NICOLET BANKSHARES INC (Form: S-4, Received: 02/01/2013 17:00:37)

By Order of the Board of Directors

Kim A. Gowey

Chairman of the Board

As filed with the Securities and Exchange Commission on February 1, 2013

Registration No. 333-____

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-4

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

NICOLET BANKSHARES, INC.
(Exact name of registrant as specified in its charter)

Wisconsin (State or other jurisdiction of incorporation or organization)				6021 (Primary Standard Industrial Classification Code Number)				47-0871001 (I.R.S. Employer Identification No.)
111 North Washington Street Green Bay, Wisconsin 54301 (920) 430-1400 (Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Robert B. Atwell
Chairman, President, and Chief Executive Officer
Nicolet Bankshares, Inc.
111 North Washington Street
Green Bay, Wisconsin 54301
(920) 430-1400

(Name, address, including zip code, and telephone number, including
area code, of agent for service)

Copies to:
Katherine M. Koops, Esq. Bryan Cave LLP 1201 West Peachtree Street, NW Atlanta, Georgia (404) 572-6600				Robert M. Fleetwood, Esq. Barack Ferrazzano Kirschbaum & Nagelberg, LLP 220 West Madison Street, Suite 3900 Chicago, Illinois 60606 (312) 984-3100

Approximate Date of Commencement of Proposed Sale of the Securities to the Public: As soon as practicable after the effective date of this Registration Statement and the satisfaction or waiver of all other conditions to the proposed merger described herein.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o __________

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o
(Do not check if a smaller reporting company)

Smaller reporting company [X]

Title of each class of securities to be registered				Amount to be registered ⁽¹⁾				Proposed maximum offering price per unit				Proposed maximum aggregate offering price ⁽²⁾				Amount of registration fee ⁽³⁾
Common stock, $0.01 par value				617,608				Not applicable				$9,611,290.20				$1,310.98

(1)

The maximum number of shares of Nicolet Bankshares, Inc. (“Nicolet”) common stock estimated to be issuable upon completion of the merger of Nicolet and Mid-Wisconsin Financial Services, Inc. (“MWFS”), as described herein. This number is based on 617,608 shares of Nicolet common stock issuable in exchange for all shares of MWFS common stock issued and outstanding immediately prior to the completion of the merger, pursuant to the terms of the Agreement and Plan of Merger by and between Nicolet and MWFS, dated as of November 28, 2012, and, as amended, attached to the joint proxy statement-prospectus as Appendix A, and assuming that no cash will be paid by the registrant in connection with the merger.

(2)

The proposed maximum aggregate offering price of the registrant’s common stock was calculated based upon the market value of shares of MWFS common stock (the securities to be cancelled in the merger) in accordance with Rules 457(c) and 457(f) under the Securities Act as follows: (A) the product of (i) $5.80, the average of the high and low prices per share of MWFS common stock as reported on the OTCQB on January 30, 2013, and (ii) 1,657,119, the estimated maximum number of shares of MWFS common stock that may be exchanged for the merger consideration.

(3)

Computed pursuant to Rules 457(f) and 457(c) under the Securities Act, based on a rate of $136.40 per $1,000,000 of the proposed maximum aggregate offering price.

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this joint proxy statement-prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This joint proxy statement-prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Preliminary — Subject to Completion Dated February __, 2013


PROXY STATEMENT OF MID-WISCONSIN FINANCIAL SERVICES, INC.				PROXY STATEMENT AND PROSPECTUS OF NICOLET BANKSHARES, INC.

PROPOSED MERGER — YOUR VOTE IS VERY IMPORTANT

The boards of directors of Mid-Wisconsin Financial Services, Inc. (“Mid-Wisconsin”) and Nicolet Bankshares, Inc. (“Nicolet”) have each unanimously approved a transaction that will result in the merger of Mid-Wisconsin with and into Nicolet. Nicolet will be the surviving bank holding company in the merger. If the merger is completed, Mid-Wisconsin shareholders will receive for each of their shares 0.3727 shares of Nicolet common stock or, for holders of 200 or fewer shares of Mid-Wisconsin common stock (subject to adjustment as described herein) or residents of states in which the Nicolet common stock cannot be offered without unreasonable effort or expense, $6.15 in cash. After the merger is completed, we expect that current Nicolet shareholders will own approximately 84.9% of the issued and outstanding common stock of the combined company and current Mid-Wisconsin shareholders will own approximately 15.1% of the combined issued and outstanding shares of common stock of the company.

The Nicolet common stock issued pursuant to the merger will be registered under the Securities Act of 1933, as amended. Although Nicolet plans to cause its common stock to be quoted on the Over-the-Counter Bulletin Board or other quotation system at or before the closing of the merger, its common stock is not currently traded on any securities exchange or quotation system.

We cannot complete the merger unless we obtain the necessary governmental approvals and unless the shareholders of both companies approve the merger agreement. Each of us is asking our shareholders to consider and vote on this merger proposal at our respective companies’ special meetings of shareholders. Whether or not you plan to attend your company’s meeting, please take the time to vote by following the voting instructions included in the enclosed proxy card. If you sign, date and mail your proxy card without indicating how you want to vote, your proxy will be counted as a vote FOR the merger agreement. If you do not vote your shares as instructed in the enclosed proxy card, or if you do not instruct your broker how to vote any shares held for you in “street name,” the effect will be a vote against the merger agreement.

The places, dates and times of the shareholders’ meetings are as follows:

For shareholders of Nicolet: For shareholders of Mid-Wisconsin:

This document contains a more complete description of the shareholders’ meetings and the terms of the merger. We urge you to review this entire document carefully. You may also obtain information about Mid-Wisconsin from documents that it has filed with the Securities and Exchange Commission and information about Nicolet’s and Mid-Wisconsin’s respective bank subsidiaries from Call Reports that they have filed with the Federal Deposit Insurance Corporation.

Nicolet and the Mid-Wisconsin boards of directors recommend that the Nicolet and Mid-Wisconsin shareholders, respectively, vote FOR approval of the merger agreement.

[Signature]				[Signature]

Robert B. Atwell Chairman, President and Chief Executive Officer Nicolet Bankshares, Inc.				Kim A. Gowey Chairman of the Board Mid-Wisconsin Financial Services, Inc.

You should read this entire joint proxy statement-prospectus carefully because it contains important information about the merger. In particular, you should read carefully the information under the section entitled “Risk Factors,” beginning on page 15.

Neither the Securities and Exchange Commission nor any state securities regulators have approved or disapproved of the securities to be issued in the merger or determined if this document is truthful or complete. Any representation to the contrary is a criminal offense.

The shares of Nicolet common stock to be issued in the merger are not deposits or savings accounts or other obligations of any bank or savings association and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

This joint proxy statement-prospectus is dated ______________, 2013 and is first being mailed to Mid-Wisconsin’s shareholders on or about _____________, 2013 and to Nicolet’s shareholders on or about ______________, 2013.

PLEASE NOTE

We have not authorized anyone to provide you with any information other than the information included in this joint proxy statement-prospectus and the documents to which we refer you herein. If someone provides you with other information, please do not rely on it as being authorized by us.

This joint proxy statement—prospectus has been prepared as of the date on the cover page. There may be changes in the affairs of Nicolet or Mid-Wisconsin since that date that are not reflected in this document.

As used in this joint proxy statement-prospectus, the terms “Nicolet” and “Mid-Wisconsin” refer to Nicolet Bankshares, Inc. and Mid-Wisconsin Financial Services, Inc., respectively, and, where the context requires, “Nicolet” may refer to Nicolet Bankshares, Inc. and its subsidiary, Nicolet National Bank. Similarly, where context requires, “Mid-Wisconsin” may refer to Mid-Wisconsin Financial Services, Inc. and its subsidiary, Mid-Wisconsin Bank.

Unless the context indicates otherwise, all references to the “merger agreement” refer to the Agreement and Plan of Merger dated November 28, 2012 by and among Nicolet and Mid-Wisconsin, as amended by Amendment No. 1 thereto dated January 17, 2013.

MID-WISCONSIN FINANCIAL SERVICES, INC.
132 West State Street
Medford, Wisconsin 54451

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON ______________, 2013

To the Shareholders of Mid-Wisconsin Financial Services, Inc.:

Mid-Wisconsin Financial Services, Inc. will hold a special meeting of shareholders at ______________________, on ___________, 2013 at ____ __.m., local time, for the following purposes:

1. Merger . To authorize, approve and adopt the Agreement and Plan of Merger, as amended, by and among Nicolet Bankshares, Inc. and Mid-Wisconsin Financial Services, Inc., pursuant to which Mid-Wisconsin will merge with and into Nicolet on and subject to the terms and conditions contained therein. A copy of the merger agreement, as amended, is attached to the accompanying joint proxy statement-prospectus as Appendix A .

2. Other business . To transact such other business as may properly come before the special meeting or any adjournments or postponements of the special meeting.

Only shareholders of record at the close of business on __________, 2013, the record date, are entitled to notice of and to vote at the special meeting or any adjournments or postponements of the special meeting. The approval of the Agreement and Plan of Merger requires the affirmative vote of at least a majority of the shares of Mid-Wisconsin common stock issued and outstanding on the record date.

After careful consideration, your board of directors supports the merger and unanimously recommends that you vote FOR approval of the Agreement and Plan of Merger.

YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the special meeting, please take the time to vote by following the instructions in the enclosed proxy card. You may revoke your proxy at any time before it is voted by giving written notice of revocation to Mid-Wisconsin’s Corporate Secretary or by filing a properly executed proxy card of a later date with Mid-Wisconsin’s Corporate Secretary at or before the meeting. You may also revoke your proxy by attending the meeting, giving oral notice of your revocation, and voting your shares in person at the meeting.

Mid-Wisconsin’s shareholders have dissenters’ rights with respect to the merger under Wisconsin law. Shareholders who wish to assert their dissenters’ rights and comply with the procedural requirements of Subchapter XIII of the Wisconsin Business Corporation Law will be entitled to receive payment of the fair value of their shares in cash in accordance with Wisconsin law. A copy of Subchapter XIII of the Wisconsin Business Corporation Law is attached as Appendix B to the joint proxy statement-prospectus.

We do not know of any other matters to be presented at the special meeting, but if other matters are properly presented, the persons named as proxies will vote on such matters at their discretion.

Medford, Wisconsin
__________, 2013

NICOLET BANKSHARES, INC.
111 North Washington Street
Green Bay, Wisconsin 54301

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON ______________, 2013

To the Shareholders of Nicolet Bankshares, Inc.:

Nicolet Bankshares, Inc. will hold a special meeting of shareholders at ________________________, on ________, 2013 at ____ __.m., local time, for the following purposes:

2. Other business . To transact such other business as may properly come before the special meeting or any adjournments or postponements of the special meeting.

Only shareholders of record at the close of business on __________, 2013, the record date, are entitled to notice of and to vote at the special meeting or any adjournments or postponements of the special meeting. The approval of the Agreement and Plan of Merger requires the affirmative vote of at least a majority of the shares of Nicolet common stock issued and outstanding on the record date.

After careful consideration, your board of directors supports the merger and unanimously recommends that you vote FOR approval of the Agreement and Plan of Merger.

YOUR VOTE IS VERY IMPORTANT . Whether or not you plan to attend the special meeting, please take the time to vote by following the voting instructions included in the enclosed proxy card. You may revoke your proxy at any time before it is voted by giving written notice of revocation to Nicolet’s Corporate Secretary or by filing a properly executed proxy card of a later date with Nicolet’s Corporate Secretary at or before the meeting. You may also revoke your proxy by attending the meeting, giving oral notice of your revocation, and voting your shares in person at the meeting.

Nicolet’s shareholders have dissenters’ rights with respect to the merger under Wisconsin law. Shareholders who wish to assert their dissenters’ rights and comply with the procedural requirements of Subchapter XIII of the Wisconsin Business Corporation Law will be entitled to receive payment of the fair value of their shares in cash in accordance with Wisconsin law. A copy of Subchapter XIII of the Wisconsin Business Corporation Law is attached as Appendix B to the joint proxy statement-prospectus.

We do not know of any other matters to be presented at the special meeting, but if other matters are properly presented, the persons named as proxies will vote on such matters at their discretion.

				By Order of the Board of Directors

				Robert B. Atwell Chairman, President and Chief Executive Officer

Green Bay, Wisconsin
_______, 2013

TABLE OF CONTENTS

				Page
QUESTIONS AND ANSWERS					i

SUMMARY					1
T HE C OMPANIES					1
T HE M ERGER A GREEMENT					2
W HAT Y OU W ILL R ECEIVE IN THE M ERGER					2
E FFECT OF THE M ERGER ON M ID-WISCONSIN O PTIONS					2
Y OUR E XPECTED T AX T REATMENT AS A R ESULT OF THE M ERGER					3
D ISSENTERS ’ R IGHTS					3
C OMPARATIVE S TOCK P RICES					3
R EASONS FOR THE M ERGER					3
O PINION OF M ID-WISCONSIN ’ S F INANCIAL A DVISOR					5
O PINION OF N ICOLET ’ S F INANCIAL A DVISOR					5
B OTH B OARDS OF D IRECTORS R ECOMMEND S HAREHOLDER A PPROVAL OF THE M ERGER A GREEMENT					5
I NFORMATION A BOUT THE S HAREHOLDERS ’ M EETINGS					5
Q UORUM AND V OTE R EQUIRED AT THE M EETINGS					6
S HARE O WNERSHIP OF M ANAGEMENT					6
S TRUCTURE OF THE M ERGER					6
W E M UST O BTAIN R EGULATORY A PPROVAL TO C OMPLETE THE M ERGER					7
W E M UST M EET S EVERAL C ONDITIONS TO C OMPLETE THE M ERGER					7
T ERMINATION AND T ERMINATION F EE					8
M ID-WISCONSIN ’ S D IRECTORS AND E XECUTIVE O FFICERS H AVE I NTERESTS IN THE M ERGER THAT D IFFER FROM ITS S HAREHOLDERS ’ I NTERESTS					8
E MPLOYEE B ENEFITS OF M ID-WISCONSIN E MPLOYEES AFTER THE M ERGER					8
D IFFERENCES IN R IGHTS OF M ID-WISCONSIN ’ S S HAREHOLDERS AFTER THE M ERGER					9
A CCOUNTING T REATMENT					9

UNAUDITED COMPARATIVE PER SHARE DATA					10

SELECTED UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION					11

RISK FACTORS					15

A WARNING ABOUT FORWARD-LOOKING STATEMENTS					26

THE MID-WISCONSIN SPECIAL SHAREHOLDERS’ MEETING					27
P URPOSE					27
R ECORD D ATE; Q UORUM AND V OTE R EQUIRED					27
S OLICITATION AND R EVOCATION OF P ROXIES					28
D ISSENTERS ’ R IGHTS					29
R ECOMMENDATION OF THE B OARD OF D IRECTORS OF M ID-WISCONSIN					29

THE NICOLET SPECIAL SHAREHOLDERS’ MEETING					30

PROPOSAL 1: THE MERGER AGREEMENT					33
B ACKGROUND OF THE M ERGER					33
R EASONS FOR THE M ERGER					35

OPINION OF MID-WISCONSIN’S FINANCIAL ADVISOR					37

OPINION OF NICOLET’S FINANCIAL ADVISOR					45

THE MERGER AGREEMENT					54

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER					66

CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS					71

DISSENTERS’ RIGHTS					76

				Page

BUSINESS OF NICOLET					83
G ENERAL					83
B USINESS AND P ROPERTIES					84
C OMPETITION					86
E MPLOYEES					86
L EGAL P ROCEEDINGS					86
M ARKET P RICES OF AND D IVIDENDS D ECLARED ON N ICOLET C OMMON S TOCK					86
C ERTAIN P ROVISIONS OF N ICOLET ’ S A RTICLES OF I NCORPORATION AND B YLAWS R EGARDING C HANGE OF C ONTROL					87

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT					88

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF NICOLET					90

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION					92

MANAGEMENT OF NICOLET					137
C ONTINUING D IRECTORS					137
N EW D IRECTORS OF THE C OMBINED E NTITY					138
N OMINATIONS					139
D IRECTOR C OMPENSATION					140
E XECUTIVE O FFICERS					140

EXECUTIVE COMPENSATION					141

RELATED PARTY TRANSACTIONS					144

INFORMATION ABOUT MID-WISCONSIN					145
A VAILABLE I NFORMATION					145
M ARKET P RICES OF AND D IVIDENDS D ECLARED ON M ID-WISCONSIN C OMMON S TOCK					146

SUPERVISION AND REGULATION					147

OTHER MATTERS					159

EXPERTS					159

LEGAL MATTERS					159

IMPORTANT NOTICE FOR MID-WISCONSIN’S SHAREHOLDERS					159

WHERE YOU CAN FIND ADDITIONAL INFORMATION					160

CONSOLIDATED FINANCIAL STATEMENTS OF NICOLET BANKSHARES, INC.					F-1

QUESTIONS AND ANSWERS

On what am I being asked to vote?

You are being asked to approve the Agreement and Plan of Merger, as amended, by and between Nicolet and Mid-Wisconsin which we may refer to as the merger agreement, and which provides for the merger of Mid-Wisconsin with and into Nicolet.

Why have Nicolet and Mid-Wisconsin decided to merge?

Nicolet and Mid-Wisconsin agreed to merge for strategic reasons that benefit both parties. Their boards of directors believe that the merger will stabilize Mid-Wisconsin’s operations while allowing Nicolet to expand and enter into new markets.

How does my board of directors recommend I vote on the merger agreement?

The boards of directors of Mid-Wisconsin and Nicolet have unanimously approved and adopted the merger agreement and recommend that their respective shareholders vote “FOR” approval of the merger agreement.

What will happen to Nicolet National Bank and Mid-Wisconsin Bank as a result of the merger?

If the merger occurs, Mid-Wisconsin Bank, which is a wholly owned subsidiary of Mid-Wisconsin, will be merged with and into Nicolet National Bank, which is a wholly owned subsidiary of Nicolet. We may refer to this transaction as the bank merger. Nicolet National Bank will be the surviving entity in the bank merger.

What vote is required to approve the merger agreement?

Approval of the merger agreement requires the affirmative vote of a majority of the issued and outstanding shares of Mid-Wisconsin common stock as of [MWFS record date] and the affirmative vote of a majority of the issued and outstanding shares of Nicolet common stock as of [Nicolet record date] .

What will I receive in the merger?

Mid-Wisconsin shareholders will receive for each of their shares either (i) 0.3727 shares of Nicolet common stock or, (ii) for holders of 200 or fewer shares of Mid-Wisconsin common stock (subject to adjustment as described herein) or residents of states in which the Nicolet common stock cannot be offered without unreasonable effort or expense, $6.15 in cash. In lieu of any fractional shares of Nicolet common stock, Mid-Wisconsin shareholders will receive $16.50 per share in cash, which is the per share value assigned the Nicolet common stock for purposes of the merger. After the merger is completed, we expect that current Nicolet shareholders will own approximately 84.9% of the issued and outstanding shares of common stock of the combined company and current Mid-Wisconsin shareholders will own approximately 15.1% of the issued and outstanding shares of common stock of the combined company. See page __ for further explanation.

What are the federal income tax consequences of the merger to me?

Bryan Cave LLP has issued an opinion, which it will confirm as of the effective date of the merger, that the merger will qualify as a reorganization under Section 368(a) of the Internal Revenue Code. Mid-Wisconsin shareholders receiving stock consideration in the merger will not recognize gain for U.S. federal income tax purposes as a result of the surrender of Mid-Wisconsin common stock for receipt of Nicolet common stock. However, to the extent that shareholders may receive cash either as a result of the exercise of dissenters’ rights, in lieu of a state-restricted fractional share, because they hold fewer than 200 shares of Mid-Wisconsin common stock, or because they are residents of states in which Nicolet common stock cannot be offered without unreasonable effort or expense, they may recognize gain for U.S. federal income tax purposes. Your tax treatment will depend on your specific situation and many variables not within our control. You should consult your own tax advisor for a full understanding of the tax consequences of the merger to you.

When do you expect the merger to be completed?

We are working to complete the merger in the second quarter of 2013, shortly after the special shareholders’ meetings, assuming Mid-Wisconsin and Nicolet shareholders and the applicable bank regulatory agencies approve the merger and other conditions to closing are met. We could experience delays in meeting these conditions or be unable to meet them at all. See “Risk Factors” beginning on page 15 for a discussion of these and other risks relating to the merger.

Will I be able to sell the Nicolet common stock I receive pursuant to the merger?

Yes. The Nicolet common stock issued pursuant to the merger will be registered under the Securities Act of 1933, as amended, and Nicolet plans to cause its common stock to be quoted on the Over-the-Counter Bulletin Board or other quotation system at or before closing of the merger. All shares of Nicolet common stock that you receive pursuant to the merger will be freely transferable unless you are deemed an affiliate of Nicolet. Affiliates of Nicolet may, however, be able to sell the shares they receive pursuant to the merger subject to applicable securities regulations. See “Resale of Nicolet Common Stock” on page 63.

What should I do now?

After carefully reading and considering the information in this joint proxy statement-prospectus, follow the voting instructions included in the enclosed proxy card in order to vote your shares as soon as possible, so that your shares will be represented at your company’s special meeting.

NOTE: If you sign and send in your proxy card and do not indicate how you want to vote, your proxy will be voted “FOR” the proposal to approve the merger agreement.

What if I do not vote?

If you do not vote, it will have the same effect as voting your shares against the merger.

If my shares are held in “street name” by my broker, will my broker automatically vote my shares for me?

No. Your broker will vote your shares of stock on the merger agreement only if you provide instructions on how to vote. You should instruct your broker on how to vote your shares, following the directions your broker provides. If you do not provide instructions to your broker, and your broker submits an unvoted proxy, the resulting broker nonvote will not be counted toward a quorum and your shares will not be voted at your company’s special meeting, which will have the same effect as voting your shares against the merger.

Can I change my vote after I deliver my proxy?

Yes. You can change your vote at any time before your proxy is voted at the special meeting. You can do this in three ways. First, you can revoke your proxy by giving written notice of revocation to your company’s Corporate Secretary. Second, you can submit a new properly executed proxy with a later date to your company’s Corporate Secretary at or before your company’s special meeting. The latest proxy actually received before the meeting will be counted, and any earlier proxies will be revoked. Third, you can attend your company’s special meeting, give oral notice of your revocation, and vote your shares in person. Any earlier proxy will be thereby revoked. However, simply attending the meeting without voting will not revoke your proxy. If you hold shares in “street name,” you must contact your broker prior to your company’s special meeting if you wish to revoke your proxy or change your vote.

Should I send in my stock certificates now?

No. If you are a Nicolet shareholder, your shares of Nicolet common stock will remain outstanding and unchanged in the merger. Consequently, you do not need to surrender your stock certificates or exchange them for new ones.

If you are a Mid-Wisconsin shareholder and the merger is completed, Nicolet’s exchange agent will send all Mid-Wisconsin shareholders written instructions for exchanging Mid-Wisconsin common stock

certificates for the merger consideration they are entitled to receive. In any event, do not send your stock certificates with your proxy card.

Who can help answer my questions?

If you would like additional copies of this document, or if you would like to ask any questions about the merger and related matters, you should contact:

For Mid-Wisconsin shareholders: _______________, Mid-Wisconsin Financial Services, Inc., 132 West State Street, Medford, Wisconsin, 54451, telephone: (____) ____________.

For Nicolet shareholders: Robert B. Atwell, Nicolet Bankshares, Inc., 111 North Washington Street, Green Bay, Wisconsin 54301, telephone: (920) 430-1400.

iii

SUMMARY

We have prepared this summary of certain material information to assist you in your review of this joint proxy statement-prospectus. It is necessarily general and abbreviated, and it is not intended to be a complete explanation of all of the matters covered in this joint proxy statement-prospectus. To understand the merger and the issuance of cash and shares of Nicolet common stock in the merger, please see the more complete and detailed information in the sections that follow this summary, as well as the financial statements and appendices included in this joint proxy statement-prospectus by reference. For more information about Nicolet or Mid-Wisconsin, please see the section entitled “Where You Can Find Additional Information.” We urge you to read all of these documents in their entirety prior to returning your proxy or voting at the special meeting of your company’s shareholders.

Each item in this summary refers to the page of this document on which that subject is discussed in more detail.

The Companies
(See page ___ for Nicolet and page ___ for Mid-Wisconsin)

N ICOLET B ANKSHARES, I NC.
111 North Washington Street
Green Bay, Wisconsin 54301
(920) 430-1400

Nicolet is a Wisconsin corporation and was incorporated as Green Bay Financial Corporation, a Wisconsin corporation, on April 5, 2000 to serve as the holding company for and the sole shareholder of Nicolet National Bank. It amended and restated its articles of incorporation and changed its name to Nicolet Bankshares, Inc. on March 14, 2002. It subsequently became the holding company for Nicolet National Bank upon completion of Nicolet National Bank’s reorganization into a holding company structure on June 6, 2002.

Nicolet is a registered bank holding company under the Bank Holding Company Act of 1956, as amended, and under the bank holding company laws of the State of Wisconsin. It conducts operations through its wholly-owned subsidiary, Nicolet National Bank, which was organized in 2000 as a national bank under the laws of the United States and opened for business on November 1, 2000. Nicolet National Bank provides a full range of traditional banking services throughout northeastern Wisconsin and the upper peninsula of Michigan. Nicolet offers commercial, retail and wealth management services through 11 branch locations in Green Bay, De Pere, Appleton, Marinette and Crivitz, Wisconsin and Menominee, Michigan.

As of September 30, 2012, Nicolet had consolidated total assets of approximately $683 million, consolidated total gross loans of approximately $546 million, consolidated total deposits of approximately $555 million and consolidated shareholders’ equity of approximately $77 million.

M ID-WISCONSIN F INANCIAL S ERVICES, I NC.
132 West State Street
Medford, Wisconsin 54451
(715) 748-8300

Mid-Wisconsin Financial Services, Inc. is a registered bank holding company headquartered in Medford, Wisconsin. Mid-Wisconsin Bank, Mid-Wisconsin’s wholly-owned banking subsidiary was incorporated on September 1, 1890, as a state bank under the laws of Wisconsin. Mid-Wisconsin Bank operates 11 retail banking locations throughout North Central Wisconsin serving markets in Clark, Eau Claire, Marathon, Oneida, Price, Taylor and Vilas Counties.

As of September 30, 2012, Mid-Wisconsin had consolidated total assets of approximately $464 million, consolidated total gross loans of approximately $308 million, consolidated total deposits of approximately $364 million and consolidated shareholders’ equity of approximately $37 million.

The Merger Agreement
(See page 54)

Under the terms of the merger agreement, Mid-Wisconsin will merge with and into Nicolet with Nicolet being the surviving corporation. Following the merger of Mid-Wisconsin with and into Nicolet, Mid-Wisconsin Bank will merge with and into Nicolet National Bank with Nicolet National Bank being the surviving bank. Both Nicolet and Nicolet National Bank will continue their existence under Wisconsin law and the laws of the United States, respectively, while Mid-Wisconsin and Mid-Wisconsin Bank will cease to exist. The merger agreement is attached to this document as Appendix A and is incorporated into this joint proxy statement-prospectus by reference. We encourage you to read the entire merger agreement carefully as it is the legal document that governs the proposed merger.

What You Will Receive in the Merger
(See page 54)

If the merger is completed, Mid-Wisconsin shareholders will receive 0.3727 shares of Nicolet common stock for each of their shares except in the circumstances described below.

Fractional Shares. No fractional shares of Nicolet common stock will be issued in connection with the merger. Instead, Nicolet will make a cash payment without interest to each shareholder of Mid-Wisconsin who would otherwise receive a fractional share of Nicolet common stock. The amount of such cash payment will be determined by multiplying the fraction of a share of Nicolet common stock otherwise issuable to such shareholder by $16.50, the value attributed to each share of Nicolet common stock solely for purposes of this transaction.

State-Restricted Shares. A record holder of shares of Mid-Wisconsin common stock who resides in a state in which shares of Nicolet common stock cannot be issued in the merger under that state’s securities laws without commercially unreasonable effort or expense will receive, in lieu of shares of Nicolet common stock, $6.15 in cash for each share of Mid-Wisconsin common stock he, she or it owns. In this joint proxy statement-prospectus, we refer to these shares as “state-restricted shares.” Nicolet will be permitted to issue its common stock in the merger based on a self-executing exemption that is available in all states except the District of Columbia, Minnesota, New Hampshire, New York, and Utah. In those states, a notice or other filing is required. Although Nicolet presently anticipates that it will be able to issue stock in the merger in those states as well without unreasonable commercial effort or expense, it is possible that it could encounter a condition to issuance that would make it economically unreasonable to issue shares to any shareholders residing in that state.

Effect of the Merger on Mid-Wisconsin Options
(See page 56)

As of September 30, 2012, there were 30,510 outstanding options to purchase Mid-Wisconsin common stock, with a weighted average exercise price of $28.13 per share. The merger agreement requires that all outstanding options to acquire Mid-Wisconsin common stock be cancelled effective upon the closing of the merger without payment.

Your Expected Tax Treatment as a Result of the Merger
(See page ___)

We expect that Mid-Wisconsin shareholders who receive only Nicolet common stock for their shares of Mid-Wisconsin common stock will not recognize any gain or loss for U.S. federal income tax purposes as a result of the merger. The completion of the merger is conditioned on receipt of a tax opinion from Bryan Cave LLP that the merger qualifies as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) and that Mid-Wisconsin shareholders will not recognize gain or loss in connection with the exchange of their shares (except with respect to any cash received). The opinion will not bind the Internal Revenue Service, which could take a different view. This tax treatment will not apply to any Mid-Wisconsin shareholder who receives cash consideration in the merger in exchange for Mid-Wisconsin common stock, or who receives cash pursuant to the exercise of dissenters’ rights.

Any shareholder of Mid-Wisconsin who receives cash in the merger, as a result of perfecting dissenters’ rights under Wisconsin law, or otherwise, will recognize gain to the extent the cash received exceeds the shareholder’s tax basis in his or her Mid-Wisconsin common stock. See “Material Federal Income Tax Consequences of the Merger” for a more detailed discussion of the tax consequences of the merger.

Determining the actual tax consequences of the merger to you as an individual taxpayer can be complicated. The tax treatment will depend on your specific situation and many variables not within our control. For these reasons, we recommend that you consult your tax advisor concerning the federal and any applicable state, local or other tax consequences of the merger to you.

Dissenters’ Rights
(See page ___)

If the merger is completed, shareholders of Mid-Wisconsin or Nicolet who do not vote for the merger and who follow certain procedures as required by Wisconsin law and described in this joint proxy statement-prospectus will be entitled to exercise dissenters’ rights and receive the “fair value” of their shares in cash under Wisconsin law. If you assert and perfect your dissenters’ rights, you will not receive any merger consideration but will be entitled to receive the “fair value” of your shares of stock in cash as determined in accordance with Wisconsin law. The “fair value” of your shares may be more or less than the consideration to be paid in the merger. Appendix B includes the relevant provisions of Wisconsin law regarding these rights. See “Dissenters’ Rights” beginning on page __ of this joint proxy statement-prospectus.

Comparative Stock Prices
(See page __ for Nicolet and page __ for Mid-Wisconsin)

Nicolet. The Nicolet common stock does not currently trade on any securities exchange or interdealer quotation system, but Nicolet plans to cause its common stock to be quoted on the Over-the-Counter Bulletin Board or other quotation system on or before the closing date of the merger. The last known sale price for a share of Nicolet common stock prior to the mailing of this joint proxy statement-prospectus was $ ______ on _________, 2013.

Mid-Wisconsin. The Mid-Wisconsin common stock currently trades on the OTCQB market of the OTC Markets Group, Inc. under the symbol “MWFS.” The last known sale price for a share of Mid-Wisconsin common stock prior to the mailing of this joint proxy statement-prospectus was $_____ on ___________, 2013.

Reasons for the Merger
(See page 35)

Nicolet

In deciding to pursue an acquisition of Mid-Wisconsin, Nicolet’s management and board of directors noted, among other things, the following:

•

information concerning the business, operations, earnings, asset quality, and financial condition of Mid-Wisconsin and Mid-Wisconsin Bank;

•

the financial terms of the merger, including the relationship of the value of the consideration issuable in the merger to the market value, tangible book value, and earnings per share of Mid-Wisconsin’s common stock;

•

the ability of Mid-Wisconsin’s operations to contribute to Nicolet’s earnings after the merger;

•

the recent comparative earnings and financial performance of Mid-Wisconsin and Nicolet;

•

the financial terms of recent business combinations in the financial services industry and a comparison of the multiples of selected combinations with the terms of the proposed merger;

•

the various effects of Nicolet becoming a public reporting company under the regulation of the Securities and Exchange Commission (the “SEC”) as a result of the merger, including increased liquidity for holders of Nicolet’s common stock;

•

evaluation of redemption strategies available to Mid-Wisconsin and Nicolet for the preferred stock issued by Mid-Wisconsin to the U.S. Treasury (“Treasury”) under the Troubled Asset Relief Program Capital Purchase Program (“TARP”);

•

the compatibility of Mid-Wisconsin’s management team, strategic objectives and geographic footprint with those of Nicolet;

•

the opportunity to leverage the infrastructure of Nicolet;

•

the nonfinancial terms of the merger, including the treatment of the merger as a tax-free reorganization for U.S. federal income tax purposes;

•

the opinion of Sandler O’Neill + Partners, L.P. (“Sandler O’Neill”) that the consideration to be received by Mid-Wisconsin’s common shareholders in the merger is fair, from a financial point of view, to the shareholders of Nicolet; and

•

the likelihood of the merger being approved by applicable regulatory authorities without undue conditions or delay.

Mid-Wisconsin

In deciding to engage in the merger transaction, Mid-Wisconsin’s board of directors consulted with its management, as well as its legal counsel and financial advisor, and considered numerous factors, including the following:

•

the value of the consideration to be received by Mid-Wisconsin’s shareholders compared to shareholder value for Mid-Wisconsin as an independent entity;

•

information concerning business, operations, earnings, asset quality, and financial condition, prospects, and capital levels of Mid-Wisconsin and Nicolet, both individually and as a combined entity;

•

the perceived risks and uncertainties attendant to Mid-Wisconsin’s operation as an independent banking organization, including risks and uncertainties related to the continuing deferral of dividends and interests on its Fixed Rate Cumulative Preferred Stock, Series A (the “Series A Preferred Stock”) and its Fixed Rate Cumulative Perpetual Preferred Stock, Series B (the “Series B Preferred Stock” and together with the Series A Preferred Stock, the “Preferred Stock”) and Floating/Fixed Rate Junior Subordinated Deferrable Interest Debentures, due 2035 (the “Debentures”), the continuing low-interest rate environment, operating under enhanced regulatory scrutiny and the formal written agreements between Mid-Wisconsin and the Federal Deposit Insurance Corporation (the “FDIC”) and the Wisconsin Department of Financial Institutions (“WDFI”), and increased capital requirements;

•

the financial terms of recent business combinations in the financial services industry and a comparison of the multiples of selected combinations with the terms of the proposed merger;

•

the receipt of the stock consideration by Mid-Wisconsin’s shareholders on a tax-free basis;

•

the opinion of Raymond James & Associates, Inc. (“Raymond James”) that the consideration to be received by Mid-Wisconsin’s common shareholders in the merger is fair from a financial point of view; and

•

the likelihood of the merger being approved by applicable regulatory authorities without undue conditions or delay.

Opinion of Mid-Wisconsin’s Financial Advisor
(See page 37)

In deciding to approve the merger, the board of directors of Mid-Wisconsin considered the opinion of its financial advisor, Raymond James. Raymond James, an investment banking and financial advisory firm, has given a fairness opinion to the Mid-Wisconsin board of directors that the terms of the merger are fair, from a financial point of view, to the shareholders of Mid-Wisconsin. The opinion is based on and subject to the procedures, matters and limitations described in the opinion and other matters that Raymond James considered relevant. The fairness opinion is attached to this joint proxy statement-prospectus as Appendix C . We urge all shareholders of Mid-Wisconsin to read the entire opinion, which describes the procedures followed, matters considered and limitations on the review undertaken by Raymond James in providing its opinion.

Opinion of Nicolet’s Financial Advisor
(See page 45)

In deciding to approve the merger, the board of directors of Nicolet considered the opinion of its financial advisor, Sandler O’Neill. Sandler O’Neill, an investment banking and financial advisory firm, has given a fairness opinion to the Nicolet board of directors that the consideration to be provided to Mid-Wisconsin’s common shareholders in the merger is fair, from a financial point of view, to the shareholders of Nicolet. The opinion is based on and subject to the procedures, matters and limitations described in the opinion and other matters that Sandler O’Neill considered relevant. The fairness opinion is attached to this joint proxy statement-prospectus as Appendix D . We urge all shareholders of Nicolet to read the entire opinion, which describes the procedures followed, matters considered and limitations on the review undertaken by Sandler O’Neill in providing its opinion.

Both Boards of Directors Recommend Shareholder Approval of the Merger Agreement
(See page __)

Mid-Wisconsin. The board of directors of Mid-Wisconsin has unanimously approved the merger agreement and believes that the merger is in the best interests of Mid-Wisconsin’s shareholders. The board unanimously recommends that you vote FOR approval of the merger agreement.

Nicolet. The board of directors of Nicolet has unanimously approved the merger agreement and believes that the merger is in the best interests of Nicolet’s shareholders. The board unanimously recommends that you vote FOR approval of the merger agreement.

Information About the Shareholders’ Meetings
(See pages __ and ___)

A special meeting of the shareholders of Mid-Wisconsin will be held on _________, 2013, at __.m., central time. The meeting will be held at _____________________. At the meeting, the shareholders of Mid-Wisconsin will vote on the merger agreement described herein. If Mid-Wisconsin’s shareholders approve the merger agreement and the conditions to completing the merger are satisfied, we expect to complete the merger shortly after the special shareholders’ meeting.

A special meeting of the shareholders of Nicolet will be held on ________, 2013, at __.m., local time. The meeting will be held at _____________________. At the meeting, the shareholders of Nicolet will vote on the merger agreement described above and in the notice for the meeting. If Nicolet’s shareholders approve

the merger agreement and the other conditions to completing the merger are satisfied, we expect to complete the merger shortly after the special shareholders’ meeting.

Quorum and Vote Required at the Meetings
(See pages __ and __)

Mid-Wisconsin. Shareholders who own Mid-Wisconsin common stock at the close of business on _________________, 2013, the record date, will be entitled to vote at the meeting. A majority of the issued and outstanding shares of Mid-Wisconsin common stock, as of the record date for the meeting, must be present in person or by proxy at the meeting in order for a quorum to be present. If a quorum is not present at the meeting, the meeting will be adjourned, and no vote will be taken until and unless a quorum is present.

Approval of the merger agreement requires the affirmative vote of a majority of the shares of Mid-Wisconsin common stock issued and outstanding on the record date.

Nicolet. Shareholders who own Nicolet common stock at the close of business on ______________, 2013, the record date, will be entitled to vote at the meeting. A majority of the issued and outstanding shares of Nicolet common stock, as of the record date for the meeting, must be present in person or by proxy at the meeting in order for a quorum to be present. If a quorum is not present at the meeting, the meeting will be adjourned, and no vote will be taken until and unless a quorum is present.

Approval of the merger agreement requires the affirmative vote of a majority of the shares of Nicolet common stock issued and outstanding on the record date.

Share Ownership of Management
(See page __)

Mid-Wisconsin. As of the record date for the special meeting, directors and executive officers of Mid-Wisconsin had or shared voting or dispositive power over approximately ____% of the issued and outstanding Mid-Wisconsin common stock. It is anticipated that these individuals will vote their shares of Mid-Wisconsin common stock in favor of the merger agreement. Certain of these individuals have entered into a written agreement with Nicolet providing that they will vote the shares over which they have voting power, subject to their fiduciary duties, in favor of the merger agreement. A copy of the form of such agreement is included as an exhibit to the merger agreement.

As of the record date for the meeting, directors and executive officers of Nicolet had or shared no voting or dispositive power over any of the issued and outstanding shares of Mid-Wisconsin common stock.

Nicolet. As of the record date for the special meeting, directors and executive officers of Nicolet had or shared voting or dispositive power over approximately ____% of the issued and outstanding Nicolet common stock. It is anticipated that these individuals will vote their shares of Nicolet common stock in favor of the merger agreement. Certain of these individuals have entered into a written agreement with Mid-Wisconsin providing that they will vote the shares over which they have voting power, subject to their fiduciary duties, in favor of the merger agreement. A copy of the form of such agreement is included as an exhibit to the merger agreement.

The directors and executive officers of Mid-Wisconsin do not have or share voting or dispositive power over any of the issued and outstanding shares of Nicolet common stock.

Structure of the Merger
(See page 33)

•

Mid-Wisconsin Financial Services, Inc. and Mid-Wisconsin Bank will cease to exist after the merger.

•

Subsequent to the merger, the business of Mid-Wisconsin Bank will be conducted through Nicolet National Bank.

•

Two current Mid-Wisconsin directors, Kim A. Gowey and Christopher Ghidorzi, will be appointed to Nicolet’s board of directors upon consummation of the merger. They will also be appointed to Nicolet National Bank’s board of directors upon consummation of the bank merger.

We Must Obtain Regulatory Approval to Complete the Merger
(See page ___)

We cannot complete the merger unless we receive the approval of the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and other applicable governmental authorities. The merger also requires approval from the Office of the Comptroller of the Currency (“OCC”) and WDFI and non-objection from the FDIC. All regulatory applications and notices required to be filed prior to the merger have been filed. Although we do not know of any reason why we could not obtain the necessary regulatory approvals in a timely manner, we cannot be certain whether or when we will obtain them.

We Must Meet Several Conditions to Complete the Merger
(See page ___)

In addition to the required regulatory approvals, the merger will only be completed if certain mutual conditions are met, including the following:

•

approval by Mid-Wisconsin’s shareholders and Nicolet’s shareholders of the merger agreement by the required vote;

•

approval of the merger and the transactions contemplated thereby by applicable regulatory authorities without imposing conditions that in the opinion of the board of directors of either Nicolet or Mid-Wisconsin would materially adversely affect the economic or business benefits of the transaction to either Nicolet or Mid-Wisconsin (a “Materially Burdensome Condition”);

•

receipt of all third-party consents (other than the regulatory consents described above) necessary to consummate the merger, other than those that would not have a material adverse effect on the party required to obtain the consent;

•

receipt by Mid-Wisconsin and Nicolet of an opinion from Bryan Cave LLP that the merger qualifies as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code;

•

the absence of a stop order suspending the effectiveness of Nicolet’s registration statement under the Securities Act with respect to the shares of Nicolet common stock to be issued to the Mid-Wisconsin shareholders;

•

the absence of an order, decree or injunction enjoining or prohibiting completion of the merger;

•

Mid-Wisconsin’s redemption of its outstanding Preferred Stock in accordance with its terms or, if such redemption is not permitted by applicable regulatory authorities, the purchase of such stock by Nicolet for a maximum payment of $12.0 million;

•

payment by Mid-Wisconsin of all accrued but unpaid interest on its Debentures or, if such payment is not permitted by applicable regulatory authorities, by Nicolet, and Nicolet’s execution of a supplemental indenture assuming the related indebtedness;

•

receipt by each party of an opinion from its independent financial advisor (which opinion shall not have been withdrawn) that the consideration to be paid to Mid-Wisconsin’s shareholders in the merger is fair to that party’s shareholders from a financial standpoint;

•

cancellation of all outstanding Mid-Wisconsin stock options;

•

the appointment of Kim A. Gowey and Christopher Ghidorzi to Nicolet’s Board of Directors to serve following the merger;

•

issuance of certain legal opinions by counsel for Mid-Wisconsin and Nicolet; and

•

each party’s certification to the other as to the continued accuracy of the representations and warranties contained in the merger agreement, compliance with covenants and closing conditions and the satisfaction of all other matters applicable to the transaction.

If all regulatory approvals are received and the other conditions to completion are satisfied, Nicolet and Mid-Wisconsin contemplate that they will complete the merger in the second quarter of 2013, shortly after their special shareholders’ meetings.

Termination and Termination Fee
(See page ___)

The merger agreement may be terminated, either before or after shareholder approval, under certain circumstances described in detail later in this joint proxy statement-prospectus. If either party terminates the merger agreement because Mid-Wisconsin’s board withdraws or changes its recommendation of the merger agreement, cancels the meeting at which Mid-Wisconsin’s shareholders or board will vote on the merger agreement, or recommends, approves or announces a transaction for the sale to or merger with an entity other than the Nicolet merger (such transaction, an “acquisition transaction”), or if Mid-Wisconsin terminates the agreement because it has received an offer for such an acquisition transaction, then Mid-Wisconsin (or its successor) must pay Nicolet a termination fee of $750,000. Similarly, if Mid-Wisconsin terminates the merger agreement because Nicolet’s board withdraws or changes its recommendation of the merger agreement, cancels the meeting at which Nicolet’s shareholders or board will vote on the merger agreement, or resolves to do any of those things, then Nicolet (or its successor) must pay Mid-Wisconsin a termination fee of $750,000. In addition, if the merger agreement is terminated by a party based on a material breach by the other party, then the breaching party will be required to pay the non-breaching party liquidated damages of $1.0 million plus documented out-of-pocket legal, investment banking, accounting, consulting and other expenses incurred by the non-breaching party in connection or associated with the preparation, negotiation, and execution of the merger agreement.

Mid-Wisconsin’s Directors and Executive Officers Have Interests in the Merger that Differ from its Shareholders’ Interests
(See page ___)

The executive officers and directors of Mid-Wisconsin have interests in the merger in addition to their interests as shareholders of Mid-Wisconsin generally. The members of the Mid-Wisconsin board of directors knew about these additional interests and considered them when they adopted the merger agreement. Such interests include, among others:

•

payments to directors under Mid-Wisconsin’s Deferred Compensation Plan and its Director Retirement Benefit Policy;

•

the continuation of employee benefits;

•

provisions in the merger agreement relating to director and officer liability insurance and the indemnification of officers and directors of Mid-Wisconsin for certain liabilities; and

•

the appointment of Kim Gowey and Christopher Ghidorzi to Nicolet’s Board of Directors.

These interests are more fully described in this joint proxy statement-prospectus under the heading “The Merger Agreement — Interests of Certain Persons in the Merger” at page 60.

Employee Benefits of Mid-Wisconsin Employees after the Merger
(See page __)

Nicolet has agreed to offer to all current employees of Mid-Wisconsin who become Nicolet employees as a result of the merger substantially similar employee benefits to those that Nicolet offers to its employees in similar positions.

Differences in Rights of Mid-Wisconsin’s Shareholders after the Merger
(See page ___)

Mid-Wisconsin shareholders who receive Nicolet common stock in the merger will become Nicolet shareholders as a result of the merger. Their rights as shareholders after the merger will be governed by Wisconsin law and by Nicolet’s articles of incorporation and bylaws. The rights of Nicolet shareholders are different in certain respects from the rights of Mid-Wisconsin’s shareholders. The material differences are described later in this joint proxy statement-prospectus.

Accounting Treatment
(See page 65)

Nicolet is required to account for the merger as a purchase transaction for accounting and financial reporting purposes under accounting principles generally accepted in the United States of America (“GAAP”). Under purchase accounting, the assets (including any identifiable intangible assets) and liabilities (including executory contracts and other commitments) of Mid-Wisconsin at the effective time of the merger will be recorded at their respective fair values and added to those of Nicolet. Any excess of purchase price over the fair values is recorded as goodwill. Any excess of the fair values over the purchase price is recorded in earnings as a bargain purchase gain. Consolidated financial statements of Nicolet issued after the merger will reflect those fair values and will not be restated retroactively to reflect the historical consolidated financial position or results of operations of Mid-Wisconsin.

UNAUDITED COMPARATIVE PER SHARE DATA

The following summary presents per share information for Nicolet and Mid-Wisconsin on a historical, pro forma combined and pro forma diluted equivalent basis for the periods and as of the dates indicated below. The pro forma information gives effect to the merger using the purchase method of accounting. This information should be read in conjunction with the companies’ historical financial statements and related notes as well as financial data included elsewhere in this joint proxy statement-prospectus. The pro forma information should not be relied upon as being indicative of the historical results the companies would have had if the merger had occurred before such periods or the future results that the companies will experience after the merger.

The pro forma combined net income per diluted share has been computed based on the diluted average number of outstanding common shares of Nicolet adjusted for the additional shares to be issued in connection with the acquisition of Mid-Wisconsin, assuming no Mid-Wisconsin shares are converted to cash under the limited circumstances provided for in the merger agreement. The Mid-Wisconsin merger equivalent net income per diluted share is based on the number of shares of Nicolet common stock into which each share of Mid-Wisconsin common stock will be converted in the merger.

The pro forma combined net book value per share is based upon the pro forma combined equity of Nicolet divided by the pro forma number of outstanding shares of the combined companies. The Mid-Wisconsin merger equivalent net book value per share is based on the number of shares of Nicolet common stock into which each share of Mid-Wisconsin common stock will be converted in the merger.

The foregoing assumes that the shares of Nicolet common stock to be issued will have a value of $16.50 per share, which was the value assigned to the Nicolet common stock in the merger agreement.

	Nine Months Ended September 30, 2012			Year Ended December 31, 2011
Net income per common share:
Income (loss) per diluted common share:
Nicolet	$	0.34		$	0.01
Mid-Wisconsin		(1.63	)		(2.78	)
Pro forma combined		(0.11	)		(0.68	)
Mid-Wisconsin merger equivalent ⁽¹⁾		(0.04	)		(0.25	)

	As of September 30, 2012		As of December 31, 2011
Balance Sheet Data:
Net book value per common share:
Nicolet	$	15.38	$	14.83
Mid-Wisconsin		16.04		17.65
Pro forma combined		18.61		17.79
Mid-Wisconsin merger equivalent ⁽¹⁾		6.94		6.63

(1)

Calculated by multiplying the pro forma combined information by the exchange ratio of 0.3727.

SELECTED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma condensed consolidated balance sheet and statements of income as of and for the nine months ended September 30, 2012 and for the year ended December 31, 2011 have been prepared to reflect the acquisition by Nicolet of Mid-Wisconsin after giving effect to the adjustments described in the notes to the pro forma condensed consolidated financial statements. In the acquisition, Mid-Wisconsin common shareholders will receive total consideration of up to 617,608 shares of Nicolet common stock, subject to adjustments as set forth herein, having an estimated aggregate value of approximately $10.19 million. The foregoing assumes that the shares of Nicolet common stock to be issued will have a value of $16.50 per share, which is the per-share value that was assigned to Nicolet common stock in the merger agreement, and assumes no Mid-Wisconsin shares are converted to cash under the limited circumstances provided for in the merger agreement.

The acquisition will be accounted for as a purchase transaction. Under the acquisition method of accounting, Nicolet records the assets and liabilities of the acquired entities at their fair values on the closing date of the acquisition. The pro forma condensed consolidated balance sheet has been prepared assuming the transaction was consummated on September 30, 2012. The pro forma condensed consolidated statement of income has been prepared assuming the transaction was consummated on January 1, 2011.

The selected unaudited pro forma condensed consolidated financial information is presented for illustrative purposes only and does not indicate either the operating results that would have occurred had the acquisition been consummated before September 30, 2012 or at January 1, 2011, as the case may be, or future results of operations or financial condition. The selected unaudited pro forma condensed financial information is based upon assumptions and adjustments that Nicolet believes are reasonable. Only such adjustments as have been noted in the accompanying footnotes have been applied in order to give effect to the proposed transaction described in this joint proxy statement-prospectus. Such assumptions and adjustments are subject to change as future events materialize and fair value estimates are refined.

These selected unaudited pro forma condensed consolidated financial statements should be read in conjunction with Mid-Wisconsin’s Annual Report on Form 10-K for the year ended December 31, 2011, and its Form 10-Q for the nine months ended September 30, 2012, which are attached as Appendices E and F , respectively, to this joint proxy statement-prospectus as well as the financial information for Nicolet, including the audited consolidated financial statements for the year ended December 31, 2011 and related notes and the unaudited consolidated financial statements for the nine months ended September 30, 2012 beginning on page F-1 of this joint proxy statement-prospectus.

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
COMBINED WITH MID-WISCONSIN FINANCIAL SERVICES, INC. AND SUBSIDIARY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
AS OF SEPTEMBER 30, 2012
(Dollars in Thousands)

	Historical
	Nicolet		Mid- Wisconsin		Pro Forma Adjustments			Pro Forma Combined
Assets
Cash and due from banks	$	27,552	$	33,352	$	(13,700	) ^(1,2)	$	47,204
Investment securities		57,075		110,335		(600	) ⁽⁴⁾		166,810
Loans held for sale		3,484		2,287		—			5,771
Loans, net		539,217		297,060		(14,071	) ⁽⁴⁾		822,206
Other real estate owned		617		4,472		(2,500	) ⁽⁴⁾		2,589
Goodwill and intangible assets		3,152		—		6,100	⁽⁴⁾		9,252
Other assets		51,705		16,556		6,040	^{(4, 5)}		74,301
Total assets	$	682,802	$	464,062	$	(18,731	)	$	1,128,133

Liabilities and Equity
Deposits	$	554,858	$	364,404	$	—		$	919,262
Junior subordinated debentures		6,186		10,310		(5,500	) ⁽⁴⁾		10,996
Other borrowings & debt		39,525		49,228		2,400	⁽⁴⁾		91,153
Other liabilities		5,354		3,191		(1,200	) ⁽²⁾		7,345
Total liabilities		605,923		427,133		(4,300	)		1,028,756

Equity
Preferred equity		24,400		10,349		(10,349	) ⁽¹⁾		24,400
Common equity		52,349		26,580		(4,082	) ^(1,3)		74,847
Stockholders’ equity		76,749		36,929		(14,431	)		99,247
Noncontrolling interest		130		—		—			130
Total equity and non-controlling interest		76,879		36,929		(14,431	)		99,377
	$	682,802	$	464,062	$	(18,731	)	$	1,128,133

(1)

Mid-Wisconsin’s redemption by consummation of its outstanding Preferred Stock for cash at $10,500 stated value (which includes $151 of unaccreted discount against common equity). Common equity and cash also reflect $2 million estimated one-time merger related expenses.

(2)

Payment by Mid-Wisconsin by consummation of accrued and unpaid dividends on Preferred Stock $900 and of accrued and unpaid interest on its Debentures $300.

(3)

Issuance of 617,608 shares of Nicolet common stock (with an assumed market value of $16.50 per share) for total consideration of $10,191, in exchange for 100% of the common equity of Mid-Wisconsin, assuming no Mid-Wisconsin shares are converted to cash under the limited circumstances provided for in the merger agreement. Net adjustments of footnotes (4) and (5) result in $1,931 debit to common equity. Mid-Wisconsin common equity eliminated ($26,429). Excess of the fair value of net assets acquired over the purchase price, $14,389, recorded directly to common equity.

(4)

Adjustments to mark acquired assets and assumed liabilities to estimated fair values at September 30, 2012 (All such estimates are subject to change as fair market value estimates are refined): a) Mid-Wisconsin’s investments ($600), fixed assets $5,000, long-term debt $2,400 and junior subordinated debentures ($5,500); b) Core deposit intangible estimated at $6,100; c) Estimated fair market value adjustment to the loan portfolio of ($24,600) and other real estate owned of ($2,500) and reversal of Mid-Wisconsin’s allowances of $10,529 (net $16,571 pre-tax credit).

(5)

A deferred tax estimate of 35% or $1,040 debit, calculated on the pre-tax aggregate of the fair value marks totaling $2,971 credit.

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
COMBINED WITH MID-WISCONSIN FINANCIAL SERVICES, INC. AND SUBSIDIARY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited)
(In Thousands, Except Per Share Data)

	Nine months ended September 30, 2012
	Historical
	Nicolet		Mid- Wisconsin			Pro Forma Adjustments			Pro Forma Combined
Interest income	$	21,059	$	14,836		$	—		$	35,895
Interest expense		5,006		3,671			187	^(2,4)		8,864
Net interest income		16,053		11,165			—			27,031
Provision for loan loss		3,350		3,680			—	⁽⁵⁾		7,030
Net interest income after provision for loan losses		12,703		7,485			—			20,001
Other income		7,985		2,911			—			10,896
Other expense		17,722		11,458			928	^(1,3)		30,108
Income from continuing operations before income taxes		2,966		(1,062	)		—			789
Income taxes		828		1,152			(1,712	)*		268
Income from continuing operations		2,138		(2,214	)		—			521
Net income from noncontrolling interest		39		—			—			39
Preferred stock dividends and discount accretion		915		487			(487	) ⁽⁶⁾		915
Net income available to common shareholders	$	1,184	$	(2,701	)				$	(433	)
Weighted average number of common shares outstanding —
basic		3,449		1,657			(1,039	) ⁽⁷⁾		4,067
diluted		3,465		1,657			(1,039	) ⁽⁷⁾		4,067
Net income (loss) per common share from continuing operations —
basic	$	0.34	$	(1.63	)				$	(0.11	)
diluted	$	0.34	$	(1.63	)				$	(0.11	)

	Year Ended December 31, 2011
	Historical
	Nicolet		Mid- Wisconsin			Pro Forma Adjustments			Pro Forma Combined
Interest income	$	29,830	$	22,039		$	—		$	51,869
Interest expense		8,383		6,485			250	^(2,4)		15,118
Net interest income		21,447		15,554			—			36,751
Provision for loan loss		6,600		4,750			—	⁽⁵⁾		11,350
Net interest income after provision for loan losses		14,847		10,804			—			25,401
Other income		8,444		4,287			—			12,731
Other expense		21,443		17,187			1,420	^(1,3)		40,050
Income from continuing operations before income taxes		1,848		(2,096	)		—			(1,918	)
Income taxes		318		1,861			(2,831	)*		(652	)
Income from continuing operations		1,530		(3,957	)		—			(1,266	)
Net income from noncontrolling interest		40		—			—			40
Preferred stock dividends and discount accretion		1,461		644			(644	) ⁽⁶⁾		1,461
Net income (loss) available to common shareholders	$	29	$	(4,601	)		—		$	(2,767	)
Weighted average number of common shares outstanding —
basic		3,469		1,654			(1,036	) ⁽⁷⁾		4,087
diluted		3,488		1,654			(1,036	) ⁽⁷⁾		4,087
Net income (loss) per common share from continuing operations —
basic	$	0.01	$	(2.78	)				$	(0.68	)
diluted	$	0.01	$	(2.78	)				$	(0.68	)

Reflects the tax impact at a tax rate of 34%.

(1)

Estimated depreciation expense resulting from premises pro forma adjustment using straight-line over 25-year estimated useful life.

(2)

Estimated fair value adjustment on FHLB advances assuming straight-line over 3-year weighted average life.

(3)

Estimated amortization of core deposit intangible resulting from the fair value pro forma adjustment amortized
over 10 years using sum-of-years-digits.

(4)

Estimated fair value adjustment on Trust Preferred Securities (TruPS) using straight line amortization over 10 years.

(5)

No adjustment for the provision for loan loss is reflected in the pro-forma statement of income. Upon consummation of this transaction, Nicolet expects reduction in the provision.

(6)

Reversal of dividends on Mid-Wisconsin’s outstanding Preferred Stock, which will be repurchased prior to consummation as part of the transaction in accordance with the terms of the merger agreement.

(7)

Mid-Wisconsin common stock will be exchanged in the merger at a ratio of 0.3727 shares of Nicolet common stock for each share of Mid-Wisconsin common stock.

RISK FACTORS

In addition to the other information included in this joint proxy statement-prospectus, you should carefully consider the matters described below in determining whether to adopt and approve the merger agreement.

Risk Relating to the Merger

The merger consideration is fixed despite any changes in Nicolet’s or Mid-Wisconsin’s stock prices.

Each share of Mid-Wisconsin common stock owned by Mid-Wisconsin shareholders will be converted into the right to receive 0.3727 shares of Nicolet common stock or, in certain limited circumstances, $6.15 in cash. The market price of the Nicolet common stock received, as well as the market price of the Mid-Wisconsin common stock currently owned, may vary between the date of this joint proxy statement-prospectus, the date of Mid-Wisconsin’s special meeting and the closing of the merger. Such variations in the prices of Nicolet and Mid-Wisconsin common stock may result from changes in the business, operations or prospects of Nicolet or Mid-Wisconsin, regulatory considerations, general market and economic conditions as well as other factors. Despite any such variations, the merger consideration Mid-Wisconsin’s shareholders are entitled to receive will not change.

In addition, there is currently no established public trading market for shares of Nicolet common stock, and the market for the Mid-Wisconsin common stock on the OTCQB market of the OTC Markets Group, Inc. has been illiquid and irregular. There is no guarantee that a more liquid or regular market for Nicolet common stock will develop after the merger. At the time of the special meeting, you will not know the exact market value of Nicolet common stock. See “The Merger Agreement — What Mid-Wisconsin Shareholders will Receive in the Merger” at page 54.

Because there is no public market for Nicolet common stock, it is difficult to determine how the fair value of Nicolet common stock compares with the merger consideration.

The outstanding shares of Nicolet common stock are privately held and are not traded in any public market. This lack of public market makes it difficult to determine the fair value of Nicolet common stock. Nicolet’s and Mid-Wisconsin’s boards of directors, respectively, did obtain fairness opinions from their financial advisors; however, because there is no public market for Nicolet’s common stock such opinions may not be indicative of the fair value of the shares of Nicolet common stock.

Combining our two companies may be more difficult, costly, or time-consuming than we expect.

Nicolet and Mid-Wisconsin have operated, and, until completion of the merger, will continue to operate, independently. It is possible that the integration process could result in the loss of key employees or disruption of each company’s ongoing business or inconsistencies in standards, procedures and policies that would adversely affect our ability to maintain relationships with clients and employees or to achieve the anticipated benefits of the merger. If we have difficulties with the integration process, we might not achieve the economic benefits we expect to result from the acquisition. As with any merger of banking institutions, there also may be business disruptions that cause the combined entity to lose customers or cause customers to take their deposits out of our banks and move their business to other financial institutions.

Nicolet and Mid-Wisconsin will be subject to business uncertainties while the merger is pending, which could adversely affect their respective businesses.

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on Mid-Wisconsin and Nicolet and consequently on the business and stock price of the combined company after the merger. Although Mid-Wisconsin and Nicolet intend to take steps to reduce any adverse effects, these uncertainties may impair their ability to attract, retain, and motivate key personnel until the merger is consummated and for a period of time thereafter, and could cause customers and others that deal with them to seek to change their existing business relationships. Employee retention could be particularly challenging during the merger, as employees may experience uncertainty about their roles in the combined company

following the merger. If key employees depart because of issues relating to the perceived uncertainty and difficulty of integration or a desire not to remain with the combined company, the combined company’s business following the merger could be harmed and the market price of its common stock could decrease.

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated.

The merger must be approved by the Federal Reserve, the OCC and the WDFI. The Federal Reserve, the OCC and the WDFI will consider, among other factors, the competitive impact of the merger, our financial and managerial resources and the convenience and needs of the communities to be served. As part of that consideration, we expect that the Federal Reserve, the OCC and the WDFI will review the capital position, safety and soundness, and legal and regulatory compliance matters and Community Reinvestment Act (“CRA”) matters. There can be no assurance as to whether other necessary approvals will be received, the timing of those approvals, or whether any conditions will be imposed.

The market price of Nicolet common stock after the merger may be affected by factors different from those affecting the market price of Mid-Wisconsin common stock or the Nicolet common stock currently.

The businesses of Nicolet and Mid-Wisconsin differ in some respects and, accordingly, the results of operations of Nicolet and the market price of Nicolet’s shares of common stock after the merger may be affected by factors different from those currently affecting the independent results of operations of each of Nicolet or Mid-Wisconsin. For a discussion of the businesses of Nicolet and Mid-Wisconsin and of certain factors to consider in connection with those businesses, see, “Information About Mid-Wisconsin,” at page 145, as well as, “Information About Nicolet,” at page __.

The merger agreement limits Mid-Wisconsin’s ability to pursue alternatives to the merger.

The merger agreement contains provisions that limit Mid-Wisconsin’s ability to discuss competing third-party proposals to acquire all or a significant part of Mid-Wisconsin. In addition, Mid-Wisconsin has agreed to pay Nicolet a fee of $750,000 if the transaction is terminated because Mid-Wisconsin decides to pursue another acquisition transaction, among other things. These provisions might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of Mid-Wisconsin from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share price than that proposed in the merger, or might result in a potential competing acquirer proposing to pay a lower per share price to acquire Mid-Wisconsin than it might otherwise have proposed to pay.

Certain directors and executive officers of Mid-Wisconsin have interests in the merger other than their interests as shareholders.

Certain directors and executive officers of Mid-Wisconsin have interests in the merger other than their interests as shareholders. The board of directors of Mid-Wisconsin was aware of these interests at the time it approved the merger. These interests may cause Mid-Wisconsin’s directors and executive officers to view the merger proposal differently than you may view it. See, “The Merger Agreement — Interests of Certain Persons in the Merger,” at page 60.

You will experience a substantial reduction in percentage ownership and voting power with respect to your shares as a result of the merger.

Mid-Wisconsin shareholders will experience a substantial reduction in their respective percentage ownership interests and effective voting power through their stock ownership in Nicolet relative to their percentage ownership interest in Mid-Wisconsin prior to the merger. If the merger is consummated, discounting the potential impact of the exercise of dissenters’ rights or the payment of cash for Mid-Wisconsin shares under the terms of the merger agreement, current Mid-Wisconsin shareholders would own approximately 15.1% of Nicolet’s issued and outstanding common stock, on a fully diluted basis, based on the number of shares of outstanding Nicolet common stock as of September 30, 2012 and assuming no Mid-Wisconsin shares are converted to cash under the limited circumstances provided for in the merger agreement.

Accordingly, even if such shareholders were to vote as a group, such a group could still be outvoted by other Nicolet shareholders.

In addition, the current holders of Nicolet common stock will have their ownership interest in Nicolet diluted by the issuance of common stock to the common stock holders of Mid-Wisconsin. Consequently, while the current Nicolet shareholders will still own a majority of the Nicolet common stock after the merger, they will have less voting power per share. See, “The Merger Agreement — What Mid-Wisconsin Shareholders will Receive in the Merger,” at page 54.

Risk Relating to Nicolet and the Combined Company

Nicolet’s recent results may not be indicative of its future results.

Nicolet may not be able to sustain its historical rate of growth and may not even be able to grow its business at all following the merger. In addition, Nicolet’s recent growth may distort some of its historical financial ratios and statistics. In the future, Nicolet may not have the benefit of a generally predictable interest rate environment or the ability to find suitable expansion opportunities. Various factors, such as economic conditions, regulatory and legislative considerations and competition, may also impede or prohibit Nicolet’s ability to expand its market presence. If Nicolet experiences a significant decrease in its historical rate of growth, its results of operations, financial condition, and share price may be adversely affected due to the prolonged low-rate environment pressuring net interest margins and to a high percentage of its operating costs, such as salaries, lease payment and insurance premiums, being fixed expenses.

Nicolet’s financial projections are based on numerous assumptions about future events and its actual financial performance may differ materially from its projections if its assumptions are inaccurate.

If the communities in which Nicolet operates do not grow or if the prevailing economic conditions locally or nationally are less favorable than we have assumed, Nicolet’s ability to reduce its non-performing loans and other real estate owned (“OREO”) and implement its business strategies may be adversely affected and its actual financial performance may be materially different from its projections.

Moreover, Nicolet cannot give any assurance that it will benefit from any market growth or favorable economic conditions in its market areas even if they do occur. If its senior management team is unable to provide the effective leadership necessary to implement its strategic plan, including the successful integration of Mid-Wisconsin, its actual financial performance may be materially adversely different from its projections. Additionally, to the extent that any component of its strategic plan requires regulatory approval, if it is unable to obtain necessary approval, it will be unable to completely implement its strategy, which may adversely affect its actual financial results. Nicolet’s inability to successfully implement its strategic plan could adversely affect the price of its common stock.

Nicolet may experience increased delinquencies and credit losses, which could have a material adverse effect on its capital, financial condition, and results of operations.

Like other lenders, Nicolet faces the risk that its customers will not repay their loans. A customer’s failure to repay Nicolet is usually preceded by missed monthly payments. In some instances, however, a customer may declare bankruptcy prior to missing payments, and, following a borrower filing bankruptcy, a lender’s recovery of the credit extended is often limited. Since its loans are secured by collateral, Nicolet may attempt to seize the collateral when and if customers default on their loans. However, the value of the collateral may not equal the amount of the unpaid loan, and Nicolet may be unsuccessful in recovering the remaining balance from its customers. Rising delinquencies and rising rates of bankruptcy in its market area, generally and among its customers specifically, can be precursors of future charge-offs and may require Nicolet to increase its allowance for loan losses. Higher charge-off rates and an increase in its allowance for loan losses may hurt its overall financial performance if Nicolet is unable to increase revenue to compensate for these losses and may also increase its cost of funds.

The impact of the current economic environment on performance of other financial institutions in its markets; actions taken by its competitors to address the current economic downturn; and public perception of and confidence in the economy generally, and the banking industry specifically, may present significant challenges for Nicolet and could adversely affect its performance.

Nicolet is operating in a challenging and uncertain economic environment, including generally uncertain national conditions and adverse local conditions in its primary markets. Financial institutions continue to be affected by decreasing valuations in real estate markets and constrained financial markets. While Nicolet is taking steps to decrease and limit its exposure to certain types of loans secured by commercial real estate collateral, Nicolet nonetheless retains direct exposure to the real estate markets, and is affected by these events. Continued declines in real estate values and financial stress on borrowers as a result of the uncertain economic environment, including job losses, could have an adverse effect on its borrowers or their customers, which could adversely affect its financial condition and results of operations.

The impact of events in recent years relating to housing and commercial real estate markets has not been limited to those directly involved in the real estate industry, but rather it has affected a number of related businesses such as building materials suppliers, equipment leasing firms, and real estate attorneys, among others. All of these affected businesses have banking relationships, and when their businesses suffer from recession, the banking relationship suffers as well.

In addition, the market value of the real estate securing Nicolet’s loans as collateral has been adversely affected by the slowing economy and unfavorable changes in economic conditions in its market areas and could be further adversely affected in the future. As of September 30, 2012, approximately 38% of its loans were secured by commercial-based real estate and 24% of its loans receivable were secured by residential real estate. Any sustained period of increased payment delinquencies, foreclosures, or losses caused by the adverse market and economic conditions, including the downturn in the real estate market, in its markets will continue to adversely affect the value of its assets, revenues, results of operations, and financial condition. Its market area has for the past several years experienced, and certain portions of its market area are currently experiencing such a sustained economic downturn, and if it continues or if economic conditions otherwise worsen, its earnings could be further adversely affected.

The overall deterioration in economic conditions may subject Nicolet to increasing regulatory scrutiny. In addition, further deterioration in national economic conditions or the economic conditions in its local markets could drive losses beyond the amount provided for in its allowance for loan losses, resulting in the following other consequences: increased loan delinquencies, problem assets, and foreclosures; decline in demand for its products and services; decrease in deposits, adversely affecting its liquidity position; and decline in value of collateral, reducing its customers’ borrowing power and the value of assets and collateral associated with its existing loans. These consequences could also result in decreased earnings or a decline in the market value of Nicolet’s common stock. As a community bank, Nicolet National Bank is less able to spread the risk of unfavorable economic conditions than larger national or regional banks. Moreover, Nicolet cannot give any assurance that it will benefit from any market growth or favorable economic conditions in its primary market areas even if they do occur.

Nicolet’s business strategy includes the continuation of significant growth plans, and its financial condition and results of operations could be negatively affected if it fails to manage its growth effectively.

Nicolet has grown over the past several years and intends to continue to pursue a significant growth strategy for its business. Nicolet’s prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in significant growth stages of development. Nicolet may not be able to further expand its market presence in existing markets or to enter new markets successfully, nor can it guarantee that any such expansion would not adversely affect its results of operations. Failure to manage growth effectively could have a material adverse effect on the business, future prospects, financial condition or results of operations of Nicolet, and could adversely affect its ability to successfully implement business strategies. Also, if such growth occurs more slowly than anticipated or declines, Nicolet’s operating results could be materially adversely affected.

Nicolet’s ability to grow successfully will depend on a variety of factors including the continued availability of desirable business opportunities, the competitive responses from other financial institutions in its market areas and the ability to manage its growth. While management believes it has the management resources and internal systems in place to manage future growth successfully, there can be no assurance that growth opportunities will be available or that any growth will be managed successfully.

Nicolet is subject to extensive regulation that could limit or restrict its activities.

Nicolet operates in a highly regulated industry and is subject to examination, supervision, and comprehensive regulation by various regulatory agencies. Its compliance with these regulations, including compliance with its regulatory commitments, is costly and restricts certain of its activities, including the declaration and payment of cash dividends to stockholders, mergers and acquisitions, investments, loans and interest rates charged, interest rates paid on deposits, and locations of offices. Nicolet is also subject to capitalization guidelines established by its regulators, which require Nicolet to maintain adequate capital to support its growth and operations.

The laws and regulations applicable to the banking industry have recently changed and may continue to change, and Nicolet cannot predict the effects of these changes on its business and profitability. Because government regulation greatly affects the business and financial results of all commercial banks and bank holding companies, the cost of compliance could adversely affect its ability to operate profitably.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was enacted on July 21, 2010. The full implications of the Dodd-Frank Act, or its implementing regulations, on Nicolet’s business are unclear at this time, but it may adversely affect its business, results of operations, and the underlying value of its stock. The full effect of this legislation will not be even reasonably certain until all implementing regulations are promulgated, which could take several years in some cases.

Some or all of the changes, including the new rulemaking authority granted to the newly-created Consumer Financial Protection Bureau, may result in greater reporting requirements, assessment fees, operational restrictions, capital requirements, and other regulatory burdens for Nicolet National Bank and Nicolet, and many of their competitors that are not banks or bank holding companies may remain free from such limitations. This could affect Nicolet’s ability to attract and maintain depositors, to offer competitive products and services, and to expand its business.

Congress may consider additional proposals to substantially change the financial institution regulatory system and to expand or contract the powers of banking institutions and bank holding companies. Such legislation may change existing banking statutes and regulations, as well as the current operating environment significantly. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand its permissible activities, or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. Nicolet cannot predict whether new legislation will be enacted and, if enacted, the effect that it, or any regulations, would have on its business, financial condition, or results of operations.

Its financial condition and results of operations are affected by credit policies of monetary authorities, particularly the Federal Reserve. Actions by monetary and fiscal authorities, including the Federal Reserve, could have an adverse effect on its deposit levels, loan demand, stock price, ability to pay dividends, or business and earnings. See “Supervision and Regulation” at page 147.

Changes in the interest rate environment could reduce its net interest income, which could reduce its profitability.

As a financial institution, Nicolet’s earnings significantly depend on net interest income, which is the difference between the interest income that it earns on interest-earning assets, such as investment securities and loans, and the interest expense that it pays on interest-bearing liabilities, such as deposits and borrowings. Therefore, any change in general market interest rates, including changes in federal fiscal and monetary policies, affects Nicolet more than non-financial institutions and can have a significant effect on its net interest income and total income. Its assets and liabilities may react differently to changes in overall market rates or conditions because there may be mismatches between the repricing or maturity characteristics of the assets

and liabilities. As a result, an increase or decrease in market interest rates could have material adverse effects on its net interest margin and results of operations.

In addition, Nicolet cannot predict whether interest rates will continue to remain at present levels. Changes in interest rates may cause significant changes, up or down, in its net interest income. Depending on its portfolio of loans and investments, its results of operations may be adversely affected by changes in interest rates. If there is a substantial increase in interest rates, its investment portfolio is at risk of experiencing price declines that may negatively impact Nicolet’s total capital position of Nicolet through changes in other comprehensive income. In addition, any significant increase in prevailing interest rates could adversely affect its mortgage banking business because higher interest rates could cause customers to request fewer refinancings and purchase money mortgage originations.

Changes in the allowance for loan losses could adversely affect the profitability of Nicolet and Nicolet National Bank.

Nicolet’s success depends to a significant extent upon the quality of its assets, particularly loans. In originating loans, there is a substantial likelihood that Nicolet will experience credit losses. The risk of loss will vary with, among other things, general economic conditions, the type of loan, the creditworthiness of the borrower over the term of the loan, and, in the case of a collateralized loan, the quality of the collateral for the loan.

Its loan customers may not repay their loans according to the terms of these loans, and the collateral securing the payment of these loans may be insufficient to assure repayment. As a result, Nicolet may experience significant loan losses, which could have a material adverse effect on its operating results. Management makes various assumptions and judgments about the collectability of its loan portfolio, including the creditworthiness of its borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of its loans. Nicolet maintains an allowance for loan losses in an attempt to cover any loan losses that may occur. In determining the size of the allowance, it relies on an analysis of its loan portfolio based on historical loss experience, volume and types of loans, trends in classification, volume and trends in delinquencies and non-accruals, national and local economic conditions, and other pertinent information. Nicolet has reviewed Mid-Wisconsin’s loan portfolio and allowance for loan losses and will include Mid-Wisconsin’s portfolio in its analysis after the merger. However, Nicolet cannot predict what effect, if any, the integration of Mid-Wisconsin’s loan portfolio will have on Nicolet.

If management’s assumptions are wrong, or if the inclusion of Mid-Wisconsin’s loan portfolio after the merger results in unanticipated asset quality issues, Nicolet’s current allowance may not be sufficient to cover future loan losses, and it may need to make adjustments to allow for different economic conditions or adverse developments in its loan portfolio. Material additions to its allowance would materially decrease its net income. Nicolet expects its allowance to continue to fluctuate; however, given current and future market conditions, Nicolet can make no assurance that its allowance will be adequate to cover future loan losses.

In addition, federal and state regulators periodically review its allowance for loan losses and may require Nicolet to increase its provision for loan losses or recognize further loan charge-offs, based on judgments different than those of its management. Any increase in its allowance for loan losses or loan charge-offs as required by these regulators could have a negative effect on its operating results.

Nicolet currently holds a significant amount of bank-owned life insurance.

At September 30, 2012, Nicolet held $18.5 million of bank-owned life insurance on certain key and former employees and executives, with a cash surrender value of $18.5 million. The eventual repayment of the cash surrender value is subject to the ability of the various insurance companies to pay death benefits or to return the cash surrender value to Nicolet if needed for liquidity purposes. Nicolet monitors the financial strength of the various companies with whom it carries these policies. However, any one of these companies could experience a decline in financial strength, which could impair its ability to pay benefits or return Nicolet’s cash surrender value. If Nicolet needs to liquidate these policies for liquidity purposes, it would be subject to taxation on the increase in cash surrender value and penalties for early termination, both of which would adversely impact earnings.

Nicolet is subject to liquidity risk in its operations

Liquidity risk is the possibility of being unable, at a reasonable cost and within acceptable risk tolerances, to pay obligations as they come due, to capitalize on growth opportunities as they arise, or to pay regular dividends because of an inability to liquidate assets or obtain adequate funding on a timely basis. Liquidity is required to fund various obligations, including credit obligations to borrowers, mortgage originations, withdrawals by depositors, repayment of debt, dividends to stockholders, operating expenses, and capital expenditures. Liquidity is derived primarily from retail deposit growth and retention, principal and interest payments on loans and investment securities, net cash provided from operations, and access to other funding sources. Nicolet’s access to funding sources in amounts adequate to finance its activities could be impaired by factors that affect Nicolet specifically or the financial services industry in general. Factors that could detrimentally affect its access to liquidity sources include a decrease in the level of its business activity due to a market downturn or adverse regulatory action. Nicolet’s ability to borrow could also be impaired by factors that are not specific to Nicolet, such as a severe disruption in the financial markets or negative views and expectations about the prospects for the financial services industry as a whole, given the recent turmoil faced by banking organizations in the domestic and worldwide credit markets. Currently, Nicolet has access to liquidity to meet its current anticipated needs; however, its access to additional borrowed funds could become limited in the future, and Nicolet may be required to pay above market rates for additional borrowed funds, if Nicolet is able to obtain them at all, which may adversely affect its results of operations.

Competition in the banking industry is intense and Nicolet faces strong competition from larger, more established competitors.

The banking business is highly competitive, and Nicolet experiences strong competition from many other financial institutions. Nicolet competes with commercial banks, credit unions, savings and loan associations, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, money market funds, and other financial institutions that operate in its primary market areas and elsewhere.

Nicolet competes with these institutions both in attracting deposits and in making loans. In addition, Nicolet has to attract its customer base from other existing financial institutions and from new residents. Many of its competitors are well-established, much larger financial institutions. While Nicolet believes it can and does successfully compete with these other financial institutions in its markets, it may face a competitive disadvantage as compared to large national or regional banks as a result of its smaller size and lack of geographic diversification.

Although Nicolet competes by concentrating its marketing efforts in its primary market area with local advertisements, personal contacts, and greater flexibility in working with local customers, Nicolet can give no assurance that this strategy will be successful.

As a community bank, Nicolet has different lending risks than larger banks.

Nicolet National Bank provides services to its local communities. It’s ability to diversify its economic risks is limited by its own local markets and economies. Nicolet National Bank lends primarily to individuals and to small to medium-sized businesses, which may expose it to greater lending risks than those of banks lending to larger, better-capitalized businesses with longer operating histories.

Nicolet National Bank manages its credit exposure through careful monitoring of loan applicants and loan concentrations in particular industries, and through loan approval and review procedures. It has established an evaluation process designed to determine the adequacy of its allowance for loan losses. While this evaluation process uses historical and other objective information, the classification of loans and the establishment of loan losses is an estimate based on experience, judgment and expectations regarding borrowers and economic conditions, as well as regulator judgments. Nicolet National Bank can make no assurance that its loan loss reserves will be sufficient to absorb future loan losses or prevent a material adverse effect on its business, profitability or financial condition.

Nicolet’s success depends upon local and regional economic conditions.

The core industries in Nicolet’s market area are paper, packaging, food production, food processing, and tourism. The area has a broad range of diversified equipment manufacturing services related to these core industries and others. The Mid-Wisconsin market areas are concentrated in agriculture, tourism, and forest products, as well as diversified small manufacturing. The residential and commercial real estate markets throughout these areas depend primarily on the strength of these core industries. A material decline in any of these sectors will affect the communities Nicolet serves and could negatively impact its financial results and have a negative impact on profitability.

Nicolet may not be able to maintain its historical growth rate, which may adversely affect its results of operations and financial condition.

Nicolet has grown substantially in the recent past from approximately $471 million in total consolidated assets at December 31, 2005 to approximately $683 million in total consolidated assets at September 30, 2012. This growth has been achieved primarily through internal organic growth. Nicolet’s future profitability will depend in part on its continued ability to grow. Nicolet may not be able to sustain its historical rate of growth or may not be able to grow its business at all after the merger. Nicolet may also not be able to obtain the capital or financing necessary to fund additional growth and may not be able to find suitable candidates for additional acquisitions in the future. Various factors, such as economic conditions, regulatory and legislative considerations and competition, may impede or prohibit Nicolet’s ability to acquire additional banks and bank holding companies and open new branch offices. The acquisition of Mid-Wisconsin and the transactional costs associated therewith, both from the perspective of tangible costs such as technology conversion as well as less tangible but very real costs to management time, may likewise impede the ability of Nicolet to maintain its historic growth rate.

The FDIC Deposit Insurance assessments that Nicolet National Bank is required to pay may continue to materially increase in the future, which would have an adverse effect on its earnings.

As a member institution of the FDIC, Nicolet is assessed a quarterly deposit insurance premium. Failed banks nationwide have significantly depleted the insurance fund and reduced the ratio of reserves to insured deposits. As a result, Nicolet National Bank may be required to pay significantly higher premiums or additional special assessments that could adversely affect its earnings.

On October 19, 2010, the FDIC adopted a Deposit Insurance Fund (“DIF”) Restoration Plan, which requires the DIF to attain a 1.35% reserve ratio by September 30, 2020. In addition, the FDIC modified the method by which assessments are determined and, effective April 1, 2011, adjusted assessment rates, which will range from 2.5 to 45 basis points (annualized), subject to adjustments for unsecured debt and, in the case of small institutions outside the lowest risk category and certain large and highly complex institutions, brokered deposits. Further increased FDIC assessment premiums, due to its risk classification, emergency assessments, or implementation of the modified DIF reserve ratio, could adversely impact its earnings.

Nicolet may need to raise additional capital in the future, including through proposed increased minimum capital thresholds established by its regulators as part of their implementation of Basel III, but that capital may not be available when it is needed or may be dilutive to its shareholders.

Nicolet is required by federal and state regulatory authorities to maintain adequate capital levels to support its operations. New regulations implementing the proposed Basel III capital standards could require financial institutions to maintain higher minimum capital rations and may place a greater emphasis on common equity as a component of Tier 1 capital. In order to support its operations and comply with regulatory standards, Nicolet may need to raise capital in the future. Its ability to raise additional capital will depend on conditions in the capital markets at that time, which are outside its control, on its financial performance and on the successful integration of Mid-Wisconsin. Accordingly, Nicolet cannot assure you of its ability to raise additional capital, if needed, on favorable terms. The capital and credit markets have experienced significant volatility in recent years. In some cases, the markets have produced downward pressure on stock prices and credit availability for certain issuers without regard to those issuers’ underlying

financial strength. If current levels of volatility continue or worsen, its ability to raise additional capital may be disrupted. If Nicolet cannot raise additional capital when needed, its results of operations and financial condition may be adversely affected, and its banking regulators may subject Nicolet to regulatory enforcement action, including receivership. In addition, the issuance of additional shares of its equity securities will dilute the economic ownership interest of its common and preferred shareholders.

Nicolet’s directors and executive officers own a significant portion of its common stock and can influence stockholder decisions.

The directors and executive officers of Nicolet, as a group, beneficially owned approximately 23.1% of its fully diluted issued and outstanding common stock as of December 31, 2012. Following the merger, the directors and executive officers of the combined company, as a group, are expected to beneficially own approximately 20.5% of the fully diluted outstanding common stock of the combined company. As a result of their ownership, the directors and executive officers of Nicolet have the ability, if they voted their shares in concert, to influence the outcome of all matters submitted to its shareholders for approval, including the election of directors.

Nicolet continually encounters technological change and it may have fewer resources than its competition to continue to invest in technological improvements; Nicolet’s information systems may experience an interruption or breach in security.

The banking and financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Nicolet’s future success will depend, in part, upon its ability to address the needs of its customers by using technology to provide products and services that enhance customer convenience, as well as create additional efficiencies in operations. Many of Nicolet’s competitors have greater resources to invest in technological improvements, and Nicolet may not be able to effectively implement new technology-driving products and services, which could reduce its ability to effectively compete.

In addition, Nicolet relies heavily on communications and information systems to conduct its business. Any failure, interruption or breach in security of these systems could result in failures or disruptions in customer relationship management, general ledger, deposit, loan functionality and the effective operation of other systems. While Nicolet has policies and procedures designed to prevent or limit the effect of a failure, interruption or security breach of its information systems, there can be no assurance that any such failures, interruptions or security breaches will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures, interruptions or security breaches of Nicolet’s information systems could damage its reputation, result in a loss of customer business, subject Nicolet and/or Nicolet National Bank to additional regulatory scrutiny, or expose Nicolet to civil litigation and possible financial liability, any of which could have a material adverse effect on Nicolet’s financial condition and results of operations.

Risks Related to Ownership of Nicolet’s Common Stock

The Nicolet common stock does not currently have an established trading market, and a liquid market for its common stock may not develop after the merger.

Nicolet plans to cause its common stock to be quoted on the Over-the-Counter Bulletin Board or other quotation system at or before closing of the merger, but is not currently traded on any securities exchange or quotation system. Although price quotations will be available, a liquid market for the stock may not develop after the merger. As a result, it may be difficult for you to sell your shares of Nicolet common stock at the times or prices that you desire.

Substantial sales of Nicolet common stock could cause its stock price to fall.

If shareholders sell substantial amounts of Nicolet common stock in the public market following the merger, the market price of Nicolet common stock could fall. Such sales also might make it more difficult for Nicolet to sell equity or equity-related securities in the future at a time and price that it deems appropriate.

Nicolet has not historically paid dividends to its common shareholders and cannot guarantee that it will pay dividends to such shareholders in the future, including after the merger.

The holders of Nicolet common stock, including those who will receive Nicolet common stock pursuant to the merger agreement, receive dividends if and when declared by the Nicolet board of directors out of legally available funds. Nicolet’s board of directors has not declared a dividend on the common stock since its inception in 2000 and does not expect to do so in the foreseeable future. Any future determination relating to dividend policy will be made at the discretion of Nicolet’s board of directors and will depend on a number of factors, including the company’s future earnings, capital requirements, financial condition, future prospects, regulatory restrictions and other factors that the board of directors may deem relevant.

The principal business operations of Nicolet are conducted through Nicolet National Bank. Cash available to pay dividends to shareholders of Nicolet is derived primarily, if not entirely, from dividends paid by Nicolet National Bank. After the merger, the ability of Nicolet National Bank to pay dividends to Nicolet, as well as Nicolet’s ability to pay dividends to its shareholders, will continue to be subject to and limited by certain legal and regulatory restrictions. Further, any lenders making loans to Nicolet may impose financial covenants that may be more restrictive than regulatory requirements with respect to the payment of dividends by Nicolet. There can be no assurance of whether or when Nicolet may pay dividends after the merger.

Holders of Nicolet’s subordinated debentures have rights that are senior to those of its common stockholders.

Nicolet has supported its continued growth by issuing trust preferred securities and accompanying junior subordinated debentures. As of September 30, 2012, Nicolet had outstanding trust preferred securities and associated junior subordinated debentures with an aggregate principal amount of approximately $6.2 million, and Nicolet will assume Mid-Wisconsin’s obligations with respect to an additional $10.3 million in principal amount of junior subordinated debentures associated with Mid-Wisconsin’s outstanding trust preferred securities in the merger.

Nicolet has unconditionally guaranteed the payment of principal and interest on its trust preferred securities and will do the same when it assumes Mid-Wisconsin’s obligations as described above. Also, the junior debentures issued to the special purpose trusts that relate to those trust preferred securities are senior to Nicolet common stock, including shares that it issues to holders of Mid-Wisconsin common stock in the merger. As a result, Nicolet must make payments on the junior subordinated debentures before it can pay any dividends on its common stock, and in the event of Nicolet’s bankruptcy, dissolution or liquidation, holders of its junior subordinated debentures must be satisfied before any distributions can be made on its common stock. Nicolet does have the right to defer distributions on its junior subordinated debentures (and related trust preferred securities) for up to five years, but during that time would not be able to pay dividends on its common or preferred stock.

Holders of Nicolet’s SBLF Preferred Stock have rights that are senior to those of its common stock, and contractual restrictions relative to Nicolet’s SBLF Preferred Stock may limit or prevent Nicolet from paying dividends on and repurchasing its common stock.

Nicolet has supported its capital operations by issuing preferred stock to the Treasury pursuant to the Small Business Lending Fund (“SBLF”) program (such preferred stock, the “SBLF Preferred Stock”).

The SBLF Preferred Stock issued to and currently held by the Treasury has dividend rights that are senior to those of Nicolet’s common stock; therefore, Nicolet must pay dividends on the SBLF Preferred Stock before it can pay any dividends to holders of its common stock. In the event of Nicolet’s bankruptcy, dissolution, or liquidation, the holders of the SBLF Preferred Stock must be satisfied before Nicolet can make

any distributions to holders of its common stock. In addition, under the terms of the SBLF Preferred Stock and the securities purchase agreement between Nicolet and the Treasury in connection with the SBLF transaction, Nicolet is generally unable to pay dividends on or repurchase its common stock where such payment or repurchase would result in a reduction of Nicolet’s Tier 1 capital from the level on September 1, 2011, the date on which the SBLF Preferred Stock was issued, by more than 10%. Under the terms of the SBLF Preferred Stock, Treasury does not have voting rights with respect to the proposed merger.

Holders of Nicolet’s SBLF Preferred Stock have limited voting rights.

Other than under certain limited circumstances, holders of Nicolet’s SBLF Preferred Stock have no voting rights except with respect to matters that would involve certain fundamental changes to the terms of the SBLF Preferred Stock or as required by law. These matters include the authorization of stock senior to the SBLF Preferred Stock, amendments that adversely affect the rights of the holders of the SBLF Preferred Stock, and certain business combination transactions. These rights could make it more difficult to consummate a transaction that the common shareholders wish to approve.

Because Nicolet is a regulated bank holding company, your ability to obtain “control” or to act in concert with others to obtain control over Nicolet without the prior consent of the Federal Reserve or other applicable bank regulatory authorities is limited and may subject you to regulatory oversight.

Nicolet is a bank holding company and, as such, is subject to significant regulation of its business and operations. In addition, under the provisions of the Bank Holding Company Act of 1956, as amended, and the Change in Bank Control Act, certain regulatory provisions may become applicable to individuals or groups who are deemed by the regulatory authorities to “control” Nicolet or its subsidiary bank. Nicolet does not believe that the merger would result in any unwitting acquisitions by any current Mid-Wisconsin shareholders of “control” of Nicolet, as that term is defined under applicable law and regulation. However, the Federal Reserve and other bank regulatory authorities have very broad interpretive discretion in this regard and it is possible that the Federal Reserve or some other bank regulatory authority may, whether through the merger or through subsequent acquisition of Nicolet’s shares, deem one or more of Nicolet’s shareholders to control or to be acting in concert for purposes of gaining or exerting control over Nicolet. Such a determination may require a shareholder or group of shareholders, among other things, to make voluminous regulatory filings under the Change in Bank Control Act, including disclosure to the regulatory authorities of significant amounts of confidential personal or corporate financial information. In addition, certain groups or entities may also be required to either register as a bank holding company under the Bank Holding Company Act of 1956, as amended, becoming themselves subject to regulation by the Federal Reserve under that Act and the rules and regulations promulgated thereunder, which may include requirements to materially limit other operations or divest other business concerns, or to divest immediately their investments in Nicolet. Furthermore, in the event that Nicolet or Nicolet National Bank may seek to undertake the acquisition of the assets of failed financial institutions through submitting bids on such assets to the FDIC, whether pursuant to a loss-sharing agreement or otherwise, it is possible that individuals deemed to “control” Nicolet may become further subject to the FDIC’s 2009 Statement of Policy on Qualifications for Failed Bank Acquisitions. Failure to abide by these requirements may subject such shareholders to sanctions up to and including the imposition of civil money penalties.

In addition, these limitations on the acquisition of Nicolet’s stock may generally serve to reduce the potential acquirers of its stock or to reduce the volume of its stock that any potential acquirer may be able to acquire. These restrictions may serve to generally limit the liquidity of its stock and, consequently, may adversely affect its value.

Nicolet’s securities are not FDIC insured.

Nicolet’s securities, including the shares of Nicolet common stock to be issued in the merger, are not savings or deposit accounts or other obligations of Nicolet National Bank, and are not insured by the Deposit Insurance Fund, or any other agency or private entity and are subject to investment risk, including the possible loss of some or all of the value of your investment.

A WARNING ABOUT FORWARD-LOOKING STATEMENTS

This joint proxy statement-prospectus includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss future expectations, describe future plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Forward-looking statements are generally identifiable by the use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “endeavor,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “potential,” “predict,” “project,” “seek,” “should,” “will” and other similar words and expressions of future intent.

The ability of Nicolet and Mid-Wisconsin to predict results or the actual effect of future plans or strategies is inherently uncertain. Although Nicolet and Mid-Wisconsin believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, actual results and performance could differ materially from those set forth in the forward-looking statements. Factors that could cause actual results and performance to differ from those expressed in the forward-looking statements include, but are not limited to:

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The costs of integrating Nicolet’s and Mid-Wisconsin’s operations, which may be greater than expected.

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Potential customer loss and deposit attrition as a result of the merger, and the failure to achieve expected gains, revenue growth and/or expense savings from such transactions.

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Nicolet’s ability to effectively manage interest rate risk and other market risk, credit risk and operational risk both before and after the merger.

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Nicolet’s ability to manage fluctuations in the value of assets and liabilities and off-balance sheet exposure so as to maintain sufficient capital and liquidity to support Nicolet’s business.

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Nicolet’s ability to keep pace with technological changes.

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Nicolet’s ability to develop competitive new products and services in a timely manner and the acceptance of such products and services by its customers and potential customers.

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Nicolet’s ability to expand into new markets.

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The cost and other effects of material contingencies, including litigation contingencies.

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Further easing of restrictions on participants in the financial services industry, such as banks, securities brokers and dealers, investment companies and finance companies, which may increase competitive pressures and affect Nicolet’s ability to preserve its customer relationships and margins.

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Possible changes in general economic and business conditions in the United States in general and in the larger region and communities Nicolet serves in particular, which may lead to deterioration in credit quality, thereby requiring increases in its provision for credit losses, or a reduced demand for credit, thereby reducing earning assets.

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The threat or occurrence of war or acts of terrorism and the existence or exacerbation of general geopolitical instability and uncertainty.

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Possible changes in trade, monetary and fiscal policies, laws, and regulations, and other activities of governments, agencies, and similar organizations, including changes in accounting standards.

The cautionary statements in the “Risk Factors” section and elsewhere in this joint proxy statement-prospectus also identify important factors and possible events that involve risk and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. Nicolet and Mid-Wisconsin do not intend, and undertake no obligation, to update or revise any forward-looking statements, whether as a result of differences in actual results, changes in assumptions or changes in other factors affecting such statements.

THE MID-WISCONSIN SPECIAL SHAREHOLDERS’ MEETING

Purpose

Mid-Wisconsin shareholders are receiving this joint proxy statement-prospectus because on ____________, 2013, the record date for a special meeting of shareholders to be held on ______________, 2013, at__________ at __.m., they owned shares of the common stock of Mid-Wisconsin Financial Services, Inc., and the board of directors of Mid-Wisconsin is soliciting proxies for the matter to be voted on at this special meeting, as described in more detail below. Each copy of this joint proxy statement-prospectus was mailed to holders of Mid-Wisconsin common stock on [______________] and is accompanied by a proxy card for use at the meeting and at any adjournment(s) of the meeting.

At the meeting, Mid-Wisconsin shareholders will consider and vote upon the merger agreement and any other matters that are properly brought before the meeting, or any adjournments(s) of the meeting.

When you sign the enclosed proxy card or otherwise vote pursuant to the instructions set forth on the proxy card, you appoint the proxy holder as your representative at the meeting. The proxy holder will vote your shares as you have instructed in the proxy card, thereby ensuring that your shares will be voted whether or not you attend the meeting. Even if you plan to attend the meeting, we ask that you instruct the proxies how to vote your shares in advance of the meeting just in case your plans change. In the event that other matters arise at the special meeting, the proxy holder will vote your shares according to his or her discretion.

If you have not already done so, please complete, date and sign the accompanying proxy card and return it promptly in the enclosed, postage paid envelope. If you do not return your properly executed card, or if you do not attend and cast your vote at the special meeting, the effect will be a vote against the merger agreement.

Record Date; Quorum and Vote Required

The record date for the Mid-Wisconsin special meeting is ____________, 2013. Mid-Wisconsin’s shareholders of record as of the close of business on that day will receive notice of and will be entitled to vote at the special meeting. As of December 31, 2012, there were 1,657,119 shares of Mid-Wisconsin common stock issued and outstanding and entitled to vote at the meeting. The issued and outstanding shares are held by approximately 840 holders of record.

The presence, in person or by proxy, of a majority of the shares of Mid-Wisconsin common stock entitled to vote on the merger agreement is necessary to constitute a quorum at the meeting. Each share of Mid-Wisconsin common stock outstanding on the record date, entitles its holder to one vote on the merger agreement and any other proposal that may properly come before the meeting.

To determine the presence of a quorum at the meeting, Mid-Wisconsin will also count as present at the meeting the shares of Mid-Wisconsin common stock present in person but not voting, and the shares of common stock for which Mid-Wisconsin has received proxies but with respect to which the holders of such shares have abstained or signed without providing instructions as described in “— Solicitation and Revocation of Proxies” below. On ____________, 2013, the record date for the meeting, there were __________ shares of Mid-Wisconsin common stock issued and outstanding. Therefore at least __________ shares need to be present at the special meeting, whether in person or by proxy, to constitute a quorum.

Approval of the merger agreement requires the affirmative vote of the holders of a majority of the issued and outstanding shares of Mid-Wisconsin common stock as of the record date for the special meeting.

As of the record date for the meeting, Mid-Wisconsin’s directors and executive officers beneficially owned a total of _________ shares, or approximately __% of the issued and outstanding shares, of Mid-Wisconsin common stock. We anticipate that these individuals will vote their shares in favor of the merger agreement. Certain of these individuals have entered into a written agreement with Nicolet that they will vote their shares in favor of the merger agreement, except as may be limited by their fiduciary obligations.

Solicitation and Revocation of Proxies

If you have delivered a signed proxy card for the Mid-Wisconsin special meeting, you may revoke it at any time before it is voted by:

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attending the meeting and voting in person;

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giving written notice revoking your proxy to Mid-Wisconsin’s Corporate Secretary prior to the date of the meeting; or

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submitting a signed proxy card that is dated later than your initial proxy card to Mid-Wisconsin’s Corporate Secretary.

The proxy holders will vote as directed on all valid proxies that are received at or prior to the meeting and that are not subsequently revoked. If you complete, date and sign your proxy card but do not provide instructions as to your vote, the proxy holders will vote your shares FOR approval of the merger agreement. If any other matters are properly presented at the meeting for consideration, the persons named in the proxy card will have discretionary authority to vote your shares on those matters. Mid-Wisconsin’s board of directors is not aware of any matter to be presented at the meeting other than the proposal to approve the merger agreement.

If you hold shares in “street name” with a broker, bank, or other fiduciary, you will receive voting instructions from the holder of record of your shares. Under the rules of various national and regional securities exchanges, brokers, banks and other fiduciaries may generally vote your shares on routine matters, such as the ratification of an independent registered public accounting firm, even if you provide no instructions, but may not vote on non-routine matters, such as the matters being brought before the special meeting, unless you provide voting instructions. Shares for which a broker does not have the authority to vote are recorded as “broker nonvotes,” are not counted in the vote by shareholders but will count for purposes of a quorum. As a result, any broker nonvotes will have the practical effect of a vote against the merger proposal but will not affect the adjournment proposal. We therefore encourage you to provide directions to your broker as to how you want your shares voted on all matters to be brought before the special meeting. You should do this by carefully following the instructions your broker gives you concerning its procedures. If you hold shares in “street name” and wish to change your vote at any time, you must contact your broker.

Mid-Wisconsin will bear the cost of soliciting proxies from its shareholders. Mid-Wisconsin will solicit shareholder votes by mail, and may also solicit certain shareholders by other means of communication, including telephone or in person. If anyone solicits your vote in person, by telephone, or by other means of communication, they will receive no additional compensation for doing so. Mid-Wisconsin will reimburse brokerage firms and other persons representing beneficial owners of shares for their reasonable expenses in forwarding solicitation material to those beneficial owners.

How to Vote Your Shares

Shareholders of record (i.e., those who own shares in their own name) can vote by telephone, on the internet, or by mail as follows:

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Voting by Telephone . Call the toll-free number listed on the proxy card and follow the instructions. You will need to have your proxy card with you when you call.

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Voting on the Internet. Go to www.___________.com and follow the instructions. You will need to have your proxy card with you when you link to the website.

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Voting by Mail. Complete, sign, date, and return the enclosed proxy card in the envelope provided.

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Voting at the Mid-Wisconsin Special Meeting. If you decide to attend the special meeting and vote in person, you may deposit your proxy card with a representative of Mid-Wisconsin at the special meeting registration desk. You may also complete a ballot that will be distributed at the meeting. Whether or not you plan to attend the special meeting, please submit your proxy promptly in the enclosed envelope or vote telephonically or through the Internet by following the instructions on the proxy card.

“Street name” shareholders (i.e., those who own their shares in the name of a broker, bank, or other fiduciary) should refer to the information you receive from your broker to see which voting methods are available to you. Please note, if you are a street name shareholder, and wish to vote in person at the special meeting, you must obtain a proxy executed in your favor from your broker to be able to vote at the special meeting.

You should not send any stock certificates with your proxy card. If the merger agreement is approved, you will receive instructions for exchanging your stock certificates after the merger has been completed.

Dissenters’ Rights

Mid-Wisconsin’s shareholders have dissenters’ rights with respect to the merger under Wisconsin law. Shareholders who wish to assert their dissenters’ rights and comply with the procedural requirements of Subchapter XIII of the Wisconsin Business Corporation Law (“WBCL”) will be entitled to receive payment of the fair value of their shares in cash in accordance with Wisconsin law. For more information regarding the exercise of these rights, see, “Dissenters’ Rights,” at page 76.

Recommendation of the Board of Directors of Mid-Wisconsin

Mid-Wisconsin’s board of directors has unanimously approved the merger agreement and the transactions contemplated thereby, believes that the merger is in the best interests of Mid-Wisconsin and its shareholders, and recommends that you vote FOR approval of the merger agreement.

In the course of reaching its decision to approve the merger agreement and the transactions contemplated in the merger agreement, Mid-Wisconsin’s board of directors, among other things, consulted with its legal advisor, Barack Ferrazzano Kirschbaum & Nagelberg LLP, regarding the legal terms of the merger agreement, and with its financial advisor, Raymond James., regarding the fairness of the merger consideration to Mid-Wisconsin’s common shareholders from a financial point of view. For a discussion of the factors considered by the board of directors in reaching its conclusion, see, “Background of and Reasons for the Merger — Background of the Merger,” at page 33, and “- Mid-Wisconsin’s Reasons for the Merger,” at page 35.

Shareholders should note that Mid-Wisconsin’s directors have certain interests in, and may derive benefits as a result of, the merger that are in addition to their interests as shareholders of Mid-Wisconsin. See, “The Merger Agreement — Interests of Certain Persons in the Merger,” at page __.

THE NICOLET SPECIAL SHAREHOLDERS’ MEETING

Purpose

Nicolet shareholders have received this joint proxy statement-prospectus because on ______________, 2013, the record date for a special meeting of shareholders to be held on ________, 2013, at ______________ at ____ __.m., they owned shares of the common stock of Nicolet Bankshares, Inc, and the board of directors of Nicolet is soliciting proxies for the matter to be voted on at this special meeting, as described in more detail below. Each copy of this joint proxy statement-prospectus was mailed to holders of Nicolet common stock on [____________] and is accompanied by a proxy card for use at the meeting and at any adjournment(s) of the meeting.

At the meeting, Nicolet shareholders will consider and vote upon the merger agreement and any other matters that are properly brought before the meeting or any adjournment(s) of the meeting.

If you have not already done so, please complete, date and sign the accompanying proxy card and return it promptly in the enclosed, postage paid envelope or otherwise vote pursuant to the instructions set forth on the proxy card. If you do not vote your shares as instructed on the proxy card, or if you do not attend and cast your vote at the special meeting, the effect will be a vote against the merger agreement.

Record Date; Quorum and Vote Required

The record date for the Nicolet special meeting is ___________, 2013. Nicolet’s shareholders of record as of the close of business on that day will receive notice of and will be entitled to vote at the special meeting. As of ______________, 2013, there were ________ shares of Nicolet common stock issued and outstanding and entitled to vote at the meeting. The issued and outstanding shares are held by approximately ________ holders of record.

The presence, in person or by proxy, of a majority of the shares of Nicolet common stock entitled to vote on the merger agreement is necessary to constitute a quorum at the meeting. Each share of Nicolet common stock outstanding on the record date, entitles its holder to one vote on the merger agreement and any other proposal that may properly come before the meeting.

To determine the presence of a quorum at the meeting, Nicolet will also count as present at the meeting the shares of Nicolet common stock present in person but not voting, and the shares of common stock for which Nicolet has received proxies but with respect to which the holders of such shares have abstained or signed without providing instructions as described in “— Solicitation and Revocation of Proxies” below. On ____________, 2013, the record date for the meeting, there were _______ shares of Nicolet common stock issued and outstanding. Therefore at least _____ shares need to be present at the special meeting, whether in person or by proxy, to constitute a quorum.

Approval of the merger agreement requires the affirmative vote of the holders of a majority of the issued and outstanding shares of Nicolet common stock as of the record date for the special meeting.

As of the record date for the meeting, Nicolet’s directors and executive officers beneficially owned a total of __________ shares, or approximately ____% of the issued and outstanding shares, of Nicolet common stock. We anticipate that these individuals will vote their shares in favor of the merger agreement. Certain of these individuals have entered into a written agreement with Mid-Wisconsin that they will vote their shares in favor of the merger agreement, except as may be limited by their fiduciary obligations.

Solicitation and Revocation of Proxies

If you have delivered a signed proxy card for the Nicolet special meeting or otherwise voted pursuant to the instructions set forth on the proxy card, you may revoke it at any time before it is voted by:

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attending the meeting and voting in person;

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giving written notice revoking your proxy to Nicolet’s Corporate Secretary prior to the date of the meeting; or

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submitting a signed proxy card that is dated later than your initial proxy card to Nicolet’s Corporate Secretary.

The proxy holders will vote as directed on all valid proxies that are received at or prior to the meeting and that are not subsequently revoked. If you complete, date and sign your proxy card but do not provide instructions as to your vote, the proxy holders will vote your shares FOR approval of the merger agreement. If any other matters are properly presented at the meeting for consideration, the persons named in the proxy card will have discretionary authority to vote your shares on those matters. Nicolet’s board of directors is not aware of any matter to be presented at the meeting other than the proposal to approve the merger agreement.

Nicolet will bear the cost of soliciting proxies from its shareholders. Nicolet will solicit shareholder votes by mail, and may also solicit certain shareholders by other means of communication, including telephone or in person. If anyone solicits your vote in person, by telephone, or by other means of communication, they will receive no additional compensation for doing so. Nicolet will reimburse brokerage firms and other persons representing beneficial owners of shares for their reasonable expenses in forwarding solicitation material to those beneficial owners.

How to Vote Your Shares

Shareholders of record (i.e., those who own shares in their own name) can vote by telephone, on the Internet, or by mail as follows:

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Voting by Telephone . Call the toll-free number listed on the proxy card and follow the instructions. You will need to have your proxy card with you when you call.

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Voting on the Internet . Go to www.________.com and follow the instructions. You will need to have your proxy card with you when you link to the website.

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Voting by Mail. Complete, sign, date, and return the enclosed proxy card in the envelope provided.

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Voting at the Nicolet Special Meeting . If you decide to attend the special meeting and vote in person, you may deposit your proxy card with a representative of Nicolet at the special meeting registration desk. You may also complete a ballot that will be distributed at the meeting. Whether or not you plan to attend the special meeting, please submit your proxy promptly in the enclosed envelope or vote telephonically or through the internet by following the instructions on the proxy card.

Dissenters’ Rights

Nicolet’s shareholders have dissenters’ rights with respect to the merger under Wisconsin law. Shareholders who wish to assert their dissenters’ rights and comply with the procedural requirements of Subchapter XIII of the WBCL will be entitled to receive payment of the fair value of their shares in cash in accordance with Wisconsin law. For more information regarding the exercise of these rights, see, “Dissenters’ Rights,” at page 29.

Recommendation of the Board of Directors of Nicolet

Nicolet’s board of directors has unanimously approved the merger agreement and the transactions contemplated thereby, believes that the merger is in the best interests of Nicolet and its shareholders, and recommends that you vote FOR approval of the merger agreement.

In the course of reaching its decision to approve the merger agreement and the transactions contemplated in the merger agreement, Nicolet’s board of directors, among other things, consulted with its legal advisor, Bryan Cave LLP, regarding the legal terms of the merger agreement, and with its financial advisor, Sandler O’Neill regarding the fairness of the merger consideration to Nicolet’s common shareholders from a financial point of view. For a discussion of the factors considered by the board of directors in reaching its conclusion, see, “Background of and Reasons for the Merger — Background of the Merger,” at page 33, and “- Nicolet’s Reasons for the Merger,” at page 35.

PROPOSAL 1: THE MERGER AGREEMENT

Structure of the Merger

The merger agreement provides for the merger of Mid-Wisconsin with and into Nicolet, with Nicolet being the surviving entity in the merger. After the merger, Mid-Wisconsin Bank will merge with and into Nicolet National Bank, with Nicolet National Bank being the surviving entity. Each share of Mid-Wisconsin common stock issued and outstanding at the effective time of the merger will be converted into the right to receive either 0.3727 shares of Nicolet common stock or, in certain limited circumstances, $6.15 in cash. Nicolet will appoint Kim A. Gowey and Christopher Ghidorzi, who are both current Mid-Wisconsin directors, to the boards of directors of Nicolet and Nicolet National Bank.

Background of the Merger

Mid-Wisconsin’s board regularly assesses strategic alternatives for maximizing shareholder value. During the past two years, Mid-Wisconsin, like many other banks, has experienced certain stresses, such as the matters addressed in Mid-Wisconsin’s formal written agreement with the Federal Reserve dated May 10, 2011 and Mid-Wisconsin Bank’s written agreement with the FDIC and WDFI on November 9, 2010 (together, the “Consent Order”) that led to the need for additional capital and a more robust infrastructure during a difficult time for the banking industry as a whole. Consequently, Mid-Wisconsin was required to defer its regularly scheduled quarterly payments on its Preferred Stock and the Debentures and is in arrears with the dividend payments on the Preferred Stock and the interest payments on the Debentures. In light of these challenges, Mid-Wisconsin’s board determined that it was in the best interest of its shareholders to more actively explore its strategic options to determine whether there was a possible merger partner that shared their desire to maximize shareholder value while providing exemplary service to the communities and customers that they serve.

Like the Mid-Wisconsin board, Nicolet’s board of directors engages in regular assessments of strategic alternatives for maximizing shareholder value. Since Nicolet’s inception in 2000, its objective has been to build, through organic growth and acquisitions, a community bank of sufficient size to address efficiently the compliance and capital requirements presented by an uncertain regulatory and economic environment while enhancing shareholder value, expanding product lines and continuing to deliver personalized customer service with local decision-making. From time to time, Nicolet’s Chairman, President, and Chief Executive Officer, Robert B. Atwell, would engage in informal, non-binding discussions with potential acquisition candidates, with limited due diligence occurring on such occasions. Until discussions of the proposed merger with Mid-Wisconsin began, however, none of these potential transactions progressed beyond a non-binding expression of interest.

In late 2011, the Mid-Wisconsin board of directors invited representatives of Raymond James to make a presentation to the board regarding potential strategic alternatives. On December 21, 2011, representatives of Raymond James met with the Mid-Wisconsin board and discussed various strategic alternatives. On January 6, 2012, Mid-Wisconsin retained Raymond James to serve as its financial advisor and to ascertain potential market interest in an acquisition of Mid-Wisconsin and its subsidiary bank.

From January through May 2012, Raymond James contacted potential likely acquirers, with one potential acquirer conducting limited off-site due diligence on Mid-Wisconsin Bank’s asset quality and other business matters during the first quarter. Following this due diligence and several discussions between the parties, the third party elected not to pursue an opportunity with Mid-Wisconsin at that time, citing its need to raise additional capital to facilitate the transaction as well as possible difficulties receiving regulatory approval for a transaction at this time. On May 30, 2012, Raymond James updated the Mid-Wisconsin board on the process and was authorized by the board to continue to contact potential acquirers.

As part of this process, representatives of Raymond James met with Mr. Atwell in Green Bay, Wisconsin to discuss a potential acquisition of Mid-Wisconsin by Nicolet. On June 21, 2012, following the execution of confidentiality agreements, Mr. Atwell and Michael E. Daniels, President and Chief Operating Officer of Nicolet National Bank, met with representatives of Raymond James, Dr. Gowey, Mid-Wisconsin’s chairman, and Scot Thompson, the President of Mid-Wisconsin Bank, in Wausau, Wisconsin.

Following that meeting, Nicolet commenced initial onsite due diligence on Mid-Wisconsin in Medford, Wisconsin, which concluded during the week of July 9, 2012. Nicolet retained Sandler O’Neill as its independent financial advisor to assist in the evaluation of the proposed merger on July 17, 2012.

On July 23, 2012, Nicolet submitted a draft letter of intent to Mid-Wisconsin, and on July 25, 2012, Mid-Wisconsin’s board approved continued negotiations with Nicolet.

After further negotiations, Nicolet and Mid-Wisconsin signed a non-binding letter of intent setting forth the proposed terms of the merger on August 3, 2012. The letter of intent contemplated that the merger consideration would consist of Nicolet common stock at an exchange ratio to be determined based on an assumed value of $6.50 to $8.00 per share for the Mid-Wisconsin common stock and an assumed value of $16.50 per share for the Nicolet common stock. The letter of intent contemplated that Mid-Wisconsin’s Preferred Stock issued to the Treasury would be purchased by Nicolet for up to $5.0 million, representing a discount to its $10.5 million face value.

During the remainder of the month of August, Nicolet and its advisors conducted legal and business due diligence on Mid-Wisconsin and discussed with Mid-Wisconsin and its legal and financial advisors various alternative approaches to the Preferred Stock. On August 21, 2012, representatives of Sandler O’Neill met with Nicolet’s board of directors to discuss these alternatives, which included a cash purchase of the Preferred Stock at a discount negotiated with Treasury, Nicolet’s participation as the “designated bidder” in Treasury’s private “Dutch auction” process, delaying a possible merger to allow negotiation with third-party purchasers of the securities following the Treasury auction process, and assuming Mid-Wisconsin’s obligations under the securities. Based on these discussions, as well as discussions with Treasury representatives, the parties agreed that Nicolet would act as the “designated bidder” for the Preferred Stock in Treasury’s private auction process.

From September 4 through September 6, 2012, representatives of Nicolet conducted additional onsite loan due diligence in Medford, Wisconsin. Nicolet’s management team and legal and financial advisors also continued their due diligence review of documents provided by Mid-Wisconsin. From September 10 through September 14, 2012, Nicolet’s compliance officer and internal auditor, and an external compliance auditor performed a limited scope review on Mid-Wisconsin’s compliance to selected regulations. On September 17 and 18, 2012, Mid-Wisconsin’s management team and legal and financial advisors conducted onsite due diligence on Nicolet in Green Bay, Wisconsin. On September 25, 2012, Mid-Wisconsin notified Treasury of its intent to opt out of the pooled auction process and identified Nicolet as the “designated bidder” for the Preferred Stock.

During the month of October, counsel to Nicolet drafted the form of merger agreement and circulated the initial draft to all parties on October 23, 2012. During the following week, the parties continued their discussions with representatives of Treasury regarding Nicolet’s potential purchase of the Mid-Wisconsin Preferred Stock. Based on these discussions, the parties agreed that a purchase of the securities at a discount to the stated value was unlikely and that their respective interests would best be served by structuring the merger to contemplate Mid-Wisconsin’s redemption of the Preferred Stock at its $10.5 million stated value, together with accrued and unpaid dividends, and an exchange ratio for the Nicolet common stock based on an assumed value of $6.15 per share for the Mid-Wisconsin common stock. On October 31, 2012, following consultation with its legal and financial advisors, the Mid-Wisconsin board authorized management to proceed with the negotiation of a definitive merger agreement on the revised terms described above. The parties subsequently notified Treasury of their decision and Nicolet withdrew as the designated bidder for the Preferred Stock.

During the month of November, the parties and their advisors negotiated the terms of the merger agreement and continued the due diligence process. On November 20, 2012, Nicolet’s board of directors met with representatives of Sandler O’Neill and counsel from Bryan Cave LLP to review the terms of the merger agreement. At the meeting, representatives of Sandler O’Neill provided the board with its analysis of the fairness of the merger consideration to Nicolet’s shareholders from a financial point of view and counsel reviewed the board’s fiduciary duties and the terms and conditions of the merger agreement. Following a discussion of these matters and the other factors listed under “—Nicolet’s Reasons for the Merger,” the board concluded that the proposed merger would be in the best interest of Nicolet and its shareholders and approved

the merger agreement in substantially the form presented, with Nicolet’s executive officers being authorized to negotiate, execute and deliver the final agreement on behalf of Nicolet.

On November 28, 2012, Mid-Wisconsin’s board of directors met with representatives of Raymond James and counsel from Barack Ferrazzano Kirschbaum & Nagelberg LLP to review the terms of the merger agreement. At the meeting, representatives of Raymond James provided the board with its analysis of the fairness of the merger consideration to Mid-Wisconsin’s shareholders from a financial point of view and counsel reviewed the board’s fiduciary duties and the terms and conditions of the merger agreement. Following a discussion of these matters and the other factors listed under “—Mid-Wisconsin’s Reasons for the Merger,” the board concluded that the proposed merger would be in the best interest of Mid-Wisconsin and its shareholders and approved the merger agreement in substantially the form presented, with Mid-Wisconsin’s executive officers being authorized to negotiate, execute and deliver the final agreement on behalf of Mid-Wisconsin.

The parties executed the merger agreement on November 28, 2012 and issued a press release announcing the proposed merger on November 29, 2012. Mid-Wisconsin also filed a Current Report on Form 8-K attaching the merger agreement and press release with the SEC on November 29, 2012. Nicolet’s board of directors unanimously ratified the merger agreement, as executed, at a board meeting on December 18, 2012 and approved a technical amendment to the merger agreement that was executed by the parties on January 17, 2013.

Reasons for the Merger

General

The financial and other terms of the merger agreement resulted from arm’s-length negotiations between Nicolet’s and Mid-Wisconsin’s representatives. The following discussion of the information and factors considered by the Nicolet and Mid-Wisconsin boards of directors is not intended to be exhaustive but includes all of the material factors the respective boards considered in determining whether to enter into the merger agreement. In reaching their determinations to approve the merger and to recommend that their respective shareholders approve the merger, neither the Nicolet board of directors nor the Mid-Wisconsin board of directors assigned any relative or specific weight to the following factors, and individual directors may have given.

Nicolet

In deciding to pursue an acquisition of Mid-Wisconsin, Nicolet’s management and board of directors considered, among other things, the following:

•

information concerning the business, operations, earnings, asset quality, and financial condition of Mid-Wisconsin and Mid-Wisconsin Bank;

•

the ability of Mid-Wisconsin’s operations to contribute to Nicolet’s earnings after the merger;

•

the recent comparative earnings and financial performance of Mid-Wisconsin and Nicolet;

•

the financial terms of recent business combinations in the financial services industry and a comparison of the financial terms of such business combinations with the terms of the proposed merger;

•

the market for alternative merger or acquisition transactions in the banking industry and the likelihood of other material strategic transactions;

•

the increased importance of scale in the banking industry, the fact that the merger would increase Nicolet’s size to over $1 billion in total assets, and would provide Nicolet’s banking franchise with additional access to a broader base of middle market and small business prospects;

•

the various effects of Nicolet becoming a public reporting company under the regulation of the SEC as a result of the merger, including increased liquidity for holders of Nicolet’s common stock;

•

the compatibility of Mid-Wisconsin’s management team, strategic objectives, culture, and geographic footprint with those of Nicolet;

•

Mid-Wisconsin’s familiarity with the central Wisconsin market;

•

the opportunity to leverage the infrastructure of Nicolet;

•

the nonfinancial terms of the merger, including the treatment of the merger as a tax-free reorganization for U.S. federal income tax purposes;

•

the opinion of Sandler O’Neill that the consideration to be provided to Mid-Wisconsin’s common shareholders in the merger is fair, from a financial point of view, to the shareholders of Nicolet; and

•

the likelihood of the merger being approved by applicable regulatory authorities without undue conditions or delay.

Mid-Wisconsin

•

the value of the consideration to be received by Mid-Wisconsin’s shareholders compared to shareholder value for Mid-Wisconsin as an independent entity;

•

information concerning business, operations, earnings, asset quality, and financial condition, prospects, and capital levels of Mid-Wisconsin and Nicolet, both individually and as a combined entity;

•

the perceived risks and uncertainties attendant to Mid-Wisconsin’s operation as an independent banking organization, including risks and uncertainties related to the continuing deferral of dividends and interests on its Preferred Stock, and Debentures, the continuing low-interest rate environment, operating under enhanced regulatory scrutiny and the formal written agreements between Mid-Wisconsin and the FDIC and the WDFI, and increased capital requirements;

•

the financial terms of recent business combinations in the financial services industry and a comparison of the multiples of selected combinations with the terms of the proposed merger;

•

the receipt of the stock consideration by Mid-Wisconsin’s shareholders on a tax-free basis;

•

the opinion of Raymond James that the consideration to be received by Mid-Wisconsin’s common shareholders in the merger is fair from a financial point of view; and

•

the likelihood of the merger being approved by applicable regulatory authorities without undue conditions or delay.

OPINION OF MID-WISCONSIN’S FINANCIAL ADVISOR

Mid-Wisconsin retained Raymond James as financial advisor on January 6, 2012. In connection with that engagement, the Mid-Wisconsin Board of Directors requested that Raymond James evaluate the fairness, from a financial point of view, to the holders of Mid-Wisconsin’s outstanding common stock of the price per share merger consideration to be received by such holders pursuant to the merger agreement.

At the November 28, 2012 meeting of the Mid-Wisconsin Board of Directors, Raymond James gave its opinion that, as of such date and based upon and subject to various qualifications and assumptions described with respect to its opinion, the merger consideration to be received by the holders of Mid-Wisconsin common stock pursuant to the merger agreement was fair, from a financial point of view, to the holders of Mid-Wisconsin’s outstanding common stock.

The full text of the written opinion of Raymond James, dated November 28, 2012, which sets forth assumptions made, matters considered, and limits on the scope of review undertaken, is attached as Appendix C to this joint proxy statement-prospectus. The summary of the opinion of Raymond James set forth in this joint proxy statement-prospectus is qualified in its entirety by reference to the full text of such opinion.

Holders of Mid-Wisconsin common stock are urged to read Raymond James’ written opinion in its entirety. Raymond James’ opinion, which is addressed to the Mid-Wisconsin Board of Directors, is directed only to the fairness, from a financial point of view, of the merger consideration to be received by holders of Mid-Wisconsin common stock in connection with the proposed merger. Raymond James’ opinion does not constitute a recommendation to any holder of Mid-Wisconsin common stock as to how such stockholder should vote at the special meeting of Mid-Wisconsin shareholders and does not address any other aspect of the proposed merger or any related transaction. Raymond James does not express any opinion as to the likely trading range of Nicolet common stock following the merger, which may vary depending on numerous factors that generally impact the price of securities or on the financial condition of Nicolet at that time.

In connection with rendering its opinion, Raymond James, among other things:

•

reviewed the financial terms and conditions as stated in the merger agreement;

•

reviewed the audited financial statements of Mid-Wisconsin as of and for the years ended December 31, 2010 and December 31, 2011, and the unaudited financial statements for the quarter ending September 30, 2012;

•

reviewed Mid-Wisconsin’s Annual Reports filed on Form 10-K for the years ended December 31, 2010 and December 31, 2011 and Quarterly Reports filed on Form 10-Q for the quarters ended March 31, June 30, and September 30, 2012;

•

reviewed other Mid-Wisconsin financial and operating information requested from and/or provided by Mid-Wisconsin;

•

reviewed certain other publicly available information on Mid-Wisconsin;

•

reviewed financial projections of Mid-Wisconsin provided to Nicolet by Mid-Wisconsin’s management;

•

reviewed financial information for comparable companies with similar publicly-traded securities;

•

reviewed the financial terms of recent business combinations involving companies deemed to be similar;

•

discussed with members of the senior management of Mid-Wisconsin certain information relating to the aforementioned factors and any other matters which we have deemed relevant to our inquiry; and

•

reviewed other information and conducted such other analyses we deemed relevant.

In connection with its review, Raymond James assumed and relied upon the accuracy and completeness of all information supplied or otherwise made available to Raymond James by Mid-Wisconsin, Nicolet or any

other party, and did not undertake any duty or responsibility to verify independently any of such information. Raymond James has not made or obtained an independent appraisal of the assets or liabilities (contingent or otherwise) of Mid-Wisconsin. With respect to financial forecasts and other information and data provided to or otherwise reviewed by or discussed with Raymond James, Raymond James assumed that such forecasts and other information and data were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of management, and relied upon each party to advise Raymond James promptly if any information previously provided became inaccurate or was required to be updated during the period of its review.

In rendering its opinion, Raymond James assumed that the merger would be consummated on the terms described in the merger agreement. Furthermore, Raymond James assumed, in all respects material to its analysis, that the representations and warranties of each party contained in the merger agreement were true and correct, that each party will perform all of the covenants and agreements required to be performed by it under the merger agreement and that all conditions to the consummation of the merger will be satisfied without being waived. Raymond James also assumed that all material governmental, regulatory or other consents and approvals will be obtained and that, in the course of obtaining any necessary governmental, regulatory or other consents and approvals, or any amendments, modifications or waivers to any documents to which Mid-Wisconsin is a party, as contemplated by the merger agreement, no restrictions will be imposed or amendments, modifications or waivers made that would have any material adverse effect on Mid-Wisconsin. In its financial analyses, Raymond James assumed the merger consideration had a value of $6.15 per Mid-Wisconsin common share. Raymond James expressed no opinion as to the underlying business decision to effect the merger, the structure or tax consequences of the merger agreement, or the availability or advisability of any alternatives to the merger. In rendering the opinion, Raymond James reviewed the terms of the merger agreement and offered no judgment as to the negotiations resulting in such terms.

In conducting its investigation and analyses and in arriving at its opinion, Raymond James took into account such accepted financial and investment banking procedures and considerations as it deemed relevant, including the review of: (i) historical and projected revenues, operating earnings, net income and capitalization of Mid-Wisconsin and certain other publicly held companies in businesses Raymond James believed to be comparable to Mid-Wisconsin; (ii) the current and projected financial position and results of operations of Mid-Wisconsin; (iii) the historical market prices and trading activity of the common stock of Mid-Wisconsin; (iv) financial and operating information concerning selected business combinations which Raymond James deemed comparable in whole or in part; and (v) the general condition of the securities markets.

The following summarizes the material financial analyses presented by Raymond James to the Mid-Wisconsin Board of Directors at its meeting on November 28, 2012, which was considered by Raymond James in rendering the opinion described below. No company or transaction used in the analyses described below is directly comparable to Mid-Wisconsin, Nicolet or the contemplated merger.

Trading Analysis

Raymond James analyzed historical closing prices of Mid-Wisconsin common stock and compared them to the value of the proposed merger consideration. The results of this analysis are summarized below:

	Price Per Share
Merger consideration value	$	6.15	—
Mid-Wisconsin closing stock price as of November 27, 2012	$	4.00	53.8	%
52-week high Mid-Wisconsin stock price (May 18, 2012)	$	6.50	–5.4	%
52-week low Mid-Wisconsin stock price (December 27, 2011 and November 27, 2012)	$	4.00	53.8	%

Comparable Company Analysis

Raymond James reviewed and compared certain financial information of Mid-Wisconsin to corresponding financial information, ratios and public market multiples observed for two sets of publicly-traded banks.

The first set included publicly-traded banks and thrifts headquartered in the Midwest with assets between $200.0 million and $1.0 billion, nonperforming assets to total assets between 4.0% and 10.0%, a return on

average assets less than 0.50% over the last-twelve-months, and an average daily trading volume of their respective common stock of at least 100 shares per day. The financial data used was as of September 30, 2012 (or in four instances, June 30, 2012 when more current financial information was not readily available). The institutions included in the first set of comparable companies included:

• Centrue Financial Corp.	• Mercantile Bancorp, Inc.	• Fentura Financial Inc.
• First Community Financial Partners	• HMN Financial, Inc.	• Wolverine Bancorp Inc.
• Camco Financial Corp	• CIB Marine Bancshares, Inc.	• Bremen Bancorp
• Baraboo Bancorp.	• Ameriana Bancorp	• Central Federal Corp.

The second set included publicly-traded banks and thrifts based nationwide that have some amount of outstanding preferred stock issued through TARP, assets between $200.0 million and $1.0 billion, nonperforming assets to total assets between 4.0% and 10.0%, a return on average assets less than 0.50% over the last-twelve-months, and an average daily trading volume of their respective common stock of at least 100 shares per day. The financial data used was as of September 30, 2012 (or in six instances, June 30, 2012 when more current financial information was not readily available). The institutions included in the second set of comparable companies included:

• Centrue Financial Corp.	• SouthCrest Financial Group Inc	• IBW Financial Corp
• Royal Bancshares of PA	• First Reliance Bancshares	• M&F Bancorp Inc
• Unity Bancorp Inc	• Delmar Bancorp	• Carolina Trust Bank
• Baraboo Bancorp	• Citizens Bancshares Corp	• United American Bank
• 1 ^st Financial Services Corp.	• Northwest Bancorp
• HMN Financial Inc.	• Provident Community Bancshares

Raymond James attained various financial multiples and ratios for the selected public companies and Mid-Wisconsin based on publicly available financial information, information provided by Mid-Wisconsin’s management, and common stock closing prices on November 27, 2012. For each of the selected public companies and Mid-Wisconsin, Raymond James reviewed:

•

Common stock price as a multiple of tangible book value as of September 30, 2012 or, in certain instances, June 30, 2012; and

•

Common stock price as a multiple of earnings per share for the last-twelve-months as of September 30, 2012 or, in certain instances, June 30, 2012.

The results of these analyses are summarized below:

				Trading Multiples of Comp. Publicly-Traded Companies
	Proposed Transaction			Low			Mean			Median			High
Comparable Companies — Midwest Banks
Price/Tangible Book Value Per Share		38.3	%		11.7	%		46.5	%		39.8	%		81.4	%
Price/LTM Earnings Per Share ⁽¹⁾		NM			6.5	x		19.4	x		20.5	x		30.0	x

Comparable Companies — TARP Banks
Price/Tangible Book Value Per Share		38.3	%		7.3	%		36.9	%		33.9	%		82.5	%
Price/LTM Earnings Per Share ⁽¹⁾		NM			4.9	x		23.6	x		22.4	x		43.2	x

(1)

Mid-Wisconsin’s last-twelve-months (“LTM”) earnings as of September 30, 2012 were negative, thus its price / LTM earnings per share was not material.

Raymond James also applied the mean, median, minimum, and maximum relative multiples for each of the metrics to Mid-Wisconsin’s actual financial results and determined the implied market value of Mid-Wisconsin common stock and then compared those implied prices per share to Mid-Wisconsin’s closing stock price of $4.00 on November 27, 2012, one day before the merger announcement. These results are summarized below:

	Implied Mid-Wisconsin Price Per Share Based on Trading Multiples of Comp. Publicly Traded Companies
	Low		Mean		Median		High
Comparable Companies — Midwest Banks
Price/Tangible Book Value Per Share	$	1.87	$	7.46	$	6.39	$	13.06
Price/LTM Earnings Per Share ⁽¹⁾		NM		NM		NM		NM

Comparable Companies — TARP Banks
Price/Tangible Book Value Per Share	$	1.18	$	5.91	$	5.44	$	13.24
Price/LTM Earnings Per Share ⁽¹⁾		NM		NM		NM		NM

(1)

Mid-Wisconsin’s LTM earnings as of September 30, 2012 were negative, thus rendering the implied values as not material

Precedent Transactions Analysis

Raymond James analyzed publicly available information relating to two sets of selected acquisitions of bank and thrift targets announced since January 1, 2010. The first set included targets which had outstanding preferred stock issued through the TARP, assets between $200.0 million and $1.0 billion and nonperforming assets to total assets greater than 4.0% at the time of the announced acquisition. The transactions included in the first set include:

Announce Date	Acquirer/Target	Announce Date	Acquirer/Target
6/5/12	Equity Bancshares Inc. (KS)/First Community Bancshares Inc (KS)	6/24/11	SCJ Inc. (CA)/Santa Lucia Bancorp (CA)
2/9/12	Horizon Bancorp (IN)/Heartland Bancshares (IN)	2/23/11	Piedmont Cmnty Bk Hldgs Inc. (NC)/Crescent Financial Corp. (NC)
1/12/12	First Volunteer Corp. (TN)/Gateway Bancshares Inc. (GA)	2/10/11	CBM Florida Holding Co. (FL)/First Community Bk of America (FL)
12/19/11	SCBT Financial Corp. (SC)/Peoples Bancorporation Inc. (SC)

Note: Only transactions with available pricing data shown

The second set included targets with assets between $200.0 million and $1.0 billion and nonperforming assets to total assets between 4.0% and 10.0% and a return on average assets of less than 0.50% for the last-twelve-months prior to the announced acquisition. The transactions included in the second set include:

Announce Date	Acquirer/Target	Announce Date	Acquirer/Target
8/7/12	SCBT Financial Corp. (SC)/Savannah Bancorp Inc. (GA)	3/30/11	Home Bancorp Inc. (LA)/GS Financial Corp. (LA)
7/19/12	SKBHC Holdings LLC (WA)/ICB Financial (CA)	3/30/11	Park Sterling Corporation (NC)/Community Capital Corp. (SC)
6/5/12	Equity Bancshares Inc. (KS)/First Community Bancshares Inc (KS)	2/21/11	IBERIABANK Corp. (LA)/Omni Bancshares Inc. (LA)
4/4/12	Washington Federal Inc. (WA)/South Valley Bancorp Inc. (OR)	2/10/11	CBM Florida Holding Co. (FL)/First Community Bk of America (FL)
3/19/12	IBERIABANK Corp. (LA)/Florida Gulf Bancorp Inc. (FL)	12/15/10	American National Bankshares (VA)/MidCarolina Financial Corp. (NC)
2/9/12	Horizon Bancorp (IN)/Heartland Bancshares (IN)	10/20/10	Modern Capital Partners L.P. (NY)/Madison National Bancorp Inc. (NY)
1/24/12	Old National Bancorp (IN)/Indiana Community Bancorp (IN)	10/5/10	Old National Bancorp (IN)/Monroe Bancorp (IN)
1/12/12	First Volunteer Corp. (TN)/Gateway Bancshares Inc. (GA)	9/30/10	FNB United Corp. (NC)/Bank of Granite Corp. (NC)
12/21/11	BNC Bancorp (NC)/KeySource Financial Inc. (NC)	9/1/10	Old Line Bancshares Inc (MD)/Maryland Bankcorp Inc. (MD)
12/19/11	SCBT Financial Corp. (SC)/Peoples Bancorporation Inc. (SC)	7/14/10	Grandpoint Capital Inc. (CA)/First Commerce Bancorp (CA)
12/14/11	First Farmers Financial Corp (IN)/First Citizens of Paris Inc. (IL)	5/10/10	Jacksonville Bancorp Inc. (FL)/Atlantic BancGroup Inc. (FL)
7/25/11	Wintrust Financial Corp. (IL)/Elgin State Bancorp Inc. (IL)	3/17/10	Roma Financial Corp. (MHC) (NJ)/Sterling Banks Inc. (NJ)
6/9/11	SKBHC Holdings LLC (AZ)/Sunrise Bank(CA)

Note: Only transactions with available pricing data shown

For the first set of precedent transactions, Raymond James examined multiples of:

•

transaction value as a multiple of tangible book value; and

•

transaction value as a multiple of the target’s earnings for the last-twelve-months.

For the second set of precedent transactions, Raymond James examined multiples of:

•

transaction value as a multiple of tangible book value;

•

transaction value as a multiple of the target’s earnings for the last-twelve-months; and

•

transaction value premium over tangible book value as a percentage of core deposits.

Raymond James reviewed the means, medians, minimums, and maximums of these multiples for the selected transactions and compared them to the corresponding multiples for Mid-Wisconsin implied by the merger consideration.

				Multiples of Precedent Transactions
	Proposed Transaction			Low			Mean			Median			High
TARP Related M&A Transactions
Transaction Value/
Tangible Book Value Per Share		38.3	%		21.5	%		54.6	%		52.8	%		96.0	%
LTM Earnings Per Share ⁽¹⁾		NM			14.4	x		20.2	x		22.0	x		24.3	x
General M&A Transactions
Transaction Value/
Tangible Book Value Per Share		38.3	%		27.8	%		90.2	%		92.2	%		161.7	%
LTM Earnings Per Share ⁽¹⁾		NM			14.4	x		39.4	x		45.0	x		69.1	x
Transaction Value less TBV/
Core Deposits ⁽²⁾		–4.7	%		–5.5	%		–0.6	%		–0.8	%		6.2	%

(1)

Mid-Wisconsin’s LTM earnings as of September 30, 2012 were negative, thus its transaction value / LTM earnings per share was not material

(2)

Core deposits defined as total deposits less time deposits greater than $100,000

Raymond James also applied the mean, median, minimum, and maximum relative multiples for each of the metrics to Mid-Wisconsin’s actual financial results and determined the implied change of control price per share of Mid- Wisconsin as indicated by the precedent transactions and then compared those implied prices per share to the merger consideration of $6.15 per share.

	Implied Mid-Wisconsin Price Per Share Based on Precedent Transaction Multiples
	Low		Mean		Median		High
TARP Related M&A Transactions
Transaction Value/
Tangible Book Value Per Share	$	3.44	$	8.75	$	8.47	$	15.39
LTM Earnings Per Share ⁽¹⁾		NM		NM		NM		NM

General M&A Transactions
Transaction Value/
Tangible Book Value Per Share	$	4.45	$	14.47	$	14.79	$	25.93
LTM Earnings Per Share ⁽¹⁾		NM		NM		NM		NM
Transaction Value less TBV/
Core Deposits ⁽²⁾	$	4.62	$	14.79	$	14.29	$	29.09

(1)

Mid-Wisconsin’s LTM earnings as of September 30, 2012 were negative, thus its transaction value / LTM earnings per share was not material

(2)

Core deposits defined as total deposits less time deposits greater than $100,000

Net Present Value Analysis

Raymond James performed a net present value analysis to estimate a range of implied fully-diluted equity values for the holders of Mid-Wisconsin common stock. The analysis used financial projections provided by Mid-Wisconsin’s management for the years ending December 31, 2012 through 2015, which represented the best available estimates and judgment of management. The net income projections were modeled assuming Mid-Wisconsin continues to operate as an independent entity. The valuation range was determined by adding (i) the present value of estimated economic dividends from the time period December 31, 2012 to December 31, 2015 and (ii) the present value of the “terminal value” of Mid-Wisconsin. In calculating terminal values, Raymond James used tangible book value multiples of estimated 2015 year end tangible equity and price/earnings multiples of estimated 2015 net income. The tangible book value multiples ranged from 50.0% to 110.0%, while the price/earnings multiples ranged from 8.0x to 14.0x.

The projected dividends paid and terminal values were discounted using discount rates ranging from 16.0% to 22.0%, which are rates Raymond James viewed as appropriate for a company with Mid-Wisconsin’s risk characteristics and size. This analysis yielded a range of implied present values of Mid-Wisconsin price per share of common stock of $1.01 to $2.09 when applying a price / earnings multiple and $5.84 to $15.14 when applying a price / tangible book value multiple. Greater weight was placed on the price-to-earnings multiple analysis as a bank’s ability to generate earnings has historically had a more significant impact on its resulting stock price than its tangible book value.

Premium Paid Analysis

Raymond James analyzed the stock price premiums paid in the 25 merger and acquisition transactions used in the second set of precedent transactions above. These transactions were all announced since January 1, 2010 and included targets with assets between $200.0 million and $1.0 billion and nonperforming assets to total assets between 4.0% and 10.0% and a return on average assets of less than 0.50% for the last-twelve-months prior to the announced acquisition. In those transactions where the selling institution was a publicly-traded bank or thrift, Raymond James measured each transaction price per share relative to each target’s closing price per share one day, five days and 30 days prior to announcement of the transaction. Raymond James compared the mean, median, minimum and maximum premiums paid from this set of transactions to the Mid-Wisconsin merger consideration expressed as a premium relative to the closing stock price of Mid-Wisconsin on November 27, November 23, and October 29, 2012. The results of the premium paid analysis are summarized below:

	Premiums Paid in Precedent Transactions
	1-day			5-day			30-day
Minimum		–49.6	%		16.8	%		–40.3	%
Mean		29.2	%		58.2	%		53.4	%
Median		24.0	%		55.2	%		61.7	%
Maximum		69.1	%		143.0	%		149.2	%

	Proposed Transaction
	1-day			5-day			30-day
Merger consideration	$	6.15		$	6.15		$	6.15
Mid-Wisconsin closing stock price per share	$	4.00		$	4.50		$	4.95
Implied Transaction premium		53.8	%		36.7	%		24.2	%

Furthermore, Raymond James applied the mean, median, minimum, and maximum premiums for each of the metrics to Mid-Wisconsin’s actual corresponding closing stock prices to determine the implied equity price per share and then compared those implied equity values per share to the merger consideration of $6.15 per share. The results of this are summarized below:

	Implied Mid-Wisconsin Price Per Share Based on Premiums Paid in Precedent Transactions
	1-day		5-day		30-day
Minimum	$	2.02	$	5.26	$	2.95
Mean	$	5.17	$	7.12	$	7.59
Median	$	4.96	$	6.98	$	8.00
Maximum	$	6.76	$	10.94	$	12.34

	Proposed Transaction
	1-day			5-day			30-day
Merger consideration	$	6.15		$	6.15		$	6.15
Implied Transaction Premium		53.8	%		36.7	%		24.2	%

Additional Considerations

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. Raymond James believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering the analyses taken as a whole, would create an incomplete view of the process underlying the analyses set forth in its opinion. In addition, Raymond James considered the results of all such analyses and did not assign relative weights to any of the analyses, but rather made qualitative judgments as to significance and relevance of each analysis and factor. As such, the ranges of valuations resulting from any particular analysis described above should not be taken to be Raymond James’ view of the actual value of Mid-Wisconsin.

In performing its analyses, Raymond James made numerous assumptions with respect to industry performance, general business, economic and regulatory conditions and other matters, many of which are beyond the control of Mid-Wisconsin. The analyses performed by Raymond James are not necessarily indicative of actual values, trading values or actual future results which might be achieved, all of which may be significantly more or less favorable than suggested by such analyses. Such analyses were provided to the Mid-Wisconsin Board of Directors and were prepared solely as part of Raymond James’ analysis of the fairness, from a financial point of view, to the holders of Mid-Wisconsin common stock of the price per share merger consideration to be received by such holders in connection with the proposed merger. The analyses do not purport to be appraisals or to reflect the prices at which companies may actually be sold, and such estimates are inherently subject to uncertainty. The opinion of Raymond James was one of many factors taken into consideration by the Mid-Wisconsin Board of Directors in making its determination to approve the merger. Consequently, the analyses described above should not be viewed as determinative of the Mid-Wisconsin Board of Directors’ or Mid-Wisconsin management’s opinion with respect to the value of Mid-Wisconsin. Mid-Wisconsin placed no limits on the scope of the analysis performed, or opinion expressed, by Raymond James.

Raymond James’ opinion was necessarily based upon market, economic, financial, and other circumstances and conditions existing and disclosed to it on November 27, 2012, and any material change in such circumstances and conditions may affect Raymond James’ opinion, but Raymond James does not have any obligation to update, revise or reaffirm that opinion.

For services rendered in connection with the delivery of its opinion, Mid-Wisconsin paid Raymond James a customary investment banking fee upon delivery of its opinion. Mid-Wisconsin will also pay Raymond James a customary fee for advisory services in connection with the merger, which is contingent upon the closing of the merger. Mid-Wisconsin also agreed to reimburse Raymond James for its expenses incurred in connection with its services, including the fees and expenses of its counsel, and will indemnify Raymond James against certain liabilities arising out of its engagement.

Raymond James is actively involved in the investment banking business and regularly undertakes the valuation of investment securities in connection with public offerings, private placements, business combinations and similar transactions. In the ordinary course of business, Raymond James may trade in the securities of Mid-Wisconsin and Nicolet for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities.

OPINION OF NICOLET’S FINANCIAL ADVISOR

By letter dated July 17, 2012, Nicolet retained Sandler O’Neill to act as its financial advisor in connection with a potential merger with Mid-Wisconsin. Sandler O’Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Sandler O’Neill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

Sandler O’Neill acted as financial advisor to Nicolet in connection with the proposed transaction and participated in certain of the negotiations leading to the execution of the merger agreement. At a meeting of the Nicolet board of directors on November 20, 2012, Sandler O’Neill delivered to the Nicolet board of directors its oral opinion, followed by delivery of its written opinion, that, as of such date, the common stock consideration was fair to the holders of Nicolet common stock from a financial point of view. The full text of Sandler O’Neill’s written opinion dated November 28, 2012 is attached as Appendix D to this joint proxy statement prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the opinion. Nicolet stockholders are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.

Sandler O’Neill’s opinion speaks only as of the date of the opinion. The opinion was directed to the Nicolet board of directors and is directed only to the fairness, from a financial point of view, to the holders of Nicolet common stock of the common stock consideration to be paid to the holders of Mid-Wisconsin common stock. It does not address the underlying business decision of Nicolet to engage in the merger or any other aspect of the merger and is not a recommendation to any Nicolet stockholder as to how such stockholder should vote at the special meeting with respect to the merger or any other matter.

In connection with rendering its November 28, 2012 opinion, Sandler O’Neill reviewed and considered, among other things:

•

the merger agreement;

•

certain publicly available financial statements and other historical financial information of Nicolet that Sandler O’Neill deemed relevant;

•

certain publicly available financial statements and other historical financial information of Mid-Wisconsin that Sandler O’Neill deemed relevant;

•

internal financial projections for Nicolet for the years ending December 31, 2012 through December 31, 2014 as provided by and discussed with senior management of Nicolet;

•

internal financial projections for Mid-Wisconsin for the years ending December 31, 2012 through 2016 as provided by and discussed with senior management of Mid-Wisconsin;

•

the pro forma financial impact of the merger on Nicolet, based on assumptions relating to transaction expenses, purchase accounting adjustments, cost savings and other synergies as determined by the management of Nicolet;

•

a comparison of certain financial information for Nicolet and Mid-Wisconsin with similar institutions for which public information is available;

•

the financial terms of certain recent business combinations in the commercial banking industry, to the extent publicly available;

•

the current market environment generally and the banking environment in particular; and

•

such other information, financial studies, analyses and investigations and financial, economic and market criteria as Sandler O’Neill considered relevant.

Sandler O’Neill also discussed with certain members of senior management of Nicolet the business, financial condition, results of operations and prospects of Nicolet.

In performing its review, Sandler O’Neill has relied upon the accuracy and completeness of all of the financial and other information that was available to Sandler O’Neill from public sources, that was provided to Sandler O’Neill by Nicolet and by Mid-Wisconsin or their financial representatives or that was otherwise reviewed by Sandler O’Neill and Sandler O’Neill assumed such accuracy and completeness for purposes of rendering its opinion. Sandler O’Neill has further relied on the assurances of management of each of Nicolet and Mid-Wisconsin that they were not aware of any facts or circumstances that would make any of such information inaccurate or misleading. Sandler O’Neill has not been asked to and has not undertaken an independent verification of any of such information and it did not assume any responsibility or liability for the accuracy or completeness thereof. Sandler O’Neill did not make an independent evaluation or appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of Nicolet and Mid-Wisconsin or any of their subsidiaries, or the collectability of any such assets, nor was it furnished with any such evaluations or appraisals.

Sandler O’Neill did not make an independent evaluation of the adequacy of the allowance for credit losses of Nicolet and Mid-Wisconsin and has not reviewed any individual credit files relating to Nicolet and Mid-Wisconsin. Sandler O’Neill assumed, with Nicolet’s consent, that the respective allowances for credit losses for both Nicolet and Mid-Wisconsin are adequate to cover such losses.

With respect to the internal financial projections for Nicolet and Mid-Wisconsin and as provided by and discussed with the respective managements of Nicolet and Mid-Wisconsin and used by Sandler O’Neill in its analyses, the respective managements of Nicolet and Mid-Wisconsin confirmed to Sandler O’Neill that they reflected the best currently available estimates and judgments of such respective management of the future financial performances of Nicolet and Mid-Wisconsin, respectively, and Sandler O’Neill assumed that such performances would be achieved. With respect to the projections of transaction expenses, purchase accounting adjustments and cost savings provided by the management of Nicolet, management confirmed to Sandler O’Neill that they reflected the best currently available estimates and judgments of such management and Sandler O’Neill assumed that such performances would be achieved. Sandler O’Neill expressed no opinion as to such financial projections or the assumptions on which they are based. Sandler O’Neill has also assumed that there has been no material change in Nicolet and Mid-Wisconsin assets, financial condition, results of operations, business or prospects since the date of the most recent financial statements made available to Sandler O’Neill. Sandler O’Neill has assumed in all respects material to its analysis that Nicolet and Mid-Wisconsin will remain as going concerns for all periods relevant to the analyses, that all of the representations and warranties contained in the merger agreement are true and correct, that each party to the merger agreement will perform all of the covenants required to be performed by such party under the merger agreement and that the conditions precedent in the merger agreement are not waived. Sandler O’Neill expressed no opinion as to any of the legal, accounting or tax matters relating to the merger and the other transactions contemplated by the merger agreement.

Sandler O’Neill’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Sandler O’Neill as of, the date of the opinion. Events occurring after the date of the opinion could materially affect the opinion. Sandler O’Neill has not undertaken to update, revise, reaffirm or withdraw the opinion or otherwise comment upon events occurring after the date of the opinion. Sandler O’Neill expressed no opinion as to what the value of Nicolet common stock will be when issued to Mid-Wisconsin stockholders pursuant to the merger agreement or the prices at which Nicolet and Mid-Wisconsin common stock may trade at any time.

Sandler O’Neill’s opinion is directed only to the fairness, from a financial point of view, of the merger consideration to Nicolet and does not address the underlying business decision of Nicolet to engage in the merger, the relative merits of the merger as compared to any other alternative business strategies that might exist for Nicolet or the effect of any other transaction in which Nicolet might engage. Sandler O’Neill’s opinion was approved by Sandler O’Neill’s fairness opinion committee. Sandler O’Neill has consented to inclusion of its opinion and a summary thereof in this joint proxy statement/prospectus and in the registration statement on Form S-4 which includes this joint proxy statement/prospectus. Sandler O’Neill did not express any opinion as to the fairness of the amount or nature of the consideration to be received in the merger by any Nicolet or Mid-Wisconsin officer, director, or employee, or class of such persons, relative to the consideration to be received in the merger by any other stockholders.

In rendering its November 28, 2012 opinion, Sandler O’Neill performed a variety of financial analyses. The following is a summary of the material analyses performed by Sandler O’Neill, but is not a complete description of all the analyses underlying Sandler O’Neill’s opinion. The summary includes information presented in tabular format. In order to fully understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. In arriving at its opinion, Sandler O’Neill did not attribute any particular weight to any analysis or factor that it considered. Rather Sandler O’Neill made qualitative judgments as to the significance and relevance of each analysis and factor. Sandler O’Neill did not form an opinion as to whether any individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinion; rather Sandler O’Neill made its determination as to the fairness of the common stock consideration on the basis of its experience and professional judgment after considering the results of all its analyses taken as a whole. The process, therefore, is not necessarily susceptible to a partial analysis or summary description. Sandler O’Neill believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses to be considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all such factors and analyses, could create an incomplete view of the evaluation process underlying its opinion. Also, no company included in Sandler O’Neill’s comparative analyses described below is identical to Nicolet or Mid-Wisconsin and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or merger transaction values, as the case may be, of Nicolet or Mid-Wisconsin and the companies to which they are being compared.

In performing its analyses, Sandler O’Neill also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which cannot be predicted and are beyond the control of Nicolet, Mid-Wisconsin and Sandler O’Neill. The analysis performed by Sandler O’Neill is not necessarily indicative of actual values or future results, both of which may be significantly more or less favorable than suggested by such analyses. Sandler O’Neill prepared its analyses solely for purposes of rendering its opinion and provided such analyses to the Nicolet board of directors at the November 20, 2012 meeting. Estimates on the values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different. The analysis and opinion of Sandler O’Neill was among a number of factors taken into consideration by the Nicolet board of directors in making its determination to adopt the plan of merger contained in the merger agreement and the analyses described below should not be viewed as determinative of the decision the Nicolet board of directors with respect to the fairness of the merger.

At the November 20, 2012 meeting of the Nicolet board of directors, Sandler O’Neill presented certain financial analyses of the merger. The summary below is not a complete description of the analyses underlying the opinions of Sandler O’Neill or the presentation made by Sandler O’Neill to the Nicolet board of directors, but is instead a summary of the material analyses performed and presented in connection with the opinion.

Summary of Proposal

Sandler O’Neill reviewed the financial terms of the proposed transaction. Using the per share cash consideration of the fixed exchange ratio of 0.3727x multiplied by Nicolet’s stock price of $16.50 as agreed upon in the merger agreement, as amended, Sandler O’Neill calculated that Nicolet would pay a transaction value of $6.15 per share, or a transaction value of $10.2 million for the common shares of Mid-Wisconsin, plus the redemption of $10.5 million for the Mid-Wisconsin Preferred Stock and $1.2 million for deferred Preferred Stock dividends and accured and unpaid interest on the Debentures. Based upon financial information for Mid-Wisconsin as or for the quarter ended September 30, 2012, Sandler O’Neill calculated the following ratios related to the transaction:


Transaction price/Last twelve months EPS	NM		23.9	x	16.4	x
Transaction price/Estimated 2012 EPS	NM		—		—
Transaction price/Book value	38	%	76	%	109	%
Transaction price/Tangible book value	38	%	76	%	109	%
Transaction price/Adj. tangible book value (1)	52	%	—		—
Core deposit premium (2)	(5.4	)%	(2.1	)%	0.9	%
Premium to market (3)	28.1	%	37.2	%	—

(1)

Stated 9/30/12 Tangible Common Equity adjusted for estimated purchase accounting adjustments; includes impact of pre-tax mark-to-market of –$24.6 mm on gross loans (–7.94%), –$2.5 mm on OREO (–55.9%), $0.6 mm on Investment Securities; $5.0 mm on fixed assets; $2.4 mm on FHLB borrowings and –$5.5 mm on Trust Preferred Securities.

(2)

Core deposits measured as total deposits less all time deposits greater than $100,000.

(3)

Based on Mid-Wisconsin’s closing price as of November 14, 2012 of $4.80.

(4)

Includes all bank and thrift transactions announced since January 1, 2011 with Target NPAs / Assets > 5.5% and disclosed Deal Values $5 mm–$50 mm (31 transactions).

(5)

Includes all bank and thrift transactions announced since January 1, 2011 for institutions headquartered in WI, MN and MI with disclosed Deal Values $5 mm–$50 mm (6 transactions).

The aggregate transaction value for the common stock of Mid-Wisconsin of approximately $10.2 million is based upon the offer price per share of $6.15 and 1,657,119 shares of Mid-Wisconsin common stock outstanding.

Comparable Company Analysis

Sandler O’Neill used publicly available information to perform a comparison of selected financial and market trading information for Mid-Wisconsin and Nicolet. Sandler O’Neill also used publicly available information to compare selected financial and market trading information for Mid-Wisconsin and a group of financial institutions selected by Sandler O’Neill. The Mid-Wisconsin peer group consisted of the following publicly-traded commercial banks headquartered in Wisconsin and Michigan with total assets greater than $300 million and less than $1.0 billion as selected by Sandler O’Neill ¹ :

Baylake Corporation				Citizens Community Bancorp
First Manitowoc Bancorp Inc.				Southern Michigan Bancorp Inc.
United Bancorp Inc.				ChoiceOne Financial Services
Baraboo Bancorp				CIB Marine Bancshares Inc.
PSB Holdings Inc.				Denmark Bancshares Inc.
HMN Financial Inc.				Commercial National Financial
Blackhawk Bancorp Inc.				West Shore Bank Corporation
Mackinac Financial Corp.				Sturgis Bancorp

The analysis compared publicly available financial information for Mid-Wisconsin, Nicolet and the median financial and market trading data for the Mid-Wisconsin peer group as of and for the last twelve months ended September 30, 2012. The table below sets forth the data for Mid-Wisconsin, Nicolet and the

median data for the Mid-Wisconsin peer group as of and for the last twelve months ended September 30, 2012, with pricing data as of November 12, 2012.

	Mid-Wisconsin			Nicolet			Comparable Group Median
Total assets (in millions)	$	464		$	682		$	542
Tangible common equity/tangible assets		5.73	%		7.25	%		8.19	%
Total risk based capital ratio		16.14	%		15.12	%		14.67	%
Return on average assets		0.32	%		0.57	%		0.7	%
Net interest margin		3.32	%		3.81	%		3.68	%
Efficiency ratio		73.2	%		68.1	%		67.5	%
Non-performing assets/assets		5.64	%		2.31	%		2.91	%
Loan loss reserve/total loans		3.40	%		1.18	%		1.75	%
Net charge-offs/average loans		1.47	%		0.40	%		0.83	%
Market capitalization (in millions)	$	8.0			NA		$	30.7
Price/Last twelve months earnings per share		NM			NA			10.0
Price/tangible book value		30	%		NA			73	%

Financial data as of or for period ending September 30, 2012
Pricing data as of November 12, 2012

				Balance Sheet				Capital Adequacy						Profitability (MRQ)								Asset Quality						Valuation
																												Price/
Company	City, State	Ticker		Total Assets ($mm)		Loans/ Deposits (%)		TCE/ TA (%)		Leverage Ratio (%)		Total RBC (%)		ROAA (%)		ROAE (%)		NIM (%)		Eff. Ratio (%)		Res./ Loans (%)		NPAs/ Assets (%)		NCOs/ Loans (%)		TBV (%)		LTM EPS (x)		Market Cap. ($mm)
Baylake Corp.	Sturgeon Bay, WI		BYLK		985		75.2		8.63		8.48		15.28		0.80		9.3		3.53		64.2		1.77		2.73		2.03		73		10.3		61.5
First Manitowoc Bancorp Inc.	Manitowoc, WI		FMWC		938		90.1		9.72		9.28		12.28		0.97		9.3		3.78		51.6		1.09		1.14		0.27		111		9.8		100.0
United Bancorp Inc.	Ann Arbor, MI		UBMI		899		76.3		8.50		10.10		16.40		0.62		5.8		3.65		67.4		3.72		4.32		1.10		73		13.3		55.9
Baraboo Bancorp.	Baraboo, WI		BAOB		746		81.8		6.07		8.81		12.63		0.67		7.3		3.41		67.1		2.47		8.51		1.19		30		NM		13.6
PSB Holdings Inc.	Wausau, WI		PSBQ		693		87.7		7.77		8.58		14.72		0.70		9.2		3.39		59.9		1.54		2.48		0.19		83		7.8		44.9
HMN Financial Inc. ²	Rochester, MN		HMNF		644		97.9		5.38		9.55		14.61		0.40		4.2		3.71		74.4		4.10		7.38		1.29		45		NM		15.5
Blackhawk Bancorp Inc. ³	Beloit, WI		BHWB		559		73.4		5.72		7.93		12.29		0.50		6.0		3.63		69.0		1.74		4.47		2.64		45		6.4		14.3
Mackinac Financial Corp	Manistique, MI		MFNC		551		98.8		11.24		11.93		15.15		0.76		6.1		4.10		67.5		1.20		1.60		0.04		65		5.0		40.2
Citizens Community Bncp ^{2 4}	Eau Claire, WI		CZWI		533		101.1		10.09		10.18		15.00		0.26		2.6		3.90		74.2		1.32		2.15		0.81		54		NM		29.3
Southern Michigan Bancorp Inc.	Coldwater, MI		SOMC		516		81.3		7.89		9.00		13.70		0.91		8.6		3.83		67.2		1.52		2.20		0.18		81		7.6		32.1
ChoiceOne Financial Services ⁴	Sparta, MI		COFS		510		72.2		9.05		8.47		13.40		0.88		7.5		4.06		65.2		1.90		1.91		0.44		107		11.4		47.9
CIB Marine Bancshares Inc.	Waukesha, WI		CIBH		495		80.2		3.25		13.80		18.55		0.76		5.7		3.75		103.2		3.69		6.10		1.35		34		NM		5.5
Denmark Bancshares Inc. ⁴	Denmark, WI		DMKB		430		91.2		13.50		13.79		19.92		0.91		6.8		3.42		61.5		2.11		3.09		0.53		64		10.2		37.1
Commercial National Financial ^{2 4}	Ithaca, MI		CEFC		365		89.4		5.65		8.08		14.59		0.51		8.9		3.61		71.1		0.84		3.89		0.86		127		12.5		26.0
West Shore Bank Corporation	Ludington, MI		WSSH		345		81.7		9.20		8.85		15.26		0.69		7.5		3.84		70.4		1.34		2.50		0.84		86		12.3		27.3
Sturgis Bancorp	Sturgis, MI		STBI		317		109.5		6.84		8.69		13.26		0.66		7.9		3.61		72.4		2.10		6.06		0.07		76		7.7		16.2

High					985		109.5		13.50		13.80		19.92		0.97		9.3		4.10		103.2		4.10		8.51		2.64		127		13.3		100.0
Low					317		72.2		3.25		7.93		12.28		0.26		2.6		3.39		51.6		0.84		1.14		0.04		30		5.0		5.5
Mean					595		86.7		8.03		9.72		14.82		0.69		7.0		3.70		69.1		2.03		3.78		0.86		72		9.5		35.4
Median					542		84.8		8.19		8.93		14.67		0.70		7.4		3.68		67.5		1.75		2.91		0.83		73		10.0		30.7

Mid-Wisconsin Financial	Medford, WI		MWFS		464		84.4		5.73		9.70		16.14		0.32		4.1		3.32		73.2		3.40		5.64		1.47		30		NM		8.0

Nicolet Bankshares, Inc.	Green Bay, WI		—		678		98.9		7.25		11.54		15.12		0.57		5.1		3.81		68.1		1.18		2.31		0.40		—		—		—

(1)

Includes public banks and thrifts headquartered in WI, MN, and MI with assets between $300 mm—$1.0 bn. Excludes companies with less than 1.0% of one year average trading volume / total shares.

(2)

Bank level regulatory financial data for the period ended September 30, 2012.

(3)

Regulatory financial data for the period ended September 30, 2012.

(4)

GAAP Financial data for the period ended June 30, 2012.

Net Present Value Analysis of Mid-Wisconsin Common Stock

Sandler O’Neill performed an analysis that estimated the present value per share of Mid-Wisconsin common stock through December 31, 2016. Sandler O’Neill based the analysis on Mid-Wisconsin projected earnings stream as derived from the internal financial projections provided by Mid-Wisconsin management for the years ending December 31, 2012 through 2016. To approximate the terminal value of Mid-Wisconsin common stock at December 31, 2016, Sandler O’Neill applied price to forward earnings multiples of 12.0x to 16.0x and multiples of tangible book value ranging from 100% to 180%. The income streams and terminal values were then discounted to present values using different discount rates ranging from 12.0% to 15.0%, which were assumed deviations, both up and down, as selected by Sandler O’Neill based on the Mid-Wisconsin discount rate of 13.4% as determined by Sandler O’Neill. The discount rate is determined by adding the 10 year Treasury Bond rate (1.61%), the published Ibbotson 60 year equity risk premium (5.70%), the published Ibbotson size premium (3.89%) and the published Ibbotson Industry Premium (2.20%).

Earnings Per Share Multiples
(Value shown in $ per share)

Discount Rate
12.0%	12.65	13.71	14.76	15.82	16.87
13.0%	12.18	13.20	14.22	15.23	16.25
13.4%	12.00	13.00	14.00	15.00	16.00
14.0%	11.74	12.71	13.69	14.67	15.65
15.0%	11.31	12.25	13.19	14.14	15.08

Sandler O’Neill also considered and discussed with Nicolet’s board of directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler O’Neill performed a similar analysis assuming Mid-Wisconsin net income varied from 20% above projections to 20% below projections. This analysis resulted in the following reference ranges of indicated per share values for Mid-Wisconsin common stock, using a discount rate of 13.40%:

Earnings Per Share Multiples
(Value shown in $ per share)

EPS Projection Change from Base Case
–20.0%	9.60	10.40	11.20	12.00	12.80
–10.0%	10.80	11.70	12.60	13.50	14.40
0.0%	12.00	13.00	14.00	15.00	16.00
10.0%	13.20	14.30	15.40	16.50	17.60
20.0%	14.40	15.60	16.80	18.00	19.20

Analysis of Selected Merger Transactions

Sandler O’Neill reviewed the terms of merger transactions announced from January 1, 2011 through November 20, 2012 involving Midwest banks with announced transaction values of greater than $5 million and less than $50 million and nationwide banks where the target had an Nonperforming Assets/Assets ratio greater than 5.5% with announced transaction values of greater than $5 million and less than $50 million. Sandler O’Neill deemed these transactions to be reflective of the proposed Mid-Wisconsin and Nicolet combination. Sandler O’Neill reviewed the following ratios and multiples: transaction price to stated book value, transaction price to stated tangible book value, transaction price to last twelve months earnings per share, and market price premium at announcement. As illustrated in the following table, Sandler O’Neill compared the proposed merger multiples to the median multiples of the comparable transactions.


Transaction price/book value	38	%	76	%	109	%
Transaction price/tangible book value	38	%	76	%	109	%
Transaction price/last twelve months earnings per share	NM		23.9	x	16.4	x
Core deposit premium	(5.4	)%	(2.1	)%	0.9	%
Premium to market	28.1	%	37.2	%	NA

Transactions Announced with a Nationwide Bank Target with NPAs/Assets > 5.5%

Announced Deal Value $5mm-$50mm

				Transaction Information														Seller Information
						Price/
Acquiror	Target	State	Annc. Date	Deal Value ($mm)		LTM EPS (x)		Book Value (%)		TBV (%)		Core Deposit Premium (%)			1 Day Market Premium (%)			Total Assets ($mm)		TCE/ TA (%)		YTD ROAA (%)			NPAs/ Assets (%)
Talmer Bancorp Inc.	First Place Bank	OH	10/26/12		45.0		1.6		29		29		(5.3	)		—			2,639		5.79		1.31			7.74
BBCN Bancorp Inc.	Pacific International Bancorp	WA	10/22/12		14.7		NM		37		37		(7.2	)		—			209		11.68		(2.83	)		12.04
Sterling Financial Corp.	American Heritage Holdings	CA	10/22/12		6.5		NM		51		51		(5.1	)		—			150		9.88		(0.34	)		11.97
Strategic Growth Bank Inc.	Mile High Banks	CO	09/27/12		5.5		NM		27		27		(1.9	)		—			844		2.41		(0.49	)		15.71
Old Line Bancshares Inc	WSB Holdings Inc.	MD	09/10/12		49.0		43.7		89		89		(2.8	)		—			374		14.76		0.24			10.04
City Holding Co.	Community Financial Corp.	VA	08/02/12		37.9		23.9		66		66		(3.8	)		46.8			504		7.53		0.35			7.27
Hana Financial Group Inc.	BNB Financial Services Corp.	NY	07/21/12		11.3		NM		42		42		(7.7	)		—			355		11.97		(0.54	)		6.59
Drummond Banking Co.	Williston Holding Co.	FL	06/14/12		15.6		NM		83		83		(2.1	)		—			188		7.45		(2.55	)		7.21
BNC Bancorp	First Trust Bank	NC	06/04/12		36.0		14.0		76		76		(4.3	)		27.7			437		10.86		0.76			10.43
Northfield Bancorp Inc. (MHC)	Flatbush Fed Bncp Inc. (MHC)	NY	02/29/12		18.2		NM		120		120		3.8			90.1			144		10.53		(0.73	)		7.17
Arvest Bank Group Inc.	Union Bank	MO	01/30/12		34.0		NM		189		189		3.9			—			459		3.91		(3.13	)		25.59
First Volunteer Corp.	Gateway Bancshares Inc.	GA	01/12/12		16.4		24.3		69		69		(3.2	)		—			267		9.24		(0.44	)		6.09
BNC Bancorp	KeySource Financial Inc.	NC	12/21/11		12.2		14.4		60		60		(5.0	)		—			206		10.86		0.18			7.36
First Farmers Financial Corp	First Citizens of Paris Inc.	IL	12/14/11		16.9		49.0		88		90		(1.1	)		—			219		10.13		0.33			5.89
Bitterroot Holding Co.	Ravalli County Bankshares Inc.	MT	10/12/11		18.1		NM		89		89		(1.7	)		—			187		10.92		0.10			8.66
SKBHC Holdings LLC	Viking Fncl. Services Corp.	WA	09/08/11		7.2		NM		68		68		(1.0	)		—			405		2.62		(1.91	)		11.61
Investors Bancorp Inc. (MHC)	BFS Bancorp MHC	NY	08/16/11		10.3		NM		25		25		(9.5	)		—			470		8.67		(1.58	)		24.93
Wintrust Financial Corp.	Elgin State Bancorp Inc.	IL	07/25/11		15.5		NM		92		92		(0.6	)		—			288		6.44		0.02			6.41
Security Star Bancshares Inc.	Bank of Texas Bcshs Inc.	TX	07/22/11		5.1		NM		113		113		1.7			—			50		9.15		(2.06	)		5.71
SKBHC Holdings LLC	Sunrise Bank	CA	06/09/11		18.5		NM		92		92		(1.0	)		—			232		8.67		0.95			6.07
SKBHC Holdings LLC	Bank of the Northwest	WA	05/24/11		16.8		NM		111		111		1.5			—			146		10.38		0.22			5.72
North American Finl Hldgs Inc.	Green Bankshares Inc	TN	05/05/11		9.9		NM		8		8		(7.6	)		—			2,406		2.89		(3.21	)		10.77
Banco do Brasil S.A.	EuroBank	FL	04/06/11		6.0		NM		109		109		1.3			—			102		5.39		(3.47	)		12.39
First Bank Lubbock Bcshs Inc.	Jefferson Bank	TX	04/03/11		11.0		NM		92		92		(1.1	)		—			205		5.83		(0.91	)		10.55
Park Sterling Corporation	Community Capital Corp.	SC	03/30/11		32.3		NM		68		70		(3.2	)		21.2			656		7.05		(0.75	)		6.62
First Foundation Inc.	Desert Commercial Bank	CA	03/22/11		20.1		NM		126		126		4.8			—			153		10.40		(1.01	)		5.98
Embarcadero Bank	Coronado First Bank	CA	03/22/11		9.3		NM		100		100		(0.0	)		48.4			83		11.21		(0.12	)		7.45
Opus Bank	Cascade Financial Corp.	WA	03/03/11		21.8		NM		26		27		(3.4	)		(19.9	)		1,498		1.39		(4.27	)		9.76
Piedmont Cmnty Bk Hldgs Inc.	Crescent Financial Corp.	NC	02/23/11		30.6		NM		44		44		(10.4	)		—			973		5.65		(1.00	)		5.51
IBERIABANK Corp.	Omni Bancshares Inc.	LA	02/21/11		40.0		NM		121		121		1.4			—			746		4.42		(0.04	)		8.71
CBM Florida Holding Co.	First Community Bk of America	FL	02/10/11		10.0		NM		37		37		(5.5	)		—			471		5.74		(3.48	)		9.75

				Transaction Information														Seller Information
						Price/
Acquiror	Target	State	Annc. Date	Deal Value ($mm)		LTM EPS (x)		Book Value (%)		TBV (%)		Core Deposit Premium (%)			1 Day Market Premium (%)			Total Assets ($mm)		TCE/ TA (%)		YTD ROAA (%)			NPAs/ Assets (%)
			High		49.0		49.0		189		189		4.8			90.1			2,639		14.76		1.31			25.59
			Low		5.1		1.6		8		8		(10.4	)		(19.9	)		50		1.39		(4.27	)		5.51
			Mean		19.4		24.4		76		76		(2.4	)		35.7			518		7.86		(0.98	)		9.60
			Median		16.4		23.9		76		76		(2.1	)		37.2			288		8.67		(0.54	)		7.74

Transactions Announced with a Bank Target with Headquarters located in Wisconsin, Michigan or Minnesota

Announced Deal Value $5mm-$50mm

				Transaction Information													Seller Information
						Price/
Acquiror	Target	State	Annc. Date	Deal Value ($mm)		LTM EPS (x)		Book Value (%)		TBV (%)		Core Deposit Premium (%)			1 Day Market Premium (%)		Total Assets ($mm)		TCE/ TA (%)		YTD ROAA (%)		NPAs/ Assets (%)
Centra Ventures Inc	Richmond Bank Holding Co.	MN	09/14/12		8.3		10.4		70		70		(5.0	)		—		86		14.27		0.81		0.30
Heartland Financial USA Inc.	First Shares Inc.	WI	07/31/12		11.0		34.7		85		85		(1.8	)		—		130		11.00		0.26		1.96
Frandsen Financial Corporation	Clinton Bancshares Inc.	MN	07/27/12		11.2		11.9		120		120		3.5			—		66		14.16		2.92		0.88
PSB Holdings Inc.	Marathon State Bank	WI	03/15/12		5.6		9.9		100		100		0.0			—		108		18.42		0.54		0.00
Golden Oak Bancshares, Inc	Park Bank	WI	05/18/11		6.3		21.0		123		123		4.6			—		44		14.45		0.82		5.17
Finlayson Bancshares Inc.	First NB of the North	MN	01/20/11		7.1		51.6		119		119		1.9			—		70		8.60		0.64		2.59

			High		11.2		51.6		123		123		4.6			—		130		18.42		2.92		5.17
			Low		5.6		9.9		70		70		(5.0	)		—		44		8.60		0.26		0.00
			Mean		8.3		23.2		103		103		0.5			—		84		13.48		1.00		1.82
			Median		7.7		16.4		109		109		0.9			—		78		14.21		0.73		1.42

Pro Forma Merger Analysis

Sandler O’Neill analyzed certain potential pro forma effects of the merger, assuming the following: (1) the merger is completed at the end of the first quarter of 2013; (2) the deal value per share is equal to $6.15 per Mid-Wisconsin share, given an exchange ratio of 0.3727 of a share of Nicolet common stock for each share of Mid-Wisconsin common stock; (3) management prepared earnings projections for Mid-Wisconsin for the years ending December 31, 2013 through 2016 as adjusted by senior management of Nicolet; (4) certain purchase accounting adjustments, including a credit mark against Mid-Wisconsin’s loan portfolio, and additional marks on securities, fixed assets, and borrowings; (5) cost savings of 20% of Mid-Wisconsin’s annual operating expenses, fully phased-in in 2013; (6) approximately $2.0 million in pre-tax transaction costs and expenses; and (7) certain other assumptions pertaining to costs and expenses associated with the transaction, intangible amortization, opportunity cost of cash and other items.

For each of the years 2013 and 2014, Sandler O’Neill compared the earnings per share of Nicolet common stock to the earnings per share, on the basis of GAAP, of the combined company common stock using the foregoing assumptions.

The following table sets forth the results of the analysis:

				GAAP Basis Accretion
2013 Estimated EPS				$	1.14
2014 Estimated EPS				$	1.53

The analyses indicated that the merger would be accretive to Nicolet’s projected 2011 and 2012 earnings per share. The actual results achieved by the combined company may vary from projected results and the variations may be material.

At the anticipated close of the transaction, Sandler O’Neill compared the estimated tangible book value (“TBV”) per share of Nicolet to the estimated pro forma tangible book value of the combined company using the foregoing assumptions. The following table sets forth the results of the analysis:

				TBV per Share at March 31, 2013
Nicolet stand alone estimate				$	14.66
Pro forma combined estimate				$	16.48

Sandler O’Neill’s Compensation and Other Relationships with Nicolet

Nicolet’s board of directors selected Sandler O’Neill as financial advisor in connection with the merger based on Sandler O’Neill’s qualifications, expertise, reputation and experience in mergers and acquisitions. Nicolet agreed to pay Sandler O’Neill a transaction fee of $500,000. $150,000 of the transaction fee was payable upon the signing of the merger agreement and delivery of Sandler O’Neill’s fairness opinion to the board of directors. The remainder of the transaction fee is contingent upon completion of the merger. Nicolet has also agreed to reimburse Sandler O’Neill for its expenses and to indemnify Sandler O’Neill against certain liabilities arising out of its engagement. Sandler O’Neill’s fairness opinion was approved by Sandler O’Neill’s fairness opinion committee.

In the ordinary course of their respective broker and dealer businesses, Sandler O’Neill may purchase securities from and sell securities to Mid-Wisconsin and Nicolet and their affiliates. Sandler O’Neill may also actively trade the debt and/or equity securities of Mid-Wisconsin and Nicolet or their affiliates for their own accounts and for the accounts of their customers and, accordingly, may at any time hold a long or short position in such securities. Sandler O’Neill in the past has provided and in the future may provide investment banking and other financial services to Nicolet. In the past two years, Sandler O’Neill has received no compensation other than fees referenced above for such services and in the future may receive compensation for rendering of such services.

THE MERGER AGREEMENT

This section of the proxy statement-prospectus describes certain terms of the merger agreement. It is not intended to include every term of the merger, but rather addresses only the significant aspects of the merger. This discussion is qualified in its entirety by reference to the merger agreement, which is attached as Appendix A to this joint proxy statement-prospectus and is incorporated herein by reference, and the opinions of the parties’ respective financial advisors, which are attached as Appendices C and D to this joint proxy statement-prospectus and are incorporated herein by reference. We urge you to read these documents as well as the discussion in this document carefully.

General; Business and Operations after the Merger

If the shareholders of Mid-Wisconsin and Nicolet approve the merger agreement and the other conditions to the consummation of the merger are satisfied, Nicolet will acquire Mid-Wisconsin. Nicolet will exchange 0.3727 shares of Nicolet common stock for each outstanding share of Mid-Wisconsin common stock, except for fractional shares, dissenting shares, state-restricted shares and cash-out shares which will receive cash as described further below. Each share of Nicolet common stock issued and outstanding immediately prior to the effective date of the merger, except for shares as to which dissenters’ rights have been exercised, will remain issued and outstanding and unchanged as a result of the merger.

Following the consummation of the merger, Mid-Wisconsin Bank will merge with and into Nicolet National Bank with Nicolet National Bank surviving the merger. Mid-Wisconsin Financial Services, Inc. and Mid-Wisconsin Bank will cease to exist after the merger, and the business of Mid-Wisconsin Bank will be conducted through Nicolet National Bank. Two current Mid-Wisconsin directors, Kim A. Gowey and Christopher Ghidorzi, will be appointed to the boards of directors of Nicolet Bankshares, Inc. and Nicolet National Bank to serve on their respective boards following the merger. With the exception of the aforementioned additions, it is expected that the current directors and executive officers of Nicolet and Nicolet National Bank will remain in place following the merger.

What Mid-Wisconsin’s Shareholders Will Receive in the Merger

Stock Merger Consideration

If the merger is completed, holders of Mid-Wisconsin common stock will receive for each of their shares 0.3727 shares of Nicolet common stock, except in the cases referred to under “— Cash Merger Consideration” and “Dissenters’ Rights” below.

Although the Mid-Wisconsin common stock is traded on the Over-the-Counter Bulletin Board on the OTCQB marketplace, historical transactions in its stock have been sporadic and irregular. Nicolet plans to cause its common stock to be quoted on the Over-the-Counter Bulletin Board or other quotation system at or before the closing of the merger, but its common stock is not currently traded on any securities exchange or quotation system. The last sale of Nicolet common stock known to management prior to the mailing of this joint proxy statement-prospectus occurred on ________, 2013 at $_____ per share, and the last sale of Mid-Wisconsin common stock reported on the OTCQB occurred on ________, 2013 at $_____ per share. However, given the historical absence of a fully liquid market for Nicolet and Mid-Wisconsin common stock, neither the price at which Nicolet or Mid-Wisconsin common stock was last sold nor the price of Nicolet common stock for the purposes of cashing out fractional shares in this transaction should be considered indicative of the value of Nicolet common stock following this transaction.

Any shares of Mid-Wisconsin common stock held in the treasury of Mid-Wisconsin immediately prior to the effective time of the merger will be canceled and extinguished. No payment will be made with respect to such shares. In addition, all outstanding options to purchase Mid-Wisconsin common stock will be cancelled effective upon the closing of the merger without payment.

Cash Merger Consideration

Fractional Shares. No fractional shares of Nicolet common stock will be issued in connection with the merger. Instead, Nicolet will make a cash payment without interest to each shareholder of Mid-Wisconsin who would otherwise receive a fractional share. The amount of such cash payment will be determined by multiplying the fraction of a share of Nicolet common stock otherwise issuable to such shareholder by $16.50, the value attributed to each share of Nicolet common stock solely for purposes of this transaction.

State-Restricted Shares. A record holder of shares of Mid-Wisconsin common stock who resides in a state in which shares of Nicolet common stock cannot be issued in the merger under that state’s securities laws without commercially unreasonable effort or expense will receive, in lieu of shares of Nicolet common stock, $6.15 in cash, which reflects the value attributed to a share of Mid-Wisconsin’s common stock for purposes of this transaction, for each share of Mid-Wisconsin common stock he, she or it owns. Nicolet will be permitted to issue its common stock in the merger based on a self-executing exemption that is available in all states except the District of Columbia, Minnesota, New Hampshire, New York, and Utah. In those states, a notice or other filing is required. Although Nicolet presently anticipates that it will be able to issue stock in the merger in those states as well without unreasonable commercial effort or expense, it is possible that it could encounter a condition to issuance that would make it economically unreasonable to issue shares to any shareholders residing in that state.

Cash-Out Shares. As a means of reducing the administrative burden and expense relating to servicing holders of small numbers of shares of Nicolet common stock after the merger, Nicolet intends to pay cash in the amount of $6.15 per share to Mid-Wisconsin shareholders who own 200 or fewer shares of Mid-Wisconsin common stock of record as of the closing date of the merger. This cash payment is in lieu of the issuance of shares of Nicolet common stock in the merger. Nicolet may adjust the 200-share threshold if, after deducting payments for fractional shares and state-restricted shares and estimated payments for Mid-Wisconsin dissenting shares from $500,000, the amount of cash payable for cash-out shares at that threshold would not enable each holder of cash-out shares to receive $6.15 per share for all of their shares. In such a case, Nicolet may either: (i) change the 200-share threshold to the highest number of shares that would enable all Mid-Wisconsin shareholders with record ownership of Mid-Wisconsin common stock below the new threshold to receive the cash merger consideration of $6.15 per share for all of their shares or (ii) deliver shares of Nicolet common stock as merger consideration to all holders of cash-out shares in accordance with the terms of the merger agreement.

Series A and B Preferred Stock

Treasury, as the holder of Mid-Wisconsin’s Preferred Stock, will be paid the $10.5 million stated value of those shares, together with accrued and unpaid dividends, by Mid-Wisconsin (or by Nicolet if Mid-Wisconsin is unable to obtain regulatory approval for such payment, not to exceed a total of $12.0 million) at or before the effective time of the merger.

Debentures

Mid-Wisconsin will pay all accrued and unpaid interest on its Debentures at or before the effective time of the merger, subject to regulatory approval. If Mid-Wisconsin is unable to obtain regulatory approval to pay the accrued and unpaid interest on the Debentures, Nicolet will make such payment.

Dissenters’ Rights

Holders of shares of Mid-Wisconsin common stock who properly elect to exercise the dissenters’ rights provided for in Subchapter XIII of the WBCL will not have their shares converted into the right to receive merger consideration. If a holder’s dissenters’ rights are lost or withdrawn, such holder will receive his, hers or its pro rata portion of the merger consideration. Nicolet shareholders will also have dissenters’ rights in connection with their vote on the merger. See “Dissenters’ Rights” on page 76 and Appendix B for additional information.

Effect of the Merger on Mid-Wisconsin Options

As of September 30, 2012, Mid-Wisconsin had 30,510 options to purchase Mid-Wisconsin common stock outstanding at a weighted average exercise price of $28.13 per share. The merger agreement requires that all outstanding options to acquire shares of Mid-Wisconsin common stock, whether or not then exercisable, be cancelled effective upon the closing of the merger without payment.

Closing and Effective Time of the Merger

The merger will be completed only if all of the following occur:

•

the merger agreement is approved by Mid-Wisconsin’s and Nicolet’s shareholders;

•

all required regulatory consents and approvals are obtained; and

•

all other conditions to the merger discussed in this joint proxy statement-prospectus and the merger agreement are either satisfied or waived.

If all of these conditions are met, the closing of the merger will occur as soon as practicable thereafter on a date mutually agreeable to Nicolet and Mid-Wisconsin.

Representations and Warranties in the Merger Agreement

Mid-Wisconsin and Nicolet have made customary representations and warranties to each other as part of the merger agreement. Mid-Wisconsin’s representations and warranties are contained in Section 5 of the merger agreement and relate to, among other things:

•

its organization and authority to enter into the merger agreement;

•

its capitalization, subsidiaries, properties and financial statements;

•

pending and threatened litigation against Mid-Wisconsin and its subsidiaries;

•

Mid-Wisconsin Bank’s loan portfolio and allowance for loan losses;

•

its insurance, employee benefits, tax and environmental matters;

•

Mid-Wisconsin Bank’s privacy of customer information and the status of technology systems;

•

its legal and regulatory compliance;

•

its contractual obligations and contingent liabilities; and

•

its public reports filed with the SEC.

Nicolet’s representations and warranties are contained in Section 6 of the merger agreement and relate to, among other things:

•

its organization and authority to enter into the merger agreement;

•

its capitalization, subsidiaries and financial statements;

•

pending and threatened litigation against Nicolet and its subsidiaries;

•

Nicolet National Bank’s loan portfolio and allowance for loan losses;

•

tax matters;

•

legal and regulatory compliance; and

•

the shares of Nicolet common stock to be issued in the merger.

Each party’s representations and warranties are for the benefit of the other; they are not for the benefit of and may not be relied upon by shareholders. The representations and warranties of the parties will not survive the closing of the merger.

Conditions to the Merger

The merger agreement contains a number of conditions that must be satisfied or waived (if they are waivable) to complete the merger. The conditions include, among other things:

•

approval by Mid-Wisconsin’s shareholders and Nicolet’s shareholders of the merger agreement by the required vote;

•

approval of the merger and the transactions contemplated thereby by the OCC, the Federal Reserve and the WDFI without imposing conditions that would materially adversely affect the economic or business benefits of the transaction to either Nicolet or Mid-Wisconsin (a “Materially Burdensome Condition”);

•

receipt by Mid-Wisconsin and Nicolet of a tax opinion from counsel to Nicolet that the merger qualifies as a tax-free reorganization under the Internal Revenue Code;

•

the absence of an order, decree or injunction enjoining or prohibiting completion of the merger;

•

receipt by Mid-Wisconsin of an opinion from Raymond James. dated November 28, 2012 (which opinion shall not have been withdrawn) that the consideration to be paid to Mid-Wisconsin’s shareholders in the merger is fair to such shareholders from a financial standpoint;

•

receipt by Nicolet of an opinion from Sandler O’Neill dated November 20, 2012 (which opinion shall not have been withdrawn) that the consideration to be paid to Mid-Wisconsin’s shareholders in the merger is fair to Nicolet’s shareholders from a financial standpoint;

•

cancellation of all outstanding Mid-Wisconsin stock options;

•

appointment of Kim A. Gowey and Christopher Ghidorzi to Nicolet’s Board of Directors;

•

continued accuracy in all material respects of the representations and warranties set forth in the merger agreement and fulfillment in all material respects of the parties’ covenants set forth in the merger agreement as of the closing date;

•

the absence of any material adverse change in the financial condition, results of operations, business or prospects of either Mid-Wisconsin or Nicolet;

•

each party’s receipt of affiliate agreements from certain affiliates of the other party (see “— Affiliate Agreements”); and

•

issuance of certain legal opinions by counsel for Mid-Wisconsin and Nicolet.

The conditions to the merger are set forth in Article 9 of the merger agreement. The parties intend to complete the merger as soon as practicable after all conditions have been satisfied or waived; however, we cannot assure you that all conditions will be satisfied or waived.

Waiver and Amendment

Nearly all of the conditions to completing the merger may be waived at any time by the party for whose benefit they were created; however, the merger agreement provides that the parties may not waive any condition that would result in the violation of any law or regulation. Also, the parties may amend or supplement the merger agreement at any time by written agreement. Any material change in the terms of the merger agreement after the Mid-Wisconsin special shareholders’ meeting may require a re-solicitation of votes from Mid-Wisconsin’s shareholders with respect to the amended merger agreement.

Business of Mid-Wisconsin Pending the Merger

The merger agreement requires Mid-Wisconsin to continue to operate its business as usual and to preserve its business organization, rights and franchises pending the merger and to refrain from taking any action that would materially adversely affect the receipt of required regulatory or other consents or materially adversely affect either party’s ability to perform its covenants and agreements under the merger agreement. Among other things, and subject to certain specified exceptions, Mid-Wisconsin may not, without Nicolet’s consent, take or agree to take any of the following actions:

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amend its articles of incorporation or bylaws or other governing instruments;

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incur any additional debt or other obligation in excess of $50,000 or allow any lien or encumbrance to be placed on any asset, except in the ordinary course of business and consistent with past practices;

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redeem, repurchase, or otherwise acquire any shares of its capital stock (except exchanges in the ordinary course under employee benefit plans) or pay any distribution or dividend on its capital stock, except for dividends on the Preferred Stock;

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adjust, split, combine, substitute or reclassify any shares of its common stock or dispose of any asset having a book value in excess of $50,000 except in the ordinary course of business for reasonable and adequate consideration;

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except in the ordinary course of business, purchase investment securities or make any material investments;

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enter into or modify any agreement requiring the payment of any salary, bonus, extra compensation, pension or severance payment to any of its current or former directors, employees or service providers, or, subject to certain exceptions, increase the compensation of any such person in any manner inconsistent with its past practices;

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adopt any new employee benefit plan or terminate or amend any existing plans, except as required by law;

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make any significant change to tax or accounting methods or internal accounting controls, except as required by law, regulation or GAAP;

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commence any litigation inconsistent with past practices or settle any litigation for over $50,000 in money damages or any restrictions on its operations; or

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except in the ordinary course of business, enter into, modify, amend, or terminate any contract or waive, release, or assign any right or claim in any amount exceeding $50,000.

The restrictions on Mid-Wisconsin’s business activities are set forth in Section 7.2 of the merger agreement.

Business of Nicolet Pending the Merger

The merger agreement requires Nicolet to continue to operate its business as usual and to preserve its business organization, rights and franchises pending the merger and to refrain from taking any action that would materially adversely affect the receipt of required regulatory or other consents or materially adversely affect either party’s ability to perform its covenants and agreements under the merger agreement. Among other things, and subject to certain specified exceptions, Nicolet may not, without Mid-Wisconsin’s consent, take or agree to take any of the following actions:

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amend its articles of incorporation or bylaws or other governing instruments;

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redeem, repurchase, or otherwise acquire any shares of its capital stock (except exchanges in the ordinary course under employee benefit plans and repurchases of up to an aggregate of 10,000 shares of common stock) or pay any distribution or dividend on its capital stock; except for dividends on its SBLF Preferred Stock;

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issue, sell, pledge, encumber, authorize the issuance of, or otherwise permit to become outstanding, any additional shares of its common stock, except pursuant to the exercise of currently outstanding stock options, transactions in the ordinary course of administration of Nicolet’s employee benefit plans, and potential incentive grants to executive officers in connection with annual compensation determinations by Nicolet’s Compensation Committee;

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make any significant change to tax or accounting methods or internal accounting controls, except as required by law, regulation or GAAP.

The restrictions on Nicolet’s business activities are set forth in Section 7.3 of the merger agreement.

No Solicitation of Alternative Transactions

Mid-Wisconsin was required to immediately cease any negotiations with any person regarding any acquisition transaction existing at the time the merger agreement was executed. In addition, Mid-Wisconsin may not solicit, directly or indirectly, inquiries or proposals with respect to, or, except to the extent determined by Mid-Wisconsin’s board of directors in good faith, after consultation with its legal counsel, to be required to discharge properly the directors’ fiduciary duties, furnish any information relating to, or participate in any negotiations or discussions concerning, any sale of all or substantially all of its assets, any purchase of a substantial equity interest in it or any merger or other combination with it. Subject to the same fiduciary duties, Mid-Wisconsin’s board may not withdraw its recommendation to its shareholders of the merger or recommend to its shareholders any such other transaction.

Mid-Wisconsin was also required to instruct its respective officers, directors, agents, and affiliates to refrain from taking action prohibited by Mid-Wisconsin and is required to notify Nicolet immediately if it receives any inquires from third parties. However, no director or officer of Mid-Wisconsin is prohibited from taking any action that the board of directors of Mid-Wisconsin determines in good faith, after consultation with counsel, is required by law or is required to discharge such director’s or officer’s fiduciary duties.

Termination of the Merger Agreement; Termination Fee

The merger agreement specifies the circumstances under which the parties may terminate the agreement and abandon the merger. Those circumstances are:

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by mutual consent of Mid-Wisconsin’s board of directors and Nicolet’s board of directors;

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by either party if the other party materially breaches any representation, warranty or covenant, such breach cannot be, or is not, cured within 30 days after written notice and the existence of such breach would result in a “material adverse effect,” as defined in the merger agreement, on the breaching party;

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by either party if Mid-Wisconsin’s or Nicolet’s shareholders do not approve the merger agreement or if any required consent of any regulatory authority is denied or issued subject to a Materially Burdensome Condition;

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by either party if the merger has not been consummated or a condition precedent cannot be satisfied or waived by April 30, 2013 (or May 31, 2013 if the impediment is the result of a delay in receiving regulatory approval or effectiveness of the Registration Statement), so long as the failure to consummate is not caused by a breach of the merger agreement by the party electing to terminate;

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by Nicolet if Mid-Wisconsin’s board of directors withdraws, modifies or changes its recommendation to its shareholders of the merger agreement; cancels the shareholders’ or board meeting at which the shareholders or directors will vote on the merger agreement; recommends or approves a merger, sale of assets or other business combination or substantial investment by a third party (other than the Nicolet merger); or resolves or announces any agreement to do any of those things;

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by Mid-Wisconsin if Mid-Wisconsin receives a bona fide written offer for an acquisition transaction that the Mid-Wisconsin board determines in good faith, after consultation with its financial advisors and counsel, to be more favorable to the Mid-Wisconsin shareholders than the Nicolet merger

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by Nicolet if the holders of more than 5% of the outstanding Mid-Wisconsin common stock or if more than 2% of the outstanding Nicolet common stock exercise dissenters’ rights; or

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by Mid-Wisconsin if Nicolet’s board of directors withdraws, modifies or changes its recommendation to its shareholders of the merger agreement; cancels the shareholders’ or board meeting at which the shareholders or directors will vote on the merger agreement, or resolves to do any of those things.

If either party terminates the merger agreement because Mid-Wisconsin’s board withdraws or changes its recommendation of the merger agreement, cancels the meeting at which Mid-Wisconsin’s shareholders or board will vote on the merger agreement, or recommends, approves or announces an acquisition transaction other than the Nicolet merger, or if Mid-Wisconsin terminates the agreement because it has received an offer for such an acquisition transaction, then Mid-Wisconsin (or its successor) must pay Nicolet a termination fee of $750,000. Similarly, if Mid-Wisconsin terminates the merger agreement because Nicolet’s board withdraws or changes its recommendation of the merger agreement, cancels the meeting at which Nicolet’s shareholders or board will vote on the merger agreement, or resolves to do any of those things, then Nicolet (or its successor) must pay Mid-Wisconsin a termination fee of $750,000. In addition, if the merger agreement is terminated by a party based on a Material Breach by the other party, then the breaching party will be required to pay the non-breaching party liquidated damages of $1.0 million plus documented out-of-pocket legal, investment banking, accounting, consulting and other expenses incurred by the non-breaching party in connection or associated with the preparation, negotiation, and execution of the merger agreement.

Provisions of the merger agreement regarding confidentiality, payment of the termination fee and indemnification of Mid-Wisconsin and its controlling persons will survive any termination of the merger agreement.

Payment of Expenses Relating to the Merger

Subject to their obligations in the event of a Material Breach as described above, the parties will pay all of their own expenses related to negotiating and completing the merger.

Interests of Certain Persons in the Merger

Some of Mid-Wisconsin’s directors and executive officers have interests in the transaction in addition to their interests generally as shareholders of Mid-Wisconsin. These interests are described below. Mid-Wisconsin’s board of directors was aware of these interests and considered them, in addition to other matters, in approving the merger agreement.

Mid-Wisconsin Directors’ Deferred Compensation Plan

Mid-Wisconsin has a Directors’ Deferred Compensation Plan in which certain directors participated prior to 2005 and that is considered grandfathered for purposes of Code Section 409A. The plan is a nonqualified deferred compensation plan that allowed directors to elect to defer all or a portion of their compensation for service as directors before 2005 into either a cash account or an account tied to Mid-Wisconsin’s stock price, with payment of their accrued balances being made after their resignation from the board in a lump-sum or in installments over a period not in excess of five years. In the event of a director’s termination of service in connection with a change in control (such as the proposed Nicolet merger), the director’s account balance is to be paid in a lump sum to the director as of the last day of the month in which the director’s termination of service occurs. The board may terminate this plan at any time and pay all amounts deferred under the plan to directors.

Mid-Wisconsin also has a Directors’ Deferred Compensation Plan in which its directors currently participate. The plan is a nonqualified deferred compensation plan that allows directors to elect to defer all or a portion of their compensation for service as directors after 2004 into either a cash account or an account tied to Mid-Wisconsin’s stock price, with payment of their accrued balances being made after their resignation from the board in a lump-sum or in installments over a period not in excess of five years. In the event of a director’s termination of service in connection with a change in control (such as the proposed Nicolet merger), the director’s account balance is to be paid in a lump sum to the director as of the last day of the month in which the director’s termination of service occurs. In connection with a change in control (such as the proposed Nicolet merger), the board may terminate this plan in accordance with Code Section 409A within the 30 days preceding or the 12 months following the change in control and pay all amounts deferred under the plan to directors within 12 months of the date the board takes action to terminate the plan.

Nicolet has requested that Mid-Wisconsin terminate the Directors’ Deferred Compensation Plan prior to the closing of the merger. As a result of such termination, no directors are expected to receive any compensation based on or related to the merger that has not already accrued to or vested in them. As of December 31, 2012, lump sum distributions due to Dr. Gowey and Messrs. Hallgren, Mertens, Ghidorzi, Hager and Sczygelski in connection with such termination were $157,347; $85,107; $89,622; $12,697; $26,323; and $515, respectively.

Mid-Wisconsin Directors’ Retirement Policy

Mid-Wisconsin directors who complete at least 20 years of service as non-employee directors are eligible for a cash retirement benefit equal to the retainer fees in effect during the first year following the director’s termination of service. Directors who complete less than 20 years of service as non-employee directors are eligible for a benefit equal to the product of (a) the retainer fees in effect during the first year following the director’s termination of service, multiplied by (b) a fraction, the numerator of which is the greater of (i) 10 or (ii) the director’s full and partial years of service as a director, and the denominator of which is 20. The benefit is payable on the same schedule as applies to payments of retainer fees to directors who continue to serve on the board. In connection with a change in control (such as the proposed Nicolet merger) , the board may terminate this policy in accordance with Code Section 409A within the 30 days preceding or the 12 months following the change in control and pay all amounts deferred under the plan to directors within 12 months of the date the board takes action to terminate the plan.

Nicolet has requested that Mid-Wisconsin terminate this policy prior to the closing of the merger. As a result of such termination, no directors are expected to receive any compensation based on or related to the merger that has not already accrued to or vested to them. As of December 31, 2012, lump sum distributions due to Dr. Gowey and Messrs. Hallgren, Mertens, Ghidorzi, Hager, and Sczygelski in connection with such termination were $3,746; $3,435; $4,693; $2,850; $3,889; and $2,850, respectively.

Mid-Wisconsin Stock Options

As of the date of the merger agreement, Mid-Wisconsin’s directors and executive officers held options to purchase an aggregate of 30,510 shares of Mid-Wisconsin common stock, with a weighted average exercise

price of $28.13 per share. The merger agreement requires Mid-Wisconsin to take such actions as may be necessary to cancel these options effective upon consummation of the merger without payment.

Indemnification and Insurance

Nicolet has agreed that all rights to indemnification and all limitations of liability existing in favor of indemnified parties under Mid-Wisconsin’s articles of incorporation and bylaws as in effect on November 28, 2012 with respect to matters occurring prior to or at the effective time of the merger will survive for a period concurrent with the applicable statute of limitations. In addition, Nicolet has agreed to indemnify, under certain conditions, Mid-Wisconsin’s directors, officers and controlling persons against certain expenses and liabilities, including certain liabilities arising under federal securities laws. Mid-Wisconsin will use its best efforts to cause the officers and directors of Mid-Wisconsin to be covered by Mid-Wisconsin’s directors and officers liability insurance policy (or a substitute policy) for six years following the effective time of the merger, subject to certain conditions.

Trading Market for Nicolet Stock

The shares of Nicolet common stock issued pursuant to the merger will be registered under the Securities Act of 1933, as amended, and will be freely transferable under applicable securities laws, except to the extent of any limitations or restrictions applicable to any shares received by any shareholder who may be deemed an affiliate of Nicolet following completion of the merger. See “—Resale of Nicolet Common Stock,” at page ___.

Although Nicolet plans to cause its common stock to be quoted on the Over-the-Counter Bulletin Board or other quotation system at or before the closing of the merger, its common stock is not currently traded on any securities exchange or quotation system. There is, however, no guarantee that a liquid market for shares of Nicolet common stock will develop.

Nicolet Dividends

The holders of Nicolet common stock receive dividends if and when declared by the Nicolet board of directors out of legally available funds. Nicolet’s board of directors has not declared a dividend since its inception in 2000 and does not currently expect to do so in the foreseeable future. Instead, the board currently anticipates that all earnings, if any, will be used for working capital, to support Nicolet’s operations and to finance the growth and development of its business, including the merger and integration of Mid-Wisconsin. Any future determination relating to dividend policy will be made at the discretion of Nicolet’s board of directors and will depend on a number of factors, including the company’s future earnings, capital requirements, financial condition, future prospects, regulatory restrictions and other factors that the board of directors may deem relevant.

Surrender and Exchange of Mid-Wisconsin Stock Certificates

At the effective time of the merger, Mid-Wisconsin shareholders who will receive Nicolet common stock in the merger will automatically become entitled to all of the rights and privileges afforded to Nicolet shareholders as of that time, and Mid-Wisconsin shareholders who will receive cash in the merger will be entitled to receipt of that cash upon their surrender of their Mid-Wisconsin stock certificates. However, the actual physical exchange of Mid-Wisconsin common stock certificates for cash and certificates representing shares of Nicolet common stock will occur after the merger.

Computershare Investor Services, Inc. will serve as exchange agent for the merger. Within five business days after the effective date of the merger, Nicolet will send or cause to be sent to all Mid-Wisconsin’s shareholders (other than any shareholders who have exercised their dissenters’ rights) a letter of transmittal with instructions for exchanging their Mid-Wisconsin stock certificates for the merger consideration to which they are entitled. Each Mid-Wisconsin stock certificate issued and outstanding immediately prior to the effective time of the merger will be deemed for all purposes to evidence the right to receive the merger consideration to which such holder is entitled, regardless of when they are actually exchanged.

