85,790 
Net interest incomeNet interest income$27,385 $670 $28,055 $70,851 $(2,848)$68,003 Net interest income$12,363 $(13,868)$(1,505)$39,094 $(33,365)$5,729 
(1)The change in interest due to both rate and volume has been allocated in proportion to the relationship of dollar amountsamount of change in each.
(2)The yield on tax-exempt loans and tax-exempt investment securities is computed on a tax-equivalent basis using a federal tax rate of 21% and adjusted for the disallowance of interest expense.


The Federal Reserve raised short-term interest rates a total of 300425 bps since mid-Marchduring 2022, increasing the Federal Funds rate to a range of 3.00%4.25% to 3.25%4.50% as of September 30,December 31, 2022. Prior to this, short-term interest rates remained steady since March 2020, withAdditional increases totaling 100 bps were made in the first nine months of 2023, resulting in a Federal Funds range of 0.00%5.25% to 0.25%.5.50% as of September 30, 2023.
Tax-equivalent net interest income was $173.1$179 million for the first nine months ended September 30, 2023, an increase of 2022, comprised of net interest income of $171.9$6 million ($67.5 million or 65% higher than(3%) over the first nine months of 2021), and a $1.3 million tax-equivalent adjustment.ended September 30, 2022. The $68.0$6 million increase in tax-equivalent net interest income was attributable to net favorable volumes (which added $70.9$39 million to net interest income, mostly from interest-earning asset volumes added with the recent acquisitions, as well as solidCharter acquisition and loan growth and strategic investment purchases)growth) and net unfavorable rates (which decreased net interest income $2.8$33 million from competitive pricing pressurehigher deposit costs and the lag in repricing the loan portfolio to current market interest rates).
Average interest-earning assets increased to $6.8$7.7 billion, up $2.5 billion (58%$849 million (12%) over the 2021 comparable 2022 period, primarily due to the acquisitionstiming of Mackinac, County, and Charter (in September 2021, December 2021, and August 2022, respectively).the acquisition of Charter. Between the comparable nine-month periods, average loans increased $2.1$1.2 billion (70%(25%), mostly due to timing of the Mackinac, County, and Charter acquisitions, whichacquisition (which added loans of $0.9 billion, $1.0 billion,$827 million at acquisition) and $0.8 billion respectively, at acquisition. In addition, average loans reflected strong organic loan growth and the repurchase of previously participated agricultural loans, which more than offset the reduction in PPP loans from continued loan forgiveness.throughout 2022. Average investment securities increased $1.0 billiondecreased $414 million between the comparable nine-month periods, partlywhile other interest-earning assets increased $15 million, mostly due to the acquisitions, and partly due to the strategic re-investment of approximately $0.5 billion excess cash liquidity into U.S. Treasury securities of varying yields and durations during fourth quarter 2021. Other interest-earning assets declined $0.6 billion with the additional assets added with the acquisitions, more than offset by lower cash mostly from the re-investment of excess cash liquidity noted above.investable cash. As a result, the mix of average interest-earning assets shifted to 73%81% loans, 23%15% investments and 4% other interest-earning assets (mostly cash) for the first nine months of 2022,2023, compared to 68%73%, 13%23% and 19%4%, respectively, for the first nine months of 2021.
37


2022.
Average interest-bearing liabilities were $4.6$5.3 billion for the first nine months of 2022,2023, an increase of $1.8 billion (62%$716 million (16%) over the first nine months of 2021, primarily due to the acquisitions of Mackinac, County, and Charter. Average interest-bearing core deposits increased $1.4 billion and average brokered deposits increased $166 million between the comparable nine-month periods largely due to the acquisitions. Other interest-bearing liabilities grew $159 million between the comparable nine-month periods, partly due to the private placement of $100 million in fixed-to-floating rate subordinated notes in July 2021, and partly due to wholesale funding acquired with the acquisitions. The mix of average interest-bearing liabilities was 85% core deposits, 10% brokered deposits and 5% wholesale funding for the first nine months of 2022, compared to 87%, 10% and 3%, respectively, for the first nine months of 2021.
Between the comparable nine-month periods, the interest rate spread increased 14 bps. The interest-earning asset yield increased 16 bps to 3.67% for the first nine months of 2022, primarily due to the timing of the acquisition of Charter. Average interest-bearing core deposits increased $442 million and average brokered deposits increased $170 million between the comparable nine-month periods, reflecting the impact of the Charter acquisition and brokered funding to support the strong loan growth in 2022. Other interest-bearing liabilities increased $104 million between the comparable nine-month periods, partly due to wholesale funding acquired with Charter and partly due to FHLB borrowings to support the strong loan growth in 2022. The mix of average interest-bearing liabilities was 82% core deposits, 12% brokered deposits and 6% wholesale funding for the first nine months of 2023, compared to 85%, 10%, and 5%, respectively, for the first nine months of 2022.
37


The interest rate spread decreased 91 bps between the comparable nine-month periods, as our liabilities have repriced faster than our assets in the rapidly rising interest rate environment. The interest-earning asset yield increased 118 bps to 4.85% for the first nine months of 2023, due to the changing mix of interest-earning assets (mostly(noted above), as well as the reduction in cash due to the re-investment of excess cash liquidity noted above).higher interest rate environment. The loan yield declined 26improved 88 bps to 4.45%5.33% between the comparable nine-month periods, largely due to the impactrepricing of the lownew and renewed loans in a rising interest rate environment, through early 2022 and competitive pricing pressures on new, renewed, and variable rate loans, while the yield on investment securities declined 33increased 60 bps to 1.62%, also attributable to the low interest rate environment through early 2022, as well as the strategic re-investment of cash into U.S. Treasury securities.2.22%. The cost of funds increased 2209 bps to 0.47%2.56% for the first nine months of 2022, as lower rates on core interest-bearing deposits and brokered deposits, were more than offset by higher wholesale funding rates2023, also reflecting the rising interest rate environment and a shiftmigration of customer deposits into higher rate deposit products. The contribution from net free funds increased 62 bps, mostly due to the higher value in the mix of interest-bearing liabilities (mostly the increase in wholesale funding noted above).rising interest rate environment. As a result, the tax-equivalent net interest margin was 3.07% for the first nine months of 2023, down 29 bps compared to 3.36% for the first nine months of 2022, up 14 bps compared to 3.22% for the first nine months of 2021.2022.
Tax-equivalent interest income was $189.4$281 million for the first nine months of 2022,2023, up $74.8$92 million from the first nine monthscomparable period of 2021,2022, comprised of $79.3$45 million higher volumes partly offset by lowerand $47 million higher average rates.rates (mostly in the loan portfolio). Interest income on loans increased $63.1$84 million over the first nine months of 2021, mostly2022, due to higher average balances from the acquisitions,Charter acquisition and strong organic loan growth in 2022, as well as solid loan growth. Betweenhigher rates from the comparable nine-month periods,rising interest income on investment securities grew $11.1 million, also attributable to the acquisitions, as well as the re-investment of excess cash liquidity (noted above).rate environment. Interest expense increased to $16.3$102 million for the first nine months of 2022,2023, up $6.8$86 million compared to the first nine months of 2021, comprised of $8.5 million2022, mostly due to a much higher volumes, partly offset by $1.7 million from lower overall cost of funds. Interest expense on deposits increased $1.4$80 million (18%) from the first nine months of 2021 given higher average interest-bearing deposit balances at a lower cost as product and rate changes were made during 2021 in the low rate environment, while brokered deposits cost less largely from maturities of higher-costing term brokered funds procured under competitive conditions in mid-2020 during the pandemic. Interest expense on wholesale funding increased between the comparable nine-month periods mostly due to higher average balances from the July 2021 subordinated notes issuance, as well as wholesale funding acquired with the acquisitions.rapidly rising interest rate environment.
Provision for Credit Losses
The provision for credit losses was $4.0 million for the nine months ended September 30, 2023 (comprised of $1.7 million related to the ACL-Loans and $2.3 million for the ACL on securities AFS), compared to $9.7 million for the nine months ended September 30, 2022 (comprised of $9.1 million related to the ACL-Loans and $0.6 millionthe remainder for the ACL on unfunded commitments), compared. The 2023 provision for credit losses on loans was attributable to $6.5 milliongrowth and changes in the underlying loan portfolio, while the provision for the nine months ended September 30, 2021 (comprised of $4.5 million relatedcredit losses on securities AFS was due to the ACL-Loans and $2.0 million for the ACLexpected loss on unfunded commitments).our Signature Bank subordinated debt investment which was fully charged-off during first quarter 2023. The 2022 provision for credit losses was mostly due to the Day 2 ACL increase from the Charter acquisition, while the 2021 provision for credit losses was mostly due to the Day 2 ACL increase for the Mackinac acquisition.
The provision for credit losses is predominantly a function of Nicolet’s methodology and judgment as to qualitative and quantitative factors used to determine the appropriateness of the ACL-Loans and unfunded commitments.ACL. The appropriateness of the ACL-Loans is affected by changes in the size and character of the loan portfolio, changes in levels of collateral dependent and other nonperforming loans, historical losses and delinquencies in each portfolio segment, the risk inherent in specific loans, concentrations of loans to specific borrowers or industries, existing and future economic conditions, the fair value of underlying collateral, and other factors which could affect expected credit losses. The ACL for securities is affected by risk of the underlying issuer, while the ACL for unfunded commitments is affected by many of the same factors as the ACL-Loans, as well as funding assumptions relative to lines of credit. See also Note 6, “Loans, Allowance for Credit Losses - Loans, and Credit Quality” of the Notes to Unaudited Consolidated Financial Statements under Part I, Item 1, for additional disclosures. For additional information regarding asset quality and the ACL-Loans, see “BALANCE SHEET ANALYSIS — Loans,” “— Allowance for Credit Losses - Loans,” and “— Nonperforming Assets.”

