NCBS: Nicolet Bankshares, Inc. (NASDAQ: NCBS)

Nicolet Bankshares, Inc. (NASDAQ: NCBS) (“Nicolet”) stated 3rd-quarter 2k19 net income of $13.50M and earnings for each diluted common share of $1.400, contrast to $18.50M and $1.910 for 2nd-quarter 2k19, and $10.90M and $1.090 for 3rd-quarter 2k18, respectively. Annualized quarterly return on average assets was 1.730 percent, 2.460 percent and 1.450 percent, for 3rd-quarter 2k19, 2nd-quarter 2k19 and 3rd-quarter 2k18, respectively.

Net income for the nine months finished September 30, 2k19 was $42.30M, 40.00 percent higher than $30.20M for the 1st-nine months of 2k18, and earnings for each diluted common share was $4.360, 44.00 percent higher than $3.020 for the comparable duration a year ago. Annualized return on average assets for the 1st-nine months of 2k19 and 2k18 was 1.850 percent and 1.360 percent, respectively.

During 2nd-quarter 2k19, net income favourably included $5.40M (or $0.550 of diluted earnings for each share) related to two actions combined, the sale of 80.00 percent of Nicolet’s equity investment in a data processing entity ($7.40M after-tax gain) and retirement-related compensation declared to benefit all employees after that sale ($2.00M after-tax cost), impacting the 2k19 year-to-date and linked-quarter comparisons.

At September 30, 2k19, assets were $3.10B (up 3.0 percent since September 30, 2k18), loans were $2.20B (up 5.0 percent), and deposits were $2.6B (up 2.0 percent). Since June 30, duration end loans raised $40.00M or 7.0 percent annualized, with the majority in commercial loans, while deposits raised $48.00M or 7.0 percent annualized, with growth in transaction accounts surpassing the decline in time deposits. Year-over-year, average loans raised 3.0 percent and average deposits grew 2.0 percent.

Asset quality remained exceptional, with nonperforming assets of only $11.00M, representing 0.340 percent of total assets at September 30, 2k19. The allowance for loan losses represented 0.610 percent of total loans at September 30, 2k19. The provision for loan losses was $0.90M for the nine months finished September 30, 2k19 (covering $0.40M of net charge-offs), contrast to $1.40M (covering $1.00M of net charge-offs) for the nine months finished September 30, 2k18.

Contrast to 2nd-quarter 2k19, net interest income raised $0.20M (1.0 percent), despite continued pressure from recent Federal Reserve cuts to short-term interest rates. Apart From net asset gains, 3rd-quarter noninterest income grew $1.00M (9.0 percent) over 2nd-quarter, predominantly from stellar net mortgage income. Noninterest cost reduced $2.80M (11.00 percent) from 2nd-quarter, due principally to $2.750M of retirement-related compensation actions in 2nd-quarter. Income tax cost raised $1.80M as 3rd-quarter returned to a more normal effective tax rate of 25.30 percent,whereas 2nd-quarter was 13.20 percent given the favourable tax treatment on the equity investment sale, BOLI death benefit, and the tax benefit on stock-based compensation.

Net interest income raised $2.20M (8.0 percent) between the comparable 3rd-quarter durations, driven mostly by net positive volume and rate variances, as aggregate discount income was similar between the quarters. Net interest income and margin improvements benefited from a higher mix of average earning assets in loans, in addition to a 22 bps incline in the earning asset yield and only a 13 bps incline in the cost of funds. Noninterest income apart from net asset gains raised $1.50M (15.00 percent) mostly from strong net mortgage income, while noninterest cost was minimally changed (down $0.20M or 1.0 percent) between the comparable 3rd-quarter durations.

Total capital was $428.00M at September 30, 2k19, a boost of $17.00M or 4.0 percent since June 30, 2k19, with strong 3rd-quarter earnings and positive net fair value investment changes. During 3rd-quarter 2k19, we repurchased minimal shares of our common stock and will continue to be opportunistic with respect to such repurchases. At September 30, 2k19, there remained $24.40M authorized under the 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.

On June 26, 2k19, Nicolet reached a definitive merger agreement with Choice Bancorp, Inc. (“Choice”) under which Choice will merge with and into Nicolet to create the leading community bank in the Oshkosh marketplace. The acquisition will involve stock-for-stock consideration at a fixed exchange ratio, subject to cap and collar provisions offered for in the merger agreement. At September 30, 2k19, Choice had total assets of $438.00M, loans of $347.00M, deposits of $308.00M, and equity of $46.00M. The merger is expected to close on November 8, 2k19, pending the Choice shareholder vote on October 22, 2k19 and other customary closing conditions.


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