Nicolet will delay paying former shareholders of Mid-Wisconsin who become holders of Nicolet common stock pursuant to the merger any dividends or other distributions that may become payable to holders of record of Nicolet common stock following the effective time of the merger until they have surrendered their certificates evidencing their Mid-Wisconsin common stock, at which time Nicolet will pay any such dividends or other distributions without interest.

You should not send in your Mid-Wisconsin stock certificate(s) until you have received a letter of transmittal and further written instructions after the effective date of the merger. Please do NOT send in your stock certificates with your proxy card.

After the exchange agent receives your Mid-Wisconsin certificate(s), together with a properly completed election form/letter of transmittal, it will deliver to you the merger consideration to which you are entitled, consisting of any Nicolet common stock certificates (together with any withheld dividends or other distributions, but without interest thereon) and any cash payments due for a fractional share, state-restricted shares or cash-out shares without interest.

Because the determination of the appropriate share threshold for ownership of cash-out shares will be made based on record ownership of Mid-Wisconsin common stock on the closing date of the merger, it is not presently possible to state with certainty whether a Mid-Wisconsin shareholder who owns 200 or fewer shares will receive cash instead of Nicolet stock as merger consideration. The letter of transmittal that is mailed after the merger will specify the form of consideration that the recipient will receive.

Shareholders who cannot locate their stock certificates are urged to contact promptly:

Mid-Wisconsin Financial Services, Inc.
132 West State Street
Medford, Wisconsin 54451
Attention: _____________
Telephone: (____) ___________

Mid-Wisconsin will issue a new stock certificate to replace the lost certificate(s) only if the shareholder of Mid-Wisconsin signs an affidavit certifying that his, her or its certificate(s) cannot be located and containing an agreement to indemnify Mid-Wisconsin and Nicolet against any claim that may be made against Mid-Wisconsin or Nicolet by the owner of the certificate(s) alleged to have been lost or destroyed. Mid-Wisconsin or Nicolet may also require the shareholder to post a bond in an amount sufficient to support the shareholder’s agreement to indemnify Mid-Wisconsin and Nicolet.

Resale of Nicolet Common Stock

The shares of Nicolet common stock to be issued in the merger will be registered under the Securities Act. Mid-Wisconsin shareholders who are not affiliates of Nicolet may generally freely trade their Nicolet common stock upon completion of the merger. The term “affiliate” generally means each person who is an executive officer, director or 10% shareholder of Nicolet after the merger.

Those shareholders who are deemed to be affiliates of Nicolet may only sell their Nicolet common stock as provided by Rule 144 under the Securities Act or as otherwise permitted under the Securities Act. Rule 144 requires the availability of current public information about the issuer, a holding period for shares issued without SEC registration, volume limitations and other restrictions on the manner of sale of the shares.

Affiliate Agreements

Mid-Wisconsin has caused each executive officer and director of Mid-Wisconsin to execute an Affiliate Agreement, in which each such officer or director agrees to vote all of his or her shares of Mid-Wisconsin common stock in favor of the merger agreement. Nicolet has obtained similar Affiliate Agreements from its directors and certain executive officers relating to their shares of Nicolet common stock.

Forms of the Affiliate Agreements are attached as Exhibits C-1 and C-2 to the merger agreement, which is attached to this joint proxy statement-prospectus as Appendix A . These agreements may have the effect of

discouraging third parties from making a proposal for an acquisition transaction involving Mid-Wisconsin. The following is a brief summary of the material provisions of the agreements:

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The executive officer or director agrees to vote, or cause to be voted, in person or by proxy, all of the Mid-Wisconsin or Nicolet common stock as to which he or she owns beneficially or of record in favor of the merger agreement unless Mid-Wisconsin or Nicolet, as applicable, is then in breach of the agreement.

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The executive officer or director agrees, except for certain specific transfers set forth in the agreement, not to directly or indirectly transfer any of his or her Mid-Wisconsin or Nicolet common stock until the closing date of the merger without prior written consent of Nicolet or Mid-Wisconsin, as applicable.

Regulatory and Other Required Approvals

Federal Reserve

The Federal Reserve must approve the merger before it can be completed. Nicolet and Mid-Wisconsin must then wait at least 30 days after the date of Federal Reserve approval before they may complete the merger. During this waiting period, the U.S. Department of Justice may object to the merger on antitrust grounds. Nicolet filed an application for approval of the merger with the Federal Reserve on January 24, 2013. In reviewing that application, the Federal Reserve is required to consider the following:

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competitive factors, such as whether the merger will result in a monopoly or whether the benefits of the merger to the public in meeting the needs and convenience of the community clearly outweigh the merger’s anticompetitive effects or restraints on trade; and

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banking and community factors, which includes an evaluation of:

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the financial and managerial resources of Nicolet, including its subsidiaries, and of Mid-Wisconsin, and the effect of the proposed transaction on these resources;

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management expertise;

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internal control and risk management systems;

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the capital of Nicolet;

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the convenience and needs of the communities to be served; and

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the effectiveness of Nicolet and Mid-Wisconsin in combating money laundering activities.

The application process includes publication and opportunity for comment by the public. The Federal Reserve may receive, and must consider, properly filed comments and protests from community groups and others regarding (among other issues) each institution’s performance under the Community Reinvestment Act of 1977, as amended. The Federal Reserve is also required to ensure that the proposed transaction would not violate Wisconsin law regarding the number of years a bank must be in operation before it can be acquired, deposit concentration limits, Wisconsin community reinvestment laws and any Wisconsin antitrust statutes.

OCC and WDFI

The merger of Mid-Wisconsin Bank with and into Nicolet National Bank requires the approval of the OCC and the WDFI. Nicolet filed an Interagency Bank Merger Application for approval of the bank merger with the OCC (which will forward the application to the WDFI) on January 17, 2013. In evaluating the bank merger, the OCC and the WDFI must consider, among other factors, the financial and managerial resources and future prospects of the institutions and the convenience and needs of the communities to be served. The relevant statutes prohibit the OCC from approving the bank merger if:

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it would result in a monopoly or be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any part of the United States; or

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its effect in any section of the country could be to substantially lessen competition or to tend to create a monopoly, or if it would result in a restraint of trade in any other manner.

However, if the OCC should find that any anticompetitive effects are outweighed clearly by the public interest and the probable effect of the transaction in meeting the convenience and needs of the communities to be served, it may approve the bank merger. The bank merger may not be consummated until the 30th day (which the OCC may reduce to 15 days) following the later of the date of OCC approval, during which time the U.S. Department of Justice would be afforded the opportunity to challenge the transaction on antitrust grounds. The commencement of any antitrust action would stay the effectiveness of the approval of the agencies, unless a court of competent jurisdiction should specifically order otherwise.

In connection with or as a result of the merger, Nicolet or Mid-Wisconsin may be required, pursuant to other laws and regulations, either to notify or obtain the consent of other regulatory authorities and organizations to which such companies or subsidiaries of either or both of them may be subject. The Nicolet common stock to be issued in exchange for Mid-Wisconsin common stock in the merger has been registered with the SEC and will be issued pursuant to available exemptions from registration under state securities laws.

Preferred Stock and Debentures

Pursuant to the terms of the merger agreement, Mid-Wisconsin will seek regulatory approval to redeem the Preferred Stock and to pay all accrued but unpaid interest on the Debentures at or before the effective time of the merger. If Mid-Wisconsin is unable to obtain regulatory approval for such payment or redemption, Nicolet will purchase the Preferred Stock and pay all accrued but unpaid interest on the Debentures.

Status and Effect of Approvals

All regulatory applications and notices required to be filed prior to the merger have been filed. Nicolet and Mid-Wisconsin contemplate that they will complete the merger shortly after the later of the Mid-Wisconsin or Nicolet special shareholders’ meeting, assuming all required approvals are received.

Nicolet and Mid-Wisconsin believe that the proposed merger is compatible with the regulatory requirements described in the preceding paragraphs; however, we cannot assure you that we will be able to comply with any required conditions or that compliance or noncompliance with any such conditions would not have adverse consequences for the combined company after the merger.

While Nicolet and Mid-Wisconsin believe that the requisite regulatory approvals for the merger will be obtained, we can give you no assurance regarding the timing of the approvals, our ability to obtain the approvals on satisfactory terms or the absence of litigation challenging those approvals or otherwise. Similarly, we cannot assure you that any state attorney general or other regulatory authority will not attempt to challenge the merger on antitrust grounds or for other reasons, or, if such a challenge is made, project the result thereof. The merger is conditioned upon the receipt of all consents, approvals and actions of governmental authorities and the filing of all other notices with such authorities in respect of the merger.

We are not aware of any regulatory approvals that would be required for completion of the transactions contemplated by the merger agreement other than as described above. Should any other approvals be required, those approvals would be sought, but we cannot assure you that they will be obtained.

Accounting Treatment of the Merger

Nicolet is required to account for the merger as a purchase transaction for accounting and financial reporting purposes under GAAP. Under purchase accounting, the assets (including any identifiable intangible assets) and liabilities (including executory contracts and other commitments) of Mid-Wisconsin at the effective time of the merger will be recorded at their respective fair values and added to those of Nicolet. Any excess of purchase price over the fair values is recorded as goodwill. Any excess of the fair values over the purchase price is recorded in earnings as a bargain purchase gain. Consolidated financial statements of Nicolet issued after the merger will reflect those fair values and will not be restated retroactively to reflect the historical consolidated financial position or results of operations of Mid-Wisconsin.

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

The following is a summary description of the anticipated material U.S. federal income tax consequences of the merger generally applicable to U.S. Shareholders (as defined below) of Mid-Wisconsin who hold the common stock as capital assets within the meaning of Section 1221 of the Internal Revenue Code. This summary description deals only with the U.S. federal income tax consequences of the merger. No information is provided regarding the tax consequences of the merger under state, local, gift, estate, foreign or other tax laws. We do not intend it to be a complete description of the U.S. federal income tax consequences of the merger to all Mid-Wisconsin shareholders in light of their particular circumstances or to Mid-Wisconsin shareholders subject to special treatment under U.S. federal income tax laws, such as:

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Non-U.S. Shareholders (as defined below) (except to the extent discussed under the subheading “Tax Implications to Non-U.S. Shareholders,” below);

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entities treated as partnerships for U.S. federal income tax purposes or Mid-Wisconsin shareholders who hold their shares through entities treated as partnerships for U.S. federal income tax purposes;

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qualified insurance plans;

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tax-exempt organizations;

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qualified retirement plans and individual retirement accounts;

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brokers or dealers in securities or currencies;

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traders in securities that elect to use a mark-to-market method of accounting;

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regulated investment companies;

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real estate investment trusts;

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persons whose functional currency is not the U.S. dollar;

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shareholders who received their stock upon the exercise of employee stock options or otherwise acquired their stock as compensation;

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persons who purchased or sell their shares of Mid-Wisconsin common stock as part of a wash sale; or

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shareholders who hold the common stock as part of a “hedge,” “straddle” or other risk reduction, “constructive sale,” or “conversion transaction,” as these terms are used in the Internal Revenue Code.

This discussion is based upon, and subject to, the Internal Revenue Code, the treasury regulations promulgated under the Internal Revenue Code, existing interpretations, administrative rulings and judicial decisions all of which are in effect as of the date of this statement, and all of which are subject to change, possibly with retroactive effect. Any such change could affect the continuing validity of this discussion. Tax laws are complex, and your individual circumstances may affect the tax consequences to you. We urge you to consult a tax advisor regarding the tax consequences of the merger to you.

U.S. Shareholders

For purposes of this discussion, the term “U.S. Shareholder” means a beneficial owner of Mid-Wisconsin common stock that is:

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a citizen or resident of the U.S.;

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a corporation (including any entity treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the U.S. or any of its political subdivisions;

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a trust that (i) is subject to both the primary supervision of a court within the U.S. and the control of one or more U.S. persons, or (ii) has a valid election in effect under applicable U.S. treasury regulations to be treated as a U.S. person; or

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an estate that is subject to U.S. federal income tax on its income regardless of its source.

If a partnership (including any entity or arrangement, domestic or foreign, that is treated as a partnership for U.S. federal income tax purposes) holds Mid-Wisconsin common stock, the tax treatment of a partner will generally depend on the status of the partners and the activities of the partnership. Partnerships and partners in such a partnership should consult their tax advisors regarding the tax consequences of the merger to them.

Qualification of the Merger as a Reorganization

Nicolet and Mid-Wisconsin have structured the merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. The obligation of Nicolet and Mid-Wisconsin to complete the merger is condition upon the receipt of a tax opinion from Bryan Cave LLP to the effect that:

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the merger will constitute a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code; and

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the exchange in the merger of Mid-Wisconsin common stock for Nicolet common stock will not give rise to a gain or loss to the shareholders of Mid-Wisconsin with respect to such exchange, except to the extent of any cash received.

The tax opinion will be based upon law existing on the date of the opinion and upon certain facts, assumptions, limitations, representations and covenants including those contained in representation letters executed by officers of Mid-Wisconsin and Nicolet that, if incorrect in certain material respects, would jeopardize the conclusions reached by Bryan Cave LLP in its opinion. The tax opinion will not bind the Internal Revenue Service or prevent the Internal Revenue Service from successfully asserting a contrary opinion. No ruling will be requested from the Internal Revenue Service in connection with the merger.

Tax Implications to U.S. Shareholders

The following discussion summarizes the material U.S. federal income tax consequences of the merger to U.S. Shareholders, assuming the merger qualifies as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code.

Tax Consequences to U.S. Shareholders . The U.S. federal income tax consequences of the merger to an owner of Mid-Wisconsin common stock that is a U.S. Shareholder generally will depend on whether the U.S. Shareholder exchanges Mid-Wisconsin common stock for cash, Nicolet common stock or a combination of cash and Nicolet common stock.

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Exchange Solely for Nicolet Stock . No gain or loss will be recognized by U.S. Shareholders upon the exchange of shares of Mid-Wisconsin common stock solely for shares of Nicolet common stock pursuant to the merger, except in respect of cash received in lieu of the issuance of a fractional share of Nicolet common stock (as discussed below).

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Exchange for Cash and Nicolet Common Stock . A U.S. Shareholder who receives a combination of cash (not including cash received in lieu of the issuance of a fractional share of Nicolet common stock) and Nicolet common stock in exchange for Mid-Wisconsin common stock will generally recognize gain (but not loss) in an amount equal to the lesser of: (i) the excess, if any, of (a) the sum of the amount of cash treated as received in exchange for Mid-Wisconsin common stock in the merger (excluding cash received in lieu of a fractional share) plus the fair market value of Nicolet common stock (including the fair market value of any fractional share) received in the merger, over (b) the U.S. Shareholder’s adjusted tax basis in the shares of Mid-Wisconsin common stock exchanged, or (ii) the amount of cash (excluding cash received in lieu of a fractional share) received in the merger. Any taxable gain to a U.S. Shareholder on the exchange of Mid-Wisconsin common stock generally will be treated as capital gain (either long-term or short-term capital gain depending on whether the shareholder has held such Mid-Wisconsin common stock for more than one (1) year in the case of long-term capital gain or one (1) year or less in the case of short-term capital gain). If a U.S. Shareholder acquired different blocks of Mid-Wisconsin common stock at different times or at different prices, such U.S. Shareholder’s basis and holding period in its shares of Nicolet common

stock may be determined with reference to each block of Mid-Wisconsin common stock. Such U.S. Shareholder should consult its individual tax advisor regarding the manner in which gain or loss should be determined. If, however, the cash received has the effect of the distribution of a dividend (as discussed below), the gain will be treated as a dividend to the extent of the U.S. Shareholder’s ratable share of accumulated earnings and profits as calculated for U.S. federal income tax purposes.

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Exchange of Cash in Lieu of Fractional Share . A U.S. Shareholder who receives cash in lieu of the issuance of a fractional share of Nicolet common stock will generally be treated as having received such factional share pursuant to the merger and then as having received cash in exchange for such fractional share. Gain or loss generally will be recognized in an amount equal to the difference between the amount of cash received instead of the fractional share and the portion of the U.S. Shareholder’s aggregate adjusted tax basis of the Mid-Wisconsin shares exchanged in the merger which is allocable to the fractional share of Nicolet common stock. Such gain or loss generally will be capital gain or loss, and will be long-term capital gain or loss if, as of the effective date of the merger, the holding period for such shares of Mid-Wisconsin common stock is more than one year.

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Tax Basis of Nicolet Common Stock Received in the Merger . The aggregate tax basis of the Nicolet common stock (including a fractional share deemed received and sold for cash as described above) received in the merger will equal the aggregate tax basis of the Mid-Wisconsin common stock surrendered in the exchange, reduced by the amount of cash received, if any, that is treated as received in exchange for Mid-Wisconsin common stock (excluding any cash received in lieu of a fractional share of Nicolet common stock), and increased by the amount of gain, if any, recognized in the exchange (including any portion of the gain that is treated as a dividend but excluding any gain resulting from a fractional share deemed received and sold for cash as described above).

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Holding Period of Nicolet Common Stock Received in the Merger. The holding period for any Nicolet common stock received in the merger will include the holding period of the Mid-Wisconsin common stock surrendered in the exchange.

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Possible Treatment of Cash as a Dividend. There are certain circumstances in which all or part of the gain recognized by a U.S. Shareholder will be treated as a dividend rather than capital gain. In general, the determination of whether the gain recognized in the exchange (other than gain with respect to fractional shares) will be treated as capital gain or has the effect of a distribution of a dividend depends upon whether, and to what extent, the exchange reduces the U.S. Shareholder’s deemed percentage stock ownership in Nicolet. These rules are complex and dependent upon the specific factual circumstances particular to each U.S. Shareholder, including the application of certain constructive ownership rules. Consequently, each U.S. Shareholder should consult its tax advisor regarding the potential tax consequences of the merger to such shareholder.

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Exchange Solely for Cash . A U.S. Shareholder who receives solely cash in exchange for Mid-Wisconsin common stock, whether as a result of exercising dissenter’s rights, state-restricted shares, cash-out shares, or otherwise, will generally recognize gain or loss in an amount equal to the difference between the cash received and the U.S. Shareholder’s adjusted tax basis in the shares of Mid-Wisconsin common stock surrendered by such shareholder. Any taxable gain to a U.S. Shareholder on the exchange of Mid-Wisconsin common stock will generally be treated as capital gain, either long-term or short-term capital gain depending on such shareholder’s holding period for the Mid-Wisconsin common stock. Each holder of Mid-Wisconsin common stock who contemplates exercising statutory dissenters’ or appraisal rights should consult its tax advisor as to the possibility that all or a portion of the payment received pursuant to the exercise of such rights will be treated as dividend income.

Tax Consequences to Nicolet and Mid-Wisconsin . Neither Nicolet nor Mid-Wisconsin will recognize taxable gain or loss as a result of the merger, except for, in the case of Mid-Wisconsin, gain, if any, that has been deferred in accordance with the consolidated return regulations.

Tax Implications to Non-U.S. Shareholders

For purposes of this discussion, the term “Non-U.S. Shareholder” means a beneficial owner of Mid-Wisconsin common stock (other than an entity treated as a partnership for U.S. federal income tax purposes) that is not a U.S. Shareholder. The rules governing the U.S. federal income taxation of Non-U.S. Shareholders are complex, and no attempt will be made herein to provide more than a limited summary of those rules.

Tax Consequences to Non-U.S. Shareholders . Any gain a Non-U.S. Shareholder recognizes from the exchange of Mid-Wisconsin common stock for Nicolet common stock and cash in the merger generally will not be subject to U.S. federal income tax unless (a) the gain is effectively connected with a trade or business conducted by the Non-U.S. Shareholder in the United States, or (b) in the case of a Non- U.S. Shareholder who is an individual, such shareholder is present in the United States for 183 days or more in the taxable year of the sale and other conditions are met. Non-U.S. Shareholders described in (a) above will be subject to tax on gain recognized at applicable U.S. federal income tax rates and, in addition, Non-U.S. Shareholders that are corporations (or treated as corporations for U.S. federal income tax purposes) may be subject to a branch profits tax equal to 30% (or a lesser rate under an applicable income tax treaty) on their effectively connected earnings and profits for the taxable year, which would include such gain. Non-U.S. Shareholders described in (b) above will be subject to a flat 30% tax on any gain recognized, which may be offset by U.S. source capital losses.

Dividends Paid with Respect to Nicolet Common Stock. As a result of the merger, current shareholders of Mid-Wisconsin common stock will hold Nicolet common stock. Dividends paid to Non-U.S. Shareholders (to the extent paid out of Nicolet’s current or accumulated earnings and profits, as determined for U.S. federal income tax purposes) with respect to such shares of Nicolet common stock will be subject to withholding at a 30% rate or such lower rate as may be specified by an applicable income tax treaty unless the dividends are effectively connected with the conduct of a trade or business within the United States and, if certain tax treaties apply, are attributable to a U.S. permanent establishment, as discussed below. Even if a Non-U.S. Shareholder is eligible for a lower treaty rate, Nicolet will generally be required to withhold at a 30% rate (rather than the lower treaty rate) on dividend payments unless Nicolet has received a valid IRS Form W-8BEN or other documentary evidence establishing entitlement to a lower treaty rate with respect to such payments. If a Non-U.S. Shareholder holds the Nicolet common stock through a foreign financial institution or other foreign non-financial entity, a 30% withholding tax will be imposed on dividends paid after December 31, 2012, to such “foreign financial institution” or other foreign non-financial entity unless (i) the foreign financial institution undertakes certain diligence and reporting obligations or (ii) the foreign non-financial entity either certifies it does not have any substantial U.S. owners or furnishes identifying information regarding each substantial U.S. owner.

If a Non-U.S. Shareholder is subject to withholding at a rate in excess of a reduced rate for which it is eligible under a tax treaty or otherwise, it may be able to obtain a refund of or credit for any amounts withheld in excess of the applicable rate. Investors are encouraged to consult with their own tax advisers regarding the possible implications of these withholding requirements.

Dividends that are effectively connected with the conduct of a trade or business within the United States and, if certain tax treaties apply, are attributable to a U.S. permanent establishment, are not subject to withholding tax, but instead are subject to U.S. federal income tax on a net income basis at applicable graduated rates. Special certification and disclosure requirements must be satisfied for effectively connected income to be exempt from withholding. Any such effectively connected dividend received by a Non-U.S. Shareholder that is a corporation for U.S. federal income tax purposes may be subject to an additional branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.

Tax Consequences if the Merger Does Not Qualify as a Reorganization

If the merger fails to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, the merger will be a fully taxable transaction to the shareholders of Mid-Wisconsin common stock. In such case, U.S. Shareholders will recognize gain or loss measured by the difference between the total consideration received in the merger and such shareholders’ tax basis in the shares of Mid-Wisconsin common stock surrendered in the merger. Each shareholder of Mid-Wisconsin common stock is urged to

consult its tax advisor regarding the manner in which gain or loss should be calculated among different blocks of Mid-Wisconsin common stock surrendered in the merger. The aggregate tax basis in the shares of Nicolet common stock received pursuant to the merger will be equal to the fair market value of such Nicolet common stock as of the closing date of the merger. The holding period of such shares of Nicolet common stock will begin on the date immediately following the closing date of the merger.

Backup Withholding and Information Reporting

In general, information reporting requirements may apply to the cash payments made to shareholders of Mid-Wisconsin common stock in connection with the merger, unless an exemption applies. Backup withholding may be imposed on the above payments at a rate of 31% if a U.S. Shareholder or Non-U.S. Shareholder (i) fails to provide a taxpayer identification number or appropriate certificates, or (ii) otherwise fails to comply with all applicable requirements of the backup withholding rules.

Any amounts withheld from payments to shareholders of Mid-Wisconsin common stock under the backup withholding rules are not an additional tax and will be allowed as a refund or credit against your applicable U.S. federal income tax liability, provided the required information is furnished to the Internal Revenue Service. Both U.S. Shareholders and Non-U.S. Shareholders should consult their own tax advisors regarding the application of backup withholding based on their particular circumstances and the availability and procedure for obtaining an exemption from backup withholding.

Recent Tax Legislation

Under recently enacted legislation, net long term capital gains and qualified dividend income recognized in taxable years beginning on or after January 1, 2013 will be taxed generally at a maximum rate of 20% (for individuals earning $400,000 or more per year and married individuals filing jointly earning $450,000 or more or $250,000 or more per year for married individuals filing separately). Shareholders of Mid-Wisconsin common stock should consult their own tax advisors regarding the availability of the preferential tax rates in light of such shareholders’ particular circumstances.

Beginning in 2013, a U.S. Shareholder will be subject to a 3.8% Medicare tax on certain net investment income earned by individuals, estates and trusts. For these purpose, net investment income generally includes a shareholder’s allocable share of income and gain realized by a shareholder from a sale of stock. In the case of an individual, the tax will be imposed on the lesser of (i) the shareholder’s net investment income, or (ii) the amount by which the shareholder’s modified adjusted gross income exceeds a certain threshold (which is $250,000 in the case of married individuals filing jointly, $125,000 in the case of married individuals filing separately, and $200,000 in all other cases).

CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS

If the merger is completed, Mid-Wisconsin’s shareholders (other than those exercising dissenters’ rights or who receive only cash for their Mid-Wisconsin shares) will become Nicolet shareholders. Their rights as shareholders will then be governed by Nicolet’s articles of incorporation and bylaws rather than by Mid-Wisconsin’s articles of incorporation and bylaws.

Nicolet and Mid-Wisconsin are both Wisconsin corporations organized under the laws of the State of Wisconsin. The corporate affairs of Nicolet and Mid-Wisconsin are governed generally by the provisions of the WBCL. The following is a summary of differences between the rights of Mid-Wisconsin shareholders and Nicolet shareholders not described elsewhere in this joint proxy statement-prospectus. The summary is necessarily general, and it is not intended to be a complete statement of all differences affecting the rights of shareholders. It is qualified in its entirety by reference to the WBCL, as well as the articles of incorporation and bylaws of each corporation. Mid-Wisconsin shareholders should consult their own legal counsel with respect to specific differences and changes in their rights as shareholders that would result from the proposed merger.

Authorized Capital Stock

Nicolet . Nicolet’s articles of incorporation authorize it to issue 30,000,000 shares of common stock, $0.01 par value, and 10,000,000 shares of preferred stock, no par value, with such preferences, limitations and relative rights as determined by the board of directors. As of the date of the merger agreement, there were 3,479,888 shares (including 54,475 shares of restricted stock granted but not yet vested under Nicolet’s employee benefit plans) of common stock issued and 3,425,413 shares of common stock outstanding. Of the authorized preferred stock, (i) 14,964 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, and 748 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series B, were authorized but no shares of either series were issued or outstanding, and (ii) 24,400 shares of Non-Cumulative Perpetual Preferred Stock, Series C, were authorized, issued and outstanding as of the date of the merger agreement. In addition, as of the date of the merger agreement, 839,107 shares of Nicolet common stock were subject to outstanding options.

Mid-Wisconsin . Mid-Wisconsin’s articles of incorporation authorize it to issue 6,000,000 shares of common stock, $0.10 par value, and 50,000 shares of preferred stock, no par value. As of the date of the merger agreement, there were 1,657,119 shares of Mid-Wisconsin common stock issued and outstanding. Of the authorized preferred stock, 10,000 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, and 500 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series B, were authorized, issued and outstanding as of the date of the merger agreement. In addition, as of the date of the merger agreement, 30,510 shares of Mid-Wisconsin common stock were subject to outstanding options.

Composition and Election of the Board of Directors

Nicolet. Nicolet’s articles of incorporation and bylaws provide that the board of directors shall consist of not fewer than two nor more than 25 directors, with the exact number of directors to be set by resolution of the board. Its articles of incorporation provide for the election of directors by cumulative voting, which means that the number of votes each common shareholder may cast is determined by multiplying the number of shares he, she or it owns by the number of directors to be elected. Those votes may be cumulated and cast for a single candidate or may be distributed among two or more candidates in the manner selected by the shareholder.

Mid-Wisconsin. Mid-Wisconsin’s articles of incorporation provide that the board shall consist of such number of directors as the bylaws of Mid-Wisconsin may provide, but not fewer than three or more than 11, and that the board shall be divided into three classes. Each class of directors serves a three-year term, and directors of each class are elected by plurality vote at successive annual meetings of shareholders. Cumulative voting for directors is denied under Mid-Wisconsin’s articles of incorporation.

Director Nominations

Nicolet. Under Nicolet’s bylaws, either directors or shareholders may nominate persons for election as Nicolet directors. Nominations that are not made by or on behalf of Nicolet’s management must be delivered in writing to Nicolet’s President no less than 14 and no more than 50 days before the meeting at which directors will be elected. If less than 21 days’ notice of such meeting is given, then the delivery deadline for the shareholder’s written notice is the close of business on the seventh day after the date on which notice of the meeting was mailed. The shareholder’s nomination must specify (to the extent known to the shareholder) the nominee’s name, address and principal occupation; the number of shares of capital stock that will be voted in favor of the nominee; and the nominating shareholder’s name, address and beneficial ownership of Nicolet capital stock.

Mid-Wisconsin . Shareholder nominations of directors are subject to the provisions of Mid-Wisconsin’s bylaws described under “—Advance Notice of Shareholder Proposals” below. In addition to the matters specified in that paragraph, a shareholder’s nomination of a director must include all information relating to the nominee that would be required to be disclosed in solicitations of proxies for the election of directors under the Securities Exchange Act of 1934, as amended, including the nominee’s written consent to being named in a proxy statement as a nominee and to serving as a director if elected. If the number of directors to be elected is increased and Mid-Wisconsin does not issue a public announcement identifying all of the nominees or specifying the size of the increased board at least 70 days before the first anniversary of the preceding year’s annual meeting, a shareholder’s notice of nomination will also be considered timely, but only as to nominees for any new positions created by such increase, if it is delivered to Mid-Wisconsin’s Corporate Secretary no later than the 10th day following the day on which Mid-Wisconsin first made such public announcement.

Board Committees

Nicolet . Under the WBCL, unless the articles of incorporation or bylaws provide otherwise, a board of directors may create one or more committees, appoint members of the board of directors to serve on the committees and designate other members of the board of directors to serve as alternates. The WBCL provides that a committee may exercise the authority of the full board of directors except that it cannot approve or recommend to shareholders matters that require shareholder approval under the WBCL and it cannot adopt, amend or repeal a corporate bylaw. In addition to these restrictions, Nicolet’s bylaws provide that no board committee may approve dividends, fill board vacancies without express authorization by the full board, amend the articles of incorporation, approve a plan of merger not requiring shareholder approval, approve the reacquisition of outstanding Nicolet capital stock except pursuant to parameters established by the full board, or approve the issuance of capital stock except to the extent authorized by the full board.

Mid-Wisconsin . Subject to the provisions of the WBCL as described above, Mid-Wisconsin’s bylaws permit the board of directors to establish an Executive Committee that may exercise the authority of the full board of directors to the extent provided in the resolution appointing the committee, except that it may not take action with respect to dividends to shareholders, election of principal officer or the filling of vacancies in the board of directors or any committee thereof.

Director Removal

Nicolet. Directors may be removed for cause by the affirmative vote of the holders of a majority of the issued and outstanding shares of Nicolet common stock entitled to vote in the election of directors, except that a director may not be removed if a number of cumulative votes sufficient to elect him or her is cast against his or her removal. Removal must be voted upon at a special shareholders’ meeting called for that purpose, and any vacancy so created may be filled by majority vote of the remaining directors. “Cause” is defined as conviction of a felony, a demand for removal by regulatory authorities or a determination by two-thirds of the directors then in office (excluding the director whose removal is being sought) that the director’s conduct was inimical to the best interests of Nicolet.

Mid-Wisconsin . Directors may be removed with or without cause by the affirmative vote of a majority of the outstanding shares entitled to vote at a special meeting called for that purpose, and any vacancy so created may be filled by the shareholders at such meeting or by majority vote of the remaining directors.

Advance Notice of Shareholder Proposals

Nicolet. Nicolet’s bylaws provide that in addition to any other requirements generally applicable to matters to be brought before an annual meeting of shareholders under Nicolet’s articles of incorporation or bylaws or the WBCL, a Nicolet shareholder who wishes to present a matter for consideration at such meeting must notify Nicolet’s Corporate Secretary in writing no later than 60 days before the meeting. The shareholder’s notice must specify the nature and reason for the business proposed to be conducted; the shareholder’s name, address and beneficial ownership of Nicolet stock; and any material interest of the shareholder in the matter proposed for consideration. See “—Director Nominations” above for special provisions relating to shareholder nominations of candidates for the board of directors.

Mid-Wisconsin . Mid-Wisconsin’s bylaws contain a similar advance notice provision for shareholder proposals relating to the annual meeting. The notice to Mid-Wisconsin’s Corporate Secretary must be delivered no less than 60 and no more than 90 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, than if the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice must be delivered no earlier than the 90 ^th day prior to such annual meeting and no later than the close of business on the later of: (i) the 60 ^th day prior to such annual meeting; or (ii) the 10 ^th day following the day on which public announcement of the date of such meeting is first made. The shareholder’s notice must set forth the same matters as are described above with respect to Nicolet. See “—Director Nominations” above for special provisions relating to shareholder nominations of candidates for the board of directors.

Meetings of Shareholders

Nicolet. Nicolet’s bylaws provide that annual meetings of shareholders will be held at such date as may be specified by the board of directors or Corporate Secretary. Subject to any contrary requirements of the WBCL, special meetings of shareholders may be called by either Nicolet’s Chief Executive Officer or President at the direction of the board of directors or by the holder(s) of at least 10% of Nicolet’s outstanding stock. Nicolet’s bylaws require at least 10 and not more than 60 days’ notice of any meeting of shareholders.

Mid-Wisconsin. Mid-Wisconsin’s bylaws provide that annual meetings of shareholders will be held on the fourth Tuesday in April each year or on such other date as the board of directors designates. Special meetings of shareholders may be called by either Mid-Wisconsin’s President or Board of Directors or by the Corporate Secretary at the request of the holder(s) of at least 10% of the outstanding shares entitled to vote at the meeting. Mid-Wisconsin’s bylaws require at least 10 and not more than 50 days’ notice of any meeting of shareholders, except that if the meeting is called to consider a proposal for a merger, consolidation or sale of substantially all assets of Mid-Wisconsin, at least 20 days’ notice is required.

Shareholder Vote Requirements

Nicolet. Except as described under “—Board of Directors” above and “—Mergers, Consolidations and Sales of Assets” below, and unless a greater number of votes is required under Nicolet’s articles of incorporation or the WBCL, a matter voted upon by Nicolet shareholders will be approved if more votes are cast in favor of a matter than against it, assuming a quorum is present.

Mid-Wisconsin . Except as described under “—Board of Directors” above, and unless a greater number of votes is required under Mid-Wisconsin’s articles of incorporation, the bylaws or the WBCL, a matter voted upon by Mid-Wisconsin shareholders will be approved if more votes are cast in favor of a matter than against it, assuming a quorum is present.

Mergers, Consolidations and Sales of Assets

Nicolet. Nicolet’s articles of incorporation provide that any merger or share exchange of Nicolet with or into any other corporation, or any sale, lease, exchange or other disposition of substantially all of its assets to any other person or entity will require the approval of either: (i) two-thirds of the directors then in office and a majority of the issued and outstanding shares entitled to vote; or (ii) a majority of the directors then in office and two-thirds of the issued and outstanding shares entitled to vote. A merger of Nicolet into another corporation would also require the approval of the Federal Reserve and the OCC and the non-objection of the FDIC.

Mid-Wisconsin . The merger of Mid-Wisconsin requires the affirmative vote of a majority of the board of directors and a majority of the issued and outstanding shares entitled to vote. Such a merger must also be approved by the Federal Reserve and the WDFI.

Dividends

Nicolet. The holders of Nicolet common stock are entitled to receive dividends when, as and if declared by Nicolet’s board of directors and paid by Nicolet out of funds legally available therefor. Under Federal Reserve policy, a bank holding company such as Nicolet generally should not maintain a rate of cash dividends unless the available net income of the bank holding company is sufficient to fully fund the dividends. Further, the prospective rate of earnings retention should appear to be consistent with its capital needs, asset quality, and overall financial condition. In addition, Nicolet may not pay dividends that would render it insolvent. Nicolet has not declared a dividend on its common stock since its inception in 2000 and does not expect to do so in the foreseeable future. Instead, Nicolet anticipates that all earnings, if any, will be used for working capital, to support operations and to finance the growth and development of its business.

Mid-Wisconsin. Mid-Wisconsin is subject to a written agreement with the Federal Reserve Bank of Minneapolis dated May 10, 2011 that prohibits Mid-Wisconsin from paying dividends without the Federal Reserve’s prior written approval. Subject to the foregoing, holders of Mid-Wisconsin common stock are entitled to receive dividends when, as and if declared by Mid-Wisconsin’s board of directors and paid by Mid-Wisconsin out of funds legally available therefor. Similar to Nicolet, Mid-Wisconsin must adhere to the Federal Reserve Policy for bank holding companies and cannot pay dividends that would render it insolvent.

Indemnification

Nicolet. Nicolet’s bylaws provide for the mandatory indemnification of a director, officer, employee or agent of Nicolet (or a person concurrently serving in such a capacity with another entity at Nicolet’s request), to the extent such person has been successful on the merits or otherwise in the defense of any threatened, pending or completed civil, criminal, administrative or investigative action, suit, arbitration or other proceeding brought by or in the right of Nicolet or by any other person or entity to which such person is a party because he or she is a director, officer, employee or agent, for all reasonable fees, costs, charges, disbursements, attorneys’ fees and other expenses incurred in connection with proceeding. In all other cases, Nicolet shall indemnify a director or officer, and may indemnify and employee or agent, of Nicolet against all liability and reasonable fees, costs, charges, disbursements, attorneys’ fees and other expenses incurred by such person in any proceeding brought by or in the right of Nicolet or by any other person or entity to which such person is a party because he or she is a director, officer, employee or agent, unless it has been proven by final adjudication that such person breached or failed to perform a duty owed to Nicolet that constituted:

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a willful failure to deal fairly with Nicolet or its shareholders in connection with a matter in which the director, officer, employee or agent has a material conflict of interest;

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a violation of criminal law, unless the director, officer, employee or agent had reasonable cause to believe his or her conduct was lawful or no reasonable cause to believe his or her conduct was unlawful;

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a transaction from which the director, officer, employee or agent derived an improper personal profit; or

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willful misconduct.

Unless modified by written agreement, the determination as to whether indemnification is proper shall be made in accordance with the WBCL. The right to indemnification under Nicolet’s bylaws may only be amended by the vote of two-thirds of the outstanding shares of Nicolet capital stock entitled to vote on the matter. Nicolet is authorized to purchase and maintain insurance on behalf of its directors, officers, employees or agents in connection with the foregoing indemnification obligations.

Mid-Wisconsin. Mid-Wisconsin’s bylaws state that any person who has served as a director, officer, employee or agent of Mid-Wisconsin, or of any other enterprise at Mid-Wisconsin’s request, shall be indemnified by Mid-Wisconsin in accordance with, and to the fullest extent permitted by, the provisions of the WBCL. The WBCL requires indemnification of a director or officer to the extent that he or she has been successful on the merits or otherwise in the defense of a proceeding, for all reasonable expenses incurred in the proceeding if the director or officer was a party because he or she is a director or officer of the corporation. In other cases, the WBCL requires indemnification of a director or officer against liability incurred in a proceeding to which he or she was a party because of his or her status as a director or officer of the corporation, unless liability was incurred because he or she breached or failed to perform a duty owed to the corporation and the breach or failure to perform constitutes any of the following:

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a willful failure to deal fairly with the corporation or its shareholders in connection with a matter in which the director, officer, employee or agent has a material conflict of interest;

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a transaction from which the director, officer, employee or agent derived an improper personal profit; or

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willful misconduct.

The merger agreement provides that Nicolet will assume Mid-Wisconsin’s indemnification obligations after the merger.

Amendments to Articles of Incorporation and Bylaws

Nicolet. Nicolet’s articles of incorporation may be amended as provided in the WBCL, which provides that unless the articles of incorporation, bylaws or WBCL require a higher vote, and subject to any rights of a class to vote separately on the amendment under the WBCL, an amendment to the articles of incorporation will be approved if the number of votes cast in favor of the amendment exceed the votes cast against it. Nicolet’s bylaws may be amended by the shareholders or by majority vote of the board of directors, except as otherwise provided in the WBCL and except as specified under “—Indemnification” above. The WBCL requires shareholder approval for an amendment to any shareholder-adopted bylaw that states that the board may not amend it. Additionally, a bylaw that fixes a greater or lower quorum requirement or a greater voting requirement for shareholders may not be adopted, amended or repealed by the board of directors. A bylaw that fixes a greater or lower quorum requirement or a greater voting requirement for the board of directors may be amended or repealed as follows: (i) if originally adopted by the shareholders, only by the shareholders, unless the bylaw also permits board approval of the amendment, or (ii) if originally adopted by the board of directors, either by the shareholders or by the board of directors.

Mid-Wisconsin. Mid-Wisconsin’s articles of incorporation and bylaws may be amended as provided in the WBCL, as summarized for Nicolet above. Mid-Wisconsin’s bylaws also state that they may be amended by the shareholders or by majority vote of the board of directors, except that the board may not amend or repeal any bylaw adopted by the shareholders unless such authority has been conferred upon the directors by that bylaw.

DISSENTERS’ RIGHTS

The following discussion is not a complete description of the law relating to dissenters’ rights available to holders and beneficial holders of Mid-Wisconsin and Nicolet common stock under Wisconsin law. This description is qualified in its entirety by the full text of the relevant provisions of the WBCL, which are reprinted in their entirety as Appendix B to this joint proxy statement-prospectus. If you desire to exercise dissenters’ rights, you should review carefully the WBCL and consult a legal advisor before electing or attempting to exercise these rights.

Mid-Wisconsin

Pursuant to the provisions of sections. 180.1301 to 180.1331 of the WBCL, holders and beneficial holders of Mid-Wisconsin common stock have the right to dissent from the merger and to receive the fair value of their shares in cash. Holders and beneficial holders of Mid-Wisconsin common stock who fulfill the requirements of the WBCL summarized below and set forth in Appendix B will be entitled to assert dissenters’ rights in connection with the merger. Shareholders or beneficial shareholders considering initiation of a dissenters’ proceeding should review this section and should also review Appendix B in its entirety. A dissenters’ proceeding may involve litigation.

Preliminary Procedural Steps

Pursuant to the provisions of the WBCL, if the merger is consummated, in order to exercise dissenter’s rights you must have:

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Given to Mid-Wisconsin, prior to the vote at the special meeting with respect to the approval of the merger, written notice of your intent to demand payment for your shares of common stock (hereinafter referred to as “shares”);

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Not voted in favor of the merger; and

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Complied with the statutory requirements summarized below.

If you have perfected your dissenters’ rights and the merger is consummated, you will receive the fair value of your shares as of the effective date of the merger. A shareholder or beneficial shareholder who fails to deliver written notice of his, her or its intent to demand payment for his, her or its shares if the merger is consummated in accordance with the requirements of the WBCL is not entitled to payment for his or her shares pursuant to the provisions of the WBCL.

Brokers or others who hold shares in their name that are beneficially owned by others may assert dissenters’ rights as to fewer than all of the shares registered in your name only if they dissent with respect to all shares beneficially owned by any one person and notify Mid-Wisconsin in writing of the name and address of each person on whose behalf they are asserting dissenters’ rights. The rights of a shareholder who asserts dissenters’ rights as to fewer than all of the shares registered in his, her or its name are determined as if the shares as to which that holder dissents and that holder’s other shares were registered in the names of different shareholders.

Written Dissent Demand

Voting against the merger will not satisfy the written demand requirement. In addition to not voting in favor of the merger, if you wish to preserve the right to dissent and seek appraisal, you must give a separate written notice of your intent to demand payment for your shares if the merger is effected.

Any written notice of intent to dissent to the merger, satisfying the requirements discussed above, should be addressed to Mid-Wisconsin Financial Services, Inc., 132 West State Street, Medford, Wisconsin 54451, Attn: Corporate Secretary.

Dissenters’ Notice

If the shareholders of Mid-Wisconsin approve the merger at the special meeting, Mid-Wisconsin (or Nicolet as its successor) must deliver a written dissenters’ notice (the “Dissenters’ Notice”) to all of its shareholders who satisfy the foregoing requirements. The Dissenters’ Notice must be sent no later than 10 days after the date that the merger is approved by Mid-Wisconsin’s shareholders and must:

•

State where dissenting shareholders should send the demand for payment and where and when dissenting shareholders should deposit certificates for the shares;

•

Inform holders of uncertificated shares as to what extent transfer of these shares will be restricted after the demand for payment is received;

•

Include a form for demanding payment that includes the date of the first announcement to news media or to shareholders of the terms of the merger and requires the shareholder or beneficial shareholder asserting dissenters’ rights to certify whether he, she or it acquired beneficial ownership of the shares prior to that date;

•

Set a date by which Mid-Wisconsin (or Nicolet as its successor) must receive the demand for payment (which date may not be fewer than 30 nor more than 60 days after the Dissenters’ Notice is delivered); and

•

Be accompanied by a copy of sections 180.1301 to 180.1331 of the WBCL.

A shareholder or beneficial shareholder who receives the Dissenters’ Notice or a beneficial shareholder whose shares are held by a nominee who is sent a Dissenters’ Notice must demand payment and certify as to his or her ownership of the shares in accordance with the Dissenters’ Notice. A shareholder or beneficial shareholder who holds certificated shares must also deposit his, her or its share certificates with Mid-Wisconsin (or Nicolet as its successor) in accordance with the terms of the Dissenters’ Notice.

A dissenting shareholder or beneficial shareholder who demands payment and deposits his, her or its share certificate in accordance with the terms of the Dissenters’ Notice will retain all of the rights of a shareholder or beneficial shareholder, respectively, until those rights are canceled or modified by the consummation of the merger. Mid-Wisconsin may restrict the transfer of uncertificated shares from the date that the demand for payment for those shares is received until the merger is effected or the restrictions released, in the event that it does not consummate the merger.

A shareholder or beneficial shareholder with certificated or uncertificated shares who does not demand payment by the date set forth in the Dissenters’ Notice is not entitled to payment for his, her or its shares under sections 180.1301 to 180.1331 of the WBCL. A shareholder or beneficial shareholder with certificated shares who does not deposit his, her or its share certificates where required and by the date set forth in the Dissenters’ Notice is not entitled to payment for his, her or its shares under sections 180.1301 to 180.1331 of the WBCL. Mid-Wisconsin (or Nicolet as its successor) may elect to withhold payment from a dissenter and instead make an offer of payment if that dissenter was not the beneficial owner of his, her or its shares prior to the date specified in the Dissenters’ Notice as the date on which the first announcement of the merger was made to the news media or to Mid-Wisconsin’s shareholders.

Payment

Except as described below, Mid-Wisconsin (or Nicolet as its successor) must, as soon as the merger is effected or upon receipt of a payment demand, whichever is later, pay each shareholder who has complied with the payment demand and deposit requirements described above the amount Mid-Wisconsin (or Nicolet as its successor) estimates to be the fair value of the shares, plus accrued interest. The offer of payment must be accompanied by:

•

Recent financial statements of Mid-Wisconsin;

•

A statement of the estimate of the fair value of the shares;

•

An explanation of how the interest was calculated;

•

A statement of the dissenter’s right to demand payment under section 180.1328 of the WBCL; and

•

A copy of sections 180.1301 to 180.1331 of the WBCL.

If the merger is not consummated within 60 days after the date set for demanding payment and depositing share certificates, Mid-Wisconsin must return the deposited certificates and release the transfer restrictions imposed on uncertificated shares. Mid-Wisconsin (or Nicolet as its successor) must send a new Dissenters’ Notice if the merger is consummated after the return of certificates and any dissenting shareholders must repeat the payment demand procedure described above.

Section 180.1328 of the WBCL provides that a dissenter may notify Mid-Wisconsin (or Nicolet as its successor) in writing of his, her or its own estimate of the fair value of such holder’s shares and the interest due, and may demand payment of such holder’s estimate, less any payment received from Mid-Wisconsin (or Nicolet as its successor), if:

•

He or she believes that the amount paid or offered by Mid-Wisconsin (or Nicolet as its successor) is less than the fair value of his or her shares or that Mid-Wisconsin (or Nicolet as its successor) has calculated incorrectly the interest due;

•

Mid-Wisconsin (or Nicolet as its successor) fails to make payment within 60 days after the date set in the Dissenters’ Notice for demanding payment; or

•

Mid-Wisconsin, having failed to consummate the merger, does not return the deposited certificates or release the transfer restrictions imposed on uncertificated shares within 60 days after the date set for demanding payment in the Dissenters’ Notice.

A dissenting shareholder waives his or her right to demand payment under sections 180.1328 unless his, her or its provides Mid-Wisconsin (or Nicolet as its successor) with notice of his or her demand, in conformance with the notice requirements of section 180.0141, within 30 days after Mid-Wisconsin (or Nicolet as its successor) making or offering of payment for the dissenting shareholder’s shares.

Litigation

If a demand for payment under section 180.1328 remains unsettled, Mid-Wisconsin (or Nicolet as its successor) must commence a nonjury equity valuation proceeding in the Circuit Court of Taylor County, Wisconsin (in the case of Mid-Wisconsin) or Brown County, Wisconsin (in the case of Nicolet), within 60 days after having received the payment demand under section 180.1328 and must petition the court to determine the fair value of the shares and accrued interest. If Mid-Wisconsin (or Nicolet as its successor) does not commence the proceeding within those 60 days, the WBCL requires Mid-Wisconsin (or Nicolet as its successor) to pay each dissenting shareholder whose demand remains unsettled the amount demanded. Mid-Wisconsin (or Nicolet as its successor) is required to make all dissenting shareholders whose demands remain unsettled parties to the proceeding and to serve a copy of the petition upon each of them.

The jurisdiction of the court in which the proceeding is brought is plenary and exclusive. The court may appoint one or more appraisers to receive evidence and to recommend a decision on fair value. An appraiser has the powers delegated to such appraiser in the court order appointing him or her or in any amendment to the order. Dissenters are entitled to the same discovery rights as parties in other civil proceedings.

Each dissenting shareholder made a party to the proceeding is entitled to judgment for the amount, if any, by which the court finds the fair value of such holder’s shares, plus interest, exceeds the amount paid or offered, as applicable, by Mid-Wisconsin (or Nicolet as its successor) .

The court in an appraisal proceeding commenced under the foregoing provision must determine the costs of the proceeding, excluding fees and expenses of attorneys and experts for the respective parties, and must assess those costs against Mid-Wisconsin (or Nicolet as its successor), except that the court may assess the costs against all or some of the dissenting shareholders to the extent the court finds they acted arbitrarily, vexatiously, or not in good faith in demanding payment under section 180.1328 of the WBCL. The court also may assess the fees and expenses of attorneys and experts for the respective parties against Mid-Wisconsin (or Nicolet as its successor) if the court finds Mid-Wisconsin (or Nicolet as its successor) did not substantially

comply with the requirements of the WBCL, or against either Mid-Wisconsin (or Nicolet as its successor) or a dissenting shareholder if the court finds that such party acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by the WBCL.

If the court finds that the services of attorneys or experts for any dissenter were of substantial benefit to other dissenters similarly situated, the court may award those attorneys reasonable fees out of the amounts awarded the dissenters who were benefited.

This is a summary of the material rights of a dissenting shareholder and is qualified in its entirety by reference to the applicable portions of the WBCL, which are included as Appendix B to this joint proxy statement-prospectus. If you intend to dissent from approval of the merger, you should review carefully the text of Appendix B and should also consult with your attorney. We will not give you any further notice of the events giving rise to dissenters’ rights or any steps associated with perfecting dissenters’ rights, except as indicated above or otherwise required by law.

We have not made any provision to grant you access to any of the corporate files of Nicolet or Mid-Wisconsin, except as may be required by the WBCL, or to obtain legal counsel or appraisal services at the expense of Mid-Wisconsin (or Nicolet as its successor).

Any dissenting shareholder who perfects his, her or its right to be paid the “fair value” of his, her or its shares will recognize taxable gain or loss upon receipt of cash for such shares for federal income tax purposes. See “Material Federal Income Tax Consequences of the Merger” at page 66.

You must do all of the things described in this section and as set forth in the WBCL in order to preserve your dissenters’ rights and to receive the fair value of your shares in cash (as determined in accordance with those provisions). If you do not follow each of the steps as described above, you will have no right to receive cash for your shares as provided in the WBCL. In view of the complexity of these provisions of Wisconsin law, shareholders of Mid-Wisconsin who are considering exercising their dissenters’ rights should consult their legal advisors.

Nicolet

Pursuant to the provisions of sections 180.1301 to 180.1331 of the WBCL, holders and beneficial holders of Nicolet’s common stock have the right to dissent from the merger and to receive the fair value of their shares in cash. Holders and beneficial holders of Nicolet common stock who fulfill the requirements of the WBCL summarized below and set forth in Appendix B will be entitled to assert dissenters’ rights in connection with the merger. Shareholders or beneficial shareholders considering initiation of a dissenters’ proceeding should review this section and should also review Appendix B in its entirety. A dissenters’ proceeding may involve litigation.

Preliminary Procedural Steps

Pursuant to the provisions of the WBCL, if the merger is consummated, in order to exercise your dissenter’s rights you must have:

•

Given to Nicolet, prior to the vote at the special meeting with respect to the approval of the merger, written notice of your intent to demand payment for your shares of common stock (hereinafter referred to as “shares”);

•

Not voted in favor of the merger; and

•

Complied with the statutory requirements summarized below.

If you have perfected your dissenters’ rights and the merger is consummated, you will receive the fair value of your shares as of the effective date of the merger. A shareholder or beneficial shareholder who fails to deliver written notice of his, her or its intent to demand payment for his, her or its shares if the merger is consummated in accordance with the requirements of the WBCL is not entitled to payment for his, her or its shares pursuant to the provisions of the WBCL.

You may assert dissenters’ rights as to fewer than all of the shares registered in your name only if you dissent with respect to all shares beneficially owned by any one person and you notify Nicolet in writing of the name and address of each person on whose behalf you are asserting dissenters’ rights. The rights of a shareholder who asserts dissenters’ rights as to fewer than all of the shares registered in his or her name are determined as if the shares as to which that holder dissents and that holder’s other shares were registered in the names of different shareholders.

Written Dissent Demand

Any written notice of intent to dissent to the merger, satisfying the requirements discussed above, should be addressed to Nicolet Bankshares, Inc., 111 North Washington Street, Green Bay, WI 54301, Attn: Corporate Secretary.

Dissenters’ Notice

If the shareholders of Nicolet approve the merger at the special meeting, Nicolet must deliver a written dissenters’ notice (the “Dissenters’ Notice”) to all of its shareholders who satisfy the foregoing requirements. The Dissenters’ Notice must be sent no later than 10 days after the date that the merger is approved by Nicolet’s shareholders and must:

•

State where dissenting shareholders should send the demand for payment and where and when dissenting shareholders should deposit certificates for the shares;

•

Inform holders of uncertificated shares as to what extent transfer of these shares will be restricted after the demand for payment is received;

•

Include a form for demanding payment that includes the date of the first announcement to news media or to shareholders of the terms of the merger and requires the shareholder or beneficial shareholder asserting dissenters’ rights to certify whether he or she acquired beneficial ownership of the shares prior to that date;

•

Set a date by which Nicolet must receive the demand for payment (which date may not be fewer than 30 nor more than 60 days after the Dissenters’ Notice is delivered); and

•

Be accompanied by a copy of sections 180.1301 to 180.1331 of the WBCL.

A shareholder or beneficial shareholder who receives the Dissenters’ Notice or a beneficial shareholder whose shares are held by a nominee who is sent a Dissenters’ Notice must demand payment and certify as to his or her ownership of the shares in accordance with the Dissenters’ Notice. A shareholder or beneficial shareholder who holds certificated shares must also deposit his, her or its share certificates with Nicolet in accordance with the terms of the Dissenters’ Notice.

A dissenting shareholder or beneficial shareholder who demands payment and deposits his, her or its share certificate in accordance with the terms of the Dissenters’ Notice will retain all of the rights of a shareholder or beneficial shareholder, respectively, until those rights are canceled or modified by the consummation of the merger. Nicolet may restrict the transfer of uncertificated shares from the date that the demand for payment for those shares is received until the merger is effected or the restrictions released, in the event that Nicolet does not consummate the merger.

that dissenter was not the beneficial owner of his, her or its shares prior to the date specified in the Dissenters’ Notice as the date on which the first announcement of the merger was made to the news media or to Nicolet’s shareholders.

Payment

Except as described below, Nicolet must, as soon as the merger is effected or upon receipt of a payment demand, whichever is later, pay each shareholder who has complied with the payment demand and deposit requirements described above the amount Nicolet estimates to be the fair value of the shares, plus accrued interest. Nicolet’s offer of payment must be accompanied by:

•

Recent financial statements of Nicolet;

•

A statement of Nicolet’s estimate of the fair value of the shares;

•

An explanation of how the interest was calculated;

•

A statement of the dissenter’s right to demand payment under sections 180.1328 of the WBCL; and

•

A copy of sections 180.1301 to 180.1331 of the WBCL.

If the merger is not consummated within 60 days after the date set for demanding payment and depositing share certificates, Nicolet must return the deposited certificates and release the transfer restrictions imposed on uncertificated shares. Nicolet must send a new Dissenters’ Notice if the merger is consummated after the return of certificates and any dissenting shareholders must repeat the payment demand procedure described above.

Section 180.1328 of the WBCL provides that a dissenter may notify Nicolet in writing of his or her own estimate of the fair value of such holder’s shares and the interest due, and may demand payment of such holder’s estimate, less any payment received from Nicolet, if:

•

He or she believes that the amount paid or offered by Nicolet is less than the fair value of his or her shares or that Nicolet has calculated incorrectly the interest due;

•

Nicolet fails to make payment within 60 days after the date set in the Dissenters’ Notice for demanding payment; or

•

Nicolet, having failed to consummate the merger, does not return the deposited certificates or release the transfer restrictions imposed on uncertificated shares within 60 days after the date set for demanding payment in the Dissenters’ Notice.

A dissenting shareholder waives his or her right to demand payment under section 180.1328 unless he or she provides Nicolet with notice of his or her demand, in conformance with the notice requirements of section 180.0141, within 30 days after Nicolet making or offering of payment for the dissenting shareholder’s shares.

Litigation

If a demand for payment under section 180.1328 remains unsettled, Nicolet must commence a nonjury equity valuation proceeding in the Circuit Court of Brown County, Wisconsin, within 60 days after having received the payment demand under section 180.1328 and must petition the court to determine the fair value of the shares and accrued interest. If Nicolet does not commence the proceeding within those 60 days, the WBCL requires Nicolet to pay each dissenting shareholder whose demand remains unsettled the amount demanded. Nicolet is required to make all dissenting shareholders whose demands remain unsettled parties to the proceeding and to serve a copy of the petition upon each of them.

The court in an appraisal proceeding commenced under the foregoing provision must determine the costs of the proceeding, excluding fees and expenses of attorneys and experts for the respective parties, and must assess those costs against Nicolet, except that the court may assess the costs against all or some of the dissenting shareholders to the extent the court finds they acted arbitrarily, vexatiously, or not in good faith in demanding payment under section 180.1328 of the WBCL. The court also may assess the fees and expenses of attorneys and experts for the respective parties against Nicolet if the court finds Nicolet did not substantially comply with the requirements the WBCL, or against either Nicolet or a dissenting shareholder if the court finds that such party acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by the WBCL.

You must do all of the things described in this section and as set forth in the WBCL in order to preserve your dissenters’ rights and to receive the fair value of your shares in cash (as determined in accordance with those provisions). If you do not follow each of the steps as described above, you will have no right to receive cash for your shares as provided in the WBCL. In view of the complexity of these provisions of Wisconsin law, shareholders of Nicolet who are considering exercising their dissenters’ rights should consult their legal advisors.

BUSINESS OF NICOLET

General

Nicolet is a Wisconsin corporation and was incorporated as Green Bay Financial Corporation, a Wisconsin corporation, on April 5, 2000 to serve as the holding company for and the sole shareholder of Nicolet National Bank. It amended and restated its articles of incorporation and changed its name to Nicolet Bankshares, Inc. on March 14, 2002. It subsequently became the holding company for Nicolet National Bank upon completion of the Nicolet National Bank’s reorganization into a holding company structure on June 6, 2002.

Nicolet is a registered bank holding company under the Bank Holding Company Act of 1956, as amended, and under the bank holding company laws of the State of Wisconsin. It conducts operations through its wholly-owned subsidiary, Nicolet National Bank, which was organized in 2000 as a national bank under the laws of the United States and opened for business on November 1, 2000. Nicolet National Bank provides a full range of traditional commercial and retail banking services, as well as wealth management services, throughout northeastern Wisconsin and the upper peninsula of Michigan. Nicolet primarily markets its services to owner-managed companies as well as the individual owners of these businesses and other residents of its market area through 11 branch locations in Green Bay, De Pere, Appleton, Marinette and Crivitz, Wisconsin and Menominee, Michigan.

Since its opening in late 2000, Nicolet has grown to $683 million in assets as of September 30, 2012. Over this time, to supplement its organic growth, Nicolet National Bank purchased a Menominee, Michigan branch office and deposits from a Michigan-based bank in December 2003. In July 2010, Nicolet National Bank purchased four Brown County, Wisconsin branch offices from a Madison-based thrift, acquiring assets with a fair value of approximately $107 million, including $25 million of loans, $4 million of core deposit intangible and $78 million in cash, and assumed liabilities with a fair value of approximately $107 million, including $106 million of deposits. In 2005, Nicolet effected a reorganization through a cash-out merger to shareholders owning 1,500 or fewer shares of common stock as a means of reducing its number of shareholders of record to a level that would permit Nicolet to suspend its SEC filing obligations, which it did in March 2005. In late 2007, Nicolet effected a voluntary stock repurchase. In December 2008, Nicolet raised $9.5 million in capital through a private placement of common stock and also raised $14.96 million through the issuance of preferred stock to Treasury under TARP. On September 1, 2011, Nicolet redeemed this preferred stock for its $15.7 million stated value and issued $24.4 million of SBLF Preferred Stock to Treasury in connection with its participation in the federal government’s Small Business Lending Fund.

As of September 30, 2012, Nicolet had consolidated total assets of $683 million, consolidated total gross loans of $546 million, consolidated total deposits of $555 million and consolidated shareholders’ equity of $77 million.

Target Markets

Nicolet, through its subsidiary Nicolet National Bank, provides a full range of traditional banking services throughout northeastern Wisconsin and the upper peninsula of Michigan. Based on deposit market share data published by the FDIC as of June 30, 2012, Nicolet National Bank ranks third in the Brown County, Wisconsin market and in the top six in the Marinette, Wisconsin and Menominee, Michigan county markets. With its second branch opened in Appleton in December 2011, Nicolet National Bank is increasing its market share in Outagamie County, Wisconsin. It employs seasoned banking and wealth management professionals with experience in the market area and who are active in their communities.

This emphasis on meeting customer needs in a relationship-focused manner, combined with local decision-making on extensions of credit, distinguishes Nicolet from its competitors, particularly in the case of large financial institutions. Nicolet believe it further distinguishes itself by providing a range of products and services characteristic of a large financial institution while providing the personalized service and convenience characteristic of a community bank.

Products and Services Overview

Nicolet National Bank is a full-service community bank. Its principal business is banking, consisting of lending and deposit gathering (as well as other banking-related products and services) to businesses and individuals of the communities it serves, and the operational support to deliver, fund and manage such banking services. Additionally, Nicolet National Bank offers wealth management services to the businesses and individuals it serves. Profitability is significantly dependent upon net interest income (interest income earned on loans and other interest-earning assets such as investments, net of interest expense on deposits and other borrowed funds), noninterest income sources (including but not limited to service charges on deposits, trust and brokerage fees, and mortgage fee income from sales of residential mortgages into the secondary market), the level of the provision for loan losses, noninterest expense (largely employee compensation and overhead expenses tied to processing and operating Nicolet National Bank’s business).

Nicolet National Bank offers a variety of loans, deposits and related services to business customers (especially small and medium-sized businesses and professional concerns), including but not limited to: business checking and other business deposit products and services, business loans, lines of credit, commercial real estate loans, construction loans and letters of credit, and retirement planning services. Similarly, it offers a variety of banking products and services to consumers, including but not limited to: home equity loans and lines, residential mortgage loans and mortgage refinancing, residential construction loans, personal loans, checking, savings and money market accounts, various certificate of deposit and individual retirement accounts and safe deposit boxes, and personal brokerage, trust and fiduciary services. It also provides on-line services, including commercial, retail and trust on-line banking, automated bill payment, remote deposit capture, and telephone banking, and other services such as wire transfers, courier services, debit cards, credit cards, direct deposit, official bank checks, and U.S. Savings Bonds.

Business and Properties

The main office of both Nicolet and Nicolet National Bank is located at 111 North Washington Street, Green Bay, Wisconsin 54301. Including the main office, Nicolet National Bank operates eleven branches, most are free-standing, newer buildings that provide adequate access, customer parking, and drive-through and/or ATM service. The following table summarizes pertinent details of Nicolet National Bank’s branches.

Office Address	Owned/ Leased
111 North Washington Street Green Bay, Brown County, Wisconsin (main office)	Leased	38,000

2380 Dousman Street, Suites 100 and 200 Green Bay, Brown County, Wisconsin ¹	Owned	7,700

2363 Holmgren Way Green Bay, Brown County, Wisconsin ¹	Leased	4,200

1610 Lawrence Drive De Pere, Brown County, Wisconsin ¹	Leased	4,100

1011 North Broadway De Pere, Brown County, Wisconsin	Owned	3,500

2082 Monroe Road De Pere, Brown County, Wisconsin ¹	Leased	4,200

2400 S. Kensington Ave., Suite 100 Appleton, Outagamie County, Wisconsin	Leased	3,500

900 West College Avenue Appleton, Outagamie County, Wisconsin	Leased	3,800

Office Address	Owned/ Leased
315 N. US Highway 141 Crivitz, Marinette County, Wisconsin	Owned	2,900

2009 Hall Avenue Marinette, Marinette County, Wisconsin	Owned	3,000

1015 Tenth Avenue Menominee, Menominee County, Michigan ²	Owned	1,400

(1)

Branch was acquired through a purchase and assumption transaction from a thrift, which was consummated in July 2010.

(2)

Branch was acquired through a purchase and assumption transaction from another bank, which was consummated in December 2003.

Lending Services

Lending . Nicolet National Bank seeks creditworthy borrowers within a limited geographic area. Its primary lending function is to make commercial loans, consisting of commercial and business loans and owner-occupied commercial real estate loans; commercial real estate (“CRE”) loans, consisting of commercial investment real estate loans and construction and land development loans; residential real estate, including residential first mortgages, residential junior mortgages (such as home equity loans and lines), and to a lesser degree residential construction loans; and other loans, mainly consumer in nature. As of September 30, 2012, Nicolet National Bank’s loan portfolio mix was as follows:

Loan Category
Commercial and industrial	37	%
Owner-occupied commercial real estate	20	%
Total commercial loans	57	%
CRE-investment	13	%
Construction and land development	5	%
Total CRE loans	18	%
Residential first mortgages	15	%
Residential junior mortgages	8	%
Residential construction	1	%
Total residential real estate loans	24	%
Other	1	%

Loan Policies and Procedures . Nicolet National Bank has and follows extensive loan policies and procedures to standardize processes, meet compliance requirements and prudently manage underwriting, credit and other risks. These include, but are not limited to: loan approval policies at various levels (individual officers and committees), lending limits (some imposed by law and others to address risks based on loan type or nature of borrower; such limits may increase or decrease with the capital level of the bank or for other reasons), appraisal policies (some imposed by law, but including quality of appraiser and loan-to-appraised value guidelines for different loan types), and various review and documentation procedures.

Credit Risks . The principal economic risk associated with lending in each type of loan Nicolet National Bank makes is the creditworthiness of the borrower. The ability of borrowers to repay their loans is influenced and affected by numerous things, including but not limited to: general economic conditions, such as the health of the economy as a whole, levels and trends in the interest rate environment, inflation, employment rates and trends; demand for a commercial borrower’s product or services; factors affecting a borrower’s customers, suppliers or employees; business management abilities; tenant vacancy rates; supply, demand and price of residential or commercial real estate; and in general a borrower’s financial stability, as well as personal factors (such as job loss, divorce, illness and other personal hardships). Credit risk is controlled and monitored through active asset quality management, including the use of lending standards, the thorough review of

potential borrowers through Nicolet’s underwriting process, close relationships with and regular check-ins with borrowers, and active asset quality administration. For further discussion of credit risk management, see “Management’s Discussion and Analysis of Financial Condition and Results of Operation” at page 92.

Competition

The financial services industry is highly competitive. Nicolet competes for loans, deposits, and financial services in all of its principal markets. It competes directly with other bank and nonbank institutions located within its markets, internet-based banks, out-of-market banks and bank holding companies that advertise or otherwise serve its markets, along with money market and mutual funds, brokerage houses, mortgage companies, and insurance companies or other commercial entities that offer financial services products. Competition involves efforts to retain current customers, obtain new loans and deposits, increase the scope and type of services offered, and offer competitive interest rates paid on deposits and charged on loans. Many of Nicolet’s competitors enjoy competitive advantages, including greater financial resources, a wider geographic presence, more accessible branch office locations, the ability to offer additional services, more favorable pricing alternatives and lower origination and operating costs. Some of Nicolet’s competitors have been in business for a long time and have an established customer base and name recognition. Nicolet believes that its competitive pricing, personalized service and community involvement enable it to effectively compete in the communities in which it operates.

Employees

Nicolet and Nicolet National Bank currently employ approximately 175 persons on a full-time or part-time basis.

Legal Proceedings

From time to time, Nicolet is involved in litigation relating to claims arising out of operations in the normal course of business. As of the date hereof, Nicolet is not engaged in any legal proceedings that are expected, individually or in the aggregate, to have a material adverse effect on Nicolet National Bank.

Market Prices of and Dividends Declared on Nicolet Common Stock

There is no established public trading market for shares of Nicolet common stock. As a result, any market in Nicolet common stock prior to the merger should be characterized as illiquid and irregular. As of ________, 2013, Nicolet had approximately ________ shareholders of record. The last known privately negotiated trade of Nicolet common stock prior to the mailing of this joint proxy statement-prospectus occurred on ________, 2013 at a price of $____ per share, and the last known privately negotiated trade of which management was aware prior to the November 28, 2012 announcement of the proposed merger occurred on October 29, 2012 at a price of $16.50 per share. Additional information available to management regarding the high and low trade prices (to the extent known to management) for Nicolet common stock is provided below. For quarters where there were no sales of Nicolet common stock to management’s knowledge, neither high nor low prices are given.

	High		Low
2012
Fourth Quarter	$	16.50	$	16.50
Third Quarter		16.50		16.50
Second Quarter		16.50		16.50
First Quarter		16.50		16.50

2011
Fourth Quarter	$	15.00	$	15.00
Third Quarter		—		—
Second Quarter		16.50		16.50
First Quarter		16.50		16.50

	High		Low
2010
Fourth Quarter	$	17.15	$	16.00
Third Quarter		17.15		17.15
Second Quarter		16.80		16.50
First Quarter		16.80		16.80

The payment of dividends by Nicolet and Nicolet National Bank are subject to certain regulations that may limit or prevent the payment of dividends except in certain circumstances. See “Supervision and Regulation — Payment of Dividends” at page 156. Moreover, the payment of dividends is further subject to the discretion of the boards of directors of Nicolet and Nicolet National Bank, and the payment of dividends on the common stock of Nicolet is subject to the rights of the holders of its senior securities. Nicolet has not paid any dividends on its common stock since its inception in 2000, nor does it currently have any plans to pay dividends to its holders of its common stock in the foreseeable future.

Nicolet anticipates that its earnings, if any, will be held for purposes of enhancing its capital. No assurances can be given that any dividends on Nicolet’s common stock will be declared in the future or, if declared, what the amount of such dividends will be or whether such dividends will continue for future periods.

Certain Provisions of Nicolet’s Articles of Incorporation and Bylaws Regarding Change of Control.

Supermajority Voting Requirements

Any transaction that would involve the merger or share exchange of Nicolet with or into any other corporation or any sale, lease, exchange or other disposition of substantially all of the assets of Nicolet to any other corporation, person or other entity would require either (i) the affirmative vote of at least two-thirds (2/3) of the directors of Nicolet and the affirmative vote of at least a majority of the issued and outstanding shares of Nicolet entitled to vote or (ii) the affirmative vote of at least the majority of the directors of Nicolet and the affirmative vote of at least two-thirds (2/3) of the issued and outstanding shares of Nicolet entitled to vote. This provision could make such a transaction that did not have the support of at least a super-majority of the board of directors more difficult for the shareholders to approve, and without the approval of at least a supermajority of the board of directors, such a transaction may not be approved, even if more than a majority (but less than a supermajority) of the shareholders of Nicolet supported such a transaction.

Ability to Consider Other Constituencies

Nicolet’s articles of incorporation require its board of directors, when evaluating a tender or exchange offer for the securities of Nicolet or a proposed merger, share exchange or combination of Nicolet with any other corporation, or an offer to purchase or otherwise acquire all or substantially all of the assets of Nicolet and in determining what is believed to be in the best interest of Nicolet and its shareholders to give due consideration to all relevant factors, including (but not necessarily limited to) the short- and long-term social and economic effects of such a transaction on Nicolet’s employees, customers, shareholders and other constituencies, and on the communities in which it and its subsidiaries operate in addition to the consideration being offered by the other party in relation to the current and estimated future value of Nicolet as an independent entity. This provision requires Nicolet’s board of directors to consider numerous judgmental or subjective factors affecting a proposal, including some non-financial matters, and on the basis of these considerations Nicolet’s board of directors may oppose a business combination or some other transaction which, viewed exclusively from a financial perspective, might be attractive to some, or even a majority, of its shareholders.

Limitations on Matters Brought Before Nicolet’s Shareholders

Nicolet’s bylaws limit the way in which matters may properly be brought before its shareholders by individuals other than management or the board of directors of Nicolet. Under Nicolet’s bylaws, matters other than the election of directors may only be brought before the shareholders of Nicolet for consideration at Nicolet’s annual meeting by Nicolet’s management or board of directors or by a shareholder that has complied with the notice requirements of Nicolet’s bylaws. These provisions require that a shareholder deliver to the secretary of Nicolet no less than 60 days prior to the date fixed for the annual meeting a notice (i) describing briefly the business desired to be brought before the meeting and the reasons for conducting such business at the annual meeting, (ii) the name and the record address of the shareholder proposing such business, (iii) the classes and number of shares of each class of shares beneficially owned by the shareholder and (iv) any material interest the shareholder has in the business being proposed. The chairman of the annual meeting has final interpretive discretion as to the propriety of matters brought before the shareholders, and any matters determined by the chairman to be not properly brought before the meeting shall not be transacted at the meeting. In addition, special meetings of Nicolet’s shareholders may only be called by the management and board of directors of Nicolet or by shareholders owning, in the aggregate, no less than ten percent (10%) of Nicolet’s stock. These provisions may limit the ability of a shareholder of Nicolet to bring proposed transactions before the shareholders for approval, whether as initial offers or as competing transactions, unless such proposed transactions are also supported by the board and management of Nicolet.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information with respect to the beneficial ownership, as of December 31, 2012, of shares of Nicolet common stock by (i) each person known by Nicolet to be the beneficial owner of more than 5% of Nicolet’s issued and outstanding common stock; (ii) each of Nicolet’s current directors and executive officers; (iii) all current Nicolet directors and executive officers as a group; (iv) each new director to be appointed to the Nicolet board of directors upon the closing of the merger; and (v) all current and prospective Nicolet directors and executive officers as a group. Except as noted below, management believes that each person listed below has sole investment and voting power with respect to the shares included in the table.

Information relating to beneficial ownership of Nicolet common stock is based upon “beneficial owner” concepts set forth in rules under the Securities and Exchange Act of 1934, as amended. Under these rules, a person is deemed to be a “beneficial owner” of a security if that person has sole or shared “voting power” or “investment power” over the security. Voting power includes the power to vote or to direct the voting of the security, and investment power includes the power to dispose or to direct the disposition of the security. Under the rules, more than one person may be deemed to be a beneficial owner of the same securities.

				Percentage of Issued and Outstanding Shares ⁽¹⁾
Name	Number of Shares			Before Merger			After Merger
Current Directors and Executive Officers
Robert B. Atwell		173,243	⁽²⁾		4.6	%		4.0	%
Michael E. Daniels		176,263	⁽³⁾		4.7			4.0
John N. Dykema		49,905	⁽⁴⁾		1.3			1.1
Gary L. Fairchild		2,104	⁽⁵⁾		*			*
Michael F. Felhofer		72,000			1.9			1.7
Andrew F. Hetzel, Jr.		42,074	⁽⁶⁾		1.1			*
Donald J. Long, Jr.		89,407	⁽⁷⁾		2.4			2.0
Benjamin P. Meeuwsen		5,200	⁽⁸⁾		*			*
Susan L. Merkatoris		125,000	⁽⁹⁾		3.3			2.9
Therese Pandl		1,022	⁽¹⁰⁾		*			*
Randy J. Rose		30,451	⁽¹¹⁾		*			*
Robert J. Weyers		73,978	⁽¹²⁾		2.0			1.7

				Percentage of Issued and Outstanding Shares ⁽¹⁾
Name	Number of Shares			Before Merger		After Merger
Current Non-Director Executive Officers
Ann K. Lawson		23,900	⁽¹³⁾		*		*
All Current Directors and Executive Officers as a Group (13 persons)		864,547	⁽¹⁴⁾		23.1		19.8
Prospective Directors
Kim A. Gowey		0			0		* ⁽¹⁵	)
Christopher Ghidorzi		0			0		0	⁽¹⁵⁾
All Current and Prospective Directors and Executive Officers as a Group (15 persons)		864,547	⁽¹⁴⁾		23.1		20.5	⁽¹⁵⁾

Represents less than one percent.

(1)

For purposes of this table, the percentages shown treat shares subject to exercisable options held by the indicated director or executive officer as if they were issued and outstanding. Unvested shares of restricted stock are entitled to vote and are therefore included with the issued and outstanding shares reflected in this table. Percentage ownership after the merger assumes that 617,608 shares of common stock are issued in the merger and that each director and executive officer’s beneficial ownership of Nicolet common stock does not change prior to consummation of the merger.

(2)

Includes exercisable options to purchase 124,014 shares of common stock, 6,379 shares Mr. Atwell owns in his Nicolet 401(k) plan, and 19,550 shares of unvested restricted stock.

(3)

Includes 3,420 shares held by his minor children, 9,803 shares held in his spouse’s IRA, exercisable options to purchase 124,014 shares of common stock, 4,910 shares Mr. Daniels owns in his Nicolet 401(k) plan, and 19,550 shares of unvested restricted stock.

(4)

Includes 3,055 shares Mr. Dykema purchased through the Deferred Compensation Plan for Non-Employee Directors.

(5)

Includes 1,854 shares Mr. Fairchild purchased through the Deferred Compensation Plan for Non-Employee Directors.

(6)

Includes 2,074 shares Mr. Hetzel purchased through the Deferred Compensation Plan for Non-Employee Directors.

(7)

Includes 2,007 shares Mr. Long purchased through the Deferred Compensation Plan for Non-Employee Directors.

(8)

Includes 1,825 shares Mr. Meeuwsen purchased through the Deferred Compensation Plan for Non-Employee Directors.

(9)

Includes 13,000 shares held by Ms. Merkatoris’ children.

(10)

Includes 922 shares Ms. Pandl purchased through the Deferred Compensation Plan for Non-Employee Directors.

(11)

Includes 151 shares Mr. Rose purchased through the Deferred Compensation Plan for Non-Employee Directors.

(12)

Includes 3,228 shares Mr. Weyers purchased through the Deferred Compensation Plan for Non-Employee Directors.

(13)

Includes exercisable options to purchase 18,500 shares of common stock held by Ms. Lawson, 1,650 shares of unvested restricted stock, and exercisable options to purchase 1,250 shares of common stock held by Ms. Lawson’s spouse.

(14)

Includes exercisable options to purchase 267,778 shares of common stock and 40,750 shares of unvested restricted stock.

(15)

Reflects the conversion of 80,544 shares of Mid-Wisconsin common stock held by Dr. Gowey into 30,018 shares of Nicolet common stock pursuant to the terms of the merger. Mr. Ghidorzi does not own any shares of Mid-Wisconsin common stock and will not receive any Nicolet common stock in the merger. Neither Dr. Gowey nor Mr. Ghidorzi currently owns any shares of Nicolet common stock.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF NICOLET

The following table presents Nicolet’s selected historical consolidated financial data as of and for the periods indicated and should be read in conjunction with its consolidated financial statements and the notes thereto included elsewhere in this joint proxy statement-prospectus. The financial data as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009 is derived from Nicolet’s audited consolidated financial statements beginning on page F-1 of this joint proxy statement-prospectus, and the financial data as of December 31, 2009, 2008 and 2007 and for the years ended December 31, 2008 and 2007 is derived from Nicolet’s audited consolidated financial statements that are not included in this joint proxy-statement prospectus. The financial data as of and for the nine months ended September 30, 2012 and 2011 is unaudited, but management of Nicolet believes that such amounts reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of its results of operations and financial condition as of and for the periods indicated. You should not assume the results of operations for past periods and for the nine months ended September 30, 2012 indicate results for any future period.

(dollars in thousands, except per share data)	At and for the nine month period ended September 30,					At and for the year ended December 31,
	2012		2011			2011		2010		2009			2008			2007
	(unaudited)
Results of operations:
Interest income	$	21,059	$	22,668		$	29,830	$	31,420	$	31,582		$	33,384		$	36,463
Interest expense		5,006		6,451			8,383		11,291		15,218			19,872			20,229
Net interest income		16,053		16,217			21,447		20,129		16,364			13,512			16,234
Provision for loan losses		3,350		4,800			6,600		8,500		6,000			4,029			1,160
Net interest income after provision for loan losses		12,703		11,417			14,847		11,629		10,364			9,483			15,074
Other income		7,985		6,015			8,444		8,968		7,531			6,124			6,312
Other expense		17,722		16,287			21,443		19,316		16,684			16,440			14,813
Income (loss) before income taxes		2,966		1,145			1,848		1,281		1,211			(833	)		6,573
Income tax (benefit) expense		828		133			318		136		45			(996	)		2,106
Net income (loss)		2,138		1,012			1,530		1,145		1,166			163			4,467
Net income (loss) attributable to noncontrolling interest		39		30			40		35		(11	)		(26	)		(80	)
Net income attributable to Nicolet Bankshares, Inc.		2,099		982			1,490		1,110		1,177			189			4,547
Preferred stock dividends and discount accretion		915		1,156			1,461		985		1,001			—			—
Net income (loss) available to common equity	$	1,184	$	(174	)	$	29	$	125	$	176		$	189		$	4,547
Earnings (loss) per common share:
Basic	$	0.34	$	(0.05	)	$	0.01	$	0.04	$	0.05		$	0.07		$	1.53
Diluted		0.34		(0.05	)		0.01		0.04		0.05			0.06			1.41
Weighted average common shares outstanding:
Basic		3,449		3,467			3,469		3,452		3,500			2,899			2,970
Weighted		3,445		3,487			3,488		3,481		3,528			3,045			3,228

Year-End Balances:
Loans	$	545,708	$	479,052		$	472,489	$	513,761	$	486,571		$	479,179		$	442,357
Allowance for loan losses		6,491		5,746			5,899		8,635		6,232			5,546			5,383
Investment securities available-for-sale, at fair value		57,074		57,060			56,759		52,388		54,273			50,525			55,756
Total assets		682,802		615,508			678,249		674,754		675,403			694,019			561,555
Deposits		554,858		490,551			551,536		558,464		556,984			571,248			450,921
Other debt		39,525		38,693			39,506		39,972		43,486			47,076			59,969
Junior subordinated debentures		6,186		6,186			6,186		6,186		6,186			6,186			6,186
Common equity		52,349		51,187			51,623		50,417		49,790			50,557			39,182
Stockholders’ equity		76,749		75,768			76,023		65,620		64,824			65,420			39,194
Book value per common share		15.38		14.74			14.83		14.57		14.47			14.43			13.26

Average Balances:
Loans	$	509,536	$	510,852		$	503,362	$	499,193	$	478,267		$	455,247		$	416,942
Earning assets		606,227		586,540			582,486		603,182		579,803			578,639			482,673
Total assets		659,400		642,298			642,353		653,710		633,284			624,476			525,225
Deposits		531,795		524,727			522,297		530,682		510,741			516,887			422,231
Interest-bearing liabilities		502,011		505,639			500,895		524,461		507,223			532,278			443,955
Common equity		51,928		50,920			50,968		51,661		50,441			40,931			38,937
Stockholders’ equity		76,328		67,185			69,284		66,923		65,387			40,931			41,140

(dollars in thousands, except per share data)	At and for the nine month period ended September 30,						At and for the year ended December 31,
	2012			2011			2011			2010			2009			2008			2007
	(unaudited)
Financial Ratios:
Return on average assets		0.43	%		0.20	%		0.23	%		0.17	%		0.19	%		0.03	%		0.87	%
Return on average equity		3.67	%		1.95	%		2.15	%		1.66	%		1.80	%		0.46	%		11.05	%
Return on average common equity		3.05	%		—0.46	%		0.06	%		0.24	%		0.35	%		0.46	%		11.05	%
Average equity to average assets		11.58	%		10.46	%		10.79	%		10.22	%		10.32	%		6.55	%		7.83	%
Net interest margin		3.59	%		3.76	%		3.75	%		3.39	%		2.89	%		2.39	%		3.42	%
Stockholders’ equity to assets		11.24	%		12.28	%		11.21	%		9.73	%		9.60	%		9.43	%		6.98	%
Net loan charge-offs to average loans		0.72	%		2.01	%		1.85	%		1.22	%		1.11	%		0.85	%		0.18	%
Nonperforming loans to total loans		2.78	%		2.46	%		2.01	%		2.10	%		1.69	%		1.44	%		0.18	%
Nonperforming assets to total assets		2.31	%		2.06	%		1.49	%		1.81	%		1.42	%		0.99	%		0.16	%

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION

For the Years Ended December 31, 2011, 2010, and 2009

Critical Accounting Policies

The consolidated financial statements of Nicolet Bankshares, Inc. and its subsidiaries are prepared in conformity with GAAP and follow general practices within the industry in which we operate. This preparation requires management to make estimates, assumptions and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statements. Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. Estimates that are particularly susceptible to significant change include the determination of the allowance for loan losses and income taxes and, therefore, are critical accounting policies.

Allowance for Loan Losses

The allowance for loan losses (the “ALLL”) is a reserve for estimated credit losses on individually evaluated loans determined to be impaired as well as estimated credit losses inherent in the loan portfolio. Actual credit losses, net of recoveries, are deducted from the ALLL. Loans are charged off when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the ALLL. A provision for loan losses, which is a charge against earnings, is recorded to bring the ALLL to a level that, in management’s judgment, is adequate to absorb probable losses in the loan portfolio. Management’s evaluation process used to determine the appropriateness of the ALLL is subject to the use of estimates, assumptions, and judgment. The evaluation process involves gathering and interpreting many qualitative and quantitative factors which could affect probable credit losses. Because interpretation and analysis involves judgment, current economic or business conditions can change, and future events are inherently difficult to predict, the anticipated amount of estimated loan losses and therefore the appropriateness of the ALLL could change significantly.

The allocation methodology applied by Nicolet is designed to assess the appropriateness of the ALLL and includes allocations for specifically identified impaired loans and loss factor allocations for all remaining loans, with a component primarily based on historical loss rates and a component primarily based on other qualitative factors. The methodology includes evaluation and consideration of several factors, such as but not limited to management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and nonaccrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or circumstances underlying collectability of loans. Because each of the criteria used is subject to change, the allocation of the ALLL is made for analytical purposes and is not necessarily indicative of the trend of future loan losses in any particular loan category. The total allowance is available to absorb losses from any segment of the loan portfolio. Management believes the ALLL is appropriate. The allowance analysis is reviewed by the board of directors on a quarterly basis in compliance with regulatory requirements. In addition, various regulatory agencies periodically review the ALLL. These agencies may require Nicolet National Bank to make additions to the ALLL based on their judgments of collectability based on information available to them at the time of their examination.

Income taxes

The assessment of tax assets and liabilities involves the use of estimates, assumptions, interpretation, and judgment concerning certain accounting pronouncements and federal and state tax codes. There can be no assurance that future events, such as court decisions or positions of federal and state taxing authorities, will not differ from management’s current assessment, the impact of which could be significant to the consolidated results of operations and reported earnings.

Nicolet files a consolidated federal income tax return and a combined state income tax return (both of which include Nicolet and its wholly-owned subsidiaries). Accordingly, amounts equal to tax benefits of those companies having taxable federal losses or credits are reimbursed by the companies that incur federal tax liabilities. Amounts provided for income tax expense are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable under tax laws. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax law rates applicable to the periods in which the differences are expected to affect taxable income. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through provision for income tax expense. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Nicolet may also recognize a liability for unrecognized tax benefits from uncertain tax positions. Unrecognized tax benefits represent the differences between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured in the financial statements. Penalties related to unrecognized tax benefits are classified as income taxes.

Unless noted otherwise, all remaining information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are shown in thousands, except per share data.

The following discussion is Nicolet management’s analysis of the understanding and evaluation of the consolidated financial condition and results of operations of Nicolet. It should be read in conjunction with Nicolet’s audited consolidated financial statements as of December 31, 2011 and 2010, and for the three years ended December 31, 2011.

Overview

Nicolet is a bank-holding company headquartered in Green Bay, Wisconsin, providing a diversified range of traditional banking and wealth management services to individuals and businesses in its market area through the 11 branch offices of its banking subsidiary, Nicolet National Bank, in Green Bay, De Pere, Appleton, Marinette and Crivitz, Wisconsin and Menominee, Michigan.

Nicolet’s primary revenue sources are net interest income from loans and other interest earning assets such as investments, less interest expense on deposits and other borrowings; and noninterest income, including, among others, trust fees, secondary mortgage income and other fees or revenue from financial services provided to customers or ancillary to loans and deposits. Business volumes and pricing drive revenue potential and tend to be influenced by overall economic factors, including market interest rates, business spending, consumer confidence, economic growth and competitive conditions within the marketplace.

During 2011, Nicolet continued to aggressively work through its credit quality issues, which resulted in a decrease in problem loans for the year. In line with its growth strategies, Nicolet experienced a full year of contribution from the four Brown County branches purchased in July 2010 and opened a new branch in Appleton, Wisconsin in December 2011. In September 2011, Nicolet redeemed its senior preferred stock under TARP, paying the Treasury $15,712 and accelerating the accretion of the remaining discount of $396, which unfavorably affected 2011 net income available to common shareholders. Such redemption was in connection with Nicolet’s September 2011 participation in the Small Business Lending Fund (“SBLF”), whereby Nicolet received $24,400 from Treasury for the issuance of new senior preferred stock. See “Business of Nicolet — General” on page 83 for additional information.

Performance Summary

Nicolet reported $1,490 in net income for 2011, $380 greater than $1,110 for 2010. Net income available to common shareholders for 2011 was $29, or $0.01 per diluted common share, compared to net income available to common shareholders of $125, or $0.04 per diluted common share, for 2010. A $476 increase in preferred stock dividends and discount accretion reduced net income available to common shareholders in 2011. The $1,461 of preferred dividends and discount accretion for 2011 included $396 in accelerated discount accretion resulting from the repayment of the TARP senior preferred stock and higher dividends given the increase in its senior preferred stock from the SBLF.

•

Net interest income was $21,447 for 2011, an increase of $1,318 or 6.5% compared to 2010. On a tax-equivalent basis, the net interest margin for 2011 increased to 3.75% from 3.39% in 2010. The average yield on earning assets was 5.18% for 2011, down 7 basis points (“bps”) from 5.25% for 2010, while the cost of interest-bearing liabilities fell 48 bps to 1.67% for 2011 versus 2.15% for 2010. The improvement in net interest income and net interest margin was primarily due to lower interest expense and cost of funds, principally from the maturity of high-cost brokered deposits.

•

Loans of $472,489 at December 31, 2011 decreased $41,272 from December 31, 2010. Lower utilization of commercial lines of credit accounted for 80% of the year-over-year decline, as commercial customers were cautious about debt levels. On average for the year, loans increased $4,169 to $503,362 for 2011.

•

Net charge-offs were $9,336 for 2011 and $6,097 for 2010. The provision for loan losses was $6,600 for 2011, compared with $8,500 for 2010. The continued higher provision levels accommodated aggressive problem loan resolutions. The allowance to loans ratio at December 31, 2011 was 1.25% compared to 1.68% at December 31, 2010, and the decline is primarily attributable to the higher level of net charge-offs in 2011 and lower nonperforming loans.

•

Total deposits were $551,536 at December 31, 2011, down $6,928 from December 31, 2010. Brokered deposits declined $48,454 since year end 2010, as maturing brokered CDs were not renewed given strong customer deposit growth during 2011. On average for the year, total deposits were $522,297, down $8,385, of which brokered deposits declined $63,724 and were almost fully replaced by customer deposit growth.

•

Noninterest income for 2011 was $8,444, down $524, or 5.8%, compared to 2010. The decline was driven by lower mortgage banking income from the sales of residential real estate loans into the secondary market which fell $852 to $1,767 for 2011. Mortgage banking income increased in the second half of 2011 as compared to the first half due to declines in interest rates; however, the activity was not as high as 2010 levels. Offsetting the mortgage banking decline were increases in trust fees, service charges on deposits, and brokerage fees.

•

Noninterest expense for 2011 was $21,443, an increase of $2,127, or 11.0%, over 2010, due primarily to carrying a full year of costs associated with the four branches purchased in July 2010 (mainly in employment and occupancy costs, as well as a $412 increase in core deposit intangible amortization). Nicolet benefited from the FDIC’s change in its assessment calculation, with FDIC assessments declining $297 to $630 for 2011.

Net Interest Income

Net interest income in the consolidated statements of income (which excludes the taxable equivalent adjustment) was $21,447 in 2011 compared to $20,129 in 2010 and $16,364 in 2009. Taxable equivalent adjustments (adjustments to bring tax-exempt interest to a level that would yield the same after-tax income had that been subject to a 34% tax rate) were $660, $596 and $665 for 2011, 2010 and 2009, respectively, resulting in taxable equivalent net interest income of $22,107 for 2011, $20,725 for 2010 and $17,029 for 2009.

Taxable equivalent net interest income is a non-GAAP measure, but is a preferred industry measurement of net interest income (and its use in calculating a net interest margin) as it enhances the comparability of net interest income arising from taxable and tax-exempt sources.

Net interest income is the primary source of Nicolet’s revenue, and is the difference between interest income on earning assets, such as loans and investment securities, and interest expense on interest-bearing liabilities, such as deposits and other borrowings. Net interest income is directly impacted by the sensitivity of the balance sheet to changes in interest rates and by the amount and composition of interest earning assets and interest-bearing liabilities, including characteristics such as the fixed or variable nature of the financial instruments, contractual maturities, and repricing frequencies.

Tables 1, 2, and 3 present information to facilitate the review and discussion of selected average balance sheet items, taxable equivalent net interest income, interest rate spread and net interest margin.

Table 1: Average Balance Sheet and Net Interest Income Analysis — Taxable-Equivalent Basis
For the Years Ended December 31,
(dollars in thousands)

	Years Ended December 31
	2011							2010							2009
	Average Balance		Interest		Average Rate			Average Balance		Interest		Average Rate			Average Balance		Interest		Average Rate
ASSETS
Earning assets
Loans	$	503,362	$	28,190		5.54	%	$	499,193	$	29,466		5.84	%	$	478,267	$	28,956		5.99	%
Investment securities
Taxable		20,866		689		3.30	%		22,295		865		3.88	%		17,534		767		4.37	%
Tax-exempt		32,540		1,445		4.44	%		29,860		1,460		4.89	%		32,780		1,691		5.16	%
Other interest-earning assets		25,718		166		0.64	%		51,834		225		0.53	%		51,222		833		1.73	%
Total interest-earning assets		582,486	$	30,490		5.18	%		603,182	$	32,016		5.25	%		579,803	$	32,247		5.51	%
Cash and due from banks		18,785							11,382							17,926
Other assets		41,082							39,146							35,555
Total assets	$	642,353						$	653,710						$	633,284
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities
Savings	$	16,829	$	45		0.27	%	$	12,273	$	31		0.25	%	$	9,916	$	34		0.34	%
Interest-bearing demand		63,346		404		0.64	%		76,489		360		0.47	%		41,258		232		0.56	%
MMA		156,471		1,142		0.73	%		115,973		1,105		0.95	%		97,902		1,153		1.18	%
Core CD’s and IRA’s		154,115		2,664		1.73	%		140,828		3,225		2.29	%		101,387		3,360		3.31	%
Brokered deposits		63,749		2,255		3.54	%		127,473		4,633		3.63	%		204,139		7,909		3.87	%
Total interest-bearing deposits		454,510		6,510		1.43	%		473,036		9,354		1.98	%		454,602		12,688		2.79	%
Other interest-bearing liabilities		46,385		1,873		4.04	%		51,425		1,937		3.77	%		52,621		2,530		4.81	%
Total interest-bearing liabilities		500,895		8,383		1.67	%		524,461		11,291		2.15	%		507,223		15,218		3.00	%
Noninterest-bearing demand		67,787							57,647							56,139
Other liabilities		4,387							4,679							4,536
Total equity		69,284							66,923							65,387
Total liabilities and stockholders’ equity	$	642,353						$	653,710						$	633,284
Net interest income and rate spread			$	22,107		3.51	%			$	20,725		3.11	%			$	17,029		2.51	%
Net interest margin						3.75	%						3.39	%						2.89	%

(1)

Nonaccrual loans are included in the daily average loan balances outstanding.

(2)

The yield on tax-exempt loans and tax-exempt investment securities is computed on a tax-equivalent basis using a federal tax rate of 34% and adjusted for the disallowance of interest expense.

(3)

Interest income includes loan fees of $396 in 2011, $492 in 2010 and $470 in 2009.

Table 2: Volume/Rate Variance — Taxable-Equivalent Basis
(dollars in thousands)

	2011 Compared to 2010 Increase (decrease) Due to Changes in									2010 Compared to 2009 Increase (decrease) Due to Changes in
	Volume			Rate*			Net			Volume			Rate*			Net
Earning assets
Loans (2)	$	236		$	(1,512	)	$	(1,276	)	$	1,196		$	(686	)	$	510
Investment securities
Taxable		(21	)		(119	)		(140	)		224			(135	)		89
Tax-exempt (2)		(58	)		6			(51	)		(178	)		(44	)		(222	)
Other interest-earning assets		(66	)		8			(58	)		(332	)		(277	)		(609	)
Total interest-earning assets	$	91		$	(1,617	)	$	(1,525	)	$	910		$	(1,142	)	$	(232	)

Interest-bearing liabilities
Interest-bearing demand	$	(12	)	$	2		$	14		$	7		$	(10	)	$	(3	)
Savings deposits		(69	)		113			44			171			(43	)		128
MMA		332			(295	)		37			193			(241	)		(48	)
Core CD’s and IRA’s		284			(845	)		(561	)		1,082			(1,217	)		(135	)
Brokered deposits		(2,257	)		(121	)		(2,378	)		(2,813	)		(463	)		(3,276	)
Total interest-bearing deposits		(1,698	)		(1,146	)		(2,844	)		(1,360	)		(1,974	)		(3,334	)
Other interest-bearing liabilities		(74	)		10			(64	)		12			(605	)		(593	)
Total interest-bearing liabilities		(1,772			(1,136	)		(2,908	)		(1,348	)		(2,579	)		(3,927	)
Net interest income	$	1,863		$	(481	)	$	1,383		$	2,258		$	1,437		$	3,695

Nonaccrual loans are included in the daily average loan balances outstanding.

(1)

The change in interest due to both rate and volume has been allocated in proportion to the relationship of dollar amounts of change in each.

(2)

The yield on tax-exempt loans and tax-exempt investment securities is computed on a tax-equivalent basis using a federal tax rate of 34% adjusted for the disallowance of interest expense.

Table 3: Interest Rate Spread, Margin and Average Balance Mix — Tax Equivalent Basis
(dollars in thousands)

	Years Ended December 31,
	2011								2010								2009
	Average Balance		% of Earning Assets			Yield/Rate			Average Balance		% of Earning Assets			Yield/Rate			Average Balance		% of Earning Assets			Yield/Rate
Total loans	$	503,362		86.4	%		5.54	%	$	499,193		82.8	%		5.84	%	$	478,267		82.5	%		5.99	%
Securities and other earning assets		79,124		13.6	%		2.91	%		103,989		17.2	%		2.45	%		101,536		17.5	%		3.23	%
Total interest-earning assets	$	582,486		100.0	%		5.19	%	$	603,182		100.0	%		5.26	%	$	579,803		100.0	%		5.51	%

Interest-bearing liabilities	$	500,895		88.1	%		1.67	%	$	524,461		90.1	%		2.15	%	$	507,223		90.0	%		3.00	%
Noninterest-bearing demand		67,787		11.9	%					57,647		9.9	%					56,139		10.0	%
Total funds sources	$	568,682		100.0	%		1.44	%	$	582,107		100.0	%		1.87	%	$	563,361		100.0	%		2.62	%
Interest rate spread							3.52	%							3.11	%							2.51	%
Contribution from net free funds							0.23	%							0.28	%							0.38	%
Net interest margin							3.75	%							3.39	%							2.89	%

Comparison of 2011 versus 2010

Taxable-equivalent net interest income was $22,107 for 2011, an increase of $1,382, or 6.7%, from 2010 predominantly attributable to lower volumes of high-rate brokered deposits (as brokered CDs matured without replacement) and lower rates on customer time deposits (given renewals in the lower rate environment), offset

partly by lower rates on loans (given renewals in the lower rate environment and competitive pricing pressures on new loans).

The taxable-equivalent net interest margin was 3.75% for 2011, up from 3.39% for 2010. For 2011, the earning asset yield was 5.18%, 7 bps lower than last year, affected mainly by a decline in loan yields (down 30 bps to 5.54%), but aided by loans representing a higher percentage of earning assets (to 86.4% for 2011 versus 82.8 % in 2010) since loans yield more than other earning assets. All other earning assets combined yielded 2.91% for 2011, up 46 bps over last year, given a lower proportion of low-earning cash balances in 2011 versus 2010 from cash being utilized to support the average loan growth and payoff of maturing brokered deposits.

The cost of interest-bearing liabilities of 1.67% for 2011 was 48 bps lower than 2010, aided by a number of positive factors. The average cost of interest-bearing deposits for 2011 was 1.43%, down 55 bps versus 2010. This favorable decline was predominantly due to high-cost brokered deposits (3.54% for 2011 and 3.63% for 2010) representing a lower proportion of average interest-bearing deposits (14% for 2011 compared to 27% for 2010), and the cost of the remaining interest-bearing customer deposits combined (i.e. savings, interest-bearing demand, MMA and time deposits) falling 28 bps to 1.09% for 2011, led by time deposits. The cost of other interest-bearing liabilities (comprised of short- and long-term borrowings) increased 27 bps to 4.04% for 2011, mainly as a result of less lower-cost short-term borrowings in the mix of funds.

Average earning assets were $582,486 for 2011, $20,697 lower than 2010, primarily from lower interest-bearing cash balances (down nearly $26,000 from 2010), offset partly by higher average loans. Average loans increased $4,169 to $503,362, despite high 2011 charge off levels, with relatively steady growth through the first half but declining sharply in the second half of 2011, mainly from lower commercial line usage and business customers being more cautious about debt levels and economic conditions.

Average interest-bearing liabilities were $500,895 for 2011, down $23,566 from 2010. Average brokered deposits declined $63,724 as maturing CDs were not renewed, while the remaining interest-bearing customer deposits combined grew $45,199, impacted largely from a full year contribution of the deposits acquired in the July 2010 branch acquisition. Other interest-bearing liabilities declined $5,040 to $46,385, mainly in lower-cost short-term funds.

Comparison of 2010 versus 2009

Taxable equivalent net interest income for 2010 was $20,725, an increase of $3,696, or 21.7%, over 2009. The increase in taxable equivalent net interest income was a function of favorable volume and rate variances in interest-bearing liabilities (contributing $1,348 from lower funding balances, particularly brokered deposits, and $2,579 from lower funding costs, across all fund sources but mostly customer CDs and IRAs renewing in the lower rate environment), but an unfavorable net variance from earning assets (as lower yields on loans and other earning assets decreased net interest income by $1,141, offset partly by improved volumes contributing $910 to net interest income, especially from loans).

The net interest margin for 2010 was 3.39%, compared to 2.89% in 2009. The 50 bps improvement came largely from an 85 bps improvement in the cost of funds, offset by 25 bps decline in the yield on earning assets and 10 bps lower net free funds. For 2010, the yield on earning assets of 5.25% was 25 bps lower than 2009, with loan yields down 15 bps to 5.84%, impacted by renewals and competitive pricing pressures in a low interest rate environment and carrying more low-interest cash balances in the mix of 2011 other earning assets.

The cost of average interest-bearing liabilities of 2.15% in 2010 was 85 bps lower than 2009. The average cost of interest-bearing deposits in 2010 was 1.98%, 81 bps lower than 2009, reflecting heavy runoff of high-cost brokered deposits and growth in other lower-cost deposits, mainly from the part year contribution of deposits acquired in the July 2010 branch acquisition. The cost of other interest-bearing liabilities decreased 111 bps to 3.63% for 2010, as 2009 carried prepayment interest on certain long-term advances that were refinanced early given the low rate environment.

Average earning assets of $603,182 in 2010 were $23,379 higher than 2009, of which $20,926 was attributable to loan growth. Average interest-bearing liabilities of $524,461 in 2010 were up $17,238 versus

2009, attributable largely to growth from the July 2010 branch acquisition, offset by a decline in brokered deposits from maturities.

Provision for Loan Losses

The provision for loan losses in 2011 was $6,600, compared to $8,500 and $6,000 for 2010 and 2009, respectively. The continued higher than historical level of provision was due primarily to aggressive work-outs of problem loans, the levels of loan charge-offs, nonperforming loan trends, depressed collateral values, and continuing economic conditions. Net charge-offs were $9,336 for 2011, compared to $6,097 for 2010 and $5,314 for 2009. The increase in net charge-offs during 2011 was primarily due to the resolution of issues relating to certain impaired loans identified in late 2010. At December 31, 2011, the ALLL was $5,899, compared to $8,635 at December 31, 2010, and $6,232 at December 31, 2009. The ratio of the allowance to total loans was 1.25%, 1.68%, and 1.28% at December 31, 2011, 2010, and 2009, respectively. Nonperforming loans at December 31, 2011, were $9,476, compared to $10,803 at December 31, 2010, and $8,212 at December 31, 2009, representing 2.0%, 2.1%, and 1.7% of total loans, respectively.

The provision for loan losses is predominantly a function of Nicolet’s methodology and judgment as to qualitative and quantitative factors used to determine the adequacy of the ALLL. The adequacy of the allowance is affected by changes in the size and character of the loan portfolio, changes in levels of impaired and other nonperforming loans, historical losses and delinquencies in each portfolio segment, the risk inherent in specific loans, concentrations of loans to specific borrowers or industries, existing and future economic conditions, the fair value of underlying collateral, and other factors which could affect potential credit losses. For additional information regarding asset quality and the ALLL, see “Balance Sheet Analysis — Loans,” and “Balance Sheet Analysis — Impaired Loans and Nonperforming Assets.”

Noninterest Income

Table 4: Noninterest Income
(dollars in thousands)

	Years Ended December 31,									Change From Prior Year
										$ Change			% Change			$ Change			% Change
	2011			2010			2009			2011			2011			2010			2010
Service charges on deposit accounts	$	1,180		$	1,087		$	932		$	93			8.6	%	$	155			16.6	%
Trust services fee income		2,899			2,811			2,858			88			3.1	%		(47	)		(1.6%)
Mortgage fee income		1,767			2,619			1,547			(852	)		(32.5%)			1,072			69.3	%
Brokerage fee income		334			291			208			43			14.8	%		83			39.9	%
Loss on sale, disposal and write down of assets, net		(55	)		(59	)		(150	)		4			6.8	%		91			60.7	%
Bank owned life insurance		572			574			558			(2	)		(0.3%)			16			2.9	%
Rent income		955			970			1,003			(15	)		(1.5%)			(33	)		(3.3%)
Investment advisory fees		330			308			357			22			7.1	%		(49	)		(13.7%)
Other		462			367			218			95			25.9	%		149			68.3	%
Total other income	$	8,444		$	8,968		$	7,531		$	(524	)		(5.8%)		$	1,437			19.1	%

Comparison of 2011 versus 2010

Noninterest income was $8,444 for 2011, down $524, or 5.8%, from 2010, led by lower mortgage fee income.

Service fees on deposit accounts for 2011 were $1,180, up $93, or 8.6%, over 2010. The increase in service fees for 2011 was due mainly to higher non-sufficient funds (“NSF”) fees from the larger deposit base carried all year given the four Brown County branches acquired in July 2010.

Trust service fees were $2,899 in 2011, up $88 compared to 2010, primarily from slight market improvements on assets under management, on which fees are based. Brokerage fees were up $43 over 2010, as a result of increased sales and the noted market improvement.

Mortgage fee income represents net gains received from the sale of residential real estate loans service-released into the secondary market and to a small degree, some related income. During the second half of 2010, mortgage rates fell to historically low levels, prompting a wave of residential refinancing activity generating $2,619 of mortgage banking income for the year. Mortgage banking income was $1,767 for 2011, reflecting a similar slow first half and stronger second half pattern, but not as dramatic as 2010.

Nicolet recognized a $55 net loss on sale, disposal and write down of assets in 2011 consisting of a $128 other-than-temporary impairment (“OTTI”) charge on a private equity security, and $73 net gains on other real estate owned (“OREO”) and other assets sold. Comparatively 2010 carried a $59 net loss, consisting of an OTTI charge of $428 on the same private equity security, $283 gains on investment sales and $86 net gain on OREO and other assets sold. Other income increased $95 to $462 in 2011 compared to 2010 largely from ancillary fees tied to deposit- related products.

Comparison of 2010 versus 2009

Noninterest income was $8,968 for 2010, an increase of $1,437, or 19.1%, from 2009.

For 2010, mortgage banking income was $2,619, up $1,072 from 2009. Sales of residential loan originations and refinancing activity reached a high in 2010 due to the historically low interest rate environment spurring refinancing activity.

The net loss on sale, disposal and write down of assets was $59 for 2010 compared to $150 in 2009, with 2009 carrying a $157 net loss on OREO sales offset by $7 gain on a small investment sale.

Noninterest Expense

Table 5: Noninterest Expense
(dollars in thousands)

	Years Ended December 31,						Change From Prior Year
							$ Change			% Change			$ Change			% Change
	2011		2010		2009		2011			2011			2010			2010
Salaries and employee benefits	$	11,334	$	10,165	$	8,282	$	1,169			11.5	%	$	1,883			22.7	%
Occupancy, equipment and office		4,409		3,748		3,254		661			17.6	%		494			15.2	%
Business development and marketing		1,362		1,243		1,285		119			9.6	%		(42	)		(3.3%)
Data processing		1,360		1,293		1,143		67			5.2	%		150			13.1	%
FDIC assessments		630		927		1,144		(297	)		(32.0%)			(217	)		(19.0%)
Core deposit intangible amortization		741		329		—		412			125.0	%		329			100	%
Other		1,607		1,611		1,576		(4	)		(0.2%)			35			2.3	%

Total other expenses	$	21,443	$	19,316	$	16,684	$	2,127			11.0	%	$	2,632			15.8	%

Comparison of 2011 versus 2010

Total noninterest expense was $21,443 for 2011, an increase of $2,127, or 11.0%, over 2010 due primarily to increased salaries and employee benefits as well as occupancy costs. These expenses were largely impacted from carrying a full year of costs associated with the four branches purchased in July 2010, as well as normal merit increases between the years.

Salaries and employee benefits increased by $1,169, or 11.5%, over 2010. As noted above, this increase is largely due to the full year of salary and benefits paid as a result of the 2010 branch acquisition transaction.

Occupancy, equipment and office increased $661, or 17.6%, over 2010. The increase was mainly the result of increasing rent and depreciation expense related to the larger branch network as well as continued investment in facilities consistent with plans for future growth.

FDIC assessments were $630 for 2011, $297 lower than 2010. Nicolet benefited from the FDIC’s change in assessment calculation effective in 2011.

The core deposit intangible amortization increased $412 from 2010 as a full year impact of the 2010 branch acquisition was realized.

Other operating expenses were $1,606 for 2011, a decrease of $6 over 2010. Nicolet continues to manage its costs commensurate with its operational requirements.

Comparison of 2010 versus 2009

Noninterest expense increased $2,632, or 15.8%, from 2009, primarily from increases in salaries and employee benefits, occupancy and data processing costs. Remaining noninterest expenses were stable or declining.

Salaries in 2010 increased mainly from personnel added with the July 2010 branch acquisition, as well as normal merit adjustments, and cash and equity incentive increases given better 2010 versus 2009 performance.

Occupancy expenses increased $494, or 15.2% from 2009 amounts. The majority of this increase was in rent expense which increased from $89 in 2009 to $355 in 2010, given the July 2010 branch acquisition.

Data processing increased $150, from general rate increases and the larger processing volumes added in 2010 with the branch acquisition.

Income Taxes

Income tax expense was $318 for 2011, $136 for 2010 and $45 for 2009. The effective tax rates were 17.2%, 10.6%, and 3.8% for 2011, 2010, and 2009, respectively, influenced largely by the amount of income before tax and the mix of tax-exempt income each year. The basic principles for accounting for income taxes require that deferred income taxes be analyzed to determine if a valuation allowance is required. A valuation allowance is required if it is more likely than not that some portion of the deferred tax asset will not be realized. At December 31, 2011 and 2010, no valuation allowance was determined to be necessary except for state NOL carry forwards.

At December 31, 2011, state tax net operating losses at Nicolet of approximately $3,700 existed to offset future taxable income resulting in a deferred tax asset of $200 for which a valuation allowance of $187 has been recognized as it is not expected to be realized under current regulations.

BALANCE SHEET ANALYSIS

Loans

Nicolet National Bank services a diverse customer base throughout Northeast Wisconsin and Michigan including the following industries: manufacturing, wholesaling, retail, service, and businesses supporting the general building industry. It continues to concentrate its efforts in originating loans in its local markets and assisting its current loan customers. It actively utilizes government loan programs such as those provided by the U.S. Small Business Administration to help these customers weather current economic conditions and position their businesses for the future.

Total loans were $472,489 at December 31, 2011, a decrease of $41,272, or 8.0%, from December 31, 2010. Lower utilization of commercial lines of credit accounted for 80% of this decline. During 2011, Nicolet actively pursued loan growth, but the decline in loan balances was primarily a result of reduced borrower demand, particularly during the second half of 2011, due to economic contraction.

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Table 6: Loan Composition
As of December 31,
(dollars in thousands)

	2011					2010					2009					2008					2007
	Amount		% of Total			Amount		% of Total			Amount		% of Total			Amount		% of Total			Amount		% of Total
Commercial & industrial	$	154,011		32.6	%	$	170,919		33.3	%	$	146,121		30.0	%	$	162,216		33.8	%	$	132,570		30.0	%
CRE owner-occupied		111,179		23.5			123,122		24.0			142,621		29.3			139,710		29.2			148,525		33.6
CRE investment		66,577		14.1			63,839		12.4			37,908		7.8			41,393		8.6			37,349		8.4
Construction & land development		24,774		5.2			31,464		6.1			40,619		8.3			29,729		6.2			39,946		9.0
Residential construction		9,363		2.0			8,893		1.7			12,940		2.7			14,279		3.0			4,595		1.0
Residential-1st Mortgage		56,393		11.9			56,533		11.0			47,352		9.7			38,881		8.1			29,360		6.7
Residential-Junior mortgage		42,699		9.1			46,621		9.1			47,020		9.7			46,945		9.8			41,328		9.3
Retail & other		7,493		1.6			12,370		2.4			11,990		2.5			6,026		1.3			8,684		2.0
Total Loans	$	472,489		100.0	%	$	513,761		100.0	%	$	486,571		100.0	%	$	479,179		100.0	%	$	442,357		100.0	%

Commercial and industrial, real estate commercial, and construction and land development loans comprised 75.4% of the loan portfolio at December 31, 2011. Such loans are considered to have more inherent risk of default than residential mortgage or installment loans. The commercial balance per borrower is typically larger than that for residential and mortgage loans, implying higher potential losses on an individual customer basis. Commercial loan growth throughout 2010 and 2011 was hampered by soft loan demand (most predominantly during the second half of 2011) across all markets, Nicolet’s aggressive approach to recognizing risks associated with specific borrowers and the recognition of charge-offs on nonperforming loans in a timely manner.

Commercial and industrial loans were $154,011 at December 31, 2011, down $16,908, or 9.9%, since year end 2010, and comprised 32.6% of total loans. The commercial loan classification primarily consists of commercial loans to small businesses and loans to municipalities. Owner-occupied commercial real estate loans primarily consist of loans secured by business real estate that is occupied by borrowers that also have commercial and industrial loans. Owner-occupied commercial real estate loans were $111,179 at December 31, 2011, down $11,943, or 9.7%, since year end 2010, and comprised 23.5% of total loans. Both of these loan segments include a diverse range of industries. The credit risk related to commercial loans and owner-occupied commercial real estate loans is largely influenced by general economic conditions and the resulting impact on a borrower’s operations, or on the value of underlying collateral, if any. The decline in these commercial loan segments was primarily due to soft loan demand from business borrowers resulting from generally poor economic conditions.

Commercial investment real estate loans totaled $66,577 at December 31, 2011, up $2,738, or 4.3%, from December 31, 2010, and comprised 14.1% of total loans, up from 12.4% at the end of 2010. The investment real estate loan classification primarily includes commercial-based mortgage loans that are secured by non-owner occupied, nonfarm/nonresidential real estate properties, and multi-family residential properties.

Construction and land development loans totaled $24,774 at December 31, 2011, down $6,690, or 21.3%, from December 31, 2010, and comprised 5.2% of total loans, down from 6.1% at the end of 2010. Loans in this classification provide financing for the development of commercial income properties, multi-family residential development, and land designated for future development. Nicolet controls the credit risk on these types of loans by making loans in familiar markets, reviewing the merits of individual projects, controlling loan structure, and monitoring the progress of projects through the analysis of construction advances. The decrease in this segment was due to charge-offs, pay downs, and Nicolet National Bank decreasing its credit exposure by encouraging the refinancing of certain loan relationships with other financial institutions. Future lending in this segment will focus on loans that are secured by commercial income-producing properties as opposed to speculative real estate development. Credit risk is managed by employing sound underwriting guidelines, lending primarily to borrowers in local markets, periodically evaluating the underlying collateral, and formally reviewing the borrower’s financial soundness and relationships on an ongoing basis. Residential

101

construction loans totaled $9,363 at the end of 2011, up $470, or 5.3%, from the prior year end, and comprised 2.0% and 1.7% of total loans outstanding at year end 2011 and 2010, respectively.

Residential first-mortgage real estate loans declined $140, or 0.2%, to $56,393 at December 31, 2011, representing 11.9% and 11.0% of the total loan portfolio at the end of 2011 and 2010, respectively. Residential first mortgage loans include conventional first-lien home mortgages, not including loans held for sale in the secondary market. Residential junior-lien real estate loans declined $3,922, or 8.4%, to $42,699, representing 9.0% and 9.1% of the total loan portfolio at the end of 2011 and 2010, respectively. Residential junior-lien real estate loans consist of home equity lines and term loans secured by junior mortgage liens. If the declines in market values that have occurred in the residential real estate markets worsen, particularly in Nicolet’s market area, the value of collateral securing its real estate loans could decline further, which could cause an increase in the provision for loan losses. In light of the uncertainty that exists in the economy and credit markets, there can be no guarantee that Nicolet will not experience additional deterioration resulting from a downturn in credit performance by its residential real estate loan customers. As part of its management of originating residential mortgage loans, nearly all of Nicolet’s long-term, fixed-rate residential real estate mortgage loans are sold in the secondary market without retaining the servicing rights. At December 31, 2011, $11,373 of residential mortgages were held for resale to the secondary market, compared to $5,334 at December 31, 2010.

Retail consumer loans totaled $7,493 at December 31, 2011, down $4,877, or 39.4%, compared to 2010, and represented 1.6% and 2.4% of the 2011 and 2010 yearend loan portfolio, respectively. The decline in aggregate consumer loan balances is largely a result of reduced consumer demand due to economic conditions. Loans in this classification include short-term and other personal installment loans not secured by real estate. Credit risk is primarily controlled by reviewing the creditworthiness of the borrowers, monitoring payment histories, and taking appropriate collateral and guaranty positions.

Factors that are important to managing overall credit quality are sound loan underwriting and administration, systematic monitoring of existing loans and commitments, effective loan review on an ongoing basis, early problem loan identification and remedial action to minimize losses, an adequate ALLL, and sound nonaccrual and charge-off policies. An active credit risk management process is used for commercial loans to further ensure that sound and consistent credit decisions are made. The credit management process is regularly reviewed and the process has been modified over the past several years to further strengthen the controls.

The loan portfolio is widely diversified by types of borrowers, industry groups, and market areas. Significant loan concentrations are considered to exist for a financial institution when there are amounts loaned to multiple numbers of borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. At December 31, 2011, no significant industry concentrations existed in Nicolet’s portfolio in excess of 25% of total loans. Nicolet National Bank has also developed guidelines to manage its exposure to various types of concentration risks.

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The following table presents the maturity distribution of the loan portfolio at December 31, 2011:

Table 7: Loan Maturity Distribution
(dollars in thousands)

	Loan Maturity
	One Year or Less			Over One Year to Five Years			Over Five Years			Totals
Commercial & industrial	$	82,136		$	64,931		$	6,944		$	154,011
CRE owner-occupied		35,741			66,167			9,271			111,179
CRE investment		26,120			33,784			6,673			66,577
Construction & land development		19,410			5,316			48			24,774
Residential construction		9,285			—			78			9,363
Residential 1st mortgage		12,097			17,977			26,318			56,393
Residential junior mortgage		7,672			14,708			20,319			42,699
Retail & other		5,404			1,624			466			7,493
Total Loans	$	197,865		$	204,507		$	70,117		$	472,489
Percent by maturity distribution		41.9	%		43.3	%		14.8	%		100.0	%

Allowance for Loan and Lease Losses

Credit risks within the loan portfolio are inherently different for each loan type. Credit risk is controlled and monitored through the use of lending standards, a thorough review of potential borrowers, and on-going review of loan payment performance. Active asset quality administration, including early problem loan identification and timely resolution of problems, aids in the management of credit risk and minimization of loan losses.

The ALLL is established through a provision for loan losses charged to expense to appropriately provide for potential credit losses in the existing loan portfolio. Loans are charged against the ALLL when management believes that the collection of principal is unlikely. The level of the ALLL represents management’s estimate of an amount of reserves that provides for estimated probable credit losses in the loan portfolio at the balance sheet date. To assess the ALLL, an allocation methodology is applied by Nicolet which focuses on evaluation of qualitative and environmental factors, including but not limited to: (i) evaluation of facts and issues related to specific loans; (ii) management’s ongoing review and grading of the loan portfolio; (iii) consideration of historical loan loss and delinquency experience on each portfolio segment; (iv) trends in past due and nonperforming loans; (v) the risk characteristics of the various loan segments; (vi) changes in the size and character of the loan portfolio; (vii) concentrations of loans to specific borrowers or industries; (viii) existing and forecasted economic conditions; (ix) the fair value of underlying collateral; and (x) other qualitative and quantitative factors which could affect potential credit losses. Nicolet’s methodology reflects guidance by regulatory agencies to all financial institutions.

At December 31, 2011, the ALLL was $5,899, compared to $8,635 at December 31, 2010 and $6,232 at December 31, 2009. The ALLL as a percentage of total loans was 1.3%, 1.7%, and 1.3% at December 31, 2011, 2010 and 2009, respectively. This trend has improved in 2011. The level of the provision for loan losses is directly correlated to the amount of net charge-offs, as it is Nicolet’s policy that the loan loss provisions, over time, exceed net charge-offs and provide coverage for potential credit losses in the existing loan portfolio.

Nicolet’s maagement allocates the ALLL by pools of risk within each loan portfolio segment. The allocation methodology consists of the following components. First, a specific reserve, for the estimated collateral shortfall, is established for all loans determined to be impaired. Loans measured for impairment include all loans risk-weighted as “substandard” and “doubtful” with balances greater than $25 and all troubled debt-restructurings (“restructured loans”), determined to be impaired by Nicolet. The specific reserve in the ALLL is equal to the aggregate collateral shortfall calculated from the impairment analysis. Second, Nicolet’s management allocates ALLL with historical loss rates by loan segment. The loss factors applied in the methodology are periodically re-evaluated and adjusted to reflect changes in historical loss levels on an

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annual basis. Lastly, management allocates ALLL to the remaining loan portfolio using the qualitative factors mentioned above. Consideration is given to those current qualitative or environmental factors that are likely to cause estimated credit losses as of the evaluation date to differ from the historical loss experience of each loan segment

The ALLL was 62.3%, 83.8% and 75.9% of nonperforming loans at December 31, 2011, 2010 and 2009, respectively. Gross charge-offs were $9,401 for 2011, $6,292 for 2010, and $5,427 for 2009, while recoveries for the corresponding periods were $65, $195, and $113, respectively. As a result, net charge-offs for 2011 were $9,336, or 1.9%, of average loans, compared to $6,097, or 1.2% of average loans, for 2010 and $5,314, or 1.1% of average loans, for 2009. The 2011 increase in net charge-offs of $3,239 was primarily due to a $1,429 increase in commercial & industrial loan net charge-offs, an $880 increase in construction & land development, a $299 increase in other commercial real estate, and a $673 increase in residential first- and junior-lien mortgage loans offset by a $42 decrease in retail and other. Issues impacting asset quality over the past few years have included historically depressed economic factors, such as depressed commercial and residential real estate markets, volatile energy prices, heightened unemployment, and depressed consumer confidence. Declining collateral values have significantly contributed to elevated levels of nonperforming loans, net charge-offs, and ALLL. Nicolet has been focused on reducing its exposure within these portfolio segments by pursuing rigorous workout and resolution plans on problem credits, and by implementing enhancements to the credit management process to address and enhance underwriting, and recognition and mitigation of risk on new extensions of credit. The level of the provision for loan losses is directly correlated to the amount of net charge-offs, as it is Nicolet’s policy that the loan loss provisions, over time, exceed net charge-offs and provide coverage for potential credit losses in the existing loan portfolio. Loans charged-off are subject to continuous review, and specific efforts are taken to achieve maximum recovery of principal, accrued interest, and related expenses.

The largest portion of the ALLL at year end 2011 was allocated to construction and land development loans and was $2,035, representing 34.5% of the ALLL at year end 2011 compared to 25.1% at year end 2010. The increase in the percentage amount allocated to construction and land development was mostly attributable to the decrease in the percentage of the total portfolio represented by construction and land development, to $24,774 or 5.2% of total loans at year end 2011, down from $31,464 or 6.1% at year end 2010. The ALLL allocated to commercial and industrial loans was $1,964 at year end 2011, a decrease of $2,608 from year end 2010, and represented 33.3% of the ALLL at year end 2011, compared to 53.0% at year end 2010. The decrease in the commercial and industrial allocation was due to a $1,970 decrease in impaired Commercial and Industrial loans, which represented 18.4% of impaired loans at year end 2011 compared to 34.3% at year end 2010. In comparison to the construction and land development and commercial and industrial loan segments, allocations to the ALLL for other loan segments are relatively small, and did not change appreciably from December 31, 2010 to December 31, 2011

Management performs ongoing intensive analyses of its loan portfolios to allow for early identification of customers experiencing financial difficulties, maintains prudent underwriting standards, understands the economy in its markets, and considers the trend of deterioration in loan quality in establishing the level of the ALLL.

Consolidated net income and stockholders’ equity could be affected if Nicolet’s management’s estimate of the ALLL necessary to cover expected losses is subsequently materially different, requiring a change in the level of provision for loan losses to be recorded. While management uses currently available information to recognize losses on loans, future adjustments to the ALLL may be necessary based on newly received appraisals, updated commercial customer financial statements, rapidly deteriorating customer cash flow, and changes in economic conditions that affect Nicolet’s customers. As an integral part of their examination process, federal regulatory agencies also review the ALLL. Such agencies may require additions to the ALLL or may require that certain loan balances be charged-off or downgraded into criticized loan categories when their credit evaluations differ from those of management based on their judgments about information available to them at the time of their examination.

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Table 8: Loan Loss Experience
For the Years Ended December 31,
(dollars in thousands)

	2011			2010			2009			2008			2007
Allowance for loan losses (ALLL):
Beginning balance	$	8,635		$	6,232		$	5,546		$	5,383		$	4,954
Loans charged off:
Commercial & industrial		2,553			1,217			1,694			3,018			130
CRE owner-occupied		428			292			418			572			—
CRE investment		181			53			478			—			522
Construction & land development		5,243			4,335			300			108			131
Residential construction		42			—			500			68			—
Residential 1 ^st mortgage		488			167			397			56			12
Residential junior mortgage		459			136			811			347			24
Retail & other		7			92			829			16			26
Total loans charged off		9,401			6,292			5,427			4,185			845
Recoveries of loans previously charged off:
Commercial & industrial		23			116			7			67			95
CRE — owner-occupied		3			5			23			27			—
CRE — investment		—			33			76			211			6
Construction & land development		28			—			—			8			—
Residential construction		—			—			—			1			—
Residential 1 ^st mortgage		9			40			7			—			10
Residential junior mortgage		2			—			—			2			—
Retail & other		—			1			—			4			3
Total recoveries		65			195			113			320			114
Total net charge offs		9,336			6,097			5,314			3,865			731
Provision for loan losses		6,600			8,500			6,000			4,028			1,160
Ending balance of ALLL	$	5,899		$	8,635		$	6,232		$	5,546		$	5,383
Ratios at the end of year:
ALLL to total loans		1.25	%		1.68	%		1.28	%		1.16	%		1.22	%
ALLL to net charge offs		63.2	%		141.6	%		117.3	%		143.5	%		736.4	%
Net charge offs to average loans		1.9	%		1.2	%		1.1	%		.8	%		.2	%
Net loan charge-offs:
Commercial & industrial	$	2,530		$	1,101		$	1,687		$	2,951		$	35
CRE owner-occupied		425			287			395			545			—
CRE investment		181			20			402			(211	)		516
Construction & land development		5,215			4,335			300			100			131
Residential construction		42			—			500			67			—
Residential 1 ^st mortgage		479			127			390			56			2
Residential junior mortgage		457			136			811			345			24
Retail & other		7			91			829			12			23
Total net charge offs	$	9,336		$	6,097		$	5,314		$	3,865		$	731

The allocation of the ALLL for each of the past five years is based on Nicolet’s estimate of loss exposure by category of loans is shown in Table 9.

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Table 9: Allocation of the Allowance for Loan Losses
As of December 31,
(dollars in thousands)

	2011					2010*					2009*					2008*					2007*
ALLL allocation
Commercial & industrial	$	1,964		32.6	%	$	4,572		33.3	%	$	2,849		30.0	%	$	4,448		33.8	%	$	4,442		30.0	%
CRE owner-occupied*		347		23.5	%		556		24.0	%		799		29.3	%		—		29.2	%		—		33.6	%
CRE investment		392		14.1	%		209		12.4	%		237		7.8	%		599		8.6	%		539		8.4	%
Construction & land development		2,035		5.2	%		2,165		6.1	%		1,404		8.3	%		211		6.2	%		169		9.0	%
Residential construction*		311		2.0	%		285		1.7	%		187		2.7	%		—		3.0	%		—		1.0	%
Residential 1 ^st mortgage		405		11.9	%		304		11.0	%		343		9.7	%		102		8.1	%		110		6.7	%
Residential junior mortgage*		420		9.1	%		482		9.1	%		389		9.7	%		—		9.8	%		—		9.3	%
Retail & other		25		1.6	%		62		2.4	%		24		2.5	%		186		1.3	%		123		2.0	%
Total ALLL	$	5,899		100.0	%	$	8,635		100.0	%	$	6,232		100.0	%	$	5,546		100.0	%	$	5,383		100.0	%
ALLL category as a percent of total ALLL:
Commercial & industrial		33.3	%				53.0	%				45.8	%				80.2	%				82.6	%
CRE owner-occupied		5.9	%				6.4	%				12.8	%				—					—
CRE investment		6.6	%				2.4	%				3.8	%				10.8	%				10.0	%
Construction &land development		34.5	%				25.1	%				22.5	%				3.8	%				3.1	%
Residential construction		5.3	%				3.3	%				3.0	%				—					—
Residential 1 ^st mortgage		6.9	%				3.5	%				5.5	%				1.8	%				2.0	%
Residential junior mortgage		7.1	%				5.6	%				6.2	%				—					—
Retail & other		.4	%				.7	%				.4	%				3.4	%				2.3	%
Total ALLL		100.0	%				100.0	%				100.0	%				100.0	%				100.0	%

The allocation of the ALLL is calculated using the categories indicated in Table 9 starting in 2011. The amounts for 2010 and 2009 were “recast” using these categories for purposes of comparability. Data was unavailable to calculate the categorical information for 2008 and 2007. Commercial RE- Owner Occupied balances were included in total Commercial RE — Investment, Residential Construction was included in total Construction & Development and Residential Junior Mortgage was included with total retail and other.

Impaired Loans and Nonperforming Assets

As part of its overall credit risk management process, Nicolet’s management has been committed to an aggressive problem loan identification philosophy. This philosophy has been implemented through the ongoing monitoring and review of all pools of risk in the loan portfolio to ensure that problem loans are identified early and the risk of loss is minimized.

Nonperforming loans are considered one indicator of potential future loan losses. Nonperforming loans are defined as nonaccrual loans, including those defined as impaired under current accounting standards, and loans 90 days or more past due but still accruing interest. Loans are generally placed on nonaccrual status when contractually past due 90 days or more as to interest or principal payments. Additionally, whenever management becomes aware of facts or circumstances that may adversely impact the collectability of principal or interest on loans, it is management’s practice to place such loans on nonaccrual status immediately. Previously accrued and uncollected interest on such loans is reversed, amortization of related loan fees is suspended, and income is recorded only to the extent that interest payments are subsequently received in cash after a determination has been made that the principal balance of the loan is collectible. If collectability of the principal is in doubt, payments received are applied to loan principal.

Nonaccrual loans were $9,476, $10,303 and $8,212 at December 31, 2011, 2010, and 2009, respectively, reflecting the continued impact of the economy on Nicolet’s customers. Total nonaccrual loans at December 31, 2011 were down $827 since year end 2010, with commercial and industrial nonaccrual loans down $1,970. In contrast, commercial investment real estate nonaccruals were up $586, and residential first- and junior-lien

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nonaccruals were up $584, as these real-estate secured segments continue to exhibit signs of stress. Between year end 2010 and 2009, total nonaccrual loans increased $2,091, with commercial and industrial nonaccrual loans up $2,039 and construction and land development nonaccruals up $953. Nicolet’s ALLL methodology at December 31, 2011 included an impairment analysis on specifically identified loans defined by Nicolet as impaired, and incorporated the level of specific reserves for these credit relationships in determining the overall appropriate level of the ALLL.

The level of potential problem loans is another predominant factor in determining the relative level of risk in the loan portfolio and in determining the adequacy of the ALLL. Potential problem loans are generally defined by management to include loans rated as Substandard by management but that are in performing status; however, there are circumstances present which might adversely affect the ability of the borrower to comply with present repayment terms. The decision of management to include performing loans in potential problem loans does not necessarily mean that Nicolet expects losses to occur, but that management recognizes a higher degree of risk associated with these loans. The loans that have been reported as potential problem loans are predominantly commercial loans covering a diverse range of businesses and real estate property types. Potential problem loans totaled $23,232 at December 31, 2011 and $31,217 at December 31, 2010. Potential problem loans require a heightened management review of the pace at which a credit may deteriorate, the duration of asset quality stress, and uncertainty around the magnitude and scope of economic stress that may be felt by Nicolet’s customers and on underlying real estate values.

OREO decreased to $641 at December 31, 2011, compared to $1,443 at December 31, 2010 and $1,370 at December 31, 2009. The decrease in OREO during 2011 was primarily attributable to disposition and sale of development land that was recorded in OREO as of the previous year end. Nicolet’s management actively seeks to ensure properties held are monitored to minimize Nicolet’s risk of loss. Evaluations of the fair market value of the OREO properties are done quarterly and valuation adjustments, if necessary, are recorded in Nicolet’s consolidated financial statements.

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Table 10: Nonperforming Assets
As of December 31,
(dollars in thousands)

	2011			2010			2009			2008			2007
Nonaccrual loans considered impaired:
Commercial & industrial	$	1,745		$	3,715		$	1,676		$	422		$	40
CRE owner-occupied		934			1,092			1,449			—			—
CRE investment		716			130			500			1,216			317
Construction & land development		3,367			3,331			2,378			4,729			451
Residential construction		1,480			1,380			1,748			—			—
Residential 1 ^st mortgage		1,129			595			461			200			—
Residential junior mortgage		105			55			—			220			—
Retail & other		—			5			—			104			—
Total nonaccrual loans considered impaired		9,476			10,303			8,212			6,891			808
Impaired loans still accruing interest		—			—			—			—			—
Accruing loans past due 90 days or more		—			500			—			—			—
Total nonperforming loans		9,476			10,803			8,212			6,891			808
OREO		641			1,443			1,370			9			68
Total nonperforming assets	$	10,117		$	12,246		$	9,582		$	6,900		$	876
Total restructured loans accruing		—			—			—			—			—
Ratios
Nonperforming loans to total loans		2.0	%		2.1	%		1.7	%		1.4	%		.2	%
Nonperforming loans to total loans plus OREO		2.0	%		2.1	%		1.7	%		1.4	%		.2	%
Nonperforming loans to total assets		1.4	%		1.6	%		1.2	%		1.0	%		.1	%
ALLL to nonperforming loans		62.3	%		79.9	%		75.9	%		80.0	%		666.2	%
ALLL to total loans at end of year		1.2	%		1.7	%		1.3	%		1.2	%		1.2	%
Nonperforming assets by type:
Commercial & industrial	$	1,745		$	4,215		$	1,676		$	422		$	40
CRE owner-occupied		934			1,092			1,449			—			—
CRE investment		716			130			500			1,216			317
Construction & land development		3,367			3,331			2,378			4,729			451
Residential construction		1,480			1,380			1,748			—			—
Residential 1 ^st mortgage		1,129			595			461			200			—
Residential junior mortgage		105			55			—			220			—
Retail & other		—			5			—			104			—
Total nonperforming loans	$	9,476		$	10,803		$	8,212		$	6,891		$	808
Commercial real estate owned	$	566		$	1,368		$	1,255		$	9		$	68
Residential real estate owned		75			75			115			—			—
Total other real estate owned	$	641		$	1,443		$	1,370		$	9		$	68
Total nonperforming assets	$	10,117		$	12,246		$	9,582		$	6,900		$	876

The following tables shows the approximate gross interest that would have been recorded if the loans accounted for on nonaccrual basis and restructured loans for the years ended as indicated had performed in accordance with their original terms, in contrast to the amount of interest income that was included in interest income for the period.

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Table 11: Foregone Loan Interest
For the Years Ended December 31,
(dollars in thousands)

	2011			2010			2009
Interest income in accordance with original terms	$	1,390		$	1,004		$	638
Interest income recognized		(220	)		(415	)		(239	)
Reduction in interest income	$	1,170		$	589		$	399

Investment Securities Portfolio

The investment securities portfolio is intended to provide Nicolet National Bank with adequate liquidity, flexible asset/liability management and a source of stable income. The portfolio is structured with minimal credit exposure to Nicolet. All securities are classified as available-for-sale and are carried at fair value. Unrealized gains and losses are excluded from earnings, but are reported as other comprehensive income in a separate component of shareholders’ equity, net of income tax. Premium amortization and discount accretion are recognized as adjustments to interest income using the interest method. Realized gains or losses on sales are based on the net proceeds and the adjusted carrying value amount of the securities sold using the specific identification method.

Table 12: Investment Securities Portfolio
As of December 31,
(dollars in thousands)

	2011							2010							2009
	Amortized Cost		Fair Value		% of Total			Amortized Cost		Fair Value		% of Total			Amortized Cost		Fair Value		% of Total
State, county and municipals	$	30,130	$	31,848		56	%	$	29,897	$	31,109		59	%	$	31,862	$	33,424		61	%
Mortgage-backed securities		17,450		18,484		33	%		16,852		17,407		33	%		19,043		19,819		36	%
U.S. Government sponsored enterprises		4,995		5,020		9	%		2,502		2,499		5	%		—		—		—
Equity securities		1,624		1,407		2	%		1,624		1,373		3	%		1,753		1,030		3	%
Total	$	54,199	$	56,759		100	%	$	50,875	$	52,388		100	%	$	52,658	$	54,273		100	%

At December 31, 2011, the total carrying value of investment securities was $56,759, an increase of $4,371, or 8.3%, compared to December 31, 2010, and represented 8.4% and 7.8% of total assets at December 31, 2011 and 2010, respectively. Primarily due to weak investment returns and soft loan demand in 2011, much of Nicolet’s excess liquidity was held in low-rate cash accounts rather than committing funds to longer term investments in this low rate environment.

At December 31, 2011, the securities portfolio did not contain securities of any single issuer that were payable from and secured by the same source of revenue or taxing authority where the aggregate carrying value of such securities exceeded 10% of shareholders’ equity.

In addition to securities available-for-sale, Nicolet had other investments of $5,211 and $4,910 at December 31, 2011 and 2010, respectively, consisting of capital stock in the Federal Reserve and the FHLB (required as members of the Federal Reserve Bank System and the Federal Home Loan Bank System), as well as equity investments in other private companies. The FHLB and Federal Reserve investments are “restricted” in that they can only be sold back to the respective institutions or another member institution at par, and are thus, not liquid, have no ready market or quoted market value, and are carried at cost. The investments in private companies have no quoted market prices, and are carried at cost less OTTI charges, if any. Nicolet’s management evaluates all these other investments periodically for impairment, considering financial condition and other available relevant information. OTTI charges recorded in 2011 and 2010 were $128 (related to one private equity security classified in other investments) and $428 (related to the same security), respectively, and none for 2009.

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Table 13: Investment Securities Portfolio Maturity Distribution
As of December 31, 2011
(dollars in thousands)

	Within One Year					After One but Within Five Years					After Five but Within Ten Years					After Ten Years					Mortgage- related and Equity Securities					Total Amortized Cost					Total Fair Value
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount
U.S. Government sponsored enterprises		4,995		0.7	%	$	—		—%		$	—		—%		$	—		—%		$	—		—%		$	4,995		0.7	%	$	5,020
State and county municipals		4,045		5.0			18,213		4.6			6,897		4.8			975		0.6			—		—			30,130		4.6			31,848
Mortgage-backed securities		—		—			—		—			—		—			—		—			17,450		3.7			17,450		3.7	%		18,484
Equity securities		—		—			—		—			—		—			—		—			1,624		—			1,624		—			1,407
Total amortized cost	$	9,040		2.6	%	$	18,213		4.6	%	$	6,897		4.8	%	$	975		0.6	%	$	19,074		3.4	%	$	54,199		3.8	%	$	56,759
Total fair value and carrying value	$	9,134				$	19,260				$	7,499				$	975				$	19,891									$	56,759

(1)

The yield on tax-exempt investment securities is computed on a tax-equivalent basis using a federal tax rate of 34% adjusted for the disallowance of interest expense.

Deposits

Deposits represent Nicolet’s largest source of funds. Nicolet competes with other bank and nonbank institutions for deposits, as well as with a growing number of non-deposit investment alternatives available to depositors, such as mutual funds, money market funds, annuities, and other brokerage investment products. Challenges to deposit growth include price changes on deposit products given movements in the rate environment and other competitive pricing pressures, and customer preferences regarding higher-costing deposit products or non-deposit investment alternatives.

At December 31, 2011, total deposits were $551,536, down $6,928 from year-end 2010. Consistent with Nicolet’s funding strategy, Nicolet continued to reduce brokered deposits during 2011. Total brokered deposits(included in time deposits in Table 14) declined from $86,063 at December 31, 2010 to $38,609 at December 31, 2011, or 56%, as Nicolet did not renew maturing brokered CDs. Excluding brokered deposits, deposits were $512,927, up $40,526 over year-end 2010, largely in response to deposit growth initiatives, new product offerings and deposit features.

Table 14: Deposits
At December 31,
(dollars in thousands)

	2011					2010					2009
	Amount		% of Total			Amount		% of Total			Amount		% of Total
Demand	$	78,154		14.2	%	$	68,202		12.2	%	$	56,873		10.2	%
Money market and NOW accounts		265,817		48.2	%		213,044		38.2	%		212,271		38.1	%
Savings		21,284		3.9	%		13,600		2.4	%		10,184		1.8	%
Time		186,281		33.7	%		263,618		47.2	%		277,656		49.9	%
Total	$	551,536		100.0	%	$	558,464		100.0	%	$	556,984		100.0	%

On average, deposits were $522,297 for 2011, down $8,385, or 1.6%, from the average for 2010. The mix of average deposits was also impacted by shift in customer preferences, predominantly away from time deposits.

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Table 15: Average Deposits
For the Years Ended December 31,
(dollars in thousands)

	2011					2010					2009
	Amount		% of Total			Amount		% of Total			Amount		% of Total
Demand	$	67,787		13.0	%	$	57,647		10.9	%	$	56,139		11.0	%
Money market and NOW accounts		219,817		42.1	%		192,462		36.3	%		139,160		27.3	%
Savings		16,829		3.2	%		12,273		2.3	%		9,916		1.9	%
Time		217,864		41.7	%		268,301		50.5	%		305,526		59.8	%
Total	$	522,297		100.0	%	$	530,683		100.0	%	$	510,741		100.0	%

Table 16: Maturity Distribution of Certificates of Deposit of $100,000 or More
As of the Years Ended December 31,
(dollars in thousands)

	2011		2010
3 months or less	$	36,871	$	39,172
Over 3 months through 6 months		8,361		16,437
Over 6 months through 12 months		25,645		35,804
Over 12 months		22,213		61,984

Total	$	93,090	$	153,397

Other Funding Sources

Other funding sources, which include short-term and long-term borrowings, were $45,691 and $46,157 at December 31, 2011 and 2010, respectively. Short-term borrowings, consisting mainly of customer repurchase agreements, totaled $4,132 at December 31, 2011 and $4,390 at December 31, 2010. Long-term borrowings include a joint venture note, and FHLB advances, totaling $35,374 at December 31, 2011, down $208 from December 31, 2010 attributable to scheduled principal payments on the joint venture note payable. Also included in long-term borrowings are the junior subordinated debentures of $6,186 issued in July 2004 in connection with the $6,000 of trust preferred securities issued by Nicolet Bankshares Statutory Trust I (the “Statutory Trust”), bearing an 8% fixed rate. Nicolet has the right to redeem the debentures purchased by the Statutory Trust, in whole or in part, on or after July 15, 2009. If the debentures are redeemed prior to maturity, the redemption price will be the principal amount and any accrued but unpaid interest. The maturity date of the debenture, if not redeemed, is July 15, 2034. Further discussion on the junior subordinated debentures is included in Note 8, “Junior Subordinated Debentures” of the Notes to Consolidated Financial Statements for December 31, 2011, and further discussion of the terms of the joint venture note is included in Note 6, “Notes Payable” of the Notes to Consolidated Financial Statements for December 31, 2011.

Off-Balance Sheet Obligations

As of December 31, 2011 and 2010, Nicolet had the following commitments that did not appear on its balance sheet:

Table 17: Commitments
At December 31,
(dollars in thousands)

				2011				2010
Commitments to extend credit — Fixed and variable rate				$	158,261			$	119,751
Standby and irrevocable letters of credit-fixed rate					6,631				6,959

Further discussion of these commitments is included in Note 13, “Commitments and Contingencies” of the Notes to Consolidated Financial Statements.

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Contractual Obligations

Nicolet is party to various contractual obligations requiring the use of funds as part of its normal operations. The table below outlines principal amounts and timing of these obligations, excluding amounts due for interest, if applicable. Most of these obligations are routinely refinanced into similar replacement obligations. However, renewal of these obligations is dependent on its ability to offer competitive interest rates, liquidity needs, or availability of collateral for pledging purposes supporting the long-term advances.

Table 18: Contractual Obligations
As of December 31, 2011
(dollars in thousands)

	Maturity by Years
	Total		1 or less		1-3		3-5		Over 5
Junior Subordinated debentures	$	6,186	$	—	$	—	$	—	$	6,186
Joint venture note		10,374		218		481		9,675		—
FHLB borrowings		25,000		5,000		20,000		—		—

Total long-term borrowing obligations	$	41,560	$	5,218	$	20,481	$	9,675	$	6,186

At the completion of the construction of Nicolet’s headquarters building in 2005 and as part of a joint venture investment related to the building, Nicolet and the other joint venture partners guaranteed a joint venture note to finance certain costs of the building. This note is secured by the building, bears a fixed rate of 5.81% and requires monthly principal and interest payments until its maturity on June 1, 2016. The balance of this joint venture note was $10,374 and $10,581 as of December 31, 2011 and 2010, respectively.

Liquidity and Interest Rate Sensitivity

Liquidity management refers to the ability to ensure that cash is available in a timely and cost-effective manner to meet cash flow requirements of depositors and borrowers and to meet other commitments as they fall due, including the ability to pay dividends to shareholders, service debt, invest in subsidiaries, repurchase common stock, and satisfy other operating requirements.

Funds are available from a number of basic banking activity sources including the core deposit base, the repayment and maturity of loans, investment securities sales, and sales of brokered deposits. All investment securities are classified as available-for-sale and are reported at fair value on the consolidated balance sheet. Approximately $7,487 of the $56,759 investment securities portfolio on hand at December 31, 2011 was pledged to secure public deposits, short-term borrowings, and repurchase agreements and for other purposes as required by law. Other funding sources available include short-term borrowings, federal funds purchased, and long-term borrowings.

Cash and cash equivalents at December 31, 2011 and 2010 were approximately $92,100 and $52,100, respectively. The rise in cash and cash equivalents was predominantly due to strong customer deposit growth and a decline in loans between December 31, 2011 and 2010. Nicolet’s liquidity resources were sufficient as of December 31, 2011 to fund loans and to meet other cash needs as necessary.

Interest Rate Sensitivity Gap Analysis

Table 19 represents a schedule of Nicolet National Bank’s assets and liabilities repricing over various time intervals. The primary market risk faced by Nicolet is interest rate risk. The static gap analysis starts with contractual repricing information for assets, liabilities, and off-balance sheet instruments. These items are then combined with repricing estimations for administered rate (interest-bearing demand deposits, savings, and money market accounts) and non-rate related products (demand deposit accounts, other assets, and other liabilities) to create a baseline repricing balance sheet. In addition to the contractual information, residential mortgage whole loan products and mortgage-backed securities are adjusted based on industry estimates of prepayment speeds that capture the expected prepayment of principal above the contractual amount based on how far away the contractual coupon is from market coupon rates. At the indicated time intervals the cumulative maturity gap was within Nicolet’s established guidelines of not greater than +25% or -25%.

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Table 19: Interest Rate Sensitivity Gap Analysis
(dollars in thousands)

	December 31, 2011
	0-90 Days			91-180 Days			181-365 Days			1-5 years			Beyond 5 Years			Total
Earning Assets:
Loans	$	247,479		$	26,185		$	36,760		$	133,806		$	28,259		$	472,489
Securities at fair value		—			—			5,000			—			51,759			56,759
Other earnings assets		92,444			—			—			—			1,852			94,296
Total	$	339,923		$	26,185		$	41,760		$	133,806		$	81,870		$	623,544

Cumulative rate sensitive assets	$	339,923		$	366,108		$	407,868		$	541,674		$	623,544

Interest-bearing liabilities
Interest bearing deposits	$	352,809		$	16,150		$	53,591		$	50,825		$	6		$	473,381
Borrowings		4,390			258			5,516			24,160			5,182			39,506
Subordinated debentures		774			774			1,548			3,090			—			6,186
Total	$	357,973		$	17,182		$	60,655		$	78,075		$	5,188		$	519,073

Cumulative interest sensitive liabilities	$	357,973		$	375,155		$	435,810		$	513,860		$	519,048

Interest sensitivity gap	$	(18,050	)	$	9,003		$	(18,895	)	$	55,731		$	76,682

Cumulative interest sensitivity gap	$	(18,050	)	$	(9,047	)	$	(27,942	)	$	27,789		$	104,471
Cumulative ratio of rate sensitive assets to rate sensitive liabilities		95	%		98	%		94	%		105	%		120	%

(1)

The interest rate sensitivity assumptions for savings accounts, money market accounts, and interest-bearing demand deposits accounts are based on current and historical experiences regarding portfolio retention and interest rate repricing behavior. Based on these experiences, a portion of these balances are considered to be long-term and fairly stable and are, therefore, included in the “1-5 Years” and “Beyond 5 Years” categories.

In order to limit exposure to interest rate risk, management monitors the liquidity and gap analysis on a monthly basis and adjust pricing, term and product offerings when necessary to stay within applicable guidelines and maximize the effectiveness of asset/liability management.

Along with the static gap analysis, Nicolet’s management also estimates the effect a gradual change and a sudden change in interest rates could have on expected net interest income through income simulation. The simulation is run using the prime rate as the base with the assumption of rates increasing 100, 200, and 300 bps or decreasing 100, 200 and 300 bps. All rates are increased or decreased parallel to the change in prime rate. The simulation assumes a static mix of assets and liabilities. As a result of the simulation, over a 12-month time period ending December 31, 2011, net interest income was estimated to decrease 3.6% if rates increase 100 bps, while in a 100 bps rate environment assumption, net interest income was estimated to increase 2.76% during the same period. These results are in line with Nicolet’s relatively neutral interest rate sensitivity position, relatively short loan maturities and level of variable rate loans with interest floors. These results are based solely on the modeled changes in the market rates and do not reflect the earnings sensitivity that may arise from other factors such as changes in the shape of the yield curve, changes in spreads between key market rates, or changes in consumer or business behavior. These results also do not include any management action to mitigate potential income variances within the modeled process. The simulation results are one indicator of interest rate risk, and actual net interest income is largely impacted by the allocation of assets, liabilities and product mix. Nicolet’s management continually reviews its interest rate risk position through the Asset/Liability Committee process, and such Committee reports to the full board of directors on a monthly basis.

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Capital

Nicolet regularly reviews the adequacy of its capital to ensure that sufficient capital is available for current and future needs and is in compliance with regulatory guidelines. Nicolet’s management actively reviews capital strategies in light of perceived business risks associated with current and prospective earning levels, liquidity, asset quality, economic conditions in the markets served, and level of dividends available to shareholders. Nicolet’s management intends to maintain an optimal capital and leverage mix for growth and for shareholder return.

In December 2008, through a private placement of common stock, Nicolet raised $9,500 in capital. On December 23, 2008, under TARP, Nicolet received $14,964 from the Treasury for the issuance of 14,964 shares of senior preferred stock with $1,000 per share liquidation value (bearing a 5% dividend for the first five years and 9% thereafter) and an additional 748 shares of senior preferred stock with $1,000 per share liquidation value (bearing a 9% dividend) following the Treasury’s immediate exercise of preferred stock warrants. The initial $848 discount recorded on preferred stock that resulted from allocating a portion of the proceeds to the warrants is accreted directly to retained earnings over a five-year period on a straight-line basis.

While the TARP preferred stock was outstanding, Nicolet was subject to various restrictions governed by the executed documents with the Treasury, and by related governmental enactments. Such restrictions included: a) Treasury approval required for any increase in common dividends per share and for any repurchase of outstanding common stock; b) TARP dividends on Nicolet’s TARP preferred stock required to be paid in full before dividends could be paid to common shareholders; c) no tax deduction to Nicolet for any senior executive officer whose compensation was above $500; and d) additional restrictions and compliance requirements on executive compensation. In September of 2009, Nicolet received approval from the Treasury and its regulator to repurchase up to 100,000 shares of its common stock, under which 96,600 shares of common stock at a cost of $1,619 were repurchased and subsequently retired during 2009. Similar approvals were obtained for 2010 and 2011, allowing the repurchase of up to 100,000 shares of common stock pursuant to these authorizations each year. No shares were repurchased under these authorities during 2010 or 2011.

On September 1, 2011, after appropriate regulatory approvals, Nicolet effectively redeemed all the senior preferred stock under TARP, paying the Treasury $15,712 and accelerating the accretion of the remaining discount of $396 against retained earnings. Such redemption was in connection with Nicolet’s participation in the Treasury’s SBLF described below. The SBLF is a program separate and distinct from TARP, and thus, among other things, the restrictions noted above under TARP or related government enactments were no longer applicable to Nicolet.

The SBLF is a Treasury program made available to community banks, designed to boost lending to small businesses by providing participating banks with capital and liquidity. In particular, the SBLF program targets commercial, industrial, owner-occupied real-estate and agricultural-based lending to qualifying small businesses, which include businesses with less than $50 million in revenue, and promotes outreach to women-owned, veteran-owned and minority-owned businesses.

On September 1, 2011, under the SBLF, Nicolet received $24,400 from the Treasury for the issuance of 24,400 shares of Non-Cumulative Perpetual Preferred Stock, Series C, with $1,000 per share liquidation value. The annual dividend rate upon funding and for the following nine calendar quarters is 5%, unless there is growth in qualifying small business loans outstanding over a baseline which could reduce the rate to as low as 1% (as determined under the terms of the Securities Purchase Agreement (the “Agreement”)), adjusted quarterly. The dividend rate is fixed for the tenth quarter after funding through the end of the first four and one-half years at 7% (unless fixed at a lower rate given increased lending as similarly described above); and finally the dividend rate is fixed at 9% after four and one-half years if the preferred stock is not repaid. Nicolet’s weighted average dividend rate for 2011 (since funding) was 5%. Under the terms of the Agreement, Nicolet is required to provide various information, certifications, and reporting to the Treasury. At December 31, 2011, Nicolet believes it was in compliance with the requirements set by the Treasury in the Agreement. The preferred stock (under TARP or SBLF) qualifies as Tier 1 capital for regulatory purposes.

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A summary of Nicolet’s and Nicolet National Bank’s regulatory capital ratios as of December 31, 2011 and 2010 are as follows:

Table 20: Capital
(dollars in thousands)

Nicolet’s and Nicolet National Bank’s actual regulatory capital amounts and ratios as December 31, 2011 and 2010 are presented in the following table:

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions (2)
	Amount		Ratio (1)			Amount		Ratio (1)			Amount		Ratio (1)
As of December 31, 2011
Nicolet
Total capital	$	82,638		16.7	%	$	39,510		8.0	%		N/A		N/A
Tier I capital		76,739		15.5	%		19,755		4.0	%		N/A		N/A
Leverage		76,739		12.1	%		25,468		4.0	%		N/A		N/A

Nicolet National Bank
Total capital	$	74,586		15.6	%	$	38,340		8.0	%	$	47,925		10.0	%
Tier I capital		68,687		14.3	%		19,170		4.0	%		28,755		6.0	%
Leverage		68,687		11.1	%		24,831		4.0	%		31,039		5.0	%
As of December 31, 2010

Nicolet
Total capital	$	72,635		13.8	%	$	42,056		8.0	%		N/A		N/A
Tier I capital		66,259		12.6	%		21,028		4.0	%		N/A		N/A
Leverage		66,259		9.9	%		26,798		4.0	%		N/A		N/A

Nicolet National Bank
Total capital	$	65,796		13.0	%	$	40,623		8.0	%	$	50,779		10.0	%
Tier I capital		59,420		11.7	%		20,312		4.0	%		30,768		6.0	%
Leverage		59,420		9.2	%		25,958		4.0	%		32,447		5.0	%

(1)

The total capital ratio is defined as tier1 capital plus tier 2 capital divided by total risk-weighted assets. The tier 1 capital ratio is defined as tier1 capital divided by total risk-weighted assets. The leverage ratio is defined as tier1 capital divided by the most recent quarter’s average total assets.

(2)

Prompt corrective action provisions are not applicable at the bank holding company level.

A source of income and funds for Nicolet are dividends from Nicolet National Bank. Dividends declared by Nicolet National Bank that exceed the retained net income for the most current year plus retained net income for the preceding two years must be approved by federal regulatory agencies. At December 31, 2011, Nicolet National Bank could pay dividends of approximately $3,585 without seeking regulatory approval.

Effects of Inflation

The effect of inflation on a financial institution differs significantly from the effect on an industrial company. While a financial institution’s operating expenses, particularly salary and employee benefits, are affected by general inflation, the asset and liability structure of a financial institution consists largely of monetary items. Monetary items, such as cash, loans and deposits, are those assets and liabilities which are or will be converted into a fixed number of dollars regardless of changes in prices. As a result, changes in interest rates have a more significant impact on a financial institution’s performance than does general inflation. For additional information regarding interest rates and changes in net interest income see “Liquidity and Interest Rate Sensitivity.”

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Selected Quarterly Financial Data

The following is selected financial data summarizing the results of operations for each quarter in the years ended December 31, 2011, 2010 and 2009:

Table 21: Selected Quarterly Financial Data
(dollars in thousands, except per share data)

	2011 Quarter Ended
	December 31,		September 30,			June 30,			March 31,
Interest income	$	7,162	$	7,310		$	7,427		$	7,931
Interest expense		1,932		2,060			2,074			2,317
Net interest income		5,230		5,250			5,353			5,614
Provision for loan losses		1,800		1,500			1,800			1,500
Noninterest income		2,428		2,137			1,914			1,965
Noninterest expense		5,155		5,487			5,338			5,463
Net income		508		343			210			429
Net income (loss) available to common equity		203		(321	)		(36	)		182
Basic and diluted earnings (loss) per common share		0.06		(0.09	)		(0.01	)		0.05

	2010 Quarter Ended
	December 31,			September 30,		June 30,		March 31,
Interest income	$	7,977		$	8,212	$	7,680	$	7,550
Interest expense		2,610			2,825		2,778		3,078
Net interest income		5,367			5,387		4,902		4,472
Provision for loan losses		4,000			1,500		1,500		1,500
Noninterest income		2,925			2,333		1,872		1,838
Noninterest expense		4,955			5,247		4,462		4,651
Net income		(318	)		670		572		187
Net income (loss) available to common equity		(565	)		423		326		(60	)
Basic and diluted earnings (loss) per common share		(0.16	)		0.12		0.09		(0.01	)

For the Nine Month Periods Ended September 30, 2012 and 2011

Basis of Accounting and Critical Accounting Policies

The consolidated financial statements of Nicolet Bankshares, Inc. and its subsidiaries are prepared in conformity with accounting principles generally accepted in the United States of America and follow general practices within the industry in which Nicolet operates. The financial condition and results of operations presented in the consolidated financial statements, accompanying notes to the consolidated financial statements, selected financial data appearing elsewhere within this report, and management’s discussion and analysis are dependent upon Nicolet’s accounting policies. The selection and application of these accounting policies involve judgments about matters that affect the amounts reported in the financial statements and accompanying notes, and may require management to make estimates, assumptions and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. Nicolet made no significant changes in its critical accounting policies and significant estimates from those disclosed in its attached 2011 consolidated financial statements. The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes.

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Overview

During the first nine months of 2012, Nicolet benefited from contributions of its new Appleton branch opened in December 2011 (adding to both loan and deposit growth), from steady growth in customer deposits, particularly resulting from a new checking product introduced in mid-2011, very strong secondary mortgage fee income from higher refinances than the prior year, and quality loan growth and increased commercial line of credit usage. Additionally, Nicolet continued to aggressively work through its asset quality, with nonperforming loans declining, except for the addition in March 2012 to nonaccrual loans of a large credit relationship with strong collateral of approximately $8.5 million which remained in nonaccrual status at September 30, 2012. Given significantly lower net loan charge offs ($2.8 million for the first nine months of 2012 versus $7.7 million for the first nine months of 2011), Nicolet recognized lower provision for loan losses of $3.3 million for the nine months ended September 30, 2012, compared to $4.8 million for the comparable nine month period in 2011.

Unless otherwise noted, all remaining information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations is shown in thousands, except per share data.

The following management’s discussion and analysis is presented to assist in the understanding and evaluation of Nicolet’s consolidated financial condition as of September 30, 2012 and December 31, 2011 and results of operations for the three-month and nine-month periods ended September 30, 2012 and 2011. It is intended to supplement the unaudited consolidated financial statements, condensed footnotes, and supplemental financial data appearing elsewhere in this document.

Performance Summary

For the first nine months of 2012, Nicolet reported $2,099 of net income, up $1,117 over the 2011 comparable period. Net income available to common shareholders for this same period, was $1,184, or $0.34 per diluted common share, compared to a net loss available to common shareholders of $174, or $0.05 per share, for the first nine months of 2011. The 2011 results included $396 in accelerated discount accretion resulting from the repayment of Nicolet’s TARP senior preferred stock on September 1, 2011.

For the three months ended September 30, 2012, Nicolet reported net income of $965 and net income available to common shareholders of $660, or $0.19 per common share, compared to net income of $343 but a net loss to common shareholders of $320 (after $664 of preferred stock dividends and discount accretion, inflated for the accelerated accretion noted above), or $0.09 per common share net loss, in the comparable 2011 period.

Key financial data includes:

•

For the first nine months of 2012 versus 2011, net income benefited from higher loan volumes though at lower yields than the prior year, growth in the mix of lower costing deposits, strong secondary market mortgage fee income due to increased refinance volume and a lower provision for loan losses, offset by growing expenses attributable to costs of its new branch that opened in December 2011, and higher personnel costs from a larger work force and higher incentives due to improved financial performance in 2012.

•

For the three months ended September 30, 2012 versus 2011, net income benefited mainly from lower interest expense, lower provision for loan loss, and strong mortgage fee income, offset by higher noninterest expense, again concentrated in personnel costs.

•

The provision for loan losses was $3,350 for the first nine months of 2012, exceeding net charge-offs of $2,759; comparatively, the provision for the first nine months of 2011 was $4,800, against $7,690 in net charge offs, primarily as issues contemplated by Nicolet’s management on certain impaired loans that were reserved for in late 2010 came to fruition in early 2011. The provision for loan losses was $975 for the third quarter of 2012, compared with $1,500 for the same period in 2011. The 2012 provision was positively impacted by reduced loan impairments between the years. The ALLL to total loans ratio at September 30, 2012 was 1.19% compared to 1.25% at December 31, 2011.

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•

Net interest income of $16,053 for the nine months ended September 30, 2012 decreased by $164, or 1.0%, from the same period in 2011, as a favorable variance in interest expense (down $1,444) was slightly more than offset by the decline in interest income (down $1,608). Net interest income for the third quarter of 2012 was $5,650, down $400 from third quarter 2011, of which interest expense was favorable by $497 between the comparable third quarters.

•

The net interest margin for the first nine months of 2012 was 3.59%, 17 bps lower than the comparable margin last year. The margin contraction comes largely from downward pressure on earning asset yields (down 54 bps to 4.68% for the first nine months of 2012, led by a 40 bps decline in loan yield to 5.15% and a higher mix of low-earning cash balances between the periods), while Nicolet’s cost of funds continued a favorable decline (down 38 bps to 1.32%, mainly from a dramatic decline in the volume and cost of brokered deposits between the nine month periods). For the third quarter of 2012, the net interest margin was 3.67%, with a 4.67% earning asset yield and a 1.19% cost of funds, compared to 3.71%, 5.14% and 1.68%, respectively, for third quarter 2011.

•

Total assets were $682,802 at September 30, 2012, 1% higher than at December 31, 2011. However, the asset mix at September 30, 2012 reflected a greater percentage of loans than cash as compared to the asset mix at December 31, 2011. Loans were $545,708 at September 30, 2012, $73,219 higher than at December 31, 2011, funded mainly by cash and cash equivalents which declined $64,577. There was moderate and improving loan demand in the markets and higher commercial line of credit usage since December 31, 2011.

•

Total deposits were $554,858 at September 30, 2012, up $3,322, or 1%, from December 31, 2011. Typically there is a pattern in Nicolet’s deposit base where deposits are at their lowest point in September and at their highest point in December. On average, total deposits for the first nine months of 2012 were $531,795, up $7,068 over average deposits for the first nine months of 2011.

•

Noninterest income for the nine months ended September 30, 2012 was $7,986. This is an increase of $1,971, or 32.8%, compared to the nine months ended September 30, 2011. The most significant increase was in mortgage fee income (up $1,410) which continues to experience significant activity in the current low rate environment.

•

For the nine months ended September 30, 2012, noninterest expense increased $1,435, or 8.8%, to $17,722 compared to $16,288 for the nine month period ended September 30, 2011. The most significant increase was in salaries and benefits and data processing expenses. These costs are consistent with Nicolet’s future strategic plans.

Net Interest Income

Net interest income is the primary source of Nicolet’s revenue. Net interest income, which is the difference between interest earned on loans, investments and other earning assets and the interest paid on deposits and other interest-bearing liabilities, is directly impacted by the sensitivity of the balance sheet to changes in interest rates and by the amount and composition of interest earning assets and interest-bearing liabilities, including characteristics such as the fixed or variable nature of the financial instruments, contractual maturities, and repricing frequencies.

Comparison of nine months ended September 30, 2012 versus September 30, 2011

Net interest income in the consolidated statements of income (which excludes the taxable equivalent adjustment) was $16,053 and $16,217 for the nine months ending September 30, 2012 and 2011, respectively. Taxable equivalent adjustments (adjustments to bring tax-exempt interest to a level that would yield the same after-tax income had that been subject to a 34% tax rate) were $464 and $497 for the nine months ending September 30, 2012 and 2011, respectively, resulting in taxable equivalent net interest income of $16,517 and $16,714 for the nine months ending September 30, 2012 and 2011.

For the first nine months of 2012 versus 2011, net interest income benefited from higher loan volumes though at lower yields than the prior year and beneficial growth in the mix of lower costing deposits. The net interest margin for the first nine months of 2012 was 3.59%, 17 bps lower than the comparable margin last

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year. Taxable-equivalent net interest income was $16,517 for the first nine months of 2012, which is a decrease of $197 from the same period in 2011. The margin contraction comes largely from downward pressure on earning asset yields which were down 54 bps to 4.68% for the first nine months of 2012 compared to the same period in 2011. This decline was led by a 40 bps decline in loan yield to 5.15% and a higher mix of low-earning cash balances between the periods.

Nicolet’s cost of funds continued a favorable decline, decreasing 38 bps to 1.32%. This decrease was mainly attributable to a dramatic decline in the volume and cost of brokered deposits between the nine month periods providing a favorable variance to net interest expense of $1,493. The cost of the remaining interest-bearing customer deposits combined (i.e. savings, interest-bearing demand, MMA and time deposits) remained stable, showing a slight unfavorable variance in expense of $73 over the same nine month period in 2011.

Average earning assets were $606,227 for the nine months ending September 30, 2012, compared to $586,540 for the same period in 2011. The increase was primarily from increases in lower interest-bearing cash balances. Loans were declining during the first nine months of 2011 but increasing during the first nine months of 2012 reflecting a similar average balance but with opposite directional trends ending with strong loan growth in 2012. Average interest-bearing liabilities were $502,011 and $505,639 for the nine months ending September 30, 2012 and 2011, respectively.

Comparison of three months ended September 30, 2012 versus September 30, 2011

Net interest income in the consolidated statements of income (which excludes the taxable equivalent adjustment) was $5,650 and $5,250 for the three months ending September 30, 2012 and 2011, respectively. Taxable equivalent adjustments (adjustments to bring tax-exempt interest to a level that would yield the same after-tax income had that been subject to a 34% tax rate) were $147 and $166 for the three months ending September 30, 2012 and 2011, respectively, resulting in taxable equivalent net interest income of $5,797 and $5,416 for the three months ending September 30, 2012 and 2011.

For the third quarter of 2012, the net interest margin was 3.67%, with a 4.67% earning asset yield and a 1.19% cost of funds, compared to 3.71%, 5.14% and 1.68%, respectively, for third quarter 2011. Net interest income for the third quarter of 2012 was $5,797, down $381 from third quarter 2011. Significant favorable volume variances in loans were not enough to offset the continued unfavorable rate variances and total earning assets reflect a decline of $116 in interest income compared to the third quarter of 2011.

Interest expense was favorable by $497 between the comparable third quarters the majority of benefit being reflected in the reductions in brokered deposits. Favorable rate variances continue to be seen in the remaining interest-bearing customer deposits combined.

Average earning assets were $617,172 for the three months ending September 30, 2012, compared to $569,040 for the same quarter in 2011. The increase was primarily from increases in loans. Average interest-bearing liabilities were $469,680 and $440,268 for the quarters ending September 30, 2012 and 2011, respectively, largely from the bigger customer deposit base.

Tables 1 through 4 set forth information to facilitate the review and discussion of selected average balance sheet items, taxable equivalent net interest income, volume and rate differences, interest rate spread and net interest margin.

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Table 1: Year-To-Date Net Interest Income Analysis
(dollars in thousands)


	For the Nine Months Ended September 30,
	2012							2011
	Average Balance		Interest		Average Rate			Average Balance		Interest		Average Rate
ASSETS
Interest-earning assets:
Loans, net of unearned income (1)(2)	$	509,536	$	19,916		5.15	%	$	510,852	$	21,442		5.55	%
Taxable securities		23,066		450		2.56	%		20,678		515		3.27	%
Tax-exempt securities		32,400		1,001		4.06	%		32,600		1,094		4.41	%
Other interest-earning assets		41,225		156		0.70	%		22,410		114		0.67	%
Total interest-earning assets		606,227	$	21,523		4.68	%		586,540	$	23,165		5.22	%
Cash and due from banks		7,740							14,919
Other assets		45,432							40,839
Total assets	$	659,400						$	642,298

LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Interest-bearing deposits
Savings	$	29,767	$	99		0.44	%	$	15,693	$	28		0.24	%
Interest-bearing demand		86,602		617		0.95	%		60,712		262		0.57	%
Money Markets		161,664		580		0.48	%		155,327		898		0.77	%
Core CD’s and IRA’s		136,907		1,875		1.82	%		155,678		1,910		1.63	%
Brokered deposits		40,395		458		1.51	%		72,063		1,950		3.61	%
Total interest-bearing deposits		455,335		3,629		1.06	%		459,474		5,048		1.46	%
Other interest-bearing liabilities		46,676		1,377		3.88	%		46,165		1,403		3.99	%
Total interest-bearing liabilities	$	502,011	$	5,006		1.32	%	$	505,639	$	6,451		1.70	%
Non-interest-bearing deposits		76,460							65,253
Other liabilities		4,602							4,221
Stockholders’ equity		76,328							67,185
Total liabilities and stockholders’ equity	$	659,400						$	642,298
Net interest income and interest-rate spread			$	16,517		3.36	%			$	16,714		3.52	%
Net interest margin						3.59	%						3.76	%

(1)

Nonaccrual loans are included in the daily average loan balances outstanding.

(2)

Interest income includes loan fees of $100 in 2012 and $300 in 2011.

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Table 2: Volume/Rate Variance
(dollars in thousands)

Comparison of nine months ended September 30, 2012 versus 2011

	Volume			Rate (1)			Net
Loans (1)	$	(69	)	$	(1,457	)	$	(1,526	)
Investment securities
Taxable		73			(138	)		(65	)
Tax-exempt		(9	)		(84	)		(93	)
Other interest-earning assets		34			8			42
Total earning assets	$	30		$	(1,672	)	$	(1,642	)

Interest-bearing demand	$	141		$	(70	)	$	71
Savings deposits		36			319			355
Money Markets		35			(353	)		(318	)
Core CD’s and IRA’s		(245	)		210			(35	)
Brokered deposits		(645	)		(848	)		(1,492	)
Total interest-bearing deposits		(677	)		(742	)		(1,419	)
Other interest-bearing liabilities		9			(35	)		(26	)
Total interest-bearing liabilities		(668	)		(777	)		(1,445	)
Net interest income	$	698		$	(895	)	$	(197	)

(1)

Nonaccrual loans are included in the daily average loan balances outstanding.

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Table 3: Quarterly Net Interest Income Analysis
(dollars in thousands)

	For the Three Months Ended September 30,
	2012							2011
	Average Balance		Interest		Average Rate			Average Balance		Interest		Average Rate
ASSETS
Interest-earning assets:
Loans, net of unearned income (1)(2)	$	538,989	$	6,852		4.97	%	$	491,361	$	6,902		5.50	%
Taxable securities		24,331		149		2.40	%		20,953		173		3.24	%
Tax-exempt securities		32.412		318		3.84	%		32,961		362		4.30	%
Other interest-earning assets		21,439		41		0.74	%		23,766		39		0.63	%
Total interest-earning assets		617,172	$	7,360		4.67	%		569,040		7,476		5.14	%
Cash and due from banks		14,654							17,404
Other assets		46,406							42,477
Total assets	$	678,232						$	628,921

LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Interest-bearing deposits
Savings	$	35,358	$	40		0.45	%	$	16,765	$	11		0.27	%
Interest-bearing demand		91,455		228		0.99	%		63,322		108		0.67	%
Money Markets		156,079		177		0.45	%		148,613		254		0.68	%
Core CD’s and IRA’s		132,153		584		1.75	%		150,192		697		1.84	%
Brokered CD’s		54,634		83		0.60	%		61,375		519		3.36	%
Total interest-bearing deposits		469,680		1,113		0.94	%		440,268		1,588		1.43	%
Other interest-bearing liabilities		47,275		450		3.72	%		45,512		471		4.05	%
Total interest-bearing liabilities	$	516,955	$	1,563		1.19	%	$	485,780	$	2,060		1.68	%
Non-interest-bearing deposits		79,905							69,111
Other liabilities		5,024							4,627
Stockholders’ equity		76,349							69,404
Total liabilities and stockholders’ equity	$	678,232						$	628,921
Net interest income and interest-rate spread			$	5,797		3.47	%			$	5,416		3.46	%
Net interest margin						3.67	%						3.71	%

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Table 4: Volume/Rate Variance
(dollars in thousands)

Comparison of three months ended September 30, 2012 versus 2011

	Volume			Rate (1)			Net
Loans (1)	$	626		$	(676	)	$	(50	)
Taxable securities		58			(82	)		(24	)
Tax-exempt securities		(23	)		(21	)		(44	)
Other interest-earning assets		—			2			2
Total earning assets	$	662		$	(778	)	$	(116	)

Interest-bearing demand	$	59		$	(29	)	$	29
Savings deposits		18			103			120
Money Markets		12			(89	)		(76	)
Core CD’s and IRA’s		(81	)		(32	)		(113	)
Brokered deposits		(52	)		(385	)		(436	)
Total interest-bearing deposits		(44	)		(432	)		(476	)
Other interest-bearing liabilities		2			(24	)		(21	)
Total interest-bearing liabilities		(41	)		(456	)		(497	)
Net interest income	$	703		$	(322	)	$	381

(1)

Nonaccrual loans are included in the daily average loan balances outstanding.

Provision for Loan Losses

The provision for loan losses for the nine months ended September 30, 2012 and 2011 was $3,350 and $4,800 respectively. The provision for loan losses for the three months ended September 30, 2012 and 2011 was $975 and $1,500, respectively. While decreasing, the level of provision remains higher to accommodate continued loan-workout and loan growth. Net charge-offs were $529 and $1,656 for the third quarter ended September 30, 2012 and 2011, respectively. The decrease in net charge-offs in 2012 was primarily due to aggressive work-out of problem loans occurring in 2011 resulting in overall improved asset quality. At September 30, 2012, December 31, 2011 and September 30, 2011, the ALLL was $6,491, $5,899 and $5,746, respectively. The ratio of the ALLL to total loans for the same period ends was 1.19%, 1.25% and 1.19%, respectively. Nonperforming loans at September 30, 2012, were $15,152, compared to $11,826 at September 30, 2011 representing 2.8% and 2.5% of total loans, respectively, with nonperforming loans at September 30, 2012 including one large credit relationship with strong collateral of approximately $8,800.

The provision for loan losses is predominantly a function of Nicolet’s methodology and judgment as to qualitative and quantitative factors used to determine the adequacy of the ALLL. The adequacy of the allowance is affected by changes in the size and character of the loan portfolio, changes in levels of impaired and other nonperforming loans, historical losses and delinquencies in each portfolio segment, the risk inherent in specific loans, concentrations of loans to specific borrowers or industries, existing and future economic conditions, the fair value of underlying collateral, and other factors which could affect potential credit losses. For additional information regarding asset quality and the ALLL, see sections “Financial Condition —Loans,” “—Allowance For Loan Losses,” and “—Impaired Loans and Nonperforming Assets.”

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Noninterest Income

Table 5: Noninterest Income
(dollars in thousands)

	Three months ended										Nine months ended
	September 30, 2012		September 30, 2011		$ Change			% Change			September 30, 2012		September 30, 2011		$ Change			% Change
Service charges on deposit accounts	$	293	$	281	$	12			4.3	%	$	859	$	886	$	(27	)		(3.0	)%
Trust services fee income		759		743		16			2.2	%		2,213		2,231		(18	)		(0.8	)%
Mortgage fee income		846		410		436			106.3	%		2,254		844		1,410			167.1	%
Brokerage fee income		77		77		—			—			241		258		(17	)		(6.6	)%
Gain on sale, disposal and writedown of assets, net		5		54		(49	)		(90.7	)%		388		59		329			557.6	%
Bank owned life insurance		186		146		40			27.4	%		523		433		90			20.8	%
Rent income		264		237		27			11.4	%		744		717		27			3.8	%
Investment advisory fees		82		79		3			3.8	%		254		246		8			3.3	%
Other		173		110		63			57.3	%		509		341		168			49.3	%
Total noninterest income	$	2,685	$	2,137	$	548			25.6	%	$	7,985	$	6,015	$	1,970			32.8	%

Comparison of nine months ended September 30, 2012 versus the nine months ended September 30, 2011

Noninterest income for the first nine months of 2012 was $7,985, up $1,970, or 33%, from the same period in 2011, largely attributable to mortgage banking income which was $2,254, up $1,410 over the comparable period in 2011, which had a slower pace of refinance activity. Mortgage banking income represents net gains received from the sale of residential real estate loans sold (service-released) into the secondary market. Service fees on deposit accounts for the first nine months of 2012 were $859, down $27, or 3%, from the comparable 2011 period, primarily in NSF fees. For the first nine months of 2012, Nicolet recognized a $388 net gain on the sale of assets, as a result of securities sales to recognize accumulated increases, offset by OREO sale losses. Bank-owned life insurance (“BOLI”) income for the first nine months of 2012 was $523, up $90, or 21%, due to a new BOLI investment purchased in the first quarter of 2012. Other income was $509, up $168 over the first nine months of 2011, primarily from higher ancillary fees tied to deposits, such as debit card income and wire transfer fees.

Comparison of three months ended September 30, 2012 versus the three months ended September 30, 2011

Total noninterest income for the quarter ended September 30, 2012 was $2,685 compared to $2,137 during the September 30, 2011 quarter, an increase of $548, or 26%. Third quarter 2012 noninterest income increased primarily due to increased mortgage fee income and other income. The remaining noninterest income categories were relatively stable or slightly improved.

Noninterest Expense

Table 6: Noninterest Expense
(dollars in thousands)

	Three months ended										Nine months ended
	September 30, 2012		September 30, 2011		$ Change			% Change			September 30, 2012		September 30, 2011		$ Change			% Change
Salaries and employee benefits	$	3,325	$	2,926	$	399			13.6	%	$	9,991	$	8,681	$	1,310			15.1	%
Occupancy, equipment and office		1,093		1,108		(15	)		(1.3	)		3,334		3,287		47			1.4
Business development and marketing		438		326		112			34.4			1,134		962		172			17.9
Data processing		444		348		96			27.6			1,255		1,026		229			22.3
FDIC assessments		134		134		—			—			408		504		(96	)		(19.0	)
Core deposit intangible amortization		154		178		(24	)		(13.5	)		490		573		(83	)		(14.5	)
Other		340		467		(127	)		(27.2	)		1,110		1,255		(145	)		(11.6	)
Total noninterest expense	$	5,928	$	5,487	$	441			8.0	%	$	17,722	$	16,288	$	1,434			8.8	%

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Comparison of nine months ended September 30, 2012 versus the nine months ended September 30, 2011

Total noninterest expense was $17,722 for the first nine months of 2012, an increase of $1,434, or 9%, compared to the first nine months of 2011, in part due to carrying costs related to the new branch opened in December 2011. The majority of the noninterest expense increase was due to increased salaries and employee benefits of $1,310, or 15%, higher than the first nine months of 2011, mainly from carrying a larger work force and higher incentives due to improved financial performance in 2012. Data processing increased mainly from the conversion of Nicolet trust system platform in mid-2012. Business development and marketing increased with more loan and deposit gathering initiatives and events in 2012.

Comparison of three months ended September 30, 2012 versus the nine months ended September 30, 2011

Noninterest expense for the third quarter of 2012 increased $441, or 8%, compared to the third quarter of 2011. Salaries and employee benefits increased in conjunction with the growth plans of Nicolet, and data processing costs, business development and marketing expenses increased as a result of asset and customer growth over the prior year. Costs related to occupancy, core deposit intangible amortization and other expenses were reduced.

Income Taxes and Deferred Tax Asset

Nicolet recorded income tax expense of $453 for the third quarter of 2012, compared to $54 for the third quarter of 2011. For the first nine months of 2012, income tax expense totaled $828 compared with expense of $133 for the same period of 2011. The increase in tax expense for the three months and nine months ended September 30, 2012 was due to increased taxable income compared to the 2011 periods.

Under GAAP, Nicolet must periodically analyze its deferred tax asset to determine if a valuation allowance is required. A valuation allowance is required to be recognized if it is “more likely than not” that such deferred tax assets will not be realized. In making that determination, management is required to evaluate both positive and negative evidence, including recent historical financial performance, forecasts of future income, tax planning strategies and assessments of the current and future economic and business conditions. Based upon consideration of the available evidence, including historical losses, which must be treated as substantial negative evidence, and the potential of future taxable income, no valuation allowance was determined to be necessary at September 30, 2012 or 2011, other than for state NOL carry forwards expected to expire unused.

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FINANCIAL CONDITION

Investment Securities Portfolio

The investment securities portfolio is intended to provide Nicolet National Bank with adequate liquidity, flexible asset/liability management and a source of stable income. The portfolio is structured with minimum credit exposure to Nicolet National Bank. All securities are classified as available-for-sale and are carried at fair market value. Unrealized gains and losses are excluded from earnings, but are reported as other comprehensive income in a separate component of stockholders’ equity, net of income tax. Premium amortization and discount accretion are recognized as adjustments to interest income using the interest method. Realized gains or losses on sales are based on the net proceeds and the adjusted carrying value amount of the securities sold using the specific identification method.

Table 7: Investments
(dollars in thousands)

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2012
State, county and municipals	$	32,315	$	1,304	$	—	$	33,619
Mortgage-backed securities		17,412		951		—		18,363
U.S. Government sponsored enterprises		2,499		4		—		2,503
Equity securities		1,624		966		—		2,590
	$	53,850	$	3,225	$	—	$	57,075

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Values
December 31, 2011
State, county and municipals	$	30,130	$	1,718	$	—	$	31,848
Mortgage-backed securities		17,450		1,042		7		18,484
U.S. Government sponsored enterprises		4,995		24		—		5,020
Equity securities		1,624		—		217		1,407
	$	54,199	$	2,784	$	224	$	56,759

At September 30, 2012, the total carrying value of investment securities was $57,075, an increase of $316, or 0.6%, compared to December 31, 2011, and represented 8.4% of total assets. Primarily due to weak investment returns in 2012, much of Nicolet’s excess liquidity was held in low-rate cash accounts rather than committing funds to longer term investments in this low rate environment.

At September 30, 2012, the securities portfolio did not contain securities of any single issuer that were payable from and secured by the same source of revenue or taxing authority where the aggregate carrying value of such securities exceeded 10% of shareholders’ equity.

Loans

Total loans were $545,708 at September 30, 2012, an increase of $73,219, or 15.5%, from December 31, 2011. This increase was primarily the result of increased commercial lines and industrial loans, and residential first mortgage loans, which increased by $47,352 and $23,150, respectively, as a result of increased borrower demand, maintaining selected residential mortgages in the portfolio, and active marketing for new loans in Nicolet’s various markets.

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Table 8: Loan Composition
(dollars in thousands)

	As of
	September 30, 2012					June 30, 2012					March 31, 2012					December 31, 2011					September 30, 2011
	Amount		% of Total			Amount		% of Total			Amount		% of Total			Amount		% of Total			Amount		% of Total
Commercial & Industrial	$	201,363		36.9	%	$	199,212		38.5	%	$	168,808		34.9	%	$	154,011		32.6	%	$	157,989		33.0	%
CRE Owner-occupied		112,040		20.5			116,451		22.5			114,037		23.6			111,179		23.5			110,451		23.1
CRE Investment		71,520		13.1			62,857		12.2			62,797		13.0			66,577		14.1			65,966		13.8
Construction & Land Development		26,964		5.0			24,612		4.8			27,934		5.8			24,774		5.2			27,360		5.7
Residential Construction		7,670		1.4			5,961		1.2			4,143		0.9			9,363		2.0			9,794		2.0
Residential First Mortgage		79,543		14.6			63,155		12.2			58,375		12.1			56,392		11.9			55,756		11.6
Residential Junior Mortgage		40,928		7.5			38,082		7.4			40,484		8.3			42,699		9.0			43,848		9.2
Retail & Other		5,680		1.0			6,662		1.2			7,284		1.4			7,494		1.7			7,888		1.6
Total loans	$	545,708		100.0	%	$	516,992		100.0	%	$	483,862		100.0	%	$	472,489		100.0	%	$	479,052		100.0	%

Commercial and commercial real estate loans comprised 75.5% of the loan portfolio at September 30, 2012. Such loans are considered to have more inherent risk of default than residential mortgage or installment loans. The commercial balance per borrower is typically larger than for residential and mortgage loans, implying higher potential losses on an individual customer basis. Commercial loan growth throughout 2012 has been positively impacted by generally improving economic conditions and growth in borrower demand in each of Nicolet’s markets, including the development of new borrowing relationships in the market of its new branch opened in December 2011.

Commercial and industrial loans were $201,363 at September 30, 2012, an increase of $47,352, or 31%, since year-end 2011, and comprised 36.9% of total loans. The commercial business loan classification primarily consists of commercial loans to small businesses, multi-family residential income-producing real estate, and loans to municipalities. Loans of this type include a diverse range of industries. Owner-occupied commercial real estate loans primarily consist of loans secured by business real estate that is occupied by borrowers that also have commercial and industrial loans. Owner-occupied commercial real estate loans were $112,040 at September 30, 2012, up $861, or 0.8%, since year-end 2011, and comprised 20.5% of total loans. Both of these loan segments include a diverse range of industries. The credit risk related to commercial loans and owner-occupied commercial real estate loans is largely influenced by general economic conditions and the resulting impact on a borrower’s operations, or on the value of underlying collateral, if any. The increase in these commercial loan segments during 2012 was primarily due to increased loan demand from business borrowers, spurred by generally improving economic conditions, as well as development of new commercial business relationships in all of its markets.

Commercial investment real estate loans totaled $71,520 at September 30, 2012, up $4,943, or 7.4%, from December 31, 2011, and comprised 13.1% of total loans, down from 14.1% at the end of 2011. The investment real estate loan classification primarily includes commercial-based mortgage loans that are secured by non-owner occupied, nonfarm/nonresidential real estate properties, as well as multi-family residential properties. Credit risk is managed by employing sound underwriting guidelines, lending primarily to borrowers in local markets, periodically evaluating the underlying collateral, and formally reviewing the borrower’s financial soundness and overall relationship on an ongoing basis.

Construction and land development loans totaled $26,964 at September 30, 2012, up $2,190, or 8.8%, from December 31, 2011, and comprised 5.0% of total loans, down from 5.2% at the end of 2011. Loans in this classification provide financing for the development of commercial income properties, residential subdivisions and lots, multi-family residential development, and land designated for future development. Nicolet controls the credit risk on these types of loans by making loans in familiar markets, reviewing the merits of individual projects, controlling loan structure, and monitoring the progress of projects through the

127

analysis of construction advances. Future lending in this segment will focus on loans that are secured by commercial income-producing properties as opposed to speculative real estate development. Residential construction loans totaled $7,670 at September 30, 2012, down $1,693, or 18.1%, from the prior year end, and comprised 1.4% and 2.0% of total loans outstanding at September 30, 2012 and year end 2011, respectively.

Residential first-mortgage real estate loans increased $23,151, or 41.1%, to $79,543, representing 14.6% and 11.9% of the total loan portfolio at September 30, 2012 and the end of 2011, respectively. Residential first mortgage loans include conventional first-lien home mortgages, not including loans held for sale in the secondary market. Residential junior-mortgage real estate loans declined $1,771, or 4.1%, to $40,928, representing 7.5% and 9.0% of the total loan portfolio as of September 30, 2012 and the end of 2011, respectively. Residential junior-mortgage real estate loans consist of home equity lines and term loans secured by junior mortgage liens. The increase in residential first-lien mortgage loans is due to increased borrower demand for new and refinance loans, driven by stabilizing market values and historically low interest rates. In addition, during 2012, Nicolet elected to expand the quantity and amount of first-lien mortgages held in its own portfolio. As part of its management of originating residential mortgage loans, Nicolet continues to sell the majority of its long-term, fixed-rate residential real estate mortgage loans in the secondary market without retaining the servicing rights. At September 30, 2012, $3,484 of residential mortgages were held for resale in the secondary market, compared to $11,373 at December 31, 2011.

Retail consumer loans totaled $5,680 at September 30, 2012, down $1,814, or 24.2%, compared to December 31, 2011, and represented 1.0% and 1.7% of the loan portfolio at September 30, 2012 and year end 2011, respectively. The decline in aggregate consumer loan balances is largely a result of reduced consumer demand and debt retirement. Loans in this classification include short-term and other personal installment loans not secured by real estate. Credit risk is primarily controlled by reviewing the creditworthiness of the borrowers, monitoring payment histories, and taking appropriate collateral and guaranty positions.

The loan portfolio is widely diversified by types of borrowers, industry groups, and market areas. Significant loan concentrations are considered to exist for a financial institution when there are amounts loaned to multiple numbers of borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. At September 30, 2012, no significant industry concentrations existed in Nicolet’s portfolio in excess of 25% of total loans. Nicolet National Bank has also developed guidelines to manage its exposure to various types of concentration risks.

Allowance for Loan Losses

At September 30, 2012, the ALLL was $6,491, compared to $5,899 at December 31, 2011. The ALLL as a percentage of total loans was 1.19% and 1.25% at September 30, 2012 and December 31, 2011, respectively. The provision for loan losses for the first nine months of 2012 was $3,350, compared to $4,800 for the first nine months of 2011. Net charge-offs were $2,758 for the nine months ended September 30, 2012, compared to $7,690 for the comparable period in 2011. The ALLL for individually evaluated impaired loans was $165 and $591 at September 30, 2012 and December 31, 2011, respectively, or 1.1% and 6.1% of the respective impaired loan balances.

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The ALLL was 42.8% and 62.3% of nonperforming loans at September 30, 2012 and December 31, 2011, respectively. Gross charge-offs were $2,837 for the first nine months of 2012 compared to $7,743 for the first nine months of 2011, while recoveries for the corresponding periods were $79 and $53, respectively. As a result, net charge-offs at September 30, 2012 were 0.55% of average loans, compared to 1.52% of average loans at September 30, 2011. The decrease in net charge-offs of $4,932 was primarily due a $2,054 decrease in the commercial and industrial loan segment, a $4,023 decrease in the construction and land development loan segment, and net decreases of $85 and $251 in the residential first- and junior lien mortgage segments, respectively. These decreases were partially offset by an $892 increase in the owner-occupied commercial real estate segment, a $305 increase in the investment commercial real estate segment, a $396 increase in the residential construction segment, and a $37 increase in retail and other loans. Nicolet’s improved charge-off experience in 2012 is a result of aggressive recognition of charge-offs in 2011, together with improving asset quality in the current year due to strong efforts to resolve problem loans as well as generally improving economic conditions.

The largest portion of the ALLL at September 30, 2012 was allocated to commercial and industrial loans and was $2,676, an increase of $711 from year-end 2011, and represented 41.2% of the ALLL at September 30, 2012 compared to 33.3% at year-end 2011. The increase in the amount allocated to commercial and industrial loans was attributable to the increase in the balances in the commercial and industrial loan segment, which grew to 36.7% of total loans at September 30, 2012 from 32.6% at year-end 2011. The ALLL allocated to construction and land development loans was $1,904 at September 30, 2012, a decrease of $131 from year-end 2011, and represented 29.3% of the ALLL at September 30, 2012, compared to 34.5% at year-end 2011. The decrease in the construction and land development allocation was due to lower specific allocations for individual loans in this segment, as well as improvement in the risk profile of this segment. No other allocations to the ALLL for other loan segments represented more than 10% of the total ALLL as of September 30, 2012 or year-end 2011. Changes in the amount of ALLL allocation for these remaining loan segments were not significant, and reflect changes in the risk profile of the individual loan segments as well as the composition of the total loan portfolio. Nicolet’s management performs ongoing analyses of its loan portfolios to allow for early identification of customers experiencing financial difficulties, maintains prudent underwriting standards, understands the economy in its markets, and considers the trend of deterioration in loan quality in establishing the level of the ALLL. Nicolet believes that at September 30, 2012 the ALLL was appropriate to absorb probable incurred losses on existing loans that may become uncollectible.

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Table 9: Loan Loss Experience
(dollars in thousands)

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Allowance for loan losses:
Balance at beginning of period	$	6,045		$	5,901		$	5,899		$	8,635
Loans charged-off:
Commercial & Industrial		52			65			129			2,166
CRE Owner-occupied		301			177			1,327			428
CRE Investment		150			100			305			100
Construction & Land Development		—			1,135			307			4,334
Residential Construction		1			—			396			43
Residential First Mortgage		48			7			216			302
Residential Junior Mortgage		—			198			118			364
Retail & Other		—			5			38			5
Total loans charged-off		552			1,687			2,836			7,742
Recoveries of loans previously charged-off:
Commercial & Industrial		4			3			34			17
CRE Owner-occupied		1			1			9			2
CRE Investment		—			—			—			—
Construction & Land Development		17			26			22			26
Residential Construction		—			—			—			—
Residential First Mortgage		—			2			7			8
Residential Junior Mortgage		1			—			5			—
Retail & Other		—			—			1			—
Total recoveries		23			32			78			53
Total net charge-offs		529			1,655			2,758			7,689
Provision for loan losses		975			1,500			3,350			4,800
Balance at end of period	$	6,491		$	5,746		$	6,491		$	5,746
Ratios at end of period:
Allowance for loan losses to total loans		1.19	%		1.20	%		1.19	%		1.20	%
Allowance for loan losses to net charge-offs		1227.0	%		347.2	%		235.4	%		74.7	%
Net charge-offs to average loans		.10	%		.34	%		.54	%		1.51	%
Net loan charge-offs (recoveries):
Commercial & Industrial	$	48		$	62		$	95		$	2,149
CRE Owner-occupied		300			176			1,318			426
CRE Investment		150			100			305			100
Construction & Land Development		(17	)		1,109			285			4,308
Residential Construction		1			—			396			43
Residential First Mortgage		48			5			209			294
Residential Junior Mortgage		(1	)		198			113			364
Retail & Other		—			5			37			5
Total net charge-offs	$	529		$	1,655		$	2,758		$	7,689

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The allocation of the ALLL is based on management’s estimate of loss exposure by category of loans shown in following table.

Table 10: Allocation of the ALLL
(dollars in thousands)

	September 30, 2012					June 30, 2012					March 31, 2012					December 31, 2011					September 30, 2011
ALLL allocation:
Commercial & Industrial	$	2,676		36.67	%	$	2,645		38.5	%	$	2,192		34.9	%	$	1,965		32.6	%	$	2,733		33.0	%
CRE Owner-occupied		536		20.40	%		552		22.5	%		746		23.6	%		347		23.5	%		486		23.1	%
CRE Investment		298		13.02	%		262		12.2	%		247		13.0	%		393		14.1	%		378		13.8	%
Construction & Land Development		1,904		4.91	%		1,666		4.8	%		1,887		5.8	%		2,035		5.2	%		1,099		5.7	%
Residential Construction		120		1.40	%		79		1.2	%		47		0.9	%		311		2.0	%		122		2.0	%
Residential First Mortgage		506		15.12	%		416		12.2	%		412		12.1	%		405		11.9	%		450		11.6	%
Residential Junior Mortgage		431		7.45	%		401		7.4	%		416		8.3	%		419		9.0	%		446		9.2	%
Retail & Other		20		1.03	%		24		1.2	%		26		1.4	%		24		1.7	%		32		1.6	%
Total allowance for loan losses	$	6,491		100.0	%	$	6,045		100.0	%	$	5,973		100.0	%	$	5,899		100.0	%	$	5,746		100.0	%

ALLL category as a percent of total ALLL:
Commercial & Industrial		41.2	%				43.8	%				36.7	%				33.3	%				47.6	%
CRE Owner-occupied		8.3	%				9.1	%				12.5	%				5.9	%				8.5	%
CRE Investment		4.6	%				4.3	%				4.1	%				6.6	%				6.6	%
Construction & Land Development		29.3	%				27.6	%				31.6	%				34.5	%				19.1	%
Residential Construction		1.9	%				1.3	%				0.8	%				5.3	%				2.1	%
Residential First Mortgage		7.8	%				6.9	%				6.9	%				6.9	%				7.8	%
Residential Junior Mortgage		6.6	%				6.6	%				7.0	%				7.1	%				7.8	%
Retail & Other		0.3	%				0.4	%				0.4	%				0.4	%				0.5	%
Total allowance for loan losses		100.0	%				100.0	%				100.0	%				100.0	%				100.0	%

Impaired Loans and Nonperforming Assets

Nonperforming loans are considered one indicator of potential future loan losses. Nonperforming loans are defined as nonaccrual loans, including those defined as impaired under current accounting standards, loans 90 days or more past due but still accruing interest, and nonaccrual restructured loans. Loans are generally placed on nonaccrual status when contractually past due 90 days or more as to interest or principal payments. Additionally, whenever management becomes aware of facts or circumstances that may adversely impact the collectability of principal or interest on loans, it is management’s practice to place such loans on nonaccrual status immediately. Previously accrued and uncollected interest on such loans is reversed, amortization of related loan fees is suspended, and income is recorded only to the extent that interest payments are subsequently received in cash after a determination has been made that the principal balance of the loan is collectible. If collectability of the principal is in doubt, payments received are applied to loan

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principal. Management considers a loan to be impaired when it is probable Nicolet will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement.

Nonperforming loans were $15,152 at September 30, 2012, compared to $9,476 at year-end 2011. Total nonperforming loans have increased $5,676, or 59.9%, since year-end 2011. During the first quarter of 2012, one loan relationship totaling $5.6 million, which was previously classified as a Substandard accruing loan, was moved to nonaccrual status.

The level of potential problem loans is another predominant factor in determining the relative level of risk in the loan portfolio and in determining the adequacy of the ALLL. Potential problem loans are generally defined by management to include performing loans rated as Substandard by management, but having circumstances present which might adversely affect the ability of the borrower to comply with present repayment terms. The decision of management to include performing loans in potential problem loans does not necessarily mean that Nicolet expects losses to occur, but that management recognizes a higher degree of risk associated with these loans. Potential problem loans are predominantly commercial loans covering a diverse range of businesses and real estate property types. At September 30, 2012, potential problem loans totaled $11,542. Identifying potential problem loans requires a heightened management review of the pace at which a credit may deteriorate, the duration of asset quality stress, and uncertainty around the magnitude and scope of economic stress that may be felt by Nicolet’s customers and on underlying real estate values.

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Table 11: Nonperforming Loans and OREO
(dollars in thousands)

	As of,
	September 30, 2012			June 30, 2012			March 31, 2012			December 31, 2011			September 30, 2011
Nonaccrual loans:
Commercial & Industrial	$	3,986		$	4,088		$	4,473		$	1,744		$	2,424
CRE Owner-occupied		354			389			1,235			934			745
CRE Investment		380			544			555			716			858
Construction & Land Development		8,558			8,531			8,820			3,367			4,740
Residential Construction		397			1,200			1,231			1,480			1,843
Residential First Mortgage		1,326			396			900			1,129			888
Residential Junior Mortgage		—			36			105			106			328
Retail & Other		151			151			151			—			—
Total nonaccrual loans	$	15,152		$	15,335		$	17,470		$	9,476		$	11,826
Accruing loans past due 90 days or more		—			—			—			—			—
Total nonperforming loans	$	15,152		$	15,335		$	17,470		$	9,476		$	11,826
OREO		617			890			260			641			858
Other repossessed assets		—			—			—			—			—
Total nonperforming assets	$	15,769		$	16,225		$	17,730		$	10,117		$	12,684
Total restructured loans accruing	$	—		$	—		$	—		$	—		$	—

RATIOS
Nonperforming loans to total loans		2.78	%		2.97	%		3.61	%		2.01	%		2.47	%
Nonperforming assets to total loans plus OREO		2.89	%		3.13	%		3.66	%		2.14	%		2.64	%
ALLL to nonperforming loans		42.8	%		39.4	%		34.2	%		62.3	%		48.6	%
ALLL to total loans at end of period		1.19	%		1.17	%		1.23	%		1.25	%		1.20	%
Nonperforming loans by type:
Commercial & Industrial	$	3,986		$	4,088		$	4,473		$	1,744		$	2,424
CRE Owner-occupied		354			389			1,235			934			745
CRE Investment		380			544			555			716			858
Construction & Land Development		8,558			8,531			8,820			3,367			4,740
Residential Construction		397			1,200			1,231			1,480			1,843
Residential First Mortgage		1,326			396			900			1,129			888
Residential Junior Mortgage		—			36			105			106			328
Retail & Other		151			151			151			—			—
Total nonperforming loans		15,152			15,335			17,470			9,476			11,826
Commercial real estate owned		412			437			117			566			783
Residential real estate owned		205			453			143			75			75
Total OREO		617			890			260			641			858
Other repossessed assets		—			—			—			—			—
Total nonperforming assets	$	15,769		$	16,225		$	17,730		$	10,117		$	12,684

Deposits

Deposits represent Nicolet’s largest source of funds. Nicolet competes with other bank and nonbank institutions for deposits, as well as with a growing number of non-deposit investment alternatives available to depositors, such as mutual funds, money market funds, annuities, and other brokerage investment products. Competition for deposits remains high. Challenges to deposit growth include price changes on deposit products given movements in the rate environment, and customer preferences regarding higher-costing deposit products or non-deposit investment alternatives.