38



Noninterest Income
Table 4: Noninterest Income
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)(in thousands)20222021$ Change% Change20222021$ Change% Change(in thousands)20232022$ Change% Change20232022$ Change% Change
Trust services fee incomeTrust services fee income$1,969 $2,043 $(74)(4)%$5,984 $5,724 $260 %Trust services fee income$2,107 $1,969 $138 %$6,288 $5,984 $304 %
Brokerage fee incomeBrokerage fee income3,040 3,154 (114)(4)9,716 8,938 778 Brokerage fee income3,950 3,040 910 30 11,151 9,716 1,435 15 
Wealth management fee incomeWealth management fee income6,057 5,009 1,048 21 17,439 15,700 1,739 11 
Mortgage income, netMortgage income, net1,728 4,808 (3,080)(64)7,186 17,637 (10,451)(59)Mortgage income, net2,020 1,728 292 17 5,308 7,186 (1,878)(26)
Service charges on deposit accountsService charges on deposit accounts1,589 1,314 275 21 4,602 3,541 1,061 30 Service charges on deposit accounts1,492 1,589 (97)(6)4,501 4,602 (101)(2)
Card interchange incomeCard interchange income3,012 2,299 713 31 8,543 6,492 2,051 32 Card interchange income3,321 3,012 309 10 9,685 8,543 1,142 13 
BOLI incomeBOLI income966 572 394 69 2,667 1,658 1,009 61 BOLI income1,090 966 124 13 3,363 2,667 696 26 
Deferred compensation plan asset market valuationsDeferred compensation plan asset market valuations(457)(571)114 N/M988 (2,354)3,342 N/M
LSR income, netLSR income, net(517)— (517)N/M(1,042)— (1,042)N/MLSR income, net1,108 (517)1,625 N/M3,398 (1,042)4,440 N/M
Other incomeOther income1,259 993 266 27 2,548 3,594 (1,046)(29)Other income1,879 1,830 49 5,611 4,902 709 14 
Noninterest income without
net gains
13,046 15,183 (2,137)(14)40,204 47,584 (7,380)(16)
Noninterest income without
net gains (losses)
Noninterest income without
net gains (losses)
16,510 13,046 3,464 27 50,293 40,204 10,089 25 
Asset gains (losses), netAsset gains (losses), net(46)(1,187)1,141 N/M2,870 3,716 (846)(23)Asset gains (losses), net31 (46)77 N/M(38,755)2,870 (41,625)N/M
Total noninterest incomeTotal noninterest income$13,000 $13,996 $(996)(7)%$43,074 $51,300 $(8,226)(16)%Total noninterest income$16,541 $13,000 $3,541 27 %$11,538 $43,074 $(31,536)(73)%
Trust services fee income & Brokerage fee income combined$5,009 $5,197 $(188)(4)%$15,700 $14,662 $1,038 %
N/M means not meaningful.
Noninterest income was $43.1$11.5 million for the first nine months of 2022, a decrease2023, an unfavorable change of $8.2$31.5 million (16%) compared to $51.3 millionthe first nine months of 2022, primarily due to the balance sheet repositioning. Excluding net asset gains (losses), noninterest income for the first nine months of 2021, primarily due to lower net mortgage income.2023 was $50.3 million, a $10.1 million (25%) increase over the comparable period in 2022.
Trust servicesWealth management fee income and brokerage fee income combined were $15.7was $17.4 million, up $1.0$1.7 million (7%(11%) overfrom the first nine months of 2021, consistent with the2022, on growth in accounts and assets under management (up 24% from year-end 2022), though tempered by unfavorable market-related declines.changes.
Mortgage income representsincludes 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 $7.2$5.3 million, decreased $10.5$1.9 million (59%(26%) between the comparable nine-month periods, mostly due to the rising interest rate environment reducing secondary market volumes and the related gains on sales. Gains on sales and capitalized gains combined decreased $10.9 million and the fair value of the mortgage derivatives decreased $0.4 million, while MSR impairment was $0.9 million favorable on slower paydown activity. See also “Lending-Related Commitments” and Note 7, “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.
Service charges on deposit accounts were up $1.1 million to $4.6 million for the nine months ended September 30, 2022, mostly due to the larger deposit base from the acquisitions.
Card interchange income grew $2.1$1.1 million (32%(13%) between the comparable nine-month periods due to higher volume and activity.
BOLI income was up $1.0$0.7 million between the comparable nine-month periods, attributable to higher average balances from BOLI acquired with the acquisitions and also benefiting from the rising interest rate environment.Charter acquisition.
Loan servicing rights (“LSR”) income includes agricultural loan servicing fees net ofincreased $4.4 million between the related LSR amortization. Nicolet is not adding new loanscomparable nine-month periods mostly due to this servicing portfolio and repurchased approximately $100 million of these previously participated loans during second quarter 2022; thus, thelower LSR amortization is currently outpacingfrom the loan servicing fees.much slower prepayment speeds in the higher interest rate environment. See also Note 7, “Goodwill and Other Intangibles and Servicing Rights” of the Notes to Unaudited Consolidated Financial Statements under Part I, Item 1, for additional information on the LSR asset.
Other income of $2.5$5.6 million for the nine months ended September 30, 20222023 was down $1.0up $0.7 million from the comparable 20212022 period, largely due to unfavorable changes inbroker fees and card incentive income.
Net asset losses of $38.8 million for the fair valuefirst nine months of nonqualified deferred compensation plan assets from the recent market declines, partly offset by new revenue from crop insurance sales (related2023 were primarily attributable to the County acquisition). See also “Noninterest Expense” for discussionlosses on the offsetting fair value changesale of approximately $500 million (par value) U.S. Treasury held to the nonqualified deferred compensation plan liabilities.
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Netmaturity securities executed in early March as part of a balance sheet repositioning, while net asset gains of $2.9 million for the first nine months of 2022 were primarily attributable to gains on sales of other real estate owned (mostly closed bank branch locations), while net asset gains of $3.7 million for the first nine months of 2021 were primarily attributable to favorable fair value marks on equity securities..

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Noninterest Expense
Table 5: Noninterest Expense
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)($ in thousands)20222021Change% Change20222021Change% Change($ in thousands)20232022Change% Change20232022Change% Change
PersonnelPersonnel$24,136 $16,927 $7,209 43 %$65,008 $49,127 $15,881 32 %Personnel$23,944 $24,136 $(192)(1)%$72,172 $65,008 $7,164 11 %
Occupancy, equipment and officeOccupancy, equipment and office7,641 5,749 1,892 33 21,476 13,939 7,537 54 Occupancy, equipment and office9,027 7,641 1,386 18 26,655 21,476 5,179 24 
Business development and marketingBusiness development and marketing2,281 1,654 627 38 6,169 3,853 2,316 60 Business development and marketing1,869 2,281 (412)(18)5,936 6,169 (233)(4)
Data processingData processing3,664 2,939 725 25 10,647 8,408 2,239 27 Data processing4,643 3,664 979 27 12,849 10,647 2,202 21 
Intangibles amortizationIntangibles amortization1,628 758 870 115 4,399 2,400 1,999 83 Intangibles amortization1,986 1,628 358 22 6,230 4,399 1,831 42 
FDIC assessmentsFDIC assessments480 480 — — 1,440 1,555 (115)(7)FDIC assessments1,500 480 1,020 213 3,049 1,440 1,609 112 
Merger-related expenseMerger-related expense519 2,793 (2,274)(81)1,172 3,449 (2,277)(66)Merger-related expense— 519 (519)(100)189 1,172 (983)(84)
Other expenseOther expense2,218 1,761 457 26 6,344 7,158 (814)(11)Other expense2,769 2,218 551 25 8,490 6,344 2,146 34 
Total noninterest expenseTotal noninterest expense$42,567 $33,061 $9,506 29 %$116,655 $89,889 $26,766 30 %Total noninterest expense$45,738 $42,567 $3,171 %$135,570 $116,655 $18,915 16 %
Non-personnel expensesNon-personnel expenses$18,431 $16,134 $2,297 14 %$51,647 $40,762 $10,885 27 %Non-personnel expenses$21,794 $18,431 $3,363 18 %$63,398 $51,647 $11,751 23 %
Average full-time equivalent (“FTE”) employeesAverage full-time equivalent (“FTE”) employees907 646 261 40 %863 591 272 46 %Average full-time equivalent (“FTE”) employees977 907 70 %955 863 92 11 %

