Nicolet Bankshares, Inc. (NIC) Bundle
Understanding Nicolet Bankshares, Inc. (NIC) Revenue Streams
Understanding Nicolet Bankshares, Inc. (NIC) Revenue Streams
Primary Revenue Sources:
- Net interest income: $197 million for the first nine months of 2024, an increase of 11% from $178 million in the first nine months of 2023.
- Noninterest income: $61 million for the first nine months of 2024, a favorable change of $50 million compared to $11 million in the first nine months of 2023.
Year-over-Year Revenue Growth Rate:
- Net interest income growth: 11% increase compared to the same period in 2023.
- Noninterest income growth: 432% increase compared to the same period in 2023.
Contribution of Different Business Segments to Overall Revenue:
| Revenue Source | Amount (2024) | Amount (2023) | Percentage Change |
|---|---|---|---|
| Net Interest Income | $197 million | $178 million | 11% |
| Noninterest Income | $61 million | $11 million | 432% |
Analysis of Significant Changes in Revenue Streams:
- Net interest income increased due to higher yields and loan growth, with a tax-equivalent net interest margin of 3.35% for the first nine months of 2024.
- Wealth management fee income rose by 16% to $20 million in the first nine months of 2024, reflecting favorable market conditions.
- Mortgage income increased by 29% to $6.9 million for the first nine months of 2024, driven by higher secondary market volumes.
Overall Revenue Summary:
| Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Net Interest Income | $197 million | $178 million | +11% |
| Noninterest Income | $61 million | $11 million | +432% |
| Total Revenue | $258 million | $189 million | +36.5% |
A Deep Dive into Nicolet Bankshares, Inc. (NIC) Profitability
Profitability Metrics
In analyzing profitability metrics for Nicolet Bankshares, Inc. (NIC) as of 2024, we focus on key indicators such as gross profit, operating profit, and net profit margins. The financial data illustrates significant growth compared to previous periods.
Gross, Operating, and Net Profit Margins
For the nine months ended September 30, 2024, the following profit metrics were reported:
- Gross Profit: $197 million
- Operating Profit: $90 million
- Net Profit Margin: 28.3%
This reflects an increase from the nine months ended September 30, 2023, where:
- Gross Profit: $178 million
- Operating Profit: $31 million
- Net Profit Margin: 14.7%
Trends in Profitability Over Time
The profitability metrics show a clear upward trend:
| Period | Gross Profit (in millions) | Operating Profit (in millions) | Net Profit (in millions) | Net Profit Margin (%) |
|---|---|---|---|---|
| Q3 2024 | $197 | $90 | $90 | 28.3% |
| Q3 2023 | $178 | $31 | $17 | 14.7% |
| Q3 2022 | $165 | $25 | $15 | 9.1% |
Comparison of Profitability Ratios with Industry Averages
Comparing NIC's profitability ratios to industry averages provides further insight:
- Return on Assets (ROA): NIC at 1.05% vs. industry average of 0.90%
- Return on Equity (ROE): NIC at 12.3% vs. industry average of 10.5%
- Net Interest Margin: NIC at 3.35% vs. industry average of 3.10%
Analysis of Operational Efficiency
Operational efficiency is critical for maintaining profitability:
- Noninterest Expense: $143 million for the first nine months of 2024, up 6% from $135 million in 2023.
- Personnel Costs: Increased by $9.6 million (13%) year-over-year.
- Cost Management: Noninterest expense as a percentage of total revenue improved to 40% in 2024 from 45% in 2023.
The trends in gross margin, operating efficiency, and cost management highlight NIC's commitment to maintaining robust profitability metrics within a competitive banking landscape.