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At September 30, 2012, total deposits were $554,858, up $3,323, or 0.6%, from year-end 2011, primarily due to seasonal fluctuations in noninterest-bearing demand deposits, decreased time deposits, and Nicolet’s strategy to continue to reduce noncore funding sources with continued rewards and other core deposit growth.

Time deposits were $176,246 at September 30, 2012, down $10,034 from December 31, 2011, as customers have moved time deposits into liquid, short-term, non-maturing deposits as time deposit rates have decreased to levels relative to certain non-maturity deposit accounts.

Brokered deposits were approximately $45,607 and $38,609 at September 31, 2012 and December 31, 2011, respectively.

Table 12: Deposit Distribution
(dollars in thousands)

	September 30, 2012				December 31, 2011
Noninterest-bearing demand deposits	$	91,578	16.5	%	$	78,154	14.2	%
Interest-bearing demand deposits		248,947	44.9	%		270,738	49.1	%
Savings deposits		38,087	6.9	%		21,781	3.9	%
Time deposits		176,246	31.7	%		180,862	32.8	%
Total	$	554,858	100.0	%	$	551,535	100.0	%

Contractual Obligations

Nicolet is a party to various contractual obligations requiring the use of funds as part of its normal operations. The table below outlines the principal amounts and timing of these obligations, excluding amounts due for interest, if applicable. Most of these obligations are routinely refinanced into similar replacement obligations. However, renewal of these obligations is dependent on Nicolet’s ability to offer competitive interest rates, liquidity needs, or availability of collateral for pledging purposes.

Table 13: Contractual Obligations
(dollars in thousands)

	Payments due by period
	Total		< 1 year		1-3 years		3-5 years		> 5 years
Subordinated debentures	$	6,186	$	—	$	—	$	—	$	6,186
Other long-term borrowings		10,212		230		503		9,480		—
FHLB borrowings		25,000		10,000		10,000		5,000		—
Total long-term borrowing obligations	$	41,398	$	10,230	$	10,503	$	14,480	$	6,186

Liquidity

Funds are available from a number of basic banking activity sources including the core deposit base, the repayment and maturity of loans, investment securities sales, and sales of brokered deposits. All investment securities are classified as available-for-sale and are reported at fair value on the consolidated balance sheet. Approximately $8,761 of the $57,075 investment securities portfolio on hand at September 30, 2012, was pledged to secure public deposits, short-term borrowings, and repurchase agreements and for other purposes as required by law. Other funding sources available include short-term borrowings, federal funds purchased, and long-term borrowings.

Cash and cash equivalents at September 30, 2012 and December 31, 2011, were $27,552 and $92,129, respectively. The decrease in cash and cash equivalents was due to strong loan growth between December 31, 2011 and September 30, 2012 which was accompanied by modest deposit growth during the same period.

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Nicolet’s liquidity resources were sufficient as of September 30, 2012 to fund its loans and to meet other cash needs when necessary.

Capital

Nicolet regularly reviews the adequacy of its capital to ensure that sufficient capital is available for current and future needs and is in compliance with regulatory guidelines. Management actively reviews capital strategies for Nicolet and Nicolet National Bank in light of perceived business risks associated with current and prospective earning levels, liquidity, asset quality, economic conditions in the markets served, and the level of dividends available to shareholders.

Nicolet (on a consolidated basis) and Nicolet National Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on Nicolet and Nicolet National Bank’s financial statements.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, Nicolet and Nicolet National Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require Nicolet and Nicolet National Bank to maintain minimum amounts and ratios of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2011 and 2010, that Nicolet and Nicolet National Bank met all capital adequacy requirements to which they are subject.

As of September 30, 2012 and December 31, 2011, the most recent notifications from the regulatory agencies categorized Nicolet National Bank as well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, an institution must maintain minimum Total risk-based, Tier 1 risk- based, and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since these notifications that management believes have changed Nicolet National Bank’s category.

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A summary of Nicolet’s and Nicolet National Bank’s regulatory capital ratios as of September 30, 2012 and December 31, 2011 are as follows:

Table 14: Capital Ratios
(dollars in thousands)

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions (2)
	Amount		Ratio (1)			Amount		Ratio (1)			Amount		Ratio (1)
As of September 30, 2012
Nicolet
Total capital	$	84,090		15.1	%	$	44,487		8.0	%		N/A		N/A
Tier I capital		77,599		14.0	%		22,243		4.0	%		N/A		N/A
Leverage		77,599		11.5	%		26,897		4.0	%		N/A		N/A
Nicolet National Bank
Total capital	$	78,458		14.5	%	$	43,387		8.0	%	$	54,234		10.0	%
Tier I capital		71,967		13.3	%		21,694		4.0	%		32,541		6.0	%
Leverage		71,967		10.9	%		26,328		4.0	%		32,910		5.0	%
As of December 31, 2011
Nicolet
Total capital	$	82,638		16.7	%	$	39,510		8.0	%		N/A		NA/
Tier I capital		76,739		15.5	%		19,755		4.0	%		N/A		N/A
Leverage		76,739		12.1	%		25,468		4.0	%		N/A		N/A
Nicolet National Bank
Total capital	$	74,586		15.6	%	$	38,340		8.0	%	$	47,925		10.0	%
Tier I capital		68,687		14.3	%		19,170		4.0	%		28,755		6.0	%
Leverage		68,687		11.1	%		24,831		4.0	%		31,039		5.0	%

(1)

The total capital ratio is defined as tier 1 capital plus tier 2 capital divided by total risk-weighted assets. The tier 1 capital ratio is defined as tier 1 capital divided by total risk-weighted assets. The leverage ratio is defined as tier 1 capital divided by the most recent quarter’s average total assets.

(2)

Prompt corrective action provisions are not applicable at the bank holding company level.

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MANAGEMENT OF NICOLET

Continuing Directors

The following table shows for each current director of Nicolet who will remain a director of the combined entity following the merger: (1) his or her name; (2) his or her age at December 31, 2012; (3) how long he or she has been a director of Nicolet; (4) his or her position(s) with Nicolet, other than as a director; and (5) his or her principal occupation and business experience for the past five years. Except as otherwise indicated, each director has been engaged in his or her present principal occupation for more than five years. All directors of Nicolet are also directors of Nicolet National Bank.

Name (Age)	Director Since	Positions and Business Experience
Robert B. Atwell (55)	2000	Chairman and chief executive officer of Nicolet National Bank since 2000 and chairman, president, and chief executive officer of Nicolet since its formation in 2002.

Michael E. Daniels (48)	2000	President and chief operating officer of Nicolet National Bank since 2007, executive vice president and chief lending officer of Nicolet National Bank from 2000 to 2007 and secretary of Nicolet since 2002.

John N. Dykema (49)	2006	Owner, president and chief executive officer of Campbell Wrapper Corporation and Circle Packaging Machinery, Inc., manufacturers of custom packaging machinery.

Gary L. Fairchild (61)	2008	President, owner and chief executive officer of Fairchild Equipment, Inc. serving Wisconsin, Minnesota, and the Upper Peninsula of Michigan. A franchise dealer of forklift trucks, construction equipment, and various handling equipment.

Michael F. Felhofer (55)	2000	Owner and president of Candleworks of Door County, Inc., a candle manufacturer and retailer.

Andrew F. Hetzel, Jr. (56)	2001	President and chief executive officer of NPS Corp. and Blue Ridge Tissue Corp. These companies market and manufacture spill control products, towel and tissue products for the washroom and protective packaging materials. Managing member of Hetzel Enterprises LLC, a real estate holding company.

Donald J. Long, Jr. (55)	2000	Former owner and chief executive officer of Century Drill & Tool Co., Inc., an expediter of power tool accessories.

Benjamin P. Meeuwsen (44)	2008	President and owner of Fourinox, Inc., a custom equipment manufacturing company.

Susan L. Merkatoris (49)	2003	Certified Public Accountant; Owner of Larboard Enterprises, LLC, a packing and shipping franchise doing business as The UPS Stores; Co-owner and vice president of Midwest Stihl Inc., a distributor of Stihl Power Products.

Therese B. Pandl (59)	2010	President and chief executive officer of the Hospital Sisters Health System’s Division in Eastern Wisconsin, which includes St. Vincent Hospital and St. Mary’s Hospital Medical Center in Green Bay and St. Nicholas Hospital in Sheboygan; President and chief executive officer of St. Mary’s Hospital Medical Center and St. Vincent Hospital in Green Bay.

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Name (Age)	Director Since	Positions and Business Experience

Randy J. Rose (58)	2012	Retired president and chief executive officer of Schwabe North America. Currently serves as a member of the Executive Strategic Committee for Dr. Willmar Schwabe GmbH and Co. KG, parent of Schwabe North America, which encompasses Nature’s Way Holding Company, Enzymatic Therapy, and Integrative Therapeutics.

Robert J. Weyers (48)	2000	Co-owner of Weyers Group, a private equity investment firm; Commercial Horizons, Inc., a commercial property development company; and PBJ Holdings, LLC, a real estate holding company (see “Related Party Transactions”).

New Directors of the Combined Entity

In addition to the above listed directors who will remain directors of Nicolet following the merger, Nicolet will appoint two current directors of Mid-Wisconsin, Kim A. Gowey and Christopher Ghidorzi, to its board of directors effective upon the consummation of the merger as a condition of the merger agreement. Dr. Gowey and Mr. Ghidorzi will serve until Nicolet’s next annual meeting of shareholders or their earlier resignation or removal under Nicolet’s bylaws and will be nominated for election at the first Nicolet annual meeting of shareholders following the expiration of their initial term. They will also serve as directors of Nicolet National Bank upon consummation of the bank merger.

Meetings and Committees of the Board of Directors

Nicolet’s board of directors conducts its business through meetings of the full board and through committees. Board committees include, among others, an Executive Committee, an Audit Committee and a Compensation Committee. During 2012, the board of directors held 12 meetings; the Executive Committee held three meetings; the Audit Committee held 6 meetings and the Compensation Committee held three meetings.

Executive Committee

The Executive Committee is authorized to exercise the board of directors’ authority between board meetings, subject to specific limitations. It functions as a nominating committee to select nominees for election to the board of directors and supports strategic discussions presented by management. The Executive Committee does not have a charter. The Executive Committee will consider nominees recommended by shareholders if submitted to Nicolet in accordance with the procedures set forth in Section 2.6 of Nicolet’s bylaws. See “Director Nominations and Shareholder Communications” below.

Current Executive Committee members are Robert B. Atwell, Michael E. Daniels, John Dykema, Donald J. Long, Jr., and Robert J. Weyers.

Audit Committee

The Audit Committee is responsible for reviewing, with Nicolet’s independent accountants, its audit plan, the scope and results of its audit engagement and the accompanying management letter, if any; reviewing the scope and results of Nicolet’s internal auditing procedures; consulting with the independent accountants and management with regard to Nicolet’s accounting methods and the adequacy of Nicolet’s internal accounting controls; pre-approving all audit and permissible non-audit services provided by the independent accountants; reviewing the independence of the independent accountants; and reviewing the range of the independent accountants’ audit and non-audit fees.

The current members of the Audit Committee are Susan L. Merkatoris, John N. Dykema, Michael F. Felhofer, and Ben Meeuwsen. Although Nicolet’s common stock is not listed on an exchange, each member of the Audit Committee meets the requirements for independence as defined by Nasdaq Stock Market listing

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standards. In addition, Ms. Merkatoris meets the criteria specified under applicable SEC regulations for an “audit committee financial expert.”

Compensation Committee

The Compensation Committee is responsible for, among other duties as may be directed by the board, determining compensation to be paid to Nicolet’s executive officers and directors and reviewing and administering Nicolet’s incentive plans, including making grants under those plans. The Compensation Committee also reviews Nicolet’s incentive compensation programs with senior risk officers to (i) ensure that the programs do not encourage officers to take unnecessary and excessive risks that threaten the value of Nicolet and (ii) identify and implement means of limiting such risks. The Compensation Committee is also responsible for discussing evaluating and reviewing employee compensation plans to ensure that such plans do not encourage the manipulation of Nicolet’s reported earnings. Finally, the Compensation Committee is responsible for submitting to various regulators such reports relating to Nicolet’s compensation practices as may be required.

The current members of the Compensation Committee are Donald J. Long, Jr., John Dykema, and Robert J. Weyers. Each member is an independent director under the standards promulgated by the NASDAQ Stock Market, with the exception of Mr. Weyers due to his ownership interest in PBJ Holdings, LLC. For further discussion, see “Related Party Transactions” at page 144.

Nominations

Nicolet’s board of directors has not created a standing nominating committee for director nominees and has not adopted a nominating committee charter. Rather, the full board of directors participates in the consideration of director nominees. Because of its current size, Nicolet believes a standing nominating committee for director nominees is not necessary.

Any shareholder of any class of outstanding capital stock of the corporation entitled to vote on the election of directors may also nominate individuals for election to the board of directors. Nominations, other than those made by the board of directors, must be in writing and must be delivered or mailed to the President of Nicolet not less than 14 days nor more than 50 days prior to any meeting of shareholders called for the election of directors, provided, however, that if less than 21 days’ notice of such meeting is given to shareholders, nominations by a shareholder must be delivered or mailed to the President of Nicolet no later than the close of business on the 7 ^th day following the day on which notice of the meeting was given to shareholders. Written nominations by shareholders must contain, to the extent known to the nominating shareholder, the name and address of each proposed nominee, the principal occupation of each proposed nominee, the total number of shares of Nicolet that will be voted for each nominee, the name and address of the nominating shareholder, and the number of shares of capital stock owned by the nominating shareholder. Nominations not made in accordance with these requirements may be disregarded by the chairman of the meeting, and votes for such nominees disregarded.

Nicolet’s board of directors has not adopted a formal policy or process for identifying or evaluating nominees, but informally solicits and considers recommendations from a variety of sources, including other directors, members of the community, customers and shareholders of Nicolet, and professionals in the financial services and other industries. Similarly, the board does not prescribe any specific qualifications or skills that a nominee must possess, although it considers the potential nominee’s business experience; knowledge of Nicolet and the financial services industry; experience in serving as a director of Nicolet or another financial institution or public company generally; wisdom, integrity and analytical ability; familiarity with and participation in the communities served by Nicolet; commitment to and availability for service as a director; and any other factors the board deems relevant.

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Director Compensation

In 2012, directors received $500 for each board meeting and $250 for each committee meeting attended. The audit committee chair received $400 for each audit committee meeting. In 2011, directors received $400 for each board meeting and $200 for each committee meeting attended. Compensation for employee/directors of Nicolet is included in the table below.

The following table shows information concerning the compensation paid to the directors of Nicolet and its subsidiaries for their services as Directors during the fiscal year ended December 31, 2012. See “Executive Compensation” below for additional information regarding the compensation paid to Messrs. Atwell and Daniels in their capacities as executive officers of Nicolet.

Name	Fees earned or paid in cash*
Robert B. Atwell	$	14,750
Michael E. Daniels		16,750
John N. Dykema*		10,000
Gary L. Fairchild*		9,250
Michael F. Felhofer		14,250
Andrew F. Hetzel, Jr.*		7,250
Donald J. Long, Jr.		11,000
Benjamin P. Meeuwsen*		9,250
Susan L. Merkatoris		13,150
Therese B. Pandl*		7,000
Randy J. Rose*		5,500
Robert J. Weyers*		11,000

Directors have the option of receiving their compensation in the form of Nicolet common stock through the Deferred Compensation Plan for Non-Employee Directors. For the seven directors noted, their 2012 cash director fees were remitted to the plan and used by the plan to purchase Nicolet common stock on behalf of the director.

Executive Officers

Executive officers are appointed annually at the meetings of the board of directors of Nicolet, to serve until their successors are chosen and qualified. The following table sets forth for each executive officer of Nicolet: (1) the person’s name; (2) his or her age at December 31, 2012; (3) the year he or she was first elected as an officer of Nicolet; and (4) his or her positions with Nicolet, and his or her recent business experience for the past five years. The listed executive officers will continue to be Nicolet’s executive officers after the merger.

Name (Age)	Officer Since	Business Experience and Position with Nicolet
Robert B. Atwell (55)	2000	Chairman and chief executive officer of Nicolet National Bank since 2000 and chairman, president and chief executive officer of Nicolet since its formation in 2002.

Michael E. Daniels (48)	2000	President and chief operating officer of Nicolet National Bank since 2007, executive vice president and chief lending officer of Nicolet National Bank from 2000 to 2007 and secretary of Nicolet since 2002.

Ann K. Lawson (52)	2009	Chief financial officer of Nicolet National Bank and of Nicolet since February 2, 2009. Ms. Lawson previously served as the director of corporate accounting and reporting with a large regional bank holding company headquartered in Green Bay, Wisconsin, from September 1998 to January 2009.

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EXECUTIVE COMPENSATION

Summary Compensation Table

Nicolet has designated its chief executive officer and two other officers as “executive officers” in accordance with SEC reporting requirements. The following table provides certain summary information for the years ended December 31, 2012 and 2011 concerning the compensation paid or accrued by Nicolet and its subsidiaries to or on behalf of these officers.

Name
Robert B. Atwell	2012	350,000	140,000	322,575	⁽⁶⁾	314,115	82,923	⁽²⁾	1,209,613
	2011	350,000	30,000	0		0	22,536	⁽²⁾	402,536

Michael E. Daniels	2012	295,000	118,000	322,575	⁽⁶⁾	314,115	71,654	⁽³⁾	1,121,344
	2011	295,000	25,000	0		0	21,309	⁽³⁾	341,309

Ann K. Lawson	2012	150,026	30,000	27,225		24,350	10,502	⁽⁴⁾	242,103
	2011	145,656	25,000	0		0	8,739	⁽⁴⁾	179,395

(1)

All bonuses are reported for the year in which they are earned.

(2)

Includes $15,000 and $14,700 of 401(k) company matching contributions and discretionary profit sharing and $7,923 and $7,836 of life insurance premiums for 2012 and 2011, respectively. 2012 also includes $60,000 cash consideration paid to Mr. Atwell for signing a revised employment agreement in 2012.

(3)

Includes $15,000 and $14,700 of 401(k) company matching contributions and discretionary profit sharing and $6,654 and $6,609 of life insurance premiums for 2012 and 2011, respectively. 2012 also includes $50,000 cash consideration paid to Mr. Daniels for signing a revised employment agreement in 2012.

(4)

Includes $10,502 and $8,739 of 401(k) company matching contributions and discretionary profit sharing for 2012 and 2011, respectively.

(5)

Nicolet have omitted information on perquisites and other personal benefits with an aggregate value below $10,000.

(6)

Reflects the fair value of restricted stock on the date of grant. Does not include 5,303 shares of restricted stock issued to each of Messrs. Atwell and Daniels in January 2013 and described in “— 2013 Restricted Stock Awards” below.

Employment Agreements.

Robert B. Atwell . Effective April 7, 2000, Nicolet National Bank entered into a rolling three-year employment agreement with Robert B. Atwell regarding Mr. Atwell’s employment. Under the terms of the agreement, Mr. Atwell received a fixed annual base salary during the initial three-year term, plus benefits, and annual bonus compensation pursuant to any incentive compensation program as may be adopted from time to time by the Board of Directors. Mr. Atwell’s compensation, including incentive compensation, is subject to annual review by the Board of Directors, and his 2011 and 2012 compensation is described in the Summary Compensation Table above.

Mr. Atwell’s agreement automatically renews for an additional day each day after April 7, 2000, so that it always has a three-year term, unless either of the parties to the agreement gives notice of his or its intent not to renew the agreement, which will cause the agreement to terminate on the third anniversary of the 30th day following the date of notice. The agreement also provides various other benefits and change in control provisions, and subjects Mr. Atwell to non-compete restrictions. Mr. Atwell’s employment agreement was amended and restated on April 17, 2012 to expand the geographic region subject to the non-compete

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restrictions. Additionally, under Mr. Atwell’s agreement, Nicolet is obligated to pay Mr. Atwell his base salary and health insurance reimbursement, as indicated, for the following terminating events:

Terminating Event				Payment Obligation of Base Salary
Mr. Atwell becomes disabled, as defined				Maximum of six (6) months

Nicolet National Bank terminates Mr. Atwell’s employment without cause, as defined				Maximum of twelve (12) months salary and health insurance reimbursement

Mr. Atwell terminates his employment for cause, as defined				Maximum of twelve (12) months salary and health insurance reimbursement

Mr. Atwell terminates his employment for cause within six months after a change of control, as defined				One and one-half times base salary and bonus and twelve (12) months health insurance reimbursement

Michael E. Daniels. Effective April 7, 2000, Nicolet National Bank entered into a rolling three-year employment agreement with Michael E. Daniels regarding Mr. Daniels’ employment. Under the terms of the agreement, Mr. Daniels received a fixed annual base salary during the initial three-year term, plus benefits and annual bonus compensation pursuant to any incentive compensation program as may be adopted from time to time by the Board of Directors. Mr. Daniels’ compensation is subject to annual review by the Board of Directors, and his 2011 and 2012 compensation is described in the Summary Compensation Table above.

Mr. Daniels’ agreement automatically renews for an additional day each day after April 7, 2000, so that it always has a three-year term, unless any of the parties to the agreement gives notice of his or its intent not to renew the agreement, which will cause the agreement to terminate on the third anniversary of the 30th day following the date of notice. The agreement also provides various other benefits and change in control provisions, and subjects Mr. Daniels to non-compete restrictions. Mr. Daniels’ employment agreement was amended and restated on April 17, 2012 to expand the geographic region subject to the non-compete restrictions. Additionally, under Mr. Daniels’ agreement, Nicolet is obligated to pay Mr. Daniels his base salary and health insurance reimbursement following the termination of his agreement under the same conditions and terms as described above for Mr. Atwell’s employment agreement.

2013 Restricted Stock Awards

Nicolet has, from time to time and as reflected in each of the Summary Compensation Table, above, and the Outstanding Equity Awards at 2012 Fiscal Year End Table, below, provided incentive equity awards to certain of its executive officers. In addition, in 2012, Nicolet’s Compensation Committee approved annual incentive targets for the performance of its Chief Executive Officer and Chief Operating Officer in 2012, which were met and resulted in the granting of equity awards to each officer in early 2013. In January 2013, Nicolet granted awards of restricted stock to Messrs. Atwell and Daniels in the amount of 5,303 shares each. The terms of this restricted stock provide for vesting in equal increments, with one-third of the granted shares vesting immediately, one-third of the granted shares vesting on the first anniversary of the grant date, and one-third of the granted shares vesting on the second anniversary of the grant date, with immediate, accelerated vesting in the event of a termination of employment based on death or disability or upon a change in control of Nicolet. The terms of the restricted stock also permit the surrender of shares to Nicolet on vesting in order to satisfy applicable tax withholding requirements, and each of Messrs. Atwell and Daniels surrendered 583 shares in connection with that portion of their respective awards that vested immediately in January 2013.

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Outstanding Equity Awards at 2012 Fiscal Year End Table

The following table sets forth information at December 31, 2012, concerning outstanding awards previously granted to the named executive officers.

	Option Awards									Stock Awards
Name	Number of securities underlying unexercised options exercisable (#)		Number of securities underlying unexercised options Unexercisable (#)			Equity Incentive Plan Awards: Number of shares underlying unexercised unearned options (#)		Option exercise price ($)		Option expiration date		Number of shares of units of stock that have not vested (#)			Market value of shares or units of stock that have not vested ($)		Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)		Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)
Robert B. Atwell		79,570		0			0		18.00		12/13/2015
		44,444		11,111	⁽¹⁾		0		18.00		12/13/2015
		0		64,500	⁽²⁾		0		16.50		4/10/2022
													19,550	^{(7) (8)}		322,575		0		0
Michael E. Daniels		79,570		0			0		18.00		12/13/2015
		44,444		11,111	⁽¹⁾		0		18.00		12/13/2015
		0		64,500	⁽²⁾		0		16.50		4/10/2022
													19,550	^{(7) (8)}		322,575		0		0
Ann K. Lawson		12,000		8,000	⁽³⁾		0		16.00		2/2/2019
		6,000		4,000	⁽⁴⁾		0		16.80		12/15/2019
		355		710	⁽⁵⁾		0		16.50		4/10/2012
		145		3,790	⁽⁶⁾		0		16.50		4/10/2022
													1,650	⁽⁹⁾		27,225		0		0

(1)

Represents the unvested remainder of a grant of 55,555 options made on December 13, 2005, which vest in 10 equal annual increments beginning on the date of grant.

(2)

Granted on April 10, 2012, and vesting in 5 equal increments over a 5-year period on the anniversaries of the initial grant.

(3)

Represents the unvested remainder of a grant of 20,000 options made on February 2, 2009, which vest in 5 equal increments over a 5-year period on the anniversaries of the initial grant.

(4)

Represents the unvested remainder of a grant of 10,000 options made on December 15, 2009, which vest in 5 equal increments over a 5-year period on the anniversaries of the initial grant.

(5)

Represents the unvested remainder of a grant of 1,065 options made on April 10, 2012, of which one-third vested immediately and one-third vest on each of the first and second anniversaries of the initial grant.

(6)

Represents the unvested remainder of a grant of 3,935 options made on April 10, 2012, of which 145 vested immediately, 145 will vest on each of April 10, 2013 and April 10, 2014, and the remainder will vest in equal increments of 500 over the seven years subsequent to 2014 on the anniversaries of the initial grant.

(7)

Represents the unvested remainder of a grant of 19,550 restricted shares made on April 10, 2012, which vest in 5 equal increments over a 5-year period on the anniversaries of the initial grant.

(8)

Excludes restricted stock granted in January, 2013.

(9)

Represents the unvested remainder of a grant of 1,650 restricted shares made on April 10, 2012, which vest in 10 equal increments over a 10-year period on the anniversaries of the initial grant.

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RELATED PARTY TRANSACTIONS

Nicolet and its subsidiary Nicolet National Bank have banking and other business transactions in the ordinary course of business with directors and officers of Nicolet and Nicolet National Bank and their affiliates, including members of their families, corporations, partnerships or other organizations in which such directors and officers have a controlling interest. These transactions take place on substantially the same terms as those prevailing at the same time for comparable transactions with unrelated parties.

One of Nicolet’s directors, Robert J. Weyers, is a director of, and holds a one-third ownership interest in, PBJ Holdings, LLC, a real estate development and investment firm. In 2004, Nicolet entered into a joint venture with PBJ Holdings, LLC in connection with the development of the site of Nicolet’s headquarters facility. Mr. Weyers abstained from discussion or deliberations regarding the transaction in his capacity as a director of Nicolet and Nicolet National Bank. The joint venture involves a 50% investment by Nicolet on standard commercial terms reached through arms-length negotiation. During 2012, Nicolet National Bank paid approximately $978,000 in rent expense to the joint venture. For 2012, the joint venture’s net income was approximately $113,000, benefiting Nicolet and PBJ Holdings, LLC by approximately $56,500 each. Additionally, in 2011, Nicolet National Bank entered into a five-year facility lease through an arms-length negotiation with an LLC entity of which PBJ Holdings is the sole member. Nicolet National Bank pays approximately $ 64,000 per year in rent and CAM to the LLC under this lease. Management believes that the terms of the joint venture and lease described above are no less favorable to Nicolet National Bank or Nicolet than would have been achieved in a transaction with an unaffiliated third party.

From time to time, Nicolet National Bank will make loans to the directors and officers of Nicolet and Nicolet National Bank and their affiliates. None of these loans are currently nonaccrual, past due, restructured or potential problem loans. All such loans were: (i) made in the ordinary course of business; (ii) made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to Nicolet or Nicolet National Bank, and did not involve more than the normal risk of collectibility or present other unfavorable features.

Nicolet National Bank has employed certain employees who are related to Nicolet’s executive officers and/or directors. These individuals are compensated consistent with the policies of Nicolet National Bank that apply to all employees.

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INFORMATION ABOUT MID-WISCONSIN

General

Mid-Wisconsin was established as a Wisconsin corporation in 1986 to serve as a bank holding company for Mid-Wisconsin Bank, its current operating subsidiary. Both Mid-Wisconsin and Mid-Wisconsin Bank have their principal offices in Medford, Wisconsin. As the sole shareholder of Mid-Wisconsin Bank, Mid-Wisconsin is a bank holding company registered with, and subject to, regulation by the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended.

Mid-Wisconsin Bank

Mid-Wisconsin Bank was incorporated on September 1, 1890, as a state bank under the laws of Wisconsin. Mid-Wisconsin Bank operates 11 retail banking locations throughout North Central Wisconsin serving markets in Clark, Eau Claire, Lincoln, Marathon, Oneida, Price, Taylor and Vilas counties.

The day-to-day management of Mid-Wisconsin Bank rests with its officers with oversight provided by the board of directors. Mid-Wisconsin Bank is engaged in general commercial and retail banking services, including wealth management services. Mid-Wisconsin Bank serves individuals, businesses and governmental units and offers most forms of commercial and consumer lending, including lines of credit, term loans, real estate financing, mortgage lending and agricultural lending. In addition, Mid-Wisconsin Bank provides a full range of personal banking services, including checking accounts, savings and time products, installment and other personal loans, as well as mortgage loans. To expand services to its customers on a 24-hour basis, Mid-Wisconsin Bank offers ATM services, merchant capture, cash management, express phone, online and mobile banking. New services are frequently added.

Mid-Wisconsin Bank’s wealth management division (“Wealth Management”) consists of two delivery methods of providing financial products and services to assist customers in building, investing, or protecting their wealth. Through its state granted trust powers, Wealth Management provides fiduciary, administrative, and investment management services to personal trusts, estates, individuals, businesses, non-profits, and foundations for an asset based fee. Through a third-party broker/dealer, LPL Financial, which is a member of FINRA and SIPC and a registered broker/dealer, Wealth Management makes available a variety of retail investment and insurance products including equities, bonds, fixed and variable annuities, mutual funds, life insurance, long-term care insurance and brokered certificates of deposits, which are commission-based transactions.

All of Mid-Wisconsin Bank’s products and services are directly or indirectly related to the business of community banking and all activity is reported as one segment of operations. All revenue, profit and loss, and total assets are reported in one segment and represent Mid-Wisconsin Bank’s entire operations.

At September 30, 2012, Mid-Wisconsin had total consolidated assets of approximately $464 million, total consolidated deposits of approximately $364 million, total consolidated gross loans of approximately $308 million, and consolidated shareholders’ equity of approximately $37 million.

Available Information

Financial information, information relating to executive compensation, various benefit plans, voting securities and the principal holders of voting securities, relationships and related transactions and other related matters as to Mid-Wisconsin are set forth in Mid-Wisconsin’s Form 10-K Annual Report for the year ended December 31, 2011, a copy of which is included as Appendix E to this joint proxy statement-prospectus. Additional financial information as to Mid-Wisconsin for the nine months ended September 30, 2012 is set forth in Mid-Wisconsin’s Form 10-Q Quarterly Report, a copy of which is included as Appendix F to this joint proxy statement-prospectus.

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Market Prices of and Dividends Declared on Mid-Wisconsin Common Stock

The Mid-Wisconsin common stock is currently traded on the OTCQB market of the OTC Markets Group under the symbol “MWFS.” The last reported sale price of Mid-Wisconsin’s common stock prior to the mailing of this joint proxy statement-prospectus on , 2013 was $ on , 2013, and the last reported sale price prior to the announcement of the merger was $3.94 on November 28, 2012. Additional information available to management regarding the quarterly high and low bid prices for the Mid-Wisconsin common stock is provided below. For quarters where there were no sales of Mid-Wisconsin common stock, neither high nor low prices are given. As of , 201 , Mid-Wisconsin had shares of common stock issued and outstanding and approximately shareholders of record.

	High		Low
2012
Fourth Quarter	$	4.75	$	4.05
Third Quarter	$	6.50	$	4.50
Second Quarter	$	6.00	$	4.80
First Quarter	$	5.60	$	3.94

2011
Fourth Quarter	$	5.00	$	3.50
Third Quarter	$	8.70	$	4.75
Second Quarter	$	8.00	$	4.75
First Quarter	$	8.05	$	7.90

The holders of Mid-Wisconsin common stock receive dividends if and when declared by the Mid-Wisconsin board of directors out of legally available funds. However, Mid-Wisconsin has paid no dividends on its common stock since August 2009 and is subject to a written agreement with the Federal Reserve Bank of Minneapolis that, among other things, prohibits Mid-Wisconsin’s payment of dividends absent the prior written consent of the Federal Reserve. In addition, Mid-Wisconsin’s ability to pay dividends on its common stock is restricted by the terms of certain of its other securities. For example, under the terms of the Debentures, Mid-Wisconsin may not pay dividends on its capital stock unless all accrued and unpaid interest payments on the Debentures have been fully paid. Additionally, the terms of the Preferred Stock provide that no dividends on any common or preferred stock that ranks equal to or junior to the Preferred Stock may be paid unless and until all accrued and unpaid dividends for all past dividend periods on the Preferred Stock have been fully paid. The principal source of Mid-Wisconsin cash flow, including cash flow to pay dividends to its shareholders, stems from dividends that Mid-Wisconsin Bank pays to Mid-Wisconsin as its sole shareholder. Statutory and regulatory limitations, as well as other factors that their board of directors deems relevant, apply to Mid-Wisconsin Bank’s payment of dividends to the Mid-Wisconsin, as well as to Mid-Wisconsin’s payment of dividends to its shareholders.

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SUPERVISION AND REGULATION

Both Nicolet and Nicolet National Bank are subject to extensive state and federal banking laws and regulations that impose restrictions on and provide for general regulatory oversight of their operations. These laws and regulations are generally intended to protect depositors and not stockholders. Legislation and regulations authorized by legislation influence, among other things:

•

how, when, and where Nicolet and Nicolet National Bank may expand geographically;

•

into what product or service markets Nicolet and Nicolet National Bank may enter;

•

how Nicolet and Nicolet National Bank must manage their assets; and

•

under what circumstances money may or must flow between the parent bank holding company and the subsidiary bank.

Set forth below is an explanation of the major pieces of legislation and regulation affecting the banking industry and how that legislation and regulation affects Nicolet’s actions. The following summary is qualified by reference to the statutory and regulatory provisions discussed. Changes in applicable laws or regulations may have a material effect on the business and prospects of Nicolet or Nicolet National Bank, and legislative changes and the policies of various regulatory authorities may significantly affect their operations. Nicolet cannot predict the effect that fiscal or monetary policies, or new federal or state legislation may have on the future business and earnings of Nicolet or Nicolet National Bank.

Regulation of Nicolet

Because Nicolet owns all of the capital stock of Nicolet National Bank, it is a bank holding company under the federal Bank Holding Company Act of 1956 (the “Bank Holding Company Act”). As a result, Nicolet is primarily subject to the supervision, examination, and reporting requirements of the Bank Holding Company Act and the regulations of the Board of Governors of the Federal Reserve System (the “Federal Reserve”). As a bank holding company located in Wisconsin, the WDFI also regulates and monitors all significant aspects of its operations.

Acquisitions of Banks

The Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve before:

•

acquiring direct or indirect ownership or control of any voting shares of any bank if, after the acquisition, the bank holding company will directly or indirectly own or control more than 5% of the bank’s voting shares;

•

acquiring all or substantially all of the assets of any bank; or

•

merging or consolidating with any other bank holding company.

Additionally, The Bank Holding Company Act provides that the Federal Reserve may not approve any of these transactions if it would result in or tend to create a monopoly, substantially lessen competition, or otherwise function as a restraint of trade, unless the anti-competitive effects of the proposed transaction are clearly outweighed by the public interest in meeting the convenience and needs of the community to be served. The Federal Reserve is also required to consider the financial and managerial resources and future prospects of the bank holding companies and banks involved in the transaction and the convenience and needs of the community to be served. The Federal Reserve’s consideration of financial resources generally focuses on capital adequacy, which is discussed below.

Under The Bank Holding Company Act, if adequately capitalized and adequately managed, Nicolet or any other bank holding company located in Wisconsin may purchase a bank located outside of Wisconsin. Conversely, an adequately capitalized and adequately managed bank holding company located outside of Wisconsin may purchase a bank located inside Wisconsin. In each case, however, restrictions may be placed

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on the acquisition of a bank that has only been in existence for a limited amount of time or will result in specified concentrations of deposits.

Change in Bank Control

Subject to various exceptions, The Bank Holding Company Act and the Change in Bank Control Act, together with related regulations, require Federal Reserve approval prior to any person or company acquiring “control” of a bank holding company. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of the bank holding company. Control is rebuttably presumed to exist if a person or company acquires 10% or more, but less than 25%, of any class of voting securities and either:

•

the bank holding company has registered securities under Section 12 of the Securities Act of 1934; or

•

no other person owns a greater percentage of that class of voting securities immediately after the transaction.

Following the completion of the merger, Nicolet’s common stock will not be registered under Section 12 of the Securities Exchange Act of 1934. The regulations provide a procedure for challenging rebuttable presumptions of control.

Permitted Activities

The Bank Holding Company Act has generally prohibited a bank holding company from engaging in activities other than banking or managing or controlling banks or other permissible subsidiaries and from acquiring or retaining direct or indirect control of any company engaged in any activities other than those determined by the Federal Reserve to be closely related to banking or managing or controlling banks as to be a proper incident thereto. Provisions of the Gramm-Leach-Bliley Act have expanded the permissible activities of a bank holding company that qualifies as a financial holding company. Under the regulations implementing the Gramm-Leach-Bliley Act, a financial holding company may engage in additional activities that are financial in nature or incidental or complementary to financial activities. Those activities include, among other activities, certain insurance and securities activities.

To qualify to become a financial holding company, Nicolet National Bank and any other depository institution subsidiary of Nicolet must be well capitalized and well managed and must have a Community Reinvestment Act rating of at least “satisfactory.” Additionally, Nicolet must file an election with the Federal Reserve to become a financial holding company and must provide the Federal Reserve with 30 days’ written notice prior to engaging in a permitted financial activity. While Nicolet meets the qualification standards applicable to financial holding companies, Nicolet has not elected to become a financial holding company at this time.

Support of Subsidiary Institutions

Under Federal Reserve policy, Nicolet is expected to act as a source of financial strength for Nicolet National Bank and to commit resources to support Nicolet National Bank. In addition, pursuant to the Dodd-Frank Act, the federal banking regulators are required to issue, within two years of enactment, rules that require a bank holding company to serve as a source of financial strength for any depository institution subsidiary. This support may be required at times when, without this Federal Reserve policy or the impending rules, Nicolet might not be inclined to provide it. In addition, any capital loans made by Nicolet to Nicolet National Bank will be repaid only after Nicolet National Bank’s deposits and various other obligations are repaid in full. In the unlikely event of its bankruptcy, any commitment that Nicolet gives to a bank regulatory agency to maintain the capital of Nicolet National Bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.

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Sarbanes-Oxley Act of 2002

On July 30, 2002, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) was signed into law and became some of the most sweeping federal legislation addressing accounting, corporate governance, and disclosure issues. The impact of the Sarbanes-Oxley Act is wide-ranging as it applies to all public companies and imposes significant new requirements for public company governance and disclosure requirements.

In general, the Sarbanes-Oxley Act mandated important new corporate governance and financial reporting requirements intended to enhance the accuracy and transparency of public companies’ reported financial results. It established new responsibilities for corporate chief executive officers, chief financial officers and audit committees in the financial reporting process and created a new regulatory body to oversee auditors of public companies. It backed these requirements with new SEC enforcement tools, increases criminal penalties for federal mail, wire and securities fraud, and created new criminal penalties for document and record destruction in connection with federal investigations. It also increased the opportunity for more private litigation by lengthening the statute of limitations for securities fraud claims and provided new federal corporate whistleblower protection.

The economic and operational effects of this legislation on public companies, including us, is significant in terms of the time, resources and costs associated with complying with this law. Because the Sarbanes-Oxley Act, for the most part, applies equally to larger and smaller public companies, Nicolet is presented with additional challenges as a smaller, community-oriented financial institution seeking to compete with larger financial institutions in its market.

On July 21, 2010, the Dodd-Frank Act was signed into law and included a permanent delay of the implementation of section 404(b) of the Sarbanes-Oxley Act for companies with non-affiliated public float under $75,000,000 (“non-accelerated filer”). Section 404(b) is the requirement to have an independent accounting firm audit and attest to the effectiveness of a company’s internal controls. As Nicolet does not exceed the public float threshold described above, there are no additional costs anticipated for complying with Section 404(b) in 2013.

Nicolet National Bank

Regulation of Nicolet National Bank

Because Nicolet National Bank is chartered as a national bank, it is primarily subject to the supervision, examination, and reporting requirements of the National Bank Act and the regulations of the OCC. The OCC regularly examines Nicolet National Bank’s operations and has the authority to approve or disapprove mergers, the establishment of branches and similar corporate actions. The OCC also has the power to prevent the continuance or development of unsafe or unsound banking practices or other violations of law. Because Nicolet National Bank’s deposits are insured by the FDIC to the maximum extent provided by law, it is also subject to certain FDIC regulations and the FDIC also has examination authority and back-up enforcement power over Nicolet National Bank. Nicolet National Bank is also subject to numerous state and federal statutes and regulations that affect Nicolet its business, activities, and operations.

Branching. National banks are required by the National Bank Act to adhere to branching laws applicable to state banks in the states in which they are located. Under Wisconsin law, Nicolet National Bank may open branch offices throughout the state with the prior approval of the OCC. In addition, with prior regulatory approval, Nicolet National Bank may acquire branches of existing banks located in Wisconsin or other states. Prior to the enactment of the Dodd-Frank Act, Nicolet National Bank and any other national- or state-chartered banks were generally permitted to branch across state lines by merging with banks in other states if allowed by the applicable states’ laws. However, interstate branching is now permitted for all national- and state-chartered banks as a result of the Dodd-Frank Act, provided that a state bank chartered by the state in which the branch is to be located would also be permitted to establish a branch.

Prompt Corrective Action. The Federal Deposit Insurance Corporation Improvement Act of 1991 establishes a system of prompt corrective action to resolve the problems of undercapitalized financial institutions. Under this system, the federal banking regulators have established five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically

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undercapitalized, in which all institutions are placed. The federal banking agencies have also specified by regulation the relevant capital levels for each category.

As a bank’s capital position deteriorates, federal banking regulators are required to take various mandatory supervisory actions and are authorized to take other discretionary actions with respect to institutions in the three undercapitalized categories. The severity of the action depends upon the capital category in which the institution is placed. Generally, subject to a narrow exception, the banking regulator must appoint a receiver or conservator for an institution that is critically undercapitalized.

A “well-capitalized” bank is one that is not required to meet and maintain a specific capital level for any capital measure, pursuant to any written agreement, order, capital directive, or prompt corrective action directive, and has a total risk-based capital ratio of at least 10%, a Tier 1 risk-based capital ratio of at least 6%, and a Tier 1 leverage ratio of at least 5%. Generally, a classification as well capitalized will place a bank outside of the regulatory zone for purposes of prompt corrective action. However, a well-capitalized bank may be reclassified as “adequately capitalized” based on criteria other than capital, if the federal regulator determines that a bank is in an unsafe or unsound condition, or is engaged in unsafe or unsound practices, which requires certain remedial action.

An “adequately-capitalized” bank meets the required minimum level for each relevant capital measure, including a total risk-based capital ratio of at least 8%, a Tier 1 risk-based capital ratio of at least 4% and a Tier 1 leverage ratio of at least 4%. A bank that is adequately capitalized is prohibited from directly or indirectly accepting, renewing or rolling over any brokered deposits, absent applying for and receiving a waiver from the applicable regulatory authorities. Institutions that are not well capitalized are also prohibited, except in very limited circumstances where the FDIC permits use of a higher local market rate, from paying yields for deposits in excess of 75 basis points above a national average rate for deposits of comparable maturity, as calculated by the FDIC. In addition, all institutions are generally prohibited from making capital distributions and paying management fees to controlling persons if, subsequent to such distribution or payment, the institution would be undercapitalized. Finally, an adequately-capitalized bank may be forced to comply with operating restrictions similar to those placed on undercapitalized banks.

An “undercapitalized” bank fails to meet the required minimum level for any relevant capital measure. A bank that reaches the undercapitalized level is likely subject to a formal agreement, consent order or another formal supervisory sanction. An undercapitalized bank is not only subject to the requirements placed on adequately-capitalized banks, but also becomes subject to the following operating and managerial restrictions, which:

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prohibit capital distributions;

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prohibit payment of management fees to a controlling person;

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require the bank to submit a capital restoration plan within 45 days of becoming undercapitalized;

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require close monitoring of compliance with capital restoration plans, requirements and restrictions by the primary federal regulator;

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restrict asset growth by requiring the bank to restrict its average total assets to the amount attained in the preceding calendar quarter;

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prohibit the acceptance of employee benefit plan deposits; and

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require prior approval by the primary federal regulator for acquisitions, branching and new lines of business.

Finally, an undercapitalized institution may be required to comply with operating restrictions similar to those placed on significantly-undercapitalized institutions.

A “significantly-undercapitalized” bank has a total risk-based capital ratio less than 6%, a Tier 1 risk-based capital less than 3%, and a Tier 1 leverage ratio less than 3%. In addition to being subject to the restrictions applicable to undercapitalized institutions, significantly undercapitalized banks may, at the

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discretion of the bank’s primary federal regulator, also become subject to the following additional restrictions, which:

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require the sale of enough capital stock so that the bank is adequately capitalized or, if grounds for conservatorship or receivership exist, the merger or acquisition of the bank;

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restrict affiliate transactions;

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restrict interest rates paid on deposits;

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further restrict growth, including a requirement that the bank reduce its total assets;

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restrict or prohibit all activities that are determined to pose an excessive risk to the bank;

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require the bank to elect new directors, dismiss directors or senior executive officers, or employ qualified senior executive officers to improve management;

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prohibit the acceptance of deposits from correspondent banks, including renewals and rollovers of prior deposits;

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require prior approval of capital distributions by holding companies;

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require holding company divestiture of the financial institution, bank divestiture of subsidiaries and/or holding company divestiture of other affiliates; and

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require the bank to take any other action the federal regulator determines will “better achieve” prompt corrective action objectives.

Finally, without prior regulatory approval, a significantly undercapitalized institution must restrict the compensation paid to its senior executive officers, including the payment of bonuses and compensation that exceeds the officer’s average rate of compensation during the 12 calendar months preceding the calendar month in which the bank became undercapitalized.

A “critically-undercapitalized” bank has a ratio of tangible equity to total assets that is equal to or less than 2%. In addition to the appointment of a receiver in not more than 90 days, or such other action as determined by an institution’s primary federal regulator, an institution classified as critically undercapitalized is subject to the restrictions applicable to undercapitalized and significantly-undercapitalized institutions, and is further prohibited from doing the following without the prior written regulatory approval:

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entering into material transactions other than in the ordinary course of business;

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extending credit for any highly leveraged transaction;

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amending the institution’s charter or bylaws, except to the extent necessary to carry out any other requirements of law, regulation or order;

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making any material change in accounting methods;

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engaging in certain types of transactions with affiliates;

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paying excessive compensation or bonuses, including golden parachutes;

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paying interest on new or renewed liabilities at a rate that would increase the institution’s weighted average cost of funds to a level significantly exceeding the prevailing rates of its competitors; and

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making principal or interest payment on subordinated debt 60 days or more after becoming critically undercapitalized.

In addition, a bank’s primary federal regulator may impose additional restrictions on critically-undercapitalized institutions consistent with the intent of the prompt corrective action regulations. Once an institution has become critically undercapitalized, subject to certain narrow exceptions such as a material capital remediation, federal banking regulators will initiate the resolution of the institution.

FDIC Insurance Assessments. Nicolet National Bank’s deposits are insured by the Deposit Insurance Fund (the “DIF”) of the FDIC up to the maximum amount permitted by law, which was permanently

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increased to $250,000 by the Dodd-Frank Act. The FDIC uses the DIF to protect against the loss of insured deposits if an FDIC-insured bank or savings association fails. Pursuant to the Dodd-Frank Act, the FDIC must take steps, as necessary, for the DIF reserve ratio to reach 1.35% of estimated insured deposits by September 30, 2020. Nicolet National Bank is thus subject to FDIC deposit premium assessments.

Currently, the FDIC uses a risk-based assessment system that assigns insured depository institutions to one of four risk categories based on three primary sources of information — supervisory risk ratings for all institutions, financial ratios for most institutions, including Nicolet National Bank, and a “scorecard” calculation for large institutions. The FDIC adopted new rules, effective April 1, 2011, redefining the assessment base and adjusting the assessment rates. Under the old rules, the assessment base was domestic deposits; the new rule uses an assessment base of average consolidated total assets minus tangible equity, which is defined as Tier 1 Capital. Under the new rules, institutions assigned to the lowest risk category must pay an annual assessment rate now ranging between 2.5 and 9 cents per $100 of the assessment base. For institutions assigned to higher risk categories, assessment rates now range from 9 to 45 cents per $100 of the assessment base. These ranges reflect a possible downward adjustment for unsecured debt outstanding and, in the case of institutions outside the lowest risk category, possible upward adjustments for brokered deposits.

The new rules retain the FDIC Board’s flexibility to, without further notice-and-comment rulemaking, adopt rates that are higher or lower than the stated base assessment rates, provided that the FDIC cannot (1) increase or decrease the total rates from one quarter to the next by more than two basis points, or (2) deviate by more than two basis points from the stated base assessment rates. Although the Dodd-Frank Act requires that the FDIC eliminate its requirement to pay dividends to depository institutions when the reserve ratio exceeds a certain threshold, the FDIC’s new rule establishes a decreasing schedule of assessment rates that would take effect when the DIF reserve ratio first meets or exceeds 1.15%. If the DIF reserve ratio meets or exceeds 1.15% but is less than 2%, base assessment rates would range from 1.5 to 40 basis points; if the DIF reserve ratio meets or exceeds 2% but is less than 2.5%, base assessment rates would range from 1 to 38 basis points; and if the DIF reserve ratio meets or exceeds 2.5%, base assessment rates would range from 0.5 to 35 basis points.

On November 12, 2009, the FDIC adopted a rule requiring nearly all FDIC-insured depository institutions, including Nicolet National Bank, to prepay their DIF assessments for the fourth quarter of 2009 and for the following three years on December 30, 2009. At that time, the FDIC indicated that the prepayment of DIF assessments was in lieu of additional special assessments; however, there can be no guarantee that continued pressures on the DIF will not result in additional special assessments being collected by the FDIC in the future.

On October 19, 2010, the FDIC adopted a new DIF Restoration Plan that foregoes the uniform three basis point-increase previously scheduled to take effect on January 1, 2011. The FDIC indicated that this change was based on revised projections calling for lower than previously expected DIF losses for the period 2010 through 2014, continued stresses on the earnings of insured depository institutions, and the additional time afforded to reach the DIF reserve ratio required by the Dodd-Frank Act.

The FDIC also collects a deposit-based assessment from insured financial institutions on behalf of The Financing Corporation (“FICO”). The funds from these assessments are used to service debt issued by FICO in its capacity as a financial vehicle for the Federal Savings & Loan Insurance Corporation. The FICO assessment rate is set quarterly and in 2011 and 2012 ranged from 0.66 cents to 1.00 cents per $100 of assessable deposits. These assessments will continue until the debt matures between 2017 and 2019.

The FDIC may terminate its insurance of deposits if it finds that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC.

Allowance for Loan Losses. The ALLL represents one of the most significant estimates in Nicolet National Bank’s financial statements and regulatory reports. Because of its significance, Nicolet National Bank has developed a system by which it develops, maintains, and documents a comprehensive, systematic, and consistently applied process for determining the amounts of the ALLL and the provision for loan losses. “The Interagency Policy Statement on the Allowance for Loan and Lease Losses,” issued on December 13, 2006,

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encourages all banks to ensure controls are in place to consistently determine the ALLL in accordance with GAAP, Nicolet National Bank’s stated policies and procedures, management’s best judgment, and relevant supervisory guidance. Consistent with supervisory guidance, Nicolet National Bank maintains a prudent and conservative, but not excessive, ALLL, that is at a level that is appropriate to cover estimated credit losses on individually evaluated loans determined to be impaired as well as estimated credit losses inherent in the remainder of the loan and lease portfolio. Nicolet National Bank’s estimate of credit losses reflects consideration of all significant factors that affect the collectability of the portfolio as of the evaluation date. See “Management’s Discussion and Analysis — Critical Accounting Policies.”

Commercial Real Estate Lending. On December 6, 2006, the federal banking regulators issued final guidance to remind financial institutions of the risk posed by commercial real estate (“CRE”) lending concentrations. CRE loans generally include land development, construction loans, and loans secured by multifamily property, and nonfarm, nonresidential real property where the primary source of repayment is derived from rental income associated with the property. The guidance prescribes the following guidelines for its examiners to help identify institutions that are potentially exposed to significant CRE risk and may warrant greater supervisory scrutiny:

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total reported loans for construction, land development and other land represent 100% or more of the institutions total capital, or

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total commercial real estate loans represent 300% or more of the institution’s total capital, and the outstanding balance of the institution’s commercial real estate loan portfolio has increased by 50% or more.

Enforcement Powers . The Financial Institution Reform Recovery and Enforcement Act (“FIRREA”) expanded and increased civil and criminal penalties available for use by the federal regulatory agencies against depository institutions and certain “institution-affiliated parties.” Institution-affiliated parties primarily include management, employees, and agents of a financial institution, as well as independent contractors and consultants such as attorneys and accountants and others who participate in the conduct of the financial institution’s affairs. These practices can include the failure of an institution to timely file required reports or the filing of false or misleading information or the submission of inaccurate reports. Civil penalties may be as high as $1,100,000 per day for such violations. Criminal penalties for some financial institution crimes have been increased to 20 years. In addition, regulators are provided with greater flexibility to commence enforcement actions against institutions and institution-affiliated parties.

Possible enforcement actions include the termination of deposit insurance. Furthermore, banking agencies’ power to issue regulatory orders were expanded. Such orders may, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnifications or guarantees against loss. A financial institution may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts, or take other actions as determined by the ordering agency to be appropriate. The Dodd-Frank Act increases regulatory oversight, supervision and examination of banks, bank holding companies and their respective subsidiaries by the appropriate regulatory agency.

Community Reinvestment Act. The Community Reinvestment Act requires that, in connection with examinations of financial institutions within their respective jurisdictions, the federal banking agencies evaluate the record of each financial institution in meeting the credit needs of its local community, including low- and moderate-income neighborhoods. These facts are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility. Failure to adequately meet these criteria could impose additional requirements and limitations on Nicolet National Bank. Additionally, Nicolet National Bank must publicly disclose the terms of various Community Reinvestment Act-related agreements.

Other Regulations. Interest and other charges collected or contracted for by Nicolet National Bank are subject to state usury laws and federal laws concerning interest rates. Nicolet National Bank’s loan operations are also subject to federal laws applicable to credit transactions, such as the:

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Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

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Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

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Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed, or other prohibited factors in extending credit;

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Fair Credit Reporting Act of 1978, as amended by the Fair and Accurate Credit Transactions Act, governing the use and provision of information to credit reporting agencies, certain identity theft protections, and certain credit and other disclosures;

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Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;

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National Flood Insurance Act and Flood Disaster Protection Act, requiring flood insurance to extend or renew certain loans in flood plains;

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Real Estate Settlement Procedures Act, requiring certain disclosures concerning loan closing costs and escrows, and governing transfers of loan servicing and the amounts of escrows in connection with loans secured by one-to-four family residential properties;

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Soldiers’ and Sailors’ Civil Relief Act of 1940, as amended, governing the repayment terms of, and property rights underlying, secured obligations of persons currently on active duty with the United States military;

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Talent Amendment in the 2007 Defense Authorization Act, establishing a 36% annual percentage rate ceiling, which includes a variety of charges including late fees, for certain types of consumer loans to military service members and their dependents;

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Bank Secrecy Act, as amended by the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”), imposing requirements and limitations on specific financial transactions and account relationships, intended to guard against money laundering and terrorism financing;

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sections 22(g) and 22(h) of the Federal Reserve Act which set lending restrictions and limitations regarding loans and other extensions of credit made to executive officers, directors, principal shareholders and other insiders; and

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rules and regulations of the various federal agencies charged with the responsibility of implementing these federal laws.

Nicolet National Bank’s deposit operations are subject to federal laws applicable to depository accounts, such as the following:

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Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

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Truth-In-Savings Act, requiring certain disclosures for consumer deposit accounts;

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Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve Board to implement that act, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; and

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rules and regulations of the various federal agencies charged with the responsibility of implementing these federal laws.

As part of the overall conduct of the business, Nicolet and Nicolet National Bank must comply with:

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privacy and data security laws and regulations at both the federal and state level; and

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anti-money laundering laws, including the USA Patriot Act.

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The Consumer Financial Protection Bureau . The Dodd-Frank Act creates the Consumer Financial Protection Bureau (the “Bureau”) within the Federal Reserve Board. The Bureau is tasked with establishing and implementing rules and regulations under certain federal consumer protection laws with respect to the conduct of providers of certain consumer financial products and services. The Bureau has rulemaking authority over many of the statutes governing products and services offered to bank consumers. In addition, the Dodd-Frank Act permits states to adopt consumer protection laws and regulations that are more stringent than those regulations promulgated by the Bureau and state attorneys general are permitted to enforce consumer protection rules adopted by the Bureau against state-chartered institutions.

Capital Adequacy

Nicolet and Nicolet National Bank are required to comply with the capital adequacy standards established by the Federal Reserve Board, in the case of Nicolet, and the OCC, in the case of Nicolet National Bank. The Federal Reserve Board has established a risk-based and a leverage measure of capital adequacy for bank holding companies. Nicolet National Bank is also subject to risk-based and leverage capital requirements adopted by its primary regulator, which are substantially similar to those adopted by the Federal Reserve Board for bank holding companies.

The risk-based capital standards are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank holding companies, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets. Assets and off-balance sheet items, such as letters of credit and unfunded loan commitments, are assigned to broad risk categories, each with appropriate risk weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items.

The minimum guideline for the ratio of total capital to risk-weighted assets, and classification as adequately capitalized, is 8%. A bank that fails to meet the required minimum guidelines is classified as undercapitalized and subject to operating and management restrictions. A bank, however, that exceeds its capital requirements and maintains a ratio of total capital to risk-weighted assets of 10% is classified as well capitalized.

Total capital consists of two components: Tier 1 capital and Tier 2 capital. Tier 1 capital generally consists of common stockholders’ equity, minority interests in the equity accounts of consolidated subsidiaries, qualifying noncumulative perpetual preferred stock, and a limited amount of qualifying cumulative perpetual preferred stock, less goodwill and other specified intangible assets. Tier 1 capital must equal at least 4% of risk-weighted assets. Tier 2 capital generally consists of subordinated debt, other preferred stock and hybrid capital, and a limited amount of loan loss reserves. The total amount of Tier 2 capital is limited to 100% of Tier 1 capital. As of September 30, 2012, Nicolet National Bank’s ratio of total capital to risk-weighted assets was 14.5% and Nicolet National Bank’s ratio of Tier 1 capital to risk-weighted assets was 13.3%.

In addition, the Federal Reserve Board has established minimum leverage ratio guidelines for bank holding companies, which are intended to further address capital adequacy. The OCC has adopted substantially similar requirements for banks. These guidelines provide for a minimum ratio of Tier 1 capital to average assets, less goodwill and other specified intangible assets, of 3% for institutions that meet specified criteria, including having the highest regulatory rating and implementing the risk-based capital measure for market risk. All other institutions generally are required to maintain a leverage ratio of at least 4%. Nicolet National Bank has agreed with the OCC to maintain a leverage ratio of at least 8%. As of September 30, 2012, Nicolet National Bank’s leverage ratio was 10.9%. The guidelines also provide that institutions experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels without reliance on intangible assets. The banking regulators consider the leverage ratio and other indicators of capital strength in evaluating proposals for expansion or new activities.

Through a provision known as “The Collins Amendment,” the Dodd-Frank Act establishes certain regulatory capital deductions with respect to hybrid capital instruments, such as trust preferred securities, that will effectively disallow the inclusion of such instruments in Tier 1 capital if such capital instrument is issued on or after May 19, 2010. However, preferred shares issued to the Treasury pursuant to the TARP Community

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Development Capital Initiative are exempt from the Collins Amendment and are permanently includable in Tier 1 capital. In addition, securities issued prior to May 19, 2010 by bank holding companies with less than $15 billion in total consolidated assets as of December 31, 2009 will not be subject to these required capital deductions. Finally, bank holding companies subject to the Federal Reserve Board’s Small Bank Holding Company Policy Statement as in effect on May 19, 2010 — generally, holding companies with less than $500 million in consolidated assets — are exempt from the trust preferred treatment changes required by the Dodd-Frank Act.

In June 2012, federal regulators issued proposed rules to implement the capital adequacy recommendations of the Basel Committee on Bank Supervision first proposed in December 2010. These proposals, which are known as “Basel III,” propose significant changes to the minimum capital levels and asset risk-weights for all banks, regardless of size, and bank holding companies with greater than $500 million in assets. Among the many changes in these proposed rules, banks would be required to hold higher levels of capital, a significantly higher portion of which would be required to be Tier 1 capital. Further, beginning in 2016, the ability of a bank or bank holding company to declare and pay dividends or pay discretionary bonuses to certain executive officers would become limited should the bank or bank holding company fail to maintain a “capital conservation buffer” composed of Tier 1 common equity that is 2.5% greater than applicable minimum capital requirements. The proposed Basel III rules would also impose significant changes on the risk-weighting of many assets, including home mortgages with high loan to value ratios, certain acquisition, development and construction loans, and certain past due assets. Finally, the proposed rules would also prevent trust preferred securities from counting as Tier 1 capital for the issuer following a ten-year phase out ending in 2022. The comment period for the proposed rules closed in late October 2012, and final rulemaking is pending.

Failure to meet capital guidelines could subject a bank or bank holding company to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting brokered deposits, and certain other restrictions on its business. As described above, significant additional restrictions can be imposed on FDIC-insured depository institutions that fail to meet applicable capital requirements. See “Prompt Corrective Action” above.

The OCC, the Federal Reserve Board, and the FDIC have authority to compel or restrict certain actions if Nicolet National Bank’s capital should fall below adequate capital standards as a result of operating losses, or if its regulators otherwise determine that it has insufficient capital. Among other matters, the corrective actions may include, removing officers and directors; and assessing civil monetary penalties; and taking possession of and closing and liquidating Nicolet National Bank.

Generally, the regulatory capital framework under which Nicolet and Nicolet National Bank operate is in a period of change with likely legislation or regulation that will continue to revise the current standards and very likely increase capital requirements for the entire banking industry. Pursuant to the Dodd-Frank Act, bank regulators are required to establish new minimum leverage and risk-based capital requirements for certain bank holding companies and systematically important non-bank financial companies. The new minimum thresholds will not be lower than existing regulatory capital and leverage standards applicable to insured depository institutions and may, in fact, be higher once established.

Payment of Dividends

Nicolet is a legal entity separate and distinct from Nicolet National Bank. The principal source of Nicolet’s cash flow, including cash flow to pay dividends to its shareholders, are dividends that Nicolet National Bank pays to Nicolet as Nicolet National Bank’s sole shareholder. Statutory and regulatory limitations apply to Nicolet National Bank’s payment of dividends to Nicolet as well as to Nicolet’s payment of dividends to its shareholders. If, in the opinion of the OCC, Nicolet National Bank were engaged in or about to engage in an unsafe or unsound practice, the OCC could require that Nicolet National Bank stop or refrain from engaging in the practice. The federal banking agencies have indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level, would be an unsafe and unsound banking practice.

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Nicolet National Bank is required by federal law to obtain prior approval of the OCC for payments of dividends if the total of all dividends declared by Nicolet National Bank in any year will exceed (1) the total of Nicolet National Bank’s net profits for that year, plus (2) Nicolet National Bank’s retained net profits of the preceding two years, less any required transfers to surplus. The payment of dividends by Nicolet and Nicolet National Bank may also be affected by other factors, such as the requirement to maintain adequate capital above regulatory guidelines , any conditions or restrictions that may be imposed by regulatory authorities in connection with their approval of the merger, or the requirements of any written agreements that either Nicolet or Nicolet National Bank may enter into with their respective regulatory authorities.

When Nicolet received its capital investment from the Treasury under the SBLF on September 1, 2011, it became subject to certain contractual limitations on the payment of dividends. These limitations require, among other things, that (1) all dividends for the SBLF Preferred Stock paid before other dividends can be paid and (2) no dividends on or repurchases of Nicolet common stock will be permitted if the payment or dividends would result in a reduction of Nicolet’s Tier 1 capital from the level on the SBLF closing date by more than 10%.

Furthermore, the Federal Reserve Board clarified its guidance on dividend policies for bank holding companies through the publication of a Supervisory Letter, dated February 24, 2009. As part of the letter, the Federal Reserve Board encouraged bank holding companies to consult with the Federal Reserve Board prior to dividend declarations and redemption and repurchase decisions even when not explicitly required to do so by federal regulations. This guidance is largely consistent with prior regulatory statements encouraging bank holding companies to pay dividends out of net income and to avoid dividends that could adversely affect the capital needs or minimum regulatory capital ratios of the bank holding company and its subsidiary bank.

Any future determination relating to its dividend policy will be made at the discretion of the Board of Directors and will depend on many of the statutory and regulatory factors mentioned above.

Restrictions on Transactions with Affiliates

Nicolet and Nicolet National Bank are subject to the provisions of Section 23A of the Federal Reserve Act. Section 23A places limits on the amount of:

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a bank’s loans or extensions of credit to affiliates;

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a bank’s investment in affiliates;

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assets a bank may purchase from affiliates, except for real and personal property exempted by the Federal Reserve Board;

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loans or extensions of credit to third parties collateralized by the securities or obligations of affiliates; and

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a bank’s guarantee, acceptance, or letter of credit issued on behalf of an affiliate.

The total amount of the above transactions is limited in amount, as to any one affiliate, to 10% of a bank’s capital and surplus and, as to all affiliates combined, to 20% of a bank’s capital and surplus. In addition to the limitation on the amount of these transactions, each of the above transactions must also meet specified collateral requirements. Nicolet National Bank must also comply with other provisions designed to avoid taking low-quality assets.

Nicolet and Nicolet National Bank are also subject to the provisions of Section 23B of the Federal Reserve Act which, among other things, prohibit an institution from engaging in the above transactions with affiliates unless the transactions are on terms substantially the same, or at least as favorable to the institution or its subsidiaries, as those prevailing at the time for comparable transactions with nonaffiliated companies.

The Dodd-Frank Act enhances the requirements for certain transactions with affiliates under Section 23A and 23B, including an expansion of the definition of “covered transactions” and increasing the amount of time for which collateral requirements regarding covered transactions must be maintained.

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Nicolet National Bank is also subject to restrictions on extensions of credit to its executive officers, directors, principal shareholders, and their related interests. These extensions of credit (1) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties, and (2) must not involve more than the normal risk of repayment or present other unfavorable features. Effective July 21, 2011, an insured depository institution will be prohibited from engaging in asset purchases or sales transactions with its officers, directors, or principal shareholders unless (1) the transaction is on market terms and, (2) if the transaction represents greater than 10% of the capital and surplus of the bank, a majority of the disinterested directors has approved the transaction.

Limitations on Senior Executive Compensation

In June of 2010, federal banking regulators issued guidance designed to help ensure that incentive compensation policies at banking organizations do not encourage excessive risk-taking or undermine the safety and soundness of the organization. In connection with this guidance, the regulatory agencies announced that they will review incentive compensation arrangements as part of the regular, risk-focused supervisory process. Regulatory authorities may also take enforcement action against a banking organization if (1) its incentive compensation arrangement or related risk management, control, or governance processes pose a risk to the safety and soundness of the organization and (2) the organization is not taking prompt and effective measures to correct the deficiencies. To ensure that incentive compensation arrangements do not undermine safety and soundness at insured depository institutions, the incentive compensation guidance sets forth the following key principles:

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incentive compensation arrangements should provide employees incentives that appropriately balance risk and financial results in a manner that does not encourage employees to expose the organization to imprudent risk;

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incentive compensation arrangements should be compatible with effective controls and risk management; and

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incentive compensation arrangements should be supported by strong corporate governance, including active and effective oversight by the board of directors.

The Dodd-Frank Act

The Dodd-Frank Act has had a broad impact on the financial services industry, including significant regulatory and compliance changes previously discussed and including, among other things, (1) enhanced resolution authority of troubled and failing banks and their holding companies; (2) increased regulatory examination fees; and (3) numerous other provisions designed to improve supervision and oversight of, and strengthening safety and soundness for, the financial services sector. Additionally, the Dodd-Frank Act establishes a new framework for systemic risk oversight within the financial system to be distributed among new and existing federal regulatory agencies, including the Financial Stability Oversight Council, the Federal Reserve Board, the OCC, and the FDIC.

Many of the requirements called for in the Dodd-Frank Act will be implemented over time, and most will be subject to implementing regulations over the course of several years. Given the uncertainty associated with the manner in which the provisions of the Dodd-Frank Act will be implemented by the various regulatory agencies and through regulations, the full extent of the impact such requirements will have on financial institutions’ operations is unclear. The changes resulting from the Dodd-Frank Act may impact the profitability of its business activities; require changes to certain of its business practices; impose upon us more stringent capital, liquidity, and leverage ratio requirements; or otherwise adversely affect its business. These changes may also require us to invest significant management attention and resources to evaluate and make necessary changes in order to comply with new statutory and regulatory requirements.

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Proposed Legislation and Regulatory Action

New regulations and statutes are regularly proposed that contain wide-ranging proposals for altering the structures, regulations, and competitive relationships of financial institutions operating and doing business in the United States. Nicolet cannot predict whether or in what form any proposed regulation or statute will be adopted or the extent to which its business may be affected by any new regulation or statute.

Effect of Governmental Monetary Policies

Nicolet National Bank’s earnings are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve Board’s monetary policies have had, and are likely to continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve Board affect the levels of bank loans, investments, and deposits through its control over the issuance of United States government securities, its regulation of the discount rate applicable to member banks, and its influence over reserve requirements to which member banks are subject. Neither Nicolet nor Nicolet National Bank can predict the nature or impact of future changes in monetary and fiscal policies.

OTHER MATTERS

Neither Nicolet’s nor Mid-Wisconsin’s respective management teams are aware of any other matters to be brought before their respective special shareholders’ meeting. However, if any other matters are properly brought before the applicable meeting, the persons named in the enclosed proxy card will have discretionary authority to vote all proxies with respect to such matters in accordance with their judgment.

EXPERTS

The consolidated financial statements and schedules as of December 31, 2011, and for each of the years in the three-year period ended December 31, 2011 included in Mid-Wisconsin’s Annual Report on Form 10-K for the year ended December 31, 2011, which is attached as Appendix E to this joint proxy statement-prospectus have been audited by Wipfli LLP. The consolidated financial statements as of December 31, 2011, and for each of the years in the three-year period ended December 31, 2011 for Nicolet, included beginning on page F-1 of this joint proxy statement-prospectus, and registration statement have been audited by Porter Keadle Moore LLC, Nicolet’s independent registered public accounting firm, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

LEGAL MATTERS

Godfrey & Kahn LLP will provide an opinion to Nicolet and Mid-Wisconsin as to the validity of the shares of common stock that Nicolet will issue in the merger. The material U.S. federal income tax consequences of the merger will also be passed upon by Bryan Cave LLP. Certain additional legal matters relating to the merger will be passed upon for Nicolet by Bryan Cave LLP and Godfrey & Kahn LLP and for Mid-Wisconsin by Barack Ferrazzano Kirschbaum & Nagelberg LLP.

IMPORTANT NOTICE FOR MID-WISCONSIN’S SHAREHOLDERS

If you cannot locate your Mid-Wisconsin common stock certificate(s), please contact at Mid-Wisconsin, 132 West State Street, Medford, Wisconsin 54451, telephone number (715) 748-8300. If you have misplaced your stock certificates or if you hold certificates in names other than your own and wish to vote in person at the special meeting, we encourage you to resolve those matters before the meeting.

Please do not send your Mid-Wisconsin stock certificates at this time.

159

WHERE YOU CAN FIND ADDITIONAL INFORMATION

Until December 20, 2012, Mid-Wisconsin was required to file certain reports, proxy statements and other information with the SEC. The SEC maintains a web site on the Internet that contains reports, proxy statements and other information about public companies, including Mid-Wisconsin’s filings through December 20, 2012. The address of that site is http://www.sec.gov. You may also read and copy any materials filed with the SEC by Mid-Wisconsin at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

Nicolet has filed a registration statement on Form S-4 with the SEC that registers the Nicolet common stock to be issued in the merger. This joint proxy statement-prospectus is a part of that registration statement and constitutes a prospectus of Nicolet and a joint proxy statement of Mid-Wisconsin and Nicolet for their respective special meetings.

In addition, both Mid-Wisconsin Bank and Nicolet National Bank file quarterly Consolidated Reports of Condition and Income (“Call Reports”) with the FDIC. All Call Reports are publicly available, free of charge, on the FDIC’s website at www.fdic.gov . Each Call Report consists of a Balance Sheet, Income Statement, Changes in Equity Capital and other supporting schedules as of the end of or for the period to which the Call Report relates. The Call Reports are prepared in accordance with regulatory instructions issued by the Federal Financial Institutions Examination Council. These instructions in most, but not all, cases follow GAAP, including the opinions and statements of the Accounting Principles Board and the Financial Accounting Standards Board. These reports are supervisory and regulatory documents, not primarily accounting documents, and do not provide a complete range of financial disclosure about the reporting bank. Nevertheless, the reports provide important information concerning the bank’s financial condition and results of operations.

This joint proxy statement-prospectus does not contain all of the information in the registration statement. Please refer to the registration statement for further information about Nicolet and the Nicolet common stock to be issued in the merger. Statements contained in this joint proxy statement-prospectus concerning the provisions of certain documents included in the registration statement are not necessarily complete. A complete copy of each document is filed as an exhibit to the registration statement. You may obtain copies of all or any part of the registration statement, including exhibits thereto, upon payment of the prescribed fees, at the offices of the SEC listed above.

Nicolet has supplied all of the information contained in this joint proxy statement-prospectus relating to Nicolet and its subsidiary bank. Mid-Wisconsin has supplied all of the information relating to Mid-Wisconsin and its subsidiary bank.

You should rely only on the information contained or incorporated by reference in this joint proxy statement-prospectus to vote on the proposals to Nicolet and Mid-Wisconsin shareholders in connection with the merger. We have not authorized anyone to provide you with information that is different from what is contained in this joint proxy statement-prospectus. This joint proxy statement-prospectus is dated [ ], 2013. You should not assume that the information contained in this joint proxy statement-prospectus is accurate as of any other date other than such date, and neither the mailing of this joint proxy statement-prospectus nor the issuance of Nicolet common stock as contemplated by the merger agreement will create any implication to the contrary.

160

NICOLET BANKSHARES, INC.
AND SUBSIDIARIES

Consolidated Financial Statements
December 31, 2011

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders
Nicolet Bankshares, Inc.
Green Bay, Wisconsin

We have audited the accompanying consolidated balance sheets of Nicolet Bankshares, Inc. and subsidiaries as of December 31, 2011 and 2010, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Nicolet Bankshares, Inc. and subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

Atlanta, Georgia
February 29, 2012, except for Note 19, as to which the date is February 1, 2013

F-2

NICOLET BANKSHARES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets
December 31, 2011 and 2010

	2011			2010
Assets
Cash and due from banks	$	13,741,792		$	14,737,396
Interest-earning deposits		77,391,757			36,374,796
Federal funds sold		995,500			990,463
Cash and cash equivalents		92,129,049			52,102,655
Certificates of deposit in other banks		248,000			497,000
Securities available for sale		56,759,395			52,388,150
Other investments		5,211,150			4,910,450
Loans held for sale		11,373,260			5,333,900
Loans		472,488,814			513,760,783
Allowance for loan losses		(5,899,488	)		(8,635,059	)
Loans, net		466,589,326			505,125,724
Premises and equipment, net		19,256,425			19,121,027
Bank owned life insurance		14,236,662			13,664,446
Accrued interest receivable and other assets		12,445,458			21,610,959
Total assets	$	678,248,725		$	674,754,311

Liabilities and Stockholders’ Equity
Liabilities:
Demand	$	78,154,193		$	68,201,600
Money market and NOW accounts		270,738,311			213,043,751
Savings		21,780,998			14,195,129
Time		180,862,028			263,023,433
Total deposits		551,535,530			558,463,913
Short-term borrowings		4,131,892			4,390,436
Notes payable		35,373,896			35,581,489
Junior subordinated debentures		6,185,568			6,185,568
Accrued interest payable and other liabilities		4,808,600			4,466,843
Total liabilities		602,035,486			609,088,249
Stockholders’ Equity:
Preferred equity		24,400,000			15,203,280
Common stock		34,804			34,604
Additional paid-in capital		36,740,711			36,255,430
Retained earnings		13,156,974			13,128,021
Accumulated other comprehensive income		1,690,021			998,530
Total Nicolet Bankshares Inc. stockholders’ equity		76,022,510			65,619,865
Noncontrolling interest		190,729			46,197
Total stockholders’ equity and noncontrolling interest		76,213,239			65,666,062
Total liabilities, noncontrolling interest and stockholders’ equity	$	678,248,725		$	674,754,311

Preferred shares authorized (no par value)		10,000,000			10,000,000
Preferred shares issued		24,400			15,712
Common shares authorized (par value $0.01 per share)		30,000,000			30,000,000
Common shares issued		3,480,355			3,460,437

See Notes to Consolidated Financial Statements

F-3

NICOLET BANKSHARES, INC. AND SUBSIDIARIES

Consolidated Statements of Income
Years Ended December 31, 2011, 2010 and 2009

	2011			2010			2009
Interest income:
Loans, including loan fees	$	28,033,620		$	29,384,906		$	28,878,744
Investment securities:
Taxable		689,229			865,173			766,632
Non-taxable		941,479			953,850			1,103,039
Federal funds sold		2,492			9,937			21,429
Other interest income		163,355			205,919			811,914
Total interest income		29,830,175			31,419,785			31,581,758
Interest expense:
Money market and NOW accounts		1,546,429			1,465,504			1,384,693
Savings and time deposits		4,963,800			7,888,960			11,303,884
Short term borrowings		9,009			24,193			28,089
Junior subordinated debentures		501,718			501,858			501,718
Notes payable		1,362,045			1,410,080			1,999,116
Total interest expense		8,383,001			11,290,595			15,217,500
Net interest income		21,447,174			20,129,190			16,364,258
Provision for loan losses		6,600,000			8,500,000			6,000,000
Net interest income after provision for loan losses		14,847,174			11,629,190			10,364,258
Other income:
Service charges on deposit accounts		1,180,214			1,087,321			932,025
Trust services fee income		2,898,673			2,811,173			2,857,632
Mortgage fee income		1,766,778			2,618,909			1,546,565
Brokerage fee income		334,209			290,582			207,679
Loss on sale, disposal and writedown of assets, net		(55,055	)		(58,668	)		(150,467	)
Bank owned life insurance		572,216			573,940			557,627
Rent income		954,888			969,809			1,003,402
Investment advisory fees		329,518			307,608			357,456
Other		462,360			367,263			218,742
Total other income		8,443,801			8,967,937			7,530,661

Other expenses:
Salaries and employee benefits		11,333,831			10,165,339			8,281,869
Occupancy, equipment and office		4,408,651			3,747,946			3,253,722
Business development and marketing		1,362,572			1,242,421			1,284,734
Data processing		1,360,463			1,292,704			1,143,296
FDIC assessments		629,845			926,943			1,144,058
Core deposit intangible amortization		740,621			329,165			—
Other		1,606,744			1,611,429			1,576,063
Total other expenses		21,442,727			19,315,947			16,683,742
Income before income tax expense		1,848,248			1,281,180			1,211,177
Income tax expense		318,431			136,326			45,551
Net income		1,529,817			1,144,854			1,165,626
Less: Net income (loss) attributable to noncontrolling interest		39,532			34,505			(11,137	)
Net income attributable to Nicolet Bankshares, Inc.		1,490,285			1,110,349			1,176,763
Less: Preferred stock dividends and discount accretion		1,461,332			985,160			1,001,017
Net income available to common shareholders	$	28,953		$	125,189		$	175,746

Basic earnings per common share	$	0.01		$	0.04		$	0.05
Diluted earnings per common share	$	0.01		$	0.04		$	0.05

Weighted average common shares outstanding:
Basic		3,468,658			3,452,358			3,499,793
Diluted		3,487,760			3,481,042			3,528,102

See Notes to Consolidated Financial Statements

F-4

NICOLET BANKSHARES, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity
Years Ended December 31, 2011, 2010 and 2009

	Nicolet Bankshares, Inc. Stockholders’ Equity
	Preferred Equity			Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income			Noncontrolling Interest			Total
Balance, December 31, 2008	$	14,864,000		$	35,025		$	36,706,079		$	12,827,086		$	999,373		$	10,829		$	65,442,392
Net income (loss)		—			—			—			1,176,763			—			(11,137	)		1,165,626
Change in net unrealized gains on securities available for sale, net of tax		—			—			—			—			70,729			—			70,729
Reclassification adjustment for gains realized on securities available for sale, net of tax		—			—			—			—			(4,543	)		—			(4,543	)
Total comprehensive income																				1,231,812
Stock compensation expense		—			—			162,038			—			—			—			162,038
Exercise of stock options, including income tax benefit of $0		—			253			257,248			—			—			—			257,501
Issuance of common stock		—			107			180,222			—			—			—			180,329
Preferred stock accretion		169,640			—			—			(169,640	)		—			—			—
Preferred stock dividends		—			—			—			(831,377	)		—			—			(831,377	)
Common stock repurchase and cancellation (96,600 shares)		—			(966	)		(1,617,914	)		—			—			—			(1,618,880	)
Owner contribution to noncontrolling interest		—			—			—			—			—			12,000			12,000
Balance, December 31, 2009	$	15,033,640		$	34,419		$	35,687,673		$	13,002,832		$	1,065,559		$	11,692		$	64,835,815
Net income		—			—			—			1,110,349			—			34,505			1,144,854
Change in net unrealized gains on securities available for sale, net of tax		—			—			—			—			119,851			—			119,851
Reclassification adjustment for gains realized on securities available for sale, net of tax		—			—			—			—			(186,880	)		—			(186,880	)
Total comprehensive income																				1,077,825
Stock compensation expense		—			—			295,740			—			—			—			295,740
Exercise of stock options, including income tax benefit of $0		—			64			64,436			—			—			—			64,500
Issuance of common stock		—			121			207,581			—			—			—			207,702
Preferred stock accretion		169,640			—			—			(169,640	)		—			—			—
Preferred stock dividends		—			—			—			(815,520	)		—			—			(815,520	)
Balance, December 31, 2010	$	15,203,280		$	34,604		$	36,255,430		$	13,128,021		$	998,530		$	46,197		$	65,666,062
Net income		—			—			—			1,490,285			—			39,532			1,529,817
Change in net unrealized gains on securities available for sale, net of tax		—			—			—			—			691,491			—			691,491
Total comprehensive income																				2,221,308
Stock compensation expense		—			—			294,458			—			—			—			294,458
Exercise of stock options, including income tax benefit of $3,205		—			178			196,073			—			—			—			196,251
Issuance of common stock		—			22			35,750			—			—			—			35,772
Preferred stock accretion		508,720			—			—			(508,720	)		—			—			—
Preferred stock dividends		—			—			—			(952,612	)		—			—			(952,612	)
Preferred stock redemption, CPP		(15,712,000	)		—			—			—			—			—			(15,712,000	)
Issuance of preferred stock, SBLF, net		24,400,000			—			(41,000	)		—			—			—			24,359,000
Owner contribution to noncontrolling interest		—			—			—			—			—			105,000			105,000
Balance, December 31, 2011	$	24,400,000		$	34,804		$	36,740,711		$	13,156,974		$	1,690,021		$	190,729		$	76,213,239

See Notes to Consolidated Financial Statements

F-5

NICOLET BANKSHARES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
Years Ended December 31, 2011, 2010 and 2009

	2011			2010			2009
Cash Flows From Operating Activities:
Net income	$	1,529,817		$	1,144,854		$	1,165,626
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion		1,901,875			1,429,973			1,468,196
Provision for loan losses		6,600,000			8,500,000			6,000,000
Provision for deferred taxes		453,803			(880,983	)		(339,774	)
Increase in cash surrender value of life insurance		(572,216	)		(573,940	)		(557,627	)
Stock compensation expense		294,458			295,740			162,037
Loss on sale, disposal or writedown of assets, net		55,055			58,668			150,467
Gain on sale of loans held for sale, net		(1,766,778	)		(2,618,909	)		(1,546,565	)
Proceeds from sale of loans held for sale		108,858,230			161,346,099			120,834,339
Origination of loans held for sale		(113,130,812	)		(158,449,240	)		(121,481,124	)
Net change in:
Accrued interest receivable and other assets		7,151,062			(6,045,475	)		(2,366,799	)
Accrued interest payable and other liabilities		(217,526	)		(358,753	)		395,407
Net cash provided by operating activities		11,156,968			3,848,034			3,884,183
Cash Flows From Investing Activities:
Net decrease in certificates of deposit in other banks		249,000			2,479,000			30,280,000
Net decrease (increase) in loans		30,963,273			(8,965,918	)		(15,400,473	)
Purchases of securities available for sale		(9,704,315	)		(12,111,065	)		(10,771,514	)
Proceeds from sales of securities available for sale		—			3,305,201			14,264
Proceeds from calls and maturities of securities available for sale		6,263,087			10,794,659			7,095,617
Purchases of other investments		(428,450	)		(15,500	)		(323,100	)
Purchases of premises and equipment		(1,736,229	)		(1,612,717	)		(239,746	)
Proceeds from sale of other real estate and other assets		1,839,775			765,893			1,176,415
Net cash received in business combination		—			77,777,555			—
Net cash provided by investing activities		27,446,141			72,417,108			11,831,463

Cash Flows From Financing Activities:
Net decrease in deposits		(6,345,049	)		(104,205,084	)		(14,264,626	)
Net decrease in short term borrowings		(258,544	)		(3,208,398	)		(2,942,514	)
Repayments of notes payable		(207,593	)		(305,762	)		(647,480	)
Proceeds from Federal Home Loan Bank advances		—			—			25,000,000
Repayments of Federal Home Loan Bank advances		—			—			(25,000,000	)
Purchase of treasury stock		—			—			(1,618,880	)
Proceeds from issuance of common stock, net		35,772			207,702			180,329
Proceeds from exercise of common stock options		196,251			64,500			257,501
Proceeds from issuance of preferred stock (SBLF), net		24,359,000			—			—
Repayment of preferred stock (CPP)		(15,712,000	)		—			—
Noncontrolling interest in joint venture		105,000			—			12,000
Cash dividends paid on preferred stock		(749,552	)		(815,520	)		(729,437	)
Net cash provided (used) by financing activities		1,423,285			(108,262,562	)		(19,753,107	)
Net increase (decrease) in cash and cash equivalents		40,026,394			(31,997,420	)		(4,037,461	)
Cash and cash equivalents:
Beginning	$	52,102,655		$	84,100,075		$	88,137,536
Ending	$	92,129,049		$	52,102,655		$	84,100,075

(continued)

See Notes to Consolidated Financial Statements

F-6

NICOLET BANKSHARES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows — continued
Years Ended December 31, 2011, 2010 and 2009

	2011			2010			2009
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest	$	9,211,295		$	11,754,089		$	16,322,703
Income taxes		205,000			1,146,000			555,000

Supplemental Schedule of Noncash Investing Activities:
Change in accumulated other comprehensive income relating to unrealized (gains) losses on securities available for sale, net of tax	$	(691,491	)	$	(119,851	)	$	(70,729	)
Transfer of loans to other assets		973,125			512,024			2,694,000

Supplemental Schedules of Noncash Financing Activities:
Accretion of preferred stock discount	$	508,720		$	169,640		$	169,640

See Notes to Consolidated Financial Statements

F-7

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.

NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Banking Activities : Nicolet Bankshares, Inc. was incorporated on April 5, 2000. Effective June 6, 2002, Nicolet Bankshares, Inc. received approval to become a one-bank holding company owning 100% of the common stock of Nicolet National Bank. Nicolet National Bank opened for business on October 29, 2000.

The consolidated income of Nicolet Bankshares, Inc. (the “Company”) is principally from the income of its wholly-owned subsidiary, Nicolet National Bank (the “Bank”). The Bank grants primarily commercial loans in its trade area of northeastern Wisconsin, but also grants residential and consumer loans, accepts deposits and provides trust and brokerage services to its customers. The Bank is subject to competition from other financial institutions providing financial products. The Company and the Bank are regulated by certain regulatory agencies, including the Office of the Comptroller of the Currency and the Federal Reserve Board and are subject to periodic examination by those agencies.

During 2004, the Company entered into a joint venture, Nicolet Joint Ventures, LLC (the “JV”), with a real estate development and investment firm in connection with the selection and development of a site for a new headquarters facility. The firm that is the joint venture party is considered a related party, as one of its principals is a Board member and shareholder of the Company. The JV involves a 50% ownership by the Company.

During 2008, the Company purchased 100% of Brookfield Investment Partners, LLC (“Brookfield Investments”), an investment advisory firm that provides investment strategy and transactional services to financial institutions.

In 2010, the Company purchased selected assets and assumed the deposits and leases of four Brown County, Wisconsin, branch offices from a Madison-based thrift (the “2010 Branch Acquisition”). See Note 2, “Business Combinations,” for additional disclosures.

A summary of the Company’s significant accounting policies follows.

Principles of Consolidation : The consolidated financial statements of the Company include the accounts of the Bank, Brookfield Investments and the JV. The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and conform to general practices within the banking industry. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements. Results of operations of companies purchased, if any, are included from the date of acquisition.

Use of Estimates : In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, and the valuation of foreclosed real estate and deferred tax assets. The fair value disclosure of financial instruments is an estimate that can be computed within a range.

Cash and Cash Equivalents : For purposes of the consolidated statements of cash flows, cash and cash equivalents include cash and due from banks, federal funds sold, and interest-earning deposits in other banks with original maturities of 90 days or less, if any. The Bank maintains amounts in due from banks which, at times, may exceed federally insured limits. Management monitors these correspondent relationships. The Bank has not experienced any losses in such accounts. The Bank has restrictions on cash and due from banks as it is required to maintain certain vault cash and reserve balances with the Federal Reserve Bank to meet specific reserve requirements. The Bank’s reserve requirement was $175,000 at December 31, 2011, and there was no reserve requirement at December 31, 2010.

F-8

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Securities Available For Sale : Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity. Any decision to sell a security classified as available for sale would be based on various factors, including significant movements in interest rates, changes in the maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital considerations, and other similar factors. Securities classified as available for sale are carried at fair value, with unrealized gains or losses, net of related deferred income taxes, reported as increases or decreases in accumulated other comprehensive income. Premiums and discounts are amortized or accreted into interest income over the life of the related securities using the effective interest method. Management evaluates investment securities for other-than-temporary impairment on at least an annual basis. A decline in the market value of any investment below amortized cost that is deemed other-than-temporary is charged to earnings for the decline in value deemed to be credit related and a new cost basis in the security is established. The decline in value attributed to non-credit related factors considered temporary in nature is recognized in other comprehensive income. In evaluating other-than-temporary impairment, management considers the length of time and extent to which the fair value has been less than cost, and the financial condition and near-term prospects of the issuer for a period sufficient to allow for any anticipated recovery in fair value in the near term. Realized gains or losses on securities sales (using the specific identification method) and declines in value judged to be other-than-temporary are included in the consolidated statements of income under loss on assets, net.

Other Investments : As a member of the Federal Reserve Bank System and the Federal Home Loan Bank (FHLB) System, the Bank is required to maintain an investment in the capital stock of these entities. These equity securities are “restricted” in that they can only be sold back to the respective institutions or another member institution at par. Therefore, they are less liquid than other tradable equity securities. As no ready market exists for these stocks, and they have no quoted market value, these investments are carried at cost. Also included are Company investments in other private companies that do not have quoted market prices, carried at cost less other-than-temporary impairment charges, if any. Management’s evaluation of these other investments for impairment includes consideration of the financial condition and other available relevant information of the issuer.

Loans Held for Sale : Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value as determined on an aggregate basis. The amount by which cost exceeds market value is accounted for as a valuation allowance. Changes, if any, in the valuation allowance are included in the determination of net income in the period in which the change occurs. As of December 31, 2011 and 2010, no valuation allowance was necessary. Loans held for sale are sold servicing released and without recourse. Mortgage fee income represents net gains from the sale of mortgage loans held for sale, as well as fees, if any, received from borrowers and loan investors related to these loans.

Loans : Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are carried at their principal amount outstanding. Interest income is accrued on the unpaid principal balance using the simple interest method. The accrual of interest income on loans is discontinued when, in the opinion of management, there is reasonable doubt as to the borrower’s ability to meet payment of interest or principal when due. Loans are generally placed on nonaccrual status when contractually past due 90 days or more as to interest or principal, though may be placed in such status earlier based on circumstances. Loans past due 90 days or more may continue on accrual only when they are well secured and/or in process of collection or renewal. When interest accrual is discontinued, all previously accrued but uncollected interest is reversed against current period interest income. Cash collections on nonaccrual loans are credited to the loan receivable balance and no interest income is recognized on those loans until the principal balance is paid in full. Accrual of interest may be resumed when the customer is current on all principal and interest payments and has been paying on a timely basis for a period of time.

F-9

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Management considers a loan to be impaired when it is probable the Bank will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement.

Allowance for Loan Losses : The allowance for loan losses is a reserve for estimated credit losses on individually evaluated loans determined to be impaired as well as estimated credit losses inherent in the loan portfolio. Actual credit losses, net of recoveries, are deducted from the allowance for loan losses. Loans are charged off when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance for loan losses. A provision for loan losses, which is a charge against earnings, is recorded to bring the allowance for loan losses to a level that, in management’s judgment, is adequate to absorb probable losses in the loan portfolio.

The allocation methodology applied by the Company is designed to assess the appropriateness of the allowance for loan losses and includes allocations for specifically identified impaired loans and loss factor allocations for all remaining loans, with a component primarily based on historical loss rates and a component primarily based on other qualitative factors. The methodology includes evaluation and consideration of several factors, such as but not limited to management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and nonaccrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or circumstances underlying collectability of loans. Because each of the criteria used is subject to change, the allocation of the allowance for loan losses is made for analytical purposes and is not necessarily indicative of the trend of future loan losses in any particular loan category. The total allowance is available to absorb losses from any segment of the loan portfolio. Management believes the allowance for loan losses is appropriate. The allowance analysis is reviewed by the Board on a quarterly basis in compliance with regulatory requirements.

In addition, various regulatory agencies periodically review the allowance for loan losses. These agencies may require the Bank to make additions to the allowance for loan losses based on their judgments of collectability based on information available to them at the time of their examination.

Credit-Related Financial Instruments : In the ordinary course of business the Bank has entered into financial instruments consisting of commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they are funded.

Transfers of Financial Assets : Transfers of financial assets, primarily in loan participation activities, are accounted for as sales only when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of the right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return assets.

Premises and Equipment : Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed on straight-line and accelerated methods over the estimated useful lives of the related assets. Leasehold improvements are amortized on the straight-line method over the shorter of the estimated useful lives of the improvements or the terms of the related leases. Maintenance and repairs are expensed as incurred.

F-10

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Estimated useful lives of premises and equipment generally range as follows:

Building	25 – 39	years
Leasehold improvements	5 – 15	years
Furniture and equipment	3 – 10	years

Other Real Estate Owned : Other real estate owned, acquired through partial or total satisfaction of loans, is carried at the lower of cost or fair value less estimated costs to sell. Any write-down in the carrying value at the time of acquisition is charged to the allowance for loan losses. Any subsequent write-downs to reflect current fair market value, as well as gains or losses on disposition and revenues and expenses incurred to hold and maintain such properties, are treated as period costs. Other real estate owned, included in other assets in the consolidated balance sheets, was approximately $641,000 and $1,443,000 at December 31, 2011 and 2010, respectively.

Goodwill and Core Deposit Intangible : The excess of the cost of an acquisition over the fair value of the net assets acquired results primarily in goodwill or deposit base premiums which are included in other assets in the consolidated balance sheets. The core deposit intangible (related to the 2010 Branch Acquisition) has an estimated finite life, is amortized on an accelerated basis over a 10-year period, and is subject to periodic impairment evaluation. Goodwill is not amortized but is subject to impairment tests on at least an annual basis. Management periodically reviews the carrying value of its long-lived and intangible assets to determine if any impairment has occurred or whether changes in circumstances have occurred that would require a revision to the remaining useful life, in which case an impairment charge would be recorded as an expense in the period of impairment. In making such determination, management evaluates whether there are any adverse qualitative factors indicating that an impairment may exist, as well as the performance, on an undiscounted basis, of the underlying operations or assets which give rise to the intangible. The Company’s annual assessments indicated no impairment charge on goodwill or core deposit intangible was required for 2011 or 2010. Goodwill was approximately $762,000 at both December 31, 2011 and 2010. The net book value of core deposit intangible was approximately $2,880,000 and $3,621,000 at December 31, 2011 and 2010, respectively.

Short-term borrowings : Short-term borrowings consist primarily of overnight Federal funds purchased and securities sold under agreements to repurchase (“repos”), or other short-term borrowing arrangements. Repos are with commercial deposit customers, and are treated as financing activities carried at the amounts that will be subsequently repurchased as specified in the respective agreements. Repos generally mature within one to four days from the transaction date. The Company may be required to provide additional collateral based on the fair value of the underlying securities.

Stock-based Compensation Plans : Share-based payment to employees, including grants of employee stock options, are valued at fair value on the date of grant and expensed as compensation expense over the applicable vesting period.

For stock option grants with graded vesting schedules compensation expense is recognized on a straight-line basis over the requisite service period of the award. The fair value of each option is estimated on the date of grant using the Black-Scholes model. There were no stock option grants in 2011. The weighted average assumptions used for valuing option grants in 2010 and 2009 follow:

	2010			2009
Dividend yield		0	%		0	%
Expected volatility		25	%		22	%
Risk-free interest rate		2.12	%		3.00	%
Expected average life		7 years			7 years
Weighted average per share fair value of options	$	5.41		$	5.25

F-11

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income taxes : The Company files a consolidated federal income tax return and a combined state income tax return (both of which include the Company and its wholly-owned subsidiaries). Accordingly, amounts equal to tax benefits of those companies having taxable federal losses or credits are reimbursed by the companies that incur federal tax liabilities.

Amounts provided for income tax expense are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable under tax laws. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws rates applicable to the periods in which the differences are expected to affect taxable income. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company may also recognize a liability for unrecognized tax benefits from uncertain tax positions. Unrecognized tax benefits represent the differences between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured in the financial statements. At December 31, 2011, the Company had determined it had no significant uncertain tax positions. Interest and penalties related to unrecognized tax benefits are classified as income taxes.

Earnings Per Common Share : Basic earnings per common share are calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share are calculated by dividing net income available to common shareholders by the weighted average number of common shares adjusted for the dilutive effect of outstanding stock options, and other potential common stock issuances, if any, from instruments such as convertible securities and warrants.

Earnings per share and related information are summarized as follows:

	Years ended December 31,
	2011		2010		2009
Net income, net of noncontrolling interest	$	1,490,285	$	1,110,349	$	1,176,763
Less preferred stock dividends and discount accretion		1,461,332		985,160		1,001,017
Net income available to common shareholders	$	28,953	$	125,189	$	175,746

Weighted average common shares outstanding		3,468,658		3,452,358		3,499,793
Effect of dilutive stock options		19,102		28,684		28,309
Diluted weighted average common shares outstanding		3,487,760		3,481,042		3,528,102

Basic earnings per common share	$	0.01	$	0.04	$	0.05
Diluted earnings per common share	$	0.01	$	0.04	$	0.05

Treasury Stock : Treasury stock is accounted for at cost on a first-in-first-out basis. It is the Company’s general policy to cancel treasury stock shares in the same year as purchased.

Comprehensive income : Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, bypass the income statement and instead are reported in accumulated other comprehensive income, as a separate component of the equity section of the balance sheet. Realized gains or losses are reclassified to current period earnings. Changes in these items, along with net income, are components of comprehensive income.

Reclassifications : Certain amounts in the 2010 and 2009 consolidated financial statements have been reclassified to conform to the 2011 presentation.

F-12

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

New Accounting Developments : In July 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. This ASU requires additional disclosure to facilitate financial statement users’ evaluation of: (1) the nature of credit risk inherent in the entity’s loan portfolio, (2) how that risk is analyzed and assessed in arriving at the allowance for loan losses, and (3) the changes and reasons for those changes in the allowance for loan losses. The increased disclosures as of the end of a reporting period are effective for periods ending on or after December 15, 2011. Increased disclosures about the activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 31, 2011. The Company adopted the accounting standard as of December 31, 2011, except for the activity-related disclosures which are required to be adopted in 2012, with no material impact on its results of operations, financial position and liquidity. See Note 4 for additional disclosures required under this accounting standard.

NOTE 2.

BUSINESS COMBINATION

On July 23, 2010, the Company consummated its cash purchase of four Brown County, Wisconsin, branch offices from a Madison-based thrift (the “2010 Branch Acquisition”), to extend its deposit outreach in this market and to add greater retail diversity to its deposit base. At consummation, the Company acquired assets with a fair value of approximately $107 million, including $25 million of loans, $4 million of core deposit intangible and $78 million in cash, and assumed liabilities with a fair value of approximately $107 million, including $106 million of deposits. The acquired loans were performing loans, carefully and specifically selected, and judged by management to carry pricing appropriately commensurate with loan type, term and borrower creditworthiness; therefore, par was determined to be the initial fair value from both a market price and credit perspective. None of the acquired loans were considered impaired at the time of acquisition. A discounted cash flow method was used to mark the acquired time deposits to estimated fair value based on current comparable market rates for like-term deposits, resulting in a $1 million initial mark (amortized against interest expense over the weighted average remaining life of the acquired term deposits). The value of acquiring long-term relationships with depositors (i.e. the core deposit intangible) was estimated, including consideration of market and competitive information, comparable deposit premiums in other transactions, trend analysis, run-off risks, and other modeling, resulting in a $4 million initial core deposit intangible (amortized on an accelerated basis over its estimated useful life of 10 years). The Company incurred approximately $107,000 of non-recurring expenses in 2010 to consummate and integrate the 2010 Branch Acquisition, included primarily in other expenses in the consolidated statement of income.

NOTE 3.

SECURITIES AVAILABLE FOR SALE

Amortized costs and fair values of securities available for sale are summarized as follows:

	December 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
State, county and municipals	$	30,129,777	$	1,718,153	$	—	$	31,847,930
Mortgage-backed securities		17,449,742		1,041,824		6,851		18,484,715
U.S. Government sponsored enterprises		4,995,463		24,287		—		5,019,750
Equity securities		1,623,775		—		216,775		1,407,000
	$	54,198,757	$	2,784,264	$	223,626	$	56,759,395

F-13

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3. SECURITIES AVAILABLE FOR SALE (Continued)

	December 31, 2010
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
State, county and municipals	$	29,896,878	$	1,251,118	$	39,271	$	31,108,725
Mortgage-backed securities		16,851,830		555,597		—		17,407,427
U.S. Government sponsored enterprises		2,502,743		—		4,243		2,498,500
Equity securities		1,623,775		—		250,277		1,373,498
	$	50,875,226	$	1,806,715	$	293,791	$	52,388,150

The current fair value and associated unrealized losses on investments in debt and equity securities with unrealized losses at December 31, 2011 and 2010 are summarized in the following table, with the length of time the individual securities have been in a continuous loss position.

	December 31, 2011
	Less than 12 months				12 months or more				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Government sponsored enterprises	$	1,015,445	$	6,851	$	—	$	—	$	1,015,445	$	6,851
Equity securities		—		—		1,407,000		216,775		1,407,000		216,775
	$	1,015,445	$	6,851	$	1,407,000	$	216,775	$	2,422,445	$	223,626

	December 31, 2010
	Less than 12 months				12 months or more				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Government sponsored enterprises	$	2,498,500	$	4,243	$	—	$	—	$	2,498,500	$	4,243
State, county and municipals		4,961,962		39,271		—		—		4,961,962		39,271
Equity securities		—		—		1,373,498		250,277		1,373,498		250,277
	$	7,460,462	$	43,514	$	1,373,498	$	250,277	$	8,833,960	$	293,791

At December 31, 2011, one U.S. government mortgage-backed security had unrealized losses less than 12 months. The category with unrealized losses greater than 12 months was comprised of one equity security. The unrealized losses in each category have occurred as a result of changes in interest rates, market spreads and market conditions subsequent to purchase. The Company does not consider securities with unrealized losses at December 31, 2011 to be other-than-temporarily impaired. The Company has the ability and intent to hold its securities to maturity.

F-14

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3. SECURITIES AVAILABLE FOR SALE (Continued)

The amortized cost and fair value of securities available for sale by contractual maturity at December 31, 2011 are shown below. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or prepaid without any penalties; therefore, these securities are not included in the maturity categories in the following summary.

	December 31, 2011
	Amortized Cost		Fair Value
Due in less than one year	$	9,040,894	$	9,134,246
Due in one year through five years		18,212,866		19,259,643
Due after five years through ten years		6,896,480		7,498,791
Due after ten years		975,000		975,000
		35,125,240		36,867,680
Mortgage-backed securities		17,449,742		18,484,715
Equity securities		1,623,775		1,407,000
Securities available for sale	$	54,198,757	$	56,759,395

Securities with a carrying value of approximately $7,487,000 and $10,013,000 as of December 31, 2011 and 2010, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.

There were no securities sales during 2011. Proceeds from sales of securities available for sale during 2010 and 2009 were $3,305,200 and $14,264, respectively. Gross gains of $283,152 and $6,883 were realized on sales in 2010 and 2009, respectively. Other-than-temporary impairment charges recorded in 2011 and 2010 were $127,750 (related to one private equity security classified in other investments) and $428,178 (related to the same security), respectively, and none for 2009.

NOTE 4.

LOANS

Major classifications of loans as of December 31, were as follows:

	2011				2010
Commercial	$	265,189,830	56	%	$	294,040,544	57	%
Real Estate-Commercial		66,576,760	14			63,839,435	13
Real Estate-Residential		56,392,417	12			56,532,928	11
Construction		34,136,929	7			40,357,249	8
Consumer		50,192,878	11			58,990,627	11
Loans		472,488,814	100	%		513,760,783	100	%
Less allowance for loan losses		5,899,488				8,635,059
Loans, net	$	466,589,326			$	505,125,724

Loan categories above include the following: Commercial includes business and industrial loans and lines, owner-occupied commercial real estate, and agriculture/farm-based loans. Commercial real estate includes multifamily and other non-owner occupied commercial real estate. Residential real estate includes one- to four-family first-lien loans. Construction loans include land, land development and residential or commercial construction loans. Consumer includes predominantly home equity lending plus retail and other loans.

Practically all of the Bank’s loans, commitments, and standby letters of credit have been granted to customers in the Bank’s market area. Although the Bank has a diversified loan portfolio, the credit risk in the loan portfolio is largely influenced by general economic conditions and trends of the counties and markets in which the debtors operate, and the resulting impact on the operations of borrowers or on the value of underlying collateral, if any.

F-15

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4. LOANS (Continued)

Changes in the allowance for loan losses for the years ended December 31, are presented as follows:

	2011			2010			2009
Balance at beginning of year	$	8,635,059		$	6,231,609		$	5,546,212
Provision for loan losses		6,600,000			8,500,000			6,000,000
Loans charged off		(9,400,479	)		(6,292,416	)		(5,426,858	)
Recoveries on loans previously charged off		64,908			195,866			112,255
Balance at end of year	$	5,899,488		$	8,635,059		$	6,231,609
Allowance for loan losses to loans		1.25	%		1.68	%		1.28	%

In determining the appropriateness of the allowance for loan losses, management includes allocations for specifically identified impaired loans and loss factor allocations for all remaining loans, with a component primarily based on historical loss rates and another component primarily based on other qualitative actors. Impaired loans are individually assessed and are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent.

Loans that are determined to be not impaired are collectively evaluated for impairment, stratified by type and allocated loss ranges based on the Company’s actual historical loss ratios for each strata, and adjustments are also provided for certain current environmental and qualitative factors. An internal loan review function rates loans using a grading system based on nine different categories. Loans with grades of seven or higher (“classified loans”) represent loans with a greater risk of loss and may be assigned allocations for loss based on specific review of the weaknesses observed in the individual credits if classified as impaired. Classified loans are constantly monitored by the loan review function to ensure early identification of any deterioration.

A breakdown of the allowance for loan losses and recorded investments in loans at December 31, 2011 is as follows ($ in thousands):

	Commercial			Real Estate- Commercial			Real Estate- Residential			Construction			Consumer			Total
Allowance for Loan Losses (AFLL):
Beginning balance	$	4,865		$	162		$	250		$	2,836		$	522		$	8,635
Provision for loan losses charged to operations		403			411			634			4,767			385			6,600
Loans charged off		2,981			181			488			5,285			466			9,401
Recoveries chargeoffs		26			—			9			28			2			65
Ending balance	$	2,313		$	392		$	405		$	2,346		$	443		$	5,899
As percent of AFLL		39.2	%		6.6	%		6.9	%		39.8	%		7.5	%		100	%

AFLL attributed to individually evaluated loans	$	85		$	163		$	37		$	264		$	—		$	549
AFLL attributed to collectively evaluated loans		2,228			229			368			2,082			443			5,350
Ending balance	$	2,313		$	392		$	405		$	2,346		$	443		$	5,899

Loans:
Individually evaluated	$	2,679		$	716		$	714		$	5,262		$	256		$	9,627
Collectively evaluated		262,511			65,861			55,678			28,875			49,937			462,862
Total loans	$	265,190		$	66,577		$	56,392		$	34,137		$	50,193		$	472,489

Total Loans	$	265,190		$	66,577		$	56,392		$	34,137		$	50,193		$	472,489
Less allowance for loan losses		2,313			392			405			2,346			443			5,899
Net loans	$	262,877		$	66,185		$	55,987		$	31,791		$	49,750		$	466,590

F-16

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4. LOANS (Continued)

The following is a summary of information pertaining to impaired loans as of December 31:

	2011		2010		2009
Impaired loans for which a specific allowance has been provided	$	3,353,000	$	7,789,000	$	12,709,000
Impaired loans for which no specific allowance has been provided		6,274,000		4,860,000		3,130,000
Total loans determined to be impaired	$	9,627,000	$	12,649,000	$	15,839,000
Specific allowance provided for impaired loans, included in the allowance for loan losses	$	549,000	$	3,423,000	$	2,398,000
Average investment in year-end impaired loans	$	19,096,000	$	16,173,000	$	29,932,000
Cash basis interest income recognized on year-end impaired loans	$	373,000	$	612,000	$	1,264,000

A description of the loan grades are as follows:

1-4 Pass : Credits exhibit adequate cash flows, appropriate management and financial ratios within industry norms and/or are supported by sufficient collateral. Some credits in these rating categories may require a need for monitoring but elements of concern are not severe enough to warrant an elevated rating.

5 Watch : Credits with this rating are adequately secured and performing but are being monitored due to the presence of various short term weaknesses which may include unexpected, short term adverse financial performance, managerial problems, potential impact of a decline in the entire industry or local economy and delinquency issues. Loans to individuals or loans supported by guarantors with marginal net worth or collateral may be included in this rating category.

6 Special Mention : Credits with this rating have potential weaknesses that, without the Company’s attention and correction may result in deterioration of repayment prospects. These assets are considered Criticized Assets. Potential weaknesses may include adverse financial trends for the borrower or industry, repeated lack of compliance with Company requests, increasing debt to worth, serious management conditions and decreasing cash flow.

7 Substandard : Assets with this rating are characterized by the distinct possibility the Company will sustain some loss if deficiencies are not corrected. All foreclosures, liquidations, non-accrual loans are considered to be categorized in this rating, regardless of collateral sufficiency.

8 Doubtful : Assets with this rating exhibit all the weaknesses as one rated Substandard with the added characteristic that such weaknesses make collection or liquidation in full highly questionable.

9 Loss : Assets in this category are considered uncollectible. Pursuing any recovery or salvage value is impractical but does not preclude partial recovery in the future.

The following is a breakdown of loan types by risk grading as of December 31, 2011 ($ in thousands):

	Grades 1 – 4		Grade 5		Grade 6		Grade 7		Grade 8		Grade 9		Total
Commercial	$	233,201	$	11,037	$	3,779	$	17,173	$	—	$	—	$	265,190
Real Estate-Commercial		60,656		5,205		—		716		—		—		66,577
Real Estate-Residential		51,950		1,245		213		2,984		—		—		56,392
Construction		14,900		7,334		897		11,006		—		—		34,137
Consumer		49,040		324		—		829		—		—		50,193
Total loans	$	409,747	$	25,145	$	4,889	$	32,708	$	—	$	—	$	472,489

F-17

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4. LOANS (Continued)

A breakdown of past due loans by type as of December 31, 2011 ($ in thousands):

	2011
	30–89 Days Past Due (accruing)			90 Days & Over or on non-accrual			Current			Total
Commercial	$	1,278		$	2,530		$	261,382		$	265,190
Real Estate-Commercial		—			716			65,861			66,577
Real Estate-Residential		330			1,129			54,933			56,392
Construction		1,139			4,847			28,151			34,137
Consumer		123			254			49,816			50,193
Total loans	$	2,870		$	9,476		$	460,143		$	472,489
As a percent of total loans		0.6	%		2.0	%		97.4	%		100.0	%

The following is a summary of nonperforming assets as of December 31:

	2011			2010			2009
Nonaccrual loans	$	9,476,000		$	10,303,000		$	8,212,000
Loans past due 90 days or more, still accruing		—			500,000			—
Nonperforming loans		9,476,000			10,803,000			8,212,000
Other real estate owned		641,000			1,443,000			1,370,000
Nonperforming assets	$	10,117,000		$	12,246,000		$	9,582,000
Nonperforming loans to loans		2.01	%		2.10	%		1.69	%
Nonperforming assets to assets		1.49	%		1.81	%		1.42	%

Interest income of approximately $1,390,000, $1,004,000 and $638,000 would have been earned on the year-end nonaccrual loans had they been performing in accordance with their original terms during the years ended December 31, 2011, 2010 and 2009, respectively. Interest of approximately $220,000, $415,000 and $239,000 was earned on year-end nonaccrual loans and included in income for the years ended December 31, 2011, 2010 and 2009, respectively.

NOTE 5.

PREMISES AND EQUIPMENT

Premises and equipment, less accumulated depreciation, are summarized as follows:

	2011		2010
Land	$	1,785,376	$	1,285,376
Land improvements		1,252,582		1,252,583
Building and improvements		15,611,933		15,126,933
Leasehold improvements		4,052,308		4,034,139
Furniture and equipment		6,894,582		6,227,490
		29,596,781		27,926,521
Less accumulated depreciation		10,340,356		8,805,494
Premises and equipment, net	$	19,256,425	$	19,121,027

Depreciation expense amounted to approximately $1,609,000, $1,440,000 and $1,447,000 in 2011, 2010 and 2009, respectively.

The Company and certain of its subsidiaries are obligated under noncancelable operating leases for facilities, certain of which provide for increased rentals based upon increases in cost of living adjustments and other indices.

F-18

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5. PREMISES AND EQUIPMENT (Continued)

At December 31, 2011, the approximate minimum annual rentals under these noncancelable agreements with remaining terms in excess of one year are as follows ($ in thousands):

2012	$	549
2013		558
2014		550
2015		556
2016		565
Thereafter		3,305
Total	$	6,083

Total rent expense under leases totaled $662,800, $355,200 and $88,900 for 2011, 2010 and 2009 respectively.

NOTE 6.

DEPOSITS

Brokered deposits were approximately $38,609,000 and $87,063,000 at December 31, 2011 and 2010, respectively. The weighted average rate of brokered deposits was 3.08% and 3.89% at December 31, 2011 and 2010, respectively.

At December 31, 2011, the scheduled maturities of time deposits were as follows:

Years Ending December 31,
2012	$	130,031,969
2013		29,588,013
2014		9,249,953
2015		4,559,565
2016		7,427,265
Thereafter		5,263
	$	180,862,028

The aggregate amount of time deposits, each with a minimum denomination of $100,000, was approximately $93,090,000 and $153,397,000 at December 31, 2011 and 2010, respectively.

NOTE 7.

NOTES PAYABLE

At December 31 the Company had the following notes payable:

	2011		2010
Joint Venture note	$	10,373,896	$	10,581,489
FHLB advances		25,000,000		25,000,000
	$	35,373,896	$	35,581,489

At the completion of the construction of the Company’s headquarters building in 2005 and as part of a joint venture investment related to the building, the Company and the other joint venture partners guaranteed a JV note to finance certain costs of the building. This note is secured by the building, bears a fixed rate of 5.81% and requires monthly principal and interest payments until its maturity on June 1, 2016. The balance of this JV note was $10,373,896, and $10,581,489 as of December 31, 2011 and 2010, respectively.

At December 31, 2011 and 2010, the Company’s five fixed-rate FHLB advances total $25,000,000, have a weighted average rate of 2.87%, require interest-only monthly payments, and have maturities between July 2012 and July 2014. The FHLB advances are collateralized by a blanket lien on qualifying first mortgages, home equity loans, multi-family loans and certain farmland loans which totaled approximately $47,316,000

F-19

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. NOTES PAYABLE (Continued)

and $49,854,000 at December 31, 2011 and 2010, respectively. During 2009, the Company refinanced its FHLB advances into the five advances noted above, in anticipation of possible inflationary pressures at that time, and incurred a prepayment cost of approximately $324,000 charged to 2009 interest expense.

At December 31, 2010, the Company had a zero outstanding balance on its $10,000,000 line of credit with a third party bank, bearing interest of one-month LIBOR plus 2.50%, but not less than a floor rate of 4.50%, with quarterly payments of interest only. On October 17, 2011, the Company replaced this line with a $7,500,000 line of credit with a different third party bank bearing an interest rate of one-month LIBOR plus 2.25%, but not less than a floor rate of 4.25%, with quarterly payments of interest only. The outstanding balance was zero at December 31, 2011.

The following table shows the maturity schedule of the notes payable as of December 31, 2011.

Years Ending December 31,
2012	$	5,218,413
2013		10,233,377
2014		10,247,502
2015		262,481
2016		9,412,123
	$	35,373,896

NOTE 8.

JUNIOR SUBORDINATED DEBENTURES

In July 2004 the Company formed a wholly-owned Connecticut statutory trust, Nicolet Bankshares Statutory Trust I (the “Statutory Trust”), which issued $6.0 million of guaranteed preferred beneficial interests in the Company’s junior subordinated deferrable interest debentures that qualify as Tier 1 capital under Federal Reserve Board guidelines. All of the common securities of the Statutory Trust are owned by the Company. The proceeds from the issuance of the common securities and the trust preferred securities were used by the Statutory Trust to purchase $6,185,568 of junior subordinated debentures of the Company, which pay an 8% fixed rate. The proceeds received by the Company from the sale of the junior subordinated debentures were used for general purposes, primarily to provide capital to the Bank. The debentures represent the sole asset of the Statutory Trust. The Statutory Trust is not included in the consolidated financial statements. The net combined effect of all the documents entered into in connection with the trust preferred securities is that the Company is liable to make the distributions and other payments required on the trust preferred securities.

The Company has the right to redeem the debentures purchased by the Statutory Trust, in whole or in part, on or after July 15, 2009. If the debentures are redeemed prior to maturity, the redemption price will be the principal amount and any accrued but unpaid interest. The maturity date of the debenture, if not redeemed, is July 15, 2034.

NOTE 9.

EMPLOYEE AND DIRECTOR BENEFIT PLANS

The Company has purchased life insurance contracts on the lives of certain key officers. At December 31, 2011 and 2010, the cash surrender value of the bank owned life insurance was approximately $14,237,000 and $13,664,000, respectively, as included in the consolidated balance sheets.

The Company sponsors a deferred compensation plan for certain key management employees and directors. Under the management plan, employees designated by the Board of Directors may defer compensation and receive the deferred amounts plus earnings thereon upon termination of employment or at their election. The liability for the cumulative employee contributions and earnings thereon at December 31, 2011 and 2010 totaled approximately $391,000 and $356,000, respectively. Under the director plan, which

F-20

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9. EMPLOYEE AND DIRECTOR BENEFIT PLANS (Continued)

was approved in 2005, participating directors may defer up to 100% of their Board compensation towards the purchase of Company common stock at market prices on a quarterly basis that is held in a Rabbi Trust. During 2011 and 2010 the plan purchased 3,004 and 3,765 shares of Company common stock, respectively, valued at approximately $49,600 in 2011 and $64,200 in 2010. No distributions of shares under this director plan were made in 2011 or 2010. The common stock outstanding and the related director deferred compensation liability are offsetting components of the Company’s equity in the amount of $315,762 at year end 2011 and $266,196 at year end 2010 representing 16,889 shares and 13,885 shares, respectively.

The Company also sponsors a 401(k) savings plan under which eligible employees may choose to save up to 100% of salary compensation on either a pre-tax or after-tax basis, subject to certain IRS limits. Under the plan, the Company matches 100% of participating employee contributions up to 6% of the participant’s gross compensation. The Company contribution vests over five years. The Company can make additional annual discretionary profit sharing contributions, as determined by the Board of Directors.

For 2011, 2010 and 2009, the Company’s matching expense and discretionary contribution, if any for the year, totaled approximately $462,000, $415,000 and $415,000, respectively.

NOTE 10.

STOCK-BASED COMPENSATION

In 2000, the Company adopted a Stock Incentive Plan covering up to 285,000 shares of the Company’s common stock. During 2002, the Company adopted a second Stock Incentive Plan covering an additional 125,000 shares of the Company’s common stock. During 2005 and 2008, the Company revised the second Stock Incentive Plan to allow for an additional 450,000 shares and 600,000 shares, respectively. A total of 1,460,000 shares have been reserved for potential stock options under these plans.

In 2011, the Company adopted a Long Term Incentive Plan covering up to 500,000 shares of the Company’s common stock. This plan provides for certain stock-based awards, such as but not limited to stock options, stock appreciation rights and restricted common stock, as well as cash performance awards. No awards have been made under this plan since its inception through December 31, 2011.

These plans are administered by a committee of the Board of Directors and provide for the granting of various equity awards per the plan documents to certain eligible officers, employees and directors of the Company.

In general, the exercise price of each option granted under these plans will not be less than the fair market value of the shares of common stock subject to the option on the date of grant as determined by the committee. Options will be exercisable in whole or in part upon such vesting terms as may be determined by the committee. Options expire ten years after the date of grant.

F-21

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. STOCK-BASED COMPENSATION (Continued)

As of December 31, 2011 approximately 944,000 shares were available for grant under these plans (collectively the “Stock Incentive Plans”).

Activity of the Stock Incentive Plans is summarized in the following table:

	Weighted- Average Fair Value of Options Granted				Weighted- Average Exercise Price
Balance — December 31, 2008			582,357		$	17.52	444,807
Granted	$	5.25	222,500			16.70
Exercise of stock options			(25,250	)		10.20
Cancelled			(24,000	)		18.00
Balance — December 31, 2009			755,607			17.51	432,852
Granted	$	5.41	12,500			17.15
Exercise of stock options			(6,450	)		10.00
Cancelled			(32,000	)		17.03
Balance — December 31, 2010			729,657			17.59	491,780
Granted		—	—			—
Exercise of stock options			(17,750	)		11.06
Cancelled			(9,000	)		15.76
Balance — December 31, 2011			702,907		$	17.78	533,074

Options outstanding at December 31, 2011 are exercisable at option prices ranging from $10.00 to $26.00. There are 252,083 options outstanding in the range from $10.00–$17.00, 403,824 options outstanding in the range from $17.01–$22.00, and 47,000 options outstanding in the range from $22.01–$26.00. The exercisable options have a weighted average remaining contractual life of approximately 5 years as of December 31, 2011.

The Company recognized approximately $294,000, $296,000, and $162,000 of stock-based employee compensation expense during the years ended December 31, 2011, 2010 and 2009, respectively, associated with its stock option grants. As of December 31, 2011, there was approximately $667,500 of unrecognized compensation cost related to stock option grants. The cost is expected to be recognized over the remaining vesting period of approximately three years.

Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock options. The total intrinsic value of options exercised in 2011, 2010 and 2009 was approximately $97,000, $45,000 and $156,000, respectively. The weighted average exercise price of stock options exercisable at December 31, 2011 was $17.84.

NOTE 11.

STOCKHOLDERS’ EQUITY

On March 18, 2005, the stockholders of the Company approved a reorganization plan for the purpose of taking the Company private by reducing its number of stockholders of record below 300. The reorganization plan permitted the Company to discontinue reporting to the Securities and Exchange Commission based on the reduced number of stockholders. The reorganization was accomplished through a cash-out merger whereby stockholders owning 1,500 or fewer shares of common stock were paid cash for each share owned.

In December 2008, through a private placement, the Company raised $9,500,000 in capital, issuing 594,083 shares. The $100,000 of incurred costs related to the private placement issuance was charged against additional paid-in capital.

F-22

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. STOCKHOLDERS’ EQUITY (Continued)

On December 23, 2008, under the federal government’s Capital Purchase Program (“CPP”), the Company received $14,964,000 from the U.S. Treasury Department (“the UST”) for the issuance of 14,964 shares of senior preferred stock with $1,000 per share liquidation value (bearing a 5% dividend for the first five years and 9% thereafter) and an additional 748 shares of senior preferred stock with $1,000 per share liquidation value (bearing a 9% dividend) following the UST’s immediate exercise of preferred stock warrants. The $100,000 of incurred costs related to the preferred stock issuance was charged directly against preferred stock. The initial $848,200 discount recorded on preferred stock that resulted from allocating a portion of the proceeds to the warrants is accreted directly to retained earnings over a five-year period on a straight-line basis.

While the preferred stock under CPP was outstanding, the Company was subject to various restrictions governed by the executed documents with the UST, and by related governmental enactments. Such restrictions included: a) UST approval required for any increase in common dividends per share and for any repurchase of outstanding common stock; b) CPP period dividends required to be paid in full before dividends could be paid to common shareholders; c) no tax deduction to the Company for any senior executive officer whose compensation was above $500,000; and d) additional restrictions and compliance requirements on executive compensation. In September of 2009, the Company received approval from the UST and its regulator to repurchase up to 100,000 shares of its common stock, under which 96,600 shares of common stock at a cost of $1,618,880 were repurchased and subsequently retired during 2009. Similar approvals were obtained for 2010 and 2011, allowing repurchase of up to 100,000 shares of common stock each year. No shares were repurchased under these authorities during 2010 or 2011.

On September 1, 2011, after appropriate regulatory approvals, the Company effectively redeemed all the senior preferred stock under the CPP, paying the UST $15,712,000 and accelerating the accretion of the remaining discount. Such redemption was in connection with the Company’s participation in the UST’s Small Business Lending Fund (“SBLF”) described below. The SBLF is a program separate and distinct from the Troubled Asset Relief Program (“TARP”), and thus, among other things, the restrictions noted above under the CPP or related government enactments are no longer applicable to the Company.

The SBLF is a UST program made available to community banks, designed to boost lending to small businesses by providing participating banks with capital and liquidity. In particular, the SBLF program targets commercial, industrial, owner-occupied real-estate and agricultural-based lending to qualifying small businesses, which include businesses with less than $50 million in revenue, and promotes outreach to women-owned, veteran-owned and minority-owned businesses.

On September 1, 2011, under the SBLF, the Company received $24,400,000 from the UST for the issuance of 24,400 shares of Non-cumulative Perpetual Preferred Stock, Series C, with $1,000 per share liquidation value. The $41,000 of incurred issuance costs was charged against additional paid-in capital. The annual dividend rate upon funding and for the following nine calendar quarters is 5%, unless there is growth in qualifying small business loans outstanding over a baseline which could reduce the rate to as low as 1% (as determined under the terms of the Securities Purchase Agreement (the “Agreement”)), adjusted quarterly. The dividend rate is fixed for the tenth quarter after funding through the end of the first four and one-half years at 7% (unless fixed at a lower rate given increased lending as similarly described above); and finally the dividend rate is fixed at 9% after four and one-half years if the preferred stock is not repaid. The Company’s weighted average dividend rate for 2011 (since funding) was 5%. Under the terms of the Agreement, the Company will be required to provide various information, certifications, and reporting to the UST. At December 31, 2011, the Company believes it was in compliance with the requirements set by the UST in the Agreement. The preferred stock (under CPP or SBLF) qualifies as Tier 1 capital for regulatory purposes.

F-23

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12.

INCOME TAXES

The current and deferred amounts of income tax expense (benefit) were as follows:

	2011			2010			2009
Current	$	(135,372	)	$	1,017,309		$	385,325
Deferred		461,598			(880,983	)		(233,732	)
Change in valuation allowance		(7,795	)		—			(106,042	)
Income tax expense	$	318,431		$	136,326		$	45,551

The differences between the income tax expense recognized and the amount computed by applying the statutory federal income tax rate to the earnings before income taxes, less noncontrolling interest, for the years ended December 31, 2011, 2010 and 2009 are included in the following table.

	2011			2010			2009
Tax on pretax income, less noncontrolling interest, at statutory rates	$	614,963		$	423,870		$	415,586
State income taxes, net of federal effect		90,996			59,589			51,726
Tax-exempt interest income		(410,944	)		(374,066	)		(421,346	)
Non-deductible interest disallowance		52,973			63,762			86,624
Increase in cash surrender value life insurance		(194,553	)		(195,140	)		(189,593	)
Non-deductible business entertainment		84,077			75,023			70,415
Stock based employee compensation		96,911			100,552			55,080
Other, net		(15,992	)		(17,264	)		(22,941	)
Income tax expense	$	318,431		$	136,326		$	45,551

The net deferred tax asset included with other assets into the accompanying consolidated balance sheets includes the following amounts of deferred tax assets and liabilities at December 31:

	2011			2010			2009
Deferred tax assets:
Allowance for loan losses	$	2,322,653		$	3,399,659		$	2,247,654
State net operating loss carryforwards		199,887			194,490			194,490
Credit carryforwards		450,226			—			117,091
Other real estate		12,702			50,772			50,772
Investment securities		218,871			168,575			147,466
Compensation		278,436			244,987			206,792
Core deposit intangible		299,537			217,594			—
Other		200,600			53,303			249,379
Total deferred tax asset		3,982,912			4,329,380			3,213,644
Less valuation allowance		(186,695	)		(194,490	)		(194,490	)
Deferred tax asset		3,796,217			4,134,890			3,019,154
Deferred tax liabilities:
Premises and equipment		(487,317	)		(347,898	)		(193,532	)
Prepaid expenses		(99,402	)		(32,558	)		(43,304	)
Other		—			(91,133	)		—
Unrealized gain on securities available for sale		(870,620	)		(514,394	)		(548,924	)
Total deferred tax liability		(1,457,339	)		(985,983	)		(785,760	)
Net deferred tax asset	$	2,338,878		$	3,148,907		$	2,233,394

F-24

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12. INCOME TAXES (Continued)

The Company has a state net operating loss carryforward of approximately $3,700,000 resulting in a deferred tax asset of approximately $200,000. A valuation allowance of $187,000 has been recognized on this asset relating to the parent company’s state loss carryforward which is not expected to be realized under current regulations. The remaining state net operating loss carryforward will not expire until 2026. At December 31, 2011, the Company has available alternative minimum tax credit carryforwards for federal tax purposes of approximately $450,000 which may be used indefinitely.

NOTE 13.

COMMITMENTS AND CONTINGENCIES

The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, financial guarantees, and standby letters of credit. They involve, to varying degrees, elements of credit risk in excess of amounts recognized on the consolidated balance sheets.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making commitments and issuing letters of credit as they do for on-balance-sheet instruments.

A summary of the contract or notional amount of the Company’s exposure to off-balance-sheet risk as of December 31 is as follows:

	2011		2010
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	158,261,000	$	119,751,000
Standby letters of credit		6,631,000		6,959,000

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Credit card commitments are generally unsecured.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third-party. Those guarantees are primarily issued to support public and private borrowing arrangements and, generally, have terms of one year or less. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds collateral, which may include accounts receivable, inventory, property, equipment, and income-producing properties, supporting those commitments if deemed necessary. In the event the customer does not perform in accordance with the terms of the agreement with the third-party, the Bank would be required to fund the commitment. The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount. If the commitment is funded, the Bank would be entitled to seek recovery from the customer. At December 31, 2011 and 2010, no amounts have been recorded as liabilities for the Bank’s potential obligations under these guarantees.

The Company has federal funds accommodations with other financial institutions where funds may be borrowed on a short-term basis at the market rate in effect at the time of the borrowing. The total federal funds accommodations as of December 31, 2011 and 2010 are $65,000,000 and $80,000,000, respectively. At December 31, 2011 and 2010, the Company had no outstanding balance on these lines.

In the normal course of business, the Company is involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material adverse effect on the consolidated financial statements.

F-25

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14.

RELATED PARTY TRANSACTIONS

The Company conducts transactions, in the normal course of business, with its directors and officers, including companies in which they have a beneficial interest. It is the Company’s policy to comply with federal regulations that require that these transactions with directors and executive officers be made on substantially the same terms as those prevailing at the time made for comparable transactions to other persons. Related party loans totaled approximately $24,510,000 at December 31, 2011 and $25,120,000 at December 31, 2010.

During 2004, the Company entered into a joint venture (50% ownership by the Company) with a real estate development and investment firm (the “Firm”) in connection with the new headquarters facility. The Firm is considered a related party, as one of its principals is a Board member and shareholder of the Company. During 2009, the Company entered into an additional transaction with the Firm involving a 40% ownership of another entity resulting from an arm’s length workout of a loan originally held by the Bank. This 40% ownership was subsequently sold during 2010 at a gain to the Company of approximately $88,000. Finally, in August 2011, the Company opened a new branch location in a facility which is leased from an entity owned by the Firm on terms considered by management to be arms-length.

NOTE 15.

GAIN (LOSS) ON ASSETS

Components of the gain (loss) on assets are as follows for the years ended December 31:

	2011			2010			2009
Gain on sale of securities, net	$	—		$	283,152		$	6,883
Other than temporary impairment charge on securities		(127,750	)		(428,178	)		—
Gain (loss) on sale of other real estate owned, net		64,472			(10,307	)		(157,350	)
Gain on sale of other assets, net		8,223			96,665			—
Loss on assets, net	$	(55,055	)	$	(58,668	)	$	(150,467	)

NOTE 16.

REGULATORY CAPITAL REQUIREMENTS AND RESTRICTIONS OF DIVIDENDS

The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company and Bank’s financial statements.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2011 and 2010, that the Company and the Bank met all capital adequacy requirements to which they are subject.

As of December 31, 2011 and 2010, the most recent notifications from the regulatory agencies categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, an institution must maintain minimum Total risk-based, Tier I risk-based, and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since these notifications that management believes have changed the Bank’s category.

F-26

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16. REGULATORY CAPITAL REQUIREMENTS AND RESTRICTIONS OF DIVIDENDS
(Continued)

The Company’s and the Bank’s actual regulatory capital amounts and ratios as December 31, 2011 and 2010 are presented in the following table.

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions (2)
($ in thousands)	Amount		Ratio (1)			Amount		Ratio (1)			Amount		Ratio (1)
As of December 31, 2011:
Company
Total capital	$	82,638		16.7	%	$	39,510		8.0	%
Tier I capital		76,739		15.5			19,755		4.0
Leverage		76,739		12.1			25,468		4.0

Bank
Total capital	$	74,586		15.6	%	$	38,340		8.0	%	$	47,925		10.0	%
Tier I capital		68,687		14.3			19,170		4.0			28,755		6.0
Leverage		68,687		11.1			24,831		4.0			31,039		5.0

As of December 31, 2010:
Company
Total capital	$	72,635		13.8	%	$	42,056		8.0	%
Tier I capital		66,259		12.6			21,028		4.0
Leverage		66,259		9.9			26,798		4.0

Bank
Total capital	$	65,796		13.0	%	$	40,623		8.0	%	$	50,779		10.0	%
Tier I capital		59,420		11.7			20,312		4.0			30,468		6.0
Leverage		59,420		9.2			25,958		4.0			32,447		5.0

(1)

The Total capital ratio is defined as tier 1 capital plus tier 2 capital divided by total risk-weighted assets. The Tier 1 capital ratio is defined as tier 1 capital divided by total risk-weighted assets. The Leverage ratio is defined as tier 1 capital divided by the most recent quarter’s average total assets.

(2)

Prompt corrective action provisions are not applicable at the bank holding company level.

A source of income and funds for the Company are dividends from the Bank. Dividends declared by the Bank that exceed the retained net income for the most current year plus retained net income for the preceding two years must be approved by Federal regulatory agencies. At December 31, 2011, the Bank could pay dividends of approximately $3,585,000 without seeking regulatory approval.

NOTE 17.

FAIR VALUE OF FINANCIAL INFORMATION

Disclosure of the fair value of financial instruments, whether recognized or not recognized in the balance sheet, is required for those instruments for which it is practicable to estimate that value, with the exception of certain financial instruments and all nonfinancial instruments as provided for by the accounting standards. For financial instruments recognized at fair value in the consolidated balance sheets, the fair value disclosure requirements also apply.

F-27

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17. FAIR VALUE OF FINANCIAL INFORMATION (Continued)

permit fair value measurements; accordingly, the standard amends numerous accounting pronouncements but does not require any new fair value measurements of reported balances. The standard emphasizes that fair value (i.e. the price that would be received in an orderly transaction that is not a forced liquidation or distressed sale at the measurement date), among other things, is based on exit price versus entry price, should include assumptions about risk such as nonperformance risk in liability fair values, and is a market-based measurement versus an entity-specific measurement. The standard was effective for the Company as of January 1, 2008, with the exception of the application to nonfinancial assets and liabilities measured at fair value on a nonrecurring basis (such as other real estate owned and goodwill or other intangibles for impairment testing) to which the standard became effective on January 1, 2009.

The fair value hierarchy prioritizes inputs used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that a company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the fair value measurement is based on inputs from different levels, the level within which the entire fair value measurement will be categorized is based on the lowest level input that is significant to the fair value measurement in its entirety; this assessment of the significance of an input requires management judgment.

The table following presents items measured at fair value on a recurring basis as of December 31, 2011 and 2010, aggregated by the level in the fair value hierarchy within which those measurements fall, as well as a roll forward of 2010 activity for Level 3 (significant unobservable inputs) fair value measurements.

			Fair Value Measurements Using
Measured at Fair Value on a Recurring Basis:	Total		Level 1		Level 2		Level 3
($ in thousands)
State, county and municipals	$	31,848	$	—	$	30,873	$	975
Mortgage-backed securities		18,484		—		18,484		—
US Government sponsored enterprises		5,020		—		5,020		—
Equity securities		1,407		1,407		—		—
Securities available for sale, December 31, 2011	$	56,759	$	1407	$	54,377	$	975

State, county and municipals	$	31,109	$	—	$	30,059	$	1,050
Mortgage-backed securities		17,407		—		17,407		—
US Government sponsored enterprises		2,499		—		2,499		—
Equity securities		1,373		1,373		—		—
Securities available for sale, December 31, 2010	$	52,388	$	1,373	$	49,965	$	1,050

	Securities Available for Sale
Level 3 Fair Value Measurements ($ in thousands):	2011			2010
Balance at beginning of year	$	1,050		$	1,250
Purchases/(sales)/(settlements), net		(75	)		(200	)
Net change in gain/(loss), realized and unrealized		—			—
Transfers in/(out) of Level 3		—			—
Balance at end of year	$	975		$	1,050

F-28

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17. FAIR VALUE OF FINANCIAL INFORMATION (Continued)

The following is a description of the valuation methodologies used by the Company for the items noted in the table above, including the general classification of such instruments in the fair value hierarchy. Where quoted market prices on securities exchanges are available, the investment is classified in Level 1 of the fair value hierarchy. Level 1 investments primarily include exchange-traded equity securities available for sale. If quoted market prices are not available, fair value is generally determined using pricing models (such as matrix pricing which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities), quoted market prices of securities with similar characteristic (adjusted for differences between the quoted instruments and the instrument being valued), or discounted cash flows, and are classified in Level 2 of the fair value hierarchy. Examples of these investments include mortgage-related securities and obligations of state, county and municipals. Finally, in certain cases where there is limited activity or less transparency around inputs to the estimated fair value, investments are classified within Level 3 of the hierarchy. Examples of these include auction rate securities available for sale (for which there has been no liquid market since 2008). At December 31, 2011 and 2010, it was determined that carrying value was the best approximation of fair value for these Level 3 securities, based primarily on receipt of par from refinances for the auction rate securities.

The table following presents the Company’s collateral-dependent impaired loans and other real estate owned measured at fair value on a nonrecurring basis as of December 31, 2011 and 2010, aggregated by the level in the fair value hierarchy within which those measurements fall.

			Fair Value Measurements Using
Measured at Fair Value on a Nonrecurring Basis:	Total		Level 1		Level 2		Level 3
($ in thousands)
December 31, 2011:
Collateral-dependent impaired loans	$	8,878	$	—	$	8,878	$	—
Other real estate owned		641		—		641		—

December 31, 2010:
Collateral-dependent impaired loans	$	8,067	$	—	$	8,067	$	—
Other real estate owned		1,443		—		1,443		—

The following is a description of the valuation methodologies used by the Company for the items noted in the table above, including the general classification of such instruments in the fair value hierarchy. Per the applicable accounting standard, the use of observable market price or estimated fair value of collateral on collateral-dependent impaired loans and other real estate owned is considered a fair value measurement subject to the fair value hierarchy and provisions of the accounting standard. The primary inputs underlying estimated fair value of collateral- dependent impaired loans and other real estate owned classified within Level 2 are appraised values obtained from external parties for real estate collateral and current financial statements for non-real estate collateral (i.e. usually current assets in nature, such as accounts receivable or inventories). Appraised values of other real estate owned are adjusted for the expected costs to sell.

F-29

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17. FAIR VALUE OF FINANCIAL INFORMATION (Continued)

Summarized below are the estimated fair values of the Company’s financial instruments at December 31, 2011 and 2010, along with the methods and assumptions used by the Company in estimating the fair value disclosures.

	2011				2010
($ in thousands)	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	92,129	$	92,129	$	52,103	$	52,103
Certificates of deposits in other banks		248		248		497		497
Securities available for sale		56,759		56,759		52,388		52,388
Other investments		5,211		5,211		4,910		4,910
Loans held for sale		11,373		11,373		5,334		5,334
Loans, net		466,589		469,734		505,126		504,773
Bank owned life insurance		14,237		14,237		13,664		13,664

Financial liabilities:
Deposits	$	551,536	$	553,761	$	558,464	$	561,458
Short-term borrowings		4,132		4,132		4,390		4,390
Notes payable		35,374		36,557		35,581		36,535
Junior subordinated debentures		6,186		6,186		6,186		6,069

Cash and cash equivalents and certificates of deposits in other banks: For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities available for sale and other investments: Fair values for securities are based on quoted market prices on securities exchanges, when available. If quoted market prices are not available, fair value is generally determined using pricing models, quoted market prices of securities with similar characteristics, or discounted cash flows. For other investments, the carrying amount of Federal Reserve Bank and FHLB stock is a reasonably accepted fair value estimate given their restricted nature, while the carrying amount of the remaining other investments (particularly common stocks of companies or other banks that are not publicly traded) approximates their fair value, determined primarily by analysis of company financial statements and recent capital issuances of the respective companies or banks, if any.

Loans held for sale: The carrying amount of loans held for sale approximates the fair value, given the short-term nature of the loans between origination and sale.

Loans, net: For variable-rate loans that reprice frequently and with no significant change in credit risk or other optionality, fair values are based on carrying values. Fair values for all other loans are estimated by discounting contractual cash flows using estimated market discount rates, which reflect the credit and interest rate risk inherent in the loan. Collateral-dependent impaired loans are included in loans, net.

Bank owned life insurance: The carrying value of these assets approximates fair value.

Deposits: The fair value of deposits with no stated maturity (such as demand deposits, savings, interest and non-interest checking, and money market accounts) is, by definition, equal to the amount payable on demand at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates within the market place.

Short-term borrowings: For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

F-30

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17. FAIR VALUE OF FINANCIAL INFORMATION (Continued)

Notes payable and junior subordinated debentures: The fair values of notes payable and junior subordinated debentures are estimated using discounted cash flow analysis based on current interest rates being offered by instruments with similar terms and credit quality.

Off-balance-sheet instruments: The estimated fair value of letters of credit at December 31, 2011 and 2010 was insignificant. Loan commitments on which the committed interest rate is less than the current market rate are also insignificant at December 31, 2011 and 2010.

Limitations: Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Fair value estimates may not be realizable in an immediate settlement of the instrument. In some instances, there are no quoted market prices for the Company’s various financial instruments, in which case fair values may be based on estimates using present value or other valuation techniques, or based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of the financial instruments, or other factors. Those techniques are significantly affected by the assumptions used, including the discount rate and estimate of future cash flows. Subsequent changes in assumptions could significantly affect the estimates.

NOTE 18.

PARENT COMPANY ONLY FINANCIAL INFORMATION

The following reflects the condensed financial statements (for the parent company) of Nicolet Bankshares, Inc.:

Balance Sheets

	December 31,
	2011		2010
Assets
Cash and due from subsidiary	$	4,604,894	$	117,860
Investments		3,384,750		3,479,000
Investments in subsidiaries		74,147,607		64,921,594
Loans		—		3,100,000
Other assets		498,779		545,552
Total assets	$	82,636,030	$	72,164,006

Liabilities and Stockholders’ Equity
Junior subordinated debentures	$	6,185,568	$	6,185,568
Other liabilities		427,953		358,573
Stockholders’ equity		76,022,509		65,619,865
Total liabilities and stockholders’ equity	$	82,636,030	$	72,164,006

F-31

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 18. PARENT COMPANY ONLY FINANCIAL INFORMATION (Continued)

Statements of Income

	For the years ended December 31,
	2011			2010			2009
Interest income	$	55,935		$	135,763		$	17,292
Interest expense		502,562			538,073			517,538
Net interest expense		(446,627	)		(402,310	)		(500,246	)
Dividend income		1,500,000			—			—
Operating expense		(75,938	)		(65,594	)		(133,975	)
Gain (loss) on assets, net		(127,750	)		(260,214	)		6,883
Income tax benefit		303,425			381,720			287,560
Earnings (loss) before equity in undistributed earnings of subsidiaries		1,153,110			(346,398	)		(339,778	)
Equity in undistributed earnings of subsidiaries, net of dividends received		337,175			1,456,747			1,516,541
Net income	$	1,490,285		$	1,110,349		$	1,176,763

Statements of Cash Flows

	For the years ended December 31,
	2011			2010			2009
Cash Flows From Operating Activities:
Net Income attributable to Nicolet Bankshares, Inc.	$	1,490,285		$	1,110,349		$	1,176,763
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Loss (gain) on assets, net		127,750			260,214			(6,883	)
Change in other assets and liabilities, net		(98,297	)		1,503,702			(629,562	)
Equity in undistributed earnings of subsidiaries, net of dividends received		(337,175	)		(1,456,747	)		(1,516,541	)
Net cash provided (used) by operating activities		1,182,563			1,417,518			(976,223	)
Cash Flows from Investing Activities:
Decrease (Increase) in loans		3,100,000			(3,100,000	)		—
Purchase of investments and other assets, net		—			(38,000	)		(633,812	)
Proceeds from sale of investments and other assets		—			548,185			—
Capital infusion to subsidiaries		(7,925,000	)		—			(712,000	)
Net cash used in investing activities		(4,825,000	)		(2,589,815	)		(1,345,812	)
Cash Flows From Financing Activities:
Purchase of treasury stock		—			—			(1,618,880	)
Proceeds from issuance of common stock, net		35,772			207,702			180,329
Exercise of common stock options		196,251			64,500			257,501
Proceeds from issuance of preferred stock (SBLF), net		24,359,000			—			—
Redemption of preferred stock (CPP)		(15,712,000	)		—			—
Cash dividends on preferred stock		(749,552	)		(815,520	)		(729,437	)
Net cash provided (used) by financing activities		8,129,471			(543,318	)		(1,910,487	)
Net increase (decrease) in cash		4,487,034			(1,715,615	)		(4,232,523	)
Beginning cash		117,860			1,833,475			6,065,997
Ending cash	$	4,604,894		$	117,860		$	1,833,475

F-32

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19.

SUBSEQUENT EVENTS

On November 28, 2012, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Mid-Wisconsin Financial Services, Inc. (“MWFS”), the holding company of Mid-Wisconsin Bank. Pursuant to the terms of the Merger Agreement, MWFS will be merged with and into Nicolet Bankshares, Inc. with Nicolet Bankshares, Inc. surviving the merger. After the merger, Mid-Wisconsin Bank will be merged with and into Nicolet National Bank with Nicolet National Bank surviving the merger. The transactions contemplated by the Merger Agreement are expected to be completed in the second quarter of 2013 and are contingent on customary conditions, including regulatory approval and the approval of the shareholders of both the Company and MWFS.

Under the terms of the Merger Agreement, MWFS shareholders will receive 0.3727 shares of Nicolet Bankshares, Inc. common stock, except in certain limited circumstances outlined in the Merger Agreement, which include, among other instances, cash in lieu of shares for fractional shares or for certain MWFS shareholders who own a small number of shares of MWFS common stock, all as defined or adjusted pursuant to the terms of the Merger Agreement. As a condition of the merger, MWFS shall have redeemed by the closing of the merger its preferred stock (issued to the UST by MWFS as part of its participation in the CPP with par value of $10.5 million) plus all accrued and unpaid dividends thereon; or if such redemption is not permitted by regulatory authorities for MWFS, the redemption of such stock by the Company for a maximum payment of $12.0 million.

F-33

NICOLET BANKSHARES, INC.
AND SUBSIDIARIES

Consolidated Financial Statements
Unaudited

September 30, 2012

F-34

NICOLET BANKSHARES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

	September 30, 2012 (Unaudited)			December 31, 2011 (Audited)
Assets
Cash and due from banks	$	17,220,607		$	13,741,792
Interest-earning deposits		10,322,108			77,391,757
Federal funds sold		9,000			995,500
Cash and cash equivalents		27,551,715			92,129,049
Certificates of deposit in other banks		—			248,000
Securities available for sale		57,074,520			56,759,395
Other investments		5,220,550			5,211,150
Loans held for sale		3,483,625			11,373,260
Loans		545,707,995			472,488,814
Allowance for loan losses		(6,490,649	)		(5,899,488	)
Loans, net		539,217,346			466,589,326
Premises and equipment, net		19,787,545			19,256,425
Bank owned life insurance		18,509,274			14,236,662
Accrued interest receivable and other assets		11,957,011			12,445,458
Total assets	$	682,801,586		$	678,248,725

Liabilities and Stockholders’ Equity
Liabilities:
Demand	$	91,577,676		$	78,154,193
Money market and NOW accounts		262,509,341			270,738,311
Savings		38,889,295			21,780,998
Time		161,881,207			180,862,028
Total deposits		554,857,519			551,535,530
Short-term borrowings		4,313,240			4,131,892
Notes payable		35,212,115			35,373,896
Junior subordinated debentures		6,185,568			6,185,568
Accrued interest payable and other liabilities		5,354,367			4,808,600
Total liabilities		605,922,809			602,035,486

Stockholders’ Equity:
Preferred equity		24,400,000			24,400,000
Common stock		34,043			34,804
Additional paid-in capital		35,845,032			36,740,711
Retained earnings		14,341,038			13,156,974
Accumulated other comprehensive income		2,128,469			1,690,021
Total Nicolet Bankshares Inc. stockholders’ equity		76,748,582			76,022,510
Noncontrolling interest		130,195			190,729
Total stockholders’ equity and noncontrolling interest		76,878,777			76,213,239
Total liabilities, noncontrolling interest and stockholders’ equity	$	682,801,586		$	678,248,725

Preferred shares authorized (no par value)		10,000,000			10,000,000
Preferred shares issued		24,400			24,400
Common shares authorized (par value $0.01 per share)		30,000,000			30,000,000
Common shares issued		3,404,312			3,480,355

See accompanying notes to consolidated financial statements.

F-35

NICOLET BANKSHARES, INC. AND SUBSIDIARIES

Consolidated Statements of Income
(Unaudited)

	Three Months Ended					Nine Months Ended
	September 30,		September 30,			September 30,		September 30,
	2012		2011			2012		2011
Interest income:
Loans, including loan fees	$	6,815,026	$	6,862,388		$	19,800,654	$	21,324,399
Investment securities:
Taxable		149,309		172,813			449,758		514,997
Tax-exempt		200,555		236,519			639,699		714,089
Federal funds sold		516		688			2,018		1,861
Other interest income		46,815		37,835			167,361		112,601
Total interest income		7,212,221		7,310,243			21,059,490		22,667,947
Interest expense:
Money market and NOW accounts		418,325		361,292			1,222,126		1,159,089
Savings and time deposits		694,250		1,227,201			2,406,966		3,888,530
Short term borrowings		1,261		2,239			3,395		7,801
Junior subordinated debentures		126,461		126,461			376,632		375,258
Notes payable		322,308		342,698			997,342		1,020,161
Total interest expense		1,562,605		2,059,891			5,006,461		6,450,839
Net interest income		5,649,616		5,250,352			16,053,029		16,217,108
Provision for loan losses		975,000		1,500,000			3,350,000		4,800,000
Net interest income after provision for loan losses		4,674,616		3,750,352			12,703,029		11,417,108
Other income:
Service charges on deposit accounts		292,816		280,590			859,340		886,674
Trust services fee income		758,991		742,768			2,213,482		2,230,542
Mortgage fee income		845,797		410,188			2,254,232		844,012
Brokerage fee income		76,719		77,113			241,282		257,503
Gain on sale, disposal and write-down of assets, net		5,341		54,444			388,243		59,202
Bank owned life insurance		186,339		146,235			522,612		432,956
Rent income		263,878		237,314			743,899		716,845
Investment advisory fees		82,431		78,815			253,732		246,268
Other		172,251		109,089			508,750		341,386
Total other income		2,684,563		2,136,556			7,985,572		6,015,388
Other expenses:
Salaries and employee benefits		3,325,001		2,925,690			9,991,271		8,680,789
Occupancy, equipment and office		1,093,872		1,108,480			3,334,457		3,287,177
Business development and marketing		437,506		326,081			1,134,115		961,592
Data processing		443,723		347,715			1,255,252		1,026,112
FDIC assessments		133,951		134,378			407,751		503,690
Core deposit intangible amortization		154,708		177,749			490,456		572,747
Other		339,586		466,642			1,109,150		1,255,619
Total other expenses		5,928,347		5,486,735			17,722,452		16,287,726

Income before income tax expense		1,430,832		400,173			2,966,149		1,144,770
Income tax expense		452,852		54,356			827,619		133,002
Net income		977,980		345,817			2,138,530		1,011,768
Less: Net income attributable to noncontrolling interest		13,142		2,659			39,466		29,706
Net income attributable to Nicolet Bankshares, Inc.		964,838		343,158			2,099,064		982,062
Less: Preferred stock dividends and discount accretion		305,000		663,752			915,000		1,156,332
Net income (loss) available to common shareholders	$	659,838	$	(320,594	)	$	1,184,064	$	(174,270	)
Basic earnings (loss) per common share	$	0.19	$	(0.09	)	$	0.34	$	(0.05	)
Diluted earnings (loss) per common share	$	0.19	$	(0.09	)	$	0.34	$	(0.05	)

Weighted average common shares outstanding:
Basic		3,414,561		3,472,064			3,448,916		3,466,960
Diluted		3,431,321		3,472,064			3,465,031		3,466,960

See accompanying notes to consolidated financial statements.

F-36

NICOLET BANKSHARES, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income
(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Net income	$	977,980		$	345,817		$	2,138,530		$	1,011,768

Other comprehensive income, net of tax:

Unrealized gains on securities available for sale:

Net unrealized holding gains arising during the period		470,530			185,760			1,104,583			928,252

Reclassification adjustment for net gains included earnings		—			—			(440,268	)		—

Income tax expense		(159,980	)		(63,158	)		(225,867	)		(315,606	)

Total other comprehensive income		310,550			122,602			438,448			612,646

Comprehensive income	$	1,288,530		$	468,419		$	2,576,978		$	1,624,414

See accompanying notes to consolidated financial statements.

F-37

NICOLET BANKSHARES, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity
(Unaudited)

	Preferred Equity			Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (“AOCI”)		Noncontrolling Interest		Total
Balance, December 31, 2010	$	15,203,280		$	34,604	$	36,255,430		$	13,128,021		$	998,530	$	46,197	$	65,666,062
Net income		—			—		—			982,062			—		29,706		1,011,768
Other Comprehensive income		—			—		—			—			612,646		—		612,646
Stock compensation expense		—			—		223,559			—			—		—		223,559
Exercise of stock options, including income tax benefit of $2,000		—			105		123,645			—			—		—		123,750
Issuance of common stock		—			15		25,428			—			—		—		25,443
Preferred stock accretion		508,720			—		—			(508,720	)		—		—		—
Preferred stock dividends		—			—		—			(647,612	)		—		—		(647,612	)
Preferred stock redemption, CPP		(15,712,000	)		—		—			—			—		—		(15,712,000	)
Issuance of preferred stock, SBLF, net		24,400,000			—		(41,000	)		—			—		—		24,359,000
Owner contribution to Noncontrolling interest		—			—		—			—			—		105,000		105,000
Balance, September 30, 2011	$	24,400,000		$	34,724	$	36,587,062		$	12,953,751		$	1,611,176	$	180,903	$	75,767,616

	Preferred Equity		Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (“AOCI”)		Noncontrolling Interest			Total
Balance, December 31, 2011	$	24,400,000	$	34,804		$	36,740,711		$	13,156,974		$	1,690,021	$	190,729		$	76,213,239
Net income		—		—			—			2,099,064			—		39,466			2,138,530
Other Comprehensive income		—		—			—			—			438,448		—			438,448
Stock compensation expense		—		—			376,270			—			—		—			376,270
Exercise of stock options, including income tax benefit of $2,720		—		45			56,205			—			—		—			56,250
Retirement of common stock		—		(806	)		(1,328,154	)		—			—		—			(1,328,960	)
Preferred stock dividends		—		—			—			(915,000	)		—		—			(915,000	)
Disbursement from noncontrolling interest		—		—			—			—			—		(100,000	)		(100,000	)
Balance, September 30, 2012	$	24,400,000	$	34,043		$	35,845,032		$	14,341,038		$	2,128,469	$	130,195		$	76,878,777

See accompanying notes to consolidated financial statements.

F-38

NICOLET BANKSHARES, INC. AND SUBSIDIARIES

Consolidated Statement of Cash Flows
(Unaudited)

	Nine Months Ended September 30, 2012			Nine Months Ended September 30, 2011
Cash Flows From Operating Activities:
Net income	$	2,138,530		$	1,011,768
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion		1,824,496			1,567,410
Provision for loan losses		3,350,000			4,800,000
Increase in cash surrender value of life insurance		(522,612	)		(432,956	)
Stock compensation expense		376,270			223,559
Gain on sale, disposal and write-down of assets, net		(388,243	)		(59,202	)
Gain on sale of loans held for sale, net		(2,254,232	)		(844,012	)
Proceeds from sale of loans held for sale		144,716,375			49,799,969
Origination of loans held for sale		(134,572,509	)		(57,540,689	)
Net change in:
Accrued interest receivable and other assets		(42,703	)		7,114,696
Accrued interest payable and other liabilities		319,900			(470,912	)
Net cash provided by operating activities		14,945,272			5,169,631

Cash Flows From Investing Activities:
Net decrease in certificates of deposit in other banks		248,000			—
Net (increase) decrease in loans		(77,484,015	)		24,264,444
Purchases of securities available for sale		(11,829,910	)		(7,294,616	)
Proceeds from sales of securities available for sale		5,415,008			—
Proceeds from calls and maturities of securities available for sale		7,075,315			3,462,899
Purchase of other investments		(9,400	)		(187,150	)
Purchase of BOLI		(3,750,000	)		—
Purchase of premises and equipment		(1,720,051	)		(1,149,639	)
Proceeds from sale of other real estate and other assets		1,478,601			1,541,283
Net cash provided by (used in) investing activities		(80,576,452	)		20,637,221

Cash Flows From Financing Activities:
Net increase (decrease) in deposits		3,321,989			(67,329,687	)
Net increase (decrease) in short term borrowings		181,348			(1,125,009	)
Repayments of notes payable		(161,781	)		(154,137	)
Proceeds from Federal Home Loan Bank advances		5,000,000			—
Repayments of Federal Home Loan Bank advances		(5,000,000	)		—
Purchase of treasury stock		(1,328,960	)		—
Proceeds from issuance of common stock, net		—			25,443
Proceeds from exercise of common stock options		56,250			123,750
Proceeds from issuance of preferred stock (SBLF), net		—			24,359,000
Repayment of preferred stock (CPP), net		—			(15,712,000	)
Noncontrolling interest in joint venture		(100,000	)		105,000
Cash dividends paid on preferred stock		(915,000	)		(647,885	)
Net cash provided by (used in) by financing activities		1,053,846			(60,355,525	)
Net decrease in cash and cash equivalents		(64,577,334	)		(34,548,673	)
Cash and cash equivalents:
Beginning		92,129,049			52,102,655
Ending	$	27,551,715		$	17,553,982

See accompanying notes to consolidated financial statements.

F-39

NICOLET BANKSHARES, INC. AND SUBSIDIARIES

Consolidated Statement of Cash Flows, Continued
(Unaudited)

	Nine Months Ended September 30, 2012			Nine Months Ended September 30, 2011
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$	5,075,456		$	7,423,265
Cash paid for taxes		704,500			205,000
Change in AOCI for unrealized gains on AFS, net of tax		(438,448	)		(612,646	)
Transfer of loans to other real estate owned		1,505,994			905,125
Accretion of preferred stock discount		—			508,720

See accompanying notes to consolidated financial statements.

F-40

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED

NOTE 1.

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

General : In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly Nicolet Bankshares, Inc. (the “Company”) and its subsidiaries, consolidated balance sheets, statements of income, comprehensive income, changes in stockholders’ equity and cash flows for the periods presented, and all such adjustments are of a normal recurring nature. All material intercompany transactions and balances are eliminated. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the entire year.

These interim consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission and, therefore, certain information and footnote disclosures normally presented in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been omitted or abbreviated. The information contained in the audited consolidated financial statements and footnotes for the year ended December 31, 2011 should be referred to in connection with the reading of these unaudited interim financial statements.

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, and the valuation of deferred tax assets.

Reclassification : Certain amounts in the 2011 consolidated financial statements have been reclassified to conform to the 2012 presentation.

Recent Accounting Pronouncements : In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment (the revised standard). It allows companies to perform a “qualitative” assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary, similar in approach to the goodwill impairment test. The revised standard is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, and entities can choose to early adopt the revised guidance. It is not expected to have a material impact on the Company’s financial position, results of operations or disclosures.

In April 2012, the FASB issued a proposed ASU to address the subsequent measurement of indemnification assets recognized as a result of a government assisted acquisition of a financial institution. The proposal requires an indemnification asset recognized as a result of a government assisted acquisition to be subsequently measured on the same basis as the indemnified item subject to the contractual limitations and amounts of the underlying contract. Comment letters on this proposed guidance were due by July 16, 2012. Because this standard is still in the proposal stage, the impact on the Company’s financial position, results of operations and disclosures has not been assessed.

In May 2011, the FASB issued an accounting standard that requires companies to disclose more of the processes for valuing items categorized as Level 3 in the fair value hierarchy, provide quantitative information about the significant unobservable inputs used in the measurement and, in certain cases, explain how sensitive the measurements are to changes in the inputs. Other than requiring additional disclosures, the adoption of this new guidance does not have a material impact on the Company’s financial condition, results of operations or liquidity.

F-41

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED

NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

and a total amount for comprehensive income. The statement(s) are required to be presented with equal prominence as the other primary financial statements. The accounting pronouncement eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity, but does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The Company adopted this standard effective with its 2012 reporting, electing to present a consolidated statement of comprehensive income separate from, but consecutive to, its consolidated income statement.

NOTE 2.

BUSINESS COMBINATION

NOTE 3.

EARNINGS (LOSS) PER COMMON SHARE

Earnings (loss) per common share is calculated by dividing net income (loss) available to common equity by the weighted average number of common shares outstanding. Diluted earnings (loss) per share is calculated by dividing net income (loss) available to common equity by the weighted average number of shares adjusted for the dilutive effect of common stock awards, if any. Presented below are the calculations for basic and diluted earnings (loss) per common share.

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2012		2011			2012		2011
(in thousands)
Net income, net of noncontrolling interest	$	965	$	343		$	2,099	$	982
Less preferred stock dividends and discount accretion		305		664			915		1,156
Net income (loss) available to common shareholders’	$	660	$	(321	)	$	1,184	$	(174	)
Weighted average common shares outstanding		3,415		3,472			3,449		3,467
Effect of dilutive stock instruments		16		—			16		—
Diluted weighted average common shares outstanding		3,431		3,472			3,465		3,467
Basic earnings (loss) per common share	$	0.19	$	(0.09	)	$	0.34	$	(0.05	)
Diluted earnings (loss) per common share	$	0.19	$	(0.09	)	$	0.34	$	(0.05	)

F-42

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED

NOTE 4.

SECURITIES

Amortized costs and fair values of securities available for sale are summarized as follows:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2012
State, county and municipals	$	32,315	$	1,304	$	—	$	33,619
Mortgage-backed securities		17,412		951		—		18,363
U.S. Government sponsored enterprises		2,499		4		—		2,503
Equity securities		1,624		966		—		2,590
	$	53,850	$	3,225	$	—	$	57,075

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Values
December 31, 2011
State, county and municipals	$	30,130	$	1,718	$	—	$	31,848
Mortgage-backed securities		17,450		1,042		7		18,485
U.S. Government sponsored enterprises		4,995		24		—		5,019
Equity securities		1,624		—		217		1,407
	$	54,199	$	2,784	$	224	$	56,759

The following table represents gross unrealized losses and the related fair value of securities available for sale, aggregated by investment category and length of time individual securities have been in a continuous unrealized loss position, at December 31, 2011. The Company did not have any individual securities in an unrealized loss position at September 30,2012.

	December 31, 2011
	Less than 12 months				12 months or more				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Government sponsored enterprises	$	1,015	$	7	$	—	$	—	$	1,015	$	7
Equity securities		—		—		1,407		217		1,407		217
	$	1,015	$	7	$	1,407	$	217	$	2,422	$	224

The amortized cost and fair values of securities available for sale at September 30, 2012, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Fair values of securities are estimated based on financial models or prices paid for similar securities. It is possible interest rates could change considerably, resulting in a material change in estimated fair value.

	September 30, 2012
(in thousands)	Amortized Cost		Fair Value
Due in less than one year	$	6,381	$	6,410
Due in one year through five years		20,978		21,973
Due after five years through ten years		7,080		7,364
Due after ten years		375		375
		34,814		36,122
Mortgage-backed securities		17,412		18,363
Equity securities		1,624		2,590
Securities available for sale	$	53,850	$	57,075

F-43

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED

NOTE 4. SECURITIES (Continued)

There were no securities sales during 2011. Proceeds from sales of securities available for sale during the nine months ended September 30, 2012 were $5.4 million, recognizing gross gains of approximately $440,000. There were no other-than-temporary impairment (“OTTI”) charges recorded during the nine months ended September 30, 2012 or 2011.

NOTE 5.

LOANS, ALLOWANCE FOR LOAN LOSSES, AND CREDIT QUALITY

The loan composition as of September 30, 2012 and December 31, 2011 is summarized as follows:

	2012					2011
(in thousands)	Amount		% of Total			Amount		% of Total
Commercial & Industrial	$	201,363		36.9	%	$	154,011		32.6	%
Commercial real estate (“CRE”) Owner-occupied		112,040		20.5	%		111,179		23.5	%
CRE Investment		71,520		13.1	%		66,577		14.1	%
Construction & Land Development		26,964		5.0	%		24,774		5.2	%
Residential Construction		7,670		1.4	%		9,363		2.0	%
Residential First Mortgage		79,543		14.6	%		56,392		11.9	%
Residential Junior Mortgage		40,928		7.5	%		42,699		9.0	%
Retail & Other		5,680		1.0	%		7,494		1.7	%
Loans		545,708		100.0	%		472,489		100.0	%
Less allowance for loan losses		6,491					5,899
Loans, net	$	539,217				$	466,590

The allowance for loan losses (“ALLL”) represents management’s estimate of probable and inherent credit losses in the Bank’s loan portfolio at the balance sheet date. In general, estimating the amount of the ALLL is a function of a number of factors, including but not limited to changes in the loan portfolio, net charge-offs, trends in past due and impaired loans, and the level of potential problem loans, all of which may be susceptible to significant change. To the extent actual outcomes differ from management estimates, additional provisions for loan losses could be required that could adversely affect our earnings or financial position in future periods. Allocations of the ALLL may be made for specific loans but the entire ALLL is available for any loan that, in management’s judgment, should be charged-off or for which an actual loss is realized.

F-44

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED

NOTE 5. LOANS, ALLOWANCE FOR LOAN LOSSES, AND CREDIT QUALITY (Continued)

A year-to-date summary of the changes in the ALLL by portfolio segment for the periods indicated is as follows (in thousands):


Allowance for Loan Losses (ALLL):	Commercial & Industrial		Owner-occ. CRE		Investment CRE		Construction & Land Development		Residential Construction		Residential First Mortgage		Residential Junior Mortgage		Retail & Other		Total
Beginning balance December 31, 2011	$	1,965	$	347	$	393	$	2,035	$	311	$	405	$	419	$	24	$	5,899
Provision for loan losses charged to operations		806		1,507		210		154		205		310		125		33		3,350
Loans charged off		129		1,327		305		307		396		216		118		38		2,836
Recoveries		34		9		—		22		—		7		5		1		78
Ending balance September 30, 2012	$	2,676	$	536	$	298	$	1,904	$	120	$	506	$	431	$	20	$	6,491
As percent of ALLL

ALLL attributed to individually evaluated loans	$	—	$	165	$	—	$	—	$	—	$	—	$	—	$	—	$	165
ALLL attributed to collectively evaluated loans		2,676		371		298		1,904		120		506		431		20		6,326
Ending balance	$	2,676	$	536	$	298	$	1,904	$	120	$	506	$	431	$	20	$	6,491

Loans:
Individually evaluated	$	3,986	$	354	$	380	$	8,558	$	397	$	1,326	$	—	$	151	$	15,152
Collectively evaluated		197,377		111,686		71,140		18,406		7,273		78,217		40,928		5,529		530,556
Total loans	$	201,363	$	112,040	$	71,520	$	26,964	$	7,670	$	79,543	$	40,928	$	5,680	$	545,708

Less ALLL	$	2,676	$	536	$	298	$	1,904	$	120	$	506	$	431	$	20	$	6,491
Net loans	$	198,687	$	111,504	$	71,222	$	25,060	$	7,550	$	79,037	$	40,497	$	5,660	$	539,217

The allocation methodology used by the Company includes specific allocations for impaired loans evaluated individually for impairment based on collateral values and for the remaining loan portfolio collectively evaluated for impairment primarily based on historical loss rates and other qualitative factors. Loan charge-offs and recoveries are based on actual amounts charged-off or recovered by loan category. Management allocates the ALLL by pools of risk within each loan portfolio.

The following table presents nonaccrual loans by portfolio segment as of September 30, 2012 and December 31, 2011:

(in thousands)	2012				2011
Commercial & Industrial	$	3,986	26.3	%	$	1,596	16.8	%
CRE Owner-occupied		354	2.3	%		934	9.9	%
CRE Investment		380	2.5	%		716	7.6	%
Construction & Land Development		8,558	56.5	%		3,367	35.5	%
Residential Construction		397	2.6	%		1,480	15.6	%
Residential First Mortgage		1,326	8.8	%		1,129	11.9	%
Residential Junior Mortgage		—	—%			105	1.1	%
Retail & Other		151	1.0	%		149	1.6	%
Loans	$	15,152	100.0	%	$	9,476	100	%

F-45

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED

NOTE 5. LOANS, ALLOWANCE FOR LOAN LOSSES, AND CREDIT QUALITY (Continued)

Loans are generally placed on nonaccrual status when management has determined collection of the interest on a loan is doubtful or when a loan is contractually past due 90 days or more as to interest or principal payments. When loans are placed on nonaccrual status or charged-off, all current year unpaid accrued interest is reversed against interest income. The interest on these loans is subsequently accounted for on the cash basis until qualifying for return to accrual status. If collectability of the principal is in doubt, payments received are applied to loan principal. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Management considers a loan to be impaired when it is probable the Bank will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement.

A summary of loans by credit quality indicator based on internally assigned credit grade as of September 30, 2012 is as follows:

(in thousands)	Grades 1–4		Grade 5		Grade 6		Grade 7		Grade 8		Grade 9		Total
Commercial & Industrial	$	193,018	$	958	$	1,381	$	6,006	$	—	$	—	$	201,363
CRE Owner-occupied		101,139		7,042		2,054		1,640		165		—		112,040
CRE Investment		60,375		10,009		—		1,136		—		—		71,520
Construction & Land Development		11,240		923		885		13,916		—		—		26,964
Residential Construction		6,739		—		—		931		—		—		7,670
Residential First Mortgage		76,066		1,102		—		2,375		—		—		79,543
Residential Junior Mortgage		40,091		216		249		372		—		—		40,928
Retail & Other		5,529		—		—		151		—		—		5,680
Total loans	$	494,197	$	20,250	$	4,569	$	26,527	$	165	$	—	$	545,708

Loans risk rated Acceptable (1–4) and Watch (5) are credits performing in accordance with the original terms, have adequate sources of repayment and little identifiable collectability risk. Special Mention (6) credits have potential weaknesses that deserve management’s attention. If left unremediated, these potential weaknesses may result in deterioration of the repayment of the credit. Substandard (7) loans typically have weaknesses in the paying capability of the obligor and/or guarantor or in collateral coverage. These loans have a well-defined weakness that jeopardizes the liquidation of the debt and are characterized by the possibility that the Company will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful (8) have all the weaknesses of substandard loans with the added characteristic that the collection of all amounts due according to the original contractual terms is highly unlikely and the amount of the loss is reasonably estimable. Loans classified as loss are considered uncollectible. All substandard and doubtful loans are evaluated individually for impairment based on collateral values.

The following table presents loans by past due status as of the dates indicated:

	September 30, 2012
(in thousands)	30–89 Days Past Due (accruing)			90 Days & Over or non-accrual			Current			Total
Commercial & Industrial	$	100		$	3,986		$	197,277		$	201,363
CRE Owner-occupied		1,857			354			109,829			112,040
CRE Investment		—			380			71,140			71,520
Construction & Land Development		—			8,558			18,406			26,964
Residential Construction		—			397			7,273			7,670
Residential First Mortgage		—			1,326			78,217			79,543
Residential Junior Mortgage		—			—			40,928			40,928
Retail & Other		14			151			5,515			5,680
Total loans	$	1,971		$	15,152		$	528,585		$	545,708
As a percent of total loans		0.4	%		2.8	%		96.8	%		100.0	%

F-46

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED

NOTE 5. LOANS, ALLOWANCE FOR LOAN LOSSES, AND CREDIT QUALITY (Continued)

	December 31, 2011
	30–89 Days Past Due (accruing)			90 Days & Over or on non-accrual			Current			Total
Commercial	$	1,278		$	2,530		$	261,382		$	265,190
Real Estate-Commercial		—			716			65,861			66,577
Real Estate-Residential		330			1,129			54,933			56,392
Construction		1,139			4,847			28,151			34,137
Consumer		123			254			49,816			50,193
Total loans	$	2,870		$	9,476		$	460,143		$	472,489
As a percent of total loans		0.6	%		2.0	%		97.4	%		100.0	%

The following table presents impaired loans as of the dates indicated:

(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
September 30, 2012
With no related allowance:
Commercial & Industrial	$	3,986	$	4,432	$	—	$	2,330	$	274
CRE Owner-occupied		60		60		—		298		12
CRE Investment		380		409		—		370		17
Construction & Land Development		8,558		8,692		—		7,289		374
Residential Construction		397		446		—		811		18
Residential First Mortgage		1,326		1,369		—		739		49
Residential Junior Mortgage		—		—		—		62		—
Retail & Other		151		151		—		151		—
With a related allowance:						—
Commercial & Industrial	$	—	$	—		—	$	1,243	$	—
CRE Owner-occupied		294		294		165		431		—
CRE Investment		—		—		—		179		—
Construction & Land Development.		—		—		—		30		—
Residential Construction		—		—		—		370		—
Residential First Mortgage		—		—		—		95		—
Residential Junior Mortgage		—		—		—		—		—
Retail & Other		—		—		—		—		—
Total:
Commercial & Industrial	$	3,986	$	4,432		—	$	3,573	$	274
CRE Owner-occupied		354		354		165		728		12
CRE Investment		380		409		—		549		17
Construction & Land Development		8,558		8,692		—		7,319		374
Residential Construction		397		446		—		1,181		18
Residential First Mortgage		1,326		1,369		—		834		49
Residential Junior Mortgage		—		—		—		62		—
Retail & Other		151		151		—		151		—
Total	$	15,152	$	15,853	$	165	$	14,397	$	744

F-47

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED

NOTE 5. LOANS, ALLOWANCE FOR LOAN LOSSES, AND CREDIT QUALITY (Continued)

The following is a summary of information pertaining to impaired loans as of December 31, 2011:

Impaired loans for which a specific allowance has been provided	$	3,353,000
Impaired loans for which no specific allowance has been provided		6,274,000
Total loans determined to be impaired	$	9,627,000
Specific allowance provided for impaired loans, included in the allowance for loan losses	$	549,000
Average investment in year-end impaired loans	$	19,096,000
Cash basis interest income recognized on year-end impaired loans	$	373,000

NOTE 6.

NOTES PAYABLE

The Company had the following notes payable:

(in thousands)	September 30, 2012		December 31, 2011
Joint Venture note	$	10,212	$	10,374
FHLB advances		25,000		25,000
	$	35,212	$	35,374

At the completion of the construction of the Company’s headquarters building in 2005 and as part of a joint venture investment related to the building, the Company and the other joint venture partners guaranteed a Joint Venture (“JV”) note to finance certain costs of the building. This note is secured by the building, bears a fixed rate of 5.81% and requires monthly principal and interest payments until its maturity on June 1, 2016. This note was current at September 30, 2012.

At September 30, 2012 and December 31, 2011, the Company’s five fixed-rate FHLB advances total $25,000,000, have a weighted average rate of 2.61% and 2.87%, respectively, and require interest-only monthly payments. At September 30, 2012, the FHLB advances have maturities between June 2013 and August 2016.The FHLB advances are collateralized by a blanket lien on qualifying first mortgages, home equity loans, multi-family loans and certain farmland loans which totaled approximately $43,997,000 and $47,316,000 at September 30, 2012 and December 31, 2011, respectively.

NOTE 7.

JUNIOR SUBORDINATED DEBENTURES

In July 2004 the Company formed a wholly-owned Connecticut statutory trust, Nicolet Bankshares Statutory Trust I (the “Statutory Trust”), which issued $6.0 million of guaranteed preferred beneficial interests in the Company’s junior subordinated deferrable interest debentures that qualify as Tier I capital under Federal Reserve Board guidelines. All of the common securities of the Statutory Trust are owned by the Company. The proceeds from the issuance of the common securities and the trust preferred securities were used by the Statutory Trust to purchase $6,186 of junior subordinated debentures of the Company, which pay an 8% fixed rate. The proceeds received by the Company from the sale of the junior subordinated debentures were used for general purposes, primarily to provide capital to the Bank. The debentures represent the sole asset of the Statutory Trust. The Statutory Trust is not included in the consolidated financial statements. The net combined effect of all the documents entered into in connection with the trust preferred securities is that the Company is liable to make the distributions and other payments required on the trust preferred securities.

F-48

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED

NOTE 8.

STOCKHOLDERS’ EQUITY

On December 23, 2008, under the federal government’s Capital Purchase Program (“CPP”), the Company received $14,964,000 from the U.S. Treasury Department (“the UST”) for the issuance of 14,964 shares of senior preferred stock with $1,000 per share liquidation value (bearing a 5% dividend for the first five years and 9% thereafter) and an additional 748 shares of senior preferred stock with $1,000 per share liquidation value (bearing a 9% dividend) following the UST’s immediate exercise of preferred stock warrants. The $100,000 of incurred costs related to the preferred stock issuance was charged directly against preferred stock. The initial $848,000 discount recorded on preferred stock that resulted from allocating a portion of the proceeds to the warrants is accreted directly to retained earnings over a five- year period on a straight-line basis.

On September 1, 2011, under the SBLF, the Company received $24,400,000 from the UST for the issuance of 24,400 shares of Non-cumulative Perpetual Preferred Stock, Series C, with $1,000 per share liquidation value. The $41,000 of incurred issuance costs was charged against additional paid-in capital. The annual dividend rate upon funding and for the following nine calendar quarters is 5%, unless there is growth in qualifying small business loans outstanding over a baseline which could reduce the rate to as low as 1% (as determined under the terms of the Securities Purchase Agreement (the “Agreement”)), adjusted quarterly. The dividend rate is fixed for the tenth quarter after funding through the end of the first four and one-half years at 7% (unless fixed at a lower rate given increased lending as similarly described above); and finally the dividend rate is fixed at 9% after four and one-half years if the preferred stock is not repaid. The Company’s weighted average dividend rate for the nine month period ended September 30, 2012 and the period from funding through September 30, 2011 was 5%. Under the terms of the Agreement, the Company will be required to provide various information, certifications, and reporting to the UST. At September 30, 2012 and December 31, 2011, the Company believes it was in compliance with the requirements set by the UST in the Agreement. The preferred stock (under CPP or SBLF) qualifies as Tier 1 capital for regulatory purposes.

For the nine months ended September 30, 2012 the Company had repurchased 80,692 shares of its common stock for gross proceeds of approximately $1,331,000.

F-49

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED

NOTE 9.

FAIR VALUE MEASUREMENTS

The relevant accounting standard (codified in ASC Topic 820, “Fair Value Measurements and Disclosures”) defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This standard applies under other accounting pronouncements that require or permit fair value measurements; accordingly, the standard amends numerous accounting pronouncements but does not require any new fair value measurements of reported balances. The standard emphasizes that fair value (i.e. the price that would be received in an orderly transaction that is not a forced liquidation or distressed sale at the measurement date), among other things, is based on exit price versus entry price, should include assumptions about risk such as nonperformance risk in liability fair values, and is a market-based measurement versus an entity-specific measurement.

The fair value hierarchy prioritizes inputs used to measure fair value into three broad levels. Level 1inputs are quoted market prices in active markets for identical assets or liabilities that a company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liabilities, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the fair value measurement is based on inputs from different levels, the level within which the entire fair value measurement will be categorized is based on the lowest level input that is significant to the fair value measurement in its entirety; this assessment of the significance of an input requires management judgment.

The following table presents items measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011, aggregated by the level in the fair value hierarchy within which those measurements fall, as well as a roll forward of activity for Level 3 (significant unobservable inputs) fair value measurements.

	September 30, 2012
Measured at Fair Value on a Recurring Basis	Fair Value Measurements Using
(in thousands)	Total		Level 1		Level 2		Level 3
State, county and municipals	$	33,619	$	—	$	32,644	$	975
Mortgage-backed securities		18,363		—		18,363		—
U.S. Government sponsored enterprises		2,503		—		2,503		—
Equity securities		2,590		2,590		—		—
Securities available-for-sale	$	57,075	$	2,590	$	53,510	$	975

	December 31, 2011
	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
State, county and municipals	$	31,848	$	—	$	30,873	$	975
Mortgage-backed securities		18,484		—		18,484		—
U.S. Government sponsored enterprises		5,020		—		5,020		—
Equity securities		1,407		1,407		—		—
Securities available-for-sale	$	56,759	$	1,407	$	54,377	$	975

	Securities Available for Sale
Level 3 Fair Value Measurements:	Nine Months Ended September 30, 2012		Year Ended December 31, 2012
(in thousands)
Balance at beginning of year	$	975	$	1,050
Purchases/(sales)/(settlements), net		—		(75	)
Net change in gain/(loss), realized and unrealized		—		—
Transfers in/(out) of Level 3		—		—
Balance at end of period	$	975	$	975

F-50

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED

NOTE 9. FAIR VALUE MEASUREMENTS (Continued)

The following is a description of the valuation methodologies used by the Company for the items noted in the table above, including the general classification of such instruments in the fair value hierarchy. Where quoted market prices on securities exchanges are available, the investment is classified in Level 1 of the fair value hierarchy. Level1investments primarily include exchange-traded equity securities available for sale. If quoted market prices are not available, fair value is generally determined using pricing models (such as matrix pricing which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities), quoted market prices of securities with similar characteristic (adjusted for differences between the quoted instruments and the instrument being valued), or discounted cash flows, and are classified in Level 2 of the fair value hierarchy. Examples of these investments include mortgage-related securities and obligations of state, county and municipals. Finally, in certain cases where there is limited activity or less transparency around inputs to the estimated fair value, investments are classified within Level 3 of the hierarchy. Examples of these include auction rate securities available for sale (for which there has been no liquid market since 2008). At September 30, 2012 and December 31, 2011, it was determined that carrying value was the best approximation of fair value for these Level 3 securities, based primarily on receipt of par from refinances for the auction rate securities.

The following table presents the Company’s collateral-dependent impaired loans and other real estate owned measured at fair value on a nonrecurring basis as of September 30, 2012 and December 31, 2011, aggregated by the level in the fair value hierarchy within which those measurements fall.

Measured at Fair Value on a Nonrecurring Basis			Fair Value Measurements Using
(in thousands)	September 30, 2012		Level 1		Level 2		Level 3
Collateral-dependent impaired loans	$	15,152	$	—	$	15,152	$	—
Other real estate owned		617		—		617		—

			Fair Value Measurements Using
	December 31, 2011		Level 1		Level 2		Level 3
Collateral-dependent impaired loans	$	8,878	$	—	$	8,878	$	—
Other real estate owned		641		—		641		—

The following is a description of the valuation methodologies used by the Company for the items noted in the table above, including the general classification of such instruments in the fair value hierarchy. Per the applicable accounting standard, the use of observable market price or estimated fair value of collateral on collateral-dependent impaired loans and other real estate owned is considered a fair value measurement subject to the fair value hierarchy and provisions of the accounting standard. The primary inputs underlying estimated fair value of collateral dependent impaired loans and other real estate owned classified within Level 2 are appraised values obtained from external parties for real estate collateral and current financial statements for non-real estate collateral (i.e. usually current assets in nature, such as accounts receivable or inventories). Appraised values of other real estate owned are adjusted for the expected costs to sell.

F-51

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED

NOTE 9. FAIR VALUE MEASUREMENTS (Continued)

Summarized below are the estimated fair values of the Company’s financial instruments at September 30, 2012 and December 31, 2011, along with the methods and assumptions used by the Company in estimating the fair value disclosures.

	September 30, 2012
					Fair Value Measurements Using
(in thousands)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	27,552	$	27,552	$	27,552	$	—	$	—
Securities available for sale		57,075		57,075		2,590		53,510		975
Other investments		5,221		5,221		—		—		5,221
Loans held for sale		3,484		3,484		—		—		3,484
Loans, net		539,217		543,263		—		15,152		528,111
Bank owned life insurance		18,509		18,509		—		18,509		—

Financial liabilities:
Deposits	$	554,858	$	556,741	$	—	$	—	$	556,741
Short-term borrowings		4,313		4,313		—		4,313		—
Notes payable		35,212		35,994		—		35,994		—
Junior subordinated debentures		6,186		6,186		—		—		6,186

	December 31, 2011
	Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	92,129	$	92,129
Certificates of deposits in other banks		248		248
Securities available for sale		56,759		56,759
Other investments		5,211		5,211
Loans held for sale		11,373		11,373
Loans, net		466,589		469,734
Bank owned life insurance		14,237		14,237

Financial liabilities:
Deposits	$	551,536	$	553,761
Short-term borrowings		4,132		4,132
Notes payable		35,374		36,557
Junior subordinated debentures		6,186		6,186

The following is a description of the valuation methodologies used to estimate the fair value of financial instruments.

Cash and cash equivalents and certificates of deposits in other banks : For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities available for sale and other investments : Fair values for securities are based on quoted market prices on securities exchanges, when available. If quoted market prices are not available, fair value is generally determined using pricing models, quoted market prices of securities with similar characteristics, or discounted cash flows. For other investments, the carrying amount of Federal Reserve Bank and FHLB stock is a reasonably accepted fair value estimate given the irrestricted nature, while the carrying amount of the remaining other investments (particularly common stocks of companies or other banks that are not publicly

F-52

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED

NOTE 9. FAIR VALUE MEASUREMENTS (Continued)

traded) approximates their fair value, determined primarily by analysis of company financial statements and recent capital issuances of the respective companies or banks, if any.

Loans held for sale : The carrying amount of loans held for sale approximates the fair value, given the short-term nature of the loans between origination and sale.

Loans, net : For variable-rate loans that reprice frequently and with no significant change in credit risk or other optionality, fair values are based on carrying values. Fair values for all other loans are estimated by discounting contractual cash flows using estimated market discount rates, which reflect the credit and interest rate risk inherent in the loan. Collateral-dependent impaired loans are included in loans, net.

Bank owned life insurance : The carrying value of these assets approximates fair value.

Deposits : The fair value of deposits with no stated maturity (such as demand deposits, savings, interest and non-interest checking, and money market accounts) is, by definition, equal to the amount payable on demand at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates within the marketplace.

Short-term borrowings : For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Notes payable and junior subordinated debentures : The fair values of notes payable and junior subordinated debentures are estimated using discounted cash flow analysis based on current interest rates being offered by instruments with similar terms and credit quality.

Off-balance-sheet instruments : The estimated fair value of letters of credit at September 30, 2012 and December 31, 2011 was insignificant. Loan commitments on which the committed interest rate is less than the current market rate are also insignificant at September 30, 2012 and December 31,2011.

Limitations : Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Fair value estimates may not be realizable in an immediate settlement of the instrument. In some instances, there are no quoted market prices for the Company’s various financial instruments, in which case fair values may be based on estimates using present value or other valuation techniques, or based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of the financial instruments, or other factors. Those techniques are significantly affected by the assumptions used, including the discount rate and estimate of future cash flows. Subsequent changes in assumptions could significantly affect the estimates.

NOTE 10.

STOCK-BASED COMPENSATION

The Company has stock incentive plans administered by a committee of the Board of Directors that provide for the granting of various equity awards per the plan documents to certain eligible officers, employees and directors of the Company.

F-53

NICOLET BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED

NOTE 10. STOCK-BASED COMPENSATION (Continued)

Activity of the stock incentive plans for options is summarized in the following table:

	Weighted- Average Fair Value per share of Options Granted				Weighted- Average Exercise Price
Balance — December 31, 2010			729,657		$	17.59	491,780
Granted		—	—			—
Exercise of stock options			(17,750	)		11.06
Cancelled			(9,000	)		15.76
Balance — December 31, 2011			702,907			17.78	533,074
Granted	$	4.87	184,625			16.50
Exercise of stock options			(4,500	)		12.50
Cancelled			(22,175	)		17.01
Balance — September 30, 2012			860,857		$	17.55	540,937

Activity of the restricted stock awards is summarized in the following table:

	Weighted- Average Fair Value per share of Restricted Stock
Balance — December 31, 2011			—
Granted	$	16.50	54,725
Vested			—
Forfeited		16.50	(250	)
Balance — September 30, 2012	$	16.50	54,475

The Company recognized stock-based employee compensation expense of approximately $376,000 and $224,000 for nine months ended September 30, 2012 and 2011, respectively.

NOTE 11.

SUBSEQUENT EVENTS

F-54

APPENDIX A

AGREEMENT AND PLAN OF MERGER, AS AMENDED

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

NICOLET BANKSHARES, INC.

AND

MID-WISCONSIN FINANCIAL SERVICES, INC.

Dated as of November 28, 2012

TABLE OF CONTENTS


Parties		1

Preamble		1

ARTICLE 1	TRANSACTIONS AND TERMS OF MERGER	1

1.1	Merger	1
1.2	Bank Merger	1
1.3	Effective Time	1
1.4	Time and Place of Closing	1

ARTICLE 2	TERMS OF MERGER	2

2.1	Articles of Incorporation	2
2.2	Bylaws	2
2.3	Directors	2
2.4	Officers	2

ARTICLE 3	MANNER OF CONVERTING SHARES	2

3.1	Conversion of Target Shares	2
3.2	Cancellation of Stock Options	3

ARTICLE 4	EXCHANGE OF SHARES	3

4.1	Exchange Procedures	3
4.2	Rights of Former Target Shareholders	3

ARTICLE 5	REPRESENTATIONS AND WARRANTIES OF TARGET	4
5.1	Organization, Standing, and Power	4
5.2	Authority of Target; No Breach By Agreement	4
5.3	Capital Stock	5
5.4	Target Subsidiaries	5
5.5	SEC Filings; Financial Statements	6
5.6	Absence of Undisclosed Liabilities	6
5.7	Loan Portfolio	6
5.8	Absence of Certain Changes or Events	6
5.9	Tax Matters	7
5.10	Allowance for Possible Loan Losses	8
5.11	Assets	8
5.12	Intellectual Property	9
5.13	Environmental Matters	9
5.14	Compliance with Laws	10
5.15	Labor Relations	10
5.16	Employee Benefit Plans	10
5.17	Material Contracts	14
5.18	Legal Proceedings	15
5.19	Regulatory Reports	15
5.20	Internal Accounting and Disclosure Controls	15
5.21	Community Reinvestment Act	15


5.22	Privacy of Customer Information	15
5.23	Technology Systems	16
5.24	Bank Secrecy Act Compliance	16
5.25	Target Disclosure Memorandum	16
5.26	Board Recommendation	16
5.27	Brokers	16

ARTICLE 6	REPRESENTATIONS AND WARRANTIES OF PURCHASER	16

6.1	Organization, Standing and Power	16
6.2	Authority of Purchaser; No Breach By Agreement	17
6.3	Capital Stock	17
6.4	Purchaser Subsidiaries	18
6.5	Financial Statements	18
6.6	Absence of Undisclosed Liabilities	18
6.7	Absence of Certain Changes or Events	19
6.8	Tax Matters	19
6.9	Compliance with Laws	20
6.10	Legal Proceedings	20
6.11	Internal Accounting and Disclosure Controls	21
6.12	Community Reinvestment Act	21
6.13	Board Recommendation	21
6.14	Brokers	21
6.15	Loan and Investment Portfolios	21
6.16	Allowance for Possible Loan Losses	21
6.17	Regulatory Reports	21
6.18	Bank Secrecy Act Compliance	22

ARTICLE 7	CONDUCT OF BUSINESS PENDING CONSUMMATION	22

7.1	Affirmative Covenants of Each Party	22
7.2	Negative Covenants of Target	22
7.3	Negative Covenants of Target	23
7.4	Adverse Changes in Condition	24
7.5	Reports	24

ARTICLE 8	ADDITIONAL AGREEMENTS	24

8.1	Registration Statement; Proxy Statement; Shareholder Approval	24
8.2	Applications	25
8.3	Filings of Articles of Merger	25
8.4	Investigation and Confidentiality	25
8.5	No Solicitations	26
8.6	Press Releases	26
8.7	Tax Treatment	26
8.8	Agreement of Affiliates	26
8.9	Indemnification	27
8.10	Employee Benefits and Contracts	28
8.11	Authorization and Approval of Purchaser Common Stock	28
8.12	Supplemental Indenture	28
8.13	Repurchase or Redemption of Target Preferred Stock	28
8.14	Payment of Target Trust Preferred Interest Payments	28
8.15	Prosecution of Regulatory Approvals	29


8.16	Meetings of Shareholders	29

ARTICLE 9	CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE	29

9.1	Conditions to Obligations of Each Party	29
9.2	Conditions to Obligations of Purchaser	30
9.3	Conditions to Obligations of Target	31

ARTICLE 10	TERMINATION	31

10.1	Termination	31
10.2	Effect of Termination	32
10.3	Non-Survival of Representations and Covenants	33
10.4	Termination Payments	33

ARTICLE 11	MISCELLANEOUS	34

11.1	Definitions	34
11.2	Expenses	40
11.3	Entire Agreement	40
11.4	Amendments	40
11.5	Waivers	40
11.6	Assignment	41
11.7	Notices and Service of Process	41
11.8	Governing Law	41
11.9	Counterparts	41
11.10	Captions; Articles and Sections	41
11.11	Interpretations	41
11.12	Severability	42

EXHIBITS

Exhibit A	Bank Plan of Merger
Exhibit B	Target Director Nominees
Exhibit C-1	Form of Target Affiliate Agreement
Exhibit C-2	Form of Purchaser Affiliate Agreement
Exhibit D	Matters to be Opined Upon by Target Counsel
Exhibit E	Matters to be Opined Upon by Purchaser Counsel

iii

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of November 28, 2012, by and between NICOLET BANKSHARES, INC. (“Purchaser”), a Wisconsin corporation, and MID-WISCONSIN FINANCIAL SERVICES, INC. (“Target”), a Wisconsin corporation.

Preamble

The respective Boards of Directors of Target and Purchaser are of the opinion that the transactions described herein are in the best interests of the parties to this Agreement and their respective shareholders. This Agreement provides for the merger of Target with and into Purchaser (the “Merger”), pursuant to which the outstanding shares of Target Common Stock shall be converted into the right to receive either cash or shares of Purchaser Common Stock and the shareholders of Target (other than those shareholders who exchange their shares solely for cash) shall become shareholders of Purchaser. Following the consummation of the Merger, Mid-Wisconsin Bank (“Target Bank”), a Wisconsin chartered bank, will merge with and into Nicolet National Bank (“Purchaser Bank”), a national bank chartered under the laws of the United States of America, in accordance with the terms of the Plan of Merger attached as Exhibit A . The transactions described in this Agreement are subject to the approvals of the shareholders of Target and of Target Bank, the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the Wisconsin Department of Financial Institutions (the “DFI”), the Office of the Comptroller of the Currency (the “OCC”), the Federal Deposit Insurance Corporation (the “FDIC”) and the satisfaction of certain other conditions described in this Agreement. It is the intention of the parties of this Agreement that the Merger for federal income tax purposes shall qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code.

Certain terms used in this Agreement but not otherwise defined herein are defined in Section 11.1 of this Agreement.

NOW, THEREFORE, in consideration of the above and the mutual warranties, representations, covenants, and agreements set forth herein, the parties agree as follows:

ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER

1.1 Merger . Subject to the terms and conditions of this Agreement, Target shall be merged with and into Purchaser in accordance with the provisions of the Wisconsin Business Corporation Law (the “WBCL”). Purchaser shall be the Surviving Entity resulting from the Merger and shall continue to be governed by the Laws of the State of Wisconsin. The Merger shall be consummated pursuant to the terms of this Agreement, which has been approved and adopted by the respective Boards of Directors of Target and Purchaser.

1.2 Bank Merger . Following the consummation of the Merger, Target Bank shall be merged with and into Purchaser Bank in accordance with the provisions of Section 18(c) of the Federal Deposit Insurance Act and Subchapter VII of the Wisconsin Banking Law and pursuant to the terms and conditions of the Bank Plan of Merger attached hereto as Exhibit A .

1.3 Effective Time . The Merger and other transactions contemplated by this Agreement shall become effective on the date and at the time Articles of Merger reflecting the Merger shall become effective with the DFI (the “Effective Time”). At the Effective Time, the separate corporate existence of Target shall cease, with Purchaser continuing as the Surviving Entity in the Merger.

1.4 Time and Place of Closing . The closing of the transactions contemplated hereby (the “Closing”) will take place at 9:00 A.M. Central Time on the date (the “Closing Date”) on which the Effective Time occurs (or the immediately preceding day if the Effective Time is earlier than 9:00 A.M.), or at such other time as the Parties, acting through their authorized officers, may mutually agree. The Closing shall be held at the office of Bryan Cave LLP, 1201 West Peachtree Street, Atlanta, GA 30309, or at such location as may be mutually agreed upon by the Parties.

ARTICLE 2
TERMS OF MERGER

2.1 Articles of Incorporation . At the Effective Time, the Articles of Incorporation of Purchaser in effect immediately prior to the Effective Time shall be the Articles of Incorporation of the Surviving Entity of the Merger.

2.2 Bylaws . At the Effective Time, the Bylaws of Purchaser in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Entity of the Merger.

2.3 Directors . From and after the Effective Time, the directors of Purchaser in office immediately prior to the Effective Time, together with the two nominees set forth in Exhibit B who are submitted by Target and approved by Purchaser’s Board of Directors (with such approval not to be unreasonably withheld) shall serve as the directors of the Surviving Entity of the Merger. The two nominees submitted by Target set forth on Exhibit B shall serve until their terms expire or their earlier resignation or removal under the provisions of Purchaser’s Bylaws and shall thereafter be nominated for election at the first meeting of the Purchaser’s shareholders, as applicable, after the expiration of such nominees’ initial term.

2.4 Officers . At the Effective Time, the officers of Purchaser in office immediately prior to the Effective Time shall serve as the officers of the Surviving Entity of the Merger.

ARTICLE 3
MANNER OF CONVERTING SHARES

3.1 Conversion of Target Shares . Subject to the provisions of this Article 3, at the Effective Time, by virtue of the Merger and without any action on the part of Purchaser, Target, or the shareholders of either of the foregoing, the shares of the constituent corporations shall be converted as follows:

(a) Each share of capital stock of Purchaser issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding from and after the Effective Time.

(b) Each share of Target Common Stock outstanding immediately prior to the Effective Time, other than Dissenting Shares, shares held by Target, State-Restricted Shares or Cash-Out Shares, shall automatically be converted at the Effective Time into the right to receive 0.3727 shares of Purchaser Common Stock (the “Stock Merger Consideration”). Each share of Target Common Stock outstanding immediately prior to the Effective Time that is held by a holder of record of State-Restricted Shares or Cash-Out Shares shall automatically be converted at the Effective Time into the right to receive $6.15 in cash (the “Cash Merger Consideration”), payable by Purchaser. Such shares to be converted are sometimes referred to herein as the “Outstanding Target Shares,” and the shares of Purchaser Common Stock and any cash to be delivered pursuant to this Section 3.1(b) or Section 3.1(c) are referred to as the “Merger Consideration.” The Merger Consideration will be adjusted proportionately for any stock split, stock dividend, recapitalization, reclassification, or similar transaction that is effected by either Party, or for which a record date occurs, prior to the Effective Time, and the 200-share threshold for determining ownership of Cash-Out Shares may be adjusted by Purchaser if, after deducting payments for fractional shares, Dissenting Shares (assuming a $6.15 per share payment) and State-Restricted Shares from $500,000, the amount of cash payable for Cash-Out Shares at that threshold would not enable each holder of Cash-Out Shares to receive cash Merger Consideration for all of their shares. In such a case, Purchaser may either (i) change the 200-share threshold to the highest number of shares that would enable all holders of Target Common Stock with record ownership of Target Common Stock below such threshold to receive Cash Merger Consideration for all of their shares of Target Common Stock or (ii) deliver Stock Merger Consideration in lieu of Cash Merger Consideration to all holders of Cash-Out Shares.

(c) Notwithstanding any other provision of this Agreement, each holder of Outstanding Target Shares exchanged pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of Purchaser Common Stock (after taking into account all certificates delivered by such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to such fractional part of a share of Purchaser Common Stock multiplied by $6.15. No such holder will be entitled to dividends, voting rights, or any other rights as a shareholder in respect of any fractional shares.

(d) At the Effective Time, each share of Target Common Stock that is held by Target shall be cancelled without consideration therefor.

(e) No Dissenting Shares shall be converted in the Merger. All such shares shall be canceled, and the holders thereof shall thereafter have only such rights as are granted to dissenting shareholders under Subchapter XIII of the WBCL; provided, however, that if any such shareholder fails to perfect his, her or its rights as a dissenting shareholder with respect to his, her or its Dissenting Shares in accordance with Subchapter XIII of the WBCL or withdraws or loses such holder’s Dissenter’s Rights, such shares held by such shareholder shall be deemed to have been converted into, and become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration to which the holder of such shares would have been entitled as of the Effective Time, without interest thereon.

3.2 Cancellation of Stock Options . Prior to the Effective Time, Target will take such action as may be necessary or appropriate to cancel, as of the Effective Time, all outstanding stock options granted by Target under the Target Plans (“Target Options”), without any payment made in exchange therefor.

ARTICLE 4
EXCHANGE OF SHARES

4.1 Exchange Procedures . Prior to the Effective Time, Purchaser shall select a transfer agent, bank or trust company to act as exchange agent (the “Exchange Agent”) to effect the delivery of the Merger Consideration to holders of Target Common Stock. At the Effective Time, Purchaser shall deliver the Merger Consideration to the Exchange Agent. Within five (5) days following the Effective Time, the Exchange Agent shall send to each holder of Outstanding Target Shares that owns shares of Target Common Stock as of the Effective Time a letter of transmittal (the “Letter of Transmittal”) for use in exchanging certificates previously evidencing shares of Target Common Stock (“Old Certificates”). The Letter of Transmittal will contain instructions with respect to the surrender of Old Certificates and the distribution of the Merger Consideration to holders of Target Common Stock. If any certificates for shares of Purchaser Common Stock are to be issued in a name other than that for which an Old Certificate surrendered or exchanged is issued, the Old Certificate so surrendered shall be properly endorsed and otherwise in proper form for transfer and the person requesting such exchange shall affix any requisite stock transfer tax stamps to the Old Certificate surrendered or provide funds for their purchase or establish to the satisfaction of the Exchange Agent that such taxes are not payable. Subject to applicable law and to the extent that the same has not yet been paid to a public official pursuant to applicable abandoned property laws, upon surrender of his, her or its Old Certificates, the holder thereof shall be paid the consideration to which he, she or it is entitled. All such property, if held by the Exchange Agent for payment or delivery to the holders of unsurrendered Old Certificates and unclaimed at the end of one (1) year from the Effective Time, shall at such time be paid or redelivered by the Exchange Agent to Purchaser, and after such time any holder of an Old Certificate who has not surrendered such certificate shall, subject to applicable laws and to the extent that the same has not yet been paid to a public official pursuant to applicable abandoned property laws, look as a general creditor only to Purchaser for payment or delivery of such property. In no event will any holder of Target Common Stock exchanged in the Merger be entitled to receive any interest on any amounts held by the Exchange Agent or Purchaser.

