NICOLET BANKSHARES INCNIC
NICOLET BANKSHARES INC Fair Value Disclosure
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
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.
Recurring basis fair value measurements:
The following table presents the balances of assets and liabilities measured at fair value on a recurring basis.
| (in thousands) | Fair Value Measurements Using | |||||||||||||||||||||||||
| Measured at Fair Value on a Recurring Basis: | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||
| U.S. Treasury securities | $ | 24,054 | $ | — | $ | 24,054 | $ | — | ||||||||||||||||||
| U.S. government agency securities | 4,172 | — | 4,172 | — | ||||||||||||||||||||||
| State, county and municipals | 274,824 | — | 274,057 | 767 | ||||||||||||||||||||||
| Mortgage-backed securities | 496,781 | — | 496,781 | — | ||||||||||||||||||||||
| Corporate debt securities | 60,003 | — | 54,146 | 5,857 | ||||||||||||||||||||||
| Securities AFS | $ | 859,834 | $ | — | $ | 853,210 | $ | 6,624 | ||||||||||||||||||
| Other investments (equity securities) | $ | 9,505 | $ | 9,505 | $ | — | $ | — | ||||||||||||||||||
| Derivative assets | 610 | — | 376 | 234 | ||||||||||||||||||||||
| Derivative liabilities | 450 | — | 376 | 74 | ||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| U.S. Treasury securities | $ | 14,028 | $ | — | $ | 14,028 | $ | — | ||||||||||||||||||
| U.S. government agency securities | 5,520 | — | 5,520 | — | ||||||||||||||||||||||
| State, county and municipals | 284,703 | — | 283,773 | 930 | ||||||||||||||||||||||
| Mortgage-backed securities | 421,953 | — | 421,027 | 926 | ||||||||||||||||||||||
| Corporate debt securities | 80,211 | — | 74,442 | 5,769 | ||||||||||||||||||||||
| Securities AFS | $ | 806,415 | $ | — | $ | 798,790 | $ | 7,625 | ||||||||||||||||||
| Other investments (equity securities) | $ | 8,610 | $ | 8,610 | $ | — | $ | — | ||||||||||||||||||
| Derivative assets | 160 | — | 71 | 89 | ||||||||||||||||||||||
| Derivative liabilities | 71 | — | 71 | — | ||||||||||||||||||||||
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 table above.
Securities AFS and Equity Securities: 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 December 31, 2025 and 2024, it was determined that carrying value was the best approximation of fair value for the majority of these Level 3 securities, based primarily on the internal analysis performed 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”), as well as interest rate swaps with a corresponding mirror interest rate swap. The fair value of interest rate lock commitments was 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 was determined using quoted prices of to-be-announced securities in active markets, or benchmarked to such securities. The mortgage derivative assets and liabilities are classified within Level 3 of the hierarchy. The fair value of the interest rate swap derivative assets and liabilities was determined using a discounted cash flow analysis 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. The interest rate swap derivative assets and liabilities are classified within Level 2 of the hierarchy.
The following table presents the changes in Level 3 securities AFS measured at fair value on a recurring basis.
| (in thousands) | Years Ended | ||||||||||
| Level 3 Fair Value Measurements: | December 31, 2025 | December 31, 2024 | |||||||||
| Balance at beginning of year | $ | 7,625 | $ | 6,063 | |||||||
| Transfer in | — | 2,004 | |||||||||
| Paydowns/Sales/Settlements | (1,099) | (527) | |||||||||
| Unrealized gains / (losses) | 98 | 85 | |||||||||
| Balance at end of year | $ | 6,624 | $ | 7,625 | |||||||
Nonrecurring basis fair value measurements:
The following table presents the Company’s assets measured at fair value on a nonrecurring basis, aggregated by the level in the fair value hierarchy within which those measurements fall.
| (in thousands) | Fair Value Measurements Using | |||||||||||||||||||||||||
| Measured at Fair Value on a Nonrecurring Basis: | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||
| Collateral dependent loans | $ | 27,426 | $ | — | $ | — | $ | 27,426 | ||||||||||||||||||
| MSR asset (disclosure) | 18,474 | — | — | 18,474 | ||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| Collateral dependent loans | $ | 22,207 | $ | — | $ | — | $ | 22,207 | ||||||||||||||||||
| MSR asset (disclosure) | 17,182 | — | — | 17,182 | ||||||||||||||||||||||
The following is a description of the valuation methodologies used by the Company for the assets and liabilities measured at fair value on a nonrecurring basis, noted in the table above.
Collateral dependent loans: For individually evaluated 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 upon the sale of the collateral, or the estimated liquidity of the note.