Noninterest expense was $116.7$135.6 million, an increase of $26.8$18.9 million (30%(16%) over the first nine months of 2021.2022. Personnel costs increased $15.9$7.2 million (32%(11%), while non-personnel expenses combined increased $10.9$11.8 million (27%(23%) compared to the first nine months of 2021.2022.
Personnel expense was $65.0$72.2 million for the nine months ended September 30, 2022,2023, an increase of $15.9$7.2 million from the comparable period in 2021.2022. Salary expense increased $16.4$6.0 million (58%(11%) over the first nine months of 2021,2022, reflecting higher salaries from the larger employee base (with average full-time equivalent employees up 46%11%, mostly due to the timing of the 2022 and 2021 acquisitions)Charter acquisition), investments in our wealth team, and merit increases between the years. Salary expense also reflected increases in hourly pay and base salaries effective atyears, partly offset by lower incentive compensation commensurate with the end of March 2022, which benefited 67% of our employee base.lower current period earnings. Fringe benefits increased $3.4$1.2 million (50%(12%) over the first nine months of 2021, commensurate with2022, reflecting higher overall health care expenses as well as the larger employee base. PersonnelSalary expense was also impacted by the change in the fair value of nonqualified deferred compensation plan liabilities from the recent market declines.improvements. See also “Noninterest Income” for discussion on the offsetting fair value change to the nonqualified deferred compensation plan assets.
Occupancy, equipment and office expense was $21.5$26.7 million for the first nine months of 2022,2023, up $7.5$5.2 million (54%(24%) compared to the first nine months of 2021,2022, largely due to the expanded branch network with the recent acquisitions,Charter acquisition, as well as additional expense for software and technology solutions.
Business development and marketing expense was $6.2$5.9 million, up $2.3down $0.2 million (60%(4%), between the comparable nine-month periods, largely dueattributable to higher travelthe timing and entertainment expenses, as well as additionalextent of marketing donations, promotions, and media to support our expanded branch network and community base.media.
Data processing expense was $10.6$12.8 million, up $2.2 million (27%(21%) between the comparable nine-month periods, mostly due to volume-based increases in core and card processing charges, includingpartly from the larger operating base following the Mackinac, County, and Charter acquisitions.acquisition.
Intangibles amortization increased $2.0$1.8 million between the comparable nine-month periods due to higher amortization from the intangibles added with the recent acquisitions.Charter acquisition.
Other expense was $6.3$8.5 million, down $0.8up $2.1 million (11%(34%) between the comparable nine-month periods, mostly due to a $2.1 million contract termination charge incurred in 2021, partly offset by higher professional fees, costs to carry closed bank branches, and overall higher expenses related to our larger operating base.fees.

Income Taxes
Income tax expense was $18.4 million (effective tax rate of 37.3%) for the first nine months of 2023, compared to expense of $22.0 million (effective tax rate of 24.8%) for the first nine months of 2022, compared to $15.0 million (effective tax rate of 25.2%) for the comparable period of 2021.2022. The change in income tax expense was due to lower pretax earnings, and also included a $9.1 million charge to income tax expense to establish a tax valuation allowance related to the Wisconsin tax law change noted above in the “Performance Summary” section.
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Income Statement Analysis – Three Months Ended September 30, 20222023 versus Three Months Ended September 30, 20212022
Net income was $18.5$17.2 million, or adjusted net income (non-GAAP) of $23.3 million, for the three months ended September 30, 2022,2023, compared to $7.8net income of $18.5 million, or adjusted net income (non-GAAP) of $24.9 million for the three months ended September 30, 2021.2022. Earnings per diluted common share was $1.14 for third quarter 2023, compared to $1.29 for third quarter 2022, compared to $0.73 for third quarter 2021.2022.
Tax-equivalent net interest income was $63.5$62.0 million for third quarter 2022, comprised2023, a decrease of net interest$1.5 million from third quarter 2022. Interest income of $63.0increased $29.2 million ($27.8 million or 79% over third quarter 2021), and a tax-equivalent adjustment of $0.5 million. Tax-equivalent2022, while interest expense increased $30.7 million from third quarter 2022. The increase in interest income increased $32.2included $15.8 million betweenfrom higher yields (reflecting the third quarter periods, with $30.1rising interest rate environment) and $13.3 million from stronger volumes (led by average loans which grew $2.3 billion$839 million or 75%16% over third quarter 2021,2022, mostly due to timing of the acquisitions) and $2.2 million from higher yields.Charter acquisition). Average investment securities increased $1.0 billiondecreased $663 million, while other interest-earning assets grew $340 million (primarily investable cash) between the comparable third quarter periods, partlymostly due to the acquisitions,balance sheet repositioning actions in first quarter 2023 as well as investment securities maturities and partly due to the strategic re-investment of approximately $0.5 billion excess cash liquidity into U.S. Treasury securities of varying yields and durations during fourth quarter 2021.paydowns. Interest expense increased $4.2$30.7 million from third quarter 2021, including $2.7 million from higher volumes (mostly from higher average deposit balances from the acquisitions) and $1.5 million2022, mostly due to $29.7 million higher overall funding costs. For additional information regarding average balances, net interest income and net interest margin, see “INCOME STATEMENT ANALYSIS — Net Interest Income.”
The net interest margin for third quarter 20222023 was 3.48%3.16%, compared to 2.94%3.48% for third quarter 2021, influenced2022, impacted by the rising interest rate increasesenvironment and the changing balance sheet mix. The mix of average interest-earning assets shifted from 65%75% loans, 13%23% investments and 22%2% other interest-earning assets (mostly investable cash) for third quarter 2021,2022, to 75%81%, 23%13% and 2%6%, respectively, for third quarter 2022. As2023. The mix of average interest-bearing liabilities shifted from 84% core deposits, 10% brokered deposits, and 6% wholesale funding for third quarter 2022, to 83%, 12%, and 5%, respectively, for third quarter 2023, including a result, thenotable shift to higher rate deposit products. The yield on interest-earning assets of 3.91%5.15% increased 67124 bps from third quarter 2021. The yield on loans was 4.60%, 9 bps higher than third quarter 2021, largely due to2022, while the impact of the rising interest rate environment. The cost of funds of 0.65%2.83% increased 19218 bps between the comparable quarters, also due to the rising interest rates.quarters.
Provision for credit losses was $0.5 million for third quarter 2023 (all related to the ACL-Loans), compared to $8.6 million provision for credit losses for third quarter 2022 (comprised of $8.2 million related to the ACL-Loans, and $0.4 million for the ACL on unfunded commitments), compared to $6.0 million provision for credit losses for. The third quarter 2021. The 2022 provision for credit losses was mostly due to the Day 2 ACL increase from the Charter acquisition, while the 2021 provision for credit losses was mostly due to the Day 2 ACL increase for the Mackinac acquisition. For additional information regarding the allowance for credit losses-loans and asset quality, see “BALANCE SHEET ANALYSIS — Allowance for Credit Losses - Loans” and “BALANCE SHEET ANALYSIS — Nonperforming Assets.”
Noninterest income was $13.0$16.5 million for third quarter 2022, a decrease2023, an increase of $1.0$3.5 million (7%(27%) from third quarter 2021. Net mortgage income of $1.7 million for third quarter 2022 was down $3.1 million (64%) from third quarter 2021, primarily due to the rising interest rate environment reducing secondary market volumes and the related gains on sales. Trust services2022. Wealth management fee income and brokerage fee income combined was down $0.2grew $1.0 million (4%(21%), including favorable market-related changes, as unfavorable market-related declines outpaced thewell as growth in accounts and assets under management. Service charges on deposit accounts grew $0.3 million to $1.6 million for third quarter 2022, mostly due to the larger deposit base from the acquisitions. Card interchange income grew $0.7$0.3 million (31%(10%) between the comparable third quarter periods due to higher volume and activity. Net asset losses were minimal inLSR income increased $1.6 million between the comparable third quarter 2022, while net asset losses of $1.2 millionperiods mostly due to lower LSR amortization from the much slower prepayments speeds in third quarter 2021 were primarily attributable to fair value marks on equity securities.the higher interest rate environment. For additional information regarding noninterest income, see “INCOME STATEMENT ANALYSIS — Noninterest Income.”
Noninterest expense was $42.6$45.7 million for third quarter 2022,2023, an increase of $9.5$3.2 million (29%(7%) from third quarter 2021,2022, including a $7.2$0.2 million increasedecrease in personnel expense and a $2.3$3.4 million increase in non-personnel expenses. The increasedecrease in personnel was due toincluded higher salaries and fringe benefits from the larger employee base (with average full-time equivalent employees up 40%), investments in our wealth team, and merit increases between the years.more than offset by lower incentive compensation. Occupancy, equipment, and office of $7.6$9.0 million was up $1.9$1.4 million (33%(18%), largely due to the expanded branch network with the recent acquisitions,Charter acquisition as well as additional expense for software and technology solutions. Business development and marketing of $2.3 million increased $0.6 million over third quarter 2021, largely due to higher travel and entertainment expenses, as well as additional marketing donations, promotions, and media to support our expanded branch network and community base. Data processing expense was $3.7$4.6 million, up $0.7$1.0 million (25%(27%) between the comparable third quarter periods, mostly due to volume-based increases in core and card processing charges, including the larger operating base following the Mackinac, County, and Charter acquisitions.acquisition. Other expense was $2.2$2.8 million, up $0.5an increase of $0.6 million between the comparable third quarter periods, primarily due to higher professional fees and overall higher expenses related to our larger operating base. For additional information regarding noninterest expense, see “INCOME STATEMENT ANALYSIS — Noninterest Expense.”
Income tax expense was $14.7 million (effective tax rate of 46.1%) for third quarter 2022 was2023, compared to $6.3 million with an effective(effective tax rate of 25.4%, compared) for third quarter 2022. The change in income tax expense included a $9.1 million charge to income tax expense to establish a tax valuation allowance, partly offset by a $3.0 million reduction to income tax expense to reverse amounts recorded in the first half of $2.3 million and an effective2023, both related to the Wisconsin tax rate of 22.7% for third quarter 2021.law change noted above in the “Performance Summary” section.
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BALANCE SHEET ANALYSIS
At September 30, 2022,2023, period end assets were $8.9$8.4 billion, an increasea decrease of $1.2 billion (16%$348 million (4%) from December 31, 2021, largely due to2022, mostly lower investment securities from the Charter acquisition, which added total assets of $1.1 billion at acquisition.first quarter balance sheet repositioning, as well as subsequent investment securities maturities and paydowns, partly offset by higher cash balances. Total loans increased $1.4 billion$59 million from December 31, 2021, largely due to2022, with growth in residential mortgage loans partly offset by slower commercial loan demand, the Charter acquisition (which addedsale of specific nonaccrual loans, and the payoff of $827 million at acquisition) and solid organictwo larger loan growth.relationships. Total deposits of $7.4$7.2 billion at September 30, 2023, were minimally changed from December 31, 2022, increased $930with growth in customer and brokered time deposits partly offset by lower transaction account balances. Total borrowings decreased $345 million from December 31, 2021, including2022 in FHLB advances, mostly from the Charter acquisition (which added deposits of $870 million at acquisition) and higher brokered deposits. Total borrowings increased $288 million from December 31, 2021, with approximately half acquired with Charter and the remainder related to new FHLB advances.first quarter balance sheet repositioning. Total stockholders’ equity was $938$974 million at September 30, 2022,2023, an increase of $47$2 million since December 31, 2021, primarily due to common stock issued in the Charter acquisition and current year2022, with increases from earnings partlysubstantially offset by stock repurchase activity and unfavorable changes in thenegative fair value of securities AFS.investment changes and dividend payments.
Compared to September 30, 2021,2022, assets were up $2.5 billion (39%decreased $480 million (5%), including lower investment securities from September 30, 2021, largely due to the acquisitions of Charterfirst quarter balance sheet repositioning, as well as subsequent investment securities maturities and County.paydowns, partly offset by solid loan growth. Total loans increased $2.5 billion$255 million, primarily in residential mortgage and totalagricultural loans. Total deposits increased $2.0 billion from September 30, 2021, also largely due to the acquisitions of Charter and County. Stockholders’ equity increased $209decreased $214 million from September 30, 2021, primarily due to common stock issued in the Charter and County acquisitions and2022. Stockholders’ equity increased $36 million from September 30, 2022, with solid net income, partially offset by stock repurchases over the year and negative net fair value investment changes.changes and dividend payments.