4.2 Rights of Former Target Shareholders .

(a) At the Effective Time, the stock transfer books of Target shall be closed as to holders of Target Common Stock immediately prior to the Effective Time and no transfer of Target Common Stock by any such holder shall thereafter be made or recognized. Until surrendered for exchange in accordance with the provisions of Section 4.1, each certificate theretofore representing Target Common Stock shall from and after the Effective Time represent for all purposes only the right to receive the consideration provided in Section 3.1 in exchange therefor. To the extent permitted by Law, former shareholders of record of Target shall be entitled to vote after the Effective Time at any meeting of Purchaser shareholders the number of whole shares of Purchaser Common Stock into which their respective shares of Target Common Stock are converted, regardless of whether such holders have exchanged their Old Certificates for certificates representing Purchaser Common Stock in accordance with the provisions of this Agreement.

(b) Whenever a dividend or other distribution is declared by Purchaser on the Purchaser Common Stock, the record date for which is at or after the Effective Time, the declaration shall include dividends or other distributions on all shares of Purchaser Common Stock issuable pursuant to this Agreement, but no dividend or other distribution payable to the holders of record of Purchaser Common Stock as of any time subsequent to the Effective Time shall be delivered to the holder of any Old Certificate until such holder surrenders such Old Certificate for exchange as provided in Section 4.1. However, upon surrender of such Old Certificate, both the Purchaser Common Stock certificate and any undelivered dividends and cash payments payable hereunder (without interest) shall be delivered and paid with respect to each share represented by such Old Certificate.

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF TARGET

Target hereby represents and warrants to Purchaser as follows:

5.1 Organization, Standing, and Power .

(a) Target is a corporation duly organized, validly existing, and in good standing under the Laws of the State of Wisconsin, and has the corporate power and authority to carry on its business as now conducted and to own, lease and operate its Assets. Target is duly qualified or licensed to transact business as a foreign corporation in good standing in the jurisdictions where the character of the Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect. The minute book and other organizational documents for Target have been made available to Purchaser for its review and accurately reflect all amendments thereto and all proceedings of the Board of Directors and shareholders thereof.

(b) Target Bank is a bank duly organized, validly existing, and in good standing under the Laws of the State of Wisconsin, and has the corporate power and authority to carry on its business as now conducted and to own, lease and operate its Assets. Target Bank is duly qualified or licensed to transact business and in good standing in jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect. The minute books and other organizational documents and corporate records for Target Bank have been made available to Purchaser for its review and are true and complete in all material respects as in effect as of the date of this Agreement and accurately reflect in all material respects all amendments thereto and all proceeding of the Board of Directors and shareholder thereof. Target Bank is an “insured institution” as defined in the Federal Deposit Insurance Act and applicable regulations thereunder.

5.2 Authority of Target; No Breach By Agreement .

(a) Target has the corporate power and authority necessary to execute and deliver this Agreement, and each of the Target Entities has the corporate power and authority necessary to perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated herein, including the Merger, have been duly and validly authorized by all necessary corporate action in respect thereof on the part of Target. Subject to the requisite approval by Target’s shareholders and any applicable Consents of Regulatory Authorities, this Agreement represents a legal, valid, and binding obligation of Target, enforceable against Target in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, receivership, conservatorship, moratorium, or similar Laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought).

(b) Neither the execution and delivery of this Agreement by Target, nor the consummation by Target of the transactions contemplated hereby, nor compliance by Target with any of the provisions hereof, will (i) conflict with or result in a breach of any provision of Target’s Articles of Incorporation or

Bylaws or the certificate or articles of incorporation or bylaws of any Target Entity or any resolution adopted by the board of directors or the shareholders of any Target Entity that is currently in effect, (ii) except as disclosed in Section 5.2(b) of the Target Disclosure Memorandum or except to the extent it would not have a Target Material Adverse Effect, constitute or result in a Default under, or require any Consent pursuant to, or result in the creation of any Lien on any Asset of any Target Entity under, any Contract or Permit of any Target Entity, or, (iii) subject to receipt of the requisite Consents referred to in Section 9.1(b) or except to the extent it would not have a Target Material Adverse Effect, constitute or result in a Default under, or require any Consent pursuant to, any Law or Order applicable to any Target Entity or any of its Assets (including any Purchaser Entity or Target Entity becoming subject to or liable for the payment of any Tax or any of the Assets owned by any Purchaser Entity or Target Entity being reassessed or revalued by any Taxing authority, except where such Default would not have a Target Material Adverse Effect).

(c) Other than in connection or compliance with the provisions of the Securities Laws, applicable state corporate and securities Laws, and rules of the Over-the-Counter Bulletin Board, and other than Consents required from Regulatory Authorities, and other than notices to or filings with the Internal Revenue Service or the Pension Benefit Guaranty Corporation with respect to any employee benefit plans, no notice to, filing with, or Consent of, any public body or authority is necessary for the consummation by Target of the Merger or the other transactions contemplated in this Agreement.

5.3 Capital Stock .

(a) The authorized capital stock of Target consists of 6,000,000 shares of $0.10 par value per share Target Common Stock, of which 1,657,119 shares are issued and outstanding, and 50,000 shares of Target Preferred Stock, of which 10,000 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, are issued and outstanding and 500 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series B, are issued and outstanding. In addition, 30,510 shares of Target Common Stock are reserved for issuance pursuant to outstanding Target Options. All of the issued and outstanding shares of capital stock of Target are duly and validly issued and outstanding and are fully paid and nonassessable under the WBCL. To Target’s Knowledge, none of the outstanding shares of capital stock of Target has been issued in violation of any preemptive rights of the current or past shareholders of Target.

(b) The authorized capital stock of Target Bank consists of 668,500 shares of common stock, $5.00 par value per share. All of the issued and outstanding shares of capital stock of Target Bank are duly and validly issued and outstanding and are fully paid and nonassessable.

(c) Except as set forth in Section 5.3(a) or 5.3(b) of this Agreement, there are no (i) shares of capital stock, preferred stock or other equity securities of Target or Target Bank outstanding or (ii) outstanding Equity Rights relating to the capital stock of Target or Target Bank.

5.4 Target Subsidiaries . Except as set forth in Section 5.4 of the Target Disclosure Memorandum , Target or one of its wholly owned Subsidiaries owns all of the issued and outstanding shares of capital stock (or other equity interests) of each Target Subsidiary. No capital stock (or other equity interest) of any Target Subsidiary is or may become required to be issued (other than to another Target Entity) by reason of any Equity Rights, and there are no Contracts by which any Target Subsidiary is bound to issue (other than to another Target Entity) additional shares of its capital stock (or other equity interests) or Equity Rights or by which any Target Entity is or may be bound to transfer any shares of the capital stock (or other equity interests) of any Target Subsidiary (other than to another Target Entity). There are no Contracts relating to the rights of any Target Entity to vote or to dispose of any shares of the capital stock (or other equity interests) of any Target Subsidiary. All of the shares of capital stock (or other equity interests) of each Target Subsidiary held by a Target Entity are fully paid and nonassessable and are owned by the Target Entity free and clear of any Lien. Each Target Subsidiary is either a bank, corporation or statutory trust, and each such Target Subsidiary is duly organized, validly existing, and in good standing under the Laws of the jurisdiction in which it is incorporated or organized, and has the corporate power and authority necessary for it to own, lease and operate its Assets and to carry on its business as now conducted. Each Target Subsidiary is duly qualified or licensed to transact business as a foreign corporation in good standing in the jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except

for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect.

5.5 SEC Filings; Financial Statements .

(a) Target has timely filed all SEC Documents required to be filed by Target since January 1, 2010 (the “Target SEC Reports”). The Target SEC Reports (i) at the time filed, complied in all material respects with the applicable requirements of the Securities Laws and other applicable Laws and (ii) did not, at the time they were filed (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such Target SEC Reports or necessary in order to make the statements in such Target SEC Reports, in light of the circumstances under which they were made, not misleading. No Target Subsidiary is required to file any SEC Documents.

(b) Each of the Target Financial Statements (including, in each case, any related notes) contained in the Target SEC Reports, including any Target SEC Reports filed after the date of this Agreement until the Effective Time, complied as to form in all material respects with the applicable published rules and regulations of the SEC with respect thereto, was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited interim statements, as permitted by Form 10-Q of the SEC), and fairly presented in all material respects the consolidated financial position of Target and its Subsidiaries as at the respective dates and the consolidated results of operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount or effect.

5.6 Absence of Undisclosed Liabilities . To Target’s Knowledge, the Target Entities have no Liabilities of a nature required to be reflected on the consolidated balance sheets prepared in accordance with GAAP, except Liabilities that are accrued or reserved against in the consolidated balance sheets of the Target Entities as of September 30, 2012, included in the Target Financial Statements or reflected in the notes thereto. The Target Entities have not incurred or paid any Liability since September 30, 2012, except for such Liabilities incurred or paid (i) in the ordinary course of business consistent with past business practice and that are not reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect; (ii) to legal, financial and other advisers in connection with the transactions contemplated by this Agreement; or (iii) set forth in Section 5.6 of the Target Disclosure Memorandum .

5.7 Loan Portfolio . As of the date of this Agreement, all loans, discounts and financing leases reflected on the Target Financial Statements were, and with respect to the Target Financial Statements delivered as of the dates subsequent to the execution of this Agreement, will be as of the dates thereof, (a) at the time and under the circumstances in which made, made for good, valuable and adequate consideration in the ordinary course of business, (b) evidenced by genuine notes, agreements or other evidences of indebtedness and (c) to the extent secured, have been secured by valid liens and security interests that have been perfected. Except as specifically set forth in Section 5.7 of the Target Disclosure Memorandum , no Target Entity is a party to any written or oral loan agreement, note or borrowing arrangement, including any loan guaranty, that was, as of the most recent month-end (i) delinquent by more than 30 days in the payment of principal or interest, (ii) known by the Target Entities to be otherwise in Default for more than 30 days, (iii) classified as “substandard,” “doubtful,” “loss,” “other assets especially mentioned” or any comparable classification by Target, the FDIC or the DFI, or (iv) an obligation of any director, executive officer or 10% shareholder of Target who is subject to Regulation O of the Federal Reserve Board (12 C.F.R. Part 215), or any person, corporation or enterprise controlling, controlled by or under common control with any of the foregoing.

5.8 Absence of Certain Changes or Events . Since September 30, 2012, except as disclosed in the Target Financial Statements or in Section 5.8 of the Target Disclosure Memorandum , (i) to Target’s Knowledge, there have been no events, changes, or occurrences which have had, or are reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect, (ii) Target has not declared, set aside for payment or paid any dividend to holders of, or declared or made any distribution on, any shares of Target Common Stock and (iii) no Target Entity has taken any action, or failed to take any action, prior to the date

of this Agreement, which action or failure, if taken after the date of this Agreement, would represent or result in a material breach or violation of any of the covenants and agreements of Target provided in Article 7. Except as may result from the transactions contemplated by this Agreement, or as set forth in Section 5.8 of the Target Disclosure Memorandum , no Target Entity has since September 30, 2012:

(a) borrowed any money other than deposits or overnight fed funds or entered into any capital lease or leases; or, except in the ordinary course of business and consistent with past practices: (i) lent any money or pledged any of its credit in connection with any aspect of its business whether as a guarantor, surety, issuer of a letter of credit or otherwise, (ii) mortgaged or otherwise subjected to any Lien any of its assets, sold, assigned or transferred any of its assets in excess of $50,000 in the aggregate or (iii) incurred any other Liability or loss representing, individually or in the aggregate, over $50,000;

(b) suffered over $50,000 in damage, destruction or loss to immovable or movable property, whether or not covered by insurance;

(c) failed to operate its business in the ordinary course consistent with past practices, or failed to use reasonable efforts to preserve its business or to preserve the goodwill of its customers and others with whom it has business relations;

(d) forgiven any debt owed to it in excess of $50,000, or canceled any of its claims or paid any of its noncurrent obligations or Liabilities except in the ordinary course of business;

(e) made any capital expenditure or capital addition or betterment in excess of $50,000;

(f) entered into any agreement requiring the payment, conditionally or otherwise, of any salary, bonus, extra compensation (including payments for unused vacation or sick time), pension or severance payment to any of its present or former directors, officers or employees, except such agreements as are terminable at will without any penalty or other payment by it or increased (except for increases of not more than 5% consistent with past practices) the compensation (including salaries, fees, bonuses, profit sharing, incentive, pension, retirement or other similar payments) of any such person whose annual compensation would, following such increase, exceed $50,000;

(g) except as required in accordance with GAAP, changed any accounting practice followed or employed in preparing the Target Financial Statements;

(h) authorized or issued any additional shares of Target Common Stock, Target Preferred Stock, or Equity Rights; or

(i) entered into any agreement, contract or commitment to do any of the foregoing.

5.9 Tax Matters .

(a) All Tax Returns required to be filed by or on behalf of any Target Entity have been timely filed or requests for extensions have been timely filed, granted, and have not expired for all periods ended on or before the date of the most recent fiscal year end immediately preceding the Effective Time and all Tax Returns filed are complete and accurate in all material respects. All Taxes shown on filed Tax Returns have been paid. There is no audit examination, deficiency, or refund Litigation with respect to any Taxes, except as reserved against in the Target Financial Statements delivered prior to the date of this Agreement or as disclosed in Section 5.9 of the Target Disclosure Memorandum . Target’s federal income Tax Returns have not been audited by the IRS. All Taxes and other Liabilities due with respect to completed and settled examinations or concluded Litigation have been paid. There are no Liens with respect to Taxes upon any of the Assets of Target.

(b) No Target Entity has executed an extension or waiver of any statute of limitations on the assessment or collection of any Tax due that is currently in effect.

(c) The provision for any Taxes due or to become due for any Target Entity for the period or periods through and including the date of the respective Target Financial Statements that has been made and is reflected on such Target Financial Statements is sufficient to cover all such Taxes.

(d) Deferred Taxes of the Target Entities have been provided for in accordance with GAAP.

(e) The Target Entities are in compliance with, and its records contain all information and documents (including properly completed IRS Forms W-9) necessary to comply with, all applicable information reporting and Tax withholding requirements under federal, state, and local Tax Laws, and such records identify with specificity all accounts subject to backup withholding under Section 3406 of the Internal Revenue Code, except where any such failure to comply would not reasonably be expected to have a Target Material Adverse Effect.

(f) No Target Entity has experienced a change in ownership with respect to its stock, within the meaning of Section 382 of the Internal Revenue Code, other than the ownership change that will occur as a result of the transactions contemplated by this Agreement.

(g) There is no pending claim by any taxing authority of a jurisdiction where either the Target or Target Bank has not filed Tax Returns that either Target or Target Bank is subject to taxation in that jurisdiction.

(h) Neither Target nor Target Bank has ever been a member of an “affiliated group” within the meaning of Code Section 1504(a) filing a consolidated federal income tax return, other than any “affiliated group” of which Target is the “common parent.” Except as set forth in Section 5.9 of the Target Disclosure Memorandum , neither Target nor Target Bank is a party to any Tax sharing or Tax allocation agreement that will remain in affect after consummation to the Mergers contemplated by this Agreement.

(i) Target has not taken or agreed to take any action, and has no Knowledge of any fact or circumstance that is reasonably likely, to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code.

5.10 Allowance for Possible Loan Losses . The allowance for possible loan or credit losses (the “Allowance”) shown on the consolidated balance sheets of the Target Entities included in the Target Financial Statements and the allowance shown on the consolidated balance sheets of the Target Entities as of dates subsequent to the execution of this Agreement will be, as of the dates thereof, adequate in the judgment of Target’s management and consistent with GAAP and applicable regulatory requirements or guidelines to provide for all known or reasonably anticipated losses relating to or inherent in the loan and lease portfolios (including accrued interest receivables) of the Target Entities and other extensions of credit (including letters of credit and commitments to make loans or extend credit) by Target as of the dates thereof.

5.11 Assets .

(a) Except as disclosed in Section 5.11 of the Target Disclosure Memorandum or as disclosed or reserved against in the Target Financial Statements, the Target Entities have good and marketable title, free and clear of all Liens, to their respective Assets, except for (i) mortgages and encumbrances that secure indebtedness that is properly reflected in the Target Financial Statements or that secure deposits of public funds as required by law; (ii) Liens for taxes accrued but not yet payable; (iii) Liens arising as a matter of law in the ordinary course of business, provided that the obligations secured by such Liens are not delinquent or are being contested in good faith; (iv) such imperfections of title and encumbrances, if any, as do not materially detract from the value or materially interfere with the present use of any of such properties or Assets; and (v) capital leases and leases, if any, to third parties for fair and adequate consideration. All tangible properties used in the business of the Target Entities are in satisfactory working condition, reasonable wear and tear excepted, and are usable in the ordinary course of business consistent with Target’s past practices. All Assets which are material to the Target Entities’ businesses on a consolidated basis, held under leases or subleases by a Target Entity, are held under valid Contracts enforceable against such Target Entity in accordance with their respective terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceedings may be brought), and each such Contract is in full force and effect.

(b) The Target Entities have paid all amounts due and payable under any insurance policies and guarantees applicable to the Target Entities and their respective Assets and operations; all such insurance policies and guarantees are in full force and effect, and all of the Target Entities’ material properties are

insured in amounts, events and with deductibles, as set forth in Section 5.11(b) of the Target Disclosure Memorandum . Since January 1, 2010 no Target Entity has received written notice from any insurance carrier that (i) any policy of insurance will be canceled or that coverage thereunder will be reduced or eliminated, or (ii) premium costs with respect to such policies of insurance will be substantially increased. There are presently no claims for amounts exceeding in any individual case $50,000 pending under such policies of insurance, and no notices of claims in excess of such amounts have been given by a Target Entity under such policies. Except as set forth in Section 5.11(b) of the Target Disclosure Memorandum , the Target Entities are not aware of any circumstances that could give rise to any claim for an amount exceeding $50,000, nor has any notice of such circumstance been given under such policies.

(c) With respect to each lease of any real property or personal property to which any Target Entity is a party (whether as lessee or lessor) set forth on Section 5.11(c) of the Target Disclosure Memorandum , except for financing leases in which a Target Entity is lessor (i) such lease is in full force and effect in accordance with its terms against the Target Entity that is a party to the lease; (ii) all rents and other monetary amounts that have become due and payable thereunder have been paid by the Target Entity that is a party to the lease; (iii) there exists no Default under such lease by the Target Entity that is party to the lease; and (iv) upon receipt of the consents described in Section 5.11(c) of the Target Disclosure Memorandum , the Mergers will not constitute a default or a cause for termination or modification of such lease.

(d) No Target Entity has a legal obligation, absolute or contingent, to any other person to sell or otherwise dispose of any substantial part of its Assets except in the ordinary course of business consistent with past practices.

(e) The Target Entities’ Assets include all Assets reasonably required to operate the businesses of the Target Entities as presently conducted.

5.12 Intellectual Property . The Target Entities own or have a license to use the Intellectual Property used by the Target Entities in the course of their businesses. The Target Entities own or have a license to any Intellectual Property sold or licensed to a third party by a Target Entity in connection with the Target Entities’ business operations, and the Target Entities have the right to convey by sale or license any Intellectual Property so conveyed. No Target Entity has received notice of Default under any of their respective Intellectual Property licenses. No proceedings have been instituted, or are pending or overtly threatened, that challenge the rights of the Target Entities with respect to Intellectual Property used, sold or licensed by the Target Entities in the course of their businesses, nor, to Target’s Knowledge, has any Person claimed or alleged any rights to such Intellectual Property. To the Knowledge of the Target Entities, the conduct of the Target Entities’ businesses does not infringe any Intellectual Property of any other person. Except as disclosed in Section 5.12 of the Target Disclosure Memorandum , no Target Entity is obligated to pay any recurring royalties to any Person with respect to any such Intellectual Property.

5.13 Environmental Matters .

(a) The Target Entities and their Operating Properties are, and have been, in compliance with all Environmental Laws.

(b) There is no Litigation pending or threatened before any court, governmental agency, or authority or other forum in which the Target Entities or any of their Operating Properties (or the Target Entities in respect of such Operating Property) has been or, with respect to threatened Litigation, may be named as a defendant (i) for alleged noncompliance (including by any predecessor) with any Environmental Law or (ii) relating to the Release into the indoor or outdoor Environment of any Hazardous Material, whether or not occurring in, at, on, under, about, adjacent to, or affecting (or potentially affecting) an Asset currently or formerly owned, leased, or operated by the Target Entities or any of its Operating Properties or Participation Facilities, nor is there any reasonable basis for any Litigation of a type described in this sentence.

(c) During the period of (i) the Target Entities’ ownership or operation of any of their Assets, or (ii) the Target Entities’ holding of a security interest in an Operating Property, to the Knowledge of the Target Entities, there has been no Release of any Hazardous Material in, at, on, under, about, adjacent to, or affecting (or potentially affecting) such properties. Prior to the period of (i) the Target Entities’ ownership

or operation of any of its Assets, or (ii) the Target Entities’ holding of a security interest in an Operating Property, to the Knowledge of the Target Entities, there was no Release of any Hazardous Material in, at, on, under, about, or affecting any such property or Operating Property.

(d) Target has delivered to Purchaser true and complete copies and results of any reports, studies, analyses, tests, or monitoring possessed or initiated by a Target Entity pertaining to Hazardous Materials in, at, on, under, about, or affecting (or potentially affecting) any Asset, or concerning compliance by the Target Entities or any other Person for whose conduct it is or may be held responsible, with Environmental Laws.

(e) To Target’s Knowledge, there are no aboveground or underground storage tanks, whether in use, out-of-service or closed, in, at, on, under, affecting or potentially affecting any of the Operating Properties. Any above-ground or underground storage tanks removed by or on behalf of the Target Entities at or from any Asset were removed in accordance with Environmental Laws and no soil or groundwater contamination or Release resulted from the operation or removal of such tanks.

5.14 Compliance with Laws . Target is a Wisconsin corporation and a registered bank holding company under the BHC Act, as amended, and has in effect all Permits necessary for it to own, lease, or operate its Assets and to carry on its business as now conducted, and there has occurred no Default under any such Permit, except where such Default would not have a Target Material Adverse Effect. No Target Entity is:

(a) in Default under any of the provisions of its respective Articles of Incorporation or Bylaws (or other governing instruments);

(b) in Default under any Laws, Orders, or Permits applicable to its business or employees conducting its business except where such Default would not have a Target Material Adverse Effect; or

(c) since January 1, 2010, in receipt of any written notification or communication from any agency or department of federal, state, or local government or any Regulatory Authority or the staff thereof (i) asserting that any Target Entity is not in compliance with any of the Laws or Orders which such governmental authority or Regulatory Authority enforces, (ii) threatening to revoke any Permits or (iii) except as set forth in Section 5.14(c) of the Target Disclosure Memorandum , requiring the Target Entity to enter into or consent to the issuance of a cease and desist order, formal agreement, directive, commitment, or memorandum of understanding, or to adopt any Board resolution or similar undertaking, which restricts materially the conduct of its business or in any manner relates to its capital adequacy, its credit or reserve policies or its management.

(d) Target Bank is a Wisconsin state bank whose deposits are, and will at the Effective Time be, insured by the FDIC to the extent such insurance is available.

5.15 Labor Relations . No Target Entity is a party to any Litigation asserting that it has committed an unfair labor practice (within the meaning of the National Labor Relations Act or comparable state law) or seeking to compel it to bargain with any labor organization or other employee representative to wages or conditions of employment, nor is any Target Entity party to any collective bargaining agreement, nor is there any pending or, to the Knowledge of the Target Entities, threatened strike, slowdown, picketing, work stoppage or other labor dispute involving Target. To the Knowledge of Target, there is no activity involving any employees of the Target Entities seeking to certify a collective bargaining unit or engaging in any other organization activity.

5.16 Employee Benefit Plans .

(a) Target and any other entities which now or in the past five years constitute a single employer within the meaning of Internal Revenue Code Section 414 are hereinafter collectively referred to as the “Target Group.”

(b) The following agreements, plans or arrangements, whether formal or informal and whether or not documented in writing, which are presently in effect and which cover current or former

employees, directors and/or other service providers of any member of the Target Group (collectively “Participants”) are referred to as the “Target Plans”:

(i) Any employee benefit plan as defined in Section 3(3) of ERISA, and any trust or other funding agency created thereunder, or under which any member of the Target Group, with respect to employees, has any outstanding, present, or future obligation or liability, or under which any employee or former employee has any present or future right to benefits which are covered by ERISA; or

(ii) Any other pension, profit sharing, retirement, deferred compensation, stock purchase, stock option, incentive, bonus, vacation, severance, disability, hospitalization, medical, life insurance, split dollar or other employee benefit plan, program, policy, or arrangement, whether written or unwritten, formal or informal, which any member of the Target Group maintains or to which any member of the Target Group has any outstanding, present or future obligations to contribute or make payments under, whether voluntary, contingent or otherwise.

With respect to each Target Plan, Target has delivered to Purchaser true, complete and correct copies of the following (as applicable): (1) the written document evidencing such Target Plan or, with respect to any such plan that is not in writing, a written description thereof; (2) the summary plan description; (3) any related trust agreements, insurance contracts or documents of any other funding arrangements; (4) material third party service provider agreements; (5) all amendments, modifications or supplements to any such document; (6) the three most recent Internal Revenue Service Forms 5500 required to have been filed, including all schedules thereto; (7) the three most recent audit and/or actuarial reports; (8) the most recent determination letter from the Internal Revenue Service; and (9) any notices to or from the Internal Revenue Service, any office or representative of the Department of Labor or any other governmental entity relating to any compliance issues in respect of any Target Plan.

(c) Except as to those plans identified in Section 5.16 of the Target Disclosure Memorandum as Target Plans intended to be qualified under Section 401(a) of the Internal Revenue Code (the “Target Qualified Plans”), no member of the Target Group maintains a Target Plan which meets or was intended to meet the requirements of Section 401(a). As to each Target Qualified Plan, the Internal Revenue Service has issued favorable determination letter(s) to the effect that such Target Qualified Plan is a tax-qualified plan in form and that any related trust is exempt from taxation, and such determination letter(s) remain in effect and have not been revoked or, in the alternative, the Internal Revenue Service has issued favorable determination letter(s) to the effect that the prototype plan under which such Target Qualified Plan has been adopted is a tax-qualified plan in form and that any related trust is exempt from taxation, and that Target may rely upon such favorable determination letter(s) and, to the Knowledge of Target, such favorable determination letter(s) remain in effect and have not been revoked. Copies of the most recent favorable determination letters and any outstanding requests for a favorable determination letter with respect to each Target Qualified Plan, if any, have been delivered to the Purchaser. Except as to those plans identified in Section 5.16 of the Target Disclosure Memorandum , no Target Qualified Plan has been amended since the issuance of each respective most recent favorable determination letter. The Target Qualified Plans currently are intended to comply in form with the requirements under Internal Revenue Code Section 401(a), other than changes required by statutes, regulations and rulings for which amendments are not yet required. To the Knowledge of Target, no issue concerning qualification of the Target Qualified Plans is pending before or is threatened by the Internal Revenue Service. The Target Qualified Plans have been administered according to their terms (except for those terms which are inconsistent with the changes required by statutes, regulations, and rulings for which changes are not yet required to be made, in which case the Target Qualified Plans have been administered in accordance with the provisions of those statutes, regulations and rulings) and in accordance with the requirements of Internal Revenue Code Section 401(a). To the Knowledge of Target, no member of the Target Group or any fiduciary of any Target Qualified Plan has done anything that would adversely affect the qualified status of the Target Qualified Plans or the related trusts. Any Target Qualified Plan which is required to satisfy Internal Revenue Code Sections 401(k)(3) and 401(m)(2) has been, or will be, tested for compliance with, and has satisfied, or will satisfy, the requirements of, such Sections of the Internal Revenue Code for each plan year ending prior to the Closing Date in accordance with the requirements of the Internal Revenue Code.

(d) Except as set forth in Section 5.16 of the Target Disclosure Memorandum , each member of the Target Group is in, or will be in prior to the Closing Date, material compliance with the requirements prescribed by any and all statutes, orders, governmental rules and regulations applicable to the Target Plans and all reports and disclosures relating to the Target Plans required to be filed with or furnished to any governmental entity, Participants or beneficiaries prior to the Closing Date have been or will be filed or furnished in a timely manner and in accordance with applicable Law. Each member of the Target Group has made full and timely payment through all due dates falling on or before the Closing Date of all contributions which are required under the terms of each of the Target Plans and in accordance with applicable Law and Contracts and, to the extent applicable, consistent with past practice and actuarial recommendations, to be paid as a contribution to each Target Plan. All insurance premiums have been paid in full, subject only to normal retrospective adjustments in the ordinary course, with regard to Target Plans providing insured benefits for policy years or other applicable policy periods ending on or before the Closing Date. Except as set forth in Section 5.16 of the Target Disclosure Memorandum , all other material obligations, whether arising by operation of applicable Law or by Contract, required to be performed with respect to each Target Plan on or before the Closing Date have been timely performed, and there have been no material defaults, omissions or violations by any party with respect to any Target Plan. No member of the Target Group has made or is obligated to make any nondeductible contributions to any Target Plan.

(e) Except as set forth in Section 5.16 of the Target Disclosure Memorandum , no member of the Target Group or any predecessors thereto maintains or has ever maintained, an “employee benefit pension plan” within the meaning of Section 3(2) of ERISA that is or was subject to Title IV of ERISA or Section 412 of the Internal Revenue Code. No member of the Target Group or any predecessors thereto has any obligation or liability to contribute or has ever contributed to any “multiemployer plan” as defined in Section 3(37) of ERISA. No member of the Target Group has incurred any current or projected liability in respect of post-retirement health, medical or life insurance benefits for Participants, except as required to avoid an excise tax under Section 4980B of the Internal Revenue Code or comparable State benefit continuation laws. Except as set forth in Section 5.16 of the Target Disclosure Memorandum , no Target Plan is or has been funded by, associated with, or related to a “voluntary employee’s beneficiary association” within the meaning of Section 501(c)(9) of the Internal Revenue Code, a “welfare benefit fund” within the meaning of Section 419 of the Internal Revenue Code, a “qualified asset account” within the meaning of Section 419A of the Internal Revenue Code or a “multiple employer welfare arrangement” within the meaning of Section 3(40) of ERISA.

(f) Except as set forth in Section 5.16 of the Target Disclosure Memorandum , no member of the Target Group is obligated, contingently or otherwise, under any agreement to pay any amount which would be treated as a “parachute payment,” as defined in Internal Revenue Code Section 280G(b) (determined without regard to Internal Revenue Code Section 280G(b)(2)(A)(ii)) or would be subject to tax under Section 4999 of the Internal Revenue Code.

(g) Except as contemplated by Section 8.10 of this Agreement, no termination or partial termination of any Target Qualified Plan has occurred, or will occur, prior to the Closing Date and no notice of intent to terminate any Target Qualified Plan has been, or will be, issued by a member of the Target Group prior to the Closing Date.

(h) No member of the Target Group has any remaining liability under any previously maintained Target Plan, whether maintained as a written or unwritten, formal or informal arrangement.

(i) To the Knowledge of the Target Group, no member of the Target Group nor any other “disqualified person” or “party in interest” (as defined in Internal Revenue Code Section 4975 and ERISA Section 3(14), respectively) with respect to the Target Plans, has engaged in any non-exempt “prohibited transaction” (as defined in Internal Revenue Code Section 4975 or ERISA Section 406). To the Knowledge of Target, all members of the Target Group and all fiduciaries with respect to the Target Plans, including any members of the Target Group which are fiduciaries as to a Target Plan, have complied in all respects with the requirements of ERISA Section 404, and to the Knowledge of Target, no member of the Target Group and no party in interest or disqualified person with respect to the Target Plans has taken or omitted any action which could lead to the imposition of an excise tax under the Internal Revenue Code or a fine under ERISA.

(j) Other than routine claims for benefits, to the Knowledge of Target, there are no actions, audits, investigations, suits or claims pending, or threatened against any Target Plan, any trust or other funding agency created thereunder, or against any fiduciary of any Target Plan or against the assets of any Target Plan.

(k) All assets attributable to any Target Plan that is subject to ERISA have been held in trust, unless a statutory or administrative exemption to the trust requirements of Section 403(a) of ERISA applies. Except as disclosed in Section 5.16 of the Target Disclosure Memorandum , no Target Plan is a self-funded or self-insured arrangement, and, with respect to each Target Plan that is funded in whole or in part through an insurance policy, no member of the Target Group has any liability in the nature of a retroactive rate adjustment, loss-sharing arrangement or other actual or contingent liability arising wholly or partially out of events occurring on or before the date of this Agreement or is reasonably expected to have such liability with respect to periods through the Closing Date. Any Target Plan funded in whole or in part with pre-tax contributions from Participants have been made in accordance with a written plan instrument that for all relevant periods has complied in form with the requirements under Internal Revenue Code Section 125, other than changes required by statutes, regulations and rulings for which amendments are not yet required.

(l) The actuarial present values of all accrued deferred compensation entitlements (including entitlements under any executive compensation, supplemental retirement, or employment agreement) maintained by the Target Group for Participants have been fully and accurately reflected on the Target Financial Statements to the extent required by and in accordance with GAAP. Except as disclosed in Section 5.16 of the Target Disclosure Memorandum , (i) the actuarial present values of all accrued deferred compensation entitlements (including entitlements under any executive compensation, supplemental retirement, or employment agreement) for which the members of the Target Group are obligated have been fully and accurately reflected on the Target Financial Statements to the extent required by and in accordance with GAAP, and (ii) the assets of each Target Plan are reported at their fair market value on the books and records of such plans, unless otherwise stated in such books and records.

(m) Each Target Plan that is a nonqualified plan of deferred compensation, within the meaning of Section 409A of the Internal Revenue Code, (i) is exempt from Parts 2, 3 and 4 of Title I of ERISA as an unfunded plan that is maintained primarily for the purpose of providing deferred compensation or life insurance for a select group of management or highly compensated employees, pursuant to Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA or (ii) is exempt from all Parts of ERISA as an unfunded plan maintained exclusively for non-employee service providers. For each such Target Plan, Section 5.16 of the Target Disclosure Memorandum contains a list of assets that are associated with such plan.

(n) Each Target Plan that is a “nonqualified deferred compensation plan,” within the meaning of Section 409A(d)(1) of the Internal Revenue Code, maintained by one or more members of the Target Group has been operated since its date of inception in good faith compliance with the applicable provisions of Section 409A of the Internal Revenue Code; and has been since January 1, 2010, in documentary compliance with the applicable provisions of Section 409A or will be corrected in accordance with IRS Notice 2010-6, as modified by IRS Notice 2010-80, prior to the Closing Date. No member of the Target Group (i) has been required to report to any governmental entity any Taxes due as a result of a failure to comply with Section 409A; or (ii) has any indemnity or gross-up obligation for any Taxes or interest imposed or accelerated under Section 409A. To the Knowledge of Target, nothing has occurred, whether by action or failure to act, or is reasonably expected or intended to occur, that would subject an individual having rights under any such Target Plan to accelerated Tax as a result of Section 409A or a Tax imposed under Section 409A.

(o) The members of the Target Group have complied in all respects with the compensation limitations and corresponding disclosure and certification requirements imposed upon them under the Emergency Economic Stabilization Act of 2008, as amended, and all rules and regulations promulgated by the responsible agencies of the United States government under such Act as a result of the Target’s participation in the United States Treasury’s Capital Purchase Program.

(p) The members of the Target Group, or any successor entity, may terminate any Target Plan prospectively at any time without further liability to any member of the Target Group or the successor entity, including, without limitation, any additional contributions, penalties, premiums, fees, surrender charges,

market value adjustments or any other charges as a result of such termination, except to the extent of funds set aside for such purpose or reflected as reserved for such purpose on the Target Financial Statements.

(q) Since September 30, 2012, except as disclosed in Section 5.16 of the Target Disclosure Memorandum , no member of the Target Group has (i) increased the rate of compensation payable or to become payable to any director, employee or other service provider of the Target Group, other than in the ordinary course of business and consistent with past practice; (ii) amended or entered into any employment, severance, change in control or similar Contract with any such director, employee or other service provider; (iii) paid or agreed to pay any bonuses or other compensation, other than in the ordinary course of business and consistent with past practice, to any such director, employee or other service provider; (iv) amended any Target Plan, other than any amendment required by Law; (v) adopted any new plan, program, policy or arrangement, which if it existed as of the Closing Date, would constitute a Target Plan; or (vi) terminated any existing Target Plan.

(r) Except as disclosed in Section 5.16 of the Target Disclosure Memorandum , neither the execution and delivery of this Agreement, shareholder approval of the Agreement or the transaction contemplated hereby, nor the consummation of the transactions contemplated hereby, either alone or in combination with a subsequent event, will (i) result in any payment (including severance, unemployment compensation, “excess parachute payment” (within the meaning of Section 280G of the Internal Revenue Code, but without regard to whether any such payment or portion thereof is reasonable compensation for personal services performed or to be performed in the future), forgiveness of indebtedness or otherwise) becoming due to any current or former employee, officer or director of the a member of the Target Group under any Target Plan or otherwise, (ii) increase any benefits otherwise payable under any Target Plan, (iii) result in any acceleration of the time of payment or vesting of any such benefits, (iv) require the funding or increase in the funding of any such benefits, (v) result in any limitation on the right of any member of the Target Group to amend, merge, terminate or receive a reversion of assets from any Target Plan or related trust, or (vi) result in any payment or portion of any payment that would not otherwise be deductible under Section 162(m) of the Internal Revenue Code.

5.17 Material Contracts . Except as disclosed in Section 5.17 of the Target Disclosure Memorandum or otherwise reflected in the Target Financial Statements, neither the Target Entities nor any of their Assets, businesses, or operations is a party to, or is bound or affected by, or receives benefits under, (i) any employment, severance, termination, consulting, or retirement Contract, (ii) any Contract relating to the borrowing of money by the Target Entities or the guarantee by a Target Entity of any such obligation (other than Contracts evidencing deposit liabilities, purchases of federal funds, fully-secured repurchase agreements, and Federal Home Loan Bank advances of depository institution Subsidiaries, trade payables and Contracts relating to borrowings or guarantees made in the ordinary course of business), (iii) any Contract that prohibits or restricts any Target Entity or employee thereof from engaging in any business activities in any geographic area, line of business or otherwise in competition with any other Person, (iv) any Contract involving Intellectual Property (other than Contracts entered into in the ordinary course of business with customers), (v) any Contract relating to the provision of data processing, network communication, or other technical services to or by any Target Entity, (vi) any Contract relating to the purchase or sale of any goods or services (other than Contracts entered into in the ordinary course of business and involving payments under any individual Contract not in excess of $50,000) or (vii) any exchange-traded or over-the-counter swap, forward, future, option, cap, floor, or collar financial Contract, or any other interest rate or foreign currency protection Contract not included on its balance sheet that is a financial derivative Contract (the “Target Contracts”). With respect to each Target Contract: (i) the Contract is in full force and effect against the Target Entity; (ii) no Target Entity is in Default thereunder; (iii) no Target Entity has repudiated or waived any material provision of any such Contract; and (iv) to the Knowledge of any Target Entity, no other party to any such Contract is in Default in any respect, or has repudiated or waived any material provision thereunder. All of the indebtedness of the Target Entities for money borrowed is prepayable at any time by such Target Entity without penalty or premium. Payments under Target Contracts for products and services provided, licensed or sub-licensed by, or requiring a license for use or operation from, Jack Henry & Associates, Inc. or Fidelity Information Services, Inc. that are triggered by the consummation of the transactions contemplated hereby will not exceed an aggregate of $600,000, assuming solely for purposes of this calculation a May 31, 2013 Closing Date.

5.18 Legal Proceedings .

(a) Section 5.18 of the Target Disclosure Memorandum contains a summary of all Litigation as of the date of this Agreement to which any Target Entity is a party and that names a Target Entity as a defendant or cross-defendant or for which such Target Entity has any potential Liability in excess of $50,000 or that otherwise would have, or reasonably be expected to have, a Target Material Adverse Effect.

(b) There are no material uncured violations, or violations with respect to which material refunds or restitution may be required, cited in any compliance report to any Target Entity as a result of examination by any bank or bank holding company Regulatory Authority.

5.19 Regulatory Reports .

(a) Since January 1, 2010, the Target Entities have timely filed all reports and statements, together with any amendments required to be made with respect thereto, that it was required to file with Regulatory Authorities. As of their respective dates, each of such reports and documents, including the financial statements, exhibits, and schedules thereto, complied in all material respects with all applicable Laws. As of its respective date, each such report and document did not, in all material respects, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(b) Each of the Target Financial Statements (including, in each case, any related notes) contained in the Target Regulatory Reports complied as to form in all material respects with the applicable published rules and regulations of the appropriate Regulatory Authorities, was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements), and fairly presented in all material respects the consolidated financial position of the Target Entities as at the respective dates and the consolidated results of operations and cash flows for the periods indicated.

5.20 Internal Accounting . The Target Entities maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit the preparation of financial statements in conformity with GAAP and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference.

5.21 Community Reinvestment Act . Target Bank has complied in all material respects with the provisions of the Community Reinvestment Act (“CRA”) and the rules and regulations thereunder, has a CRA rating of not less than “satisfactory,” has received no material criticism from regulators with respect to discriminatory lending practices, and has no Knowledge of any conditions or circumstances that are likely to result in a CRA rating of less than “satisfactory” or material criticism from regulators with respect to discriminatory lending practices.

5.22 Privacy of Customer Information .

(a) The Target Entities are the sole owners or, in the case of participated loans, co-owners with the other participant(s), of all individually identifiable personal information (“IIPI”) relating to customers, former customers and prospective customers that will be transferred to the Purchaser Entities pursuant to this Agreement and the other transactions contemplated hereby. For purposes of this Section 5.22, “IIPI” shall include any information relating to an identified or identifiable natural person.

(b) The collection and use of such IIPI by the Target Entities, the transfer of such IIPI to the Purchaser Entities, and the use of such IIPI by the Purchaser Entities as contemplated by this Agreement complies with all applicable privacy policies, the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act and all other applicable state, federal and foreign privacy Laws, and any contract or industry standard relating to privacy.

5.23 Technology Systems .

(a) Since January 1, 2010, the Technology Systems have not suffered unplanned disruption causing a Target Material Adverse Effect. Except for ongoing payments due under relevant third party agreements, the Technology Systems are free from any Liens. Access to business critical parts of the Technology Systems is not shared with any third party.

(b) Details of the Target Entities’ disaster recovery and business continuity arrangements have been provided to Purchaser.

(c) Except as set forth in Section 5.2(b) of the Target Disclosure Memorandum , no Target Entity has received notice of or is aware of any circumstances including, without limitation, the execution of this Agreement, that would enable any third party to terminate any of the Target Entities’ agreements or arrangements relating to the Technology Systems (including maintenance and support).

5.24 Bank Secrecy Act Compliance . Target Bank is in compliance in all material respects with the provisions of the Bank Secrecy Act of 1970, as amended (the “Bank Secrecy Act”), and all regulations promulgated thereunder including, but not limited to, those provisions of the Bank Secrecy Act that address suspicious activity reports and compliance programs. Target Bank has implemented a Bank Secrecy Act compliance program that adequately covers all of the required program elements as required by 12 C.F.R. §21.21.

5.25 Target Disclosure Memorandum . Target has delivered to Purchaser the Target Disclosure Memorandum containing certain information regarding Target as indicated at various places in this Agreement. All information set forth in the Target Disclosure Memorandum shall be deemed for all purposes of this Agreement to constitute part of the representations and warranties of Target under this Article 5. The information contained in the Target Disclosure Memorandum and any updates thereto shall be deemed to be part of and qualify all representations and warranties contained in this Article 5 and the covenants in Article 7 to the extent applicable.

5.26 Board Recommendation . The Board of Directors of Target, at a meeting duly called and held, has by unanimous vote of the directors present (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, and the Affiliate Agreements as set forth in Exhibit B and the transactions contemplated thereby, taken together, are fair to and in the best interests of the shareholders; (ii) approved this Agreement; and (iii) resolved to recommend that the holders of the shares of Target Common Stock approve this Agreement.

5.27 Brokers . Except for Raymond James & Associates, Inc., no broker, finder, or investment banker is entitled to any brokerage, finder’s, or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of any Target Entity.

ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser hereby represents and warrants to Target as follows:

6.1 Organization, Standing and Power .

(a) Purchaser is a corporation duly organized, validly existing, and in good standing under the Laws of the State of Wisconsin, and has the corporate power and authority to carry on its business as now conducted and to own, lease and operate its Assets. Purchaser is duly qualified or licensed to transact business as a foreign corporation in good standing in the jurisdictions where the character of the Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Purchaser Material Adverse Effect. The minute book and other organizational documents for Purchaser have been made available to Target for its review and accurately reflect all amendments thereto and all proceedings of the Board of Directors and shareholders thereof.

(b) Purchaser Bank is a national bank duly organized, validly existing, and in good standing under the Laws of the United States of America, and has the corporate power and authority to carry on its business as now conducted and to own, lease and operate its Assets. Purchaser Bank is duly qualified or licensed to transact business and in good standing in jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Purchaser Material Adverse Effect. The minute books and other organizational documents and corporate records for Purchaser Bank have been made available to Target for its review and are true and complete in all material respects as in effect as of the date of this Agreement and accurately reflect in all material respects all amendments thereto and all proceeding of the Board of Directors and shareholder thereof. Purchaser Bank is an “insured institution” as defined in the Federal Deposit Insurance Act and applicable regulations thereunder.

6.2 Authority of Purchaser; No Breach By Agreement .

(a) Purchaser has the corporate power and authority necessary to execute and deliver this Agreement, and each of the Purchaser Entities has the corporate power and authority necessary to perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein, including the Merger, have been duly and validly authorized by all necessary corporate action in respect thereof on the part of Purchaser. Subject to receipt of the requisite Consents of Regulatory Authorities, this Agreement represents a legal, valid, and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, receivership, conservatorship, moratorium, or similar Laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought).

(b) Neither the execution and delivery of this Agreement by Purchaser, nor the consummation by Purchaser of the transactions contemplated hereby, nor compliance by Purchaser with any of the provisions hereof, will (i) conflict with or result in a breach of any provision of Purchaser’s Articles of Incorporation or Bylaws or the certificate or articles of incorporation or bylaws of any Purchaser Entity or any resolution adopted by the board of directors or the shareholders of any Purchaser Entity that is currently in effect, or (ii) except to the extent it would not have a Purchaser Material Adverse Effect, constitute or result in a Default under, or require any Consent pursuant to, or result in the creation of any Lien on any Asset of any Purchaser Entity under, any Contract or Permit of any Purchaser Entity or, (iii) subject to receipt of the requisite Consents referred to in Section 9.1(b), and except to the extent it would not have a Purchaser Material Adverse Effect, constitute or result in a Default under, or require any Consent pursuant to, any Law or Order applicable to any Purchaser Entity or any of its Assets (including any Purchaser Entity or Target Entity becoming subject to or liable for the payment of any Tax or any of the Assets owned by any Purchaser Entity or Target Entity being reassessed or revalued by any Taxing authority).

(c) Other than in connection or compliance with the provisions of the Securities Laws, applicable state corporate and securities Laws, and rules of the Over-the-Counter Bulletin Board, and other than Consents required from Regulatory Authorities, and other than notices to or filings with the Internal Revenue Service or the Pension Benefit Guaranty Corporation with respect to any employee benefit plans, no notice to, filing with, or Consent of any public body or authority is necessary for the consummation by Purchaser of the Merger or the other transactions contemplated in this Agreement.

6.3 Capital Stock .

(a) The authorized capital stock of Purchaser consists of 30,000,000 shares, $0.01 par value, of Purchaser Common Stock, of which 3,479,888 shares (including 54,475 shares of restricted stock granted but not yet vested under Purchaser’s employee benefit plans) are issued and 3,425,413 shares are outstanding, and 10,000,000 shares of Purchaser Preferred Stock, no par value, of which: (i) 14,964 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, are authorized, but no shares are outstanding; (ii) 748 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series B, are authorized, but no shares are

outstanding; and (iii) 24,400 shares of Non-Cumulative Perpetual Preferred Stock, Series C (the “Purchaser Series C Preferred Stock”), of which 24,400 shares are authorized, issued and outstanding. In addition, 839,107 shares of Purchaser Common Stock are subject to outstanding Purchaser Options. All of the issued and outstanding shares of Purchaser capital stock are, and all of the shares of Purchaser Common Stock to be issued in exchange for shares of Target Common Stock upon consummation of the Merger, when issued in accordance with the terms of this Agreement, will be, duly and validly issued, fully paid and nonassessable under the WBCL. None of the shares of Purchaser Common Stock to be issued in exchange for shares of Target Common Stock upon consummation of the Merger will be, and to Purchaser’s Knowledge, none of the outstanding shares of Purchaser capital stock has been, issued in violation of any preemptive rights of the current or past shareholders of Purchaser.

(b) Except as set forth in Section 6.3 of this Agreement, there are no (i) shares of capital stock, preferred stock or other equity securities of Purchaser outstanding or (ii) outstanding Equity Rights relating to the capital stock of Purchaser.

6.4 Purchaser Subsidiaries . Except as set forth in Section 6.4 of the Purchaser Disclosure Memorandum , Purchaser or one of its wholly owned Subsidiaries owns all of the issued and outstanding shares of capital stock (or other equity interests) of each Purchaser Subsidiary. No capital stock (or other equity interest) of any Purchaser Subsidiary is or may become required to be issued (other than to another Purchaser Entity) by reason of any Equity Rights, and there are no Contracts by which any Purchaser Subsidiary is bound to issue (other than to another Purchaser Entity) additional shares of its capital stock (or other equity interests) or Equity Rights or by which any Purchaser Entity is or may be bound to transfer any shares of the capital stock (or other equity interests) of any Purchaser Subsidiary (other than to another Purchaser Entity). There are no Contracts relating to the rights of any Purchaser Entity to vote or to dispose of any shares of the capital stock (or other equity interests) of any Purchaser Subsidiary. All of the shares of capital stock (or other equity interests) of each Purchaser Subsidiary held by a Purchaser Entity are fully paid and (except pursuant to 12 U.S.C. Section 55) nonassessable and are owned by the Purchaser Entity free and clear of any Lien. Each Purchaser Subsidiary is either a bank, a corporation, a statutory trust or a limited liability company, and each such Purchaser Subsidiary is duly organized, validly existing, and in good standing under the Laws of the jurisdiction in which it is incorporated or organized, and has the corporate power and authority necessary for it to own, lease and operate its Assets and to carry on its business as now conducted. Each Purchaser Subsidiary is duly qualified or licensed to transact business as a foreign corporation in good standing in the jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Purchaser Material Adverse Effect.

6.5 Financial Statements . Purchaser has delivered to Target copies of all Purchaser Financial Statements and will deliver to Target copies of all similar financial statements prepared subsequent to the date hereof. The Purchaser Financial Statements and any supplemental financial statements (as of the date thereof and for the periods covered thereby) (a) are, or if dated after the date of this Agreement will be, in accordance with the books and records of Purchaser, which are and will be, as the case may be, complete and correct in all material respects and which have been or will have been, as the case may be, maintained in accordance with good business practices, (b) present or will present, as the case may be and in all material respects, fairly the financial position of Purchaser as of the dates indicated and the results of operation, changes in shareholders’ equity, and cash flows of Purchaser for the periods indicated, in accordance with GAAP (subject to any exceptions as to consistency specified therein or as may be indicated in the notes thereof or, in the case of interim financial statements, to the normal recurring year-end adjustments that are not material in any amount or effect), and (c) do not or will not, as the case may be, contain any untrue statement of a material fact omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading.

6.6 Absence of Undisclosed Liabilities . To Purchaser’s Knowledge, the Purchaser Entities have no Liabilities of a nature required to be reflected on consolidated balance sheets prepared in accordance with GAAP, except Liabilities that are accrued or reserved against in the consolidated balance sheet of the Purchaser Entities as of September 30, 2012, included in the Purchaser Financial Statements or reflected in the

notes thereto. The Purchaser Entities have not incurred or paid any Liability since September 30, 2012, except for such Liabilities incurred or paid (i) in the ordinary course of business consistent with past business practice and that are not reasonably likely to have, individually or in the aggregate, a Purchaser Material Adverse Effect, or (ii) in connection with the transactions contemplated by this Agreement.

6.7 Absence of Certain Changes or Events . Since September 30, 2012, except as disclosed in the Purchaser Financial Statements, (i) to Purchaser’s Knowledge, there have been no events, changes or occurrences which have had, or are reasonably likely to have, individually or in the aggregate, a Purchaser Material Adverse Effect, (ii) Purchaser has not declared, set aside for payment or paid any dividend to holders of, or declared or made any distribution on, any Shares of Purchaser Common Stock and (iii) none of the Purchaser Entities has taken any action, or failed to take any action, prior to the date of this Agreement, which action or failure, if taken after the date of this Agreement, would represent or result in a material breach or violation of any of the covenants and agreements of Purchaser provided in Article 8. Except as may result from the transactions contemplated by this Agreement, no Purchaser Entity has, since September 30, 2012:

(a) suffered over $150,000 in damage, destruction or loss to immovable or movable property, whether or not covered by insurance;

(b) failed to operate its business in the ordinary course consistent with past practices, or failed to use reasonable efforts to preserve its business or to preserve the goodwill of its customers and others with whom it has business relations;

(c) forgiven any debt owed to it in excess of $150,000, or canceled any of its claims or paid any of its noncurrent obligations or Liabilities except in the ordinary course of business;

(d) except as required in accordance with GAAP, changed any accounting practice followed or employed in preparing the Purchaser Financial Statements;

(e) except as required by the terms of this Agreement or pursuant to the exercise of outstanding Purchaser Options, authorized or issued any additional shares of Purchaser Common Stock, Purchaser Preferred Stock or Equity Rights of the Purchaser; or

(f) entered into any agreement, contract or commitment to do any of the foregoing.

6.8 Tax Matters .

(a) All Tax Returns required to be filed by or on behalf of any Purchaser Entity have been timely filed or requests for extensions have been timely filed, granted, and have not expired for all periods ended on or before the date of the most recent fiscal year end immediately preceding the Effective Time and all Tax Returns filed are complete and accurate in all material respects. All Taxes shown on filed Tax Returns have been paid. The Purchaser Financial Statements reflect adequate reserves for any audit examination, deficiency, or refund Litigation with respect to any Taxes. Except for an audit of its 2010 consolidated federal income tax return, Purchaser’s federal income Tax Returns have not been audited by the IRS. All Taxes and other Liabilities due with respect to completed and settled examinations or concluded Litigation have been paid and, to Purchaser’s Knowledge, Purchaser shall not incur any interest, penalty or assessment in excess of $150,000 as a result of the audit of Purchaser’s 2010 consolidated federal income tax return. There are no Liens with respect to Taxes upon any of the Assets of Purchaser.

(b) No Purchaser Entity has executed an extension or waiver of any statute of limitations on the assessment or collection of any Tax due that is currently in effect.

(c) The provision for any Taxes due or to become due for any Purchaser Entity for the period or periods through and including the date of the respective Purchaser Financial Statements that has been made and is reflected on such Purchaser Financial Statements is sufficient to cover all such Taxes.

(d) Deferred Taxes of the Purchaser Entities have been provided for in accordance with GAAP.

(e) The Purchaser Entities are in compliance with, and their records contain all information and documents (including properly completed IRS Forms W-9) necessary to comply with, all applicable information reporting and Tax withholding requirements under federal, state, and local Tax Laws, and such records identify with specificity all accounts subject to backup withholding under Section 3406 of the Internal Revenue Code, except where any such failure to comply would not reasonably be expected to have a Purchaser Material Adverse Effect.

(f) No Purchaser Entity has experienced a change in ownership with respect to its stock, within the meaning of Section 382 of the Internal Revenue Code, other than the ownership change that will occur as a result of the transactions contemplated by this Agreement.

(g) To the Knowledge of the Purchaser Entities, there is no pending claim by any taxing authority of a jurisdiction where either the Purchaser or Purchaser Bank has not filed Tax Returns that either Purchaser or Purchaser Bank is subject to taxation in that jurisdiction.

(h) Neither Purchaser nor Purchaser Bank has ever been a member of an “affiliated group” within the meaning of Code Section 1504(a) filing a consolidated federal income tax return, other than the “affiliated group” of which Purchaser is the “common parent.” Neither Purchaser nor Purchaser Bank is a party to any Tax sharing or Tax allocation agreement that will remain in effect after consummation to the Mergers contemplated by this Agreement.

(i) Purchaser has not taken or agreed to take any action, and has no Knowledge of any fact or circumstance that is reasonably likely, to (i) prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially impede or delay receipt of any Consents of Regulatory Authorities referred to in Section 9.1 or result in the imposition of a condition or restriction of the type referred to in the last sentence of such Section.

6.9 Compliance with Laws . Purchaser is a Wisconsin corporation and a registered bank holding company under the BHC Act, as amended, and has in effect all Permits necessary for it to own, lease, or operate its Assets and to carry on its business as now conducted, and there has occurred no Default under any such Permit, except where such Default would not have a Purchaser Material Adverse Effect. No Purchaser Entity is:

(a) in Default under any of the provisions of its respective Articles of Incorporation or Bylaws (or other governing instruments);

(b) in Default under any Laws, Orders, or Permits applicable to its business or employees conducting its business, except where such Default would not have a Purchaser Material Adverse Effect; or

(c) since January 1, 2010, in receipt of any written notification or communication from any agency or department of federal, state, or local government or any Regulatory Authority or the staff thereof (i) asserting that any Purchaser Entity is not in compliance with any of the Laws or Orders which such governmental authority or Regulatory Authority enforces, (ii) threatening to revoke any Permits or (iii) requiring the Purchaser Entity to enter into or consent to the issuance of a cease and desist order, formal agreement, directive, commitment, or memorandum of understanding, or to adopt any Board resolution or similar undertaking, which restricts materially the conduct of its business or in any manner relates to its capital adequacy, its credit or reserve policies or its management.

(d) Purchaser Bank is a national bank chartered under the Laws of the United States of America whose deposits are, and will at the Effective Time be, insured by the FDIC to the extent such insurance is available.

6.10 Legal Proceedings .

(a) There is no Litigation instituted, pending or, to the Knowledge of Purchaser, threatened, against any Purchaser Entity, or against any employee benefit plan of the Purchaser Entities, or against any Asset, interest or right of any of them, that in any case individually seeks damages in excess of $50,000 and that otherwise would have, or reasonably be expected to have, a Purchaser Material Adverse Effect.

(b) There are no material uncured violations, or violations with respect to which material refunds or restitution may be required, cited in any compliance report to any Purchaser Entity as a result of examination by any bank or bank holding company regulatory authority.

6.11 Internal Accounting . The Purchaser Entities maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit the preparation of financial statements in conformity with GAAP and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference.

6.12 Community Reinvestment Act . Purchaser Bank has complied in all material respects with the provisions of the CRA and the rules and regulations thereunder, has a CRA rating of not less than “satisfactory,” and has received no material criticism from regulators with respect to discriminatory lending practices, and has no Knowledge of any conditions or circumstances that are likely to result in CRA ratings of less than “satisfactory” or material criticism from regulators with respect to discriminatory lending practices.

6.13 Board Recommendation . The Board of Directors of Purchaser, at a meeting duly called and held, has by unanimous vote of the directors present (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, taken together, are fair to and in the best interests of the shareholders; and (ii) approved this Agreement.

6.14 Brokers . Except for Sandler O’Neill & Partners, L.P., no broker, finder, or investment banker is entitled to any brokerage fee, finder’s fee, or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Purchaser.

6.15 Loan and Investment Portfolios . As of the date of this Agreement, all loans, discounts and financing leases reflected on the Purchaser Financial Statements were, and with respect to the Purchaser Financial Statements delivered as of the dates subsequent to the execution of this Agreement, will be as of the dates thereof, (a) at the time and under the circumstances in which made, made for good, valuable and adequate consideration in the ordinary course of business, (b) evidenced by genuine notes, agreements or other evidences of indebtedness and (c) to the extent secured, have been secured by valid liens and security interests that have been perfected. Except as set forth in Section 6.15 of the Purchaser Disclosure Memorandum , no Purchaser Entity is a party to any written or oral loan agreement, note or borrowing arrangement, including any loan guaranty, that was, as of the most recent month-end or other date referenced in such schedule, (i) delinquent by more than 30 days in the payment of principal or interest, (ii) known by the Purchaser Entities to be otherwise in Default for more than 30 days, (iii) classified as “substandard,” “doubtful,” “loss,” “other assets especially mentioned” or any comparable classification by Purchaser, the FDIC or the DFI, or (iv) an obligation of any director, executive officer or 10% shareholder of Purchaser who is subject to Regulation O of the Federal Reserve Board (12 C.F.R. Part 215), or any person, corporation or enterprise controlling, controlled by or under common control with any of the foregoing.

6.16 Allowance for Possible Loan Losses . The Allowance shown on the consolidated balance sheets of the Purchaser Entities included in the Purchaser Financial Statements and the allowance shown on the consolidated balance sheets of the Purchaser Entities as of dates subsequent to the execution of this Agreement will be, as of the dates thereof, adequate in the judgment of Purchaser’s management and consistent with GAAP and applicable regulatory requirements or guidelines to provide for all known or reasonably anticipated losses relating to or inherent in the loan and lease portfolios (including accrued interest receivables) of the Purchaser Entities and other extensions of credit (including letters of credit and commitments to make loans or extend credit) by Purchaser as of the dates thereof.

6.17 Regulatory Reports .

(a) Since January 1, 2010, the Purchaser Entities have timely filed all reports and statements, together with any amendments required to be made with respect thereto, that it was required to file with Regulatory Authorities. As of their respective dates, each of such reports and documents, including the financial statements, exhibits, and schedules thereto, complied in all material respects with all applicable

Laws. As of its respective date, each such report and document did not, in all material respects, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(b) Each of the Purchaser Financial Statements (including, in each case, any related notes) contained in the Purchaser Regulatory Reports complied as to form in all material respects with the applicable published rules and regulations of the appropriate Regulatory Authorities, was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements), and fairly presented in all material respects the consolidated financial position of the Purchaser Entities as at the respective dates and the consolidated results of operations and cash flows for the periods indicated.

6.18 Bank Secrecy Act Compliance . Purchaser Bank is in compliance in all material respects with the provisions of the Bank Secrecy Act, and all regulations promulgated thereunder including, but not limited to, those provisions of the Bank Secrecy Act that address suspicious activity reports and compliance programs. Purchaser Bank has implemented a Bank Secrecy Act compliance program that adequately covers all of the required program elements as required by 12 C.F.R. §21.21.

ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION

7.1 Affirmative Covenants of Each Party . From the date of this Agreement until the earlier of the Effective Time or the termination of this Agreement, unless the prior written consent of the other Party shall have been obtained, and except as otherwise expressly contemplated herein, each Party shall and shall cause each of its Subsidiaries to (a) operate its business only in the usual, regular, and ordinary course, (b) preserve intact its business organization and material Assets and maintain its rights and franchises, and (c) take no action that would (i) materially adversely affect the ability of either Party to obtain any Consents required for the transactions contemplated hereby without imposition of a condition or restriction of the type referred to in the last sentences of Section 9.1(b) or 9.1(c), or (ii) materially adversely affect the ability of either Party to perform its covenants and agreements under this Agreement.

7.2 Negative Covenants of Target . From the date of this Agreement until the earlier of the Effective Time or the termination of this Agreement, unless the prior written consent of Purchaser shall have been obtained, which consent shall not be unreasonably withheld, and except as otherwise expressly contemplated herein, Target covenants and agrees that it will not do or agree or commit to do or permit any Target Entity to agree or commit to do any of the following:

(a) amend the Articles of Incorporation, Bylaws or other governing instruments of any Target Entity in any manner that adversely affects the rights of the holders of Target capital stock, or

(b) incur or permit any Target Subsidiary to incur any additional debt obligation or other obligation for borrowed money in excess of an aggregate of $50,000 except in the ordinary course of business of Target or any Target Subsidiary consistent with past practices (which shall include creation of deposit liabilities, purchases of federal funds, advances from the Federal Reserve Bank or Federal Home Loan Bank, and entry into repurchase agreements fully secured by U.S. government or agency securities), or impose, or suffer the imposition, on any Asset of any Target Entity, of any Lien or permit any such Lien to exist (other than in connection with deposits, repurchase agreements, Bankers acceptances, “treasury tax and loan” accounts established in the ordinary course of business, the satisfaction of legal requirements in the exercise of trust powers, and Liens in effect as of the date hereof; or

(c) repurchase, redeem, or otherwise acquire or exchange (other than exchanges in the ordinary course under employee benefit plans or in connection with the exercise of its existing Target Options), directly or indirectly, any shares, with the exception of the redemption or repurchase of the Target Preferred Stock pursuant to Section 9.1(g) hereof, or any securities convertible into any shares, of Target’s capital stock, or declare or pay any dividend or make any other distribution in respect of Target’s capital stock other than the Target Preferred Stock; or

(d) issue, sell, pledge, encumber, authorize the issuance of, enter into any Contract to issue, sell, pledge, encumber, or authorize the issuance of, or otherwise permit to become outstanding, any additional shares of Target Common Stock or any other capital stock of Target, or any stock appreciation rights, or any option, warrant, or other Equity Right, except pursuant to the exercise of Target Options; or

(e) adjust, split, combine or reclassify any shares of Target Common Stock or issue or authorize the issuance of any other securities in respect of or in substitution for shares of Target Common Stock or sell, lease, mortgage or otherwise dispose of or otherwise encumber any Asset having a book value in excess of $50,000 other than in the ordinary course of business for reasonable and adequate consideration; or

(f) except for purchases of securities in the ordinary course of business, purchase any securities or make any material investment, either by purchase of stock or securities, contributions to capital, Asset transfers, or purchase of any Assets, in any Person, or otherwise acquire direct or indirect control over any Person, other than in connection with (i) foreclosures in the ordinary course of business, (ii) acquisitions of control by a depository institution Subsidiary in its fiduciary capacity, or (iii) the creation of new wholly owned Subsidiaries organized to conduct or continue activities otherwise permitted by this Agreement; or

(g) (i) increase the rate of compensation payable or to become payable to any director, employee or consultant of the Target Group, other than in the ordinary course of business and consistent with past practice or, in the case of any consultant of the Target Group, payment at his, her or its existing hourly rates in connection with the negotiation of this agreement and the consummation of the transactions contemplated herein; (ii) amend or enter into any employment, severance, change in control or similar Contract with any such director, employee or other service provider; (iii) pay or agree to pay any bonuses or other compensation, other than in the ordinary course of business and consistent with past practice, to any such director, employee or other service provider; (iv) amend any Target Plan, other than any amendment required by Law; (v) adopt any new plan, program, policy or arrangement, which if it existed as of the Closing Date, would constitute a Target Plan; or (vi) terminate any existing Target Plan; or

(h) make any significant change in any Tax or accounting methods or systems of internal accounting controls, except as may be appropriate to conform to changes in Tax Laws or regulatory accounting requirements or GAAP; or

(i) commence any Litigation other than in accordance with past practice, or settle any Litigation involving any Liability of any Target Entity for over $50,000 in money damages or any restrictions upon the operations of the Target Entities; or

(j) except in the ordinary course of business, enter into, modify, amend or terminate any Contract (including any loan Contract with an unpaid balance) or waive, release, compromise or assign any right or claim in an amount exceeding $50,000.

7.3 Negative Covenants of Purchaser . From the date of this Agreement until the earlier of the Effective Time or the termination of this Agreement, unless the prior written consent of Purchaser shall have been obtained, which consent shall not be unreasonably withheld, and except as otherwise expressly contemplated herein, Purchaser covenants and agrees that it will not do or agree or commit to do or permit any Purchaser Entity to agree or commit to do any of the following:

(a) amend the Articles of Incorporation, Bylaws or other governing instruments of any Purchaser Entity, or

(b) repurchase, redeem, or otherwise acquire or exchange (other than transactions under employee benefit plans in the ordinary course of business or repurchases of up to an aggregate of 10,000 shares of Purchaser Common Stock), directly or indirectly, any shares, or any securities convertible into any shares, of Purchaser’s capital stock, or declare or pay any dividend or make any other distribution in respect of Purchaser’s capital stock except for scheduled dividends on the Purchaser Series C Preferred Stock); or

(c) except as required by the terms of this Agreement or as set forth in Section 7.3(c) of the Purchaser Disclosure Memorandum , issue, sell, pledge, encumber, authorize the issuance of, or enter into any Contract to issue, sell, pledge, encumber, or authorize the issuance of, or otherwise permit to become

outstanding, any additional shares of Purchaser Common Stock or any other capital stock of Purchaser, or any stock appreciation rights, or any option, warrant, or other Equity Right, except in the ordinary course of business; or

(d) adjust, split, combine or reclassify any shares of Purchaser Common Stock or issue or authorize the issuance of any other securities in respect of or in substitution for shares of Purchaser Common Stock, or sell, lease, mortgage or otherwise dispose of or otherwise encumber any Asset having a book value in excess of $150,000 other than in the ordinary course of business for reasonable and adequate consideration; or

(e) make any significant change in any Tax or accounting methods or systems of internal accounting controls, except as may be appropriate to conform to changes in Tax Laws or regulatory accounting requirements or GAAP.

7.4 Adverse Changes in Condition . Each Party agrees to give written notice promptly to the other Party upon becoming aware of the occurrence or impending occurrence of any event or circumstance relating to it or any of its Subsidiaries that (i) is reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect or a Purchaser Material Adverse Effect, as applicable, or (ii) would cause or constitute a material breach of any of its representations, warranties, or covenants contained herein, and to use its reasonable efforts to prevent or promptly remedy the same.

7.5 Reports . Each Party and its Subsidiaries shall file all reports required to be filed by it with Regulatory Authorities between the date of this Agreement and the Effective Time and shall deliver to the other Party copies of all such reports promptly after the same are filed.

ARTICLE 8
ADDITIONAL AGREEMENTS

8.1 Purchaser Registration Statement .

(a) Purchaser will promptly prepare and file a Registration Statement on Form S-4 (which will include the Proxy Statement) complying with all the requirements of the 1933 Act (and the rules and regulations thereunder) applicable thereto, for the purpose, among other things, of registering the Purchaser Common Stock that will be issued to the holders of Target Common Stock pursuant to the Merger. Purchaser shall use commercially reasonable efforts to file the Registration Statement within 60 days after the date hereof, to cause the Registration Statement to become effective as soon as practicable, to qualify the Purchaser Common Stock under the Securities Laws of such jurisdictions as may be required and to keep the Registration Statement and such qualifications current and in effect for so long as is necessary to consummate the transactions contemplated hereby. As a result of the registration of the Purchaser Common Stock pursuant to the Registration Statement, such stock shall be freely tradable by the shareholders of Target except to the extent that the transfer of any shares of Purchaser Common Stock received by shareholders of Target is subject to the provisions of Rule 145 under the Securities Act or restricted under applicable Tax rules. Target and its counsel shall have reasonable opportunity to review and comment on the Registration Statement being filed with the SEC and any responses filed with the SEC regarding the Registration Statement. The Parties shall deliver to each other copies of all filings, correspondence, orders and any other documents to and from all Regulatory Authorities, including the SEC, and shall promptly relay to each other any oral communications to and from all such Regulatory Authorities, in connection with the Form S-4 and any documents related thereto.

(b) Each of the Parties will cooperate in the preparation of the Registration Statement and Proxy Statement that complies with the requirements of the Securities Laws, for the purpose of submitting this Agreement and the transactions contemplated hereby to the Target’s shareholders and to the Purchaser’s shareholders for approval. Each of the Parties will as promptly as practicable after the date hereof furnish all such data and information relating to it and its Subsidiaries, as applicable, as the other Party may reasonably request for the purpose of including such data and information in the Registration Statement and the Proxy Statement. None of the information to be supplied by the Parties for inclusion in (i) the Registration Statement will, at the time the Registration Statement becomes effective under the Securities Act, contain any untrue

statement of a material fact required to be stated therein or necessary to make the statements therein, not misleading, (ii) the Proxy Statement will, at the date it is first mailed to the Target’s shareholders and at the time of the Target shareholders’ meeting (except to the extent amended or supplemented by a subsequent communication), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading or (iii) any other document filed with any other regulatory agency in connection herewith will, at the time such document is filed, fail to comply as to form in all material respects with the provisions of applicable Law. The Proxy Statement will comply as to form in all material respects with any applicable requirements of the 1934 Act and the rules and regulations thereunder, except that no representation or warranty is made by either Party with respect to statements made or incorporated by reference therein based on information supplied by the other Party for inclusion or incorporation by reference in the Proxy Statement.

8.2 Applications . Purchaser shall promptly prepare and file, and Target shall cooperate in the preparation and, where appropriate, filing of, applications with all Regulatory Authorities having jurisdiction over the transactions contemplated by this Agreement seeking the requisite Consents necessary to consummate the transactions contemplated by this Agreement. Purchaser shall use commercially reasonable efforts to file such applications no later than sixty (60) days from the date hereof. The Parties shall deliver to each other copies of all filings, correspondence and orders to and from all Regulatory Authorities and shall promptly relay to each other any oral communications to and from all Regulatory Authorities in connection with the transactions contemplated hereby.

8.3 Filings of Articles of Merger . Upon the terms and subject to the conditions of this Agreement, Purchaser shall execute and file Articles of Merger for the Merger with the DFI in connection with the Closing.

8.4 Investigation and Confidentiality .

(a) Prior to the Effective Time, each Party shall keep the other Party advised of all material developments relevant to its business and to consummation of the Mergers and shall permit the other Party to make or cause to be made such investigation of the business and properties of it and its Subsidiaries and of their respective financial and legal conditions as the other Party reasonably requests, provided that such investigation shall be reasonably related to the transactions contemplated hereby and shall not interfere unnecessarily with normal operations. No investigation by a Party shall affect the representations and warranties of the other Party.

(b) The Parties will not disclose, and will cause their respective representatives to not disclose, directly or indirectly, before or after the consummation or termination of this Agreement, any confidential information, whether written or oral, furnished to it by the other Party concerning its and its Subsidiaries’ businesses, operations, and financial positions, to any Person for any reason other than in connection with the regulatory notice and application process or as otherwise required by Law or, after termination of this Agreement pursuant to Section 10.1 hereof, use such Subject Information for its own purposes or for the benefit of any other Person under any circumstances. The term “Subject Information” does not include any information that (i) at the time of disclosure or thereafter is generally available to and known to the public, other than by a Breach of this Agreement by the disclosing Party, (ii) was available to the disclosing Party on a non-confidential basis from a source other than the non-disclosing Party or (iii) was independently acquired or developed without violating any obligations of this Agreement. If this Agreement is terminated prior to the Effective Time, each Party shall promptly return or certify the destruction of all documents and copies thereof and all work papers containing confidential information received from the other Party.

(c) Each Party agrees to give the other Party notice as soon as practicable after any determination by it of any fact or occurrence relating to the other Party which it has discovered through the course of its investigation and which represents, or is reasonably likely to represent, either a material breach of any representation, warranty, covenant or agreement of the other Party or which has had or is reasonably likely to have a Target Material Adverse Effect or a Purchaser Material Adverse Effect, as applicable.

8.5 No Solicitations .

(a) Except as contemplated by Section 8.5(c) of this Agreement and prior to the Effective Time or until the termination of this Agreement, Target shall not, and shall use its best efforts to ensure that its directors, officers, employees, advisers and agents shall not, directly or indirectly, without the prior written approval of Purchaser,

(i) solicit, initiate or authorize inquiries, discussions, negotiations, or submissions of proposals with respect to, furnish any information regarding, enter into any Contract with respect to or participate in any Acquisition Proposal;

(ii) knowingly provide or furnish any nonpublic information about or with respect to the Target and Target Bank; or

(iii) subject to Section 8.5(c) below, withdraw its recommendation to the holders of Target Common Stock regarding the Merger or make a recommendation regarding any Acquisition Transaction.

(b) Target shall instruct its officers, directors, agents and affiliates to refrain from doing any of the above and will notify Purchaser promptly if any such inquiries or proposals are received by it, any such information is requested from it, or any such negotiations or discussions are sought to be initiated with any of its officers, directors, agents and affiliates.

(c) Nothing contained in this Section 8.5 shall prohibit any officer or director of Target from taking any action that the Board of Directors of Target shall determine in good faith, after consultation with legal counsel, is required by law or is required to discharge his or her fiduciary duties to Target and its shareholders, including the approval of an Acquisition Proposal and the termination of this Agreement.

(d) Target shall immediately cease and cause to be terminated all existing discussions or negotiations with any persons conducted with respect to any Acquisition Transaction except those contemplated by this Agreement.

(e) Each Party shall promptly advise the other Party following the receipt of any Acquisition Proposal and the details thereof, including but not limited to the identity of the Person making the offer, proposal, inquiry or request and the terms of such offer, proposal, inquiry or request, and advise the other Party of any developments with respect to such Acquisition Proposal promptly upon the occurrence thereof.

8.6 Press Releases . Prior to the Effective Time, Target and Purchaser shall consult with each other as to the form and substance of any press release or other public disclosure materially related to this Agreement or any other transaction contemplated hereby; provided, that nothing in this Section 8.6 shall be deemed to prohibit any Party from making any disclosure its legal counsel deems necessary or advisable in order to satisfy such Party’s disclosure obligations imposed by Law, including any disclosure obligations that may be imposed by the SEC.

8.7 Tax Treatment . Each of the Parties undertakes and agrees to use its reasonable efforts to cause the Mergers to qualify as a tax-free “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code for federal income tax purposes and to take no action which would cause the Mergers not to so qualify.

8.8 Agreement of Affiliates .

(a) Target shall use its reasonable efforts to cause each Person set forth on Section 8.8 of the Target Disclosure Memorandum to deliver to Purchaser not later than 30 days after the date of this Agreement, a written agreement substantially in the form of Exhibit C-1 .

(b) Purchaser shall use its reasonable efforts to cause each Person set forth in Section 8.8 of the Purchaser’s Disclosure Memorandum to deliver to Target not later than 30 days after the date of this Agreement, a written agreement substantially in the Form of Exhibit C-2 .

8.9 Indemnification and Insurance .

(a) Purchaser covenants and agrees that all rights to indemnification (including, without limitation, rights to mandatory advancement of expenses) and all limitations of liability existing in favor of indemnified parties under Target’s Articles of Incorporation and Bylaws as in effect as of the date of this Agreement with respect to matters occurring prior to or at the Effective Time (an “Indemnified Party”) shall survive the Merger and shall continue in full force and effect, without any amendment thereto, for a period concurrent with the applicable statute of limitations; provided, however, that all rights to indemnification in respect of any claim asserted or made as to which Purchaser is notified in writing within such period shall continue until the final disposition of such claim. Promptly after receipt by an Indemnified Party of notice of the commencement of any action, such Indemnified Party shall, if a claim in respect thereof is to be made against Purchaser under such subparagraph, notify Purchaser in writing of the commencement thereof. In case any such action shall be brought against any Indemnified Party, Purchaser shall be entitled to participate therein and, to the extent that it shall wish, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Party, and, after notice from Purchaser to such Indemnified Party of its election so to assume the defense thereof, Purchaser shall not be liable to such Indemnified Party under such subparagraph for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Party; provided, however, if Purchaser elects not to assume such defense or if counsel for the Indemnified Party advises Purchaser in writing that there are material substantive issues that raise conflicts of interest between Purchaser or Target and the Indemnified Party, such Indemnified Party may retain counsel satisfactory to it, and Purchaser shall pay all reasonable fees and expenses of such counsel for the Indemnified Party promptly as statements therefor are received. Notwithstanding the foregoing, Purchaser shall not be obligated to pay the fees and expenses of more than one counsel for all Indemnified Parties in respect of such claim unless in the reasonable judgment of an Indemnified Party a conflict of interest exists between an Indemnified Party and any other Indemnified Parties in respect to such claims.

(b) Target covenants and agrees that it shall use its best efforts to cause the persons serving as its officers or directors of the Target Entities immediately prior to the Effective Time to be covered for a period of six years from the Effective Time (or such lesser period of time reasonably acceptable to the Parties) by the directors’ and officers’ liability insurance policy maintained by Target with respect to acts or omissions occurring prior to or at the respective effective times that were committed by such officers and directors in their capacity as such; provided that (i) Purchaser may in its reasonable discretion with the consent of Target, with such consent not to be unreasonably withheld, substitute a policy or policies with at least the same coverage and amounts and terms and conditions that are no less advantageous (or with Target’s consent, given prior to the Effective Time, any other policy); and (ii) the aggregate premium to be paid by Target for such insurance shall not exceed 200% of the most current annual premium paid by Target for its directors and officers liability insurance without Purchaser’s prior approval.

(c) Purchaser covenants and agrees that if Purchaser or any of its successors or assigns (i) shall consolidate with or merge into any corporation or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and assets to any Person, then and in each such case, proper provisions shall be made so that the successors and assigns of Purchaser shall assume the obligations set forth in this Section 8.9.

(d) The provisions of this Section 8.9 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives.

(e) The Parties acknowledge that Section 18(k) of the Federal Deposit Insurance Act provides that no payment may be made by any insured depository institution or its holding company for the benefit of any person who is or was an institution-affiliated party to pay or reimburse such person for any liability or legal expense with regard to any administrative proceeding or civil action instituted by the appropriate federal banking agency which results in a final order under which such person (1) is assessed a civil money penalty, (2) is removed or prohibited from participating in the conduct of the affairs of the insured depository institution, or (3) is required to take an affirmative action to correct or remedy a regulatory violation. Accordingly, the Parties recognize that the indemnification provisions set forth in this Section 8.9

are subject to and limited by the provisions of Section 18(k) of the Federal Deposit Insurance Act and its accompanying regulations.

8.10 Employee Benefits and Contracts . Following the Effective Time, Purchaser shall provide generally to officers and employees of the Target Entities who continue employment with Purchaser or any of its Subsidiaries employee benefits, including compensation, on terms and conditions which, when taken as a whole, are substantially similar to those then currently provided by Purchaser to its other similarly situated officers and employees. For purposes of benefit accrual (but only for purposes of determining benefits accruing under payroll practices such as vacation policy or under fringe benefit programs that do not rise to the level of a “plan” within the meaning of Section 3(3) of ERISA) and for purposes of determining eligibility to participate and vesting determinations in connection with the provision of any such employee benefits generally, service with the Target Entities prior to the Effective Date shall be counted. All accrued balances in Target’s Short Term Disability Bank as of December 31, 2012 shall transfer and otherwise be made available to each eligible employee of Target pursuant to the terms of Purchaser’s Long-Term Sick Pay policies then in effect, provided that upon a termination of employment, any such eligible employee shall be entitled to receive at least his or her accrued balance under Target’s Short Term Disability Bank as of December 31, 2012, to the extent not used under Purchaser’s Long-Term Sick Pay policies. All 2013 accrued and unused paid time off balances of Target’s employees as of the Effective Time shall transfer to Purchaser’s Vacation Pay and Personal Pay policies and their applicable accrual schedules then in effect on a pro-rata basis. If Purchaser shall terminate any “group health plan,” within the meaning of Section 4980B(g)(2) of the Internal Revenue Code, in which one or more employees of a Target Entity participated immediately prior to the Effective Time (a “Company Health Plan”), Purchaser shall cause any successor group health plan to waive any underwriting requirements; to give credit for any such employee’s participation in the Company Health Plan prior to the Effective Time for purposes of applying any waiting period and/or pre-existing condition limitations set forth therein; and, if such transition occurs during the middle of the plan year for such a Company Health Plan, to give credit towards satisfaction of any annual deductible limitation and out-of pocket maximum applied under such successor group health plan for any deductible amounts and co-payments previously paid by any such employee respecting his or her participation in that Company Health Plan during that plan year prior to the Effective Time. Purchaser also shall be considered a successor employer for and shall provide to “qualified beneficiaries,” determined immediately prior to the Effective Time, under any Target Plan appropriate “continuation coverage” (as those terms are defined in Section 4980B of the Internal Revenue Code) following the Effective Time under either the Target Plan or any successor group health plan maintained by Purchaser. At the request of Purchaser, the Target Entities will take all appropriate action to terminate, prior to the Effective Time, the Target’s Directors Deferred Compensation Plan and any retirement plan maintained by the Target Entities that is intended to be qualified under Section 401(a) of the Internal Revenue Code.

8.11 Authorization and Approval of Purchaser Common Stock . Purchaser shall, as of the date hereof, authorize, if necessary, and reserve the maximum number of shares of Purchaser Common Stock to be issued pursuant to this Agreement and take all other necessary corporate action to issue the Purchaser Common Stock pursuant to the terms of this Agreement.

8.12 Supplemental Indenture . On or prior to the Closing Date, the Purchaser shall execute a Supplemental Indenture relating to the Junior Subordinated Debentures issued by Target pursuant to that certain Indenture dated October 14, 2005, between Target, as issuer, and Wilmington Trust Company, as trustee pursuant to which Purchaser shall assume all liabilities outstanding under the Junior Subordinated Debentures as of the Closing Date.

8.13 Repurchase or Redemption of Target Preferred Stock . Purchaser covenants and agrees that if Target is unable to repurchase or redeem the Target Preferred Stock because of an inability to receive the appropriate Consent from the Regulatory Authorities that Purchaser shall purchase all outstanding Target Preferred Stock from the U.S. Department of the Treasury for a maximum purchase price of $12.0 million.

8.14 Payment of Target Trust Preferred Interest Payments . Purchaser covenants and agrees that if Target is unable to pay all accrued and unpaid interest on the Debentures that is due and payable under the terms of the Indenture as of the Closing Date because of an inability to receive the appropriate Consent from the Regulatory Authorities that Purchaser shall pay all such accrued and unpaid interest on the Debentures.

8.15 Prosecution of Regulatory Approvals . Purchaser covenants and agrees that Purchaser shall use its best efforts to ensure that all Consents of Regulatory Authorities required pursuant to Section 9.1(b) are obtained on or prior to the Closing Date and that Purchaser shall satisfy any conditions or remove any restrictions (other than such conditions or restrictions as are referred to in the last sentence of Section 9.1(b)) placed on the Consents by the Regulatory Authorities prior to Closing.

8.16 Meetings of Shareholders . Each Party will, as soon as practicable, take all steps under applicable Law and its Articles of Incorporation and Bylaws to call, give notice of, convene and hold a meeting of its shareholders at such times as may be mutually agreed to by the Parties for the purpose of approving this Agreement and the transactions contemplated hereby. Unless otherwise required by the fiduciary duties of its Board of Directors under applicable Law, each Party’s Board of Directors will recommend to such Party’s shareholders the approval of this Agreement and the transactions contemplated hereby and each Party will use its best efforts to obtain the necessary approval by its shareholders of this Agreement and the transactions contemplated hereby.

ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE

9.1 Conditions to Obligations of Each Party . The respective obligations of each Party to perform this Agreement and consummate the Mergers and the other transactions contemplated hereby are subject to the satisfaction of the following conditions, unless waived by both Parties pursuant to Section 11.5:

(a) Shareholder Approval . The shareholders of Target and the shareholders of Purchaser shall have approved this Agreement, and the consummation of the transactions contemplated hereby, including the Merger and the Bank Merger, as and to the extent required by Law and, by the provisions of any governing instruments.

(b) Regulatory Approvals . All Consents of, filings and registrations with, and notifications to, all Regulatory Authorities required for consummation of the Merger and the Bank Merger shall have been obtained or made and shall be in full force and effect and all waiting periods required by Law shall have expired. No Consent obtained from any Regulatory Authority that is necessary to consummate the transactions contemplated hereby shall be conditioned or restricted in a manner (including requirements relating to the raising of additional capital or the disposition of Assets) which in the reasonable judgment of the Board of Directors of either Party would so materially adversely impact the economic or business benefits of the transactions contemplated by this Agreement that, had such condition or requirement been known, such Party would not, in its reasonable judgment, have entered into this Agreement.

(c) Consents and Approvals . Each Party shall have obtained any and all Consents required for consummation of the Mergers (other than those referred to in Section 9.1(b)) or for the preventing of any Default under any Contract or Permit of such Party which, if not obtained or made, is reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect or a Purchaser Material Adverse Effect, as applicable; provided that, with the exception of the Consents referred to in Section 9.1(b), Target shall only be required to deliver those consents set forth in Section 5.2(b) of the Target Disclosure Memorandum . No Consent so obtained which is necessary to consummate the transactions contemplated hereby shall be conditioned or restricted in a manner which in the reasonable judgment of the Board of Directors of either Party would so materially adversely impact the economic or business benefits of the transactions contemplated by this Agreement that, had such condition or requirement been known, such Party would not, in its reasonable judgment, have entered into this Agreement.

(d) Legal Proceedings . No court or governmental or regulatory authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law or Order (whether temporary, preliminary or permanent) or taken any other action that prohibits, restricts or makes illegal consummation of the transactions contemplated by this Agreement.

(e) Registration Statement . The Registration Statement shall be effective under the 1933 Act, no stop orders suspending the effectiveness of the Registration Statement shall have been issued, no action, suit, proceeding or investigation by the SEC to suspend the effectiveness thereof shall have been

initiated and be continuing, and all necessary approvals under state securities Laws or the 1933 Act or 1934 Act relating to the issuance or trading of the shares of Purchaser Common Stock issuable pursuant to the Merger shall have been received.

(f) Tax Matters . Each Party shall have received a written opinion of counsel from Bryan Cave LLP, in form reasonably satisfactory to such Parties (the “Tax Opinion”), to the effect that (i) the Merger will constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, and (ii) the exchange in the Merger of Target Common Stock for Purchaser Common Stock will not give rise to gain or loss to the shareholders of Target with respect to such exchange (except to the extent of any cash received).

(g) Repurchase or Redemption of Target Preferred Stock . Target shall have consummated the repurchase or redemption of the Target Preferred Stock effective no later than the Closing Date; provided, however, that if Target is unable to consummate such repurchase or redemption because of an inability to receive the appropriate Consent from the Regulatory Authorities that Purchaser shall purchase the Target Preferred Stock in accordance with the provisions of Section 8.13 of this Agreement.

(h) Target Trust Preferred Interest Payments . Target shall have paid all accrued and unpaid interest on the Debentures that is due and payable under the terms of the Indenture as of the Closing Date; provided, however, that if Target is unable to pay all such accrued and unpaid interest because of an inability to receive the appropriate Consents from the Regulatory Authorities that Purchaser shall pay all such accrued and unpaid interest.

9.2 Conditions to Obligations of Purchaser . The obligations of Purchaser to perform this Agreement and consummate the Mergers and the other transactions contemplated hereby are subject to the satisfaction of the following conditions, unless waived by Purchaser pursuant to Section 11.5:

(a) Representations and Warranties . The representations and warranties of Target and Target Bank set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Effective Time with the same effect as though all such representations and warranties had been made on and as of the Effective Time (provided that representations and warranties that are confined to a specified date shall speak only as of such date), except for inaccuracies that are not reasonably likely to have a Target Material Adverse Effect.

(b) Performance of Agreements and Covenants . Each and all of the agreements and covenants of Target to be performed and complied with pursuant to this Agreement and the other agreements contemplated hereby prior to the Effective Time shall have been duly performed and complied with in all material respects, except where such non-performance or non compliance would not have a Target Material Adverse Effect.

(c) Certificates . Target shall have delivered to Purchaser (i) a certificate, dated as of the Effective Time and signed on its behalf by its principal executive officer and its principal financial officer, to the effect that the conditions set forth in Section 9.1 as relates to Target, Section 9.2(a) and Section 9.2(b) have been satisfied, and (ii) certified copies of resolutions duly adopted by Target’s Board of Directors and shareholders evidencing the taking of all corporate action necessary to authorize the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby, all in such reasonable detail as Purchaser and its counsel shall request.

(d) Affiliate Agreements . Purchaser shall have received from each Person listed in Section 8.8 of the Target Disclosure Memorandum the affiliate agreement referred to in Section 8.8(a). The affiliate agreements shall be delivered to Purchaser within 30 days from the execution of this Agreement.

(e) Target Option Cancellation . Target shall have cancelled all outstanding Target Options, effective as of the Effective Time, and delivered evidence of such cancellation (including but not limited to such optionee consents as may be required in connection with such cancellation) to Purchaser.

(f) Opinion of Barack Ferrazzano Kirschbaum & Nagelberg LLP . Purchaser shall have received the opinion of Barack Ferrazzano Kirschbaum & Nagelberg LLP in the form attached as Exhibit D.

(g) Opinion of Financial Advisor . Purchaser shall have received the opinion of Sandler O’Neill + Partners, L.P., dated November 20, 2012 to the effect that the Merger Consideration to be issued in the Merger is fair, from a financial point of view, to the holders of Purchaser Common Stock, and such opinion shall not have been withdrawn.

9.3 Conditions to Obligations of Target . The obligations of Target to perform this Agreement and consummate the Mergers and the other transactions contemplated hereby are subject to the satisfaction of the following conditions, unless waived by Target pursuant to Section 11.5:

(a) Representations and Warranties . The representations and warranties of Purchaser set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Effective Time with the same effect as though all such representations and warranties had been made on and as of the Effective Time (provided that representations and warranties that are confined to a specified date shall speak only as of such date), except for inaccuracies that are not reasonably likely to have a Purchaser Material Adverse Effect.

(b) Performance of Agreements and Covenants . Each and all of the agreements and covenants of Purchaser to be performed and complied with pursuant to this Agreement and the other agreements contemplated hereby prior to the Effective Time shall have been duly performed and complied with in all material respects, except where such non performance or non-compliance would not have a Purchaser Material Adverse Effect.

(c) Certificates . Purchaser shall have delivered to Target (i) a certificate, dated as of the Effective Time and signed on its behalf by its chief executive officer and its chief financial officer, to the effect that the conditions set forth in Section 9.1 as relates to Purchaser, Section 9.3(a) and Section 9.3(b) have been satisfied, and (ii) certified copies of resolutions duly adopted by Purchaser’s Board of Directors evidencing the taking of all corporate action necessary to authorize the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby, all in such reasonable detail as Target and its counsel shall request.

(d) Election of Directors . The Board of Directors of Purchaser shall have expanded its size to the extent necessary to create two vacancies and appointed or elected the two nominees listed in Exhibit B and approved by the Board of Directors of Purchaser, with such approval not to be unreasonably withheld to fill such vacancies for terms beginning at the Effective Time and continuing until their successors are duly elected and qualified as set forth in Section 2.3.

(e) Supplemental Indenture . Purchaser and Wilmington Trust Company shall have executed and delivered a Supplemental Indenture relating to the Junior Subordinated Debentures issued by Target pursuant to that certain Indenture dated October 14, 2005 between Target, as issuer, and Wilmington Trust Company, as trustee.

(f) Opinion of Bryan Cave . Target shall have received the opinion of Bryan Cave LLP in the form attached as Exhibit E .

(g) Opinion of Financial Advisor . Target shall have received the opinion of Raymond James & Associates, Inc., dated November 28, 2012, to the effect that the Merger Consideration to be received by the holders of Target Common Stock is fair, from a financial point of view, to such holder, and such opinion shall not have been withdrawn.

(h) Affiliate Agreements . Target shall have received from each Person listed in Section 8.8 of the Purchaser Disclosure Memorandum the affiliate agreement referred to in Section 8.8(b). The affiliate agreements shall be delivered to Target within 30 days from the execution of this Agreement.

ARTICLE 10
TERMINATION

10.1 Termination . Notwithstanding any other provision of this Agreement, and notwithstanding the approval of this Agreement by the shareholders of Target, this Agreement may be terminated and the Mergers abandoned at any time prior to the Effective Time:

(a) By mutual written consent of the Boards of Directors of Purchaser and Target; or

(b) By the Board of Directors of either Party (provided that the terminating Party is not then in material breach of any representation, warranty, covenant, or other agreement contained in this Agreement) in the event of a material Breach by the other Party which cannot be or has not been cured within 30 days after the giving of written notice to the breaching Party of such breach (provided that the right to effect such cure shall not extend beyond the lesser of 30 days after the giving of such written notice or the date set forth in subparagraph (d) below) and which breach is reasonably likely, in the opinion of the non-breaching Party, to have, individually or in the aggregate, a Target Material Adverse Effect or a Purchaser Material Adverse Effect, as applicable, on the breaching Party; or

(c) By the Board of Directors of either Party in the event (i) any Consent of any Regulatory Authority required for consummation of the Mergers and the other transactions contemplated hereby shall have been denied or any condition or restriction on such Consent (other than a condition or restriction of the type specified in the last sentence of Section 9.1(b)) shall not have been satisfied or removed by Purchaser, or (ii) the shareholders of Target or Purchaser fail to vote their approval of the matters relating to this Agreement and the transactions contemplated hereby at the Shareholders’ Meeting where such matters were presented to such shareholders for approval and voted upon; or

(d) By the Board of Directors of either Party in the event that the Mergers shall not have been consummated by April 30, 2013, if the failure to consummate the transactions contemplated hereby on or before such date is not caused by any breach of this Agreement by the Party electing to terminate pursuant to this Section 10.1(d); provided that such termination date shall be automatically extended until May 31, 2013 if the sole impediment to Closing is the delay or failure of (i) any Regulatory Authority to provide any necessary Consent, or (ii) the Registration Statement being declared effective by the SEC.

(e) By the Board of Directors of either Party in the event that any of the conditions precedent to the obligations of such Party to consummate the Mergers cannot be satisfied or waived by the date specified in Section 10.1(d), provided that the failure to consummate the Mergers is not caused by the Party electing to terminate pursuant to this Section 10.1(e); or

(f) By the Board of Directors of Purchaser if the Board of Directors of Target

(i) shall withdraw, modify or change its recommendation to the Target shareholders with respect to this Agreement or the Merger, cancel the meeting in which the shareholders or Board of Directors will vote on such Agreement, or shall have resolved to do any of the foregoing or;

(ii) either recommends to the Target shareholders or affirmatively approved any Acquisition Transaction or makes any announcement of any agreement to enter into an Acquisition Transaction; or

(g) By the Board of Directors of Target if Target receives a bona fide written offer with respect to an Acquisition Transaction, and the Board of Directors of Target determines in good faith, after consultation with its financial advisors and counsel, that such Acquisition Transaction is more favorable to Target’s shareholders than the transactions contemplated by this Agreement; or

(h) By the Board of Directors of Purchaser if the holders of more than 5% in the aggregate of the Outstanding Target Shares assert dissenters’ rights in compliance with Section 180,1321(i) of the WBCL.

(i) By the Board of Directors of Target if the Board of Directors of Purchaser shall withdraw, modify or change its recommendation to the Purchaser shareholders with respect to this Agreement or the Merger, cancel the meeting in which the shareholders or Board of Directors will vote on such Agreement, or shall have resolved to do any of the foregoing.

10.2 Effect of Termination . In the event of the termination and abandonment of this Agreement pursuant to Section 10.1, this Agreement shall become void and have no effect, except that (i) the provisions of this Section 10.2, 10.4, and Article 11 and Section 8.5(b) shall survive any such termination and abandonment.

10.3 Non-Survival of Representations and Covenants . The respective representations, warranties, obligations, covenants, and agreements of the Parties shall not survive the Effective Time except this Article 10 and Articles 1, 2, 3, 4 and 11 and Sections 8.4 and 8.9.

10.4 Termination Payments .

(a) (i) If this Agreement is terminated by either of the Parties pursuant to subsection 10.1(f) or 10.1(g), then Target (or its successor) shall pay or cause to be paid to Purchaser, as liquidated damages and not as a penalty, upon demand a termination payment of $750,000 payable in same day funds; provided that Purchaser materially complies with its obligations under this Agreement.

(ii) If this Agreement is terminated by Target pursuant to subsection 10.1(i), then Purchaser (or its successor) shall pay or cause to be paid to Target, as liquidated damages and not as a penalty, upon demand a termination payment of $750,000 payable in same day funds; provided that Target materially complies with its obligations under this Agreement.

(b) In the event that this Agreement is terminated by either party pursuant to subsection 10.1(b), the breaching Party shall pay or cause to be paid to the non-breaching Party, as liquidated damages and not as a penalty, upon demand a termination payment of $1,000,000, plus documented out-of-pocket expenses and costs incurred by the non-breaching Party in connection with the examination and investigation of the breaching Party, the preparation and negotiation of this Agreement and related agreements, regulatory filings and other documents related to the transactions contemplated hereunder, including, without limitation, fees and expenses of investment banking, consultants, accountants, attorneys and other agents.

(c) The Parties agree that the termination payments are a reasonable forecast of the harm that would be caused by termination and that damages from such termination are difficult to estimate as of the date of this Agreement. This Section 10.4 shall be the sole and exclusive remedy for actionable breach by the breaching Party under Section 10.1(b) of this Agreement.

ARTICLE 11
MISCELLANEOUS

11.1 Definitions .

(a) Except as otherwise provided herein, the capitalized terms set forth below shall have the following meanings:

“1933 Act” shall mean the Securities Act of 1933, as amended.

“1934 Act” shall mean the Securities Exchange Act of 1934, as amended.

“Acquisition Proposal” with respect to a Party shall mean any tender offer or exchange offer or any proposal for a merger, acquisition of all of the stock or assets of or other business combination involving the acquisition of such Party or any of its Subsidiaries or the acquisition of a substantial equity interest in, or a substantial portion of the assets of, such Party or any of its Subsidiaries.

“Acquisition Transaction” shall mean: (i) any merger, consolidation, share exchange, business combination or other similar transaction (other than the transactions contemplated by this Agreement); (ii) any sale, lease, transfer other disposition of all or substantially all of the assets of Target, or the beneficial ownership or 15% or more of any class of Target capital stock; or (iii) any acquisition, by any person or group, of the beneficial ownership of 15% or more of any class of Target capital stock.

“Affiliate” of a Person shall mean: (i) any other Person directly, or indirectly through one or more intermediaries, controlling, controlled by or under common control with such Person; (ii) any officer, director, partner, employer, or direct or indirect beneficial owner of any 10% or greater equity or voting interest of such Person; or (iii) any other Person for which a Person described in clause (ii) acts in any such capacity.

“Agreement” shall mean this Agreement and Plan of Merger, including the Exhibits delivered pursuant hereto and incorporated herein by reference.

“Assets” of a Person shall mean all of the assets, properties, businesses and rights of such Person of every kind, nature, character and description, whether real, personal or mixed, tangible or intangible, accrued or contingent, or otherwise relating to or utilized in such Person’s business, directly or indirectly, in whole or in part, whether or not carried on the books and records of such Person, and whether or not owned in the name of such Person or any Affiliate of such Person and wherever located.

“BHC Act” shall mean the federal Bank Holding Company Act of 1956, as amended.

“Breach” shall mean, with respect to a representation, warranty, covenant, obligation or other provision of this Agreement, or any instrument delivered pursuant to this Agreement, any inaccuracy in or breach of, or any failure to perform or comply with, such representation, warranty, covenant, obligation or other provision of this Agreement.

“Cash Merger Consideration” shall have the meaning ascribed to it in Section 3.1(b).

“Cash-Out Shares” shall mean those shares held by holders of record of 200 or fewer shares of Target Common Stock (subject to adjustment as provided in Section 3.1(b).

“Closing” shall have the meaning given to it in Section 1.4.

“Closing Date” shall mean the date on which the Closing occurs.

“Consent” shall mean any consent, approval, authorization, clearance, exemption, waiver, or similar affirmation by any Person pursuant to any Contract, Law, Order, or Permit.

“Contract” shall mean any written or oral agreement, arrangement, authorization, commitment, contract, indenture, instrument, lease, obligation, plan, practice, restriction, understanding, or undertaking of any kind or character, or other document to which any Person is a party or that is binding on any Person or its capital stock, Assets or business.

“Debentures” shall mean the Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures due 2035 issued by Target.

“Default” shall mean (i) any breach or violation of, default under, contravention of, or conflict with, any Contract, Law, Order, or Permit, (ii) any occurrence of any event that with the passage of time or the giving of notice or both would constitute a breach or violation of, default under, contravention of, or conflict with, any Contract, Law, Order, or Permit, or (iii) any occurrence of any event that with or without the passage of time or the giving of notice would give rise to a right of any Person to exercise any remedy or obtain any relief under, terminate or revoke, suspend, cancel, or modify or change the current terms of, or renegotiate, or to accelerate the maturity or performance of, or to increase or impose any Liability under, any Contract, Law, Order, or Permit.

“Dissenting Shares” shall mean shares with respect to which the holders thereof have perfected dissenters’ rights under Subchapter XIII of the WBCL.

“Environment” shall mean any soil, land surface or subsurface strata, surface waters (including navigable waters, ocean waters, streams, ponds, natural or artificial drainage systems, and wetlands), groundwaters, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life, biota, and any other environmental media or natural resource.

“Environmental Laws” shall mean any federal, state or local law, statute, ordinance, code, rule, regulation, license, authorization, decision, order, injunction, decree, or rule of common law (including but not limited to nuisance or trespass claims), and any judicial interpretation of any of the foregoing, which pertains to health, safety, any Hazardous Material, or the Environment (including, but not limited to, ground, air, water or noise pollution or contamination, and underground or above-ground storage tanks) and shall include without limitation, the Solid Waste Disposal Act, 42 U.S.C. § 6901 et seq .; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §9601 et seq . (“ CERCLA ”), as amended by the Superfund Amendments and Reauthorization Act of 1986 (“ SARA ”); the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq .; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq .; the Clean Air Act, 42 U.S.C. § 7401 et seq .; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq .; the Safe Drinking Water Act, 42 U.S.C. § 300f et seq . and any other state or federal environmental statutes, and all rules, regulations, orders and decrees now or hereafter promulgated under any of the foregoing, as any of the foregoing now exist or may be changed or amended or come into effect in the future.

“Equity Rights” shall mean all arrangements, calls, commitments, Contracts, options, rights to subscribe to, script, understandings, warrants, or other binding obligations of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of the capital stock of a Person or by which a Person is or may be bound to issue additional shares of its capital stock or other Equity Rights.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

“Exhibits” shall mean the Exhibits marked A through F, copies of which are attached to this Agreement. Such Exhibits are hereby incorporated by reference herein and made a part hereof, and may be referred to in this Agreement and any other related instrument or document without being attached thereto.

“FDIC” shall mean the Federal Deposit Insurance Corporation.

“GAAP” shall mean accounting principles generally accepted in the United States, consistently applied during the periods involved and in the immediately preceding comparable period.

“Hazardous Material(s)” shall mean any substance or material, whether solid, liquid or gaseous in concentration, quantity or location (i) which is listed, defined or is regulated as a “hazardous substance,” “hazardous waste,” “hazardous constituent,” “contaminant,” “medical waste,” “infectious waste” or “solid waste,” or otherwise classified as a hazardous, toxic, or regulated substance, in or pursuant to any Environmental Law; (ii) which is, or is regulated because it contains, lead, asbestos, radon, methane, infectious matter or waste, carcinogenic, mutagenic, pathogenic organism(s), fomites, polychlorinated

biphenyl, perchlorate, any perfluorooctanoic acid or any substance similar to perfluorooctanoic acid, any polybrominated diphenyl ether, bisphenol A, BPA, hexabromobiphenyl, lindane, perfluorooctane, 1,4-dioxane, 1,2,3-trichloropropane, urea formaldehyde foam insulation, any actual or suspected “endocrine-disruptor” that mimics or blocks hormones or effects, impacts or interferes with a human endocrine system, any explosive or radioactive material, unexploded ordinance, fuel, natural or synthetic gas, motor fuel, petroleum product or constituent, or other hydrocarbons; or (iii) which causes or poses a threat to cause personal injury, property damage, diminution in value, contamination, danger, pollution, a nuisance, or a hazard to any Asset, any property, the Environment, or to the health or safety of persons or property.

“Indenture” shall mean that certain Indenture dated as of October 14, 2005 between Target and Wilmington Trust relating to the Debentures.

“Intellectual Property” shall mean copyrights, patents, trademarks, service marks, service names, trade names, applications therefor, technology rights and licenses, computer software (including any source or object codes therefor or documentation relating thereto), trade secrets, franchises, know-how, inventions, and other intellectual property rights.

“Internal Revenue Code” shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

“Knowledge” as used with respect to a Person (including references to such Person being aware of a particular matter) shall mean (i) with respect to Purchaser, the personal knowledge after due inquiry of Robert B. Atwell, Michael Daniels, Ann Lawson and Eric Witczak; and (ii) with respect to Target, Kim Gowey, Scot Thompson, Rhonda Norrbom and William Weiland and the knowledge of any such persons set forth if clauses (i) and (ii) above obtained or which would have been obtained from a reasonable investigation.

“Law” shall mean any code, law (including common law), ordinance, regulation, reporting or licensing requirement, rule, or statute applicable to a Person or its Assets, Liabilities, or business, including those promulgated, interpreted or enforced by any Regulatory Authority.

“Liability” shall mean any liability, indebtedness, obligation, penalty, cost or expense (including costs of investigation, collection and defense), claim, deficiency, guaranty or endorsement of or by any Person (other than endorsements of notes, bills, checks, and drafts presented for collection or deposit in the ordinary course of business) of any type, whether accrued or unaccrued, absolute or contingent, liquidated or unliquidated, matured or unmatured, whether due or to become due, or otherwise.

“Lien” shall mean any conditional sale agreement, default of title, easement, encroachment, encumbrance, hypothecation, infringement, lien, mortgage, pledge, reservation, restriction, security interest, title retention or other security arrangement, or any adverse right or interest, charge, or claim of any nature whatsoever of, on, or with respect to any property or property interest, other than (i) Liens for current Taxes not yet due and payable, (ii) for depository institution Subsidiaries of a Party, pledges to secure deposits and other Liens incurred in the ordinary course of the Banking business, (iii) Liens which do not materially impair the use of or title to the Assets subject to such Lien; and (iv) the items set forth in Section 5.11(a) of the Target Disclosure Memorandum .

“Litigation” shall mean any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard before or by, or otherwise involving, any judicial or governmental authority, including a Regulatory Authority, or arbitrator, but shall not include regular, periodic examinations of depository institutions and their Affiliates by Regulatory Authorities.

“Merger Consideration” shall mean the shares of Purchaser Common Stock, the Cash Merger Consideration and cash to be delivered in lieu of fractional shares.

“Operating Property” shall mean any property owned, leased, or operated by the Party in question or by any of its Subsidiaries except for OREO, and, where required by the context, includes the owner or operator of such property, but only with respect to such property.

“Order” shall mean any administrative decision or award, decree, injunction, judgment, order, quasi-judicial decision or award, ruling, or writ of any federal, state, local or foreign or other court, arbitrator, mediator, tribunal, administrative agency, or Regulatory Authority.

“OREO” means any real estate owned by Target Bank and designated as “other real estate owned.”

“Party” shall mean either Target or Purchaser, and “Parties” shall mean both Target and Purchaser.

“Permit” shall mean any federal, state, local, and foreign governmental approval, authorization, certificate, easement, filing, franchise, license, notice, permit, or right to which any Person is a party or that is or may be binding upon or inure to the benefit of any Person or its securities, Assets, or business.

“Person” shall mean a natural person or any legal, commercial or governmental entity, such as, but not limited to, a corporation, general partnership, joint venture, limited partnership, limited liability company, trust, business association, group acting in concert, or any person acting in a representative capacity.

“Proxy Statement” shall mean the proxy statement used by Target to solicit the approval of its shareholders of the transactions contemplated by this Agreement, which shall include the prospectus of Purchaser relating to the issuance of the Purchaser Common Stock to holders of Target Common Stock.

“Purchaser Bank” shall mean Nicolet National Bank, which is a national bank chartered under the Laws of the United States of America.

“Purchaser Common Stock” shall mean the $0.01 par value common stock of Purchaser.

“Purchaser Options” shall mean options to purchase Purchaser Common Stock under Purchaser’s employee benefit plans.

“Purchaser Disclosure Memorandum” shall mean the written information entitled “Purchaser Disclosure Memorandum” delivered prior to the date of this Agreement to Target and any updates thereto describing in reasonable detail the matters contained therein and, with respect to each disclosure made therein, specifically referencing each Section of this Agreement under which such disclosure is being made. Information disclosed with respect to one Section shall be deemed to be disclosed for purposes of any other Section referenced with respect thereto, provided that sufficient details are set forth in such disclosure such that a reasonable person would understand that such disclosure was related to such other representation or warranty.

“Purchaser Entities” shall mean, collectively, Purchaser and all Purchaser Subsidiaries.

“Purchaser Financial Statements” shall mean (i) the consolidated balance sheets (including related notes and schedules, if any) of Purchaser as of December 31, 2011 and 2010, and the related statements of income, changes in shareholders’ equity, and cash flows (including related notes and schedules, if any), and (ii) the unaudited consolidated balance sheet (including related notes and schedules, if any) of Purchaser as of September 30, 2012, and the related statements of income, changes in shareholders’ equity, and cash flows (including related notes and schedules, if any), as delivered by Purchaser to Target prior to execution of this Agreement.

“Purchaser Material Adverse Effect” shall mean an event, change or occurrence which, individually or together with any other event, change or occurrence, has, or is reasonably likely to have, a material adverse impact on (i) the financial position, business, results of operations or prospects of the Purchaser Entities, taken as a whole, or (ii) the ability of Purchaser to perform its obligations under this Agreement or to consummate the Merger or the other transactions contemplated by this Agreement, provided that “Material Adverse Effect” shall not be deemed to include the impact of (a) changes in banking and similar Laws of general applicability or interpretations thereof by courts or governmental authorities, or changes in GAAP or regulatory accounting principles generally applicable to banks and their holding companies, so long as such changes or conditions do not adversely affect the Purchaser Entities, taken as a

whole, in a materially disproportionate manner relative to similarly situated banks and their holding companies, (b) actions and omissions of any of the Purchaser Entities taken with the prior informed written Consent of Target in contemplation of the transactions contemplated hereby, (c) the direct effects of compliance with this Agreement on the operating performance of the Purchaser Entities taken as a whole, including expenses incurred by the Purchaser Entities in consummating the transactions contemplated by this Agreement; (d) changes after the date hereof in general United States or global business, political, economic or market (including capital or financial markets) conditions and (e) any outbreak, escalation or worsening of hostilities, declared or undeclared acts of war, sabotage, military action or terrorism.

“Purchaser Regulatory Reports” shall mean the reports, registrations and statements, together with any amendments thereto, that are required to be filed with the Federal Reserve, the FDIC, the OCC or any other regulatory authority having supervisory jurisdiction over the Purchaser Entities.

“Purchaser Subsidiaries” shall mean the Subsidiaries of Purchaser set forth on Section 11.1(a) of the Purchaser Disclosure Memorandum and any corporation, bank, statutory trust, savings association, limited liability company or other organization acquired as a Subsidiary of Purchaser in the future and held as a Subsidiary by Purchaser at the Effective Time.

“Registration Statement” shall mean the Registration Statement on Form S-4, or other appropriate form, including any pre-effective or post-effective amendments or supplements thereto, filed with the SEC by Purchaser under the 1933 Act with respect to the shares of Purchaser Common Stock to be issued to the shareholders of Target in connection with the transactions contemplated by this Agreement.

“Regulatory Authorities” shall mean, collectively, the SEC, the Federal Trade Commission, the United States Department of Justice, the Federal Reserve, the FDIC, the OCC, the DFI, and all other federal, state, county, local or other governmental or regulatory agencies, authorities (including self-regulatory authorities), instrumentalities, commissions, boards or bodies having jurisdiction over the Parties and their respective Subsidiaries.

“Release” or “Released” means any spilling, leaking, pumping, pouring, emptying, injecting, emitting, discharging, depositing, escaping, leaching, migration, filtration, pouring, seepage, disposal, dumping, or other releasing into the indoor or outdoor Environment, whether intentional or unintentional, including, without limitation, the movement of Hazardous Materials in, on, under or through the Environment.

“Representative” shall mean any investment banker, financial advisor, attorney, accountant, consultant, or other representative engaged by a Person.

“SEC” shall mean the United States Securities and Exchange Commission.

“SEC Documents” shall mean all forms, proxy statements, registration statements, reports, schedules, and other documents filed, or required to be filed, by a Party or any of its Subsidiaries with any Regulatory Authority pursuant to the Securities Laws.

“Securities Laws” shall mean the 1933 Act, the 1934 Act, the Investment Company Act of 1940, as amended, the Investment Advisors Act of 1940, as amended, the Trust Indenture Act of 1939, as amended, and the rules and regulations of any Regulatory Authority promulgated thereunder.

“State-Restricted Shares” shall mean shares of Target Common Stock held by residents of states in which the Purchaser Common Stock cannot be issued in the Merger under state Securities Laws without commercially unreasonable effort or expense.

“Subsidiaries” shall mean all those corporations, associations, or other business entities of which the entity in question either (i) owns or controls 50% or more of the outstanding equity securities either directly or through an unbroken chain of entities as to each of which 50% or more of the outstanding equity securities is owned directly or indirectly by its parent (provided, there shall not be included any such entity the equity securities of which are owned or controlled in a fiduciary capacity), (ii) in the case of partnerships, serves as a general partner, (iii) in the case of a limited liability company, serves as a managing member, or (iv) otherwise has the ability to elect a majority of the directors, trustees or managing members thereof.

“Surviving Entity” shall mean Nicolet Bankshares, Inc. as the surviving corporation resulting from the Merger.

“Target Bank” shall mean Mid-Wisconsin Bank, a Wisconsin state bank.

“Target Common Stock” shall mean the $0.10 par value common stock of Target.

“Target Disclosure Memorandum” shall mean the written information entitled “Target Disclosure Memorandum” delivered prior to the date of this Agreement to Purchaser and any updates thereto describing in reasonable detail the matters contained therein and, with respect to each disclosure made therein, specifically referencing each Section of this Agreement under which such disclosure is being made. Information disclosed with respect to one Section shall be deemed to be disclosed for purposes of any other Section referenced with respect thereto, provided that sufficient details are set forth in such disclosure such that a reasonable person would understand that such disclosure was related to such other representation or warranty.

“Target Entities” shall mean, collectively, Target and all Target Subsidiaries.

“Target Financial Statements” shall mean (i) the consolidated balance sheets (including related notes and schedules, if any) of Target as of December 31, 2011 and 2010, and the related statements of income, changes in shareholders’ equity, and cash flows (including related notes and schedules, if any) as filed by Target in SEC documents, and (ii) the unaudited consolidated balance sheet (including related notes and schedules, if any) of Target as of September 30, 2012, and the related statements of income, changes in shareholders’ equity, and cash flows (including related notes and schedules, if any), as delivered by Target to Purchaser prior to execution of this Agreement.

“Target Material Adverse Effect” shall mean an event, change or occurrence which, individually or together with any other event, change or occurrence, has, or is reasonably likely to have, a material adverse impact on (i) the financial position, business, results of operations or prospects of the Target Entities, taken as a whole, or (ii) the ability of Target to perform its obligations under this Agreement or to consummate the Merger or the other transactions contemplated by this Agreement, provided that “Material Adverse Effect” shall not be deemed to include the impact of (a) changes in banking and similar Laws of general applicability or interpretations thereof by courts or governmental authorities, or changes in GAAP or regulatory accounting principles generally applicable to banks and their holding companies, so long as such changes or conditions do not adversely affect the Target Entities, taken as a whole, in a materially disproportionate manner relative to other similarly situated banks and their holding companies, (b) actions and omissions of any of the Target Entities taken with the prior informed written Consent of Purchaser in contemplation of the transactions contemplated hereby, (c) the direct effects of compliance with this Agreement on the operating performance of the Target Entities taken as a whole, including expenses incurred by the Target Entities in consummating the transactions contemplated by this Agreement; (d) changes after the date hereof in general United States or global business, political, economic or market (including capital or financial markets) conditions, and (e) any outbreak, escalation or worsening of hostilities, declared or undeclared acts of war, sabotage, military action or terrorism.

“Target Preferred Stock” shall mean the preferred stock, no par value, of Target, including but not limited to the Fixed Rate Cumulative Perpetual Preferred Stock, Series A, and Fixed Rate Cumulative Perpetual Preferred Stock, Series B.

“Target Regulatory Reports” shall mean the reports, registrations and statements, together with any amendments thereto, that are required to be filed with the Federal Reserve, the FDIC, the DFI or any other regulatory authority having supervisory jurisdiction over the Target Entities.

“Target Shareholders Meeting” shall mean the meeting of the shareholders of Target to be held pursuant to this Agreement, including any adjournment or adjournments thereof.

“Target Subsidiaries” shall mean the Subsidiaries of Target set forth on Section 11.1(a) of the Target Disclosure Memorandum and any corporation, bank, savings association, statutory trust, limited liability company or other organization acquired as a Subsidiary of Target in the future and held as a Subsidiary by Target at the Effective Time.

“Tax Return” shall mean any report, return, information return, or other information required to be supplied to a taxing authority in connection with Taxes, including any return of an affiliated or combined or unitary group that includes a Party or its Subsidiaries.

“Tax” or “Taxes” shall mean any federal, state, county, local, or foreign taxes, charges, fees, levies, imposts, duties, or other assessments, including income, gross receipts, excise, employment, sales, use, transfer, license, payroll, franchise, severance, stamp, occupation, windfall profits, environmental, federal highway use, commercial rent, customs duties, capital stock, paid-up capital, profits, withholding, Social Security, single business and unemployment, disability, real property, personal property, registration, ad valorem, value added, alternative or add-on minimum, estimated, or other tax or governmental fee of any kind whatsoever, imposes or required to be withheld by the United States or any state, county, local or foreign government or subdivision or agency thereof, including any interest, penalties, and additions imposed thereon or with respect thereto.

“WBCL” shall mean the Wisconsin Business Corporation Law.

(b) Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed followed by the words “without limitation.”

11.2 Expenses . Except as otherwise provided in this Agreement, each of the Parties shall bear and pay all direct costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including filing, registration and application fees, printing fees, and fees and expenses of its own financial or other consultants, investment bankers, accountants, and counsel.

11.3 Entire Agreement . Except as otherwise expressly provided herein, this Agreement (including the documents and instruments referred to herein) constitutes the entire agreement between the Parties with respect to the transactions contemplated hereunder and supersedes all prior arrangements or understandings with respect thereto, written or oral.

11.4 Amendments . To the extent permitted by Law, this Agreement may be amended by a subsequent writing signed by each of the Parties, whether before or after shareholder approval of this Agreement has been obtained; provided, that after any such approval by the holders of Target Common Stock, there shall be made no amendment that pursuant to Subchapter XI of the WBCL requires further approval by such shareholders without the further approval of such shareholders; and further provided, that after any such approval by the holders of Target Common Stock, the provisions of this Agreement relating to the manner or basis in which shares of Target Common Stock will be exchanged for shares of Purchaser Common Stock shall not be amended after the Target Shareholders’ Meeting in a manner adverse to the holders of Target Common Stock without any requisite approval of the holders of the issued and outstanding shares of Target Common Stock entitled to vote thereon.

11.5 Waivers .

(a) Prior to or at the Effective Time, Purchaser, acting through its Board of Directors, chief executive officer or other authorized officer, shall have the right to waive any Default in the performance of any term of this Agreement by a Target Entity, to waive or extend the time for the compliance or fulfillment by a Target Entity of any and all of its obligations under this Agreement, and to waive any or all of the conditions precedent to the obligations of Purchaser under this Agreement, except any condition which, if not satisfied, would result in the violation of any Law. No such waiver shall be effective unless in writing signed by a duly authorized officer of Purchaser.

(b) Prior to or at the Effective Time, Target, acting through its Board of Directors, chief executive officer or other authorized officer, shall have the right to waive any Default in the performance of any term of this Agreement by a Purchaser Entity, to waive or extend the time for the compliance or fulfillment by a Purchaser Entity of any and all of its obligations under this Agreement, and to waive any or all of the conditions precedent to the obligations of Target under this Agreement, except any condition which, if not satisfied, would result in the violation of any Law. No such waiver shall be effective unless in writing signed by a duly authorized officer of Target.

(c) The failure of any Party at any time or times to require performance of any provision hereof shall in no manner affect the right of such Party at a later time to enforce the same or any other provision of this Agreement. No waiver of any condition or of the breach of any term contained in this Agreement in one or more instances shall be deemed to be or construed as a further or continuing waiver of such condition or breach or a waiver of any other condition or of the breach of any other term of this Agreement.

11.6 Assignment . Except as expressly contemplated hereby, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any Party hereto (whether by operation of Law or otherwise) without the prior written consent of the other Party. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and assigns.

11.7 Notices and Service of Process . All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if delivered by hand, by facsimile transmission, by registered or certified mail, postage pre-paid, or by courier or overnight carrier, to the persons at the addresses set forth below (or at such other address as may be provided hereunder), and shall be deemed to have been delivered as of the date so delivered:

Target:				Mid-Wisconsin Financial Services, Inc.
				132 West State Street
				Medford, Wisconsin 54451
				Attention: Chief Executive Officer

With a copy to:				Robert M. Fleetwood, Esq.
				Barack Ferrazzano Kirschbaum & Nagelberg LLP
				200 West Madison Street
				Suite 3900
				Chicago, Illinois 60606

Purchaser:				Nicolet Bankshares, Inc.
				111 North Washington Street
				Green Bay, Wisconsin 54305
				Attention: Chief Executive Officer

With a copy to:				Katherine M. Koops, Esq.
				Bryan Cave LLP
				One Atlantic Center, 14 ^th Floor
				1201 West Peachtree Street, N.E.
				Atlanta, Georgia 30309

The Parties agree that service of process may be effected by certified or registered mail, return receipt requested, directed to the other Party at the addresses set forth in this Section 11.7, and service so made shall be completed when received.

11.8 Governing Law . This Agreement shall be governed by and construed in accordance with the Laws of the State of Wisconsin, without regard to any applicable conflicts of Laws.

11.9 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

11.10 Captions; Articles and Sections . The captions contained in this Agreement are for reference purposes only and are not part of this Agreement. Unless otherwise indicated, all references to particular Articles or Sections shall mean and refer to the referenced Articles and Sections of this Agreement.

11.11 Interpretations . Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any party, whether under any rule of construction or otherwise. No party to this Agreement shall be considered the draftsman. The parties acknowledge and agree that this Agreement has been reviewed, negotiated, and accepted by all parties and their attorneys and shall be construed and

interpreted according to the ordinary meaning of the words used so as fairly to accomplish the purposes and intentions of all parties hereto.

11.12 Severability . Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.

[Signatures appear on next page]

IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed on its behalf by its duly authorized officers as of the day and year first above written.

				NICOLET BANKSHARES, INC.

				By:				/s/ Robert B. Atwell
				Robert B. Atwell Chief Executive Officer

				MID-WISCONSIN FINANCIAL SERVICES, INC.
				By:				/s/ Kim A. Gowey
				Kim A. Gowey Chairman of the Board

EXHIBIT A

PLAN OF MERGER
BY AND BETWEEN
NICOLET NATIONAL BANK
AND
MID-WISCONSIN BANK

This Plan of Merger (the “Plan”) is made and entered into as of the ___ day of _____________, 20__, by and between Nicolet National Bank (“Nicolet National”), a bank organized under the laws of the United States of America and located in Green Bay, Wisconsin, and Mid-Wisconsin Bank (“MWB”), a bank organized under the laws of the State of Wisconsin and located in Medford, Wisconsin.

W I T N E S S E T H :

WHEREAS, on _____________, 2012, Nicolet Bankshares, Inc., and Mid-Wisconsin Financial Services, Inc. (“MWFS”), entered into an Agreement and Plan of Merger (the “Agreement”), pursuant to which Nicolet Bankshares, Inc. will acquire MWFS and MWB;

WHEREAS, pursuant to the Agreement and the terms of this Plan, MWB will merge with and into Nicolet National (the “Bank Merger”);

NOW, THEREFORE, in consideration of the above premises and the mutual warranties, representations, covenants and agreements set forth herein, the parties agree as follows:

1. Merger . Pursuant to the provisions of Section 18(c) of the Federal Deposit Insurance Act and Subchapter VII of the Wisconsin Banking Law, MWB shall be merged with and into Nicolet National. Nicolet National shall be the survivor of the Merger (the “Resulting Bank”), and shall operate with the name “Nicolet National Bank.”

2. Effective Date of the Merger . The Bank Merger shall become effective on the date that Articles of Merger reflecting the Bank Merger become effective with the Office of the Comptroller of the Currency and the Wisconsin Department of Financial Institutions (the “Effective Date”).

3. Location, Articles and Bylaws and Directors of the Resulting Bank . On the Effective Date of the Bank Merger:

(a) The head office of the Resulting Bank shall be located at the head office of Nicolet National immediately prior to the Effective Date.

(b) The Articles of Incorporation of the Resulting Bank shall be the Articles of Association of Nicolet National in effect immediately prior to the Effective Date. The Bylaws of the Resulting Bank shall be the Bylaws of Nicolet National in effect immediately prior to the Effective Date of the Merger.

(c) The directors of Nicolet National in office on the Effective Date, together with two nominees submitted by MWB set forth on Exhibit A-1 and approved by Nicolet National’s Board of Directors (with such approval not to be unreasonably withheld), shall serve as the directors of the Resulting Bank. The two nominees submitted by MWB set forth on Exhibit A-1 shall serve until their terms expire and shall thereafter be nominated for election at the first meeting of the Resulting Bank’s shareholders after the expiration of such nominees’ initial term.

4. Manner of Converting Shares .

(a) By virtue of the Bank Merger, automatically and without any action on the part of the holder thereof, each of the shares of MWB Common Stock issued and outstanding immediately prior to the Effective Date shall be cancelled and retired at the Effective Date and no consideration shall be issued in exchange therefor.

(b) Upon and after the Effective Date, each issued and outstanding share of Nicolet National Common Stock shall remain unchanged and shall continue to evidence the same number of shares of Nicolet National Common Stock.

A-1

5. Conditions Precedent to Consummation . Consummation of the Bank Merger herein provided for is conditioned upon (a) receipt of all necessary consents to the Bank Merger from applicable regulatory authorities, (b) approval of the Plan by MWFS, as sole shareholder of MWB, and (c) approval of the Plan by Nicolet Bankshares, Inc., as sole shareholder of Nicolet National.

6. Termination . This Plan may be terminated by the mutual consent of the Parties at any time prior to the Effective Date.

7. Counterparts, Headings, Governing Law . This Plan may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. The title of this Plan and the headings herein are for convenience or reference only and shall not be deemed a part of this Plan. This Plan shall be governed by and construed in accordance with the laws of the State of Wisconsin.

[SIGNATURES ON NEXT PAGE]

A-2

IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger to be executed by their duly authorized officers and their seals to be affixed hereto, all as of the day and year first above written.


				NICOLET NATIONAL BANK

[BANK SEAL]				By:

				Name:

				Title:

ATTEST:


Secretary

				MID-WISCONSIN BANK

[BANKK SEAL]				By:

				Name:

				Title:

ATTEST:


Secretary

A-3

EXHIBIT A-1

Target Bank Director Nominees

Kim Gowey
Christopher Ghidorzi

A-1

EXHIBIT B

Target Director Nominees

Kim A. Gowey
Christopher Ghidorzi

B-1

EXHIBIT C-1

FORM OF TARGET AFFILIATE AGREEMENT

Nicolet Bankshares, Inc.
Attention: Chief Executive Officer

Ladies and Gentlemen:

The undersigned is a shareholder of Mid-Wisconsin Financial Services, Inc. (“Target”), a Wisconsin corporation and a registered bank holding company under the BHC Act. Target is located in Medford, Wisconsin. The undersigned will become a shareholder of Nicolet Bankshares, Inc. (“Purchaser”) pursuant to the transactions described in the Agreement and Plan of Merger, dated as of November 28, 2012 (the “Agreement”), between Target and Purchaser. Under the terms of the Agreement, Target will be merged into and with Purchaser (the “Merger”), and the shares of the $0.10 par value common stock of Target (“Target Common Stock”) will be converted into and exchanged for either shares of the $0.01 par value common stock of Purchaser (“Purchaser Common Stock”) or, in certain circumstances, cash. This Affiliate Agreement represents an agreement between the undersigned and Purchaser regarding certain rights and obligations of the undersigned in connection with the shares of Purchaser Common Stock to be received by the undersigned as a result of the Merger.

In consideration of the benefits the undersigned will receive as a shareholder of Target and the mutual covenants contained herein, the undersigned and Purchaser hereby agree as follows:

1. Vote on the Merger. The undersigned agrees to vote all shares of Target Common Stock that the undersigned owns beneficially or of record in favor of approving the Agreement, unless Purchaser is then in Breach or Default in any material respect as regards any covenant, agreement, representation or warranty as to it contained in the Agreement; provided, however, that nothing in this sentence shall be deemed to require the undersigned to vote any shares of Target Common Stock over which he, she or it has or shares voting power solely in a fiduciary capacity on behalf of any person other than Target, if the undersigned determines, in good faith after consultation with legal counsel, that such a vote would cause a breach of fiduciary duty to such other person.

2. Restriction on Transfer. The undersigned further agrees that he, she or it will not, without the prior written consent of Purchaser, transfer any shares of Target Common Stock prior to the Effective Date, as that term is set forth in the Agreement, except (i) by operation of law, (ii) by will, (iii) under the laws of descent and distribution or (iv) with the prior written consent of Purchaser which consent shall not be unreasonably withheld, for any sales, assignments, transfers or other dispositions necessitated by hardship, or (v) as Target and Purchaser may otherwise agree in writing.

3. Miscellaneous. This Affiliate Agreement is the complete agreement between Purchaser and the undersigned concerning the subject matter hereof. Any notice required to be sent to any party hereunder shall be sent by registered or certified mail, return receipt requested, using the addresses set forth herein or such other address as shall be furnished in writing by the parties. This Affiliate Agreement shall be governed by the laws of the State of Wisconsin.

4. Capitalized Terms . Unless otherwise defined herein, all capitalized terms in this Affiliate Agreement shall have the same meaning as given such terms in the Agreement.

C1-1

This Affiliate Agreement is executed as of the ____ day of ______, 2012.

Very truly yours,

Signature

Print Name

Address Telephone No.

AGREED TO AND ACCEPTED as of

__________________, 2012

NICOLET BANKSHARES, INC.

By:

Its:

C1-1

EXHIBIT C-2

FORM OF AFFILIATE AGREEMENT

Mid-Wisconsin Financial Services, Inc.
Attention: Chief Executive Officer

Ladies and Gentlemen:

The undersigned is a shareholder of Nicolet Bankshares, Inc. (“Purchaser”), a Wisconsin corporation and a registered bank holding company under the BHC Act. Purchaser is located in Green Bay, Wisconsin. This Affiliate Agreement relates to the Agreement and Plan of Merger, dated as of November 28, 2012 (the “Agreement”), between Mid-Wisconsin Financial Services, Inc., a Wisconsin corporation (“Target”) and Purchaser. Under the terms of the Agreement, Target will be merged into and with Purchaser (the “Merger”), and the shares of the $0.10 par value common stock of Target (“Target Common Stock”) will be converted into and exchanged for either shares of the $0.01 par value common stock of Purchaser (“Purchaser Common Stock”) or, in certain circumstances, cash. This Affiliate Agreement represents an agreement between the undersigned and Target regarding certain rights and obligations of the undersigned in connection with the Merger and the shares of Purchaser Common Stock held by the undersigned.

In consideration of the benefits the undersigned will receive as a shareholder of Purchaser and the mutual covenants contained herein, the undersigned and Purchaser hereby agree as follows:

1. Vote on the Merger. The undersigned agrees to vote all shares of Purchaser Common Stock that the undersigned owns beneficially or of record in favor of approving the Agreement, unless Target is then in Breach or Default in any material respect as regards any covenant, agreement, representation or warranty as to it contained in the Agreement; provided, however, that nothing in this sentence shall be deemed to require the undersigned to vote any shares of Purchaser Common Stock over which he, she or it has or shares voting power solely in a fiduciary capacity on behalf of any person other than Purchaser, if the undersigned determines, in good faith after consultation with legal counsel, that such a vote would cause a breach of fiduciary duty to such other person.

2. Restriction on Transfer. The undersigned further agrees that he, she or it will not, without the prior written consent of Target, transfer any shares of Purchaser Common Stock prior to the Effective Date, as that term is set forth in the Agreement, except (i) by operation of law, (ii) by will, (iii) under the laws of descent and distribution or (iv) with the prior written consent of Target which consent shall not be unreasonably withheld, for any sales, assignments, transfers or other dispositions necessitated by hardship, or (v) as Target and Purchaser may otherwise agree in writing.

4. Capitalized Terms. Unless otherwise defined herein, all capitalized terms in this Affiliate Agreement shall have the same meaning as given such terms in the Agreement.

C2-1

This Affiliate Agreement is executed as of the ____ day of ______, 2012.

Very truly yours,

Signature

Print Name

Address Telephone No.

AGREED TO AND ACCEPTED as of

__________________, 2012

MID-WISCONSIN FINANCIAL SERVICES, INC.

By:

Its:

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EXHIBIT D

MATTERS TO BE OPINED UPON BY COUNSEL TO THE TARGET

Capitalized terms used in this Exhibit shall have the meaning set forth in the Agreement.

1. Based solely on a certificate issued by the Secretary of State of the State of Wisconsin dated ___________, Target is validly existing as a corporation and is legally existing under the laws of the State of Wisconsin.

2. Target has the corporate power and authority to own, operate and lease its properties, to carry on its business as it is being conducted in all material respects, and to execute and deliver the Agreement and carry out its obligations thereunder.

3. The execution, delivery and performance by Target of the Agreement and the consummation of the transactions contemplated thereby have been duly authorized by all necessary corporate action on the part of Target.

4. The execution and delivery by Target of the Agreement and the consummation by Target of its obligations thereunder do not result in any violation by Target of (i) the provisions of Target’s Articles of Incorporation or Bylaws, (ii) any provision of applicable Federal or Wisconsin state statute or regulation that we, based on our experience, recognize as applicable to Target in a transaction of this type, or (iii) to our knowledge, any order, writ, judgment or decree of any Federal or Wisconsin state court or governmental authority or regulatory body having jurisdiction over Target or any of its properties that names or is specifically directed to Target.

D-1

EXHIBIT E

MATTERS TO BE OPINED UPON BY COUNSEL TO THE PURCHASER

Capitalized terms used in this Exhibit shall have the meaning set forth in the Agreement.

1. Based solely on a certificate issued by the Secretary of State of the State of Wisconsin dated ___________, the Company is validly existing as a corporation and is legally existing under the laws of the State of Wisconsin.

2. The Company has the corporate power and authority to own, operate and lease its properties, to carry on its business as it is being conducted in all material respects, and to execute and deliver the Agreement and carry out its obligations thereunder.

3. The shares of Purchaser Common Stock that will be issued to the shareholders of Target as contemplated in the Agreement have been duly and validly authorized, and, when issued and delivered in accordance with the terms of the Agreement, will be duly and validly issued and fully paid and non-assessable.

4. The execution, delivery and performance by the Company of the Agreement and the consummation of the transactions contemplated thereby have been duly authorized by all necessary corporate action on the part of the Company.

5. The execution and delivery by Purchaser of the Agreement and the consummation by Purchaser of its obligations thereunder do not result in any violation by Purchaser of (i) the provisions of Purchaser’s Articles of Incorporation or Bylaws, (ii) any provision of applicable Federal or Wisconsin state statute or regulation that we, based on our experience, recognize as applicable to Purchaser in a transaction of this type, or (iii) to our knowledge, any order, writ, judgment or decree of any Federal or Wisconsin state court or governmental authority or regulatory body having jurisdiction over Purchaser or any of its properties that names or is specifically directed to Purchaser.

6. We have been advised that the Registration Statement is effective under the 1933 Act, and to our knowledge, based solely upon an oral acknowledgement by the staff of the Securities and Exchange Commission, no stop order suspending the effectiveness of the Registration Statement has been issued under the Securities Act or proceedings therefor initiated or threatened by the Commission.

E-1

AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER

AMENDMENT NO. 1, dated as of January 17, 2013 (the “Amendment”) to the AGREEMENT AND PLAN OF MERGER dated November 28, 2012 (the “Agreement”), by and between NICOLET BANKSHARES, INC. (“Purchaser”), a Wisconsin corporation, and MID-WISCONSIN FINANCIAL SERVICES, INC. (“Target”), a Wisconsin corporation.

Preamble

WHEREAS, Purchaser and Target have entered into the Agreement to effect the Merger upon the terms and conditions described therein; and

WHEREAS, Purchaser and Target wish to amend the terms of the Agreement as set forth in greater detail herein;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Purchaser and Target agree as follows:

ARTICLE 1 DEFINITIONS

All capitalized terms used but not defined in this Amendment shall have the meanings ascribed to them in the Agreement.

ARTICLE 2 AMENDMENTS

2.1

Section 3.1 of Article 3 of the Agreement is hereby amended as follows:

(a)

Section 3.1(a) is deleted in its entirety and replaced with the following:

“(a) Each share of capital stock of Purchaser issued and outstanding immediately prior to the Effective Time, except for any Purchaser Dissenting Shares, shall remain issued and outstanding from and after the Effective Time.”

(b) Section 3.1(b) is amended to replace “Dissenting Shares” with “Target Dissenting Shares” wherever such term appears therein.

(d) Section 3.1(e) is deleted in its entirety and replaced with the following:

“(e) No Target Dissenting Shares shall be converted in the Merger. All such shares shall be canceled, and the holders thereof shall thereafter have only such rights as are granted to dissenting shareholders under Subchapter XIII of the WBCL; provided, however, that if any such shareholder takes any action or fails to take any action the result of which would be to cause such shareholder to withdrawal his, her or its notice of intent to demand payment or to otherwise forfeit his, her or its rights as a dissenting shareholder with respect to his, her or its Target Common Stock in accordance with Subchapter XIII of the WBCL as of the Effective Time, such shares of Target Common Stock held by such shareholder shall be deemed to have been converted into, and become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration to which the holder of such shares would have been entitled as of the Effective Time, without interest thereon. Holders of any Purchaser Dissenting Shares shall have only such rights as are granted to dissenting shareholders under Subchapter XIII of the WBCL; provided, however, that if any such shareholder takes any action or fails to take any action the result of which would be to cause such shareholder to withdrawal his, her or its notice of intent to demand payment or to otherwise forfeit his, her or its rights as a dissenting shareholder with respect to his, her or its Purchaser Common Stock in accordance with Subchapter XIII of the WBCL, such shares of Purchaser Common Stock shall remain issued and outstanding and held by such shareholder.”

2.2

Subsection (h) of Section 10.1 of Article 10 of the Agreement is hereby deleted in its entirety and replaced with the following:

“(h) By the Board of Directors of Purchaser if: (i) the holders of more than 5% in the aggregate of the Outstanding Target Shares shall have, as of the time of such termination, asserted and preserved Dissenters’ Rights with respect to such Target Common Stock pursuant to Subchapter XIII of the WBCL by (A) taking all action required of a dissenting holder by s. 180.1321 of the WBCL and (B) neither taking any action nor failing to take any action the result of which would be to cause such holder to withdrawal his, her or its notice of intent to demand payment or to otherwise forfeit his, her or its rights

as a dissenting holder with respect to his, her or its Target Common Stock in accordance with Subchapter XIII of the WBCL, or (ii) the holders of more than 2% of the outstanding shares of Purchaser Common Stock shall have, as of the time of such termination, asserted and preserved Dissenters’ Rights with respect to such shares of Purchaser Common Stock pursuant to Subchapter XIII of the WBCL by (A) taking all action required of a dissenting holder by s. 180.1321 of the WBCL and (B) neither taking any action nor failing to take any action the result of which would be to cause such holder to withdrawal his, her or its notice of intent to demand payment or to otherwise forfeit his, her or its rights as a dissenting holder with respect to his, her or its Purchaser Common Stock in accordance with Subchapter XIII of the WBCL.”

2.3 Section 11.1 of Article 11 of the Agreement is hereby amended by deleting the definition of “Dissenting Shares” from Section 11.1(a) and adding the following definitions to Section 11.1(a):

“Dissenters’ Rights” shall mean those rights given to dissenting shareholders and beneficial shareholders under Subchapter XIII of the WBCL.

“Purchaser Dissenting Shares” shall mean shares of Purchaser Common Stock with respect to which the holders thereof have asserted and preserved Dissenters’ Rights by (A) taking all action required of a dissenting holder by s. 180.1321 of the WBCL and (B) neither taking any action nor failing to take any action the result of which would be to cause such holder to withdrawal his, her or its notice of intent to demand payment or to otherwise forfeit his, her or its rights as a dissenting holder with respect to such shares of Purchaser Common Stock in accordance with Subchapter XIII of the WBCL.

“Target Dissenting Shares” shall mean shares of Target Common Stock with respect to which the holders thereof have asserted and preserved Dissenters’ Rights by (A) taking all action required of a dissenting holder by s. 180.1321 of the WBCL and (B) neither taking any action nor failing to take any action the result of which would be to cause such holder to withdrawal his, her or its notice of intent to demand payment or to otherwise forfeit his, her or its rights as a dissenting holder with respect to such shares of Target Common Stock in accordance with Subchapter XIII of the WBCL.”

ARTICLE 3 MISCELLANEOUS

3.1 Agreement to Remain in Full Force . All of the terms of the Agreement, as amended hereby, shall remain and continue in full force and effect and are hereby confirmed, as so amended, in all respects. The Agreement, as amended by this Amendment, represents the final agreement between the parties about the subject matter of the Agreement and may not be contradicted by evidence or prior, contemporaneous, or subsequent oral agreements of the parties.

3.2 Notices and Service of Process . All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if delivered by hand, by facsimile transmission, by registered or certified mail, postage pre-paid, or by courier or overnight carrier, to the persons at the addresses set forth below (or at such other address as may be provided hereunder), and shall be deemed to have been delivered as of the date so delivered:

With a copy to:

Katherine M. Koops, Esq.
Bryan Cave LLP
One Atlantic Center, 14th Floor
1201 West Peachtree Street, N.E.
Atlanta, Georgia 30309

3.3

Governing Law . This Amendment shall be governed by and construed in accordance with the Laws of the State of Wisconsin, without regard to any applicable conflicts of Laws.

3.4 Counterparts . This Amendment may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

3.5 Severability . Any term or provision of this Amendment which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Amendment or affecting the validity or enforceability of any of the terms or provisions of this Amendment in any other jurisdiction. If any provision of this Amendment is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.

[Signatures appear on next page]

IN WITNESS WHEREOF, each of the Parties has caused this Amendment to be executed on its behalf by its duly authorized officers as of the day and year first above written.

				NICOLET BANKSHARES, INC.

				By:				/s/ Robert B. Atwell
								Robert B. Atwell Chief Executive Officer


				MID-WISCONSIN FINANCIAL SERVICES, INC.

				By:				/s/ Kim A. Gowey
								Kim A. Gowey Chairman of the Board

APPENDIX B

SUBCHAPTER XIII OF THE
WISCONSIN BUSINESS CORPORATION LAW

SUBCHAPTER XIII OF THE
WISCONSIN BUSINESS CORPORATION LAW
DISSENTERS’ RIGHTS

180.1301

Definitions. In ss. 180.1301 to 180.1331.

(1) “Beneficial shareholder” means a person who is a beneficial owner of shares held by a nominee as the shareholder.

(1m) “Business combination” has the meaning given in s. 180.1130 (3).

(2) “Corporation” means the issuer corporation or, if the corporate action giving rise to dissenters’ rights under s. 180.1302 is a merger or share exchange that has been effectuated, the surviving domestic corporation or foreign corporation of the merger or the acquiring domestic corporation or foreign corporation of the share exchange.

(3) “Dissenter” means a shareholder or beneficial shareholder who is entitled to dissent from corporate action under s. 180.1302 and who exercises that right when and in the manner required by ss. 180.1320 to 180.1328.

(4) “Fair value”, with respect to a dissenter’s shares other than in a business combination, means the value of the shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable. “Fair value”, with respect to a dissenter’s shares in a business combination, means market value, as defined in s. 180.1130 (9) (a) 1. to 4.

(5) “Interest” means interest from the effectuation date of the corporate action until the date of payment, at the average rate currently paid by the corporation on its principal bank loans or, if none, at a rate that is fair and equitable under all of the circumstances.

(6) “Issuer corporation” means a domestic corporation that is the issuer of the shares held by a dissenter before the corporate action.

History: 1989 a. 303; 1991 a. 16.

“Date of payment” in sub. (5) refers to the actual payment date by a corporation following a special proceeding, even if the payment occurs after a “verdict, decision or report,” within the meaning of s. 814.04 (4), or after “judgment,” within the meaning of s. 815.05 (8). Thus the definition of interest contained in sub. (5) applies to the time period following a court decision on fair value until final payment is made. HMO-W Incorporated v. SSM Health Care System, 2003 WI App 137, 266 Wis. 2d 69, 667 N.W.2d 733, 02-0042.

The phrase “rate that is fair and equitable under all of the circumstances” in sub. (5) directs the circuit court to consider the circumstances of the particular case in determining the interest rate to be paid. It was appropriate under this standard to look at the borrowing power of a parent corporation to determine if the rate the subsidiary would obtain would be the rate the parent could obtain. HMO-W Incorporated v. SSM Health Care System, 2003 WI App 137, 266 Wis. 2d 69, 667 N.W.2d 733, 02-0042.

180.1302

Right to dissent.

(1) Except as provided in sub. (4) and s. 180.1008 (3), a shareholder or beneficial shareholder may dissent from, and obtain payment of the fair value of his or her shares in the event of, any of the following corporate actions:

(a) Consummation of a plan of merger to which the issuer corporation is a party if any of the following applies:

1. Shareholder approval is required for the merger by s. 180.1103 or by the articles of incorporation.

2. The issuer corporation is a subsidiary that is merged with its parent under s. 180.1104.

3. The issuer corporation is a parent that is merged with its subsidiary under s. 180.1104. This subdivision does not apply if all of the following are true:

a. The articles of incorporation of the surviving corporation do not differ from the articles of incorporation of the parent before the merger, except for amendments specified in s. 180.1002 (1) to (9).

b. Each shareholder of the parent whose shares were outstanding immediately before the effective time of the merger holds the same number of shares with identical designations, preferences, limitations, and relative rights, immediately after the merger.

c. The number of voting shares, as defined in s. 180.1103 (5) (a) 2., outstanding immediately after the merger, plus the number of voting shares issuable as a result of the merger, either by the conversion of securities issued pursuant to the merger or the exercise of rights or warrants issued pursuant to the merger, do not exceed by more than 20 percent the total number of voting shares of the parent outstanding immediately before the merger.

d. The number of participating shares, as defined in s. 180.1103 (5) (a) 1., outstanding immediately after the merger, plus the number of participating shares issuable as a result of the merger, either by the conversion of securities issued pursuant to the merger or the exercise of rights or warrants issued pursuant to the merger, do not exceed by more than 20 percent the total number of participating shares of the parent outstanding immediately before the merger.

(b) Consummation of a plan of share exchange if the issuer corporation’s shares will be acquired, and the shareholder or the shareholder holding shares on behalf of the beneficial shareholder is entitled to vote on the plan.

(c) Consummation of a sale or exchange of all, or substantially all, of the property of the issuer corporation other than in the usual and regular course of business, including a sale in dissolution, but not including any of the following:

1. A sale pursuant to court order.

2. A sale for cash pursuant to a plan by which all or substantially all of the net proceeds of the sale will be distributed to the shareholders within one year after the date of sale.

(cm) Consummation of a plan of conversion.

(d) Except as provided in sub. (2), any other corporate action taken pursuant to a shareholder vote to the extent that the articles of incorporation, bylaws or a resolution of the board of directors provides that the voting or nonvoting shareholder or beneficial shareholder may dissent and obtain payment for his or her shares.

(2) Except as provided in sub. (4) and s. 180.1008 (3), the articles of incorporation may allow a shareholder or beneficial shareholder to dissent from an amendment of the articles of incorporation and obtain payment of the fair value of his or her shares if the amendment materially and adversely affects rights in respect of a dissenter’s shares because it does any of the following:

(a) Alters or abolishes a preferential right of the shares.

(b) Creates, alters or abolishes a right in respect of redemption, including a provision respecting a sinking fund for the redemption or repurchase, of the shares.

(d) Excludes or limits the right of the shares to vote on any matter or to cumulate votes, other than a limitation by dilution through issuance of shares or other securities with similar voting rights.

(e) Reduces the number of shares owned by the shareholder or beneficial shareholder to a fraction of a share if the fractional share so created is to be acquired for cash under s. 180.0604.

(3) Notwithstanding sub. (1) (a) to (c), if the issuer corporation is a statutory close corporation under ss. 180.1801 to 180.1837, a shareholder of the statutory close corporation may dissent from a corporate action and obtain payment of the fair value of his or her shares, to the extent permitted under sub. (1) (d) or (2) or s. 180.1803, 180.1813 (1) (d) or (2) (b), 180.1815 (3) or 180.1829 (1) (c).

(4) Unless the articles of incorporation provide otherwise, subs. (1) and (2) do not apply to the holders of shares of any class or series if the shares of the class or series are registered on a national securities exchange or quoted on the National Association of Securities Dealers, Inc., automated quotations system on the record date fixed to determine the shareholders entitled to notice of a shareholders meeting at which shareholders are to vote on the proposed corporate action.

(5) Except as provided in s. 180.1833, a shareholder or beneficial shareholder entitled to dissent and obtain payment for his or her shares under ss. 180.1301 to 180.1331 may not challenge the corporate action creating

his or her entitlement unless the action is unlawful or fraudulent with respect to the shareholder, beneficial shareholder or issuer corporation.

History: 1989 a. 303; 1991 a. 16; 2001 a. 44; 2005 a. 476.

Minority discounts are inappropriate under dissenters’ rights statutes and will not be applied in determining “fair value” under sub. (1). Each dissenting shareholder should be assigned the proportionate interest of his or her shares in the going interest in the entire company. HMO-W Incorporated v. SSM Health Care System, 2000 WI 46, 234 Wis. 2d 707, 611 N.W.2d 250, 98-2834.

The Role of Discounts in Determining “Fair Value” Under Wisconsin’s Dissenters’ Rights Statutes: The Case for Discounts. Emory. 1995 WLR 1155.

180.1303

Dissent by shareholders and beneficial shareholders.

(1) A shareholder may assert dissenters’ rights as to fewer than all of the shares registered in his or her name only if the shareholder dissents with respect to all shares beneficially owned by any one person and notifies the corporation in writing of the name and address of each person on whose behalf he or she asserts dissenters’ rights. The rights of a shareholder who under this subsection asserts dissenters’ rights as to fewer than all of the shares registered in his or her name are determined as if the shares as to which he or she dissents and his or her other shares were registered in the names of different shareholders.

(2) A beneficial shareholder may assert dissenters’ rights as to shares held on his or her behalf only if the beneficial shareholder does all of the following:

(a) Submits to the corporation the shareholder’s written consent to the dissent not later than the time that the beneficial shareholder asserts dissenters’ rights.

(b) Submits the consent under par. (a) with respect to all shares of which he or she is the beneficial shareholder.

History: 1989 a. 303.

180.1320

Notice of dissenters’ rights.

(1) If proposed corporate action creating dissenters’ rights under s. 180.1302 is submitted to a vote at a shareholders’ meeting, the meeting notice shall state that shareholders and beneficial shareholders are or may be entitled to assert dissenters’ rights under ss. 180.1301 to 180.1331 and shall be accompanied by a copy of those sections.

(2) If corporate action creating dissenters’ rights under s. 180.1302 is authorized without a vote of shareholders, the corporation shall notify, in writing and in accordance with s. 180.0141, all shareholders entitled to assert dissenters’ rights that the action was authorized and send them the dissenters’ notice described in s. 180.1322.

History: 1989 a. 303.

When the plaintiff was not a shareholder at the time of the complained of acts, it had no right to vote in dissent to a plan of liquidation and dissolution, and it could not be a dissenter entitled to notice of dissenters’ rights, as only one who can vote in dissent is entitled to such notice under this section. Borne v. Gonstead Advanced Techniques, Inc. 2003 WI App 135, 266 Wis. 2d 253, 667 N.W.2d 709, 01-2624.

180.1321

Notice of intent to demand payment.

(1) If proposed corporate action creating dissenters’ rights under s. 180.1302 is submitted to a vote at a shareholders’ meeting, a shareholder or beneficial shareholder who wishes to assert dissenters’ rights shall do all of the following:

(a) Deliver to the issuer corporation before the vote is taken written notice that complies with s. 180.0141 of the shareholder’s or beneficial shareholder’s intent to demand payment for his or her shares if the proposed action is effectuated.

(b) Not vote his or her shares in favor of the proposed action.

(2) A shareholder or beneficial shareholder who fails to satisfy sub. (1) is not entitled to payment for his or her shares under ss. 180.1301 to 180.1331.

History: 1989 a. 303.

180.1322

Dissenters’ notice.

(1) If proposed corporate action creating dissenters’ rights under s. 180.1302 is authorized at a shareholders’ meeting, the corporation shall deliver a written dissenters’ notice to all shareholders and beneficial shareholders who satisfied s. 180.1321.

(2) The dissenters’ notice shall be sent no later than 10 days after the corporate action is authorized at a shareholders’ meeting or without a vote of shareholders, whichever is applicable. The dissenters’ notice shall comply with s. 180.0141 and shall include or have attached all of the following:

(a) A statement indicating where the shareholder or beneficial shareholder must send the payment demand and where and when certificates for certificated shares must be deposited.

(b) For holders of uncertificated shares, an explanation of the extent to which transfer of the shares will be restricted after the payment demand is received.

(c) A form for demanding payment that includes the date of the first announcement to news media or to shareholders of the terms of the proposed corporate action and that requires the shareholder or beneficial shareholder asserting dissenters’ rights to certify whether he or she acquired beneficial ownership of the shares before that date.

(d) A date by which the corporation must receive the payment demand, which may not be fewer than 30 days nor more than 60 days after the date on which the dissenters’ notice is delivered.

(e) A copy of ss. 180.1301 to 180.1331.

History: 1989 a. 303.

180.1323

Duty to demand payment.

(1) A shareholder or beneficial shareholder who is sent a dissenters’ notice described in s. 180.1322, or a beneficial shareholder whose shares are held by a nominee who is sent a dissenters’ notice described in s. 180.1322, must demand payment in writing and certify whether he or she acquired beneficial ownership of the shares before the date specified in the dissenters’ notice under s. 180.1322 (2) (c). A shareholder or beneficial shareholder with certificated shares must also deposit his or her certificates in accordance with the terms of the notice.

(2) A shareholder or beneficial shareholder with certificated shares who demands payment and deposits his or her share certificates under sub. (1) retains all other rights of a shareholder or beneficial shareholder until these rights are canceled or modified by the effectuation of the corporate action.

(3) A shareholder or beneficial shareholder with certificated or uncertificated shares who does not demand payment by the date set in the dissenters’ notice, or a shareholder or beneficial shareholder with certificated shares who does not deposit his or her share certificates where required and by the date set in the dissenters’ notice, is not entitled to payment for his or her shares under ss. 180.1301 to 180.1331.

History: 1989 a. 303.

180.1324

Restrictions on uncertificated shares.

(1) The issuer corporation may restrict the transfer of uncertificated shares from the date that the demand for payment for those shares is received until the corporate action is effectuated or the restrictions released under s. 180.1326.

(2) The shareholder or beneficial shareholder who asserts dissenters’ rights as to uncertificated shares retains all of the rights of a shareholder or beneficial shareholder, other than those restricted under sub. (1), until these rights are canceled or modified by the effectuation of the corporate action.

History: 1989 a. 303.

180.1325

Payment.

(1) Except as provided in s. 180.1327, as soon as the corporate action is effectuated or upon receipt of a payment demand, whichever is later, the corporation shall pay each shareholder or beneficial shareholder who has complied with s. 180.1323 the amount that the corporation estimates to be the fair value of his or her shares, plus accrued interest.

(2) The payment shall be accompanied by all of the following:

(a) The corporation’s latest available financial statements, audited and including footnote disclosure if available, but including not less than a balance sheet as of the end of a fiscal year ending not more than 16 months before the date of payment, an income statement for that year, a statement of changes in shareholders’ equity for that year and the latest available interim financial statements, if any.

(b) A statement of the corporation’s estimate of the fair value of the shares.

(d) A statement of the dissenter’s right to demand payment under s. 180.1328 if the dissenter is dissatisfied with the payment.

(e) A copy of ss. 180.1301 to 180.1331.

History: 1989 a. 303.

180.1326

Failure to take action.

(1) If an issuer corporation does not effectuate the corporate action within 60 days after the date set under s. 180.1322 for demanding payment, the issuer corporation shall return the deposited certificates and release the transfer restrictions imposed on uncertificated shares.

(2) If after returning deposited certificates and releasing transfer restrictions, the issuer corporation effectuates the corporate action, the corporation shall deliver a new dissenters’ notice under s. 180.1322 and repeat the payment demand procedure.

History: 1989 a. 303.

180.1327

After-acquired shares.

(1) A corporation may elect to withhold payment required by s. 180.1325 from a dissenter unless the dissenter was the beneficial owner of the shares before the date specified in the dissenters’ notice under s. 180.1322 (2) (c) as the date of the first announcement to news media or to shareholders of the terms of the proposed corporate action.

(2) To the extent that the corporation elects to withhold payment under sub. (1) after effectuating the corporate action, it shall estimate the fair value of the shares, plus accrued interest, and shall pay this amount to each dissenter who agrees to accept it in full satisfaction of his or her demand. The corporation shall send with its offer a statement of its estimate of the fair value of the shares, an explanation of how the interest was calculated, and a statement of the dissenter’s right to demand payment under s. 180.1328 if the dissenter is dissatisfied with the offer.

History: 1989 a. 303.

180.1328 Procedure if dissenter dissatisfied with payment or offer.

(1) A dissenter may, in the manner provided in sub. (2), notify the corporation of the dissenter’s estimate of the fair value of his or her shares and amount of interest due, and demand payment of his or her estimate, less any payment received under s. 180.1325, or reject the offer under s. 180.1327 and demand payment of the fair value of his or her shares and interest due, if any of the following applies:

(a) The dissenter believes that the amount paid under s. 180.1325 or offered under s. 180.1327 is less than the fair value of his or her shares or that the interest due is incorrectly calculated.

(b) The corporation fails to make payment under s. 180.1325 within 60 days after the date set under s. 180.1322 for demanding payment.

(c) The issuer corporation, having failed to effectuate the corporate action, does not return the deposited certificates or release the transfer restrictions imposed on uncertificated shares within 60 days after the date set under s. 180.1322 for demanding payment.

(2) A dissenter waives his or her right to demand payment under this section unless the dissenter notifies the corporation of his or her demand under sub. (1) in writing within 30 days after the corporation made or offered payment for his or her shares. The notice shall comply with s. 180.0141.

History: 1989 a. 303.

When payment is made by check, the payment date under sub. (2) is the date the payee receives the check. Kohler Co. v. Sogen International Fund, Inc. 2000 WI App 60, 233 Wis. 2d 592, 608 N.W.2d 746, 99-0960.

180.1330

Court action.

(1) If a demand for payment under s. 180.1328 remains unsettled, the corporation shall bring a special proceeding within 60 days after receiving the payment demand under s. 180.1328 and petition the court to determine the fair value of the shares and accrued interest. If the corporation does not bring the special proceeding within the 60-day period, it shall pay each dissenter whose demand remains unsettled the amount demanded.

(2) The corporation shall bring the special proceeding in the circuit court for the county where its principal office or, if none in this state, its registered office is located. If the corporation is a foreign corporation without a registered office in this state, it shall bring the special proceeding in the county in this state in which was located the registered office of the issuer corporation that merged with or whose shares were acquired by the foreign corporation.

(3) The corporation shall make all dissenters, whether or not residents of this state, whose demands remain unsettled parties to the special proceeding. Each party to the special proceeding shall be served with a copy of the petition as provided in s. 801.14.

(4) The jurisdiction of the court in which the special proceeding is brought under sub. (2) is plenary and exclusive. The court may appoint one or more persons as appraisers to receive evidence and recommend decision on the question of fair value. An appraiser has the power described in the order appointing him or her or in any amendment to the order. The dissenters are entitled to the same discovery rights as parties in other civil proceedings.

(5) Each dissenter made a party to the special proceeding is entitled to judgment for any of the following:

(a) The amount, if any, by which the court finds the fair value of his or her shares, plus interest, exceeds the amount paid by the corporation.

(b) The fair value, plus accrued interest, of his or her shares acquired on or after the date specified in the dissenter’s notice under s. 180.1322 (2) (c), for which the corporation elected to withhold payment under s. 180.1327.

History: 1989 a. 303.

Because this section does not provide for different procedures, all procedural mechanisms under chs. 801 to 847 are available in an action under this section. Kohler Co. v. Sogen International Fund, Inc. 2000 WI App 60, 233 Wis. 2d 592, 608 N.W.2d 746, 99-0960.

Subs. (2) and (4) establish a rule of venue applicable within Wisconsin’s judicial system and do not attempt to block corporations from using federal diversity jurisdiction. Albert Trostel & Son v. Edward Notz, 679 F.3d 627 (2012).

180.1331

Court costs and counsel fees.

(1)

(a) Notwithstanding ss. 814.01 to 814.04, the court in a special proceeding brought under s. 180.1330 shall determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court and shall assess the costs against the corporation, except as provided in par. (b).

(b) Notwithstanding ss. 814.01 and 814.04, the court may assess costs against all or some of the dissenters, in amounts that the court finds to be equitable, to the extent that the court finds the dissenters acted arbitrarily, vexatiously or not in good faith in demanding payment under s. 180.1328.

(2) The parties shall bear their own expenses of the proceeding, except that, notwithstanding ss. 814.01 to 814.04, the court may also assess the fees and expenses of counsel and experts for the respective parties, in amounts that the court finds to be equitable, as follows:

(a) Against the corporation and in favor of any dissenter if the court finds that the corporation did not substantially comply with ss. 180.1320 to 180.1328.

(b) Against the corporation or against a dissenter, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously or not in good faith with respect to the rights provided by this chapter.

(3) Notwithstanding ss. 814.01 to 814.04, if the court finds that the services of counsel and experts for any dissenter were of substantial benefit to other dissenters similarly situated, the court may award to these counsel and experts reasonable fees to be paid out of the amounts awarded the dissenters who were benefited.

History: 1989 a. 303.

APPENDIX C

FAIRNESS OPINION OF
RAYMOND JAMES & ASSOCIATES, INC.

November 28, 2012

Board of Directors
Mid-Wisconsin Financial Services, Inc.
132 West State Street
Medford, Wisconsin 54451

Members of the Board:

You have requested our opinion as to the fairness, from a financial point of view, to the shareholders of the outstanding common stock, par value $0.10 (the “Common Stock”) of Mid-Wisconsin Financial Services, Inc. (the “Company”) of the consideration to be received by such holders in connection with the proposed merger (the “Merger”) of the Company into Nicolet Bankshares, Inc. (“Nicolet”) pursuant to the Agreement and Plan of Merger between the Company and Nicolet, dated as of November 28, 2012 (the “Agreement”). Under and subject to the terms of the Agreement, the consideration to be offered by Nicolet in exchange for all the outstanding Common Stock is 0.3727 shares of Nicolet common stock, or the cash equivalent at Nicolet’s election (the “Consideration”). For purposes of our opinion, we have, with your consent, assumed the value of the Consideration to be paid by Nicolet to be $6.15 per share.

In connection with our review of the proposed Merger and the preparation of our opinion herein, we have, among other things:

reviewed the financial terms and conditions as stated in the Agreement;

reviewed the audited financial statements of the Company as of and for the years ended December 31, 2010 and December 31, 2011, and the unaudited financial statements for the quarter ending September 30, 2012;

reviewed the Company’s Annual Report filed on Form 10-K for the years ended December 31, 2010 and December 31, 2011 and Quarterly Reports filed on Form 10-Q for the quarters ended March 31, June 30, and September 30, 2012;

reviewed other Company financial and operating information requested from and/or provided by the Company;

reviewed certain other publicly available information on the Company;

reviewed financial projections of the Company provided to us by the Company’s management;

reviewed financial information for comparable companies with similar information for comparable companies with publicly traded securities;

Board of Directors
Mid-Wisconsin Financial Services, Inc.
November 28, 2012
Page 2

reviewed the financial terms of recent business combinations involving companies deemed to be similar; and

discussed with members of the senior management of the Company certain information relating to the aforementioned and any other matters which we have deemed relevant to our inquiry.

With your consent, we have assumed and relied upon the accuracy and completeness of all information supplied or otherwise made available to us by the Company, Nicolet or any other party, and we have undertaken no duty or responsibility to verify independently any of such information. We have not made or obtained an independent appraisal of the assets or liabilities (contingent or otherwise) of the Company. With respect to financial forecasts and other information and data provided to or otherwise reviewed by or discussed with us, we have, with your consent, assumed that such forecasts and other information and data have been reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of management, and we have relied upon each party to advise us promptly if any information previously provided became inaccurate or was required to be updated during the period of our review.We have assumed that the final form of the Agreement will be substantially similar to the draft reviewed by us, and that the Merger will be consummated in accordance with the terms of the Agreement without waiver of any conditions thereof.

Our opinion is based upon market, economic, financial and other circumstances and conditions existing and disclosed to us as of November 27, 2012 and any material change in such circumstances and conditions would require a reevaluation of this opinion, which we are under no obligation to undertake.

We express no opinion as to the underlying business decision to effect the Merger, the structure or tax consequences of the Agreement or the availability or advisability of any alternatives to the Merger. We did not structure the Merger or negotiate the final terms of the Merger. This letter does not express any opinion as to the likely trading range of Nicolet stock following the Merger, which may vary depending on numerous factors that generally impact the price of securities or on the financial condition of Nicolet at that time. Our opinion is limited to the fairness, from a financial point of view, of the Merger to the shareholders of the Company. We express no opinion with respect to any other reasons, legal, business, or otherwise, that may support the decision of the Board of Directors to approve or consummate the Merger. In formulating our opinion, we have considered only what we understand to be the consideration to be received by the shareholders of the Company as is described above, and we have not considered, and this opinion does not address, any other payments that may be made in connection to Company employees or other shareholders in connection with the Transaction.

In conducting our investigation and analyses and in arriving at our opinion expressed herein, we have taken into account such accepted financial and investment banking procedures and considerations as we have deemed relevant, including the review of (i) historical and projected revenues, operating earnings, net income and capitalization of the Company and certain other publicly held companies in businesses we believe to be comparable to the Company; (ii) the current and projected financial position and results of operations of the Company; (iii) the historical market prices and trading activity of the Common Stock of the Company; (iv) financial and operating information concerning selected business combinations which we deemed comparable in whole or in part; and (v) the general condition of the securities markets. The delivery of this opinion was approved by our fairness opinion committee.

Board of Directors
Mid-Wisconsin Financial Services, Inc.
November 28, 2012
Page 3

In arriving at this opinion, Raymond James did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, Raymond James believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering all analyses, would create an incomplete view of the process underlying this opinion.

Raymond James & Associates, Inc. (“Raymond James”) is actively engaged in the investment banking business and regularly undertakes the valuation of investment securities in connection with public offerings, private placements, business combinations and similar transactions. Raymond James has been engaged to render financial advisory services to the Company in connection with the proposed Merger and will receive a fee for such services, which fee is contingent upon consummation of the Merger. Raymond James will also receive a fee upon the delivery of this opinion. In addition, the Company has agreed to indemnify us against certain liabilities arising out of our engagement.

In the ordinary course of our business, Raymond James may trade in the securities of the Company or Nicolet for our own account or for the accounts of our customers and, accordingly, may at any time hold a long or short position in such securities.

It is understood that this letter is for the information of the Board of Directors of the Company in evaluating the proposed Merger and does not constitute a recommendation to any shareholder of the Company regarding how said shareholder should vote on the proposed Merger. Furthermore, this letter should not be construed as creating any fiduciary duty on the part of Raymond James to any such party. This opinion is not to be quoted or referred to, in whole or in part, without our prior written consent, which will not be unreasonably withheld.

Based upon and subject to the foregoing, it is our opinion that, as of November 28, 2012 the Consideration to be received by the shareholders of the Company pursuant to the Agreement is fair, from a financial point of view, to the holders of the Company’s outstanding Common Stock.

Very truly yours,

RAYMOND JAMES & ASSOCIATES, INC.

APPENDIX D

FAIRNESS OPINION OF
SANDLER O’NEILL + PARTNERS, L.P.

November 28, 2012

Board of Directors
Nicolet Bankshares, Inc.
111 North Washington Street
Green Bay, WI 54301

Ladies and Gentlemen:

Nicolet Bankshares, Inc. (“Nicolet”) and Mid-Wisconsin Financial Services, Inc. (“Mid-Wisconsin”) have entered into a Plan of Merger and Merger Agreement, dated as of November 28, 2012 (the “Agreement”), pursuant to which Mid-Wisconsin will merge with and into Nicolet (the “Merger”). Under the terms of the Agreement, upon consummation of the Merger, each share of Mid-Wisconsin common stock issued and outstanding immediately prior to the Merger (the “Mid-Wisconsin Common Stock”), other than certain shares specified in the Agreement, will be converted into the right to receive 0.3727 (the “Exchange Ratio”) of a share of Nicolet common stock (the “Merger Consideration”). The terms of the Merger are more fully described in the Agreement. Capitalized terms used herein without definition shall have the meanings given to such terms in the Agreement. You have requested our opinion as to the fairness, from a financial point of view, of the Merger Consideration to Nicolet.

Sandler O’Neill & Partners, L.P., as part of its investment banking business, is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions. In connection with this opinion, we have reviewed, among other things: (i) the Agreement; (ii) certain publicly available financial statements and other historical financial information of Nicolet that we deemed relevant; (iii) certain publicly available financial statements and other historical financial information of Mid-Wisconsin that we deemed relevant; (iv) internal financial projections for Nicolet for the years ending December 31, 2012 through December 31, 2014 as provided by and discussed with senior management of Nicolet; (v) internal financial projections for Mid-Wisconsin for the years ending December 31, 2012 through 2016 as provided by senior management of Mid-Wisconsin; (vi) the pro forma financial impact of the Merger on Nicolet based on assumptions relating to transaction expenses, purchase accounting adjustments, cost savings and other synergies as determined by the senior management of Nicolet; (vii) a comparison of certain financial information for Nicolet and Mid-Wisconsin with similar institutions for which publicly available information is available; (viii) the financial terms of certain recent business combinations in the commercial banking industry, to the extent publicly available; (ix) the current market environment generally and the banking environment in particular; and (x) such other information, financial studies, analyses and investigations and financial, economic and market criteria as we considered relevant. We also discussed with certain members of senior management of Nicolet the business, financial condition, results of operations and prospects of Nicolet.

In performing our review, we have relied upon the accuracy and completeness of all of the financial and other information that was available to us from public sources, that was provided to us by Nicolet and Mid-Wisconsin or their respective representatives or that was otherwise reviewed by us and have assumed such accuracy and completeness for purposes of rendering this opinion. We have further relied on the

assurances of the respective managements of Nicolet and Mid-Wisconsin that they are not aware of any facts or circumstances that would make any of such information inaccurate or misleading. We have not been asked to and have not undertaken an independent verification of any of such information and we do not assume any responsibility or liability for the accuracy or completeness thereof. We did not make an independent evaluation or appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of Nicolet and Mid-Wisconsin or any of their respective subsidiaries. We render no opinion or evaluation on the collectability of any assets or the future performance of any loans of Nicolet and Mid-Wisconsin. We did not make an independent evaluation of the adequacy of the allowance for loan losses of Nicolet and Mid-Wisconsin, or the combined entity after the Merger and we have not reviewed any individual credit files relating to Nicolet and Mid-Wisconsin. We have assumed, with your consent, that the respective allowances for loan losses for both Nicolet and Mid-Wisconsin are adequate to cover such losses and will be adequate on a pro forma basis for the combined entity.

In preparing its analyses, Sandler O’Neill used internal financial projections for Nicolet and Mid-Wisconsin as provided by the respective senior managements of Nicolet and Mid-Wisconsin. Sandler O’Neill also received and used in its analyses certain projections of transaction costs, purchase accounting adjustments, expected cost savings and other synergies which were prepared by and/or reviewed with the senior management of Nicolet. With respect to those projections, estimates and judgments, the management of Nicolet confirmed to us that those projections, estimates and judgments reflected the best currently available estimates and judgments of management of the future financial performance of Nicolet and Mid-Wisconsin, respectively, and we assumed that such performance would be achieved. We express no opinion as to such estimates or the assumptions on which they are based. We have also assumed that there has been no material change in Nicolet’ and Mid-Wisconsin’s assets, financial condition, results of operations, business or prospects since the date of the most recent financial statements made available to us. We have assumed in all respects material to our analysis that Nicolet and Mid-Wisconsin will remain as going concerns for all periods relevant to our analyses, that all of the representations and warranties contained in the Agreement and all related agreements are true and correct, that each party to the Agreement will perform all of the covenants required to be performed by such party under the Agreement, that the conditions precedent in the Agreement are not waived and that the Merger will qualify as a tax-free reorganization for federal income tax purposes. Finally, with your consent, we have relied upon the advice Nicolet has received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating to the Merger and the other transactions contemplated by the Agreement.

Our opinion is necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. Events occurring after the date hereof could materially affect this opinion. We have not undertaken to update, revise, reaffirm or withdraw this opinion or otherwise comment upon events occurring after the date hereof. We have acted as Nicolet’ financial advisor in connection with the Merger and will receive a fee for our services, a substantial portion of which is contingent upon consummation of the Merger. Nicolet has also agreed to indemnify us against certain liabilities arising out of our engagement. In the ordinary course of our business as a broker-dealer, we may purchase securities from and sell securities to Nicolet and Mid-Wisconsin and their affiliates.

-3-

Our opinion is directed to the Board of Directors of Nicolet in connection with its consideration of the Merger and does not constitute a recommendation to any shareholder of either Nicolet or Mid-Wisconsin as to how any such shareholder should vote at any meeting of shareholders called to consider and vote upon the Merger. Our opinion is directed only to the fairness, from a financial point of view, of the Merger Consideration to Nicolet and does not address the underlying business decision of Nicolet to engage in the Merger, the relative merits of the Merger as compared to any other alternative business strategies that might exist for Nicolet or the effect of any other transaction in which Nicolet might engage. This opinion shall not be reproduced or used for any other purposes, without Sandler O’Neill’s prior written consent. This opinion has been approved by Sandler O’Neill’s fairness opinion committee. We do not express any opinion as to the fairness of the amount or nature of the compensation to be received in the Merger by any officer, director, or employees, or class of such persons, relative to the compensation to be received in the Merger by any other shareholder.

Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Merger Consideration is fair to Nicolet from a financial point of view.

				Very truly yours,

-4-

APPENDIX E

ANNUAL REPORT OF MID-WISCONSIN FINANCIAL SERVICES, INC.
FOR THE YEAR ENDED DECEMBER 31, 2011
ON FORM 10-K

(WITHOUT EXHIBITS)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the fiscal year ended December 31, 2011

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from______________________ to____________________

Commission file number: 0-18542

MID-WISCONSIN FINANCIAL SERVICES, INC.

(Exact name of registrant as specified in its charter)

WISCONSIN (State or other jurisdiction of incorporation or organization)				06-1169935 (I.R.S. Employer Identification No.)

132 West State Street Medford, Wisconsin 54451 (Address of principal executive offices) (Zip code) Registrant’s telephone number, including area code: (715) 748-8300

Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act:

$0.10 Par Value Common Stock (Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No [X]

Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

o (Do not check if a smaller reporting company)

Smaller reporting company

[X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No [X]

As of June 30, 2011 (the last business day of the registrant’s most recently completed second fiscal quarter) the aggregate market value of the voting and non-voting equity held by non-affiliates of the registrant was approximately $12,253,000 based upon a price per share of $8.00.

As of March 1, 2012, there were 1,657,119 shares of $0.10 par value common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Document
Proxy Statement for Annual Meeting of
Shareholders on April 24, 2012

Part of Form 10-K Into Which
Portions of Documents Are Incorporated
Part III

MID-WISCONSIN FINANCIAL SERVICES, INC.

2011 FORM 10-K

TABLE OF CONTENTS

PART I

Page

ITEM 1.

Business

ITEM 1A.

Risk Factors

ITEM 1B.

Unresolved Staff Comments

ITEM 2.

Properties

ITEM 3.

Legal Proceedings

ITEM 4.

Mine Safety Disclosures

PART II

ITEM 5.

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

ITEM 6.

Selected Financial Data

ITEM 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

ITEM 7A.

Quantitative and Qualitative Disclosures About Market Risk

ITEM 8.

Financial Statements and Supplementary Data

ITEM 9.

Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

ITEM 9A

Controls and Procedures

ITEM 9B.

Other Information

PART III

ITEM 10.

Directors, Executive Officers and Corporate Governance

ITEM 11.

Executive Compensation

ITEM 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

ITEM 13.

Certain Relationships and Related Transactions, and Director Independence

ITEM 14.

Principal Accountant Fees and Services

PART IV

ITEM 15.

Exhibits and Financial Statement Schedules

Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7, contains forward-looking statements as defined in The Private Securities Litigation Reform Act of 1995, that involve risks, uncertainties, and assumptions. Forward-looking statements are based on current management expectations and are not guarantees of future performance, nor should they be relied upon as representing management’s view as of any subsequent date. If the risks or uncertainties ever materialize or the assumptions prove incorrect, our results may differ materially from those presented, either expressed or implied, in this filing. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Forward-looking statements may be identified by, among other things, expressions of beliefs or expectations that certain events may occur or are anticipated, and projections or statements of expectations. Such forward-looking statements include, without limitation, statements regarding expected financial and operating activities and results that are preceded by, followed by, or that include words such as “will,” “expect,” “anticipate,” “estimate,” “plan,” “believe,” “should,” “intend,” or similar expressions. Such statements are subject to important factors that could cause our actual results to differ materially from those anticipated by the forward-looking statements. These factors, many of which are beyond our control, include the following:

•

operating, legal and regulatory risks, including the effects of the Dodd-Frank Wall Street Reform and Consumer Protection Act and regulations promulgated thereunder;

•

economic, political and competitive forces affecting our banking and wealth management businesses;

•

changes in monetary policy and general economic conditions, which may impact our net interest income;

•

the risk that our analyses of these risks and forces could be incorrect and/or that the strategies developed to address them could be unsuccessful;

•

other factors discussed under Item 1A, “Risk Factors” and elsewhere herein, and from time to time in our other filings with the Securities and Exchange Commission after the date of this report.

These factors should be considered in evaluating the forward-looking statements, and you should not place undue reliance on such statements. We specifically disclaim any obligation to update factors or to publicly announce the results of revisions to any of the forward-looking statements or comments included herein to reflect future events or developments.

PART I

ITEM 1. BUSINESS

General

Our subsidiary operates under the name Mid-Wisconsin Bank (the “Bank”) and has its principal office in Medford, Wisconsin. We are a Wisconsin corporation organized in 1986 and, as the sole shareholder of the Bank, are a bank holding company registered with, and subject to, regulation by the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended (the “BHCA”). This Annual Report on Form 10-K describes our business and that of the Bank in effect on December 31, 2011, and any reference to the “Company” refers to Mid-Wisconsin Financial Services, Inc. or the consolidated operations of Mid-Wisconsin Financial Services, Inc. and the Bank, as the context requires.

The Bank

The Bank was incorporated on September 1, 1890, as a state bank under the laws of Wisconsin. The Bank operates thirteen retail banking locations throughout North Central Wisconsin serving markets in Clark, Eau Claire, Lincoln, Marathon, Oneida, Price, Taylor and Vilas counties.

The day-to-day management of the Bank rests with its officers with oversight provided by the board of directors. The Bank is engaged in general commercial and retail banking services, including wealth management services. The Bank serves individuals, businesses and governmental units and offers most forms of commercial and consumer lending, including lines of credit, term loans, real estate financing, mortgage lending and agricultural lending. In addition, the Bank provides a full range of personal banking services, including checking accounts, savings and time products, installment and other personal loans, as well as mortgage loans. To expand services to its customers on a 24-hour basis, the Bank offers ATM services, merchant capture, cash management, express phone, online and mobile banking. New services are frequently added.

The Wealth Management area consists of two delivery methods of providing financial products and services to assist customers in building, investing, or protecting their wealth. Through its state granted trust powers, Wealth Management provides fiduciary, administrative, and investment management services to personal trusts, estates, individuals, businesses, non-profits, and foundations for an asset based fee. Through a third-party broker/dealer, LPL Financial, Member FINRA/SIPC, a registered broker/dealer, Wealth Management makes available a variety of retail investment and insurance products including equities, bonds, fixed and variable annuities, mutual funds, life insurance, long-term care insurance and brokered certificates of deposits, which are commission-based transactions.

All of our products and services are directly or indirectly related to the business of community banking and all activity is reported as one segment of operations. All revenue, profit and loss, and total assets are reported in one segment and represent our entire operations.

Employees

As of December 31, 2011, we employed 150 full-time equivalent employees. None of our employees are represented by unions. We consider the relationship with our employees to be good.

Competition

The Bank competes for loans, deposits and financial services in all of its principal markets. Much of this competition comes from companies which are larger and have greater resources. The Bank competes directly with other banks, savings associations, credit unions, finance companies, mutual funds, life insurance companies, and other financial and non-financial companies.

SUPERVISION AND REGULATION

General.

Financial institutions, their holding companies and their affiliates are extensively regulated under federal and state law. As a result, the growth and earnings performance of the Company may be affected not only by management decisions and general economic conditions, but also by requirements of federal and state statutes and by the regulations and policies of various bank regulatory authorities, including the Wisconsin Department of Financial Institutions (the “WDFI”), the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the Federal Deposit Insurance Corporation (the “FDIC”) and the newly-created Bureau of Consumer Financial Protection (the “Bureau”). Furthermore, taxation laws administered by the Internal Revenue Service and state taxing authorities, accounting rules developed by the Financial Accounting Standards Board (the “FASB”) and securities laws administered by the Securities and Exchange Commission (the “SEC”) and state securities authorities have an impact on the business of the Company. The effect of these statutes, regulations, regulatory policies and accounting rules are significant to the operations and results of the Company and Bank, and the nature and extent of future legislative, regulatory or other changes affecting financial institutions are impossible to predict with any certainty.

Federal and state banking laws impose a comprehensive system of supervision, regulation and enforcement on the operations of financial institutions, their holding companies and affiliates that is intended primarily for the protection of the FDIC-insured deposits and depositors of banks, rather than shareholders. These federal and state laws, and the regulations of the bank regulatory authorities issued under them, affect, among other things, the scope of business, the kinds and amounts of investments banks may make, reserve requirements, capital levels relative to operations, the nature and amount of collateral for loans, the establishment of branches, the ability to merge, consolidate and acquire, dealings with insiders and affiliates and the payment of dividends. In addition, turmoil in the credit markets in recent years prompted the enactment of unprecedented legislation that allowed the U.S. Department of the Treasury (“Treasury”) to make equity capital available to qualifying financial institutions to help restore confidence and stability in the U.S. financial markets, which imposes additional requirements on institutions in which Treasury invests.

In addition, the Company and Bank are subject to regular examination by their respective regulatory authorities, which results in examination reports and ratings (that are not publicly available) that can impact the conduct and growth of business. These examinations consider not only compliance with applicable laws and regulations, but also capital levels, asset quality and risk, management ability and performance, earnings, liquidity, and various other factors. The regulatory agencies generally have broad discretion to impose restrictions and limitations on the operations of a regulated entity where the agencies determine, among other things, that such operations are unsafe or unsound, fail to comply with applicable law or are otherwise inconsistent with laws and regulations or with the supervisory policies of these agencies.

The following is a summary of the material elements of the supervisory and regulatory framework applicable to the Company and the Bank. It does not describe all of the statutes, regulations and regulatory policies that apply, nor does it restate all of the requirements of those that are described. The descriptions are qualified in their entirety by reference to the particular statutory or regulatory provision.

Financial Regulatory Reform.

On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) into law. The Dodd-Frank Act represents a sweeping reform of the supervisory and regulatory framework applicable to financial institutions and capital markets in the United States, certain aspects of which are described below in more detail. The Dodd-Frank Act creates new federal governmental entities responsible for overseeing different aspects of the U.S. financial services industry, including identifying emerging systemic risks. It also shifts certain authorities and responsibilities among federal financial institution regulators, including the supervision of holding company affiliates and the regulation of consumer financial services and products. In particular, and among other things, the Dodd-Frank Act: creates a Bureau of Consumer Financial Protection authorized to regulate providers of consumer credit, savings, payment and other consumer financial products and services; narrows the scope of federal preemption of state consumer laws enjoyed by national banks and federal savings associations and expands the authority of state

attorneys general to bring actions to enforce federal consumer protection legislation; imposes more stringent capital requirements on bank holding companies and subjects certain activities, including interstate mergers and acquisitions, to heightened capital conditions; significantly expands underwriting requirements applicable to loans secured by 1–4 family residential real property; restricts the interchange fees payable on debit card transactions for issuers with $10 billion in assets or greater; requires the originator of a securitized loan, or the sponsor of a securitization, to retain at least 5% of the credit risk of securitized exposures unless the underlying exposures are qualified residential mortgages or meet certain underwriting standards to be determined by regulation; creates a Financial Stability Oversight Council as part of a regulatory structure for identifying emerging systemic risks and improving interagency cooperation; provides for enhanced regulation of advisers to private funds and of the derivatives markets; enhances oversight of credit rating agencies; and prohibits banking agency requirements tied to credit ratings.

Numerous provisions of the Dodd-Frank Act are required to be implemented through rulemaking by the appropriate federal regulatory agencies. Some of the required regulations have been issued and some have been released for public comment, but many have yet to be released in any form. Furthermore, while the reforms primarily target systemically important financial service providers, their influence is expected to filter down in varying degrees to smaller institutions over time. Management of the Company and Bank will continue to evaluate the effect of the changes; however, in many respects, the ultimate impact of the Dodd-Frank Act will not be fully known for years, and no current assurance may be given that the Dodd-Frank Act, or any other new legislative changes, will not have a negative impact on the results of operations and financial condition of the Company and the Bank.

The Increasing Importance of Capital.

While capital has historically been one of the key measures of the financial health of both holding companies and depository institutions, its role is becoming fundamentally more important in the wake of the financial crisis. Not only will capital requirements increase, but the type of instruments that constitute capital will also change, and, as a result of the Dodd-Frank Act, after a phase-in period, bank holding companies will have to hold capital under rules as stringent as those for insured depository institutions. Moreover, the actions of the international Basel Committee on Banking Supervision, a committee of central banks and bank supervisors, to reassess the nature and uses of capital in connection with an initiative called “Basel III,” discussed below, will have a significant impact on the capital requirements applicable to U.S. bank holding companies and depository institutions.

Required Capital Levels.

The Dodd-Frank Act mandates the Federal Reserve to establish minimum capital levels for bank holding companies on a consolidated basis that are as stringent as those required for insured depository institutions. The components of Tier 1 capital will be restricted to capital instruments that are currently considered to be Tier 1 capital for insured depository institutions. As a result, the proceeds of trust preferred securities will be excluded from Tier 1 capital unless such securities were issued prior to May 19, 2010 by bank holding companies with less than $15 billion of assets. As the Company has assets of less than $15 billion, it will be able to maintain its trust preferred proceeds as capital but it will have to comply with new capital mandates in other respects, and it will not be able to raise Tier 1 capital in the future through the issuance of trust preferred securities.

Under current federal regulations, the Bank is subject to, and, after a phase-in period, the Company will be subject to, the following minimum capital standards: (i) a leverage requirement consisting of a minimum ratio of Tier 1 capital to total assets of 3% for the most highly-rated banks with a minimum requirement of at least 4% for all others; and (ii) a risk-based capital requirement consisting of a minimum ratio of total capital to total risk-weighted assets of 8% and a minimum ratio of Tier 1 capital to total risk-weighted assets of 4%. For this purpose, Tier 1 capital consists primarily of common stock, noncumulative perpetual preferred stock and related surplus less intangible assets (other than certain loan servicing rights and purchased credit card relationships). Total capital consists primarily of Tier 1 capital plus Tier 2 capital, which includes other nonpermanent capital items such as certain other debt and equity instruments that do not qualify as Tier 1 capital and a portion of the Bank’s allowance for loan and lease losses.

The capital requirements described above are minimum requirements. Federal law and regulations provide various incentives for banking organizations to maintain regulatory capital at levels in excess of minimum regulatory requirements. For example, a banking organization that is “well-capitalized” may qualify for exemptions from prior notice or application requirements otherwise applicable to certain types of activities may qualify for expedited processing of other required notices or applications and may accept brokered deposits. Additionally, one of the criteria that determines a bank holding company’s eligibility to operate as a financial holding company (see “— Acquisitions, Activities and Changes in Control” below) is a requirement that all of its depository institution subsidiaries be “well-capitalized.” Under the Dodd-Frank Act, that requirement is extended such that, as of July 21, 2011, bank holding companies, as well as their depository institution subsidiaries, had to be well-capitalized in order to operate as financial holding companies. Under the capital regulations of the Federal Reserve, in order to be “well-capitalized” a banking organization must maintain a ratio of total capital to total risk-weighted assets of 10% or greater, a ratio of Tier 1 capital to total risk-weighted assets of 6% or greater and a ratio of Tier 1 capital to total assets of 5% or greater.

Higher capital levels may also be required if warranted by the particular circumstances or risk profiles of individual banking organizations. For example, the Federal Reserve’s capital guidelines contemplate that additional capital may be required to take adequate account of, among other things, interest rate risk, or the risks posed by concentrations of credit, nontraditional activities or securities trading activities. Further, any banking organization experiencing or anticipating significant growth would be expected to maintain capital ratios, including tangible capital positions ( i.e. , Tier 1 capital less all intangible assets), well above the minimum levels. See “— The Bank — Regulatory Proceedings Against the Bank” for a discussion regarding the heightened capital requirements which the Bank has agreed to maintain.

It is important to note that certain provisions of the Dodd-Frank Act and Basel III, discussed below, will ultimately establish strengthened capital standards for banks and bank holding companies, will require more capital to be held in the form of common stock and will disallow certain funds from being included in a Tier 1 capital determination. Once fully implemented, these provisions may represent regulatory capital requirements which are meaningfully more stringent than those outlined above.

Prompt Corrective Action.

A banking organization’s capital plays an important role in connection with regulatory enforcement as well. Federal law provides the federal banking regulators with broad power to take prompt corrective action to resolve the problems of undercapitalized institutions. The extent of the regulators’ powers depends on whether the institution in question is “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” in each case as defined by regulation. Depending upon the capital category to which an institution is assigned, the regulators’ corrective powers include: (i) requiring the institution to submit a capital restoration plan; (ii) limiting the institution’s asset growth and restricting its activities; (iii) requiring the institution to issue additional capital stock (including additional voting stock) or to be acquired; (iv) restricting transactions between the institution and its affiliates; (v) restricting the interest rate the institution may pay on deposits; (vi) ordering a new election of directors of the institution; (vii) requiring that senior executive officers or directors be dismissed; (viii) prohibiting the institution from accepting deposits from correspondent banks; (ix) requiring the institution to divest certain subsidiaries; (x) prohibiting the payment of principal or interest on subordinated debt; and (xi) ultimately, appointing a receiver for the institution.

As of December 31, 2011, the Bank exceeded its minimum regulatory capital requirements under Federal Reserve capital adequacy guidelines, as well as the heightened capital requirements that it has agreed to maintain with the FDIC and WDFI (as described under “— The Bank — Regulatory Proceedings Against the Bank”). As of December 31, 2011, the Company had regulatory capital in excess of the Federal Reserve’s requirements and met the Dodd-Frank Act capital requirements.

Basel III.

The current risk-based capital guidelines that apply to the Bank and will apply to the Company are based upon the 1988 capital accord of the international Basel Committee on Banking Supervision, a committee of central banks and bank supervisors, as implemented by the U.S. federal banking agencies on an interagency basis. In 2008, the banking agencies collaboratively began to phase-in capital standards based on a second capital accord, referred to as “Basel II,” for large or “core” international banks (generally defined for U.S. purposes as having total assets of $250 billion or more or consolidated foreign exposures of $10 billion or more). Basel II emphasized internal assessment of credit, market and operational risk, as well as supervisory assessment and market discipline in determining minimum capital requirements.

On September 12, 2010, the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, announced agreement to a strengthened set of capital requirements for banking organizations in the United States and around the world, known as Basel III. The agreement is currently supported by the U.S. federal banking agencies. As agreed to, Basel III is intended to be fully-phased in on a global basis on January 1, 2019. Basel III requires, among other things: (i) a new required ratio of minimum common equity equal to 7% of total assets (4.5% plus a capital conservation buffer of 2.5%); (ii) an increase in the minimum required amount of Tier 1 capital from the current level of 4% of total assets to 6% of total assets; (iii) an increase in the minimum required amount of total capital, from the current level of 8% to 10.5% (including 2.5% attributable to the capital conservation buffer). The purpose of the conservation buffer (to be phased in from January 2016 until January 1, 2019) is to ensure that banks maintain a buffer of capital that can be used to absorb losses during periods of financial and economic stress. There will also be a required countercyclical buffer to achieve the broader goal of protecting the banking sector from periods of excess aggregate credit growth.

Pursuant to Basel III, certain deductions and prudential filters, including minority interests in financial institutions, mortgage servicing rights and deferred tax assets from timing differences, would be deducted in increasing percentages beginning January 1, 2014, and would be fully deducted from common equity by January 1, 2018. Certain instruments that no longer qualify as Tier 1 capital, such as trust preferred securities, also would be subject to phase-out over a 10-year period beginning January 1, 2013.

The Basel III agreement calls for national jurisdictions to implement the new requirements beginning January 1, 2013. At that time, the U.S. federal banking agencies, including the Federal Reserve, will be expected to have implemented appropriate changes to incorporate the Basel III concepts into U.S. capital adequacy standards.

The Company

General.

The Company, as the sole shareholder of the Bank, is a bank holding company. As a bank holding company, the Company is registered with, and is subject to regulation by, the Federal Reserve under the Bank Holding Company Act of 1956, as amended (the “BHCA”). In accordance with Federal Reserve policy, and as now codified by the Dodd-Frank Act, the Company is legally obligated to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances where the Company might not otherwise do so. Under the BHCA, the Company is subject to periodic examination by the Federal Reserve. The Company is required to file with the Federal Reserve periodic reports of the Company’s operations and such additional information regarding the Company and its subsidiaries as the Federal Reserve may require.

Regulatory Proceedings Against the Company.

On May 10, 2011, the Company entered into a formal written agreement (the “Company Agreement”) with the Federal Reserve to help ensure the financial soundness of the Company and the Bank. Pursuant to the Company Agreement, the Company has agreed to take certain actions and operate in compliance with the Company Agreement’s provisions during its terms. Specifically, under the terms of the Company Agreement, the Company is required to: (i) ensure the Bank complies with the Agreement; (ii) refrain from (x) declaring or paying any dividend on its capital stock, (y) taking any dividend from the Bank, or (z) making any

distributions on its subordinated debentures or the trust preferred securities related thereto issued by its nonbank subsidiary, each without the written consent of the Federal Reserve; (iii) refrain from incurring, increasing or guaranteeing any debt without the written consent of the Federal Reserve; (iv) refrain from purchasing or redeeming any shares of its capital stock without the written consent of the Federal Reserve; and (v) develop certain plans and projections with respect to its capital levels and cash flows, all as described in more detail in the Company Agreement.

While the Company’s board of directors and management team have assigned great importance to complying with the terms of the Company Agreement, and believe they have taken or commenced the steps necessary to resolve any and all matters presented therein, the Fed could take further enforcement actions if it is not satisfied with the actions taken by the Company. A copy of the Company Agreement was filed as a part of the Company’s Quarterly Report on Form 10-Q filed on May 13, 2011 with the SEC.

Acquisitions, Activities and Change in Control.

The primary purpose of a bank holding company is to control and manage banks. The BHCA generally requires the prior approval of the Federal Reserve for any merger involving a bank holding company or any acquisition by a bank holding company of another bank or bank holding company. Subject to certain conditions (including deposit concentration limits established by the BHCA and the Dodd-Frank Act), the Federal Reserve may allow a bank holding company to acquire banks located in any state of the United States. In approving interstate acquisitions, the Federal Reserve is required to give effect to applicable state law limitations on the aggregate amount of deposits that may be held by the acquiring bank holding company and its insured depository institution affiliates in the state in which the target bank is located (provided that those limits do not discriminate against out-of-state depository institutions or their holding companies) and state laws that require that the target bank have been in existence for a minimum period of time (not to exceed five years) before being acquired by an out-of-state bank holding company. Furthermore, in accordance with the Dodd-Frank Act, as of July 21, 2011, bank holding companies must be well-capitalized in order to effect interstate mergers or acquisitions. For a discussion of the capital requirements, see “— The Increasing Importance of Capital” above.

The BHCA generally prohibits the Company from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company that is not a bank and from engaging in any business other than that of banking, managing and controlling banks or furnishing services to banks and their subsidiaries. This general prohibition is subject to a number of exceptions. The principal exception allows bank holding companies to engage in, and to own shares of companies engaged in, certain businesses found by the Federal Reserve prior to November 11, 1999 to be “so closely related to banking ... as to be a proper incident thereto.” This authority would permit the Company to engage in a variety of banking-related businesses, including the ownership and operation of a savings association, or any entity engaged in consumer finance, equipment leasing, the operation of a computer service bureau (including software development), and mortgage banking and brokerage. The BHCA generally does not place territorial restrictions on the domestic activities of nonbank subsidiaries of bank holding companies.

Additionally, bank holding companies that meet certain eligibility requirements prescribed by the BHCA and elect to operate as financial holding companies may engage in, or own shares in companies engaged in, a wider range of nonbanking activities, including securities and insurance underwriting and sales, merchant banking and any other activity that the Federal Reserve, in consultation with the Secretary of the Treasury, determines by regulation or order is financial in nature or incidental to any such financial activity or that the Federal Reserve determines by order to be complementary to any such financial activity and does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally. As of the date of this filing, the Company has not applied for approval to operate as a financial holding company.

Federal law also prohibits any person or company from acquiring “control” of an FDIC-insured depository institution or its holding company without prior notice to the appropriate federal bank regulator. “Control” is conclusively presumed to exist upon the acquisition of 25% or more of the outstanding voting securities of a bank or bank holding company, but may arise under certain circumstances between 10% and 24.99% ownership.

Capital Requirements.

Bank holding companies are required to maintain minimum levels of capital in accordance with Federal Reserve capital adequacy guidelines, as affected by the Dodd-Frank Act and Basel III. For a discussion of capital requirements, see “— The Increasing Importance of Capital” above.

Emergency Economic Stabilization Act of 2008.

Events in the U.S. and global financial markets over the past several years, including deterioration of the worldwide credit markets, created significant challenges for financial institutions throughout the country. In response to this crisis affecting the U.S. banking system and financial markets, on October 3, 2008, the U.S. Congress passed, and the President signed into law, the Emergency Economic Stabilization Act of 2008 (the “EESA”). The EESA authorized the Secretary of the Treasury to implement various temporary emergency programs designed to strengthen the capital positions of financial institutions and stimulate the availability of credit within the U.S. financial system. Financial institutions participating in certain of the programs established under the EESA are required to adopt Treasury’s standards for executive compensation and corporate governance.

The TARP Capital Purchase Program.

On October 14, 2008, Treasury announced that it would provide Tier 1 capital (in the form of perpetual preferred stock) to eligible financial institutions. This program, known as the TARP Capital Purchase Program (the “CPP”), allocated $250 billion from the $700 billion authorized by the EESA to Treasury for the purchase of senior preferred shares from qualifying financial institutions (the “CPP Preferred Stock”). Under the program, eligible institutions were able to sell equity interests to the Treasury in amounts equal to between 1% and 3% of the institution’s risk-weighted assets. The CPP Preferred Stock is nonvoting and pays dividends at the rate of 5% per annum for the first five years and thereafter at a rate of 9% per annum. In conjunction with the purchase of the CPP Preferred Stock, the Treasury received warrants to purchase common stock with an aggregate market price equal to 15% of the investment from participating institutions with an established trading market, and warrants to purchase shares of an additional series of CPP Preferred Stock with a liquidation preference equal to 5% of the aggregate investment from participating institutions without an established trading market. Participating financial institutions were required to adopt Treasury’s standards for executive compensation and corporate governance for the period during which Treasury holds equity issued under the CPP. These requirements are discussed in more detail in the Executive Officer Compensation section in the Company’s proxy statement, which is incorporated by reference in this Form 10-K.

Pursuant to the CPP, on February 20, 2009, the Company entered into a Letter Agreement with Treasury, pursuant to which the Company issued (i) 10,000 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”), and (ii) a warrant to purchase 500 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series B (the “Series B Preferred Stock” and together with the Series A Preferred Stock, the “TARP Preferred Stock”), which were immediately exercised, for an aggregate purchase price of $10,000,000 in cash. Although the Company is a public company, an established trading market for its stock does not exist, and therefore it was required to issue Treasury a warrant for additional CPP Preferred Stock rather than common stock. The Company’s federal regulators, the Treasury and the Treasury’s Office of the Inspector General maintain significant oversight over the Company as a participating institution, to evaluate how it is using the capital provided and to ensure that it strengthens its efforts to help its borrowers avoid foreclosure, which is one of the core aspects of the EESA.

Dividend Payments.

The Company’s ability to pay dividends to its shareholders may be affected by both general corporate law considerations and policies of the Federal Reserve applicable to bank holding companies. As a Wisconsin corporation, the Company is subject to the limitations of the Wisconsin Business Corporation Law, which prohibit the Company from paying dividends if such payment would (i) render the Company unable to pay its debts as they become due in the usual course of business, or (ii) result in the Company’s assets being less than the sum of its total liabilities plus the amount needed to satisfy the preferential rights upon dissolution of

any shareholders with preferential rights superior to those shareholders receiving the dividend. Consistent with the “source of strength” policy for subsidiary banks, the Federal Reserve has stated that, as a matter of prudent banking, a bank holding company generally should not maintain a rate of cash dividends unless its net income available to common shareholders over the past year has been sufficient to fully fund the dividends and the prospective rate of earnings retention appears to be consistent with the corporation’s capital needs, asset quality and overall financial condition. The Federal Reserve also possesses enforcement powers over bank holding companies and their nonbank subsidiaries to prevent or remedy actions that represent unsafe or unsound practices or violations of applicable statutes and regulations. Among these powers is the ability to proscribe the payment of dividends by banks and bank holding companies. As described under “— Regulatory Proceedings Against the Company,” on May 10, 2011 the Company entered into the Company Agreement with the Federal Reserve, pursuant to which the Company agreed to refrain from declaring or paying any dividend on its capital stock and making any distributions on its subordinated debentures or the trust preferred securities related thereto without the written consent of the Federal Reserve.

