Intent on reinvigorating a strong community banking culture in northern Wisconsin, Bob Atwell and Mike Daniels left one of the state’s largest banks to start Nicolet Bankshares in November of 2000. With nearly $9 billion in assets, Nicolet is now the second-largest banking organization based in the state, behind their former employer, Associated Bank. While the Nicolet story is one of growth and financial success, the founders would be the first to tell you making money has not been the goal.
“At every annual meeting, we have explicitly said some version of the following,” Atwell explains in a letter to shareholders. “If you think the purpose of our organization is to make money you might want to own a different stock. Return to shareholders is the result of our work in service to the people in our area, but it is not the purpose of our actions.”
That statement might be a little difficult for investors to digest, without the knowledge that the bank’s return to shareholders since its founding has been nearly 700 percent compared to the broad public market index of 235 percent, or the U.S. banking index, which is up only 53 percent during that same timeframe.
Atwell told public radio in Milwaukee a few years ago, “We are a for-profit co-op, or a credit union that pays taxes and our ownership is voluntary. Ownership is local, deposits are local and our lending is overwhelmingly local. We see ourselves as a vessel of community cooperation. That has been the understanding from the beginning and it is what we sought to live.”
It is a philosophy that has distinguished the organization in a region once dominated by stalwart organizations such as First Wisconsin and M&I. Today, those franchises are gone, and Nicolet is emerging among the state’s industry leadership, attracting customers, investors and other bankers who want to board the Nicolet bandwagon. The Green Bay-based holding company has been the state’s most active acquirer, closing nine bank acquisitions in the last decade.
The story of Atwell and Daniels is one of building a successful organization, but it is also one of a unique partnership based on a rare shared philosophy of mattering in a real way to the people the bank serves. Executive Chair Bob Atwell and President/CEO Mike Daniels are being honored by BankBeat magazine as 2023 Bankers of the Year.
Laying the keel
Atwell and Daniels met at Green Bay’s Associated Bank, where they started work on the same spring day in 1987. Atwell had a little more experience than Daniels, but they both advanced as rising stars at Associated, making an impact in commercial lending. Early in the 1990s, at the age of 29, Daniels took a two-year assignment at a troubled bank in Georgia. His work led to the successful sale of the bank, and he returned to Associated in 1995.
In the latter 1990s, the pair felt Associated was missing a lot of opportunities to lend to businesses that really needed their help. “A lot of companies were having to go to Milwaukee or Chicago that really could have been banked locally,” Atwell said.
Restless with their situation, Daniels raised the possibility of starting a bank; Atwell readily credits Daniels with being more entrepreneurial. They agreed there was an opening in the market, and both wanted an opportunity to run an organization focused on serving customers, making a real impact in communities. The two of them quit Associated in March 2000, not saying much at the time about their intentions.
“You have a choice,” Daniels explained. “You either do what you are getting paid to do by who’s paying you, and you do it really well. You don’t plan your next endeavor while someone else is paying you, which is why we quit. We didn’t tell anyone what we were doing at first.”
The pair met with potential investors, telling a story about the need for a bank that would focus on service in a highly personal way. They were persuasive, raising $18 million in the biggest initial capital raise for a new bank in Wisconsin up to that time. They opened their doors that November.
Daniels summarized the business plan: “You only have to do three things and do it really, really well. You have to matter to your customers, you’ve got to matter to your community, and you have to matter to one another, in an environment of shared success,” he said. “We talk about it today; we talked about it 22 years ago.”
Potential investors saw two gutsy bankers who had interrupted secure careers at one of the state’s largest banks in order to start their own. Atwell and Daniels each put up $250,000 and signed personal guarantees on a startup line of credit. Atwell had 10 kids at home with one on the way; Daniels had seven kids. Daniels said the investors who were impressed by their conviction signed up. Nearly all of those who studied the details of the financial projections took a pass.
“You could not have found a knowledgeable bank analyst that would have said that what we [were] trying to do would result in where we are today,” Atwell said.
Launching the ship
Leveraging their commercial lending contacts, Atwell and Daniels grew the bank initially with wholesale-funded C&I lending. Atwell has worn out a story about a former military interrogator-turned OCC regulator who came to see him about three years into their venture. “He told me that was no way to run a bank,” Atwell said. “He said, ‘You need to have organic funding.’ And he was absolutely right.”
“You have to choose,” Daniels summarized. “Are you going to be a real bank or are you just going to be a commercial loan shop? Are you going to be a real community bank?”
Daniels and Atwell beefed up the bank’s retail operations and their timing was critical. Retail banking “helped us in the financial crisis [of 2007-2010] because we were much more focused on building out the deposit imperative than we were on continuing to build assets,” Atwell explained. “We were well down the retail track before the financial crisis hit, and we had gotten more selective in our underwriting, because we did have some irrational exuberance in our early years. We were very well positioned on the front end of the crisis, having a very solid customer base and a greater understanding of the resilience that deposits brought and the importance of capital.”