Loans
In addition to the discussion that follows, see also Note 6, “Loans, Allowance for Credit Losses - Loans, and Credit Quality,” in the Notes to Unaudited Consolidated Financial Statements under Part I, Item 1, for additional disclosures on loans. For additional information regarding the allowance for credit losses and nonperforming assets see also “BALANCE SHEET ANALYSIS – Allowance for Credit Losses - Loans” and “BALANCE SHEET ANALYSIS – Nonperforming Assets.”
Nicolet services a diverse customer base inthroughout Wisconsin, Michigan and Minnesota. We concentrate on originating loans in our local markets and assisting current loan customers. TheNicolet actively utilizes government loan portfolio is widely diversifiedprograms such as those provided by typesthe U.S. Small Business Administration (“SBA”) and the U.S. Department of borrowers, industry groups, and market areas.Agriculture’s Farm Service Agency (“FSA”).
An active credit risk management process is used to ensure that sound and consistent credit decisions are made. The credit management process is regularly reviewed and has been modified over the past several years to further strengthen the controls. Factors that are important to managing overall credit quality are sound loan underwriting and administration, systematic monitoring of existing loans and commitments, effective loan review on an ongoing basis, early problem loan identification and remedial action to minimize losses, an appropriate ACL-Loans, and sound nonaccrual and charge-off policies.
For additional disclosures on loans, see also Note 6, “Loans, Allowance for Credit Losses - Loans, and Credit Quality,” in the Notes to Unaudited Consolidated Financial Statements under Part I, Item 1. For information regarding the allowance for credit losses and nonperforming assets see “BALANCE SHEET ANALYSIS – Allowance for Credit Losses - Loans” and “BALANCE SHEET ANALYSIS – Nonperforming Assets.” A detailed discussion of the loan portfolio accounting policies, general loan portfolio characteristics, and credit risk are described in Note 1, “Nature of Business and Significant Accounting Policies,” of the Notes to Consolidated Financial Statements, included in Part II, Item 8 of the Company’s 2022 Annual Report on Form 10-K.
Table 6: Period End Loan Composition
September 30, 2022December 31, 2021September 30, 2021September 30, 2023December 31, 2022September 30, 2022
(in thousands)(in thousands)Amount% of TotalAmount% of TotalAmount% of Total(in thousands)Amount% of TotalAmount% of TotalAmount% of Total
Commercial & industrialCommercial & industrial$1,268,252 21 %$1,042,256 23 %$956,257 27 %Commercial & industrial$1,237,789 20 %$1,304,819 21 %$1,268,252 21 %
Owner-occupied CREOwner-occupied CRE954,933 16 787,189 17 697,816 20 Owner-occupied CRE971,397 16 954,599 15 954,933 16 
AgriculturalAgricultural1,017,498 17 794,728 17 112,409 Agricultural1,108,261 18 1,088,607 18 1,017,498 17 
CommercialCommercial3,240,683 54 2,624,173 57 1,766,482 50 Commercial3,317,447 54 3,348,025 54 3,240,683 54 
CRE investmentCRE investment1,132,951 19 818,061 18 662,871 19 CRE investment1,130,938 18 1,149,949 19 1,132,951 19 
Construction & land developmentConstruction & land development306,446 213,035 173,971 Construction & land development326,747 318,600 306,446 
Commercial real estateCommercial real estate1,439,397 24 1,031,096 23 836,842 24 Commercial real estate1,457,685 23 1,468,549 24 1,439,397 24 
Commercial-based loansCommercial-based loans4,680,080 78 3,655,269 80 2,603,324 74 Commercial-based loans4,775,132 77 4,816,574 78 4,680,080 78 
Residential constructionResidential construction101,286 70,353 59,611 Residential construction76,289 114,392 101,286 
Residential first mortgageResidential first mortgage970,384 16 713,983 15 688,491 19 Residential first mortgage1,136,748 18 1,016,935 16 970,384 16 
Residential junior mortgageResidential junior mortgage176,428 131,424 130,279 Residential junior mortgage195,432 177,332 176,428 
Residential real estateResidential real estate1,248,098 21 915,760 19 878,381 25 Residential real estate1,408,469 22 1,308,659 21 1,248,098 21 
Retail & otherRetail & other56,259 50,807 51,493 Retail & other55,656 55,266 56,259 
Retail-based loansRetail-based loans1,304,357 22 966,567 20 929,874 26 Retail-based loans1,464,125 23 1,363,925 22 1,304,357 22 
Total loansTotal loans$5,984,437 100 %$4,621,836 100 %$3,533,198 100 %Total loans$6,239,257 100 %$6,180,499 100 %$5,984,437 100 %
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As noted in Table 6 above, the loan portfolio at September 30, 2022,2023, was 78%77% commercial-based and 22%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.
Total loans of $6.2 billion at September 30, 2023, increased $59 million from December 31, 2022, with growth in residential mortgage loans partly offset by slower commercial loan demand, the sale of specific nonaccrual loans, and the payoff of two larger loan relationships. At September 30, 2023, commercial and industrial loans represented the largest segment of Nicolet’s loan portfolio at 20% of the total portfolio, followed by agricultural and CRE investment each at 18% of the total 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 September 30, 2023.
Commercial Loan Portfolio by Industry Type (based on NAICS codes)
Commercial Loan Portfolio by Industry_09.30.2023.jpg
The following table presents the maturity distribution of the loan portfolio.
Table 7: Loan Maturity Distribution
As of September 30, 2023Loan Maturity
(in thousands)One Year
or Less
After One Year
to Five Years
After Five Years to Fifteen YearsAfter Fifteen YearsTotal
Commercial & industrial$421,162 $648,557 $157,771 $10,299 $1,237,789 
Owner-occupied CRE77,437 674,765 190,312 28,883 971,397 
Agricultural395,017 322,060 350,574 40,610 1,108,261 
CRE investment127,690 748,772 228,546 25,930 1,130,938 
Construction & land development30,254 184,992 85,995 25,506 326,747 
Residential construction *28,245 8,189 1,248 38,607 76,289 
Residential first mortgage24,177 265,884 186,542 660,145 1,136,748 
Residential junior mortgage15,247 18,580 34,558 127,047 195,432 
Retail & other29,656 13,012 8,861 4,127 55,656 
   Total loans$1,148,885 $2,884,811 $1,244,407 $961,154 $6,239,257 
Percent by maturity distribution19 %46 %20 %15 %100 %
Total fixed rate loans$505,680 $2,681,310 $863,139 $323,819 $4,373,948 
Total floating rate loans$643,205 $203,501 $381,268 $637,335 $1,865,309 
42
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At September 30, 2022,
As of December 31, 2022Loan Maturity
(in thousands)One Year
or Less
After One Year
to Five Years
After Five Years to Fifteen YearsAfter Fifteen YearsTotal
Commercial & industrial$433,319 $660,560 $197,352 $13,588 $1,304,819 
Owner-occupied CRE78,759 639,093 208,719 28,028 954,599 
Agricultural350,752 328,495 367,913 41,447 1,088,607 
CRE investment129,770 737,869 250,256 32,054 1,149,949 
Construction & land development64,169 131,889 92,379 30,163 318,600 
Residential construction *41,049 6,922 2,091 64,330 114,392 
Residential first mortgage22,985 263,810 202,514 527,626 1,016,935 
Residential junior mortgage6,814 19,941 33,201 117,376 177,332 
Retail & other27,814 15,002 8,021 4,429 55,266 
   Total loans$1,155,431 $2,803,581 $1,362,446 $859,041 $6,180,499 
Percent by maturity distribution19 %45 %22 %14 %100 %
Total fixed rate loans$520,535 $2,631,295 $987,225 $315,982 $4,455,037 
Total floating rate loans$634,896 $172,286 $375,221 $543,059 $1,725,462 
* The residential construction loans were $6.0 billion, $1.4 billion higher than December 31, 2021, largely duewith a loan maturity after five years represent a construction to the Charter acquisition (which added loans of $827 million at acquisition) and solid organicpermanent loan growth. Excluding the $827 million of loans Charter added at acquisition, loans increased $536 million (16% annualized) from year-end 2021 on solid organic growth, as well as the repurchase of approximately $100 million previously participated agricultural loans. Commercial and industrial loans continue to be the largest segment of Nicolet’s portfolio and represented 21% of the total portfolio at September 30, 2022.
Residential real estate loans of $1.2 billion grew $332 million from year-end 2021, including the Charter acquisition and organic growth, to represent 21% of total loans at September 30, 2022. Residential first mortgage loans include conventional first-lien home mortgages, while residential junior mortgage loans consist mainly of home equity lines and term loans secured by junior mortgage liens. As part of our management of residential mortgage loans, the majority of Nicolet’s long-term, fixed-rate residential first mortgage loans are sold in the secondary market with servicing rights retained. Nicolet’s mortgage loans are typically of high quality and have historically had low net charge-off rates.
Retail and other loans were up slightly ($5 million) from year-end 2021, representing approximately 1% of the total loan portfolio, and include predominantly short-term and other personal installment loans not secured by real estate.product.