Furthermore, the Company’s ability to pay dividends on its common stock is restricted by the terms of certain of its other securities. For example, under the terms of certain of the Company’s junior subordinated debentures, it may not pay dividends on its capital stock unless all accrued and unpaid interest payments on the subordinated debentures have been fully paid. Additionally, the terms of the TARP Preferred Stock provide that no dividends on any common or preferred stock that ranks equal to or junior to the TARP Preferred Stock may be paid unless and until all accrued and unpaid dividends for all past dividend periods on the TARP Preferred Stock have been fully paid. On May 12, 2012, in consultation with the Federal Reserve, the Company elected to begin deferring the interest payments due on its junior subordinated debentures, as well as the dividend payments due on the TARP Preferred Stock, and therefore may not pay common stock dividends until such time as these deferred payments have been made in full.

Federal Securities Regulation.

The Company’s common stock is registered with the SEC under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Consequently, the Company is subject to the information, proxy solicitation, insider trading and other restrictions and requirements of the SEC under the Exchange Act.

Corporate Governance.

The Dodd-Frank Act addresses many investor protection, corporate governance and executive compensation matters that will affect most U.S. publicly traded companies. The Dodd-Frank Act will increase shareholder influence over boards of directors by requiring companies to give shareholders a nonbinding vote on executive compensation and so-called “golden parachute” payments, and authorizing the SEC to promulgate rules that would allow shareholders to nominate and solicit voters for their own candidates using a company’s proxy materials. The legislation also directs the Federal Reserve to promulgate rules prohibiting excessive compensation paid to bank holding company executives, regardless of whether the company is publicly traded.

The Bank

General.

The Bank is a Wisconsin-chartered bank, the deposit accounts of which are insured by the FDIC’s Deposit Insurance Fund (“DIF”) to the maximum extent provided under federal law and FDIC regulations. As a Wisconsin-chartered, FDIC-insured, nonmember bank, the Bank is presently subject to the examination, supervision, reporting and enforcement requirements of the WDFI, the chartering authority for Wisconsin banks, and the FDIC, designated by federal law as the primary federal regulator of insured state banks that, like the Bank, are not members of the Federal Reserve System.

Regulatory Proceedings Against the Bank.

On November 9, 2010, the Bank entered into a formal written agreement (the “Agreement”) with the FDIC and WDFI. Pursuant to the Agreement, the Bank agreed to take certain actions and operate in compliance with the Agreement’s provisions during its terms. The Agreement is based on the results of an annual examination of the Bank by the FDIC and WDFI and addresses certain matters that, in the view of the FDIC and WDFI, may impact the Bank’s overall safety and soundness. Specifically, under the terms of the Agreement, the Bank is required to, among other things: (i) maintain ratios of Tier 1 capital to each of total assets and total risk-weighted assets of at least 8.5% and 12%, respectively; (ii) refrain from declaring or paying any dividend without the written consent of the FDIC and WDFI; (iii) refrain from increasing its total assets by more than 5% during any three-month period without first submitting a growth plan to the FDIC and WDFI; (iv) develop and maintain a number of plans, policies and procedures, including, but not limited to, a management plan, a liquidity plan, and a strategic plan; and (v) take certain actions related to its loan portfolio and budgeting process, such as reducing the level of certain classified assets, reviewing (and, if necessary, adjusting) its allowance for loan losses, refraining from extending additional loans to certain classified borrowers, and revising certain of its budgets.

The Bank’s board of directors and management team have assigned great importance to complying with the terms of the Agreement, and believe they have taken or commenced the steps necessary to resolve any and all matters presented therein. Further, as of December 31, 2011, the Bank’s ratio of Tier 1 capital to each of total assets and total risk-weighted assets was 8.7% and 14.2%, respectively, exceeding the ratios required under the Agreement. Additionally, in accordance with the Agreement, the Bank has refrained from declaring dividends, taken measures to monitor and limit its growth, and provided various periodic progress reports to the FDIC and WDFI.

While management and the board of directors believes they have taken or commenced the necessary measures to resolve any and all remaining matters presented in the Agreement, the FDIC and WDFI could take further enforcement actions, including requiring the sale or liquidation of the Bank, if they are not satisfied with the corrective actions that are taken by the Bank. In such case, there can be no assurance that the proceeds of any such sale or liquidation would result in a full return of capital to investors. A copy of the Agreement was filed as a part of the Company’s Quarterly Report on Form 10-Q filed on November 12, 2010 with the SEC.

Deposit Insurance.

As an FDIC-insured institution, the Bank is required to pay deposit insurance premium assessments to the FDIC. The FDIC has adopted a risk-based assessment system whereby FDIC-insured depository institutions pay insurance premiums at rates based on their risk classification. An institution’s risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to the regulators.

On November 12, 2009, the FDIC adopted a final rule that required insured depository institutions to prepay on December 30, 2009, their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011, and 2012. As such, on December 31, 2009, the Bank prepaid the FDIC its assessments based on its actual September 30, 2009 assessment base, adjusted quarterly by an estimated 5% annual growth rate through the end of 2012. The FDIC also used the institution’s total base assessment rate in effect on September 30, 2009, increasing it by an annualized 3 basis points beginning in 2011. The FDIC began to offset prepaid assessments on March 30, 2010, representing payment of the regular quarterly risk-based deposit insurance assessment for the fourth quarter of 2009. Any prepaid assessment not exhausted after collection of the amount due on June 30, 2013, will be returned to the institution.

Amendments to the Federal Deposit Insurance Act also revise the assessment base against which an insured depository institution’s deposit insurance premiums paid to the DIF will be calculated. Under the amendments, the assessment base will no longer be the institution’s deposit base, but rather its average consolidated total assets less its average tangible equity. This may shift the burden of deposit insurance premiums toward those large depository institutions that rely on funding sources other than U.S. deposits. Additionally, the Dodd-Frank Act makes changes to the minimum designated reserve ratio of the DIF,

increasing the minimum from 1.15% to 1.35% of the estimated amount of total insured deposits, and eliminating the requirement that the FDIC pay dividends to depository institutions when the reserve ratio exceeds certain thresholds. The FDIC is given until September 3, 2020 to meet the 1.35 reserve ratio target. Several of these provisions could increase the Bank’s FDIC deposit insurance premiums.

The Dodd-Frank Act permanently increases the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per insured depositor, retroactive to January 1, 2009. Furthermore, the legislation provides that non-interest bearing transaction accounts have unlimited deposit insurance coverage through December 31, 2012. This temporary unlimited deposit insurance coverage replaces the Transaction Account Guarantee Program (“TAGP”) that expired on December 31, 2010. It covers all depository institution non-interest-bearing transaction accounts, but not low interest-bearing accounts. Unlike TAGP, there is no special assessment associated with the temporary unlimited insurance coverage, nor may institutions opt-out of the unlimited coverage.

FICO Assessments.

The Financing Corporation (“FICO”) is a mixed-ownership governmental corporation chartered by the former Federal Home Loan Bank Board pursuant to the Competitive Equality Banking Act of 1987 to function as a financing vehicle for the recapitalization of the former Federal Savings and Loan Insurance Corporation. FICO issued 30-year noncallable bonds of approximately $8.1 billion that mature in 2017 through 2019. FICO’s authority to issue bonds ended on December 12, 1991. Since 1996, federal legislation has required that all FDIC-insured depository institutions pay assessments to cover interest payments on FICO’s outstanding obligations. These FICO assessments are in addition to amounts assessed by the FDIC for deposit insurance. During the year ended December 31, 2011, the FICO assessment rate was approximately 0.01% of deposits. A rate reduction to .00680% began with the fourth quarter of 2011 to reflect the change from an assessment base computed on deposits to an assessment base computed on assets as required by the Dodd-Frank Act.

Supervisory Assessments.

All Wisconsin banks are required to pay supervisory assessments to the WDFI to fund the operations of the WDFI. The amount of the assessment is calculated on the basis of total assets. During the year ended December 31, 2011, the Bank paid supervisory assessments to the WDFI totaling $20,088.

Capital Requirements.

Banks are generally required to maintain capital levels in excess of other businesses. For a discussion of the Bank’s capital requirements, see “— The Increasing Importance of Capital,” as well as “— Regulatory Proceedings Against the Bank.”

Dividend Payments.

The primary source of funds for the Company is dividends from the Bank. Under Wisconsin state law, the board of directors of a bank may declare and pay a dividend from its undivided profits in an amount they consider expedient. The board of directors shall provide for the payment of all expenses, losses, required reserves, taxes, and interest accrued or due from the bank before the declaration of dividends from undivided profits. If dividends declared and paid in either of the two immediately preceding years exceeded net income for either of those two years respectively, the bank may not declare or pay any dividend in the current year that exceeds year-to-date net income except with the written consent of the WDFI.

The payment of dividends by any financial institution is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations, and a financial institution generally is prohibited from paying any dividends if, following payment thereof, the institution would be undercapitalized. As described above, the Bank exceeded its minimum capital requirements under applicable guidelines as of December 31, 2011. However, as described in “— Regulatory Proceedings Against the Bank,” the Bank has agreed to refrain from declaring or paying any dividend without the consent of the FDIC and WDFI. Furthermore the Federal Reserve may prohibit the payment of any dividends by the Bank if the Federal Reserve determines such payment would constitute an unsafe or unsound practice.

Insider Transactions.

The Bank is subject to certain restrictions imposed by federal law on “covered transactions” between the Bank and its “affiliates.” The Company is an affiliate of the Bank for purposes of these restrictions, and covered transactions subject to the restrictions include extensions of credit to the Company, investments in the stock or other securities of the Company and the acceptance of the stock or other securities of the Company as collateral for loans made by the Bank. The Dodd-Frank Act enhances the requirements for certain transactions with affiliates as of July 21, 2011, including an expansion of the definition of “covered transactions” and an increase in the amount of time for which collateral requirements regarding covered transactions must be maintained.

Certain limitations and reporting requirements are also placed on extensions of credit by the Bank to its directors and officers, to directors and officers of the Company, to principal shareholders of the Company and to “related interests” of such directors, officers and principal shareholders. In addition, federal law and regulations may affect the terms upon which any person who is a director or officer of the Company or the Bank or a principal shareholder of the Company may obtain credit from banks with which the Bank maintains a correspondent relationship.

Safety and Soundness Standards.

The federal banking agencies have adopted guidelines that establish operational and managerial standards to promote the safety and soundness of federally insured depository institutions. The guidelines set forth standards for internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, asset quality and earnings.

In general, the safety and soundness guidelines prescribe the goals to be achieved in each area, and each institution is responsible for establishing its own procedures to achieve those goals. If an institution fails to comply with any of the standards set forth in the guidelines, the institution’s primary federal regulator may require the institution to submit a plan for achieving and maintaining compliance. If an institution fails to submit an acceptable compliance plan, or fails in any material respect to implement a compliance plan that has been accepted by its primary federal regulator, the regulator is required to issue an order directing the institution to cure the deficiency. Until the deficiency cited in the regulator’s order is cured, the regulator may restrict the institution’s rate of growth, require the institution to increase its capital, restrict the rates the institution pays on deposits or require the institution to take any action the regulator deems appropriate under the circumstances. Noncompliance with the standards established by the safety and soundness guidelines may also constitute grounds for other enforcement action by the federal banking regulators, including cease and desist orders and civil money penalty assessments.

As described in further detail above, the Bank is currently subject to the Agreement with the FDIC and WDFI, pursuant to which it has agreed to maintain certain heightened capital ratios, refrain from declaring or paying dividends without prior regulatory approval, observe certain limitations on its asset growth, develop and maintain certain policies and procedures, and take certain actions related to its loan portfolio and budgeting process. The Bank’s board of directors and management team have assigned great importance to complying with the terms of the Agreement, and believe they have taken or commenced the steps necessary to resolve any and all matters presented therein. See “— Regulatory Proceedings Against the Bank” for further detail on the Agreement.

Branching Authority.

Wisconsin banks, such as the Bank, have the authority under Wisconsin law to establish branches anywhere in the State of Wisconsin, subject to receipt of all required regulatory approvals.

Federal law permits state and national banks to merge with banks in other states subject to: (i) regulatory approval; (ii) federal and state deposit concentration limits; and (iii) state law limitations requiring the merging bank to have been in existence for a minimum period of time (not to exceed five years) prior to the merger. The establishment of new interstate branches or the acquisition of individual branches of a bank in another state (rather than the acquisition of an out-of-state bank in its entirety) has historically been permitted

only in those states the laws of which expressly authorize such expansion. However, the Dodd-Frank Act permits well-capitalized banks to establish branches across state lines without these impediments.

State Bank Investments and Activities.

The Bank is permitted to make investments and engage in activities directly or through subsidiaries as authorized by Wisconsin law. However, under federal law and FDIC regulations, FDIC-insured state banks are prohibited, subject to certain exceptions, from making or retaining equity investments of a type, or in an amount, that are not permissible for a national bank. Federal law and FDIC regulations also prohibit FDIC-insured state banks and their subsidiaries, subject to certain exceptions, from engaging as principal in any activity that is not permitted for a national bank unless the bank meets, and continues to meet, its minimum regulatory capital requirements and the FDIC determines the activity would not pose a significant risk to the deposit insurance fund of which the bank is a member. These restrictions have not had, and are not currently expected to have, a material impact on the operations of the Bank.

Transaction Account Reserves.

Federal Reserve regulations require depository institutions to maintain reserves against their transaction accounts (primarily NOW and regular checking accounts). For 2012: the first $11.5 million of otherwise reservable balances are exempt from the reserve requirements; for transaction accounts aggregating more than $11.5 million to $71.0 million, the reserve requirement is 3% of total transaction accounts; and for net transaction accounts in excess of $71.0 million, a 10% reserve ratio will be assessed. These reserve requirements are subject to annual adjustment by the Federal Reserve. The Bank is in compliance with the foregoing requirements.

Consumer Financial Services.

There are numerous developments in federal and state laws regarding consumer financial products and services that impact the Bank’s business. Importantly, the current structure of federal consumer protection regulation applicable to all providers of consumer financial products and services changed significantly on July 21, 2011 when the new Bureau of Consumer Financial Protection commenced operations to supervise and enforce consumer protection laws. The Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all providers of consumer products and services, including the Bank, as well as the authority to prohibit “unfair, deceptive or abusive” acts and practices. The Bureau has examination and enforcement authority over providers with more than $10 billion in assets. Banks and savings institutions with $10 billion or less in assets, like the Bank, will continue to be examined by their applicable bank regulators. The Dodd-Frank Act also generally weakens the federal preemption available for national banks and federal savings associations, and gives state attorneys general the ability to enforce applicable federal consumer protection laws. It is unclear what changes will be promulgated by the Bureau and what effect, if any, such changes would have on the Bank.

The Dodd-Frank Act contains additional provisions that affect consumer mortgage lending. First, the new law significantly expands underwriting requirements applicable to loans secured by 1–4 residential real property and augments federal law combating predatory lending practices. In addition to numerous new disclosure requirements, the Dodd-Frank Act imposes new standards for mortgage loan originations on all lenders, including banks and savings associations, in an effort to strongly encourage lenders to verify a borrower’s ability to repay. Most significantly, the new standards limit the total points and fees that the Bank and/or a broker may charge on conforming and jumbo loans to 3% of the total loan amount. Also, the Dodd-Frank Act, in conjunction with the Federal Reserve’s final rule on loan originator compensation effective April 1, 2011, prohibits certain compensation payments to loan originators and prohibits steering consumers to loans not in their interest because it will result in greater compensation for a loan originator. These standards may result in a myriad of new system, pricing and compensation controls in order to ensure compliance and to decrease repurchase requests and foreclosure defenses. In addition, the Dodd-Frank Act generally requires lenders or securitizers to retain an economic interest in the credit risk relating to loans the lender sells and other asset-backed securities that the securitizer issues if the loans have not complied with the ability to repay

standards. The risk retention requirement generally will be 5%, but could be increased or decreased by regulation.

Foreclosure and Loan Modifications.

Federal and state laws further impact foreclosures and loan modifications, many of which laws have the effect of delaying or impeding the foreclosure process on real estate secured loans in default. Mortgages on commercial property can be modified, such as by reducing the principal amount of the loan or the interest rate, or by extending the term of the loan, through plans confirmed under Chapter 11 of the Bankruptcy Code. In recent years legislation has been introduced in Congress that would amend the Bankruptcy Code to permit the modification of mortgages secured by residences, although at this time the enactment of such legislation is not in prospect. The scope, duration and terms of potential future legislation with similar effect continue to be discussed.

State legal and/or legislative action may be on the horizon in light of the settlement reached in early February of 2012 by 49 state attorneys general and the federal government with the country’s five largest loan servicers: Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo. Every state except Oklahoma signed on to the settlement. The settlement will provide as much as $25 billion in relief to distressed borrowers in the states who signed on to the settlement; and direct payments to signing states and the federal government. The agreement settles state and federal investigations finding that the country’s five largest loan servicers routinely signed foreclosure related documents outside the presence of a notary public and without really knowing whether the facts they contained were correct and holds the banks accountable for their wrongdoing on robo-signing and mortgage servicing. The agreement settles only some aspects of the banks’ conduct related to the financial crisis (foreclosure practices, loan servicing, and origination of loans). State cases against the rating agencies and bid-rigging in the municipal bond market, for example, continue.

Available Information.

Under the Securities Exchange Act of 1934, the Company is required to file annual, quarterly and current reports, proxy and other information to the SEC. We make available, free of charge, on our website ( www.midwisc.com ) under the caption “Investor Relations,” our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such materials to the SEC. Materials that we file or furnish to the SEC may also be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information that we file electronically with the SEC.

ITEM 1A. RISK FACTORS

An investment in our common stock is subject to risks inherent to our business. The material risks and uncertainties that management believes affect us are described below. Before making an investment decision, you should carefully consider the risks described below because they could materially and adversely affect our business, liquidity, financial condition, results of operation, and prospects. This report is qualified in its entirety by these risk factors. In addition to the risks and uncertainties described below, other risks and uncertainties not currently known to us or that we currently deem immaterial also may materially and adversely affect our business, financial condition and results of operations. See also, the cautionary statement in Item 1 regarding the use of forward-looking statements in this Annual Report on Form 10-K.

Our stock does not have a significant amount of trading activity.

There is no active public trading market for our stock. Therefore, low activity may increase the volatility of the price of our stock and result in a greater spread between the bid and ask prices as compared to more actively-traded stocks. Investors may not be able to resell shares at the price or time they desire. The lack of an active public trading market may also limit our ability to raise additional capital through the issuance of new stock.

Changes in future rules applicable to TARP recipients could adversely affect our business, results of operations and financial condition.

The rules and policies applicable to recipients of capital under the CPP have evolved since we first elected on February 20, 2009 to participate in the program, and their scope, timing and effect may continue to evolve in the future. Any redemption of the securities sold to the Treasury to avoid these restrictions would require prior Federal Reserve and Treasury approval. Based on guidelines issued by the Federal Reserve, institutions seeking to redeem CPP Preferred Stock must demonstrate an ability to access the long-term debt markets, successfully demonstrate access to public equity markets and meet a number of additional requirements and considerations before such institutions can redeem any securities sold to the Treasury.

Our agreements with the Treasury under the CPP, as well as provisions of our outstanding Debentures, impose restrictions and obligations on us that limit, among other things, our ability to pay dividends and repurchase our common or preferred stock.

In February 2009, we issued preferred stock to the Treasury under the CPP. In consultation with the Federal Reserve Bank of Minneapolis, on May 12, 2011, we exercised our right to suspend dividends on the outstanding TARP Preferred Stock. Dividend payments on the TARP Preferred Stock may be deferred without default, but the dividend is cumulative and therefore will continue to accrue and, if we fail to pay dividends for an aggregate of six quarters, whether or not consecutive, the holder will have the right to appoint representatives to the Company’s board of directors. The terms of the TARP Preferred Stock also prevent us from paying cash dividends on or repurchasing our common stock while dividends are in arrears. Therefore we will not be able to pay dividends on our common stock until we have fully paid all accrued and unpaid dividends on the TARP Preferred Stock.

We also exercised our right to defer payment of interest due under the terms of the Debentures on May 12, 2011, in consultation with the Federal Reserve Bank of Minneapolis. We are allowed to defer payments of interest for 20 quarterly periods without default or penalty, but such amounts will continue to accrue. Also during the deferral period, we generally may not pay cash dividends on or repurchase common stock or preferred stock, including the TARP Preferred Stock. On December 31, 2011, we had $485 accrued and unpaid dividends on the TARP Preferred Stock and $146 accrued and unpaid interest due on the Debentures.

Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed.

We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations. We anticipate that our existing capital resources will satisfy our capital requirements for the foreseeable future. However, we may at some point need to raise additional capital to support growth or counteract the effects of future losses. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside our control, and on our financial performance. Accordingly, we cannot assure you of our ability to raise additional capital if needed on terms acceptable to us. If we cannot raise additional capital when needed, our ability to expand our operations through internal growth and acquisitions could be materially impaired.

We operate in a highly competitive industry and market areas.

We operate exclusively in North Central Wisconsin. Increased competition within our markets may result in reduced demand for loans and deposits, increased expenses, and difficulty in recruiting and retaining talented employees. Many competitors offer similar banking services in our market areas. Such competitors include national, regional, and other community banks, as well as other types of financial institutions, including savings and loan associations, trust companies, finance companies, brokerage firms, insurance companies, credit unions, and other financial intermediaries. The financial services industry could become even more competitive as a result of legislative, regulatory, and technological changes, and/or continued consolidation. Furthermore, many nonbank competitors are not subject to the same regulatory restrictions as

we are and may therefore provide customers with potentially attractive alternatives to traditional banking services.

Our ability to compete successfully depends on a number of factors, including, among other things:

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Our ability to develop, maintain, and build upon long-term customer relationships based on top quality service, and high ethical standards.

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Our ability to expand our market position.

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The scope, relevance, and pricing of products and services offered to meet customer needs and demands.

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The rate at which we introduce new products and services relative to our competitors.

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Industry and general economic trends.

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Failure to perform or other negative implications in any of these areas could significantly weaken our competitive position and adversely affect our consolidated financial condition and results of operations.

Our profitability depends significantly on the economic conditions of the markets in which we operate.

Our success depends on the general economic conditions of North Central Wisconsin where substantially all of our loans are originated. Local economic conditions have a significant impact on the demand for our products and services, the ability of our customers to repay loans, the value of the collateral securing loans, and the stability of our deposit funding sources. A significant decline in general local economic conditions, caused by inflation, recession, unemployment, changes in securities markets, changes in housing market prices, or other factors could impact local economic conditions and, in turn, have a material adverse effect on our consolidated financial condition and results of operations.

We continually encounter technological change.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends on being able to effectively implement new technology and in being successful in marketing these products and services to our customers. Many of our larger competitors have substantially greater resources to invest in technological improvements. As a result, they may be able to offer additional or superior products to those we will be able to offer, which would put us at a competitive disadvantage. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition and results of operations.

New lines of business or new products and services may subject us to additional risk.

From time to time, we may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business and/or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business and/or new products or services could substantially increase our operating costs, direct capital from other more profitable lines of business, or lead to a variety of unforeseen risks, each of which could have a material adverse effect on our business, results of operations and financial condition.

Negative publicity could damage our reputation

Reputation risk, or the risk to our earnings and capital from negative public opinion, is inherent in our business. Negative public opinion could adversely affect our ability to keep and attract customers, expose us to adverse legal and regulatory consequences or cause service providers to be reluctant to commit to long-term projects with us. Negative public opinion could result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance, regulatory compliance, sharing or inadequate protection of customer information, from our actual or perceived financial condition, and from actions taken by government regulators and community organizations in response to such conduct or financial condition.

Credit risk cannot be eliminated.

There are risks in making any loan, including risks inherent in dealing with individual borrowers, risks of nonpayment, risks resulting from uncertainties as to the future value of collateral and cash flows available to service debt and risks resulting from economic and market conditions. We attempt to reduce our credit risk through loan application approval procedures, monitoring the concentration of loans within specific industries and geographic location, and periodic independent reviews of outstanding loans by our loan review and external parties. However, while such procedures should reduce our risks, they cannot be expected to completely eliminate our credit risks. If the overall economic climate in the United States, generally, and our market areas, specifically, worsens or fails to meaningfully improve, or even if it does, our borrowers may experience difficulties in repaying their loans, and the level of nonperforming loans, charge-offs and delinquencies could rise and require further increases in the provision for loan losses, which would cause our net income and return on equity to decrease.

Commercial loans make up a significant portion of our loan portfolio.

Commercial loans, defined as commercial business, commercial real estate, and real estate construction loans, comprised $193,923,000 and $201,378,000 or 58% and 60%, of our loan portfolio at December 31, 2011 and 2010, respectively. Our commercial loans are primarily made based on the identified cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. Most often, this collateral is accounts receivable, inventory, or machinery. Credit support provided by the borrower for most of these loans and the probability of repayment is based on the liquidation of the pledged collateral and enforcement of a personal guarantee, if any exists. As a result, in the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. The collateral securing other loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business. Due to the larger average size of each commercial loan as compared with other loans such as residential loans, as well as collateral that is generally less readily-marketable, losses incurred on a small number of commercial loans could have a material adverse impact on our financial condition and results of operations.

Our agricultural loans involve a greater degree of risk than other loans, and the ability of the borrower to repay maybe affected by many factors outside of the borrower’s control.

At December 31, 2011 and 2010, agricultural real estate loans totaled $45,351,000 and $39,671,000, or 14% and 12%, of our total loan portfolio, respectively. Agricultural real estate lending involves a greater degree of risk and typically involves larger loans to single borrowers than lending on single-family residences. Payments on agricultural real estate loans are dependent on the profitable operation or management of the farm property securing the loan. The success of the farm may be affected by many factors outside the control of the farm borrower, including adverse weather conditions that prevent the planting of a crop or limit crop yields (such as hail, drought and floods), loss of livestock due to disease or other factors, declines in market prices for agricultural products (both domestically and internationally) and the impact of government regulations (including changes in price supports, subsidies and environmental regulations). In addition, many farms are dependent on a limited number of key individuals whose injury or death may significantly affect the successful operation of the farm. If the cash flow from a farming operation is diminished, the borrower’s ability to repay the loan may be impaired.

Our loan portfolio has a large concentration of real estate loans, which involve risks specific to real estate values.

Real estate lending (including commercial, construction, land and residential) is a large portion of our loan portfolio. These categories were $85,614,000 or approximately 26% of our total loan portfolio as of December 31, 2011, as compared to $$91,974,000, or approximately 26%, as of December 31, 2010. The market value of real estate can fluctuate significantly in a short period of time as a result of market conditions in the geographic area in which the real estate is located. Although a significant portion of such loans are secured by a secondary form of collateral, adverse developments affecting real estate values in one or more of our markets could increase the credit risk associated with our loan portfolio. Additionally, real estate lending typically involves higher loan principal amounts and the repayment of the loans generally is dependent, in large part, on sufficient income from the properties securing the loans to cover operating expenses and debt service. Economic events or governmental regulations outside of the control of the borrower or lender could negatively impact the future cash flow and market values of the affected properties.

If the loans that are collateralized by real estate become troubled during a time when market conditions are declining or have declined, then we may not be able to realize the amount of security that we anticipated at the time of originating the loan, which could cause us to increase our provision for loan losses and adversely affect our operating results and financial condition. In particular, if the declines in values that have occurred in the residential and commercial real estate markets worsen, particularly within our market area, the value of collateral securing our real estate loans could decline further. In light of the uncertainty that exists in the economy and credit markets nationally, there can be no guarantee that we will not experience additional deterioration resulting from the downturn in credit performance by our real estate loan customers.

Our allowance for loan losses (“ALLL”) may be insufficient to absorb losses in our loan portfolio.

We maintain an ALLL, which is a reserve established through a provision for loan losses charged to expense, which represents management’s best estimate of potential credit losses that could be incurred within the existing loan portfolio. The ALLL, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. The level of the ALLL reflects management’s continuing evaluation of industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present economic and regulatory conditions, and unidentified losses inherent in the existing loan portfolio. The determination of the appropriate level of the ALLL involves a high degree of subjectivity and requires us to make significant estimates of current credit risks using existing qualitative and quantitative information, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans, and other factors, both within and outside of our control, may require an increase in the ALLL. In addition, bank regulatory agencies periodically review our ALLL and may require an increase in the provision for loan losses or the recognition of additional loan charge-offs based on judgments different than those of management. An increase in the provision for loan losses to bolster the ALLL results in a decrease in net income, and possibly risk-based capital, and may have a material adverse effect on our consolidated financial condition and results of operations.

We depend on the accuracy and completeness of information about customers and counterparties.

In deciding whether to extend credit or enter into other transactions, we may rely on information furnished by or on behalf of customers and counterparties, including financial statements, credit reports, appraisals, and other financial information. Reliance on inaccurate or misleading financial statements, credit reports, appraisals, or other financial information could cause us to enter into unfavorable transactions, which could have a material adverse effect on our consolidated financial condition and results of operations.

Liquidity is essential to our business.

Our liquidity could be impaired by an inability to access the capital markets or unforeseen outflows of cash. This situation may arise due to circumstances that we may be unable to control, such as a general market disruption or an operational problem that affects third parties or us. Our credit ratings are important to our liquidity. A reduction in our credit ratings could adversely affect our liquidity and competitive position,

increase our borrowing costs, limit our access to the capital markets or trigger unfavorable contractual obligations.

We rely on dividends from our subsidiaries for most of our revenue.

The Company is a separate and distinct legal entity from the Bank. Historically a substantial portion of its revenue has come from dividends from the Bank. These dividends are the principal source of funds to pay dividends on our common and preferred stock, and to pay interest and principal on our debentures. Various federal and/or state laws and regulations limit the amount of dividends that the Bank may pay to the Company. Moreover, the Bank has agreed to refrain from paying dividends to the Company without the prior approval of the FDIC and WDFI, which in light of the current financial condition of the Bank, may not be granted in the near future. In the event the Bank is unable to continue to pay dividends to the Company, the Company may not be able to service debt, pay obligations, or pay dividends on our common and preferred stock. The inability to receive dividends from the Bank could have a material adverse effect on our business, consolidated financial condition, and results of operations.

We are subject to interest rate risk.

Our earnings are dependent upon our net interest income, which is the spread between the interest rates earned on investments and loans and the interest rates paid on deposits and other interest-bearing liabilities. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve. Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and investments and the amount of interest we pay on deposits and borrowings, but such changes could also affect: (i) our ability to originate loans and obtain deposits; (ii) the fair value of our financial assets and liabilities, and (iii) the average duration of our mortgage-backed securities portfolio and other interest-earning assets. If the interest rates paid on deposits and other liabilities increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.

The impact of interest rates on our mortgage banking activities can have a significant impact on revenues.

Changes in interest rates can impact mortgage banking income. A decline in mortgage rates generally increases the demand for mortgage loans as borrowers refinance, but also generally leads to accelerated payoffs. Conversely, in a constant or increasing rate environment, we would expect fewer loans to be refinanced and a decline in payoffs.

Legislative and regulatory reforms applicable to the financial services industry may, if enacted or adopted, have a significant impact on our business, financial condition and results of operations.

On July 21, 2010, the Dodd-Frank Act was signed into law, which significantly changed the regulation of financial institutions and the financial services industry. The Dodd-Frank Act, together with the regulations to be developed there under, included provisions affecting large and small financial institutions alike, including several provisions that will affect how community banks, thrifts and small bank and thrift holding companies will be regulated in the future.

The Dodd-Frank Act, among other things, imposed new capital requirements on bank holding companies; changed the base for FDIC insurance assessments to a bank’s average consolidated total assets minus average tangible equity, rather than upon its deposit base, and permanently raised the current standard deposit insurance limit to $250,000; and expanded the FDIC’s authority to raise insurance premiums. The legislation also called for the FDIC to raise the ratio of reserves to deposits from 1.15% to 1.35% for deposit insurance purposes by September 30, 2020 and to “offset the effect” of increased assessments on insured depository institutions with assets of less than $10 billion. The Dodd-Frank Act also authorized the Federal Reserve to limit interchange fees payable on debit card transactions, established the Bureau of Consumer Financial

Protection as an independent entity within the Federal Reserve, which will have broad rulemaking, supervisory and enforcement authority over consumer financial products and services, including deposit products, residential mortgages, home-equity loans and credit cards, and contained provisions on mortgage-related matters, such as steering incentives, determinations as to a borrower’s ability to repay and prepayment penalties. The Dodd-Frank Act also included provisions that affect corporate governance and executive compensation at all publicly-traded companies and allowed financial institutions to pay interest on business checking accounts.

The Collins Amendment to the Dodd-Frank Act, among other things, eliminated certain trust preferred securities from Tier 1 capital, but certain trust preferred securities issued prior to May 19, 2010 by bank holding companies with total consolidated assets of $15 billion or less will continue to be includible in Tier 1 capital. This provision also required the federal banking agencies to establish minimum leverage and risk-based capital requirements that will apply to both insured banks and their holding companies.

These provisions, or any other aspects of current or proposed regulatory or legislative changes to laws applicable to the financial industry, if enacted or adopted, may impact the profitability of our business activities or change certain of our business practices, including the ability to offer new products, obtain financing, attract deposits, make loans, and achieve satisfactory interest spreads, and could expose us to additional costs, including increased compliance costs. These changes also may require us to invest significant management attention and resources to make any necessary changes to operations in order to comply, and could therefore also materially and adversely affect our business, financial condition and results of operations. Our management continues to stay abreast of developments with respect to the Dodd-Frank Act as its provisions are phased-in over time, and periodically reassesses its probable impact on our operations. However, the ultimate effect of the Dodd-Frank Act on the financial services industry in general, and us in particular, is uncertain at this time.

The U.S. Congress has also recently adopted additional consumer protection laws such as the Credit Card Accountability Responsibility and Disclosure Act of 2010, and the Federal Reserve has adopted numerous new regulations addressing banks’ credit card, overdraft and mortgage lending practices. Additional consumer protection legislation and regulatory activity is anticipated in the near future.

The Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, adopted Basel III in September 2010, which is a strengthened set of capital requirements for banking organizations in the United States and around the world. Basel III is currently supported by the U.S. federal banking agencies. As agreed to, Basel III is intended to be fully-phased in on a global basis on January 1, 2019. However, the ultimate timing and scope of any U.S. implementation of Basel III remains uncertain. As agreed to, Basel III would require, among other things: (i) an increase in the minimum required common equity to 7% of total assets; (ii) an increase in the minimum required amount of Tier 1 capital from the current level of 4% of total assets to 8.5% of total assets; and (iii) an increase in the minimum required amount of total capital, from the current level of 8% to 10.5%. Each of these increased requirements includes 2.5% attributable to a capital conservation buffer to position banking organizations to absorb losses during periods of financial and economic stress. Basel III also calls for certain items that are currently included in regulatory capital to be deducted from common equity and Tier 1 capital. The Basel III agreement calls for national jurisdictions to implement the new requirements beginning January 1, 2013. At that time, the U.S. federal banking agencies will be expected to have implemented appropriate changes to incorporate the Basel III concepts into U.S. capital adequacy standards. Basel III changes, as implemented in the United States, will likely result in generally higher regulatory capital standards for all banking organizations.

Such proposals and legislation, if finally adopted, would change banking laws and our operating environment and that of our subsidiaries in substantial and unpredictable ways. We cannot determine whether such proposals and legislation will be adopted, or the ultimate effect that such proposals and legislation, if enacted, or regulations issued to implement the same, would have upon our business, financial condition or results of operations.

We may be a defendant in a variety of litigation and other actions, which may have a material adverse effect on our financial condition and results of operation.

We may be involved from time to time in a variety of litigation arising out of our business. Our insurance may not cover all claims that may be asserted against us, regardless of merit or eventual outcome. Such litigation may divert the focus of our management, and it is also possible that such litigation may harm our reputation. Should judgments or settlements in any litigation exceed our insurance coverage, they could have a material adverse effect on our financial condition and results of operation. In addition, we may not be able to obtain appropriate types or levels of insurance in the future, nor may we be able to obtain adequate replacement policies with acceptable terms, if at all.

Impairment of investment securities or deferred tax assets could require charges to earnings, which could result in a negative impact on our results of operations.

In assessing the impairment of investment securities, management considers the length of time and extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuers, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. If the Company experiences a pre-tax loss position in the future there is a likelihood that an additional valuation allowance may be necessary against its deferred tax asset. The impact of each of these impairment matters could have a material adverse effect on our business, results of operations, and financial condition.

We may not be able to attract and retain skilled people.

Our past performance and growth has been influenced strongly by our ability to attract and retain management experienced in banking and financial services and familiar with the communities in our market areas. Our ability to retain key employees of our bank subsidiary will continue to be important to the successful implementation of our strategy. The unexpected loss of services of any key employees, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business, results of operations and financial condition.

Further, we are subject to extensive restrictions on our ability to pay bonuses and other incentive compensation during the period in which we have any outstanding securities held by the Treasury that were issued under the CPP. Many of the restrictions are not limited to our senior executives and could cover other employees whose contributions to revenue and performance can be significant. The limitations may adversely affect our ability to recruit and retain these key employees in addition to our senior executive officers, especially if we are competing for talent against institutions that are not subject to the same restrictions. The Dodd-Frank Act also directs the Federal Reserve to promulgate rules prohibiting excessive compensation paid to bank holding company executives. These rules, if adopted, may make it more difficult to attract and retain the people we need to operate our businesses and limit our ability to promote our objectives through our compensation and incentive programs.

We are subject to operational risk.

We are subject to operational risk which represents the risk of loss resulting from human error, inadequate or failed internal processes and systems, and external events. Operational risk also encompasses compliance (legal) risk, which is the risk of loss from violations of, or noncompliance with, laws, rules, regulations, prescribed practices, or ethical standards. Although we seek to mitigate operational risk through a system of internal controls, resulting losses from operational risk could take the form of explicit charges, increased operational costs, harm to our reputation, or forgone opportunities, any and all of which could have a material adverse effect on our financial condition and results of operations.

Our internal controls and procedures may fail or be circumvented.

Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, financial condition, and results of operations.

We rely on other companies to provide key components of our business infrastructure.

Third party vendors provide key components of our business infrastructure such as internet connections, online banking and core applications. While we have selected these third party vendors carefully, we do not control their actions. Any problems caused by these third parties, including a failure to provide us with their services for any reason or poor performance, could adversely affect our ability to deliver products and services to our customers and otherwise to conduct our business. Replacing these third party vendors could also entail significant delay and expense.

System failure or breaches of our network security, including with respect to our internet banking activities, could subject us to increased operating costs as well as litigation and other liabilities.

The computer systems and network infrastructure we use in our operations and internet banking activities could be vulnerable to unforeseen problems. Our operations are dependent upon our ability to protect our computer equipment against damage from physical theft, fire, power loss, telecommunications failure or a similar catastrophic event, as well as from security breaches, denial of service attacks, viruses, worms and other disruptive problems caused by hackers. Computer break-ins, phishing and other disruptions could also jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, as well as that of our customers engaging in internet banking activities. In addition, advances in computer capabilities, new discoveries in the field of cryptography or other developments could result in a compromise or breach of the algorithms we and our third-party service providers use to encrypt and protect customer data. Although we have procedures in place to prevent or limit the effects of any of these potential problems and intend to continue to implement security technology and establish operational procedures to prevent such occurrences, there can be no assurance that these measures will be successful. Any interruption in, or breach in security of, our computer systems and network infrastructure, or that of our internet banking customers, could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our headquarters are located at the Bank’s administrative office facility at 132 West State Street, Medford, Wisconsin. We own one building in Wausau and lease the premises back to the Bank. The Bank owns nine buildings and leases three. All buildings owned or leased by the Bank are in good condition and considered adequate for present and near-term requirements.

Branch	Address
Medford-Plaza	134 South 8 ^th Street, Medford, WI 54451	20,000
Medford-Corporate	132 West State Street, Medford, WI 54451	15,900
Rib Mountain	3845 Rib Mountain Drive, Wausau, WI 54401	13,000
Colby	101 South First Street, Colby, WI 54421	8,767
Neillsville	500 West Street, Neillsville, WI 54456	7,560
Minocqua*	8744 Highway 51 N, Suite 4, Minocqua, WI 54548	4,500
Rhinelander	2170 Lincoln Street, Rhinelander, WI 54501	4,285
Phillips	864 N Lake Avenue, Phillips, WI 54555	4,285
Eagle River*	325 West Pine Street, Eagle River, WI 54521	4,000
Abbotsford	119 North First Street, Abbotsford, WI 54405	2,986
Weston *	7403 Stone Ridge Drive, Weston, WI 54476	2,500
Rib Lake	717 McComb Avenue, Rib Lake, WI 54470	2,112
Fairchild	111 N Front Street, Fairchild, WI 54741	1,040

Branch leased from third party.

ITEM 3. LEGAL PROCEEDINGS

We engage in legal actions and proceedings, both as plaintiff and defendant, from time to time in the ordinary course of business. In some instances, such actions and proceedings involve substantial claims for compensatory or punitive damages or involve claims for an unspecified amount of damages. There are, however, presently no proceedings pending or contemplated which, in our opinion, would have a material adverse effect on our consolidated financial position, results of operations or liquidity.

As previously reported, in 2007 we commenced a legal action against the guarantor of a loan to a former car dealership (“Impaired Borrower”) and others seeking relief for damages. On September 30, 2010 a Marathon County jury found the Impaired Borrower liable for intentionally misrepresenting the financial condition of the dealership and for acts of conspiracy in enticing the Bank to extend credit to it. The jury awarded the Bank a $4,000,000 judgment for the losses it suffered as a result of this transaction. This judgment is subject to appeal and the ability to collect is unclear at this time. As a result of our continuing collection efforts to recover losses related to this transaction, the Bank received an insurance settlement in the amount of $500,000 in January 2011. We continue to pursue all avenues of recovery.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

There is no active established public trading market in our common stock, although two regional broker-dealers act as market makers for the stock. Bid and ask prices are quoted on the OTC Bulletin Board under the symbol “MWFS.OB”. Transactions in our common stock are limited and sporadic.

Market Prices and Dividends

The following table summarizes price ranges of over-the-counter quotations and cash dividends paid on our common stock for the periods indicated. Prices represent the bid prices reported on the OTC Bulletin Board. The prices do not reflect retail mark-up, mark-down or commissions, and may not necessarily represent actual transactions.

	2011 Prices and Dividends									2010 Prices and Dividends
Quarter	High		Low		Dividends		Quarter			High		Low		Dividends
1 ^st	$	8.05	$	7.90	$	0.00		1	st	$	9.10	$	6.00	$	0.00
2nd		8.70		7.77		0.00		2	nd		11.00		9.00		0.00
3rd		8.00		4.75		0.00		3	rd		9.50		7.85		0.00
4th		5.00		3.50		0.00		4	th		7.85		7.80		0.00

Holders

As of March 1, 2012, there were approximately 850 holders of record of our common stock. Some of our common stock is held in “street” or “nominee” name and the number of beneficial owners of such shares is not known nor included in the foregoing number.

Dividend Policy

Prior to 2009, dividends on our common stock were historically paid in cash on a quarterly basis in March, June, September, and December. In 2009, we declared a first quarter dividend payable to shareholders in March of that year. Subsequent to the payment of the 2009 first quarter dividend, we changed our dividend payment policy on our common stock to declare semi-annual dividends, payable in February and August; however, following an analysis of our operating results, capital position and the general economic climate, we elected to defer dividends beginning in August 2009 and do not anticipate paying dividends on our common stock for the foreseeable future.

Our ability to pay dividends depends in part upon the receipt of dividends from the Bank and these dividends are subject to limitation under banking laws and regulations. Our declaration of dividends to our shareholders is discretionary and will depend upon earnings, capital requirements, and the operating and financial condition of the Company. Prior to the third anniversary of the Treasury’s purchase of the Series A and B Preferred Stock, unless such stock has been redeemed, the consent of the Treasury will be required for us to increase our annual common stock dividend above $0.44 per common share. We are also prohibited from paying dividends on our common stock if we fail to make distributions or scheduled payments on the Debentures or TARP Preferred Stock. In consultation with the Federal Reserve Bank of Minneapolis, on May 12, 2011, the Company exercised its rights to suspend dividends on the outstanding TARP Preferred Stock and has also elected to defer interest on the Debentures. As of December 31, 2011, the Company had $485 accrued and unpaid dividends on the TARP Preferred Stock and $146 accrued and unpaid interest due of the Debentures. Consequently, we may not declare a dividend on our common stock until such accrued amounts have been paid and we are current on all distributions due holders of the Debentures and TARP Preferred Stock.

Stock Buy-Back

Under the CPP, prior to February 20, 2012, we were required to obtain the consent of the Treasury prior to redemption, purchase or acquisition any shares of our capital stock, other than (i) redemptions, purchases or other acquisitions of the TARP Preferred Stock, (ii) redemptions, purchases or other acquisitions of shares of our common stock in connection with the administration of any employee benefit plan in the ordinary course of business and consistent with past practice and (iii) certain other redemptions, repurchases or other acquisitions as permitted under the CPP. We did not repurchase any shares of our capital stock in 2011, nor do we expect to in the near future.

ITEM 6. SELECTED FINANCIAL DATA

Table 1: Earnings Summary and Selected Financial Data

Years Ended December 31,	2011			2010			2009			2008			2007
	(In thousands, except per share data)
Results of operations:
Interest income	$	22,039		$	25,062		$	26,932		$	29,732		$	32,144
Interest expense		6,485			8,762			10,500			13,297			16,564
Net interest income		15,554			16,300			16,432			16,435			15,580
Provision for loan losses		4,750			4,755			8,506			3,200			1,140
Net interest income after provision for loan losses		10,804			11,545			7,926			13,235			14,440
Noninterest income		4,287			5,550			4,421			4,026			4,057
Other-than-temporary impairment losses, net		0			412			301			0			0
Noninterest expense		17,187			15,805			16,450			16,010			17,334
Income (loss) before income taxes		(2,096	)		878			(4,404	)		1,251			1,163
Income tax (benefit) expense		1,861			135			(1,916	)		9			45
Net income (loss)		(3,957	)		743			(2,488	)		1,242			1,118
Preferred stock dividends, discount and premium		(644	)		(641	)		(545	)		0			0
Net income (loss) available to common equity	$	(4,601	)	$	102		$	(3,033	)	$	1,242		$	1,118
Earnings (loss) per common share:
Basic and diluted	$	(2.78	)	$	0.06		$	(1.84	)	$	0.76		$	0.68
Cash dividends per common share	$	0.00		$	0.00		$	0.11		$	0.55		$	0.66
Weighted average common shares outstanding:
Basic		1,654			1,650			1,645			1,643			1,640
Diluted		1,654			1,650			1,646			1,643			1,641

SELECTED FINANCIAL DATA
Year-End Balances:
Loans	$	329,863		$	339,170		$	358,616		$	364,381		$	357,988
Allowance for loan losses		9,816			9,471			7,957			4,542			4,174
Investment securities available-for-sale, at fair value		110,376			101,310			103,477			81,038			82,551
Total assets		488,176			509,082			505,460			496,459			480,359
Deposits		381,620			400,610			397,800			385,675			369,479
Long-term borrowings		40,061			42,561			42,561			49,429			46,429
Subordinated debentures		10,310			10,310			10,310			10,310			10,310
Stockholders’ equity		39,513			42,970			43,184			35,805			34,571
Book value per common share	$	17.65		$	19.85		$	20.10		$	21.78		$	21.06
Average Balances:
Loans	$	338,607		$	355,575		$	363,966		$	361,883		$	355,307
Investment securities available-for-sale, at fair value		129,742			123,103			110,515			90,776			86,972
Total assets		493,686			505,597			497,994			477,274			470,209
Deposits		384,210			394,872			380,633			364,710			360,101
Short-term borrowings		12,285			10,410			11,907			11,634			17,939
Long-term borrowings		41,273			42,561			47,296			51,874			42,462
Stockholders’ equity		42,973			43,976			44,122			35,317			34,348
Financial Ratios:
Return on average assets		(0.93%)			0.02	%		(0.61%)			0.26	%		0.24	%
Return on average common equity		(14.05%)			0.23	%		(6.87%)			3.52	%		3.25	%
Average equity to average assets		8.70	%		8.70	%		8.86	%		7.21	%		7.20	%
Net interest margin (1)		3.38	%		3.46	%		3.53	%		3.71	%		3.60	%
Total risk-based capital		15.57	%		15.46	%		14.49	%		13.33	%		13.32	%
Net charge-offs to average loans		1.30	%		0.91	%		1.40	%		0.78	%		1.45	%
Nonperforming loans to total loans		4.00	%		3.70	%		3.89	%		2.47	%		1.77	%
Efficiency ratio (1)		85.53	%		73.40	%		79.20	%		76.86	%		86.71	%
Noninterest income to average assets		0.87	%		1.10	%		0.89	%		0.84	%		0.86	%
Noninterest expenses to average assets		3.48	%		3.13	%		3.30	%		3.35	%		3.69	%
Dividend payout ratio		0.00	%		0.00	%		7.27	%		72.68	%		96.78	%
Stock Price Information: (2)
High	$	8.70		$	11.00		$	16.25		$	24.00		$	38.00
Low		3.50			6.00			7.00			12.25			19.75
Market price at year end		3.50			7.80			7.00			12.25			19.75

(1)

Fully taxable equivalent basis, assuming a federal tax rate of 34% and adjusted for the disallowance of interest expense

(2)

Bid Price

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis reviews significant factors with respect to our consolidated financial condition at December 31, 2011 and 2010, and results of operations for the three-year period ended December 31, 2011. This discussion should be read in conjunction with the consolidated financial statements, notes, tables, and selected financial data presented elsewhere in this report.

Our discussion and analysis contains forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. However, such performance involves risks and uncertainties that may cause actual results to differ materially from those discussed in such forward-looking statements. A cautionary statement regarding forward-looking statements is set forth under the caption “Special Note Regarding Forward-Looking Statements” in Item 1 of this Annual Report on Form 10-K. This discussion and analysis should be considered in light of such cautionary statements and the risk factors disclosed elsewhere in this report.

Critical Accounting Policies

Our financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and follow general practices within the industry in which we operate. This preparation requires management to make estimates, assumptions and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statements. Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. We believe the following policies are important to the portrayal of our financial condition and require subjective or complex judgments and, therefore, are critical accounting policies.

Investment Securities : The fair value of our investment securities is important to the presentation of the consolidated financial statements since the investment securities are carried on the consolidated balance sheet at fair value. We utilize a third party vendor to assist in the determination of the fair value of our investment portfolio. Adjustments to the fair value of the investment portfolio impact our consolidated financial condition by increasing or decreasing assets and shareholders’ equity, and possibly earnings. Declines in the fair value of investment securities below their cost that are deemed to be other-than-temporarily impaired (“OTTI”) are reflected in earnings as realized losses and assigned a new cost basis. In estimating OTTI, we consider many factors which include: (i) the length of time and the extent to which fair value has been less than cost; (ii) the financial condition and near-term prospects of the issuer; and (iii) our intent and ability to retain the investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. To determine OTTI, we utilize a discounted cash flow model to estimate the fair value of the security. The use of a discounted cash flow model involves judgment, particularly of interest rates, estimated default rates and prepayment speeds.

Allowance for Loan Losses : Management’s evaluation process used to determine the adequacy of the ALLL is subject to the use of estimates, assumptions, and judgments. The evaluation process combines several factors: (i) evaluation of facts and issues related to specific loans; (ii) management’s ongoing review and grading of the loan portfolio; (iii) consideration of historical loan loss and delinquency experience on each portfolio category; (iv) trends in past due and nonperforming loans; (v) the risk characteristics of the various loan segments; (vi) changes in the size and character of the loan portfolio; (vii) concentrations of loans to specific borrowers or industries; (viii) existing and forecasted economic conditions; (ix) the fair value of underlying collateral; and (x) other qualitative and quantitative factors which could affect potential credit losses. Because current economic conditions can change and future events are inherently difficult to predict, the anticipated amount of estimated loan losses, and therefore the adequacy of the ALLL, could change significantly. As an integral part of their examination process, various regulatory agencies also review the ALLL. Such agencies may require that certain loan balances be classified differently or charged-off when their credit evaluations differ from those of management, based on their judgments about information available to

them at the time of their examination. The Company believes the ALLL as recorded in the consolidated financial statements is adequate.

Other real estate owned (“OREO”) : Real estate acquired through, or in lieu of, loan foreclosure is held for sale and is initially recorded at fair value at the date of foreclosure, establishing a new cost basis. The fair value is based on appraised or estimated values obtained, less estimated costs to sell, and adjusted based on highest and best use of the properties, or other changes. There are uncertainties as to the price we may ultimately receive on the sale of the properties, potential property valuation allowances due to declines in the fair values, and the carrying costs of properties for expenses such as utilities, real estate taxes, and other ongoing expenses that may affect future earnings.

Income taxes : The assessment of tax assets and liabilities involves the use of estimates, assumptions, interpretations, and judgment concerning certain accounting pronouncements and federal and state tax codes. There can be no assurance that future events, such as court decisions or positions of federal and state taxing authorities, will not differ from management’s current assessment, the impact of which could be significant to the consolidated results of operations and reported earnings. Quarterly assessments will be performed to determine if additional valuation allowances may be necessary against its deferred tax asset. At December 31, 2011 the Company believes the tax assets and liabilities are adequate and properly recorded in the consolidated financial statements.

All remaining information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are shown in thousands of dollars, except per share data.

Credit Management Process Enhancements

Our Principal Executive Officer, Executive Vice President and Chief Credit Officer (“Executive Management”) have been focused on continued enhancements to the Company’s credit management process to address credit quality and the effects of the economy. To enhance credit risk management, the Company has taken several actions, including but not limited to: (i) the establishment of a credit administration function and hiring of an experienced Chief Credit Officer in November 2009; (ii) the expansion of its special assets and collection staff; (iii) the adoption of enhanced credit underwriting policies and procedures, including the requirement that exceptions to loan policies and procedures be approved by Executive Management; and (iv) loan officers prepare problem loan memos for all credits risk rated “special mention” and higher to identify risks and the remediation necessary to prevent continued credit quality declines in the loan portfolio. These changes have prompted a number of personnel changes among our lending staff and in some instances the reassignment of duties and responsibilities among remaining staff members.

Additionally, while the board of directors has always provided oversight of the credit process, it has increased its involvement over the past several years. Three independent directors and the President comprise the Bank’s Board Loan Committee (“BLC”). The BLC meets at least twice each month (and other times as necessary) to review loan proposals for (i) secured loans risk rated acceptable or better and over $1,200; (ii) unsecured loans risk rated acceptable or better over $500; (iii) secured loans risk rated special mention or greater over $750; and (iv) unsecured loans risk rated special mention or greater over $100. All actions or proposed actions for all loans risk rated substandard or doubtful, or which have been adversely classified by regulatory agencies, must be approved by the BLC. Any secured loan over $7,000 or unsecured loan over $5,000 and all loan participations must be approved by the full board of directors. The BLC annually reviews all loan relationships risk rated acceptable or better and over $1,200, all loan relationships risk rated special mention and over $750, and all loan relationships risk rated substandard or doubtful. Delinquent loans are reviewed with the BLC on a regular basis.

Since 2009, the board’s Audit Committee has engaged the services of an independent third party to perform periodic reviews to evaluate the credit quality, loan administration and approval processes with respect to the Bank’s loan portfolio. During 2011, the Audit Committee had the independent loan reviewer perform an in-depth review of “acceptable,” “special mention,” and “substandard” risk rated loans to confirm that the loan portfolio was appropriately risk rated. The review identified some loans that required the rating

to be adjusted up or down, but overall confirmed that our loan procedures have improved. Three independent loan reviews are scheduled to be performed in 2012 as well.

Results of Operations

Overview

The Company reported a net loss available to common shareholders of $4,601, or $2.78 per common share, for the year ended December 31, 2011, compared to net income available to common shareholders of $102, or $0.06 per common share, for the year ended December 31, 2010.

The Company’s financial results for 2011 were significantly impacted by the credit quality of the Bank’s loan portfolio, as there is a strong correlation between performance and the level of provision for loan losses, charge-offs and costs of adverse credit quality. As described further below, during the fourth quarter of 2011, a $2,911 valuation allowance was recognized in income tax expense to offset deferred tax assets. Weak loan demand, combined with historically low interest rates, has created intense competition for high quality credits while other investment alternatives offer little return resulting in a compressed net interest margin. We expect that the level of provision for loan losses, along with the costs of adverse credit quality will continue to put pressure on our earnings in 2012.

Key factors behind these results are discussed below:

•

Net interest income of $15,554 for the year ended December 31, 2011, decreased by 5% from 2010. On a fully tax-equivalent basis, the net interest margin at December 31, 2011 decreased to 3.38% from 3.46% in 2010. The decrease in net interest margin was primarily due to an elevated level of liquidity that was invested in lower-yielding assets, weak loan demand, high levels of nonaccrual loans, and the sale of higher yielding investment securities during the latter half of 2010. Average loans outstanding decreased by $16,968 to $338,607 and the average balance of investment securities increased $9,940 to $105,868 at December 31, 2011, compared to a year earlier. The average yield on earning assets was 4.76% at December 31, 2011 compared to 5.29% at December 31, 2010.

•

Loans of $329,863 at December 31, 2011, decreased $9,307 from December 31, 2010. Loan growth has been impacted by the current credit environment, lack of loan demand in our market area, loan payoffs, and charge-offs. Although competition among local and regional banks for creditworthy borrowers and core deposit customers remains high, we remain committed to supporting our markets through lending to creditworthy borrowers despite the increasing regulatory burdens placed on financial institutions and the continuing economic challenges.

•

Total deposits were $381,620 at December 31, 2011, down $18,990 from the year ended December 31, 2010, primarily due to the maturity of brokered certificates of deposit and deposits acquired under a listing service. The Company decided to not replace these funding sources due to excess liquidity and continued efforts to reduce reliance on non core deposits.

•

Net charge-offs were $4,405 for 2011, and $3,241 for 2010. The provision for loan losses was $4,750 for 2011, compared with $4,755 for 2010. The continued high level of provision was due primarily to the levels of loan charge-offs, levels of nonperforming loans, depressed collateral values, and internal assessments of currently performing loans with increased risk for future delinquencies. The Bank’s coverage ratio of the ALLL to total loans at December 31, 2011 was 2.98% compared to 2.79% at December 31, 2010.

•

Another major contributor to current year results was a $2,911 valuation allowance taken in the fourth quarter of 2011 that was recognized in income tax expense to offset deferred tax assets. The valuation allowance was taken to account for the possibility that some portion of the deferred tax asset will not be realized in the future. A deferred tax asset is the amount of tax deductions the Company has available to be utilized on future income tax returns. Upon the generation of future taxable income during the periods in which the tax deductions become deductible all or a portion of the established valuation allowance could be reversed. If the Company experiences a pre-tax loss position in the future

there is likelihood that an additional valuation allowance may be necessary. At December 31, 2011 the remaining balance of the deferred tax asset was $1,179.

•

Excluding a legal settlement of $500 and a $55 loss on the sale of investments in 2011 and the $1,054 gain on sale of investments recognized in 2010, noninterest income for 2011 was $3,842, down $654, or 15%, compared to 2010. Noninterest income continued to decline as a result of regulatory changes under the Dodd-Frank Act limiting certain service fees and decreased mortgage banking income from the sales of residential real estate loans into the secondary market. Mortgage banking income did increase in the third and fourth quarters of 2011 as compared to the first half of the year due to declines in interest rates; however, even with the uptick in refinancing, the activity was not as high as 2010 levels.

•

Noninterest expense for 2011 was $17,187, an increase of $1,382, or 9%, over 2010, due primarily to increased foreclosure/OREO expenses, collection expenses, FDIC costs, marketing and product expenses associated with a new suite of deposit products, and loan servicing costs.

•

In 2010, the Company recognized OTTI write-downs of $412 from two private placement trust preferred securities as the unrealized losses appeared to be related to expected credit losses that will not be recovered by the Company. No OTTI credit losses were recognized in earnings during 2011.

•

As of December 31, 2011, the Bank’s Tier One Capital Leverage ratio was 8.7% and Total Risk-Based capital ratio was 14.2%, compared to 9.0% and 13.9%, respectively, at December 31, 2010. The Company’s Tier One Capital Leverage ratio was 9.6% and Total Risk-Based capital ratio was 15.6%, compared to 10.0% and 15.5%, respectively, at December 31, 2010. All ratios are above the regulatory guidelines stipulated in the Bank’s and Company’s agreements with their primary regulators.

Net Interest Income

Our earnings are substantially dependent on net interest income which is the difference between interest earned on investments and loans and the interest paid on deposits and other interest-bearing liabilities. Net interest income is directly impacted by the sensitivity of the balance sheet to changes in interest rates and by the amount and composition of earning assets and interest-bearing liabilities, including characteristics such as the fixed or variable nature of the financial instruments, contractual maturities, and repricing frequencies.

Table 2 presents changes in the mix of average interest-earning assets and average interest-bearing liabilities for the three years ended December 31, 2011. The mix of the balance sheet has shifted from loans to taxable securities funded by a growing allocation of savings deposits as compared to time deposits thus lowering the Company’s taxable-equivalent net interest income.

Table 2: Mix of Average Interest Earning-Assets and Average Interest-Bearing Liabilities

	Years Ended December 31,
($ in thousands)	2011			2010			2009
Loans		72	%		74	%		77	%
Taxable securities		20	%		18	%		17	%
Tax-exempt securities		3	%		2	%		2	%
Other		5	%		6	%		4	%
Total interest-earning assets		100	%		100	%		100	%
Interest-bearing demand		9	%		9	%		7	%
Savings deposits		30	%		26	%		26	%
Time deposits		44	%		49	%		49	%
Short-term borrowings		3	%		3	%		3	%
Long-term borrowings		11	%		10	%		12	%
Subordinated debentures		3	%		3	%		3	%
Total interest-bearing liabilities		100	%		100	%		100	%

Table 3: Average Balance Sheet and Net Interest Income Analysis — Taxable-Equivalent Basis

	Years Ended December 31,
	2011								2010								2009
	Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate
	($ in thousands)
ASSETS
Earnings assets
Loans (1) (2) (3)	$	338,607		$	18,980		5.61	%	$	355,575		$	21,391		6.02	%	$	363,966		$	22,814		6.27	%
Investment securities:
Taxable		93,511			2,563		2.74	%		85,925			3,216		3.74	%		79,030			3,540		4.48	%
Tax-exempt (2)		12,357			597		4.83	%		10,003			544		5.43	%		11,795			725		6.15	%
Federal funds sold		12,296			16		0.13	%		17,182			26		0.15	%		12,164			14		0.12	%
Securities purchased under agreements to sell		8,065			108		1.34	%		3,833			65		1.70	%		0			0		0.00	%
Other interest-earning assets		3,512			39		1.11	%		6,160			64		1.04	%		7,526			135		1.79	%
Total earning assets	$	468,348		$	22,303		4.76	%	$	478,678		$	25,306		5.29	%	$	474,481		$	27,228		5.74	%
Cash and due from banks		7,857								7,789								7,618
Other assets		26,737								27,797								22,628
Allowance for loan losses		(9,256	)							(8,667	)							(6,733	)
Total assets	$	493,686							$	505,597							$	497,994
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities
Interest-bearing demand	$	35,785		$	164		0.46	%	$	35,100		$	205		0.59	%	$	29,639		$	187		0.63	%
Savings deposits		116,802			902		0.77	%		107,622			1,074		1.00	%		105,330			1,393		1.32	%
Time deposits		169,825			3,500		2.06	%		199,942			5,123		2.56	%		195,712			6,221		3.18	%
Short-term borrowings		12,285			123		1.00	%		10,410			95		0.91	%		11,907			124		1.04	%
Long-term borrowings		41,273			1,614		3.91	%		42,561			1,670		3.92	%		47,296			1,961		4.15	%
Subordinated debentures		10,310			183		1.77	%		10,310			595		5.77	%		10,310			614		5.98	%
Total interest-bearing liabilities	$	386,280		$	6,486		1.68	%	$	405,945		$	8,762		2.16	%	$	400,194		$	10,500		2.62	%
Noninterest-bearing demand deposits		61,798								52,208								49,952
Other liabilities		2,635								3,468								3,726
Stockholders’ equity		42,973								43,976								44,122
Total liabilities and stockholders’ equity	$	493,686							$	505,597							$	497,994
Net interest income and rate spread				$	15,817		3.08	%				$	16,544		3.13	%				$	16,728		3.12	%
Net interest margin							3.38	%							3.46	%							3.53	%

(1)

Nonaccrual loans are included in the daily average loan balances outstanding.

(2)

The yield on tax-exempt loans and tax-exempt investment securities is computed on a tax-equivalent basis using a federal tax rate of 34% and adjusted for the disallowance of interest expense.

(3)

Interest income includes loan fees of $317 in 2011, $387 in 2010 and $489 in 2009.

Table 4: Volume/Rate Variance — Taxable-Equivalent Basis

	2011 vs. 2010									2010 vs. 2009
	Volume			Due to Rate (1)			Net			Volume			Due to Rate (1)			Net
Loans (2)	$	(1,021	)	$	(1,390	)	$	(2,411	)	$	(526	)	$	(897	)	$	(1,423	)
Taxable investments		284			(937	)		(653	)		309			(633	)		(324	)
Tax-exempt investments (2)		128			(75	)		53			(110	)		(71	)		(181	)
Federal funds sold		(7	)		(2	)		(10	)		6			6			12
Securities purchased under agreements to sell		72			(29	)		43			0			65			65
Other interest-earning assets		(28	)		2			(25	)		(25	)		(46	)		(71	)
Total earning assets	$	(572	)	$	(2,431	)	$	(3,003	)	$	(346	)	$	(1,576	)	$	(1,922	)
Interest-bearing demand	$	4		$	(45	)	$	(41	)	$	34		$	(16	)	$	18
Savings deposits		92			(264	)		(172	)		30			(349	)		(319	)
Time deposits		(771	)		(852	)		(1,623	)		135			(1,233	)		(1,098	)
Short-term borrowings		17			11			28			(16	)		(13	)		(29	)
Long-term borrowings		(50	)		(6	)		(56	)		(197	)		(94	)		(291	)
Subordinated debenture		0			(412	)		(412	)		0			(19	)		(19	)
Total interest-bearing liabilities	$	(708	)	$	(1,568	)	$	(2,276	)	$	(14	)	$	(1,724	)	$	(1,738	)
Net interest income	$	136		$	(863	)	$	(727	)	$	(332	)	$	148		$	(184	)

(1)

The change in interest due to both rate and volume has been allocated to rate.

(2)

The yield on tax-exempt loans and tax-exempt investment securities is computed on a tax-equivalent basis using a federal tax rate of 34% adjusted for the disallowance of interest expense.

Table 5: Yield on Earning Assets

	December 31, 2011						December 31, 2010						December 31, 2009
	Yield			Change			Yield			Change			Yield			Change
Yield on earning assets (1)		4.76	%		(0.53	)%		5.29	%		(0.45	)%		5.74	%		(0.91	)%
Effective rate on all liabilities as a percentage of earning assets		1.38	%		(0.45	)%		1.83	%		(0.38	)%		2.21	%		(0.73	)%
Net yield on earning assets		3.38	%		(0.08	)%		3.46	%		(0.07	)%		3.53	%		(0.18	)%

(1)

The yield on tax-exempt loans and tax-exempt investment securities is computed on a tax-equivalent basis using a federal tax rate of 34% adjusted for the disallowance of interest expense.

Comparison of 2011 versus 2010

Taxable-equivalent net interest income was $15,817 for 2011, a decrease of 4% from 2010 primarily attributable to unfavorable rate variances as the impact of interest rates received on loans and other investments decreased more than the interest rates paid on deposits and other borrowings. Taxable-equivalent net interest income decreased $863 in 2011 compared to 2010 due to changes in rate.

The taxable-equivalent net interest margin was 3.38% for 2011, down from 3.46% for 2010. For 2011, the yield on earning assets of 4.76% was 53 basis points (“bps”) lower than the comparable period last year. Loan yields decreased 41 bps, to 5.61%, impacted by levels of nonaccrual loans, lower loan yields given the repricing of adjustable rate loans, soft loan demand, and competitive pricing pressures to retain and/or obtain creditworthy borrowers. The yield on investment securities decreased 94 bps to 2.98%, impacted by the Company’s excess liquidity position being invested in lower-yielding investment securities resulting from soft loan demand during 2011 and the sale of $33,184 of investment securities during the latter half of 2010.

The cost of interest-bearing liabilities of 1.68% for 2011 was 48 bps lower than 2010. The average cost of interest-bearing deposits was 1.42%, down 45 bps due to decreasing deposit offering rates, while the cost

of wholesale funding (comprised of short-term borrowings and long-term borrowings) decreased 9 bps to 3.24% for 2011. The Company’s outstanding $10,310 of Debentures had a fixed rate of 5.98% through December 15, 2010, after which they have had a floating rate equal to the three-month LIBOR plus 1.43%, adjusted quarterly. The interest rate at December 31, 2011 was 1.98%.

Average earning assets of $468,348 for 2011 were $10,330 lower than the comparable period last year. Average investment securities grew $9,940 to $105,868, reflecting the Company’s increased liquidity position invested in lower-yielding assets. Average loans decreased $16,968 to $338,607 as a result of soft loan demand, pay-offs and charge-offs. Taxable-equivalent interest income in 2011 decreased $3,003 to $22,303 due to $572 unfavorable earning asset volume changes and $2,431 unfavorable rate variances.

Average interest-bearing liabilities of $386,280 for 2011 were down $19,665 compared to the related 2010 period. Average interest-bearing deposits decreased $20,252 while noninterest-bearing deposits increased $9,590. For 2011, interest expense decreased $2,276 of which $1,568 was due to favorable rate changes and $708 was due to favorable volume changes.

Comparison of 2010 versus 2009

Taxable equivalent net interest income for 2010 was $16,544, a decrease of $184, or 1%, from $16,728 in 2009. The decrease in taxable equivalent net interest income was a function of unfavorable volume variances (as balance sheet changes in both volume and mix decreased taxable equivalent net interest income by $332) and favorable interest rate changes (as the impact of changes in the interest rate environment and product pricing increased taxable equivalent interest income by $148). The change in mix and volume of earning assets decreased taxable equivalent interest income by $346, while the change in volume and composition of interest-bearing liabilities decreased interest expense $14. Rate changes on earning assets reduced interest income by $1,576, while changes in rates on interest-bearing liabilities lowered interest expense by $1,724, for a net favorable impact of $148.

The net interest margin for 2010 was 3.46%, compared to 3.53% in 2009. For 2010, the yield on earning assets of 5.29% was 45 bps lower than 2009. Loan yields decreased 25 bps, to 6.02%, impacted by the levels of nonaccrual loans, repricing of adjustable rate loans and competitive pricing pressures in a low interest rate environment. The yield on investment securities and other interest-earning assets decreased 81 bps, impacted by the Company’s excess liquidity position during most of 2010 and the sale of investment securities.

The cost of average interest-bearing liabilities of 2.16% in 2010 was 46 bps lower than 2009. The average cost of interest-bearing deposits in 2010 was 1.87%, 49 bps lower than 2009, reflecting the low interest rate environment. The cost of wholesale funding (comprised of short-term borrowings and long-term borrowings) decreased 19 bps to 3.33% for 2010. The Debentures had a fixed rate of 5.98% through December 15, 2010, after which they have a floating rate of the three-month Libor plus 1.43%, adjusted quarterly. The interest rate at December 31, 2010 was 1.73%.

Average earning assets of $478,678 in 2010 were $4,197 lower than 2009. Average federal funds sold and overnight repurchase agreements and investment securities grew $10,849 and $5,103, respectively, reflecting the Company’s increased liquidity position. Average loans decreased $8,391. Taxable equivalent interest income in 2010 decreased $1,922 due to earning asset rate and volume changes.

Average interest-bearing liabilities of $405,945 in 2010 were up $5,751 versus 2009, attributable to a higher level of interest-bearing deposits. Average interest-bearing deposits grew $11,983 and average noninterest-bearing deposits increased $2,256. Given the soft loan demand and growth in deposits, average wholesale funding decreased by $6,232. In 2010, interest expense decreased $1,724 due to rate changes, with a $1,598 decrease from interest-bearing deposits and a $126 decrease due to short-term and long-term borrowings and subordinated debentures.

Provision for Loan Losses

The provision for loan losses in 2011 was $4,750, compared to $4,755 and $8,506 for 2010 and 2009, respectively. The continued high level of provision was due primarily to the levels of loan charge-offs, levels of nonperforming loans, depressed collateral values, existing economic conditions, and internal assessments of

currently performing loans with increased risk for future delinquencies. Net charge-offs were $4,405 for 2011, compared to $3,241 for 2010 and $5,091 for 2009. The increase in net charge-offs from 2010 was primarily due to management’s decision, made in consultation with the Bank’s regulators, to charge-off certain impaired loans that were covered by specific reserve allocations identified in the ALLL in 2011. At December 31, 2011, the ALLL was $9,816, an increase of $345 over December 31, 2010 and an increase of $1,859 over December 31, 2009. The ratio of the ALLL to total loans was 2.98%, 2.79%, and 2.22% for the years ended December 31, 2011, 2010, and 2009, respectively. Nonperforming loans at December 31, 2011, were $13,200, compared to $12,543 at December 31, 2010, and $13,942 at December 31, 2009, representing 4.00%, 3.70%, and 3.89% of total loans, respectively.

The provision for loan losses is predominantly a function of the Company’s methodology and judgment as to qualitative and quantitative factors used to determine the adequacy of the ALLL. The adequacy of the ALLL is affected by changes in the size and character of the loan portfolio, changes in levels of impaired and other nonperforming loans, historical losses and delinquencies in each portfolio segment, the risk inherent in specific loans, concentrations of loans to specific borrowers or industries, existing and future economic conditions, the fair value of underlying collateral, and other factors which could affect potential credit losses. We believe the level of provisioning and the level of our ALLL followed the direction of our policies and was adequate to cover anticipated and unexpected loan losses inherent in our loan portfolio as of December 31, 2011. However, we may need to increase our provisions in the future should the quality of the loan portfolio decline or other factors used to determine the allowance worsen. Please refer to the discussion under “Balance Sheet Analysis-Allowance for Loan Losses” and “Balance Sheet Analysis-Impaired Loans and Nonperforming Assets” for further information.

Noninterest Income

Table 6: Noninterest Income

	Years Ended December 31,							Change From Prior Year
($ in thousands)	2011			2010		2009		$ Change 2011			% Change 2011			$ Change 2010			% Change 2010
Service fees	$	953		$	1,174	$	1,239	$	(221	)		(19%)		$	(65	)		(5%)
Trust service fees		1,066			1,103		1,024		(37	)		(3%)			79			8.0	%
Investment product commissions		221			221		237		0			0	%		(16	)		(7%)
Mortgage banking		523			955		564		(432	)		(45%)			391			69	%
Gain (loss) on sale of investments		(55	)		1,054		449		(1,109	)		(105%)			605			135	%
Other		1,579			1,043		908		536			51	%		135			15	%
Total noninterest income	$	4,287		$	5,550	$	4,421	$	(1,263	)		(23%)		$	1,129			26	%

Comparison of 2011 versus 2010

Noninterest income was $4,287 for 2011, down $1,263, or 23%, from 2010. Excluding a legal settlement of $500 and a $55 loss on the sale of investments in 2011 and the $1,054 gain on sale of investments recognized in 2010, noninterest income for the year ended December 31, 2011 totaled $3,842 down $654, or 15%, compared to 2010.

Service fees on deposit accounts for 2011 were $953, down $221, or 19%, from 2010. The decline in service fees was due to a general decrease in the amount of NSF/overdraft fees collected due to regulatory changes under the Dodd-Frank Act and changes in customer behavior. For 2012, core fee-based revenues are expected to face challenges related to the same factors that have affected 2011 results.

The Wealth Management Services Group generates trust service fees and investment product commissions. Trust service fees were $1,066 in 2011, down $37 from 2010, primarily due to a decrease in the valuations of assets under management, on which fees are based. Investment product commissions remained unchanged at $221 for 2011 and 2010.

Mortgage banking income represents income received from the sale of residential real estate loans into the secondary market. During 2010, mortgage rates fell to historically low levels, prompting a wave of consumer refinancing activity generating $955 of mortgage banking income. Mortgage banking income did

increase in the third and fourth quarters of 2011 due to further declines in interest rates; however, even with the uptick in refinancing, the refinancing activity was not as high as 2010 levels.

The Company recognized a $55 loss on the sale of investments in 2011. The security sales were executed in an effort to increase the credit quality of the Company’s investment portfolio. Excluding the $500 legal settlement noted above, other operating income increased $36 to $1,079 in 2011 compared to $1,043 in 2010.

Comparison of 2010 versus 2009

Noninterest income was $5,550 for 2010, an increase of $1,129, or 26%, from 2009.

For 2010, mortgage banking income was $955, up $391 from 2009. In 2010, 407 mortgage loans were sold totaling $68,886 into the secondary market compared to 301 loans totaling $47,436 for 2009. Residential loan activity reached an all time high in 2010 due to the historically low interest rate environment.

Gain on sale of investments was $1,054 for 2010 compared to $449 in 2009. Proceeds from 2010 sales totaled $38,146 while proceeds from 2009 were $12,717. The sales of investments are considered a normal function of prudently managing the portfolio and taking advantage of gain positions when appropriate. Sales also occurred to remove those mortgage securities that were considered too small to hold, to remove those securities that will have a tendency to react most negatively as rates rise and lastly to reposition the portfolio for future rising interest rates.

Noninterest Expense

Table 7: Noninterest Expense

	Years Ended December 31,						Change From Prior Year
($ in thousands)	2011		2010		2009		$ Change 2011			% Change 2011			$ Change 2010			% Change 2010
Salaries and employee benefits	$	8,561	$	8,537	$	8,411	$	24			0	%	$	126			1	%
Occupancy		1,769		1,830		1,893		(61	)		(3%)			(63	)		(3%)
Data processing		667		651		648		16			2	%		3			0	%
Foreclosure/OREO expense		857		243		1,278		614			253	%		(1,035	)		(81%)
Legal and professional fees		891		677		882		214			32	%		(205	)		(23%)
FDIC expense		1,117		1,036		1,057		81			8	%		(21	)		(2%)
Other		3,325		2,831		2,281		494			17	%		550			24	%
Total noninterest expense	$	17,187	$	15,805	$	16,450	$	1,382			9	%	$	(645	)		(4%)

Comparison of 2011 versus 2010

Total noninterest expense was $17,187 for the full year of 2011, an increase of $1,382, or 9%, over 2010 due primarily to increased foreclosure/OREO expenses, collection expenses, FDIC costs, and marketing and product expenses associated with a new suite of deposit products. The Company expects the costs of adverse credit quality to continue to stress earnings in 2012.

Foreclosure/OREO expense consists of the costs associated with OREO properties such as real estate taxes, utilities, maintenance costs, valuation adjustments against the carrying costs, and gains or losses on the sale of OREO properties. Foreclosure/OREO expense was $857 for the full year 2011 and consisted of $1,098 of OREO carrying costs offset by a $241 gain on the sales of various OREO properties. Foreclosure/OREO expense also included $628 of valuation adjustments against the carrying cost of various foreclosed properties based on appraisals obtained during 2011, compared to $159 in 2010. The majority of the remaining increase in foreclosure/OREO expense was due to real estate taxes and maintenance costs.

Legal and professional fees of $891 increased $214, or 32%, primarily due to higher legal costs associated with loan collection activities in 2011. An increase in FDIC expense of $81 was primarily due to increased deposit insurance rates due to a change in our risk rating.

Other operating expenses were $3,325 for the full year 2011, an increase of $494 over 2010, primarily due to increased marketing costs and reward payments based on debit card usage associated with the introduction of a new deposit program. The new deposit program did enhance our brand awareness across our

markets and increased our balances in noninterest-bearing demand and savings deposits. In 2012 we anticipate that the amount of rewards we will be able to pay our customers under this deposit program will decrease as a result of certain limitations to which the Bank is subject pursuant to its Agreement with the FDIC and WDFI.

In 2012, the Company has renewed efforts to reduce noninterest expenses, including but not limited to staff reductions and no merit increases for 2012, delaying non-critical projects, workflow changes, renegotiating vendor contracts, decreasing marketing expenses and reducing the levels of other discretionary spending.

Comparison of 2010 versus 2009

Noninterest expense declined $645, or 4%, from 2009, primarily from a reduction of $1,035 in expenses related to foreclosure/OREO expense as we were actively working out more loans in 2009 than in 2010.

Generally we continued to control noninterest expenses through staff reductions during 2010 (full-time-equivalents at December 31, 2010 were 151 compared to 158 at December 31, 2009), renegotiated vendor contracts and reduced our level of discretionary spending.

Our primary noninterest expense is salaries and benefits. Overall, salaries were generally frozen for all employees in 2010 and related expenses declined $19; however, this was offset by increases of $145 in the Company’s insurance and medical plans, provided as an employee benefit, for a net increase of $126 in 2010.

Foreclosure/OREO expense for 2010 was $243, a reduction of $1,035 from 2009. Savings of $698 were realized due to lower valuation adjustments required for OREO properties and the carrying expenses thereof, as well as a general reduction in foreclosure expenses.

Other expenses of $2,831 increased $550 in 2010 primarily due to $118 increase in advertising, marketing and public relations expenses; $289 in higher loan servicing expenses and $100 due to the recalculation of directors’ deferred compensation fees.

Income Taxes

Income tax expense for 2011 was $1,861 compared to $135 for 2010. The basic principles for accounting for income taxes require that deferred income taxes be analyzed to determine if a valuation allowance is required. A valuation allowance is required if it is more likely than not that some portion of the deferred tax asset will not be realized. Primarily due to net operating loss carryovers in 2011, the Bank’s net deferred tax asset (prior to any valuation allowance) increased to $4,260. All available evidence, both positive and negative, was considered to determine whether any impairment of this asset should be recognized. Based on consideration of the available evidence including historical losses which must be treated as substantial negative evidence and the potential of future taxable income, a $3,081 valuation allowance was determined to be necessary at December 31, 2011 to adjust deferred tax assets to the amount of net operating losses that are expected to be realized. If realized, the tax benefit for this item will reduce current tax expense for that period. If future earnings projections are not met there is a likelihood that an additional valuation allowance may be necessary.

Both the Company and the Bank pay federal and state income taxes on their consolidated net earnings. At December 31, 2011 tax net operating losses at the Company of approximately $4,071 federal and $10,038 state existed to offset future taxable income.

BALANCE SHEET ANALYSIS

Loans

The Bank services a diverse customer base throughout North Central Wisconsin including the following industries: agriculture (primarily dairy), retail, manufacturing, service, resort properties, timber and businesses supporting the general building industry. We continue to concentrate our efforts in originating loans in our local markets and assisting our current loan customers. We are actively utilizing government loan programs such as those provided by the U.S. Small Business Administration, U.S. Department of Agriculture, and

USDA Farm Service Agency to help these customers weather current economic conditions and position their businesses for the future.

Total loans were $329,863 at December 31, 2011, a decrease of $9,307, or 3%, from December 31, 2010. During 2011, the Company focused primarily on improving asset quality and working out current credit issues rather than loan growth.

Table 8: Loan Composition

	2011					2010					2009					2008					2007
	Amount		% of Total			% of Amount		% of Total			Amount		% of Total			Amount		% of Total			Amount		% of Total
	($ in thousands)
Commercial business	$	41,347		12	%	$	39,093		12	%	$	35,673		10	%	$	39,047		11	%	$	39,892		11	%
Commercial real estate		123,868		37	%		132,079		39	%		138,891		39	%		127,209		34	%		114,028		32	%
Real estate construction		28,708		9	%		30,206		9	%		35,417		10	%		45,665		13	%		45,959		13	%
Agricultural		45,351		14	%		39,671		12	%		42,280		12	%		43,345		12	%		40,804		11	%
Real estate residential		85,614		26	%		91,974		26	%		99,116		27	%		100,311		28	%		107,239		30	%
Installment		4,975		2	%		6,147		2	%		7,239		2	%		8,804		2	%		10,066		3	%
Total loans	$	329,863		100	%	$	339,170		100	%	$	358,616		100	%	$	364,381		100	%	$	357,988		100	%
Owner occupied	$	70,412		57	%	$	83,115		63	%	$	88,002		63	%	$	54,749		43	%	$	57,027		50	%
Non-owner occupied		53,456		43	%		48,964		37	%		50,889		37	%		72,460		57	%		57,001		50	%
Commercial real estate	$	123,868		100	%	$	132,079		100	%	$	138,891		100	%	$	127,209		100	%	$	114,028		100	%
1–4 family construction	$	1,837		6	%	$	967		3	%	$	3,523		10	%	$	4,757		10	%	$	8,034		17	%
All other construction		26,871		94	%		29,239		97	%		31,894		90	%		40,908		90	%		37,925		83	%
Real estate construction	$	28,708		100	%	$	30,206		100	%	$	35,417		100	%	$	45,665		100	%	$	45,959		100	%

Commercial business loans, commercial real estate, real estate construction loans and agricultural loans comprise 72% of our loan portfolio at December 31, 2011. Such loans are considered to have more inherent risk of default than residential mortgage or installment loans. The commercial balance per borrower is typically larger than that for residential and mortgage loans, implying higher potential losses on an individual customer basis. Commercial loan growth throughout 2010 and 2011 has been negatively impacted by soft loan demand across all markets, the Company’s aggressive approach to recognizing risks associated with specific borrowers and the recognition of charge-offs on nonperforming loans in a timely manner.

Commercial business loans were $41,347 at December 31, 2011, up $2,254, or 6%, since year end 2010, and comprised 12% of total loans. The commercial business loan classification primarily consists of commercial loans to small businesses, multi-family residential income-producing businesses, and loans to municipalities. Loans of this type include a diverse range of industries. The credit risk related to commercial business loans is largely influenced by general economic conditions and the resulting impact on a borrower’s operations, or on the value of underlying collateral, if any.

The commercial real estate loan classification primarily includes commercial-based mortgage loans that are secured by nonfarm/nonresidential real estate properties. Commercial real estate loans totaled $123,868 at December 31, 2011, down $8,211, or 6%, from December 31, 2010, and comprised 37% of total loans, down from 39% at the end of 2010. The decrease in this segment was due to charge-offs, pay downs, and the bank decreasing its credit exposure by encouraging the refinancing of certain loan relationships with other financial institutions. Future lending in this segment will focus on loans that are secured by commercial income producing properties as opposed to speculative real estate development. Credit risk is managed by employing sound underwriting guidelines, lending primarily to borrowers in local markets, periodically evaluating the underlying collateral, and formally reviewing the borrower’s financial soundness and relationship on an ongoing basis.

Real estate construction loans declined $1,498, or 5%, to $28,708, representing 9% of the total loan portfolio at the end of 2011 and 2010. Loans in this classification provide financing for the acquisition or development of commercial income properties, multi-family residential development, and single-family consumer construction. The Company controls the credit risk on these types of loans by making loans in familiar markets, underwriting the loans to meet the requirements of institutional investors in the secondary

market, reviewing the merits of individual projects, controlling loan structure, and monitoring the progress of projects through the analysis of construction advances.

Agricultural loans totaled $45,351 at December 31, 2011, up $5,680, or 14%, compared to December 31, 2010, and represented 14% of the 2011 year end loan portfolio, up from 12% at year end 2010. The majority of the increase was from two new credit relationships. Loans in this classification include loans secured by farmland and financing for agricultural production. Credit risk is managed by employing sound underwriting guidelines, periodically evaluating the underlying collateral, and formally reviewing the borrower’s financial soundness and relationship on an ongoing basis.

Real estate residential loans totaled $85,614 at the end of 2011, down $6,360, or 7%, from the prior year end, but comprised 26% of total loans outstanding at year end 2011 and 2010. Residential mortgage loans include conventional first lien home mortgages and home equity loans. Home equity loans consist of home equity lines, and term loans, some of which are first lien positions. If the declines in market values that have occurred in the residential real estate markets worsen, particularly in our market area, the value of collateral securing our real estate loans could decline further, which could cause an increase in our provision for loan losses. In light of the uncertainty that exists in the economy and credit markets, there can be no guarantee that we will not experience additional deterioration resulting from a downturn in credit performance by our residential real estate loan customers. As part of its management of originating residential mortgage loans, nearly all of the Company’s long-term, fixed-rate residential real estate mortgage loans are sold in the secondary market without retaining the servicing rights. At December 31, 2011, $2,163 of residential mortgages were being held for resale to the secondary market, compared to $7,444 at December 31, 2010.

Installment loans totaled $4,975 at December 31, 2011, down $1,172, or 19%, compared to 2010, and represented 2% of the 2011 and 2010 year end loan portfolio. The decline in aggregate installment loan balances is largely a result of the fact that the Company experiences extensive competition from local credit unions offering low rates on installment loans and therefore has directed resources toward more profitable lending segments. Loans in this classification include short-term and other personal installment loans not secured by real estate. Credit risk is primarily controlled by reviewing the creditworthiness of the borrowers, monitoring payment histories, and taking appropriate collateral and guaranty positions.

The loan portfolio is widely diversified by types of borrowers, industry groups, and market areas. Significant loan concentrations are considered to exist for a financial institution when there are amounts loaned to multiple numbers of borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. At December 31, 2011, no significant industry concentrations existed in the Company’s portfolio in excess of 30% of total loans. The Bank has also developed guidelines to manage its exposure to various types of concentration risks.

The following table presents the maturity distribution of the loan portfolio at December 31, 2011:

Table 9: Loan Maturity Distribution

	Loan Maturity
	One Year or Less		Over One Year to Five Years		Over Five Years
	($ in thousands)
Commercial business	$	11,664	$	27,020	$	2,663
Commercial real estate		48,451		60,363		15,054
Real estate construction		10,726		12,956		5,026
Agricultural		17,240		20,177		7,934
Real estate residential		17,751		27,974		39,889
Installment		1,790		2,983		202
Total	$	107,622	$	151,473	$	70,768
Fixed rate	$	91,231	$	136,329	$	7,327
Variable rate		16,391		15,144		63,441
Total	$	107,622	$	151,473	$	70,768

Allowance for Loan Losses

The ALLL is established through a provision for loan losses charge to expense to appropriately provide for potential credit losses in the exiting loan portfolio. Loans are charged against the ALLL when management believes that the collection of principal is unlikely. The level of the ALLL represents management’s estimate of an amount of reserves that provides for estimated probable credit losses in the loan portfolio at the balance sheet date. To assess the ALLL, an allocation methodology is applied by the Company which focuses on evaluation of qualitative and environmental factors, including but not limited to: (i) evaluation of facts and issues related to specific loans; (ii) management’s ongoing review and grading of the loan portfolio; (iii) consideration of historical loan loss and delinquency experience on each portfolio segment; (iv) trends in past due and nonperforming loans; (v) the risk characteristics of the various loan segments; (vi) changes in the size and character of the loan portfolio; (vii) concentrations of loans to specific borrowers or industries; (viii) existing and forecasted economic conditions; (ix) the fair value of underlying collateral; and (x) other qualitative and quantitative factors which could affect potential credit losses. Our methodology reflects guidance by regulatory agencies to all financial institutions.

At December 31, 2011, the ALLL was $9,816, compared to $9,471 at December 31, 2010 and $7,957 at December 31, 2009. The ALLL as a percentage of total loans was 2.98%, 2.79%, and 2.22% at December 31, 2011, 2010 and 2009, respectively. The heightened level of the ALLL is appropriate while problem loans and charge-offs continue at elevated levels. The level of the provision for loan losses is directly correlated to the amount of net charge-offs, as it is the Company’s policy that the loan loss provisions, over time, exceed net charge-offs and provide coverage for potential credit losses in the existing loan portfolio.

Management allocates the ALLL by pools of risk within each loan portfolio segment. The allocation methodology consists of the following components. First a specific reserve, for the estimated collateral shortfall, is established for all impaired loans. Impaired loans include all troubled debt-restructurings (“restructured loans”), loans risk-weighted as “substandard” and “doubtful” with balances greater than $100 and loans risk-weighted “special mention” with balances greater than $250 determined to be impaired by the Company. During June 2011, to conservatively provide for unexpected changes within the impaired loans, the specific reserve in the ALLL is the greater of (i) the estimated collateral shortfall calculated in the impairment analysis, or (ii) an amount equal to 50% of the homogenous pool loss rate by loan segment and risk rating.

Second, management allocates ALLL with loss factors by loan segment, primarily based on risk ratings in the larger and more volatile loan segments and the migration of loan balances from the “special mention” risk rating to “substandard” and “doubtful” risk ratings. During the second quarter of 2011, management refined its process for determining historical loss rates by incorporating default and loss severity rates at a more granular level within each loan segment. The loss factors applied in the methodology are periodically re-evaluated and adjusted to reflect changes in historical loss levels for the rolling twelve months. Lastly, management allocates ALLL to the remaining loan portfolio using qualitative factors, including but not limited to: (i) delinquency rate of loans 30 days or more past-due; (ii) unemployment rates in the seven counties the Company serves; (iii) consumer disposable income; (iv) loan management; (v) loan segmentation by risk of collectability; and (vi) historical loss history for the rolling 36 months, adjusted quarterly.

The ALLL was 74%, 76% and 57% of nonperforming loans at December 31, 2011, 2010 and 2009, respectively. Gross charge-offs were $4,988 for 2011, $4,034 for 2010, and $5,283 for 2009, while recoveries for the corresponding periods were $583, $793 and $192, respectively. As a result, net charge-offs for 2011 were $4,405, or 1.30%, of average loans, compared to $3,241, or 0.91% of average loans, for 2010 and $5,091, or 1.40% of average loans, for 2009. The 2011 increase in net charge-offs of $1,164 was comprised of a $1,296 increase in commercial and real estate construction net charge-offs offset by a $132 decrease in agricultural, real estate residential and installment loans. The 2011 increase in commercial net charge-offs was mainly attributable to management’s decision, made in consultation with its banking regulators, to charge-off certain impaired loans that were covered by specific reserve allocations identified in the ALLL. Since 2007, aggregate net charge-offs have been $20,719, of which $15,598, or 75%, were from commercial loans. Issues impacting asset quality during this period included historically depressed economic factors, such as heightened unemployment, depressed commercial and residential real estate markets, volatile energy prices, and depressed consumer confidence. Declining collateral values have significantly contributed to our elevated levels of nonperforming loans, net charge-offs, and ALLL. The Company has been focused on implementing enhancements to the credit management process to address and enhance underwriting and risk-based pricing guidelines for commercial real estate and real estate construction lending, as well as on new home equity and residential mortgage loans, to reduce potential exposure within these portfolio segments. The level of the provision for loan losses is directly correlated to the amount of net charge-offs, as it is the Company’s policy that the loan loss provisions, over time, exceed net charge-offs and provide coverage for potential credit losses in the existing loan portfolio. Loans charged-off are subject to continuous review, and specific efforts are taken to achieve maximum recovery of principal, accrued interest, and related expenses.

The largest portion of the ALLL at year end 2011 was allocated to commercial real estate loans and was $3,685, representing 38% of the ALLL at year end 2011 compared to 46% at year end 2010. The decrease in the amount allocated to commercial real estate was attributable to the decrease in the percentage of nonaccrual loans represented by commercial real estate loans, 36% of total nonaccrual loans at year end 2011, compared to 49% at year end 2010 — and the decrease in the percentage of our total portfolio represented by commercial real estate to 37% of total loans at year end 2011, down from 39% at year end 2010. The ALLL allocated to commercial business loans was $1,004 at year end 2011, an increase of $468 from year end 2010, and represented 10% of the ALLL at year end 2011, compared to 6% at year end 2010. The increase in the commercial business allocation was due to a $680 increase in nonaccrual loans which represented 7% of nonaccrual loans at year end 2011 compared to less than 1% at year end 2010. At December 31, 2011, the ALLL allocated to real estate construction was $1,320, compared to $1,278 at December 31, 2010, representing 13% of the ALLL for 2011 and 2010. The allocation to real estate construction remained relatively unchanged as the level on nonaccrual loans in the category decreased $125 from 2010 but the category as a whole remained at 9% of total loans. The ALLL allocation to agricultural loans remained at 12% for 2011 and 2010. Agricultural loans as a percent of the total loan portfolio increased to 14% for 2011 up from 12% for 2010; however the credit quality of the agricultural loan portfolio improved during 2011 as the level of nonaccrual loans decreased to $134 at December 31, 2011 from $440 at year end 2010. The ALLL allocation to real estate residential increased to 26% at December 31, 2011, compared to 22% at December 31, 2010, given the increase in real estate residential as a percentage of nonaccrual loans and net charge-offs. The ALLL allocation to installment loans remained at 1% for year end 2011 and 2010. Management performs ongoing intensive analyses of its loan portfolios to allow for early identification of customers experiencing financial difficulties, maintains prudent underwriting standards, understands the

economy in its markets, and considers the trend of deterioration in loan quality in establishing the level of the ALLL.

Consolidated net income and stockholders’ equity could be affected if management’s estimate of the ALLL necessary to cover expected losses is subsequently materially different, requiring a change in the level of provision for loan losses to be recorded. While management uses currently available information to recognize losses on loans, future adjustments to the ALLL may be necessary based on newly received appraisals, updated commercial customer financial statements, rapidly deteriorating customer cash flow, and changes in economic conditions that affect our customers. As an integral part of their examination process, various federal and state regulatory agencies also review the ALLL. Such agencies may require additions to the ALLL or may require that certain loan balances be charged-off or downgraded into criticized loan categories when their credit evaluations differ from those of management based on their judgments about information available to them at the time of their examination.

Table 10: Loan Loss Experience

	Years Ended December 31,
	2011			2010			2009			2008			2007
	($ in thousands)
Allowance for loan losses:
Balance at beginning of year	$	9,471		$	7,957		$	4,542		$	4,174		$	8,184
Loans charged-off:
Commercial business		173			435			608			299			1,443
Commercial real estate		2,005			1,490			1,990			1,469			3,309
Real estate construction		1,295			537			1,556			186			6
Agricultural		203			206			38			25			1
Total commercial		3,676			2,668			4,192			1,979			4,759
Real estate residential		1,067			1,207			964			895			341
Installment		245			159			127			195			98
Total loans charged-off		4,988			4,034			5,283			3,069			5,198
Recoveries of loans previously charged-off:
Commercial business		37			167			4			122			1
Commercial real estate		135			275			151			16			11
Real estate construction		134			149			0			0			0
Agricultural		90			86			4			7			0
Total commercial		396			677			159			145			12
Real estate residential		101			83			13			53			10
Installment		86			33			20			39			26
Total recoveries		583			793			192			237			48
Total net charge-offs		4,405			3,241			5,091			2,832			5,150
Provision for loan losses		4,750			4,755			8,506			3,200			1,140
Balance at end of year	$	9,816		$	9,471		$	7,957		$	4,542		$	4,174
Ratios at end of year:
Allowance for loan losses to total loans		2.98	%		2.79	%		2.22	%		1.25	%		1.17	%
Allowance for loan losses to net charge-offs		2.2	x		2.9	x		1.6	x		1.6	x		0.8	x
Net charge-offs to average loans		1.30	%		0.91	%		1.40	%		0.78	%		1.45	%
Net loan charge-offs:
Commercial business	$	136		$	268		$	604		$	177		$	1,442
Commercial real estate		1,870			1,215			1,839			1,453			3,298
Real estate construction		1,161			388			1,556			186			6
Agricultural		113			120			34			18			1
Total commercial		3,280			1,991			4,033			1,834			4,747
Real estate residential		966			1,124			951			842			331
Installment		159			126			107			156			72
Total net charge-offs	$	4,405		$	3,241		$	5,091		$	2,832		$	5,150
Commercial Real Estate and Construction net charge-off detail:
Owner occupied	$	1,431		$	502		$	757		$	1,078		$	(11	)
Non-owner occupied		439			713			1,082			375			3,309
Commercial real estate	$	1,870		$	1,215		$	1,839		$	1,453		$	3,298
1–4 family construction	$	0		$	(18	)	$	33		$	186		$	0
All other construction		1,161			406			1,523			0			6
Real estate construction	$	1,161		$	388		$	1,556		$	186		$	6

The allocation of the ALLL for each of the past five years is based on our estimate of loss exposure by category of loans is shown in Table 11.

Table 11: Allocation of the Allowance for Loan Losses

	2011					2010					2009					2008					2007
	($ in thousands)
ALLL allocation:
Commercial business	$	1,004		12	%	$	536		12	%	$	497		10	%	$	295		11	%	$	301		11	%
Commercial real estate		3,685		37	%		4,320		39	%		3,954		39	%		1,836		34	%		1,899		32	%
Real estate construction		1,320		9	%		1,278		9	%		685		10	%		836		13	%		351		13	%
Agricultural		1,139		14	%		1,146		12	%		981		12	%		450		12	%		374		11	%
Total commercial		7,148		72	%		7,280		72	%		6,117		71	%		3,417		70	%		2,925		67	%
Real estate residential		2,530		26	%		2,060		26	%		1,753		27	%		1,010		28	%		1,056		30	%
Installment		138		2	%		131		2	%		87		2	%		115		2	%		193		3	%
Total allowance for loan losses	$	9,816		100	%	$	9,471		100	%	$	7,957		100	%	$	4,542		100	%	$	4,174		100	%
ALLL category as a percent of total ALLL:
Commercial business		10	%				6	%				6	%				7	%				7	%
Commercial real estate		38	%				46	%				50	%				40	%				46	%
Real estate construction		13	%				13	%				9	%				18	%				8	%
Agricultural		12	%				12	%				12	%				10	%				9	%
Total commercial		73	%				77	%				77	%				75	%				70	%
Real estate residential		26	%				22	%				22	%				22	%				25	%
Installment		1	%				1	%				1	%				3	%				5	%
Total allowance for loan losses		100.0	%				100.0	%				100.0	%				100.0	%				100.0	%

Impaired Loans and Nonperforming Assets

As part of its overall credit risk management process, management has been committed to an aggressive problem loan identification philosophy. This philosophy has been implemented through the ongoing monitoring and review of all pools of risk in the loan portfolio to ensure that problem loans are identified early and the risk of loss is minimized.

Nonaccrual loans were $11,194, $11,540 and $13,925 at December 31, 2011, 2010, and 2009, respectively, reflecting the continued impact of the economy on the Company’s customers. Total nonaccrual loans at December 31, 2011 were down $346 since year end 2010, with commercial nonaccrual loans down $1,345, while consumer-related nonaccrual loans were up $999 as this loan segment continues to exhibit signs of stress. The number of impaired consumer mortgage loans has increased significantly over the past twelve months and virtually all are in foreclosure and the legally-required redemption period. Between year end 2010 and 2009, total nonaccrual loans decreased $2,385, with commercial and consumer nonaccrual loans down $1,776 and $609, respectively. Management’s ALLL methodology at December 31, 2011, included an impairment analysis on specifically identified commercial and consumer loans defined by the Company as

impaired and incorporated the level of specific reserves for these credit relationships in determining the overall appropriate level of the ALLL.

Restructured loans involve the granting of some concession to the borrower as a result of their financial distress involving the modification of terms of the loan, such as changes in payment schedule or interest rate, which generally would not otherwise be considered, to increase the likelihood of long-term loan repayment. Restructured loans can involve loans remaining on nonaccrual, moving to nonaccrual, or continuing accrual status, depending on the individual facts and circumstances of the borrower. Generally, restructured loans remain on nonaccrual until the customer has attained a sustained period of repayment performance, generally nine months. At December 31, 2011, the Company had total restructured loans of $12,887 which consisted of $7,541 performing in accordance with the modified terms and $5,346 classified as nonaccrual, compared to total restructured loans of $1,265 at December 31, 2010, all of which were performing in accordance with the modified terms.

The level of potential problem loans is another predominant factor in determining the relative level of risk in the loan portfolio and in determining the adequacy of the ALLL. Potential problem loans are generally defined by management to include loans rated as substandard by management but that are in performing status; however, there are circumstances present which might adversely affect the ability of the borrower to comply with present repayment terms. The decision of management to include performing loans in potential problem loans does not necessarily mean that the Company expects losses to occur, but that management recognizes a higher degree of risk associated with these loans. The loans that have been reported as potential problem loans are predominantly commercial loans covering a diverse range of businesses and real estate property types. Potential problem loans totaled $23,124 at December 31, 2011 and $33,025 at December 31, 2010. Potential problem loans requires a heightened management review of the pace at which a credit may deteriorate, the duration of asset quality stress, and uncertainty around the magnitude and scope of economic stress that may be felt by the Company’s customers and on underlying real estate values.

OREO increased to $4,404 at December 31, 2011, compared to $4,230 at December 31, 2010 and $1,808 at December 31, 2009. The increase in OREO during 2010 was primarily attributable to a $1,744 loan participation, which represents 40% of the current OREO balance, in a hotel/water park that was recorded into OREO. Net gains on sales of OREO were $241 and $187 for 2011 and 2010, respectively, and a net loss of $91 was recorded for 2009. Write-downs on OREO were $628, $159, and $958 for 2011, 2010, and 2009, respectively. Management actively seeks to ensure properties held are monitored to minimize the Company’s risk of loss. Evaluations of the fair market value of the OREO properties are done quarterly and valuation adjustments, if necessary, are recorded in our consolidated financial statements.

Table 12: Nonperforming Assets

	2011			2010			2009			2008			2007
	($ in thousands)
Nonaccrual loans not considered impaired:
Commercial	$	1,937		$	808		$	751		$	36		$	32
Agricultural		30			369			371			521			0
Real estate residential		1,447			1,605			958			1,273			485
Installment		5			2			19			47			42
Total nonaccrual loans not considered impaired		3,419			2,784			2,099			1,877			559
Nonaccrual loans considered impaired:
Commercial		5,392			7,561			8,894			5,632			3,786
Agricultural		104			71			568			216			277
Real estate residential		2,279			1,124			2,363			808			1,140
Installment		0			0			0			416			499
Total nonaccrual loans considered impaired		7,775			8,756			11,825			7,072			5,702
Impaired loans still accruing interest		1,985			993			0			0			0
Accruing loans past due 90 days or more (credit cards)		21			10			18			36			64
Total nonperforming loans		13,200			12,543			13,942			8,985			6,325
OREO		4,404			4,230			1,808			2,556			2,352
Other repossessed assets		60			0			450			5			0
Investment security (Trust Preferred)		0			136			211			0			0
Total nonperforming assets	$	17,664		$	16,909		$	16,411		$	11,546		$	8,677
Restructured loans accruing
Commercial	$	5,908		$	278		$	151		$	569		$	700
Agricultural		201			0			0			0			0
Real estate residential		1,411			987			0			0			0
Installment		21			0			0			0			0
Total restructured loans accruing	$	7,541		$	1,265		$	151		$	569		$	700
RATIOS
Nonperforming loans to total loans		4.00	%		3.70	%		3.89	%		2.47	%		1.77	%
Nonperforming assets to total loans plus OREO		5.28	%		4.92	%		4.55	%		3.15	%		2.41	%
Nonperforming assets to total assets		3.62	%		3.32	%		3.25	%		2.33	%		1.81	%
Allowance for loan losses to nonperforming loans		74	%		76	%		57	%		51	%		66	%
Allowance for loan losses to total loans at end of year		2.98	%		2.79	%		2.22	%		1.25	%		1.17	%
Nonperforming assets by type:
Commercial business	$	858		$	54		$	40		$	160		$	547
Commercial real estate		5,937			6,653			8,858			3,183			3,155
Real estate construction		2,519			2,644			747			2,325			0
Agricultural		134			440			939			737			393
Total commercial		9,448			9,791			10,584			6,405			4,095
Real estate residential		3,726			2,740			3,321			2,081			1,625
Installment		26			12			37			499			605
Total nonperforming loans		13,200			12,543			13,942			8,985			6,325
Commercial real estate owned		4,116			3,683			1,523			1,827			1,660
Real estate residential owned		288			547			285			729			692
Total other real estate owned		4,404			4,230			1,808			2,556			2,352
Other repossessed assets		60			0			450			5			0
Investment security (Trust Preferred)		0			136			211			0			0
Total nonperforming assets	$	17,664		$	16,909		$	16,411		$	11,546		$	8,677
CRE and Construction nonperforming loan detail:
Owner occupied	$	2,877		$	5,210		$	5,798		$	2,255		$	2,479
Non-owner occupied		3,060			1,443			3,060			928			676
Commercial real estate	$	5,937		$	6,653		$	8,858		$	3,183		$	3,155
1–4 family construction	$	0		$	0		$	0		$	296		$	0
All other construction		2,519			2,644			747			2,029			0
Real estate construction	$	2,519		$	2,644		$	747		$	2,325		$	0

Table 13: Forgone Loan Interest

	Years Ended December 31,
	2011			2010			2009
	($ in thousands)
Interest income in accordance with original terms	$	452		$	819		$	819
Interest income recognized		(139	)		(197	)		(622	)
Reduction in interest income	$	313		$	622		$	197

Investment Securities Portfolio

The investment securities portfolio is intended to provide the Bank with adequate liquidity, flexible asset/liability management and a source of stable income. The portfolio is structured with minimal credit exposure to the Bank. All securities are classified as available-for-sale and are carried at market value. Unrealized gains and losses are excluded from earnings, but are reported as other comprehensive income in a separate component of shareholders’ equity, net of income tax. Premium amortization and discount accretion are recognized as adjustments to interest income using the interest method. Realized gains or losses on sales are based on the net proceeds and the adjusted carrying value amount of the securities sold using the specific identification method.

Table 14: Investment Securities Portfolio at Estimated Fair Value

	Years Ended December 31,
	2011		2010		2009
	($ in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	18,808	$	22,567	$	3,179
Mortgage-backed securities		67,653		56,916		81,766
Obligations of states and political subdivisions		22,932		20,715		17,184
Corporate debt securities		832		961		1,198
Total debt securities		110,225		101,159		103,327
Equity securities		151		151		150
Total securities available-for-sale	$	110,376	$	101,310	$	103,477

At December 31, 2011, the total carrying value of investment securities was $110,376, an increase of $9,066, or 9%, compared to December 31, 2010, and represented 23% and 20% of total assets at December 31, 2011 and 2010, respectively. Primarily due to soft loan demand in 2011, the Company’s excess liquidity was invested in securities resulting in the increase in investment securities experienced in 2011. As loan demand increases in the future, we anticipate that the monthly pay downs received from the investment securities portfolio will be used to fund loans.

At December 31, 2011, with the exception of securities of the U.S. Government, the securities portfolio did not contain securities of any single issuer that were payable from and secured by the same source of revenue or taxing authority where the aggregate carrying value of such securities exceeded 10% of shareholders’ equity.

The Company previously determined that OTTI existed in one non-agency mortgage-backed security and two corporate securities held, as the unrealized losses on these securities appeared to be related in part to expected credit losses that would not be recovered by the Company. During 2010, the Company recognized OTTI write-downs of $412 on the two corporate securities. In the first quarter 2011, the company sold these three OTTI securities, which resulted in net investment security losses of $55, to improve the credit quality of

the investment portfolio. As of December 31, 2011 the Company has determined that there are no remaining OTTI securities in the investment portfolio.

A summary of the investment portfolio is shown below:

Table 15: Investments

Investment Category		December 31, 2011					December 31, 2010
		Amount		%			Amount		%
		($ in thousands)
U.S. Treasury & Government Agencies Debt	AAA	$	18,808		100	%	$	22,567		100	%
	Total	$	18,808		100	%	$	22,567		100	%
U.S. Treasury & Government Agencies Debt as % of Portfolio					17	%				22	%
Mortgage-Backed Securities	AAA	$	67,588		100	%	$	56,205		99	%
	AA3		53		0	%		0		0	%
	A+		12		0	%		13		0	%
	Baa2		0		0	%		60		0	%
	BA1		0		0	%		308		0	%
	BA3		0		0	%		330		1	%
	Total	$	67,653		100	%	$	56,916		100	%
Mortgage-Backed Securities as % of Portfolio					61	%				57	%
Obligations of States and Political Subdivisions	Aa1	$	3,457		15	%	$	3,496		17	%
	Aa2		5,704		25	%		4,492		22	%
	AA3		3,363		15	%		2,665		13	%
	A1		990		4	%		905		4	%
	Baa1		0		0	%		339		2	%
	Baa2		337		1	%		0		0	%
	NR		9,081		40	%		8,818		42	%
	Total	$	22,932		100	%	$	20,715		100	%
Obligations of States and Political Subdivisions as % of Portfolio					21	%				20	%
Corporate Debt and Equity Securities	NR	$	983		100	%	$	1,112		100	%
	Total	$	983		100	%	$	1,112		100	%
Corporate Debt and Equity Securities as % of Portfolio					1	%				1	%
Total Market Value of Securities Available-For-Sale		$	110,376		100	%	$	101,310		100	%

Obligations of States and Political Subdivisions (“municipal securities”) : At December 31, 2011 and 2010, municipal securities were $22,932 and $20,715, respectively, and represented 21% of total investment securities for 2011 and 20% for 2010 based on fair value. The majority of municipal securities held are general obligations or essential service bonds. Municipal bond insurance company downgrades have resulted in credit downgrades in certain municipal securities; however, it has been determined that due to the large number of small investments in these obligations the loss exposure on any particular obligation is mitigated. The municipal portfolio is evaluated periodically for credit risk by a third party. As of December 31, 2011, the total fair value of municipal securities reflected a net unrealized gain of $1,313.

Mortgage-Backed Securities : At December 31, 2011 and 2010, mortgage-related securities (which include predominantly mortgage-backed securities and collateralized mortgage obligations) were $67,653 and $56,916, respectively, and represented 61% and 57%, respectively, of total investment securities based on fair value. The fair value of mortgage-related securities is subject to inherent risks based upon the future performance of the underlying collateral (mortgage loans) for these securities. Future performance is impacted by prepayment risk and interest rate changes.

Corporate Debt and Equity Securities : At December 31, 2011 and 2010, corporate debt securities were $983 and $1,112, respectively, and represented 1% of total investment securities based on fair value. Corporate debt and equity securities include trust preferred debt securities, corporate bonds, and common equity securities.

Corporate debt and equity securities at December 31, 2011, consisted of two trust preferred securities of $800, and other securities of $183. Corporate debt securities at December 31, 2010, consisted of trust

preferred securities of $937, and other equity securities of $175. As of December 31, 2011, the interest payments on the two trust preferred securities were current.

The Company had $2,306 of Federal Home Loan Bank of Chicago (“FHLB”) stock at December 31, 2011 and 2010. While the FHLB announced in October 2007 that it was under a consensual cease and desist order with its regulator, which among other things, restricted the FHLB from paying dividends or redeeming stock without prior approval, the FHLB resumed payment of dividends during the first quarter of 2011. Recently, we have been notified by the FHLB that it will repurchase approximately $500,000 in excess capital stock held by its members on February 15, 2012. The Bank redeemed approximately $465 of its excess FHLB capital stock.

Accounting guidance indicates that an investor in FHLB capital stock should recognize impairment if it concludes that it is not probable that it will ultimately recover the par value of its shares. The decision of whether impairment exists is a matter of judgment that should reflect the investor’s view of the FHLB’s long-term performance, which includes factors such as: (i) its operating performance; (ii) the severity and duration of declines in the market value of its net assets related to its capital stock amount; (iii) its commitment to make payments required by law or regulation and the level of such payments in relation to its operating performance; (iv) the impact of legislation and regulatory changes on FHLB, and on the members of FHLB; and (v) its liquidity and funding position. After evaluating all of these considerations, the Company believes the cost of the investment will be recovered, and no impairment has been recorded on these securities during 2011, 2010, and 2009.

Table 16: Investment Securities Portfolio Maturity Distribution

	Within One Year					After One But Within Five Years					After Five but Within Ten Years					After Ten Years					Total
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
	($ in thousands)
U.S. treasury securities and obligations of U.S. government corporations and agencies	$	0		0.00	%	$	14,710		1.91	%	$	4,098		2.10	%	$	0		0.00	%	$	18,808		1.95	%
Mortgage-backed securities		1		4.25	%		663		3.92	%		19,604		2.53	%		47,385		2.75	%		67,653		2.69	%
Obligations of states and political subdivisions		2,744		5.10	%		7,721		4.68	%		10,239		3.87	%		2,228		4.07	%		22,932		4.31	%
Corporate debt securities		0		0.00	%		25		4.99	%		0		0.00	%		958		3.08	%		983		3.13	%
Total securities available-for-sale	$	2,745		5.10	%	$	23,119		2.90	%	$	33,941		2.88	%	$	50,571		2.81	%	$	110,376		2.91	%

(1)

The yield on tax-exempt investment securities is computed on a tax-equivalent basis using a federal tax rate of 34% adjusted for the disallowance of interest expense.

Deposits

Deposits represent the Company’s largest source of funds. The Company competes with other bank and nonbank institutions for deposits, as well as with a growing number of non-deposit investment alternatives available to depositors, such as mutual funds, money market funds, annuities, and other brokerage investment products. Competition for deposits remains high. Challenges to deposit growth include price changes on deposit products given movements in the rate environment and other competitive pricing pressures, and customer preferences regarding higher-costing deposit products or non-deposit investment alternatives.

At December 31, 2011 total deposits were $381,620, down $18,990 from year end 2010. Consistent with the Company’s funding strategy, the Company continued to reduce noncore funding sources during 2011. The decrease in total deposits included an $18,857 decrease in brokered certificates of deposit and deposits acquired under a listing service. The Company decided to not replace these funding sources due to excess liquidity and continued efforts to reduce reliance on non core deposits. On February 1, 2011, the Company introduced a suite of new consumer deposit products that pay rewards based on customers’ debit card usage, which was a major contributor to the $10,344, or 17%, increase in non-interest bearing demand deposits and $5,998, or 5%, increase in savings deposits experienced in 2011.

Table 17: Deposits

	2011					2010					2009
	Amount		% of Total			Amount		% of Total			Amount		% of Total
	($ in thousands)
Noninterest-bearing demand deposits	$	70,790		19	%	$	60,446		15	%	$	55,218		14	%
Interest-bearing demand deposits		39,160		10	%		39,462		10	%		33,375		8	%
Savings deposits		120,513		32	%		114,515		29	%		104,822		26	%
Time deposits		136,140		35	%		159,201		39	%		165,204		42	%
Brokered certificates of deposit		15,017		4	%		26,986		7	%		39,181		10	%
Total	$	381,620		100	%	$	400,610		100	%	$	397,800		100	%

On average, deposits were $384,210 for 2011, down $10,662, or 3%, from the average for 2010. The mix of average deposits was also impacted by shift in customer preferences, predominantly toward the product design and pricing features of the new deposit suite of noninterest-bearing demand and savings deposits.

Table 18: Average Deposits

	2011					2010					2009
	Amount		% of Total			Amount		% of Total			Amount		% of Total
	($ in thousands)
Noninterest-bearing demand deposits	$	61,798		16	%	$	52,208		13	%	$	49,952		13	%
Interest-bearing demand deposits		35,785		9	%		35,100		9	%		29,639		8	%
Savings deposits		116,802		30	%		107,622		27	%		105,330		28	%
Time deposits		150,461		39	%		166,475		42	%		151,827		40	%
Brokered certificates of deposit		19,364		6	%		33,467		9	%		43,885		11	%
Total	$	384,210		100	%	$	394,872		100	%	$	380,633		100	%

A stipulation of the Bank’s Agreement with the FDIC and WDFI limits the rates of interest it may set on its deposit products. As a result, in 2012, the amount of rewards we will be able to pay our customers for debit card usage related to the new suite of deposit products introduced in 2011will be reduced to a level at or below certain national rate caps.

Table 19: Maturity Distribution of Certificates of Deposit of $100,000 or More

	Years Ended December 31,
	2011		2010
	($ in thousands)
3 months or less	$	13,693	$	19,900
Over 3 months through 6 months		3,734		6,196
Over 6 months through 12 months		13,730		11,736
Over 12 months		15,538		23,277
Total	$	46,695	$	61,109

Other Funding Sources

Other funding sources, which include short-term and long-term borrowings, were $64,026 and $62,383 at December 31, 2011 and 2010, respectively. Short-term borrowings consist of corporate repurchase agreements which totaled $13,655 at December 31, 2011 and $9,512 at December 31, 2010. Long-term borrowings at December 31, 2011, were $40,061, a decrease of $2,500 from December 31, 2010 attributable to the maturity of FHLB advances during the year that were not replaced. Also included in long-term borrowings are trust preferred securities. In 2005, Mid-Wisconsin Statutory Trust I (the “Trust”), a Delaware Business Trust subsidiary of the Company, issued $10,000 in trust preferred securities. The trust preferred securities were sold in a private placement to institutional investors. The Trust used the proceeds from the offering along with the Company’s common ownership investment to purchase $10,310 of the Company’s Debentures. The trust

preferred securities and the Debentures mature on December 15, 2035, and had a fixed rate of 5.98% until December 15, 2010. They now have a floating rate of the three-month LIBOR plus 1.43%, adjusted quarterly. The interest rates were 1.98% and 1.73% at December 31, 2011 and 2010, respectively.

The following information relates to federal funds purchased, securities sold under repurchase agreements, and Federal Home Loan Bank open line of credit at December 31:

Table 20: Short-Term Borrowings

	Years Ended December 31,
	2011			2010			2009
	($ in thousands)
Balance end of year	$	13,655		$	9,512		$	7,983
Average balance outstanding during year	$	12,285		$	10,411		$	12,031
Maximum month-end balance outstanding	$	15,817		$	18,329		$	20,074
Weighted average rate on amounts outstanding during year		1.00	%		0.69	%		1.06	%
Weighted average rate on amounts outstanding at end of year		0.46	%		0.49	%		0.48	%

At December 31, 2011 the Bank and Company had additional sources of liquidity available through pre-approved overnight federal funds lines of credit with corresponding banks, the Federal Reserve discount window and other long term borrowing agreements totaling $29,699.

Off-Balance Sheet Obligations

As of December 31, 2011 and 2010, we had the following commitments, which do not appear on our balance sheet:

Table 21: Commitments

	2011		2010
	($ in thousands)
Commitments to extend credit:
Fixed rate	$	17,163	$	25,073
Adjustable rate		23,515		33,406
Standby and irrevocable letters of credit-fixed rate		3,737		3,921
Credit card commitments		3,541		3,776

Further discussion of these commitments is included in Note 19, “Commitments and Contingencies” of the Notes to Consolidated Financial Statements.

Contractual Obligations

We are party to various contractual obligations requiring the use of funds as part of our normal operations. The table below outlines principal amounts and timing of these obligations, excluding amounts due for interest, if applicable. Most of these obligations are routinely refinanced into similar replacement obligations. However, renewal of these obligations is dependent on our ability to offer competitive interest rates, liquidity needs, or availability of collateral for pledging purposes supporting the long-term advances.

Table 22: Contractual Obligations

	Payments due by period
	Total		< 1 year		1-3 years		3-5 years		> 5 years
	($ in thousands)
Subordinated debentures	$	10,310	$	0	$	0	$	0	$	10,310
Other long-term borrowings		10,000		0		5,000		5,000		0
FHLB borrowings		30,061		4,000		18,061		8,000		0
Total long-term borrowing obligations	$	50,371	$	4,000	$	23,061	$	13,000	$	10,310

Also, we have liabilities due to directors for services rendered with various payment terms depending on their anticipated retirement date or their election of payout terms following retirement. The total liability at December 31, 2011 for current and retired directors is $577, and is estimated to have a maturity in excess of five years.

Liquidity and Interest Rate Sensitivity

Funds are available from a number of basic banking activity sources, primarily from the core deposit base and from the repayment and maturity of loans and investment securities. Additionally, liquidity is available from the sale of investment securities and brokered deposits. Volatility or disruptions in the capital markets may impact the Company’s ability to access certain liquidity sources.

While dividends and service fees from the Bank and proceeds from the issuance of capital have historically been the primary funding sources for the Company, these sources may continue to be limited or costly (such as by regulation increasing the capital needs of the Bank, or by limited appetite for new sales of company stock). No dividends were received in cash from the Bank in 2011, 2010 or 2009. Also, as discussed in Part 1, Item 1 the Bank’s written Agreement with the FDIC and WDFI places restrictions on the payment of dividends from the Bank to the Company without prior approval with our regulators. On May 12, 2011 the Company also entered into a separate formal written agreement with the Federal Reserve Bank of Minneapolis. Pursuant to the written agreement at the holding company level, the Company needs the written consent of the Federal Reserve Bank of Minneapolis to pay dividends to its stockholders. We are also prohibited from paying dividends on our common stock if we fail to make distributions or required payments on the Company’s Debentures or on the TARP Preferred Stock. In consultation with the Federal Reserve, on May 12, 2011, the Company exercised its rights to suspend dividends on the outstanding TARP Preferred Stock and has also elected to defer interest on the Debentures. See Part 1, Item 1 for additional discussion.

Investment securities are an important tool to the Company’s liquidity objective. All investment securities are classified as available-for-sale and are reported at fair value on the consolidated balance sheet. Approximately $65,548 of the $110,376 investment securities portfolio on hand at December 31, 2011, were pledged to secure public deposits, short-term borrowings, and for other purposes as required by law. The majority of the remaining securities could be sold to enhance liquidity, if necessary.

The scheduled maturity of loans could also provide a source of additional liquidity. The Bank has $107,622, or 33%, of its total loans maturing within one year. Factors affecting liquidity relative to loans are loan renewals, origination volumes, prepayment rates, and maturity of the existing loan portfolio. The Bank’s liquidity position is influenced by changes in interest rates, economic conditions, and competition. Conversely, loan demand as a need for liquidity may cause us to acquire other sources of funding which could be more costly than deposits.

Deposits are another source of liquidity for the Bank. Deposit liquidity is affected by core deposit growth levels, certificates of deposit maturity structure, and retention and diversification of wholesale funding sources. Deposit outflows would require the Bank to access alternative funding sources which may not be as liquid and may be more costly.

Other funding sources for the Bank are in the form of short-term borrowings (corporate repurchase agreements, and federal funds purchased), and long-term borrowings. Long-term borrowings are used for asset/liability matching purposes and to access more favorable interest rates than deposits. The Bank’s liquidity resources were sufficient in 2011 to fund our loans and the growth in investments, and to meet other cash needs when necessary.

Interest Rate Sensitivity Gap Analysis

Table 23 represents a schedule of the Bank’s assets and liabilities maturing over various time intervals. The primary market risk faced by the Company is interest rate risk. The table reflects a cumulative positive interest sensitivity gap position, i.e. more rate sensitive assets maturing than rate sensitive liabilities. We extensively evaluate the cumulative gap position at the one and two-year time frames. At those time intervals the cumulative maturity gap was within our established guidelines of 60% to 120%.

Table 23: Interest Rate Sensitivity Gap Analysis

	December 31, 2011
	0-90 Days			91-180 Days			181-365 Days			1-5 Years			Beyond 5 years			Total
	($ in thousands)
Earning Assets:
Loans	$	37,166		$	37,000		$	62,033		$	163,421		$	30,243		$	329,863
Securities		8,780			6,466			8,618			57,848			28,664			110,376
Other earning assets		13,072			0			0			0			0			13,072
Total	$	59,018		$	43,466		$	70,651		$	221,269		$	58,907		$	453,311
Cumulative rate sensitive assets	$	59,018		$	102,484		$	173,135		$	394,404		$	453,311
Interest-bearing liabilities:
Interest-bearing deposits (1)	$	47,194		$	34,922		$	63,796		$	138,727		$	26,191		$	310,830
Borrowings		15,655			2,000			0			36,061			0			53,716
Subordinated debentures		0			0			0			0			10,310			10,310
Total	$	62,849		$	36,922		$	63,796		$	174,788		$	36,501		$	374,856
Cumulative interest sensitive liabilities	$	62,849		$	99,771		$	163,567		$	338,355		$	374,856
Interest sensitivity gap	$	(3,831	)	$	6,544		$	6,855		$	46,481		$	22,406
Cumulative interest sensitivity gap	$	(3,831	)	$	2,713		$	9,568		$	56,049		$	78,455
Cumulative ratio of rate sensitive assets to rate sensitive liabilities		93.9	%		102.7	%		105.8	%		116.6	%		120.9	%

(1)

The interest rate sensitivity assumptions for savings accounts, money market accounts, and interest-bearing demand deposits accounts are based on the Office of the Comptroller of the Currency tables regarding portfolio retention and interest rate repricing behavior. Based on these experiences, a portion of these balances are considered to be long-term and fairly stable and are, therefore, included in the “1-5 Years” and “Beyond 5 Years” categories.

In order to limit exposure to interest rate risk, we monitor the liquidity and gap analysis on a monthly basis and adjust pricing, term and product offerings when necessary to stay within our guidelines and maximize effectiveness of asset/liability management.

We also estimate the effect a sudden change in interest rates could have on expected net interest income through income simulation. The simulation is run using the prime rate as the base with the assumption of rates increasing 100, 200, 300 and 400 basis points or decreasing 100 or 200 basis points. All rates are increased or decreased parallel to the change in prime rate. The simulation assumes a static mix of assets and liabilities. As a result of the simulation, over a 12-month time period ending December 31, 2011, net interest income is estimated to increase 0.9% if rates increase 200 basis points. In a down 200 basis point rate environment assumption, net interest income is estimated to decrease 8.3% during the same period. These results are based solely on the modeled changes in the market rates and do not reflect the earnings sensitivity that may arise from other factors such as changes in the shape of the yield curve, changes in spreads between key market rates, or changes in consumer or business behavior. These results also do not include any

management action to mitigate potential income variances within the modeled process. We realize actual net interest income is largely impacted by the allocation of assets, liabilities and product mix. The simulation results are one indicator of interest rate risk. We also estimate the effect changes in the yield curve may have on net interest income through various non-parallel rate shifts. Several scenarios are run for extended projection time frames.

Management continually reviews its interest rate risk position through our Asset/Liability Committee process. This is also reported to the board of directors through the Board Investment Committee on a bi-monthly basis.

Capital

The Company regularly reviews the adequacy of its capital to ensure that sufficient capital is available for current and future needs and is in compliance with regulatory guidelines. Management actively reviews capital strategies for the Company and the Bank in light of perceived business risks associated with current and prospective earning levels, liquidity, asset quality, economic conditions in the markets served, and level of dividends available to shareholders. It is management’s intent to maintain an optimal capital and leverage mix for growth and for shareholder return.

Management believes that the Company and Bank had strong capital bases at the end of 2011. As of December 31, 2011 and 2010, the Tier One Risk-Based capital ratio, Total Risk-Based capital (Tier 1 and Tier 2) ratio, and Tier One Leverage ratio for the Company and Bank were in excess of regulatory minimum requirements, as well as the heightened requirements as set forth in the Bank’s Agreement with the FDIC and WDFI.

On November 9, 2010, the Bank entered into a formal Agreement with the FDIC and the WDFI. Under the terms of the agreement, the Bank is required to: (i) maintain ratios of Tier 1 capital to each of total assets and total risk-weighted assets of at least 8.5% and 12%, respectively; (ii) refrain from declaring or paying any dividend without the written consent of the FDIC and WDFI; and (iii) refrain from increasing its total assets by more than 5% during any three-month period without first submitting a growth plan to the FDIC and WDFI. Additionally, on May 10, 2011, the Company entered into a formal written agreement with the Federal Reserve Bank of Minneapolis. Pursuant to the Company Agreement, the Company needs the written consent of the Federal Reserve Bank of Minneapolis to pay dividends to our stockholders. We are also prohibited from paying dividends on our common stock if we fail to make distributions or required payments on the Debentures or on our TARP Preferred Stock.

On October 14, 2008, the Treasury announced details of the CPP whereby the Treasury made direct equity investments into qualifying financial institutions in the form of preferred stock, providing an immediate influx of Tier 1 capital into the banking system. Participants also adopted the Treasury’s standards for executive compensation and corporate governance for the period during which the Treasury holds equity issued under this program.

On February 20, 2009, under the CPP, the Company issued 10,000 shares TARP Preferred Stock to the Treasury. Total proceeds received were $10,000. The proceeds received were allocated between the Series A Preferred Stock and the Series B Preferred Stock based upon their relative fair values, which resulted in the recording of a discount on the Series A Preferred Stock and a premium on the Series B Preferred Stock. The discount and premium will be amortized over five years. The allocated carrying value of the Series A Preferred Stock and Series B Preferred Stock on the date of issuance (based on their relative fair values) was $9,442 and $558, respectively. Cumulative dividends on the Series A Preferred Stock accrue and are payable quarterly at a rate of 5% per annum for five years. The rate will increase to 9% per annum thereafter if the shares are not redeemed by the Company. The Series B Preferred Stock dividends accrue and are payable quarterly at 9%. All $10,000 of the CPP Preferred Stock qualify as Tier 1 Capital for regulatory purposes at the Company.

A summary of the Company’s and Bank’s regulatory capital ratios as of December 31, 2011 and 2010 are as follows:

Table 24: Capital

	For Capital Adequacy Purposes (1)
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	($ in thousands)
December 31, 2011
Mid-Wisconsin Financial Services, Inc.
Tier 1 to average assets	$	46,729		9.6	%	$	19,396		4.0	%
Tier 1 risk-based capital ratio		46,729		14.3	%		13,071		4.0	%
Total risk-based capital ratios		50,884		15.6	%		26,142		8.0	%
Mid-Wisconsin Bank
Tier 1 to average assets	$	41,736		8.7	%	$	19,261		4.0	%	$	40,929		8.5	%
Tier 1 risk-based capital ratio		41,736		12.9	%		12,946		4.0	%		19,419		6.0	%
Total risk-based capital ratios		45,853		14.2	%		25,891		8.0	%		38,837		12.0	%

December 31, 2010
Mid-Wisconsin Financial Services, Inc.
Tier 1 to average assets	$	50,575		10.0	%	$	20,143		4.0	%
Tier 1 risk-based capital ratio		50,575		14.2	%		14,252		4.0	%
Total risk-based capital ratios		55,091		15.5	%		28,504		8.0	%
Mid-Wisconsin Bank
Tier 1 to average assets	$	44,787		9.0	%	$	20,024		4.0	%	$	42,552		8.5	%
Tier 1 risk-based capital ratio		44,787		12.7	%		14,140		4.0	%		21,210		6.0	%
Total risk-based capital ratios		49,268		13.9	%		28,280		8.0	%		42,420		12.0	%

(1)

The Bank has agreed with the FDIC and WDFI that, until its formal written agreement with such parties is no longer in effect, it will maintain minimum capital ratios at specified levels higher that those otherwise required by applicable regulations as follows: Tier 1 capital to total average assets — 8.5% and total capital to risk-weighted assets (total capital) — 12%.

(2)

Prompt corrective action provisions are not applicable at the bank holding company level.

The Company’s ability to pay dividends depends in part upon the receipt of dividends from the Bank and these dividends are subject to limitation under banking laws and regulations. Pursuant to the Agreement with the FDIC and WDFI, the Bank needs the written consent of the regulators to pay dividends to the Company. The Bank has not paid dividends to the Company since 2006. In consultation with the Federal Reserve Bank of Minneapolis, on May 12, 2011, the Company exercised its rights to suspend dividends on the outstanding TARP Preferred Stock and has also elected to defer interest on the Debentures. Under the terms of the Debentures, the Company is allowed to defer payments of interest for 20 quarterly periods without default or penalty, but such amounts will continue to accrue. Also during the deferral period, the Company generally may not pay cash dividends on or repurchase its common stock or preferred stock, including the TARP Preferred Stock. Dividend payments on the TARP Preferred Stock may be deferred without default, but the dividend is cumulative and therefore will continue to accrue and, if the Company fails to pay dividends for an aggregate of six quarters, whether or not consecutive, the holder will have the right to appoint representatives to the Company’s board of directors. The terms of the TARP Preferred Stock also prevent the Company from paying cash dividends on or repurchasing its common stock while dividends are in arrears. Therefore, the Company will not be able to pay dividends on its common stock until it has fully paid all accrued and unpaid dividends on the Debentures and the TARP Preferred Stock. On December 31, 2011, the Company had $485 accrued and unpaid dividends on the TARP Preferred Stock and $146 accrued and unpaid interest due on the Debentures.

Effects of Inflation

Selected Quarterly Financial Data

The following is selected financial data summarizing the results of operations for each quarter in the years ended December 31, 2011, 2010 and 2009:

Table 25: Selected Quarterly Financial Data

	2011 Quarter Ended
	December 31,			September 30,			June 30,			March 31,
	(In thousands, except per share data)
Interest income	$	5,507		$	5,368		$	5,519		$	5,645
Interest expense		1,467			1,594			1,663			1,761
Net interest income		4,040			3,774			3,856			3,884
Provision for loan losses		900			900			1,900			1,050
Income (loss) before income taxes		(589	)		(395	)		(1,249	)		137
Net (loss) available to common equity		(3,373	)		(346	)		(862	)		(20	)
Basic and diluted (loss) per common share	$	(2.04	)	$	(0.21	)	$	(0.52	)	$	(0.01	)

	2010 Quarter Ended
	December 31,		September 30,		June 30,		March 31,
	(In thousands, except per share data)
Interest income	$	6,018	$	6,196	$	6,391	$	6,457
Interest expense		2,004		2,175		2,255		2,328
Net interest income		4,014		4,021		4,136		4,129
Provision for loan losses		1,500		900		955		1,400
Income (loss) before income taxes		305		183		456		(66	)
Net income (loss) available to common equity		80		2		168		(148	)
Basic and diluted earnings (loss) per common share	$	0.05	$	0.00	$	0.10	$	(0.09	)

	2009 Quarter Ended
	December 31,			September 30,			June 30,			March 31,
	(In thousands, except per share data)
Interest income	$	6,623		$	6,665		$	6,822		$	6,822
Interest expense		2,456			2,554			2,701			2,789
Net interest income		4,167			4,111			4,121			4,033
Provision for loan losses		2,856			2,150			2,750			750
Income (loss) before income taxes		(1,475	)		(1,289	)		(2,017	)		377
Net income (loss) available to common equity		(1,155	)		(833	)		(1,252	)		207
Basic and diluted earnings (loss) per common share	$	(0.70	)	$	(0.51	)	$	(0.76	)	$	0.13

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this Item 7A is set forth in “Liquidity and Interest Rate Sensitivity” under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, which such information is incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Mid-Wisconsin Financial Services, Inc.
Medford, Wisconsin

We have audited the accompanying consolidated balance sheets of Mid-Wisconsin Financial Services, Inc. and Subsidiary as of December 31, 2011 and 2010, and the related consolidated statements of income (loss), changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included considerations of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mid-Wisconsin Financial Services, Inc. and Subsidiary at December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States.

/s/ WIPFLI LLP
Wipfli LLP

March 19, 2012
Oak Brook, Illinois

Mid-Wisconsin Financial Services, Inc. and Subsidiary
Consolidated Balance Sheets
December 31, 2011 and 2010
(In thousands, except share data)

	2011			2010
Assets
Cash and due from banks	$	18,278		$	9,502
Interest-bearing deposits in other financial institutions		10			8
Federal funds sold and securities purchased under agreements to sell		13,072			32,473
Investment securities available-for-sale, at fair value		110,376			101,310
Loans held for sale		2,163			7,444
Loans		329,863			339,170
Less: Allowance for loan losses		(9,816	)		(9,471	)
Loans, net		320,047			329,699
Accrued interest receivable		1,640			1,853
Premises and equipment, net		7,943			8,162
Other investments, at cost		2,616			2,616
Deferred tax asset		1,179			3,959
Other assets		10,852			12,056
Total assets	$	488,176		$	509,082
Liabilities and Stockholders’ Equity
Noninterest-bearing deposits	$	70,790		$	60,446
Interest-bearing deposits		310,830			340,164
Total deposits		381,620			400,610
Short-term borrowings		13,655			9,512
Long-term borrowings		40,061			42,561
Subordinated debentures		10,310			10,310
Accrued interest payable		878			992
Accrued expenses and other liabilities		2,139			2,127
Total liabilities		448,663			466,112
Stockholders’ equity:
Series A preferred stock		9,745			9,634
Series B preferred stock		526			538
Common Stock		166			165
Additional paid-in capital		11,945			11,916
Retained earnings		15,526			20,127
Accumulated other comprehensive income		1,605			590
Total stockholders’ equity		39,513			42,970
Total liabilities and stockholders’ equity	$	488,176		$	509,082
Series A preferred stock authorized (no par value)		10,000			10,000
Series A preferred stock issued and outstanding		10,000			10,000
Series B preferred stock authorized (no par value)		500			500
Series B preferred stock issued and outstanding		500			500
Common stock authorized (par value $0.10 per share)		6,000,000			6,000,000
Common stock issued and outstanding		1,657,119			1,652,122

The accompanying notes to the consolidated financial statements are an integral part of these statements.

Mid-Wisconsin Financial Services, Inc. and Subsidiary
Consolidated Statements of Income (Loss)
Years Ended December 31, 2011, 2010, and 2009
(In thousands, except per share data)

	2011			2010			2009
Interest Income
Loans, including fees	$	18,910		$	21,325		$	22,756
Securities:
Taxable		2,563			3,216			3,540
Tax-exempt		403			366			487
Other		163			155			149
Total interest income		22,039			25,062			26,932
Interest Expense
Deposits		4,566			6,402			7,801
Short-term borrowings		122			95			124
Long-term borrowings		1,614			1,670			1,961
Subordinated debentures		183			595			614
Total interest expense		6,485			8,762			10,500
Net interest income		15,554			16,300			16,432
Provision for loan losses		4,750			4,755			8,506
Net interest income after provision for loan losses		10,804			11,545			7,926
Noninterest Income
Service fees		953			1,174			1,239
Trust service fees		1,066			1,103			1,024
Investment product commissions		221			221			237
Mortgage banking		523			955			564
Gain (loss) on sale of investments		(55	)		1,054			449
Other		1,579			1,043			908
Total noninterest income		4,287			5,550			4,421
Other-than-temporary impairment losses, net
Total other-than-temporary impairment losses		0			(426	)		(374	)
Amount in other comprehensive income, before taxes		0			14			73
Total impairment		0			(412	)		(301	)
Noninterest Expense
Salaries and employee benefits		8,561			8,537			8,411
Occupancy		1,769			1,830			1,893
Data processing		667			651			648
Foreclosure/OREO expense		857			243			1,278
Legal and professional fees		891			677			882
FDIC expense		1,117			1,036			1,057
Other		3,325			2,831			2,281
Total noninterest expense		17,187			15,805			16,450
Income (loss) before income taxes		(2,096	)		878			(4,404	)
Income tax (benefit) expense		1,861			135			(1,916	)
Net income (loss)		(3,957	)		743			(2,488	)
Preferred stock dividends, discount and premium		(644	)		(641	)		(545	)
Net income (loss) available to common equity	$	(4,601	)	$	102		$	(3,033	)
Earnings (loss) per common share:
Basic and diluted	$	(2.78	)	$	0.06		$	(1.84	)

The accompanying notes to the consolidated financial statements are an integral part of these statements.

Mid-Wisconsin Financial Services, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders’ Equity
Years Ended December 31, 2011, 2010, and 2009
(In thousands, except per share data)

	Preferred Stock					Common Stock
	Shares		Amount			Shares		Amount		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Totals
Balance, January 1, 2009		0		0			1,644		164		11,804		23,239			598			35,805
Comprehensive loss:
Net loss													(2,488	)					(2,488	)
Other comprehensive income																370			370
Reclassification adjustment for net realized gains on securities available-for-sale included in earnings, net of tax																88			88
Total comprehensive loss																			(2,030	)
Issuance of preferred stock Series A		10,000		9,442															9,442
Issuance of preferred stock Series B		500		558															558
Accretion of preferred stock discount				85									(85	)					0
Amortization of preferred stock premium				(9	)								9						0
Issuance of common stock:
Proceeds from stock purchase plans							4		1		34								35
Cash dividends:
Preferred stock													(401	)					(401	)
Common stock, $0.11 per share													(181	)					(181	)
Dividends — Preferred stock													(68	)					(68	)
Stock-based compensation											24								24
Balance, December 31, 2009		10,500	$	10,076			1,648	$	165	$	11,862	$	20,025		$	1,056		$	43,184
Comprehensive income:
Net income													743						743
Other comprehensive loss																(854	)		(854	)
Reclassification adjustment for net realized gains on securities available-for-sale included in earnings, net of tax																388			388
Total comprehensive income																			277
Accretion of preferred stock discount				107									(107	)					0
Amortization of preferred stock premium				(11	)								11						0
Issuance of common stock:
Proceeds from stock purchase plans							4		0		32								32
Dividends — Preferred stock													(545	)					(545	)
Stock-based compensation											22								22
Balance, December 31, 2010		10,500	$	10,172			1,652	$	165	$	11,916	$	20,127		$	590		$	42,970
Comprehensive loss:
Net loss													(3,957	)					(3,957	)
Other comprehensive income																982			982
Reclassification adjustment for net realized losses on securities available-for-sale included in earnings, net of tax																33			33
Total comprehensive loss																			(2,942	)
Accretion of preferred stock discount				111									(111	)					0
Amortization of preferred stock premium				(12	)								12						0
Issuance of common stock:
Proceeds from stock purchase plans							5		1		29								30
Dividends — Preferred stock													(545	)					(545	)
Balance, December 31, 2011		10,500	$	10,271			1,657	$	166	$	11,945	$	15,526		$	1,605		$	39,513

The accompanying notes to the consolidated financial statements are an integral part of these statements.

Mid-Wisconsin Financial Services, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31, 2011, 2010, and 2009
(In thousands, except per share data)

	2011			2010			2009
Increase (decrease) in cash and due from banks:
Cash flows from operating activities:
Net income (loss)	$	(3,957	)	$	743		$	(2,488	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		1,094			911			961
Provision for loan losses		4,750			4,755			8,506
Provision for valuation allowance OREO		628			159			958
Benefit for deferred income taxes		(868	)		(90	)		(1,578	)
(Gain) loss on sale of investment securities		55			(1,054	)		(449	)
Other-than-temporary impairment losses, net		0			412			301
(Gain) loss on premises and equipment disposals		(44	)		0			12
(Gain) loss on sale of foreclosed OREO		(241	)		(187	)		91
Stock-based compensation		0			22			24
Valuation allowance — deferred taxes		2,911			0			0
Changes in operating assets and liabilities:
Loans held for sale		5,281			(1,992	)		(4,968	)
Other assets		1,590			939			(3,906	)
Other liabilities		(510	)		(503	)		(376	)
Net cash provided by (used in) operating activities		10,689			4,115			(2,912	)
Cash flows from investing activities:
Net (increase) decrease in interest-bearing deposits in other financial institutions		(2	)		5			8
Net (increase) decrease in federal funds sold		19,401			(23,409	)		13,236
Securities available for sale:
Proceeds from sales		641			38,146			12,717
Proceeds from maturities		33,184			32,614			25,238
Payment for purchases		(41,563	)		(68,747	)		(59,552	)
Net increase (decrease) in loans		2,346			12,220			(639	)
Capital expenditures		(685	)		(682	)		(280	)
Proceeds from sale of premises and equipment		223			0			9
Proceeds from sale of OREO		1,995			1,590			1,012
Net cash provided by (used in) investing activities		15,540			(8,263	)		(8,251	)

Mid-Wisconsin Financial Services, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31, 2011, 2010, and 2009
(In thousands, except per share data)

	2011			2010			2009
Cash flows from financing activities:
Net increase (decrease) in deposits	$	(18,990	)	$	2,810		$	12,125
Net increase (decrease) in short-term borrowings		4,143			1,529			(3,328	)
Proceeds from issuance of long-term borrowings		0			22,061			6,500
Principal payments on long-term borrowings		(2,500	)		(22,061	)		(13,368	)
Proceeds from issuance of preferred stock and common stock warrants		0			0			10,000
Proceeds from stock benefit plans		30			32			35
Cash dividends paid preferred stock		(136	)		(545	)		(401	)
Cash dividends paid common stock		0			0			(181	)
Net cash provided by (used in) financing activities		(17,453	)		3,826			11,382
Net increase (decrease) in cash and due from banks		8,776			(322	)		219
Cash and due from banks at beginning of year		9,502			9,824			9,605
Cash and due from banks at end of year	$	18,278		$	9,502		$	9,824
Supplemental disclosures of cash flow information:
Cash paid (refunded) during the year for:
Interest	$	6,599		$	9,057		$	10,931
Income taxes		250			0			(19	)
Noncash investing and financing activities:
Loans transferred to OREO	$	2,631		$	4,965		$	1,652
Loans charged-off		4,988			4,034			5,283
Dividends declared but not yet paid on preferred stock		477			68			68
Loans made in connection with the sale of OREO		75			981			339

The accompanying notes to the consolidated financial statements are an integral part of these statements.

Mid-Wisconsin Financial Services, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

Note 1 — Summary of Significant Accounting Policies

Principal Business Activity

Mid-Wisconsin Financial Services, Inc. (the “Company”) operates as a full-service financial institution with a primary market area including, but not limited to, Clark, Eau Claire, Lincoln, Marathon, Oneida, Price, Taylor and Vilas Counties, Wisconsin. It provides a variety of traditional banking product sales, insurance services, and wealth management services. The Company is regulated by federal and state agencies and is subject to periodic examinations by those agencies.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiary, Mid-Wisconsin Bank (the “Bank”), and the Bank’s wholly-owned subsidiary, Mid-Wisconsin Investment Corporation. All significant intercompany balances and transactions have been eliminated in consolidation. The accounting and reporting policies of the Company conform to generally accepted accounting principles and to general practices within the banking industry.

The Company also owns Mid-Wisconsin Statutory Trust 1 (the “Trust”), a wholly owned subsidiary that is a variable interest entity because the Company is not the primary beneficiary and, as a result, the Trust’s financial statements are not consolidated with the Company. The Trust is a qualifying special-purpose entity established for the sole purpose of issuing trust preferred securities. The proceeds from the issuance were used by the Trust to purchase subordinated debentures (the “Debentures”) of the Company, which is the sole asset of the Trust. Liabilities on the consolidated balance sheets include the subordinated debentures related to the Trust, as more fully described in Note 11.

Estimates

The preparation of the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ significantly from those estimates. Estimates that are susceptible to significant change include the determination of the allowance for loan losses and the valuation of investment securities.

Cash Equivalents

For purposes of presentation in the consolidated statements of cash flows, cash and cash equivalents are defined as those amounts included in the balance sheet caption “Cash and due from banks.” Cash and due from banks include cash on hand and non-interest-bearing deposits at correspondent banks.

Investment Securities Available-for-Sale

Securities are classified as available-for-sale and are carried at fair value, with unrealized gains and losses, net of related deferred income taxes, included in stockholders’ equity as a separate component of other comprehensive income. Amortization of premiums and accretion of discounts are recognized in interest income using the interest method over the terms of the securities. Declines in fair value of securities that are deemed to be other-than-temporary are reflected in earnings as a realized loss, and a new cost basis is established. In estimating other-than-temporary impairment losses, management considers the length of time and the extent to which fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

sufficient to allow for any anticipated recovery in fair value. Gains and losses on the sale of securities are determined using the specific-identification method.

Loans Held for Sale

Loans held for sale consist of the current origination of certain fixed rate mortgage loans and are recorded at the lower of aggregate cost or fair value. A gain or loss is recognized at the time of the sale reflecting the present value of the difference between the contractual interest rate of the loans sold and the yield to the investor. All loans held for sale at December 31, 2011 and 2010 have a forward sale commitment from an investor. Mortgage servicing rights are not retained.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest on loans is accrued and credited to income based on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments are due. Loans are generally placed on nonaccrual status when management has determined collection of such interest is doubtful or when a loan is contractually past due 90 days or more as to interest or principal payments. When loans are placed on nonaccrual status or charged-off, all current year unpaid accrued interest is reversed against interest income. The interest on these loans is subsequently accounted for on the cash basis until qualifying for return to accrual status. If collectability of the principal is in doubt, payments received are applied to loan principal. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

A loan is accounted for as a troubled debt restructuring if the Company, for economic or legal reasons related to the borrower’s financial condition, grants a significant concession to the borrower that it would not otherwise consider. A troubled debt restructuring may involve the receipt of assets from the debtor in partial or full satisfaction of the loan, or a modification of terms such as a reduction of the stated interest rate, a reduction of accrued interest, an extension of the maturity date at a stated interest rate lower than the current market rate for a new loan with similar risk, or some combination of these concessions. All restructured loans are considered impaired for reporting and measurement purposes. A loan that has been modified at a below market rate will return to performing status if it satisfies the nine-month performance requirement; however, it will remain classified as a restructured loan.

Allowance for Loan Losses

The allowance for loan losses is a reserve for estimated credit losses on individually evaluated loans determined to be impaired as well as estimated credit losses inherent in the loan portfolio, and is based on quarterly evaluations of the collectability and historical loss experience of loans. Loans are charged against the allowance for loan losses when management believes the collectability of the principal in unlikely. A provision for loan losses, which is a charge against earnings, is recorded to bring the allowance for loan losses to a level that, in management’s judgment, is adequate to absorb probable losses in the loan portfolio.

The allocation methodology applied by the Company to assess the appropriateness of the allowance for loan losses focuses on evaluation of several factors, including but not limited to: (i) the establishment of specific reserve allocations on impaired credits when a high risk of loss is anticipated but not yet realized; (ii) management’s ongoing review and grading of the loan portfolio; (ii) consideration of historical loan loss and delinquency experience on each portfolio category; (iv) trends in past due and nonperforming loans;

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

(v) the risk characteristics of the various classifications of loans; (vi) changes in the size and character of the loan portfolio; (vii) concentrations of loans to specific borrowers or industries; (viii) existing and forecasted economic conditions; (ix) the fair value of underlying collateral; and (x) other qualitative and quantitative factors which could affect potential credit losses. The total allowance is available to absorb losses from any segment of the portfolio.

The allowance for loan losses includes specific allowances related to loans which have been judged to be impaired under current accounting standards. A loan is impaired when, based on current information, it is probable the Company will not collect all amounts due in accordance with the original contractual terms of the loan agreement, including both principal and interest. Management has determined that loans that have a nonaccrual status or have had their terms restructured in a trouble debt restructuring meet this definition. Large groups of homogeneous loans, such as mortgage and consumer loans, are primarily evaluated using historical loss rates. Specific allowances on impaired loans are based on an evaluation of the customers’ cash flow ability to repay the loan or the fair value of the collateral if the loan is collateral dependent.

Management believes that the level of the allowance for loan loss is appropriate. While management uses available information to recognize losses on loans, future additions to the allowance for loan losses may be necessary based on changes in economic conditions.

In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to make additions to the allowance for loan losses and certain loan balances to be charged-off or downgraded into criticized loan categories when their credit evaluations differ from those of management based on their judgments about information available to them at the time of their examination.

Premises and Equipment

Premises and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed on a straight-line method and is based on the estimated useful lives of the assets. Maintenance and repair costs are charged to expense as incurred. Gains or losses on disposition of premises and equipment are reflected in income.

Other Real Estate Owned (“OREO”)

OREO consists of real estate properties acquired through a foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure. OREO is recorded at the lower of the recorded investment in the loan at the time of acquisition or the fair value of the underlying property value, less estimated selling costs. Any write-down in the carrying value of a property at the time of acquisition is charged to the allowance for loan losses. Any subsequent write-downs to reflect current fair market value, as well as gains and losses on sale, and revenues and expenses incurred in maintaining such properties, are treated as period costs. OREO is included in the balance sheet caption “Other assets.”

Federal Home Loan Bank (“FHLB”) Stock

As a member of the FHLB system, the Company is required to hold stock in the FHLB based on the outstanding amount of FHLB borrowings. This stock is recorded at cost, which approximates fair value. The FHLB of Chicago is under regulatory requirements which require approval of dividend restrictions and stock redemptions. The stock is evaluated for impairment on an annual basis. However, the stock is viewed as a long-term investment; therefore, its value is determined based on the ultimate recovery of the par value rather than recognizing temporary declines in value. Transfer of the stock is substantially restricted. FHLB stock is included in the balance sheet caption “Other investments, at cost” and totals $2,306 at December 31, 2011 and 2010.

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

Income Taxes

Amounts provided for income tax expense are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable under tax laws. Deferred income taxes, which arise from temporary differences between the amounts reported in the financial statements and the tax basis of assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities as measured by the current enacted tax rates which will be in effect when these differences are expected to reverse. Provision (credit) for deferred taxes is the result of changes in deferred tax assets and liabilities. A deferred tax valuation allowance is established if it is more likely than not that all or a portion of deferred tax assets will not be realized.

The Company may also recognize a liability for unrecognized tax benefits from uncertain tax positions. Unrecognized tax benefits represent the differences between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured in the financial statements. Interest and penalties related to unrecognized tax benefits are classified as income taxes.

Off-Balance Sheet Financial Instruments

In the ordinary course of business, the Company has entered into off-balance sheet financial instruments consisting of commitments to extend credit, commitments under commercial letters of credit, and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable.

Rate Lock Commitments

The Company enters into commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding (rate lock commitments). Rate lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. The mortgage loans are sold to the secondary market shortly after the loan is closed. The fair value of the mortgage loan rate lock commitments is immaterial to the financial statements. The Company’s rate lock commitments were $13,655 and $8,542 at December 31, 2011 and 2010, respectively.

Segment Information

The Company, through a branch network of its banking subsidiary, provides a full range of consumer and commercial banking services to individuals, businesses, and farms in north central Wisconsin. These services include demand, time, and savings deposits; safe deposit services; credit cards; notary services; night depository; money orders; traveler’s checks; cashier’s checks; savings bonds; secured and unsecured consumer, commercial, and real estate loans; ATM processing; cash management; merchant capture; online banking; and trust and financial planning.

While the Company’s management monitors the revenue streams of various Company products and services, operations are managed and financial performance is evaluated on a companywide basis. Accordingly, all of the Company’s banking operations are considered by management to be aggregated in one reportable operating segment.

Advertising Costs

Advertising costs are generally expensed as incurred.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on securities available-for-sale, net of tax, which are recognized as a separate component of equity, and accumulated other comprehensive income (loss).

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

Earnings (loss) per Common Share

Earnings (loss) per common share is calculated by dividing net income (loss) available to common equity by the weighted average number of common shares outstanding.

Diluted earnings (loss) per common share includes the potential common stock shares issuable under stock option plans.

Stock-Based Compensation

The Company accounts for employee stock compensation plans using the fair value based method of accounting. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is also the vesting period.

Reclassifications

Certain reclassifications have been made to prior year financial statements to conform to the 2011 classifications.

Subsequent Events

Management has reviewed the Company’s operations for potential disclosure of information or financial statement impacts related to events occurring after December 31, 2011, but prior to the release of these financial statements. Based on the results of this review, no subsequent event disclosures are required as of the release date.

Recent Accounting Pronouncements

In April 2011, the FASB issued clarifying guidance regarding which loan modifications constitute troubled debt restructurings. In evaluating whether a restructuring constitutes a troubled debt restructuring, the guidance maintains a creditor must separately conclude that the restructuring constitutes a concession and the debtor is experiencing financial difficulties. The accounting standard provides further guidance with respect to whether a creditor has granted a concession and whether a debtor is experiencing financial difficulties. The measurement guidance is effective for interim and annual periods beginning on or after June 15, 2011, while the disclosure guidance is effective for interim and annual periods beginning on or after June 15, 2011 with retrospective application to restructurings occurring on or after the beginning of the fiscal year. The Company adopted the accounting standard as of the beginning of the third quarter of 2011, as required, with no material impact on its results of operations, financial position, and liquidity.

In July 2010, the FASB issued guidance for improving disclosures about an entity’s allowance for loan losses and the credit quality of its loans. The guidance requires additional disclosure to facilitate financial statement users’ evaluation of the following: (1) the nature of credit risk inherent in the entity’s loan portfolio, (2) how that risk is analyzed and assessed in arriving at the allowance for loan losses, and (3) the changes and reasons for those changes in the allowance for loan losses. The increased disclosures as of the end of a reporting period are effective for periods ending on or after December 15, 2010. Increased disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 31, 2010. The Company adopted the accounting standard as of December 31, 2010, with no material impact on the consolidated financial statements of the Company.

In January 2010, the FASB issued an accounting standard providing additional guidance relating to fair value measurement disclosures. Specifically, companies are required to separately disclose significant transfers into and out of Level 1 and Level 2 measurements in the fair value hierarchy and the reasons for those transfers. Significance should generally be based on earnings and total assets or liabilities, or when changes are recognized in other comprehensive income, based on total equity. Companies may take different approaches in determining when to recognize such transfers, including using the actual date of the event or

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

change in circumstances causing the transfer, or using the beginning or ending of a reporting period. For Level 3 fair value measurements, the new guidance requires presentation of separate information about purchases, sales, issuances and settlements. The FASB also clarified existing fair value measurement disclosure requirements relating to the level of disaggregation, inputs, and valuation techniques. This accounting standard was effective at the beginning of 2010, except for the detailed Level 3 disclosures which were effective at the beginning of 2011. The Company adopted the accounting standard including the Level 3 disclosures with no material impact on the consolidated financial statements of the Company.

In April 2011, the FASB issued an accounting standard that modifies the criteria for determining when repurchase agreements would be accounted for as a secured borrowing rather than as a sale. Currently, an entity that maintains effective control over transferred financial assets must account for the transfer as a secured borrowing rather than as a sale. The provisions remove from the assessment of effective control the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee. The FASB believes that contractual rights and obligations determine effective control and that there does not need to be a requirement to assess the ability to exercise those rights. The accounting standard does not change the other existing criteria used in the assessment of effective control and is effective prospectively for transactions, or modifications of existing transactions, that occur on or after January 1, 2012. As the Company accounts for all of its repurchase agreements as collateralized financing arrangements, the adoption of this accounting standard is not expected to have a material impact on the consolidated financial statements of the Company.

In May 2011, the FASB issued an accounting standard that provides a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and International Financial Reporting Standards (“IFRS”). The changes to U.S. GAAP as a result of the accounting standard are as follows: (1) the concepts of highest and best use and valuation premise are only relevant when measuring the fair value of nonfinancial assets (that is, it does not apply to financial assets or any liabilities); (2) U.S. GAAP currently prohibits application of a blockage factor in valuing financial instruments with quoted prices in active markets, while the new accounting standard extends that prohibition to all fair value measurements; (3) an exception is provided to the basic fair value measurement principles for an entity that holds a group of financial assets and financial liabilities with offsetting positions in market risks or counterparty credit risk that are managed on the basis of the entity’s net exposure to either of those risks, which such exception allows the entity, if certain criteria are met, to measure the fair value of the net asset or liability position in a manner consistent with how market participants would price the net risk position; (4) the fair value measurement of instruments classified within an entity’s shareholders’ equity have been aligned with the guidance for liabilities; and (5) disclosure requirements have been enhanced for recurring Level 3 fair value measurements to disclose quantitative information about unobservable inputs and assumptions used, to describe the valuation processes used by the entity, and to describe the sensitivity of fair value measurements to changes in unobservable inputs and interrelationships between those inputs. In addition, entities must report the level in the fair value hierarchy of items that are not measured at fair value in the statement of condition but whose fair value must be disclosed. The provisions of the accounting standard are effective for the Company’s interim reporting period beginning on or after December 15, 2011. The adoption of this accounting standard is not expected to have a material impact on the consolidated financial statements of the Company.

In June 2011, the FASB issued an accounting standard that allows an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. The statement(s) are required to be presented with equal prominence as the other primary financial statements. The accounting pronouncement eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders’

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

equity but does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The provisions of this accounting standard are effective for the Company’s interim reporting period beginning on or after December 15, 2011, with retrospective application required. The adoption of this accounting standard will have no material impact on the consolidated financial statements of the Company.

Note 2 — Earnings (Loss) per Common Share

Earnings (loss) per common share is calculated by dividing net income (loss) available to common equity by the weighted average number of common shares outstanding. Diluted earnings (loss) per share is calculated by dividing net income (loss) available to common equity by the weighted average number of shares adjusted for the dilutive effect of common stock awards. Presented below are the calculations for basic and diluted earnings (loss) per common share.

	For the Years Ended December 31,
	2011			2010			2009
Net income (loss)	$	(3,957	)	$	743		$	(2,488	)
Preferred stock dividends, discount and premium		(644	)		(641	)		(545	)
Net income (loss) available to common equity	$	(4,601	)	$	102		$	(3,033	)
Weighted average common shares outstanding		1,654			1,650			1,645
Effect of dilutive stock options		0			0			1
Diluted weighted average common shares outstanding		1,654			1,650			1,646
Basic and diluted earnings (loss) per common share	$	(2.78	)	$	0.06		$	(1.84	)

Note 3 — Cash and Due From Banks

Cash and due from banks in the amount of $257 and $298 was restricted at December 31, 2011 and 2010, respectively, to meet the reserve requirements of the Federal Reserve System.

In the normal course of business, the Bank maintains cash and due from bank balances with correspondent banks. Accounts at each institution are insured in full by the Federal Deposit Insurance Corporation (“FDIC”). Federal funds sold invested in other institutions are not insured.

Note 4 — Securities

The amortized cost and fair values of investment securities available-for-sale at December 31, 2011 and 2010 were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2011
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	18,479	$	329	$	0	$	18,808
Mortgage-backed securities		66,622		1,110		79		67,653
Obligations of states and political subdivisions		21,619		1,316		3		22,932
Corporate debt securities		831		1		0		832
Total debt securities		107,551		2,756		82		110,225
Equity securities		151		0		0		151
Total securities available-for-sale	$	107,702	$	2,756	$	82	$	110,376

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2010
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	22,732	$	69	$	234	$	22,567
Mortgage-backed securities		56,292		908		284		56,916
Obligations of states and political subdivisions		20,239		661		185		20,715
Corporate debt securities		974		0		13		961
Total debt securities		100,237		1,638		716		101,159
Equity securities		151		0		0		151
Total securities available-for-sale	$	100,388	$	1,638	$	716	$	101,310

The following tables represents gross unrealized losses and the related fair value of investment securities available-for-sale, aggregated by investment category and length of time individual securities have been in a continuous unrealized loss position, at December 31, 2011 and 2010.

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
December 31, 2011
U.S. Treasury obligations and direct obligations of U.S. government agencies	$	0	$	0	$	0	$	0	$	0	$	0
Mortgage-backed securities		9,730		73		12		6		9,742		79
Obligations of states and political subdivisions		0		0		327		3		327		3
Total	$	9,730	$	73	$	339	$	9	$	10,069	$	82
December 31, 2010
U.S. Treasury obligations and direct obligations of U.S. government agencies	$	13,784	$	234	$	0	$	0	$	13,784	$	234
Mortgage-backed securities		26,715		277		72		7		26,787		284
Obligations of states and political subdivisions		5,719		185		0		0		5,719		185
Corporate debt securities		0		0		136		13		136		13
Total	$	46,218	$	696	$	208	$	20	$	46,426	$	716

The Company reviews the investment securities portfolio on a quarterly basis to monitor its exposure to other-than-temporary impairment (“OTTI”) that may result from adverse economic conditions. A determination as to whether a security’s decline in market value is OTTI takes into consideration numerous factors. Some factors the Company may consider in the OTTI analysis include: (1) the length of time and extent to which fair value has been less than cost; (2) the financial condition and near-term prospects of the issuer; and (3) our intent and ability to retain the investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Based on the Company’s evaluation, a third party vendor may review specific investment securities identified by management for OTTI. To determine OTTI, a discounted cash flow model is utilized to estimate the fair value of the security. The use of a discounted cash flow model involves judgment, particularly of interest rates, estimated default rates and prepayment speeds.

As of December 31, 2010, the Company determined that OTTI existed in one non-agency mortgage-backed security and two corporate securities since the unrealized losses on these securities appear to be related in part to expected credit losses that will not be recovered by the Company. In the first quarter 2011, the company sold these three OTTI securities, which resulted in net investment security losses of $55. As of December 31, 2011 the Company has determined that there are no remaining OTTI securities in the investment portfolio.

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

The following is a summary of the credit loss of OTTI recognized in earnings on investment securities.

	Non-Agency Mortgage- Backed Securities			Corporate Securities			Total
Balance of credit-related OTTI at December 31, 2009	$	12		$	289		$	301
Credit losses on securities for which OTTI was not previously recorded		0			201			201
Additional credit losses on securities for which OTTI was previously recognized		0			211			211
Balance of credit-related OTTI at December 31, 2010	$	12		$	701		$	713
Credit losses realized from sale/permanent write-off of securities		(12	)		(701	)		(713	)
Balance of credit-related OTTI at December 31, 2011	$	0		$	0		$	0

Based on the Company’s evaluation, management believes that any remaining unrealized losses at December 31, 2011, are primarily attributable to changes in interest rates and current market conditions, and not credit deterioration. At December 31, 2011, 12 debt securities had unrealized losses with aggregate depreciation of 0.82%. The Company currently has both the intent and ability to hold the securities that are in a continuous unrealized loss position for the time necessary to recover the amortized cost.

The amortized cost and fair value of investment debt securities available-for-sale at December 31, 2011, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Fair values of securities are estimated based on financial models or prices paid for similar securities. It is possible interest rates could change considerably, resulting in a material change in estimated fair value.

	Amortized Cost		Fair Value
Due in one year or less	$	2,710	$	2,745
Due after one year but within five years		21,851		22,455
Due after five years but within ten years		13,445		14,337
Due after ten years or more		2,923		3,035
Mortgage-backed securities		66,622		67,653
Total debt securities available-for-sale	$	107,551	$	110,225

During 2011, proceeds from sales of investment securities available-for-sale were $641 which resulted in investment security losses of $59 and investment security gains of $4. Investment securities gains of $1,054 during 2010 were attributable to the sales of investment securities available-for-sale of $38,146.

Securities with a carrying value of $65,548 and $65,847 at December 31, 2011 and 2010, respectively, were pledged to secure public deposits, short-term borrowings, and for other purposes as required by law.

The FHLB of Chicago announced in October 2007 that it was under a consensual cease and desist order with its regulator, which among other things, restricts various future activities of the FHLB of Chicago. Such restrictions may limit or stop the FHLB of Chicago from paying dividends or redeeming stock without prior approval. Cash dividends have been paid quarterly in 2011. These were the first dividends paid by the FHLB of Chicago since the third quarter of 2007. Based on an evaluation of this investment the Company believes the cost of the investment will be recovered and no impairment has been recorded on these securities during 2011, 2010, or 2009.

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

Note 5 — Loans, Allowance for Loan Losses, and Credit Quality

Loans at December 31 are summarized as follows:

	2011		2010
Commercial business	$	41,347	$	39,093
Commercial real estate		123,868		132,079
Real estate construction		28,708		30,206
Agricultural		45,351		39,671
Real estate residential		85,614		91,974
Installment		4,975		6,147
Total loans	$	329,863	$	339,170

The Company serves the credit needs of its customers predominantly in central and northern Wisconsin. Significant loan concentrations are considered to exist for a financial institution when there are amounts loaned to multiple numbers of borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. At December 31, 2011 no significant concentrations existed in the Company’s loan portfolio in excess of 30% of total loans.

The Bank, in the ordinary course of business, grants loans to its executive officers and directors, including affiliated companies in which they are principal owners. These loans were made on substantially the same terms, including rates and collateral, as those prevailing at the time for comparable transactions with other unrelated customers. In the opinion of management, such loans do not involve more than the normal risk of collectability or present other unfavorable features. These loans to related parties are summarized as follows:

	2011			2010
Balance at beginning of year	$	4,333		$	3,917
New loans		574			2,921
Repayments		(1,339	)		(2,497	)
Changes due to status of executive officers and directors		(3,194	)		(8	)
Balance at end of year	$	374		$	4,333

A summary of the changes in the allowance for loan losses by portfolio segment for the years indicated:

	Beginning Balance at 1/1/2011		Charge-offs			Recoveries		Provision		Ending Balance at 12/31/2011		Ending balance: individually evaluated for impairment		Ending balance: collectively evaluated for impairment
December 31, 2011
Commercial business	$	536	$	(173	)	$	37	$	604	$	1,004	$	352	$	652
Commercial real estate		4,320		(2,005	)		135		1,235		3,685		1,758		1,927
Real estate construction		1,278		(1,295	)		134		1,203		1,320		460		860
Agricultural		1,146		(203	)		90		106		1,139		35		1,104
Real estate residential		2,060		(1,067	)		101		1,436		2,530		680		1,850
Installment		131		(245	)		86		166		138		15		123
Total	$	9,471	$	(4,988	)	$	583	$	4,750	$	9,816	$	3,300	$	6,516

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

	Beginning Balance at 1/1/2010		Charge-offs			Recoveries		Provision		Ending Balance at 12/31/2010		Ending balance: individually evaluated for impairment		Ending balance: collectively evaluated for impairment
December 31, 2010
Commercial business	$	497	$	(435	)	$	167	$	307	$	536	$	0	$	536
Commercial real estate		3,954		(1,490	)		275		1,581		4,320		1,236		3,084
Real estate construction		685		(537	)		149		981		1,278		484		794
Agricultural		981		(206	)		86		285		1,146		8		1,138
Real estate residential		1,753		(1,207	)		83		1,431		2,060		213		1,847
Installment		87		(159	)		33		170		131		0		131
Total	$	7,957	$	(4,034	)	$	793	$	4,755	$	9,471	$	1,941	$	7,530

	Beginning Balance at 1/1/2009		Charge-offs			Recoveries		Provision		Ending Balance at 12/31/2009		Ending balance: individually evaluated for impairment		Ending balance: collectively evaluated for impairment
December 31, 2009
Commercial business	$	295	$	(608	)	$	4	$	806	$	497	$	0	$	497
Commercial real estate		1,836		(1,990	)		151		3,957		3,954		1,726		2,228
Real estate construction		836		(1,556	)		0		1,405		685		57		628
Agricultural		450		(38	)		4		565		981		47		934
Real estate residential		1,010		(964	)		13		1,694		1,753		460		1,293
Installment		115		(127	)		20		79		87		0		87
Total	$	4,542	$	(5,283	)	$	192	$	8,506	$	7,957	$	2,290	$	5,667

The following table presents nonaccrual loans by portfolio segment for the periods indicated as follows:

	December 31, 2011		December 31, 2010
	Amount		Amount
Commercial business	$	734	$	54
Commercial real estate		4,076		5,670
Real estate construction		2,519		2,644
Agricultural		134		440
Real estate residential		3,726		2,730
Installment		5		2
Total nonaccrual loans	$	11,194	$	11,540

A summary of loans by credit quality indicator based on internally assigned credit grade is as follows:

December 31, 2011	Highest Quality		High Quality		Quality		Moderate Risk		Acceptable		Special Mention		Substandard		Doubtful		Loss	Total
Commercial business	$	188	$	4,268	$	5,153	$	8,688	$	10,898	$	8,333	$	3,068	$	751	$	$	41,347
Commercial real estate		0		1,521		15,061		35,596		36,947		14,811		13,828		6,104			123,868
Real estate construction		166		2,169		4,680		3,905		11,383		839		2,980		2,586			28,708
Agricultural		121		427		2,527		8,052		22,283		8,428		2,812		701			45,351
Real estate residential		466		6,273		19,181		20,856		22,300		6,678		5,911		3,949			85,614
Installment		6		430		1,258		2,205		759		273		39		5			4,975
Total	$	947	$	15,088	$	47,860	$	79,302	$	104,570	$	39,362	$	28,638	$	14,096	$	$	329,863

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

December 31, 2010	Highest Quality		High Quality		Quality		Moderate Risk		Acceptable		Special Mention		Substandard		Doubtful		Loss	Total
Commercial business	$	1,118	$	2,760	$	6,217	$	10,437	$	13,166	$	3,928	$	559	$	908	$	$	39,093
Commercial real estate		0		1,306		16,790		32,019		39,448		19,146		14,735		8,635			132,079
Real estate construction		172		1,673		6,685		7,062		7,171		1,883		2,723		2,837			30,206
Agricultural		0		868		3,341		7,607		18,748		4,338		4,176		593			39,671
Real estate residential		652		7,208		24,395		24,574		18,295		7,990		5,022		3,838			91,974
Installment		15		555		1,850		2,707		841		165		11		3			6,147
Total	$	1,957	$	14,370	$	59,278	$	84,406	$	97,669	$	37,450	$	27,226	$	16,814	$	$	339,170

Loans risk rated acceptable or better are credits performing in accordance with the original terms, have adequate sources of repayment and little identifiable collectability risk. Special mention credits have potential weaknesses that deserve management’s attention. If left unremediated, these potential weaknesses may result in deterioration of the repayment of the credit. Substandard loans typically have weaknesses in the paying capability of the obligor and/or guarantor or in collateral coverage. These loans have a well-defined weakness that jeopardizes the liquidation of the debt and are characterized by the possibility that the Bank will sustain some loss if the deficiencies are not corrected. Loans classified as doubtful have all the weaknesses of substandard loans with the added characteristic that the collection of all amounts due according to the original contractual terms is highly unlikely and the amount of the loss is reasonably estimable. Loans classified as loss are considered uncollectible.

The following table presents loans by past due status at December 31, 2011 and 2010:

	30–59 Days Past Due		60–89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
December 31, 2011
Commercial business	$	50	$	14	$	612	$	676	$	40,671	$	41,347	$	0
Commercial real estate		787		830		2,885		4,502		119,366		123,868		0
Real estate construction		114		157		2,519		2,790		25,918		28,708		0
Agricultural		88		120		241		449		44,902		45,351		201
Real estate residential		989		176		3,044		4,209		81,405		85,614		0
Installment		29		0		0		29		4,946		4,975		21
Total	$	2,057	$	1,297	$	9,301	$	12,655	$	317,208	$	329,863	$	222

	30–59 Days Past Due		60–89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
December 31, 2010
Commercial business	$	389	$	28	$	0	$	417	$	38,676	$	39,093	$	0
Commercial real estate		422		2,580		3,677		6,679		125,400		132,079		0
Real estate construction		0		1,143		2,644		3,787		26,419		30,206		0
Agricultural		177		357		250		784		38,887		39,671		0
Real estate residential		1,710		472		2,255		4,437		87,537		91,974		0
Installment		35		16		10		61		6,086		6,147		10
Total	$	2,733	$	4,596	$	8,836	$	16,165	$	323,005	$	339,170	$	10

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

The following table presents impaired loans:

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
December 31, 2011
With no related allowance:
Commercial business	$	0	$	0	$	0	$	0	$	0
Commercial real estate		0		0		0		349		0
Real estate construction		0		0		0		96		0
Agricultural		0		0		0		8		0
Real estate residential		0		0		0		165		0
Installment		0		0		0		0		0
With a related allowance:
Commercial business	$	482	$	834	$	352	$	460	$	11
Commercial real estate		8,130		9,888		1,758		7,646		392
Real estate construction		2,103		2,563		460		2,080		51
Agricultural		270		305		35		233		4
Real estate residential		3,010		3,690		680		2,586		103
Installment		6		21		15		8		2
Total:
Commercial business	$	482	$	834	$	352	$	460	$	11
Commercial real estate		8,130		9,888		1,758		7,995		392
Real estate construction		2,103		2,563		460		2,176		51
Agricultural		270		305		35		241		4
Real estate residential		3,010		3,690		680		2,751		103
Installment		6		21		15		8		2
Total	$	14,001	$	17,301	$	3,300	$	13,631	$	563
December 31, 2010
With no related allowance:
Commercial business	$	0	$	0	$	0	$	0	$	0
Commercial real estate		243		243		0		413		0
Real estate construction		182		182		0		36		3
Agricultural		0		0		0		109		0
Real estate residential		335		335		0		268		3
Installment		0		0		0		0		0
With a related allowance:
Commercial business	$	0	$	0	$	0	$	0	$	0
Commercial real estate		4,715		5,951		1,236		6,805		120
Real estate construction		1,684		2,168		484		984		18
Agricultural		63		71		8		310		0
Real estate residential		586		799		213		1,319		21
Installment		0		0		0		0		0
Total:
Commercial business	$	0	$	0	$	0	$	0	$	0
Commercial real estate		4,958		6,194		1,236		7,218		120
Real estate construction		1,866		2,350		484		1,020		21
Agricultural		63		71		8		419		0
Real estate residential		921		1,134		213		1,587		24
Installment		0		0		0		0		0
Total	$	7,808	$	9,749	$	1,941	$	10,244	$	165

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

The following table presents impaired loans: (continued)

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
December 31, 2009
With no related allowance:
Commercial business	$	0	$	0	$	0	$	73	$	0
Commercial real estate		793		793		0		728		25
Real estate construction		0		0		0		62		0
Agricultural		108		108		0		422		5
Real estate residential		193		193		0		563		6
Installment		0		0		0		102		0
With a related allowance:
Commercial business	$	0	$	0	$	0	$	117	$	0
Commercial real estate		6,030		7,756		1,726		5,204		152
Real estate construction		288		345		57		1,519		8
Agricultural		413		460		47		71		13
Real estate residential		1,710		2,170		460		1,385		33
Installment		0		0		0		0		0
Total:
Commercial business	$	0	$	0	$	0	$	190	$	0
Commercial real estate		6,823		8,549		1,726		5,932		177
Real estate construction		288		345		57		1,581		8
Agricultural		521		568		47		493		18
Real estate residential		1,903		2,363		460		1,948		39
Installment		0		0		0		102		0
Total	$	9,535	$	11,825	$	2,290	$	10,246	$	242

No additional funds are committed to be advance in connection with impaired loans.

When, for economic or legal reasons related to the borrowers financial difficulties, the Company grants a concession to the borrower that the Company would not otherwise consider, the modified loan is classified as a troubled debt restructuring. Loan modifications may involve the receipt of assets from the debtor in partial or full satisfaction of the loan, or a modification of terms such as a reduction of the stated interest rate, a reduction of accrued interest, an extension of the maturity date at a stated interest rate lower than the current market rate for a new loan with similar risk, or some combination of these concessions.

The following table provides the number of loans modified and classified as trouble debt restructurings by loan category during the year ended December 31, 2011.

		Pre-Modification Recorded Balance		Post-Modification Recorded Balance
Commercial business	3	$	722	$	721
Commercial real estate	15		6,160		6,160
Real estate construction	4		2,839		2,809
Agricultural	4		249		249
Real estate residential	13		2,474		2,473
Installment	1		22		22
Total	40	$	12,466	$	12,434

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

The following table summarizes trouble debt restructurings that defaulted during the year ended December 31, 2011, within twelve months of their modification dates.

		Recorded Investment
Commercial business	3	$	711
Commercial real estate	4		1,039
Real estate construction	2		1,338
Agricultural	1		40
Real estate residential	9		1,789
Installment	0		0
Total	19	$	4,917

Note 6 — Premises and Equipment

A summary of premises and equipment at December 31 was as follows:

	2011		2010
Land and improvements	$	2,004	$	2,052
Buildings		9,331		9,246
Furniture and equipment		7,634		7,489
Total cost		18,969		18,787
Less: accumulated depreciation		11,026		10,625
Premises and equipment, net	$	7,943	$	8,162

Depreciation and amortization of premises and equipment totaled $724 in 2011, $814 in 2010, and $930 in 2009.

The Bank leases certain of its facilities and equipment, certain of which provide for increased rentals based upon increases in cost of living adjustments and other operating costs. The approximate minimum annual rentals and commitments under these leases with remaining terms in excess of one year are as follows:

2012		125
2013		126
2014		129
2015		133
2016		94
Thereafter		334
Total	$	941

Total rental expense under operating leases was $146, $186, and $184 in 2011, 2010, and 2009, respectively.

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

Note 7 — OREO

A summary of OREO at December 31 was as follows:

	2011			2010
Balance at beginning of year	$	4,230		$	1,808
Transfer of loans at net realizable value to OREO		2,631			4,965
Sale proceeds		(1,995	)		(1,590	)
Loans made in sale of OREO		(75	)		(981	)
Net gain from sale of OREO		241			187
Provision for write-downs charged to operations		(628	)		(159	)
Balance at end of year	$	4,404		$	4,230

An analysis of the valuation allowance on OREO at December 31 was follows:

	2011			2010			2009
Balance at beginning of year	$	2,788		$	2,994		$	2,616
Provision for write-downs charged to operations		628			159			958
Amounts related to OREO disposed of		(3,006	)		(365	)		(580	)
Balance at end of year	$	410		$	2,788		$	2,994

Note 8 — Deposits

The distribution of deposits at December 31 was as follows:

	2011		2010
Noninterest-bearing demand deposits	$	70,790	$	60,446
Interest-bearing demand deposits		39,160		39,462
Money market deposits		91,247		89,546
Savings deposits		29,266		24,969
IRA retirement accounts		32,031		33,519
Brokered certificates of deposit		15,017		26,986
Certificates of deposit		104,109		125,682
Total deposits	$	381,620	$	400,610

IRA retirement accounts, brokered certificates of deposit and certificates of deposit, (“time deposits”), with individual balances of $100 or more were $46,695 and $61,109 at December 31, 2011 and 2010 respectively.

Aggregate annual maturities of all time deposits at December 31, 2011, are as follows:

Maturities During Year Ending December 31,
2012		109,488
2013		30,420
2014		7,047
2015		3,570
2016		294
Thereafter		338
Total	$	151,157

Deposits from the Company’s directors, executive officers, and affiliated companies in which they are principal owners totaled $2,744 and $3,112 at December 31, 2011 and 2010, respectively.

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

Note 9 — Short-Term Borrowings

Short-term borrowings consisted of $13,655 and $9,512 of securities sold under repurchase agreements at December 31, 2011 and 2010, respectively.

The Company pledges securities available-for-sale as collateral for repurchase agreements. The fair value of securities pledged for short-term borrowings totaled $19,481 and $14,032 at December 31, 2011 and 2010, respectively.

The following information relates to federal funds purchased, securities sold under repurchase agreements, and Federal Home Loan Bank open line of credit at December 31:

	2011			2010			2009
Weighted average rate at December 31,		0.46	%		0.49	%		0.48	%
For the year:
Highest month-end balance	$	15,817		$	18,329		$	20,074
Daily average balance	$	12,285		$	10,411		$	12,031
Weighted average rate		1.00	%		0.69	%		1.06	%

Note 10 — Long-Term Borrowings

Long-term borrowings at December 31 were as follows:

	2011		2010
FHLB advances	$	30,061	$	32,561
Other borrowed funds		10,000		10,000
Total long-term borrowings	$	40,061	$	42,561

FHLB advances at December 31 were as follows:

	2011		2010
1.84% to 4.22% fixed rate, interest payable monthly with principal due during 2011	$	0	$	2,500
2.17% to 5.12% fixed rate, interest payable monthly with principal due during 2012		4,000		4,000
3.90% fixed rate, interest payable monthly with principal due during 2013		2,000		2,000
1.79% to 3.03% fixed rate, interest payable monthly with principal due during 2014		16,061		16,061
3.16% to 3.48% fixed rate, interest payable monthly with principal due during 2015		8,000		8,000
Total	$	30,061	$	32,561

FHLB advances are secured by FHLB stock, qualifying mortgages of the Bank (such as residential mortgage, home equity, and commercial real estate) and by municipal bonds and mortgage-backed securities totaling approximately $58,311 and $67,519 at December 31, 2011 and 2010, respectively. At December 31, 2011, the Bank had $5,999 in available, but unused, FHLB advances.

In April 2010, FHLB advances of $22,061 were restructured. The present value of the cash flows before and after the restructuring were reviewed and it was determined the restructuring was closely related to the original contract within accounting guidance that allows the prepayment penalty to be incorporated into the new borrowing agreements.

Other borrowed funds include $10,000 of structured repurchase agreements at December 31, 2011 and 2010. The fixed rate structured repurchase agreements mature in 2014 and 2015, callable in 2013, and had

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

weighted-average interest rates of 4.24% at December 31, 2011 and 2010, respectively. Other borrowings are secured by investment securities totaling $11,582 and $13,390 at December 31, 2011 and 2010, respectively.

Note 11 — Subordinated Debentures

In 2005, The Trust issued $10,000 in trust preferred securities. The trust preferred securities were sold in a private placement to institutional investors. The Trust used the proceeds from the offering along with the Company’s common ownership investment to purchase $10,310 of the Company’s the Debentures. The Debentures are the sole asset of the Trust.

The trust preferred securities and the Debentures mature on December 15, 2035, and had a fixed rate of 5.98% until December 15, 2010, after which they have a floating rate of the three-month LIBOR plus 1.43%, adjusted quarterly. The interest rates were 1.98% and 1.73% at December 31, 2011 and 2010, respectively. The Debentures may be called at par in part or in full on or after December 15, 2010, or within 120 days of certain events. The trust preferred securities are mandatorily redeemable upon the maturity or early redemption of the Debentures.

The Company has fully and unconditionally guaranteed all of the obligations of the Trust. The guarantee covers the quarterly distributions and payments on liquidation or redemption of the trust preferred securities, but only to the extent of funds held by the Trust. The trust preferred securities qualify under the risk-based capital guidelines as Tier 1 capital for regulatory purposes.

In consultation with the Federal Reserve, on May 12, 2011, the Company exercised its rights to defer interest payments on the Debentures. Under the terms of the Debentures, the Company is allowed to defer payments of interest for 20 quarterly periods without default or penalty, but such amounts will continue to accrue. On December 31, 2011, the Company had $146 accrued and unpaid interest due on the Debentures.

Note 12 — Income Taxes

The current and deferred amounts of income tax expense (benefit) were as follows:

	2011			2010			2009
Current income tax expense (benefit):
Federal	$	(182	)	$	225		$	(338	)
State		0			0			0
Total current		(182	)		225			(338	)
Deferred income tax expense (benefit):
Federal		(682	)		(134	)		(1,223	)
State		(186	)		44			(355	)
Total deferred		(868	)		(90	)		(1,578	)
Change in valuation allowance		2,911			0			0
Total income tax expense (benefit)	$	1,861		$	135		$	(1,916	)

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

A summary of the sources of differences between income taxes at the federal statutory rate and the provision for income taxes for the years ended December 31 follows:

	2011						2010						2009
	Amount			Percent of Pretax Income			Amount			Percent of Pretax Income			Amount			Percent of Pretax Income
Tax (benefit) expense at statutory rate	$	(713	)		(34.0%)		$	299			34.0	%	$	(1,497	)		(35.0%)
Increase (decrease) in taxes resulting from:
Tax-exempt interest		(180	)		(8.6	)		(169	)		(19.2	)		(190	)		(4.3	)
Federal tax refund		0			0.0			0			0.0			0			0.0
State income taxes		(122	)		(5.8	)		40			4.5			(239	)		(5.4	)
Bank-owned life insurance		(53	)		(2.5	)		(53	)		(6.0	)		(36	)		(0.8	)
Change in valuation allowance		2,911			138.9			0			0.0			0			0.0
Other		18			0.8			18			2.1			46			1.0
Provision (benefit) for income taxes	$	1,861			88.8	%	$	135			15.4	%	$	(1,916	)		(43.5%)

Temporary differences between the amounts reported in the financial statements and the tax bases of assets and liabilities resulted in deferred taxes. Deferred tax assets and liabilities at December 31 were as follows:

	2011		2010
Deferred tax assets:
Allowance for loan losses	$	3,170	$	2,835
Valuation allowance for other real estate owned		222		1,098
Deferred compensation		399		361
State net operating losses		539		362
Federal net operating losses		1,384		62
Purchased deposit intangible		39		97
AMT credit carryover		45		204
Other		46		20
Total deferred tax assets		5,844		5,039
Deferred tax liabilities:
Premises and equipment		300		253
FHLB stock		215		215
Prepaid expense and other		0		105
Unrealized gain on securities available for sale		1,069		332
Total deferred tax liabilities		1,584		905
Less — Valuation allowance		3,081		175
Net deferred tax asset	$	1,179	$	3,959

Primarily due to net operating loss carryovers in 2011, the Company’s net deferred tax asset (prior to any valuation allowance) increased to $5,159. All available evidence, both positive and negative, was considered to determine whether any impairment of this asset should be recognized. Based on consideration of the available evidence including historical losses which must be treated as substantial negative evidence and the potential of future taxable income, a $3,081 valuation allowance has been recognized to adjust deferred tax assets to the amount of net operating losses that are expected to be realized. If realized, the tax benefit for this item will reduce current tax expense for that period.

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

At December 31, 2011, federal tax returns remained open for Internal Revenue Service review for tax years after 2007, while state tax returns remain open for review by state taxing authorities for tax years after 2006. There were no federal or state income tax audits being conducted at December 31, 2011.

Note 13 — Self-Funded Insurance

Effective January 1, 2009, the Company moved to a fully insured HMO health insurance plan. Expenses under this plan were expensed as incurred and based upon actual claims paid, reinsurance premiums, administration fees, and unpaid claims at year-end. The Company purchased reinsurance to cover catastrophic individual claims over $30. Health care expense for 2009 was $738. During 2009, the Company recovered $140, which represented the remaining balance of the self-funded health insurance fund after all outstanding claims and expenses were paid.

Note 14 — Retirement Plans

The Company sponsors a defined contribution plan referred to as the Profit Sharing and 401(k) Plan covering substantially all full-time employees. The plan consists of a fixed contribution and a discretionary matching contribution by the Company. In 2011, 2010 and 2009, the Company made the fixed contribution of 1% of eligible employees’ annual pay and matched 100% of the first 2% of employees’ deferrals and 50% on the next 4% of employees’ deferrals to the plan up to a 4% matching contribution. Total expense associated with the plan was $281, $274, and $289 for the years ended December 31, 2011, 2010, and 2009, respectively. The Company has a nonqualified deferred directors’ fee compensation plan which permits directors to defer all or a portion of their compensation into a stock equivalent account or a cash account. The benefits are payable after a director’s resignation from the Board of the Company in a lump-sum or in installments over a period not in excess of five years. Included in other liabilities is the estimated present value of future payments of $577 and $697 at December 31, 2011 and 2010, respectively. The expense associated with the deferred stock account is impacted by the market price of the Company’s stock. Expense, including directors’ fees, associated with this plan was $46, $171, and $25 in 2011, 2010, and 2009, respectively.

Note 15 — Employee Stock Purchase, Stock Option, and Other Stock Purchase Plans

Employee Stock Purchase Plan

Under the Company’s Employee Stock Purchase Plan, the Company is authorized to issue up to 50,000 shares of common stock to its full-time employees, nearly all of whom are eligible to participate. Under the terms of the plan, employees can choose each year to have up to 5% of their annual gross earnings withheld to purchase the Company’s common stock. Stock is purchased quarterly by employees under the plan. The purchase price of the stock is 95% of the lower of its market value on the first payroll date of the quarterly offering period or the market price on the close of business on the day before the last quarterly payroll date. There were 4,997 shares purchased in 2011. Approximately 30% of eligible employees participated in the plan during 2011. The Employee Stock Purchase Plan was discontinued in 2012.

Stock Option Plan

Under the terms of an incentive stock option plan, 260,154 shares of unissued common stock are reserved for options to officers and key employees of the Company at prices not less than the fair market value of the shares at the date of the grant. All options granted after January 1, 2006 are nonqualified options and become exercisable over a four-year period following a one-year waiting period from the grant date. These options expire ten years after the grant date.

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

The fair value of stock options granted in 2009 was estimated on the date of grant using the Black-Scholes option pricing model. There were no stock options granted in 2011 and 2010. The following assumptions were made in estimating the fair value for options granted at December 31:

	2009
Dividend yield		1.89	%
Risk-free interest rate		3.00	%
Expected volatility		29.87	%
Weighted average expected life (years)		7
Weighted average per share fair value of options	$	2.71

Total compensation expense $22 and $24 was recognized during 2010 and 2009, respectively. There was no compensation expense recognized in 2011. As of December 31, 2011, there was $1 of total unrecognized compensation cost related to nonvested share-based compensation arrangements, which is expected to be recognized in 2012. Changes in estimated forfeitures will be recognized in the period of change and will also impact the amount of stock compensation expense to be recognized in future periods.

The following table summarizes information regarding the Company’s stock options outstanding at December 31, 2011:

	Outstanding Options						Exercisable Options
	Options Outstanding		Weighted Average Exercise Price		Remaining Life (Years)		Options Exercisable		Weighted Average Exercise Price
Range of Exercise Prices:
$9.25 to $36.00		37,406	$	26.47		5.5		31,969	$	27.98

The intrinsic value of all outstanding options and exercisable options as of December 31, 2011, was $0.

A summary of the Company’s stock option activity for 2011, 2010, and 2009, is presented below.

			Weighted Average Price
December 31, 2008	67,174		$	28.12
Options granted	6,000			9.25
Options forfeited	(10,571	)		26.81
December 31, 2009	62,603		$	26.54
Options granted	0			0.00
Options forfeited	(4,698	)		26.71
December 31, 2010	57,905		$	26.52
Options granted	0			0.00
Options forfeited	(20,499	)		26.47
December 31, 2011	37,406		$	26.55

A summary of nonvested shares as of December 31, 2011, and changes during the year is presented below.

			Weighted Average Fair Value
December 31, 2010	16,750		$	296
Options granted	0			0
Options vested	(1,313	)		(38	)
Options forfeited	(10,000	)		(178	)
December 31, 2011	5,437		$	80

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

The Company’s incentive stock option plan has expired and no new grants to officers and key employees will be made under that plan.

Note 16 — Stockholders’ Equity

The Company’s Articles of Incorporation, as amended, authorized the issuance of 10,000 shares of Series A Preferred Stock and 500 shares of Series B Preferred Stock. On February 20, 2009, under the United States Department of the Treasury (“Treasury”) Capital Purchase Plan (“CPP”) whereby the Treasury made direct equity investment into qualifying financial institutions in the form of preferred stock, the Company issued 10,000 shares of Series A Preferred Stock and a warrant to purchase 500 shares of Series B Preferred Stock (together with the Series A Preferred Stock, the “TARP Preferred Stock”), which was immediately exercised, to the Treasury. Total proceeds received were $10,000. The proceeds received were allocated between the Series A Preferred Stock and the Series B Preferred Stock based upon their relative fair values, which resulted in the recording of a discount on the Series A Preferred Stock and a premium on the Series B Preferred Stock. The discount and premium will be amortized over five years. The allocated carrying value of the Series A Preferred Stock and Series B Preferred Stock on the date of issuance (based on their relative fair values) was $9,442 and $558, respectively. Cumulative dividends on the Series A Preferred Stock will accrue and be payable quarterly at a rate of 5% per annum for five years. The rate will increase to 9% per annum thereafter if the shares are not redeemed by the Company. The Series B Preferred Stock dividends will accrue and be payable quarterly at 9%. All $10,000 of the TARP Preferred Stock qualifies as Tier 1 Capital for regulatory purposes at the Company.

For as long as the TARP Preferred Stock owned by the Treasury is outstanding, no dividends may be declared or paid on junior preferred shares, preferred shares ranking equal to the TARP Preferred Stock, or common shares, nor may the Company repurchase or redeem any such shares, unless all accrued and unpaid dividends for all past dividend periods on the TARP Preferred Stock are fully paid. The consent of the Treasury was required for any increase in the quarterly dividends of the Company’s common stock or for any share repurchases of junior preferred or common shares, until February 20, 2012. Participation in this program also subjects the Company to certain restrictions with respect to the compensation of certain executives.

The American Recovery and Reinvestment Act of 2009 (“ARRA”) requires the Treasury, subject to consultation with appropriate banking regulators, to permit participants in the CPP to repay any amounts previously received without regard to whether the recipient has replaced such funds from any other source or to any waiting period. All redemptions of the Trust Preferred Stock shall be at 100% of the issue price, plus any accrued and unpaid dividends. The Trust Preferred Stock is nonvoting, other than for class voting rights on any authorization or issuance of senior ranking shares, any amendment to its rights, or any merger, exchange or similar transaction which would adversely affect its rights.

The Company’s ability to pay dividends depends in part upon the receipt of dividends from the Bank and these dividends are subject to limitation under banking laws and regulations. Pursuant to an agreement (the “Agreement”) with the FDIC and Wisconsin Department of Financial Institutions (“WDFI”), the Bank needs the written consent of its regulators to pay dividends to the Company. The Bank has not paid dividends to the Company since 2006. Additionally, on May 10, 2011, the Company entered into a formal written agreement (the “Company Agreement”) with the Federal Reserve Bank of Minneapolis (the “Federal Reserve”). Pursuant to the written agreement at the holding company level, the Company needs the written consent of the Federal Reserve to pay dividends to our stockholders. We are also prohibited from paying dividends on our common stock if we fail to make distributions or required payments on the Debentures or on the TARP Preferred Stock. In consultation with the Federal Reserve, on May 12, 2011, the Company exercised its rights to suspend dividends on the outstanding TARP Preferred Stock and has also elected to defer interest on the Debentures. Under the terms of the Debentures, the Company is allowed to defer payments of interest for 20 quarterly periods without default or penalty, but such amounts will continue to accrue. Also during the deferral period, the Company generally may not pay cash dividends on or repurchase its common stock or preferred stock, including the TARP Preferred Stock. Dividend payments on the TARP Preferred Stock may be

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

deferred without default, but the dividend is cumulative and therefore will continue to accrue and, if the Company fails to pay dividends for an aggregate of six quarters, whether or not consecutive, the holder will have the right to appoint representatives to the Company’s board of directors. The terms of the TARP Preferred Stock also prevent the Company from paying cash dividends on or repurchasing its common stock while dividends are in arrears. Therefore, the Company will not be able to pay dividends on its common stock until it has fully paid all accrued and unpaid dividends on the Debentures and the TARP Preferred Stock. On December 31, 2011, the Company had $485 accrued and unpaid dividends on the TARP Preferred Stock and $146 accrued and unpaid interest due on the Debentures.

Note 17 — Regulatory Matters

Regulatory Capital Requirements

The Company and the Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. These requirements take into account risk attributable to balance sheet assets and off-balance sheet activities. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of tier 1 capital to average assets (as defined). Further, on November 9, 2010, the Bank entered into an agreement with the FDIC and WDFI to, among other things, maintain certain heightened regulatory capital ratios. Management believes, as of December 31, 2011 and 2010, that the Company and the Bank meet all capital adequacy requirements to which it is subject, and exceeded the minimum regulatory capital ratios that financial institutions must meet to be categorized as well capitalized under the regulatory framework for prompt corrective action.

Under the terms of the Agreement, the Bank is required to: (i) maintain ratios of Tier 1 capital to each of total assets and total risk-weighted assets of at least 8.5% and 12%, respectively; (ii) refrain from declaring or paying any dividend without the written consent of the FDIC and WDFI; and (iii) refrain from increasing its total assets by more than 5% during any three-month period without first submitting a growth plan to the FDIC and WDFI. Additionally, the Bank is required to develop and maintain a number of policies and procedures and to take certain actions related to its loan portfolio and budgeting process, all as described in more detail in the Agreement.

In addition to the Bank’s Agreement with its regulators, on May 10, 2011, the Company entered into the Company Agreement with its primary regulator, the Federal Reserve, to help ensure the financial soundness of the Company and the Bank. Pursuant to the Company Agreement, the Company has agreed to take certain actions and operate in compliance with the Company Agreement’s provisions during its terms. Specifically, under the terms of the Company Agreement, the Company is required to: (i) ensure the Bank complies with the Agreement; (ii) refrain from declaring or paying any dividend on its capital stock, taking any dividend from the Bank, or making any distributions on its subordinated debentures or the trust preferred securities related thereto issued by its nonbank subsidiary, each without the written consent of the Federal Reserve; (iii) refrain from incurring, increasing or guaranteeing any debt without the written consent of the Federal Reserve; (iv) refrain from purchasing or redeeming any shares of its capital stock without the written consent of the Federal Reserve; and (v) develop certain plans and projections with respect to its capital levels and cash flows, all as described in more detail in the Company Agreement.

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

	Actual					For Capital Adequacy Purposes (1)					To Be Well Capitalized Under Prompt Corrective Action Provisions (2)
	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2011
Mid-Wisconsin Financial Services, Inc.
Tier 1 to average assets	$	46,729		9.6	%	$	19,396		4.0	%
Tier 1 risk-based capital ratio		46,729		14.3	%		13,071		4.0	%
Total risk-based capital ratios		50,884		15.6	%		26,142		8.0	%
Mid-Wisconsin Bank
Tier 1 to average assets	$	41,736		8.7	%	$	19,261		4.0	%	$	40,929		8.5	%
Tier 1 risk-based capital ratio		41,736		12.9	%		12,946		4.0	%		19,419		6.0	%
Total risk-based capital ratios		45,853		14.2	%		25,891		8.0	%		38,837		12.0	%

December 31, 2010
Mid-Wisconsin Financial Services, Inc.
Tier 1 to average assets	$	50,575		10.0	%	$	20,143		4.0	%
Tier 1 risk-based capital ratio		50,575		14.2	%		14,252		4.0	%
Total risk-based capital ratios		55,091		15.5	%		28,504		8.0	%
Mid-Wisconsin Bank
Tier 1 to average assets	$	44,787		9.0	%	$	20,024		4.0	%	$	42,552		8.5	%
Tier 1 risk-based capital ratio		44,787		12.7	%		14,140		4.0	%		21,210		6.0	%
Total risk-based capital ratios		49,268		13.9	%		28,280		8.0	%		42,420		12.0	%

(1)

(2)

Prompt corrective action provisions are not applicable at the bank holding company level.

The Company has a Dividend Reinvestment Plan which provides shareholders the opportunity to automatically reinvest their cash dividends in shares of the Company’s common stock. Common stock shares issued under the plan will be either newly issued shares or shares purchased for plan participants in the open market. In accordance with the plan, 150,000 shares of common stock are reserved at December 31, 2011.

Note 18 — Accumulated Other Comprehensive Income (Loss)

Comprehensive income (loss) is shown in the consolidated statements of changes in stockholders’ equity. The Company’s accumulated other comprehensive income (loss) is comprised of the unrealized gain or loss on securities available-for-sale, net of the tax effect and a reclassification adjustment for losses realized in income. A summary of activity in accumulated other comprehensive income (loss) follows.

	2011			2010			2009
Accumulated other comprehensive income at beginning	$	590		$	1,056		$	598
Activity:
Reclassification for (gains) losses on sale of investments included in income		55			(1,054	)		(449	)
Unrealized gain (loss) on securities available for sale		1,697			(58	)		872
Reclassification for impairment losses included in income		0			412			301
Tax effect		(737	)		234			(266	)
Other comprehensive income (loss)		1,015			(466	)		458
Accumulated other comprehensive income at end	$	1,605		$	590		$	1,056

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

Note 19 — Commitments and Contingencies

Credit Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets.

The Company uses the same credit policies and approval process in making commitments and conditional obligations as it does for on-balance sheet instruments. The Company’s exposure to credit loss in the event of nonperformance by the other party to these financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The following is a summary of lending-related commitments at December 31:

	2011		2010
Commitments to extend credit:
Fixed rate	$	17,163	$	25,073
Adjustable rate		23,515		33,406
Standby and irrevocable letters of credit — Fixed rate		3,737		3,921
Credit card commitments		3,541		3,776

Standby and irrevocable letters of credit are conditional lending commitments used by the Company to guarantee the performance of a customer to a third party. Generally, all standby letters of credit issued have expiration dates within one year. The credit risk involved in issuing standby and irrevocable letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company generally holds collateral supporting these commitments. Standby letters of credit are not reflected in the consolidated financial statements since recording the fair value of these guarantees would not have a significant impact on the consolidated financial statements.

Credit card commitments are commitments of credit issued by the Company and serviced by Elan Financial Services. These commitments are unsecured.

