Nicolet(US:NIC)2021-04-23 17:14Financial Data and Key Metrics Changes - The company reported a net income of $3.9 million or $0.62 per diluted share for Q1 2021, with net interest income decreasing to $10.8 million due to lower loan fees from PPP forgiveness compared to the previous quarter [4][5] - The loan loss provision was $0.2 million, indicating improving credit quality metrics, with a stable adversely classified asset ratio at 39.61% [5][7] - The company repurchased 109,862 common shares during the quarter [5][33] Business Line Data and Key Metrics Changes - Loans sold and serviced increased by $29.3 million, contributing to higher loan servicing and origination rate income [5][31] - The adverse classified ratio remained stable, with watch credits decreasing by $24.2 million due to upgrades in the dairy portfolio [7][11] Market Data and Key Metrics Changes - Class III milk prices averaged $15.98 for Q1 2021, with expectations for an average of $18.16 for the remaining nine months, which is above most dairy producers' breakeven projections [13][14] - The outlook for U.S. dairy exports is strong, with expectations for significant demand from Asia and a weaker dollar aiding export activity [18][19] Company Strategy and Development Direction - The company is focused on enhancing its deposit growth and effective cost of funds management, with a strategy to alter the composition of the right side of its balance sheet [21][26] - The company is investing in technology and infrastructure to improve service offerings and client relationships, including a new full-service location in Appleton [24][76] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding credit quality improvement and anticipated continued positive credit migration throughout 2021 [5][11] - The company expects to see a strong pipeline for loan growth, particularly in the Ag sector, despite potential payoffs on the commercial side [42][83] Other Important Information - The company completed a technology project in Q1 2021 that was initially budgeted for the entire year, resulting in non-recurring expenses for the remainder of 2021 [32][62] - The company has a robust strategy for managing its Ag deposit portfolio, with the addition of a dedicated treasury management expert [80] Q&A Session Summary Question: Thoughts on leverage strategy and potential growth - The company plans to evaluate its leverage strategy quarterly, with an initial target of $200 million over a year [38] Question: Loan growth and impact of PPP on Ag customers - Loan growth is expected to continue, with strong pipelines on both commercial and Ag sides, despite some unexpected payoffs [40][42] Question: Progress on dairy reviews and credit migration - Approximately 20% of Ag reviews are completed, with expectations for continued positive credit migration [48][50] Question: Liquidity management and margin outlook - The company anticipates some downward pressure on margins but expects to offset this with interest recovery [52][54] Question: Technology strategy and expense run rate - The technology strategy is being developed to align with the overall strategic plan, with expenses expected to remain on track [62] Question: Crop insurance commission structure and growth - The crop insurance business has shown steady growth, with a focus on federal programs and margin insurance for dairy producers [66][70] Question: Funding opportunities in the Ag space - The new Appleton location is expected to enhance visibility and brand recognition, translating into deposit growth [76][78] Question: Share buyback strategy - The company plans to take advantage of market conditions for share buybacks, especially during Russell reconstitution [108][110]