Nicolet Bankshares Strikes a Major Acquisition Deal
Green Bay, Wisconsin-based Nicolet Bankshares is set to significantly increase its asset size with a strategic acquisition. The community bank has agreed to purchase Iowa City, Iowa-based MidWestOne Financial Group in an all-stock deal valued at approximately $864 million. This move aims to expand Nicolet’s reach into Iowa and the Twin Cities, marking the bank’s first significant entry into a large metropolitan area. The deal is expected to close in the first half of 2026.
Why the Acquisition Matters
For Nicolet Bankshares, this acquisition is more than just an expansion move. The deal will catapult the bank’s asset size from around $9 billion to more than $15 billion, allowing it to surpass the $10 billion-asset threshold. This is significant as banks that approach $10 billion in assets often face higher regulatory costs. To offset these costs with a larger revenue base, banks typically opt for acquisitions that move them well beyond this threshold, rather than incrementally surpassing it.
As Nicolet’s chairman, president, and CEO, Mike Daniels, explained, “We were not looking to acquire to just get bigger”, but the acquisition of MidWestOne also makes Nicolet better, providing the needed scale to offset some of the costs and revenue hurdles that come with passing the $10 billion mark.
Entering Larger Metropolitan Markets
Until now, Nicolet has mainly operated in smaller Wisconsin markets such as Green Bay, Eau Claire, and Appleton. However, with MidWestOne’s 15 banking offices in the Minneapolis-St. Paul region, Nicolet can now establish a significant presence in a large metropolitan area. According to Daniels, the bank has always wanted to be in markets where it can matter and entering larger metro markets required a sizable acquisition like MidWestOne.
Uncertainty about Denver Expansion
While the Twin Cities expansion is a definite part of Nicolet’s growth strategy, the bank is yet to decide on building a significant presence in Denver, where MidWestOne operates two banking offices. “Mattering in Denver will require additional scale,” Daniels noted, expressing excitement about evaluating this prospect going forward.
The Financial Details
The transaction values MidWestOne at a price-to-tangible-book-value-per-share of 166%. Nicolet’s shares were down 3.5% in mid-afternoon trading following the announcement. The two banks project a combined asset size of $15.7 billion once the deal closes, a significant leap from Nicolet’s current $9.03 billion of assets, as of Sept. 30, and MidWestOne’s $6.2 billion of assets.
Impact on Revenues
How will crossing the $10 billion asset threshold affect Nicolet’s revenues? Daniels estimated that interchange fee caps, which apply to banks surpassing this asset limit, will impact the bank’s revenues by about $8.5 million next year.
Nicolet’s Acquisition History
Founded in 2000, Nicolet Bankshares has been an active acquirer of banks. Its most recent acquisition was the purchase of Charter Bankshares in August 2022, marking its third deal in 18 months. However, like many U.S. banks, Nicolet faced the impact of rising interest rates shortly after the Charter acquisition, leading 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.
Shared Values and Future Prospects
Both Nicolet and MidWestOne share similar mindsets and values, with a strong focus on team and customer success. “We both absolutely abhor mediocrity,” said MidWestOne CEO Chip Reeves. With MidWestOne operating 57 branches, mostly in eastern and central Iowa, the acquisition promises to enhance Nicolet’s foothold in these markets.
After the transaction closes, MidWestOne shareholders will own 30% of the combined company. Nicolet will have eight board seats, while MidWestOne will have four. Both Reeves and MidWestOne’s CFO Barry Ray are expected to join Nicolet’s leadership team.
This acquisition not only signifies Nicolet’s strategic growth but also its commitment to providing top-notch banking services in more markets. Only time will tell how this move will shape the bank’s future and its position in the banking industry.
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