Contingent Liabilities

Note 20 — Fair Value Measurements

The FASB issued accounting guidance which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This guidance emphasized that fair value (i.e., the price that would be received in an orderly transaction that is not a forced liquidation or distressed sale at the measurement date), among other things, is based on exit price versus entry price, and is a market-based measurement, not an entity-specific measurement. When considering the assumption that market participants would use in pricing the asset or liability, the guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). The fair value hierarchy prioritizes inputs used to measure fair value into three broad levels.

Level 1 — Fair value measurement is based on quoted prices for identical assets or liabilities in active markets.

Level 2 — Fair value measurement is based on: 1) quoted prices for similar assets or liabilities in active markets; 2) quoted prices for similar assets or liabilities in markets that are not active; or 3) valuation models and methodologies for which all significant assumptions are or can be corroborated by observable market data.

Level 3 — Fair value measurement is based on valuation models and methodologies that incorporate unobservable inputs, which are typically based on an entity’s own assumptions, as there is little related market activity.

Some assets and liabilities, such as securities available-for-sale, are measured at fair values on a recurring basis under accounting principles generally accepted in the United States. Other assets and liabilities, such as loans held for sale, impaired loans and OREO, are measured at fair values on a nonrecurring basis.

In instances where the determination of the fair value measurements is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considerations specific to the asset or liability.

Following is a description of the valuation methodology used for the Company’s more significant instruments measured on a recurring and nonrecurring basis at fair value, as well as the classification of the asset or liability within the fair value hierarchy:

Investment securities available-for-sale — Securities available-for-sale may be classified as Level 1, Level 2, or Level 3 measurements within the fair value hierarchy. Level 1 investment securities include equity securities traded on a national exchange. The fair value measurement of a Level 1 security is based on the quoted price of the security. The fair value measurement of a Level 2 security is obtained from an independent pricing service and is based on recent sales of similar securities and other observable market data. Examples of these investment securities include U.S. government and agency securities, obligations of states and political subdivisions, corporate debt securities, and mortgage related securities. In certain cases where there is limited activity or less transparency around inputs to the estimated fair value, securities are classified within Level 3 of the fair value hierarchy. The fair value measurement of a Level 3 security is based on a discounted cash flow model that incorporates assumptions market participants would use to measure the fair value of the security.

Loans held for sale — Loans held for sale, which consist generally of current production of certain fixed-rate, first-lien residential mortgage loans, are carried at the lower of cost or estimated fair value. The estimated fair value is based on current secondary market prices for similar loans, which is considered a Level 2 nonrecurring fair value measurement.

The fair value of loans held for sale is based on observable current prices in the secondary market in which loans trade. All loans held for sale are categorized based on commitments received from secondary sources that the loans qualify for placement at the time of underwriting and at an agreed upon price. A gain or loss is recognized at the time of sale reflecting the present value of the difference between the contractual interest rate of the loan and the yield to investors.

Impaired loans — The Company considers a loan impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the note agreement, including principal and interest. Loans considered to be impaired are measured at fair value on a nonrecurring basis. The fair

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

value measurement of an impaired loan is based on the fair value of the underlying collateral. Fair value measurements of underlying collateral that utilize observable market data such as independent appraisals reflecting recent comparable sales are considered Level 2 measurements. Other fair value measurements that incorporate estimated assumptions market participants would use to measure fair value are considered Level 3 measurements.

OREO — Real estate acquired through or in lieu of loan foreclosure is not measured at fair value on a recurring basis. However, OREO is initially measured at fair value, less estimated costs to sell when it is acquired and is also measured at fair value, less estimated costs to sell if it becomes subsequently impaired.

The fair value measurement for each property may be obtained from an independent appraiser or prepared internally. Fair value measurements obtained from independent appraisers are generally based on sales of comparable assets and other observable market data and are considered Level 2 measurements. Fair value measurements prepared internally are based on observable market data but include significant unobservable data and are therefore considered Level 3 measurements.

Information regarding the fair value of assets measured at fair value on a recurring basis as of December 31, 2011, and December 31, 2010, is as follows:

			Recurring Fair Value Measurements Using
	Assets Measured at Fair Value		Quoted Price in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
December 31, 2011
Investment securities available for sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	18,808	$	0	$	18,808	$	0
Mortgage-backed securities		67,653		0		67,641		12
Obligations of states and political subdivisions		22,932		0		22,405		527
Corporate debt securities		832		0		7		825
Total debt securities	$	110,225	$	0	$	108,861	$	1,364
Equity securities		151		0		51		100
Total investment securities available-for-sale	$	110,376	$	0	$	108,912	$	1,464
December 31, 2010
Investment securities available for sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	22,567	$	0	$	22,567	$	0
Mortgage-backed securities		56,916		0		56,205		711
Obligations of states and political subdivisions		20,715		0		20,188		527
Corporate debt securities		961		0		0		961
Total debt securities	$	101,159	$	0	$	98,960	$	2,199
Equity securities		151		0		51		100
Total investment securities available-for-sale	$	101,310	$	0	$	99,011	$	2,299

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

The table below presents a roll forward of the balance sheet amounts for the years ended December 31, 2011 and 2010, for assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

Assets Measured at Fair Value Using Significant Unobservable Inputs (Level 3)
	2011			2010
Balance at beginning of year	$	2,299		$	3,119
Total gains or losses (realized/unrealized)
Included in earnings		(55	)		(412	)
Included in other comprehensive income		7			273
Principal payments		(146	)		(693	)
Sales		(641	)		0
Transfers in and/or out of Level 3		0			12
Balance at end of year	$	1,464		$	2,299

Information regarding the fair values of assets measured at fair value on a nonrecurring basis as of December 31, 2011, and December 31, 2010, is as follows:

			Nonrecurring Fair Value Measurements Using
	Assets Measured at Fair Value		Quoted Price in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
December 31, 2011
Loans held for sale	$	2,163	$	0	$	2,163	$	0
Impaired loans	$	14,001	$	0	$	14,001	$	0
OREO	$	4,404	$	0	$	4,404	$	0
December 31, 2010
Loans held for sale	$	7,444	$	0	$	7,444	$	0
Impaired loans	$	7,808	$	0	$	7,361	$	447
OREO	$	4,230	$	0	$	4,230	$	0

At December 31, 2011 loans with a carrying amount of $17,301 were considered impaired and were written down to their estimated fair value of $14,001. As a result, the Company recognized a specific valuation allowance against these impaired loans totaling $3,300. At year end December 31, 2010 loans with a carrying amount of $9,749 were considered impaired and were written down to their estimated fair value of $7,808. As a result, the Company recognized a specific valuation allowance against these impaired loans totaling $1,941.

In 2011, the Bank acquired OREO of $2,631 measured at fair value less selling costs. In addition, an impairment write down of $628 was made against these as well as some of the OREO properties acquired in prior years and charged to earnings for the year ended December 31, 2011. In 2010, the Bank acquired OREO of $4,965 measured at fair value less selling costs. In addition, an impairment write down of $159 was made against these as well as some of the OREO properties acquired in prior years and charged to earnings for the year ended December 31, 2010.

The Company is required to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Company’s financial instruments.

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

The estimated fair value of the Company’s financial instruments on the balance sheet at December 31, were as follows:

	2011				2010
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and short-term investments	$	31,360	$	31,360	$	41,983	$	41,983
Securities and other investments		112,992		112,992		103,926		103,926
Net loans		322,210		319,968		337,143		333,665
Accrued interest receivable		1,640		1,640		1,853		1,853
Financial liabilities:
Deposits		381,620		383,520		400,610		401,190
Short-term borrowings		13,655		13,655		9,512		9,512
Long-term borrowings		40,061		42,525		42,561		45,026
Subordinated debentures		10,310		4,818		10,310		6,785
Accrued interest payable		878		878		992		992

The Company estimates fair value of all financial instruments regardless of whether such instruments are measured at fair value. The following methods and assumptions were used by the Company to estimate fair value of financial instruments not previously discussed.

Cash and short-term investments — The carrying amounts reported in the consolidated balance sheets for cash and due from banks, interest-bearing deposits in other financial institutions, federal funds sold and securities purchased under agreements to sell approximate the fair value of these assets.

Securities and other investments — The fair value of investment securities available-for-sale is based on quoted prices in active markets, or if quoted prices are not available for a specific security, the fair values are estimated by using pricing models, quoted prices with similar characteristics, or discounted cash flows.

Net loans — Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, residential mortgage, and other consumer. The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan. The estimate of maturity is based on the Company’s repayment schedules for each loan classification. In addition, for impaired loans, marketability and appraisal values for collateral were considered in the fair value determination.

Deposits — The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, savings, NOW accounts, and money market accounts, is equal to the amount payable on demand at the reporting date. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate reflects the credit quality and operating expense factors of the Company.

Short-term borrowings — The carrying amount reported in the consolidated balance sheets for short-term borrowings approximates the liability’s fair value.

Long-term borrowings — The fair values are estimated using discounted cash flow analyses based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

Subordinated debentures — The fair value is estimated by discounting future cash flows using the current interest rates at which similar borrowings would be made.

Accrued interest — The carrying amount of accrued interest approximates its fair value.

Off-balance sheet instruments — The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, the current interest rates, and the present creditworthiness of the counter parties. Since this amount is immaterial, no amounts for fair value are presented.

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

Limitations — Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of particular financial instruments. Fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include premises and equipment, intangibles, other assets and other liabilities. In addition, the tax ramifications related to the realization of the unrealized gains or losses can have a significant effect on fair value estimates and have not been considered in the estimates.

Because of the wide range of valuation techniques and the numerous assumptions which must be made, it may be difficult to compare our Company’s determination of fair value to that of other financial institutions. It is important that the many assumptions discussed above be considered when using the estimated fair value disclosures and to realize that because of the uncertainties, the aggregate fair value should in no way be construed as representative of the underlying value of the Company.

Note 21 — Condensed Financial Information — Parent Company Only

	Balance Sheets December 31, 2011 and 2010
	2011		2010
Assets
Cash and due from banks	$	2,743	$	3,488
Investment in bank subsidiary		44,563		46,670
Investment in nonbank subsidiary		310		310
Investment securities available-for-sale, at fair value		100		100
Premises and equipment, net		2,927		3,027
Other assets		17		48
Total assets	$	50,660	$	53,643
Liabilities and Stockholders’ Equity
Subordinated debentures	$	10,310	$	10,310
Accrued interest payable		154		8
Accrued expense and other liabilities		683		355
Total liabilities		11,147		10,673
Stockholders’ equity		39,513		42,970
Total liabilities and stockholders’ equity	$	50,660	$	53,643

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

Note 21 — Condensed Financial Information — Parent Company Only (Continued)

	Statements of Income (Loss) For the Years Ended December 31,
	2011			2010			2009
Income:
Interest	$	10		$	19		$	51
Management and service fees from subsidiaries		192			165			180
Rental income		202			196			164
Other		5			18			21
Total income		409			398			416
Expense:
Interest on subordinated debentures		183			595			614
Salaries and employee benefits		276			412			252
Other		284			291			348
Total expense		743			1,298			1,214
(Loss) before income taxes and equity in undistributed income (loss)		(334	)		(900	)		(798	)
Income tax (benefit)		0			(354	)		(316	)
Loss before equity in undistributed net income (loss) of subsidiary		(334	)		(546	)		(482	)
Equity in undistributed net income (loss) of subsidiary		(3,623	)		1,289			(2,006	)
Net income (loss)		(3,957	)		743			(2,488	)
Preferred stock dividends, discount and premium		(644	)		(641	)		(545	)
Net income (loss) available to common equity	$	(4,601	)	$	102		$	(3,033	)

Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010, and 2009 (In thousands, except per share data)

Note 21 — Condensed Financial Information — Parent Company Only (Continued)

	Statements of Cash Flows For the Years Ended December 31,
	2011			2010			2009
Increase (decrease) in cash and due from banks:
Cash flows from operating activities:
Net income (loss)	$	(3,957	)	$	743		$	(2,488	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		89			99			108
Stock-based compensation		0			22			24
(Equity) loss in undistributed net income of subsidiary		3,623			(1,289	)		1,806
Changes in operating assets and liabilities:
Other assets		31			279			307
Other liabilities		65			(33	)		4
Net cash (used in) operating activities		(149	)		(179	)		(239	)
Cash flows from investing activities:
Investment in bank subsidiary		(500	)		(2,000	)		(5,500	)
Capital expenditures		(11	)		(64	)		(40	)
Proceeds from sale of premises and equipment		22			0			0
Net cash used in investing activities		(489	)		(2,064	)		(5,540	)
Cash flows from financing activities:
Proceeds from issuance of preferred stock and warrants		0			0			10,000
Proceeds from stock benefit plans		29			32			35
Cash dividends paid preferred stock		(136	)		(545	)		(401	)
Cash dividends paid common stock		0			0			(181	)
Net cash provided by (used in) financing activities		(107	)		(513	)		9,453
Net increase (decrease) in cash and due from banks		(745	)		(2,756	)		3,674
Cash and due from banks at beginning of year		3,488			6,244			2,570
Cash and due from banks at end of year	$	2,743		$	3,488		$	6,244

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures : As of the end of the period covered by this report, management, under the supervision, and with the participation, of our Prinicipal Executive Officer and Principal Accounting Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) pursuant to Exchange Act Rule 13a-15. The Principal Executive Officer and the Principal Accounting Officer concluded that our disclosure controls and procedures were effective as of December 31, 2011.

REPORT BY MID-WISCONSIN FINANCIAL SERVICES, INC. MANAGEMENT
ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining an effective system of internal control over financial reporting, as such term is defined in section 13a-15f of the Securities and Exchange Act of 1934. The Company’s system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. There are inherent limitations in the effectiveness of any system of internal control over financial reporting, including the possibility of human error and circumvention or overriding of controls. Accordingly, even an effective system of internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the Company’s system of internal controls over financial reporting as of December 31, 2011. This assessment was based on criteria for effective internal control over financial reporting described in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that as of December 31, 2011, the Company maintained effective internal control over financial reporting based on those criteria.

This Annual Report on Form 10-K does not include an attestation report of the Company’s registered accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the Securities and Exchange Commission’s rules permitting the Company to provide only management’s report in this Annual Report.

Changes in Internal Control Over Financial Reporting : There were no changes in the internal control over financial reporting during the quarter ended December 31, 2011, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information in the Company’s Proxy Statement, prepared for the 2012 Annual Meeting of Shareholders, which contains information concerning directors and executive officers of the Company under the caption “Proposals No. 1 and 2-Election of Directors”; information concerning certain persons’ compliance with Section 16(a) reporting requirements under the caption “Beneficial Ownership of Common Stock-Section 16(a) Beneficial Ownership Reporting Compliance”; information concerning the Company’s code of ethics under the caption “Governance of the Company — Code of Ethics”; and information concerning the audit committee of Company under the caption “Governance of the Company — Committees and Meetings — Audit Committee” is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information in the Company’s Proxy Statement, prepared for the 2012 Annual Meeting of Shareholders, which contains information concerning director compensation under the caption “Director Compensation,” is incorporated herein by reference

The information in the Company’s Proxy Statement, prepared for the 2012 Annual Meeting of Shareholders, which contains information concerning executive officer compensation under the caption “Executive Officer Compensation,” is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information relating to security ownership of certain beneficial owners is incorporated in this Form 10-K by this reference to the disclosure in the 2012 Proxy Statement under the caption “Beneficial Ownership of Common Stock.”

The following table sets forth, as of December 31, 2011, information with respect to compensation plans under which our common stock is authorized for issuance:

Plan Category			Weighted-average exercise price of outstanding options, warrants and rights (b)			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	37,406	(1)	$	26.47	(1)		252,102	(2)
Equity compensation plans not approved by security holders	—			—		—

(1)

Shares issuable upon exercise of options granted pursuant to the 1999 Stock Option Plan.

(2)

Includes 222,748 shares issuable under the 1999 Stock Option Plan and 29,354 shares available under the Employee Stock Purchase Plan. The purchase period for shares under the Employee Stock Purchase Plan is quarterly; accordingly, there were no shares subject to option as of December 31, 2011, under the plan.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information relating to certain relationships and related transactions with directors and officers, and the independence of directors, is incorporated in the Form 10-K by this reference to the disclosure in the 2012 Proxy Statement under the caption “Governance of the Company.”

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information relating to the fees and services of our principal accountant is incorporated into this Form 10-K by this reference to the disclosure in the 2012 Proxy Statement under the sub-captions “Accountant Fees,” and “Audit Committee Pre-Approval Policy.”

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Documents filed as part of this report:

(1) Financial Statements

Description				Page

Mid-Wisconsin Financial Services, Inc. Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm					58
Consolidated Balance Sheets as of December 31, 2011 and 2010					59
Consolidated Statements of Income (Loss) for the years ended December 31, 2011, 2010, and 2009					60
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2011, 2010, and 2009					61
Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010, and 2009					62
Notes to Consolidated Financial Statements					64

(2) No financial statement schedules are required by Item 8 or Item 15(c)

(3)

Exhibits Required by Item 601 of Regulation S-K:

The following exhibits required by Item 601 of Regulation S-K are filed as part of this Form 10-K:

3.1

Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K dated February 20, 2009)

3.2

Bylaws, as amended February 20, 2009 (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K dated May 27, 2009)

4.1

Indenture, dated October 14, 2005, between Mid-Wisconsin Financial Services, Inc., as issuer, and Wilmington Trust Company, as trustee, including the form of Junior Subordinated Debenture as Exhibit A thereto (incorporated by reference to Exhibit 1.1 to the Registrant’s Current Report on Form 8-K dated October 14, 2005)

4.2

Guarantee Agreement, dated October 14, 2005, between Mid-Wisconsin Financial Services, Inc., as Guarantor, and Wilmington Trust Company, as Guarantee Trustee (incorporated by reference to Exhibit 1.2 to the Registrant’s Current Report on Form 8-K dated October 14, 2005)

4.3

Amended and Restated Declaration of Trust, dated October 14, 2005, among Mid-Wisconsin Financial Services, Inc., as Sponsor, Wilmington Trust Company, Institutional and Delaware Trustees, and Administrators named thereto, including the form of Trust Preferred Securities (incorporated by reference to Exhibit 1.3 to the Registrant’s Current Report on Form 8-K dated October 14, 2005)

4.4

Warrant to Purchase Preferred Stock (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated February 20, 2009)

4.5

Form of Certificate for Senior Preferred Stock (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K dated February 20, 2009)

4.6

Form of Certificate for Warrant Preferred Stock (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K dated February 20, 2009)

10.1*

Mid-Wisconsin Financial Services, Inc. 2011 Directors’ Deferred Compensation Plan, as amended and restated effective December 16, 2010 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated December 20, 2010)

10.2*

Director Retirement Bonus Policy as amended April 22, 2008 (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2008)

10.3*

Mid-Wisconsin Financial Services, Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000)

10.4*

Mid-Wisconsin Financial Services, Inc. 1999 Stock Option Plan, as last amended December 16, 2010 (incorporated by reference to Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K for the annual period ended December 31, 2010)

10.5*

Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004)

10.6*

Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006)

10.7*

Form of Letter Agreement with Senior Executive Officers (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K dated February 20, 2009)

10.8*

2007 Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2007)

10.9

Letter Agreement dated February 20, 2009, between Mid-Wisconsin Financial Services, Inc. and the United States Treasury, which includes the Securities Purchase Agreement attached thereto, with respect to the issuance and sale of the Fixed Rate Cumulative Perpetual Preferred Stock, Series A and Warrant Preferred Stock under the TARP Capital Purchase Program (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated February 20, 2009)

10.10

Consent Order with the Federal Deposit Insurance Corporation and the Wisconsin Department of Financial Institutions, dated November 9, 2010 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010)

10.11

Written Agreement by and between the Company and the Federal Reserve Bank of Minneapolis dated May 10, 2011 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011)

21.1

Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007)

23.1

Consent of Wipfli LLP

31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)

31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)

32.1

Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 USC Section 1350, as adopted pursuant to, Section 906 of Sarbanes-Oxley Act of 2002

99.1

Certification of Principal Executive Officer pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act of 2008

99.2

Certification of Principal Financial Officer pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act of 2008

101**

Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets at December 31, 2011 and 2010; (ii) Consolidated Statements of Income for the years ended December 31, 2011 and 2010; (iii) Consolidated Statements of Changes in Stockholders’ Equity

for the years ended December 31, 2011, 2010, and 2009; (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010, and 2009; and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

Denotes executive compensation plans and arrangements

As provided in Rule 406T of Regulation S-T, this information shall not be deemed “filed” for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, or otherwise subject to liability under those sections.

The exhibits listed above are available upon request in writing to William A. Weiland, Secretary, Mid-Wisconsin Financial Services, Inc., 132 West State Street, Medford, Wisconsin 54451.

(b)

Exhibits

See Item 15(a) (3)

(c)

Financial Schedules

Not applicable

100

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 19, 2012.

				MID-WISCONSIN FINANCIAL SERVICES, INC.

				/s/ SCOT G. THOMPSON
				Scot G. Thompson, Principal Executive Officer

				/s/ WILLIAM A. WEILAND
				William A. Weiland, Secretary and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant on March 19, 2012, and in the capacities indicated.

/s/ KIM A. GOWEY				/s/ SCOT G. THOMPSON
Kim A. Gowey, Chairman of the Board, and a Director				Scot G. Thompson, Principal Executive Officer

/s/ CHRISTOPHER J. GHIDORZI				/s/ JAMES P. HAGER
Christopher J. Ghidorzi, Director				James P. Hager, Director

/s/ BRIAN B. HALLGREN				/s/ KURT D. MERTENS
Brian B. Hallgren, Director				Kurt D. Mertens, Director

/s/ SIDNEY C. SCZYGELSKI				/s/ RHONDA R. KELLEY
Sidney C. Sczygelski, Director				Rhonda R. Kelley Principal Accounting Officer and Controller (Principal Financial Officer)

101

EXHIBIT INDEX†
to
FORM 10-K
of
MID-WISCONSIN FINANCIAL SERVICES, INC.
for the period ended December 31, 2011
Pursuant to Section 102(d) of Regulation S-T
(17 C.F.R. §232.102(d))

23.1

Consent of Wipfli LLP

31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)

31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)

32.1

Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 USC Section 1350, as adopted pursuant to, Section 906 of Sarbanes-Oxley Act of 2002

99.1

Certification of Principal Executive Officer pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act of 2008

99.2

Certification of Principal Financial Officer pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act of 2008

†Exhibits required by Item 601 of Regulation S-K which have been previously filed and are incorporated by reference are set forth in Part IV, Item 15 of the Form 10-K to which this Exhibit Index relates.

102

APPENDIX F

QUARTERLY REPORT OF MID-WISCONSIN FINANCIAL SERVICES, INC.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012
ON FORM 10-Q

(WITHOUT EXHIBITS)

UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2012

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from______________________to______________________

Commission file number 0-18542

MID-WISCONSIN FINANCIAL SERVICES, INC.

(Exact name of registrant as specified in its charter)

WISCONSIN (State or other jurisdiction of incorporation or organization)				06-1169935 (IRS Employer Identification No.)

132 West State Street Medford, WI 54451 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: 715-748-8300

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

(Do not check if a smaller reporting company)

Smaller reporting company

[X]

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes o No [X]

As of November 2, 2012 there were 1,657,119 shares of $0.10 par value common stock outstanding.

MID-WISCONSIN FINANCIAL SERVICES, INC.

TABLE OF CONTENTS

PAGE

FINANCIAL INFORMATION

8–24

25–51

OTHER INFORMATION

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements:

Mid-Wisconsin Financial Services, Inc. and Subsidiary
Consolidated Balance Sheets
(In thousands, except per share data)

	September 30, 2012 (Unaudited)			December 31, 2011 (Audited)
Assets
Cash and due from banks	$	11,896		$	18,278
Interest-bearing deposits in other financial institutions		21,042			10
Federal funds sold and securities purchased under agreements to sell		414			13,072
Investment securities available-for-sale, at fair value		110,335			110,376
Loans held for sale		2,287			2,163
Loans		307,589			329,863
Less: Allowance for loan losses		(10,529	)		(9,816	)
Loans, net		297,060			320,047
Accrued interest receivable		1,635			1,640
Premises and equipment, net		7,582			7,943
Other investments, at cost		1,613			2,616
Other real estate owned		4,472			4,404
Net deferred tax asset		0			1,179
Other assets		5,726			6,448
Total assets	$	464,062		$	488,176
Liabilities and Stockholders’ Equity
Noninterest-bearing deposits	$	71,071		$	70,790
Interest-bearing deposits		293,333			310,830
Total deposits		364,404			381,620
Short-term borrowings		13,167			13,655
Long-term borrowings		36,061			40,061
Subordinated debentures		10,310			10,310
Accrued interest payable		805			878
Accrued expenses and other liabilities		2,386			2,139
Total liabilities		427,133			448,663
Stockholders’ equity:
Series A preferred stock		9,832			9,745
Series B preferred stock		517			526
Common stock		166			166
Additional paid-in capital		11,945			11,945
Retained earnings		12,825			15,526
Accumulated other comprehensive income		1,644			1,605
Total stockholders’ equity		36,929			39,513
Total liabilities and stockholders’ equity	$	464,062		$	488,176
Series A preferred stock authorized (no par value)		10,000			10,000
Series A preferred stock issued and outstanding		10,000			10,000
Series B preferred stock authorized (no par value)		500			500
Series B preferred stock issued and outstanding		500			500
Common stock authorized (par value $0.10 per share)		6,000,000			6,000,000
Common stock issued and outstanding		1,657,119			1,657,119

The accompanying condensed notes to the unaudited consolidated financial statements are an integral part of
these statements.

ITEM 1. Financial Statements Continued:

Mid-Wisconsin Financial Services, Inc. and Subsidiary
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

	Three Months Ended September 30, 2012			Three Months Ended September 30, 2011			Nine Months Ended September 30, 2012			Nine Months Ended September 30, 2011
Interest Income
Loans, including fees	$	4,160		$	4,598		$	12,964		$	14,100
Securities:
Taxable		491			651			1,539			1,980
Tax-exempt		89			102			273			303
Other		23			17			60			149
Total interest income		4,763			5,368			14,836			16,532
Interest Expense
Deposits		636			1,104			2,324			3,573
Short-term borrowings		10			35			68			87
Long-term borrowings		372			410			1,129			1,223
Subordinated debentures		49			45			150			135
Total interest expense		1,067			1,594			3,671			5,018
Net interest income		3,696			3,774			11,165			11,514
Provision for loan losses		750			900			3,680			3,850
Net interest income after provision for loan losses		2,946			2,874			7,485			7,664
Noninterest Income
Service fees		235			226			633			731
Trust service fees		270			270			823			803
Investment product commissions		55			47			131			160
Mortgage banking		104			94			376			327
Loss on sale of investments		0			0			0			(55	)
Other		313			278			948			1,303
Total noninterest income		977			915			2,911			3,269
Noninterest Expense
Salaries and employee benefits		1,815			2,133			5,669			6,360
Occupancy		391			432			1,238			1,342
Data processing		161			167			477			501
Foreclosure/OREO expense		119			261			668			432
Legal and professional fees		227			219			668			610
FDIC expense		253			263			767			862
Other		573			709			1,971			2,333
Total noninterest expense		3,539			4,184			11,458			12,440
Income (loss) before income taxes		384			(395	)		(1,062	)		(1,507	)
Income tax (benefit) expense		3			(209	)		1,152			(761	)
Net income (loss)	$	381			($186	)		($2,214	)		($746	)
Preferred stock dividends, discount and premium		(163	)		(160	)		(487	)		(482	)
Net income (loss) available to common equity	$	218			($346	)		($2,701	)		($1,228	)
Income (loss) per common share:
Basic and diluted	$	0.13			($0.21	)		($1.63	)		($0.74	)
Cash dividends declared per common share	$	0.00		$	0.00		$	0.00		$	0.00

The accompanying condensed notes to the unaudited consolidated financial statements are an integral part of
these statements.

ITEM 1. Financial Statements Continued:

Mid-Wisconsin Financial Services, Inc. and Subsidiary
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Net income (loss)	$	381			($186	)		($2,214	)		($746	)
Other comprehensive income (loss), net of tax:
Investment securities available-for-sale:
Net unrealized gains (losses)		(8	)		540			64			2,081
Reclassification adjustment for net losses realized in earnings		0			0			0			33
Income tax benefit (expense)		4			(216	)		(25	)		(882	)
Total other comprehensive income (loss) net of tax		(4	)		324			39			1,232
Comprehensive income (loss)	$	377		$	138			($2,175	)	$	486

The accompanying condensed notes to the unaudited consolidated financial statements are an integral part of
these statements.

ITEM 1. Financial Statements Continued:

Mid-Wisconsin Financial Services, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders’ Equity
(In thousands)
(Unaudited)

	Preferred Stock					Common Stock
	Shares		Amount			Shares		Amount		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income		Totals
Balance, December 31, 2010		10.5	$	10,172			1,652	$	165	$	11,916	$	20,127		$	590	$	42,970
Comprehensive income:
Net loss													(746	)				(746	)
Other comprehensive income																1,232		1,232
Comprehensive income																		486
Accretion of preferred stock dividend				82									(82	)				0
Amortization of preferred stock premium				(8	)								8					0
Issuance of common stock:
Proceeds from stock purchase plans							3		0		21							21
Accrued and unpaid dividends — Preferred stock													(408	)				(408	)
Stock-based compensation											16							16
Balance, September 30, 2011		10.5	$	10,246			1,655	$	165	$	11,953	$	18,899		$	1,822		43,085

	Preferred Stock					Common Stock
	Shares		Amount			Shares		Amount		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income		Totals
Balance, December 31, 2011		10.5	$	10,271			1,657	$	166	$	11,945	$	15,526		$	1,605	$	39,513
Comprehensive loss:
Net loss													(2,214	)				(2,214	)
Other comprehensive income																39		39
Comprehensive loss																		(2,175	)
Accretion of preferred stock dividend				87									(87	)				0
Amortization of preferred stock premium				(9	)								9					0
Accrued and unpaid dividends — Preferred stock													(409	)				(409	)
Balance, September 30, 2012		10.5	$	10,349			1,657	$	166	$	11,945	$	12,825		$	1,644		36,929

The accompanying condensed notes to the unaudited consolidated financial statements are an integral part of
these statements.

	Nine Months Ended September 30, 2012			Nine Months Ended September 30, 2011
Cash flows from operating activities:
Net loss		($2,214	)		($746	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		705			815
Provision for loan losses		3,680			3,850
Provision for valuation allowance OREO		354			318
Loss on sale of investment securities		0			55
Gain on premises and equipment disposals		0			(35	)
(Gain) loss on sale of foreclosed OREO		2			(135	)
Stock-based compensation		0			16
Valuation allowance — deferred taxes		1,152			0
Changes in operating assets and liabilities
Loans held for sale		(124	)		5,992
Other assets		728			165
Other liabilities		(234	)		310
Net cash provided by operating activities		4,049			10,605
Cash flows from investing activities:
Net increase in interest-bearing deposits in other financial institutions		(21,032	)		(2	)
Net decrease in federal funds sold		12,658			18,504
Securities available for sale:
Proceeds from sales		0			641
Proceeds from maturities		27,561			22,229
Payment for purchases		(27,639	)		(32,709	)
FHLB stock redemption		1,003			0
Net (increase) decrease in loans		17,398			(5,147	)
Capital expenditures		(178	)		(505	)
Proceeds from sale of premises and equipment		17			178
Proceeds from sale of OREO		1,485			1,067
Net cash provided by investing activities		11,273			4,256
Cash flows from financing activities:
Net decrease in deposits		(17,216	)		(14,637	)
Net increase (decrease) in short-term borrowings		(488	)		1,715
Principal payments on long-term borrowings		(4,000	)		(2,500	)
Proceeds from stock benefit plans		0			21
Cash dividends paid on preferred stock		0			(408	)
Net cash used in financing activities		(21,704	)		(15,809	)
Net decrease in cash and due from banks		(6,382	)		(948	)
Cash and due from banks at beginning of period		18,278			9,502
Cash and due from banks at end of period	$	11,896		$	8,554
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	3,744		$	5,166
Noncash investing and financing activities:
Loans transferred to OREO	$	2,158		$	2,203
Loans charged-off		3,257			4,406
Dividends declared but not yet paid on preferred stock		409			340
Loans made in connection with the sale of OREO		249			75

Exhibit 3.1

DFIICORP/38 RECORD 2011 United States of America State of Wisconsin DEPARTMENT OF FINANCIAL INSTITUTIONS To All to Whom These Presents Shall Come, Greeting: I, RAY ALLEN, Deputy Secretary, Department of Financial Institutions, do hereby certify that the annexed copy has been compared by me with the record on file in the Corporation Section of the Division of Corporate & Consumer Services of this department and that the same is a true copy thereof and the whole of such record; and that I am the legal custodian of said record, and that this certification is in due form. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the official seal of the Department. RAY ALLEN, Deputy Secretary Department of Financial Institutions DATE: AUG 3 0 2011 BY: Effective July 1, 1996, the Department of Financial Institutions assumed the functions previously performed by the Corporations Division of the Secretary of State and is the successor custodian of corporate records formerly held by the Secretary of State.

RECEfVED MAR 1 3 2002 WISCONSIN DFI AMENDED AND RESTATED ARTICLES OF INCORPORATION OF GREEN BAY FINANCIAL CORPORATION TO BE KNOWN AS NICOLET BANKSHARES, INC. I. PURPOSE The Corporation is organized under the Wisconsin Business Corporation Law. The purpose of the Coxporation is to engage in any lawful act or activity for which corporations may be organized under the Wisconsin Business Corporation Law. The following amended and restated articles of incorporation supercede and take the place of the existing articles of incorporation and any amendments thereto. II.NAME The name of the Corporation is Nicolet Bankshares, Inc. III. CAPITAL STOCK (1) Authorized Capital. The Corporation is authorized to issue thirty million (30,000,000) shares of Common Stock, $.01 par value. (2) Rights of Common Stock. The rights and preferences of shares of Common Stock are as follows: (a) Voting. Except in the election of directors, as provided in Article 7 of these Articles, each share of Common Stock shall be entitled to one vote on all matters to be voted on by shareholders, (b) Dividends. The Board of Dircetors, in its discretion, may declare and authorize payment of cash dividends on the Common Stock at such times as it deems appropriate. The Corporation may issue any type of share dividend. (c) Other. The Board of Directors may, from time to time, prior to the issuance of shares, establish a series of Common Stock, having such preferences and rights as it may deem reasonably necessary to achieve or facilitate the accomplishment of lawful corporate business or financial objectives, and may

take such other action as allowed in Wis. Stat. § 180.0602(1) as amended from time to time. IV. NO PRE-EMPTIVE RIGHTS No holders of any stock of the Corporation shall have any pre-emptive or other subscription, purchase or conversion rights of any kind, nature or description whatsoever with respect to any unissued stock or of an additional stock issued by reason of any increase of the authorized capital stock of this Cotporation, or bonds, certificates or indebtedness, debentures or other securities whether or not convertible into stock of the Corporation. V. REGISTERRD OFFICE AND REGISTERED AGENT The address of the Corporation's registered office in the State of Wisconsin is 110 South Washington Street, Green Bay, Brown County, Wisconsin 54301. The name of its registered agent at such address is Michael E. Daniels. VI. INCORPORATOR The name and mailing address of the incorporator is as follows: NAME MAILING ADDRESS Kathryn L. Knudson Powell Goldstei1l, Frazer & Murphy LLP 191 Peaehtree Street, NE, 16th Floor Atlanta. GA 30303 This document was not drafted in Wisconsin. VII. DIRECTORS (l) Initial Board of Directors. The initial Board of Directors shall consist of two members who shall be and whose addresses are as follows: NAME MAILING ADDRESS Robert B. Atwell 3225 Delahaut Street Green Bay, Wisconsin 54301 Michael E. Daniels 2421 Wandering Springs Circle Green Bay, Wisconsin 54301

(2) Number and Tenure or Directors. The board of ditectors of the Corporation shall consist of not less than two nor more than twenty-five persons, the exact number to be fixed and determined from time to time by resolution of a majority of the full board of directors then in office. A director shall hold office until the annua1 meeting for the year in which his or her term expires and until his or her successor shall be duly elected and qualified. (3) Election of Directors. In a1l elections of directors, the number of votes each common shareholder may cast will be determined by multiplying the number of shares he or she owns by the number of directors to be elected. Those votes may be cumulated and cast for a single candidate or may be distributed among two or more candidates in the manner selected by the shareholder. VIII. DURATION The Corporation shall have perpetual existence. IX. MERGERS (a) Any merger or share exchange ofthe Corporation with or into any other corporation, or any sale, lease, exchange or other disposition of substantially all of the assets of the Corporation to any other corporation, person or other entity, the approval of the transaction shall require either: (i) the affirmative vote of two-thirds (2/3) of the directors of the Corporation then in office and the affirmative vote of a majority of the issued and outstanding shares of the corporation entitled to vote; or (ii) the affirmative vote of a majority of the directors of the Corporation then in office and the affirmative vote of the holders of at least two-thirds (2/3) of the issued and outstanding shares of the Corporation entitled to vote. x. CONSTlTIJENCIES The Board of Directors, when evaluating any offer of another party to do any of the following: (1) make a tender offer or exchange offer for my equity security of the Corporation; (2) merge, effect a share exchange or otherwise combine the Corporation with any other corporation; or

(3) purchase or othetwise acquire all or substantially all of the assets of the Corporationi sha11, in detennining what is in the best interests of the Corporation and its shareholders. give due consideration to all Iclevant factors. including without limitation: (a) the short-term and long-term social and economic effects on the employees. cuslomcn, shamholdm and other constituents of the Corporatiop and iq subsidiaries. and on the conununities within which the CoJPOTUion and itt subaidhmes operate (it being understood that any subsidiuy bank of the Corporation is charged with providing support to and being involved in the communities it serves); and (b) the consideration being offeIed by the other party in relation to the then-eummt value of the Corporation in a freely negotiated trausaction and in reJadon to the Board of Directors' then-estimate of the future value of the Corporation as an independent entity. (Signatures on Next Page)

Certificate This is to certify that the foregoing restrated articles of incorporation. A. Does not contain any admendments requiring shareholder approval, and were adopted on DATE by the board of directors or incorporators OR B. Contains one or more amendments to the articles of incorporation (NOTE: Select and mark (X) for A. or B. above. COMPLETE THIS SECTION only if you have marked “B” above. C. Executed on Date Signature Title: President Secretary or other officer title Printed name This document was drafted by (Name the individual who drafted the document) INSTRUCTIONS (Ref. sec. 180.1007 Wls. Stats. for document content)

The undersigned has executed these Amended and Restated Articles of Incorporation this 19 day of February, 2002. GREEN BAY FINANCIAL CORPORATION By: Robert B. Atwell President

$40.00 + $25.00 Restated Articles of Incorporation shop.180 STATE OF WISCONSIN FILED MAR 14 2002 DEPARTMENT OF FINANCIAL INSTITUTIONS Name change changes project offices despo PO BOX increases authorized shares from 10,00,000 shs as 01pv 2,000,000 shs as npv ts; 30,000,000 shs as 01pv

RECEIVED MAR 17 2005 WISCONSIN DFIARTICLES OF MERGER OF NICOLET BANKSHARES, INC. (surviving party to the merger) WITH NICOLET INTERIM CORPORATION (non-surviving party to the merger) Pursuant to the provisions of Section 180.11OS of1he Wisconsin Buainess Corporation Law, Nicolet Bankshares, lnc., a corporation organized and aistiDa under tho laws ofthe State of Wisconsin. hereby e:xecutes the following Articles ofMergcr: 1. Pursuant to aD Agn:cmcm and Plan ofReorpnizadoo, dated as ofDeocmbcr 15, 2004 (the IIAgroemd). at the effective time set forth in Scotion 5 ofthese Articles ofMeqcr, Nicolet Jnterim Corporation. a corporation orprized lIDd czistiD& UDder the laws ofthc State of W'1SC0118iD. will merge with IIIld into Nicolet Bankshares. Inc., a Wisconsin corpolatiOU (the · "Merpr"). 2 Nicolet Bancshares, Inc. will be the surviving entity in the merger. 3. A copy ofthe executed Agreement is attached as Appeodix A hereto. 4. The Merger was duly approved in accordance with Section 180.1103 of the Wisconsin business corporation law by the shareholder of Nicolet Bancshares Inc. at a special meeting of shareholders held on March 15, 2005 and was approved by the sole shareholder of Nicolet Intrrim Corporationby written consent dated March 16, 2005. The written consent executed by the sole sbareholder of Nicolet Interim Colporation complied in all respects with Section 180.0704 of the Wisconsin business corporation law. 5. The merger shall be effective at 11:59 p..m. on March 18, 2005.

IN WITNBSS WHEREOF, the Surviving Corporation has caused this Certificate of Merger to be executed in its name by its duly authorized officers as of the 18 th day of March, 2005. ATTEST: NICOLET BANKBIIARES, INC. By: Name: Michael E.Daniels Robert B.Atwell Secretary Chairman and Chief Executive Officer [CORPORATE SEAL] DOCUMENT DRAFTED BY: Attorney Fredrick L. Schmidt Liebmann, Conway, Olejniczak & Jerry, S.C. 231 South Adams Street Green Bay, WI 54301

APPENDIX A AGREEMENT AND PLAN OF REORGANIZATION THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Plan of Reorganization") it made and entered into as of the l5th day of December, 2004, by each between Nicolet Bancshare, Inc. (“Nicolet”), a bank holding company organized under the laws of the State of Wisconsin, and Nicolet Interm Corporation (“Interm”) a Wisconsin corporation. WITNESSETH WHEREAS. Nicolet and Interim have determined that in order to effect a recapitalization of Nicolet resulting in the suspension of its duties to file reports with the Securities and Exchange Commission, Nicolet should cause Interim to be organized as a Wisconsin corporation for the sole purpose of merging with and into Nicolet, with Nicolet being the surviving corporation; WHEREAS, the authorized capital stock of Nicolet consists of 30,000,000 shares of common stock ("Nicolet Cnmmon Stock"), $O.O1 par value, of which 2,975,454 shares are issued and outsta1lding; WHEREAS, the authorized capital stock of Interim consist of 1,000 shares of common stock ("Interim Common Stock"), $O.O1 par value, of which 100 shares are issued and outstanding; WHEREAS, the respective Boards of Directors of Nico1et and Interim deem it advisable and in the best intcrests of Nicolet and Interim and their respective shareholders that Interim be merged wi1h and into Nicolet; WHEREAS, the respective Boards of Directors of Nicolet and Interim by resolution duly adopted, have approved and adopted this Plan or Reorganization and directed that it be submited to the respective shareholders of Nicolet and Interim for their approval; and NOW, THEREFORE, in consideration of the premises, mutual convenants and agreements herein contained, and for the purpose of stating the method, terms and conditions of the merger provided for herein, the mode of carrying the same into effect, the manner and basis ofconva1ioa aad cxc""qilJl the sbafes ofNicolet Q)mmon S1ncIc aDd IDt.erim Common Stock as hereinafter provided, and such other provisions relating to the reorganization and merger as the parties deem necessary or desirable, the parties hereto agree as follows: SECTION 1 REORGANIZATION

Pursuant to the applicable provisions of Wisconsin law, Interim shall be merged with and into Nicolet (the "Reorganization"), Nicolet shall be the survivor of the merger (the "Surviving Corporation"). SECTION 2 EFFECTIVE DATE OF THE REORGANIZATION The merger of Interim with and into Nicolet shall be effective as of the date (the "Effective Date") specified in the articles or certificate of merger relating to the Reorganization as filed with the Wisconsin Department of Financial Institutions. SECTION 3 LOCATION, ARTICLES AND BYLAW, AND MANAGEMENT On the Effective Date: (a) The principal office of the Surviving Co1poration shall be located at 110 South Washington Street, Green Bay, Wisconsin 54301, or such other location where Nieco1et is located on the Effective Date of the Reorganization. (b) The Articles of Incorporation and Bylaws of the Surviving Corporation sha11 be the same Articles of Incorporation and Bylaws of Nico1et as are in effect on the Effective Date of the Reorganization. (c) The directors and officers of the Surviving Corporation shall be the directors and officers of Nicolet on the Effective Date of the Reorganization. All such directors and Officers of the Surviving Corporation shall serve until their respective successors are elected or appointed pursuant to the applicable provisions of the Articles and Bylaws of the Surviving Corporation. SECTION 4 EXISTENCE, RIGHTS, DUTIES, ASSETS, AND LIABILITIES (a) As of the Effective Date of the Reorganization, the existance of Nicolet shal1 continue in the Surviving Corporation. (b) As of the Effective Date of the Reorganization, the Surviving Corporation shall have, without further act or deed, all of the properties, rights, powers, trusts, duties and obligations of Nicolet and Interim. (c) As of the Effective Date of the Reorganization, the Surviving Corporation shall have the authority to engage only in such businesses and to exercise only such powers as are provided for in the Articles of 1ncorporation of the Surviving Corporation, and the Surviving Corporation sha11 be subject to the same prohibitions and limitations to which it would be subject upon original incorporation, except that the Surviving Corporation may

engage in any business and may exercise any right that Nico1et or Interim could lawfully have exercised or engaged in immediately prior to the Effective Date of the Reorganization. (d) No liability of N1colet or Interim or of any of their shareholders, directors or officers shall be affected by the Reorganization nor shall any lien on any property of Nico1et or Interim be inpaired by the Reorganization. Any claim existing or any action pending by or against Nicolet or Interim maybe be prosecuted to judgment as if the Reorganization had not taken place, or thc Surviving Corporation may be substituted in place of Nicolet or interim. SECTION 5 EFFECT OF MERGER ON INTERIM SHAREHOLDERS Each share of Interim Common Stock outstanding immediately prior 10 the Effective Date of the Reorganization sha1l be cancelled and shall no longer be outstanding SECTION 6 MANNER AND BASIS OF CONVERTNG SHARES OF NICOLET COMMON STOCK (a) Conversion of Shares. The shares of Nicolet Common Stook that are outstanding on the Effective Date of the Reorganization, excluding those shares of Nicolet Common Stock held by shareholders who have perfected dissenters’ rights of appraisal under the applicable provisions of Wisconsin law (the "Dissenters' Rights Provisions"), shall be converted or retained as follows: (1) Each share of Nicolet Common Stock held by a shareholder who is the record holder of 1,500 or fewer shares of Nico1et Common Stock shall be converted into the right to recieve cash, payable by the Surviving Corporation, in the amount of $18.25 per share of Nicolet Common Stock. (2) Each share of Nicolet Common Stock held of record by a shareholder who is the holder of more tbm 1,500 shares of Nicolet Common Stock shall remain outstanding and held by such shareho1der. (3) All treasury stock held by the Company shall remain treasury stock and shall be unaffected by this Plan of Reorgainzation. (b) Failure to Surrender Nicolet Common Stock Certificates. Until a Nicolet shareholder receiving cash in the Reorganization surrenders his or her Nicolet Common Stock certificate or certificates to Nicolet (or suitable arrangements are made to account for any lost, stolen or destroyed certificates according to Nicolet's usual procedures), the shareholder shall not be issued the cash (or any interest thereon) that such Nicolet Common Stock certificate entitles the shareholder to receive.

SECTION 7 ACQUISITION OF DISSENTRIES’ STOCK Nicolet shall pay to any shareholder of Nicolet who complies fully with the Dissenters’ Rights Provisions an amount of cash (as determined and paid under the terms of such Provisions) for his or her shares of Nicolet Common Stock. The shares of Nicolet Common Stock so acquired shall be cane1led. SECTION 8 FURTHER ACTIONS From time to time, as and when requested by the Surviving Corporation, or by its successors or assigns, Nicolet shall execute and deliver or cause to be executed and delivered all such deeds and other instruments, and shall take or cause to be taken all such other actions, as the Surviving Corporation, or its successors and assigns, may deem necessary or desirable in order to visit in and confirm to the Surviving Corporation, and its successors and assigns, title to and possession of all the property, rights, powers, trusts, duties and obligations referred to in Section 4 hereof and otherwise to carry out the intent and purpose of this Plan of Reorganization. SECTION 9 CONDITIONS PRECEDENT TO CONSUMMATION OF THE REORGANIZATION This Plan of Reorganization is subject to, and consummation of the Reorganization herein provided for is conditioned upon, the fulfillment prior to the Effective Date of the Reorganization of each of the following conditions: (a) Approval of the Plan of Reorganization by the shareholders of each of Nico1et and Interim in accordance with the provisions of applicable law and the provisions of the applicable constituent’s articles of incorporation, bylaws and other governing instruments; (b) The number of shares held by persons who have perfected dissenters’ rights of appraisal pursuant to the Dissenters’ Rights Provisions shall not be deemed by the Board of Directors to make consummation of this Plan of Reorganization inadvisable; (c) Procurement of any, consent, approval or ruling, governmental or otherwise, which is, or in the opinion of of counsel for Nicolet and Interim may be, necessary to permit or enable the Surviving Corporation, upon and after the Reorganization, to conduct all or any part of the business and activities conducted by the Nicolet prior to the Rcorganization.

SECTION 10 TERMINATION In the event that: (a) The number of shares of Interim Common Stock or Nico1et Common Stock voted against the Reorganization shall make consummation of the Reorganization inadvisable in the opinion of the Board of Directors of Nicolet or Interim; (b) Any action, consent, approval, opinion, or ruling required to be provided by Section 9 of this Plan of Reorganization shall not have been obtained; or (c) For any other reason consummation of the Reorganization is deemed inadvisable in the opinion of the Board of Directors of Nicolet or Interim; then this Plan of Reorganization may be terminated at any time before consummation of the Reorganization by written notice, approved or authorized by the Board of Directors of the party wishing to terminate, to the other party. Upon termination by written notice as provided by this Section 10, this Plan of Reorganization shall be void and of no further effect, and there shall be no liability by reason of this Plan of Reorganization or the termination hereof on the part of Nico1et, Interim or their directors, officers, employees, agents or shareholders. SECTION 11 AMENDMENT; WAIVERS (a) At any time before or after approval and adoption hereof by the respective shareholders of Nicolet and Interim, this Plan of Reorganiza1ion may be amended by written agreement by Nicolet aud Interim; provided, however, that after the approval and adoption of this Plan of Reorganization by the shareholders of Nicolet and Interim, no amendment reducing the consideration payable to Nicolet shareholders shall be valid without having been approved by the Nicolet shareholders in the manner required for approval of the Plan of Reorganization. In particular, in the event that the consummation of the Plan of Reorganization would yield more than 300 shareholders of record, the President and Chief Executive Officer may amend the Plan of Reorganization to increase the 1,5OO-share threshold described in Section 6(a) to the minimum tbreshold necessary to ensure that the Company will have fewer than 300 shareholders of record as a resu1t of the transaction contemplated by this Plan of Reorganization. (b) A waiver by any party hereto of any breach of a term or condition of this Plan or Reeorganization sha11 not operate as a waiver of any other branch of such team or condition or of other terms or conditions, nor shal1 failure to enforce any term or condition operate as a waiver or release of any other right, inlaw or in equity, or claim which any party may have against another party for anything arissing out of, connected with or based upon this Plan of Reorganization. A waiver shall be effective only if evidenced by a writing signed by the party who is entitled to the benefit of the term or condition of this Plan of Reorganization

which is to be waived. A waiver of a team or condition on one occasion sha11 not be deemed to be a waiver of thc same or of any other term or condition on a future occasion. SECTION 12 BINDING EFFECT; COUNTERPARTS; HEADINGS; GOVERNING LAW This Plan of Reorganization it binding upon the parties hereto and upon their successors and assigns. This Plan of Reorganization may be executed simultaneously in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. The title of this Plan of Reorganization and the headings herein set out are for convenience or reference only and sha11 not be deemed a part of this Plan of Reorganization. This Plan of Reorganization shall be governed by and construed in accordance with the laws of the State of Wisconsin .

IN WITNESS WHEREOF, the parties hereto have caused this Plan of Reorganization to be executed by their duly authorized officers and their corporate seals to be affixed hereto all as of the day and year first above written. NICOLET BANKSHARES, INC. By: Name: Robert B. Atws11 Title: President and Chief Executive Officer ATTEST: NICOLET INTERIM CORPORATION By: Name: Robert B. Atwell Title: President ATTEST:

Articles of Merger Chapter 180 Effective March 18, 2005 @ 11:59pm $150.00AP $25.00 Expedite Mergers: Nicolet Interim Corporation, a Wisconsin for -profit corporation, NO31988 Auto: Nicolet Bankshares, Inc., a Wisconsin for -profit corporation, GO30106, the survivor STATE WASHINGTON FILED MAR 18 2005 DEPARTMENT OF FINANCIAL INSTITUTION Frederick Schmidt Liebmann, Conway etal PO BOX 23200 Green Bay, WI 54305-3200

DEC-19-2008 13:48 GODFREY & KRHN SC 414 273 5198 P.05 Sec. 180JOO6 State of Wisconsin DEPARTMENT OF FINANCIAL INSTITUTIONS Division of Corporate & Consumer Services ARTICLES OF AMENDMENT- STOCK, FOR-PROFIT CORPORATION A. The present corporate name (prior to any change effected by this amendment) is: Nicolet Bankshares. Inc. (Enter Corporate Name) Text of Amendment (Refer to the existing articles of incorporation and the instructions on the reverse of this form. Determine those items to be changed and set forth the number identifying the paragraph in the articles of incorporation being changed and how (he amended paragraph is to read.) RESOLVED, THAT the articles of incorporation be amended as follows: For the text for the Amendment, see Exhibit A hereto. consisting of two (2) sequentially-numbered pages. FILING FEE - $40.00 See instructions, suggestions and procedures on following pages. DFI/CORP/4(R02/05/04) Use of this form is voluntary. 100

DEC-19-2008 13:49 GODFREY KAHN SC NICOLET BANKSHARES, INC. EXHIBIT A to Articles of Amendment. dated December 1X, 2008 RESOLVED, that Article III of the Amended and Restated Articles of Incorporation of the Corporation is hereby amended by deleting such Article III in its entirety and inserting in lieu thereof a new Article DI, as follows: m. CAPITAL STOCK (1) Authorized Capital. The total number of shares of capital stock which the Corporation is authorized to issue is Forty Million (40,000,000) shares, divided into Thirty Million (30,000,000) shares of Common Stock, $.01 par value, and Ten Million (10,000,000) shares of Preferred Stock, no par value. (2) Rights of Common Stock. The rights and preferences of shares of Common Stock are as follows: (a) Voting. Except in the election of directors, as provided in Article 7 of these Articles, each share of Common Stock shall be entitled to one vote on all matters to be voted on by shareholders. (b) Dividends. The Board of Directors, in its disc1"etion, may declare and authorize payment of cash dividends on the Common Stock at such times as it deems appropriate. The Corporation may issue any type of share dividend. (c) Other. The Board of Directors may, from time to time, prior to the issuance of shares, establish a series of Common Stock. having such preferences and rights as it may deem reasonably necessary to achieve or facilitate the accomplishment of lawful corporate business or financial objectives, and may take such other action as allowed in Wis. Stat. 180.0602(1) as amended from time to rime. (3) Rights of Preferred Stock. The Board of Directors of the Corporation is authorized, subject to limitations prescribed by law and the provisions of this Article, to provide for the issuance of lhe shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Wisconsin to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences. and relatlve rights of the shares of each such series and the qualifications. or restrictions thereof. The authority of the Board of Directors with respect to each series shall include, but not be Iimiled to, detelmination of the following: Page 10 of 2

NICOLET BANKSHARES, INC. (a) Number of Shares. The number of shares constituting that series and the distinctive designation of that series; (b) Dividends. The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payments of dividends on shares of that series; (c) Voting. Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; (d) Conversion. Whether that series shall have conversion privileges, and, if 80, the terms and conditions of such conversion, including provisions for adjustment of the conversion rate in such events as the Board of Directors shall detennine; (e) Redemption. Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different condilions and at different redemption rates; (t) Sinking Fund. Whether that selies shall have a sinking fund for the redemption or purchase of shares of that series, and, if so. the terms and amount of such sinking fund; (g) Liquidation, Dissolution or Winding U.p. The rights of the shares of that series in the event of voluntary or involuntary liquidation. dissolU[ion OJ winding-up of the Company. and the relaLive rights of prionly, if any, of payment of shares of that series; and (h) Other. Any other relative rights, preferences and limitations of that series. ******************** END OF AMENDMENT ******************** Page 20 of 2

B. Amendment(s) adopted on December 19, 2009 (Indicate the method O/adoption by checking (X) the appropriate choice below). In accordance with sec. 180.1002, Wis. Stats. (By the Board of Directors) OR In accordince with sec. 180.1003, Wis. Stats. (By the Board of Directors and Shareholder) OR In accordance with sec. 180.1005, Wis. Stats. (By Incorporators or Board of Directors, before issuance of shares) C. Executed on December 19, 2008 (Date) Title: President Secretary or other officer title Exec. Vp/Sec. (Signature) Michael E. Daniels (Printed name) This document was drafted by Patrick S. Murphy (Name the individual who drafted the document) INSTRUCTIONS: (Ref. sec. 180.1006 Wis. Stats for document content) Submit one original and one exact copy to Dept. of Financial Institutions, P O Box 7846, Madison WI, 53707-7846, together with a FILING FEE of $40.00 payable to the department. Filing fee is non-refundable. (If sent by Express or Priority U.S. mail, address to 345 W. Washington Ave., 3rd Floor, Madison WI. 53703). The original must include an original manual signature, per sec. 180.0120(3)(c), Wis. Stats. NOTICE: This form may be used to accomplish filing required or permitted by statute to be made with the department. Information requested may be used for secondary purposes. If you have any questions, please contact the Division of Corporate Consumer Services at 608-261-7577. Hearing- impaired may call 608-266-8818 for TOY. DFI/CORP/41(R02/05/04)

ARTICLES OF AMENDMENT - Stock For-Profit Corporation Patrick S. Murphy, Esq. Godfrey Kahn, S.C. 780 N. Water Street Milwaukee, WI 53202 Your return address and phone number during the day: (414) 287-9222 INSTRUCTIONS (Continued) ~ A. State the name of the corporation (before any change effected by this amendment) and the text of the amendment(s). The text should recite the resolution adopted (e.g., "Resolved, that Article 1of the articles of incorporation be amended to read: (enter the amended article). If an amendment provides for an exchange, reclassification or cancellation of issued shares, state the provisions for implementing the amendment if not contained in the amendment itself. B. Enter the date of adoption of the amendment(s). If there is more than one amendment, identify the date of adoption of each. Mark (X) one of the three choices to indicate the method of adoption of the amendments(s). By Board of Directors - Refer to sec. 180.1002 for specific information on the character of amendments that may be adopted by the Board of Directors without shareholder action. By Board of Directors and Shareholders - Amendments proposed by the Board of Directors and adopted by shareholder approval. Voting requirements differ with circumstances and provisions in the articles of incorporation. See sec. l80.1003, Wis. Stats., for specific information. By Incorporators or Board of Directors - Before issuance of shares - See sec. 180.1005, Wis. Stats., for conditions attached to the adoption of an amendment approved by a vote or consent of less than 2/3rOO of the shares subscribed for. C. Enter the date of execution and the name and title of the person signing the document. The document must be signed by one of tbe following: An officer of the corporation (or incorporator if directors have not been elected), or a court-appointed receiver, trustee or fidUCiary. A director is not empowered to sigD. If the document is executed in Wisconsin, sec. 182.01(3) provides that it shall not be filed unless the name of the person (individual) who drafted it is printed, typewritten Or stamped thereon in a legible manner. If the document is not executed in Wisconsin, enter that remark. FILING FEE - $40.00. DFIICORP/4I(R02J05104)

State of Wisconsin DEPARTMENT OF FINANCIAL INSTITUTIONS Division of Corporate Consumer Services ARTICLES OF AMENDMENT - STOCK, FOR.PROFIT CORPORATION A. The present corporate name (prior to any change effected by this amendmeot) is: Nicolet Bankshares, Inc. (Enter Corporate Name) Text of Amendment (Refer to the existing articles incorporation and the instructions on the reverse of this/orm. Determine those items /0 be changed and setforth the number identifYing the paragraph in the articles of incorporaNon being changed and how the amended paragraph is to read.) RESOLVED, THAT the articles of incorporation be amended as follows: For the text of the Amendment, See Exhibit A hereto, consisting of twelve (12)pages. FR.ING FEE - 540.00 See instructions, suggestions and procedures on following pages_ DFYCORP/4(R02/05/04) Use of this form is voluntary .

__________ B. Amendment(s) adopted on December 19, 2008 (Indicate the method of adoption by checking (X) the appropriate choice below). In accordance with sec. 180.1002, Wis. Stats. (By the Board of Directors) OR In accordince with sec. 180.1003, Wis. Stats. (By the Board of Directors and Shareholder) OR In accordance with sec. 180.1005, Wis. Stats. (By Incorporators or Board of Directors, before issuance of shares) C. Executed on December 19, 2008 (Date) Title: President Secretary or other officer title Exec. Vp/Sec. (Signature) Michael E. Daniels (Printed name) This document was drafted by Patrick S. Murphy (Name the individual who drafted the document) INSTRUCTIONS: (Ref. sec. 180.1006 Wis. Stats for document content) Submit one original and one exact copy to Dept. of Financial Institutions, P O Box 7846, Madison WI, 53707-7846, together with a FILING FEE of $40.00 payable to the department. Filing fee is non-refundable. (If sent by Express or Priority U.S. mail, address to 345 W. Washington Ave., 3rd Floor, Madison WI. 53703). The original must include an original manual signature, per sec. 180.0120(3)(c), Wis. Stats. NOTICE: This form may be used to accomplish filing required or permitted by statute to be made with the department. Information requested may be used for secondary purposes. If you have any questions, please contact the Division of Corporate Consumer Services at 608-261-7577. Hearing- impaired may call 608-266-8818 for TOY. DFI/CORP/41(R02/05/04)

NICOLET BANKSHARES, INC. EXBIBITA to Articles or Amendment dated. December 19, 2008 AS OF THE DATE OF THESE ARTICLES OF AMENDMENT, THE CORPORATION HAS NOT ISSUED ANY SHARES OF THE FIXED RATE CUMULATIVE PERPETUAL PREFERRED STOCK, SERIES A. RESOLVED, that the Amended and Restated Articles of IncOIporation of the COrporation (hereinafter, the "Issuer") are amended by adding Section (4) (hereinafter, the "Certificate of Designations"), as set fonh below to ARTICLE 1II of the Amended and Restated Articles of Incorporation. "(4) Designation of Fixed Rate Cumulative Perpetual Preferred Stock, Series A. (a) Designation and Number of Shares. There is hereby created out of the authorized and unissued shares of preferred stock of the Issuer a series of preferred stock designated as the "Fixed Rate Cumulative Petpetual Preferred Stock, Series An (the "Designated Preferred Stock"). The authorized number of shares of Designated Preferred Stock shall be 14,964. (b) Standard Provisions. The Standard Provisions contained in Schedule A attached hereto are incorporated herein by reference in their entirety and shall be deemed to be a part of this Certificate of Designations to the same extent as if such provisions had been set forth in full herein. (c) Definitions_ The following terms are used in this Certificate of Designations (including the Standard Provisions in Schedule A hereto) as defined below: (i) "Common Stock" means the conunon stock, par value SO.OI per share of the Issuer. (ii) "Dividend Payment Date" means February IS, May IS, August 15 and November 15 of each year. (iii) "Junior Stock" means the Common Stock, and any other class or series of stock of the Issuer the terms of which expressly provide that it ranks junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Issuer. (iv) "LiQUidation Amount" means $1,000 per share of' Designated Preferred Stock. (v) "Minimum Amount" means $3,741,000.

(vi) "Parity Stock" means any class or series of stock of the Issuer (other than Designated Preferred Stock) the terms of which do not expressly provide that such class or series will rank senior or junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Issuer (in each case without regard to whether dividends accrue cumulatively or non- cumulatively), Without limiting the foregoing, Parity Stock shall include the Issuer's Fixed Rate Cumulative Perpetual Preferred Stock, Series B. (vii) "Signing Date" means Original Issue Date. (d) Certain Voting Matters. Holders of shares of Designated Preferred Stock will be entitled to one vote for each such share on any matter on which holders of Designated Preferred Stock are entitled to vote, including any action by written consent. [Remainder of Page Intentionally Left Blank] 2

Schedule A STANDARD PROVISIONS Section 1. General Matters. Each share of Designated Preferred Stock shall be identical in all respects to every other share of Designated Preferred Stock. The Designated Preferred Stock shall be perpetual, subject to the provisions of Section 5 of these Standard Provisions that form a part of the Certificate of Designations. The Designated Preferred Stock shall rank equally with Parity Stock and shall rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any dissolution, liquidation or winding up of the Issuer. Section 2. Standard Definitions. As used herein with respect to Designated Preferred Stock: (a) "Applicable Dividend Rate" means (i) during the period from the Original Issue Date to, but excluding, the first day of the first Dividend Period commencing on or after the fifth anniversary of the Original Issue Date, 5% per annum and (ii) from and after the first day of the firSt Dividend Period commencing on or after the fifth anniversary of the Original Issue Date, 9010 per annum. (b) "Appropriate Federal Banking Agency" means the "appropriate Federal banking agency" with respect to the Issuer as defined in Section 3 (q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q), or any successor provision. (c) "Business Combination" means a merger, consolidation, statutory share exchange or similar transaction that requires the approval of the Issuer's stockholders. (d) "Business Day" means any day except Saturday, Sunday and any day on which banking institutions in the State of New York generally are authorized or required by law or other governmental actions to close. (e) "Bylaws" means the bylaws of the Issuer, as they may be amended fronl time to time. (f) "Certificate of Designations" means the Certificate of Designations or comparable instrument relating to the Designated Preferred Stock, of which these Standard Provisions form a part, as it may be amended from time to time. (g) "Charter" means the Issuer's certificate or articles of incorporation, articles of association, Or similar organizational document. (h) "Dividend Petiod" has the meaning set forth in Section 3(a). (i) "Dividend Record Date" has the meaning set forth in Section 3(a) .

(i) "Liquidation Preference" has the meaning set forth in Section 4(a). (k) "Origipal Issue Dare" means the date on which shares of Designated Prefened Stock are first issued. (l) "Preferred Director" has the meaning set forth in Section 7(b). (m) "Preferred Stock" means any and all series of preferred stock of the Issuer, including the Designated Preferred Stock. (n) "Oualified Eguity Offering" means the sale and issuance for cash by the Issuer to persons other than the Issuer or any of its subsidiaries after the Original Issue Date of shares of perpetual Preferred Stock, Common Stock or any combination of such stock, that, in each case, qualify as and may be included in Tier 1capital of the Issuer at the time of issuance under the applicable risk-based capital guidelines of the Issuer's Appropriate Federal Banking Agency (other than any such sales and issuances made pursuant to agreements or arnmgements entered into. or pursuant to financing plans which were publicly announced, on or prior to November 17, 2008). (o) "Standard Provisions" mean these Standard Provisions that fonn a part of the Certificate of Desjgnations relating to the Designated Preferred Stock. (p) "Successor Preferred Stock" has the meaning set forth in Section Sea). (q) "Voting Parity Stock" means, with regard to any matter as to which the holders of Designated Preferred Stock are entitled to vote as specified in Sections 7(a) and 7(b) of these Standard Provisions that form a part of the Certificate of Designations, any and all series of Parity Stock upon which like voting rights have been conferred and are exercisable with respect to such matter. Section 3. Dividends. (a) Rate. Holders of Designated Preferred Stock shall be entitled to receive, on each share of Designated Preferred Stock if, as and when declared by the Board of Directors or any duly authorized committee of the Board of Directors, but only out of assets legally available therefor, cwnulative cash dividends with respect to each Dividend Period (as defined below) at a rate per annum equal to the Applicable Dividend Rate on (i) the Liquidation Amount per share of Designated Preferred Stock and (ii) the amount of accrued and unpaid dividends for any prior Dividend Period on such share of Designated Preferred Stock, if any. Such dividends shall begin to accrue and be cumulative from the Original Issue Date, shall compound on each subsequent Dividend Payment Date (i.e., no dividends Shall accme on other dividends 1.UJless and until the f1I'St DiVidend Payment Date for such other dividends has passed without such other dividends having been paid on such date) and shaH be payable quarterly in arrears on each Dividend Payment Date, commencing with the first such Dividend Payment Date to occur at least 20 calendar days after the Original Issue Date. In the event that any Dividend Payment Date would otherwise fall on a day that is not a Business Day, the dividend payment due on that date will be postponed to the next day that is a Business Day and no additional dividends will accrue as a result of that postponement. The period from and including any A-2

Dividend Payment Date to, but excluding, the next Dividend Payment Date is a "Dividend Period". provided that the initial Dividend Period shall be the period from and including the Original Issue Date to, but excluding, the next Dividend Payment Date. Dividends that are payable on Designated Preferred Stock in respect of any Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of dividends payable on Designated Preferred Stock on any date prior to the end of a Dividend Period, and for the initial Dividend Period, shall be computed on the basis of a 360-day year consisting oftwe)ve 30-day months, and actual days elapsed over a 30-day month. Dividends that are payable on Designated Preferred Stock on any Dividend Payment Date will be payable to holders of record of Designated Preferred Stock as they appear on the stock register of the Issuer on the applicable record date, which shall be the 15th calendar day immediately preceding such Dividend Payment Date or such other record date fixed by the Board of Directors or any duly authorized committee of the Board of Directors that is not more than 60 nor less than ]0 days prior to such Dividend Payment Date (each, a "Dividend Record Rate"). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day. Holders of Designated Preferred Stock shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on Designated Preferred Stock as specified in this Section 3 (subject to the other provisions of the Certificate of Designations). (b) Prioritv of Dividends. So long as any share of Designated Preferred Stock remains outstanding, no dividend or distribution shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than dividends payable solely in shares of Common Stock) Or Parity Stock, subject to the immediately following paragraph in the case of Parity Stock, and no Common Stock, Junior Stock or Parity Stock. shall be: directly or indirectly, purchased, redeemed or otherwise acquired for consideration by the Issuer or any of its subsidiaries unless all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Designated Preferred Stock have been or are contemporaneously declared and paid in full (or have been declared and a sum sufficient for the payment thereof has been set aside for the benefit of the holders of shares of Designated Preferred Stock on the applicable record date). The foregoing limitation shall not apply to (i) redemptions, purchases or other acquisitions of shares of Common Stock or other Junior Stock in connection with the administration of any employee benefit plan in the ordinary course of business and consistent with past practice; (ii) the acquisition by the Issuer or any of its subsidiaries of record ownership in Junior Stock Or Parity Stock for the beneficial ownership of any other persons (other than the Issuer or any of its subsidiaries), including as trustees or custodians; and (iii) the exchange or conversion of Junior Stock for or into other Junior Stock or of Panty Stock for or into other Parity Stock (with the same or lesser aggregate liquidation amount) or Junior Stock, in each case, solely to the extent required pursuant to binding contractual agreements entered into prior to the Signing Date or any subsequent agreement for the accelerated exercise, settlement or exchange thereof for Common Stock. A-3

When dividends are not paid (or declared and a sum sufficient for payment thereof set aside for the benefit of the holders thereof on the applicable record date) on any Djvidend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a Dividend Period related to such Dividend Payment Date) in full upon Designated Preferred Stock and any shares of Parity Stock, all dividends declared on Designated Preferred Stock and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates. on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) shall be declared pro rata so that the respective amounts of such dividends declared shall bear the same ratio to each other as all accrued and unpaid dividends per share on the shares of Designated Prefened Stock (including, if applicable as provided in Section 3(a) above, dividends on such amount) and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, 011 a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) (subject to their having been declared by the Board of Directors or a duly authorized committee of the Board of Directors out of legally available funds and including, in the case of Parity Stock that bears cumulative dividends, aU accrued but unpaid dividends) bear to each other. Tfthe Board of Directors or a duly authorized committee of the Board of Directors detcnnines not to pay any dividend or a full dividend on a Dividend Payment Date, the Issuer will provide written notice to the holders of Designated Preferred Stock prior to such Dividend Payment Date. Subject to the foregoing, and not otherwise, such dividends (pa)~ble in cash, securities or other property) as may be determined by the Board of Directors or any duly authorized committee of the Board of Directors may be declared and paid on any securities, including Common Stock and other Junior Stock, from time to time out of any funds legally available for such payment, and holders of Designated Preferred Stock shall not be entitled to participate in any such dividends. Section 4. Liquidation Rights. (a) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or winding up of the affairs of the Issuer, whether voluntary or involuntary, holders of Designated Preferred Stock shall be entitled to receive for each share of Designated Preferred Stock, out of the assets of the Issuer or proceeds thereof (whether capital or surplus) available for distribution to stockholders of the Issuer, subject to the rights of any creditors of the Issuer, before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other stock of the Issuer ranking junior to Designated Preferred Stock as to such distribution, payment in full in an amount equal to the sum of (i) the Liquidation Amount per share and (ii) the amount of any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount), whether or not declared, to the date of payment (such amounts collectively, the "Liquidation Preference"). (b) Partial Payment. If in any distribution described in Section 4(a) above the assets of the Issuer or proceeds thereof are not sufficient to pay in full the amounts payable with respect to all outstanding shares of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Issuer ranking equally with Designated Preferred A-4

Stock as to such distribution, holders of Designated Preferred Stock and the holders of such other stock shall share ratably in any such distribution in proportion to the full respective distributions to which they are entitled. (c) Residual Distributions. If the Liquidation Preference has been paid in full to all. holders of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Issuer ranking equally with Designated Preferred Stock as to such distribution has been paid in full, the holders of other stock of the Issuer shall be entitled to receive all remaining assets of the Issuer (or proceeds thereof) according to their respective rights and preferences. (d) Merger. Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 4, the merger or consolidation of the Issuer with any other corporation or other entity, including a merger or consolidation in which the holders of Designated Preferred Stock receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Issuer, shall not constitute a liquidation, dissolution or winding up of the Issuer. Section 5. Redemption. (a) Optional Redemption. Except as provided below, the Designated Preferred Stock may not be redeemed prior to the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date. On or after the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Issuer, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time to time, out of funds legally available therefor, the shares of Designated Preferred Stock at the time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the date fixed for redemption. Notwithstanding the foregoing, prior to the first Dividend Payment Date falling on or after the third anniversay of the Original Issue Date, the Issuer, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time find from time to time, the shares of Designated Preferred Stock at the time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the date fixed for redemption; provided that (x) the Issuer (or any successor by Business Combination) has received aggregate gross proceeds of not less than the Minimum Amount (plus the "Minimum Amount" as defined in the relevant certificate of designations for each other outstanding series of preferred stock of such successor that was originally issued to the United States Department of the Treasury (the "Successor preferred Stock") in connection with the Troubled Asset Relief Program Capital Purchase Program) from one or more Qualified Equity Offerings (including Qualified Equity Offerings of such successor), and (y) the A-5

aggregate redemption price of the Designated Preferred Stock (and any Successor Preferred Stock) redeemed pursuant to this paragraph may not exceed the aggregate net cash proceeds received by the Issuer (or any successor by Business Combination) from such Qualified Equity Offerings (including Qualified Equity Offerings of such successor). The redemption price for any shares of Designated Preferred Stock shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Issuer or its agent. Any declared but unpaid dividends payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 3 above. (b) No Sinking Fund. The Designated Preferred Stock will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Designated Preferred Stock will have no right to require redemption or repurchase of any shares of Designated Preferred Stock. (c) Notice of Redemption. Notice of every redemption of shares of Designated Preferred Stock shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Issuer. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumcd to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Designated Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Designated Preferred Stock. Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Issuer or any other similar facility, notice of redemption may be given to the holders of Designated Preferred Stock at such time and in any manner permitted by such facility. Each notice of redemption given to a holder shall state: (1) the redemption date; (2) the number of shares of Designated Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed) the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment ofthe redemption price. (d) Partial Redemgtion. In case of any redemption of part of the shares of Designated Preferred Stock at the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other manner as the Board of Directors or a duly authorized committee thereof may determine to be fair and equitable. Subject to the provisions hereof, the Board of Directors or a duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Designated Preferred Stock shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.

(e) Effectiveness of Redemption, If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been deposited by the Issuer, in trust for the pro rata benefit of the holders of the shares called for redemption, with a bank or trust company doing business in the Borough of Manhattan, The City of New York, and having a capital and surplus of at least $500 million and selected by the Board of Directors, so as to be and continue to be available solely therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company, without interest. Any funds unclaimed at the end of three years from the redemption date shall, to the extent pennitted by law, be released to the Issuer, after which time the holders of the shares so called for redemption shall look only to the Issuer for payment ofthe redemption price of such shares. (f) Status of Redeemed Shares. Shares of Designated Preferred Stock that are redeemed, repurchased or otherwise acquired by the Issuer shall revert to authorized but unissued shares of Preferred Stock (provided that any such cancelled shares of Designated Preferred Stock may be reissued only as shares of any series of Preferred Stock other than Designated Preferred Stock). Section 6. Conversion, Holders of Designated Preferred Stock shares shall have no right to exchange or convert such shares into any other securities. Section 7. Voting Rights. (a) General. The holders of Designated Preferred Stock shall not have any voting rights except as set forth below or as otherwise from time to time required by law. (b) Preferred Stock Directors. Whenever, at any time or times, dividends payable on the shares of Designated Preferred Stock have not been paid for an aggregate of six quarterly Dividend Periods or more, whether or not consecutive, the authorized number of directors of the Issuer shall automatically be increased by two and the holders of the Designated Preferred Stock shall have the right, with holders of shares of anyone or more other classes or series of Voting Parity Stock outstanding at the time, voting together as a class, to elect two directors (herein after the “Preferred Directors” and each a “Preferred Director”) to fill such newly created directorships at the Issuer's next annual meeting of stockholders (or at a special meeting called for that purpose prior to such next annual meeting) and at each subsequent annual meeting of stockholders until all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Designated Preferred Stock have been declared and paid in full at which time such right shall terminate with respect to the Designated Preferred Stock, except as herein or by law expressly provided, subject to re-vesting in the event of each and every subsequent default ofthe character above mentioned; provided that it shall be a qualification for election for any Preferred Director that

the election of such Preferred Director shall not cause the Issuer to violate any corporate governance requirements of any securities exchange or other trading facility on which securities ofthe Issuer may then be listed or traded that listed or traded companies must have a majority of independent directors. Upon any termination of the right of the holders of shares of Designated Preferred Stock and Voting Parity Stock as a class to vote for directors as provided above, the Preferred Directors shall cease to be qualified as directors, the term of office of all Preferred Directors then in office shall terminate immediately and the authorized number of directors shall be reduced by the number of Preferred Directors elected pursuant hereto. Any Preferred Director may be removed at any time, with or without cause, and any vacancy created thereby may be filled, only by the affinnative vote of the holders a majority of the shares of Designated Preferred Stock at the time outstanding voting separately as a class together with the holders of shares of Voting Parity Stock, to the extent the voting rights of such holders described above are then exercisable. If the office of any Preferred Director becomes vacant for any reason other than removal from office as aforesaid, the remaining Preferred Director may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occuued. (c) Class Voting Rights as to Particular Matters. So long as any shares of Designated Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Charter, the Yote or consent of the holders of at least 66 2/3% of the shares of Designated Preferred Stock at the time outstanding, voting as a separate class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating: (i) Authorization of Senior Stock. Any amendment or alteration of the Certificate of Designations for the Designated Preferred Stock or the Charter to authorize or create or increase the authorized amount of, or any issuance of, any shares of, or any securities convertible into or exchangeable or exercisable for shares of, any class or series of capital stock of the Issuer ranking senior to Designated Preferred Stock with respect to either or both the payment of dividends and/or the distribution of assets on any liquidation, dissolution or winding up ofthe Issuer; (ii) Amendment of Designated Preferred Stock. Any amendment, alteration or repeal of any provision of the Certificate of Designations for the Designated Preferred Stock or the Charter (including, unless no vote on such merger or consolidation is required by Section 7(c)(ili) below, any amendment, alteration or repeal by means of a merger, consolidation or otherwise) so as to adversely affect the rights, preferences, privileges or voting powers of the Designated Preferred Stock; or (iii) Share Exchanges. Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Designated Preferred Stock, or of a merger or consolidation of the Issuer with another corporation or other entity, unless in each case, (x) the shares of Designated Preferred Stock remain outstanding or, in the case of any such merger or consolidation with respect to which the Issuer is not the surviving or resulting entity, are converted into or exchanged for

preference securities of the surviving or resulting entity or its ultimate parent. and (y) :such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences. privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of Designated Preferred Stock immediately prior to such consummation, taken as a whole; provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized Preferred Stock, including any increase in the authorized amount of Designated Preferred Stock necessary to satisfy preemptive or similar rights granted by the Issuer to other persons prior to the Signing Date, or the creation and issuance, or an increase in the authorized or issued amount, whether pursuant to preemptive or similar rights or other Wise, of any other series of Preferred Stock, or any securities convertible into or exchangeable or exercisable for any other series of Preferred Stock, ranking equally with and/or junior to Designated Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non·cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Issuer will not be deemed to adversely affect the rights, preferences, privileges or voting powers, and shall not require the affirmative vote or consent of, the holders of outstanding shares of the Designated Preferred Stock. (d) Changes after Provision for Redemption. No vote or consent of the holders of .Designated Preferred Stock shall be required pursuant to Section 7(c) above if, at Or prior to the time when any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of the Designated Preferred Stock shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been deposited in trust for such redemption, in each case pursuant to Section 5 above. (e) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Designated Preferred Stock (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with .regard to such a meeting or such consents shall be governed by any rules of the Board of Directors or any duly authorized committee of the Board of Directors, in its discretion, may . adopt I from time to time, which rules and procedures shall conform to the requirements of the Charter, the Bylaws, and applicable law and the roles of any national securities exchange or other trading facility on which Designated Preferred Stock is listed or traded at the time. Section 8. Record Holders. To the fullest extent permitted by applicable law, the Issuer and the transfer agent for Designated Preferred Stock may deem and treat the record holder of any share of Designated Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Issuer nor such transfer agent shall be affected by any notice to the contrary. Section 9. Notices. All notices or communications in respect of Designated Preferred Stock shall be sufficiently given if given in writing and delivered in person or by fust class mail. postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designations, in the Charter or Bylaws or by applicable law. Notwithstanding the foregoing) if A-9

shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Issuer or any similar facility, such notices may be given to the holders of Designated Preferred Stock in any manner permitted by such facility. Section 10. No Preemptive Rights. No share of Designated Preferred Stock shall have any rights of preemption whoever as to any securities of the issuer, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted. Section 11. Replacement Certificates. The Issuer shall replace any mutilated certificate at the holder's expense upon surrender of that certificate to the Issuer. The Issuer shall replace certificates that become destroyed, stolen or lost at the holder's expense upon delivery to the Issuer of reasonably satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be reasonably required by the Issuer. Section 12. Other Rights. The shares of Designated Preferred Stock shall not have any rights, preferences, privileges or voting powers or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Charter or as provided by applicable law. A-lO

ARTICLES OF AMENDMENT - Stock, For-Profit Patrick S. Murphy, Esq. Godfrey & Kahn, S.C. 790 N. Water Street MilwaUKee, WI 53202 A Your return address and phone Dumber during the day: ( (414) 287 -9222 INSIRUCTIONS (Continued) A. State the name of the corporation (before any change effected by this amendment) and the text of the amendment(s). The text should recite the resolution adopted (e.g., “Resolved., that Article 1 of the articles of incorporatiobe amended to read...... (enter the amended article). If an amendment provides for an exchange. reclassification or cancellation of issued shares, state the provisions for implementing the amendment if not contained in the amendment itself. B. Enter the date of adoption of the amendment(s). lf there is more than one amendment, identify the date of adoption of each. Mark (X) one of the three choices to indicate the method of adoption of the amendment(s). By Board of Directors - Refer to sec. J80.1002 for specific information on the character of amendments that may be adopted by the Board of Directors without shareholder action. By Board of Directors and Shareholders - Amendments proposed by the Board of Directors and adopted by shareholder approval. Voting requirements differ with circumstances and provisions in the articles of incorporation. See sec. 180.1003, Wis. Stats., for specific information. By Incorporators or Board of Directors -Before issuance of shares - See sec. 180.1005, Wis. Stats,, for conditions attached to the adoption of an amendment approved by a vote or consent of less than 2/3rds of thie shares subscribed for. C. Enter the date of execution and the name and title of the person signing the document. The document must be signed by one of the following: An officer of the corporation (or incorporator if directors have not been elected), or a court·appointed receiver, trustee or fiduciary. A director is not empowered to sign. If the document is executed in Wisconsin, sec. 182.01(3) provides that it shall not be filed unless the name of the person (individual) who drafted it is printed. typewritten or stamped thereon in a legible manner. If the document is not executed in Wisconsin, enter that remark. FILING FEE $40.00 DFI/CORP/41(R02/05/04) DOS# 200812181722916

Sec. 180.1006 Wis. Stats. State of Wisconsin DEPARTMENT OF FINANCIAL INSTITUTIONS Division of Corporate & Consumer Services DEC-19-2008 GODFREY & KAHN SC 414 273 5198 P.02 ARTICLES OF AMENDMENT - STOCK, FOR-PROFIT CORPORATION A. The present corporate name (prior to any change effected by this amendment) is: Nicolet Bankshares, Inc. (Enter Corporate Name) Text of Amendment (Refer to the existing articles of incorporation and the instructions on the reverse of this form. Determine those items to be changed and set forth the number identifying the paragraph in the articles of incorporation being changed and how the amended paragraph is to read.) RESOLVED, THAT the articles of incorporation be amended as follows: For the text of the Amendment, See Exhibit A hereto, consisting of twelve (12)pages. RECEIVED DEC 19 2008 WISCONSlN DFI FILING FEE - $40.00 See instructions, suggestions and procedures on following pages. DFIICORP/4(R02/O5/04) Use of this fonn is voluntary. 100

DEC-19-2008 14:13 GODFREY & KAHN SC 414 273 5198 P.03 "B Amendment(s) adopted on December 19, 2008 (Printed name) Michael E. Daniels December 19, 2008 C. Executed on December 19: _ (Date) Title: President Secreatry or other officer title Exec. VP/Sec. or (Indicate the method of adaption by checking (X) the appropriate choice below.) OR In accordance with sec. 180.1002, WQ. Stats. (By the Board of Directors) OR In accordance with sec. 180.1003, Wis. Stats. (By the Board of Directors and Shareholders) In accordance with sec 180.1005, Wis. Stats. (By Incorporators or Board of Directors, before issuance of shares) This document was drafted by Patrick S. Murphy (Name the individual who drafted the document) INSTRUCTIONS (Ref. sec 180.1006 Wis. Stats. for document content) Submit one original and one exact copy to Dept of Financial Institutions, PO Box 7846, Madison WI, 53707-7846, together with a FILING FEE of $40.00 payable to the department. Filing fee is non-refundable. (If sent by Express or Priority U.S. mail, address to 345 W. Washington Ave., 3rd Floor, Madison WI, 53703). The original must include an original manual signature, per sec. l80.0120(3)(c), Wis. Stats. NOTICE: This form may be used to accomplish a filing required of permitted by statute to be made with the department. Information requested may be used for secondary purposes. If you have any questions. please contact the Division of Corporate & Consumer Services at 608-261-7577. Hearing impaired may call 608-266-8818 for TDY. DFI/CORP/4I(RO2/05/04) 2 of 3.

DEC-19-2008 14:14 GODFREY &KAHN SC 414 273 5198 P.05 NICOLET BANKSHARES, INC. EXHIBIT A to Articles of Amendment dated December 19,1008 AS OF THE DATE OF THESE ARTICLES OF AMENDMENT, THE CORPORATION HAS NOT ISSUED ANY SHARES OF THE FIXED RATE CUMULATIVE PERPETUAL PREFERRED STOCK, SERIES B. RESOLVED, that the Amended and Restated Articles of Incorporation of the Corporation (hereinafter, the "Issuer") are amended by adding Section (5) (hereinafter, the "Certificate of Designations"), as set forth below to ARTICLE mofthe Amended and Restated Articles of Incorporation. (5) Designation of Fixed Rate Cumulative Perpetual Preferred Stock, Series B. (a) Designation and Number of Shares. There is hereby created out of the authorized and unissued shares of preferred stock of the Issuer a series of preferred stock designated as the "Fixed Rate Cumulative Perpetual Preferred Stock, Series E" (the "Designated Preferred Stock"), The authorized number of shares of Designated Preferred Stock shall be 748. (b) Standard Provisions. The Standard Provisions contained in Schedule B attached hereto are incorporated herein by reference in their entirety and shall be deemed to be a part of this Certificate of Designations to the same extent as if such provisions had been set forth in full herein. (c) Definitions. The following terms are used in this Certificate of Designations (including the Standard Provisions in Schedule hereto) as defined below: (i) "Common Stock" means the common stock, par value $0.01 per (ii) "Dividend Payment Date" means February 15, May 151 August 15 and November 15 ofeach year. (iii) "Junior Stock" means the Common Stock, and any other class or series of stock of the Issuer the terms of which expressly provide that it ranks junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution Or winding up of the Issuer. (iv) "Liquidation Amount" means $1,000 per share of Designated Preferred Stock.. (v) "Minimum Amount" means $187,000. 1

DEC-19-2008 14:14 GODFREY & KAH SC 414 273 5198 P.06 NICOLET BANKSHARES, INC. (vi) "Parity Stock" means any class or series of stock of the Issuer (other than Designated Preferred Stock) the terms of which do not expressly provide that such class or series will rank senior or junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Issuer (in each case without regard to whether dividends accrue cumulatively or non-cumulatively). Without limiting the foregoing, Parity Stock shall include the Issuer's UST Preferred Stock. (vii) "Signing Date" means Original Issue Date. (viii) "UST Preferred Stock" means the Issuer's Fixed Rate Cumulative Perpetual Preferred Stock, Series A. (d) Certain Voting Matters. Holders of shares of Designated Preferred Stock will be entitled to one vote fot each such share on any matter on which holders of Designated Preferred Stock are entitled to vote, including any action by written consent. [Remainder of Page Intentionally Left Blank] 2

DEC-19-2008 14:14 GODFREY &KAHN SC . 414 273 5198 P.07 -• STANDARD PROVISIONS NICOLET BANKSHARES, INC. Schedule B Section 1. General Matters. Each share of Designated Preferred Stock shall be identical in all respects to every other share of Designated Preferred Stock.. The Designated Preferred Stock shall be perpetual, subject to the provisions of Section 5 of these Standard Provisions that from a part of the Certificate of Designations. The Designated Preferred Stock shall rank equally with Parity Stock and shall rank: senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any dissolution, liquidation or winding up of the Issuer. Section 2. Standard Definitions. As used herein with respect to Designated Preferred Stock: (a) "Appropriate Federal Banking Agency" means the "appropriate Federal banking agency" with respect to the Issuer as defined in Section 3 (q) of the Federal Deposit Insurance Act (12 U.S.c. Section 1813(q), or any successor provision. (b) "Business Combination" means a merger, consolidation, statutory share exchange or similar transaction that requires the approval of the Issuer's stockholders. (c) "Business Day" means any day except Saturday, Sunday and any day on which banking institutions in the State ofNew York generally are authorized or required by law Or other governmental actions to close. (d) "Bylaws" means the bylaws of the Issuer, as they may be amended from time to time. (e)·"Certificate of Designations” means the Certificate of Designations or comparable instrument relating to the Designated Preferred Stock, of which these Standard Provisions form a part, as it may be amended from time to time. (f) "Charter" means the Issuer's certificate Or articles of incorporation, articles of association, or similar organizational document. (g) "Dividend Period" has the meaning set forth in Section 3(8). (h) "Dividend Record Date" has the meaning set forth in Section 3(a). (i) "Liquidation Preference" has the meaning set forth in Section 4(a). (j) "Orieinal Issue Date" means the date on Which shares of Designated Preferred Stock are first issued. (k) "Preferred Director" has the meaning set forth in Section 7(b). (l) "Preferred Stock" means any and all series of preferred stock of the Issuer, including the Designated Preferred Stock. A-1

DEC-19-2008 14:15 GODFREY &KAHN 5C . 414 273 5198 P.I2IB NICOLET BANKSHARES, INC. {m} "Qualified Equity Offering" means the sale and issuance for cash by the Issuer to persons other than the Issuer or any of its subsidiaries after the Original Issue Date of shares of perpetual Preferred Stock, Common Stock or any combination of such stock, that, in each case, qualify as and may be included in Tier 1 capital of the Issuer at the time of issuance under the applicable risk-based capital guidelines of the I~"'User's Appropriate Federal Banking Agency (other than any such sales and issuances made pursuant to agreements or arrangements entered into, or pursuant to financing plans which were publicly announced, on or prior to November 17,2008). (n) "Standard Provisions” mean these Standard Provisions that from a part of the Certificate of Designations relating to the Designated Preferred Stock. (o) "Successor Preferred Stock" has the meaning set forth in Section 5(a). (p} “Voting Parity Stock" means, with regard to any matter as to which the holders of Designated Preferred Stock are entitled to vote as specified;n Sections 7(a) and 7(b) of these Standard Provisions that form a part of the Certificate of Designations, any and all series of Parity Stock upon which like voting rights have been conferred and are exercisable with respect to such matter. Section 3. Dividends. (a) ~Holders of Designated Preferred Stock shall be entitled to receive) on each share of Designated Preferred Stock it: as and when declared by the Board of Directors or any duly authorized committee of the Board of Directors, but only out of assets legally available therefor, cumulative cash dividends with respect to each Dividend Period (as defined below) at a per annum rate of 9.0% on (i) the Liquidation Amount per share of Designated Preferred Stock and (ii) the amount of accrued and unpaid dividends for any prior Dividend Period on such share of Designated Preferred Stock, if any. Such dividends shall begin to accrue and be cumulative from the Original Issue Date, shall compound on each subsequent Dividend Payment Date (i.e., no dividends shall accrue on other dividends unless and until the first Dividend Payment Date for such other dividends has passed without such other dividends having been paid on such date) and shall be payable quarterly in arrears on each Dividend Payment Date, commencing with the first such Dividend Payment Date to occur at least 20 calendar days after the Original Date. In the event that any Dividend Payment Date would otherwise fall on a day that is not a Business Day, the dividend payment due on that date will be postponed to the next day that is a Business Day and no additional dividends will accrue as a result of that postponement. The period from and including any Dividend Payment Date to) but excluding, the next Dividend Payment Date is a "Dividend Period", provided that the initial Dividend Period Shall be the period from and including the Original Issue Date to, but excluding, the next Dividend Payment Date. Dividends that are payable on Designated Preferred Stock in respect of any Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of dividends payable on Designated Preferred Stock on any date prior to the end of a Dividend Period, and for the initial Dividend Period., shall be computed on the basis of a 360-day year consisting of twelve 30-day months, and actual days elapsed over a 30-day month. A-2

DEC-19-2008 14:15 GODFREY &KRHN SC . 414 273 5198 P.09 NICOLET BANKSHARES, INC. Dividends that are payable on Designated Preferred Stock on any Dividend Payment Date will be payable to holders of record of Designated Preferred Stock as they appear on the stock register of the Issuer on the applicable record date, which shall be the 15th calendar day immediately preceding such Dividend Payment Date or such other record date fixed by the Board of Directors or any duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a ''Dividend Record Date"). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day. Holders of Designated Preferred Stock shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on Designated Preferred Stock as specified in this Section 3 (subject to the other provisions of the Certificate of Designations). (b) Priority of Dividends. So long as any share of Designated Preferred Stock remains outstanding, no dividend or distribution shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than dividends payable solely in shares of Common Stock) or Parity Stock, subject to the immediately following paragraph in the case of Parity Stock, and no Common Stock, Junior Stock or Parity Stock shall be, directly or indirectly) purchased, redeemed or otherwise acquired for consideration by the Issuer of any of its subsidiaries unless all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Designated Preferred Stock have been or are contemporaneously declared and paid in full (or have been declared and a sum sufficient for the payment there of has been set aside for the benefit of the holders of shares of Designated Preferred Stock on the applicable record date). The foregoing limitation shall not apply to (i) redemptions, purchases Or other acquisitions of shares of Common Stock or other Junior Stock in connection with the administration of any employee benefit plan in the ordinary course of business and consistent with past practice; (ii) the acquisition by the Issuer or any of iis subsidiaries of record ownership in Junior Stock or Parity Stock for the beneficial ownership of any other persons (other than the Issuer or any of its subsidiaries), including as trustees or custodians; and (iii) the exchange or conversion of Junior Stock for or into other Junior Stock or of Parity Stock for or into other Parity Stock (with the same Or lesser aggregate liquidation amount) or Junior Stock., in each case, solely to the extent required pursuant to binding contractual agreements entered into prior to the Signing Date or any subsequent agreement for the accelerated exercise, settlement or exchange thereof for Common Stock. When dividends are not paid (or declared and a sum sufficient for payment thereof set aside for the benefit of the holders thereof on the applicable record date) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a Dividend Period related to such Dividend Payment Date) in full upon Designated Preferred Stock and any shares of Parity Stock, aH dividends declared on Designated Preferred Stock and all such Parity Stock and payable on such Dividend Payment Date (Of, in the case of Parity Stock having dividend A-3

DEC-19-2008 14:16 GODFREY & KR-lN SC 414 273 5198 P.IIO NICOLET BANKSHARES, INC. payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) shall be declared pro rata so that the respective amounts of such dividends declared shall bear the same ratio to each other as all accrued and unpaid dividends per share on the shares of Designated Preferred Stock (including, if applicable as provided in Section 3(a) above, dividends on such amount) and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) (subject to their having been declared by the Board of Directors or a duly authorized committee of the Board of Directors out of legally available funds and including, in the case of Parity Stock that bears cumulative dividends, all accrued but unpaid dividends) bear to each other. If the Board of Directors or a duly authorized committee of the Board of Director determines not to pay any dividend or a full dividend on a Dividend Payment Date, the Issuer will provide written notice to the holders of Designated Preferred Stock prior to such Dividend Payment Date. Subject to the foregoing, and not otherwise, such dividends (payable in cash, securities or other property) as may be determined by the Board of Directors or any duly authorized committee of the Board of Directors may be declared and paid on any securities, including Common Stock and other Junior Stock, from time to time out of any funds legally available for such payment, and holders of Designated Preferred Stock shall not be entitled to participate in any such dividends. Section 4. Liquidation Rights. (a} Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or winding up of the affairs of the Issuer, whether voluntary or involuntary, holders of Designated Preferred Stock shall be entitled to receive for each share of Designated Preferred Stock, out of the assets of the Issuer or proceeds thereof(whether capital or surplus) available for distribution to stockholders of the Issuer, subject to the rights of any creditors of the Issuer, before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other stock of the Issuer ranking junior to Designated Preferred Stock as to such distribution payment in fun in an amount equal to the sum of(i) the Liquidation Amount per share and (ii) the amount of any accrued and unpaid dividends (including, if applicable as provided in Section 3{a) above, dividends on such amount), whether or not declared, to the date of payment (such amounts collectively, the "Liquidation Preference''). (b) Partial Payment. If in any distribution described in Section 4(a) above the assets of the Issuer or proceeds thereof are not sufficient to pay in full the amounts payable with respect to all outstanding shares of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Issuer ranking equally with Designated Preferred Stock as to such distribution, holders of Designated Preferred Stock and the holders of such other stock shall share ratably in any such distribution in proportion to the full respective distributions to which they are entitled. (c) Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Designated. Preferred Stock and the corresponding amounts payable with respect of any other stock of the Issuer ranking equally with Designated Preferred Stock as to such A-4 A-4

NICOLET BANKSHARES, INC. distribution has been paid in full, the holders of other stock of the Issuer shall be entitled to receive all remaining assets of the Issuer (or proceeds thereof) according to their respective rights and preferences. @ Merger. Consglidalion and Sale of Assets Not Liquidation for purposes of this Section 4, the merger or consolidation of the Issuer with any other cOIporation or other entity including a merger or consolidation in which the holders of Designated Preferred Stock receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash; securities or other property) of all or substantially all of the assets of the Issuer, shall not constitute a liquidation, dissolution or winding up of the Issuer. Section 5. Redemption. (a) Optional Redemption. Except as provided below: the Designated Preferred Stock may not be redeemed prior to the later of (i) first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date; and (ii) the date on which all outstanding shares of UST Preferred Stock have been redeemed, repurchased or otherwise acquired by the Issuer. On or after the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Issuer, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem) in whole or in part, at any time and from time to time, out of funds legally available therefor, the shares of Designated Preferred Stock at the time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any aeemed and unpaid dividends (including, jf applicable as provided in Section 3(a) above, dividends on such amoWlt) (regardless of whether any dividends are actually declared) to, but excluding.. the date fixed for redemption. Notwithstanding the foregoing, prior to the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Issuer, at its option, subject to the approval of the Appropriate Federal Banking Agency and subject to the requirement that all outstanding shares of UST Preferred Stock shall previously have been redeemed, repurchased or otherwise acquired by the Issuer, may redeem, in whole or in part, at any time and from time to time, the shares of Designated Preferred Stock at the time outstanding) upon notice given as prOVided in Section 5(c) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends 011 such amoWlt) (regardless of whether any dividends are actually declared) to, but excluding, the date fixed for redemption; provided that (x) the Issuer (or any successor by Business Combination) has received aggregate gross proceeds of not less than the Minimun Amount (plus the "Minimum Amount" as defined, in the relevant certificate of designations for each other outstanding series of preferred stock of such successor that was originally issued to the United States Department of the Treasury (the "Successor Preferred Stock") in connection with the Troubled Asset Relief Program Capital Purchase Program) from one or more Qualified EqUity Offerings (including Qualified Equity Offerings of such successor), and (y) the aggregate redemption price of the Designated Preferred Stock (and any Successor Preferred Stock) redeemed pursuant to this paragraph may not exceed the aggregate net cash proceeds received by the Issuer (or any A-5

NICOLET BANKSHARES, [NC. successor by Business Combination) from such Qualified Equity Offerings (including Qualified Equity Offerings of such successor). The redemption price for any shares of Designated Preferred Stock shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Issuer or its agent. Any declared but unpaid dividends payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 3 above. {Ql NQ Sinking Fund. The Designated Preferred Stock will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Designated Preferred Stock will have no right to require redemption or repurchase or any shares of Designated Preferred Stock. (c) Notice of Redemption. Notice of every redemption of shares of Designated Preferred Stock shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the issuer. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Designated Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Designated Preferred Stock. Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Issuer or any other similar facility, notice of redemption may be given to the holders of Designated Preferred Stock at such time and in any manner permitted by such facility. Each notice of redemption given to a holder shall state: (1) the redemption date; (2) the number of shares of Designated Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares arc to be sWTendered for payment of the redemption price. @ Partial Redemption. In case of any rederitption of part of the shares of Designated Preferred Stock at the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other manner as the Board of Directors or a duly authorized committee thereof may determine to be fair and equitable. Subject to the provisions hereof, the Board of Directors or a duly authorized committee thereof shall have full power and authority to prescribe the tenns and conditions upon which shares of Designated Preferred Stock shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof. ~ Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been deposited by the Issuer, in trust for the pro rata benefit of the holders of the shares called for redemption, wi~ a bank or trust company doing business in the Borough of Manhattan, The City of New York, and baving a capital and surplus of at least $500 million and A-6

selected by the Board of Directors, so as to be and continue to be available solely therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and tenninate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company, without interest. Any funds unclaimed at the end of three years from the redemption date shall, to the extent pennitted by law, be released to the Issuer, after which time the holders of the shares so called for redemption shall look only to the Issuer for payment of the redemption price of such shares. (f) Status of Redeemed Shares. Shares of Designated Preferred Stock that are redeemed, repurchased or otherwise acquired by the Issuer shall revert to authorized but unissued shares of Preferred Stock (provided that any such cancelled shares of Designated Preferred Stock may be reissued only as shares of any series of Preferred Stock other than Designated Preferred Stock). Section 6. Conversion. Holders of Designated Preferred Stock shares shall have no right to exchange or convert such shares into any other securities. Section 7. Voting Rights. (a) General. The holders of Designated Preferred Stock shall not have any voting rights except as set forth below or as otherwise from time to time required by law. (b) Preferred Stock Directors. Whenever, at any time or times, dividends payable on the shares of Designated Preferred Stock have not been paid for an aggregate of six quarterly Dividend Periods or more, whether or not consecutive, the authorized number of directors of the Issuer shall automatically be increased by two and the holders of the Designated Preferred Stock shall have the right, with holders of shares of anyone or more other classes or series of Voting Parity Stock outstanding at the time, voting together as a class, to elect two directors (hereinafter the "Preferred Directors" and each a "Preferred Director") to fill such newly created directorships at the Issuer's next annual meeting of stockholders (or at a special meeting called for that purpose prior to such next annual meeting) and at each subsequent annual meeting of stockholders until all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on an outstanding shares of Designated Preferred Stock have been declared and paid in full at which time such right shall tenninate with respect to the Desi~ated Preferred Stock, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above mentioned; provided that it shall be a qualification for election for any Preferred Director that the election of such Preferred Director shall not cause the Issuer to violate any corporate governance requirements of any securities exchange or other trading facility on which securities of the Issuer may then be listed or traded that listed or traded companies must have a majority of independent directors. Upon any tennination of the right of the holders of shares of Designated Preferred Stock and Voting Parity Stock as a class to vote for directors as provided above, the Preferred Directors Shall cease to be A-7

qualified as directors, the term of office of all Preferred Directors then in office shall terminate immediately and the authorized number of directors shall be reduced by the nwnber of Preferred Directors elected pursuant hereto. Any Preferred Director may be removed at any time, with or without cause, and any vacancy created thereby may be filled only by the affirmative vote of the holders a majority of the shares of Designated Preferred Stock at the time outstanding voting separately as a class together with the holders of shares of Voting Parity Stock, to the extent the voting rights of such holders described above are then exercisable. If the office of any 'Preferred Director becomes vacant for any reason other than removal from office as aforesaid, the remaining Preferred Director may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred (c) Class Voting Rights as to Particular Matters. So Jong as any shares of Designated Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Charter, the vote or consent of the holders of at least 66 2/3% of the shares of Designated Preferred Stock at the time outstanding, voting as a separate class, given ill person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating: ill Authorization of Senior Stock. Any amendment or alteration of the Certificate of Designations for the Designated Preferred Stock or the Charter to authorize or create or increase the authorized amount of, or any issuance of, any shares of, OT any securities convertible into or exchangeable or exercisable for shares of, any class or series of capital stock of the Issuer ranking senior to Designated Preferred Stock with respect to either or both the payment of dividends and/or the distribution of assets on any liquidation, dissolution or winding up of the Issuer; (ill Amendment of Designated Preferred Stock. Any amendment, alteration or repeal of any provision of the Certificate of Designations for the Designated Preferred Stock or the Charter (including, unless no vote on such merger or consolidation is required by Section 7(c)(iii) below, any amendment, alteration or repeal by means o1'a merger, consolidation or otherwise) so as to adversely affect the rights, preferences, privileges or voting powers of the Designated Preferred Stock; or (iii) Share Exchanges. Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Designated Preferred Stock, or of a merger or consolidation of the Issuer with another corporation or other entity, unless in each case (x) the shares of Designated Preferred Stock remain outstanding or, in the case of any such merger or consolidation with respect to which the Issuer is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereoftban the rights, preferences, priVileges and voting powers, and limitations and restrictions thereof, of Designated Preferred Stock immediately prior to such consummation, taken as a whole; A-8

provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized Preferred Stock, including any increase in the authorized amount of Designated Preferred Stock necessary to satisfy preemptive or similar rights granted by the Issuer to other persons prior to the Signing Date, or the creation and issuance, or an increase in the authorized or issued amount, whether pursuant to preemptive or similar rights or otherwise, of any other series of Preferred Stock, or any securities Convertible into or exchangeable or exercisable for any other series of Preferred Stock, ranking equally with and/or junior to Designated Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upollliquidation, dissolution or winding up of the Issuer will not be deemed to adversely affect the rights, preferences, privileges or voting powers, and shall not require the affinnative vote or consent of, the holders of outstanding shares of the Designated Preferred Stock. (d) Changes after Provision for Redemption. No vote or consent of the holders of Designated Preferred Stock shall be required pursuant to Section 7(c) above if, at or prior to the time when any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of the Designated Preferred Stock shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been deposited in trust for such redemption, in each case pursuant to Section 5 above. (e) Procedures for V:oting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Designated Preferred Stock (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any roles of the Board of Directors or any duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Charter, the Bylaws, and applicable law and the rules of any national securities exchange or other trading facility on which Designated Preferred Stock is listed or traded at the time. Section 8. Record Holders. To the fullest extent permitted by applicable law, the Issuer and the transfer agent for Designated Preferred Stock may deem and treat the record holder of any share of Designated Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Issuer nor such transfer agent shall be affected by any notice to the contrary. Section 9. Notices. All notices or communications in respect of Designated Preferred Stock shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designations, in the Charter or Bylaws or by applicable law. Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book~entry form through The Depository Trust Issuer or any similar facility, such notices may be given to the holders of Designated Preferred Stock in any manner permitted by such facility. Section 10. No Preemptive Rights. No share of Designated Preferred Stock shall have any rights of preemption whatsoever as to any securities of the Issuer, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or sueh warrants, rights or options, may be designated, issued or granted.

Section 11. Replacement Certificates. The Issuer shall replace any mutilated certificate at the holder's expense upon surrender of that certificate to the Issuer. The Issuer shall replace certificates that become destroyed, stolen or lost at the holder's expense upon delivery to the Issuer of reasonably satisfactory eVldence that the cenificatc has been destroyed, stolen or lost, together with any indemnity that may be reasonably required by the Issuer. Section 12. Other Rights. The shares of Designated Preferred Stock shall not have any rights, preferences, privileges or 'Voting powers or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Charter or as provided by applicable law. A-IO

ARTICLES OF AMENDMENT Stock For-Profit Corporation Patrick S. Murphy I Esq: Godfrey Kahn, S.C. 7BO N. water Street Milwaukee, WI 53202 Your return address and pbolle Dumber during the day: ( (41f ) 287- INSTRUCTIONS (Continued) A. State the name of the corporation (before any change effected by this amendment) and the text of the amendment(s). The text should recite the resolution adopted (e.g., "Resolved, that Article 1 of the ~L articles of incorporation be amended to read: (enter the amended article). If an amendment provides for an exchange, reclassification or cancellation of issued shares, state the provisions for implementing the amendment if not contained in the amendment itself. B. Enter the date of adoption of the amendment(s). Jfthere is more than one amendment, identify the date of adoption of each. Mark (X) one of the three choices to indicate the method of adoption of the amendmellt(s). By Board of Directors - Refer to sec. 180.1002 for specific information on the character of amendments that may be adopted by the Board of Directors without shareholder action. By Board of Directors and Shareholders - Amendments proposed by the Board of Directors and adopted by shareholder approval. Voting requirements differ with circumstances and provi5ions in the articles of incorporation. Sec sec. 180.1003, Wis. Stats., for specific information. By Incorporators or Board of Directors - Before issuance of shares - See sec. 180.1005, Wis. Slats., for conditions attached to the adoption of an amendment approved by a vote: or consent of less than 2/3rds of the shares subscribed for. C. Enter the date of execution and the name and title of the person signing the document The document must be signed by one of the following: An officer of the corporation (or incorporator if directors have not been elected), Or a court-appointed receiver, trustee or fiduciary. A director is not empowered to sign. If the document is executed in Wisconsin, sec. 182.01(3) provides that it shall not be filed unless the name of the person (individual) who drafted it is printed, typewritten or stamped thereon ill a legible manner. If the document is not executed in Wisconsin, enter that remark. FILING FEE $40.00. DFT/CORP/4I(R02/0S/04) OOS# 2008t2191724245

Sec. ISO. 1006 WIS. Slats. State of Wisconsin DEPARTMENT OF FINANCIAL INSTITUTIONS Division of Corporate Consumer Services ARTICLES OF AMENDMENT - STOCK, FOR-PROFIT CORPORATION A. The present corporate name (prior to any change effected by this amendment) is: Nicolet Bankshares, Inc. (Enter Corporate Name) Text of Amendment (Refer to the existing articles of incorporation and the instructions on the reverse of this form. Determine those items fa be changed and setforth the number identifying the paragraph in the articles of incorporation being changed and how the amended paragraph is to read.) RESOLVED, THAT the articles of incorporation be amended as follows: For the text of the Amendment, see Exhibit A hereto, consisting of 20 pages. FILING FEE - $40.00 See instructions, suggestions and procedures on following pages. DFI/CORP/4(R02/05/04) Use oflhis fonn is voluntary. Ion

August 16, 2011 B. Amendment(s) adopted on _ (Indicate the method of adoption by checking (X) the appropriate choice below.) In accordance with sec. 180.1002, Wis, Stats. (By the Board of Directors) OR OR In accordance with sec. 180.1003, Wis. Stats. (By the Board of Directors and Shareholders) In accordance with sec. 180.1 005, Wis. Stats. (By Incorporators or Board of Directors, before issuance of shares) C. Executed on (Date) (Signature) Title: President Dsecretaty or other officer title, Robert Atwell (Printed name) This document was drafted by Patrick S. Murphy - Godfrey Kahn, S.C. (Name the individual who drafted the document) INSTRUCTIONS (Ref. sec. 180.1006 Wis. Stats. for docwnent content) Submit one original and one exact copy to Dept. of Financial Institutions, POBox 7846, Madison WI, 53707-7846, together with a FILING FEE 0($40.00 payable to the department. Filing fee is non- refundable. (If sent by Express or Priority U.S. mail, address to 345 W. Washington Ave., 3rd Floor, Madison WI, 53703). The original must include an original manual signature, per sec. 180.0120(3Xc), Wis. Stats. NOTICE: This fonn may be used to accomplish a filing required or permitted by statute to be made with the department. Information requested may be used for secondary purposes. If you have any questions, please contact the Division of Corporate Consumer Services at 608-261-7577. Hearing. impaired may call 608-266-881 for TDY, DFl/CORP/41(R02l05/04) 20f3

NICOLET BANCSHARES, INC. EXHIBIT A to Articles of Amendment dated August 29, 2011 AS OF THE DATE OF THESE ARTICLES OF AMENDMENT, THE CORPORATION HAS NOT ISSUED ANY SHARES OF THE NONCUMULATIVE PERPETUAL PREFERRED STOCK, SERIES C. RESOLVED, that the Amended and Restated Articles of Incorporation of the Corporation (hereinafter, the "Issuer"), as amended, are further amended by adding Section (5) (hereinafter, the "Certificate of Designation"), as set forth below to ARTICLE III of the Amended and Restated Articles of Incorporation, as amended. "(5) Designation of Non-Cumulative Perpetual Preferred Stock, Series C (a) Designation and Number of Shares. There is hereby created out of the authorized and unissued shares of preferred stock of the Issuer a series of preferred stock designated as the "Non-Cumulative Perpetual Preferred Stock, Series C" (the "Designated Preferred Stock"). The authorized number of shares of Designated Preferred Stock shall be 24,400. (b) Standard Provisions. The Standard Provisions contained in Schedule A attached hereto are incorporated herein by reference in their entirety and shall be deemed to be a part of this Certificate Of Designation to the same extent as if such provisions had been set forth in full herein. (c) Definitions. The following tenns are used in this Certificate of Designation (including the Standard Provisions in Schedule A hereto) as defined below: (i) "Common Stock" means the common stock, par value $0.01 per share, of the Issuer. (ii) "Definitive Agreement" means that certain Securities Purchase Agreement by and between Issuer and Treasury, dated as of the Signing Date. (iii) "Junior Stock" means the Common Stock, and any other class or series of stock of the Issuer the terms of which expressly provide that it ranks junior to Designated Preferred Stock as to dividend and redemption rights and/or as to rights on liquidation, dissolution or winding up of the Issuer. (iv) "Liquidation Amount" means $1,000 per share of Designated Preferred Stock. SBlF Participant No. 240

(v) "Minimum Amount" means (x) the amount equal to twenty-five percent (25%) of the aggregate Liquidation Amount of Designated Preferred Stock issued on the Original Issue Date or (y) all of the outstanding Designated Preferred Stock, if the aggregate liquidation preference of the .outstanding Designated Preferred Stock is less than the amount set forth in the preceding clause (x). (vi) "Parity Stock" means any class or series of stock of the Issuer (other than Designated PrefelTed Stock) the terms of which do not expressly provide that such class or series will rank senior or junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Issuer (in each case without regard to whether dividends accrue cumulatively or noncumulatively). Without limiting the foregoing, Parity Stock shall include the Issuer's Fixed Rate Cumulative Perpemal Preferred Stock, Series A and Fixed Rate Cumulative Perpetual Preferred Stock, Series B. (vii) "Signing; Date" means September 1, 2011. (viii) "Treasury" means the United States Department of the Treasury and any successor in interest thereto. (d) Certain Voting Matters. Holders of shares of Designated Preferred Stock will be entitled to one vote for each such share on any matter on which holders of Designated Preferred Stock are entitled to vote, including any action by written consent. [Remainder of Page Intentionally Left Blank] SBlF Participant No. 240 -2-

Schedule A STANDARD PROVISIONS Section 1. General Matters. Each share of Designated Preferred Stock shall be identical in all respects to every other share of Designated Preferred Stock. The Designated Preferred Stock shall be perpetual, subject to the provisions of Section 5 of these Standard Provisions that fonn a part of the Certificate of Designation. The Designated Preferred Stock shall rank equally with Parity Stock and shall rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any dissolution, liquidation or winding up of the Issuer, as set forth below. Section 2. Standard Definitions. As used herein with respect to Designated Preferred Stock: (a) "Acguiror," in any Holding Company Transaction, means the surviving or resulting entity or its ultimate parent in the case of a merger or consolidation or the transferee in the case of a sale, lease or other transfer in one transaction or a series of related transactions of all or substantially all of the consolidated assets of the Issuer and its subsidiaries, taken as a whole. (b) "Affiliate" means, with respect to any person, any person directly or indirectly controlling, controlled by or under common control with, such other person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with") when used with respect to any person, means the possession, directly or indirectly through one or more intennediaries, of the power to cause the direction of management and/or policies of such person, whether through the ownership of voting securities by contract or otherwise. (c) "Applicable Dividend Rate" has the meaning set forth in Section 3(a). (d) "Appropriate Federal Banking Agency" means the "appropriate Federal banking agency" with respect to the Issuer as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)), or any successor provision. (e) "Bank Holding Company" means a company registered as such with the Board of Governors of the Federal Reserve System pursuant to 12 U.S.c. 1842 and the regulations of the Board of Governors of the Federal Reserve System thereunder. (f) "Baseline" means the "Initial Small Business Lending Baseline" set forth on the Initial Supplemental Report (as defined in the Definitive Agreement), subject to adjustment pursuant to Section 3(a). (g) "Business Combination" means a merger, consolidation, statutory share exchange or similar transaction that requires the approval of the Issuer's stockholders. SBlF Participant No. 240 A-I

(h) "Business Day" means any day except Saturday, Sunday and any day on which banking institutions in the State of New York or the District of Columbia generally are authorized or required by law or other 'governmental actions to close. (i) "Bylaws" means the bylaws of the Issuer, as they may be amended from time to time. G) "Call Report" has the meaning set forth in the Definitive Agreement. (k) "Certificate of Designation" means the Certificate of Designation or comparable instrument relating to the Designated Preferred Stock, of which these Standard Provisions form a part, as it may be amended from time to time. (1) "Charge-Offs" means the net amount of loans charged off by the Issuer or, if the Issuer is a Bank Holding Company or a Savings and Loan Holding Company, by the IDI Subsidiary(ies) during quarters that begin on or after the Signing Date, determined as follows: (i) if the Issuer or the applicable IDI Subsidiary is a bank, by subtracting (A) the aggregate dollar amount of recoveries reflected on line RIAD4605 of its Call Reports for such qual1ers from (B) the aggregate dollar amount of charge-offs reflected on line RIAD4635 of its Call Reports for such quarters (without duplication as a result of such dollar amounts being reported on a year-to-date basis); or (ii) if the Issuer or the applicable IDI Subsidiary is a thrift, by subtracting (A) the sum of the aggregate dollar amoWlt of recoveries reflected on line VA140 of its Call Reports for such quarters and the aggregate dollar amount of adjustments reflected on line VA150 of its Call Reports for such quarters from (B) the aggregate dollar amount of charge-offs reflected on line VA160 of its Call Reports for such quarters. (m) "Charter" means the Issuer's certificate or articles of incorporation, articles of association, or similar organizational document. (n) "CPP Lending Incentive Fee" has the meaning set forth in Section 3(e). (0) "Current Period'~ has the meaning set forth in Section 3(a)(i)(2). (p) "Dividend Payment Date" means January 1, April I, July I, and October I of each year. (q) "Dividend Period" means the period from and including any Dividend Payment Date to, but excluding, the next Dividend Payment Date; provided, however, the initial Dividend Period shall be the period from and including the Original Issue Date to, but excluding, the next Dividend Payment Date (the "Initial Dividend Period"). (r) "Dividend Record Date" has the meaning set forth in Section 3(b). SBLF Participant No. 240 A-2

(s) "Dividend Reference Period" has the meaning set forth III Section 3(a)(i)(2). (t) "GAAP" means generally accepted accounting principles in the United States. (u) "Holding Company Preferred Stock" has the meaning set forth in Section 7(c)(v). (v) "Holding Company Transaction" means the occurrence of (a) any transaction (including, without limitation, any acquisition, merger or consolidation) the result of which is that a "person" or "group" within the meaning of Section B(d) of the Securities Exchange Act of 1934, as amended, (i) becomes the direct or indirect ultimate "beneficial owner," as defined in Rule 13d-3 wlder that Act, of common equity of the Issuer representing more than 50% of the voting power of the outstanding Common Stock or (ii) is otherwise required to consolidate the Issuer for purposes of generally accepted accounting principles in the United States, or (b) any consolidation or merger of the Issuer or similar transaction or any sale, lease or other transfer in one transaction or a series of related transactions of all or substantially all of the consolidated assets of the Issuer and its subsidiaries, taken as a whole, to any Person other than one of the Issuer's subsidiaries; provided that, in the case of either clause (a) or (b), the Issuer or the Acquiror is or becomes a Bank Holding Company or Savings and Loan Holding Company. (w) "IDI Subsidiary" means any Issuer Subsidiary that is an insured depository institution. (x) "Increase in QSBL" means: (i) with respect to the first (1st) Dividend Period, the difference obtained by subtracting (A) the Baseline from (B) QSBL set forth in the Initial Supplemental Report (as defined in the Definitive Agreement); and (ii) with respect to each subsequent Dividend Period, the difference obtained by subtracting (A) the Baseline from (B) QSBL for the Dividend Reference Period for the Current Period. (y) "Initial Dividend Period" has the meaning set forth in the definition of "Dividend Period". (z) "Issuer Subsidiary" means any subsidiary of the Issuer. (aa) "Liquidation Preference" has the meaning set forth in Section 4(a). (bb) "Non-Qualifying Portion Percentage" means, with respect to any particular Dividend Period, the percentage obtained by subtracting the Qualifying Portion Percentage from one (1). SBLF Participant No. 240 A-3

(cc) "Original Issue Date" means the date on which shares of Designated Preferred Stock are first issued. (dd) "Percentage Change in OSBL" has the meaning set forth In Section 3(a)(ii). (ee) "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company or trust. (ft) "Preferred Director" has the meaning set forth in Section 7(c). (gg) "Preferred Stock" means any and all series of preferred stock of the Issuer, including the Designated Preferred Stock. (bb) "Previously Acquired Preferred Shares" has the meaning set forth in the Definitive Agreement. (ii) "Private Capital" means, if the Issuer is Matching Private Investment Supported (as defmed in the Definitive Agreement), the equity capital received by the Issuer or the applicable Affiliate of the Issuer from one or more non-governmental investors in accordance with Section 1.3(m) of the Definitive Agreement. (jj) "Publicly-traded" means a company that (i) has a class of securities that is traded on a national securities exchange and (ii) is required to fIle periodic reports with either the Securities and Exchange Commission or its primary federal bank regulator. (kk) "Qualified Small Business Lending" or "QSBL" means, with respect to any particular Dividend Period, the "Quarter-End Adjusted Qualified Small Business Lending" for such Dividend Period set forth in the applicable Supplemental Report. (II) "Qualifying Portion Percentage" means, with respect to any particular Dividend Period, the percentage obtained by dividing (i) the Increase in QSBL for such Dividend Period by (ii) the aggregate Liquidation Amount of then-outstanding Designated Preferred Stock. (mm) "Savings and Loan Holding Company" means a company registered as such with the Office of Thrift Supervision pursuant to 12 U.S.C. 1467a(b) and the regulations of the Office of Thrift Supervision promulgated thereunder. (nn) "Share Dilution Amount" means the increase in the number of diluted shares outstanding (determined in accordance with GAAP applied on a consistent basis, and as measured from the date of the Issuer's most recent consolidated financial statements prior to the Signing Date) resulting from the grant, vesting or exercise of equity-based compensation to employees and equitably adjusted for any stock split, stock dividend, reverse stock split, reclassification or similar transaction. (00) "Signing Date Tiler I Capital Amount" means $51,502,000. . SBLF Participant No. 240 A-4

(pp) "Standard Provisions" mean these Standard Provisions that fonn a part of the Certificate of Designation relating to the Designated Preferred Stock. (qq) "Supplemental Report" means a Supplemental Report delivered by the Issuer to Treasury pursuant to the Definitive Agreement. (rr) "Tier I Dividend Threshold" means, as of any particular date, the result of the following formula: ( ( A + B - C ) * 0.9 ) - D where: A = Signing Date Tier 1 Capital Amount; B = the aggregate Liquidation Amount of the Designated Preferred Stock issued to Treasury; C = the aggregate amount of Charge-Offs since the Signing Date; and D = (i) beginning on the first day of the eleventh (11th) Dividend Period, the amount equal to ten percent (10%) of the aggregate Liquidation Amount of the Designated Preferred Stock issued to Treasury as of the Effective Date (without regard to any redemptions of Designated Preferred Stock that may have occurred thereafter) for everyone percent (I %) of positive Percentage Change in Qualified Small Business Lending between the ninth (9th) Dividend Period and the Baseline; and (ii) zero (0) at all other times. (ss) "Voting Parity Stock" means, with regard to any matter as to which the holders of Designated Preferred Stock are entitled to vote as specified in Section 7(d) of these Standard Provisions that form a part of the Certificate of Designation, any and all series of Parity Stock upon which like voting rights have been conferred and are exercisable with respect to such matter. Section 3. Dividends. (a) Rate. (i) The "Applicable Dividend Rate" shall be determined as follows: SBLF Participant No. 240 (1) With respect to the Initial Dividend Period, the Applicable Dividend Rate shall be five percent (5%). A-5

(2) With respect to each of the second (2nd) through the tenth (lOth) Dividend Periods, inclusive (in each case, the "Current Period"), the Applicable Dividend Rate shall be: (A) (x) the applicable rate set forth in column "A" of the table in Section 3(a)(iii), based on the Percentage Change in QSBL between the Dividend Period that was two Dividend Periods prior to the Current Period (the "Dividend Reference Period") and the Baseline, multiplied by (y) the Qualifying Portion Percentage; plus (B) (x) five percent (5%) multiplied by (y) the Non- Qualifying Portion Percentage. In each such case, the Applicable Dividend Rate shall be detennined at the time the Issuer delivers a complete and accurate Supplemental Report to Treasury with respect to the Dividend Reference Period. (3) With respect to the eleventh (11 th) through the eighteenth (18th) Dividend Periods, inclusive, and that portion of the riineteenth (19th) Dividend Period prior to, but not including, the four and one half (4Y2) year anniversary of the Original Issue Date, the Applicable Dividend Rate shall be: (A) (x) the applicable rate set forth in column "B" of the table in Section 3(a)(iii), based on the Percentage Change in QSBL between the ninth (9th) Dividend Period and the Baseline, multiplied by (y) the Qualifying Portion Percentage, calculated as of the last day of the ninth (9th) Dividend Period; plus (B) (x) five percent (5%) multiplied by (y) the Non- Qualifying Portion Percentage, calculated as of the last day of the ninth (9th) Dividend Period. In such case, the Applicable Dividend Rate shall be determined at the time the Issuer delivers a complete and accurate Supplemental Report to Treasury with respect to the ninth (9th) Dividend Period. SBLF Participant No. 240 (4) (5) With respect to (A) that portion of the nineteenth (l9th) Dividend Period beginning on the four and one half (4Y2) year anniversary of the Original Issue Date and (B) all Dividend Periods thereafter, the Applicable Dividend Rate shall be nine percent (9%). Notwithstanding anything herein to the contrary, if the Issuer fails to submit a Supplemental Report that is due during any of the second (2nd) through tenth (lOth) A-6

Dividend Periods on or before the sixtieth (60th) day of such Dividend Period, the Issuer's QSBL for the Dividend Period that would have bee~ covered by such Supplemental Report shall be zero (0) for purposes hereof (6) Notwithstanding anything herein to the contrary, but subject to Section 3(a)(i)(5) above, if the Issuer fails to submit the Supplemental Report that is due during the tenth (lOth) Dividend Period, the Issuer's QSBL for the shall be zero (0) for purposes of calculating the Applicable Dividend Rate pursuant to Section 3(a)(i)(3) and (4). The Applicable Dividend Rate shall be re-determined effective as of the first day of the calendar quarter following the date such failure is remedied, provided it is remedied prior to the four and one half (412) anniversary of the Original Issue Date. (7) Notwithstanding anything herein to the contrary, if the Issuer fails to submit any of the certificates required by Sections 3.1 (d)(ii) or 3.1(d)(iii) of the Definitive Agreement when and as required thereby, the Issuer's QSBL for the shall be zero (0) for purposes of calculating 1he Applicable Dividend Rate pursuant to Section 3(a)(i)(2) or (3) above until such failure is remedied. (ii) The "Percentage Change in Qualified Lending" between any given Dividend Period and the Baseline shall be the result of the following formula, expressed as a percentage: ( ( QSBL for the Dividend Period - Baseline) Baseline ) x 100 (iii) The following table shall be used for determining the Applicable Dividend Rate: The Applicable Dividend Rate shall be: Column i~" Column "B" If the Percentage Change in (each of the (11 th - 18th, and Qualified Lending is: 2nd -10th the first part of the Dividend Periods) 19th, Dividend Periods) 0% or less 5% 7% More than 0%, but less than 2.5% 5% 5% 2.5% or more, but less than 5% 4% 4% 5% or more, but less than 7.5% 3% 3% SBLF Participant No_ 240 A-7

7.5% or more, but less than 10% 10% or more 2% 1% 2% 1% (iv) If the Issuer consummates a Business Combination, a purchase of loans or a purchase of participations in loans and the Designated Preferred Stock remains outstanding thereafter, then the Baseline shall thereafter be the "Quarter-End Adjusted Small Business Lending Baseline" set forth on the Quarterly Supplemental Report (as defined in the Definitive Agreement). (b) Payment. Holders of Designated Preferred Stock shall be entitled to receive, on each share of Designated Preferred Stock if, as and when declared by the Board of Directors or any duly authorized committee of the Board of Directors, but only out of assets legally available therefor, non-cumulative cash dividends with respect to: (i) each Dividend Period (other than the Initial Dividend Period) at a rate equal to one-fourth (~) of the Applicable Dividend Rate with respect to each Dividend Period on the Liquidation Amount per share of Designated Preferred Stock, and no more, payable quarterly in arrears on each Dividend Payment Date; and (ii) the Initial Dividend Period, on the first such Dividend Payment Date to occur at least twenty (20) calendar days after the Original Issue Date, an amount equal to (A) the Applicable Dividend Rate with respect to the Initial Dividend Period multiplied by (B) the number of days from the Original Issue Date to the last day of the Initial Dividend Period (inclusive) divided by 360. In the event that any Dividend Payment Date would otherwise fall on a day that is not a Business Day, the dividend payment due on that date will be postponed to the next day that is a Business Day and no additional dividends will accrue as a result of that postponement. For avoidance of doubt, "payable quarterly in arrears" means that, with respect to any particular Dividend Period, dividends begin accruing on the first day of such Dividend Period and are payable on the first day of the next Dividend Period. The amount of dividends payable on Designated Preferred Stock on any date prior to the end of a Dividend Period, and for the initial Dividend Period, shall be computed on the basis of a 360-day year consisting of four 90-day quarters, and actual days elapsed over a 90-day quarter. Dividends that are' payable on Designated Preferred Stock on any Dividend Payment Date will be payable to holders of record of Designated Preferred Stock as they appear on the stock register of the Issuer on the applicable record date, which shall be the 15th calendar day immediately preceding such Dividend Payment Date or such other record date fixed by the Board of Directors or any duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a "Dividend Record Date"). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day. SBLF Participant No. 240 A-8

Holders of Designated Preferred Stock shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on Designated Preferred Stock as specified in this Section 3 (subject to the other provisions of the Certificate of Designation). (c) Non-Cumulative. Dividends on shares of Designated Preferred Stock shall be non-cumulative. If the Board of Directors or any duly authorized committee of the Board of Directors does not declare a dividend on the Designated Preferred Stock in respect of any Dividend Period: (i) the holders of Designated Preferred Stock shall have no right to receive any dividend for such Dividend Period, and the Issuer shall have no obligation to pay a dividend for such Dividend Period, whether or not dividends are declared for any subsequent Dividend Period with respect to the Designated Preferred Stock; and (ii) the Issuer shall, within five (5) calendar days, deliver to the holders of the Designated Preferred Stock a written notice executed by the Chief Executive Officer and the Chief Financial Officer of the Issuer stating the Board of Directors' rationale for not declaring dividends. (d) Priority of Dividends; Restrictions on Dividends. (i) Subject 'to Sections 3(d)(ii), (iii) and (v) and any restTIctlons imposed by the Appropriate Federal Banking Agency or, if applicable, the Issuer's state bank supervisor (as defined in Section 3(r) of the Federal Deposit Insurance Act (12 U.S.c. 1813(q), so long as any share of Designated Preferred Stock remains outstanding, the Issuer may declare and pay dividends on the Common Stock, any other shares of Junior Stock, or Parity Stock, in each case only if (A) after giving effect to such dividend the Issuer's Tier 1 capital would be at least equal to the Tier 1 Dividend Threshold, and (B) full dividends on all outstanding shares of Designated Preferred Stock for the most recently completed Dividend Period have been or are contemporaneously declared and paid. (ii) If a dividend is not declared and paid in full on the Designated Preferred Stock in respect of any Dividend Period, then from the last day of such Dividend Period until the last day of the third (3rd) Dividend Period immediately following it, no dividend or distribution shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than dividends payable solely in shares of Common Stock) or Parity Stock; provided, however, that in any such Dividend Period in which a dividend is declared and paid on the Designated Preferred Stock, dividends may be paid on Parity Stock to the extent necessary to avoid any material breach of a covenant by which the Issuer is bound. (iii) When dJividends have not been declared and paid in full for an aggregate of four (4) Dividend Periods or more, and during such time the Issuer was not subject to a regulatory detennination that prohibits the declaration and payment of dividends, the Issuer shall, within five (5) calendar days of each missed payment, deliver SBlF Participant No. 240 A-9

to the holders of the Designated Preferred Stock a certificate executed by at least a majority of the Board of Directors stating that the Board of Directors used its best efforts to declare and pay such dividends in a manner consistent with (A) safe and sound banking practices and (B) the directors' fiduciary obligations. (iv) Subject to the foregoing and Section 3(e) below and not otherwise, such dividends (payable in cash, securities or other property) as may be detennined by the Board of Directors or any duly authorized committee of the Board of Directors may be declared and paid on any securities, including Common Stock and other Junior Stock, from time to time out of any funds legally available for such payment, and holders of Designated Preferred Stock shall not be entitled to participate in any such dividends. (v) If the Issuer is not Publicly-Traded, then after the tenth (10th) anniversary of the Signing Date, so long as any share of Designated Preferred Stock remains outstanding, no dividend or distribution shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than dividends payable solely in shares of Common Stock) or Parity Stock. (e) Special Lending Incentive Fee Related to CPP. If Treasury held Previously Acquired Preferred Shares immediately prior to the Original Issue Date and the Issuer did not apply to Treasury to redeem such Previously Acquired Preferred Shares prior to December 16, 2010, and if the Issuer's Supplemental Report with respect to the ninth (9th) Dividend Period reflects an amount of Qualified Small Business Lending that is less than or equal to the Baseline (or if the Issuer fails to timely file a Supplemental Report with respect to the ninth (9th) Dividend Period), then beginning on January 1, 2014 and on all Dividend Payment Dates thereafter ending on April 1, 2016, the Issuer shall pay to the Holders of Designated Preferred Stock, on each share of Designated Preferred Stock, but only out of assets legally available therefor, a fee equal to 0.5% of the Liquidation Amount per share of Designated Preferred Stock ("CPP Lending Incentive Fee"). All references in Section 3(d) to "dividends" on the Designated Preferred Stock shall be deemed to include the CPP Lending Incentive Fee. Section 4. Liquidation Rights. (a) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or winding up of the affairs of the Issuer, whether voluntary or involuntary, holders of Designated Preferred Stock shall be entitled to receive for each share of Designated Preferred Stock, out of the assets of the Issuer or proceeds thereof (whether capital or surplus) available for distribution to stockholders of the Issuer, subject to the rights of any creditors of the Issuer, before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other stock of the Issuer ranking junior to Designated Preferred Stock as to such distribution, payment in full in an amount equal to the sum of (i) the Liquidation Amount per share and (ii) the amount of any accrued and unpaid dividends on each such share (such amounts collectively, the "Liquidation Preference"). (b) Partial Payment. If in any distribution described in Section 4(a) above the assets of the Issuer or proceeds thereof are not sufficient to pay in full the amounts payable with respect to all outstanding shares of Designated Preferred Stock and the corresponding amounts SBLF Participant No. 240 A-I0

payable with respect of any other stock of the Issuer ranking equally with Designated Preferred Stock as to such distribution, holders of Designated Preferred Stock and the holders of such other stock shall share ratably in any such distribution in proportion to the full respective distributions to which they are entitled. (c) Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Issuer ranking equally with Designated Preferred Stock as to such distribution has been paid in full, the holders of other stock of the Issuer shall be entitled to receive all remaining assets of the Issuer (or proceeds thereof) according to their respective rights and preferences. (d) Merger, Consolidation and Sale of Assets Is Not Liquidation. For purposes of this Section 4, the merger or consolidation of the Issuer with any other corporation or other entity, including a merger or consolidation in which the holders of Designated Preferred Stock receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Issuer, shall not constitute a liquidation, dissolution or winding up of the Issuer. Section 5. Redemption. (a) Optional Redemption. (i) Subject to the other provisions of this Section 5: (1) The Issuer, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time to time, out of funds legally available therefor, the shares of Designated Preferred Stock at the time outstanding; and (2) If, after the Signing Date, there is a change in law that modifies the tenus of Treasury's investment in the Designated Preferred Stock or the tenus of Treasury's Small Business Lending Fund program in a materially adverse respect for the Issuer, the Issuer may, after consultation with the Appropriate Federal Banking Agency, redeem all of the shares of Designated Preferred Stock at the time outstanding. (ii) The per-share redemption price for shares of Designated Preferred Stock shall be equal to the sum of: SBLF Participant No. 240 (1) (2) the Liquidation Amount per share, the per-share amount of any unpaid dividends for the then current Dividend Period at the Applicable Dividend Rate to, but excluding, the date fixed for redemption (regardless A-II

of whether any dividends are actually declared for that Dividend Period; and (3) the pro rata amount of CPP Lending Incentive Fees for the current Dividend Period. The redemption price for any shares of Designated Preferred Stock shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Issuer or its agent. Any declared but unpaid dividends for the then current Dividend Period payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 3 above, (b) No Sinking Fund. The Designated Preferred Stock will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Designated Preferred Stock will have no right to require redemption or repurchase of any shares of Designated Prefen'ed Stock. (c) Notice of Redemption. Notice of every redemption of shares of Designated Preferred Stock shall be wiven by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Issuer. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Designated Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Designated Preferred Stock. Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the holders of Designated Preferred Stock at such time and in any manner permitted by such facility, Each notice of redemption given to a holder shall state: (1) the redemption date; (2) the number of shares of Designated Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price. (d) Partial Redemption. In case of any redemption of part of the shares of Designated Preferred Stock at the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other manner as the Board of Directors or a duly authorized committee thereof may determine to be fair and equitable, but in any event the shares to be redeemed shall not be less than the Minimum Amount. Subject to the provisions hereof, the Board of Directors or a duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Designated Preferred Stock shall be redeemed from time to time, subject to the approval of the Appropriate Federal Banking Agency. If fewer than all the SBlF Participant No. 240 A-12

shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof. (e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been deposited by the Issuer, in trust for the pro rata benefit of the holders of the shares called for redemption, with a bank or trust company doing business in the Borough of Manhattan, The City of New York, and having a capital and surplus of at least $500 million and selected by the Board of Directors, so as to be and continue to be available solely therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company, without interest. Any funds unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released to the Issuer, after which time the holders of the shares so called for redemption shall look only to the Issuer for payment of the redemption price of such shares. (f) Status of Redeemed Shares. Shares of Designated Preferred Stock that are redeemed, repurchased or otherwise acquired by the Issuer shall revert to authorized but unissued shares of Preferred Stock (provided that any such cancelled shares of Designated Preferred Stock may be reissued only as shares of any series of Preferred Stock other than Designated Preferred Stock). Section 6. Conversion. Holders of Designated Preferred Stock shares shall have no right to exchange or convert such shares into any other securities. Section 7. Voting Rights. (a) General. The holders of Designated Preferred Stock shall not have any voting rights except as set forth below or as otherwise from time to time required by law. (b) Board Observation Rights. Whenever, at any time or times, dividends on the shares of Designated Preferred Stock have not been declared and paid in full within five (5) Business Days after each Dividend Payment Date for an aggregate of five (5) Dividend Periods or more, whether or not consecutive, the Issuer shall invite a representative selected by the holders of a majority of the outstanding shares of Designated Preferred Stock, voting as a single class, to attend all meetings of its Board of Directors in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors in connection with such meetings; provided, that the holders of the Designated Preferred Stock shall not be obligated to select such a representative, nor shall such representative, if selected, be obligated to attend any meeting to which he/she is invited. The rights of the holders of the Designated Preferred Stock set forth in this Section 7(b) shall terminate when full dividends have been timely paid on the Designated Preferred Stock for at least four consecutive Dividend Periods, subject to revesting in the event of each and every subsequent default of the character above mentioned. SBLF Participant No. 240 A-13

(c) Preferred Stock Directors. Whenever, at any time or times, (i) dividends on the shares of Designated Preferred Stock have not been declared and paid in full within five (5) Business Days after each Dividend Payment Date for an aggregate of six (6) Dividend Periods or more, whether or not consecutive, and (ii) the aggregate liquidation preference of the then-outstanding shares of Designated Preferred Stock is greater than or equal to $25,000,000, the authorized number of directors of the Issuer shall automatically be increased by two and the holders of the Designated Preferred Stock, voting as a single class, shall have the right, but not the obligation, to elect two directors (hereinafter the "Preferred Directors" and each a "Preferred Director") to fill such newly created directorships at the Issuer's next annual meeting of stockholders (or, if the next annual meeting is not yet scheduled or is scheduled to occur more than thirty days later, the President of the Company shall promptly call a special meeting for that purpose) and at each subsequent annual meeting of stockholders until full dividends have been timely paid on the Designated Preferred Stock for at least four consecutive Dividend Periods, at which time such right shall terminate with respect to the Designated Preferred Stock, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above mentioned; provided that it shall be a qualification for election for any Preferred Director that the election of such Preferred Director shall not cause the Issuer to violate any corporate governance requirements of any securities exchange or other trading facility on which securities of the Issuer may then be listed or traded that listed or traded companies must have a majority of independent directors. Upon any termination of the right of the holders of shares of Designated Preferred Stock to vote for directors as provided above, the Preferred Directors shall cease to be qualified as directors, the term of office of all Preferred Directors then in office shall terminate immediately and the authorized number of directors shall be reduced by the number of Preferred Directors elected pursuant hereto. Any Preferred Director may be removed at any time, with or without cause, and any vacancy created thereby may be filled, only by the affirmative vote of the holders a majority of the shares of Designated Preferred Stock at the time outstanding voting separately as a class. If the office of any Preferred Director becomes vacant for any reason other than removal from office as aforesaid, the holders of a majority of the outstanding shares of Designated Preferred Stock, voting as a single class, may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred. (d) Class Voting Rights as to Particular Matters. So long as any shares of Designated Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Charter, the written consent of (x) Treasury if Treasury holds any shares of Designated Preferred Stock, or (y) the holders of a majority of the outstanding shares of Designated Preferred Stock, voting as a single class, if Treasury does not hold any shares of Designated Preferred Stock, shall be necessary for effecting or validating: (i) Authorization of Senior Stock. Any amendment or alteration of the Certificate of Designation for the Designated Preferred Stock or the Charter to authorize or create or increase the authorized amount of, or any issuance of, any shares of, or any securities convertible into or exchangeable or exercisable for shares of, any class or series of capital stock of the Issuer ranking senior to Designated Preferred Stock with respect to either or both the payment of dividends and/or the distribution of assets on any liquidation, dissolution or winding up of the Issuer; SBLF Participant No. 240 A-14

(ii) Amendment of Designated Preferred Stock. Any amendment, alteration or repeal of any provision of the Certificate of Designation for the Designated Preferred Stock or the Charter (including, unless no vote on such merger or consolidation is required by Section 7(d)(iii) below, any amendment, alteration or repeal by means of a merger, consolidation or otherwise~ so as to adversely affect the rights, preferences, privileges or voting powers of the Designated Preferred Stock; (iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Subject to Section 7(d)(v) below, any consummation of a binding share exchange or reclassification involving the Designated Preferred Stock, or of a merger or consolidation of the Issuer with another corporation or other entity, unless in each case (x) the shares of Designated Preferred Stock remain outstanding or, in the case of any such merger or consolidation with respect to which the Issuer is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and· restrictions thereof that are the same as the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of Designated Preferred Stock ilIunediately prior to such consummation, taken as a whole; provided, that in all cases, the obligations of the Issuer are assumed (by operation of law or by express written assumption) by the resulting entity or its ultimate parent; (iv) Certain Asset Sales. Any sale of all, substantially all, or any material portion of, the assets df the Company, if the Designated Preferred Stock will not be redeemed in full contemporaneously with the consummation of such sale; and (v) Holding Company Transactions. Any consummation of a Holding Company Transaction, unless as a result of the Holding Company Transaction each share of Designated Preferred Stock Shall be converted into or exchanged for one share with an equal liquidation preference of preference securities of the Issuer or the Acquiror (the "Holding Company Preferred Stock"). Any such Holding Company Preferred Stock shall entitle holders thereof to dividends from the date of issuance of such Holding Company Preferred Stock on terms that are equivalent to the terms set forth herein, and shall have such other rights, preferences, privileges and voting powers, and limitations and restrictions thereof that are the same as the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of Designated Preferred Stock immediately prior to such conversion or exchange, taken as a whole; provided, however, that for all purposes of this Section 7(d), any increase in the amount of the authorized Preferred Stock, including any increase in the authorized amount of Designated Preferred Stock necessary to satisfy preemptive or similar rights granted by the Issuer to other persons prior to the Signing Date, or the creation and issuance, or an increase in the authorized or issued amount, whether pursuant to preemptive or similar rights or otherwise, of any other series of Preferred Stock, or any securities convertible into or exchangeable or exercisable for any other series of Preferred Stock, ranking equally with and/or junior to Designated Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Issuer will not be SBLF Participant No. 240 A-iS

deemed to adversely affect the rights, preferences, privileges or voting powers, and shall not require the affirmative vote or consent of, the holders of outstanding shares of the Designated Preferred Stock. (e) Changes after Provision for Redemption. No vote or consent of the holders of Designated Preferred Stock shall be required pursuant to Section 7(d) above if, at or prior to the time when any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of the Designated Preferred Stock shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been deposited in trust for such redemption, in each case pursuant to Section 5 above. (f) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Designated Preferred Stock (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules of the Board of Directors or any duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Charter, the Bylaws, and applicable law and the rules of any national securities exchange or other trading facility on which Designated Preferred Stock is listed or traded at the time. Section 8. Restriction on Redemptions and Repurchases. (a) Subject to Sections 8(b) and (c), so long as any share of Designated Preferred Stock remains outstanding, the Issuer may repurchase or redeem any shares of Capital Stock (as defined below), in each case only if (i) after giving effect to such dividend, repurchase or redemption, the Issuer's Tier 1 capital would be at least equal to the Tier 1 Dividend Threshold and (ii) dividends on all outstanding shares of Designated Preferred Stock for the most recently completed Dividend Period have been or are contemporaneously declared and paid (or have been declared and a sum sufficient for the payment thereof has been set aside for the benefit of the holders of shares of Designated Preferred Stock on the applicable record date). (b) If a dividend is lIlot declared and paid on the Designated Preferred Stock in respect of any Dividend Period, then from the last day of such Dividend Period until the last day of the third (3rd) Dividend Period immediately following it, neither the Issuer nor any Issuer Subsidiary shall, redeem, purchase or'acquire any shares of Conunon Stock, Junior Stock, Parity Stock or other capital stock or other equity securities of any kind of the Issuer or any Issuer Subsidiary, or any trust preferred securities issued by the Issuer or any Affiliate of the Issuer ("Capital Stock"), (other than (i) redemptions, purchases, repurchases or other acquisitions of the Designated Preferred Stock and (ii) repurchases of Junior Stock or Common Stock in connection with the administration of any employee benefit plan in the ordinary course of business (including purchases to offset any Share Dilution Amount pursuant to a publicly announced repurchase plan) and consistent with past practice; provided that any purchases to offset the Share Dilution Amount shall in no event exceed the Share Dilution Amount, (iii) the acquisition by the Issuer or any of the Issuer Subsidiaries of record ownership in Junior Stock or Parity Stock for the beneficial ownership of any other persons (other than the Issuer or any other Issuer Subsidiary), including as trustees or custodians, (iv) the exchange or conversion of Junior Stock SBLF Participant No. 240 A-16

for or into other Junior Stock or of Parity Stock or trust preferred securities for or into other Parity Stock (with the same or lesser aggregate liquidation amount) or Junior Stock, in each case set forth in this clause (iv), solely to the extent required pursuant to binding contractual agreements entered into prior to the Signing Date or any subsequent agreement for the accelerated exercise, settlement or exchange thereof for Common Stock, (v) redemptions of securities held by the Issuer or any wholly-owned Issuer Subsidiary or (vi) redemptions, purchases or other acquisitions of capital stock or other equity securities of any kind of any Issuer Subsidiary required pursuant to binding contractual agreements entered into prior to (x) if Treasury held Previously Acquired Preferred Shares immediately prior to the Original Issue Date, the original issue date of such Previously Acquired Preferred Shares, or (y) otherwise, the Signing Date). (c) If the Issuer is not Public1y-Traded, then after the tenth (lOth) anniversary of the Signing Date, so long as any share of Designated Preferred Stock remains outstanding, no Common Stock, Junior Stock or Parity Stock shall be, directly or indirectly, purchased, redeemed or otherwise acquired for consideration by the Issuer or any of its subsidiaries. Section 9. No Preemptive Rights. No share of Designated Preferred Stock shall have any rights of preemption whatsoever as to any securities of the Issuer, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted. Section 10. References to Line Items of Supplemental Reports. If Treasury modifies the form of Supplemental Report, pursuant to its rights under the Definitive Agreement, and any such modification includes a change to the caption or number of any line item on the Supplemental Report, then any reference herein to such line item shall thereafter be a reference to such re-captioned or re-numbered line item. Section 11. Record Holders. To the fullest extent permitted by applicable law, the Issuer and the transfer agent for Designated Preferred Stock may deem and treat the record holder of any share of Designated Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Issuer nor such transfer agent shall be affected by any notice to the contrary. Section 12. Notices. All notices or communications in respect of Designated Preferred Stock shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designation, in the Charter or Bylaws or by applicable law. Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Company or any similar facility, such notices may be given to the holders of Designated Preferred Stock in any manner permitted by such facility. Section 13. Replacement Certificates. The Issuer shall replace any mutilated certificate at the holder's expense upon surrender of that certificate to the Issuer. The Issuer shall replace certificates that become destroyed, stolen or lost at the holder's expense upon delivery to the Issuer of reasonably satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be reasonably required by the Issuer. SBLF Participant No. 240 A-I?

Section 14. Other Rights. The shares of Designated Preferred Stock shall not have any rights, preferences, privileges or voting powers or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Charter or as provided by applicable law. SBlF Participant No 240 A-18

ARTICLES OF AMENDMENT - Stock, For-Profit Corporation Godfrey Kayn, S.C. 780 N. Water Street Milwaukee, Wisconsin 53202 INSTRUCTIONS (Continued) A. State the name of the corporation (before any change effected by this amendment) and the text of the amendment(s). The text should recite the resolution adopted (e.g., "Resolved, that Article I of the articles of incorporation be amended 10 read: (enter the amended article). If an amendment provides for an exchange, reclassification or cancellation of issued shares, state the provisions for implementing the amendment if not contained in the amendment itself. B. Enter the date of adoption of the amendment(s). If there is more than one amendment, identifY the date of adoption of each. Mark (X) one of the three choices to indicate the method of adoption of the amendment(s). By Board of Directors - Refer to sec. 180.1 002 for specific infoIDlation on the character of amendments that may be adopted by the Board of Directors without shareholder action. By Board of Directors and Shareholders - Amendments proposed by the Board of Directors and adopted by shareholder approval. Voting requirements differ with circumstances and provisions in the articles of incolporation. See sec. 180.1003, Wis. Slats., for specific infonnation. By Incorporators or Board of Directors - Before issuance of shares - See sec. 180.1005, Wis. Stats. for conditions attached to the adoption of an amendment approved by a vote or consent of Jess than 2/3rds of the shares subscribed for. C. Enter the date of execution and the name and ti tie of the person signing the document. The document must be signed by one of the following: An officer of the corporation (or incorporator if directors have not been elected), or a court-appointed receiver. trustee or fiduciary. A director is not empowered to sign. If the document is executed in Wisconsin, sec. 182.01(3) provides that it shall not be filed unless the name of the person (individual) who drafted it is printed, typewritten or stamped thereon in a legible manner. If the document is not executed in Wisconsin, enter that remark. FILING FEE - $40.00. DFTlCORP/4J(R02/0S/04) 30f3

Articles of Amendment Chapt34 180 Changes Authorized Shares to: 30,000,000 c/s $0.1PV 10,000,000 p/s/ $0.1PV 14,964 Fixed Rate Cumulative Perpetual P/S. Series 748 Fixed Rate Cuulative Perpetual P/S. Series B 24,400 Non-Cumulative Perpetual P/S. Series C 9,959,888 P/S undesignated Shirley Huntemann Godfrey Kahn SC 780 N Water St Milwaukee WI 53202-9740 OOS#2011 0829 2708922 $40.00 25.00 Exp

Exhibit 3.2

BYLAWS

NICOLET BANKSHARES, INC.

BYLAWS

NICOLET BANKSHARES, INC.

INDEX

		PAGE

1.	OFFICES		1
	1.1. Principal and Other Offices		1
	1.2. Registered Office		1

2.	SHAREHOLDERS		1
	2.1. Annual Meeting		1
	2.2. Special Meetings		1
	2.3. Place of Meeting		1
	2.4. Notice of Meeting		1
	2.5. Advance Notice of Shareholder-Proposed Business at Annual Meetings		2
	2.6. Nominations		3
	2.7. Fixing of Record Date		3
	2.8. Shareholders’ List		3
	2.9. Quorum; Votes		4
	2.10. Proxies		4
	2.11. Voting Shares Owned by the Corporation		4
	2.12. Shares in the Name of Another Corporation or a Trustee		4
	2.13. Adjournments		5
	2.14 Chairman of Meetings		5

3.	BOARD OF DIRECTORS		5
	3.1. General Powers		5
	3.2. Number, Tenure and Qualifications		5
	3.3. Regular Meeting		5
	3.4. Special Meetings		6
	3.5. Notice		6
	3.6. Quorum; Votes		6

	3.7 Removal and Resignation	7
	3.8. Vacancies	7
	3.9. Compensation	7
	3.10. Presumption of Assent	7
	3.11. Committees	8
	3.12. Informal Action Without Meeting	8
	3.13. Telephonic Meetings	9
	3.14 Chairman of Meetings	9

4.	OFFICERS	9
	4.1. Number	9
	4.2. Election and Term of Office	9
	4.3. Removal	9
	4.4. Vacancies	9
	4.5. Chairman of the Board	9
	4.6 President	9
	4.7. Vice Presidents	10
	4.9. Secretary	10
	4.10. Assistant Secretaries	10
	4.11. Salaries	10
	4.12. Voting of Stock in Other Corporations	10

5.	CERTIFICATES FOR SHARES AND THEIR TRANSFER	11
	5.1. Certificates for Shares	11
	5.2. Transfer of Shares	11
	5.3. Stock Regulations	11

6.	EMERGENCY BY-LAWS	11

7.	GENERAL	12
	7.1. Indemnity of Officers and Directors	12

8.	AMENDMENT	15

BY-LAWS

NICOLET BANKSHARES, INC.

1. OFFICES

1.1. Principal and Other Offices . The principal office of the Corporation shall be located at any place either within or outside the State of Wisconsin as shall be designated in the Corporation’s most recent annual report filed with the Wisconsin Secretary of State. The executive offices of the Corporation shall be located at its principal office. The Corporation may have such other offices, either within or without the State of Wisconsin, as the Board of Directors may designate or as the business of the Corporation may require from time to time.

1.2. Registered Office . The registered office of the Corporation required by the Wisconsin Business Corporation Law (the “WBCL”) to be maintained in the State of Wisconsin may be, but need not be, the same as any of its places of business within the State of Wisconsin. The registered office may be changed from time to time as provided in Section 180.0502 of the WBCL or any successor thereto.

2. SHAREHOLDERS

2.1. Annual Meeting . The annual meeting of shareholders shall be held at such time and/or date as shall be fixed by the Secretary of the Corporation or the Board of Directors, for the purposes of electing directors and for the transaction of such other business as may have been properly brought before the meeting in compliance with the provisions of Section 2.5 of the By-laws.

2.2. Special Meetings . Except as otherwise provided by the WBCL, special meetings of shareholders of the Corporation may be called by the Chief Executive Officer or the President of the Corporation pursuant to a resolution approved by not less than a majority of the Board of Directors, or by any one or more shareholders owning, in the aggregate, not less than ten percent of the stock of the Corporation.

2.3. Place of Meeting . The Board of Directors, Chief Executive Officer or President may designate any place, within or without the State of Wisconsin, as the place of meeting for the annual meeting or for any special meeting. If no designation is made, the place of meeting shall be the principal office of the Corporation. Any meeting may be adjourned to reconvene at any place designated by vote of a majority of the shares represented at the meeting.

2.4. Notice of Meeting . The Corporation shall notify shareholders of the date, time and place of each annual and special shareholders’ meeting not less than ten nor more than sixty days before the date of the meeting. Notice of a special meeting shall include a description of each purpose for which the meeting is called. Notice of the meeting shall be given only to those shareholders entitled to vote at the meeting, unless otherwise required by the law. Notice may be communicated in person, by telephone, telegraph, teletype, facsimile, or other forms of wire or wireless communication, or by mail or private carrier. Written notice to a shareholder shall be

deemed to be effective on the earlier of: (a) the date received; (b) the date it is deposited in the United States mail when addressed to the shareholder’s address shown in the Corporation’s current record of shareholders, with postage prepaid; (c) on the date shown on the return receipt, if sent by registered or certified mail, return receipt requested, and the receipt is signed by or on behalf of the addressee; (d) the date sent, if transmitted by telegraph, teletype, facsimile or other form of wire or wireless communication; or (e) the date delivered to a courier or deposited in a designated receptacle, if sent by private carrier, when addressed to the shareholder’s address shown in the Corporation’s current record of shareholders.

2.5. Advance Notice of Shareholder-Proposed Business at Annual Meetings .

(a)

At an annual meeting of shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be either (a) specified in the notice of meeting (or any supplement thereto) given in accordance with Section 2.4 of these By-laws, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, the Chief Executive Officer or the President, or (c) otherwise properly brought before the meeting by a shareholder. In addition to any other applicable requirements for business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice of such business in writing to the Secretary of the Corporation. Except for the nomination of directors, as provided in Section 2.6 of these By-laws, a shareholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 60 days prior to the date fixed for such meeting in accordance with Section 2.1 of these By-laws to be considered timely. A shareholder’s notice to the Secretary of the Corporation shall set forth as to each matter the shareholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the shareholder proposing such business, (iii) the class and number of shares of the Corporation which are beneficially owned by the shareholder, and (iv) any material interest of the shareholder in such business. In addition, any such shareholders shall be required to provide such further information as may be requested by the Corporation in order to comply with federal securities laws, rules and regulations.

(b)

Notwithstanding anything contained in these By-laws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 2.5; provided, however, that nothing in this Section 2.5 shall be deemed to preclude discussion by any shareholder of any business properly brought before the annual meeting in accordance with said procedure.

(c)

The chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 2.5, and if the chairman should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

2.6. Nominations . Nominations for election to the board of directors may be made by the board of directors or by any shareholder of any outstanding class of capital stock of the Corporation entitled to vote for the election of directors. Nominations, other than those made by or on behalf of the existing management of the Corporation, shall be made in writing and shall be delivered or mailed to the president of the Corporation not less than 14 days nor more than 50 days prior to any meeting of shareholders called for the election of directors, provided , however , that if less than 21 days' notice of the meeting is given to shareholders, such nomination shall be mailed or delivered to the president of the Corporation not later than the close of business on the 7 ^th day following the day on which the notice of meeting was mailed. Such notification shall contain the following information to the extent known to the notifying shareholder:

(a)

The name and address of each proposed nominee.

(b)

The principal occupation of each proposed nominee.

(c)

The total number of shares of capital stock of the Corporation that will be voted for each proposed nominee.

(d)

The name and residence address of the notifying shareholder.

(e)

The number of shares of capital stock of the Corporation owned by the notifying shareholder.

Nominations not made in accordance herewith may be disregarded by the chairperson of the meeting, in his/her discretion, and upon his/her instructions, the vote tellers may disregard all votes cast for each such nominee.

2.7. Fixing of Record Date .

(a)

For the purpose of determining any voting group entitled to notice of or to vote at any meeting of shareholders, or shareholders entitled to receive any distribution or dividend from the Corporation, or in order to determine those shareholders entitled to take any other action authorized by these By-laws or the WBCL, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders. Such record date shall not be more than 70 days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken.

(b)

When a determination of shareholders entitled to notice of or to vote at any meeting of shareholders has been made as provided in this section, such determination shall be applied to any adjournment thereof unless the Board of Directors fixes a new record date, which it shall do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.

2.8. Shareholders’ List . After fixing a record date for a meeting of shareholders, the Corporation shall prepare a list of the names of all its shareholders who are entitled to notice of a shareholders’ meeting. The list shall be arranged by class or series of shares and show the

address of and the number of shares held by each shareholder. The shareholder list shall be available for inspection by any shareholder beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting. The list shall be available at the Corporation’s principal office or at a place identified in the meeting notice in the city where the meeting is to be held. A shareholder, or his or her agent or attorney, is entitled, on written demand, to inspect and to copy the list during regular business hours and at his or her expense, during the period it is available for inspection, provided the shareholder, or his or her agent or attorney, demonstrates to the satisfaction of the Corporation he or she satisfies the requirements of the WBCL. The Corporation shall make the shareholders’ list available at the meeting and shall be subject to the inspection of any shareholder, or his or her agent or attorney, during the time of the meeting or any adjournment thereof. Refusal or failure to prepare or make available the shareholders’ list shall not affect the validity of any action taken at such meeting.

2.9. Quorum; Votes .

(a)

Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. Unless the Articles or the WBCL provides otherwise, a majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter.

(b)

Once a share is represented for any purpose at a meeting, other than for the purpose of objecting to holding the meeting or transacting business at the meeting, it is deemed present for purposes of determining whether a quorum exists for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting. If a quorum exists, action on a matter by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the Articles or the WBCL requires a greater number of affirmative votes, provided, however, that unless otherwise provided in the Articles, directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present.

2.10. Proxies . At all meetings of shareholders, a shareholder entitled to vote may vote by proxy appointed in writing by the shareholder or by his or her duly authorized attorney in fact. Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy.

2.11. Voting Shares Owned by the Corporation . Shares of the Corporation belonging to it shall not be voted directly or indirectly at any meeting of shareholders and shall not be considered in determining whether a quorum exists or for any other purpose relating to the voting of shares. Notwithstanding the foregoing, shares held by the Corporation in a fiduciary capacity are outstanding shares and may be voted and shall be considered in any such determination.

2.12. Shares in the Name of Another Corporation or a Trustee . Shares issued in the name of another corporation may be voted by the president of such corporation, or any other

officer or proxy appointed by such president in the absence of express written notice to the Corporation of the designation of some other person by the board of directors or by-laws of such other corporation. Shares in the name of a trustee shall be voted in the manner designated by a majority of the trustees or their proxy unless a greater concurrence of trustees is required by the trust, of which the Corporation shall have actual notice.

2.13. Adjournments . An annual or special meeting of shareholders may be adjourned by a vote of a majority of the shares represented at the meeting entitled to vote in the election of directors, even if less than a quorum. Upon being reconvened, the adjourned meeting shall be deemed to be a continuation of the initial meeting. A quorum will be deemed present if a quorum of shares was represented at the initial meeting and any business that could be conducted at the initial meeting may be considered at the adjourned meeting. A meeting may be adjourned at any time, including after action on one or more matters, and for any purpose, including, but not limited to, allowing additional time to solicit votes on one or more matters, to disseminate additional information to shareholders or to count votes. Notice is not required for an adjourned meeting if the date, time and place of the adjournment are announced at the meeting before adjournment. If a new record date for an adjourned meeting is fixed, notice of the adjourned meeting must be given to persons who are shareholders as of the new record date.

2.14 Chairman of Meetings . The Chairman of the Board or, in the Chairman’s absence or inability or refusal to act, the President shall preside at all meetings of the shareholders.

3. BOARD OF DIRECTORS

3.1. General Powers . All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation managed under the direction of, its Board of Directors, subject to any limitations set forth in the Articles.

3.2. Number, Tenure and Qualifications . The number of directors shall not be less than two nor more than twenty-five, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors then in office. A director shall hold office until the annual meeting for the year in which his or her term expires and until his or her successor shall be duly elected and shall qualify. Directors need not be residents of the State of Wisconsin or shareholders of the Corporation. No person shall be eligible to be elected a director at any meeting of shareholders held on or after the date he or she attains age seventy-two (72). The Board of Directors, at its discretion, may waive the age limitation or establish a greater age from time to time. The Board of Directors, at its discretion, may designate a person who has served as a director of the Corporation as a “Director Emeritus” upon such terms and conditions and at such compensation as may be fixed by resolution of the Board from time to time. A Director Emeritus shall have the right to attend meetings of the Board of Directors but shall have no vote and shall not be counted in determining the presence of a quorum.

3.3. Regular Meeting . A regular meeting of the Board of Directors shall be held, without other notice, immediately after and at the same place as the annual meeting of shareholders, and each adjourned session thereof. The Board of Directors may provide, by

resolution, the time and place for the holding of additional regular meetings without other notice than such resolution.

3.4. Special Meetings . Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, President, Secretary or three-quarters of the members of the Board of Directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place either within or without the State of Wisconsin as the place for holding any special meeting of the Board of Directors called by them.

3.5. Notice . Notice of meetings of the Board of Directors may be communicated in person, by telephone, telegraph, teletype, facsimile, electronic mail or other form of wire or wireless communication, or by mail or private carrier. Notice of meetings, except the regular annual meeting, shall be given at least 48 hours prior to the time set for the meeting if communicated orally or by telegraph, teletype, facsimile, electronic mail or other form of wire or wireless communication, and at least 5 days prior to the date set for the meeting if communicated by any other means. Written notice shall be deemed effective and given on the earlier of: (a) when received; (b) 2 days after the date it is deposited in the United States mail, with postage prepaid, when addressed to the director at an address designated by him or her to receive such notice or, in the absence of such designation, at his or her business or home address as they appear in the Corporation’s records; (c) the date and time sent, if transmitted by telegraph, teletype, facsimile, electronic mail or other form of wire or wireless communication when sent to the director at a location designated by the director to receive such notice or, in the absence of such designation, at his or her business or home as those locations appear in the Corporation’s records; or (d) the date delivered to a courier or deposited in a designated receptacle, if sent by private carrier, when addressed to the director at an address designated by him or her to receive such notice or, in the absence of such designation, at his or her business or home address as it appears in the Corporation’s records. Oral notice shall be deemed effective when communicated. Whenever any notice whatever is required to be given to any director of the Corporation under these By-laws, the Articles or under the provisions of any statute, a waiver thereof in writing, signed at any time whether before or after the time of meeting, by the director entitled to such notice, shall be deemed equivalent to timely notice. A director’s attendance at, or participation in, a meeting waives any required notice unless the director at the beginning of the meeting or promptly upon his or her arrival objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of such meeting.

3.6. Quorum; Votes . A majority of the number of directors serving in accordance with Section 3.2 shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but though less than such quorum is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. The affirmative vote of a majority of directors present shall be the act of the Board of Directors, or a committee of the Board of Directors created under Section 3.11, unless the Articles or these By-laws require the vote of a greater number of directors.

3.7 Removal and Resignation .

(a)

At any shareholders’ meeting with respect to which notice of such purpose has been given, one or more directors may be removed for cause only by the affirmative vote of the holders of at least a majority of the issued and outstanding shares of the Corporation entitled to vote in an election of directors; provided, however, that a director may not be removed if the number of votes sufficient to elect him or her under cumulative voting is voted against his or her removal.

(b)

For purposes of this Section 3.7, a director of the Corporation may be removed for cause if:

(i)

the director has been convicted of a felony;

(i)

any bank regulatory authority having jurisdiction over the Corporation requests or demands the removal; or

(iii)

at least two-thirds of the directors of the Corporation then in office, excluding the director to be removed, determine that the director’s conduct has been inimical to the best interests of the Corporation.

(c)

A director may resign at any time by delivering written notice to the Board of Directors, Chairman of the Board or to the Corporation.

3.8. Vacancies . Any vacancy on the Board of Directors, however caused, including, without limitation, any vacancy resulting from an increase in the number of directors, shall be filled by the vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Any director so elected to fill any vacancy on the Board of Directors, including a vacancy created by an increase in the size of the Board of Directors, shall hold office for the remaining term of directors of the class to which he or she has been elected and until his or her successor shall be elected and shall qualify.

3.9. Compensation . The Board of Directors, by affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, may establish reasonable compensation of all directors for services to the Corporation as directors or otherwise, or may delegate such authority to an appropriate committee.

3.10. Presumption of Assent . A director of the Corporation who is present at a meeting of the Board of Directors or a committee of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless: (a) the director objects at the beginning of the meeting (or promptly upon his or her arrival) to holding the meeting or transacting business at the meeting; or (b) the director dissents or abstains from an action taken and minutes of the meeting are prepared that show the director’s dissent or abstention from the action taken; or (c) the director delivers written notice of his or her dissent or abstention to the presiding officer of the meeting before its adjournment or to the Corporation immediately after adjournment of the meeting; or (d) the director dissents or abstains from an

action taken, minutes of the meeting are prepared that fail to show the director’s dissent or abstention from the action taken and the director delivers to the Corporation a written notice of that failure promptly after receiving the minutes. Such right to dissent shall not apply to a director who voted in favor of such action.

3.11. Committees . The Board of Directors, by resolution adopted by the affirmative vote of a majority of the number of directors then in office, may designate one or more committees, each committee to consist of two or more directors elected by the Board of Directors. The Board of Directors may elect one or more of its members as alternate members of any such committee and such alternate member may take the place of any absent member or members at any meeting of such committee upon request of the Chairman of the Board or upon request of the chairman of such meeting. Unless limited by the Articles, each committee may exercise those aspects of the authority of the Board of Directors which are within the scope of the committee’s assigned responsibilities or which the Board of Directors otherwise specifically confers upon such committee; provided, however, that no committee of the Board may do any of the following:

(a)

authorize distributions;

(b)

approve or propose to shareholders action that the WBCL requires be approved by shareholders;

(c)

fill vacancies on the Board of Directors or on any of its committees, unless the Board of Directors has specifically granted such authority to the committee;

(d)

amend the Articles;

(e)

adopt, amend, or repeal these By-laws;

(f)

approve a plan of merger not requiring shareholder approval;

(g)

authorize or approve reacquisition of shares, except according to a formula or method prescribed by the Board of Directors; or

(h)

authorize or approve the issuance or sale or contract for sale of shares or determine the designation and relative rights, preferences, and limitations of a class or series of shares, except that the Board of Directors may authorize a committee (or a senior executive officer of the Corporation) to do so within limits specifically prescribed by the Board of Directors.

3.12. Informal Action Without Meeting . Any action required or permitted by the Articles or these By-laws or any provision of law to be taken by the Board of Directors or a committee at a meeting may be taken without a meeting if the action is taken by all members of the Board of Directors. The action shall be evidenced by one or more written consents describing the action taken, signed by each director and retained by the Corporation.

3.13. Telephonic Meetings . Any or all directors may participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication which allows all directors participating to simultaneously hear each other during the meeting. In the case of any such meeting all participating directors must be informed that a meeting is taking place at which official business may be transacted. A director participating in a meeting by this means is deemed to be present in person at the meeting.

3.14 Chairman of Meetings . The Chairman of the Board or, in his or her absence or inability or refusal to act, the President shall preside at all meetings of the Board of Directors.

4. OFFICERS

4.1. Number . The principal officers of the Corporation shall be a Chairman of the Board, a President, one or more Vice Presidents, any one of whom may be designated as Executive Vice President, and a Secretary, each of whom shall be elected by the Board of Directors. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors.

4.2. Election and Term of Office . The officers of the Corporation to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after the annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as convenient. Each officer shall hold office until his or her successor shall have been duly elected or until his or her death or until he or she shall resign or shall have been removed in the manner hereinafter provided.

4.3. Removal . Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment shall not of itself create contract rights.

4.4. Vacancies . A vacancy in any principal office occurring for any reason shall be filled by the Board of Directors for the unexpired portion of the term as soon as reasonably practicable at the convenience of the Board.

4.5. Chairman of the Board . The Chairman of the Board shall have such duties as the

Board of Directors shall prescribe from time to time.

4.6 President . The President shall be the Chief Executive Officer of the Corporation and, subject to the control of the Board of Directors, shall have general supervision and control of the business and affairs of the Corporation and its officers. The President shall have the authority, subject to such rules as may be prescribed by the Board of Directors, to appoint such agents and employees of the Corporation as the President deems necessary, prescribe their powers, duties and compensation, and delegate authority to them. Such agents and employees shall hold offices at the discretion of the President. The President shall have authority to sign,

execute and acknowledge, on behalf of the Corporation, all deeds, mortgages, bonds, stock certificates, contracts, leases, reports and all other documents or instruments necessary or proper to be executed in the course of the Corporation’s regular business or which shall be authorized by the Board of Directors. Except as otherwise provided by the WBCL or the Board of Directors, the President may authorize any other officer or agent of the Corporation to sign, execute and acknowledge such documents or instruments in his or her place and stead. In general, the President shall have all authority and perform all duties incident to the office of the Chief Executive Officer and such other duties as may be prescribed by the Board of Directors from time to time.

4.7. Vice Presidents . One or more of the Vice Presidents may be designated as Executive Vice President. In the absence of the President or in the event of his or her death, inability or refusal to act, the Vice Presidents in the order designated at the time of their election (or in the absence of any designation, then in the order of their appointment), shall perform the duties of the President and when so acting shall have all the powers of and be subject to all the restrictions upon the President. Any Vice President may sign with the Secretary or Assistant Secretary certificates for shares of the Corporation and shall perform such other duties as from time to time may be assigned to him or her by the Chief Executive Officer, the President or the Board of Directors.

4.9. Secretary . The Secretary shall: (a) keep the minutes of the shareholders’ and of the Board of Directors’ meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these By-laws or as required by the WBCL; (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all documents, the execution of which on behalf of the Corporation under its seal is duly authorized; (d) keep a register of the address of each shareholder which shall be furnished to the Secretary by such shareholder or delegate that responsibility to a stock transfer agent; (e) sign with the President or a Vice President certificates for shares of the Corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; and (f) in general have all authority and perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her by the Chief Executive Officer or by the Board of Directors.

4.10. Assistant Secretaries . The Assistant Secretaries, when authorized by the Board of Directors, may sign with the President or a Vice President certificates for shares of the Corporation, the issuance of which shall have been authorized by a resolution of the Board of Directors. The Assistant Secretaries, in general, shall have such authority and perform such duties as shall be assigned to them by the Secretary, the President or the Board of Directors.

4.11. Salaries . The salaries of the officers shall be fixed from time to time by the Board of Directors or a committee authorized by the Board to fix the same and no officer shall be prevented from receiving such salary by reason of the fact that he or she is also a director of the Corporation or a member of such a committee.

4.12. Voting of Stock in Other Corporations . The Board of Directors by resolution shall from time to time designate one or more persons who shall vote all stock held by this

Corporation in any other corporation, banking corporation or banking association. Such resolution may designate such persons in the alternative and may empower them to execute proxies to vote in their stead. Where time permits, however, the manner in which such shares shall be voted shall be determined by the Board of Directors of this Corporation or the appropriate committee thereof while the Board is not in session.

5. CERTIFICATES FOR SHARES AND THEIR TRANSFER

5.1. Certificates for Shares . Subject to the requirements of the WBCL, certificates representing shares of the Corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed, either manually or by facsimile, by the President or a Vice President and by the Secretary or an Assistant Secretary. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Corporation. All certificates surrendered to the Corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in the case of a lost, destroyed or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the Corporation as the Board of Directors, the President or the Secretary may prescribe.

5.2. Transfer of Shares . Transfer of shares of the Corporation shall be made only on the stock transfer books of the Corporation by the holder of record thereof or by his or her legal representative, who shall furnish proper evidence of authority to transfer, or by his or her attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and on surrender for cancellation of the certificate for such shares.

5.3. Stock Regulations . The Board of Directors shall have the power and authority to make all such further rules and regulations not inconsistent with the WBCL as they may deem expedient concerning the issue, transfer and registration of certificates representing shares of the Corporation, including the appointment or designation of one or more stock transfer agents and one or more stock registrars.

6. EMERGENCY BY-LAWS

Unless the Articles provide otherwise, the following provisions of this Article 6 shall be effective during an “emergency” which is defined as a catastrophic event that prevents a quorum of the Corporation’s directors from being readily assembled.

During such emergency:

(a)

Any one member of the Board of Directors or any one of the following officers: President, any Vice President or Secretary, may call a meeting of the Board of Directors. Notice of such meeting need be given only to those directors whom it is practicable to reach, and may be given in any practical manner, including by publication or radio. Such notice shall be given at least six hours prior to the commencement of the meeting.

(b)

One or more officers of the corporation present at the emergency meeting of the Board of Directors, as is necessary to achieve a quorum, shall be considered to be directors for the meeting, and shall so serve in order of rank, and within the same rank, in order of seniority. In the event that less than a quorum of the directors are present (including any officers who are to serve as directors for the meeting), those directors present (including the officers serving as directors) shall constitute a quorum.

(c)

The Board of Directors as constituted in paragraph (b), and after notice as set forth in paragraph (a), may:

(1)

prescribe emergency powers to any officer of the Corporation;

(2)

delegate to any officer or director, any of the powers of the Board of Directors;

(3)

designate lines of succession of officers and agents, in the event that any of them are unable to discharge their duties;

(4)

relocate the principal place of business, or designate successive or simultaneous principal places of business; and

(5)

take any other action, convenient, helpful, or necessary to carry on the business of the Corporation. Corporate action taken in good faith in accordance with this Article 6 binds the Corporation and may not be used to impose liability on a corporate director, officer, employee or agent.

7. GENERAL

7.1. Indemnity of Officers and Directors .

(a)

Definitions for Indemnification and Insurance Provisions .

(1)

“Director, Officer, Employee or Agent” means any of the following: (i) a natural person who is or was a director, officer, employee or agent of the Corporation; (ii) a natural person who, while a director, officer, employee or agent of the Corporation, is or was serving either pursuant to the Corporation’s specific request or as a result of the nature of such person’s duties to the Corporation as a director, officer, partner, trustee, member of any governing or decision making committee, employee or agent of another corporation or foreign corporation, partnership, joint venture, trust or other enterprise; (iii) a natural person who, while a director, officer, employee or agent of the Corporation, is or was serving an employee benefit plan because his or her duties to the Corporation also imposed duties on, or otherwise involved services by, the person to the plan or to participants in or beneficiaries of the plan; or (iv) unless the context requires otherwise, the estate or personal representative of a director, officer, employee or agent.

(2)

“Liability” means the obligation to pay a judgment, penalty, assessment, forfeiture or fine, including an excise tax assessed with respect to an employee benefit plan, the agreement to pay any amount in settlement of a Proceeding (whether or not approved by a court order), and reasonable expenses and interest related to the foregoing.

(3)

“Party” means a natural person who was or is, or who is threatened to be made, a named defendant or respondent in a Proceeding.

(4)

“Proceeding” means any threatened, pending or completed civil, criminal, administrative or investigative action, suit, arbitration or other proceeding, whether formal or informal, which involves foreign, federal, state or local law and which is brought by or in the right of the Corporation or by any other person or entity, to which the, Officer, Employee or Agent was a party because he or she is a Director, Officer, Employee or Agent.

(5)

“Expenses” means all reasonable fees, costs, charges, disbursements, attorneys’ fees and any other expenses incurred in connection with the Proceeding.

(b)

Indemnification of Officers, Directors, Employees and Agents.

(1)

The Corporation shall indemnify a Director, Officer, Employee or Agent to the extent he or she has been successful on the merits or otherwise in the defense of any

Proceeding, for all reasonable Expenses.

(2)

In cases not included under subsection (1), the Corporation shall indemnify a Director or Officer and may indemnify an Employee or Agent against Liability and Expenses incurred by such person in a Proceeding unless it shall have been proven by final judicial adjudication that such person breached or failed to perform a duty owed to the Corporation which constituted:

(i)

A willful failure to deal fairly with the Corporation or its shareholders in connection with a matter in which the Director, Officer, Employee or Agent has a material conflict of interest;

(ii)

A violation of criminal law, unless the Director, Officer, Employee or Agent had reasonable cause to believe his or her conduct was lawful or no reasonable cause to believe his or her conduct was unlawful;

(iii)

A transaction from which the Director, Officer, Employee or Agent derived an improper personal profit; or

(iv)

Willful misconduct.

(c)

Determination that Indemnification is Proper .

(1)

Unless provided otherwise by a written agreement between the Director, Officer, Employee or Agent and the Corporation, determination of whether indemnification is

required under Section (b) shall be made by any method set forth in Section 180.0855 of the WBCL.

(2)

A Director, Officer, Employee or Agent who seeks indemnification under this section shall make a written request to the Corporation. As a further pre-condition to any right to receive indemnification, the writing shall contain a declaration that the Corporation shall have the right to exercise all rights and remedies available to such Director, Officer, Employee or Agent against any other person, corporation, foreign corporation, partnership, joint venture, trust or other enterprise, arising out of, or related to, the Proceeding which resulted in the Liability and the Expense for which such Director, Officer, Employee or Agent is seeking indemnification, and that the Director, Officer, Employee or Agent is hereby deemed to have assigned to the Corporation all such rights and remedies.

(3)

Indemnification under subsection (b)(1) shall be made within 10 days of receipt of a written demand for indemnification. Indemnification required under subsection (b)(2) shall be made within 30 days of receipt of a written demand for indemnification.

(4)

Indemnification under this section is not required to the extent the Director, Officer, Employee or Agent has previously received indemnification or allowance of expenses from any person or entity, including the Corporation, in connection with the same Proceeding.

(5)

Upon written request by a Director, Officer, Employee or Agent who is a Party to a Proceeding, the Corporation shall pay or reimburse his or her reasonable Expenses as incurred if the Director, Officer, Employee or Agent provides the Corporation with all of the following:

(i)

A written affirmation of his or her good faith belief that he or she is entitled to indemnification under Article 7.1; and

(ii)

A written undertaking, executed personally or on his or her behalf, to repay all amounts advanced without interest to the extent that it is ultimately determined that indemnification under 7.1(b)(2) is prohibited. The undertaking under this subsection shall be accepted without reference to the Director’s, Officer’s, Employee’s or Agent’s ability to repay the allowance. The undertaking shall be unsecured.

(6)

The right to indemnification under this Article may be amended only by a subsequent vote of not less than two-thirds of the Corporation’s outstanding capital stock entitled to vote on such matters. Any reduction in the right to indemnification may only be prospective from the date of such vote.

(d)

Insurance . The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is a Director, Officer, Employee or Agent against any Liability asserted against or incurred by the individual in any such capacity or arising out of his or her status as such, regardless of whether the Corporation is required or authorized to indemnify or allow Expenses to the individual under this section.

(e)

Severability . The provisions of this Article shall not apply in any circumstance where a court of competent jurisdiction determines that indemnification would be invalid as against public policy.

8. AMENDMENT

These Bylaws may be amended, altered or repealed, at any regular meeting of the board of directors by a vote of a majority of the total number of the directors, except as otherwise provided herein and subject to the provisions of Sections 180.1020 and 180.1022 of the Wisconsin Statutes authorizing such action by the shareholders.

EXHIBIT 4.1

COMMON STOCK COMMON STOCK

NNB

INCORPORATED UNDER THE LAWS THIS CERTIFICATE IS TRANSFERABLE IN
OF THE STATE OF WISCONSIN CINCINNATI, OHIO OR NEW YORK, NEW YORK

NICOLET BANKSHARES, INC
CUSIP 65406E 10 2

SEE REVERSE FOR
CERTAIN DEFINITIONS

This certifies that

is the registered holder of

FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR VALUE OF $0.01 PER
SHARE, OF

NICOLET BANKSHARES, INC.

transferable on the books of the Corporation by the holder hereof, in person or by duly authorized attorney, upon the surrender of this certificate properly endorsed. This certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar.

Witness the facsimile signatures of its duly authorized officers.

Dated:

/s/ Robert B. Atwell                                /s/ Michael E. Daniels
-------------------------------------               ----------------------------
PRESIDENT AND CHIEF EXECUTIVE OFFICER               SECRETARY

NICOLET BANKSHARES, INC.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations.

TEN COM- as tenants in common          UNIF GIFT MIN ACT -.     Custodian
TEN ENT- as tenants by the entireties                      -----          ------
JT TEN - as joint tenants with right                       (Cust)        (Minor)

Of Survivorship and not as tenants in under Uniform Gifts to Minors Act

(State)

UNIF TRF MIN ACT -.    Custodian (until age)
                   ----                     -----
                  (Cust)                  (Minor)

under Uniform Gifts to Transfers
(Minor)

to Minors Act
(State)

     For value received,                       hereby sells, assigns and
                         ---------------------
     transfers unto

         PLEASE INSERT SOCIAL SECURITY OR OTHER
            IDENTIFYING NUMBER OF ASSIGNEE
         --------------------------------------

         --------------------------------------
         |                                    |
         |                                    |
         --------------------------------------


--------------------------------------------------------------------------------
  (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

of the stock represented by the within Certificate, and do hereby irrevocably constitute and appoint

Attorney

to transfer the said stock on the books of the within-named Bank with full power of substitution in the premises.

Dated

NOTICE:
THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE
OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.)

Signature(s) Guaranteed

By
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM) PURSUANT TO S.E.C. RULE 17 A-d 15.

EXHIBIT 4.2

NICOLET BANKSHARES, INC.
AS ISSUER

INDENTURE

DATED AS OF JULY 21, 2004

U.S. BANK NATIONAL ASSOCIATION,
AS TRUSTEE

8.0% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES

DUE 2034

                                          TABLE OF CONTENTS
                                          -----------------


INDENTURE         1

ARTICLE I         DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
  Section 1.1.    Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

ARTICLE II.       DEBENTURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  6
  Section 2.1.    Authentication and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . .  6
  Section 2.2.    Form of Trustee's Certificate of Authentication . . . . . . . . . . . . . . . .  7
  Section 2.3.    Form and Denomination of Debentures . . . . . . . . . . . . . . . . . . . . . .  7
  Section 2.4.    Execution of Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7
  Section 2.5.    Exchange and Registration of Transfer of Debentures . . . . . . . . . . . . . .  8
  Section 2.6.    Mutilated, Destroyed, Lost or Stolen Debentures . . . . . . . . . . . . . . . .  9
  Section 2.7.    Temporary Debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
  Section 2.8.    Payment of Interest and Additional Interest . . . . . . . . . . . . . . . . . . 10
  Section 2.9.    Cancellation of Debentures Paid, etc. . . . . . . . . . . . . . . . . . . . . . 11
  Section 2.10.   Computation of Coupon Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
  Section 2.11.   Extension of Interest Payment Period. . . . . . . . . . . . . . . . . . . . . . 12

ARTICLE III.      PARTICULAR COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . 12
  Section 3.1.    Payment of Principal, Premium and Interest; Agreed Treatment of the Debentures. 12
  Section 3.2.    Offices for Notices and Payments, etc.  . . . . . . . . . . . . . . . . . . . . 13
  Section 3.3.    Appointments to Fill Vacancies in Trustee's Office. . . . . . . . . . . . . . . 13
  Section 3.4.    Provision as to Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 13
  Section 3.5.    Certificate to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
  Section 3.6.    Additional Sums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
  Section 3.7.    Compliance with Consolidation Provisions. . . . . . . . . . . . . . . . . . . . 15
  Section 3.8.    Limitation on Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
  Section 3.9.    Covenants as to the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
  Section 3.10.   Additional Junior Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . 15

ARTICLE IV.       SECURITYHOLDERS' LISTS AND REPORTS BY THE
                  COMPANY AND THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
  Section 4.1.    Securityholders' Lists. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
  Section 4.2.    Preservation and Disclosure of Lists. . . . . . . . . . . . . . . . . . . . . . 16

ARTICLE V.        REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
                  UPON AN EVENT OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
  Section 5.1.    Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
  Section 5.2.    Payment of Debentures on Default, Suit Therefor . . . . . . . . . . . . . . . . 18
  Section 5.3.    Application of Moneys Collected by Trustee. . . . . . . . . . . . . . . . . . . 19
  Section 5.4.    Proceedings by Securityholders. . . . . . . . . . . . . . . . . . . . . . . . . 20
  Section 5.5.    Proceedings by Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
  Section 5.6.    Remedies Cumulative and Continuing; Delay or Omission Not a Waiver. . . . . . . 20


                                        i

  Section 5.7.    Direction of Proceedings and Waiver of Defaults by Majority of Securityholders. 20
  Section 5.8.    Notice of Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
  Section 5.9.    Undertaking, to Pay Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

ARTICLE VI.       CONCERNING THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
  Section 6.1.    Duties and Responsibilities of Trustee. . . . . . . . . . . . . . . . . . . . . 21
  Section 6.2.    Reliance on Documents, Opinions, etc. . . . . . . . . . . . . . . . . . . . . . 22
  Section 6.3.    No Responsibility for Recitals, etc.  . . . . . . . . . . . . . . . . . . . . . 23
  Section 6.4.    Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar
                  May Own Debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
  Section 6.5.    Moneys to be Held in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
  Section 6.6.    Compensation and Expenses of Trustee. . . . . . . . . . . . . . . . . . . . . . 23
  Section 6.7.    Officers' Certificate as Evidence . . . . . . . . . . . . . . . . . . . . . . . 24
  Section 6.8.    Eligibility of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
  Section 6.9.    Resignation or Removal of Trustee . . . . . . . . . . . . . . . . . . . . . . . 24
  Section 6.10.   Acceptance by Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . 25
  Section 6.11.   Succession by Merger, etc.  . . . . . . . . . . . . . . . . . . . . . . . . . . 26
  Section 6.12.   Authenticating Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

ARTICLE VII.      CONCERNING THE SECURITYHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . 27
  Section 7.1.    Action by Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
  Section 7.2.    Proof of Execution by Securityholders . . . . . . . . . . . . . . . . . . . . . 27
  Section 7.3.    Who Are Deemed Absolute Owners. . . . . . . . . . . . . . . . . . . . . . . . . 27
  Section 7.4.    Debentures Not Outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
  Section 7.5.    Revocation of Consents; Future Holders Bound. . . . . . . . . . . . . . . . . . 28

ARTICLE VIII.     SECURITYHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
  Section 8.1.    Purposes of Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
  Section 8.2.    Call of Meetings by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 28
  Section 8.3.    Call of Meetings by Company or Securityholders. . . . . . . . . . . . . . . . . 29
  Section 8.4.    Qualifications for Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
  Section 8.5.    Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
  Section 8.6.    Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
  Section 8.7.    Quorum; Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

ARTICLE IX.       SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
  Section 9.1.    Supplemental Indentures without Consent of Securityholders. . . . . . . . . . . 30
  Section 9.2.    Supplemental Indentures with Consent of Securityholders . . . . . . . . . . . . 31
  Section 9.3.    Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . 32
  Section 9.4.    Notation on Debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
  Section 9.5.    Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee . . 32

ARTICLE X.        REDEMPTION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32


                                       ii

  Section 10.1.   Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
  Section 10.2.   Special Event Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
  Section 10.3.   Notice of Redemption; Selection of Debentures . . . . . . . . . . . . . . . . . 32
  Section 10.4.   Payment of Debentures Called for Redemption . . . . . . . . . . . . . . . . . . 33

ARTICLE XI.       CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE . . . . . . . . . . . . . . . 33
  Section 11.1.   Company May Consolidate, etc., on Certain Terms . . . . . . . . . . . . . . . . 33
  Section 11.2.   Successor Entity to be Substituted. . . . . . . . . . . . . . . . . . . . . . . 34
  Section 11.3.   Opinion of Counsel to be Given to Trustee . . . . . . . . . . . . . . . . . . . 34

ARTICLE XII.      SATISFACTION AND DISCHARGE OF INDENTURE . . . . . . . . . . . . . . . . . . . . 34
  Section 12.1.   Discharge of Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
  Section 12.2.   Deposited Moneys to be Held in Trust by Trustee . . . . . . . . . . . . . . . . 34
  Section 12.3.   Paying Agent to Repay Moneys Held . . . . . . . . . . . . . . . . . . . . . . . 35
  Section 12.4.   Return of Unclaimed Moneys. . . . . . . . . . . . . . . . . . . . . . . . . . . 35

ARTICLE XIII.     IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS . . . . . . . . 35
  Section 13.1.   Indenture and Debentures Solely Corporate Obligations . . . . . . . . . . . . . 35

ARTICLE XIV.      MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
  Section 14.1.   Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
  Section 14.2.   Official Acts by Successor Entity . . . . . . . . . . . . . . . . . . . . . . . 35
  Section 14.3.   Surrender of Company Powers . . . . . . . . . . . . . . . . . . . . . . . . . . 35
  Section 14.4.   Addresses for Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
  Section 14.5.   Governing, Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
  Section 14.6.   Evidence of Compliance with Conditions Precedent. . . . . . . . . . . . . . . . 36
  Section 14.7.   Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
  Section 14.8.   Table of Contents, Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . 36
  Section 14.9.   Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
  Section 14.10.  Separability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
  Section 14.11.  Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
  Section 14.12.  Acknowledgment of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

ARTICLE XV.       SUBORDINATION OF DEBENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . 37
  Section 15.1.   Agreement to Subordinate. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
  Section 15.2.   Default on Senior Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . 37
  Section 15.3    Liquidation, Dissolution, Bankruptcy. . . . . . . . . . . . . . . . . . . . . . 37
  Section 15.4.   Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
  Section 15.5.   Trustee to Effectuate Subordination . . . . . . . . . . . . . . . . . . . . . . 39
  Section 15.6.   Notice by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
  Section 15.7.   Rights of the Trustee; Holders of Senior Indebtedness . . . . . . . . . . . . . 39
  Section 15.8.   Subordination May Not Be Impaired . . . . . . . . . . . . . . . . . . . . . . . 40

iii

INDENTURE

THIS INDENTURE, dated as of July 21, 2004, between Nicolet Bankshares, Inc., a Wisconsin corporation (the "Company"), and U.S. Bank National Association, a national banking association organized under the laws of the United States of America, as debenture trustee (the "Trustee").

WITNESSETH:

WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of its 8.0% Junior Subordinated Deferrable Interest Debentures due 2034 (the "Debentures") under this Indenture to provide, among other things, for the execution and authentication, delivery and administration thereof, and the Company has duly authorized the execution of this Indenture; and

WHEREAS, all acts and things necessary to make this Indenture a valid agreement according to its terms, have been done and performed;

NOW, THEREFORE, This Indenture Witnesseth:

In consideration of the premises, and the purchase of the Debentures by the holders thereof, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective holders from time to time of the Debentures as follows:

ARTICLE I.
DEFINITIONS

SECTION 1.1. DEFINITIONS. The terms defined in this Section 1.1 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.1. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles and the term "generally accepted accounting principles" means such accounting principles as are generally accepted in the United States at the time of any computation. The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.

"Additional Interest" means interest, if any, that shall accrue on any interest on the Debentures the payment of which has not been made on the applicable Interest Payment Date and which shall accrue at the Coupon Rate, compounded quarterly (to the extent permitted by law).

"Additional Junior Indebtedness" means, without duplication and other than the Debentures, any indebtedness, liabilities or obligations of the Company, or any Affiliate of the Company, under debt securities (or guarantees in respect of debt securities) initially issued to any trust, or a trustee of a trust, partnership or other entity affiliated with the Company that is, directly or indirectly, a finance subsidiary (as such term is defined in Rule 3a-5 under the Investment Company Act of 1940) or other financing vehicle of the Company or any Affiliate of the Company in connection with the issuance by that entity of preferred securities or other securities that are eligible to qualify for Tier 1 capital treatment (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Company (or, if the Company is not a bank holding company, such guidelines applied to the Company as if the Company were subject to such guidelines); provided, however, that the inability of the Company to treat all or any portion of the Additional Junior Indebtedness as Tier 1 capital shall not disqualify it as Additional Junior Indebtedness if such inability results from the Company having cumulative preferred stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve now or may hereafter accord Tier 1 capital treatment (including the Debentures) in excess of the amount which may qualify for treatment as Tier 1 capital under applicable capital adequacy guidelines.

A-2-1

"Additional Sums" has the meaning set forth in Section 3.6.

"Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder.

"Authenticating Agent" means any agent or agents of the Trustee which at the time shall be appointed and acting pursuant to Section 6.12.

"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.

"Board of Directors" means the board of directors or the executive committee or any other duly authorized designated officers of the Company.

"Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee.

"Business Day" means any day other than a Saturday, Sunday or any other day on which banking institutions in the city in which the Company's principal place of business is located, New York City or Hartford, Connecticut are permitted or required by any applicable law to close.

"Capital Securities" means undivided beneficial interests in the assets of Nicolet Bankshares Statutory Trust I which rank pari passu with Common Securities issued by the Trust; provided, however, that upon the occurrence of an Event of Default (as defined in the Declaration), the rights of holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Capital Securities.

"Capital Securities Guarantee" means the guarantee agreement that the Company enters into with U.S. Bank National Association, as guarantee trustee, or other Persons that operates directly or indirectly for the benefit of holders of Capital Securities of the Trust.

"Capital Treatment Event" means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of any amendment to, or change (including any announced prospective change) in, the laws, rules or regulations of the United States or any political subdivision thereof or therein, or as the result of any official or administrative pronouncement or action or decision interpreting or applying such laws, rules or regulations, which amendment or change is effective or which pronouncement, action or decision is announced on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that the Company will not, within 90 days of the date of such opinion be entitled to treat an amount equal to the aggregate liquidation amount of the Debentures as "Tier 1 Capital" (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Company (or if the Company is not a bank holding company, such guidelines applied to the Company as if the Company were subject to such guidelines); provided, however, that the inability of the Company to treat all or any portion of the liquidation amount of the Debentures as Tier 1 Capital shall not constitute the basis for a Capital Treatment Event, if such inability results from the Company having cumulative preferred stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve or OTS, as applicable, may now or hereafter accord Tier 1 Capital treatment in excess of the amount which may now or hereafter qualify for treatment as Tier 1 Capital under applicable capital adequacy guidelines; provided further, however, that the distribution of Debentures in connection with the liquidation of the Trust shall not in and of itself constitute a Capital Treatment Event unless such liquidation shall have occurred in connection with a Tax Event or an Investment Company Event. By way of example, the ability of the Company to treat all or any portion of the liquidation amount of the Debentures as Tier 1 Capital as a result of the regulatory action set forth in the Notice of Proposed Rulemaking on Risk-Based Capital Standards:
Trust Preferred Securities and the Definition of Capital, issued on May 6, 2004 by the Federal Reserve, or any final rule adopted pursuant to such Proposed Rulemaking, shall not constitute the basis for a Capital Treatment Event.

"Certificate" means a certificate signed by any one of the principal executive officer, the principal financial officer or the principal accounting officer of the Company.

"Common Securities" means undivided beneficial interests in the assets of the Trust which rank pari passu with Capital Securities issued by the Trust; provided, however, that upon the occurrence of an Event of Default (as defined in the Declaration), the rights of holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Capital Securities.

"Company" means Nicolet Bankshares, Inc., a Wisconsin corporation, and, subject to the provisions of Article XI, shall include its successors and assigns.

"Company Order" means a written order signed in the name of the Company by its Chairman of the Board of Directors, Vice Chairman, Chief Executive Officer, President, Chief Financial Officer, one of its Managing Directors or one of its Executive Vice Presidents, Senior Vice Presidents or Vice Presidents, and delivered to the Trustee.

"Coupon Rate" has the meaning set forth in Section 2.8.

"Debenture" or "Debentures" has the meaning stated in the first recital of this Indenture.

"Debenture Register" has the meaning specified in Section 2.5.

"Declaration" means the Amended and Restated Declaration of Trust dated July 21, 2004, by and among U.S. Bank National Association, as Institutional Trustee, Nicolet Bankshares, Inc., as Sponsor, and the Administrators named therein, as amended or supplemented from time to time.

"Default" means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default.

"Defaulted Interest" has the meaning set forth in Section 2.8.

"Distribution Period" has the meaning set forth in Section 2.8.

"Event of Default" means any event specified in Section 5.1, continued for the period of time, if any, and after the giving of the notice, if any, therein designated.

"Extension Period" has the meaning set forth in Section 2.11.

"Federal Reserve" means the Board of Governors of the Federal Reserve System and any successor federal agency that is primarily responsible for regulating the activities of bank holding companies.

"Indenture" means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented, or both.

"Institutional Trustee" has the meaning set forth in the Declaration.

"Interest Payment Date" means each March 31, June 30, September 30 and December 31 during the term of this Indenture and on the Maturity Date.

"Investment Company Event" means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or written change (including any announced prospective change) in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or will be considered an "investment company" that is required to be registered under the Investment

Company Act of 1940, as amended, which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Debentures.

"Liquidation Amount" means the stated amount of $1,000.00 per Trust Security.

"Maturity Date" means the thirty-year anniversary of the Debentures initially issued hereunder.

"Officers' Certificate" means a certificate signed by the Chairman of the Board, the Vice Chairman, the Chief Executive Officer, the President, the Chief Financial Officer, any Managing Director or any Vice President, and by the Treasurer, an Assistant Treasurer, the Comptroller, an Assistant Comptroller, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. Each such certificate shall include the statements provided for in
Section 14.6 if and to the extent required by the provisions of such Section.

"Opinion of Counsel" means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company, or may be other counsel reasonably satisfactory to the Trustee. Each such opinion shall include the statements provided for in Section 14.6 if and to the extent required by the provisions of such Section.

"OTS" means the Office of Thrift Supervision and any successor federal

agency that is primarily responsible for regulating the activities of savings and loan holding companies.

"Outstanding" means, when used with reference to Debentures, subject to the provisions of Section 7.4, as of any particular time, all Debentures authenticated and delivered by the Trustee or the Authenticating Agent under this Indenture, except:

(a) Debentures theretofore canceled by the Trustee or the Authenticating Agent or delivered to the Trustee for cancellation;

(b) Debentures, or portions thereof, for the payment or redemption of which moneys in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own paying agent); provided, however, that, if such Debentures, or portions thereof, are to be redeemed prior to maturity thereof, notice of such redemption shall have been given as provided in Section 10.3 or provision satisfactory to the Trustee shall have been made for giving such notice;

(c) Debentures paid pursuant to Section 2.6 or in lieu of or in substitution for which other Debentures shall have been authenticated and delivered pursuant to the terms of Section 2.6 unless proof satisfactory to the Company and the Trustee is presented that any such Debentures are held by bona fide holders in due course; and

(d) Debentures held in accordance with Section 7.4 hereof.

"Person" means an individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

"Predecessor Security" of any particular Debenture means every previous Debenture evidencing all or a portion of the same debt as that evidenced by such particular Debenture; and, for the purposes of this definition, any Debenture authenticated and delivered under Section 2.6 in lieu of a lost, destroyed or stolen Debenture shall be deemed to evidence the same debt as the lost, destroyed or stolen Debenture.

"Principal Office of the Trustee," or other similar term, means the office of the Trustee, at which at any particular time its corporate trust business shall be principally administered, which at the time of the execution of this Indenture shall be 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103.

"Redemption Date" means the Interest Payment Date fixed for the redemption of Debentures.

"Redemption Price" means 100% of the principal amount of the Debentures being redeemed, plus accrued and unpaid interest on such Debentures to the Redemption Date.

"Responsible Officer" means, with respect to the Trustee, any officer within the Principal Office of the Trustee, including any vice-president, any assistant vice-president, any secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or other officer of the Principal Trust Office of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject.

"Securities Act" means the Securities Act of 1933, as amended from time to time or any successor legislation.

"Securityholder," "holder of Debentures," or other similar terms, means any Person in whose name at the time a particular Debenture is registered on the register kept by the Company or the Trustee for that purpose in accordance with the terms hereof.

"Senior Indebtedness" means, with respect to the Company, whether incurred on or prior to the date of this Indenture or thereafter incurred, (i) the principal, premium, if any, and interest in respect of (A) indebtedness of the Company for money borrowed and (B) indebtedness evidenced by securities, debentures, notes, bonds or other similar instruments issued by the Company;
(ii) all capital lease obligations of the Company; (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of the Company under any title retention agreement; (iv) all obligations of the Company for the reimbursement of any letter of credit, any banker's acceptance, any security purchase facility, any repurchase agreement or similar arrangement, any interest rate swap, any other hedging arrangement, any obligation under options or any similar credit or other transaction; (v) all obligations of the type referred to in clauses (i) through (iv) above of other Persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise; and (vi) all obligations of the type referred to in clauses (i) through (v) above of other Persons secured by any lien on any property or asset of the Company (whether or not such obligation is assumed by the Company). Notwithstanding the foregoing, "Senior Indebtedness" shall not include (1) any Additional Junior Indebtedness, (2) Debentures issued pursuant to this Indenture and guarantees in respect of such Debentures, (3) trade accounts payable of the Company arising in the ordinary course of business (such trade accounts payable being pari passu in right of payment to the Debentures), or (4) obligations with respect to which
(a) in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are pari passu, junior or otherwise not superior in right of payment to the Debentures and (b) the Company, prior to the issuance thereof, has notified (and, if then required under the applicable guidelines of the regulating entity, has received approval from) the Federal Reserve (if the Company is a bank holding company) or the OTS (if the Company is a savings and loan holding company). Senior Indebtedness shall continue to be Senior Indebtedness and be entitled to the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness.