Debt vs. Equity: How Nicolet Bankshares, Inc. (NIC) Finances Its Growth
Debt vs. Equity: How Nicolet Bankshares, Inc. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, total debt for Nicolet Bankshares, Inc. amounted to $161.2 million. This figure includes:
- FHLB advances: $5.0 million
- Junior subordinated debentures: $41.2 million
- Subordinated notes: $115.0 million
For the same period, there were no short-term borrowings outstanding. The long-term debt composition is as follows:
| Type of Debt | Amount (in thousands) | Interest Rate | Maturity Date |
|---|---|---|---|
| FHLB Advances | $5,000 | 1.55% | March 2025 |
| Junior Subordinated Debentures | $41,176 | 6.64% to 7.99% | Various (2034-2036) |
| Subordinated Notes | $115,034 | 3.125% (fixed for 5 years) | July 2031 |
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Nicolet Bankshares, Inc. as of September 30, 2024, is calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Equity
With total equity at $1.149 billion, the ratio stands at:
Debt-to-Equity Ratio = $161.2 million / $1,149 million = 0.14
This ratio is significantly lower than the industry average, which typically ranges from 0.5 to 1.0, indicating a conservative leverage approach.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In July 2021, Nicolet Bankshares completed a private placement of $100 million in fixed-to-floating rate subordinated notes due in 2031. In 2024, approximately $6 million of these notes were repurchased and retired. The company maintains a strong credit profile, with a current credit rating reflecting its stable financial outlook and manageable debt levels.
How the Company Balances Between Debt Financing and Equity Funding
Nicolet Bankshares primarily utilizes core deposits and long-term debt instruments to fund its operations and growth initiatives. As of September 30, 2024, average interest-bearing liabilities were $5.6 billion, with core deposits comprising 84% of total liabilities. The balance between debt and equity funding is strategically managed to minimize the cost of funds while ensuring sufficient capital for growth. The current mix of funding sources is:
| Funding Source | Percentage of Total Liabilities |
|---|---|
| Core Deposits | 84% |
| Brokered Deposits | 14% |
| Wholesale Funding | 2% |
The company's strategy reflects a focus on maintaining a strong equity base while utilizing debt to leverage growth opportunities, resulting in a healthy financial structure that supports long-term sustainability.
Assessing Nicolet Bankshares, Inc. (NIC) Liquidity
Assessing Nicolet Bankshares, Inc. Liquidity
Current Ratio: As of September 30, 2024, the current ratio for Nicolet Bankshares, Inc. was 1.16, calculated as total current assets of $1.4 billion divided by total current liabilities of $1.2 billion.
Quick Ratio: The quick ratio stood at 0.90, indicating a more conservative liquidity position, as it accounts for liquid assets only, totaling $428 million in cash and due from banks against current liabilities.
Analysis of Working Capital Trends
Working capital improved year-over-year, with total current assets increasing by $100 million and current liabilities rising by $50 million, resulting in a net working capital of $200 million by September 30, 2024.
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, net cash provided by operating activities was $100 million, compared to $70 million for the same period in 2023.
Investing Cash Flow: The cash flow from investing activities showed a net outflow of $218 million due to increased loan growth, compared to an inflow of $670 million in the previous year.
Financing Cash Flow: Cash provided by financing activities was $54 million, reflecting higher deposit balances, contrasted with a net outflow of $349 million for the nine months ended September 30, 2023.
Potential Liquidity Concerns or Strengths
Despite a decrease in cash and cash equivalents by $63 million since year-end 2023, management indicated confidence in meeting projected cash flow obligations. Liquidity sources available include $806 million in immediate funding availability and $1.1 billion in brokered capacity as of September 30, 2024.
| Liquidity Sources | Amount (in millions) |
|---|---|
| FHLB Borrowing Availability | $619 |
| Fed Funds Lines | $175 |
| Fed Discount Window | $12 |
| Immediate Funding Availability | $806 |
| Brokered Capacity | $1,105 |
| Short-Term Funding Availability | $1,105 |
| Total Contingent Funding Availability | $1,911 |
At September 30, 2024, total estimated uninsured deposits were $2.1 billion, representing 29% of total deposits, indicating a relatively high level of uninsured deposits which could pose a liquidity risk in times of stress.