Allowance for Credit Losses - Loans
In addition toFor additional disclosures on the discussion that follows,allowance for credit losses, see also Note 6, “Loans, Allowance for Credit Losses - Loans, and Credit Quality,” in the Notes to Unaudited Consolidated Financial Statements under Part I, Item 1. A detailed discussion of the loan portfolio accounting policies, general loan portfolio characteristics, and credit risk are described in Note 1, for additional disclosures“Nature of Business and Significant Accounting Policies,” of the Notes to Consolidated Financial Statements, included in Part II, Item 8 of the Company’s 2022 Annual Report on the allowance for credit losses.Form 10-K.
Credit risks within the loan portfolio are inherently different for each loan type as summarized under “BALANCE SHEET ANALYSIS — Loans.” A discussion of the loan portfolio credit risk can be found in the “Loans” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s 2021 Annual Report on Form 10-K.type. Credit risk is controlled and monitored through the use of lending standards, a thorough review of potential borrowers, and ongoing review of loan payment performance. Active asset quality administration, including early problem loan identification and timely resolution of problems, aids in the management of credit risk and minimization of loan losses. Loans charged off are subject to continuous review, and specific efforts are taken to achieve maximum recovery of principal, interest, and related expenses. For additional information regarding nonperforming assets see also “BALANCE SHEET ANALYSIS – Nonperforming Assets.”
The ACL-Loans represents management’s estimate of expected credit losses in the Company’s loan portfolio at the balance sheet date. To assess the overall appropriateness of the ACL-Loans, management applies an allocation methodology which focuses on evaluation of qualitative and environmental factors, including but not limited to: (i) evaluation of facts and issues related to specific loans; (ii) management’s ongoing review and grading of the loan portfolio; (iii) consideration of historical loan loss and delinquency experience on each portfolio segment; (iv) trends in past due and nonaccrual loans; (v) the risk characteristics of the various loan segments; (vi) changes in the size and character of the loan portfolio; (vii) concentrations of loans to specific borrowers or industries; (viii) existing economic conditions; (ix) the fair value of underlying collateral; and (x) other qualitative and quantitative factors which could affect expected credit losses. Assessing these numerous factors involves significant judgment; therefore, management considers the ACL-Loans a critical accounting estimate.
Management allocates the ACL-Loans by pools of risk within each loan portfolio segment. The allocation methodology consists of the following components. First, a specific reserve is established for individually evaluated credit deteriorated loans, which management defines as nonaccrual credit relationships over $250,000, collateral dependent loans, purchased credit deteriorated loans, and other loans with evidence of credit deterioration. The specific reserve in the ACL-Loans for these credit deteriorated loans is equal to the aggregate collateral or discounted cash flow shortfall. ManagementSecond, management allocates the ACL-Loans with historical loss rates by loan segment. The loss factors are measured on a quarterly basis and applied to each loan segment based on current loan balances and projected for their expected remaining life. Next, management allocates the ACL-Loans using the qualitative and environmental factors mentioned above. Consideration is given to those current qualitative or environmental factors that are likely to cause estimated credit losses as ofat the evaluation date to differ from the historical loss experience of each loan segment. Lastly, management considers reasonable and supportable forecasts to assess the collectability of future cash flows.
At September 30, 2022,2023, the ACL-Loans was $60$63 million (representing 1.01% of period end loans) compared to $50, minimally changed from $62 million (or 1.00% of period end loans) at December 31, 20212022 and $38up from $60 million (or 1.01% of period end loans) at September 30, 2021. The increase in the ACL-Loans from year-end 2021 was mostly due to the Charter acquisition, which added $8 million of provision for the Day 2 allowance and $2 million related to purchased credit deteriorated loans. The increase in the ACL-Loans from September 30, 2021 was largely due to the acquisitions of Charter and County, which combined added $16 million of provision for the Day 2 allowance and $5 million related to purchased credit deteriorated loans.2022. The components of the ACL-Loans are detailed further in Table 78 below.
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Table 7:8: Allowance for Credit Losses - Loans
Nine Months EndedYear EndedNine Months EndedYear Ended
(in thousands)(in thousands)September 30, 2022September 30, 2021December 31, 2021(in thousands)September 30, 2023September 30, 2022December 31, 2022
ACL-Loans:ACL-Loans:ACL-Loans:
Balance at beginning of periodBalance at beginning of period$49,672 $32,173 $32,173 Balance at beginning of period$61,829 $49,672 $49,672 
ACL on PCD loans acquiredACL on PCD loans acquired1,709 1,896 5,159 ACL on PCD loans acquired— 1,709 1,937 
Provision for credit lossesProvision for credit losses9,100 4,500 12,500 Provision for credit losses1,650 9,100 10,950 
Charge-offsCharge-offs(442)(436)(513)Charge-offs(1,091)(442)(1,033)
RecoveriesRecoveries309 266 353 Recoveries772 309 303 
Net (charge-offs) recoveriesNet (charge-offs) recoveries(133)(170)(160)Net (charge-offs) recoveries(319)(133)(730)
Balance at end of periodBalance at end of period$60,348 $38,399 $49,672 Balance at end of period$63,160 $60,348 $61,829 
Net loan (charge-offs) recoveries:Net loan (charge-offs) recoveries:Net loan (charge-offs) recoveries:
Commercial & industrialCommercial & industrial$(49)$(31)$50 Commercial & industrial$115 $(49)$(86)
Owner-occupied CREOwner-occupied CRE(36)— — Owner-occupied CRE(60)(36)(555)
AgriculturalAgricultural— (48)(48)Agricultural(63)— — 
CRE investmentCRE investment169 (2)(2)CRE investment— 169 169 
Construction & land developmentConstruction & land development— — — Construction & land development— — — 
Residential constructionResidential construction— — — Residential construction— — — 
Residential first mortgageResidential first mortgage(58)(34)(93)Residential first mortgage(58)(57)
Residential junior mortgageResidential junior mortgageResidential junior mortgage(96)
Retail & otherRetail & other(168)(59)(71)Retail & other(218)(168)(202)
Total net (charge-offs) recoveriesTotal net (charge-offs) recoveries$(133)$(170)$(160)Total net (charge-offs) recoveries$(319)$(133)$(730)
Ratios:Ratios:Ratios:
ACL-Loans to total loansACL-Loans to total loans1.01 %1.09 %1.07 %ACL-Loans to total loans1.01 %1.01 %1.00 %
Net charge-offs to average loans, annualizedNet charge-offs to average loans, annualized0.00 %0.01 %0.01 %Net charge-offs to average loans, annualized0.01 %— %0.01 %