Eric Witczak ran the retail business during those early days and today is an executive vice president responsible for all the bank’s revenue lines. Other members of the Nicolet senior leadership team include Chief Financial Officer Phil Moore and Chief Credit Officer Brad Hutjens, whom Daniels calls “a rock star.”
While Nicolet, like nearly all banks, took some credit losses during the crisis years, it stayed in the black every year. Going into the crisis well-prepared, it came out of the troubled period earlier than many of its peers. In 2013, the bank acquired two institutions, initiating a string of deals that has made the bank the “acquirer of choice for smaller institutions” in Wisconsin and adjacent areas, as Atwell and Daniels described it in their 2021 annual report. In April of that year, Nicolet bought the $447 million Mid-Wisconsin Bank in Medford, a bank that took a beating during the crisis years. Nicolet filed with the Securities and Exchange Commission to purchase the publicly traded Mid-Wisconsin. Later in 2013, Nicolet purchased the $43 million Bank of Wausau, Wis., in a government-assisted deal.
There have been seven more deals since, including Nicolet’s most recent deal last August when it purchased Charter Bankshares of Eau Claire, Wis. Every deal is different, Daniels emphasized, and Nicolet is open to talking to nearly any banker who might be interested in selling. He said there is no secret recipe regarding the mix of cash and stock as currency; the deal just needs to make sense. And, Daniels stressed, the bank wants to be in places where it matters. He is not interested in markets where it cannot distinguish itself. Atwell added that it is easier for Nicolet to matter in smaller markets.
Since it became public, Nicolet’s stock moved from the NASDAQ to the New York Stock Exchange last July. “We became an SEC-regulated company really by default,” through the Mid-Wisconsin transaction, explained Atwell. “We have never done a public stock issue through our public status. The investment community has a tough time understanding us because we have never gone out to them saying, ‘Hey, will you give us $25 million or $50 million in an IPO?’ We have always raised our stock through direct sales through people who we knew, or through buying a bank whose sellers assume status as our shareholders. We are a fairly large company to be that localish. Eighty percent of our shareholders, we estimate, are really local Wisconsin residents living in the markets we serve.”
Nicolet does not pay its shareholders a dividend. “Our highest and best use of capital has been acquisitions,” Daniels said. “You need capital to grow. You are using your currency; you are trying to be capital efficient, which has been Bob’s mantra since Day One. If we didn’t have anything better to do with the capital, then we’d pay a dividend.”
“It has never been the right strategy to pay a dividend,” Atwell added. “The street would have loved us to dissipate our capital through dividends and then have to come to them to do a public equity issue.”
Pulling Together
Nicolet’s business is built on commercial banking, mortgage lending and wealth management. Atwell says the goal is for employees across the company to work together to comprehensively serve customers. “We have to earn the right to have that customer every day,” Daniels commented.
One way the bank reinforces a culture of cooperation is by rejecting compensation arrangements dependent upon commissions. “People who live in a commission-based culture, the whole ‘I’ll eat what I kill’ thing, even if it is my neighbor — they don’t work here,” Atwell said.
The Paycheck Protection Program presented Nicolet with an opportunity to deepen its customer relationships. Daniels came up with an idea to help business owners who would have applied for small PPP loans to simply receive a grant of up to $5,000 from Nicolet Bank. The program was for existing customers only, and it was a way to simplify the process of getting needed cash quickly into the hands of stressed small business owners. The bank gave away $1.5 million to 325 companies during a two-week period. Furthermore, Daniels said Nicolet did not use PPP to win new customers, electing to focus on existing customers. “We thought, ‘You have to take care of the people who take care of us first.’”
Consistent with the culture in northeast Wisconsin, many of the bankers who work at Nicolet continued to come into the office through the pandemic, and those who worked from home were back to the office within only a couple of months. In some ways, the bank didn’t miss a beat, completing four bank acquisitions since 2020, essentially doubling the size of the organization. The rapid growth is not lost on Atwell and Daniels, who commented in their 2021 annual report:
“People often ask us whether we can maintain the personalism, the sense of belonging, and the entrepreneurial spirit at the heart of our work. While we have figured out how to be impactful and meaningful to our customers and communities in several of our northern markets, most larger institutions’ business models do not have that focus. We need to invest in our future and keep our people growing and developing.
“Above all, we need to remember the values and commitments that are resulting in better outcomes to our customers, our people and our shareholders. High ideals must be made concrete in daily actions. It is worth believing in, investing in, and communicating with people. It isn’t always easy, but it is worth it.”
Nicolet Bank keeps some reminders around so that it does not forget its origins. One such reminder greets visitors at the entryway to the holding company’s third floor offices in downtown Green Bay. There is a large wooden sign displaying the name of the bank. The sign is repurposed from a workbench at a company called Algona Hardwoods, which made doors in Algona, Wis. Wendell Ellsworth owned the company; he was an early investor and original board member and one of the bank’s first customers. The bank’s 2021 annual report states: “He believed in Mike and Bob’s vision that a startup bank focused on service and relationships could grow into something successful. His belief helped to get Nicolet off the ground.”
In 22 years, that belief has grown, and the bank continues to win converts.