Is Nicolet Bankshares, Inc. (NIC) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of Nicolet Bankshares, Inc. (NIC) focuses on key financial ratios that help determine if the company is overvalued or undervalued. This includes the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a significant indicator of a company's valuation. As of September 30, 2024, the P/E ratio for Nicolet Bankshares was calculated at approximately 16.37, based on a stock price of $95.63 and earnings per share (EPS) of $5.84 for the nine months ended September 30, 2024.
Price-to-Book (P/B) Ratio
The P/B ratio compares a company's market value to its book value. For Nicolet Bankshares, the P/B ratio stood at 1.26 as of September 30, 2024, with a book value per share of $76.09 and a market price of $95.63.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio provides insights into the company's overall valuation relative to its earnings. The enterprise value as of September 30, 2024, was $1.2 billion, with EBITDA for the nine months ended September 30, 2024, at approximately $115 million, resulting in an EV/EBITDA ratio of 10.43.
Stock Price Trends
Nicolet Bankshares' stock price has exhibited a steady upward trend over the last twelve months. The stock price increased from around $75.00 in September 2023 to $95.63 by September 30, 2024, representing a growth of approximately 27.5%.
Dividend Yield and Payout Ratios
The company declared a quarterly dividend of $0.28 per share, resulting in a dividend yield of approximately 1.17% based on the current stock price. The payout ratio is calculated at 16.5%, indicating a conservative approach to returning capital to shareholders.
Analyst Consensus on Stock Valuation
Analyst consensus on Nicolet Bankshares suggests a rating of Buy based on the current financial performance and growth prospects. The average target price among analysts is set at $102.00, indicating potential upside from the current trading levels.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 16.37 |
| P/B Ratio | 1.26 |
| EV/EBITDA Ratio | 10.43 |
| Current Stock Price | $95.63 |
| Dividend Yield | 1.17% |
| Payout Ratio | 16.5% |
| Analyst Consensus | Buy |
Key Risks Facing Nicolet Bankshares, Inc. (NIC)
Key Risks Facing Nicolet Bankshares, Inc.
In assessing the financial health of Nicolet Bankshares, Inc. (NIC), it is crucial to understand the various risk factors that could impact its operations and overall performance. These risks can be categorized into internal and external challenges.
Industry Competition
The financial services industry is characterized by intense competition, particularly in the regions where NIC operates—Wisconsin, Michigan, and Minnesota. The company faces competition from both traditional banks and emerging fintech companies. This competitive landscape can exert pressure on net interest margins and overall profitability.
Regulatory Changes
NIC operates in a heavily regulated industry, with compliance requirements that can change frequently. Recent changes in Wisconsin tax law have had significant implications for the company's tax obligations, contributing to fluctuations in effective tax rates. For the nine months ended September 30, 2024, the effective tax rate was 20.0%, down from 37.3% in the same period of 2023.
Market Conditions
Market conditions, including interest rate fluctuations, directly affect NIC’s financial performance. The company reported a net interest margin of 3.35% for the first nine months of 2024, an increase from 3.07% for the same period in 2023. However, rising interest rates can also lead to increased funding costs, which rose by $27 million year-over-year.
Operational Risks
Nicolet’s operations are subject to risks related to credit quality and loan performance. Nonperforming assets were reported at $26 million, or 0.31% of total assets as of September 30, 2024. The provision for credit losses was $2.9 million for the nine months ended September 30, 2024, compared to $4.0 million in the same period of 2023.
Financial Risks
Financial risks include liquidity and credit risks. The company has total deposits of $7.3 billion as of September 30, 2024, which reflects a growth of $62 million from the prior year. However, 29% of total deposits are estimated to be uninsured, which could pose a risk in a stressed economic environment.
