- Key insight: A Wisconsin-based community bank has agreed to an acquisition that will allow it to increase its asset size from around $9 billion to more than $15 billion.
- What's at stake: Higher regulatory costs kick in at $10 billion of assets, so banks have an incentive not to creep past the threshold, but rather to make acquisitions that move them well beyond it.
- Forward look: The $864 million, all-stock deal is expected to close in the first half of 2026.
A Wisconsin-based community bank has struck a merger deal that would vault it over the $10 billion-asset threshold and enable it to expand into Iowa and the Twin Cities.
Green Bay, Wisconsin-based Nicolet Bankshares said it will pay approximately $864 million to buy Iowa City, Iowa-based MidWestOne Financial Group. The all-stock deal is expected to close in the first half of 2026, according to the companies.
Nicolet has a large presence in several smaller Wisconsin markets, including Green Bay, Eau Claire and Appleton, but the deal marks its first major foray into a large metropolitan area. Meanwhile, MidWestOne has 15 banking offices in the Minneapolis-St. Paul region.
"Now some of you may question the position in the Twin Cities, as to date we have largely avoided larger metropolitan markets," Mike Daniels, Nicolet's chairman, president and CEO, said Friday during a call with analysts. "However, we have always stated we want to be in markets where we can matter, and that we struggled to enter larger metro markets without a sizable acquisition that would allow us to matter. Well, MidWestOne does that in the Twin Cities."
Daniels sounded more undecided about whether Nicolet will build a significant presence in another big city, Denver, where MidWestOne operates two banking offices.
"Mattering in Denver will require additional scale," Daniels said. "It is something we have talked with the MidWestOne team about, and are excited to evaluate going forward."
The transaction values MidWestOne at a price-to-tangible-book-value-per-share of 166%, the two companies said. Shares in Nicolet were down 3.5% in midafternoon trading.
Nicolet, the parent company of Nicolet National Bank, had $9.03 billion of assets as of Sept. 30. MidWestOne, the parent company of MidWestOne Bank, had $6.2 billion of assets. The two banks are projecting a combined asset size of $15.7 billion when the deal closes.
Banks that are approaching $10 billion of assets often choose to make an acquisition in order to surpass that threshold by a large margin, rather than slowly creeping past it, allowing them to offset additional regulatory costs with a larger revenue base.
"We were not looking to acquire to just get bigger," Daniels said Friday, "but we wanted to find a bank that also made Nicolet better, while also providing us with the needed scale to offset some of the costs and revenue hurdles that came with passing the $10 billion mark."
As an example of how passing $10 billion of assets will affect Nicolet's revenue, Daniels estimated that interchange fee caps, which apply to banks above that asset threshold, will have an impact of about $8.5 million next year.
Nicolet, which was founded in 2000, has been
Shortly after the Charter acquisition closed, Nicolet and many other U.S. banks were stung by the impact of rising interest rates, which led to unrealized losses.
Nicolet was one of the first banks to reposition its balance sheet, selling $500 million of U.S. Treasuries in the first quarter of 2023, Daniel said Friday. "The repositioning resulted in 10 straight quarters of improving or holding our net interest margin," he said.
MidWestOne also had an investment portfolio that took significant unrealized losses, and its leaders made the "difficult decision a year ago to raise the necessary equity to then reposition the balance sheet," Daniels said.
"As you saw over the past several quarters, this action vastly improved MidWestOne's profitability, and we believe they are on the upward swing going forward," he added.
MidWestOne operates 57 branches, mostly in the eastern and central parts of Iowa, with particularly strong footholds in the Dubuque, Iowa City and Muscatine markets.
Once the transaction closes, MidWestOne shareholders are expected to own 30% of the combined company. Nicolet will have eight board seats, and MidWestOne will have four.
MidWestOne CEO Chip Reeves and Chief Financial Officer Barry Ray are both expected to join Nicolet's leadership team. Reeves said on Friday's conference call that the two companies have similar mindsets and values.
"We both have an extreme focus on team and customer as we create shared success, and we both absolutely abhor mediocrity," he said.