Nonperforming Assets
As part of its overall credit risk management process, management is committed to an aggressive problem loan identification philosophy. This philosophy has been implemented through the ongoing monitoring and review of all pools of risk in the loan portfolio to identify problem loans early and minimize the risk of loss. Management continues to actively work with customers and monitor credit risk from the ongoing disruptions related to the pandemic, as well as economic, political, and social turmoil. See alsomacroeconomic challenges. For additional disclosures on credit quality, see Note 6, “Loans, Allowance for Credit Losses - Loans, and Credit Quality” of the Notes to Unaudited Consolidated Financial Statements under Part I, Item 1, for further disclosures on credit quality.1. For additional information on loans see also “BALANCE SHEET ANALYSIS – Loans” and for additional information on the ACL-Loans see “BALANCE SHEET ANALYSIS – Allowance for Credit Losses-Loans.”
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 September 30, 2022,2023, nonperforming assets were $40$32 million and represented 0.45%0.37% of total assets, compared to $56$40 million or 0.73%0.46% of total assets at December 31, 2021.2022. The reduction in nonperforming assets was mostly due to the nonaccrual loan sale (as noted under “BALANCE SHEET ANALYSIS – Loans” above).
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 $46$72 million (0.8%(1% of loans) and $53 million (1.1%(1% of loans) at September 30, 20222023 and December 31, 2021, respectively.2022, respectively, with the increase primarily due to the downgrade of one commercial credit relationship. 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 underlying real estate values.
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Table 8:9: Nonperforming Assets
(in thousands)(in thousands)September 30, 2022December 31, 2021September 30, 2021(in thousands)September 30, 2023December 31, 2022September 30, 2022
Nonperforming loans:Nonperforming loans:Nonperforming loans:
Commercial & industrialCommercial & industrial$3,052 $1,908 $1,778 Commercial & industrial$5,192 $3,328 $3,052 
Owner-occupied CREOwner-occupied CRE5,806 4,220 2,990 Owner-occupied CRE5,602 5,647 5,806 
AgriculturalAgricultural20,646 28,367 1,782 Agricultural13,458 20,416 20,646 
CommercialCommercial29,504 34,495 6,550 Commercial24,252 29,391 29,504 
CRE investmentCRE investment3,343 4,119 4,249 CRE investment1,100 3,832 3,343 
Construction & land developmentConstruction & land development794 1,071 1,093 Construction & land development177 771 794 
Commercial real estateCommercial real estate4,137 5,190 5,342 Commercial real estate1,277 4,603 4,137 
Commercial-based loansCommercial-based loans33,641 39,685 11,892 Commercial-based loans25,529 33,994 33,641 
Residential constructionResidential construction— — — Residential construction— — — 
Residential first mortgageResidential first mortgage4,309 4,132 4,495 Residential first mortgage3,812 3,780 4,309 
Residential junior mortgageResidential junior mortgage277 243 232 Residential junior mortgage92 224 277 
Residential real estateResidential real estate4,586 4,375 4,727 Residential real estate3,904 4,004 4,586 
Retail & otherRetail & other99 94 96 Retail & other74 82 99 
Retail-based loansRetail-based loans4,685 4,469 4,823 Retail-based loans3,978 4,086 4,685 
Total nonaccrual loansTotal nonaccrual loans38,326 44,154 16,715 Total nonaccrual loans29,507 38,080 38,326 
Accruing loans past due 90 days or moreAccruing loans past due 90 days or more— — — Accruing loans past due 90 days or more— — — 
Total nonperforming loansTotal nonperforming loans$38,326 $44,154 $16,715 Total nonperforming loans$29,507 $38,080 $38,326 
Nonaccrual loans (included above) covered by guaranteesNonaccrual loans (included above) covered by guarantees$5,493 $6,776 $1,729 Nonaccrual loans (included above) covered by guarantees$5,919 $5,459 $5,493 
OREO:OREO:OREO:
Commercial real estate ownedCommercial real estate owned$628 $1,549 $1,219 Commercial real estate owned$1,147 $628 $628 
Residential real estate owned— 99 355 
Bank property real estate ownedBank property real estate owned1,506 10,307 2,895 Bank property real estate owned884 1,347 1,506 
Total OREOTotal OREO2,134 11,955 4,469 Total OREO2,031 1,975 2,134 
Total nonperforming assetsTotal nonperforming assets$40,460 $56,109 $21,184 Total nonperforming assets$31,538 $40,055 $40,460 
Performing troubled debt restructurings$— $5,443 $2,103 
Ratios:Ratios:Ratios:
Nonperforming loans to total loansNonperforming loans to total loans0.64 %0.96 %0.47 %Nonperforming loans to total loans0.47 %0.62 %0.64 %
Nonperforming assets to total loans plus OREONonperforming assets to total loans plus OREO0.68 %1.21 %0.60 %Nonperforming assets to total loans plus OREO0.51 %0.65 %0.68 %
Nonperforming assets to total assetsNonperforming assets to total assets0.45 %0.73 %0.33 %Nonperforming assets to total assets0.37 %0.46 %0.45 %
ACL-Loans to nonperforming loansACL-Loans to nonperforming loans157 %112 %230 %ACL-Loans to nonperforming loans214 %162 %157 %
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Deposits
Deposits represent Nicolet’s largest source of funds. Total depositsfunds, and the strong core deposit base provides a stable funding source. Core deposit balances of $7.4$6.6 billion at September 30, 2022, increased $930 million2023 were minimally changed from December 31, 2021, primarily due to the Charter acquisition,2022, and included a $735 million increase in core customer depositsshift to higher rate deposit products (mostly money market accounts and a $195 million increase in brokered deposits.time deposits). Compared to September 30, 2021, total2022, core deposits increased $2.0 billion (36%decreased $178 million (3%), largely due to the Charter and County acquisitions.brokered deposits decreased $35 million (5%). The deposit composition is presented in Table 910 below.
Table 9:10: Period End Deposit Composition
September 30, 2022December 31, 2021September 30, 2021September 30, 2023December 31, 2022September 30, 2022
(in thousands)(in thousands)Amount% of TotalAmount% of TotalAmount% of Total(in thousands)Amount% of TotalAmount% of TotalAmount% of Total
Noninterest-bearing demandNoninterest-bearing demand$2,477,507 33 %$1,975,705 31 %$1,852,119 34 %Noninterest-bearing demand$2,020,074 28 %$2,361,816 33 %$2,477,507 33 %
Money market and interest-bearing demand3,012,405 41 %2,834,824 44 %2,154,557 40 %
Interest-bearing demandInterest-bearing demand955,746 13 %1,279,850 18 %1,242,961 17 %
Money marketMoney market1,933,227 27 %1,707,619 24 %1,769,444 24 %
SavingsSavings939,832 13 %803,197 12 %775,281 14 %Savings789,045 11 %931,417 13 %939,832 13 %
TimeTime966,158 13 %852,190 13 %646,817 12 %Time1,484,296 21 %898,219 12 %966,158 13 %
Total depositsTotal deposits$7,395,902 100 %$6,465,916 100 %$5,428,774 100 %Total deposits$7,182,388 100 %$7,178,921 100 %$7,395,902 100 %
Brokered transaction accountsBrokered transaction accounts$252,891 %$234,306 %$152,858 %Brokered transaction accounts$146,517 %$252,829 %$252,891 %
Brokered and listed time depositsBrokered and listed time deposits386,101 %209,857 %204,202 %Brokered and listed time deposits457,433 %339,066 %386,101 %
Total brokered depositsTotal brokered deposits$638,992 %$444,163 %$357,060 %Total brokered deposits$603,950 %$591,895 %$638,992 %
Customer transaction accountsCustomer transaction accounts$6,176,853 84 %$5,379,420 83 %$4,629,099 85 %Customer transaction accounts$5,551,575 77 %$6,027,873 84 %$6,176,853 84 %
Customer time depositsCustomer time deposits580,057 %642,333 10 %442,615 %Customer time deposits1,026,863 15 %559,153 %580,057 %
Total customer deposits (core)Total customer deposits (core)$6,756,910 92 %$6,021,753 93 %$5,071,714 93 %Total customer deposits (core)$6,578,438 92 %$6,587,026 92 %$6,756,910 92 %
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Total estimated uninsured deposits were $2.0 billion (representing 29% of total deposits) at September 30, 2023, compared to $2.3 billion (representing 32% of total deposits) at December 31, 2022.



Lending-Related Commitments
As of September 30, 20222023 and December 31, 2021,2022, Nicolet had the following off-balance sheet lending-related commitments.
Table 10:11: Commitments
(in thousands)(in thousands)September 30, 2022December 31, 2021(in thousands)September 30, 2023December 31, 2022
Commitments to extend creditCommitments to extend credit$1,854,064 $1,433,881 Commitments to extend credit$1,810,068 $1,850,601 
Financial standby letters of creditFinancial standby letters of credit26,250 13,562 Financial standby letters of credit18,235 26,530 
Performance standby letters of creditPerformance standby letters of credit9,059 7,336 Performance standby letters of credit15,814 9,375 
Interest rate lockFor additional disclosures on lending-related commitments, see Note 9, “Commitments and Contingencies” of the Notes to originate residential mortgage loans held for sale (included above in commitments to extend credit) and forward commitments to sell residential mortgage loans held for sale are considered derivative instruments (“mortgage derivatives”) and the notional amounts represented $12 million and $10 million, respectively, at September 30, 2022. In comparison, interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans held for sale represented $50 million and $1 million, respectively, at December 31, 2021. The net fair value of these mortgage derivatives combined was a gain of $121,000 at September 30, 2022 compared to a gain of $149,000 at December 31, 2021.Unaudited Consolidated Financial Statements under Part I, Item 1.

