Nicolet Bankshares (NIC)

Regional banking company Nicolet Bankshares (NYSE:NIC) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 12.7% year on year to $95.74 million. Its non-GAAP profit of $2.35 per share was 9% above analysts’ consensus estimates.

Company Overview

Starting as Green Bay Financial Corporation in 2000 before rebranding in 2002, Nicolet Bankshares (NYSE:NIC) is a regional bank holding company that provides commercial, agricultural, and consumer banking services primarily in Wisconsin, Michigan, and Minnesota.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Nicolet Bankshares competes with other regional banks operating in the Upper Midwest, including Associated Banc-Corp (NYSE:ASB), First Midwest Bancorp (NASDAQ:FMBI), and Old National Bancorp (NASDAQ:ONB), as well as larger national banks and local community banks throughout its service area.

In general, banks make money from two primary sources. The first is net interest income, which is interest earned on loans, mortgages, and investments in securities minus interest paid out on deposits. The second source is non-interest income, which can come from bank account, credit card, wealth management, investing banking, and trading fees.

Luckily, Nicolet Bankshares’s revenue grew at an incredible 16% compounded annual growth rate over the last five years. Its growth surpassed the average bank company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Nicolet Bankshares’s annualized revenue growth of 16.9% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Nicolet Bankshares reported year-on-year revenue growth of 12.7%, and its $95.74 million of revenue exceeded Wall Street’s estimates by 4.4%.

Net interest income made up 79.3% of the company’s total revenue during the last five years, meaning lending operations are Nicolet Bankshares’s largest source of revenue.

While banks generate revenue from multiple sources, investors view net interest income as the cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of non-interest income.

Topline growth carries importance, but the overall profitability behind this expansion determines true value creation. For banks, the efficiency ratio captures this relationship by measuring non-interest expenses, including salaries, facilities, technology, and marketing, against total revenue.

Investors focus on efficiency ratio changes rather than absolute levels, understanding that expense structures vary by revenue mix. Counterintuitively, lower efficiency ratios indicate better performance since they represent lower costs relative to revenue.

Over the last five years, Nicolet Bankshares’s efficiency ratio has swelled by 4.1 percentage points, going from 50.6% to 53%. Said differently, the company’s expenses have grown at a slower rate than revenue, which typically signals prudent management.

In Q2, Nicolet Bankshares’s efficiency ratio was 52.1%, close to analysts’ expectations. This result was 3 percentage points better than the same quarter last year.

For the next 12 months, Wall Street expects Nicolet Bankshares to become less profitable as it anticipates an efficiency ratio of 54.5%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Nicolet Bankshares’s EPS grew at an astounding 12.3% compounded annual growth rate over the last five years. However, this performance was lower than its 16% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.

In Q2, Nicolet Bankshares reported EPS at $2.35, up from $1.88 in the same quarter last year. This print beat analysts’ estimates by 9%. Over the next 12 months, Wall Street expects Nicolet Bankshares’s full-year EPS of $8.66 to grow 1.6%.

Banks profit by intermediating between depositors and borrowers, making them fundamentally balance sheet-driven enterprises. Market participants emphasize balance sheet quality and sustained book value growth when evaluating these institutions.

This is why we consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation. Other (and more commonly known) per-share metrics like EPS can sometimes be murky due to M&A or accounting rules allowing for loan losses to be spread out.

Nicolet Bankshares’s TBVPS grew at an excellent 8.8% annual clip over the last five years. TBVPS growth has also accelerated recently, growing by 17.1% annually over the last two years from $39.37 to $53.94 per share.

Over the next 12 months, Consensus estimates call for Nicolet Bankshares’s TBVPS to grow by 14.9% to $61.98, top-notch growth rate.

Leverage is core to the bank’s business model (loans funded by deposits) and to ensure their stability, regulators require certain levels of capital and liquidity, focusing on a bank’s Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a bank holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all banks must maintain a Tier 1 capital ratio greater than 4.5% On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, banks generally must maintain a 7-10% ratio at minimum.

Over the last two years, Nicolet Bankshares has averaged a Tier 1 capital ratio of 11.1%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, Nicolet Bankshares has averaged an ROE of 10.1%, healthy for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This shows Nicolet Bankshares has a decent competitive moat.

We enjoyed seeing Nicolet Bankshares beat analysts’ revenue expectations this quarter. We were also glad its net interest income outperformed Wall Street’s estimates. On the other hand, its tangible book value per share slightly missed. Overall, we think this was a solid quarter with some key areas of upside. The stock remained flat at $126.17 immediately after reporting.

Updated: December 3, 2025 at 11:45 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

There’s plenty to admire about Nicolet Bankshares. First off, its revenue growth was impressive over the last five years and is expected to accelerate over the next 12 months. And while its anticipated efficiency ratio over the next year signals its day-to-day expenses will rise, its estimated net interest income growth for the next 12 months is great. On top of that, its expanding net interest margin shows its loan book is becoming more profitable.

Nicolet Bankshares’s P/B ratio based on the next 12 months is 1.5x. When scanning the banking space, Nicolet Bankshares trades at a fair valuation. If you’re a fan of the business and management team, now is a good time to scoop up some shares.

Wall Street analysts have a consensus one-year price target of $155.80 on the company (compared to the current share price of $128.96), implying they see 20.8% upside in buying Nicolet Bankshares in the short term.