MSR asset: 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.
| December 31, 2025 | |||||||||||||||||||||||||||||
| (in thousands) | Carrying Amount | Estimated Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 660,232 | $ | 660,232 | $ | 660,232 | $ | — | $ | — | |||||||||||||||||||
| Securities AFS | 859,834 | 859,834 | — | 853,210 | 6,624 | ||||||||||||||||||||||||
| Other investments | 63,247 | 63,241 | 9,505 | 43,233 | 10,503 | ||||||||||||||||||||||||
| Loans held for sale | 13,620 | 13,935 | — | 13,935 | — | ||||||||||||||||||||||||
| Loans, net | 6,767,539 | 6,627,011 | — | — | 6,627,011 | ||||||||||||||||||||||||
| MSR asset | 13,173 | 18,474 | — | — | 18,474 | ||||||||||||||||||||||||
| LSR asset | 5,152 | 5,152 | — | — | 5,152 | ||||||||||||||||||||||||
| Accrued interest receivable | 26,602 | 26,602 | 26,602 | — | — | ||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||
| Deposits | $ | 7,730,771 | $ | 7,737,106 | $ | — | $ | — | $ | 7,737,106 | |||||||||||||||||||
| Long-term borrowings | 134,860 | 131,840 | — | — | 131,840 | ||||||||||||||||||||||||
| Accrued interest payable | 8,672 | 8,672 | 8,672 | — | — | ||||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||
| (in thousands) | Carrying Amount | Estimated Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 536,047 | $ | 536,047 | $ | 536,047 | $ | — | $ | — | |||||||||||||||||||
| Securities AFS | 806,415 | 806,415 | — | 798,790 | 7,625 | ||||||||||||||||||||||||
| Other investments | 62,125 | 62,114 | 8,610 | 45,197 | 8,307 | ||||||||||||||||||||||||
| Loans held for sale | 7,637 | 7,778 | — | 7,778 | — | ||||||||||||||||||||||||
| Loans, net | 6,560,262 | 6,300,325 | — | — | 6,300,325 | ||||||||||||||||||||||||
| MSR asset | 11,965 | 17,182 | — | — | 17,182 | ||||||||||||||||||||||||
| LSR asset | 6,869 | 6,869 | — | — | 6,869 | ||||||||||||||||||||||||
| Accrued interest receivable | 25,033 | 25,033 | 25,033 | — | — | ||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||
| Deposits | $ | 7,403,684 | $ | 7,402,589 | $ | — | $ | — | $ | 7,402,589 | |||||||||||||||||||
| Long-term borrowings | 161,387 | 148,900 | — | 4,969 | 143,931 | ||||||||||||||||||||||||
| Accrued interest payable | 7,774 | 7,774 | 7,774 | — | — | ||||||||||||||||||||||||
The carrying value of certain assets and liabilities such as cash and cash equivalents, accrued interest receivable, nonmaturing deposits, short-term borrowings, and accrued interest payable approximate their estimated fair value due to their immediate and shorter term maturities. For those financial instruments not previously disclosed, the following is a description of the valuation methodologies used.
Other investments: The valuation methodologies utilized for the exchange-traded equity securities are discussed under “Recurring basis fair value measurements” above. The carrying amount of Federal Reserve Bank and FHLB stock is a reasonably accepted fair value estimate given their restricted nature. Fair value is the redeemable (carrying) value based on the redemption provisions of the instruments which is considered a Level 2 measurement. The fair value of certificates of deposit in other banks was estimated using discounted cash flow analysis based on current interest rates being offered by instruments with similar terms and represents a Level 2 measurement. The carrying amount of the remaining other investments (particularly common stocks of companies or other banks that are not publicly traded) approximates their fair value, determined primarily by analysis of company financial statements and recent capital issuances of the respective companies or banks, if any, and represents a Level 3 measurement.
Loans held for sale: The fair value estimation process for the loans held for sale portfolio is segregated by loan type. The estimated fair value was based on what secondary markets are currently offering for portfolios with similar characteristics and represents a Level 2 measurement.
Loans, net: For variable-rate loans that reprice frequently and with no significant change in credit risk or other optionality, fair values are based on carrying values. Fair values for all other loans are estimated by discounting contractual cash flows using estimated market discount rates, which reflect the credit and interest rate risk inherent in the loan based on market participants. Collateral-dependent loans are included in loans, net. The fair value of loans is considered to be a Level 3 measurement due to internally developed discounted cash flow measurements.
Deposits: The fair value of deposits with no stated maturity (such as demand deposits, savings, interest and noninterest checking, and money market accounts) is equal to the amount payable on demand at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market place on certificates of similar remaining maturities. Use of internal discounted cash flows provides a Level 3 fair value measurement.
Long-term borrowings: The fair value of the FHLB advances was obtained from the FHLB which uses a discounted cash flow analysis based on current market rates of similar maturity debt securities and represents a Level 2 measurement. The fair values of the junior subordinated debentures and subordinated notes utilize a discounted cash flow analysis based on an estimate of current interest rates being offered by instruments with similar terms and credit quality. Since the market for these instruments is limited, the internal valuation represents a Level 3 measurement.
Lending-related commitments: The estimated fair value of lending-related commitments (letters of credit, interest rate lock commitments on residential mortgage loans and outstanding mandatory commitments to sell residential mortgage loans into the secondary market) were not significant.
Limitations: Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Fair value estimates may not be realizable in an immediate settlement of the instrument. In some instances, there are no quoted market prices for the Company’s various financial instruments, in which case fair values may be based on estimates using present value or other valuation techniques, or based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of the financial instruments, or other factors. Those techniques are significantly affected by the assumptions used, including the discount rate and estimate of future cash flows. Subsequent changes in assumptions could significantly affect the estimates.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Mar 8, 2019 | |
| 2017 | Mar 7, 2018 | |
| 2016 | Mar 10, 2017 | |
| 2015 | Mar 7, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.