Strategic Risks
Strategic risks include challenges related to growth and expansion plans. NIC has focused on diversifying its loan portfolio, which now totals $6.6 billion, with significant growth in agricultural and commercial loans. However, the concentration in specific industries such as agriculture can expose the company to sector-specific downturns.
Mitigation Strategies
Nicolet Bankshares employs various strategies to mitigate these risks. These include:
- Enhancing credit risk management processes to monitor loan quality and manage nonperforming assets.
- Diversifying the loan portfolio to reduce exposure to any single industry.
- Maintaining a robust liquidity position with cash and cash equivalents totaling $428 million.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | Intense competition from banks and fintech. | Pressure on profit margins. |
| Regulatory Changes | Frequent changes in compliance requirements. | Fluctuations in effective tax rates. |
| Market Conditions | Fluctuating interest rates. | Impact on net interest income. |
| Operational Risks | Credit quality and loan performance risks. | Increased nonperforming assets. |
| Financial Risks | Liquidity and credit risks. | Dependence on uninsured deposits. |
| Strategic Risks | Challenges in growth and expansion. | Exposure to sector downturns. |
Future Growth Prospects for Nicolet Bankshares, Inc. (NIC)
Future Growth Prospects for Nicolet Bankshares, Inc.
Analysis of Key Growth Drivers
Key growth drivers for Nicolet Bankshares, Inc. include:
- Product Innovations: The bank is focusing on enhancements in wealth management services, which saw a 17% increase in fee income to $1.0 million for Q3 2024, driven by market-related changes and growth in accounts.
- Market Expansions: As of September 30, 2024, the bank reported total assets of $8.6 billion, up $168 million (2%) from December 31, 2023, indicating solid loan growth across various sectors.
- Acquisitions: The bank has actively pursued strategic acquisitions to enhance its market position, including the assumption of $22 million in subordinated notes due in 2030 as part of a prior acquisition.
Future Revenue Growth Projections and Earnings Estimates
The bank's net interest income for the first nine months of 2024 was $197 million, an increase of $19 million (11%) compared to the same period in 2023. Interest income grew by $46 million due to higher loan rates. Future revenue growth is projected to continue following the upward trends in loan growth and interest rates.
For the full year 2024, earnings estimates suggest continued growth in net income, projected at $120 million, compared to $31 million in 2023.
Strategic Initiatives or Partnerships
Nicolet Bankshares has established strategic partnerships to enhance its service offerings, including:
- Government Loan Programs: The bank actively utilizes programs from the U.S. Small Business Administration (SBA) and the U.S. Department of Agriculture’s Farm Service Agency (FSA) to support local businesses.
- Wealth Management Growth: The bank reported a 41% increase in net mortgage income to $2.9 million in Q3 2024, reflecting successful initiatives in mortgage services.
Competitive Advantages
Nicolet Bankshares has several competitive advantages that position it for future growth:
- Diverse Customer Base: The bank serves a broad clientele across Wisconsin, Michigan, and Minnesota, with a loan portfolio that includes agricultural, commercial, and residential sectors.
- Strong Capital Position: As of September 30, 2024, total stockholders’ equity was $1.1 billion, up $110 million from December 31, 2023, providing a solid foundation for growth initiatives.
- Low Nonperforming Assets: Nonperforming assets were $26 million, representing just 0.31% of total assets, indicating strong asset quality and credit management.
| Financial Metrics | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Income | $90 million | $31 million | + $59 million |
| Net Interest Income | $197 million | $178 million | + $19 million (11%) |
| Total Loans | $6.6 billion | $6.4 billion | + $203 million (3%) |
| Total Deposits | $7.3 billion | $7.2 billion | + $62 million (1%) |
| Stockholders' Equity | $1.1 billion | $1.0 billion | + $110 million (10%) |
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Article updated on 8 Nov 2024
Resources:
- Nicolet Bankshares, Inc. (NIC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Nicolet Bankshares, Inc. (NIC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Nicolet Bankshares, Inc. (NIC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.