Liquidity Management
Liquidity management refers to the ability to ensure that cash isadequate liquid funds are available in a timely and cost-effective manner to meet the current and future cash flow requirementsobligations arising in the daily operations of depositors and borrowers and to meet other commitments as they fall due, includingthe Company. These cash flow obligations include the ability to service debt, invest in subsidiaries, repurchase common stock,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 requirements.expenses. The Company’s most liquid assets are cash and due from banks and interest-earning deposits, which totaled $546 million and $155 million at September 30, 2023 and December 31, 2022, respectively. Balances of these liquid assets are dependent on our operating, investing, and financing activities during any given period.
Funds are availableThe $391 million increase in cash and cash equivalents since year-end 2022 included $70 million net cash provided by operating activities and $670 million net cash provided by investing activities (mostly investment sales from a numberthe balance sheet repositioning), partly offset by $349 million net cash used in financing activities (mostly repayment of basic banking activityFHLB borrowings from the balance sheet repositioning). As of September 30, 2023, management believed that adequate liquidity existed to meet all projected cash flow obligations.
Nicolet’s primary sources including, but not limited to,of funds include the core deposit base;base, repayment and maturity of loans;loans, investment securities calls, maturities, and sales;sales, and procurement of additional brokered deposits or other wholesale funding. At September 30, 2022,2023, approximately 48%43% of the $1.6 billion investment securities portfolio was pledged as collateral to secure public deposits and borrowings, as applicable, and
47


for liquidity or other purposes as required by regulation. Additional fundingLiquidity sources available to the Company at September 30, 2022, consist of available and unused Federal funds lines, borrowing capacity at the FHLB of $554 million, and borrowing capacity2023, are presented in the brokered deposit market.Table 12 below.
Table 12: Liquidity Sources
(in millions)September 30, 2023
FHLB Borrowing Availability (1)
$560 
Fed Funds Lines195
Fed Discount Window11
Immediate Funding Availability$766 
Brokered Capacity1,192 
Guaranteed portion of SBA loans87 
Other funding sources96 
Short-Term Funding Availability (2)
$1,375 
Total Contingent Funding Availability$2,141 
(1) Excludes outstanding FHLB borrowings of $5 million at September 30, 2023.
(2) Short-term funding availability defined as funding that could be secured between 2 and 30 days.
Management is committed to the Parent Company being a source of strength to the Bank and its other subsidiaries, and therefore, regularly evaluates capital and liquidity positions of the Parent Company in light of current and projected needs, growth or strategies. The Parent Company uses cash for normal expenses, debt service requirements and, when opportune, for common stock repurchases, repayment of debt, or investment in other strategic actions such as mergers or acquisitions. At September 30, 2022,2023, the Parent Company had $38$49 million in cash. Additional cash sources available to the Parent Company include access to the public or private markets to issue new equity, subordinated notes or other debt. During 2021, Nicolet completed the private placement of $100 million in fixed-to-floating rate subordinated notes (the “Notes”) due in 2031. (See Note 8, “Short and Long-Term Borrowings” of the Notes to Unaudited Consolidated Financial Statements under Part I, Item 1, for additional information on the Notes). Dividends from the Bank and, to a lesser extent, stock option exercises, also represent significant sources of cash flows for the Parent Company.
Cash and cash equivalents at September 30, 2022 and December 31, 2021 were $438 million and $595 million, respectively. The decreaseBank is required by federal law to obtain prior approval of the OCC for payments of dividends if the total of all dividends declared by the Bank in cash and cash equivalents since year-end 2021 included $87 million net cash provided by operating activities (mostly earnings), $382 million net cash used in investing activities (with strong loan growth and cash paid for the Charter acquisition partly offset by net cash receivedany year will exceed certain thresholds. Management does not believe that regulatory restrictions on dividends from the Birmingham branch sale), and $137 million net cash provided by financing activities (mostly deposit and short-term borrowings partly offset by cash outflows for common stock repurchases). Management believesBank will adversely affect its liquidity resources were sufficient as of September 30, 2022 to fund loans, accommodate deposit cycles and trends, andability to meet otherits cash needs as necessary.obligations.

Interest Rate Sensitivity Management and Impact of Inflation
A reasonable balance between interest rate risk, credit risk, liquidity risk and maintenance of yield, is highly important to Nicolet’s business success and profitability. As an ongoing part of our financial strategy and risk management, we attempt to understand and manage the impact of fluctuations in market interest rates on our net interest income. The consolidated balance sheet consists mainly of interest-earning assets (loans, investments and cash) which are primarily funded by interest-bearing liabilities (deposits and other borrowings). Such financial instruments have varying levels of sensitivity to changes in market rates of interest. Market rates are highly sensitive to many factors beyond our control, including but not limited to general economic conditions and policies of governmental and regulatory authorities. Our operating income and net income depends, to a substantial extent, on “rate spread” (i.e., the difference between the income earned on loans, investments and other earning assets and the interest expense paid to obtain deposits and other funding liabilities).
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Asset-liability management policies establish guidelines for acceptable limits on the sensitivity to changes in interest rates on earnings and market value of assets and liabilities. Such policies are set and monitored by management and the boardBoard of directors’Directors’ Asset and Liability Committee.
To understand and manage the impact of fluctuations in market interest rates on net interest income, we measure our overall interest rate sensitivity through a net interest income analysis, which calculates the change in net interest income in the event of hypothetical changes in interest rates under different scenarios versus a baseline scenario. Such scenarios can involve static balance sheets, balance sheets with projected growth, parallel (or non-parallel) yield curve slope changes, immediate or gradual changes in market interest rates, and one-year or longer time horizons. The simulation modeling uses assumptions involving market spreads, prepayments of rate-sensitive instruments, renewal rates on maturing or new loans, deposit retention rates, and other assumptions.
Among other scenarios, we assessed the impact on net interest income in the event of a gradual +/-100 bps and +/-200 bps change in market rates (parallel to the change in prime rate) over a one-year time horizon to a static (flat) balance sheet. The results provided include the liquidity measures mentioned earlierabove and reflect the changedhigher interest rate environment. The interest rate scenarios are used for analytical purposes only and do not necessarily represent management’s view of future market interest rate movements. Based on financial data at September 30, 20222023 and December 31, 2021,2022, the projected changes in net interest income over a one-year time horizon, versus the baseline, are presented in Table 1113 below. The results are within Nicolet’s guidelines of not greater than -10% for +/- 100 bps and not greater than -15% for +/- 200 bps.
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Table 11:13: Interest Rate Sensitivity
September 30, 2022December 31, 2021September 30, 2023December 31, 2022
200 bps decrease in interest rates200 bps decrease in interest rates(1.7)%(0.3)%200 bps decrease in interest rates(1.8)%(0.7)%
100 bps decrease in interest rates100 bps decrease in interest rates(0.7)%(0.3)%100 bps decrease in interest rates(0.9)%(0.4)%
100 bps increase in interest rates100 bps increase in interest rates0.5 %(0.1)%100 bps increase in interest rates1.1 %— %
200 bps increase in interest rates200 bps increase in interest rates1.1 %(0.3)%200 bps increase in interest rates2.3 %0.1 %
Actual results may differ from these simulated results due to timing, magnitude and frequency of interest rate changes, as well as changes in market conditions and their impact on customer behavior and management strategies.
The effect of inflation on a financial institution differs significantly from the effect on an industrial company. While a financial institution’s operating expenses, particularly salary and employee benefits, are affected by general inflation, the asset and liability structure of a financial institution consists largely of monetary items. Monetary items, such as cash, investments, loans, deposits and other borrowings, are those assets and liabilities which are or will be converted into a fixed number of dollars regardless of changes in prices. As a result, changes in interest rates have a more significant impact on a financial institution’s performance than does general inflation. Inflation may also impacthave impacts on the Bank’s customers, on businesses and consumers and their ability or willingness to invest, save or spend, and perhaps on their ability to repay loans. As such, there would likely be impacts on the general appetite for banking products and the credit health of the Bank’s customer base.

