Nicolet Bankshares in Green Bay, Wisconsin, announced an agreement Tuesday to acquire in-state competitor County Bancorp for $219 million in cash and stock.
The deal, expected to close in the fourth quarter, would create the second-largest Wisconsin-headquartered bank, with assets of $7.5 billion and deposits of $6.3 billion. The $35 billion-asset Associated Banc-Corp, also based in Green Bay, is the state’s largest bank.
Manitowoc-based County Bancorp is the holding company for the $1.5 billion-asset Investors Community Bank.
Agricultural lending, one of Investors’ strong suits, played a central role in bringing the two companies together. Nicolet wanted to grow its book of ag loans but always ran into stiff competition from its rival, Chairman Bob Atwell said in a news release.
“Agricultural production lending has long been underweighted in our overall loan portfolio precisely because Investors has been so good,” Atwell said.
Agricultural loans would make up 15% of the combined bank’s $4.9 billion loan portfolio, and Nicolet would be the No. 1 dairy lender in the nation’s second-largest dairy-producing state.
Nicolet also intends to bring a portion of County Bancorp’s $842 million agricultural loan servicing book onto its balance sheet.
In a research note Tuesday, Janney Montgomery Scott analyst Brian Martin pointed out that a sustained recovery in milk prices has driven a significant improvement in County’s asset quality since the end of the first quarter. According to County, nonperforming assets totaled $39.1 million on May 31, down from $58.2 million on March 31.
Nicolet has been an active acquirer of community banks over the past decade, most recently announcing it was buying the $1.5 billion-asset Mackinac Financial in Manistique, Michigan.
Under terms of Tuesday’s deal, County shareholders will receive 0.48 Nicolet shares or $37.48 in cash for each County share, with cash to make up no more than 20% of the consideration mix. Nicolet expects to achieve cost savings equal to 33% of County’s noninterest expense base. County reported noninterest expenses totaling $39.7 million for 2020 and $8.8 million in the first quarter.
Tangible book value dilution of 1.2% should be earned back in under two years, according to Nicolet. Total consideration of $219 million represents 138% of County’s tangible book value.
“With the added scale and capital of Nicolet, this partnership will rapidly accelerate our ability to serve existing customers and build new relationships, County President Tim Schneider said in the press release. “I am very optimistic about where we can go as a combined company.”
Schneider will join Nicolet’s senior management team after the deal closes, overseeing agricultural lending. Nicolet also plans to add one County Bancorp director to its board.
