NICOLET BANKSHARES INCNIC
NICOLET BANKSHARES INC Income Taxes Disclosure
INCOME TAXES
The current and deferred amounts of income tax expense were as follows.
| Years Ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current | $ | 38,819 | $ | 31,022 | $ | 17,898 | |||||||||||
| Deferred | (4,641) | (7,382) | 3,027 | ||||||||||||||
| Increase in valuation allowance | 1,689 | 7,223 | — | ||||||||||||||
| Valuation allowance for securities AFS, net | 404 | 207 | 4,191 | ||||||||||||||
| Income tax expense | $ | 36,271 | $ | 31,070 | $ | 25,116 | |||||||||||
Federal and state income taxes paid were as follows. State income taxes paid include the states of Wisconsin, Michigan, Minnesota, and Florida, and were not significant in the aggregate except as noted below.
| Years Ended December 31, | ||||||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||||||||
| Dollar | Percent | Dollar | Percent | Dollar | Percent | |||||||||||||||||||||
| Federal | $ | 38,500 | 98 | % | $ | 24,500 | 97 | % | $ | 20,000 | 87 | % | ||||||||||||||
| State * | 661 | 2 | % | 823 | 3 | % | 3,015 | 13 | % | |||||||||||||||||
| Total income taxes paid | $ | 39,161 | $ | 25,323 | $ | 23,015 | ||||||||||||||||||||
| State income taxes paid in excess of 5% of total income taxes paid: | ||||||||||||||||||||||||||
| Wisconsin | * | * | $ | 2,600 | 11 | % | ||||||||||||||||||||
* Income taxes paid did not exceed 5% of total income taxes paid.
The differences between the income tax expense recognized and the amount computed by applying the statutory federal income tax rate of 21% to the income before income tax expense for the years ended as indicated are included in the following table.
| Years Ended December 31, | ||||||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||||||||
| Dollar | Percent | Dollar | Percent | Dollar | Percent | |||||||||||||||||||||
| Tax on pretax income, at statutory rates | $ | 39,261 | 21.0 | % | $ | 32,577 | 21.0 | % | $ | 18,193 | 21.0 | % | ||||||||||||||
| State income taxes, net of federal effect | 611 | 0.3 | % | 554 | 0.4 | % | — | — | % | |||||||||||||||||
| Tax-exempt interest income | (1,060) | (0.6) | % | (1,091) | (0.7) | % | (1,072) | (1.2) | % | |||||||||||||||||
| Increase in cash surrender value life insurance | (1,336) | (0.7) | % | (1,144) | (0.7) | % | (950) | (1.1) | % | |||||||||||||||||
| Stock-based employee compensation | (1,804) | (1.0) | % | (4,296) | (2.8) | % | (811) | (0.9) | % | |||||||||||||||||
| Executive compensation | 1,853 | 1.0 | % | 3,857 | 2.5 | % | 1,094 | 1.3 | % | |||||||||||||||||
| Valuation allowance, net | — | — | % | — | — | % | 8,677 | 10.0 | % | |||||||||||||||||
| Other, net | (1,254) | (0.7) | % | 613 | 0.4 | % | (15) | — | % | |||||||||||||||||
| Income tax expense | $ | 36,271 | 19.4 | % | $ | 31,070 | 20.0 | % | $ | 25,116 | 29.0 | % | ||||||||||||||
The net deferred tax asset includes the following amounts of deferred tax assets and liabilities.
| (in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| ACL-Loans | $ | 19,308 | $ | 18,646 | |||||||
| Net operating loss carryforwards | 10,418 | 9,781 | |||||||||
| Compensation | 12,254 | 10,823 | |||||||||
| Purchase accounting adjustments | — | 67 | |||||||||
| Unrealized loss on securities AFS | 10,530 | 17,693 | |||||||||
| Valuation allowance - securities AFS | (3,519) | (3,922) | |||||||||
| Valuation allowance - other timing differences | (14,070) | (11,978) | |||||||||
| Total deferred tax assets | 34,921 | 41,110 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Premises and equipment | (4,101) | (4,750) | |||||||||
| Prepaid expenses | (855) | (1,110) | |||||||||
| Core deposit and other intangibles | (2,988) | (4,359) | |||||||||
| MSR and LSR assets | (4,925) | (5,062) | |||||||||
| Other | (434) | — | |||||||||
| Total deferred tax liabilities | (13,303) | (15,281) | |||||||||
| Net deferred tax assets | $ | 21,618 | $ | 25,829 | |||||||
For the year ended December 31, 2023, income tax expense was impacted by a change in Wisconsin state income tax law associated with the exclusion of interest income on certain Wisconsin-based business or agriculture purpose loans. The impact of this tax law change was a one-time $9.1 million charge to state income tax expense in 2023, but moving forward Nicolet will experience a reduction / elimination of state income taxes being recognized.
A valuation allowance is required if it is more likely than not that some portion of the deferred tax asset will not be realized. The remaining valuation allowance as of December 31, 2025, of $18 million is the effect of the previously discussed Wisconsin tax law change on the state related net of tax attributes, along with the state related impact of changes to the unrealized losses on AFS securities disposed.
At December 31, 2025, the Company had a federal and state net operating loss carryforward of $3 million and $16 million, respectively, resulting from the Company’s acquisitions. These carryforwards are subject to the IRC section 382 limitation calculation and are limited in the overall amount expected to be realized. Additionally, due to the 2023 Wisconsin tax law change, the Company has accumulated a State loss carryforward of $151 million, for which a valuation allowance has been recognized.
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 Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.