Capital
Management regularly reviews the adequacy of its capital to ensure that sufficient capital is available for current and future needs and is in compliance with regulatory guidelines. The capital position and capital strategies are actively reviewed in light of perceived business risks associated with current and prospective earning levels, liquidity, asset quality, economic conditions in the markets served, and level of returns available to shareholders. Management intends to maintain an optimal capital and leverage mix for growth and shareholder return. For details on the change in capital see “BALANCE SHEET ANALYSIS.”
The Company’s and the Bank’s regulatory capital ratios remain above minimum regulatory ratios, including the capital conservation buffer. At September 30, 2022,2023, the Bank’s regulatory capital ratios qualify the Bank as well-capitalized under the prompt-corrective action framework. This strong base of capital has allowed Nicolet to be opportunistic in the current environment and in strategic growth. A summary of the Company’s and the Bank’s regulatory capital amounts and ratios, as well as selected capital metrics are presented in the following table.
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Table 12:14: Capital
At or for the Nine Months EndedAt or for the
Year Ended
At or for the Nine Months EndedAt or for the
Year Ended
($ in thousands)($ in thousands)September 30, 2022December 31, 2021($ in thousands)September 30, 2023December 31, 2022
Company Stock Repurchases: *Company Stock Repurchases: *Company Stock Repurchases: *
Common stock repurchased during the period (dollars)Common stock repurchased during the period (dollars)$60,697 $61,464 Common stock repurchased during the period (dollars)$1,519 $61,483 
Common stock repurchased during the period (full shares)Common stock repurchased during the period (full shares)661,662 793,064 Common stock repurchased during the period (full shares)26,853 671,662 
Company Risk-Based Capital:Company Risk-Based Capital:Company Risk-Based Capital:
Total risk-based capitalTotal risk-based capital$855,119 $793,410 Total risk-based capital$920,142 $889,763 
Tier 1 risk-based capitalTier 1 risk-based capital651,016 604,199 Tier 1 risk-based capital715,567 684,280 
Common equity Tier 1 capitalCommon equity Tier 1 capital613,284 567,095 Common equity Tier 1 capital677,004 646,341 
Total capital ratioTotal capital ratio12.0 %13.8 %Total capital ratio13.0 %12.3 %
Tier 1 capital ratioTier 1 capital ratio9.2 %10.5 %Tier 1 capital ratio10.1 %9.5 %
Common equity tier 1 capital ratioCommon equity tier 1 capital ratio8.6 %9.9 %Common equity tier 1 capital ratio9.6 %9.0 %
Tier 1 leverage ratioTier 1 leverage ratio8.6 %9.4 %Tier 1 leverage ratio8.8 %8.2 %
Bank Risk-Based Capital:Bank Risk-Based Capital:Bank Risk-Based Capital:
Total risk-based capitalTotal risk-based capital$801,952 $700,869 Total risk-based capital$863,617 $816,951 
Tier 1 risk-based capitalTier 1 risk-based capital750,572 664,688 Tier 1 risk-based capital805,452 764,090 
Common equity Tier 1 capitalCommon equity Tier 1 capital750,572 664,688 Common equity Tier 1 capital805,452 764,090 
Total capital ratioTotal capital ratio11.3 %12.2 %Total capital ratio12.2 %11.3 %
Tier 1 capital ratioTier 1 capital ratio10.6 %11.6 %Tier 1 capital ratio11.4 %10.6 %
Common equity tier 1 capital ratioCommon equity tier 1 capital ratio10.6 %11.6 %Common equity tier 1 capital ratio11.4 %10.6 %
Tier 1 leverage ratioTier 1 leverage ratio10.0 %10.3 %Tier 1 leverage ratio9.9 %9.1 %
* Reflects common stock repurchased under board of director authorizations for the common stock repurchase program.* Reflects common stock repurchased under board of director authorizations for the common stock repurchase program.* Reflects common stock repurchased under board of director authorizations for the common stock repurchase program.
In managing capital for optimal return, we evaluate capital sources and uses, pricing and availability of our stock in the market, and alternative uses of capital (such as the level of organic growth or acquisition opportunities)opportunities, dividends, or repayment of equity-equivalent debt) in light of strategic plans. During the first nine months of 2022, $61 million was utilized to repurchase and cancel 661,662 shares of common stock, pursuant to our common stock repurchase program. At September 30, 2022,2023, there remains $48$46 million authorized under this repurchase program, as modified, to be utilized from time-to-time to repurchase shares in the open market, through block transactions or in private transactions.

Critical Accounting Estimates
In preparing the consolidatedThe preparation of financial statements in conformity with U.S. GAAP requires management is required to make estimates, and assumptions or judgments that affect the amounts reported amounts of assetsin the financial statements and liabilitiesaccompanying notes. These estimates and assumptions are based on historical experience, current information, and other factors deemed to be relevant; accordingly, as of the date of the balance sheet and revenues and expenses for the period. Actualthis information changes, actual results could differ significantly from those estimates. EstimatesNicolet considers accounting estimates to be critical to reported financial results if the accounting estimate requires management to make assumptions about matters that are particularly susceptiblehighly uncertain and different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to significant changeoccur from period to period, could have a material impact on the financial statements. The accounting estimates we consider to be critical include business combinations and the valuation of loans acquired, the determination of the allowance for credit losses, the determination and assessment of deferred tax assets and liabilities, and the valuation of loans acquired in acquisition transactions.income taxes. A discussion of these estimates can be found in the “Critical Accounting Estimates” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s 20212022 Annual Report on Form 10-K. There have been no changes in the Company’s determination of critical accounting policies and estimates since December 31, 2021.2022.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our market risk at September 30, 2022,2023, from that presented in our 20212022 Annual Report on Form 10-K. See section “Interest Rate Sensitivity Management and Impact of Inflation” within Management’s Discussion and Analysis of Financial Condition and Results of Operations under Part I, Item 2, for our interest rate sensitivity position at September 30, 2022.2023.

ITEM 4. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. Management, under the supervision, and with the participation, of our principal executive officer and principal financial officer, evaluated our disclosure controls and procedures (as such term is defined in Exchange Act Rule 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
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(b) Changes in Internal Control Over Financial Reporting. There were no changes in the Company’s internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal controlscontrol over financial reporting.


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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
WeThe Company and ourits subsidiaries may be involved from time to time in various routine legal proceedings incidental to our respective businesses. Neither wethe Company nor any of ourits subsidiaries are currently engaged in any legal proceedings that are expected to have a material adverse effect on our results of operations or financial position.

ITEM 1A. RISK FACTORS
There have been no material changes in the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table contains information regarding purchases of Nicolet’s common stock made during third quarter 20222023 by or on behalf of the Company or any “affiliated purchaser,” as defined by Rule 10b-18(a)(3) of the Exchange Act.
Total Number of
Shares Purchased (a)
Average Price
Paid per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs
Maximum Number of
Shares that May Yet
Be Purchased Under
the Plans
or Programs (b)
(#)($)(#)(#)
Period
July 1 – July 31, 2022— $— — 
August 1 – August 31, 2022— $— — 
September 1 – September 30, 202272 $76.66 — 
Total72 $76.66 — 686,000 
Total Number of
Shares Purchased (a)
Average Price
Paid per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs
Maximum Number of
Shares that May Yet
Be Purchased Under
the Plans
or Programs (b)
(#)($)(#)(#)
Period
July 1 – July 31, 202339,745 $80.60 — 
August 1 – August 31, 2023— $— — 
September 1 – September 30, 2023— $— — 
Total39,745 $80.60 — 659,000 
a.During third quarter 2022,2023, the Company withheld 72no common shares for minimum tax withholding settlements on restricted stock.stock, and withheld 39,745 common shares to satisfy the exercise price and tax withholding requirements on stock option exercises. These are not considered “repurchases” and, therefore, do not count against the maximum number of shares that may yet be purchased under the boardBoard of directors’Directors’ authorization.
b.The boardBoard of directorsDirectors approved a common stock repurchase program which authorized, with subsequent modifications, the use of up to $276 million to repurchase outstanding shares of common stock. This common stock repurchase program was last modified on April 19, 2022, and has no expiration date. There were no common stock repurchases under this program during third quarter 2023. At September 30, 2022,2023, approximately $48$46 million remained available under this common stock repurchase program, or approximately 686,000659,000 shares of common stock (based upon the closing stock price of $70.44$69.78 on September 30, 2022)2023).
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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ITEM 5. OTHER INFORMATION
None.
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Atwell Agreement:
In connection with the Company’s succession and transition plan, on November 6, 2023, Robert B. Atwell, our Executive Chairman and one of Nicolet’s founders, and the Company entered into a letter agreement (the ���Atwell Agreement”) setting forth the terms applicable to his transition from active employment as the Executive Chairman through December 31, 2023 (the “Transition Date”), to thereafter as an advisor for a period of three years following the Transition Date (the “Term”). In consideration of the services provided and compliance with the restrictive covenants (described below) during the Term, Mr. Atwell will receive an annual fee of $680,000, health insurance coverage for Mr. Atwell and his qualified dependents, Nicolet will continue to pay the premiums for specified life insurance policies, and Nicolet will transfer ownership of his current company-owned car to Mr. Atwell. Pursuant to the Atwell Agreement, Mr. Atwell agreed to be bound by a noncompetition restriction and employee and customer non-solicitation covenants while he is providing services to the Company and for three years thereafter. Mt. Atwell will remain a member of the Company’s Board of Directors.

The foregoing summary of the material terms of the Atwell Agreement is qualified in its entirety by reference to the full text of the agreement, which is filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q.

Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements: None.

ITEM 6. EXHIBITS
The following exhibits are filed herewith:
Exhibit
Number
Description
2.110.1
31.1
31.2
32.1
32.2
101.INS101
The XBRL Instance Document does not appearInteractive data files for Nicolet Bankshares, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL: (i) the Interactive Date File because its XBRL tags are embedded withinConsolidated Balance Sheets (unaudited), (ii) the Inline XBRL document (2)Consolidated Statements of Income (unaudited), (iii) the Consolidated Statements of Comprehensive Income (Loss) (unaudited), (iv) the Consolidated Statements of Stockholders’ Equity (unaudited), (v) the Consolidated Statements of Cash Flows (unaudited), and (vi) Notes to Unaudited Consolidated Financial Statements.
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data Filefrom Nicolet Bankshares, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 (formatted asin Inline XBRL and contained in Exhibit 101)
(1) Incorporated by reference to the exhibit of the same number in the Registrant’s Current Report on Form 8-K filed on March 30, 2022.
(2) Includes the following financial information included in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) Notes to Unaudited Consolidated Financial Statements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
NICOLET BANKSHARES, INC.
November 1, 20227, 2023/s/ Michael E. Daniels
Michael E. Daniels
President and Chief Executive Officer
November 1, 20227, 2023/s/ H. Phillip Moore, Jr.
H. Phillip Moore, Jr.
Chief Financial Officer

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