"Special Event" means any of a Capital Treatment Event, an Investment Company Event or a Tax Event.

"Subsidiary" means with respect to any Person, (i) any corporation at least a majority of the outstanding voting stock of which is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any general partnership, joint venture, limited liability company or similar entity, at least a majority of the outstanding partnership or similar interests of which shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner. For the purposes of this definition, "voting stock" means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency.

the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement (including any private letter ruling, technical advice memorandum, field service advice, regulatory procedure, notice or announcement, including any notice or announcement of intent to adopt such procedures or regulations (an "Administrative Action")) or judicial decision interpreting or applying such laws or regulations, regardless of whether such Administrative Action or judicial decision is issued to or in connection with a proceeding involving the Company or the Trust and whether or not subject to review or appeal, which amendment, clarification, change, Administrative Action or decision is enacted, promulgated or announced, in each case on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that: (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Debentures; (ii) interest payable by the Company on the Debentures is not, or within 90 days of the date of such opinion, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes; or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges. Provided, however, if the Company may eliminate the results described in (i) through (iii) of such Administrative Action or judicial decision interpreting or applying such laws or regulations by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure which has no adverse effect on the Company, the Trustee, the Trust or the Holders of the Capital Securities issued by the Trust, such Administrative Action or judicial decision shall not be deemed a Tax Event.

"Trust" shall mean Nicolet Bankshares Statutory Trust I, a Connecticut statutory trust, or any other similar trust created for the purpose of issuing Capital Securities in connection with the issuance of Debentures under this Indenture, of which the Company is the sponsor.

"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation.

"Trust Securities" means Common Securities and Capital Securities of the Trust.

"Trustee" means U.S. Bank National Association, and, subject to the provisions of Article VI hereof, shall also include its successors and assigns as Trustee hereunder.

ARTICLE II.
DEBENTURES

SECTION 2.1. AUTHENTICATION AND DATING. Upon the execution and delivery of this Indenture, or from time to time thereafter, Debentures in an aggregate principal amount not in excess of $6,186,000 may be executed and delivered by the Company to the Trustee for authentication, and the Trustee shall thereupon authenticate and make available for delivery said Debentures to or upon the written order of the Company, signed by its Chairman of the Board of Directors, Vice Chairman, the Chief Executive Officer, the President, the Chief Financial Officer, one of its Managing Directors or one of its Vice Presidents without any further action by the Company hereunder. In authenticating such Debentures, and accepting the additional responsibilities under this Indenture in relation to such Debentures, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon:

(a) a copy of any Board Resolution or Board Resolutions relating thereto and, if applicable, an appropriate record of any action taken pursuant to such resolution, in each case certified by the Secretary or an Assistant Secretary of the Company, as the case may be and

(b) an Opinion of Counsel prepared in accordance with Section 14.6 which shall also state:

(1) that such Debentures, when authenticated and delivered by the Trustee and issued by the Company in each case in the manner and subject to any conditions specified in

such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, subject to or limited by applicable bankruptcy, insolvency, reorganization, conservatorship, receivership, moratorium and other statutory or decisional laws relating to or affecting creditors' rights or the reorganization of financial institutions (including, without limitation, preference and fraudulent conveyance or transfer laws), heretofore or hereafter enacted or in effect, affecting the rights of creditors generally; and

(2) that all laws and requirements in respect of the execution and delivery by the Company of the Debentures have been complied with and that authentication and delivery of the Debentures by the Trustee will not violate the terms of this Indenture.

The Trustee shall have the right to decline to authenticate and deliver any Debentures under this Section if the Trustee, being advised in writing by counsel, determines that such action may not lawfully be taken or if a Responsible Officer of the Trustee in good faith shall determine that such action would expose the Trustee to personal liability to existing holders.

The definitive Debentures shall be typed, printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Debentures, as evidenced by their execution of such Debentures.

SECTION 2.2. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. The Trustee's certificate of authentication on all Debentures shall be in substantially the following form:

This is one of the Debentures referred to in the within-mentioned Indenture.
U.S. Bank National Association, as Trustee By___________________________________________________ Authorized Signer

SECTION 2.3. FORM AND DENOMINATION OF DEBENTURES. The Debentures shall be substantially in the form of Exhibit A attached hereto. The Debentures shall be in registered, certificated form without coupons. The Debentures shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the officers executing the same may determine with the approval of the Trustee as evidenced by the execution and authentication thereof.

SECTION 2.4. EXECUTION OF DEBENTURES. The Debentures shall be signed in the name and on behalf of the Company by the manual or facsimile signature of its Chairman of the Board of Directors, Vice Chairman, Chief Executive Officer, President, Chief Financial Officer, one of its Managing Directors or one of its Executive Vice Presidents, Senior Vice Presidents or Vice Presidents. Only such Debentures as shall bear thereon a certificate of authentication substantially in the form herein before recited, executed by the Trustee or the Authenticating Agent by the manual signature of an authorized signer, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Trustee or the Authenticating Agent upon any Debenture executed by the Company shall be conclusive evidence that the Debenture so authenticated has been duly authenticated and delivered hereunder and that the holder is entitled to the benefits of this Indenture.

In case any officer of the Company who shall have signed any of the Debentures shall cease to be such officer before the Debentures so signed shall have been authenticated and delivered by the Trustee or the Authenticating Agent, or disposed of by the Company, such Debentures nevertheless may be authenticated and delivered or disposed of as though the Person who signed such Debentures had not ceased to be such officer of the Company; and any Debenture may be signed on behalf of the Company by such Persons as, at the actual date of the execution of such Debenture, shall be the proper officers of the Company, although at the date of the execution of this Indenture any such person was not such an officer.

Every Debenture shall be dated the date of its authentication.

SECTION 2.5. EXCHANGE AND REGISTRATION OF TRANSFER OF DEBENTURES. The Company shall cause to be kept, at the office or agency maintained for the purpose of registration of transfer and for exchange as provided in Section 3.2, a register (the "Debenture Register") for the Debentures issued hereunder in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration and transfer of all Debentures as in this Article II provided. The Debenture Register shall be in written form or in any other form capable of being converted into written form within a reasonable time.

Debentures to be exchanged may be surrendered at the Principal Office of the Trustee or at any office or agency to be maintained by the Company for such purpose as provided in Section 3.2, and the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in exchange therefor the Debenture or Debentures which the Securityholder making the exchange shall be entitled to receive. Upon due presentment for registration of transfer of any Debenture at the Principal Office of the Trustee or at any office or agency of the Company maintained for such purpose as provided in Section 3.2, the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in the name of the transferee or transferees a new Debenture for a like aggregate principal amount. Registration or registration of transfer of any Debenture by the Trustee or by any agent of the Company appointed pursuant to Section 3.2, and delivery of such Debenture, shall be deemed to complete the registration or registration of transfer of such Debenture.

All Debentures presented for registration of transfer or for exchange or payment shall (if so required by the Company or the Trustee or the Authenticating Agent) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee or the Authenticating Agent duly executed by the holder or his attorney duly authorized in writing.

No service charge shall be made for any exchange or registration of transfer of Debentures, but the Company or the Trustee may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in connection therewith.

The Company or the Trustee shall not be required to exchange or register a transfer of any Debenture for a period of 15 days next preceding the date of selection of Debentures for redemption.

Notwithstanding anything herein to the contrary, Debentures may not be transferred except in compliance with the restricted securities legend set forth below, unless otherwise determined by the Company, upon the advice of counsel experienced in securities law, in accordance with applicable law:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F)

PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.

THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE

FOREGOING RESTRICTIONS.

SECTION 2.6. MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES. In case any Debenture shall become mutilated or be destroyed, lost or stolen, the Company shall execute, and upon its written request the Trustee shall authenticate and deliver, a new Debenture bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Debenture, or in lieu of and in substitution for the Debenture so destroyed, lost or stolen. In every case the applicant for a substituted Debenture shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company and the Trustee evidence to their satisfaction of the destruction, loss or theft of such Debenture and of the ownership thereof.

The Trustee may authenticate any such substituted Debenture and deliver the same upon the written request or authorization of any officer of the Company. Upon the issuance of any substituted Debenture, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. In case any Debenture which has matured or is about to mature or has been called for redemption in full shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Debenture, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Debenture) if the applicant for such payment shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless and, in case of destruction, loss or theft, evidence satisfactory to the Company and to the Trustee of the destruction, loss or theft of such Debenture and of the ownership thereof.

Debentures shall be held and owned upon the express condition that, to the extent permitted by applicable law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender.

SECTION 2.7. TEMPORARY DEBENTURES. Pending the preparation of definitive Debentures, the Company may execute and the Trustee shall authenticate and make available for delivery temporary Debentures that are typed, printed or lithographed. Temporary Debentures shall be issuable in any authorized denomination, and substantially in the form of the definitive Debentures in lieu of which they are issued but with such omissions, insertions and variations as may be appropriate for temporary Debentures, all as may be determined by the Company. Every such temporary Debenture shall be executed by the Company and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with the same effect, as the definitive Debentures. Without unreasonable delay the Company will execute and deliver to the Trustee or the Authenticating Agent definitive Debentures and thereupon any or all temporary Debentures may be surrendered in exchange therefor, at the principal corporate trust office of the Trustee or at any office or agency maintained by the Company for such purpose as provided in Section 3.2, and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in exchange for such temporary Debentures a like aggregate principal amount of such definitive Debentures. Such exchange shall be made by the Company at its own expense and without any charge therefor except that in case of any such exchange involving a registration of transfer the Company may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto. Until so exchanged, the temporary Debentures shall in all respects be entitled to the same benefits under this Indenture as definitive Debentures authenticated and delivered hereunder.

SECTION 2.8. PAYMENT OF INTEREST AND ADDITIONAL INTEREST. Interest at the Coupon Rate and any Additional Interest on any Debenture that is payable, and is punctually paid or duly provided for, on any Interest Payment Date for Debentures shall be paid to the Person in whose name said Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment except that interest and any Additional Interest payable on the Maturity Date shall be paid to the Person to whom principal is paid. In the event that any Debenture or portion thereof is called for redemption and the Redemption Date is subsequent to a regular record date with respect to any Interest Payment Date and prior to such Interest Payment Date, interest on such Debenture will be paid upon presentation and surrender of such Debenture.

Each Debenture shall bear interest for the period beginning on (and including) July 15, 2004 and ending on (but excluding) September 30, 2004 at a rate per annum of 8.0% (the "Coupon Rate"), and shall also bear interest at the Coupon Rate for each successive period beginning on (and including) September 30, 2004, and each succeeding Interest Payment Date, and ending on (but excluding) the next succeeding Interest Payment Date (each, a "Distribution Period"). The Coupon Rate will be applied to the principal amount of the Debenture until the principal thereof becomes due and payable, and on any overdue principal and to the extent that payment of such interest is enforceable under applicable law (without duplication) on any overdue installment of interest at the Coupon Rate compounded quarterly. Interest shall be payable (subject to any relevant Extension Period) quarterly in arrears on each Interest Payment Date with the first installment of interest to be paid on September 30, 2004.

which shall not be more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payments. The Trustee shall promptly notify the Company of such special record date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first class postage prepaid, to each Securityholder at its address as it appears in the Debenture Register, not less than 10 days prior to such special record date. Notice of the proposed payment of such Defaulted Interest and the special record date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names such Debentures (or their respective Predecessor Securities) are registered on such special record date and shall be no longer payable.

The Company may make payment of any Defaulted Interest on any Debentures in any other lawful manner after notice given by the Company to the Trustee of the proposed payment method, provided, however, the Trustee in its sole discretion deems such payment method to be practical.

Any interest scheduled to become payable on an Interest Payment Date occurring during an Extension Period shall not be Defaulted Interest and shall be payable on such other date as may be specified in the terms of such Debentures.

The term "regular record date" as used in this Section shall mean the close of business on the 15th day next preceding the applicable Interest Payment Date.

Subject to the foregoing provisions of this Section, each Debenture delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Debenture shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Debenture.

SECTION 2.9. CANCELLATION OF DEBENTURES PAID, ETC. All Debentures surrendered for the purpose of payment, redemption, exchange or registration of transfer, shall, if surrendered to the Company or any paying agent, be surrendered to the Trustee and promptly canceled by it, or, if surrendered to the Trustee or any Authenticating Agent, shall be promptly canceled by it, and no Debentures shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. All Debentures canceled by any Authenticating Agent shall be delivered to the Trustee. The Trustee shall destroy all canceled Debentures unless the Company otherwise directs the Trustee in writing. If the Company shall acquire any of the Debentures, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Debentures unless and until the same are surrendered to the Trustee for cancellation.

SECTION 2.10. COMPUTATION OF COUPON RATE. The amount of interest payable for any Distribution Period will be calculated by applying the Coupon Rate to the principal amount outstanding at the commencement of the Distribution Period and multiplying each such amount by the actual number of days in the Distribution Period concerned divided by 360. In the event that any date on which interest is payable on the Debentures is not a Business Day, then payment of interest payable on such date shall be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), with the same force and effect as if made on the date such payment was originally payable. All percentages resulting from any calculations on the Debentures will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% or .09876545 being rounded to 9.87655% or .0987655) and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent, with one-half cent being rounded upward.

Subject to the corrective rights set forth above, all certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions relating, to the payment and calculation of interest on the Debentures and distributions on the Capital Securities by the Trustee or the Institutional Trustee will (in the absence of willful default, bad faith or manifest error) be final, conclusive and binding on the Trust, the Company and all of the holders of the Debentures and the Capital Securities, and no liability shall (in the absence of willful default, bad faith or manifest error) attach to the Trustee or the Institutional Trustee in connection with the exercise or non-exercise by either of them or their respective powers, duties and discretion.

SECTION 2.11. EXTENSION OF INTEREST PAYMENT PERIOD. So long as no Event of Default under Section 5.1(c), (e) or (f) of this Indenture has occurred and is continuing, the Company shall have the right, from time to time, and without causing an Event of Default, to defer payments of interest on the Debentures by extending the interest payment period on the Debentures at any time and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment period, an "Extension Period"), during which Extension Period no interest (including Additional Interest) shall be due and payable. No Extension Period may end on a date other than an Interest Payment Date. At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date; provided further, however, that during any such Extension Period, the Company shall not and shall not permit any Affiliate to (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's or such Affiliate's capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (ii) make any payment of principal or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (i) or (ii) above, (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of any exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (c) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or
(f) payments under the Capital Securities Guarantee. Prior to the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest to the extent permitted by applicable law. The Company must give the Trustee notice of its election to begin or extend such Extension Period at least 5 Business Days prior to the regular record date (as such term is used in Section 2.8) immediately preceding the Interest Payment Date with respect to which interest on the Debentures would have been payable except for the election to begin or extend such Extension Period.

ARTICLE III.
PARTICULAR COVENANTS OF THE COMPANY

SECTION 3.1. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST; AGREED TREATMENT OF THE DEBENTURES.

(a) The Company covenants and agrees that it will duly and punctually pay or cause to be paid the principal of and premium, if any, and Interest and any Additional Interest on the Debentures at the place, at the respective times and in the manner provided in this Indenture and the Debentures. Each installment of interest on the Debentures may be paid (i) by mailing checks for such interest payable to the order of the holder of Debentures entitled thereto as they appear on the registry books of the Company if a request for a wire transfer has not been received by the Company or (ii) by wire transfer to any account with a banking institution located in the United States designated in writing by such Person to the paying agent no later than the related record date. Notwithstanding the foregoing, so long

as the Institutional Trustee, not in its individual capacity but solely as Institutional Trustee for Nicolet Bankshares Statutory Trust I, is the holder of the Debentures, the payment of the principal and Interest on the Debentures shall be made by wire transfer of immediately available funds to the Institutional Trustee, to be received not later than 1:00 p.m., New York City time, on the Interest Payment Date of such payment at the Principal Office of the Trustee for distribution to the holders of the Capital Securities. Notwithstanding any other provision of this Indenture to the contrary, the Institutional Trustee shall not be required to make, or cause to be made, distributions to the holders of the Capital Securities, as aforesaid prior to the first Business Day on which it is practicable for the Institutional Trustee to do so in view of the time of day when the funds to be so transferred were received by it if such funds were received after 1:00 p.m., New York City time.

(b) The Company will treat the Debentures as indebtedness, and the amounts payable in respect of the principal amount of such Debentures as interest, for all United States federal income tax purposes. All payments in respect of such Debentures will be made free and clear of United States withholding tax to any beneficial owner thereof that has provided an Internal Revenue Service Form W8 BEN (or any substitute or successor form) establishing its non-United States status for United States federal income tax purposes.

(c) As of the date of this Indenture, the Company has no present intention to exercise its right under Section 2.11 to defer payments of interest on the Debentures by commencing an Extension Period.

(d) As of the date of this Indenture, the Company believes that the likelihood that it would exercise its right under Section 2.11 to defer payments of interest on the Debentures by commencing an Extension Period at any time during which the Debentures are outstanding is remote because of the restrictions that would be imposed on the Company's ability to declare or pay dividends or distributions on, or to redeem, purchase or make a liquidation payment with respect to, any of its outstanding equity and on the Company's ability to make any payments of principal of or interest on, or repurchase or redeem, any of its debt securities that rank pari passu in all respects with (or junior in interest to) the Debentures.

SECTION 3.2. OFFICES FOR NOTICES AND PAYMENTS, ETC. So long as any of the Debentures remain outstanding, the Company will maintain in Hartford, Connecticut, an office or agency where the Debentures may be presented for payment, an office or agency where the Debentures may be presented for registration of transfer and for exchange as in this Indenture provided and an office or agency where notices and demands to or upon the Company in respect of the Debentures or of this Indenture may be served. The Company will give to the Trustee written notice of the location of any such office or agency and of any change of location thereof. Until otherwise designated from time to time by the Company in a notice to the Trustee, or specified as contemplated by Section 2.5, such office or agency for all of the above purposes shall be the office or agency of the Trustee. In case the Company shall fail to maintain any such office or agency in Hartford, Connecticut, or shall fail to give such notice of the location or of any change in the location thereof, presentations and demands may be made and notices may be served at the Principal Office of the Trustee.

In addition to any such office or agency, the Company may from time to time designate one or more offices or agencies outside Hartford, Connecticut, where the Debentures may be presented for registration of transfer and for exchange in the manner provided in this Indenture, and, the Company may from time to time rescind such designation, as the Company may deem desirable or expedient; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain any such office or agency in Hartford, Connecticut, for the purposes above mentioned. The Company will give to the Trustee prompt written notice of any such designation or rescission thereof.

SECTION 3.3. APPOINTMENTS TO FILL VACANCIES IN TRUSTEE'S OFFICE. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 6.9, a Trustee, so that there shall at all times be a Trustee hereunder.

SECTION 3.4. PROVISION AS TO PAYING AGENT.

(a) If the Company shall appoint a paying agent other than the Trustee, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provision of this Section 3.4;

(1) that it will hold all sums held by it as such agent for the payment of the principal of and premium, if any, or interest, if any, on the Debentures (whether such sums have been paid to it by the Company or by any other obligor on the Debentures) in trust for the benefit of the holders of the Debentures;

(2) that it will give the Trustee prompt written notice of any failure by the Company (or by any other obligor on the Debentures) to make any payment of the principal of and premium, if any, or interest, if any, on the Debentures when the same shall be due and payable; and

(3) that it will, at any time during the continuance of any Event of Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent.

(b) If the Company shall act as its own paying agent, it will, on or before each due date of the principal of and premium, if any, or interest, if any, on the Debentures, set aside, segregate and hold in trust for the benefit of the holders of the Debentures a sum sufficient to pay such principal, premium or interest so becoming due and will notify the Trustee in writing of any failure to take such action and of any failure by the Company (or by any other obligor under the Debentures) to make any payment of the principal of and premium, if any, or interest, if any, on the Debentures when the same shall become due and payable.

Whenever the Company shall have one or more paying agents for the Debentures, it will, on or prior to each due date of the principal of and premium, if any, or interest, if any, on the Debentures, deposit with a paying agent a sum sufficient to pay the principal, premium or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto and (unless such paying agent is the Trustee) the Company shall promptly notify the Trustee in writing of its action or failure to act.

(c) Anything in this Section 3.4 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge with respect to the Debentures, or for any other reason pay, or direct any paying agent to pay to the Trustee all sums held in trust by the Company or any such paying agent, such sums to be held by the Trustee upon the trusts herein contained.

(d) Anything in this Section 3.4 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 3.4 is subject to Sections 12.3 and 12.4.

SECTION 3.5. CERTIFICATE TO TRUSTEE. The Company will deliver to the Trustee on or before 120 days after the end of each fiscal year, so long as Debentures are outstanding hereunder, a Certificate stating that in the course of the performance by the signers of their duties as officers of the Company they would normally have knowledge of any default during such fiscal year by the Company in the performance of any covenants contained herein, stating whether or not they have knowledge of any such default and, if so, specifying each such default of which the signers have knowledge and the nature and status thereof.

SECTION 3.6. ADDITIONAL SUMS. If and for so long as the Trust is the holder of all Debentures and the Trust is required to pay any additional taxes, duties, assessments or other governmental charges as a result of a Tax Event, the Company will pay such additional amounts ("Additional Sums") on the Debentures as shall be required so that the net amounts received and retained by the Trust after paying taxes, duties, assessments or other governmental charges will be equal to the amounts the Trust would have received if no such taxes, duties, assessments or other governmental charges had been imposed. Whenever in this Indenture or the Debentures there is a reference in any context to the payment of principal of or interest on the Debentures, such mention shall be deemed to include mention of payments of the Additional Sums provided for in this paragraph to the extent that, in such context, Additional Sums are, were or would be payable in respect thereof pursuant to the provisions of this paragraph and express mention of the payment of Additional Sums (if applicable) in any provisions hereof shall not be construed as excluding Additional Sums in those provisions hereof where such express mention is not made; provided, however, that the deferral of the

payment of interest during an Extension Period pursuant to Section 2.11 shall not defer the payment of any Additional Sums that may be due and payable.

SECTION 3.7. COMPLIANCE WITH CONSOLIDATION PROVISIONS. The Company will not, while any of the Debentures remain outstanding, consolidate with, or merge into, or merge into itself, or sell or convey all or substantially all of its property to any other Person unless the provisions of Article XI hereof are complied with.

SECTION 3.8. LIMITATION ON DIVIDENDS. If Debentures are initially issued to the Trust or a trustee of such trust in connection with the issuance of Trust Securities by the Trust (regardless of whether Debentures continue to be held by such Trust) and (i) there shall have occurred and be continuing an Event of Default, (ii) the Company shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee, or (iii) the Company shall have given notice of its election to defer payments of interest on the Debentures by extending the interest payment period as provided herein and such period, or any extension thereof, shall be continuing, then the Company shall not, and shall not allow any Affiliate of the Company to, (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's capital stock or its Affiliates' capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (1) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, if any, (2) as a result of any exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (3) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (4) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (5) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or
(6) payments under the Capital Securities Guarantee).

SECTION 3.9. COVENANTS AS TO THE TRUST. For so long as the Trust Securities remain outstanding, the Company shall maintain 100% ownership of the Common Securities; provided, however, that any permitted successor of the Company under this Indenture may succeed to the Company's ownership of such Common Securities. The Company, as owner of the Common Securities, shall, except in connection with a distribution of Debentures to the holders of Trust Securities in liquidation of the Trust, the redemption of all of the Trust Securities or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, take all steps necessary for the Company to cause the Trust (a) to remain a statutory trust, (b) to otherwise continue to be classified as a grantor trust for United States federal income tax purposes, and
(c) to cause each holder of Trust Securities to be treated as owning an undivided beneficial interest in the Debentures.

SECTION 3.10. ADDITIONAL JUNIOR INDEBTEDNESS. The Company shall not, and it shall not cause or permit any Affiliate of the Company to, incur, issue or be obligated on any Additional Junior Indebtedness, either directly or indirectly, by way of guarantee, suretyship or otherwise, other than: (i) Additional Junior Indebtedness that, by its terms, is expressly stated to be either junior and subordinate or pari passu in all respects to the Debentures, and (ii) Additional Junior Indebtedness of which the Company has notified (and, if then required under the applicable guidelines of the regulating entity, has received approval from) the Federal Reserve, if the Company is a bank holding company, or the OTS, if the Company is a savings and loan holding company.

ARTICLE IV.
SECURITYHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE

SECTION 4.1. SECURITYHOLDERS' LISTS. The Company covenants and agrees that it will furnish or caused to be furnished to the Trustee:

(a) on each regular record date for the Debentures, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Securityholders of the Debentures as of such record date; and

(b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished;

except that no such lists need be furnished under this Section 4.1 so long as the Trustee is in possession thereof by reason of its acting as Debenture registrar.

SECTION 4.2. PRESERVATION AND DISCLOSURE OF LISTS.

(a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of Debentures (1) contained in the most recent list furnished to it as provided in
Section 4.1 or (2) received by it in the capacity of Debentures registrar (if so acting) hereunder. The Trustee may destroy any list furnished to it as provided in Section 4.1 upon receipt of a new list so furnished.

(b) In case three or more holders of Debentures (hereinafter referred to as "applicants") apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such applicant has owned a Debenture for a period of at least 6 months preceding the date of such application, and such application states that the applicants desire to communicate with other holders of Debentures with respect to their rights under this Indenture or under such Debentures and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall within 5 Business Days after the receipt of such application, at its election, either:

(1) afford such applicants access to the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2, or

(2) inform such applicants as to the approximate number of holders of Debentures whose names and addresses appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2, and as to the approximate cost of mailing to such Securityholders the form of proxy or other communication, if any, specified in such application.

If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Securityholder whose name and address appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2 a copy of the form of proxy or other communication which is specified in such request with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender, the Trustee shall mail to such applicants and file with the Securities and Exchange Commission, if permitted or required by applicable law, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the holders of all Debentures, as the case may be, or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If said Commission, as permitted or required by applicable law, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, said Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Securityholders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application.

(c) Each and every holder of Debentures, by receiving and holding the same, agrees with Company and the Trustee that neither the Company nor the Trustee nor any paying agent shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the holders of Debentures in accordance with the provisions of subsection (b) of this
Section 4.2, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under said subsection (b).

ARTICLE V.
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
UPON AN EVENT OF DEFAULT

SECTION 5.1. EVENTS OF DEFAULT. "Event of Default" wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a) the Company defaults in the payment of any interest upon any Debenture when it becomes due and payable, and fails to cure such default for a period of 30 days; provided, however, that a valid extension of an interest payment period by the Company in accordance with the terms of this Indenture shall not constitute a default in the payment of interest for this purpose; or

(b) the Company defaults in the payment of all or any part of the principal of (or premium, if any, on) any Debentures as and when the same shall become due and payable either at maturity, upon redemption, by declaration of acceleration or otherwise; or

(c) the Company defaults in the payment of any interest upon any Debenture following the nonpayment of any such interest for twenty (20) or more consecutive quarterly interest payment periods; or

(d) the Company defaults in the performance of, or breaches, any of its covenants or agreements in this Indenture or in the terms of the Debentures established as contemplated in this Indenture (other than a covenant or agreement a default in whose performance or whose breach is elsewhere in this
Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the holders of at least 25% in aggregate principal amount of the Outstanding Debentures, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or

(e) a court of competent jurisdiction shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or

(f) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due; or

(g) the Trust shall have voluntarily or involuntarily liquidated, dissolved, wound-up its business or otherwise terminated its existence except in connection with (i) the distribution of the Debentures to holders of such Trust Securities in liquidation of their interests in the Trust, (ii) the redemption of all of the outstanding Trust Securities or (iii) certain mergers, consolidations or amalgamations, each as permitted by the Declaration.

If an Event of Default under Section 5.1(c), (e) or (f) of this Indenture occurs and is continuing with respect to the Debentures, then, and in each and every such case, unless the principal of the Debentures shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debentures then Outstanding hereunder, by notice in writing to the Company (and to the Trustee if given by Securityholders), may declare the entire principal of the Debentures and the interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable.

The foregoing provisions, however, are subject to the condition that if, at any time after the principal of the Debentures shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Company shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all the Debentures and the principal of and premium, if any, on the Debentures which shall have become due otherwise than by acceleration (with interest upon such principal and premium, if any, and Additional Interest) and such amount as shall be sufficient to cover reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and all other amounts due to the Trustee pursuant to Section 6.6, and if any and all Events of Default under this Indenture, other than the non-payment of the principal of or premium, if any, on Debentures which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein -- then and in every such case the holders of a majority in aggregate principal amount of the Debentures then outstanding, by written notice to the Company and to the Trustee, may waive all defaults and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon.

In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Trustee and the holders of the Debentures shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the holders of the Debentures shall continue as though no such proceeding had been taken.

SECTION 5.2. PAYMENT OF DEBENTURES ON DEFAULT, SUIT THEREFOR. The Company covenants that upon the occurrence of an Event of Default pursuant to
Section 5.1(a), Section 5.1(b), or Section 5.1(c), then, upon demand of the Trustee, the Company will pay to the Trustee, for the benefit of the holders of the Debentures the whole amount that then shall have become due and payable on all Debentures for principal and premium, if any, or interest, or both, as the case may be, with Additional Interest accrued on the Debentures (to the extent that payment of such interest is enforceable under applicable law and, if the Debentures are held by the Trust or a trustee of such Trust, without duplication of any other amounts paid by the Trust or a trustee in respect thereof); and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including a reasonable compensation to the Trustee, its agents, attorneys and counsel, and any other amounts due to the Trustee under Section 6.6. In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or any other obligor on such Debentures and collect in the manner provided by law out of the property of the Company or any other obligor on such Debentures wherever situated the moneys adjudged or decreed to be payable.

In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor on the Debentures under Bankruptcy Law, or in case a receiver or trustee shall have been appointed for the property of the Company or such other obligor, or in the case of any other similar judicial proceedings relative to the Company or other obligor upon the Debentures, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the principal of the Debentures shall then be due and payable as therein expressed or by declaration of acceleration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.2, shall be entitled and empowered, by intervention in such proceedings or otherwise,

(i) to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Debentures and, in case of any judicial proceedings,

(ii) to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all other amounts due to the Trustee under Section 6.6), and of the Securityholders allowed in such judicial proceedings relative to the Company or any other obligor on the Debentures, or to the creditors or property of the Company or such other obligor, and unless prohibited by applicable law and regulations, to vote on behalf of the holders of the Debentures in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or Person performing similar functions in comparable proceedings,

(iii) to collect and receive any moneys or other property payable or deliverable on any such claims, and

(iv) to distribute the same after the deduction of its charges and expenses.

Any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the Securityholders to make such payments to the Trustee, and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other amounts due to the Trustee under Section 6.6.

Nothing herein contained shall be construed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Debentures or the rights of any holder thereof or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding.

All rights of action and of asserting claims under this Indenture, or under any of the Debentures, may be enforced by the Trustee without the possession of any of the Debentures, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the holders of the Debentures.

In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all the holders of the Debentures, and it shall not be necessary to make any holders of the Debentures parties to any such proceedings.

SECTION 5.3. APPLICATION OF MONEYS COLLECTED BY TRUSTEE. Any moneys collected by the Trustee pursuant to this Article V shall be applied in the following order, at the date or dates fixed by the Trustee for the distribution of such moneys, upon presentation of the several Debentures in respect of which moneys have been collected, and stamping thereon the payment, if only partially paid, and upon surrender thereof if fully paid:

First: To the payment of costs and expenses incurred by, and reasonable fees of, the Trustee, its agents, attorneys and counsel, and of all other amounts due to the Trustee under Section 6.6;

Second: To the payment of all Senior Indebtedness of the Company if and to the extent required by Article XV;

Third: To the payment of the amounts then due and unpaid upon Debentures for principal (and premium, if any), and interest on the Debentures, in respect of which or for the benefit of which money has been collected, ratably, without preference or priority of any kind, according to the amounts due on such Debentures for principal (and premium, if any) and interest, respectively; and

Fourth: The balance, if any, to the Company.

SECTION 5.4. PROCEEDINGS BY SECURITYHOLDERS. No holder of any Debenture shall have any right to institute any suit, action or proceeding for any remedy hereunder, unless such holder previously shall have given to the Trustee written notice of an Event of Default with respect to the Debentures and unless the holders of not less than 25% in aggregate principal amount of the Debentures then Outstanding shall have given the Trustee a written request to institute such action, suit or proceeding and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred thereby, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action, suit or proceeding.

Notwithstanding any other provisions in this Indenture, however, the right of any holder of any Debenture to receive payment of the principal of, premium, if any, and interest, on such Debenture when due, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such holder and by accepting a Debenture hereunder it is expressly understood, intended and covenanted by the taker and holder of every Debenture with every other such taker and holder and the Trustee, that no one or more holders of Debentures shall have any right in any manner whatsoever by virtue or by availing itself of any provision of this Indenture to affect, disturb or prejudice the rights of the holders of any other Debentures, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Debentures. For the protection and enforcement of the provisions of this Section, each and every Securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity.

SECTION 5.5. PROCEEDINGS BY TRUSTEE. In case of an Event of Default hereunder the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law.

SECTION 5.6. REMEDIES CUMULATIVE AND CONTINUING; DELAY OR OMISSION NOT A WAIVER. Except as otherwise provided in Section 2.6, all powers and remedies given by this Article V to the Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other powers and remedies available to the Trustee or the holders of the Debentures, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture or otherwise established with respect to the Debentures, and no delay or omission of the Trustee or of any holder of any of the Debentures to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 5.4, every power and remedy given by this Article V or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Securityholders.

SECTION 5.7. DIRECTION OF PROCEEDINGS AND WAIVER OF DEFAULTS BY MAJORITY OF SECURITYHOLDERS. The holders of a majority in aggregate principal amount of the Debentures affected (voting as one class) at the time outstanding shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to such Debentures; provided, however, that (subject to the provisions of Section 6.1) the Trustee shall have the right to decline to follow any such direction if the Trustee shall determine that the action so directed would be unjustly prejudicial to the holders not taking part in such direction or if the Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if a Responsible Officer of the Trustee shall determine that the action or proceedings so directed would involve the Trustee in personal liability.

The holders of a majority in aggregate principal amount of the Debentures at the time outstanding may on behalf of the holders of all of the Debentures waive (or modify any previously granted waiver of) any past default or Event of Default, and its consequences, except a default (a) in the payment of principal of, premium, if any, or interest on any of the Debentures, (b) in respect of covenants or provisions hereof which cannot be modified or amended without

the consent of the holder of each Debenture affected, or (c) in respect of the covenants contained in Section 3.9; provided, however, that if the Debentures are held by the Trust or a trustee of such trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities of the Trust shall have consented to such waiver or modification to such waiver, provided, further, that if the consent of the holder of each outstanding Debenture is required, such waiver shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such waiver. Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of this Indenture and the Company, the Trustee and the holders of the Debentures shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by this Section, said default or Event of Default shall for all purposes of the Debentures and this Indenture be deemed to have been cured and to be not continuing.

SECTION 5.8. NOTICE OF DEFAULTS. The Trustee shall, within 90 days after the actual knowledge by a Responsible Officer of the Trustee of the occurrence of a default with respect to the Debentures, mail to all Securityholders, as the names and addresses of such holders appear upon the Debenture Register, notice of all defaults with respect to the Debentures known to the Trustee, unless such defaults shall have been cured before the giving of such notice (the term "defaults" for the purpose of this Section 5.8 being hereby defined to be the events specified in clauses (a), (b), (c), (d), (e) and
(f) of Section 5.1, not including periods of grace, if any, provided for therein); provided, however, that, except in the case of default in the payment of the principal of, premium, if any, or interest on any of the Debentures, the Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Trustee in good faith determines that the withholding of such notice is in the interests of the Securityholders.

SECTION 5.9. UNDERTAKING TO PAY COSTS. All parties to this Indenture agree, and each holder of any Debenture by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided, however, that the provisions of this Section 5.9 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder, or group of Securityholders, holding in the aggregate more than 10% in principal amount of the Debentures outstanding, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Debenture against the Company on or after the same shall have become due and payable.

ARTICLE VI.
CONCERNING THE TRUSTEE

SECTION 6.1. DUTIES AND RESPONSIBILITIES OF TRUSTEE. With respect to the holders of Debentures issued hereunder, the Trustee, prior to the occurrence of an Event of Default with respect to the Debentures and after the curing or waiving of all Events of Default which may have occurred, with respect to the Debentures, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants shall be read into this Indenture against the Trustee. In case an Event of Default with respect to the Debentures has occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.

No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

(a) prior to the occurrence of an Event of Default with respect to Debentures and after the curing or waiving of all Events of Default which may have occurred;

duties and obligations with respect to the Debentures as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(2) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture;

(b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and

(c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith, in accordance with the direction of the Securityholders pursuant to Section 5.7, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture.

None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there is ground for believing that the repayment of such funds or liability is not assured to it under the terms of this Indenture or indemnity satisfactory to the Trustee against such risk is not reasonably assured to it.

SECTION 6.2. RELIANCE ON DOCUMENTS, OPINIONS, ETC. Except as otherwise provided in Section 6.1:

(a) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, note, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officers' Certificate (unless other evidence in respect thereof be herein specifically prescribed), and any Board Resolution may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company;

(c) the Trustee may consult with counsel of its selection and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;

(d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders, pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby;

(e) the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; nothing contained herein shall, however, relieve the Trustee of the obligation, upon the occurrence of an Event of Default with respect to the Debentures (that has not been cured or waived) to exercise with respect to Debentures such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs;

investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expense or liability as a condition to so proceeding;

(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents (including any Authenticating Agent) or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed by it with due care; and

(h) with the exceptions of defaults under Sections 5.1(a), 5.1(b) or 5.1(c), the Trustee shall not be charged with knowledge of any Default or Event of Default with respect to the Debentures unless a written notice of such Default or Event of Default shall have been given to the Trustee by the Company or any other obligor on the Debentures or by any holder of the Debentures.

SECTION 6.3. NO RESPONSIBILITY FOR RECITALS, ETC. The recitals contained herein and in the Debentures (except in the certificate of authentication of the Trustee or the Authenticating Agent) shall be taken as the statements of the Company, and the Trustee and the Authenticating Agent assume no responsibility for the correctness of the same. The Trustee and the Authenticating Agent make no representations as to the validity or sufficiency of this Indenture or of the Debentures. The Trustee and the Authenticating Agent shall not be accountable for the use or application by the Company of any Debentures or the proceeds of any Debentures authenticated and delivered by the Trustee or the Authenticating Agent in conformity with the provisions of this Indenture.

SECTION 6.4. TRUSTEE, AUTHENTICATING AGENT, PAYING AGENTS, TRANSFER AGENTS OR REGISTRAR MAY OWN DEBENTURES. The Trustee or any Authenticating Agent or any paying agent or any transfer agent or any Debenture registrar, in its individual or any other capacity, may become the owner or pledgee of Debentures with the same rights it would have if it were not Trustee, Authenticating Agent, paying agent, transfer agent or Debenture registrar.

SECTION 6.5. MONEYS TO BE HELD IN TRUST. Subject to the provisions of Section 12.4, all moneys received by the Trustee or any paying agent shall, until used or applied as herein provided, be held in trust for the purpose for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee and any paying agent shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. So long as no Event of Default shall have occurred and be continuing, all interest allowed on any such moneys shall be paid from time to time upon the written order of the Company, signed by the Chairman of the Board of Directors, the Chief Executive Officer, the President, the Chief Financial Officer, a Managing Director, a Vice President, the Treasurer or an Assistant Treasurer of the Company.

SECTION 6.6. COMPENSATION AND EXPENSES OF TRUSTEE. The Company covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, such compensation as shall be agreed to in writing between the Company and the Trustee (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust), and the Company will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all Persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or willful misconduct. The Company also covenants to indemnify each of the Trustee or any predecessor Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any and all loss, damage, claim, liability or expense including taxes (other than taxes based on the income of the Trustee) incurred without negligence or willful misconduct on the part of the Trustee and arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim of liability. The obligations of the Company under this Section 6.6 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Debentures upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the holders of particular Debentures.

Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Sections 5.1(e), 5.1(f) or 5.1(g), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are

intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law.

The provisions of this Section shall survive the resignation or removal of the Trustee and the defeasance or other termination of this Indenture.

Notwithstanding anything in this Indenture or any Debenture to the contrary, the Trustee shall have no obligation whatsoever to advance funds to pay any principal of or interest on or other amounts with respect to the Debentures or otherwise advance funds to or on behalf of the Company.

SECTION 6.7. OFFICERS' CERTIFICATE AS EVIDENCE. Except as otherwise provided in Sections 6.1 and 6.2, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or willful misconduct on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee, and such certificate, in the absence of negligence or willful misconduct on the part of the Trustee, shall be full warrant to the Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof.

SECTION 6.8. ELIGIBILITY OF TRUSTEE. The Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia or a corporation or other Person authorized under such laws to exercise corporate trust powers, having (or whose obligations under this Indenture are guaranteed by an affiliate having) a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000.00) and subject to supervision or examination by federal, state, territorial, or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.8 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent records of condition so published.

The Company may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Company, serve as Trustee.

In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.8, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.9. If the Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner described by this Indenture.

SECTION 6.9. RESIGNATION OR REMOVAL OF TRUSTEE.

(a) The Trustee, or any trustee or trustees hereafter appointed, may at any time resign by giving written notice of such resignation to the Company and by mailing notice thereof, at the Company's expense, to the holders of the Debentures at their addresses as they shall appear on the Debenture Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee or trustees by written instrument, in duplicate, executed by order of its Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor Trustee. If no successor Trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation to the affected Securityholders, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, or any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least six months may, subject to the provisions of Section 5.9, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor Trustee.

(b) In case at any time any of the following shall occur --

(1) the Trustee shall fail to comply with the provisions of
Section 6.8 after written request therefor by the Company or by any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least 6 months, or

(2) the Trustee shall cease to be eligible in accordance with the provisions of Section 6.8 and shall fail to resign after written request therefor by the Company or by any such Securityholder, or

(3) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

-- then, in any such case, the Company may remove the Trustee and appoint a successor Trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor Trustee, or, subject to the provisions of Section 5.9, any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least 6 months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint successor Trustee.

(c) Upon prior written notice to the Company and the Trustee, the holders of a majority in aggregate principal amount of the Debentures at the time outstanding may at any time remove the Trustee and nominate a successor Trustee, which shall be deemed appointed as successor Trustee unless within ten
(10) Business Days after such nomination the Company objects thereto, in which case, or in the case of a failure by such holders to nominate a successor Trustee, the Trustee so removed or any Securityholder, upon the terms and conditions and otherwise as in subsection (a) of this Section 6.9 provided, may petition any court of competent jurisdiction for an appointment of a successor.

(d) Any resignation or removal of the Trustee and appointment of a successor Trustee pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor Trustee as provided in
Section 6.10.

SECTION 6.10. ACCEPTANCE BY SUCCESSOR TRUSTEE. Any successor Trustee appointed as provided in Section 6.9 shall execute, acknowledge and deliver to the Company and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations with respect to the Debentures of its predecessor hereunder, with like effect as if originally named as Trustee herein; but, nevertheless, on the written request of the Company or of the successor Trustee, the Trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the provisions of Section 6.6, execute and deliver an instrument transferring to such successor Trustee all the rights and powers of the Trustee so ceasing to act and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee thereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Trustee all such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a lien upon all property or funds held or collected by such Trustee to secure any amounts then due it pursuant to the provisions of Section 6.6.

If a successor Trustee is appointed, the Company, the retiring Trustee and the successor Trustee shall execute and deliver an indenture supplemental hereto which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Debentures as to which the predecessor Trustee is not retiring shall continue to be vested in the predecessor Trustee, and shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the Trust hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be Trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee.

No successor Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Trustee shall be eligible under the provisions of Section 6.8.

In no event shall a retiring Trustee be liable for the acts or omissions of any successor Trustee hereunder.

Upon acceptance of appointment by a successor Trustee as provided in this
Section 6.10, the Company shall mail notice of the succession of such Trustee hereunder to the holders of Debentures at their addresses as they shall appear on the Debenture Register. If the Company fails to mail such notice within 10 Business Days after the acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Company.

SECTION 6.11. SUCCESSION BY MERGER, ETC. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided such corporation shall be otherwise eligible and qualified under this Article.

In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Debentures shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee, and deliver such Debentures so authenticated; and in case at that time any of the Debentures shall not have been authenticated, any successor to the Trustee may authenticate such Debentures either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Debentures or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or authenticate Debentures in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.

SECTION 6.12. AUTHENTICATING AGENTS. There may be one or more Authenticating Agents appointed by the Trustee upon the request of the Company with power to act on its behalf and subject to its direction in the authentication and delivery of Debentures issued upon exchange or registration of transfer thereof as fully to all intents and purposes as though any such Authenticating Agent had been expressly authorized to authenticate and deliver Debentures; provided, however, that the Trustee shall have no liability to the Company for any acts or omissions of the Authenticating Agent with respect to the authentication and delivery of Debentures. Any such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States or of any state or territory thereof or of the District of Columbia authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of at least $50,000,000.00 and being subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually pursuant to law or the requirements of such authority, then for the purposes of this Section 6.12 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect herein specified in this Section.

Any corporation into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder if such successor corporation is otherwise eligible under this Section 6.12 without the execution or filing of any paper or any further act on the part of the parties hereto or such Authenticating Agent.

Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the agency of any Authenticating Agent with respect to the Debentures by giving written notice of termination to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section 6.12, the Trustee may, and upon the request of the Company shall, promptly appoint a successor Authenticating Agent eligible under this Section 6.12, shall give written notice of such appointment to the Company and shall mail notice of such appointment to all holders of Debentures as the names and addresses of such holders appear on the Debenture Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities with respect to the Debentures of its predecessor hereunder, with like effect as if originally named as Authenticating Agent herein.

The Company agrees to pay to any Authenticating Agent from time to time reasonable compensation for its services. Any Authenticating Agent shall have no responsibility or liability for any action taken by it as such in accordance with the directions of the Trustee.

ARTICLE VII.
CONCERNING THE SECURITYHOLDERS

SECTION 7.1. ACTION BY SECURITYHOLDERS. Whenever in this Indenture it is provided that the holders of a specified percentage in aggregate principal amount of the Debentures may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action) the fact that at the time of taking any such action the holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by such Securityholders in person or by agent or proxy appointed in writing, or (b) by the record of such holders of Debentures voting in favor thereof at any meeting of such Securityholders duly called and held in accordance with the provisions of Article VIII, or (c) by a combination of such instrument or instruments and any such record of such a meeting of such Securityholders or (d) by any other method the Trustee deems satisfactory.

If the Company shall solicit from the Securityholders any request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, the Company may, at its option, as evidenced by an Officers' Certificate, fix in advance a record date for such Debentures for the determination of Securityholders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same may be given before or after the record date, but only the Securityholders of record at the close of business on the record date shall be deemed to be Securityholders for the purposes of determining whether Securityholders of the requisite proportion of outstanding Debentures have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, and for that purpose the outstanding Debentures shall be computed as of the record date; provided, however, that no such authorization, agreement or consent by such Securityholders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six (6) months after the record date.

SECTION 7.2. PROOF OF EXECUTION BY SECURITYHOLDERS. Subject to the provisions of Section 6.1, 6.2 and 8.5, proof of the execution of any instrument by a Securityholder or his agent or proxy shall be sufficient if made in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The ownership of Debentures shall be proved by the Debenture Register or by a certificate of the Debenture registrar. The Trustee may require such additional proof of any matter referred to in this Section as it shall deem necessary.

The record of any Securityholders' meeting shall be proved in the manner provided in Section 8.6.

SECTION 7.3. WHO ARE DEEMED ABSOLUTE OWNERS. Prior to due presentment for registration of transfer of any Debenture, the Company, the Trustee, any Authenticating Agent, any paying agent, any transfer agent and any Debenture registrar may deem the Person in whose name such Debenture shall be registered upon the Debenture Register to be, and may treat him as, the absolute owner of such Debenture (whether or not such Debenture shall be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if any, and interest on such Debenture and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any paying agent nor any transfer agent nor any Debenture registrar shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or upon his order shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Debenture.

SECTION 7.4. DEBENTURES NOT OUTSTANDING. In determining whether the holders of the requisite aggregate principal amount of Debentures have concurred in any direction, consent or waiver under this Indenture, Debentures which are owned by the Company or any other obligor on the Debentures or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on the Debentures shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided, however, that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Debentures which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Debentures so owned which have been pledged in good faith may be regarded as outstanding for the purposes of this
Section 7.4 if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Debentures and that the pledgee is not the Company or any such other obligor or Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In the case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee.

SECTION 7.5. REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.1, of the taking of any action by the holders of the percentage in aggregate principal amount of the Debentures specified in this Indenture in connection with such action, any holder (in cases where no record date has been set pursuant to Section 7. 1) or any holder as of an applicable record date (in cases where a record date has been set pursuant to Section 7.1) of a Debenture (or any Debenture issued in whole or in part in exchange or substitution therefor) the serial number of which is shown by the evidence to be included in the Debentures the holders of which have consented to such action may, by filing written notice with the Trustee at the Principal Office of the Trustee and upon proof of holding as provided in Section 7.2, revoke such action so far as concerns such Debenture (or so far as concerns the principal amount represented by any exchanged or substituted Debenture). Except as aforesaid any such action taken by the holder of any Debenture shall be conclusive and binding upon such holder and upon all future holders and owners of such Debenture, and of any Debenture issued in exchange or substitution therefor or on registration of transfer thereof, irrespective of whether or not any notation in regard thereto is made upon such Debenture or any Debenture issued in exchange or substitution therefor.

ARTICLE VIII.
SECURITYHOLDERS' MEETINGS

SECTION 8.1. PURPOSES OF MEETINGS. A meeting of Securityholders may be called at any time and from time to time pursuant to the provisions of this Article VIII for any of the following purposes:

(a) to give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to consent to the waiving of any default hereunder and its consequences, or to take any other action authorized to be taken by Securityholders pursuant to any of the provisions of Article V;

(b) to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article VI;

(c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 9.2; or

(d) to take any other action authorized to be taken by or on behalf of the holders of any specified aggregate principal amount of such Debentures under any other provision of this Indenture or under applicable law.

SECTION 8.2. CALL OF MEETINGS BY TRUSTEE. The Trustee may at any time call a meeting of Securityholders to take any action specified in Section 8.1, to be held at such time and at such place as the Trustee shall determine. Notice of every meeting of the Securityholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed to holders of Debentures affected at their addresses as they shall appear on the Debentures Register and, if the Company is not a holder of Debentures, to the Company. Such notice shall be mailed not less than 20 nor more than 180 days prior to the date fixed for the meeting.

SECTION 8.3. CALL OF MEETINGS BY COMPANY OR SECURITYHOLDERS. In case at any time the Company pursuant to a Board Resolution, or the holders of at least 10% in aggregate principal amount of the Debentures, as the case may be, then outstanding, shall have requested the Trustee to call a meeting of Securityholders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within 20 days after receipt of such request, then the Company or such Securityholders may determine the time and the place for such meeting and may call such meeting to take any action authorized in
Section 8.1, by mailing notice thereof as provided in Section 8.2.

SECTION 8.4. QUALIFICATIONS FOR VOTING. To be entitled to vote at any meeting of Securityholders a Person shall (a) be a holder of one or more Debentures with respect to which the meeting is being held or (b) a Person appointed by an instrument in writing as proxy by a holder of one or more such Debentures. The only Persons who shall be entitled to be present or to speak at any meeting of Securityholders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.

SECTION 8.5. REGULATIONS. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Securityholders, in regard to proof of the holding of Debentures and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit.

The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Securityholders as provided in Section 8.3, in which case the Company or the Securityholders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by majority vote of the meeting.

Subject to the provisions of Section 7.4, at any meeting each holder of Debentures with respect to which such meeting is being held or proxy therefor shall be entitled to one vote for each $1,000.00 principal amount of Debentures held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Debenture challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Debentures held by him or instruments in writing as aforesaid duly designating him as the Person to vote on behalf of other Securityholders. Any meeting of Securityholders duly called pursuant to the provisions of Section 8.2 or 8.3 may be adjourned from time to time by a majority of those present, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice.

SECTION 8.6. VOTING. The vote upon any resolution submitted to any meeting of holders of Debentures with respect to which such meeting is being held shall be by written ballots on which shall be subscribed the signatures of such holders or of their representatives by proxy and the serial number or numbers of the Debentures held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Securityholders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more Persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 8.2. The record shall show the serial numbers of the Debentures voting in favor of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting.

Any record so signed and verified shall be conclusive evidence of the matters therein stated.

SECTION 8.7. QUORUM; ACTIONS. The Persons entitled to vote a majority in principal amount of the Debentures then outstanding shall constitute a quorum for a meeting of Securityholders; provided, however, that if any action is to be taken at such meeting with respect to a consent, waiver, request, demand, notice, authorization, direction

or other action which may be given by the holders of not less than a specified percentage in principal amount of the Debentures then outstanding, the Persons holding or representing such specified percentage in principal amount of the Debentures then outstanding will constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Securityholders, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 8.2, except that such notice need be given only once not less than 5 days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Debentures then outstanding which shall constitute a quorum.

Except as limited by the provisos in the first paragraph of Section 9.2, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the holders of a majority in principal amount of the Debentures then outstanding; provided, however, that, except as limited by the provisos in the first paragraph of Section 9.2, any resolution with respect to any consent, waiver, request, demand, notice, authorization, direction or other action which this Indenture expressly provides may be given by the holders of not less than a specified percentage in principal amount of the Debentures then outstanding may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid only by the affirmative vote of the holders of a not less than such specified percentage in principal amount of the Debentures then outstanding.

Any resolution passed or decision taken at any meeting of holders of Debentures duly held in accordance with this Section shall be binding on all the Securityholders, whether or not present or represented at the meeting.

ARTICLE IX.
SUPPLEMENTAL INDENTURES

SECTION 9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF SECURITYHOLDERS. The Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto, without the consent of the Securityholders, for one or more of the following purposes:

(a) to evidence the succession of another Person to the Company, or successive successions, and the assumption by the successor Person of the covenants, agreements and obligations of the Company, pursuant to Article XI hereof;

(b) to add to the covenants of the Company such further covenants, restrictions or conditions for the protection of the holders of Debentures as the Board of Directors shall consider to be for the protection of the holders of such Debentures, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions or conditions a default or an Event of Default permitting the enforcement of all or any of the remedies provided in this Indenture as herein set forth; provided, however, that in respect of any such additional covenant restriction or condition such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default;

(c) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make such other provisions in regard to matters or questions arising under this Indenture; provided that any such action shall not materially adversely affect the interests of the holders of the Debentures;

action shall not adversely affect the interests of the holders of the Debentures then outstanding (it being understood, for purposes of this proviso, that transfer restrictions on Debentures substantially similar to those that were applicable to Capital Securities shall not be deemed to materially adversely affect the holders of the Debentures);

(e) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Debentures and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee;

(f) to make any change (other than as elsewhere provided in this paragraph) that does not adversely affect the rights of any Securityholder in any material respect; or

(g) to provide for the issuance of and establish the form and terms and conditions of the Debentures, to establish the form of any certifications required to be furnished pursuant to the terms of this Indenture or the Debentures, or to add to the rights of the holders of Debentures.

The Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer and assignment of any property thereunder, but the Trustee shall not be obligated to, but may in its discretion, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise.

Any supplemental indenture authorized by the provisions of this Section 9.1 may be executed by the Company and the Trustee without the consent of the holders of any of the Debentures at the time outstanding, notwithstanding any of the provisions of Section 9.2.

SECTION 9.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF SECURITYHOLDERS. With the consent (evidenced as provided in Section 7.1) of the holders of not less than a majority in aggregate principal amount of the Debentures at the time outstanding affected by such supplemental indenture (voting as a class), the Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; provided, however, that no such supplemental indenture shall without the consent of the holders of each Debenture then outstanding and affected thereby (i) change the fixed maturity of any Debenture, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof or make the principal thereof or any interest or premium thereon payable in any coin or currency other than that provided in the Debentures, or impair or affect the right of any Securityholder to institute suit for payment thereof or impair the right of repayment, if any, at the option of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders of which are required to consent to any such supplemental indenture; provided further, however, that if the Debentures are held by a trust or a trustee of such trust, such supplemental indenture shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities shall have consented to such supplemental indenture; provided further, however, that if the consent of the Securityholder of each outstanding Debenture is required, such supplemental indenture shall not be effective until each holder of the Trust Securities shall have consented to such supplemental indenture.

Upon the request of the Company accompanied by a Board Resolution authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Securityholders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture.

Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Trustee shall transmit by mail, first class postage prepaid, a notice, prepared by the Company, setting forth in general terms the substance of such supplemental indenture, to the Securityholders as their names and addresses appear upon the Debenture Register. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

It shall not be necessary for the consent of the Securityholders under this
Section 9.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof.

SECTION 9.3. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture pursuant to the provisions of this Article IX, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the holders of Debentures shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

SECTION 9.4. NOTATION ON DEBENTURES. Debentures authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article IX may bear a notation as to any matter provided for in such supplemental indenture. If the Company or the Trustee shall so determine, new Debentures so modified as to conform, in the opinion of the Board of Directors of the Company, to any modification of this Indenture contained in any such supplemental indenture may be prepared and executed by the Company, authenticated by the Trustee or the Authenticating Agent and delivered in exchange for the Debentures then outstanding.

SECTION 9.5. EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL INDENTURE TO BE FURNISHED TO TRUSTEE. The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall, in addition to the documents required by Section 14.6, receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant hereto complies with the requirements of this Article IX. The Trustee shall receive an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article IX is authorized or permitted by, and conforms to, the terms of this Article IX and that it is proper for the Trustee under the provisions of this Article IX to join in the execution thereof

ARTICLE X.
REDEMPTION OF SECURITIES

SECTION 10.1. OPTIONAL REDEMPTION. The Company shall have the right (subject to the receipt by the Company of prior approval (i) if the Company is a bank holding company, from the Federal Reserve, if then required under applicable capital guidelines or policies of the Federal Reserve or (ii) if the Company is a savings and loan holding company, from the OTS if then required under applicable capital guidelines or policies of the OTS), to redeem the Debentures, in whole or in part, but in all cases in a principal amount with integral multiples of $1,000.00, on any Interest Payment Date on or after the five-year anniversary of the issuance of the Debentures, at the Redemption Price.

SECTION 10.2. SPECIAL EVENT REDEMPTION. If a Special Event shall occur and be continuing, the Company shall have the right (subject to the receipt by the Company of prior approval (i) if the Company is a bank holding company, from the Federal Reserve if then required under applicable capital guidelines or policies of the Federal Reserve or (ii) if the Company is a savings and loan holding company, from the OTS if then required under applicable capital guidelines or policies of the OTS) to redeem the Debentures in whole, but not in part, at any Interest Payment Date, within 120 days following the occurrence of such Special Event at the Redemption Price.

SECTION 10.3. NOTICE OF REDEMPTION; SELECTION OF DEBENTURES. In case the Company shall desire to exercise the right to redeem all, or, as the case may be, any part of the Debentures, it shall cause to be mailed a notice of such redemption at least 30 and not more than 60 days prior to the Redemption Date to the holders of Debentures so to be redeemed as a whole or in part at their last addresses as the same appear on the Debenture Register. Such mailing shall be by first class mail. The notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the holder of any Debenture designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Debenture.

Each such notice of redemption shall specify the CUSIP number, if any, of the Debentures to be redeemed, the Redemption Date, the Redemption Price at which Debentures are to be redeemed, the place or places of payment, that payment will be made upon presentation and surrender of such Debentures, that interest accrued to the date fixed for redemption will be paid as specified in said notice, and that on and after said date interest thereon or on the portions thereof to be redeemed will cease to accrue. In the event that any date on which the Redemption Price is payable is not a Business Day, then payment of the Redemption Price payable on such date shall be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), with the same force and effect as if made on the date such payment was originally payable. If less than all the Debentures are to be redeemed, the notice of redemption shall specify the number of the Debentures to be redeemed. In case the Debentures are to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Debenture, a new Debenture or Debentures in principal amount equal to the unredeemed portion thereof will be issued.

Prior to 10:00 a.m. New York City time on the Redemption Date, the Company will deposit with the Trustee or with one or more paying agents an amount of money sufficient to redeem on the Redemption Date all the Debentures so called for redemption at the appropriate Redemption Price, together with accrued interest to the Redemption Date.

If all, or less than all, the Debentures are to be redeemed, the Company will give the Trustee notice not less than 45 nor more than 60 days, respectively, prior to the Redemption Date, as to the aggregate principal amount of Debentures to be redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Debentures or portions thereof (in integral multiples of $1,000.00) to be redeemed.

SECTION 10.4. PAYMENT OF DEBENTURES CALLED FOR REDEMPTION. If notice of redemption has been given as provided in Section 10.3, the Debentures or portions of Debentures with respect to which such notice has been given shall become due and payable on the Redemption Date and at the place or places stated in such notice at the applicable Redemption Price, together with interest accrued to the Redemption Date, and on and after said date (unless the Company shall default in the payment of such Debentures at the Redemption Price, together with interest accrued to said date) interest on the Debentures or portions of Debentures so called for redemption shall cease to accrue. On presentation and surrender of such Debentures at a place of payment specified in said notice, such Debentures or the specified portions thereof shall be paid and redeemed by the Company at the applicable Redemption Price, together with interest accrued thereon to the Redemption Date.

Upon presentation of any Debenture redeemed in part only, the Company shall execute and the Trustee shall authenticate and make available for delivery to the holder thereof, at the expense of the Company, a new Debenture or Debentures of authorized denominations, in principal amount equal to the unredeemed portion of the Debenture so presented.

ARTICLE XI.
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

SECTION 11.1. COMPANY MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. Nothing contained in this Indenture or in the Debentures shall prevent any consolidation or merger of the Company with or into any other Person (whether or not affiliated with the Company) or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties, or shall prevent any sale, conveyance, transfer or other disposition of the property or capital stock of the Company or its successor or successors as an entirety, or substantially as an entirety, to any other Person (whether or not affiliated with the Company, or its successor or successors) authorized to acquire and operate the same; provided, however, that the Company hereby covenants and agrees that, upon any such consolidation, merger (where the Company is not the surviving corporation), sale, conveyance, transfer or other disposition, the due and punctual payment of the principal of (and premium, if any) and interest on all of the Debentures in accordance with their terms, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be kept or performed by the Company, shall be expressly assumed by supplemental indenture satisfactory in form to the Trustee executed and delivered to the Trustee by the entity formed by such consolidation, or into which the Company shall have merged, or by the entity which shall have acquired such property.

SECTION 11.2. SUCCESSOR ENTITY TO BE SUBSTITUTED. In case of any such consolidation, merger, sale, conveyance, transfer or other disposition by the successor entity, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of and premium if any, and interest on all of the Debentures and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Company, such successor entity shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the Company, and thereupon the predecessor entity shall be relieved of any further liability or obligation hereunder or upon the Debentures. Such successor entity thereupon may cause to be signed, and may issue in its own name, any or all of the Debentures issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee or the Authenticating Agent; and, upon the order of such successor entity instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee or the Authenticating Agent shall authenticate and deliver any Debentures which previously shall have been signed and delivered by the officers of the Company, to the Trustee or the Authenticating Agent for authentication, and any Debentures which such successor entity thereafter shall cause to be signed and delivered to the Trustee or the Authenticating Agent for that purpose. All the Debentures so issued shall in all respects have the same legal rank and benefit under this Indenture as the Debentures theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Debentures had been issued at the date of the execution hereof.

SECTION 11.3. OPINION OF COUNSEL TO BE GIVEN TO TRUSTEE. The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall receive, in addition to the Opinion of Counsel required by Section 9.5, an Opinion of Counsel as conclusive evidence that any consolidation, merger, sale, conveyance, transfer or other disposition, and any assumption, permitted or required by the terms of this Article XI complies with the provisions of this Article XI.

ARTICLE XII.
SATISFACTION AND DISCHARGE OF INDENTURE

SECTION 12.1. DISCHARGE OF INDENTURE. When

(a) the Company shall deliver to the Trustee for cancellation all Debentures theretofore authenticated (other than any Debentures which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.6) and not theretofore canceled, or

(b) all the Debentures not theretofore canceled or delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within 1 year or are to be called for redemption within one (1) year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Company shall deposit with the Trustee, in trust, funds, which shall be immediately due and payable, sufficient to pay at maturity or upon redemption all of the Debentures (other than any Debentures which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.6) not theretofore canceled or delivered to the Trustee for cancellation, including principal and premium, if any, and interest due or to become due to such date of maturity or redemption date, as the case may be, but excluding, however, the amount of any moneys for the payment of principal of, and premium, if any, or interest on the Debentures
(1) theretofore repaid to the Company in accordance with the provisions of
Section 12.4, or (2) paid to any state or to the District of Columbia pursuant to its unclaimed property or similar laws, and if in the case of either clause
(a) or clause (b) the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect except for the provisions of Sections 2.5, 2.6, 2.8, 3.1, 3.2, 3.4, 6.6, 6.8, 6.9 and 12.4 hereof shall survive until such Debentures shall mature and be paid. Thereafter, Sections 6.6 and 12.4 shall survive and the Trustee, on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with, and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture. The Company agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee in connection with this Indenture or the Debentures.

SECTION 12.2. DEPOSITED MONEYS TO BE HELD IN TRUST BY TRUSTEE. Subject to the provisions of Section 12.4, all moneys deposited with the Trustee pursuant to Section 12.1 shall be held in trust in a non-interest bearing

account and applied by it to the payment, either directly or through any paying agent (including the Company if acting as its own paying agent), to the holders of the particular Debentures for the payment of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal, and premium, if any, and interest.

SECTION 12.3. PAYING AGENT TO REPAY MONEYS HELD. Upon the satisfaction and discharge of this Indenture all moneys then held by any paying agent of the Debentures (other than the Trustee) shall, upon demand of the Company, be repaid to it or paid to the Trustee, and thereupon such paying agent shall be released from all further liability with respect to such moneys.

SECTION 12.4. RETURN OF UNCLAIMED MONEYS. Any moneys deposited with or paid to the Trustee or any paying agent for payment of the principal of, and premium, if any, or interest on Debentures and not applied but remaining unclaimed by the holders of Debentures for two (2) years after the date upon which the principal of, and premium, if any, or interest on such Debentures, as the case may be, shall have become due and payable, shall, subject to applicable escheatment laws, be repaid to the Company by the Trustee or such paying agent on written demand; and the holder of any of the Debentures shall thereafter look only to the Company for any payment which such holder may be entitled to collect, and all liability of the Trustee or such paying agent with respect to such moneys shall thereupon cease.

ARTICLE XIII.
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS

SECTION 13.1. INDENTURE AND DEBENTURES SOLELY CORPORATE OBLIGATIONS. No recourse for the payment of the principal of or premium, if any, or interest on any Debenture, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture or in any supplemental indenture, or in any such Debenture, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, officer or director, as such, past, present or future, of the Company or of any successor Person of the Company, either directly or through the Company or any successor Person of the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Debentures.

ARTICLE XIV.
MISCELLANEOUS PROVISIONS

SECTION 14.1. SUCCESSORS. All the covenants, stipulations, promises and agreements of the Company in this Indenture shall bind its successors and assigns whether so expressed or not.

SECTION 14.2. OFFICIAL ACTS BY SUCCESSOR ENTITY. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee, officer or other authorized Person of any entity that shall at the time be the lawful successor of the Company.

SECTION 14.3. SURRENDER OF COMPANY POWERS. The Company by instrument in writing executed by authority of at least 2/3 (two-thirds) of its Board of Directors and delivered to the Trustee may surrender any of the powers reserved to the Company and thereupon such power so surrendered shall terminate both as to the Company, and as to any permitted successor.

SECTION 14.4. ADDRESSES FOR NOTICES, ETC. Any notice, consent, direction, request, authorization, waiver or demand which by any provision of this Indenture is required or permitted to be given, made, furnished or served by the Trustee or by the Securityholders on or to the Company may be given or served in writing by being deposited postage prepaid by registered or certified mail in a post office letter box addressed (until another address is filed by the Company, with the Trustee for the purpose) to the Company, Nicolet Bankshares, Inc., 110 South Washington Street, Green Bay, Wisconsin 54301 Attention: President. Any notice, consent, direction, request, authorization, waiver or demand by any Securityholder or the Company to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the office of the Trustee, addressed to the Trustee, 225 Asylum Street, Goodwin Square, Hartford, Connecticut, 06103 Attention: Vice President, Corporate Trust Department, with a copy to U.S. Bank National Association, P.O. Box 960778, Boston, Massachusetts 02196-0778, Attention: Earl
W. Dennison, Jr., Corporate Trust Department. Any notice, consent, direction, request, authorization, waiver or demand on or to any Securityholder shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the address set forth in the Debenture Register.

SECTION 14.5. GOVERNING LAW. This Indenture and each Debenture shall be deemed to be a contract made under the law of the State of New York, and for all purposes shall be governed by and construed in accordance with the law of said State, without regard to conflict of laws principles thereof.

SECTION 14.6. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that in the opinion of the signers all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not in the opinion of such person, such condition or covenant has been complied with.

SECTION 14.7. NON-BUSINESS DAYS. In any case where the date of payment of interest on or principal of the Debentures will be a day that is not a Business Day, the payment of such interest on or principal of the Debentures need not be made on such date but may be made on the next succeeding Business Day with the same force and effect as if made on the original date of payment, and no interest shall accrue for the period from and after such date.

SECTION 14.8. TABLE OF CONTENTS, HEADINGS, ETC. The table of contents and the titles and headings of the articles and sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

SECTION 14.9. EXECUTION IN COUNTERPARTS. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.

SECTION 14.10. SEPARABILITY. In case any one or more of the provisions contained in this Indenture or in the Debentures shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Indenture or of such Debentures, but this Indenture and such Debentures shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein.

SECTION 14.11. ASSIGNMENT. The Company will have the right at all times to assign any of its rights or obligations under this Indenture to a direct or indirect wholly owned Subsidiary of the Company, provided that, in the event of any such assignment, the Company will remain liable for all such obligations. Subject to the foregoing, this

Indenture is binding upon and inures to the benefit of the parties hereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties hereto.

SECTION 14.12. ACKNOWLEDGMENT OF RIGHTS. The Company agrees that, with respect to any Debentures held by the Trust or the Institutional Trustee of the Trust, if the Institutional Trustee of the Trust fails to enforce its rights under this Indenture as the holder of Debentures held as the assets of such Trust after the holders of a majority in Liquidation Amount of the Capital Securities of such Trust have so directed such Institutional Trustee, a holder of record of such Capital Securities may, to the fullest extent permitted by law, institute legal proceedings directly against the Company to enforce such Institutional Trustee's rights under this Indenture without first instituting any legal proceedings against such trustee or any other Person. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest (or premium, if any) or principal on the Debentures on the date such interest (or premium, if any) or principal is otherwise payable (or in the case of redemption, on the redemption date), the Company agrees that a holder of record of Capital Securities of the Trust may directly institute a proceeding against the Company for enforcement of payment to such holder directly of the principal of (or premium, if any) or interest on the Debentures having an aggregate principal amount equal to the aggregate Liquidation Amount of the Capital Securities of such holder on or after the respective due date specified in the Debentures.

ARTICLE XV.
SUBORDINATION OF DEBENTURES

SECTION 15.1. AGREEMENT TO SUBORDINATE. The Company covenants and agrees, and each holder of Debentures by such Securityholder's acceptance thereof likewise covenants and agrees, that all Debentures shall be issued subject to the provisions of this Article XV; and each holder of a Debenture whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions.

The payment by the Company of the principal of, and premium, if any, and interest on all Debentures shall, to the extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company, whether outstanding at the date of this Indenture or thereafter incurred.

No provision of this Article XV shall prevent the occurrence of any default or Event of Default hereunder.

SECTION 15.2. DEFAULT ON SENIOR INDEBTEDNESS. In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness of the Company following any grace period, or in the event that the maturity of any Senior Indebtedness of the Company has been accelerated because of a default, then, in either case, no payment shall be made by the Company with respect to the principal (including redemption) of, or premium, if any, or interest on the Debentures.

In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee when such payment is prohibited by the preceding paragraph of this Section 15.2, such payment shall, subject to Section 15.7, be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee in writing within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness.

SECTION 15.3 LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution, winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness of the Company shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company, on account of the principal (and premium, if any) or interest on the Debentures. Upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of assets of the

Company of any kind or character, whether in cash, property or securities, which the Securityholders or the Trustee would be entitled to receive from the Company, except for the provisions of this Article XV, shall be paid by the Company, or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Securityholders or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Securityholders or to the Trustee.

In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee before all Senior Indebtedness is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued. as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness, remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness.

For purposes of this Article XV, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article XV with respect to the Debentures to the payment of all Senior Indebtedness, that may at the time be outstanding, provided that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and
(ii) the rights of the holders of such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article XI of this Indenture shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article XI of this Indenture. Nothing in Section 15.2 or in this Section shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6 of this Indenture.

SECTION 15.4. SUBROGATION. Subject to the payment in full of all Senior Indebtedness, the Securityholders shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company, applicable to such Senior Indebtedness until the principal of (and premium, if any) and interest on the Debentures shall be paid in full. For the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the Securityholders or the Trustee would be entitled except for the provisions of this Article XV, and no payment over pursuant to the provisions of this Article XV to or for the benefit of the holders of such Senior Indebtedness by Securityholders or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness of the Company, and the holders of the Debentures be deemed to be a payment or distribution by the Company to or on account of such Senior Indebtedness. It is understood that the provisions of this Article XV are and are intended solely for the purposes of defining the relative rights of the holders of the Securities, on the one hand, and the holders of such Senior Indebtedness, on the other hand.

Debentures and creditors of the Company, other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XV of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company, received upon the exercise of any such remedy.

Upon any payment or distribution of assets of the Company referred to in this Article XV, the Trustee, subject to the provisions of Article VI of this Indenture, and the Securityholders shall be entitled to conclusively rely upon any order, or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Securityholders, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XV.

SECTION 15.5. TRUSTEE TO EFFECTUATE SUBORDINATION. Each Securityholder by such Securityholder's acceptance thereof authorizes and directs the Trustee on such Securityholder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article XV and appoints the Trustee such Securityholder's attorney-in-fact for any and all such purposes.

SECTION 15.6. NOTICE BY THE COMPANY. The Company shall give prompt written notice to a Responsible Officer of the Trustee at the Principal Office of the Trustee of any fact known to the Company that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XV. Notwithstanding the provisions of this Article XV or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XV, unless and until a Responsible Officer of the Trustee at the Principal Office of the Trustee shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least two (2) Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Debenture), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within two (2) Business Days prior to such date.

The Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled to conclusively rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee or representative on behalf of such holder), to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee or representative on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article XV, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XV, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.

SECTION 15.7. RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XV in respect of any Senior Indebtedness at any time

held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder.

With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article XV, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and, subject to the provisions of Article VI of this Indenture, the Trustee shall not be liable to any holder of such Senior Indebtedness if it shall pay over or deliver to Securityholders, the Company or any other Person money or assets to which any holder of such Senior Indebtedness shall be entitled by virtue of this Article XV or otherwise.

Nothing in this Article XV shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6.

SECTION 15.8. SUBORDINATION MAY NOT BE IMPAIRED. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company, or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company, with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with.

Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Securityholders, without incurring responsibility to the Securityholders and without impairing or releasing the subordination provided in this Article XV or the obligations hereunder of the holders of the Debentures to the holders of such Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release any Person liable in any manner for the collection of such Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company, and any other Person.

Signatures appear on the following page

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written.

NICOLET BANKSHARES, INC.

By:____________________________________

Name:__________________________________

Title:_________________________________

U.S. BANK NATIONAL ASSOCIATION,
as Trustee

By:____________________________________

Name:__________________________________

Title:_________________________________

EXHIBIT A

FORM OF JUNIOR SUBORDINATED DEBENTURE

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.

THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE- CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING

RESTRICTIONS.

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

8.0% Junior Subordinated Deferrable Interest Debenture

NICOLET BANKSHARES, INC.

__________, 2004

Nicolet Bankshares, Inc., a Wisconsin corporation (the "Company" which term includes any successor Person under the Indenture hereinafter referred to), for value received promises to pay to U.S. Bank National Association, not in its individual capacity but solely as Institutional Trustee for Nicolet Bankshares Statutory Trust I (the "Holder") or registered assigns, the principal sum of $_______________ ($___________) on __________, 2034, and to pay interest on said principal sum from July 15, 2004 or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 31, June 30, September 30 and December 31 of each year commencing September 30, 2004, at an annual rate equal to 8.0% (the "Coupon Rate") beginning on (and including) July 15, 2004 and ending on (but excluding)

September 30, 2004, and for each successive period beginning on (and including) September 30, 2004, and each succeeding Interest Payment Date, and ending on (but excluding) the next succeeding Interest Payment Date (each a "Distribution Period"). The Coupon Rate will be applied to the principal amount hereof, until the principal hereof is paid or duly provided for or made available for payment, and on any overdue principal and (without duplication) on any overdue installment of interest at the same rate per annum, compounded quarterly, from the dates such amounts are due until they are paid or made available for payment. The amount of interest payable for any period will be computed on the basis of the actual number of days in the Distribution Period concerned divided by 360. In the event that any date on which interest is payable on this Debenture is not a Business Day, then a payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), with the same force and effect as if made on the date the payment was originally payable. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment, which shall be fifteen days prior to the day on which the relevant Interest Payment Date occurs. Any such interest installment not so punctually paid or duly provided for shall forthwith cease to be payable to the

Holder on such regular record date and may be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on a special record date.

All percentages resulting from any calculations on the Debentures will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% or .09876545 being rounded to 9.87655% or .0987655), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward).

The principal of and interest on this Debenture shall be payable at the office or agency of the Trustee (or other paying agent appointed by the Company) maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made by check mailed to the registered holder at such address as shall appear in the Debenture Register if a request for a wire transfer by such holder has not been received by the Company or by wire transfer to an account appropriately designated by the holder hereof. Notwithstanding the foregoing, so long as the holder of this Debenture is the Institutional Trustee, the payment of the principal of and interest on this Debenture will be made in immediately available funds at such place and to such account as may be designated by the Trustee.

So long as no Event of Default under Section 5.1(c), (e) or (f) of the Indenture has occurred and is continuing, the Company shall have the right, from time to time, and without causing an Event of Default, to defer payments of interest on the Debentures by extending the interest payment period on the Debentures at any time and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment period, an "Extension Period"), during which Extension Period no interest (including Additional Interest) shall be due and payable. No Extension Period may end on a date other than an Interest Payment Date. At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date; provided further, however, that during any such Extension Period, the Company shall not and shall not permit any Affiliate to (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's or such Affiliate's capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (i) and (ii) above, (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of any exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (c) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or
(f) payments under the Capital Securities Guarantee). Prior to the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. The Company must give the Trustee notice of its election to begin or extend such Extension Period at least five (5) Business Days prior to the regular record date (as such term is used in Section 2.8 of the Indenture) immediately preceding the Interest Payment Date with respect to which interest on the Debentures would have been payable except for the election to begin or extend such Extension Period.

Subject to the Company having received prior approval of the Federal Reserve if then required under applicable capital guidelines or policies of the Federal Reserve, the Company may redeem this Debenture prior to the Maturity Date in the manner and at the times set forth in the Indenture.

The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect thereto. Each holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions.

This Debenture shall be deemed to be a contract made under the law of the State of New York, and for all purposes shall be governed by and construed with the law of said State, without regard to conflict of laws principles thereof.

This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by or on behalf of the Trustee.

Capitalized terms used and not defined in this Debenture shall have the meanings assigned in the Indenture duly executed and dated as of the date of original issuance of this Debenture between the Trustee and the Company. The Indenture contains a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Debentures and of the terms upon which the Debentures are, and are to be, authenticated and delivered.

(continued)

IN WITNESS WHEREOF, the Company has duly executed this certificate.

NICOLET BANKSHARES, INC.

By:    /s/ Robert B. Atwell
   ------------------------------------------

Name:  Robert B. Atwell
     ----------------------------------------

Title: President and Chief Executive Officer
      ---------------------------------------

CERTIFICATE OF AUTHENTICATION

This is one of the Debentures referred to in the within-mentioned Indenture.

U.S. Bank National Association, as Trustee

By:  /s/ Earl W. Dennison, Jr.
   -------------------------------------
     Authorized Officer

EXHIBIT 4.3

GUARANTEE AGREEMENT

BY AND BETWEEN

NICOLET BANKSHARES, INC.

AND

U.S. BANK NATIONAL ASSOCIATION

DATED AS OF JULY 21, 2004

GUARANTEE AGREEMENT

This GUARANTEE AGREEMENT (this "Guarantee"), dated as of July 21, 2004, is executed and delivered by Nicolet Bankshares, Inc., a Wisconsin corporation (the "Guarantor"), and U.S. Bank National Association, a national banking association, organized under the laws of the United States of America, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Capital Securities (as defined herein) of Nicoet Bankshares Statutory Trust I, a Connecticut statutory trust (the "Issuer").

WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration"), dated as of the date hereof among U.S. Bank National Association, not in its individual capacity but solely as institutional trustee, the administrators of the Issuer named therein, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing those undivided beneficial interests in the Issuer described therein (the "Capital Securities"); and

WHEREAS, as incentive for the Holders (as defined herein) to purchase the Capital Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Guarantee, to pay to the Holders of Capital Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the purchase by each Holder of the Capital Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of the Holders.

ARTICLE I

DEFINITIONS AND INTERPRETATION

SECTION 1.1. DEFINITIONS AND INTERPRETATION. In this Guarantee, unless the context otherwise requires:

(a) capitalized terms used in this Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1;

(b) a term defined anywhere in this Guarantee has the same meaning throughout;

(c) all references to "the Guarantee" or "this Guarantee" are to this Guarantee as modified, supplemented or amended from time to time;

(d) all references in this Guarantee to "Articles" or "Sections" are to Articles or Sections of this Guarantee, unless otherwise specified;

(e) terms defined in the Declaration as at the date of execution of this Guarantee have the same meanings when used in this Guarantee, unless otherwise defined in this Guarantee or unless the context otherwise requires; and

(f) a reference to the singular includes the plural and vice versa.

"Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder.

"Beneficiaries" means any Person to whom the Issuer is or hereafter becomes indebted or liable.

"Capital Securities" has the meaning set forth in the recitals to this Guarantee.

"Common Securities" means the common securities issued by the Issuer to the Guarantor pursuant to the Declaration.

"Corporate Trust Office" means the office of the Guarantee Trustee at which the corporate trust business of the Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Guarantee is located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103.

"Covered Person" means any Holder of Capital Securities.

"Debentures" means the debt securities of the Guarantor designated the 8.0% Junior Subordinated Deferrable Interest Debentures due 2034 held by the Institutional Trustee (as defined in the Declaration) of the Issuer.

"Declaration Event of Default" means an "Event of Default" as defined in the Declaration.

"Event of Default" has the meaning set forth in Section 2.4(a).

"Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Capital Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the Declaration) which are required to be paid on such Capital Securities to the extent the Issuer shall have funds available therefor, (ii) the Redemption Price to the extent the Issuer has funds available therefor, with respect to any Capital Securities called for redemption by the Issuer, (iii) upon a voluntary or involuntary liquidation, dissolution, winding-up or termination of the Issuer (other than in connection with the distribution of Debentures to the Holders of the Capital Securities in exchange therefor as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Capital Securities to the date of payment, to the extent the Issuer shall have funds available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the "Liquidation Distribution").

"Guarantee Trustee" means U.S. Bank National Association, until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee and thereafter means each such Successor Guarantee Trustee.

"Guarantor" means Nicolet Bankshares, Inc. and each of its successors and assigns.

"Holder" means any holder, as registered on the books and records of the Issuer, of any Capital Securities; provided, however, that, in determining whether the Holders of the requisite percentage of Capital Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor.

"Indemnified Person" means the Guarantee Trustee, any Affiliate of the Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Guarantee Trustee.

"Indenture" means the Indenture dated as of the date hereof between the Guarantor and U.S. Bank National Association, not in its individual capacity but solely as trustee, and any indenture supplemental thereto pursuant to which the Debentures are to be issued to the institutional trustee of the Issuer.

"Issuer" has the meaning set forth in the opening paragraph to this Guarantee.

"Liquidation Distribution" has the meaning set forth in the definition of "Guarantee Payments" herein.

"Majority in liquidation amount of the Capital Securities" means Holder(s) of outstanding Capital Securities, voting together as a class, but separately from the holders of Common Securities, of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Capital Securities then outstanding.

"Obligations" means any costs, expenses or liabilities (but not including liabilities related to taxes) of the Issuer other than obligations of the Issuer to pay to holders of any Trust Securities the amounts due such holders pursuant to the terms of the Trust Securities.

"Officer's Certificate" means, with respect to any Person, a certificate signed by one Authorized Officer of such Person. Any Officer's Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee shall include:

(a) a statement that each officer signing the Officer's Certificate has read the

covenant or condition and the definitions relating thereto;

(b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officer's Certificate;

(c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with.

"Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature.

"Redemption Price" has the meaning set forth in the Indenture.

"Responsible Officer" means, with respect to the Guarantee Trustee, any officer within the Corporate Trust Office of the Guarantee Trustee including any Vice President, Assistant Vice President, Secretary, Assistant Secretary or any other officer of the Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject.

"Special Event" has the meaning set forth in the Indenture.

"Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 3.1.

"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation.

"Trust Securities" means the Common Securities and the Capital Securities.

ARTICLE II

POWERS, DUTIES AND RIGHTS OF

GUARANTEE TRUSTEE

SECTION 2.1. POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.

(a) This Guarantee shall be held by the Guarantee Trustee for the benefit of the Holders of the Capital Securities, and the Guarantee Trustee shall not transfer this Guarantee to any Person except a Holder of Capital Securities exercising his or her rights pursuant to Section 4.4(b) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall automatically vest in any Successor Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee.

(b) If an Event of Default actually known to a Responsible Officer of the Guarantee Trustee has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee for the benefit of the Holders of the Capital Securities.

(c) The Guarantee Trustee, before the occurrence of any Event of Default and after curing all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee, and no implied covenants shall be read into this Guarantee against the Guarantee Trustee. In case an Event of Default has occurred (that has not been waived pursuant to Section 2.4) and is actually known to a Responsible Officer of the Guarantee Trustee, the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee, and

use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

(d) No provision of this Guarantee shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred:

(A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee, and no implied covenants or obligations shall be read into this Guarantee against the Guarantee Trustee; and

(B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee;

(ii) the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that such Responsible Officer of the Guarantee Trustee or the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made;

(iii) the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the written direction of the Holders of not less than a Majority in liquidation amount of the Capital Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee; and

(iv) no provision of this Guarantee shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds is not reasonably assured to it under the terms of this Guarantee or security and indemnity, reasonably satisfactory to the Guarantee Trustee, against such risk or liability is not reasonably assured to it.

SECTION 2.2. CERTAIN RIGHTS OF GUARANTEE TRUSTEE.

(a) Subject to the provisions of Section 2.1:

(i) The Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties.

(ii) Any direction or act of the Guarantor contemplated by this Guarantee shall be sufficiently evidenced by an Officer's Certificate.

(iii) Whenever, in the administration of this Guarantee, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officer's Certificate of the Guarantor which, upon receipt of such request, shall be promptly delivered by the Guarantor.

(iv) The Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any re-recording, refiling or re-registration thereof).

(v) The Guarantee Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may

be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee from any court of competent jurisdiction.

(vi) The Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Guarantee Trustee such security and indemnity, reasonably satisfactory to the Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Guarantee Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided, however, that nothing contained in this Section 2.2(a)(vi) shall relieve the Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee.

(vii) The Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit.

(viii) The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.

(ix) Any action taken by the Guarantee Trustee or its agents hereunder shall bind the Holders of the Capital Securities, and the signature of the Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Guarantee, both of which shall be conclusively evidenced by the Guarantee Trustee's or its agent's taking such action.

(x) Whenever in the administration of this Guarantee the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee (i) may request instructions from the Holders of a Majority in liquidation amount of the Capital Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions.

(xi) The Guarantee Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith, without negligence, and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Guarantee.

No provision of this Guarantee shall be deemed to impose any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal or in which the Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a duty.

SECTION 2.3. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE. The recitals contained in this Guarantee shall be taken as the statements of the Guarantor, and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representation as to the validity or sufficiency of this Guarantee.

SECTION 2.4. EVENTS OF DEFAULT; WAIVER.

(a) An Event of Default under this Guarantee will occur upon the failure of the Guarantor to perform any of its payment or other obligations hereunder.

(b) The Holders of a Majority in liquidation amount of the Capital Securities may, voting or consenting as a class, on behalf of the Holders of all of the Capital Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and shall be deemed to have been cured, for every purpose of this Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.

SECTION 2.5. EVENTS OF DEFAULT; NOTICE.

(a) The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Capital Securities and the Guarantor, notices of all Events of Default actually known to a Responsible Officer of the Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided, however, that the Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Capital Securities.

(b) The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice from the Guarantor or a Holder of the Capital Securities (except in the case of a payment default), or a Responsible Officer of the Guarantee Trustee charged with the administration of this Guarantee shall have obtained actual knowledge thereof.

ARTICLE III

GUARANTEE TRUSTEE

SECTION 3.1. GUARANTEE TRUSTEE; ELIGIBILITY.

(a) There shall at all times be a Guarantee Trustee which shall:

(i) not be an Affiliate of the Guarantor, and

(ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or Person authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 3.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

(b) If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 3.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 3.2(c).

(c) If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee shall either eliminate such interest or resign to the extent and in the manner provided by, and subject to this Guarantee.

SECTION 3.2. APPOINTMENT, REMOVAL AND RESIGNATION OF GUARANTEE TRUSTEE.

(a) Subject to Section 3.2(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor except during an Event of Default.

(b) The Guarantee Trustee shall not be removed in accordance with
Section 3.2(a) until a Successor Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor.

(c) The Guarantee Trustee appointed to office shall hold office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by an instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee.

(d) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 3.2 within 60 days after delivery of an instrument of removal or resignation, the Guarantee Trustee resigning or being removed may petition any court of competent jurisdiction for appointment of a Successor Guarantee Trustee.

Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee.

(e) No Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Guarantee Trustee.

(f) Upon termination of this Guarantee or removal or resignation of the Guarantee Trustee pursuant to this Section 3.2, the Guarantor shall pay to the Guarantee Trustee all amounts owing to the Guarantee Trustee under Sections 7.2 and 7.3 accrued to the date of such termination, removal or resignation.

ARTICLE IV

GUARANTEE

SECTION 4.1. GUARANTEE.

(a) The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense (except the defense of payment by the Issuer), right of set-off or counterclaim that the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders.

(b) The Guarantor hereby also agrees to assume any and all Obligations of the Issuer and in the event any such Obligation is not so assumed, subject to the terms and conditions hereof, the Guarantor hereby irrevocably and unconditionally guarantees to each Beneficiary the full payment, when and as due, of any and all Obligations to such Beneficiaries. This Guarantee is intended to be for the benefit of, and to be enforceable by, all such Beneficiaries, whether or not such Beneficiaries have received notice hereof.

SECTION 4.2. WAIVER OF NOTICE AND DEMAND. The Guarantor hereby waives notice of acceptance of this Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands.

SECTION 4.3. OBLIGATIONS NOT AFFECTED. The obligations, covenants, agreements and duties of the Guarantor under this Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following:

(a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Capital Securities to be performed or observed by the Issuer;

(b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Special Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Capital Securities or the extension of time for the performance of any other obligation under, arising out of or in connection with, the Capital Securities (other than an extension of time for payment of Distributions, Redemption Price, Special Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures or any extension of the maturity date of the Debentures permitted by the Indenture);

(c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Capital Securities, or any action on the part of the Issuer granting indulgence or extension of any kind;

(d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement. composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer;

(e) any invalidity of, or defect or deficiency in, the Capital Securities;

(f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or

(g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 4.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances.

There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing.

SECTION 4.4. RIGHTS OF HOLDERS.

(a) The Holders of a Majority in liquidation amount of the Capital Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee; provided, however, that (subject to Section 2.1) the Guarantee Trustee shall have the right to decline to follow any such direction if the Guarantee Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if the Guarantee Trustee in good faith by its board of directors or trustees, executive committees or a trust committee of directors or trustees and/or Responsible Officers shall determine that the action or proceedings so directed would involve the Guarantee Trustee in personal liability.

(b) Any Holder of Capital Securities may institute a legal proceeding directly against the Guarantor to enforce the Guarantee Trustee's rights under this Guarantee, without first instituting a legal proceeding against the Issuer, the Guarantee Trustee or any other Person. The Guarantor waives any right or remedy to require that any such action be brought first against the Issuer, the Guarantee Trustee or any other Person before so proceeding directly against the Guarantor.

SECTION 4.5. GUARANTEE OF PAYMENT. This Guarantee creates a guarantee of payment and not of collection.

SECTION 4.6. SUBROGATION. The Guarantor shall be subrogated to all (if any) rights of the Holders of Capital Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if, after giving effect to any such payment, any amounts are due and unpaid under this Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders.

SECTION 4.7. INDEPENDENT OBLIGATIONS. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Capital Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 4.3 hereof.

SECTION 4.8. ENFORCEMENT BY A BENEFICIARY. A Beneficiary may enforce the obligations of the Guarantor contained in Section 4.1(b) directly against the Guarantor and the Guarantor waives any right or remedy to require that any action be brought against the Issuer or any other person or entity before proceeding against the Guarantor. The Guarantor shall be subrogated to all rights (if any) of any Beneficiary against the Issuer in respect of any amounts paid to the Beneficiaries by the Guarantor under this Guarantee, provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if at the time of any such payment, and after giving effect to such payment, any amounts are due and unpaid under this Guarantee.

ARTICLE V

LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 5.1. LIMITATION OF TRANSACTIONS. So long as any Capital Securities remain outstanding, if (a) there shall have occurred and be continuing an Event of Default or a Declaration Event of Default or (b) the Guarantor shall have selected an Extension Period as provided in the Declaration and such period, or any extension thereof, shall have commenced and be continuing, then the Guarantor shall not and shall not permit any Affiliate to
(x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Guarantor's or such Affiliate's capital stock (other than payments of dividends or distributions to the Guarantor) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Guarantor or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (i) repurchases, redemptions or other acquisitions of shares of capital stock of the Guarantor in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Guarantor (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the occurrence of the Event of Default, Declaration Event of Default or Extension Period, as applicable, (ii) as a result of any exchange or conversion of any class or series of the Guarantor's capital stock (or any capital stock of a subsidiary of the Guarantor) for any class or series of the Guarantor's capital stock or of any class or series of the Guarantor's indebtedness for any class or series of the Guarantor's capital stock, (iii) the purchase of fractional interests in shares of the Guarantor's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (iv) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (v) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (vi) payments under this Guarantee).

SECTION 5.2. RANKING. This Guarantee will constitute an unsecured obligation of the Guarantor and will rank subordinate and junior in right of payment to all present and future Senior Indebtedness (as defined in the Indenture) of the Guarantor. By their acceptance thereof, each Holder of Capital Securities agrees to the foregoing provisions of this Guarantee and the other terms set forth herein.

The right of the Guarantor to participate in any distribution of assets of any of its subsidiaries upon any such subsidiary's liquidation or reorganization or otherwise is subject to the prior claims of creditors of that subsidiary, except to the extent the Guarantor may itself be recognized as a creditor of that subsidiary. Accordingly, the Guarantor's obligations under this Guarantee will be effectively subordinated to all existing and future liabilities of the Guarantor's subsidiaries, and claimants should look only to the assets of the Guarantor for payments hereunder. This Guarantee does not limit the incurrence or issuance of other secured or unsecured debt of the Guarantor, including Senior Indebtedness of the Guarantor, under any indenture that the Guarantor may enter into in the future or otherwise.

ARTICLE VI

TERMINATION

SECTION 6.1. TERMINATION. This Guarantee shall terminate upon the later of (i) full payment of the Redemption Price of all Capital Securities then outstanding, (ii) upon the distribution of all of the Debentures to the Holders of all of the Capital Securities, and (iii) upon full payment of the amounts payable in accordance with the Declaration upon dissolution of the Issuer. This Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Capital Securities must restore payment of any sums paid under the Capital Securities or under this Guarantee.

ARTICLE VII

INDEMNIFICATION

SECTION 7.1. EXCULPATION.

(a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions.

(b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Issuer or the Guarantor and upon such information, opinions, reports or statements presented to the Issuer or the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who, if selected by such Indemnified Person, has been selected with reasonable care by such Indemnified Person, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Capital Securities might properly be paid.

SECTION 7.2. INDEMNIFICATION.

(a) The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any and all loss, liability, damage, claim or expense incurred without negligence or willful misconduct on the part of the Indemnified Person, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including, but not limited to, the costs and expenses (including reasonable legal fees and expenses) of the Indemnified Person defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of the Indemnified Person's powers or duties hereunder. The obligation to indemnify as set forth in this Section 7.2 shall survive the resignation or removal of the Guarantee Trustee and the termination of this Guarantee.

(b) Promptly after receipt by an Indemnified Person under this Section 7.2 of notice of the commencement of any action, such Indemnified Person will, if a claim in respect thereof is to be made against the Guarantor under this
Section 7.2, notify the Guarantor in writing of the commencement thereof, but the failure so to notify the Guarantor (i) will not relieve the Guarantor from liability under paragraph (a) above unless and to the extent that the Guarantor did not otherwise learn of such action and such failure results in the forfeiture by the Guarantor of substantial rights and defenses and (ii) will not, in any event, relieve the Guarantor from any obligations to any Indemnified Person other than the indemnification obligation provided in paragraph(a) above. The Guarantor shall be entitled to appoint counsel of the Guarantor's choice at the Guarantor's expense to represent the Indemnified Person in any action for which indemnification is sought (in which case the Guarantor shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the Indemnified Person or Persons except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the Indemnified Person. Notwithstanding the Guarantor's election to appoint counsel to represent the Guarantor in an action, the Indemnified Person shall have the right to employ separate counsel (including local counsel), and the Guarantor shall bear the reasonable fees, costs and expenses of such separate counsel if
(i) the use of counsel chosen by the Guarantor to represent the Indemnified Person would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the Indemnified Person and the Guarantor and the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it and/or other Indemnified Person(s) which are different from or additional to those available to the Guarantor, (iii) the Guarantor shall not have employed counsel satisfactory to the Indemnified Person to represent the Indemnified Person within a reasonable time after notice of the institution of such action or (iv) the Guarantor shall authorize the Indemnified Person to employ separate counsel at the expense of the Guarantor. The Guarantor will not, without the prior written consent of the Indemnified Persons, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the Indemnified Persons are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Person from all liability arising out of such claim, action, suit or proceeding.

SECTION 7.3. COMPENSATION, REIMBURSEMENT OF EXPENSES. The Guarantor agrees:

(a) to pay to the Guarantee Trustee from time to time such compensation for all services rendered by it hereunder as the parties shall agree to from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and

(b) except as otherwise expressly provided herein, to reimburse the Guarantee Trustee upon request for all reasonable expenses, disbursements and advances incurred or made by it in accordance with any provision of this

Guarantee (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or willful misconduct.

The provisions of this Section 7.3 shall survive the resignation or removal of the Guarantee Trustee and the termination of this Guarantee.

ARTICLE VIII

MISCELLANEOUS

SECTION 8.1. SUCCESSORS AND ASSIGNS. All guarantees and agreements contained in this Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Capital Securities then outstanding. Except in connection with any merger or consolidation of the Guarantor with or into another entity or any sale, transfer or lease of the Guarantor's assets to another entity, in each case, to the extent permitted under the Indenture, the Guarantor may not assign its rights or delegate its obligations under this Guarantee without the prior approval of the Holders of at least a Majority in liquidation amount of the Capital Securities.

SECTION 8.2. AMENDMENTS. Except with respect to any changes that do not adversely affect the rights of Holders of the Capital Securities in any material respect (in which case no consent of Holders will be required), this Guarantee may be amended only with the prior approval of the Holders of not less than a Majority in liquidation amount of the Capital Securities. The provisions of the Declaration with respect to amendments thereof apply to the giving of such approval.

SECTION 8.3. NOTICES. All notices provided for in this Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows:

(a) If given to the Guarantee Trustee, at the Guarantee Trustee's mailing address set forth below (or such other address as the Guarantee Trustee may give notice of to the Holders of the Capital Securities and the Guarantor):

U.S. Bank National Association
225 Asylum Street, Goodwin Square
Hartford, Connecticut 06103
Attention: Corporate Trust Department Telecopy: 860-244-1889

With a copy to:

U.S. Bank National Association
P.O. Box 960778
Boston, Massachusetts 02196-0778
Attention: Earl W. Dennison, Jr., Corporate Trust Department Telecopy: (617) 603-6567

(b) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Capital Securities and to the Guarantee Trustee):

Nicolet Bankshares, Inc.
110 South Washington Street
Green Bay, Wisconsin 54301
Attention: President
Telecopy: (920) 430-7580

All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver.

SECTION 8.4. BENEFIT. This Guarantee is solely for the benefit of the Holders of the Capital Securities and, subject to Section 2.1(a), is not separately transferable from the Capital Securities.

SECTION 8.5. GOVERNING LAWS. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF, NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

SECTION 8.6. COUNTERPARTS. This Guarantee may be executed in one or more counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same instrument.

SECTION 8.7. SEPARABILITY. In case one or more of the provisions contained in this Guarantee shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Guarantee, but this Guarantee shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein.

Signatures appear on the following page

THIS GUARANTEE is executed as of the day and year first above written.

NICOLET BANKSHARES, INC., as Guarantor

By:     /s/ Robert B. Atwell
   --------------------- --------------------
        Robert B. Atwell
        President and Chief Executive Officer

U.S. BANK NATIONAL ASSOCIATION,
as Guarantee Trustee

By:     /s/ Earl W. Dennison, Jr.
   --------------------- --------------------
        Earl W. Dennison, Jr.
        Vice President

NICOLET BANKSHARES, INC.

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NICOLET BANKSHARES, INC.

By:    /s/ Robert B. Atwell
      ---------------------------------
      Robert B. Atwell, President/CEO
      (Principal Executive Officer)


Date: November 11, 2004



By:   /s/ Jacqui A. Engebos
     ----------------------------------
     Jacqui Engebos, CFO
     (Principal Financial and
     Accounting Officer)


Date: November 11, 2004

Exhibit 4.4

MID-WISCONSIN FINANCIAL SERVICES, INC.,
AS ISSUER

INDENTURE

DATED AS OF OCTOBER 14, 2005

WILMINGTON TRUST COMPANY,
AS TRUSTEE

FIXED/FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES

DUE 2035

TABLE OF CONTENTS

                                                                           Page

ARTICLE I. DEFINITIONS......................................................1

      Section 1.1. Definitions..............................................1

ARTICLE II. DEBENTURES......................................................8

      Section 2.1. Authentication and Dating................................8
      Section 2.2. Form of Trustee's Certificate of Authentication..........9
      Section 2.3. Form and Denomination of Debentures......................9
      Section 2.4. Execution of Debentures..................................9
      Section 2.5. Exchange and Registration of Transfer of Debentures.....10
      Section 2.6. Mutilated, Destroyed, Lost or Stolen Debentures.........12
      Section 2.7. Temporary Debentures....................................13
      Section 2.8. Payment of Interest and Additional Interest.............13
      Section 2.9. Cancellation of Debentures Paid, etc....................14
      Section 2.10 Computation of Interest.................................14
      Section 2.11.Extension of Interest Payment Period....................16
      Section 2.12.CUSIP Numbers...........................................17

ARTICLE III. PARTICULAR COVENANTS OF THE COMPANY...........................17

      Section 3.1. Payment of Principal, Premium and Interest; Agreed
                   Treatment of the Debentures.                            17
      Section 3.2. Offices for Notices and Payments, etc...................18
      Section 3.3. Appointments to Fill Vacancies in Trustee's Office......18
      Section 3.4. Provision as to Paying Agent............................18
      Section 3.5. Certificate to Trustee..................................19
      Section 3.6. Additional Sums.........................................19
      Section 3.7. Compliance with Consolidation Provisions................20
      Section 3.8. Limitation on Dividends.................................20
      Section 3.9. Covenants as to the Trust...............................20
      Section 3.10.Additional Junior Indebtedness..........................21

ARTICLE  IV.  SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE
              TRUSTEE                                                      21

      Section 4.1. Securityholders' Lists..................................21
      Section 4.2. Preservation and Disclosure of Lists....................21

ARTICLE V. REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF
           DEFAULT                                                         22

      Section 5.1. Events of Default.......................................22
      Section 5.2. Payment of Debentures on Default; Suit Therefor.........24
      Section 5.3. Application of Moneys Collected by Trustee..............25
      Section 5.4. Proceedings by Securityholders..........................26
      Section 5.5. Proceedings by Trustee..................................26
      Section 5.6. Remedies  Cumulative  and Continuing; Delay or Omission
                   Not a Waiver............................................26
                                       i
      Section 5.7. Direction of Proceedings and  Waiver  of Defaults by
                   Majority of Securityholders.............................27
      Section 5.8. Notice of Defaults......................................27
      Section 5.9. Undertaking to Pay Costs................................27

ARTICLE VI. CONCERNING THE TRUSTEE.........................................28

      Section 6.1. Duties and Responsibilities of Trustee..................28
      Section 6.2. Reliance on Documents, Opinions, etc....................29
      Section 6.3. No Responsibility for Recitals, etc.....................30
      Section 6.4. Trustee,  Authenticating Agent, Paying Agents, Transfer
                   Agents or Registrar May Own Debentures.                 30
      Section 6.5. Moneys to be Held in Trust..............................30
      Section 6.6. Compensation and Expenses of Trustee....................30
      Section 6.7. Officers' Certificate as Evidence.......................31
      Section 6.8. Eligibility of Trustee..................................31
      Section 6.9. Resignation or Removal of Trustee.......................32
      Section 6.10 Acceptance by Successor Trustee.........................33
      Section 6.11.Succession by Merger, etc...............................33
      Section 6.12.Authenticating Agents...................................34

ARTICLE VII. CONCERNING THE SECURITYHOLDERS................................35

      Section 7.1. Action by Securityholders...............................35
      Section 7.2. Proof of Execution by Securityholders...................35
      Section 7.3. Who Are Deemed Absolute Owners..........................35
      Section 7.4. Debentures Owned by Company Deemed Not Outstanding......36
      Section 7.5. Revocation of Consents; Future Holders Bound............36

ARTICLE VIII. SECURITYHOLDERS' MEETINGS....................................36

      Section 8.1. Purposes of Meetings....................................36
      Section 8.2. Call of Meetings by Trustee.............................37
      Section 8.3. Call of Meetings by Company or Securityholders..........37
      Section 8.4. Qualifications for Voting...............................37
      Section 8.5. Regulations.............................................37
      Section 8.6. Voting..................................................38
      Section 8.7. Quorum; Actions.........................................38

ARTICLE IX. SUPPLEMENTAL INDENTURES........................................39

      Section 9.1. Supplemental Indentures without Consent of
                   Securityholders.........................................39
      Section 9.2. Supplemental Indentures with Consent of
                   Securityholders.........................................40
      Section 9.3. Effect of Supplemental Indentures.......................41
      Section 9.4. Notation on Debentures..................................41
      Section 9.5. Evidence of Compliance of Supplemental Indenture to be
                   Furnished to Trustee....................................41

ARTICLE X. REDEMPTION OF SECURITIES........................................41

      Section 10.1.Optional Redemption.....................................41
      Section 10.2.Special Event Redemption................................42
      Section 10.3.Notice of Redemption; Selection of Debentures...........42
      Section 10.4.Payment of Debentures Called for Redemption.............43
                                       ii
ARTICLE XI. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE..............43

      Section 11.1.Company May Consolidate, etc., on Certain Terms.........43
      Section 11.2.Successor Entity to be Substituted......................43
      Section 11.3.Opinion of Counsel to be Given to Trustee...............44

ARTICLE XII. SATISFACTION AND DISCHARGE OF INDENTURE.......................44

      Section 12.1.Discharge of Indenture..................................44
      Section 12.2.Deposited Moneys to be Held in Trust by Trustee.........45
      Section 12.3.Paying Agent to Repay Moneys Held.......................45
      Section 12.4.Return of Unclaimed Moneys..............................45

ARTICLE  XIII. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND
               DIRECTORS                                                   45

      Section 13.1.Indenture and Debentures Solely Corporate Obligations...45

ARTICLE XIV. MISCELLANEOUS PROVISIONS......................................46

      Section 14.1.Successors..............................................46
      Section 14.2.Official Acts by Successor Entity.......................46
      Section 14.3.Surrender of Company Powers.............................46
      Section 14.4.Addresses for Notices, etc..............................46
      Section 14.5.Governing Law...........................................46
      Section 14.6.Evidence of Compliance with Conditions Precedent........46
      Section 14.7.Table of Contents, Headings, etc........................47
      Section 14.8.Execution in Counterparts...............................47
      Section 14.9.Separability............................................47
      Section 14.10.Assignment.............................................47
      Section 14.11.Acknowledgment of Rights...............................47

ARTICLE XV. SUBORDINATION OF DEBENTURES....................................48

      Section 15.1.Agreement to Subordinate................................48
      Section 15.2.Default on Senior Indebtedness..........................48
      Section 15.3.Liquidation, Dissolution, Bankruptcy....................48
      Section 15.4.Subrogation.............................................49
      Section 15.5.Trustee to Effectuate Subordination.....................50
      Section 15.6.Notice by the Company...................................50
      Section 15.7.Rights of the Trustee; Holders of Senior Indebtedness...51
      Section 15.8.Subordination May Not Be Impaired.......................51

Exhibit A   Form of Fixed/Floating Rate Junior Subordinated Deferrable Interest
            Debenture
Exhibit B   Form of Certificate to Trustee

iii

THIS INDENTURE, dated as of October 14, 2005, between Mid-Wisconsin Financial Services, Inc., a Wisconsin corporation (the "Company"), and Wilmington Trust Company, a Delaware banking corporation, as debenture trustee (the "Trustee").

WITNESSETH:

WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of its Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures due 2035 (the "Debentures") under this Indenture to provide, among other things, for the execution and authentication, delivery and administration thereof, and the Company has duly authorized the execution of this Indenture; and

WHEREAS, all acts and things necessary to make this Indenture a valid agreement according to its terms, have been done and performed;

NOW, THEREFORE, This Indenture Witnesseth:

ARTICLE I.

DEFINITIONS

SECTION 1.1.DEFINITIONS.

The terms defined in this Section 1.1 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.1. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles and the term "generally accepted accounting principles" means such accounting principles as are generally accepted in the United States at the time of any computation. The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.

"Acceleration Event of Default" means an Event of Default under
Section 5.1(a), (d), (e) or (f), whatever the reason for such Acceleration Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.

"Additional Interest" has the meaning set forth in Section 2.11.

"Additional Junior Indebtedness" means, without duplication and other than the Debentures, any indebtedness, liabilities or obligations of the Company, or any Subsidiary of the Company, under debt securities (or guarantees in respect of debt securities) initially issued after the date of this Indenture to any trust, or a trustee of a trust, partnership or other entity affiliated with the Company that is, directly or indirectly, a finance subsidiary (as such term is defined in Rule 3a-5 under the Investment Company Act of 1940) or other financing vehicle of the Company or any Subsidiary of the Company in connection with the issuance by that entity of preferred securities or other securities that are eligible to qualify for Tier 1 capital treatment (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Company (or, if the Company is not a bank holding company, such guidelines applied to the Company as if the Company were subject to such guidelines); provided, however, that the inability of the Company to treat all or any portion of the Additional Junior

Indebtedness as Tier 1 capital shall not disqualify it as Additional Junior

Indebtedness if such inability results from the Company having cumulative preferred stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve now or may hereafter accord Tier 1 capital treatment (including the Debentures) in excess of the amount which may qualify for treatment as Tier 1 capital under applicable capital adequacy guidelines.

"Additional Sums" has the meaning set forth in Section 3.6.

"Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder.

"Authenticating Agent" means any agent or agents of the Trustee which at the time shall be appointed and acting pursuant to Section 6.12.

"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.

"Board of Directors" means the board of directors or the executive committee or any other duly authorized designated officers of the Company.

"Business Day" means any day other than a Saturday, Sunday or any other day on which banking institutions in New York City or Wilmington, Delaware are permitted or required by any applicable law or executive order to close.

"Capital Securities" means undivided beneficial interests in the assets of the Trust which rank pari passu with Common Securities issued by the Trust; provided, however, that upon the occurrence and continuance of an Event of Default (as defined in the Declaration), the rights of holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Capital Securities.

"Capital Securities Guarantee" means the guarantee agreement that the Company enters into with Wilmington Trust Company, as guarantee trustee, or other Persons that operates directly or indirectly for the benefit of holders of Capital Securities of the Trust.

in effect and applicable to the Company (or if the Company is not a bank holding company, such guidelines applied to the Company as if the Company were subject to such guidelines); provided, however, that the inability of the Company to treat all or any portion of the liquidation amount of the Capital Securities as Tier l Capital shall not constitute the basis for a Capital Treatment Event, if such inability results from the Company having cumulative preferred

stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve or OTS, as applicable, may now or hereafter accord Tier 1 Capital treatment in excess of the amount which may now or hereafter qualify for treatment as Tier 1 Capital under applicable capital adequacy guidelines; provided further, however, that the distribution of Debentures in connection with the liquidation of the Trust shall not in and of itself constitute a Capital Treatment Event unless such liquidation shall have occurred in connection with a Tax Event or an Investment Company Event.

"Certificate" means a certificate signed by any one of the principal executive officer, the principal financial officer or the principal accounting officer of the Company.

"Common Securities" means undivided beneficial interests in the assets of the Trust which rank pari passu with Capital Securities issued by the Trust; provided, however, that upon the occurrence and continuance of an Event of Default (as defined in the Declaration), the rights of holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Capital Securities.

"Company" means Mid-Wisconsin Financial Services, Inc., a Wisconsin corporation, and, subject to the provisions of Article XI, shall include its successors and assigns.

"Comparable Treasury Issue" means with respect to any Special Redemption Date the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the Fixed Rate Period Remaining Life that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the Fixed Rate Period Remaining Life. If no United States Treasury security has a maturity which is within a period from three months before to three months after the Interest Payment Date in December 2010, the two most closely corresponding fixed, non-callable United States Treasury securities, as selected by the Quotation Agent, shall be used as the Comparable Treasury Issue, and the Treasury Rate shall be interpolated or extrapolated on a straight-line basis, rounding to the nearest month using such securities.

"Comparable Treasury Price" means (a) the average of five Reference Treasury Dealer Quotations for such Special Redemption Date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (b) if the Quotation Agent obtains fewer than five such Reference Treasury Dealer Quotations, the average of all such Quotations.

"Coupon Rate" has the meaning set forth in Section 2.8.

"Debenture" or "Debentures" has the meaning stated in the first recital of this Indenture.

"Debenture Register" has the meaning specified in Section 2.5.

"Declaration" means the Amended and Restated Declaration of Trust of the Trust, as amended or supplemented from time to time.

"Default" means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default.

"Defaulted Interest" has the meaning set forth in Section 2.8.

"Distribution Period" means (i) with respect to interest paid on the first Interest Payment Date, the period beginning on (and including) the date of original issuance and ending on (but excluding) the Interest Payment Date in December 2005 and (ii) thereafter, with respect to interest paid on each

successive Interest Payment Date, the period beginning on (and including) the preceding Interest Payment Date and ending on (but excluding) such current Interest Payment Date.

"Determination Date" has the meaning set forth in Section 2.10.

"Event of Default" means any event specified in Section 5.1, continued for the period of time, if any, and after the giving of the notice, if any, therein designated.

"Extension Period" has the meaning set forth in Section 2.11.

"Federal Reserve" means the Board of Governors of the Federal Reserve System, or its designated district bank, as applicable, and any successor federal agency that is primarily responsible for regulating the activities of bank holding companies.

"Fixed Rate Period Remaining Life" means, with respect to any Debenture, the period from the Special Redemption Date for such Debenture to the Interest Payment Date in December 2010.

"Indenture" means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented, or both.

"Institutional Trustee" has the meaning set forth in the Declaration.

"Interest Payment Date" means March 15, June 15, September 15 and December 15 of each year during the term of this Indenture, or if such day is not a Business Day, then the next succeeding Business Day (it being understood that interest accrues for any such non-Business Day during the applicable Distribution Period, beginning on or after December 15, 2010), commencing in December 2005.

"Interest Rate" means for the Distribution Period beginning on (and including) the date of original issuance and ending on (but excluding) the Interest Payment Date in December 2010 the rate per annum of 5.958%, and for each Distribution Period beginning on or after the Interest Payment Date in December 2010, the Coupon Rate for such Distribution Period.

"Investment Company Event" means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a

result of the occurrence of a change in law or regulation or written change (including any announced prospective change) in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or, within 90 days of the date of such opinion will be considered an "investment company" that is required to be registered under the Investment Company Act of 1940, as amended which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Debentures.

"Liquidation Amount" means the stated amount of $1,000.00 per Trust Security.

"Maturity Date" means December 15, 2035.

"Officers' Certificate" means a certificate signed by the Chairman of the Board, the Chief Executive Officer, the Vice Chairman, the President, any Managing Director or any Vice President, and by the Treasurer, an Assistant Treasurer, the Comptroller, an Assistant Comptroller, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. Each such certificate shall include the statements provided for in Section 14.6 if and to the extent required by the provisions of such Section.

"Opinion of Counsel" means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company, or may be other counsel reasonably satisfactory to the Trustee.

Each such opinion shall include the statements provided for in Section 14.6 if and to the extent required by the provisions of such Section.

"OTS" means the Office of Thrift Supervision and any successor federal agency that is primarily responsible for regulating the activities of savings and loan holding companies.

The term "outstanding," when used with reference to Debentures, means, subject to the provisions of Section 7.4, as of any particular time, all Debentures authenticated and delivered by the Trustee or the Authenticating Agent under this Indenture, except:

(a) Debentures theretofore canceled by the Trustee or the Authenticating Agent or delivered to the Trustee for cancellation;

"Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

"Predecessor Security" of any particular Debenture means every previous Debenture evidencing all or a portion of the same debt as that evidenced by such particular Debenture; and, for purposes of this definition, any Debenture authenticated and delivered under Section 2.6 in lieu of a lost, destroyed or stolen Debenture shall be deemed to evidence the same debt as the lost, destroyed or stolen Debenture.

"Primary Treasury Dealer" means either a nationally recognized primary United States Government securities dealer or an entity of recognized standing in matters pertaining to the quotation of treasury securities that is reasonably acceptable to the Company and the Trustee.

"Principal Office of the Trustee," or other similar term, means the office of the Trustee, at which at any particular time its corporate trust business shall be principally administered, which at the time of the execution of this Indenture shall be Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-1600, Attention: Corporate Trust Administration.

"Quotation Agent" means a designee of the Institutional Trustee who shall be a Primary Treasury Dealer.

"Redemption Date" has the meaning set forth in Section 10.1.

"Redemption Price" means 100% of the principal amount of the Debentures being redeemed, plus accrued and unpaid interest (including any Additional Interest) on such Debentures to the Redemption Date.

"Reference Treasury Dealer" means (i) the Quotation Agent and (ii) any other Primary Treasury Dealer selected by the Trustee after consultation with the Company.

"Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Quotation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Quotation Agent by such Reference Treasury Dealer at 5:00
p.m., New York City time, on the third Business Day preceding such Redemption Date.

"Securities Act" means the Securities Act of 1933, as amended from time to time or any successor legislation.

"Senior Indebtedness" means, with respect to the Company, (i) the principal, premium, if any, and interest in respect of (A) indebtedness of the Company for all borrowed and purchased money and (B) indebtedness evidenced by securities, debentures, notes, bonds or other similar instruments issued by the Company; (ii) all capital lease obligations of the Company; (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of the Company under any title retention agreement; (iv) all obligations of the Company for the reimbursement of any letter of credit, any banker's acceptance, any security purchase facility, any repurchase agreement or similar arrangement, any interest rate swap, any other hedging arrangement, any obligation under options or any similar credit or other transaction; (v) all obligations of the Company associated with derivative products such as interest and foreign exchange rate contracts, commodity contracts, and similar arrangements; (vi) all obligations of the type referred to in clauses (i) through (v) above of other Persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise including, without limitation, similar obligations arising from off-balance sheet guarantees and direct credit substitutes; and (vii) all obligations of the type referred to in clauses (i) through (vi) above of other Persons secured by any lien on any property or asset of the Company (whether or not such obligation is assumed by the Company), whether incurred on or prior to the date of this Indenture or thereafter incurred. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (1) any Additional Junior Indebtedness, (2) Debentures issued pursuant to this Indenture and guarantees in respect of such Debentures,
(3) trade accounts payable of the Company arising in the ordinary course of business (such trade accounts payable being pari passu in right of payment to the Debentures), or (4) obligations with respect to which (a) in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are pari passu, junior or otherwise not superior in right of payment to the Debentures and (b) the Company, prior to the issuance thereof, has notified (and, if then required under the applicable guidelines of the regulating entity, has received approval from) the Federal Reserve (if the Company is a bank holding company) or the OTS (if the Company is a savings and loan holding company). Senior Indebtedness shall continue to be Senior

Indebtedness and be entitled to the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness.

"Special Event" means any of a Capital Treatment Event, an Investment Company Event or a Tax Event.

"Special Redemption Date" has the meaning set forth in Section 10.2.

"Special Redemption Price" means (a) if the Special Redemption Date occurs before the Interest Payment Date in December 2010, the greater of
(i) 107.5% of the principal amount of the Debentures, plus accrued and unpaid interest (including Additional Interest) on the Debentures to the Special Redemption Date, or (ii) as determined by the Quotation Agent, (A) the sum of the present values of the scheduled payments of principal and interest on the

Debentures during the Fixed Rate Period Remaining Life of the Debentures
(assuming the Debentures matured on the Interest Payment Date in December 2010)
discounted to the Special Redemption Date on a quarterly basis (assuming a 360- day year consisting of twelve 30-day months) at the Treasury Rate, plus (B) accrued and unpaid interest (including Additional Interest) on the Debentures to such Special Redemption Date, or (b) if the Special Redemption Date occurs on or after the Interest Payment Date in December 2010, 100% of the principal amount of the Debentures being redeemed, plus accrued and unpaid interest (including any Additional Interest) on such Debentures to the Special Redemption Date.

"Subsidiary" means with respect to any Person, (i) any corporation at least a majority of the outstanding voting stock of which is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any general partnership, joint venture or similar entity, at least a majority of the outstanding partnership or similar interests of which shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner. For the purposes of this definition, "voting stock" means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency.

"Tax Event" means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of any amendment to or change (including any announced prospective change) in the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement (including any private letter ruling, technical advice memorandum, field service advice, regulatory procedure, notice or announcement, including any notice or announcement of intent to adopt such procedures or regulations) (an "Administrative Action") or judicial decision interpreting or applying such laws or regulations, regardless of whether such Administrative Action or judicial decision is issued to or in connection with a proceeding involving the Company or the Trust and whether or not subject to review or appeal, which amendment, clarification, change, Administrative Action or decision is enacted, promulgated or announced, in each case on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that: (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Debentures; (ii) interest payable by the Company on the Debentures is not, or within 90 days of the date of such opinion, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes; or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges.

"3-Month LIBOR" has the meaning set forth in Section 2.10.

"Telerate Page 3750" has the meaning set forth in Section 2.10.

"Treasury Rate" means (i) the yield, under the heading which represents the average for the week immediately prior to the date of calculation,

appearing in the most recently published statistical release designated H.15
(519) or any successor publication which is published weekly by the Federal Reserve and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," for the maturity corresponding to the Fixed Rate Period Remaining Life (if no maturity is within three months before or after the Fixed Rate Period Remaining Life, yields for the two published maturities most closely corresponding to the Fixed Rate Period Remaining Life shall be determined and the Treasury Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding to the nearest month) or (ii) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Special Redemption Date. The Treasury Rate shall be calculated by the Quotation Agent on the third Business Day preceding the Special Redemption Date.

"Trust" shall mean Mid-Wisconsin Statutory Trust I, a Delaware statutory trust, or any other similar trust created for the purpose of issuing Capital Securities in connection with the issuance of Debentures under this Indenture, of which the Company is the sponsor.

"Trust Securities" means Common Securities and Capital Securities of the Trust.

"Trustee" means Wilmington Trust Company, and, subject to the provisions of Article VI hereof, shall also include its successors and assigns as Trustee hereunder.

ARTICLE II.

DEBENTURES

SECTION 2.1. AUTHENTICATION AND DATING.

Upon the execution and delivery of this Indenture, or from time to time thereafter, Debentures in an aggregate principal amount not in excess of $10,310,000.00 may be executed and delivered by the Company to the Trustee for authentication, and the Trustee, upon receipt of a written authentication order from the Company, shall thereupon authenticate and make available for delivery said Debentures to or upon the written order of the Company, signed by its Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman, the President, one of its Managing Directors or one of its Vice Presidents without any further action by the Company hereunder. Notwithstanding anything to the contrary contained herein, the Trustee shall be fully protected in relying upon the aforementioned authentication order and written order in authenticating and delivering said Debentures. In authenticating such Debentures, and accepting the additional responsibilities under this Indenture in relation to such Debentures, the Trustee shall be entitled to receive, and (subject to
Section 6.1) shall be fully protected in relying upon:

(a)a copy of any Board Resolution or Board Resolutions relating thereto and, if applicable, an appropriate record of any action taken pursuant to such resolution, in each case certified by the Secretary or an Assistant Secretary of the Company, as the case may be; and

(b)an Opinion of Counsel prepared in accordance with Section 14.6 which shall also state:

(1)that such Debentures, when authenticated and delivered by the Trustee and issued by the Company in each case in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, subject to or limited by applicable bankruptcy, insolvency, reorganization, conservatorship, receivership, moratorium and other statutory or decisional laws relating to or affecting creditors' rights or the reorganization of financial institutions (including, without limitation, preference and fraudulent conveyance or transfer laws), heretofore or hereafter enacted or in effect, affecting the rights of creditors generally; and

(2)that all laws and requirements in respect of the execution and delivery by the Company of the Debentures have been complied with and that authentication and delivery of the Debentures by the Trustee will not violate the terms of this Indenture.

SECTION 2.2. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.

The Trustee's certificate of authentication on all Debentures shall be in substantially the following form:

This is one of the Debentures referred to in the within-mentioned Indenture.

WILMINGTON TRUST COMPANY, as Trustee

By
Authorized Signer

SECTION 2.3. FORM AND DENOMINATION OF DEBENTURES.

The Debentures shall be substantially in the form of Exhibit A attached hereto. The Debentures shall be in registered, certificated form without coupons and in minimum denominations of $100,000.00 and any multiple of $1,000.00 in excess thereof. Any attempted transfer of the Debentures in a block having an aggregate principal amount of less than $100,000.00 shall be deemed to be void and of no legal effect whatsoever. Any such purported transferee shall be deemed not to be a holder of such Debentures for any purpose, including, but not limited to the receipt of payments on such Debentures, and such purported transferee shall be deemed to have no interest whatsoever in such Debentures. The Debentures shall be numbered, lettered, or

otherwise distinguished in such manner or in accordance with such plans as the officers executing the same may determine with the approval of the Trustee as evidenced by the execution and authentication thereof.

SECTION 2.4. EXECUTION OF DEBENTURES.

The Debentures shall be signed in the name and on behalf of the Company by the manual or facsimile signature of its Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman,

President, one of its Managing Directors or one of its Executive Vice Presidents, Senior Vice Presidents or Vice Presidents. Only such Debentures as shall bear thereon a certificate of authentication substantially in the form herein before recited, executed by the Trustee or the Authenticating Agent by the manual signature of an authorized signer, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Trustee or the Authenticating Agent upon any Debenture executed by the Company shall be conclusive evidence that the Debenture so authenticated has been duly authenticated and delivered hereunder and that the holder is entitled to the benefits of this Indenture.

Every Debenture shall be dated the date of its authentication.

SECTION 2.5. EXCHANGE AND REGISTRATION OF TRANSFER OF DEBENTURES.

The Company shall cause to be kept, at the office or agency maintained for the purpose of registration of transfer and for exchange as provided in
Section 3.2, a register (the "Debenture Register") for the Debentures issued hereunder in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration and transfer of all Debentures as in this Article II provided. The Debenture Register shall be in written form or in any other form capable of being converted into written form within a reasonable time.

principal amount. Registration or registration of transfer of any Debenture by the Trustee or by any agent of the Company appointed pursuant to Section 3.2, and delivery of such Debenture, shall be deemed to complete the registration or registration of transfer of such Debenture.

The Company or the Trustee shall not be required to exchange or register a transfer of any Debenture for a period of 15 days next preceding the date of selection of Debentures for redemption.

Notwithstanding anything herein to the contrary, Debentures may not be transferred except in compliance with the restricted securities legend set forth below, unless otherwise determined by the Company, upon the advice of counsel expert in securities law, in accordance with applicable law:

THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION.

SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION
3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING

RESTRICTIONS.

SECTION 2.6.MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES.

In case any Debenture shall become mutilated or be destroyed, lost or stolen, the Company shall execute, and upon its written request the Trustee shall authenticate and deliver, a new Debenture bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Debenture, or in lieu of and in substitution for the Debenture so destroyed, lost or stolen. In every case the applicant for a substituted Debenture shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company and the Trustee evidence to their satisfaction of the destruction, loss or theft of such Debenture and of the ownership thereof.

to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless and, in case of destruction, loss or theft, evidence satisfactory to the Company and to the Trustee of the destruction, loss or theft of such Debenture and of the ownership thereof.

Every substituted Debenture issued pursuant to the provisions of this
Section 2.6 by virtue of the fact that any such Debenture is destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Debenture shall be found at any time, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Debentures duly issued hereunder. All Debentures shall be held and owned upon the express condition that, to the extent permitted by applicable law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter

enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender.

SECTION 2.7. TEMPORARY DEBENTURES.

Pending the preparation of definitive Debentures, the Company may execute and the Trustee shall authenticate and make available for delivery temporary Debentures that are typed, printed or lithographed. Temporary Debentures shall be issuable in any authorized denomination, and substantially in the form of the definitive Debentures in lieu of which they are issued but with such omissions, insertions and variations as may be appropriate for temporary Debentures, all as may be determined by the Company. Every such temporary Debenture shall be executed by the Company and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with the same effect, as the definitive Debentures. Without unreasonable delay the Company will execute and deliver to the Trustee or the Authenticating Agent definitive Debentures and thereupon any or all temporary Debentures may be surrendered in exchange therefor, at the principal corporate trust office of the Trustee or at any office or agency maintained by the Company for such purpose as provided in Section 3.2, and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in exchange for such temporary Debentures a like aggregate principal amount of such definitive Debentures. Such exchange shall be made by the Company at its own expense and without any charge therefor except that in case of any such exchange involving a registration of transfer the Company may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto. Until so exchanged, the temporary Debentures shall in all respects be entitled to the same benefits under this Indenture as definitive Debentures authenticated and delivered hereunder.

SECTION 2.8. PAYMENT OF INTEREST AND ADDITIONAL INTEREST.

Interest at the Interest Rate and any Additional Interest on any Debenture that is payable, and is punctually paid or duly provided for, on any Interest Payment Date for Debentures shall be paid to the Person in whose name said Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment except that interest and any Additional Interest payable on the Maturity Date shall be paid to the Person to whom principal is paid.

Each Debenture shall bear interest for the period beginning on (and including) the date of original issuance and ending on (but excluding) the Interest Payment Date in December 2010 at a rate per annum of 5.958%, and shall bear interest for each successive Distribution Period beginning on or after the Interest Payment Date in December 2010 at a rate per annum equal to the 3-Month LIBOR, determined as described in Section 2.10, plus 1.43% (the "Coupon Rate"), applied to the principal amount thereof, until the principal thereof becomes due and payable, and on any overdue principal and to the extent that payment of such interest is enforceable under applicable law (without duplication) on any overdue installment of interest (including Additional Interest) at the Interest Rate in effect for each applicable period compounded quarterly. Interest shall be payable (subject to any relevant Extension Period) quarterly in arrears on each Interest Payment Date with the first installment of interest to be paid on the Interest Payment Date in December 2005.

Any interest on any Debenture, including Additional Interest, that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the registered holder on the relevant regular record date by virtue of having been such holder; and such Defaulted Interest shall be paid by the Company to the Persons in whose names such Debentures (or their respective Predecessor Securities) are registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner: the Company shall notify the Trustee in writing at least 25 days prior to the date of the proposed payment of the amount of Defaulted Interest proposed to be paid on each such Debenture and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a special record date for the payment of such Defaulted Interest which shall not be more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such special record date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first class postage prepaid, to each Securityholder at its address as it appears in the Debenture Register, not less than 10 days prior to such special record date. Notice of the proposed payment of such Defaulted Interest and the special record date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names such Debentures (or their respective Predecessor Securities) are registered on such special record date and shall be no longer payable.

The Company may make payment of any Defaulted Interest on any Debentures in any other lawful manner after notice given by the Company to the Trustee of the proposed payment method; provided, however, the Trustee in its sole discretion deems such payment method to be practical.

Any interest (including Additional Interest) scheduled to become payable on an Interest Payment Date occurring during an Extension Period shall not be Defaulted Interest and shall be payable on such other date as may be specified in the terms of such Debentures.

The term "regular record date" as used in this Section shall mean the close of business on the 15th Business Day preceding the applicable Interest Payment Date.

SECTION 2.9. CANCELLATION OF DEBENTURES PAID, ETC.

All Debentures surrendered for the purpose of payment, redemption, exchange or registration of transfer, shall, if surrendered to the Company or any paying agent, be surrendered to the Trustee and promptly canceled by it, or, if surrendered to the Trustee or any Authenticating Agent, shall be promptly canceled by it, and no Debentures shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. All Debentures canceled by any Authenticating Agent shall be delivered to the Trustee. The Trustee shall destroy all canceled Debentures unless the Company otherwise directs the Trustee in writing. If the Company shall acquire any of the Debentures, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Debentures unless and until the same are surrendered to the Trustee for cancellation.

SECTION 2.10. COMPUTATION OF INTEREST.

The amount of interest payable (i) for any Distribution Period commencing on or after the date of original issuance but before the Interest Payment Date in December 2010 will be computed on the basis of a 360-day year of twelve 30- day months, and (ii) for the Distribution Period commencing on the Interest Payment Date in December 2010 and each succeeding Distribution Period will be calculated by applying the Interest Rate to the principal amount outstanding at the commencement of the Distribution Period on the basis of the actual number of days in the Distribution Period concerned divided by 360. All percentages resulting from any calculations on the Debentures will be rounded, if necessary, to the nearest

one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).

(a)"3-Month LIBOR" means the London interbank offered interest rate for three-month, U.S. dollar deposits determined by the Trustee in the following order of priority:

(1) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (as defined below). "Telerate Page 3750" means the display designated as "Page 3750" on the Moneyline Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits;

(2) if such rate cannot be identified on the related Determination Date, the Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks' offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations;

(3) if fewer than two such quotations are provided as requested in clause (2) above, the Trustee will request four major New York City banks to provide such banks' offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and

(4) if fewer than two such quotations are provided as requested in clause (3) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period.

If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date.

(b) The Interest Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.

(c)"Determination Date" means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the particular Distribution Period for which a Coupon Rate is being determined.

(d)The Trustee shall notify the Company, the Institutional Trustee and any securities exchange or interdealer quotation system on which the Capital Securities are listed, of the Coupon Rate and the Determination Date for each Distribution Period, in each case as soon as practicable after the determination thereof but in no event later than the thirtieth (30th) day of the relevant Distribution Period. Failure to notify the Company, the Institutional Trustee or any securities exchange or interdealer quotation system, or any defect in said notice, shall not affect the obligation of the Company to make

payment on the Debentures at the applicable Coupon Rate. Any error in the calculation of the Coupon Rate by the Trustee may be corrected at any time by notice delivered as above provided. Upon the request of a holder of a Debenture, the Trustee shall provide the Coupon Rate then in effect and, if determined, the Coupon Rate for the next Distribution Period.

(e)Subject to the corrective rights set forth above, all certificates, communications, opinions, determinations, calculations, quotations and

decisions given, expressed, made or obtained for the purposes of the provisions relating to the payment and calculation of interest on the Debentures and distributions on the Capital Securities by the Trustee or the Institutional Trustee will (in the absence of willful default, bad faith and manifest error) be final, conclusive and binding on the Trust, the Company and all of the holders of the Debentures and the Capital Securities, and no liability shall (in the absence of willful default, bad faith or manifest error) attach to the Trustee or the Institutional Trustee in connection with the exercise or non- exercise by either of them or their respective powers, duties and discretion.

SECTION 2.11. EXTENSION OF INTEREST PAYMENT PERIOD.

So long as no Acceleration Event of Default has occurred and is continuing, the Company shall have the right, from time to time, and without causing an Event of Default, to defer payments of interest on the Debentures by extending the interest payment period on the Debentures at any time and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment period, an "Extension Period"), during which Extension Period no interest (including Additional Interest) shall be due and payable (except any Additional Sums that may be due and payable). No Extension Period may end on a date other than an Interest Payment Date. During an Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Interest Rate in effect for such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as "Additional Interest"). At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date; provided further, however, that during any such Extension Period, the Company shall not and shall not permit any Affiliate to (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's or such Affiliate's capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (i) or (ii) above, (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of any exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock,
(c) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (e) any dividend in the form of

stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which

the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (f) payments under the Capital Securities Guarantee). Prior to the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest to the extent permitted by applicable law. The Company must give the Trustee notice of its election to begin or extend an Extension Period by the close of business at least 15 Business Days prior to the Interest Payment Date with respect to which interest on the Debentures would have been payable except for the election to begin or extend such Extension Period. The Trustee shall give notice of the Company's election to begin a new Extension Period to the Securityholders.

SECTION 2.12. CUSIP NUMBERS.

The Company in issuing the Debentures may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of redemption as a convenience to Securityholders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Debentures or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Debentures, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee in writing of any change in the CUSIP numbers.

ARTICLE III.

PARTICULAR COVENANTS OF THE COMPANY

SECTION 3.1. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST; AGREED TREATMENT OF THE DEBENTURES.

(a)The Company covenants and agrees that it will duly and punctually pay or cause to be paid the principal of and premium, if any, and interest and any Additional Interest and other payments on the Debentures at the place, at the respective times and in the manner provided in this Indenture and the Debentures. Each installment of interest on the Debentures may be paid (i) by mailing checks for such interest payable to the order of the holders of Debentures entitled thereto as they appear on the registry books of the Company if a request for a wire transfer has not been received by the Company or
(ii) by wire transfer to any account with a banking institution located in the United States designated in writing by such Person to the paying agent no later than the related record date. Notwithstanding the foregoing, so long as the holder of this Debenture is the Institutional Trustee, the payment of the principal of and interest on this Debenture will be made in immediately

available funds at such place and to such account as may be designated by the Institutional Trustee.

(b)The Company will treat the Debentures as indebtedness, and the amounts payable in respect of the principal amount of such Debentures as interest, for all United States federal income tax purposes. All payments in respect of such Debentures will be made free and clear of United States withholding tax to any beneficial owner thereof that has provided an Internal Revenue Service Form W8 BEN (or any substitute or successor form) establishing its non-United States status for United States federal income tax purposes.

(c)As of the date of this Indenture, the Company has no present intention to exercise its right under to defer payments of interest on the Debentures by commencing an Extension Period.

(d)As of the date of this Indenture, the Company believes that the likelihood that it would exercise its right under to defer payments of interest on the Debentures by commencing an Extension Period at any time during which the Debentures are outstanding is remote because of the restrictions that would be imposed on the Company's ability to declare or pay dividends or distributions on, or to redeem, purchase or make a liquidation payment with respect to, any of its outstanding equity and on the Company's ability to make any payments of principal of or interest on, or repurchase or redeem, any of its debt securities that rank pari passu in all respects with (or junior in interest to) the Debentures.

SECTION 3.2. OFFICES FOR NOTICES AND PAYMENTS, ETC.

So long as any of the Debentures remain outstanding, the Company will maintain in Wilmington, Delaware, an office or agency where the Debentures may be presented for payment, an office or agency where the Debentures may be presented for registration of transfer and for exchange as in this Indenture provided and an office or agency where notices and demands to or upon the Company in respect of the Debentures or of this Indenture may be served. The Company will give to the Trustee written notice of the location of any such office or agency and of any change of location thereof. Until otherwise designated from time to time by the Company in a notice to the Trustee, or specified as contemplated by , such office or agency for all of the above purposes shall be the office or agency of the Trustee. In case the Company shall fail to maintain any such office or agency in Wilmington, Delaware, or shall fail to give such notice of the location or of any change in the location thereof, presentations and demands may be made and notices may be served at the Principal Office of the Trustee.

In addition to any such office or agency, the Company may from time to time designate one or more offices or agencies outside Wilmington, Delaware, where the Debentures may be presented for registration of transfer and for exchange in the manner provided in this Indenture, and the Company may from time to time rescind such designation, as the Company may deem desirable or expedient; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain any such office or agency in Wilmington, Delaware, for the purposes above mentioned. The Company will give to the Trustee prompt written notice of any such designation or rescission thereof.

SECTION 3.3. APPOINTMENTS TO FILL VACANCIES IN TRUSTEE'S OFFICE.

The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 6.9, a Trustee, so that there shall at all times be a Trustee hereunder.

SECTION 3.4. PROVISION AS TO PAYING AGENT.

(a)If the Company shall appoint a paying agent other than the Trustee, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provision of this Section 3.4,

(1)that it will hold all sums held by it as such agent for the payment of the principal of and premium, if any, or interest, if any, on the Debentures (whether such sums have been paid to it by the Company or by any other obligor on the Debentures) in trust for the benefit of the holders of the Debentures;

(2)that it will give the Trustee prompt written notice of any failure by the Company (or by any other obligor on the Debentures) to make any payment of the principal of and premium, if any, or interest, if any, on the Debentures when the same shall be due and payable; and

(3)that it will, at any time during the continuance of any Event of Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent.

(b)If the Company shall act as its own paying agent, it will, on or before each due date of the principal of and premium, if any, or interest or other payments, if any, on the Debentures, set aside, segregate and hold in trust for the benefit of the holders of the Debentures a sum sufficient to pay such principal, premium, interest or other payments so becoming due and will notify the Trustee in writing of any failure to take such action and of any failure by the Company (or by any other obligor under the Debentures) to make any payment of the principal of and premium, if any, or interest or other payments, if any, on the Debentures when the same shall become due and payable.

Whenever the Company shall have one or more paying agents for the Debentures, it will, on or prior to each due date of the principal of and premium, if any, or interest, if any, on the Debentures, deposit with a paying agent a sum sufficient to pay the principal, premium, interest or other payments so becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto and (unless such paying agent is the Trustee) the Company shall promptly notify the Trustee in writing of its action or failure to act.

(c)Anything in this Section 3.4 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge with respect to the Debentures, or for any other reason, pay, or direct any paying agent to pay to the Trustee all sums held in trust by the Company or any such paying agent, such sums to be held by the Trustee upon the trusts herein contained.

(d)Anything in this Section 3.4 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 3.4 is subject to Sections 12.3 and 12.4.

SECTION 3.5. CERTIFICATE TO TRUSTEE.

The Company will deliver to the Trustee on or before 120 days after the end of each fiscal year, so long as Debentures are outstanding hereunder, a Certificate stating that in the course of the performance by the signers of their duties as officers of the Company they would normally have knowledge of any default during such fiscal year by the Company in the performance of any covenants contained herein, stating whether or not they have knowledge of any such default and, if so, specifying each such default of which the signers have knowledge and the nature and status thereof. A form of this Certificate is attached hereto as Exhibit B.

SECTION 3.6. ADDITIONAL SUMS.

If and for so long as the Trust is the holder of all Debentures and the Trust is required to pay any additional taxes (including withholding taxes), duties, assessments or other governmental charges as a result of a Tax Event, the Company will pay such additional amounts ("Additional Sums") on the Debentures as shall be required so that the net amounts received and retained by the Trust after paying taxes (including withholding taxes), duties, assessments or other governmental charges will be equal to the amounts the Trust would have received if no such taxes, duties, assessments or other governmental charges had been imposed. Whenever in this Indenture or the Debentures there is a reference in any context to the payment of principal of or interest on the Debentures, such mention shall be deemed to

include mention of payments of the Additional Sums provided for in this paragraph to the extent that, in such context, Additional Sums are, were or would be payable in respect thereof pursuant to the provisions of this paragraph and express mention of the payment of Additional Sums (if applicable) in any provisions hereof shall not be construed as excluding Additional Sums in those provisions hereof where such express mention is not made; provided, however, that the deferral of the payment of interest during an Extension Period pursuant to Section 2.11 shall not defer the payment of any Additional Sums that may be due and payable.

SECTION 3.7. COMPLIANCE WITH CONSOLIDATION PROVISIONS.

The Company will not, while any of the Debentures remain outstanding, consolidate with, or merge into, or merge into itself, or sell or convey all or substantially all of its property to any other Person unless the provisions of Article XI hereof are complied with.

SECTION 3.8. LIMITATION ON DIVIDENDS.

If Debentures are initially issued to the Trust or a trustee of such Trust in connection with the issuance of Trust Securities by the Trust (regardless of whether Debentures continue to be held by such Trust) and
(i) there shall have occurred and be continuing an Event of Default, (ii) the Company shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee, or (iii) the Company shall have given notice of its election to defer payments of interest on the Debentures by extending the interest payment period as provided herein and such period, or any extension thereof, shall be continuing, then the Company shall not, and shall not allow any Affiliate of the Company to, (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a

liquidation payment with respect to, any of the Company's capital stock or its Affiliates' capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or
(y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above,
(1) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, if any, (2) as a result of any exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (3) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (4) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (5) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (6) payments under the Capital Securities Guarantee).

SECTION 3.9. COVENANTS AS TO THE TRUST.

For so long as the Trust Securities remain outstanding, the Company shall maintain 100% ownership of the Common Securities; provided, however, that any permitted successor of the Company

under this Indenture may succeed to the Company's ownership of such Common Securities. The Company, as owner of the Common Securities, shall, except in connection with a distribution of Debentures to the holders of Trust Securities in liquidation of the Trust, the redemption of all of the Trust Securities or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, cause the Trust (a) to remain a statutory trust, (b) to otherwise continue to be classified as a grantor trust for United States federal income tax purposes, and (c) to cause each holder of Trust Securities to be treated as owning an undivided beneficial interest in the Debentures.

SECTION 3.10.ADDITIONAL JUNIOR INDEBTEDNESS.

The Company shall not, and it shall not cause or permit any Subsidiary of the Company to, incur, issue or be obligated on any Additional Junior Indebtedness, either directly or indirectly, by way of guarantee, suretyship or otherwise, other than Additional Junior Indebtedness (i) that, by its terms, is expressly stated to be either junior and subordinate or pari passu in all respects to the Debentures, and (ii) of which the Company has notified (and, if then required under the applicable guidelines of the regulating entity, has

received approval from) the Federal Reserve, if the Company is a bank holding company, or the OTS, if the Company is a savings and loan holding company.

ARTICLE IV.

SECURITYHOLDERS' LISTS AND REPORTS

BY THE COMPANY AND THE TRUSTEE

SECTION 4.1. SECURITYHOLDERS' LISTS.

The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee:

(a)on each regular record date for the Debentures, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Securityholders of the Debentures as of such record date; and

(b)at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished;

except that no such lists need be furnished under this Section 4.1 so long as the Trustee is in possession thereof by reason of its acting as Debenture registrar.

SECTION 4.2. PRESERVATION AND DISCLOSURE OF LISTS.

(a)The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of Debentures (1) contained in the most recent list furnished to it as provided in
Section 4.1 or (2) received by it in the capacity of Debentures registrar (if so acting) hereunder. The Trustee may destroy any list furnished to it as provided in Section 4.1 upon receipt of a new list so furnished.

(b)In case three or more holders of Debentures (hereinafter referred to as "applicants") apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such applicant has owned a Debenture for a period of at least 6 months preceding the date of such application, and such application states that the applicants desire to communicate with other holders of Debentures with respect to their rights under this Indenture or under such Debentures and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall within 5 Business Days after the receipt of such application, at its election, either:

(1)afford such applicants access to the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2, or

(2)inform such applicants as to the approximate number of holders of Debentures whose names and addresses appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2, and as to the approximate cost of mailing to such Securityholders the form of proxy or other communication, if any, specified in such application.

(c)Each and every holder of Debentures, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any paying agent shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the holders of Debentures in accordance with the provisions of subsection (b) of this
Section 4.2, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under said subsection (b).

ARTICLE V.

REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS

UPON AN EVENT OF DEFAULT

SECTION 5.1. EVENTS OF DEFAULT.

"Event of Default," wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a)the Company defaults in the payment of any interest upon any Debenture, including any Additional Interest in respect thereof, following the nonpayment of any such interest for twenty or more consecutive Distribution Periods; or

(b)the Company defaults in the payment of all or any part of the principal of (or premium, if any, on) any Debentures as and when the same shall

become due and payable either at maturity, upon redemption, by declaration of acceleration or otherwise; or

(c)the Company defaults in the performance of, or breaches, any of its covenants or agreements in this Indenture or in the terms of the Debentures established as contemplated in this Indenture (other than a covenant or agreement a default in whose performance or whose breach is elsewhere in this
Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the holders of at least 25% in aggregate principal amount of the outstanding Debentures, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or

(d)a court of competent jurisdiction shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or

(e)the Company shall commence a voluntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due; or

(f)the Trust shall have voluntarily or involuntarily liquidated, dissolved, wound-up its business or otherwise terminated its existence except in connection with (i) the distribution of the Debentures to holders of such Trust Securities in liquidation of their interests in the Trust, (ii) the redemption of all of the outstanding Trust Securities or (iii) certain mergers, consolidations or amalgamations, each as permitted by the Declaration.

If an Acceleration Event of Default occurs and is continuing with respect to the Debentures, then, and in each and every such case, unless the principal of the Debentures shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding hereunder, by notice in writing to the Company (and to the Trustee if given by Securityholders), may declare the entire principal of the Debentures and the interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. If an Event of Default under Section 5.1(b) or
(c) occurs and is continuing with respect to the Debentures, then, and in each and every such case, unless the principal of the Debentures shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding hereunder, by notice in writing to the Company (and to the Trustee if given by Securityholders), may proceed to remedy the default or breach thereunder by such appropriate judicial proceedings as the Trustee or such holders shall deem most effectual to remedy the defaulted covenant or enforce the provisions of this Indenture so breached, either by suit in equity or by action at law, for

damages or otherwise.

installments of interest upon all the Debentures and the principal of and premium, if any, on the Debentures which shall have become due otherwise than by acceleration (with interest upon such principal and premium, if any, and Additional Interest) and such amount as shall be sufficient to cover reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and all other amounts due to the Trustee pursuant to Section 6.6, if any, and (ii) all Events of Default under this Indenture, other than the non-payment of the principal of or premium, if any, on Debentures which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein -- then and in every such case the holders of a majority in aggregate principal amount of the Debentures then outstanding, by written notice to the Company and to the Trustee, may waive all defaults and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon.

SECTION 5.2. PAYMENT OF DEBENTURES ON DEFAULT; SUIT THEREFOR.

The Company covenants that upon the occurrence of an Event of Default pursuant to Section 5.1(a) or (b) then, upon demand of the Trustee, the Company will pay to the Trustee, for the benefit of the holders of the Debentures the whole amount that then shall have become due and payable on all Debentures for principal and premium, if any, or interest, or both, as the case may be, with Additional Interest accrued on the Debentures (to the extent that payment of such interest is enforceable under applicable law and, if the Debentures are held by the Trust or a trustee of such Trust, without duplication of any other amounts paid by the Trust or a trustee in respect thereof); and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including a reasonable compensation to the Trustee, its agents, attorneys and counsel, and any other amounts due to the Trustee under
Section 6.6. In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or any other obligor on such Debentures and collect in the manner provided by law out of the property of the Company or any other obligor on such Debentures wherever situated the moneys adjudged or decreed to be payable.

(i) to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Debentures,

(ii) in case of any judicial proceedings, to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all other amounts due to the Trustee under
Section 6.6), and of the Securityholders allowed in such judicial proceedings relative to the Company or any other obligor on the Debentures, or to the creditors or property of the Company or such other obligor, unless prohibited by applicable law and regulations, to vote on behalf of the holders of the Debentures in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or Person performing similar functions in comparable proceedings,

(iii) to collect and receive any moneys or other property payable or deliverable on any such claims, and

(iv) to distribute the same after the deduction of its charges and expenses.

SECTION 5.3. APPLICATION OF MONEYS COLLECTED BY TRUSTEE.

Any moneys collected by the Trustee pursuant to this Article V shall be applied in the following order, at the date or dates fixed by the Trustee for the distribution of such moneys, upon presentation of the several Debentures in respect of which moneys have been collected, and stamping thereon the payment, if only partially paid, and upon surrender thereof if fully paid:

First: To the payment of costs and expenses incurred by, and reasonable fees of, the Trustee, its agents, attorneys and counsel, and of all other amounts due to the Trustee under Section 6.6;

Second: To the payment of all Senior Indebtedness of the Company if and to the extent required by Article XV;

Fourth: The balance, if any, to the Company.

SECTION 5.4. PROCEEDINGS BY SECURITYHOLDERS.

No holder of any Debenture shall have any right to institute any suit, action or proceeding for any remedy hereunder, unless such holder previously shall have given to the Trustee written notice of an Event of Default with respect to the Debentures and unless the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding shall have given the Trustee a written request to institute such action, suit or proceeding and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred thereby, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action, suit or proceeding.

Section, each and every Securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity.

SECTION 5.5. PROCEEDINGS BY TRUSTEE.

In case of an Event of Default hereunder the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law.

SECTION 5.6. REMEDIES CUMULATIVE AND CONTINUING; DELAY OR OMISSION NOT A WAIVER.

Except as otherwise provided in Section 2.6, all powers and remedies given by this Article V to the Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other powers and remedies available to the Trustee or the holders of the Debentures, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture or otherwise established with respect to the Debentures, and no delay or omission of the Trustee or of any holder of any of the Debentures to exercise any right, remedy or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right, remedy or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 5.4, every power and remedy given by this Article V or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall

be deemed expedient, by the Trustee (in accordance with its duties under
Section 6.1) or by the Securityholders.

SECTION 5.7. DIRECTION OF PROCEEDINGS AND WAIVER OF DEFAULTS BY MAJORITY OF SECURITYHOLDERS.

The holders of a majority in aggregate principal amount of the Debentures affected (voting as one class) at the time outstanding shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to such Debentures; provided, however, that (subject to the provisions of Section 6.1) the Trustee shall have the right to decline to follow any such direction if the Trustee shall determine that the action so directed would be unjustly prejudicial to the holders not taking part in such direction or if the Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if a Responsible Officer of the Trustee shall determine that the action or proceedings so directed would involve the Trustee in personal liability.

covenants or provisions hereof which cannot be modified or amended without the consent of the holder of each Debenture affected, or (c) in respect of the covenants contained in Section 3.9; provided, however, that if the Debentures are held by the Trust or a trustee of such trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities of the Trust shall have consented to such waiver or modification to such waiver, provided, further, that if the consent of the holder of each outstanding Debenture is required, such waiver shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such waiver. Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of this Indenture and the Company, the Trustee and the holders of the Debentures shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by this Section, said default or Event of Default shall for all purposes of the Debentures and this Indenture be deemed to have been cured and to be not continuing.

SECTION 5.8. NOTICE OF DEFAULTS.

The Trustee shall, within 90 days after the actual knowledge by a Responsible Officer of the Trustee of the occurrence of a default with respect to the Debentures, mail to all Securityholders, as the names and addresses of such holders appear upon the Debenture Register, notice of all defaults with respect to the Debentures known to the Trustee, unless such defaults shall have been cured before the giving of such notice (the term "defaults" for the purpose of this Section 5.8 being hereby defined to be the events specified in clauses (a), (b), (c), (d), (e) and (f) of Section 5.1, not including periods of grace, if any, provided for therein); provided, however, that, except in the case of default in the payment of the principal of, premium, if any, or interest on any of the Debentures, the Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Trustee in good faith determines that the withholding of such notice is in the interests of the Securityholders.

SECTION 5.9. UNDERTAKING TO PAY COSTS.

All parties to this Indenture agree, and each holder of any Debenture by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action

taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided, however, that the provisions of this Section 5.9 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder, or group of Securityholders, holding in the aggregate more than 10% in principal amount of the Debentures outstanding, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Debenture against the Company on or after the same shall have become due and payable.

ARTICLE VI.

CONCERNING THE TRUSTEE

SECTION 6.1. DUTIES AND RESPONSIBILITIES OF TRUSTEE.

With respect to the holders of Debentures issued hereunder, the Trustee, prior to the occurrence of an Event of Default with respect to the Debentures and after the curing or waiving of all Events of Default which may have occurred, with respect to the Debentures, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants shall be read into this Indenture against the Trustee. In case an Event of Default with respect to the Debentures has occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.

No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

(a)prior to the occurrence of an Event of Default with respect to Debentures and after the curing or waiving of all Events of Default which may have occurred

(1)the duties and obligations of the Trustee with respect to Debentures shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations with respect to the Debentures as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee, and

(2)in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture;

(b)the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and

(c)the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith, in accordance with the direction of the Securityholders pursuant to Section 5.7, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture.

its rights or powers, if there is ground for believing that the repayment of such funds or liability is not assured to it under the terms of this Indenture or indemnity satisfactory to the Trustee against such risk is not reasonably assured to it.

SECTION 6.2. RELIANCE ON DOCUMENTS, OPINIONS, ETC.

Except as otherwise provided in Section 6.1:

(a)the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, note, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b)any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officers' Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any Board Resolution may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company;

(c)the Trustee may consult with counsel of its selection and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;

(d)the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders, pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby;

(e)the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; nothing contained herein shall, however, relieve the Trustee of the obligation, upon the occurrence of an Event of Default with respect to the Debentures (that has not been cured or waived) to exercise with respect to Debentures such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs;

(f)the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, coupon or other paper or document, unless requested in writing to do so by the holders of not less than a majority in aggregate principal amount of the outstanding Debentures affected thereby; provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expense or liability as a condition to so proceeding;

(g)the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents (including any Authenticating Agent) or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed by it with due care; and

(h)with the exceptions of defaults under Sections 5.1(a) or (b), the Trustee shall not be charged with knowledge of any Default or Event of Default with respect to the Debentures unless a written notice of such Default or Event of Default shall have been given to the Trustee by the Company or any other obligor on the Debentures or by any holder of the Debentures.

SECTION 6.3. NO RESPONSIBILITY FOR RECITALS, ETC.

The recitals contained herein and in the Debentures (except in the certificate of authentication of the Trustee or the Authenticating Agent) shall be taken as the statements of the Company, and the Trustee and the Authenticating Agent assume no responsibility for the correctness of the same. The Trustee and the Authenticating Agent make no representations as to the validity or sufficiency of this Indenture or of the Debentures. The Trustee and the Authenticating Agent shall not be accountable for the use or application by the Company of any Debentures or the proceeds of any Debentures authenticated and delivered by the Trustee or the Authenticating Agent in conformity with the provisions of this Indenture.

SECTION 6.4. TRUSTEE, AUTHENTICATING AGENT, PAYING AGENTS, TRANSFER AGENTS OR REGISTRAR MAY OWN DEBENTURES.

The Trustee or any Authenticating Agent or any paying agent or any transfer agent or any Debenture registrar, in its individual or any other capacity, may become the owner or pledgee of Debentures with the same rights it would have if it were not Trustee, Authenticating Agent, paying agent, transfer agent or Debenture registrar.

SECTION 6.5. MONEYS TO BE HELD IN TRUST.

Subject to the provisions of Section 12.4, all moneys received by the Trustee or any paying agent shall, until used or applied as herein provided, be held in trust for the purpose for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee and any paying agent shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. So long as no Event of Default shall have occurred and be continuing, all interest allowed on any such moneys shall be paid from time to time upon the written order of the Company, signed by the Chairman of the Board of Directors, the Chief Executive Officer, the President, a Managing Director, a Vice President, the Treasurer or an Assistant Treasurer of the Company.

SECTION 6.6. COMPENSATION AND EXPENSES OF TRUSTEE.

The Company covenants and agrees to pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all Persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or willful misconduct. For purposes of clarification, this Section 6.6 does not

contemplate the payment by the Company of acceptance or annual administration fees owing to the Trustee pursuant to the services to be provided by the Trustee under this Indenture or the fees and expenses of the Trustee's counsel in connection with the closing of the transactions contemplated by this Indenture. The Company also covenants to indemnify each of the Trustee or any predecessor Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any and all loss, damage, claim, liability or expense including taxes (other than taxes based on the income of the Trustee) incurred without negligence or willful misconduct on the part of the Trustee and arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim of liability. The obligations of the Company under this Section 6.6 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for

expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Debentures upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the holders of particular Debentures.

Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.1(d), (e) or (f), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law.

The provisions of this Section shall survive the resignation or removal of the Trustee and the defeasance or other termination of this Indenture.

SECTION 6.7. OFFICERS' CERTIFICATE AS EVIDENCE.

Except as otherwise provided in Sections 6.1 and 6.2, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or willful misconduct on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee, and such certificate, in the absence of negligence or willful misconduct on the part of the Trustee, shall be full warrant to the Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof.

SECTION 6.8. ELIGIBILITY OF TRUSTEE.

The Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia or a corporation or other Person authorized under such laws to exercise corporate trust powers, having (or whose obligations under this Indenture are guaranteed by an affiliate having) a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000.00) and subject to supervision or examination by federal, state,

territorial, or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.8 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent records of condition so published.

The Company may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Company, serve as Trustee.

If the Trustee has or shall acquire any "conflicting interest" within the meaning of {section} 310(b) of the Trust Indenture Act of 1939, the Trustee shall either eliminate such interest or resign, to the extent and in the manner described by this Indenture.

SECTION 6.9.R ESIGNATION OR REMOVAL OF TRUSTEE

(a)The Trustee, or any trustee or trustees hereafter appointed, may at any time resign by giving written notice of such resignation to the Company and by mailing notice thereof, at the Company's expense, to the holders of the Debentures at their addresses as they shall appear on the Debenture Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee or trustees by written instrument, in duplicate, executed by order of its Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor Trustee. If no successor Trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation to the affected Securityholders, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, or any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least six months may, subject to the provisions of Section 5.9, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor Trustee.

(b)In case at any time any of the following shall occur --

(1)the Trustee shall fail to comply with the provisions of
Section 6.8 after written request therefor by the Company or by any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least 6 months, or

(2)the Trustee shall cease to be eligible in accordance with the provisions of Section 6.8 and shall fail to resign after written request therefor by the Company or by any such Securityholder, or

(3)the Trustee shall become incapable of acting, or shall be adjudged as bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case, the Company may remove the Trustee and appoint a successor Trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor Trustee, or, subject to the provisions of
Section 5.9, any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least 6 months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint successor Trustee.

(c)Upon prior written notice to the Company and the Trustee, the holders of a majority in aggregate principal amount of the Debentures at the time outstanding may at any time remove the Trustee and nominate a successor Trustee, which shall be deemed appointed as successor Trustee unless within 10 Business Days after such nomination the Company objects thereto, in which case, or in the case of a failure by such holders to nominate a successor Trustee, the Trustee so removed or any Securityholder, upon the terms and conditions and otherwise as in subsection (a) of this Section 6.9 provided, may petition any court of competent jurisdiction for an appointment of a successor.

(d)Any resignation or removal of the Trustee and appointment of a successor Trustee pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor Trustee as provided in Section 6.10.

SECTION 6.10. ACCEPTANCE BY SUCCESSOR TRUSTEE.

Any successor Trustee appointed as provided in Section 6.9 shall execute, acknowledge and deliver to the Company and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations with respect to the Debentures of its predecessor hereunder, with like effect as if originally named as Trustee herein; but, nevertheless, on the written request of the Company or of the successor Trustee, the Trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the provisions of Section 6.6, execute and deliver an instrument transferring to such successor Trustee all the rights and powers of the Trustee so ceasing to act and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee thereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Trustee all such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a lien upon all property or funds held or collected by such Trustee to secure any amounts then due it pursuant to the provisions of Section 6.6.

necessary to provide for or facilitate the administration of the Trust hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be Trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee.

No successor Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Trustee shall be eligible under the provisions of Section 6.8.

In no event shall a retiring Trustee be liable for the acts or omissions of any successor Trustee hereunder.

SECTION 6.11. SUCCESSION BY MERGER, ETC.

Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided such corporation shall be otherwise eligible and qualified under this Article.

authenticated, any successor to the Trustee may authenticate such Debentures either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Debentures or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or authenticate Debentures in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.

SECTION 6.12. AUTHENTICATING AGENTS.

There may be one or more Authenticating Agents appointed by the Trustee upon the request of the Company with power to act on its behalf and subject to its direction in the authentication and delivery of Debentures issued upon exchange or registration of transfer thereof as fully to all intents and purposes as though any such Authenticating Agent had been expressly authorized to authenticate and deliver Debentures; provided, however, that the Trustee

shall have no liability to the Company for any acts or omissions of the Authenticating Agent with respect to the authentication and delivery of Debentures. Any such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States or of any state or territory thereof or of the District of Columbia authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of at least $50,000,000.00 and being subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually pursuant to law or the requirements of such authority, then for the purposes of this Section 6.12 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect herein specified in this Section.

Any corporation into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, if such successor corporation is otherwise eligible under this Section 6.12 without the execution or filing of any paper or any further act on the part of the parties hereto or such Authenticating Agent.

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ARTICLE VII.

CONCERNING THE SECURITYHOLDERS

SECTION 7.1. ACTION BY SECURITYHOLDERS.

Whenever in this Indenture it is provided that the holders of a specified percentage in aggregate principal amount of the Debentures may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action) the fact that at the time

of taking any such action the holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by such Securityholders in person or by agent or proxy appointed in writing, or (b) by the record of such holders of Debentures voting in favor thereof at any meeting of such Securityholders duly called and held in accordance with the provisions of Article VIII, or (c) by a combination of such instrument or instruments and any such record of such a meeting of such Securityholders or (d) by any other method the Trustee deems satisfactory.

SECTION 7.2. PROOF OF EXECUTION BY SECURITYHOLDERS.

Subject to the provisions of Section 6.1, 6.2 and 8.5, proof of the execution of any instrument by a Securityholder or his agent or proxy shall be sufficient if made in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The ownership of Debentures shall be proved by the Debenture Register or by a certificate of the Debenture registrar. The Trustee may require such additional proof of any matter referred to in this Section as it shall deem necessary.

The record of any Securityholders' meeting shall be proved in the manner provided in Section 8.6.

SECTION 7.3. WHO ARE DEEMED ABSOLUTE OWNERS.

Prior to due presentment for registration of transfer of any Debenture, the Company, the Trustee, any Authenticating Agent, any paying agent, any transfer agent and any Debenture registrar may deem the Person in whose name such Debenture shall be registered upon the Debenture Register to be, and may treat him as, the absolute owner of such Debenture (whether or not such Debenture shall be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if any, and interest on such Debenture and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any paying agent nor any transfer agent nor any Debenture registrar shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or

upon his order shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Debenture.

SECTION 7.4. DEBENTURES OWNED BY COMPANY DEEMED NOT OUTSTANDING.

In determining whether the holders of the requisite aggregate principal amount of Debentures have concurred in any direction, consent or waiver under this Indenture, Debentures which are owned by the Company or any other obligor on the Debentures or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on the Debentures shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided, however, that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Debentures which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Debentures so owned which have been pledged in good faith may be regarded as outstanding for the purposes of this Section 7.4 if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Debentures and that the pledgee is not the Company or any such other obligor or Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In the case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee.

SECTION 7.5. REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND.

At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.1, of the taking of any action by the holders of the percentage in aggregate principal amount of the Debentures specified in this Indenture in connection with such action, any holder (in cases where no record date has been set pursuant to Section 7.1) or any holder as of an applicable record date (in cases where a record date has been set pursuant to Section 7.1) of a Debenture (or any Debenture issued in whole or in part in exchange or substitution therefor) the serial number of which is shown by the evidence to be included in the Debentures the holders of which have consented to such action may, by filing written notice with the Trustee at the Principal Office of the Trustee and upon proof of holding as provided in Section 7.2, revoke such action so far as concerns such Debenture (or so far as concerns the principal amount represented by any exchanged or substituted Debenture). Except as aforesaid any such action taken by the holder of any Debenture shall be conclusive and binding upon such holder and upon all future holders and owners of such Debenture, and of any Debenture issued in exchange or substitution therefor or on registration of transfer thereof, irrespective of whether or not any notation in regard thereto is made upon such Debenture or any Debenture issued in exchange or substitution therefor.

ARTICLE VIII.

SECURITYHOLDERS' MEETINGS

SECTION 8.1. PURPOSES OF MEETINGS.

A meeting of Securityholders may be called at any time and from time to time pursuant to the provisions of this Article VIII for any of the following purposes:

(a)to give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to consent to the waiving of any default hereunder and its consequences, or to take any other action authorized to be taken by Securityholders pursuant to any of the provisions of Article V;

(b)to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article VI;

(c)to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 9.2; or

(d)to take any other action authorized to be taken by or on behalf of the holders of any specified aggregate principal amount of such Debentures under any other provision of this Indenture or under applicable law.

SECTION 8.2. CALL OF MEETINGS BY TRUSTEE.

The Trustee may at any time call a meeting of Securityholders to take any action specified in Section 8.1, to be held at such time and at such place as the Trustee shall determine. Notice of every meeting of the Securityholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed to holders of Debentures affected at their addresses as they shall appear on the Debentures Register and, if the Company is not a holder of Debentures, to the Company. Such notice shall be mailed not less than 20 nor more than 180 days prior to the date fixed for the meeting.

SECTION 8.3. CALL OF MEETINGS BY COMPANY OR SECURITYHOLDERS.

In case at any time the Company pursuant to a Board Resolution, or the holders of at least 10% in aggregate principal amount of the Debentures, as the case may be, then outstanding, shall have requested the Trustee to call a meeting of Securityholders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within 20 days after receipt of such request, then the Company or such Securityholders may determine the time and the place for such meeting and may call such meeting to take any action authorized in Section 8.1, by mailing notice thereof as provided in
Section 8.2.

SECTION 8.4. QUALIFICATIONS FOR VOTING.

To be entitled to vote at any meeting of Securityholders a Person shall
(a) be a holder of one or more Debentures with respect to which the meeting is being held or (b) a Person appointed by an instrument in writing as proxy by a holder of one or more such Debentures. The only Persons who shall be entitled to be present or to speak at any meeting of Securityholders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.

SECTION 8.5. REGULATIONS.

Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Securityholders, in regard to proof of the holding of Debentures and of the

appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit.

Subject to the provisions of Section 7.4, at any meeting each holder of Debentures with respect to which such meeting is being held or proxy therefor shall be entitled to one vote for each $1,000.00

principal amount of Debentures held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Debenture challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Debentures held by him or instruments in writing as aforesaid duly designating him as the Person to vote on behalf of other Securityholders. Any meeting of Securityholders duly called pursuant to the provisions of Section 8.2 or 8.3 may be adjourned from time to time by a majority of those present, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice.

SECTION 8.6. VOTING.

The vote upon any resolution submitted to any meeting of holders of Debentures with respect to which such meeting is being held shall be by written ballots on which shall be subscribed the signatures of such holders or of their representatives by proxy and the serial number or numbers of the Debentures held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Securityholders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more Persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 8.2. The record shall show the serial numbers of the Debentures voting in favor of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting.

Any record so signed and verified shall be conclusive evidence of the matters therein stated.

SECTION 8.7. QUORUM; ACTIONS.

The Persons entitled to vote a majority in principal amount of the

Debentures then outstanding shall constitute a quorum for a meeting of Securityholders; provided, however, that if any action is to be taken at such meeting with respect to a consent, waiver, request, demand, notice, authorization, direction or other action which may be given by the holders of not less than a specified percentage in principal amount of the Debentures then outstanding, the Persons holding or representing such specified percentage in principal amount of the Debentures then outstanding will constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Securityholders, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 8.2, except that such notice need be given only once not less than 5 days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Debentures then outstanding which shall constitute a quorum.

Section 9.2, any resolution with respect to any consent, waiver, request, demand, notice, authorization, direction or other action which this Indenture expressly provides may be given by the holders of not less than a specified percentage in principal amount of the Debentures then outstanding may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid only by the affirmative vote of the holders of a not less than such specified percentage in principal amount of the Debentures then outstanding.

ARTICLE IX.

SUPPLEMENTAL INDENTURES

SECTION 9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF SECURITYHOLDERS.

The Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto, without the consent of the Securityholders, for one or more of the following purposes:

(a)to evidence the succession of another Person to the Company, or successive successions, and the assumption by the successor Person of the covenants, agreements and obligations of the Company, pursuant to Article XI hereof;

(b)to add to the covenants of the Company such further covenants, restrictions or conditions for the protection of the holders of Debentures as the Board of Directors shall consider to be for the protection of the holders of such Debentures, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions or conditions a default or an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided, however, that in respect of any such additional covenant restriction or condition such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default;

(c)to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make such other provisions in regard to matters or questions arising under this Indenture; provided that any such action shall not materially adversely affect the interests of the holders of the Debentures;

(d)to add to, delete from, or revise the terms of Debentures, including, without limitation, any terms relating to the issuance, exchange, registration or transfer of Debentures, including to provide for transfer procedures and restrictions substantially similar to those applicable to the Capital Securities as required by Section 2.5 (for purposes of assuring that no registration of Debentures is required under the Securities Act); provided, however, that any such action shall not adversely affect the interests of the holders of the Debentures then outstanding (it being understood, for purposes of this proviso, that transfer restrictions on Debentures substantially similar to those that were applicable to Capital Securities shall not be deemed to materially adversely affect the holders of the Debentures);

(e)to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Debentures and to add to or change any of the provisions of this Indenture as

shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee;

(f)to make any change (other than as elsewhere provided in this paragraph) that does not adversely affect the rights of any Securityholder in any material respect; or

(g)to provide for the issuance of and establish the form and terms and conditions of the Debentures, to establish the form of any certifications required to be furnished pursuant to the terms of this Indenture or the Debentures, or to add to the rights of the holders of Debentures.

Any supplemental indenture authorized by the provisions of this
Section 9.1 may be executed by the Company and the Trustee without the consent of the holders of any of the Debentures at the time outstanding, notwithstanding any of the provisions of Section 9.2.

SECTION 9.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF SECURITYHOLDERS.

With the consent (evidenced as provided in Section 7.1) of the holders of not less than a majority in aggregate principal amount of the Debentures at the time outstanding affected by such supplemental indenture (voting as a class), the Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; provided, however, that no such supplemental indenture shall without the consent of the holders of each Debenture then outstanding and affected thereby (i) change the fixed maturity of any Debenture, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof or make the principal thereof or any interest or premium thereon payable in any coin or currency other than that provided in the Debentures, or impair or affect the right of any Securityholder to institute suit for payment thereof or impair the right of repayment, if any, at the option of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders of which are required to consent to any such supplemental indenture; provided further, however, that if the Debentures are held by a trust or a trustee of such trust, such supplemental indenture shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities shall have consented to such supplemental indenture; provided further, however, that if the consent of the Securityholder of each outstanding Debenture is required, such supplemental indenture shall not be effective until each holder of the Trust Securities shall have consented to such supplemental indenture.

notice, prepared by the Company, setting forth in general terms the substance of such supplemental indenture, to the Securityholders as their names and addresses appear upon the Debenture Register. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

It shall not be necessary for the consent of the Securityholders under this Section 9.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof.

SECTION 9.3. EFFECT OF SUPPLEMENTAL INDENTURES.

Upon the execution of any supplemental indenture pursuant to the provisions of this Article IX, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the holders of Debentures shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

SECTION 9.4. NOTATION ON DEBENTURES.

Debentures authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article IX may bear a notation as to any matter provided for in such supplemental indenture. If the Company or the Trustee shall so determine, new Debentures so modified as to conform, in the opinion of the Board of Directors of the Company, to any modification of this Indenture contained in any such supplemental indenture may be prepared and executed by the Company, authenticated by the Trustee or the Authenticating Agent and delivered in exchange for the Debentures then outstanding.

SECTION 9.5. EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL INDENTURE TO BE FURNISHED TO TRUSTEE.

The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall, in addition to the documents required by Section 14.6, receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant hereto complies with the requirements of this Article IX. The Trustee shall receive an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article IX is authorized or permitted by, and conforms to, the terms of this Article IX and that it is proper for the Trustee under the provisions of this Article IX to join in the execution thereof.

ARTICLE X.

REDEMPTION OF SECURITIES

SECTION 10.1. OPTIONAL REDEMPTION.

The Company shall have the right (subject to the receipt by the Company of prior approval (i) if the Company is a bank holding company, from the Federal Reserve, if then required under applicable capital guidelines or policies of the Federal Reserve or (ii) if the Company is a savings and loan holding company, from the OTS, if then required under applicable capital guidelines or policies of the OTS) to redeem the Debentures, in whole or in part, but in all cases in a principal amount with integral multiples of $1,000.00, on any Interest Payment Date on or after the Interest Payment Date in December 2010 (the "Redemption Date"), at the Redemption Price.

SECTION 10.2. SPECIAL EVENT REDEMPTION.

If a Special Event shall occur and be continuing, the Company shall have the right (subject to the receipt by the Company of prior approval (i) if the Company is a bank holding company, from the Federal Reserve, if then required

under applicable capital guidelines or policies of the Federal Reserve or
(ii) if the Company is a savings and loan holding company, from the OTS, if then required under applicable capital guidelines or policies of the OTS) to redeem the Debentures in whole, but not in part, at any Interest Payment Date, within 120 days following the occurrence of such Special Event (the "Special Redemption Date") at the Special Redemption Price. If the Special Event redemption occurs prior to the Interest Payment Date in December 2010, the Company shall appoint a Quotation Agent, which shall be a designee of the Institutional Trustee, for the purpose of performing the services contemplated in, or by reference in, the definition of Special Redemption Price. Any error in the calculation of the Special Redemption Price by the Quotation Agent or the Trustee may be corrected at any time by notice delivered to the Company and the holders of the Debentures. Subject to the corrective rights set forth above, all certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions relating to the payment and calculation of the Special Redemption Price on the Debentures by the Trustee or the Quotation Agent, as the case may be, shall (in the absence of willful default, bad faith or manifest error) be final, conclusive and binding on the holders of the Debentures and the Company, and no liability shall attach (except as provided above) to the Trustee or the Quotation Agent in connection with the exercise or non-exercise by any of them of their respective powers, duties and discretion.

SECTION 10.3. NOTICE OF REDEMPTION; SELECTION OF DEBENTURES.

In case the Company shall desire to exercise the right to redeem all, or, as the case may be, any part of the Debentures, it shall cause to be mailed a notice of such redemption at least 30 and not more than 60 days prior to the Redemption Date or the Special Redemption Date to the holders of Debentures so to be redeemed as a whole or in part at their last addresses as the same appear on the Debenture Register. Such mailing shall be by first class mail. The notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the holder of any Debenture designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Debenture.

Each such notice of redemption shall specify the CUSIP number, if any, of the Debentures to be redeemed, the Redemption Date or the Special Redemption Date, as applicable, the Redemption Price or the Special Redemption Price, as applicable, at which Debentures are to be redeemed, the place or places of payment, that payment will be made upon presentation and surrender of such Debentures, that interest accrued to the date fixed for redemption will be paid as specified in said notice, and that on and after said date interest thereon or on the portions thereof to be redeemed will cease to accrue. If less than all the Debentures are to be redeemed the notice of redemption shall specify the numbers of the Debentures to be redeemed. In case the Debentures are to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Debenture, a new Debenture or Debentures in principal amount equal to the unredeemed portion thereof will be issued.

Redemption Date or the Special Redemption Date, as applicable, all the Debentures so called for redemption at the appropriate Redemption Price or Special Redemption Price.

If all, or less than all, the Debentures are to be redeemed, the Company will give the Trustee notice not less than 45 nor more than 60 days, respectively, prior to the Redemption Date or Special Redemption Date, as applicable, as to the aggregate principal amount of Debentures to be redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Debentures or portions thereof (in integral multiples of $1,000.00) to be redeemed.

SECTION 10.4. PAYMENT OF DEBENTURES CALLED FOR REDEMPTION.

If notice of redemption has been given as provided in Section 10.3, the Debentures or portions of Debentures with respect to which such notice has been given shall become due and payable on the Redemption Date or Special Redemption Date, as applicable, and at the place or places stated in such notice at the applicable Redemption Price or Special Redemption Price and on and after said date (unless the Company shall default in the payment of such Debentures at the Redemption Price or Special Redemption Price, as applicable) interest on the Debentures or portions of Debentures so called for redemption shall cease to accrue. On presentation and surrender of such Debentures at a place of payment specified in said notice, such Debentures or the specified portions thereof shall be paid and redeemed by the Company at the applicable Redemption Price or Special Redemption Price.

ARTICLE XI.

CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

SECTION 11.1. COMPANY MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.

Nothing contained in this Indenture or in the Debentures shall prevent any consolidation or merger of the Company with or into any other Person (whether or not affiliated with the Company) or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties, or shall prevent any sale, conveyance, transfer or other disposition of the property of the Company or its successor or successors as an entirety, or substantially as an entirety, to any other Person (whether or not affiliated with the Company, or its successor or successors) authorized to acquire and operate the same; provided, however, that the Company hereby covenants and agrees that, upon any such consolidation, merger (where the Company is not the surviving corporation), sale, conveyance, transfer or other disposition, the due and punctual payment of the principal of (and premium, if any) and interest on all of the Debentures in accordance with their terms, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be kept or performed by the Company, shall be expressly assumed by supplemental indenture satisfactory in form to the Trustee executed and delivered to the Trustee by the entity formed by such consolidation, or into which the Company shall have been merged, or by the entity which shall have acquired such property.

SECTION 11.2. SUCCESSOR ENTITY TO BE SUBSTITUTED.

In case of any such consolidation, merger, sale, conveyance, transfer or other disposition and upon the assumption by the successor entity, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of and premium, if any, and interest on all of the Debentures and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Company, such successor entity shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the Company, and thereupon the predecessor entity shall be relieved of

any further liability or obligation hereunder or upon the Debentures. Such successor entity thereupon may cause to be signed, and may issue in its own name, any or all of the Debentures issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee or the Authenticating Agent; and, upon the order of such successor entity instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee or the Authenticating Agent shall authenticate and deliver any Debentures which previously shall have been signed and delivered by the officers of the Company, to the Trustee or the Authenticating Agent for authentication, and any Debentures which such successor entity thereafter shall cause to be signed and delivered to the Trustee or the Authenticating Agent for that purpose. All the Debentures so issued shall in all respects have the same legal rank and benefit under this Indenture as the Debentures theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Debentures had been issued at the date of the execution hereof.

SECTION 11.3. OPINION OF COUNSEL TO BE GIVEN TO TRUSTEE.

The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall receive, in addition to the Opinion of Counsel required by Section 9.5, an Opinion of Counsel as conclusive evidence that any consolidation, merger, sale, conveyance, transfer or other disposition, and any assumption, permitted or required by the terms of this Article XI complies with the provisions of this Article XI.

ARTICLE XII.

SATISFACTION AND DISCHARGE OF INDENTURE

SECTION 12.1. DISCHARGE OF INDENTURE.

When

called for redemption within 1 year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Company shall deposit with the Trustee, in trust, funds, which shall be immediately due and payable, sufficient to pay at maturity or upon redemption all of the Debentures (other than any Debentures which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.6) not theretofore canceled or delivered to the Trustee for cancellation, including principal and premium, if any, and interest due or to become due to such date of maturity or redemption date, as the case may be, but excluding, however, the amount of any moneys for the payment of principal of, and premium, if any, or interest on the Debentures (1) theretofore repaid to the Company in accordance with the provisions of Section 12.4, or (2) paid to any state or to the District of Columbia pursuant to its unclaimed property or similar laws,

and if in the case of either clause (a) or clause (b) the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect except for the provisions of Sections 2.5, 2.6, 2.8, 3.1, 3.2, 3.4, 6.6, 6.8, 6.9 and 12.4 hereof shall survive until such Debentures shall mature and be paid. Thereafter, Sections 6.6 and 12.4 shall survive, and the Trustee, on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel, each stating

that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with, and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture. The Company agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee in connection with this Indenture or the Debentures.

SECTION 12.2. DEPOSITED MONEYS TO BE HELD IN TRUST BY TRUSTEE.

Subject to the provisions of Section 12.4, all moneys deposited with the Trustee pursuant to Section 12.1 shall be held in trust in a non-interest bearing account and applied by it to the payment, either directly or through any paying agent (including the Company if acting as its own paying agent), to the holders of the particular Debentures for the payment of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal, and premium, if any, and interest.

SECTION 12.3. PAYING AGENT TO REPAY MONEYS HELD.

Upon the satisfaction and discharge of this Indenture all moneys then held by any paying agent of the Debentures (other than the Trustee) shall, upon demand of the Company, be repaid to it or paid to the Trustee, and thereupon such paying agent shall be released from all further liability with respect to such moneys.

SECTION 12.4. RETURN OF UNCLAIMED MONEYS.

Any moneys deposited with or paid to the Trustee or any paying agent for payment of the principal of, and premium, if any, or interest on Debentures and not applied but remaining unclaimed by the holders of Debentures for 2 years after the date upon which the principal of, and premium, if any, or interest on

such Debentures, as the case may be, shall have become due and payable, shall, subject to applicable escheatment laws, be repaid to the Company by the Trustee or such paying agent on written demand; and the holder of any of the Debentures shall thereafter look only to the Company for any payment which such holder may be entitled to collect, and all liability of the Trustee or such paying agent with respect to such moneys shall thereupon cease.

ARTICLE XIII.

IMMUNITY OF INCORPORATORS, STOCKHOLDERS,

OFFICERS AND DIRECTORS

SECTION 13.1. INDENTURE AND DEBENTURES SOLELY CORPORATE OBLIGATIONS.

No recourse for the payment of the principal of or premium, if any, or interest on any Debenture, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture or in any supplemental indenture, or in any such Debenture, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, officer or director, as such, past, present or future, of the Company or of any successor Person of the Company, either directly or through the Company or any successor Person of the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Debentures.

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ARTICLE XIV.

MISCELLANEOUS PROVISIONS

SECTION 14.1. SUCCESSORS.

All the covenants, stipulations, promises and agreements of the Company in this Indenture shall bind its successors and assigns whether so expressed or not.

SECTION 14.2. OFFICIAL ACTS BY SUCCESSOR ENTITY.

Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee, officer or other authorized Person of any entity that shall at the time be the lawful successor of the Company.

SECTION 14.3. SURRENDER OF COMPANY POWERS.

The Company by instrument in writing executed by authority of at least 2/3 (two-thirds) of its Board of Directors and delivered to the Trustee may surrender any of the powers reserved to the Company and thereupon such power so surrendered shall terminate both as to the Company, and as to any permitted successor.

SECTION 14.4. ADDRESSES FOR NOTICES, ETC.

Any notice, consent, direction, request, authorization, waiver or demand which by any provision of this Indenture is required or permitted to be given, made, furnished or served by the Trustee or by the Securityholders on or to the Company may be given or served in writing by being deposited postage prepaid by registered or certified mail in a post office letter box addressed (until another address is filed by the Company, with the Trustee for the purpose) to the Company, 132 West State Street, Medford, Wisconsin 54451, Attention:
Rhonda R. Kelley. Any notice, consent, direction, request, authorization, waiver or demand by any Securityholder or the Company to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the office of the Trustee, addressed to the Trustee, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-1600, Attention: Corporate Trust Administration. Any notice, consent, direction, request, authorization, waiver or demand on or to any Securityholder shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the address set forth in the Debenture Register.

SECTION 14.5. GOVERNING LAW.

This Indenture and each Debenture shall be deemed to be a contract made under the law of the State of New York, and for all purposes shall be governed by and construed in accordance with the law of said State, without regard to conflict of laws principles thereof.

SECTION 14.6. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.

Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that in the opinion of the signers all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

SECTION 14.7. TABLE OF CONTENTS, HEADINGS, ETC.

The table of contents and the titles and headings of the articles and sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

SECTION 14.8. EXECUTION IN COUNTERPARTS.

This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.

SECTION 14.9. SEPARABILITY.

In case any one or more of the provisions contained in this Indenture or in the Debentures shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Indenture or of such Debentures, but this Indenture and such Debentures shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein.

SECTION 14.10. ASSIGNMENT.

The Company will have the right at all times to assign any of its rights or obligations under this Indenture to a direct or indirect wholly owned Subsidiary of the Company, provided that, in the event of any such assignment, the Company will remain liable for all such obligations. Subject to the foregoing, this Indenture is binding upon and inures to the benefit of the parties hereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties hereto.

SECTION 14.11. ACKNOWLEDGMENT OF RIGHTS.

The Company agrees that, with respect to any Debentures held by the Trust or the Institutional Trustee of the Trust, if the Institutional Trustee of the Trust fails to enforce its rights under this Indenture as the holder of Debentures held as the assets of such Trust after the holders of a majority in Liquidation Amount of the Capital Securities of such Trust have so directed such Institutional Trustee, a holder of record of such Capital Securities may, to the fullest extent permitted by law, institute legal proceedings directly against the Company to enforce such Institutional Trustee's rights under this Indenture without first instituting any legal proceedings against such trustee or any other Person. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest (or premium, if any) or principal on the Debentures on the date such interest (or premium, if any) or principal is otherwise payable (or in the case of redemption, on the redemption date), the Company agrees that a holder of record of Capital Securities of the Trust may directly institute a proceeding against the Company for enforcement of payment to such holder directly of the principal of (or premium, if any) or interest on the Debentures having an aggregate principal amount

equal to the aggregate Liquidation Amount of the Capital Securities of such holder on or after the respective due date specified in the Debentures.

ARTICLE XV.

SUBORDINATION OF DEBENTURES

SECTION 15.1. AGREEMENT TO SUBORDINATE.

The Company covenants and agrees, and each holder of Debentures by such Securityholder's acceptance thereof likewise covenants and agrees, that all Debentures shall be issued subject to the provisions of this Article XV; and each holder of a Debenture, whether upon original issue or upon transfer or

assignment thereof, accepts and agrees to be bound by such provisions.

No provision of this Article XV shall prevent the occurrence of any default or Event of Default hereunder.

SECTION 15.2. DEFAULT ON SENIOR INDEBTEDNESS.

In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness of the Company following any grace period, or in the event that the maturity of any Senior Indebtedness of the Company has been accelerated because of a default and such acceleration has not been rescinded or canceled and such Senior Indebtedness has not been paid in full, then, in either case, no payment shall be made by the Company with respect to the principal (including redemption) of, or premium, if any, or interest on the Debentures.

SECTION 15.3. LIQUIDATION, DISSOLUTION, BANKRUPTCY.

Upon any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness of the Company shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company, on account of the principal (and premium, if any) or interest on the Debentures. Upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Securityholders or the Trustee would be entitled to receive from

the Company, except for the provisions of this Article XV, shall be paid by the Company, or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Securityholders or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis of

the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Securityholders or to the Trustee.

In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee before all Senior Indebtedness is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness, remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness.

For purposes of this Article XV, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article XV with respect to the Debentures to the payment of all Senior Indebtedness, that may at the time be outstanding, provided that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article XI of this Indenture shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this
Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article XI of this Indenture. Nothing in Section 15.2 or in this Section shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6 of this Indenture.

SECTION 15.4. SUBROGATION.

Subject to the payment in full of all Senior Indebtedness, the Securityholders shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company, applicable to such Senior Indebtedness until the principal of (and premium, if any) and interest on the Debentures shall be paid in full. For the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the Securityholders or the Trustee would be entitled except for the

provisions of this Article XV, and no payment over pursuant to the provisions of this Article XV to or for the benefit of the holders of such Senior Indebtedness by Securityholders or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness of the Company, and the holders of the Debentures be deemed to be a payment or distribution by the Company to or on account of such Senior Indebtedness. It

is understood that the provisions of this Article XV are and are intended solely for the purposes of defining the relative rights of the holders of the Securities, on the one hand, and the holders of such Senior Indebtedness, on the other hand.

Nothing contained in this Article XV or elsewhere in this Indenture or in the Debentures is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness, and the holders of the Debentures, the obligation of the Company, which is absolute and unconditional, to pay to the holders of the Debentures the principal of (and premium, if any) and interest on the Debentures as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Debentures and creditors of the Company, other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XV of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company, received upon the exercise of any such remedy.

Upon any payment or distribution of assets of the Company referred to in this Article XV, the Trustee, subject to the provisions of Article VI of this Indenture, and the Securityholders shall be entitled to conclusively rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Securityholders, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XV.

SECTION 15.5. TRUSTEE TO EFFECTUATE SUBORDINATION.

Each Securityholder by such Securityholder's acceptance thereof authorizes and directs the Trustee on such Securityholder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article XV and appoints the Trustee such Securityholder's attorney-in-fact for any and all such purposes.

SECTION 15.6. NOTICE BY THE COMPANY.

The Company shall give prompt written notice to a Responsible Officer of the Trustee at the Principal Office of the Trustee of any fact known to the Company that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XV. Notwithstanding the provisions of this Article XV or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of

monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XV, unless and until a Responsible Officer of the Trustee at the Principal Office of the Trustee shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least 2 Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Debenture), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within 2 Business Days prior to such date.

SECTION 15.7. RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS.

The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XV in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder.

Nothing in this Article XV shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6.

SECTION 15.8. SUBORDINATION MAY NOT BE IMPAIRED.

No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company, or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company, with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with.

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Signatures appear on the following page

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written.

MID-WISCONSIN FINANCIAL SERVICES, INC.

By GENE C. KNOLL
Name: Gene C. Knoll
Title: President/CEO

WILMINGTON TRUST COMPANY, as Trustee

By CHRISTOPHER J. MONIGLE
Name: Christopher J. Monigle
Title: Assistant Vice President

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EXHIBIT A

FORM OF FIXED/FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE

[FORM OF FACE OF SECURITY]

THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION.

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THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING

RESTRICTIONS.

Fixed/Floating Rate Junior Subordinated Deferrable Interest Debenture

Mid-Wisconsin Financial Services, Inc.

October 14, 2005

Mid-Wisconsin Financial Services, Inc., a Wisconsin corporation (the "Company" which term includes any successor Person under the Indenture hereinafter referred to), for value received promises to pay to Wilmington Trust Company, not in its individual capacity but solely as Institutional Trustee for Mid-Wisconsin Statutory Trust I (the "Holder") or registered assigns, the principal sum of ten million three hundred ten thousand dollars ($10,310,000.00) on December 15, 2035, and to pay interest on said principal sum from October 14, 2005, or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 15, June 15, September 15 and December 15 of each year or if such day is not a Business Day, then the next succeeding Business Day (each such date, an "Interest Payment Date") (it being understood that interest accrues for any such non-Business Day during the applicable Distribution Period, beginning on or after December 15, 2010), commencing on the Interest Payment Date in December 2005, at an annual rate equal to 5.958% beginning on (and including) the date of original issuance and ending on (but excluding) the Interest Payment Date in December 2010 and at an annual rate for each successive period beginning on (and including) the Interest Payment Date in December 2010, and each succeeding Interest Payment Date, and ending on (but excluding) the next succeeding Interest Payment Date (each a "Distribution Period"), equal to 3-Month LIBOR, determined as described below, plus 1.43% (the "Coupon Rate"), applied to the principal amount hereof, until the principal hereof is paid or duly provided for or made available for payment, and on any overdue principal and (without

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duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest (including Additional Interest) at the Interest Rate in effect for each applicable period, compounded quarterly, from the dates such amounts are due until they are paid or made available for payment. The amount of interest payable (i) for any Distribution Period commencing on or after the date of original issuance but before the Interest Payment Date in December 2010 will be computed on the basis of a 360-day year of twelve 30-day months, and (ii) for the Distribution Period commencing on the Interest Payment Date in December 2010 and each succeeding Distribution Period will be computed on the basis of the actual number of days in the Distribution Period concerned divided by 360. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment, which shall be fifteen Business Days prior to the day on which the relevant

Interest Payment Date occurs. Any such interest installment not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such regular record date and may be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on a special record date.

"3-Month LIBOR" as used herein, means the London interbank offered interest rate for three-month U.S. dollar deposits determined by the Trustee in the following order of priority: (i) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date ("Telerate Page 3750" means the display designated as "Page 3750" on the Moneyline Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits); (ii) if such rate cannot be identified on the related Determination Date, the Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks' offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; (iii) if fewer than two such quotations are provided as requested in clause (ii) above, the Trustee will request four major New York City banks to provide such banks' offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and (iv) if fewer than two such quotations are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period. If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date. As used herein, "Determination Date" means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the commencement of the relevant Distribution Period.

The Interest Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.

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dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).

States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made by check mailed to the registered holder at such address as shall appear in the Debenture Register if a request for a wire transfer by such holder has not been received by the Company or by wire transfer to an account appropriately designated by the holder hereof. Notwithstanding the foregoing, so long as the holder of this Debenture is the Institutional Trustee, the payment of the principal of and interest on this Debenture will be made in immediately available funds at such place and to such account as may be designated by the Trustee.

So long as no Acceleration Event of Default has occurred and is continuing, the Company shall have the right, from time to time, and without causing an Event of Default, to defer payments of interest on the Debentures by extending the interest payment period on the Debentures at any time and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment period, an "Extension Period"), during which Extension Period no interest (including Additional Interest) shall be due and payable (except any Additional Sums that may be due and payable). No Extension Period may end on a date other than an Interest Payment Date. During an Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Interest Rate in effect for such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as "Additional Interest"). At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date; provided further, however, that during any such Extension Period, the Company shall not and shall not permit any Affiliate to engage in any of the activities or transactions described on the reverse side hereof and in the Indenture. Prior to the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. The Company must give the Trustee notice of its election to begin or extend an Extension Period by the close of business at least 15 Business Days prior to the Interest Payment Date with respect to which interest on the Debentures would have been payable except for the election to begin or extend such Extension Period.

or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions.

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The provisions of this Debenture are continued on the reverse side hereof and such provisions shall for all purposes have the same effect as though fully set forth at this place.

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IN WITNESS WHEREOF, the Company has duly executed this certificate.

MID-WISCONSIN FINANCIAL SERVICES, INC.

By
Name:
Title:

CERTIFICATE OF AUTHENTICATION

This is one of the Debentures referred to in the within-mentioned Indenture.

WILMINGTON TRUST COMPANY, as Trustee

By:
Authorized Officer

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[FORM OF REVERSE OF DEBENTURE]

This Debenture is one of the fixed/floating rate junior subordinated deferrable interest debentures of the Company, all issued or to be issued under and pursuant to the Indenture dated as of October 14, 2005 (the "Indenture"), duly executed and delivered between the Company and the Trustee, to which Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Debentures. The Debentures are limited in aggregate principal amount as specified in the Indenture.

Upon the occurrence and continuation of a Special Event prior to the Interest Payment Date in December 2010, the Company shall have the right to redeem the Debentures in whole, but not in part, at any Interest Payment Date, within 120 days following the occurrence of such Special Event, at the Special Redemption Price.

In addition, the Company shall have the right to redeem the Debentures, in whole or in part, but in all cases in a principal amount with integral multiples of $1,000.00, on any Interest Payment Date on or after the Interest Payment Date in December 2010, at the Redemption Price.

Prior to 10:00 a.m. New York City time on the Redemption Date or Special Redemption Date, as applicable, the Company will deposit with the Trustee or with one or more paying agents an amount of money sufficient to redeem on the Redemption Date or the Special Redemption Date, as applicable, all the Debentures so called for redemption at the appropriate Redemption Price or Special Redemption Price.

If all, or less than all, the Debentures are to be redeemed, the Company will give the Trustee notice not less than 45 nor more than 60 days, respectively, prior to the Redemption Date or Special Redemption Date, as applicable, as to the aggregate principal amount of Debentures to be redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Debentures or portions thereof (in integral multiples of $1,000.00) to be redeemed.

Notwithstanding the foregoing, any redemption of Debentures by the Company shall be subject to the receipt of any and all required regulatory approvals.

In case an Acceleration Event of Default shall have occurred and be continuing, upon demand of the Trustee, the principal of all of the Debentures shall become due and payable in the manner, with the effect and subject to the conditions provided in the Indenture.

The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the Debentures at the time outstanding, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; provided, however, that no such supplemental indenture shall without the consent of the holders of each Debenture then outstanding and affected thereby (i) change the fixed maturity of any Debenture, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof or make the principal thereof or any interest or premium thereon payable in any coin or currency other than that provided in the Debentures, or impair or affect the right of any Securityholder to institute suit for payment thereof or impair the right of repayment, if any, at the option of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders of which are required to consent to any such supplemental indenture.

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The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of the Debentures at the time outstanding on behalf of the holders of all of the Debentures to waive (or modify any previously granted waiver of) any past default or Event of Default, and its consequences, except a default (a) in the payment of principal of, premium, if any, or interest on any of the Debentures, (b) in respect of covenants or provisions hereof or of the Indenture which cannot be modified or amended without the consent of the holder of each Debenture affected, or (c) in respect of the covenants contained in Section 3.9 of the Indenture; provided, however, that if the Debentures are held by the Trust or a trustee of such

trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities of the Trust shall have consented to such waiver or modification to such waiver, provided, further, that if the consent of the holder of each outstanding Debenture is required, such waiver shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such waiver. Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of the Indenture and the Company, the Trustee and the holders of the Debentures shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by the Indenture, said default or Event of Default shall for all purposes of the Debentures and the Indenture be deemed to have been cured and to be not continuing.

No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest, including Additional Interest, on this Debenture at the time and place and at the rate and in the money herein prescribed.

The Company has agreed that if Debentures are initially issued to the Trust or a trustee of such Trust in connection with the issuance of Trust Securities by the Trust (regardless of whether Debentures continue to be held by such Trust) and (i) there shall have occurred and be continuing an Event of Default, (ii) the Company shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee, or (iii) the Company shall have given notice of its election to defer payments of interest on the Debentures by extending the interest payment period as provided herein and such Extension Period, or any extension thereof, shall be continuing, then the Company shall not, and shall not allow any Affiliate of the Company to,
(x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's capital stock or its Affiliates' capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (1) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, if any, (2) as a result of any exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (3) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (4) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or

repurchase of rights pursuant thereto, (5) any dividend in the form of stock, warrants, options or other rights where the

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dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (6) payments under the Capital Securities Guarantee).

The Debentures are issuable only in registered, certificated form without coupons and in minimum denominations of $100,000.00 and any multiple of $1,000.00 in excess thereof. As provided in the Indenture and subject to the transfer restrictions and limitations as may be contained herein and therein from time to time, this Debenture is transferable by the holder hereof on the Debenture Register of the Company. Upon due presentment for registration of transfer of any Debenture at the Principal Office of the Trustee or at any office or agency of the Company maintained for such purpose as provided in
Section 3.2 of the Indenture, the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in the name of the transferee or transferees a new Debenture for a like aggregate principal amount. All Debentures presented for registration of transfer or for exchange or payment shall (if so required by the Company or the Trustee or the Authenticating Agent) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to, the Company and the Trustee or the Authenticating Agent duly executed by the holder or his attorney duly authorized in writing. No service charge shall be made for any exchange or registration of transfer of Debentures, but the Company or the Trustee may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in connection therewith.

No recourse for the payment of the principal of or premium, if any, or interest on any Debenture, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in the Indenture or in any supplemental indenture, or in any such Debenture, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, officer or director, as such, past, present or future, of the Company or of any successor Person of the Company, either directly or through the Company or any successor Person of the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, it being expressly understood that all such liability

is hereby expressly waived and released as a condition of, and as a consideration for, the execution of the Indenture and the issue of the Debentures.

Capitalized terms used and not defined in this Debenture shall have the meanings assigned in the Indenture dated as of the date of original issuance of this Debenture between the Trustee and the Company.

THE INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF.

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EXHIBIT B

FORM OF CERTIFICATE TO TRUSTEE

Pursuant to Section 3.5 of the Indenture between Mid-Wisconsin Financial

Services, Inc., as the Company (the "Company"), and Wilmington Trust Company,

as Trustee, dated as of October 14, 2005 (the "Indenture"), the undersigned

hereby certifies as follows:

1. In my capacity as an officer of the Company, I would normally have

knowledge of any default by the Company during the last fiscal year in

the performance of any covenants of the Company contained in the

Indenture.

2. [To my knowledge, the Company is not in default in the performance of any

covenants contained in the Indenture.

OR, ALTERNATIVELY:

I am aware of the default(s) in the performance of covenants in the

Indentures, as specified below.]

Capitalized terms used herein, and not otherwise defined herein, have the

respective meanings ascribed thereto in the Indenture.

IN WITNESS WHEREOF, the undersigned has executed this Certificate.

Date:

Name:

Title:

B-1

Exhibit 4.5

GUARANTEE AGREEMENT

BY AND BETWEEN

MID-WISCONSIN FINANCIAL SERVICES, INC.

AND

WILMINGTON TRUST COMPANY

DATED AS OF OCTOBER 14, 2005

GUARANTEE AGREEMENT

This GUARANTEE AGREEMENT (this "Guarantee"), dated as of October 14, 2005, is executed and delivered by Mid-Wisconsin Financial Services, Inc., a Wisconsin corporation (the "Guarantor"), and Wilmington Trust Company, a Delaware banking corporation, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Capital Securities (as defined herein) of Mid-Wisconsin Statutory Trust I, a Delaware statutory trust (the "Issuer").

WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration"), dated as of the date hereof among Wilmington Trust Company, not in its individual capacity but solely as institutional trustee, the administrators of the Issuer named therein, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing on the date hereof those undivided beneficial interests, having an aggregate liquidation amount of $10,000,000.00 (the "Capital Securities"); and

WHEREAS, as incentive for the Holders to purchase the Capital Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Guarantee, to pay to the Holders of Capital Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein;

ARTICLE I

DEFINITIONS AND INTERPRETATION

SECTION 1.1. DEFINITIONS AND INTERPRETATION.

In this Guarantee, unless the context otherwise requires:

(a)capitalized terms used in this Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1;

(b)a term defined anywhere in this Guarantee has the same meaning throughout;

(c)all references to "the Guarantee" or "this Guarantee" are to this Guarantee as modified, supplemented or amended from time to time;

(d)all references in this Guarantee to "Articles" or "Sections" are to Articles or Sections of this Guarantee, unless otherwise specified;

(e)terms defined in the Declaration as at the date of execution of this Guarantee have the same meanings when used in this Guarantee, unless otherwise defined in this Guarantee or unless the context otherwise requires; and

(f)a reference to the singular includes the plural and vice versa.

"Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder.

"Beneficiaries" means any Person to whom the Issuer is or hereafter becomes indebted or liable.

"Capital Securities" has the meaning set forth in the recitals to this Guarantee.

"Common Securities" means the common securities issued by the Issuer to the Guarantor pursuant to the Declaration.

"Corporate Trust Office" means the office of the Guarantee Trustee at which the corporate trust business of the Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Guarantee is located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-1600, Attention: Corporate Trust Administration.

"Covered Person" means any Holder of Capital Securities.

"Debentures" means the debt securities of the Guarantor designated the Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures due 2035 held by the Institutional Trustee (as defined in the Declaration) of the Issuer.

"Declaration Event of Default" means an "Event of Default" as defined in the Declaration.

"Event of Default" has the meaning set forth in Section 2.4(a).

"Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Capital Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the Declaration) which are required to be paid on such Capital Securities to the extent the Issuer shall have funds available therefor,
(ii) the Redemption Price to the extent the Issuer has funds available therefor, with respect to any Capital Securities called for redemption by the Issuer, (iii) the Special Redemption Price to the extent the Issuer has funds available therefor, with respect to Capital Securities redeemed upon the occurrence of a Special Event, and (iv) upon a voluntary or involuntary liquidation, dissolution, winding-up or termination of the Issuer (other than in connection with the distribution of Debentures to the Holders of the Capital Securities in exchange therefor as provided in the Declaration), the lesser of
(a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Capital Securities to the date of payment, to the extent the Issuer shall have funds available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the "Liquidation Distribution").

"Guarantee Trustee" means Wilmington Trust Company, until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee and thereafter means each such Successor Guarantee Trustee.

"Guarantor" means Mid-Wisconsin Financial Services, Inc. and each of its successors and assigns.

"Indenture" means the Indenture dated as of the date hereof between the Guarantor and Wilmington Trust Company, not in its individual capacity but solely as trustee, and any indenture supplemental thereto pursuant to which the Debentures are to be issued to the institutional trustee of the Issuer.

"Issuer" has the meaning set forth in the opening paragraph to this Guarantee.

"Liquidation Distribution" has the meaning set forth in the definition of "Guarantee Payments" herein.

(a)a statement that the officer signing the Officer's Certificate has read the covenant or condition and the definitions relating thereto;

(b)a brief statement of the nature and scope of the examination or investigation undertaken by the officer in rendering the Officer's Certificate;

(c)a statement that the officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(d)a statement as to whether, in the opinion of the officer, such condition or covenant has been complied with.

"Redemption Price" has the meaning set forth in the Indenture.

"Special Event" has the meaning set forth in the Indenture.

"Special Redemption Price" has the meaning set forth in the Indenture.

"Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 3.1.

"Trust Securities" means the Common Securities and the Capital Securities.

ARTICLE II

POWERS, DUTIES AND RIGHTS OF

GUARANTEE TRUSTEE

SECTION 2.1. POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.

(a)This Guarantee shall be held by the Guarantee Trustee for the benefit of the Holders of the Capital Securities, and the Guarantee Trustee shall not transfer this Guarantee to any Person except a Holder of Capital Securities exercising his or her rights pursuant to Section 4.4(b) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall automatically vest in any Successor Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee.

(b)If an Event of Default actually known to a Responsible Officer of the Guarantee Trustee has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee for the benefit of the Holders of the Capital Securities.

(c)The Guarantee Trustee, before the occurrence of any Event of Default and after curing all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee, and no implied covenants shall be read into this Guarantee against the Guarantee Trustee. In case an Event of Default has occurred (that has not been waived pursuant to Section 2.4) and is actually known to a Responsible Officer of the Guarantee Trustee, the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

(d)No provision of this Guarantee shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred:

(A)the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee, and no implied covenants or obligations shall be read into this Guarantee against the Guarantee Trustee; and

to the Guarantee Trustee and conforming to the requirements of this Guarantee; but in the case of any such certificates or opinions

that by any provision hereof are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee;

(iii) the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the written direction of the Holders of not less than a Majority in liquidation amount of the Capital Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or relating to the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee; and

SECTION 2.2. CERTAIN RIGHTS OF GUARANTEE TRUSTEE.

(a)Subject to the provisions of Section 2.1:

(ii) Any direction or act of the Guarantor contemplated by this Guarantee shall be sufficiently evidenced by an Officer's Certificate.

(iv) The Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any re-recording, refiling or re-registration thereof).

(v) The Guarantee Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to

legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and

in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee from any court of competent jurisdiction.

(viii)The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.

(x) Whenever in the administration of this Guarantee the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee (i) may request instructions from the Holders of a Majority in liquidation amount of the Capital Securities,
(ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions.

(b)No provision of this Guarantee shall be deemed to impose any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal or in which the Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a duty.

SECTION 2.3. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.

The recitals contained in this Guarantee shall be taken as the statements of the Guarantor, and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representation as to the validity or sufficiency of this Guarantee.

SECTION 2.4. EVENTS OF DEFAULT; WAIVER.

(a)An Event of Default under this Guarantee will occur upon the failure of the Guarantor to perform any of its payment or other obligations hereunder.

(b)The Holders of a Majority in liquidation amount of the Capital Securities may, voting or consenting as a class, on behalf of the Holders of all of the Capital Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and shall be deemed to have been cured, for every purpose of this Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.

SECTION 2.5. EVENTS OF DEFAULT; NOTICE.

(a)The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Capital Securities and the Guarantor, notices of all Events of Default actually known to a Responsible Officer of the Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided, however, that the Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Capital Securities.

(b)The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice from the Guarantor or a Holder of the Capital Securities (except in the case of a payment default), or a Responsible Officer of the Guarantee Trustee charged with the administration of this Guarantee shall have obtained actual knowledge thereof.

ARTICLE III

GUARANTEE TRUSTEE

SECTION 3.1. GUARANTEE TRUSTEE; ELIGIBILITY.

(a)There shall at all times be a Guarantee Trustee which shall:

(i) not be an Affiliate of the Guarantor, and

(b)If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 3.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 3.2(c).

(c)If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee shall either eliminate such interest or resign to the extent and in the manner provided by, and subject to this Guarantee.

SECTION 3.2. APPOINTMENT, REMOVAL AND RESIGNATION OF GUARANTEE TRUSTEE.

(a)Subject to Section 3.2(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor except during an Event of Default.

(b)The Guarantee Trustee shall not be removed in accordance with Section 3.2(a) until a Successor Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor.

(c)The Guarantee Trustee appointed to office shall hold office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by an instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee.

(d)If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 3.2 within 60 days after

delivery of an instrument of removal or resignation, the Guarantee Trustee resigning or being removed may petition any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee.

(e)No Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Guarantee Trustee.

(f)Upon termination of this Guarantee or removal or resignation of the Guarantee Trustee pursuant to this Section 3.2, the Guarantor shall pay to the Guarantee Trustee all amounts owing to the Guarantee Trustee under Sections 7.2 and 7.3 accrued to the date of such termination, removal or resignation.

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ARTICLE IV

GUARANTEE

SECTION 4.1. GUARANTEE.

(a)The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense (except the defense of payment by the Issuer), right of set-off or counterclaim that the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders.

(b)The Guarantor hereby also agrees to assume any and all Obligations of the Issuer and in the event any such Obligation is not so assumed, subject to the terms and conditions hereof, the Guarantor hereby irrevocably and unconditionally guarantees to each Beneficiary the full payment, when and as due, of any and all Obligations to such Beneficiaries. This Guarantee is intended to be for the benefit of, and to be enforceable by, all such Beneficiaries, whether or not such Beneficiaries have received notice hereof.

SECTION 4.2. WAIVER OF NOTICE AND DEMAND.

The Guarantor hereby waives notice of acceptance of this Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands.

SECTION 4.3. OBLIGATIONS NOT AFFECTED.

The obligations, covenants, agreements and duties of the Guarantor under this Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following:

(a)the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement,

covenant, term or condition relating to the Capital Securities to be performed or observed by the Issuer;

(b)the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Special Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Capital Securities or the extension of time for the performance of any other obligation under, arising out of or in connection with, the Capital Securities (other than an extension of time for payment of Distributions, Redemption Price, Special Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures or any extension of the maturity date of the Debentures permitted by the Indenture);

(c)any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Capital Securities, or any action on the part of the Issuer granting indulgence or extension of any kind;

(d)the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer;

(e)any invalidity of, or defect or deficiency in, the Capital Securities;

(f)the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or

(g)any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 4.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances.

There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing.

SECTION 4.4. RIGHTS OF HOLDERS.

(a)The Holders of a Majority in liquidation amount of the Capital Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee; provided, however, that (subject to
Section 2.1) the Guarantee Trustee shall have the right to decline to follow any such direction if the Guarantee Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if the Guarantee Trustee in good faith by its board of directors or trustees, executive committees or a trust committee of directors or trustees and/or Responsible Officers shall determine that the action or proceedings so directed would involve the Guarantee Trustee in personal liability.

(b)Any Holder of Capital Securities may institute a legal proceeding directly against the Guarantor to enforce the Guarantee Trustee's rights under

this Guarantee, without first instituting a legal proceeding against the Issuer, the Guarantee Trustee or any other Person. The Guarantor waives any right or remedy to require that any such action be brought first against the Issuer, the Guarantee Trustee or any other Person before so proceeding directly against the Guarantor.

SECTION 4.5. GUARANTEE OF PAYMENT.

This Guarantee creates a guarantee of payment and not of collection.

SECTION 4.6. SUBROGATION.

The Guarantor shall be subrogated to all (if any) rights of the Holders of Capital Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if, after giving effect to any such payment, any amounts are due and unpaid under this Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders.

SECTION 4.7. INDEPENDENT OBLIGATIONS.

The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Capital Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 4.3 hereof.

SECTION 4.8. ENFORCEMENT BY A BENEFICIARY.

A Beneficiary may enforce the obligations of the Guarantor contained in
Section 4.1(b) directly against the Guarantor and the Guarantor waives any right or remedy to require that any action be brought against the Issuer or any other person or entity before proceeding against the Guarantor. The Guarantor shall be subrogated to all rights (if any) of any Beneficiary against the Issuer in respect of any amounts paid to the Beneficiaries by the Guarantor under this Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if at the time of any such payment, and after giving effect to such payment, any amounts are due and unpaid under this Guarantee.

ARTICLE V

LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 5.1. LIMITATION OF TRANSACTIONS.

So long as any Capital Securities remain outstanding, if (a) there shall

have occurred and be continuing an Event of Default or a Declaration Event of Default or (b) the Guarantor shall have selected an Extension Period as provided in the Declaration and such period, or any extension thereof, shall have commenced and be continuing, then the Guarantor shall not and shall not permit any Affiliate to (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Guarantor's or such Affiliate's capital stock (other than payments of dividends or distributions to the Guarantor) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Guarantor or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (I repurchases, redemptions or other acquisitions of shares of capital stock of the Guarantor in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Guarantor (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the occurrence of the Event of Default, Declaration Event of Default or Extension Period, as applicable, (ii) as a result of any exchange or conversion of any class or series of the Guarantor's capital stock (or any capital stock of a subsidiary of the Guarantor) for any class or series of the Guarantor's capital stock or of any class or series of the Guarantor's indebtedness for any class or series of the Guarantor's capital stock, (iii) the purchase of fractional interests in shares of the Guarantor's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (iv) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (v) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or
(vi) payments under this Guarantee).

SECTION 5.2. RANKING.

This Guarantee will constitute an unsecured obligation of the Guarantor and will rank subordinate and junior in right of payment to all present and future Senior Indebtedness (as defined in the Indenture) of the Guarantor. By their acceptance thereof, each Holder of Capital Securities agrees to the foregoing provisions of this Guarantee and the other terms set forth herein.

ARTICLE VI

TERMINATION

SECTION 6.1. TERMINATION.

This Guarantee shall terminate as to the Capital Securities (i) upon full payment of the Redemption Price or Special Redemption Price of all Capital Securities then outstanding,

(ii) upon the distribution of all of the Debentures to the Holders of all of the Capital Securities or (iii) upon full payment of the amounts payable in accordance with the Declaration upon dissolution of the Issuer. This Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Capital Securities must restore payment of any sums paid under the Capital Securities or under this Guarantee.

ARTICLE VII

INDEMNIFICATION

SECTION 7.1. EXCULPATION.

(a)No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions.

(b)An Indemnified Person shall be fully protected in relying in good faith upon the records of the Issuer or the Guarantor and upon such information, opinions, reports or statements presented to the Issuer or the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who, if selected by such Indemnified Person, has been selected with reasonable care by such Indemnified Person, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Capital Securities might properly be paid.

SECTION 7.2. INDEMNIFICATION.

connection with the acceptance or administration of the trust or trusts hereunder, including, but not limited to, the costs and expenses (including reasonable legal fees and expenses) of the Indemnified Person defending itself

against, or investigating, any claim or liability in connection with the exercise or performance of any of the Indemnified Person's powers or duties hereunder. The obligation to indemnify as set forth in this Section 7.2 shall survive the resignation or removal of the Guarantee Trustee and the termination of this Guarantee.

(b)Promptly after receipt by an Indemnified Person under this Section 7.2 of notice of the commencement of any action, such Indemnified Person will, if a claim in respect thereof is to be made against the Guarantor under this
Section 7.2, notify the Guarantor in writing of the commencement thereof; but the failure so to notify the Guarantor (i) will not relieve the Guarantor from liability under paragraph (a) above unless and to the extent that the Guarantor did not otherwise learn of such action and such failure results in the forfeiture by the Guarantor of substantial rights and defenses and (ii) will not, in any event, relieve the Guarantor from any obligations to any Indemnified Person other than the indemnification obligation provided in paragraph (a) above. The Guarantor shall be entitled to appoint counsel of the Guarantor's choice at the Guarantor's expense to represent the Indemnified Person in any action for which indemnification is sought (in which case the Guarantor shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the Indemnified Person or Persons except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the Indemnified Person. Notwithstanding the Guarantor's election to appoint counsel to represent the Guarantor in an action, the Indemnified Person shall have the right to employ separate counsel (including local counsel), and the Guarantor shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the Guarantor to represent the Indemnified Person would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the Indemnified Person and the Guarantor and the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it and/or other Indemnified Person(s) which are different from or additional to those available to the Guarantor,
(iii) the Guarantor shall not have employed counsel satisfactory to the Indemnified Person to represent the Indemnified Person within a reasonable time after notice of the institution of such action or (iv) the Guarantor shall authorize the Indemnified Person to employ separate counsel at the expense of the Guarantor. The Guarantor will not, without the prior written consent of the Indemnified Persons, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the Indemnified Persons are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Person from all liability arising out of such claim, action, suit or proceeding.

SECTION 7.3. COMPENSATION; REIMBURSEMENT OF EXPENSES.

The Guarantor agrees:

(a)to pay to the Guarantee Trustee from time to time such compensation for all services rendered by it hereunder as the parties shall agree to from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and

(b)except as otherwise expressly provided herein, to reimburse the Guarantee Trustee upon request for all reasonable expenses, disbursements and

advances incurred or made by it in accordance with any provision of this Guarantee (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or willful misconduct.

For purposes of clarification, this Section 7.3 does not contemplate the payment by the Guarantor of acceptance or annual administration fees owing to the Guarantee Trustee for services to be provided by the Guarantee Trustee under this Guarantee or the fees and expenses of the Guarantee Trustee's counsel in connection with the closing of the transactions contemplated by this Guarantee. The provisions of this Section 7.3 shall survive the resignation or removal of the Guarantee Trustee and the termination of this Guarantee.

ARTICLE VIII

MISCELLANEOUS

SECTION 8.1. SUCCESSORS AND ASSIGNS.

All guarantees and agreements contained in this Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Capital Securities then outstanding. Except in connection with any merger or consolidation of the Guarantor with or into another entity or any sale, transfer or lease of the Guarantor's assets to another entity, in each case, to the extent permitted under the Indenture, the Guarantor may not assign its rights or delegate its obligations under this Guarantee without the prior approval of the Holders of at least a Majority in liquidation amount of the Capital Securities.

SECTION 8.2. AMENDMENTS.

Except with respect to any changes that do not adversely affect the rights of Holders of the Capital Securities in any material respect (in which case no consent of Holders will be required), this Guarantee may be amended only with the prior approval of the Holders of not less than a Majority in liquidation amount of the Capital Securities. The provisions of the Declaration with respect to amendments thereof apply to the giving of such approval.

SECTION 8.3. NOTICES.

All notices provided for in this Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows:

(a)If given to the Guarantee Trustee, at the Guarantee Trustee's mailing address set forth below (or such other address as the Guarantee Trustee may give notice of to the Holders of the Capital Securities and the Guarantor):

Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-1600

Attention: Corporate Trust Administration Telecopy: 302-636-4140

(b)If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Capital Securities and to the Guarantee Trustee):

Mid-Wisconsin Financial Services, Inc. 132 West State Street
Medford, Wisconsin 54451

Attention: Rhonda R. Kelley
Telecopy: 715-748-6553

(c)If given to any Holder of the Capital Securities, at the address set forth on the books and records of the Issuer.

SECTION 8.4.BENEFIT.

This Guarantee is solely for the benefit of the Beneficiaries and, subject to Section 2.1(a), is not separately transferable from the Capital Securities.

SECTION 8.5.GOVERNING LAW.

THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

SECTION 8.6.COUNTERPARTS.

This Guarantee may be executed in one or more counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same instrument.

SECTION 8.7 SEPARABILITY.

In case one or more of the provisions contained in this Guarantee shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Guarantee, but this Guarantee shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein.

Signatures appear on the following page

THIS GUARANTEE is executed as of the day and year first above written.

MID-WISCONSIN FINANCIAL SERVICES, INC.,
as Guarantor

By: GENE C. KNOLL
Name: GENE C. KNOLL
Title: PRESIDENT/CEO

WILMINGTON TRUST COMPANY, as Guarantee
Trustee

By: CHRISTOPHER J. MONIGLE
Name: Christopher J. Monigle
Title: Assistant Vice President

Exhibit 10.1

MID-WISCONSIN FINANCIAL SERVICES, INC.

2011 DIRECTORS DEFERRED COMPENSATION PLAN

As amended and restated effective December 16, 2010

MID-WISCONSIN FINANCIAL SERVICES, INC.
2011 DIRECTORS DEFERRED COMPENSATION PLAN

1. AMENDMENT AND RESTATEMENT OF PLAN. Mid-Wisconsin Financial Services, Inc. ("Mid-Wisconsin") hereby amends and restates the Mid-Wisconsin Financial Services, Inc. 2005 Directors Deferred Compensation Plan, which is hereby renamed the 2011 Directors Deferred Compensation Plan (the "Plan") effective as of December 16, 2010 (the "Effective Date").

2. PURPOSE. The purposes of the Plan are:

(a) to provide an alternative method of compensating members (the "Directors") of the boards of directors of Mid-Wisconsin, Mid-Wisconsin Bank, and each other Subsidiary that has been designated by Mid-Wisconsin to participate in the Plan, whether or not they otherwise receive compensation as employees, in order to aid Mid-Wisconsin and its Subsidiaries in attracting and retaining as Directors persons whose abilities, experience, and judgment can contribute to the continued progress of Mid-Wisconsin and its Subsidiaries and to provide a mechanism by which the interests of the Directors and the shareholders of Mid-Wisconsin can be more closely aligned; and

(b) to accept and hold all amounts deferred after December 31, 2004 under the Prior Plan.

3. DEFINITIONS. As used in this Plan, the following terms shall have the meaning set forth in this paragraph 3:

(a) "ACCOUNTS" means, as of any date after December 31, 2004, such of a Participant's Deferred Cash Account and Deferred Stock Account that have an undistributed balance.

(b) "BENEFICIARY" means such person or persons, or organization or organizations, as the Participant from time to time may designate by a written designation filed with Mid-Wisconsin during the Participant's life. Any amounts payable hereunder to a Participant's Beneficiary shall be paid in such proportions and subject to such trusts, powers, and conditions as the Participant may provide in such designation. Each such designation, unless otherwise expressly provided therein, may be revoked by the Participant by a written revocation filed with Mid-Wisconsin during the Participant's life. If more than one such designation shall be filed by a Participant with Mid-Wisconsin, the last designation so filed shall control over any revocable designation filed prior to such filing. To the extent that any amounts payable under this Plan to a Participant's Beneficiary are not effectively disposed of pursuant to the above provisions of this paragraph 3(b), either because no designation was in effect at the Participant's death or because a designation in effect at the Participant's death failed to dispose of such amounts in their entirety, then for purposes of this Plan, the Participant's "Beneficiary" as to such undisposed of amounts shall be the Participant's estate.

(d) "CHANGE IN CONTROL" means the happening of any of the following events:

(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either (A) the then outstanding shares of common stock of Mid-Wisconsin (the "Outstanding Company Common Stock") or (B) the combined voting power of the then outstanding voting securities of Mid-Wisconsin entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this paragraph (i), the following acquisitions shall not constitute a Change in Control: (1) any acquisition directly from Mid-Wisconsin other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from Mid-Wisconsin, (2) any acquisition by Mid-Wisconsin, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Mid-Wisconsin or any entity controlled by Mid-Wisconsin, and (4) any acquisition pursuant to a transaction that complies with clauses (A), (B), and (C) of paragraph
(iii) of this paragraph 3(d); or

(ii) A change in the composition of the Board such that the individuals who, as of the Effective Date, constitute the Board (such Board shall be hereinafter referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of the Plan, that any individual who becomes a member of the Board subsequent to the Effective Date whose election, or nomination for election by Mid-Wisconsin's shareholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be deemed to be and shall be considered as though such individual were a member of the Incumbent Board, but provided, further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so deemed or considered as a member of the Incumbent Board; or

(iii) Consummation of a reorganization, merger or consolidation, or sale or other disposition of all or substantially all of the assets of Mid-Wisconsin or the acquisition of the assets or securities of any other entity (a "Corporate Transaction"); excluding, however, such a Corporate Transaction pursuant to which (A) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation that as a result of such transaction owns Mid-Wisconsin or all or substantially all of Mid-Wisconsin's assets either directly or through one or more subsidiaries) (the "Resulting Company") in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (other than Mid-Wisconsin, any employee benefit plan (or related trust) of Mid-Wisconsin) will beneficially own, directly or indirectly, 25% or more of, respectively, the outstanding shares of common stock of the Resulting Company or the combined voting power of the then outstanding voting securities of such Resulting Company entitled to vote generally in the election of directors except to the extent that such ownership existed with respect to Mid-Wisconsin prior to the Corporate Transaction, and (C) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the Resulting Company; or

(iv) The approval by the shareholders of Mid-Wisconsin of a complete liquidation or dissolution of Mid-Wisconsin.

(e) "CODE" means the Internal Revenue Code of 1986, as amended, and reference to any section of the Code shall be deemed to include any successor section or sections. Any reference to a section of the Code shall also be deemed to incorporate any regulation promulgated thereunder.

(f) "COMMITTEE AND MEETING FEES" means that portion of the annual amount of Director's Fees that does not constitute a Director's Retainer, whether such fees are paid for service on committees of the Board or a board of directors of a Subsidiary, the attendance at meetings, the performance of other duties, or otherwise.

(g) "COMMON STOCK" means the common stock, $.10 par value, of Mid-Wisconsin.

(h) "CONTROLLED GROUP" means Mid-Wisconsin and each other member of the controlled group of corporations or other entities under common control to which Mid-Wisconsin belongs for purposes of determining whether a separation from service has occurred pursuant to Section 409A of the Code and the regulations promulgated thereunder.

(i) "DEFERRED CASH ACCOUNT" means the account established to record a Participant's Director's Fees that have been credited in accordance with paragraph 6.

(j) "DEFERRED STOCK ACCOUNT" means the account established to record a Participant's Director's Fees that have credited with "Stock Equivalent Units" pursuant to paragraph 7.

(k) "DIRECTOR'S FEES" means all of the compensation to which a Director would otherwise become entitled for services to be rendered as a Director, but excluding any compensation to which such person is entitled to receive in his capacity, if any, as an employee of Mid-Wisconsin or any Subsidiary.

(l) "ENDING BALANCE" means the balance of a Participant's Deferred Cash Account as determined pursuant to paragraph 8(b) following the Participant's Termination of Service.

(m) "FAIR MARKET VALUE" of a share of the Common Stock as of any date means the price per share as determined in accordance with the following:

(i) Exchange. If the principal market for the Common Stock is a national securities exchange, "Fair Market Value" means the closing price of the Common Stock on the New York Stock Exchange composite transaction tape if the Common Stock is then listed for trading on such exchange, otherwise, the closing price of the Common Stock in any transaction reported on the principal exchange on which the Common Stock is then listed for trading.

(ii) Over-the-Counter. If the principal market for the Common Stock is an over-the-counter market, "Fair Market Value" means the closing
(last) price of the Common Stock reported in The Nasdaq National Market, or The Nasdaq Small Cap Market, or if the Common Stock is not then listed for trading in either of such markets, the closing (last) price of the Common Stock reported on the OTC Bulletin Board, or, if prices for the Common Stock are not quoted on the OTC Bulletin Board, the closing (last) price reported on any other bona fide over-the-counter stock market selected in good faith by the Committee.

(iii) Other Determination. If subparagraphs (i) and (ii) are not applicable, or if the Board in its sole discretion does not believe that the procedure set forth in subparagraphs (i) and (ii) is an accurate measurement of the market value of the Common Stock because of the limited trading market of the Common Stock, "fair market value" means such amount as may be determined by the Board by whatever means or method as the Board, in the good faith exercise of its discretion, shall at such time deem appropriate.

(iv) Date. If the date on which "Fair Market Value" is to be determined is not a business day, or, if there shall be no reported transactions for such date, such determination shall be made on the next preceding business day for which transactions were reported.

(n) "PARTICIPANT" means a Director who has made an election to defer Director's Fees or who has an undistributed balance in one or more Accounts.

(o) "PRIME RATE" means, as of any date, the prime rate as published in The Wall Street Journal for such date; provided, however, that if such rate is not published on such date, the prime rate as published in The Wall Street Journal on the first immediately preceding date.

(p) "PRIOR PLAN" means the Mid-Wisconsin Directors' Deferred Compensation Plan as operated and maintained to defer, hold, and pay out Director's Fees deferred prior to January 1, 2005.

(q) "PRIOR RATE OF RETURN" for a fiscal year of Mid-Wisconsin shall be determined in accordance with generally accepted accounting principles and means a percentage equal to (a) Mid-Wisconsin's return on equity as determined by dividing (i) Mid-Wisconsin's net income for the applicable year by (ii) Mid-Wisconsin's average daily equity for such year minus (b) 400 basis points.

(r) "RATE OF RETURN" for a fiscal year of Mid-Wisconsin shall be determined in accordance with generally accepted accounting principles and means a percentage equal to (a) Mid-Wisconsin's return on equity as determined by dividing (i) Mid-Wisconsin's net income for the applicable year by (ii) Mid-Wisconsin's average daily equity for such year minus (b) 400 basis points; provided, however, that the Rate of Return shall not in any event be less than the rate of interest paid by Mid-Wisconsin Bank on its 4 year certificates of deposit as of the last day of the applicable fiscal year.

(s) "RETAINER" means that portion of the annual amount of Director's Fees that is designated by the Board (or the board of directors of a Subsidiary) as a retainer payable to a Director irrespective of the attendance at meetings or the performance of other duties.

(t) "SPECIFIED EMPLOYEE" means any employee of Mid-Wisconsin or any other member of the Controlled Group who is a "specified employee" as determined pursuant to Code Section 409A. For purposes of this paragraph (s), the Specified Employee identification date shall be December 31, and the Specified Employee effective date shall be April 1.

(u) "SUBSIDIARY" means Mid-Wisconsin Bank and each other subsidiary of Mid-Wisconsin, including any subsidiary of the Bank.

(v) "TERMINATION OF EMPLOYMENT" means, with respect to a Director who is a Specified Employee, termination of the Director's employment with Mid-Wisconsin and each member of the Controlled Group.

(w) "TERMINATION OF SERVICE" means the later of (1) the bona fide termination of a Participant's services as a member of the Board and each other board of directors of any Subsidiary that has been designated as a participating Subsidiary, and (2) the Participant's Termination of Employment.

4. DEFERRAL OF DIRECTOR'S FEES.

(a) Annual Election - Retainer. No portion of a Retainer shall be paid in cash to a Director from and after January 1, 2005 and prior to December 31, 2010. Each Director may elect before December 31, 2010, with respect to the fiscal year of Mid-Wisconsin ending December 31, 2011 (the "2011 Fiscal Year") and before January 1 of any subsequent fiscal year of Mid-Wisconsin, to defer the payment of all or any portion of the Director's Retainer to which the Director would otherwise become entitled for services to be rendered during each fiscal year subsequent to the date on which such election is effective. An election by a Director to defer his Retainer pursuant to this subparagraph (a) shall be effective with respect to the Retainer earned after January 1, 2011, with respect to the 2011 Fiscal Year, and with respect to any subsequent fiscal year of Mid-Wisconsin, during the first fiscal year beginning after the date such election is made and during each subsequent fiscal year until revoked or amended, provided, however, that any such revocation or amendment shall only be effective with respect to fiscal years beginning after the date written notice of such revocation or amendment is first received by Mid-Wisconsin.

(b) Annual Election - Committee and Meeting Fees. Each Director may elect before April 30, 2005, with respect to the fiscal year of Mid-Wisconsin ending December 31, 2005 (the "2005 Fiscal Year") and before January 1 of any subsequent fiscal year of Mid-Wisconsin, to defer the payment of all or any portion of the Director's Committee and Meeting Fees to which the Director would otherwise become entitled for services to be rendered during each fiscal year subsequent to the date on which such election is effective. An election by a Director to defer Committee and Meeting Fees pursuant to this subparagraph (b) shall be effective with respect to Committee and Meeting Fees earned after April 30, 2005, with respect to the 2005 Fiscal Year, and with respect to any subsequent fiscal year of Mid-Wisconsin, during the first fiscal year beginning after the date such election is made and during each subsequent fiscal year until revoked or amended, provided, however, that any such revocation or amendment shall only be effective with respect to fiscal years beginning after the date written notice of such revocation or amendment is first received by Mid-Wisconsin.

(c) New Director. Despite any other provision of subparagraphs (a) and
(b), if a person first becomes a Director during a fiscal year, such Director may elect to become a Participant with respect to all or any portion of the Retainer and/or Committee and Meeting Fees earned and payable (i) from and after the date on which he or she is elected a Director if an election is filed on or before the date of such election or (ii), if no election is filed pursuant to clause (i), on the first day of the first month immediately following the month in such fiscal year in which such election is made if such election is made within 30 days of the date on which he or she was elected a Director. An election by a Director to defer his or her Retainer and/or Committee and Meeting Fees pursuant to this subparagraph (c) shall remain in effect until the last day of the fiscal year in which such election is made and during each subsequent fiscal year until revoked or amended, provided that any such revocation or amendment shall only be effective with respect to fiscal years beginning after the date written notice of such revocation or amendment is first received by Mid-Wisconsin.

(d) Payment of Fees. Director's Fees that are deferred pursuant to this paragraph 4 shall be distributable in accordance with paragraph 8 hereof only after such Participant's Termination of Service. Any Retainer and Committee and Meeting Fees not subject to an election made in accordance with this paragraph 4 shall be paid to the Director in cash in accordance with Mid-Wisconsin's director fee program, as may be in effect from time to time.

5. ACCOUNTING AND ELECTIONS.

(a) Accounts. Mid-Wisconsin and each participating Subsidiary shall establish a Deferred Cash Account and a Deferred Stock Account in the name of each of their Directors.

(b) Election of Accounts. Each Participant who elects to defer Retainer and/or Committee and Meeting Fees shall make an election to have such deferred fees allocated to his Deferred Cash Account or his Deferred Stock Account at the time his deferral election is filed pursuant to paragraph 4. Each fiscal year, a Participant may file a new election with Mid-Wisconsin specifying the Account or Accounts to which all Retainer and/or Committee and Meeting Fees deferred subsequent to the last day of such fiscal year (and prior to the effective date of any subsequent election) shall be allocated. The Participant shall make separate elections under this paragraph 5 with respect to any deferred Retainer and any deferred Committee and Meeting Fees.

(c) Crediting Deferred Fees. As of each date on which Mid-Wisconsin or a Subsidiary shall make payment of a Retainer or Committee and Meeting Fees, the Retainer and Committee and Meeting Fees of each Participant who has a deferral election then in effect shall, to the extent deferred, be credited by Mid-Wisconsin or the Subsidiary, as the case may be, to the Participant's Deferred Cash Account or Deferred Stock Account, as the case may be, in accordance with such Participant's most recent effective election. No transfers shall be made between a Participant's Accounts.

(d) Annual Report. Within 90 days of the end of each fiscal year in which this Plan is in effect, Mid-Wisconsin shall furnish each Participant a statement of the year-end balance in such Participant's Deferred Cash Account and Deferred Stock Account.

6. DEFERRED CASH ACCOUNT.

(a) As of the last day of each fiscal year that begins on or after January 1, 2005 (the "2005 Fiscal Year") and ends prior to January 1, 2011, there shall be computed, with respect to the Deferred Cash Account of each Participant who has not then incurred a Termination of Service, interest on the average daily balance in the Participant's Account (assuming that the Retainer and/or Committee and Meeting Fees to be deferred during the year were credited to his Account as of the date on which they would have otherwise been paid to the Participant in cash and assuming further, that all amounts transferred to such Account from the Prior Plan had been transferred as of the date on which the Director's Fees to which they are attributable would otherwise have been paid in cash) at a rate per annum equal to the Prior Rate of Return for the fiscal year ending immediately prior to the 2005 Fiscal Year. The amount so determined shall be credited to and become part of the balance of such Account as of the first day of the next fiscal year.

(b) As of the last day of each fiscal year that begins on or after January 1, 2011 (the "Current Fiscal Year") there shall be computed, with respect to the Deferred Cash Account of each Participant who has not then incurred a Termination of Service, interest on the average daily balance in the Participant's Account (assuming that the Retainer and/or Committee and Meeting Fees to be deferred during the year were credited to his Account as of the date on which they would have otherwise been paid to the Participant in cash) at a rate per annum equal to the Rate of Return for the fiscal year ending immediately prior to the Current Fiscal Year. The amount so determined shall be credited to and become part of the balance of such Account as of the first day of the next fiscal year.

7. DEFERRED STOCK ACCOUNT.

(a) Crediting Director Fees. As of each date on which the Director's Fees otherwise payable to such Participant in cash are credited to a Participant's Deferred Stock Account, the amount of such deferred Director's Fees shall be converted into that number of "Stock Equivalent Units" (rounded to the nearest one-ten thousandth of a unit) determined by dividing the amount of such Director's Fees by an amount equal to the per share Fair Market Value of the Common Stock on such date.

(b) Dividends. On each date on which a dividend payable in cash or property is paid on the Common Stock, there shall be credited to each Deferred Stock Account such number of additional Stock Equivalent Units as are determined by dividing (i) the amount of the cash or other dividend that would have then been payable on the number of shares of Common Stock equal to the number of Stock Equivalent Units (including fractional shares) then represented in such Account by (ii) an amount equal to the per share Fair Market Value of the Common Stock on such date. If the date on which a dividend is paid on the Common Stock is the same date as of which Director's Fees are to be converted into Stock Equivalent Units, the dividend equivalent to be credited to such Account under this paragraph 7 shall be determined after giving effect to the conversion of the credit balance in such Account into Stock Equivalent Units.

(c) Recording of Stock Equivalent Units. The number of Stock Equivalent Units credited to a Participant's Deferred Stock Account shall be adjusted (to the nearest one-ten thousandth of a unit) to reflect any change in the Common Stock resulting from a stock dividend, stock split-up, combination, recapitalization or exchange of shares, or the like.

8. DISTRIBUTION OF DEFERRED AMOUNTS.

(a) Conversion of Deferred Stock Accounts. As of the last day of the month in which a Participant's Termination of Service occurs, the number of Stock Equivalent Units then credited to the Participant's Deferred Stock Account shall be determined after giving effect to all other adjustments required by this Plan and such Stock Equivalent Units shall be converted into a cash equivalent by multiplying the number of such units by an amount equal to the per share Fair Market Value of the Common Stock on such date and, as of such date, the Participant's Deferred Stock Account shall be debited by the number of Stock Equivalent Units so transferred and the Participant's Deferred Cash Account credited by the amount of cash equivalent so determined.

(b) Determination of Ending Balance. As of the last day of the month in which a Participant's Termination of Service occurs, the balance of the Participant's Deferred Cash Account shall be determined by adding to the value of his Deferred Cash Account as of the last day of the immediately preceding fiscal year (i) interest on such value computed at an annual rate equal to the Rate of Return for the number of days of the fiscal year elapsed as of the last day of the month in which the Termination of Service occurred, (ii) all Retainer and/or Committee and Meeting Fees deferred by such Participant during the fiscal year in which the Termination of Service occurred, (iii) interest, as determined in clause (i) of this sentence, on the average daily balance of the Retainer and/or Committee and Meeting Fees described in clause (ii) (assuming that the Director's Fees deferred during the year were credited to his Account as of the date on which they would have otherwise been paid to the Participant in cash), and (iv) the value of the amount credited to such Deferred Cash Account pursuant to paragraph 8(a). The amount so determined pursuant to the preceding sentence, when added to the most recent year-end balance credited pursuant to paragraph 7 as of the last day of the fiscal year immediately preceding the year in which the Participant's Termination of Service occurs, shall constitute the Ending Balance of the Participant's Deferred Cash Account (the "Ending Balance").

(c) Distributions. Subject to subparagraph (e), distribution of a Participant's Deferred Cash Account shall be made in cash in accordance with the following:

(i) Automatic Form of Payment. Payment of the Ending Balance of a Participant whose Termination of Service occurs for a reason other than death and prior to a Change in Control shall be made in a lump sum as of the last day of the month in which the Participant's Termination of Service occurs unless the Participant has otherwise made an effective election in accordance with the provisions of paragraph 8(d).

(ii) Death Benefit. In the event that a Participant dies before receiving payment of the entire amount to which such Participant is entitled under this Plan, the unpaid balance shall be paid in a lump sum or in installments, as specified in the Participant's most recent effective election in accordance with the provisions of paragraph 8(d), to the Beneficiary of such Participant. If a Beneficiary dies after the Participant's death, but before receiving the entire payment of the Beneficiary's portion of the amount to which the Participant was entitled under this Plan, the portion of the unpaid balance that such Beneficiary would have received if he had not died shall be paid in a lump sum to such Beneficiary's estate unless the Participant designated otherwise.

(iii) Change in Control. In the event a Participant incurs a Termination of Service in connection with a Change in Control that also constitutes a "change in control event" under Code Section 409A, payment of the Ending Balance shall be made in a lump sum as of the last day of the month in which the Participant's Termination of Service occurs.

(d) Elective Forms of Distribution. At the same time as a Director's election to participate is filed pursuant to paragraph 4, the Director shall elect a form of distribution of his Accounts as provided in this subparagraph
(d), provided, however, that no election shall be effective unless approved by the Board prior to the effective date of such election. Subsequent to a Participant having filed his election to participate in the Plan pursuant to paragraph 4, but prior to his Termination of Service, the Participant may elect an optional form of distribution of his Accounts (or change a previous election), but such election shall be effective only if (1) such election, by its terms, will be effective not less than 12 months after the date on which it is received by Mid-Wisconsin, (2) such election is made not less than 12 months prior to the date on which distribution of his Accounts was otherwise scheduled to begin, (3) such election defers the distribution of such Accounts to a date that is not less than five years subsequent to the date on which distribution of his Accounts was otherwise scheduled to begin, (4) such election does not result in the acceleration of the distribution of the Participant's Accounts, and (5) such election is approved by the Board prior to the date specified in the election as its effective date. All such elections shall be subject to the automatic distribution provisions of paragraph 8(c)(ii) or (iii), which shall govern the distribution of benefits in the event of Termination of Service that occurs because of death or in connection with a Change of Control. Subject to the limitations of this subparagraph (d), a participant may elect that payment of the Participant's Ending Balance shall be made in one of the forms specified in subparagraphs (d)(i), (ii), or (iii) below.

(i) 60 Payments. In 60 monthly installments beginning on the last day of any month (the "Initial Payment Date") that is not later than the last day of the month in which the first anniversary of the Participant's Termination of Service occurs in an amount that is determined in accordance with the following:

(A) The monthly payment for the first twelve months shall be equal to the amount necessary to amortize the repayment of a loan in an amount equal to the Ending Balance in 60 equal monthly payments at the Prime Rate on the first day of the month in which the Initial Payment Date occurs;

(B) As of the last day of the month in which each of the first, second, third, and fourth anniversaries of the Initial Payment Date occurs, the amount of each of the next twelve monthly payments shall be recalculated and shall, for the twelve-month period beginning on each such anniversary, be equal to the amount necessary to amortize the repayment of a loan in an amount equal to the then unpaid Ending Balance in monthly payments over the Remaining Payment Period at the Prime Rate on the first day of the month in which such anniversary occurred. As of any anniversary, the "Remaining Payment Period" shall be equal to the remainder of
(1) 60, minus (2) the number of payments that have then been made.

(ii) Lump Sum. In a lump sum, payable at any time on or before the third anniversary of the Participant's Termination of Service with interest at the Prime Rate, determined as of the first day of the month in which the Participant's Termination of Service occurred, on the average undistributed portion of the Participant's Ending Balance through the date immediately preceding the date of distribution; or

(iii) Other Installments. In one or more installments of equal or unequal amounts payable at one or more times not more frequently than monthly; provided, however, the Ending Balance shall be fully distributed on or before the third anniversary of the Participant's Termination of Service; and provided, further, that the amount payable pursuant to any election to receive equal payments shall be determined by the amount necessary to amortize the repayment of a loan in an amount equal to the Participant's Ending Balance in the number of payments so elected at the Prime Rate on the first day of the month in which the Participant's Termination of Service occurred. The average daily undistributed Ending Balance of a Participant who has elected a form of distribution provided for in this subparagraph (d)(iii) that does not provide for level payments shall continue to accrue interest at a rate equal to the Prime Rate on the first day of the month in which the Participant's Termination of Service occurred; provided, however, that if the distribution of the Ending Balance shall not be complete on the first anniversary date of the Participant's Termination of Service, the interest to be credited to such Account after the first anniversary shall be at a rate equal to the Prime Rate on the first day of the month in which such anniversary occurred.

(e) Notwithstanding any other provision of the Plan or any election made or permitted to be made hereunder, no election as to the timing or form, or both, of the distribution of a Participant's Accounts, and no other distribution otherwise provided for by this Plan, shall be effective or made, as the case may be, if such timing or distribution would cause the Plan to fail to meet the requirements of Code Section 409A and cause the Participant to be subject to the interest and additional tax imposed pursuant to Code Section 409A(a)(1)(B), and any such election or such other provision shall be modified in the operation of the Plan so that the timing or form, or both, as the case may be, corresponds as closely as possible to such election or other provision, but will then comply with the requirements of Code Section 409A so as to preclude the application of Code Section 409A(a)(1)(B); including, if required, the deferral of any distribution for a period of not less than six months following the Termination of Employment of a Participant who was a Specified Employee.

(f) Modification of Payments. After a Participant's Termination of Service occurs, neither such Participant nor his Beneficiary shall have any right to modify in any way the schedule for the distribution of amounts credited to such Participant under this Plan as specified in the last election filed by the Participant.

9. FORM FOR ELECTIONS. The Secretary of Mid-Wisconsin shall provide election forms for use by Directors in making an initial election to become a Participant and for making all other elections or designations permitted or required by the Plan.

10. MISCELLANEOUS.

(a) No Assignment. Amounts payable hereunder may not be voluntarily or involuntarily sold or assigned, and shall not be subject to any attachment, levy or garnishment.

(b) No Right of Election. Participation in this Plan by any person shall not confer upon such person any right to be nominated for re-election or re-elected to the Board or the board of directors of a Subsidiary.

(c) Unsecured Claims. Neither Mid-Wisconsin nor any Subsidiary shall be obligated to reserve or otherwise set aside funds for the payment of its obligations hereunder, and the rights of any Participant under the Plan shall be an unsecured claim against the general assets of Mid-Wisconsin or a Subsidiary, whichever, and only to the extent it, established the Participant's Accounts. All amounts due Participants or Beneficiaries under this Plan shall be paid out of the general assets of Mid-Wisconsin or the Subsidiary, whichever, and only to the extent it, established the Participant's Accounts and in no event shall there be joint liability for the payment of an Account established by another participating entity.

(d) Plan Administration. The Board shall have all powers necessary to administer this Plan, including all powers of Plan interpretation, of determining eligibility, and the effectiveness of elections, and of deciding all other matters relating to the Plan; provided, however, that no Participant shall take part in any discussion of, or vote with respect to, a matter of Plan administration that is personal to him, and not of general applicability to all Participants. All decisions of the Board shall be final as to any Participant under this Plan.

(e) Amendment and Termination. The Board may amend this Plan in any and all respects at any time (including, specifically, but not limited to, the rate at which interest will be credited to any Account from and after the date of such amendment), or from time to time, or may terminate this Plan at any time, but any such amendment or termination shall be without prejudice to any Participant's right to receive amounts previously credited to such Participant under this Plan. A Subsidiary of Mid-Wisconsin may terminate its participation in the Plan at any time by action of its Board of Directors, but such termination shall be without prejudice to any Participant's right to receive amounts previously credited to such Participant under this Plan; and, provided further, that any amendment or termination of the Plan shall not cause any amount otherwise payable hereunder to be accelerated in violation of the requirements of Code Section 409A.

Exhibit 10.2

Mid-Wisconsin Financial Services, Inc. Director Retirement Benefit Policy As Amended July 25, 2007

Eligibility

A director who completes at least 20 years of service as a director of Mid-Wisconsin Financial Services, Inc. (the "Company"), including service as a director of Mid-Wisconsin Bank (the "Bank"), shall be eligible for a retirement benefit equal to the retainer fees in effect at the Company and the Bank during the first year following the director's termination of service.

A director who completes less than 20 years of service as a director of the Company, including service as a director of the Bank, shall be eligible for a retirement benefit equal to the product of (a) the retainer fees in effect during the first year following the director's termination of service, multiplied by (b) a fraction, the numerator of which is the greater of (i) 10 or (ii) the director's full and partial years of service as a director, and the denominator of which is 20.

No director shall receive credit for service as a director while employed by the Company or the Bank.

Payment

A director's retirement benefit shall be paid to the retired director, if then living, at such dates as the Company and the Bank pay the retainer fee to then serving directors during the first twelve months following the date on which the director has a termination of service. For purposes of this policy, a "termination of service" means termination as a director of the Company and each other member of the controlled group to which the Company belongs, as determined pursuant to Code Section 409A (the "Controlled Group"). No retirement benefit shall be paid with respect to any calendar month which begins on or after the date of a retired director's death.

Notwithstanding the immediately preceding paragraph, if the director was a "Specified Employee," as determined pursuant to Code Section 409A, on the date of his termination of service, no retirement benefit payment shall be made until the date which is not less than six months subsequent to the date of the director's termination of service. For purposes of this paragraph, the Specified Employee identification date shall be December 31, and the Specified Employee effective date shall be April 1. On the first day on which payment of a director's retirement benefit is permitted pursuant to the first sentence of this paragraph (the "Permitted Payment Date"), the director shall receive an amount equal to the sum of (a) each retirement benefit payment that would have been paid through such payment date, but for the application of the first sentence of this paragraph, and
(b) interest on each such payment amount at an annual rate equal to the prime rate in effect at the Bank on the date of the director's termination of service, computed from the date such payment would have been made, but for the application of the first sentence of this paragraph, through the date immediately preceding the Permitted Payment Date. Each subsequent amount due the director shall be paid in accordance with the provisions of the immediately preceding paragraph.

Required Services

In consideration of the payment of the retirement bonus, a retired director shall remain available at reasonable times, and for reasonable periods of time, for advice and counsel to the respective boards of directors of the Company and the Bank for the one year period in which payment of the retirement bonus is made.

Miscellaneous

No Assignment. Amounts payable hereunder may not be voluntarily or involuntarily sold or assigned, and shall not be subject to any attachment, levy, or garnishment.

Unsecured Claims. All amounts due a retired director under this policy shall be paid out of the general assets of the Company and the Bank, as the case may be.

Administration. The Board of Directors of the Company (the "Board") shall have all powers necessary to administer this policy. All decisions of the Board shall be final as to any director under this policy.

Amendment and Termination. The Board may amend this policy in any and all respects at any time, or from time to time, or may terminate this policy at any time, but any such amendment or termination shall be without prejudice to any then retired director's right to receive the retirement benefit due such director.

Section 409A. Notwithstanding any other provision of this policy, no retirement bonus shall be paid if such payment would violate the requirements of Code Section 409A and cause a director to be subject to the interest and additional tax imposed pursuant to Code Section 409A(a)(1)(B), and any such payment otherwise provided for shall be modified so that the timing will then comply with the requirements of Code Section 409A so as to preclude the application of Code Section 409A(a)(1)(B). For purposes of this policy, "Code" means the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

Exhibit 10.3

MID-WISCONSIN FINANCIAL SERVICES, INC.

1999 STOCK OPTION PLAN

As amended April 22, 2008

MID-WISCONSIN FINANCIAL SERVICES, INC.
1999 STOCK OPTION PLAN

Section 1. PURPOSE. The Plan has been adopted to (a) enable the Company to attract and retain superior employees by providing incentive opportunities with respect to future services that are competitive with those of other similar companies, (b) further identify the interests of participating employees with those of the Company's other shareholders through compensation based on the performance of the Company's common stock, (c) attract and retain qualified employees, and (d) promote the long-term financial interests of the Company and its shareholders.

Section 2. CERTAIN DEFINITIONS. As used in this Plan, and in addition to any terms elsewhere defined in this Plan, the following terms, when capitalized, shall have the meanings set forth in this Section 2.

Section 2.1. "BOARD" means the Board of Directors of the Company.

Section 2.2. "CAUSE" means any one or more of the following on the part of the participant: (a) the commission of an act which results in a payment of a claim filed by the Company or a Subsidiary under a blanket banker fidelity bond policy as from time to time and at any time maintained; (b) an intentional failure to perform assigned duties; (c) willful misconduct in the course of the participant's employment; (d) breach of a fiduciary duty involving personal profit or acts or omissions of personal dishonesty, including, but not limited to, commission of any crime of theft, embezzlement, misapplication of funds, unauthorized issuance of obligations, or false entries; (e) any intentional, reckless, or negligent act or omission to act which results in the violation by the participant of any policy established by the Company or a Subsidiary which is designed to insure compliance with applicable banking, securities, employment discrimination or other laws or which causes or results in the Company's or a Subsidiary's violation of such laws, except any act done by the participant in good faith, as determined in the reasonable discretion of the Board, or which results in a violation of such policies or law which is, in the reasonable sole discretion of such Board, immaterial; or (f) any of the foregoing which results in material loss to the Company or any of its Subsidiaries. Except to the extent of the discretion granted to the Board in clause (e), the Committee shall have the sole discretion to determine whether "Cause" exists, and the Committee's determination shall be final.

Section 2.3. "CHANGE IN CONTROL" has the meaning set forth in Section 9.2.

Section 2.4. "CODE" means the Internal Revenue Code of 1986, as amended. The reference to any specific section of the Code shall include any successor section or sections.

Section 2.5. "COMMITTEE" means, subject to the provisions of Section 4, the Executive Committee of the Board, or such other committee as may be designated by the Board to administer this Plan.

Section 2.6. "COMMON STOCK" means the common stock, $.10 par value per share, of the Company.

Section 2.7. "COMPANY" means Mid-Wisconsin Financial Services, Inc., a Wisconsin corporation.

Section 2.8. "DISABILITY" means (a) a physical or mental condition which qualifies as a total and permanent disability under the terms of any plan or policy maintained by the Company or a Subsidiary and for which the Optionee is eligible to receive benefits under such plan or policy, or (b) if the Optionee does not participate in a disability plan, or is not covered by a disability policy, of the Company or a Subsidiary, "Disability" means the permanent and total inability of a participant by reason of mental or physical infirmity, or both, to perform the work customarily assigned to him or her, if a medical doctor selected or approved by the Board, and knowledgeable in the field of such infirmity, advises the Committee either that it is not possible to determine when such Disability will terminate or that it appears probable that such Disability will be permanent during the remainder of said participant's lifetime.

Section 2.9. "EFFECTIVE DATE" means December 31, 1999.

Section 2.10. "EMPLOYED," and any variation thereof such as "employment," means, as appropriate, employed by or employment with any of the Company or any present or future Subsidiary.

Section 2.11. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

Section 2.12. "FAIR MARKET VALUE" of a share of the Common Stock as of any date means the price per Share on the immediately preceding date as determined in accordance with the following:

(a) EXCHANGE. If the principal market for the Common Stock is a national securities exchange, "Fair Market Value" means the closing price of the Common Stock on the New York Stock Exchange composite transaction tape if the Common Stock is then listed for trading on such exchange, otherwise, the closing price of the Common Stock in any transaction reported on the principal exchange on which the Common Stock is then listed for trading.

(b) OVER-THE-COUNTER. If the principal market for the Common Stock is an over-the-counter market, "Fair Market Value" means the closing (last) price of the Common Stock reported in The Nasdaq National Market, or The Nasdaq Small Cap Market, or if the Common Stock is not then listed for trading in either of such markets, the closing (last) price of the Common Stock reported on the OTC Bulletin Board, or, if prices for the Common Stock are not quoted on the OTC Bulletin Board, the closing (last) price reported on any other bona fide over-the-counter stock market selected in good faith by the Committee.

(c) OTHER DETERMINATION. If subparagraphs (a) and (b) are not applicable, "Fair Market Value" shall mean such amount as may be determined by the Committee by whatever means or method as the Committee, in the good faith exercise of its discretion, shall at such time deem appropriate.

(d) DATE. If the date on which "Fair Market Value" is to be determined is not a business day, or, if there shall be no reported transactions for such date, such determination shall be made on the next preceding business day for which transactions were reported.

Section 2.13. "INCENTIVE STOCK OPTION" means an Option granted pursuant to the terms of the Plan which is intended by the Committee to meet the requirements of an "incentive stock option" within the meaning of
Section 422 of the Code, or any successor section or sections; provided, however, that to the extent an Incentive Stock Option is exercised after the expiration of any limitation on the time of exercise applicable under
Section 422 of the Code, or such Option does not meet the qualifications of an "incentive stock option" within the meaning of such Section 422, such Option shall thereafter be a Non-Qualified Option.

Section 2.14. "NON-QUALIFIED OPTION" means an Option granted pursuant to the terms of the Plan which the Committee intends shall not meet the requirements of an "incentive stock option" within the meaning of Section 422 of the Code, or any successor section or sections, and any Option intended to be an Incentive Stock Option which does not satisfy the terms, or is not exercised in accordance with the requirements of, Section 422 of the Code.

Section 2.15. "OPTION" means an option to purchase Shares awarded pursuant to the provisions of Section 6.

Section 2.16. "OPTION AGREEMENT" means the written document which evidences an award of Options, whether or not such document requires the signature of the Optionee.

Section 2.17. "OPTIONEE" means an eligible employee, as determined in accordance with Section 5, who has been granted an Option.

Section 2.18. "OPTION PRICE" means, with respect to each Option, the price per Share at which such Option may be exercised and the Shares subject to such Option purchased.

Section 2.19. "PLAN" means the Mid-Wisconsin Financial Services, Inc. 1999 Stock Option Plan as set forth herein or as hereafter amended.

Section 2.20. "RETIREMENT DATE" means a participant's Termination of Employment at or after the normal or early retirement date of such participant under the terms of any retirement or pension plan sponsored by the Company which is qualified under the provisions of the Code.

Section 2.21. "SHARE" means a share of Common Stock.

Section 2.22. "SUBSIDIARY" means any corporation, partnership, or other entity in which the Company owns, directly or indirectly, at least a 50% interest in the voting rights or profits.

Section 2.23. "TERMINATION OF EMPLOYMENT" means the termination of the participant's employment with, or performance of services for, the Company and any of its Subsidiaries. A participant employed by, or performing services for, a Subsidiary shall also be deemed to incur a Termination of Employment if the Subsidiary ceases to be such a Subsidiary and the participant does not immediately thereafter become an employee of the Company or another Subsidiary. Temporary absences from employment because of illness, vacation, or leave of absence and transfers among the Company and its Subsidiaries shall not be considered Terminations of Employment. For purposes of the Plan, a participant's employment shall be deemed to have terminated at the close of business on the day preceding the first date on which he or she is no longer for any reason whatsoever employed by the Company or any of its Subsidiaries.

Section 3. NUMBER OF SHARES AVAILABLE FOR OPTIONS.

Section 3.1 SHARES SUBJECT. The aggregate number of Shares which may be delivered under Options awarded pursuant to the Plan shall be equal to the sum of (a) 200,000 and (b) any Shares available for future awards under all prior stock option plans of the Company (the "Prior Plans") as of the Effective Date, including any Shares with respect to which options awarded under any Prior Plans are hereafter forfeited, expire, or are canceled without delivery of Shares.

Section 3.2 UNDELIVERED SHARES. To the extent any Shares subject to an Option are not delivered to an Optionee (or the estate or other transferee of such Optionee) because the Option is forfeited, expires, or otherwise becomes unexercisable, or the Shares are not delivered because the Shares are used to satisfy the applicable tax withholding obligation of the Optionee, such Shares shall be deemed not to have been delivered for purposes of determining the maximum number of Shares available for delivery under the Plan.

Section 3.3 EXERCISE USING SHARES. If the Option Price of any Option awarded under the Plan or any Prior Plan is satisfied by tendering Shares to the Company (by actual delivery or attestation), only the number of Shares issued to the Optionee (or the estate or other transferee of such Optionee), net of the Shares tendered, shall be deemed delivered for purposes of determining the maximum number of Shares available for delivery under the Plan.

Section 3.4 STOCK DIVIDENDS, ETC. If the Company shall, after the Effective Date, change the Common Stock into a greater or lesser number of Shares through a stock dividend, stock split-up or combination of Shares, then (a) the number of Shares then subject to the Plan as provided for in
Section 3.1, but which are not then subject to any outstanding Option, (b) the number of Shares subject to each then outstanding Option (to the extent not previously exercised), and (c) the price per Share payable upon exercise of each then outstanding Option, shall all be proportionately increased or decreased as of the record date for such stock dividend, stock split-up or combination of Shares in order to give effect thereto. Notwithstanding any such proportionate increase or decrease, no fraction of a Share shall be issued upon the exercise of an Option and the Shares subject to an Option shall be rounded to the nearest whole Share.

Section 3.5 OTHER CHANGES. If, after the Effective Date, there shall be any change in the Common Stock or other change in the capitalization of the Company other than through a stock dividend, stock split-up or combination of Shares, including, but not limited to, a change which results from a merger, consolidation, spin-off, or other distribution of stock or property of the Company, any reorganization (whether or not such reorganization is within the meaning of Section 368 of the Code), or any partial or complete liquidation of the Company, then if, and only if, the Committee shall determine that such change equitably requires an adjustment in (a) the number or kind of shares of stock then reserved for issuance under Section 3.1, (b) the number or kind of shares of stock then subject to an Option, (c) the Option Price with respect to an Option, or (d) any other limitation on the Option which may be granted to any participant, to the extent such adjustment does not cause any Option to fail to satisfy the requirements for exemption from the limitations on deductibility imposed by
Section 162(m) of the Code that is set forth in Section 162(m)(4)(c) of the Code if such Option would have satisfied such requirements immediately prior to such adjustment and if such Option, if then exercised, would, when added to the Optionee's estimated compensation from the Company and all Subsidiaries for such year, exceed the deductibility limits of Section 162(m) of the Code, such adjustment as the Committee shall determine is equitable and as shall be approved by the Board shall be made and shall be effective and binding for all purposes of such Option and the Plan. If any member of the Board shall, at the time of such approval, be an Optionee, he shall not participate in action in connection with such adjustment.

Section 4. ADMINISTRATION OF THE PLAN.

Section 4.1 COMMITTEE. The Plan shall be administered by the Committee. The Committee shall, subject to the terms of the Plan, have the authority to, in its sole discretion, (a) select eligible employees to receive an award of one or more Options and to participate in the Plan, (b) determine the number of Shares subject to each award and the Option Price associated therewith, (c) establish terms and conditions concerning the time of, and conditions precedent to, the exercisability of each Option (including, without limitation, conditions with respect to the passage of time, performance of the Company, or a Subsidiary, or the Optionee, restrictions on competitive employment or satisfaction of Company policies, and any other conditions which the Committee deems reasonably related to the satisfaction of the purposes of the Plan), (d) determine the form of each Option Agreement and all terms and conditions thereof with respect to each award, (e) interpret the Plan and the application thereof and establish such rules and regulations as it deems necessary or desirable for the administration of the Plan, (f) modify or cancel any award or Option or take such action to cause the vesting or exercisability of any or all outstanding Options to become exercisable in part or in full for any reason at any time, subject to the limitation of Section 9.1, and (g) exercise such other authority as is reasonably related to the administration of and/or the fulfillment of the purpose of the Plan. All actions, interpretations, rules, regulations and conditions taken or established by the Committee shall be final, binding and conclusive upon the Company, each Subsidiary, and all Optionees.

Section 4.2 MEMBERSHIP OF THE COMMITTEE.

(a) MEMBERSHIP QUALIFICATIONS. Except as provided in this
Section 4.2, at all times the Committee shall consist of not less than three members designated by the Board from among those of its members who are not officers or employees of the Company or a Subsidiary and each of whom is (a) a "non-employee director" within the meaning of Rule 16b-3 under the Exchange Act (a "Non-Employee Director") and (b) an "outside director" within the meaning of Section 162(m) of the Code (an "Outside Director"); provided, however, that in addition to the Board's general authority to amend the Plan as provided for in Section 10.1, the Board shall have the specific authority to modify or eliminate the foregoing qualifications or adopt such other qualifications as are reasonably intended to result in (x) the award of Options, and transactions with respect to the award or exercise of such Options, satisfying an exemption from Section 16(b) of the Exchange Act, or any successor thereto, and (y) compensation recognized by Optionees qualifying as a deductible expense of the Company under the "performance-based compensation" exception to compensation deduction limits which would otherwise be imposed on the Company under Section 162(m) of the Code.

(b) APPOINTMENT OF OTHER MEMBERS. In the event that one or more members of the Committee shall fail to meet the qualifications set forth in Section 4.2(a), the Board shall remove such member or members and appoint a successor or successors who satisfy such qualifications. The Board shall act in a reasonably prompt manner to fill any vacancy on the Committee from among such of its members who are both Non- Employee Directors and Outside Directors.

(c) VALIDITY OF GRANTS. Notwithstanding the qualifications for members of the Committee established in Section 4.2(a), any award of Options made by the Committee in good faith and without the knowledge that one or more of its members did not satisfy such qualifications, shall be valid and enforceable by the Optionee even though the members of the Committee did not, at the time of such award, satisfy such qualifications.

Section 4.3 ACTIONS BY THE COMMITTEE. A majority of the members of the Committee shall constitute a quorum. In the absence of specific rules to the contrary, action by the Committee shall require the consent of a majority of the members of the Committee, expressed either orally at a meeting of the Committee or in writing in the absence of a meeting.

Section 4.4 ACTIONS BY THE BOARD. Any authority granted to the Committee may also be exercised by the full Board, except to the extent that the grant or exercise of such authority would cause any Option or transaction to become subject to (or lose an exemption under) the short- swing profit recovery provisions of Section 16 of the Exchange Act or cause an Option not to qualify for, or to cease to qualify for, the exemption as "performance-based compensation" under Section 162 of the Code, and the regulations promulgated thereunder. To the extent that any permitted action taken by the Board conflicts with action taken by the Committee, the Board action shall control.

Section 4.5 LIMITATION ON LIABILITY AND INDEMNIFICATION OF BOARD. No member of the Board, no executive officer or other employee of the Company, and no other agent or representative of the Company shall be liable for any act, omission, interpretation, construction, or determination made in connection with the Plan in good faith, and all such persons shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage, or expense (including attorneys fees) arising therefrom to the full extent permitted by law, except as otherwise may be provided in the Company's articles of incorporation and/or by-laws, and under any directors' and officers' liability insurance that may be in effect from time to time.

Section 5. PERSONS ELIGIBLE TO BECOME OPTIONEES. Persons who are (a) employees of the Company and any Subsidiary, (b) prospective employees who have accepted offers of employment from the Company or a Subsidiary, or (c) directors of the Company and its Subsidiaries shall be eligible to be selected, in the sole discretion of the Committee, to participate in, and receive an award of one or more Options pursuant to, the Plan; provided, however, that only employees of the Company or a Subsidiary shall be eligible to receive an Incentive Stock Option Award.

Section 6. AWARDING OF OPTIONS.

Section 6.1 OPTIONEES. Subject to the limitations of Section 5, Options shall be awarded to such eligible employees and directors of the Company and its Subsidiaries as the Committee may, from time to time and at any time, select. Membership of an employee or a director in a class shall not, without specific Committee action, entitle such employee or director to receive an Option award.

Section 6.2 OPTION AGREEMENT. Each Option shall be evidenced by an Option Agreement, the terms of which may differ from other Option Agreements. Each Option Agreement shall be signed on behalf of the Company and, if so provided by the Committee, the Optionee, and shall set forth with respect to the Option or Options awarded therein, the name of the Optionee, the date awarded, the Option Price, whether the Option is an Incentive Stock Option or a Non-Qualified Stock Option, the number of Shares subject to the Option, and such other terms and conditions consistent with the Plan as determined by the Committee. The Committee may at the time of award or at any time thereafter impose such additional terms and conditions on the exercise of such Option as it deems necessary or desirable for such Option, or the exercise thereof, to be exempt under
Section 16(b) of the Exchange Act, and the regulations promulgated thereunder, and to qualify as "performance-based compensation" under
Section 162 of the Code, and the regulations promulgated thereunder. Each Option Agreement shall incorporate by reference all terms, conditions and limitations set forth in the Plan.

Section 6.3 TERMS AND CONDITIONS OF THE OPTIONS. In addition to any other terms, conditions, and limitations specified in the Plan, each Option awarded hereunder shall, as to each Optionee, satisfy the following requirements:

(a) DATE OF AWARD. Awards intended to qualify as Incentive Stock Options must be made on or before December 14, 2009. Awards of Non- Qualified Stock Options must be awarded on or before the date on which the Plan terminates as determined in accordance with Section 10.

(b) EXPIRATION. No Incentive Stock Option shall be exercisable after the expiration of ten years from the date such Option is awarded. No Non-Qualified Stock Option shall be exercisable after the expiration of twenty years from the date such Option is awarded.

(c) PRICE. The Option Price as to any Share subject to an Option may not be less than the Fair Market Value of the Share on the date the Option is awarded.

(d) LIMITATIONS ON TRANSFERABILITY. No Incentive Stock Option shall be transferable by the Optionee other than by will or the laws of descent and distribution, nor can it be exercised by anyone other than the Optionee during the Optionee's lifetime. Except as otherwise provided in an Option Agreement or other action taken by the Committee, each of which conform to the provisions of Section 6.4, no Non-Qualified Option shall be transferable by the Optionee other than by will or the laws of descent and distribution, nor can it be exercised by anyone other than the Optionee during the Optionee's lifetime. Except as provided in Section 6.4, no Option may be sold, transferred, assigned, pledged, hypothecated, encumbered, or otherwise disposed of (whether by operation of law or otherwise), or be subject to execution, attachment, or similar process. Upon any attempt to so sell, transfer (other than in accordance with Section 6.4), assign, pledge, hypothecate, encumber, or otherwise dispose of any such award, such award and all rights thereunder shall immediately become null and void.

(e) EXERCISE. Except as otherwise permitted by the Committee, or as provided in Section 6.5, Options must be exercised in accordance with the following time limitations:

(i) Termination by Death. If an Optionee incurs a Termination of Employment by reason of death, any Option held by such Optionee may thereafter be exercised, to the extent then exercisable, for a period of one year from the date of such death or until the expiration of the stated term of such Option, whichever period is shorter.

(ii) Termination by Reason of Disability. If an Optionee incurs a Termination of Employment by reason of Disability, any Option held by such Optionee may thereafter be exercised by the Optionee (or the estate of the Optionee in the event of death), to the extent it was exercisable at the time of such Termination of Employment, for a period of one year.

(iii) Termination by Reason of Retirement. If an Optionee incurs a Termination of Employment by reason of Retirement, any Option held by such Optionee may thereafter be exercised by the Optionee (or the estate of the Optionee in the event of death), to the extent it was exercisable at the time of such Termination of Employment by reason of Retirement, for a period of two years.

(iv) Other Termination. If an Optionee incurs a Termination of Employment for any reason other than death, Disability, or Retirement, any Option held by such Optionee shall terminate.

(v) Notwithstanding any other provision of this Plan to the contrary, in the event an Optionee incurs a Termination of Employment other than for Cause during the 24-month period following a Change in Control, any Option held by such Optionee may thereafter be exercised by the Optionee, to the extent it was exercisable at the time of termination, for (x) the longer of (i) one year from such date of termination or (ii) such other period as may be provided in the Plan for such Termination of Employment, or (y) until expiration of the stated term of such Stock Option, whichever period is shorter. If an Incentive Stock Option is exercised after the expiration of the post-termination exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non- Qualified Stock Option.

If an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Option will thereafter be treated as a Non-Qualified Stock Option.

(f) MINIMUM HOLDING PERIOD. No Option may be exercised before the date which is six months after the later of (i) the date on which the Plan is approved by the shareholders of the Company, or (ii) the date on which such Option was awarded.

(g) ADDITIONAL RESTRICTIONS RELATING TO INCENTIVE STOCK OPTIONS. To the extent that the aggregate Fair Market Value (determined as of the time the Option is awarded) of the Shares for which Incentive Stock Options are exercisable for the first time by an individual during any calendar year (under the Plan, any Prior Plans, or any other plan of the Company or a Subsidiary) exceeds $100,000 (or such other individual limit as may be in effect under the Code on the date of award), such Options shall not be Incentive Stock Options. No Incentive Stock Option shall be awarded to an employee who, at the time such Option is awarded, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary within the meaning of Section 422(b)(6) of the Code unless (i) at the time the Option is awarded, the Option Price is at least 110% of the Fair Market Value of the Shares subject to the Option, and (ii) such Option by its terms is not exercisable after the expiration of five years from the date such Option is awarded.

(h) LIMITATION ON OPTION AWARDS. No Optionee may be awarded Options under the Plan in any calendar year with respect to more than 5,000 Shares.

(i) RELOAD OPTIONS. In the exercise of its authority pursuant to
Section 4.1 and Section 6, the Committee may provide that in connection with the award of an Option (the "Original Option"), subject to the terms and conditions established by the Committee, the Optionee shall be awarded a new Option (a "Reload Option") when (i) the payment of the exercise price of the Original Option is made by (A) the delivery of Shares owned by the Optionee pursuant to Section 7.2(b), (B) the withholding of Shares pursuant to Section 7.2(c), or
(C) the sale of Shares acquired upon exercise of the Original Option pursuant to the procedure permitted by Section 7.2(d) and/or (ii) Shares are tendered or withheld as payment of the amount to be withheld in order to satisfy applicable tax withholding requirements in connection with the exercise of the Original Option pursuant to
Section 7.3. A Reload Option shall be an Option to purchase the number of Shares not exceeding the sum of (i) the number of Shares tendered, withheld, or sold as consideration upon the exercise of the Original Option and (ii) the number of Shares tendered or withheld as payment of the amount to be withheld under applicable tax laws in connection with the exercise of the Original Option, in each case pursuant to the relevant provisions of the Option Agreement or Committee action relating to the Original Option. Reload Options may be granted only with respect to an Original Option awarded under the Plan after January 17, 2006. A Reload Option shall be subject to the following terms and conditions:

(i) the Option Price as to any Shares subject to a Reload Option may not be less than the Fair Market Value of the Shares on the date the Reload Option is awarded;

(ii) the date of award of the Reload Option shall be the date on which Shares are surrendered, withheld, or sold in connection with the payment of the Option Price or withholding of taxes with respect to the Original Option;

(iii) except as provided in this Section 6.3(i), the term of the Reload Option shall be identical to the term of the Original Option and shall be exercisable only to the extent the Original Option would have been exercisable;

(iv) the Reload Option shall not be exercisable after the Optionee's Termination of Employment;

(v) the Reload Option can be exercised only by the Optionee; and

(vi) except as provided in this Section 6.3(i), the Reload Option shall be awarded subject to all other terms and conditions of the Original Option.

Notwithstanding any other provision of this Section 6.3(i), no Reload Option shall be awarded with respect to the exercise of any other Reload Option.

Section 6.4 TRANSFERABILITY OF NON-QUALIFIED OPTIONS. The Committee may, in its discretion, under the terms of the Option Agreement with respect to, or at any time on or after the date of the initial award of, a Non-Qualified Option, permit transfer of such Non-Qualified Option by the Optionee to (a) the spouse, children or grandchildren of the Optionee ("Immediate Family"), (b) a trust for the exclusive benefit of the Optionee or the Optionee's Immediate Family, (c) a partnership in which the Optionee or the Optionee's Immediate Family are the only partners, or (d) to a former spouse of the Optionee pursuant to a domestic relations order within the meaning of Rule 16a-12, as promulgated under Section 16 of the Exchange Act; provided, however, that (x) there may be no consideration for any such transfer unless the payment of such consideration to the Optionee is specifically authorized by the Committee, (y) the Option Agreement, or any amendment thereof approved by the Committee, must expressly provide for transferability of the Option evidenced in such agreement in a manner consistent with this Section 6.4, and (z) once transferred pursuant to the preceding provisions of this Section 6.4, no subsequent transfer of such Options shall be permitted except a transfer by will or the laws of descent and distribution. In authorizing all or any portion of an Option to be transferred, the Committee may impose any conditions on exercise, prescribe a holding period for the Shares acquired upon such exercise, and/or impose any other conditions or limitations it deems desirable or necessary in order to carry out the purposes and requirements of the Plan. Following transfer, the terms and conditions of the Plan and the Option Agreement relating to such Option shall continue to be applicable in all respects to the Optionee who made such transfer and each transferred Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer as if such Option had not been transferred, including, but not limited to, the terms and conditions with respect to the lapse and termination of such Option. For purposes of Section 7, the transferee of an Option, where applicable, shall be deemed an "Optionee." None of the Company, the Committee, or any Optionee shall have any obligation to inform any transferee of the termination or lapse of any Option for any reason. Notwithstanding any other provision of the Plan, following the termination of Employment of an Optionee, a transferred Non- Qualified Option shall be exercisable by the transferee only to the extent, and for the periods specified in Section 6.3(e) as if such Option had not been transferred.

Section 6.5 TERMINATION OR LAPSE OF OPTIONS. Each Option shall terminate or lapse upon the first to occur of (a) the expiration date or any date as of which the Option is deemed to be forfeited as set forth in the applicable Option Agreement, (b) the applicable date set forth in
Section 6.3(b), or (c) the date which is the day next following the last day such Option could be exercised under Section 6.3(e).

Section 7. EXERCISE AND PAYMENT OF OPTION PRICE.

Section 7.1 EXERCISE OF OPTIONS. Options shall be exercised as to all or a portion of the Shares subject to the Option by written notice to the Company setting forth the exact number of Shares as to which the Option is being exercised and including with such notice payment of the Option Price (plus the minimum required tax withholding). The date of exercise shall be the date such written notice and payment have been delivered (in cash or in such other manner as provided in Section 7.2) to the Secretary of the Company either in person or by depositing said notice and payment in the United States mail, postage pre-paid and addressed to such officer at the Company's home office. Notwithstanding the fact that an Option has been transferred pursuant to Section 6.4, the Optionee with respect to such transferred Option shall remain liable for any required tax withholding.

Section 7.2 PAYMENT FOR SHARES. Payment of the Option Price (plus required tax withholding) may be made (a) by tendering cash (in the form of a check or otherwise) in such amount; (b) with the consent of the Committee, and if authorized in the Option Agreement, by tendering, by either actual delivery of Shares owned by the Optionee or by attestation, Shares with a Fair Market Value on the date of exercise equal to such amount; (c) with the consent of the Committee, by instructing the Committee to withhold a number of Shares having a Fair Market Value on the date of exercise equal to the aggregate exercise price of such Option; (d) by delivering a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company the sale or loan proceeds equal to such amount; or (e) any combination of (a), (b), (c) and (d); provided, however, that any Shares delivered in payment of the Option Price pursuant to (b) shall have been purchased on the open market and held by the Optionee for at least six months at the time of exercise of the Option. Notwithstanding the fact that an Option has been transferred pursuant to Section 6.4, the Optionee with respect to such transferred Option shall remain liable for any required tax withholding.

Section 7.3 TAX WITHHOLDING. The delivery of Shares under the Plan is subject to withholding of all applicable taxes, and the Committee may condition the delivery of any Shares or other benefits on satisfaction of applicable withholding obligations. The Committee, in its discretion, and subject to such requirements as the Committee may impose prior to the occurrence of such withholding, may permit withholding obligations to be satisfied through cash payment by the Optionee or other person exercising an Option, through the surrender of Shares which the Optionee or other person already owns, or through the surrender of Shares to which the Optionee or other person is otherwise entitled under the Plan.

Section 7.4 ISSUANCE OF SHARES. No Shares shall be issued until full payment therefor has been made. An Optionee shall have all of the rights of a shareholder of the Company holding the Common Stock that is subject to such Option (including, if applicable, the right to vote the Shares and the right to receive dividends), when the Optionee has given written notice of exercise, has paid in full for such Shares and, if requested, has given the representation described in Section 12.

Section 8. DIRECTOR STOCK OPTIONS. In addition to any Options which may be granted to a director pursuant to the provisions of Section 6.1 the Committee may also grant Options to directors of the Company and/or its Subsidiaries which satisfy the following requirements:

(a) AUTOMATIC GRANTS. Each such director who is not otherwise an employee of the Company or any of its Subsidiaries, shall, on the first day after his or her first election as a director, and thereafter on the day after each annual meeting of shareholders of the Company during such director's term, automatically be granted Non- Qualified Options in an amount specified by the Committee to purchase Common Stock having an exercise price of 100% of the Fair Market Value of the Common Stock on the date of grant of such Non-Qualified Stock Option.

(b) LIMITATIONS ON AUTOMATIC GRANTS. An automatic director Option shall be granted hereunder only if as of each date of grant the director (i) is not otherwise an employee of the Company or any of its Subsidiaries, (ii) has not been an employee of the Company or any of its Subsidiaries for any part of the preceding fiscal year, and (iii) has served on the Board continuously since the commencement of his term.

(c) RIGHTS OF OPTIONEE. Each holder of a Stock Option granted pursuant to this Section 8 shall also have the rights specified in
Section 9.

(d) INSUFFICIENT SHARES. In the event that the number of shares of Common Stock available for future grant under the Plan is insufficient to make all automatic grants required to be made on such date, then all non-employee directors entitled to a grant on such date shall share ratably in the number of Options on shares available for grant under the Plan.

(e) TERMS AND CONDITIONS OF DIRECTOR OF OPTIONS. Except as expressly provided in this 8, any Non-Qualified Option granted hereunder shall be subject to the terms and conditions of the Plan as if the grant were made pursuant to Section 6 hereof.

Section 9. CHANGE IN CONTROL.

Section 9.1 ADJUSTMENT OF OPTIONS.

(a) VESTING AND CASH PAYMENT. In the event of a Change of Control,

(i) all Options outstanding on the date on which such Change in Control has occurred (the "Change in Control Date") shall, to the extent not then exercisable or vested, immediately become exercisable in full, and

(ii) each Optionee may elect (the Optionee's "Election Right") with respect to each Option held by such Optionee on the Change in Control Date to surrender such Option for an immediate lump sum cash payment in an amount equal to the product of (A) the number of Shares then subject to the Option as to which the election is being exercised multiplied by (B) the excess, if any, of (1) the greater of (a) the Change in Control Price or (b) the highest Fair Market Value of a Share on any day in the 60-day period ending on the Change in Control Date, over (2) the Option Price of such Option. For purposes of this Section 9.1(a), the "Change in Control Price" shall mean, if the Change in Control is the result of a tender or exchange offer or a Corporate Transaction (as defined in Section 9.2(c)), the highest price per Share paid in such tender or exchange offer or Corporate Transaction, and, to the extent that the consideration paid in any such transaction consists all or in part of securities or other noncash consideration, the value of such securities or other noncash consideration shall be determined in the sole discretion of the Committee.

(b) ELECTION. The exercise of an Election Right must be in writing, specify the Option or Options and the number of Shares as to which the election is being exercised, and be delivered to the Secretary of the Company either in person or by depositing said notice and payment in the United States mail, postage pre-paid and addressed to such officer at the Company's home office on or before the 60th day following the Change in Control Date.

(c) PAYMENT DATE. All payments due an Optionee pursuant to the provisions of this Section 9.1 shall be made by the Company on or before the 5th business day following the date on which the Optionee's election has been delivered to the Company pursuant to Section 9.1(b).

Section 9.2 DEFINITION OF "CHANGE OF CONTROL." For purposes of the Plan, a "Change of Control" means the happening of any of the following events:

(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this paragraph (a), the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, and (D) any acquisition pursuant to a transaction which complies with clauses (i), (ii), and (iii) of paragraph (c) of this Section 9.2; or

(b) A change in the composition of the Board such that the individuals who, as of the Effective Date, constitute the Board (such Board shall be hereinafter referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of the Plan, that any individual who becomes a member of the Board subsequent to the Effective Date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be deemed to be and shall be considered as though such individual were a member of the Incumbent Board, but provided, further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so deemed or considered as a member of the Incumbent Board; or

(c) Consummation of a reorganization, merger or consolidation, or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of the assets or securities of any other entity (a "Corporate Transaction"); excluding, however, such a Corporate Transaction pursuant to which (i) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) (the "Resulting Company") in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (other than the Company, any employee benefit plan (or related trust) of the Company) will beneficially own, directly or indirectly, 25% or more of, respectively, the outstanding shares of common stock of the Resulting Company or the combined voting power of the then outstanding voting securities of such Resulting Company entitled to vote generally in the election of directors except to the extent that such ownership existed with respect to the Company prior to the Corporate Transaction, and
(iii) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the Resulting Company; or

(d) The approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

Section 10. AMENDMENT AND TERMINATION OF PLAN.

Section 10.1 AMENDMENT OF PLAN. The Board may amend the Plan from time to time and at any time; provided, however, that (a) except as specifically provide herein, no amendment shall, in the absence of written consent to the change by an affected Optionee, adversely affect such Optionee's rights under any Option which has been awarded prior to the amendment except to the extent such amendment is, in the sole opinion of the Committee, required to comply with any stock exchange rules, accounting rules, or laws applicable to the Company or the Plan, (b) no amendment with respect to the maximum number of Shares which may be issued pursuant to Options under the Plan or to any individual in any calendar year made be made unless approved by a majority of the Shares entitled to vote at a meeting of the shareholders if such amendment would, in the absence of such approval and in the sole opinion of the Committee, have an adverse effect on the Company under applicable tax or securities laws or accounting rules, and (c) no amendment shall be made without the approval of the Company's shareholders to the extent such approval is required by applicable law or stock exchange rules.

Section 10.2. TERMINATION OF PLAN. The Plan shall terminate on the first to occur of (a) the date on which all Shares authorized pursuant to
Section 3.1 have been delivered pursuant to the exercise of Options and (b) the date specified by the Board as the effective date of Plan termination; provided, however, that the termination of the Plan shall not limit or otherwise affect any Options outstanding on the date of termination.

Section 11. EFFECTIVE DATE. Notwithstanding any provision of this Plan to the contrary, the Plan shall not be effective, and any Options awarded under the Plan shall be null and void, unless the adoption of the Plan is approved at the annual meeting of the Company's shareholders next following the Effective Date by the majority of the shares entitled to vote at such meeting.

Section 12. INVESTMENT INTENT. The Committee may require each person purchasing or receiving Shares pursuant to an Option to represent to and agree with the Company in writing that such person is acquiring the Shares without a view to the distribution thereof. The certificates for such Shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer.

Section 13. AVAILABILITY OF INFORMATION. If the Shares subject to an Optionee's Option are not registered or to be registered under the Securities Act of 1933 as amended, the Company shall furnish each Optionee with (a) a copy of the Plan and the Company's most recent annual report to its shareholders at the time the Option Agreement is delivered to the Optionee and (b) a copy of each subsequent annual report and proxy statement, on or about the same date as such report shall be made available to shareholders of the Company. The Company will furnish, upon written request addressed to the Secretary of the Company, but at no charge to the Optionee or any duly authorized representative of the Optionee, copies of all reports filed by the Company with the Securities and Exchange Commission, including, but not limited to, the Company's annual reports on Form 10-K, its quarterly reports on Form 10-Q, and its proxy statements. Notwithstanding the foregoing provisions of this Section 13, the Company shall not be required to furnish any such report or statement if a copy of such report is otherwise provided to the Optionee in connection with another plan maintained by the Company or such Optionee's status as a shareholder of the Company.

Section 14. LIMITATION OF RIGHTS.

(a) CONDITIONS OF EMPLOYMENT. The Plan shall not constitute a contract of employment, and participation in or eligibility for participation in the Plan shall not confer upon any employee the right to be continued as an employee of the Company or any present or future Subsidiary and the Company and each Subsidiary, hereby expressly reserves the right to terminate the employment of any employee, with or without cause, as if the Plan and any Options awarded pursuant to it were not in effect.

(b) COMPANY ASSETS. Neither an Optionee nor any other person shall, by reason of receiving an award of an Option under the Plan acquire any right, title, or interest in any assets of the Company or any Subsidiary by reason of such Option or the Plan. To the extent an Optionee or any other person shall acquire a right to receive payments from the Company pursuant to an Option Agreement or the Plan, such right shall be no greater than the right of any unsecured general creditor of the Company.

(c) ISSUANCE OF SHARES. Notwithstanding any other provision of the Plan or agreements made pursuant thereto, the Company shall not be required to issue or deliver any certificate or certificates for Shares under the Plan prior to fulfillment of all of the following conditions:

(i) Listing or approval for listing upon notice of issuance, of such Shares on the exchange or over-the-counter market as may at the time be the principal market for the Common Stock;

(ii) Any registration or other qualification of the Shares under any state or federal law or regulation, or the maintaining in effect of any such registration or other qualification which the Committee shall, in its absolute discretion upon the advice of counsel, deem necessary or advisable; and

(iii) Obtaining any other consent, approval, or permit from any state or federal governmental agency which the Committee shall, in its absolute discretion after receiving the advice of counsel, determine to be necessary or advisable.

Section 15. COMPLIANCE WITH APPLICABLE LAWS. If at any time the Company shall be advised by its counsel that the exercise of any Option or the delivery of Shares upon the exercise of an Option is required to be approved, listed, registered or qualified under any securities law, that certain actions must be taken under the rules of any stock exchange or over-the-counter market, that such exercise or delivery must be accompanied or preceded by a prospectus or similar circular meeting the requirements of any applicable law, or that some other action is required to be taken by the Company in compliance with applicable law, the Company will use reasonable efforts to take all actions required within a reasonable time, but exercise of the Options or delivery by the Company of certificates for Shares may be deferred until the Company shall be in compliance with all such requirements.

Section 16. GOVERNING LAW. The Plan, each Option awarded hereunder and the related Option Agreement, and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the internal laws of the State of Wisconsin and construed in accordance therewith without giving effect to the principles of conflicts of laws applied by any state.

EXHIBIT 10.4

NICOLET BANKSHARES, INC.
2002 STOCK INCENTIVE PLAN

                         TABLE OF CONTENTS


                                                                PAGE
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SECTION 1  DEFINITIONS . . . . . . . . . . . . . . . . . . . .   1
   1.1   Definitions . . . . . . . . . . . . . . . . . . . . .   1
SECTION 2  THE STOCK INCENTIVE PLAN. . . . . . . . . . . . . .   4
   2.1   Purpose of the Plan . . . . . . . . . . . . . . . . .   4
   2.2   Stock Subject to the Plan . . . . . . . . . . . . . .   4
   2.3   Administration of the Plan. . . . . . . . . . . . . .   4
   2.4   Eligibility and Limits. . . . . . . . . . . . . . . .   5
SECTION 3  TERMS OF STOCK INCENTIVES . . . . . . . . . . . . .   6
   3.1   General Terms and Conditions. . . . . . . . . . . . .   6
   3.2   Terms and Conditions of Options.. . . . . . . . . . .   7
      (a)   Option Price . . . . . . . . . . . . . . . . . . .   7
      (b)   Option Term. . . . . . . . . . . . . . . . . . . .   7
      (c)   Payment. . . . . . . . . . . . . . . . . . . . . .   7
      (d)   Conditions to the Exercise of an Option. . . . . .   8
      (e)   Termination of Incentive Stock Option. . . . . . .   8
      (f)   Special Provisions for Certain Substitute Options.   8
   3.3   Treatment of Awards Upon Termination of Service . . .   8
SECTION 4  RESTRICTIONS ON STOCK . . . . . . . . . . . . . . .   9
   4.1   Escrow of Shares. . . . . . . . . . . . . . . . . . .   9
   4.2   Restrictions on Transfer. . . . . . . . . . . . . . .   9
SECTION 5  GENERAL PROVISIONS. . . . . . . . . . . . . . . . .   9
   5.1   Withholding.. . . . . . . . . . . . . . . . . . . . .   9
   5.2   Changes in Capitalization; Merger; Liquidation. . . .  10
   5.3   Cash Awards . . . . . . . . . . . . . . . . . . . . .  11
   5.4   Compliance with Code. . . . . . . . . . . . . . . . .  11
   5.5   Right to Terminate Service. . . . . . . . . . . . . .  11
   5.6   Restrictions on Delivery and Sale of Shares; Legends.  11
   5.7   Non-Alienation of Benefits. . . . . . . . . . . . . .  11
   5.8   Termination and Amendment of the Plan.. . . . . . . .  12
   5.9   Stockholder Approval. . . . . . . . . . . . . . . . .  12
   5.10  Choice of Law.. . . . . . . . . . . . . . . . . . . .  12
   5.11  Effective Date of the Plan. . . . . . . . . . . . . .  12

NICOLET BANKSHARES, INC.
2002 STOCK INCENTIVE PLAN

SECTION 1 DEFINITIONS

1.1 Definitions. Whenever used herein, the masculine pronoun shall be deemed to include the feminine, and the singular to include the plural, unless the context clearly indicates otherwise, and the following capitalized words and phrases are used herein with the meaning thereafter ascribed:

(a) "Affiliate" means

(1) any Subsidiary or Parent;

(2) an entity that directly or through one or more intermediaries controls, is controlled by, or is under common control with the Company, as determined by the Company; or

(3) any entity in which the Company has such a significant interest that the Company determines it should be deemed an "Affiliate," as determined in the sole discretion of the Company.

(b) "Bank" means Nicolet National Bank.

(d) "Cause" has the same meaning as provided in the employment agreement between the Participant and the Company or Affiliate(s) on the date of Termination of Service, or if no such definition or employment agreement exists, "Cause" means conduct amounting to (1) fraud or dishonesty against the Company or Affiliate(s); (2) Participant's willful misconduct, repeated refusal to follow the reasonable directions of the person or entity to whom the Participant directly reports or knowing violation of law in the course of performance of the duties of Participant's service with the Company or Affiliate(s); (3) repeated absences from work without a reasonable excuse; (4) repeated intoxication with alcohol or drugs while on the Company's or Affiliate(s)' premises during regular business hours; (5) a conviction or plea of guilty or nolo contendere to a felony or a crime involving dishonesty; or (6) a breach or violation of the terms of any agreement to which Participant and the Company or Affiliate(s) are party.

(e) "Change in Control" means any one of the following events which may occur after the date the Stock Incentive is granted:

(1) the acquisition by any individual, entity or "group," within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended, (a "Person") of beneficial ownership (within the meaning of Rule 13-d-3 promulgated under the Securities Exchange Act of 1934) of voting securities of the Company or the Bank where such acquisition causes any such Person to own thirty-three and one-third percent (33 1/3%) or more

of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors;

(2) within any twelve-month period, the persons who were directors of the Company or the Bank immediately before the beginning of such twelve-month period (the "Incumbent Directors") shall cease to constitute at least a majority of the Board of Directors of the Company or the Bank; provided that any director who was not a director as of the beginning of such twelve-month period shall be deemed to be an Incumbent Director if that director were elected to the Board of Directors of the Company or the Bank by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors; and provided further that no director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors shall be deemed to be an Incumbent Director;

(3) a reorganization, merger or consolidation, with respect to which persons who were the stockholders of the Company or the Bank immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than fifty percent (50%) of the combined voting power entitled to vote in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities; or

(4) the sale, transfer or assignment of all or substantially all of the assets of the Company or the Bank to any third party.

(f) "Code" means the Internal Revenue Code of 1986, as amended.

(g) "Committee" means the committee appointed by the Board of Directors to administer the Plan pursuant to Plan Section 2.3. If the Committee has not been appointed, the Board of Directors in its entirety shall constitute the Committee.

(h) "Disability" has the same meaning as provided in the long-term disability plan or policy maintained or, if applicable, most recently maintained, by the Company or an Affiliate for the Participant. If no long-term disability plan or policy was ever maintained on behalf of the Participant or, if the determination of Disability relates to an Incentive Stock Option, Disability shall mean that condition described in Code Section 22(e)(3), as amended from time to time. In the event of a dispute, the determination of Disability shall be made by the Board of Directors and shall be supported by advice of a physician competent in the area to which such Disability relates.

(i) "Disposition" means any conveyance, sale, transfer, assignment, pledge or hypothecation, whether outright or as security, inter vivos or testamentary, with or without consideration, voluntary or involuntary.

(j) "Fair Market Value" with regard to a date means:

(1) the price at which Stock shall have been sold on that date or the last trading date prior to that date as reported by the national securities exchange selected by the

Committee on which the shares of Stock are then actively traded or, if applicable, as reported by the NASDAQ Stock Market;

(2) if such market information is not published on a regular basis, the price of Stock in the over-the-counter market on that date or the last business day prior to that date as reported by the NASDAQ Stock Market or, if not so reported, by a generally accepted reporting service; or

(3) if Stock is not publicly traded, as determined in good faith by the Committee with due consideration being given to (i) the most recent independent appraisal of the Company, if such appraisal is not more than twelve months old and (ii) the valuation methodology used in any such appraisal.

For purposes of Paragraphs (1), (2), or (3) above, the Committee may use the closing price as of the applicable date, the average of the high and low prices as of the applicable date or for a period certain ending on such date, the price determined at the time the transaction is processed, the tender offer price for shares of Stock, or any other method which the Committee determines is reasonably indicative of the fair market value.

(k) "Incentive Stock Option" means an incentive stock option, as defined in Code Section 422, described in Plan Section 3.2.

(l) "Nonqualified Stock Option" means a stock option, other than an option qualifying as an Incentive Stock Option, described in Plan Section 3.2.

(m) "Option" means a Nonqualified Stock Option or an Incentive Stock Option.

(n) "Over 10% Owner" means an individual who at the time an Incentive Stock Option is granted owns Stock possessing more than ten percent (10%) of the total combined voting power of the Company or one of its Parents or Subsidiaries, determined by applying the attribution rules of Code Section 424(d).

(o) "Parent" means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, with respect to Incentive Stock Options, at the time of granting of the Incentive Stock Option, each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.

(p) "Participant" means an individual who receives a Stock Incentive hereunder.

(q) "Plan" means the Nicolet Bankshares, Inc. 2002 Stock Incentive

Plan.

(r) "Stock" means the Company's $.01 par value per share common stock.

(s) "Stock Incentive Agreement" means an agreement between the Company and a Participant or other documentation evidencing an award of a Stock Incentive.

(t) "Stock Incentives" means, collectively, Incentive Stock Options and Nonqualified Stock Options.

(u) "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, with respect to Incentive Stock Options, at the time of the granting of the Incentive Stock Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. A "Subsidiary" shall include any entity other than a corporation to the extent permissible under Section 424(f) or regulations or rulings thereunder.

(v) "Termination of Service" means the termination of the service relationship, whether employment or otherwise, between a Participant and the Company and any Affiliates, regardless of the fact that severance or similar payments are made to the Participant for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, Disability or retirement. The Committee shall, in its absolute discretion, determine the effect of all matters and questions relating to a Termination of Service, including, but not by way of limitation, the question of whether a leave of absence constitutes a Termination of Service, or whether a Termination of Service is for Cause.

SECTION 2 THE STOCK INCENTIVE PLAN

2.1 Purpose of the Plan. The Plan is intended to (a) provide incentives to employees and directors of the Company and its Affiliates to stimulate their efforts toward the continued success of the Company and to operate and manage the business in a manner that will provide for the long-term growth and profitability of the Company; (b) encourage stock ownership by employees and directors by providing them with a means to acquire a proprietary interest in the Company by acquiring shares of Stock; and (c) provide a means of obtaining and rewarding key personnel.

2.2 Stock Subject to the Plan. Subject to adjustment in accordance with Section 5.2, 125,000 shares of Stock (the "Maximum Plan Shares") are hereby reserved exclusively for issuance upon exercise or payment pursuant to Stock Incentives. At such time as the Company is subject to Section 16 of the Exchange Act, at no time shall the Company have outstanding Stock Incentives subject to Section 16 of the Exchange Act and shares of Stock issued in respect of Stock Incentives in excess of the Maximum Plan Shares. The shares of Stock attributable to the nonvested, unpaid, unexercised, unconverted or otherwise unsettled portion of any Stock Incentive that is forfeited or cancelled or expires or terminates for any reason without becoming vested, paid, exercised, converted or otherwise settled in full will again be available for purposes of the Plan.

2.3 Administration of the Plan. The Plan shall be administered by the Committee. The Committee shall consist of at least two members of the Board of Directors. During those

periods that the Company is subject to the provisions of Section 16 of the Securities Exchange Act of 1934, the Board of Directors shall consider whether each Committee member should qualify as an "outside director" as defined in Treasury Regulations Section 1.162-27(e) as promulgated by the Internal Revenue Service and a "non-employee director" as defined in Rule 16b(3)(b)(3) as promulgated under the Exchange Act. The Committee shall have full authority in its discretion to determine the employees and directors of the Company or its Affiliates to whom Stock Incentives shall be granted and the terms and provisions of Stock Incentives subject to the Plan. Subject to the provisions of the Plan, the Committee shall have full and conclusive authority to interpret the Plan; to prescribe, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of the respective Stock Incentive Agreements and to make all other determinations necessary or advisable for the proper administration of the Plan. The Committee's determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan (whether or not such persons are similarly situated). The Committee's decisions shall be final and binding on all Participants. Each member of the Committee shall serve at the discretion of the Board of Directors and the Board of Directors may from time to time remove members from or add members to the Committee. Vacancies on the Committee shall be filled by the Board of Directors.

The Committee shall select one of its members as chairman and shall hold meetings at the times and in the places as it may deem advisable. Acts approved by a majority of the Committee in a meeting at which a quorum is present, or acts reduced to or approved in writing by a majority of the members of the Committee, shall be the valid acts of the Committee.

2.4 Eligibility and Limits. Stock Incentives may be granted only to employees and directors of the Company or any Affiliate; provided, however, that an Incentive Stock Option may only be granted to an employee of the Company or any Subsidiary. In the case of Incentive Stock Options, the aggregate Fair Market Value (determined as of the date an Incentive Stock Option is granted) of stock with respect to which stock options intended to meet the requirements of Code Section 422 become exercisable for the first time by an individual during any calendar year under all plans of the Company and its Parents and Subsidiaries shall not exceed $100,000; provided further, that if the limitation is exceeded, the Incentive Stock Option(s) which cause the limitation to be exceeded shall be treated as Nonqualified Stock Option(s). During such periods as required by Code Section 162(m) of the Code and the regulations thereunder for compensation to be treated as qualified performance based compensation, the maximum number of shares of Stock with respect to which Options may be granted during any calendar year to an employee may not exceed 75,000, subject to adjustment in accordance with Section 5.2. If, after grant, the exercise price of an Option is reduced, the transaction shall be treated as the cancellation of the Option and the grant of a new Option. If an Option is deemed to be cancelled as described in the preceding sentence, the Option that is deemed to be cancelled and the Option that is deemed to be granted shall both be counted against the Maximum Plan Shares and the maximum number of shares for which Options may be granted to an employee during any calendar year.

SECTION 3 TERMS OF STOCK INCENTIVES

3.1 General Terms and Conditions.

(a) The number of shares of Stock as to which a Stock Incentive shall be granted shall be determined by the Committee in its sole discretion, subject to the provisions of Section 2.2, as to the total number of shares available for grants under the Plan. If a Stock Incentive Agreement so provides, a Participant may be granted a new Option to purchase a number of shares of Stock equal to the number of previously owned shares of Stock tendered in payment of the Exercise Price (as defined below) for each share of Stock purchased pursuant to the terms of the Stock Incentive Agreement.

(b) Each Stock Incentive shall be evidenced by a Stock Incentive Agreement in such form and containing such terms, conditions and restrictions as the Committee may determine is appropriate. Each Stock Incentive Agreement shall be subject to the terms of the Plan and any provision in a Stock Incentive Agreement that is inconsistent with the Plan shall be null and void.

(c) The date a Stock Incentive is granted shall be the date on which the Committee has approved the terms of, and satisfaction of any conditions applicable to, the grant of the Stock Incentive and has determined the recipient of the Stock Incentive and the number of shares covered by the Stock Incentive and has taken all such other action necessary to complete the grant of the Stock Incentive.

(d) The Committee may provide in any Stock Incentive Agreement (or subsequent to the award of a Stock Incentive but prior to its expiration or cancellation, as the case may be) that, in the event of a Change in Control, the Stock Incentive shall or may be cashed out on the basis of any price not greater than the highest price paid for a share of Stock in any transaction reported by any market or system selected by the Committee on which the shares of Stock are then actively traded during a specified period immediately preceding or including the date of the Change in Control or offered for a share of Stock in any tender offer occurring during a specified period immediately preceding or including the date the tender offer commences; provided that, in no case shall any such specified period exceed three (3) months (the "Change in Control Price"). For purposes of this Subsection, any Option shall be cashed out on the basis of the excess, if any, of the Change in Control Price over the Exercise Price to the extent the Option is then exercisable in accordance with the terms of the Option and the Plan.

(e) Any Stock Incentive may be granted in connection with all or any portion of a previously or contemporaneously granted Stock Incentive. Exercise or vesting of a Stock Incentive granted in connection with another Stock Incentive may result in a pro rata surrender or cancellation of any related Stock Incentive, as specified in the applicable Stock Incentive Agreement.

(f) Stock Incentives shall not be transferable or assignable except by will or by the laws of descent and distribution and shall be exercisable, during the Participant's lifetime, only by the Participant; in the event of the Disability of the Participant, by the legal

representative of the Participant; or in the event of the death of the Participant, by the personal representative of the Participant's estate or if no personal representative has been appointed, by the successor in interest determined under the Participant's will.

3.2 Terms and Conditions of Options. Each Option granted under the Plan shall be evidenced by a Stock Incentive Agreement. At the time any Option is granted, the Committee shall determine whether the Option is to be an Incentive Stock Option or a Nonqualified Stock Option, and the Option shall be clearly identified as to its status as an Incentive Stock Option or a Nonqualified Stock Option. At the time any Incentive Stock Option is exercised, the Company shall be entitled to place a legend on the certificates representing the shares of Stock purchased pursuant to the Option to clearly identify them as shares of Stock purchased upon exercise of an Incentive Stock Option. An Incentive Stock Option may only be granted within ten (10) years from the earlier of the date the Plan is adopted by the Board of Directors or approved by the Company's stockholders. All Options shall provide that the primary federal regulator of the Company may require a Participant to exercise an Option in whole or in part if the capital of the Company or the Bank falls below minimum requirements and shall further provide that, if the Participant fails to so exercise any such portion of the Option, that portion of the Option shall be forfeited.

(a) Option Price. Subject to adjustment in accordance with Section 5.2 and the other provisions of this Section 3.2, the exercise price (the "Exercise Price") per share of Stock purchasable under any Option shall be as set forth in the applicable Stock Incentive Agreement. With respect to each grant of an Incentive Stock Option to a Participant who is not an Over 10% Owner, the Exercise Price per share shall not be less than the Fair Market Value on the date the Option is granted. With respect to each grant of an Incentive Stock Option to a Participant who is an Over 10% Owner, the Exercise Price shall not be less than 110% of the Fair Market Value on the date the Option is granted. With respect to each grant of a Nonqualified Stock Option, the Exercise Price per share shall be no less than the Fair Market Value.

(b) Option Term. The term of an Option shall be as specified in the applicable Stock Incentive Agreement; provided, however that any Option granted to a Participant shall not be exercisable after the expiration of ten
(10) years after the date the Option is granted and any Incentive Stock Option granted to an Over 10% Owner shall not be exercisable after the expiration of five (5) years after the date the Option is granted.

(c) Payment. Payment for all shares of Stock purchased pursuant to the exercise of an Option shall be made in cash or, if the Stock Incentive Agreement provides, in a cashless exercise through a broker. In its discretion, the Committee also may authorize (at the time an Option is granted or thereafter) Company financing to assist the Participant as to payment of the Exercise Price on such terms as may be offered by the Committee in its discretion. Payment shall be made at the time that the Option or any part thereof is exercised, and no shares shall be issued or delivered upon exercise of an Option until full payment has been made by the Participant. The holder of an Option, as such, shall have none of the rights of a stockholder.

(d) Conditions to the Exercise of an Option. Each Option granted under the Plan shall be exercisable by the Participant or any other designated person, at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee shall specify in the Stock Incentive Agreement; provided, however, that subsequent to the grant of an Option, the Committee, at any time before complete termination of such Option, may accelerate the time or times at which such Option may be exercised in whole or in part, including, without limitation, upon a Change in Control and may permit the Participant or any other designated person to exercise the Option, or any portion thereof, for all or part of the remaining Option term notwithstanding any provision of the Stock Incentive Agreement to the contrary. Notwithstanding the foregoing, no Option granted prior to the third anniversary of the date the Bank opened for business shall contain provisions which allow the Option to become vested and exercisable at a rate faster than in equal, annual one-third increments commencing with the first anniversary of the date the Bank opened for business.

(e) Termination of Incentive Stock Option Status. With respect to an Incentive Stock Option, in the event of the Termination of Service of a Participant, the Option or portion thereof held by the Participant which is unexercised shall expire, terminate and become unexercisable no later than three
(3) months after the date of termination of employment; provided, however, that in the case of a holder whose termination of employment is due to death or Disability, up to one (1) year may be substituted for such three (3) month period. For purposes of this Subsection (e), Termination of Service of the Participant shall not be deemed to have occurred if the Participant is employed by another corporation (or a parent or subsidiary corporation of such other corporation) which has assumed the Incentive Stock Option of the Participant in a transaction to which Code Section 424(a) is applicable.

(f) Special Provisions for Certain Substitute Options. Notwithstanding anything to the contrary in this Section 3.2, any Option issued in substitution for an option previously issued by another entity, which substitution occurs in connection with a transaction to which Code Section 424(a) is applicable, may provide for an exercise price computed in accordance with such Code Section and the regulations thereunder and may contain such other terms and conditions as the Committee may prescribe to cause such substitute Option to contain as nearly as possible the same terms and conditions (including the applicable vesting and termination provisions) as those contained in the previously issued option being replaced thereby.

3.3 Treatment of Awards Upon Termination of Service. Except as otherwise provided by Plan Section 3.2(e), any award under this Plan to a Participant who suffers a Termination of Service may be cancelled, accelerated, paid or continued, as provided in the Stock Incentive Agreement or, in the absence of such provision, as the Committee may determine. The portion of any award exercisable in the event of continuation or the amount of any payment due under a continued award may be adjusted by the Committee to reflect the Participant's period of service from the date of grant through the date of the Participant's Termination of Service or such other factors as the Committee determines are relevant to its decision to continue the award.

SECTION 4 RESTRICTIONS ON STOCK

4.1 Escrow of Shares. Any certificates representing the shares of Stock issued under the Plan shall be issued in the Participant's name, but, if the Stock Incentive Agreement so provides, the shares of Stock shall be held by a custodian designated by the Committee (the "Custodian"). Each applicable Stock Incentive Agreement providing for transfer of shares of Stock to the Custodian shall appoint the Custodian as the attorney-in-fact for the Participant for the term specified in the applicable Stock Incentive Agreement, with full power and authority in the Participant's name, place and stead to transfer, assign and convey to the Company any shares of Stock held by the Custodian for such Participant, if the Participant forfeits the shares under the terms of the applicable Stock Incentive Agreement. During the period that the Custodian holds the shares subject to this Section, the Participant shall be entitled to all rights, except as provided in the applicable Stock Incentive Agreement, applicable to shares of Stock not so held. Any dividends declared on shares of Stock held by the Custodian shall, as the Committee may provide in the applicable Stock Incentive Agreement, be paid directly to the Participant or, in the alternative, be retained by the Custodian until the expiration of the term specified in the applicable Stock Incentive Agreement and shall then be delivered, together with any proceeds, with the shares of Stock to the Participant or to the Company, as applicable.

4.2 Restrictions on Transfer. The Participant shall not have the right to make or permit to exist any Disposition of the shares of Stock issued pursuant to the Plan except as provided in the Plan or the applicable Stock Incentive Agreement. Any Disposition of the shares of Stock issued under the Plan by the Participant not made in accordance with the Plan or the applicable Stock Incentive Agreement shall be void. The Company shall not recognize, or have the duty to recognize, any Disposition not made in accordance with the Plan and the applicable Stock Incentive Agreement, and the shares so transferred shall continue to be bound by the Plan and the applicable Stock Incentive Agreement.

SECTION 5 GENERAL PROVISIONS

5.1 Withholding. The Company shall deduct from all cash distributions under the Plan any taxes required to be withheld by federal, state or local government. Whenever the Company proposes or is required to issue or transfer shares of Stock under the Plan, the Company shall have the right to require the recipient to remit to the Company an amount sufficient to satisfy any federal, state and local tax withholding requirements prior to the delivery of any certificate or certificates for such shares. A Participant may pay the withholding obligation in cash, by tendering shares of Stock which have been owned by the holder for at least six (6) months prior to the date of exercise or, if the applicable Stock Incentive Agreement provides, a Participant may elect to have the number of shares of Stock he is to receive reduced by the smallest number of whole shares of Stock which, when multiplied by the Fair Market Value of the shares of Stock determined as of the Tax Date (defined below), is sufficient to satisfy federal, state and local, if any, withholding obligation arising from exercise or payment of a Stock Incentive (a "Withholding Election"). A Participant may make a Withholding Election only if both of the following conditions are met:

(a) The Withholding Election must be made on or prior to the date on which the amount of tax required to be withheld is determined (the "Tax Date") by executing and delivering to the Company a properly completed notice of Withholding Election as prescribed by the Committee; and

(b) Any Withholding Election made will be irrevocable; however, the Committee may, in its sole discretion, disapprove and give no effect to the Withholding Election.

5.2 Changes in Capitalization; Merger; Liquidation.

(a) The number of shares of Stock reserved for the grant of Options, the maximum number of shares of Stock for which Options may be granted to any employee during any calendar year, the number of shares of Stock reserved for issuance upon the exercise of each outstanding Option, and the Exercise Price of each outstanding Option shall be proportionately adjusted for any increase or decrease in the number of issued shares of Stock resulting from a subdivision or combination of shares or the payment of an ordinary stock dividend in shares of Stock to holders of outstanding shares of Stock or any other increase or decrease in the number of shares of Stock outstanding effected without receipt of consideration by the Company.

(b) In the event of any merger, consolidation, reorganization, extraordinary dividend, spin-off, sale of substantially all of the Company's assets, other change in the capital structure of the Company or its Stock (including any Change in Control) or tender offer for shares of Stock, the Committee, in its sole discretion, may make such adjustments with respect to awards and take such other action as it deems necessary or appropriate to reflect or in anticipation of such merger, consolidation, reorganization, extraordinary dividend, spin-off, sale of substantially all of the Company's assets, other change in capital structure or tender offer, including, without limitation; the assumption of other awards, the substitution of new awards, the adjustment of outstanding awards (with or without the payment of any consideration), the acceleration of awards or the removal of restrictions on outstanding awards, all as may be provided in the applicable Stock Incentive Agreement or, if not expressly addressed therein, as the Committee subsequently may determine in the event of any such merger, consolidation, reorganization, extraordinary dividend, spin-off, sale of substantially all of the Company's assets, other change in the capital structure of the Company or its Stock or tender offer for shares of Stock or the termination of outstanding awards in exchange for the cash value, as determined in good faith by the Committee of the vested and/or unvested portion of the award. The Committee's general authority under this Section 5.2 is limited by and subject to all other express provisions of the Plan. Any adjustment pursuant to this Section 5.2 may provide, in the Committee's discretion, for the elimination without payment therefor of any fractional shares that might otherwise become subject to any Stock Incentive.

(c) The existence of the Plan and the Stock Incentives granted pursuant to the Plan shall not affect in any way the right or power of the Company to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Stock or the rights thereof, the dissolution or liquidation of the

Company, any sale or transfer of all or any part of its business or assets, or any other corporate act or proceeding.

5.3 Cash Awards. The Committee may, at any time and in its discretion, grant to any holder of a Stock Incentive the right to receive, at such times and in such amounts as determined by the Committee in its discretion, a cash amount which is intended to reimburse such person for all or a portion of the federal, state and local income taxes imposed upon such person as a consequence of the receipt of the Stock Incentive or the exercise of rights thereunder.

5.4 Compliance with Code. All Incentive Stock Options to be granted hereunder are intended to comply with Code Section 422, and all provisions of the Plan and all Incentive Stock Options granted hereunder shall be construed in such a manner as to effectuate that intent.

5.5 Right to Terminate Service. Nothing in the Plan or in any Stock Incentive Agreement shall confer upon any Participant the right to continue as an employee, director, organizer or officer of the Company or affect the right of the Company to terminate the Participant's services at any time.

5.6 Restrictions on Delivery and Sale of Shares; Legends. Each Stock Incentive is subject to the condition that if at any time the Committee, in its discretion, shall determine that the listing, registration or qualification of the shares covered by such Stock Incentive upon any securities exchange or under any state or federal law is necessary or desirable as a condition of or in connection with the granting of such Stock Incentive or the purchase or delivery of shares thereunder, the delivery of any or all shares pursuant to such Stock Incentive may be withheld unless and until such listing, registration or qualification shall have been effected. If a registration statement is not in effect under the Securities Act of 1933 or any applicable state securities laws with respect to the shares of Stock purchasable or otherwise deliverable under Stock Incentives then outstanding, the Committee may require, as a condition of exercise of any Option or as a condition to any other delivery of Stock pursuant to a Stock Incentive, that the Participant or other recipient of a Stock Incentive represent, in writing, that the shares received pursuant to the Stock Incentive are being acquired for investment and not with a view to distribution and agree that the shares will not be disposed of except pursuant to an effective registration statement, unless the Company shall have received an opinion of counsel that such disposition is exempt from such requirement under the Securities Act of 1933 and any applicable state securities laws. The Company may include on certificates representing shares delivered pursuant to a Stock Incentive such legends referring to the foregoing representations or restrictions or any other applicable restrictions on resale as the Company, in its discretion, shall deem appropriate.

5.7 Non-Alienation of Benefits. Other than as specifically provided herein, no benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge; and any attempt to do so shall be void. No such benefit shall, prior to receipt by the Participant, be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the Participant.

5.8 Termination and Amendment of the Plan. The Board of Directors at any time may amend or terminate the Plan without stockholder approval; provided, however, that the Board of Directors may condition any amendment on the approval of stockholders of the Company if such approval is necessary or advisable with respect to tax, securities or other applicable laws. No such termination or amendment without the consent of the holder of a Stock Incentive shall adversely affect the rights of the Participant under such Stock Incentive.

5.9 Stockholder Approval. The Plan must be submitted to the stockholders of the Company for their approval within twelve (12) months before or after the adoption of the Plan by the Board of Directors.

5.10 Choice of Law. The laws of the State of Wisconsin shall govern the Plan, to the extent not preempted by federal law.

5.11 Effective Date of the Plan. The Plan was approved by the Board of Directors as of May 21, 2002 and will be effective as of that date.

NICOLET BANKSHARES, INC.

                                       By:    /s/  Robert  B.  Atwell
                                          -----------------------------------

                                       Title:  President  and  CEO
                                             --------------------------------
ATTEST:

/s/  Michael  E.  Daniels
-----------------------------
Secretary

[CORPORATE SEAL]

INCENTIVE STOCK OPTION AWARD
PURSUANT TO THE NICOLET BANKSHARES, INC.
2002 STOCK INCENTIVE PLAN

THIS AWARD is made as of the Grant Date by NICOLET BANKSHARES, INC. (the "Company") to (the "Optionee").

Upon and subject to the Terms and Conditions attached hereto and incorporated herein by reference, the Company hereby awards as of the Grant Date to Optionee an incentive stock option (the "Option"), as described below, to purchase the Option Shares.

A. Grant Date: , 2002.

B. Type of Option: Incentive Stock Option.

C. Plan under which granted: Nicolet Bankshares, Inc. 2002 Stock Incentive Plan.

D. Option Shares: All or any part of shares of the Company's $.01 par value common stock (the "Common Stock"), subject to adjustment as provided in the attached Terms and Conditions.

E. Exercise Price: $10.00 per share, subject to adjustment as provided in the attached Terms and Conditions. The Exercise Price is, in the judgment of the Committee, not less than 100% of the Fair Market Value of a share of Common Stock on the Grant Date or, in the case of an Over 10% Owner, not less than 110% of the Fair Market Value of a share of Common Stock on the Grant Date.

F. Option Period: The Option may be exercised only during the Option Period which commences on the Grant Date and ends, generally, on the earliest of (a) the tenth (10th) anniversary of the Grant Date (unless the Optionee is an Over 10% Owner, in which case the fifth (5th) anniversary of the Grant Date); (b) three (3) months following the date the Optionee ceases to be an employee of the Company (including any Parent or Subsidiary) except as provided under clause (c); or (c) one (1) year following the date the Optionee ceases to be an employee of the Company (including any Parent or Subsidiary) due to death or Disability; provided that the Option may be exercised as to no more than the vested Option Shares, determined pursuant to the Vesting Schedule. Note that other limitations to exercising the Option, as described in the attached Terms and Conditions, may apply.

G. Vesting Schedule: The Option Shares shall become vested in accordance with Schedule 1 hereto.

IN WITNESS WHEREOF, the Company has executed and sealed this Award as of the Grant Date set forth above.

NICOLET BANKSHARES, INC.

By:

Title:

TERMS AND CONDITIONS
TO THE
INCENTIVE STOCK OPTION AWARD
PURSUANT TO THE NICOLET BANKSHARES, INC.
2002 STOCK INCENTIVE PLAN

1. Exercise of Option. Subject to the provisions provided herein or in the Award made pursuant to the Nicolet Bankshares, Inc. 2002 Stock Incentive Plan:

(a) the Option may be exercised with respect to all or any portion of the vested Option Shares at any time during the Option Period by the delivery to the Company, at its principal place of business, of a written notice of exercise in substantially the form attached hereto as Exhibit 1, which shall be actually delivered to the Company no earlier than thirty (30) days and no later than ten (10) days prior to the date upon which Optionee desires to exercise all or any portion of the Option; and

(b) payment to the Company of the Exercise Price multiplied by the number of Option Shares being purchased (the "Purchase Price") as provided in Section 2.

(c) Notwithstanding any other provision of this Agreement, in the event that the capital of the Company or the Bank falls below the minimum requirements determined by the primary federal regulator of the Company (the "Regulator"), the Regulator may direct the Company to require the Optionee to exercise, or otherwise forfeit, the Option in whole or in part. If the Regulator gives such direction, the Company will notify the Optionee within forty-five (45) days from the date the Regulator notifies the Company in writing that the Optionee must exercise, or otherwise forfeit, the Option in whole or in part. If the Optionee does not exercise the Option in accordance with the Company's direction within twenty-one (21) days of the Company's notification to the Optionee, the Committee may provide for the cancellation of the Option.

Upon acceptance of such notice and receipt of payment in full of the Purchase Price and any tax withholding liability, if applicable, the Company shall cause to be issued a certificate representing the Option Shares purchased.

2. Withholding. To the extent this Award is treated as a Nonqualified Stock Option pursuant to Paragraph 18 hereof, the Optionee must satisfy his federal, state, and local, if any, withholding taxes imposed by reason of the exercise of the Option either by paying to the Company the full amount of the withholding obligation (i) in cash; (ii) by tendering shares of Common Stock which have been owned by the Optionee for at least six (6) months prior to the date of exercise having a Fair Market Value equal to the withholding obligation;
(iii) by electing, irrevocably and in writing (the "Withholding Election"), to have the smallest number of whole shares of Common Stock withheld by the Company which, when multiplied by the Fair Market Value of the Common Stock as of the date the Option is exercised, is sufficient to satisfy the amount of withholding tax; or (iv) by any combination of the above. Optionee may make a Withholding Election only if the following conditions are met:

(a) the Withholding Election is made on or prior to the date on which the amount of tax required to be withheld is determined (the "Tax Date") by executing and delivering to the Company a properly completed Notice of Withholding Election in substantially the form attached hereto as Exhibit 2; and

(b) any Withholding Election will be irrevocable; however, the Committee may, in its sole discretion, disapprove and give no effect to the Withholding Election.

3. Purchase Price. Payment of the Purchase Price for all Option Shares purchased pursuant to the exercise of an Option shall be made in cash or certified check or, alternatively, if and when the Common Stock becomes traded by brokers, whether on a national securities exchange or otherwise, by receipt of the Purchase Price in cash from a broker, dealer or other "creditor" as defined by Regulation T issued by the Board of Governors of the Federal Reserve System following delivery by the Optionee to the Committee of instructions in a form acceptable to the Committee regarding delivery to such broker, dealer or other creditor of that number of Option Shares with respect to which the Option is exercised.

4. Rights as Shareholder. Until the stock certificates reflecting the Option Shares accruing to the Optionee upon exercise of the Option are issued to the Optionee, the Optionee shall have no rights as a shareholder with respect to such Option Shares. The Company shall make no adjustment for any dividends or distributions or other rights on or with respect to Option Shares for which the record date is prior to the issuance of that stock certificate, except as the Plan or the attached Award otherwise provides.

5. Restriction on Transfer of Option and of Option Shares. The Option evidenced hereby is nontransferable other than by will or the laws of descent and distribution and shall be exercisable during the lifetime of the Optionee only by the Optionee (or in the event of his Disability, by his personal representative) and after his death, only by his legatee or the executor of his estate.

6. Changes in Capitalization.

(a) If the number of shares of Common Stock shall be increased or decreased by reason of a subdivision or combination of shares of Common Stock, the payment of a stock dividend in shares of Common Stock or any other increase or decrease in the number of shares of Common Stock outstanding effected without receipt of consideration by the Company, an appropriate adjustment shall be made by the Committee, in a manner determined in its sole discretion, in the number and kind of Option Shares and in the Exercise Price.

(b) If the Company shall be the surviving corporation in any merger consolidation, reorganization, extraordinary dividend, spin-off or other change in the capital structure of the Company, the Optionee shall be entitled to purchase the number and class of securities to which a holder of the number of shares of Common Stock subject to the Option at the time of the transaction would have been entitled to receive as a result of such transaction, and a corresponding adjustment, where appropriate, shall be made in the Exercise Price. In the event of a Change in Control or other corporate transaction pursuant to which the Company is not the surviving entity, the Committee may provide for the assumption of the Option by the surviving entity or the substitution of a new option, adjusted in a manner

similar to that contemplated by the immediately preceding sentence; however, if the surviving entity does not agree to the assumption or substitution of the Option, the Committee may elect to terminate the Option Period as of the effective date of the Change in Control in consideration of the payment to the Optionee of the sum of the difference between the then aggregate Fair Market Value of the Common Stock and the aggregate Exercise Price for each vested Option Share which has not been exercised as of the effective date of the Change in Control. A dissolution or liquidation of the Company shall cause the Option to terminate as to any portion thereof not exercised as of the effective date of the dissolution or liquidation.

(c) The existence of the Plan and the Option granted pursuant to this Agreement shall not affect in any way the right or power of the Company to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Common Stock or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or any part of its business or assets, or any other corporate act or proceeding. Any adjustment pursuant to this Section may provide, in the Committee's discretion, for the elimination without payment therefor of any fractional shares that might otherwise become subject to any Option.

7. Special Limitation on Exercise. No purported exercise of the Option shall be effective without the approval of the Committee, which may be withheld to the extent that the exercise, either individually or in the aggregate together with the exercise of other previously exercised stock options and/or offers and sales pursuant to any prior or contemplated offering of securities, would, in the sole and absolute judgment of the Committee, require the filing of a registration statement with the United States Securities and Exchange Commission or with the securities commission of any state. If a registration statement is not in effect under the Securities Act of 1933 or any applicable state securities law with respect to shares of Common Stock purchasable or otherwise deliverable under the Option, the Optionee (a) shall deliver to the Company, prior to the exercise of the Option or as a condition to the delivery of Common Stock pursuant to the exercise of an Option exercise, such information, representations and warranties as the Company may reasonably request in order for the Company to be able to satisfy itself that the Option Shares are being acquired in accordance with the terms of an applicable exemption from the securities registration requirements of applicable federal and state securities laws and (b) shall agree that the shares of Common Stock so acquired will not be disposed of except pursuant to an effective registration statement, unless the Company shall have received an opinion of counsel that such disposition is exempt from such requirement under the Securities Act of 1933 and any applicable state securities law.

8. Legend on Stock Certificates. Certificates evidencing the Option Shares, to the extent appropriate at the time, shall have noted conspicuously on the certificates a legend intended to give all persons full notice of the existence of the conditions, restrictions, rights and obligations set forth herein and in the Plan.

9. Governing Laws. This Award and the Terms and Conditions shall be construed, administered and enforced according to the laws of the State of Wisconsin.

10. Successors. This Award and the Terms and Conditions shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and permitted assigns of the Optionee and the Company.

11. Notice. Except as otherwise specified herein, all notices and other communications under this Award shall be in writing and shall be deemed to have been given if personally delivered or if sent by registered or certified United States mail, return receipt requested, postage prepaid, addressed to the proposed recipient at the last known address of the recipient. Any party may designate any other address to which notices shall be sent by giving notice of the address to the other parties in the same manner as provided herein.

12. Severability. In the event that any one or more of the provisions or portion thereof contained in the Award and these Terms and Conditions shall for any reason be held to be invalid, illegal or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of the Award and these Terms and Conditions, and the Award and these Terms and Conditions shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein.

13. Entire Agreement. Subject to the terms and conditions of the Plan, the Award and the Terms and Conditions express the entire understanding of the parties with respect to the Option.

14. Violation. Any transfer, pledge, sale, assignment, or hypothecation of the Option or any portion thereof shall be a violation of the terms of the Award or these Terms and Conditions and shall be void and without effect.

15. Headings and Capitalized Terms. Section headings used herein are for convenience of reference only and shall not be considered in construing the Award or these Terms and Conditions. Capitalized terms used, but not defined, in either the Award or the Terms and Conditions shall be given the meaning ascribed to them in the Plan.

16. Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of the Award and these Terms and Conditions, the party or parties who are thereby aggrieved shall have the right to specific performance and injunction in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.

17. No Right to Continued Retention. Neither the establishment of the Plan nor the award of Option Shares hereunder shall be construed as giving the Optionee the right to continued employment with the Company or any affiliate.

18. Qualified Status of Option. In accordance with Section 2.4 of the Plan, the aggregate Fair Market Value (determined as of the date an Incentive Stock Option is granted) of the Option Shares which become exercisable for the first time by an individual during any calendar year shall not exceed $100,000. If the foregoing limitation is exceeded with respect to any portion of the Option Shares, that portion of the Option Shares which cause the limitation to be exceeded shall be treated as a Nonqualified Stock Option.

EXHIBIT 1

NOTICE OF EXERCISE OF
STOCK OPTION TO PURCHASE
COMMON STOCK OF
NICOLET BANKSHARES, INC.

Name
Address

Date

Nicolet Bankshares, Inc.
Post Office Box 23900
Green Bay, Wisconsin 54305-3900
Attn: President

Re: Exercise of Incentive Stock Option

Gentlemen:

Subject to acceptance hereof by Nicolet Bankshares, Inc. (the "Company") and pursuant to the provisions of the Nicolet Bankshares, Inc. 2002 Stock Incentive Plan (the "Plan"), I hereby give notice of my election to exercise options granted to me to purchase shares of Common Stock of the Company under the Incentive Stock Option Award (the "Award") dated as of
. The purchase shall take place as of , 200 (the
"Exercise Date").

On or before the Exercise Date, I will pay the applicable purchase price as follows:

[ ] by delivery of cash or a certified check for $ for the full purchase price payable to the order of Nicolet Bankshares, Inc.

[ ] by delivery of the purchase price by , a broker, dealer or other "creditor" as defined by Regulation T issued by the Board of Governors of the Federal Reserve System. I hereby authorize the Company to issue a stock certificate for the number of shares indicated above in the name of said broker, dealer or other creditor or its nominee pursuant to instructions received by the Company and to deliver said stock certificate directly to that broker, dealer or other creditor (or to such other party specified in the instructions received by the Company from the broker, dealer or other creditor) upon receipt of the purchase price.

The required federal, state and local income tax withholding obligations, if any, on the exercise of the Award shall also be paid on or before the Exercise Date in cash or with previously owned shares of Common Stock, as provided in the Award, or in the manner provided in the

Exhibit 1 - Page 1 of 3

Withholding Election previously tendered or to be tendered to the Company no later than the Exercise Date.

As soon as the stock certificate is registered in my name, please deliver it to me at the above address.

If the Common Stock being acquired is not registered for issuance to and resale by the Optionee pursuant to an effective registration statement on Form S-8 (or successor form) filed under the Securities Act of 1933, as amended (the "1933 Act"), I hereby represent, warrant, covenant, and agree with the Company as follows:

The shares of the Common Stock being acquired by me will be acquired for my own account without the participation of any other person, with the intent of holding the Common Stock for investment and without the intent of participating, directly or indirectly, in a distribution of the Common Stock and not with a view to, or for resale in connection with, any distribution of the Common Stock, nor am I aware of the existence of any distribution of the Common Stock;

I am not acquiring the Common Stock based upon any representation, oral or written, by any person with respect to the future value of, or income from, the Common Stock but rather upon an independent examination and judgment as to the prospects of the Company;

The Common Stock was not offered to me by means of publicly disseminated advertisements or sales literature, nor am I aware of any offers made to other persons by such means;

I am able to bear the economic risks of the investment in the Common Stock, including the risk of a complete loss of my investment therein;

I understand and agree that the Common Stock will be issued and sold to me without registration under any state law relating to the registration of securities for sale, and will be issued and sold in reliance on the exemptions from registration under the 1933 Act, provided by Sections 3(b) and/or 4(2) thereof and the rules and regulations promulgated thereunder;

The Common Stock cannot be offered for sale, sold or transferred by me other than pursuant to: (A) an effective registration under the 1933 Act or in a transaction otherwise in compliance with the 1933 Act; and (B) evidence satisfactory to the Company of compliance with the applicable securities laws of other jurisdictions. The Company shall be entitled to rely upon an opinion of counsel satisfactory to it with respect to compliance with the above laws;

The Company will be under no obligation to register the Common Stock or to comply with any exemption available for sale of the Common Stock without registration or filing, and the information or conditions necessary to permit routine sales of securities of the Company under Rule 144 under the 1933 Act are not now available and no assurance has been given that it or they will become available. The Company is under no obligation to act in any manner so as to make Rule 144 available with respect to the Common Stock;

Exhibit 1 - Page 2 of 3

I have and have had complete access to and the opportunity to review and make copies of all material documents related to the business of the Company, including, but not limited to, contracts, financial statements, tax returns, leases, deeds and other books and records. I have examined such of these documents as I wished and am familiar with the business and affairs of the Company. I realize that the purchase of the Common Stock is a speculative investment and that any possible profit therefrom is uncertain;

I have had the opportunity to ask questions of and receive answers from the Company and any person acting on its behalf and to obtain all material information reasonably available with respect to the Company and its affairs. I have received all information and data with respect to the Company which I have requested and which I have deemed relevant in connection with the evaluation of the merits and risks of my investment in the Company;

I have such knowledge and experience in financial and business matters that I am capable of evaluating the merits and risks of the purchase of the Common Stock hereunder and I am able to bear the economic risk of such purchase; and

The agreements, representations, warranties and covenants made by me herein extend to and apply to all of the Common Stock of the Company issued to me pursuant to this Award. Acceptance by me of the certificate representing such Common Stock shall constitute a confirmation by me that all such agreements, representations, warranties and covenants made herein shall be true and correct at that time.

I understand that the certificates representing the shares being purchased by me in accordance with this notice shall bear a legend referring to the foregoing covenants, representations and warranties and restrictions on transfer, and I agree that a legend to that effect may be placed on any certificate which may be issued to me as a substitute for the certificates being acquired by me in accordance with this notice. I further understand that capitalized terms used in this Notice of Exercise without definition shall have the meanings given to them in the Plan.

Very truly yours,

AGREED TO AND ACCEPTED:

NICOLET BANKSHARES, INC.

By:

Title:

Number of Shares
Exercised:

Number of Shares
Remaining: Date:

Exhibit 1 - Page 3 of 3

EXHIBIT 2

NOTICE OF WITHHOLDING ELECTION
NICOLET BANKSHARES, INC.

TO:
FROM:

RE: Withholding Election

This election relates to the Option identified in Paragraph 3 below. I hereby certify that:

(1) My correct name and social security number and my current address are set forth at the end of this document.

(2) I am (check one, whichever is applicable).

[ ] the original recipient of the Option.

[ ] the legal representative of the estate of the original recipient of the Option.

[ ] the legal guardian of the original recipient of the Option.

(3) The Option to which this election relates was issued under the Nicolet Bankshares, Inc. 2002 Stock Incentive Plan (the "Plan") in the name of for the purchase of a total of shares

of Common Stock of the Company. This election relates to shares of Common Stock issuable upon exercise of the Option, provided that the numbers set forth above shall be deemed changed as appropriate to reflect the applicable Plan provisions.

(4) In connection with any exercise of the Option with respect to the Common Stock, I hereby elect:

[ ] to have certain of the shares issuable pursuant to the exercise withheld by the Company for the purpose of having the value of the shares applied to pay federal, state, and local, if any, taxes arising from the exercise.

[ ] to tender shares held by me for a period of at least six (6) months prior to the exercise of the Option for the purpose of having the value of the shares applied to pay such taxes.

The shares to be withheld or tendered, as applicable, shall have, as of the Tax Date applicable to the exercise, a Fair Market Value equal to the minimum statutory tax withholding requirement under federal, state, and local law in connection with the exercise.

Exhibit 2 - Page 1 of 2

(5) This Withholding Election is made no later than the Tax Date and is otherwise timely made pursuant to the Plan.

(6) I understand that this Withholding Election may not be revised, amended or revoked by me.

(7) I further understand that, if applicable, the Company shall withhold from the shares a whole number of shares having the value specified in Paragraph 4 above.

(8) The Plan has been made available to me by the Company. I have read and understand the Plan and I have no reason to believe that any of the conditions to the making of this Withholding Election have not been met.

(9) Capitalized terms used in this Notice of Withholding Election without definition shall have the meanings given to them in the Plan.

Dated:
      ---------------------------      -----------------------------------------
                                       Signature

---------------------------------      -----------------------------------------
Social Security Number                 Name (Printed)

                                       -----------------------------------------
                                       Street Address

                                       -----------------------------------------
                                       City, State, Zip Code

Exhibit 2 - Page 2 of 2

SCHEDULE 1
VESTING SCHEDULE
INCENTIVE STOCK OPTION AWARD
ISSUED PURSUANT TO THE
NICOLET BANKSHARES, INC.
2002 STOCK INCENTIVE PLAN

A. The Option Shares shall become vested Option Shares following completion of the years of service as an employee of the Company or any Parent or Subsidiary as indicated in the schedule below.

Percentage of Option Shares               Years of Service After
Which are Vested Shares                   the Grant Date
-----------------------                   --------------

          33 1/3%                                1
          66 2/3%                                2
          100%                                   3

B. Notwithstanding Part A, in the event of a Change in Control subsequent to the third anniversary of the date the Bank opened for business, the Option will be fully vested as of a date determined by the Committee which is no less than thirty (30) days prior to the effective date of the Change in Control.

C. For purposes of the Vesting Schedule, Optionee shall be granted a year of service for each twelve-consecutive-month period following the grant date and during which Optionee continues, at all times, as an employee of the Company or any Parent or Subsidiary.

Schedule 1 - Page 1 of 1

NONQUALIFIED STOCK OPTION AWARD
PURSUANT TO THE NICOLET BANKSHARES, INC.
2002 STOCK INCENTIVE PLAN

THIS AWARD is made as of the Grant Date by NICOLET BANKSHARES, INC. (the "Company") to (the "Optionee").

Upon and subject to the Terms and Conditions attached hereto and incorporated herein by reference, the Company hereby awards as of the Grant Date to Optionee a nonqualified stock option (the "Option"), as described below, to purchase the Option Shares.

A. Grant Date: .

B. Type of Option: Nonqualified Stock Option.

C. Plan under which granted: Nicolet Bankshares, Inc. 2002 Stock Incentive Plan.

D. Option Shares: All or any part of shares of the Company's $.01 par value common stock (the "Common Stock"), subject to adjustment as provided in the attached Terms and Conditions.

E. Exercise Price: $10.00 per share, subject to adjustment as provided in the attached Terms and Conditions.

F. Option Period: The Option may be exercised only during the Option Period which commences on the Grant Date and ends, generally, on the earliest of (a) the tenth (10th) anniversary of the Grant Date; (b) three (3) months following the date the Optionee ceases to be an employee of the Company (including any Parent or Subsidiary) except as provided under clause (c); or (c) one (1) year following the date the Optionee ceases to be an employee of the Company (including any Parent or Subsidiary) due to death or Disability; provided that the Option may be exercised as to no more than the vested Option Shares, determined pursuant to the Vesting Schedule. Note that other limitations to exercising the Option, as described in the attached Terms and Conditions, may apply.

G. Vesting Schedule: The Option Shares shall become vested in accordance with Schedule 1 hereto.

IN WITNESS WHEREOF, the Company has executed and sealed this Award as of the Grant Date set forth above.

NICOLET BANKSHARES, INC.

By:

Title:

TERMS AND CONDITIONS
TO THE
NONQUALIFIED STOCK OPTION AWARD
PURSUANT TO THE NICOLET BANKSHARES, INC.
2002 STOCK INCENTIVE PLAN

1. Exercise of Option. Subject to the provisions provided herein or in the Award made pursuant to the Nicolet Bankshares, Inc. 2002 Stock Incentive Plan:

(b) payment to the Company of the Exercise Price multiplied by the number of Option Shares being purchased (the "Purchase Price") as provided in Section 3.

Upon acceptance of such notice and receipt of payment in full of the Purchase Price and any tax withholding liability, to the extent applicable, the Company shall cause to be issued a certificate representing the Option Shares purchased.

2. Withholding. To the extent necessary, the Optionee must satisfy his federal, state, and local, if any, withholding taxes imposed by reason of the exercise of the Option either by paying to the Company the full amount of the withholding obligation (i) in cash; (ii) by tendering shares of Common Stock which have been owned by the Optionee for at least six (6) months prior to the date of exercise having a Fair Market Value equal to the withholding obligation;
(iii) by electing, irrevocably and in writing (the "Withholding Election"), to have the smallest number of whole shares of Common Stock withheld by the Company which, when multiplied by the Fair Market Value of the Common Stock as of the date the Option is exercised, is sufficient to satisfy the amount of withholding tax; or (iv) by any combination of the above. Optionee may make a Withholding Election only if the following conditions are met:

(a) the Withholding Election is made on or prior to the date on which the amount of tax required to be withheld is determined (the "Tax Date") by executing and

delivering to the Company a properly completed Notice of Withholding Election in substantially the form attached hereto as Exhibit 2; and

(b) any Withholding Election will be irrevocable; however, the Committee may, in its sole discretion, disapprove and give no effect to the Withholding Election.

6. Changes in Capitalization.

to terminate the Option Period as of the effective date of the Change in Control in consideration of the payment to the Optionee of the sum of the difference between the then aggregate Fair Market Value of the Common Stock and the aggregate Exercise Price for each vested Option Share which has not been exercised as of the effective date of the Change in Control. A dissolution or liquidation of the Company shall cause the Option to terminate as to any portion thereof not exercised as of the effective date of the dissolution or liquidation.

9. Governing Laws. This Award and the Terms and Conditions shall be construed, administered and enforced according to the laws of the State of Wisconsin.

13. Entire Agreement. Subject to the terms and conditions of the Plan, the Award and the Terms and Conditions express the entire understanding of the parties with respect to the Option.

EXHIBIT 1

NOTICE OF EXERCISE OF
STOCK OPTION TO PURCHASE
COMMON STOCK OF
NICOLET BANKSHARES, INC.

Name
Address

Date

Nicolet Bankshares, Inc.
Post Office Box 23900
Green Bay, Wisconsin 54305-3900
Attn: President

Re: Exercise of Nonqualified Stock Option

Ladies and Gentlemen:

Subject to acceptance hereof by Nicolet Bankshares, Inc. (the "Company") and pursuant to the provisions of the Nicolet Bankshares, Inc. 2002 Stock Incentive Plan (the "Plan"), I hereby give notice of my election to exercise options granted to me to purchase shares of Common Stock of the Company under the Nonqualified Stock Option Award (the "Award") dated as of
. The purchase shall take place as of , 200 (the
"Exercise Date").

On or before the Exercise Date, I will pay the applicable purchase price as follows:

[ ] by delivery of cash or a certified check for $ for the full purchase price payable to the order of Nicolet Bankshares, Inc.

[ ] by delivery of the purchase price by _________________________, a broker, dealer or other "creditor" as defined by Regulation T issued by the Board of Governors of the Federal Reserve System. I hereby authorize the Company to issue a stock certificate for the number of shares indicated above in the name of said broker, dealer or other creditor or its nominee pursuant to instructions received by the Company and to deliver said stock certificate directly to that broker, dealer or other creditor (or to such other party specified in the instructions received by the Company from the broker, dealer or other creditor) upon receipt of the purchase price.

Exhibit 1 - Page 1 of 3

Withholding Election previously tendered or to be tendered to the Company no later than the Exercise Date.

As soon as the stock certificate is registered in my name, please deliver it to me at the above address.

The Common Stock was not offered to me by means of publicly disseminated advertisements or sales literature, nor am I aware of any offers made to other persons by such means;

I am able to bear the economic risks of the investment in the Common Stock, including the risk of a complete loss of my investment therein;

Exhibit 1 - Page 2 of 2

Very truly yours,

AGREED TO AND ACCEPTED:

NICOLET BANKSHARES, INC.

By:

Title:

Number of Shares
Exercised:

Number of Shares
Remaining: Date:

Exhibit 1 - Page 3 of 2

EXHIBIT 2

NOTICE OF WITHHOLDING ELECTION
NICOLET BANKSHARES, INC.

TO:
FROM:

RE: Withholding Election

This election relates to the Option identified in Paragraph 3 below. I hereby certify that:

(1) My correct name and social security number and my current address are set forth at the end of this document.

(2) I am (check one, whichever is applicable).

[ ] the original recipient of the Option.

[ ] the legal representative of the estate of the original recipient of the Option.

[ ] the legal guardian of the original recipient of the Option.

(3) The Option to which this election relates was issued under the Nicolet Bankshares, Inc. 2002 Stock Incentive Plan (the "Plan") in the name of for the purchase of a total of shares

of Common Stock of the Company. This election relates to _______________ shares of Common Stock issuable upon exercise of the Option, provided that the numbers set forth above shall be deemed changed as appropriate to reflect the applicable Plan provisions.

(4) In connection with any exercise of the Option with respect to the Common Stock, I hereby elect:

[ ] to tender shares held by me for a period of at least six (6) months prior to the exercise of the Option for the purpose of having the value of the shares applied to pay such taxes.

Exhibit 2 - Page 1 of 2

(5) This Withholding Election is made no later than the Tax Date and is otherwise timely made pursuant to the Plan.

(6) I understand that this Withholding Election may not be revised, amended or revoked by me.

(7) I further understand that, if applicable, the Company shall withhold from the shares a whole number of shares having the value specified in Paragraph 4 above.

(9) Capitalized terms used in this Notice of Withholding Election without definition shall have the meanings given to them in the Plan.

Dated:
      ---------------------------      -----------------------------------------
                                       Signature

---------------------------------      -----------------------------------------
Social Security Number                 Name (Printed)

                                       -----------------------------------------
                                       Street Address

                                       -----------------------------------------
                                       City, State, Zip Code

Exhibit 2 - Page 2 of 2

SCHEDULE 1
VESTING SCHEDULE
NONQUALIFIED STOCK OPTION AWARD
ISSUED PURSUANT TO THE
NICOLET BANKSHARES, INC.
2002 STOCK INCENTIVE PLAN

A. The Option Shares shall become vested Option Shares following completion of the years of service as an employee of the Company or any Parent or Subsidiary as indicated in the schedule below.

Percentage of Option Shares              Years of Service After
Which are Vested Shares                  the Grant Date
--------------------------               ----------------------

         33 1/3%                                   1
         66 2/3%                                   2
         100%                                      3

Schedule 1 - Page 1 of 1

AMENDMENT TO
NICOLET BANKSHARES, INC.
2002 STOCK INCENTIVE PLAN

This Amendment is made this 18th day of October, 2005, by NICOLET

BANKSHARES, INC.

INTRODUCTION

Nicolet Bankshares, Inc. (the "Company") maintains the 2002 Stock Incentive Plan (the "Plan"). The Company now desires to amend the Plan to increase the number of shares of the Company's common stock authorized and reserved for issuance under the Plan from 125,000 to 525,000.

NOW, THEREFORE, Section 2.2 of the Plan is hereby amended by deleting "125,000" therefrom and inserting in lieu thereof "525,000."

Except as specifically amended hereby, the Plan shall remain in full force and affect as prior to this Amendment.

This Amendment shall be submitted to the stockholders of the Company for approval within twelve (12) months of the adoption of this Amendment by the Board of Directors and if such stockholder approval is not obtained, the adoption of this Amendment and any actions taken pursuant to this Amendment shall be rendered null and void.

IN WITNESS WHEREOF, the Company has executed this Amendment as of the day and year first above written.

NICOLET BANKSHARES, INC.

By: /s/ Michael E. Daniels
    ----------------------

Title: EVP/Secretary
       -------------------

SECOND AMENDMENT TO THE
NICOLET BANKSHARES, INC.
2002 STOCK INCENTIVE PLAN

This Second Amendment is made this 19th day of February, 2008, by NICOLET BANKSHARES, INC., a corporation organized under the laws of the State of Wisconsin (the "Company").

INTRODUCTION

The Company maintains the 2002 Stock Incentive Plan (the "Plan"), which was last amended on October 18, 2005. The Company now desires to amend the Plan to increase the number of shares of the Company's common stock authorized and reserved for issuance under the Plan from 525,000 to 1,125,000.

NOW, THEREFORE, Section 2.2 of the Plan is hereby amended by deleting "525,000" therefrom and inserting in lieu thereof "1,125,000."

Except as specifically amended hereby, the Plan shall remain in full force and affect as prior to this Second Amendment.

This Second Amendment shall be submitted to the stockholders of the Company for approval within twelve (12) months of the adoption of this Second Amendment by the Board of Directors and if such stockholder approval is not obtained, the adoption of this Second Amendment and any actions taken pursuant to this Second Amendment shall be rendered null and void.

IN WITNESS WHEREOF, the Company has executed this Second Amendment as of the day and year first above written.

NICOLET BANKSHARES, INC.

By: /s/ Michael E. Daniels
    ----------------------

Title: EVP/Secretary
       -------------------

[FORM OF INCENTIVE STOCK OPTION AWARD
FOR AWARDS GRANTED SUBSEQUENT TO 2007]

INCENTIVE STOCK OPTION AWARD
PURSUANT TO THE NICOLET BANKSHARES, INC.
2002 STOCK INCENTIVE PLAN

THIS AWARD is made as of the Grant Date by NICOLET BANKSHARES, INC. (the "Company") to _________________ (the "Optionee").

A. Grant Date: ___________________.

B. Type of Option: Incentive Stock Option.

C. Plan under which granted: Nicolet Bankshares, Inc. 2002 Stock Incentive Plan.

D. Option Shares: All or any part of _____ shares of the Company's $.01 par value common stock (the "Common Stock"), subject to adjustment as provided in the attached Terms and Conditions.

E. Exercise Price: $______ per share, subject to adjustment as provided in the attached Terms and Conditions. The Exercise Price is, in the judgment of the Committee, not less than 100% of the Fair Market Value of a share of Common Stock on the Grant Date or, in the case of an Over 10% Owner, not less than 110% of the Fair Market Value of a share of Common Stock on the Grant Date.

F. Option Period: The Option may be exercised only during the Option Period which commences on the Grant Date and ends, generally, on the earliest of (a) the tenth (10th) anniversary of the Grant Date (unless the Optionee is an Over 10% Owner, in which case the fifth
(5th) anniversary of the Grant Date); (b) ninety (90) days following the date the Optionee ceases to be an employee of the Company (including any Parent or Subsidiary) except as provided under clause
(c); or (c) one (1) year following the date the Optionee ceases to be an employee of the Company (including any Parent or Subsidiary) due to death or Disability; provided that the Option may be exercised as to no more than the vested Option Shares, determined pursuant to the Vesting Schedule. Note that other limitations to exercising the Option, as described in the attached Terms and Conditions, may apply.

G. Vesting Schedule: The Option Shares shall become vested in accordance with Schedule 1 hereto.

IN WITNESS WHEREOF, the Company and the Optionee have executed and sealed this Award as of the Grant Date set forth above.

NICOLET BANKSHARES, INC.

By: __________________________
Michael E. Daniels
Executive Vice President/Secretary

TERMS AND CONDITIONS
TO THE
INCENTIVE STOCK OPTION AWARD
PURSUANT TO THE NICOLET BANKSHARES, INC.
2002 STOCK INCENTIVE PLAN

1. Exercise of Option. Subject to the provisions provided herein or in the Award made pursuant to the Nicolet Bankshares, Inc. 2002 Stock Incentive Plan:

(a) the Option may be exercised with respect to all or any portion of the vested Option Shares at any time during the Option Period by the delivery to the Company, at its principal place of business, of a written notice of exercise in substantially the form attached hereto as Exhibit 1, which shall be actually delivered to the Company no earlier than thirty
(30) days and no later than ten (10) days prior to the date upon which Optionee desires to exercise all or any portion of the Option; and

(b) payment to the Company of the Exercise Price multiplied by the number of Option Shares being purchased (the "Purchase Price") as provided in Section 3.

(c) Notwithstanding any other provision of this Agreement, in the event that the capital of the Bank (as defined in the Plan) falls below the minimum requirements determined by the primary federal regulator of the Bank (the "Regulator"), the Regulator may direct the Company to require the Optionee to exercise, or otherwise forfeit, the Option in whole or in part. If the Regulator gives such direction, the Company will notify the Optionee within forty-five (45) days from the date the Regulator notifies the Company in writing that the Optionee must exercise, or otherwise forfeit, the Option in whole or in part. If the Optionee does not exercise the Option in accordance with the Company's direction within twenty-one (21) days of the Company's notification to the Optionee, the Committee may provide for the cancellation of the Option.

2. Withholding. To the extent this Award is treated as a Nonqualified Stock Option pursuant to Section 19 hereof, the Optionee must satisfy his federal, state, and local, if any, withholding taxes imposed by reason of the exercise of the Option either by paying to the Company the full amount of the withholding obligation (i) in cash; (ii) by tendering shares of Common Stock which have been owned by the Optionee for at least six (6) months prior to the date of exercise having a Fair Market Value equal to the withholding obligation;
(iii) by electing, irrevocably and in writing (the "Withholding Election"), to have the smallest number of whole shares of Common Stock withheld by the Company which, when multiplied by the Fair Market Value of the Common Stock as of the date the Option is exercised, is sufficient to satisfy the amount of withholding tax; or (iv) by any combination of the above. Optionee may make a Withholding Election only if the following conditions are met:

(b) any Withholding Election will be irrevocable; however, the Committee may, in its sole discretion, disapprove and give no effect to the Withholding Election.

6. Right of First Refusal.

(a) Required Notice. If, prior to the effective date of any offering by the Company of its equity securities to the public pursuant to an effective registration statement under the Securities Act of 1933 or any comparable statement under any similar federal statute then in force in which the equity securities are sold or prior to a Change in Control, the Optionee (or, if the Option Shares are owned or held by a transferee, such transferee) shall receive a bona fide offer from a third party to purchase any number of Option Shares held by the Optionee pursuant to the exercise of this Option (the "Exercised Option Shares"), which offer the Optionee or such transferee desires to accept, the Optionee or such transferee, as the case may be, before consummating the sale to such third party, shall notify the Company in writing of such offer, which notice shall state the number of Exercised Option Shares subject to such offer and the price and terms of payment offered by such third party. The Company shall have thirty (30) days after receipt by it of such notice within which to notify the Optionee or such transferee, as the case may be, in writing, of its election to purchase, or cause its designee to purchase, all or a portion of the Exercised Option Shares which are the subject of such third party offer at the same price and upon the same terms and conditions as are contained in such third party offer (subject to the provisions of Section
6(c)(iii)). Failure by the Company to give such written notice within such thirty (30) day period shall constitute a rejection of such offer by the Company.

(b) Consummation of Purchase. If the Company shall reject such offer or fail timely to accept such offer, or if after timely accepting such offer the Company, or its designee, shall fail timely to consummate the purchase of the Exercised Option Shares which are the subject of that offer, then the Optionee or such transferee, as the case may be, shall be free to sell the Exercised Option Shares which are the subject of such third party offer to the third party at the price and upon the same terms

-2-

and conditions as are set forth in the third party offer; provided, however, if the Optionee or such transferee, as the case may be, does not consummate such sale to the third party within sixty (60) days after rejection by the Company of such offer or, if such offer is timely accepted by the Company, after failure of the Company, or its designee, timely to consummate such purchase, the Exercised Option Shares which were the subject of such third party offer or agreement shall once again become subject to the provisions of this Section 6, and any subsequent disposition of such Exercised Option Shares shall be made only after compliance with the terms of this Section 6. If the Company timely accepts such offer, the consummation by the Company, or its designee, of the purchase of the Exercised Option Shares which are the subject of that offer shall be held at the offices of the Company not later than thirty
(30) days following the date the Company gives written notice of its acceptance of such offer.

(c) Payment. The price for Exercised Option Shares repurchased by the Company shall be payable at the election of the Company as follows:

(i) Upon the terms of payment as are contained in the third party offer; or

(ii) All in cash at the closing; or

(iii) If the purchase price equals or exceeds $10,000, the Company may pay all or a portion of the purchase price in substantially equal installments over a three-year period. Interest on the unpaid balance shall be at the "prime rate" reported in the Wall Street Journal on the first business day preceding the date of repurchase. If the Company elects to pay any portion of the purchase price in installments, the Company shall have the right to pay the entire remaining purchase price at any time during the installment period.

(d) The rights of the Company and the obligations of the Optionee under this Section 6 are in addition to and not in lieu of any first refusal rights of the Company and obligations of the Optionee under any other agreement.

7. Changes in Capitalization.

(b) If the Company shall be the surviving corporation in any merger consolidation, extraordinary dividend (including spin-off) recapitalization, reclassification of shares or similar reorganization, the Optionee shall be entitled to purchase the number and class of securities to which a holder of the number of shares of Common Stock subject to the Option at the time of the transaction would have been entitled to receive as a result of such transaction, and a corresponding adjustment, where appropriate, shall be made in the Exercise Price. In the event of a Change in Control or other corporate transaction pursuant to which the Company is not the surviving entity, the Committee may provide for the assumption of the Option by the surviving entity or the substitution of a new option, adjusted in a manner similar to that contemplated by the immediately preceding sentence; however, if the surviving entity does not agree to the assumption or substitution of the

-3-

Option, the Committee may elect to terminate the Option Period as of the effective date of the Change in Control in consideration of the payment to the Optionee of the sum of the difference between the then aggregate Fair Market Value of the Common Stock and the aggregate Exercise Price for each vested Option Share which has not been exercised as of the effective date of the Change in Control. A dissolution or liquidation of the Company shall cause the Option to terminate as to any portion thereof not exercised as of the effective date of the dissolution or liquidation.

8. Special Limitation on Exercise. No purported exercise of the Option shall be effective without the approval of the Committee, which may be withheld to the extent that the exercise, either individually or in the aggregate together with the exercise of other previously exercised stock options and/or offers and sales pursuant to any prior or contemplated offering of securities, would, in the sole and absolute judgment of the Committee, require the filing of a registration statement with the United States Securities and Exchange Commission or with the securities commission of any state. If a registration statement is not in effect under the Securities Act of 1933 or any applicable state securities law with respect to shares of Common Stock purchasable or otherwise deliverable under the Option, the Optionee (a) shall deliver to the Company, prior to the exercise of the Option or as a condition to the delivery of Common Stock pursuant to the exercise of an Option exercise, such information, representations and warranties as the Company may reasonably request in order for the Company to be able to satisfy itself that the Option Shares are being acquired in accordance with the terms of an applicable exemption from the securities registration requirements of applicable federal and state securities laws and (b) shall agree that the shares of Common Stock so acquired will not be disposed of except pursuant to an effective registration statement, unless the Company shall have received an opinion of counsel that such disposition is exempt from such requirement under the Securities Act of 1933 and any applicable state securities law.

9. Legend on Stock Certificates. Certificates evidencing the Option Shares, to the extent appropriate at the time, shall have noted conspicuously on the certificates a legend intended to give all persons full notice of the existence of the conditions, restrictions, rights and obligations set forth herein and in the Plan.

10. Governing Laws. This Award and the Terms and Conditions shall be construed, administered and enforced according to the laws of the State of Wisconsin.

11. Successors. This Award and the Terms and Conditions shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and permitted assigns of the Optionee and the Company.

12. Notice. Except as otherwise specified herein, all notices and other communications under this Award shall be in writing and shall be deemed to have been given if personally delivered or if sent by registered or certified United States mail, return receipt requested, postage prepaid, addressed to the proposed recipient at the last known address of the recipient. Any party may designate any other address to which notices shall be sent by giving notice of the address to the other parties in the same manner as provided herein.

-4-

13. Severability. In the event that any one or more of the provisions or portion thereof contained in the Award and these Terms and Conditions shall for any reason be held to be invalid, illegal or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of the Award and these Terms and Conditions, and the Award and these Terms and Conditions shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein.

14. Entire Agreement. Subject to the terms and conditions of the Plan, the Award and the Terms and Conditions express the entire understanding of the parties with respect to the Option.

15. Violation. Any transfer, pledge, sale, assignment, or hypothecation of the Option or any portion thereof shall be a violation of the terms of the Award or these Terms and Conditions and shall be void and without effect.

16. Headings and Capitalized Terms. Section headings used herein are for convenience of reference only and shall not be considered in construing the Award or these Terms and Conditions. Capitalized terms used, but not defined, in either the Award or the Terms and Conditions shall be given the meaning ascribed to them in the Plan.

17. Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of the Award and these Terms and Conditions, the party or parties who are thereby aggrieved shall have the right to specific performance and injunction in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.

18. No Right to Continued Retention. Neither the establishment of the Plan nor the award of Option Shares hereunder shall be construed as giving the Optionee the right to continued employment with the Company or any affiliate.

19. Qualified Status of Option. In accordance with Section 2.4 of the Plan, the aggregate Fair Market Value (determined as of the date an Incentive Stock Option is granted) of the Option Shares which become exercisable for the first time by an individual during any calendar year shall not exceed $100,000. If the foregoing limitation is exceeded with respect to any portion of the Option Shares, that portion of the Option Shares which cause the limitation to be exceeded shall be treated as a Non-Qualified Stock Option.

-5-

EXHIBIT 1

NOTICE OF EXERCISE OF
STOCK OPTION TO PURCHASE
COMMON STOCK OF
NICOLET BANKSHARES, INC.

Name ______________________________
Address ___________________________
Date ______________________________

Nicolet Bankshares, Inc.
Post Office Box 23900
Green Bay, Wisconsin 54305-3900
Attn: President

Re: Exercise of Incentive Stock Option

Greetings:

Subject to acceptance hereof by Nicolet Bankshares, Inc. (the "Company") and pursuant to the provisions of the Nicolet Bankshares, Inc.2002 Stock Incentive Plan (the "Plan"), I hereby give notice of my election to exercise options granted to me to purchase ______________ shares of Common Stock of the Company under the Incentive Stock Option Award (the "Award") dated as of ____________. The purchase shall take place as of __________, 200__ (the "Exercise Date").

On or before the Exercise Date, I will pay the applicable purchase price as follows:

[ ] by delivery of cash or a certified check for $___________ for the full purchase price payable to the order of Nicolet Bankshares, Inc.

The required federal, state and local income tax withholding obligations, if any, on the exercise of the Award shall also be paid on or before the

Exhibit 1 - Page 1 of 3

Exercise Date in cash or with previously owned shares of Common Stock, as provided in the Award, or in the manner provided in the Withholding Election previously tendered or to be tendered to the Company no later than the Exercise Date.

As soon as the stock certificate is registered in my name, please deliver it to me at the above address.

The Common Stock was not offered to me by means of publicly disseminated advertisements or sales literature, nor am I aware of any offers made to other persons by such means;

I am able to bear the economic risks of the investment in the Common Stock, including the risk of a complete loss of my investment therein;

I have and have had complete access to and the opportunity to review and make copies of all material documents related to the business of the

Exhibit 1 - Page 2 of 3

Company, including, but not limited to, contracts, financial statements, tax returns, leases, deeds and other books and records. I have examined such of these documents as I wished and am familiar with the business and affairs of the Company. I realize that the purchase of the Common Stock is a speculative investment and that any possible profit therefrom is uncertain;

I further understand and agree to the Right of First Refusal and related transfer restrictions set forth in Section 6 of the Award and that any transferee of the Shares will be required to agree to such restrictions.

Very truly yours,

AGREED TO AND ACCEPTED:

NICOLET BANKSHARES, INC.

By: _______________________________

Title: ____________________________

Number of Shares
Exercised: ________________________

Number of Shares
Remaining: ________________________ Date: __________________________

Exhibit 1 - Page 3 of 3

EXHIBIT 2

NOTICE OF WITHHOLDING ELECTION
NICOLET BANKSHARES, INC.

TO:      _____________________________________

FROM:    _____________________________________

RE:      Withholding Election

This election relates to the Option identified in Paragraph 3 below. I hereby certify that:

(1) My correct name and social security number and my current address are set forth at the end of this document.

(2) I am (check one, whichever is applicable).

[ ] the original recipient of the Option.

[ ] the legal representative of the estate of the original recipient of the Option.

[ ] the legal guardian of the original recipient of the Option.

(3) The Option to which this election relates was issued under the Nicolet Bankshares, Inc. 2002 Stock Incentive Plan (the "Plan") in the name of _________________________ for the purchase of a total of _________ shares of Common Stock of the Company. This election relates to _______________ shares of Common Stock issuable upon exercise of the Option, provided that the numbers set forth above shall be deemed changed as appropriate to reflect the applicable Plan provisions.

(4) In connection with any exercise of the Option with respect to the Common Stock, I hereby elect:

[ ] to tender shares held by me for a period of at least six (6) months prior to the exercise of the Option for the purpose of having the value of the shares applied to pay such taxes.

Exhibit 2 - Page 1 of 2

(5) This Withholding Election is made no later than the Tax Date and is otherwise timely made pursuant to the Plan.

(6) I understand that this Withholding Election may not be revised, amended or revoked by me.

(7) I further understand that, if applicable, the Company shall withhold from the shares a whole number of shares having the value specified in Paragraph 4 above.

(9) Capitalized terms used in this Notice of Withholding Election without definition shall have the meanings given to them in the Plan.

Dated: _________________________           __________________________________
                                           Signature

________________________________           __________________________________
Social Security Number                     Name (Printed)

                                           __________________________________
                                           Street Address

                                           __________________________________
                                           City, State, Zip Code

Exhibit 2 - Page 2 of 2

SCHEDULE 1
VESTING SCHEDULE
INCENTIVE STOCK OPTION AWARD
ISSUED PURSUANT TO THE
NICOLET BANKSHARES, INC.
2002 STOCK INCENTIVE PLAN

A. The Option Shares shall become vested Option Shares following completion of the years of service as an employee of the Company or any Parent or Subsidiary as indicated in the schedule below.

                                        Years of Service
Percentage of Option Shares             After the
Which are Vested Shares                 Grant Date
-----------------------                 ----------
         20%                                 1
         40%                                 2
         60%                                 3
         80%                                 4
        100%                                 5

B. Notwithstanding Part A, in the event of a Change in Control, the Option will be fully vested as of a date determined by the Committee which is no less than thirty (30) days prior to the effective date of the Change in Control.

C. For purposes of the Vesting Schedule, Optionee shall be granted a year of service for each twelve-consecutive-month period following the Grant Date and during which Optionee continues, at all times, as an employee of the Company or any Parent or Subsidiary.

Schedule 1 - Page 1 of 1

Exhibit 10.5

NICOLET BANKSHARES, INC.

2011 LONG TERM INCENTIVE PLAN

NICOLET BANKSHARES, INC.

2011 LONG TERM INCENTIVE PLAN

TABLE OF CONTENTS

		Page
SECTION I. DEFINITIONS		1

1.1	D EFINITIONS	1

SECTION 2 THE LONG-TERM INCENTIVE PLAN		5

2.1	P URPOSE OF THE P LAN	5
2.2	S TOCK S UBJECT TO THE P LAN	5
2.3	A DMINISTRATION OF THE P LAN	5
2.4	E LIGIBILITY AND L IMITS	6

SECTION 3 TERMS OF AWARDS		6

3.1	T ERMS AND C ONDITIONS OF A LL A WARDS	6
3.2	T ERMS AND C ONDITIONS OF O PTIONS	7
3.3	T ERMS AND C ONDITIONS OF S TOCK A PPRECIATION R IGHTS	9
3.4	T ERMS AND C ONDITIONS OF O THER S TOCK-BASED A WARDS	10
3.5	T ERMS AND C ONDITIONS OF C ASH P ERFORMANCE A WARDS	10
3.6	T REATMENT OF A WARDS ON T ERMINATION OF S ERVICE	11

SECTION 4 RESTRICTIONS ON STOCK		11

4.1	E SCROW OF S HARES	11
4.2	R ESTRICTIONS ON T RANSFER	12

SECTION 5 GENERAL PROVISIONS		12

5.1	W ITHHOLDING	12
5.2	C HANGES IN C APITALIZATION; M ERGER; L IQUIDATION	12
5.3	C ASH A WARDS	13
5.4	C OMPLIANCE WITH C ODE	13
5.5	R IGHT TO T ERMINATE E MPLOYMENT OR S ERVICE	14
5.6	N ON-ALIENATION OF B ENEFITS	14
5.7	R ESTRICTIONS ON D ELIVERY AND S ALE OF S HARES; L EGENDS	14
5.8	L ISTING AND L EGAL C OMPLIANCE	15
5.9	T ERMINATION AND A MENDMENT OF THE P LAN	15
5.10	S TOCKHOLDER A PPROVAL	15
5.11	C HOICE OF L AW	15
5.12	E FFECTIVE D ATE OF P LAN	15

NICOLET NATIONAL BANKSHARES, INC.

2011 LONG-TERM INCENTIVE PLAN

SECTION I. DEFINITIONS

1.1

Definitions . Whenever used herein, the masculine pronoun will be deemed to include the feminine, and the singular to include the plural, unless the context clearly indicates otherwise, and the following capitalized words and phrases are used herein with the meaning thereafter ascribed:

(a)

“ Affiliate ” means:

(1)

Any Subsidiary or Parent;

(2)

An entity that directly or through one or more intermediaries controls, is controlled by, or is under common control with the Company, as determined by the Company; or

(3)

Any entity in which the Company has such a significant interest that the Company determines it should be deemed an “Affiliate”, as determined in the sole discretion of the Company.

(b)

“ Award Agreement ” means any written agreement, contract, or other instrument or document as may from time to time be designated by the Company as evidencing an Award granted under the Plan.

(c)

“ Award Program ” means a written program established by the Committee, pursuant to which Awards are granted under the Plan under uniform terms, conditions and restrictions set forth in such written program.

(d)

“ Awards ” means, collectively, Cash Performance Awards, Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, and Other Stock-Based Awards.

(e)

“ Board of Directors ” means the board of directors of the Company.

(f)

“ Cash Performance Award ” means an Award described in Section 3.5 that is settled in cash and does not have a value that is derivative of the value of, determined by reference to a number of shares of, or determined by reference to dividends payable on, Stock.

(g)

“ Code ” means the Internal Revenue Code of 1986, as amended.

(h)

“ Committee ” means the committee appointed by the Board of Directors to administer the Plan; provided that, if no such committee is appointed, the Board of Directors in its entirety shall constitute the Committee.

(i)

“ Company ” means Nicolet Bankshares, Inc., a bank holding company incorporated under the laws of Wisconsin.

(j)

“ Disability ” unless otherwise defined by the Committee in the applicable Award Agreement or Award Program, has the same meaning as provided in the long-term disability plan or policy maintained or, if applicable, most recently maintained, by the Company or, if applicable, any Affiliate of the Company for the Participant. If no long-term disability plan or policy was ever maintained on behalf of the Participant or, if the determination of Disability relates to an Incentive Stock Option, Disability means that condition described in Code Section 22(e)(3), as amended from time to time. In the event of a dispute, the determination of Disability will be made by the Committee and will be supported by advice of a physician competent in the area to which such Disability relates.

(k)

“ Exercise Price ” means the exercise price per share of Stock purchasable under an Option.

(l)

“ Fair Market Value ” means the value of a share of Stock as of a date, determined as follows:

(1)

if the shares of Stock are readily tradable or reported on an established securities market, Fair Market Value of the Stock may be determined based upon the last sale before or the first sale after such date, the closing price on the trading day before or the trading day of such date, the arithmetic mean of the high and low prices on the trading day before or the trading day of such date, or any other reasonable method using actual transactions in the Stock as reported by such market or system; or

(2)

if the shares of Stock are not readily tradable or reported on an established securities market, Fair Market Value shall mean the fair market value of a share of Stock determined by the reasonable application of a reasonable valuation method, where such valuation method is based on the facts, circumstances, and all other available information that are material to the value of the Company as of the valuation date.

An “established securities market” includes a national securities exchange which is registered under section 6 of the Securities Exchange Act of 1934; a foreign national securities exchange which is officially recognized, sanctioned, or supervised by governmental authority; and any over-the-counter market. For purposes of Clause (1), Fair Market Value of a share of Stock also may be determined using an average selling price during a specified period that is within thirty (30) days before or thirty (30) days after the applicable determination date provided that the process under which the Award is granted irrevocably specifies the commitment to the grant with a price set using such

an average selling price before the beginning of the specified period. For purposes of Clause (2), the use of a value previously calculated under a reasonable valuation method is not reasonable as of a later date if such calculation fails to reflect information available after the date of the calculation that may materially affect the value of the Company or if the value was calculated with respect to a date that is more than twelve (12) months earlier than the date for which the valuation is being used. For purposes of granting Nonqualified Stock Options or Stock Appreciation Rights, Fair Market Value of Stock shall be determined in accordance with any other applicable requirements of Code Section 409A. Notwithstanding anything to the contrary in this Section 1.1(l), for purposes of granting Incentive Stock Options, Fair Market Value of Stock shall be determined in accordance with the requirements of Code Section 422.

(m)

“ Incentive Stock Option ” means an incentive stock option within the meaning of Section 422 of the Internal Revenue Code.

(n)

“ Nonqualified Stock Option ” means a stock option that is not an Incentive Stock Option.

(o)

“ Option ” means a Nonqualified Stock Option or an Incentive Stock Option.

(p)

“ Other Stock-Based Award ” means an Award described in Section 3.4 that has a value that is derivative of the value of, determined by reference to a number of shares of, or determined by reference to dividends payable on, Stock and may be settled in cash or in Stock. Other Stock-Based Awards may include, but not be limited to, grants of Stock, grants of rights to receive Stock in the future, or dividend equivalent rights.

(q)

“ Over 10% Owner ” means an individual who at the time an Incentive Stock Option to such individual is granted owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or its Parent or Subsidiaries, determined by applying the attribution rules of Code Section 424(d).

(r)

“ Parent ” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, with respect to Incentive Stock Options, at the time of the granting of the Option, each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A Parent shall include any entity other than a corporation to the extent permissible under Section 424(f) or regulations and rulings thereunder.

(s)

“ Participant ” means an individual who receives an Award hereunder.

(t)

“ Plan ” means the Nicolet Bankshares, Inc. 2011 Long Term Incentive Plan.

(u)

“ Separation from Service ” shall mean a termination of a Participant’s employment or other service relationship with the Company, subject to the following requirements:

(1)

in the case of a Participant who is an employee of the Company, a termination of the Participant’s employment where either (A) the Participant has ceased to perform any services for the Company and all affiliated companies that, together with the Company, constitute the “service recipient” within the meaning of Code Section 409A (collectively, the “Service Recipient”) or (B) the level of bona fide services the Participant performs for the Service Recipient after a given date (whether as an employee or as an independent contractor) permanently decreases (excluding a decrease as a result of military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the Participant retains a right to reemployment with the Service Recipient under an applicable statute or by contract) to no more than twenty percent (20%) of the average level of bona fide services performed for the Service Recipient (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of service if the Participant has been providing services to the Service Recipient for less than 36 months); or

(2)

in the case of a Participant who is an independent contractor engaged by the Service Recipient, a termination of the Participant’s service relationship with the Service Recipient either (A) upon the expiration of the contract (or in the case of more than one contract, all contracts) under which services are performed for the Service Recipient if the expiration constitutes a good-faith and complete termination of the contractual relationship; or (B) if, with respect to amounts payable to the Participant under an Award upon the termination of the independent contractor’s relationship with the Service Recipient, no amount will be paid to the Participant before at least twelve (12) months after the day on which the contract expires under which the Participant performs services for the Service Recipient (or, in the case of more than one contract, all such contracts expire) and no amount payable to the Participant on that date is actually paid to the Participant if, after the expiration of the contract (or contracts) and before that date, the Participant performs services for the Service Recipient as an independent contractor or an employee; or

(3)

in any case, as may otherwise be permitted under Code Section 409A.

(v)

“ Stock ” means the Company’s common stock.

(w)

“ Stock Appreciation Right ” means a stock appreciation right described in Section 3.3.

(x)

“ Subsidiary ” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the relevant time, each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. A “Subsidiary” shall include any entity other than a corporation to the extent permissible under Section 424(f) or regulations or rulings thereunder.

(y)

“ Termination of Employment ” means the termination of the employment relationship between a Participant and the Company and its Affiliates, regardless of whether severance or similar payments are made to the Participant for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, Disability or retirement. The Committee will, in its absolute discretion, determine the effect of all matters and questions relating to a Termination of Employment as it affects an Award, including, but not by way of limitation, the question of whether a leave of absence constitutes a Termination of Employment.

SECTION 2 THE LONG-TERM INCENTIVE PLAN

2.1

Purpose of the Plan . The Plan is intended to (a) provide incentives to certain officers, employees, and directors of the Company and its Affiliates to stimulate their efforts toward the continued success of the Company and to operate and manage the business in a manner that will provide for the long-term growth and profitability of the Company; (b) encourage stock ownership by certain officers, employees, and directors by providing them with a means to acquire a proprietary interest in the Company, acquire shares of Stock, or to receive compensation which is based upon appreciation in the value of Stock; and (c) provide a means of obtaining, rewarding and retaining officers, employees, and directors.

2.2

Stock Subject to the Plan . Subject to adjustment in accordance with Section 5.2, Five Hundred Thousand (500,000) shares of Stock (the “Maximum Plan Shares”) are hereby reserved exclusively for issuance upon exercise, settlement, or payment pursuant to Awards, all or any of which may be pursuant to any one or more Award, including without limitation, Incentive Stock Options. Shares of Stock shall not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash. The shares of Stock attributable to the nonvested, unpaid, unexercised, unconverted or otherwise unsettled portion of any Award that is forfeited or cancelled or expires or terminates for any reason without becoming vested, paid, exercised, converted or otherwise settled in full will again be available for purposes of the Plan. For purposes of determining the number of shares of Stock issued upon the exercise, settlement or grant of an Award under this Section, any shares of Stock withheld to satisfy tax withholding obligations or the Exercise Price shall be considered issued under the Plan.

2.3

Administration of the Plan . The Plan is administered by the Committee. The Committee has full authority in its discretion to determine the officers, employees, and directors of the Company or its Affiliates to whom Awards will be granted and the terms and provisions of

Awards, subject to the Plan. Subject to the provisions of the Plan, the Committee has full and conclusive authority to interpret the Plan; to prescribe, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of the respective Award Agreements and Award Programs and to make all other determinations necessary or advisable for the proper administration of the Plan. The Committee’s determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, Awards under the Plan (whether or not such persons are similarly situated). The Committee’s decisions are final and binding on all Participants. Each member of the Committee shall serve at the discretion of the Board of Directors and the Board of Directors may from time to time remove members from or add members to the Committee. Vacancies on the Committee shall be filled by the Board of Directors.

2.4

Eligibility and Limits . Awards may be granted only to officers, employees, and directors of the Company or any Affiliate of the Company; provided, however, that an Incentive Stock Option may only be granted to an employee of the Company or any Parent or Subsidiary. In the case of Incentive Stock Options, the aggregate Fair Market Value (determined as of the date an Incentive Stock Option is granted) of Stock with respect to which stock options intended to meet the requirements of Code Section 422 become exercisable for the first time by an individual during any calendar year under all plans of the Company and its Parents and Subsidiaries may not exceed $100,000; provided further, that if the limitation is exceeded, the Incentive Stock Option(s) which cause the limitation to be exceeded will be treated as Nonqualified Stock Option(s).

SECTION 3 TERMS OF AWARDS

3.1

Terms and Conditions of All Awards .

(a)

The number of shares of Stock as to which an Award may be granted or the amount of an Award will be determined by the Committee in its sole discretion, subject to the provisions of Section 2.2 as to the total number of shares available for grants under the Plan and subject to the limits in Section 2.4.

(b)

Each Award will either be evidenced by an Award Agreement in such form and containing such terms, conditions and restrictions as the Committee may determine to be appropriate, including without limitation, performance goals, if any, that must be achieved as a condition to vesting or settlement of the Award, or be made subject to the terms of an Award Program, containing such terms, conditions and restrictions as the Committee may determine to be appropriate, including without limitation, performance goals, if any, that must be achieved as a condition to vesting or settlement of the Award. Each Award Agreement or Award Program is subject to the terms of the Plan and any provisions contained in the Award Agreement or Award Program that are inconsistent with the Plan are null and void.

(c)

The date as of which an Award is granted will be the date on which the Committee has approved the terms and conditions of the Award and has determined the

recipient of the Award and the number of shares, if any, covered by the Award, and has taken all such other actions necessary to complete the grant of the Award or such later date as may be specified in the approval of such Award.

(d)

Awards are not transferable or assignable except by will or by the laws of descent and distribution governing the State in which the Participant was domiciled at the time of the Participant’s death, and are exercisable, during the Participant’s lifetime, only by the Participant; or in the event of the Disability of the Participant, by the legal representative of the Participant; or in the event of death of the Participant, by the legal representative of the Participant’s estate or if no legal representative has been appointed within ninety (90) days of the Participant’s death, by the person(s) taking under the laws of descent and distribution governing the State in which the Participant was domiciled at the time of the Participant’s death; except to the extent that the Committee may provide otherwise as to any Awards other than Incentive Stock Options.

(e)

After the date of grant of an Award, the Committee may, in its sole discretion, modify the terms and conditions of an Award, except to the extent that such modification would adversely affect the rights of a Participant under the Award (except as otherwise permitted under the Plan or Award) or would be inconsistent with other provisions of the Plan.

3.2

Terms and Conditions of Options . Each Option granted under the Plan must be evidenced by an Award Agreement. At the time any Option is granted, the Committee will determine whether the Option is to be an Incentive Stock Option described in Code Section 422 or a Nonqualified Stock Option, and the Option must be clearly identified as to its status as an Incentive Stock Option or a Nonqualified Stock Option. Incentive Stock Options may only be granted to employees of the Company or any Subsidiary or Parent. At the time any Incentive Stock Option granted under the Plan is exercised, the Company will be entitled to legend the certificates representing the shares of Stock purchased pursuant to the Option to clearly identify them as representing the shares purchased upon the exercise of an Incentive Stock Option. An Incentive Stock Option may only be granted within ten (10) years from the earlier of the date the Plan is adopted or approved by the Company’s stockholders.

(a)

Option Price . Subject to adjustment in accordance with Section 5.2 and the other provisions of this Section 3.2, the Exercise Price must be as set forth in the applicable Award Agreement, but in no event may it be less than the Fair Market Value on the date the Option is granted. With respect to each grant of an Incentive Stock Option to a Participant who is an Over 10% Owner, the Exercise Price may not be less than one hundred and ten percent (110%) of the Fair Market Value on the date the Option is granted.

(b)

Option Term . Any Incentive Stock Option granted to a Participant who is not an Over 10% Owner is not exercisable after the expiration of ten (10) years after the date the Option is granted. Any Incentive Stock Option granted to an Over 10% Owner is not exercisable after the expiration of five (5) years after the date the Option is granted.

The term of any Nonqualified Stock Option shall be as specified in the applicable Award Agreement.

(c)

Payment . Payment for all shares of Stock purchased pursuant to exercise of an Option will be made in any form or manner authorized by the Committee in the Award Agreement or by amendment thereto, including, but not limited to, cash, cash equivalents, or, if the Award Agreement provides, but in any case subject to such procedures or restrictions as the Committee may impose:

(i)

by delivery to the Company of a number of shares of Stock owned by the holder having an aggregate Fair Market Value of not less than the product of the Exercise Price multiplied by the number of shares the Participant intends to purchase upon exercise of the Option on the date of delivery;

(ii)

in a cashless exercise through a broker, except if and to the extent prohibited by law as to officers and directors, including without limitation, the Sarbanes-Oxley Act of 2002, as amended; or

(iii)

by having a number of shares of Stock withheld, the Fair Market Value of which as of the date of exercise is sufficient to satisfy the Exercise Price.

Payment must be made at the time that the Option or any part thereof is exercised, and no shares may be issued or delivered upon exercise of an Option until full payment has been made by the Participant. The holder of an Option, as such, has none of the rights of a stockholder.

(d)

Conditions to the Exercise of an Option . Each Option granted under the Plan is exercisable by whom, at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee specifies in the Award Agreement; provided, however, that subsequent to the grant of an Option, the Committee, at any time before complete termination of such Option, may modify the terms of an Option to the extent not prohibited by the terms of the Plan, including, without limitation, accelerating the time or times at which such Option may be exercised in whole or in part, including, without limitation, upon a change in control and may permit the Participant or any other designated person to exercise the Option, or any portion thereof, for all or part of the remaining Option term, notwithstanding any provision of the Award Agreement to the contrary.

(e)

Termination of Incentive Stock Option . With respect to an Incentive Stock Option, in the event of Termination of Employment of a Participant, the Option or portion thereof held by the Participant which is unexercised will expire, terminate, and become unexercisable no later than the expiration of three (3) months after the date of Termination of Employment; provided, however, that in the case of a holder whose Termination of Employment is due to death or Disability, one (1) year will be substituted for such three (3) month period; provided further, that such time limits may be exceeded by the Committee under the terms of the grant, in which case, the Incentive Stock Option

will be a Nonqualified Option if it is exercised after the time limits that would otherwise apply. For purposes of this Subsection (e), a Termination of Employment of the Participant will not be deemed to have occurred if the Participant is employed by another corporation (or a parent or subsidiary corporation of such other corporation) which has assumed the Incentive Stock Option of the Participant in a transaction to which Code Section 424(a) is applicable.

(f)

Special Provisions for Certain Substitute Options. Notwithstanding anything to the contrary in this Section 3.2, any Option issued in substitution for an option previously issued by another entity, which substitution occurs in connection with a transaction to which Code Section 424(a) is applicable, may provide for an exercise price computed in accordance with such Code Section and the regulations thereunder and may contain such other terms and conditions as the Committee may prescribe to cause such substitute Option to contain as nearly as possible the same terms and conditions (including the applicable vesting and termination provisions) as those contained in the previously issued option being replaced thereby.

(g)

No Reload Grants . Options shall not be granted under the Plan in consideration for and shall not be conditioned upon the delivery of shares of Stock to the Company in payment of the exercise price and/or tax withholding obligation under any other option held by a Participant.

(h)

No Repricing . Except as provided in Section 5.2, without the approval of the Company’s stockholders the exercise price of an Option may not be reduced after the grant of the Option and an Option may not be surrendered in consideration of, or in exchange for, the grant of a new Option having an exercise price below that of the Option that was surrendered, Stock, cash, or any other Award.

3.3

Terms and Conditions of Stock Appreciation Rights . Each Stock Appreciation Right granted under the Plan must be evidenced by an Award Agreement. A Stock Appreciation Right entitles the Participant to receive the excess of (1) the Fair Market Value of a specified or determinable number of shares of the Stock at the time of payment or exercise over (2) a specified or determinable price, which may not be less than the Fair Market Value on the date of grant.

(a)

Settlement . Upon settlement of a Stock Appreciation Right, the Company must pay to the Participant, at the discretion of the Committee, the appreciation in cash or shares of Stock (valued at the aggregate Fair Market Value on the date of payment or exercise) as provided in the Award Agreement or, in the absence of such provision, as the Committee may determine.

(b)

Conditions to Exercise . Each Stock Appreciation Right granted under the Plan is exercisable or payable at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee specifies in the Award Agreement; provided, however, that subsequent to the grant of a Stock Appreciation Right, the Committee, at any time before complete termination of such Stock Appreciation Right,

may accelerate the time or times at which such Stock Appreciation Right may be exercised or paid in whole or in part.

(c)

No Repricing . Except as provided in Section 5.2, without the approval of the Company’s stockholders the price of a Stock Appreciation Right may not be reduced after the grant of the Stock Appreciation Right, and a Stock Appreciation Right may not be surrendered in consideration of, or in exchange for, the grant of a new Stock Appreciation Right having a price below that of the Stock Appreciation Right that was surrendered, Stock, cash, or any other Award.

3.4

Terms and Conditions of Other Stock-Based Awards . An Other Stock-Based Award shall entitle the Participant to receive, at a specified future date, payment of an amount equal to all or a portion of either (i) the value of a specified or determinable number of shares of Stock granted by the Committee, (ii) a percentage or multiple of the value of a specified number of shares of Stock determined by the Committee or (iii) dividend equivalents on a specified or a determinable number, or a percentage or multiple of a specified number, of shares of Stock determined by the Committee. At the time of the grant, the Committee must determine the specified number of shares of Stock or the percentage or multiple of the specified number of shares of Stock, as may be applicable; and the performance goals, if any, applicable to the determination of the ultimate payment value of the Other Stock-Based Award. The Committee may provide for an alternate percentage or multiple under certain specified conditions.

(a)

Payment . Payment in respect of Other Stock-Based Awards may be made by the Company in cash or shares of Stock (valued at Fair Market Value as of the date payment is owed) as provided in the applicable Award Agreement or Award Program or, in the absence of such provision, as the Committee may determine.

(b)

Conditions to Payment . Each Other Stock-Based Award granted under the Plan shall be payable at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee may specify in the applicable Award Agreement or Award Program; provided, however, that subsequent to the grant of a Other Stock-Based Award, the Committee, at any time before complete termination of such Other Stock-Based Award, may accelerate the time or times at which such Other Stock-Based Award may be paid in whole or in part.

3.5

Terms and Conditions of Cash Performance Awards . A Cash Performance Award shall entitle the Participant to receive, at a specified future date, payment of an amount equal to all or a portion of either (i) the value of a specified or determinable number of units (stated in terms of a designated or determinable dollar amount per unit) granted by the Committee, or (ii) a percentage or multiple of a specified amount determined by the Committee. At the time of the grant, the Committee must determine the base value of each unit; the number of units subject to a Cash Performance Award, the specified amount and the percentage or multiple of the specified amount, as may be applicable; and the performance goals, if any, applicable to the determination of the ultimate payment value of the Cash Performance Award. The Committee may provide for an alternate base value for each unit or an alternate percentage or multiple under certain specified conditions.

(a)

Payment . Payment in respect of Cash Performance Awards shall be made by the Company in cash.

(b)

Conditions to Payment . Each Cash Performance Award granted under the Plan shall be payable at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee may specify in the applicable Award Agreement or Award Program; provided, however, that subsequent to the grant of a Cash Performance Award, the Committee, at any time before complete termination of such Cash Performance Award, may accelerate the time or times at which such Cash Performance Award may be paid in whole or in part.

3.6

Treatment of Awards on Termination of Service . Except as otherwise provided by Plan Section 3.2(e), any Award under this Plan to a Participant who has experienced a Termination of Employment, Separation from Service, or termination of some other service relationship with the Company and its Affiliates may be cancelled, accelerated, paid or continued, as provided in the applicable Award Agreement or Award Program, or, as the Committee may otherwise determine to the extent not prohibited by the Plan. The portion of any Award exercisable in the event of continuation or the amount of any payment due under a continued Award may be adjusted by the Committee to reflect the Participant’s period of service from the date of grant through the date of the Participant’s Termination of Employment, Separation from Service or termination of some other service relationship or such other factors as the Committee determines are relevant to its decision to continue the Award.

SECTION 4 RESTRICTIONS ON STOCK

4.1

Escrow of Shares . Any certificates representing the shares of Stock issued under the Plan will be issued in the Participant’s name, but, if the applicable Award Agreement or Award Program so provides, the shares of Stock will be held by a custodian designated by the Committee (the “Custodian”). Each applicable Award Agreement or Award Program providing for transfer of shares of Stock to the Custodian may require a Participant to complete an irrevocable stock power appointing the Custodian or the Custodian’s designee as the attorney-in-fact for the Participant for the term specified in the applicable Award Agreement or Award Program, with full power and authority in the Participant’s name, place and stead to transfer, assign and convey to the Company any shares of Stock held by the Custodian for such Participant, if the Participant forfeits the shares under the terms of the applicable Award Agreement or Award Program. During the period that the Custodian holds the shares subject to this Section, the Participant is entitled to all rights, except as provided in the applicable Award Agreement or Award Program, applicable to shares of Stock not so held. Any dividends declared on shares of Stock held by the Custodian must, as provided in the applicable Award Agreement or Award Program, be paid directly to the Participant or, in the alternative, be retained by the Custodian or by the Company until the expiration of the term specified in the applicable Award Agreement or Award Program and shall then be delivered, together with any proceeds, with the shares of Stock to the Participant or to the Company, as applicable.

4.2

Restrictions on Transfer . The Participant does not have the right to make or permit to exist any disposition of the shares of Stock issued pursuant to the Plan except as provided in the Plan or the applicable Award Agreement or Award Program. Any disposition of the shares of Stock issued under the Plan by the Participant not made in accordance with the Plan or the applicable Award Agreement or Award Program will be void. The Company will not recognize, or have the duty to recognize, any disposition not made in accordance with the Plan and the applicable Award Agreement or Award Program, and the shares so transferred will continue to be bound by the Plan and the applicable Award Agreement or Award Program.

SECTION 5 GENERAL PROVISIONS

5.1

Withholding . The Company shall deduct from all cash distributions under the Plan any taxes required to be withheld by federal, state or local government. Whenever the Company proposes or is required to issue or transfer shares of Stock under the Plan or upon the vesting of any Award, the Company has the right to require the recipient to remit to the Company an amount sufficient to satisfy any federal, state and local tax withholding requirements prior to the delivery of any certificate or certificates for such shares or the vesting of such Award. A Participant may satisfy the withholding obligation in cash, cash equivalents, or if and to the extent the applicable Award Agreement, Award Program, or Committee procedure so provides, a Participant may elect to have the number of shares of Stock he is to receive reduced by, or tender back to the Company, the smallest number of whole shares of Stock which, when multiplied by the Fair Market Value of the shares of Stock, is sufficient to satisfy federal, state and local, if any, withholding obligation arising from exercise or payment of an Award.

5.2

Changes in Capitalization; Merger; Liquidation .

(a)

The number of shares of Stock reserved for the grant of Options, Stock Appreciation Rights and Other Stock-Based Awards; the number of shares of Stock reserved for issuance upon the exercise, settlement, vesting, grant or payment, as applicable, of each outstanding Option, Stock Appreciation Right, and Other Stock-Based Award (if any); and the Exercise Price of each outstanding Option and the threshold price of each outstanding Stock Appreciation Right, shall be proportionately adjusted for any nonreciprocal transaction between the Company and the holders of capital stock of the Company that causes the per share value of the shares of Stock underlying an Award to change, such as a stock dividend, stock split, spinoff, rights offering, or recapitalization through a large, nonrecurring cash dividend (each, an “Equity Restructuring”).

(b)

In the event of a merger, consolidation, reorganization, extraordinary dividend, sale of substantially all of the Company’s assets, other change in capital structure of the Company, tender offer for shares of Stock, or a change in control of the Company (as defined by the Committee in the applicable Award Agreement or Award Program), that in each case does not constitute an Equity Restructuring, the Committee may make such adjustments with respect to Awards and take such other action as it deems necessary or appropriate, including, without limitation, the substitution of new

Awards, the assumption of awards not originally granted under the Plan, or the adjustment of outstanding Awards, the acceleration of Awards, the removal of restrictions on outstanding Awards, or the termination of outstanding Awards in exchange for the cash value determined in good faith by the Committee of the vested and/or unvested portion of the Award, all as may be provided in the applicable Award Agreement or Award Program or, if not expressly addressed therein, as the Committee subsequently may determine in its sole discretion. Any adjustment pursuant to this Section 5.2 may provide, in the Committee’s discretion, for the elimination without payment therefor of any fractional shares that might otherwise become subject to any Award, but except as set forth in this Section may not otherwise diminish the then value of the Award.

(c)

Notwithstanding any other provision of this Plan to the contrary, in taking any action pursuant to Subsection (a) or (b) with respect to a Nonqualified Stock Option or a Stock Appreciation Right, the Committee shall consider any provisions of Code Section 409A and the regulations thereunder that are required to be followed as a condition of the Nonqualified Stock Option and the Stock Appreciation Right not being treated as the grant of a new Option or Stock Appreciation Right or a change in the form of payment. Any adjustment described in the preceding sentence may include a substitution in whole or in part of other equity securities of the issuer and the class involved in such Equity Restructuring in lieu of the shares of Stock that are subject to the Award.

(d)

The existence of the Plan and the Awards granted pursuant to the Plan shall not affect in any way the right or power of the Company to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Stock or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or any part of its business or assets, or any other corporate act or proceeding.

5.3

Cash Awards . The Committee may, at any time and in its discretion, grant to any holder of an Award the right to receive, at such times and in such amounts as determined by the Committee in its discretion, a cash amount which is intended to reimburse such person for all or a portion of the federal, state and local income taxes imposed upon such person as a consequence of the receipt of the Award or the exercise of rights thereunder.

5.4

Compliance with Code .

(a)

Code Section 422 .

All Incentive Stock Options to be granted hereunder are intended to comply with Code Section 422, and all provisions of the Plan and all Incentive Stock Options granted hereunder must be construed in such manner as to effectuate that intent.

(b)

Code Section 409A .

Except to the extent provided otherwise by the Committee, Awards under the Plan are intended to satisfy the requirements of Section

409A of the Code (and the Treasury Department guidance and regulations issued thereunder) so as to avoid the imposition of any additional taxes or penalties under Code Section 409A. If the Committee determines that an Award, Award Agreement, Award Program, payment, distribution, deferral election, transaction or any other action or arrangement contemplated by the provisions of the Plan would, if undertaken, cause a Participant to become subject to any additional taxes or other penalties under Code Section 409A, then unless the Committee provides otherwise, such Award, Award Agreement, Award Program, payment, distribution, deferral election, transaction or other action or arrangement shall not be given effect to the extent it causes such result and the related provisions of the Plan, Award Agreement, and / or Award Program will be deemed modified, or, if necessary, suspended in order to comply with the requirements of Code Section 409A to the extent determined appropriate by the Committee, in each case without the consent of or notice to the Participant.

5.5

Right to Terminate Employment or Service . Nothing in the Plan or in any Award Agreement confers upon any Participant the right to continue as an officer, employee, or director of the Company or any of its Affiliates or affect the right of the Company or any of its Affiliates to terminate the Participant’s employment or services at any time.

5.6

Non-Alienation of Benefits . Other than as provided herein, no benefit under the Plan may be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge; and any attempt to do so shall be void. No such benefit may, prior to receipt by the Participant, be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the Participant.

5.7

Restrictions on Delivery and Sale of Shares; Legends . Each Award is subject to the condition that if at any time the Committee, in its discretion, shall determine that the listing, registration or qualification of the shares covered by such Award upon any securities exchange or under any state or federal law is necessary or desirable as a condition of or in connection with the granting of such Award or the purchase or delivery of shares thereunder, the delivery of any or all shares pursuant to such Award may be withheld unless and until such listing, registration or qualification shall have been effected. If a registration statement is not in effect under the Securities Act of 1933 or any applicable state securities laws with respect to the shares of Stock purchasable or otherwise deliverable under Awards then outstanding, the Committee may require, as a condition of exercise of any Option or as a condition to any other delivery of Stock pursuant to an Award, that the Participant or other recipient of an Award represent, in writing, that the shares received pursuant to the Award are being acquired for investment and not with a view to distribution and agree that the shares will not be disposed of except pursuant to an effective registration statement, unless the Company shall have received an opinion of counsel that such disposition is exempt from such requirement under the Securities Act of 1933 and any applicable state securities laws. The Company may include on certificates representing shares delivered pursuant to an Award such legends referring to the foregoing representations or restrictions or any other applicable restrictions on resale as the Company, in its discretion, shall deem appropriate.

5.8

Listing and Legal Compliance . The Committee may suspend the exercise or payment of any Award so long as it determines that securities exchange listing or registration or qualification under any securities laws is required in connection therewith and has not been completed on terms acceptable to the Committee.

5.9

Termination and Amendment of the Plan . The Board of Directors at any time may amend or terminate the Plan without stockholder approval; provided, however, that the Board of Directors may condition any amendment on the approval of stockholders of the Company if such approval is necessary or advisable with respect to tax, securities or other applicable laws. The Board of Directors shall consider that to preserve the Plan’s ability to grant Incentive Stock Options, stockholder approval is required for any amendment to the Plan that increases the number of shares of Stock available for the grant of Incentive Stock Options under the Plan, changes the employees (or class of employees) eligible to receive Incentive Stock Options under the Plan, or if the Plan is assumed in connection with a corporate transaction which results in a change in either the granting corporation or the stock available for purchase or grant under the Plan; provided, however, if the consolidation agreement fully describes the Plan and such agreement is approved by the stockholders, no further stockholder approval of the Plan shall be required. No such termination or amendment without the consent of the holder of an Award may adversely affect the rights of the Participant under such Award.

5.10

Stockholder Approval . The Plan shall be submitted to the stockholders of the Company for their approval within twelve (12) months before or after the adoption of the Plan by the Board of Directors of the Company. If such approval is not obtained, any Award granted hereunder will be void.

5.11

Choice of Law . The laws of the State of Wisconsin shall govern the Plan, to the extent not preempted by federal law, without reference to the principles of conflict of laws.

5.12

Effective Date of Plan . The Plan shall become effective as of the date the Plan was approved by the Board of Directors, regardless of the date the Plan is signed.

IN WITNESS WHEREOF, the Company has executed this Plan, and the Plan has become effective as of March 15, 2011.

NICOLET BANKSHARES, INC.

By: /s/ Michael E. Daniels

Title: EVP/Secretary

NICOLET BANKSHARES, INC.

RESTRICTED STOCK AWARD

This RESTRICTED STOCK AWARD (the “Award”) is made and entered into as of the Grant Date by and between Nicolet Bankshares, Inc. (the “Company”), a Wisconsin corporation, and _________________________ (the “Employee”).

Upon and subject to the Additional Terms and Conditions attached hereto and incorporated herein by reference as part of this Award, the Company hereby awards as of the Grant Date to the Employee the Restricted Shares described below pursuant to the Nicolet Bankshares, Inc. 2011 Long-Term Incentive Plan (the “Plan”) in consideration of the Employee’s services to the Company.

Grant Date : _________________, 201__.

Restricted Shares : ___________ shares of the Company’s voting common stock (“Common Stock”).

Vesting : The Restricted Shares shall become Vested Shares following completion of the years of service as an employee of the Company and/or any Affiliate as and to the extent indicated in the Vesting Schedule below:

Percentage of Restricted Shares

Years of Service After

which are Vested Shares

the Grant Date

Less than 1

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

10 or more

Employee shall be granted a year of service for each twelve-consecutive-month period following the Grant Date and during which Employee remains in the continuous service of the Company and/or its Affiliates (the “Continuous Service Condition”).

The Employee shall continue to vest in Restricted Shares according to the Vesting Schedule so long as the Employee remains in the continuous service of the Company and its Affiliates without incurring a Termination of Employment, regardless of the reason.

Notwithstanding the foregoing Vesting Schedule, the Continuous Service Condition will be deemed satisfied as to all of the Restricted Shares if the Employee provides continuous services to the Company and/or any Affiliate following the Grant Date through the date of any of the earlier events listed below:

(a)

in the event of a Termination of Employment due to either death or a Disability; or

(b)

the effective date of a Change in Control.

The Restricted Shares which have satisfied (or are deemed to have satisfied) the Continuous Service Condition are herein referred to as the “Vested Shares.” There shall be no proration for partial years of service. Any portion of the Restricted Shares which have not become Vested Shares in accordance with this Paragraph C. before or at the time of Employee’s Termination of Employment shall be forfeited .

IN WITNESS WHEREOF, the Company and Employee have signed this Award as of the Grant Date set forth above.

Nicolet Bankshares, Inc.


By: ______________________________________		______________________________________
		Employee

Title: ____________________________________

ADDITIONAL TERMS AND CONDITIONS OF

NICOLET BANKSHARES, INC.

RESTRICTED STOCK AWARD

Tax Withholding Obligation .

(a)

Employee’s Obligation . Employee must deliver to the Company, within two (2) business days after the earlier of (i) the date (the “Vesting Date”) on which any Restricted Shares become Vested Shares, or (ii) the date the Employee makes an election pursuant to Section 83(b) of the Internal Revenue Code as to all or any portion of the Restricted Shares, either cash or a certified check payable to the Company in the amount of all tax withholding obligations (whether federal, state or local) imposed on the Company by reason of the vesting of the Restricted Shares, or the making of an election pursuant to Section 83(b) of the Internal Revenue Code, as applicable, except as provided in Section 1(b).

(b)

Alternative Withholding Election . If the Employee does not make an election pursuant to Section 83(b) of the Internal Revenue Code, in lieu of paying the withholding tax obligations in cash or by certified check as required by Section 1(a), Employee may elect (the “Withholding Election”) to have the actual number of shares of Common Stock that become Vested Shares reduced by the smallest number of whole shares of Common Stock which, when multiplied by the Fair Market Value of the Common Stock, determined as of the applicable Vesting Date, is sufficient to satisfy the amount of the tax withholding obligations imposed on the Company by reason of the vesting of the Restricted Shares on the applicable Vesting Date. Employee may make a Withholding Election only if all of the following conditions are met:

(i)

the Withholding Election must be made on or prior to the Vesting Date by executing and delivering to the Company a properly completed Notice of Withholding Election, in substantially the form of Exhibit A attached hereto; and

(ii)

any Withholding Election made will be irrevocable; however, the Committee may, in its sole discretion, disapprove and give no effect to any Withholding Election.

(c)

Broker Facilitated Alternative . If the shares of Common Stock are being traded by brokers and the Employee is not a “director” or “executive officer”, within the meaning of Section 13(k) of the Securities Exchange Act of 1934 (Section 402 of the Sarbanes-Oxley Act of 2002), at the time tax withholding obligations become due, at the request of the Employee, the Committee may make, or authorize the making of, such arrangements with the Employee and a broker, dealer or other “creditor” (as defined by Regulation T issued by the Board of Governors of the Federal Reserve System) acting on behalf of the Employee for the receipt from such broker, dealer or other “creditor” of cash by the Company in an amount necessary to satisfy the Employee’s tax withholding obligations in exchange for delivery of a number of Vested Shares directly to the broker, dealer or other “creditor” having a value equal to the cash delivered.

(d)

Condition to Delivery of Vested Shares; Forfeiture . Unless and until the Employee provides for the payment of the tax withholding obligations in accordance with the provisions of this Section 1, the Company shall have no obligation to deliver any of the

Vested Shares and may take any other actions necessary to satisfy such obligations, including withholding of appropriate sums from other amounts payable to the Employee. A failure on the part of the Employee to provide for the satisfaction of the tax withholding obligations shall result in a forfeiture of the Restricted Shares.

(e)

Acknowledgement by Employee of Section 83(b) Tax Election Opportunity . Employee acknowledges that the award of the Restricted Shares constitutes a transfer of property for federal income tax purposes under Section 83 of the Internal Revenue Code and that the Employee shall have the sole responsibility for determining whether to elect early income tax treatment by making an election permitted under Subsection (b) of Section 83 of the Internal Revenue Code and the sole responsibility for effecting any such election in an appropriate and on a timely basis; provided, however, that if Employee makes an election permitted under Subsection (b) of Section 83 of the Internal Revenue Code, Employee is required to provide a copy of such election to the Company within fifteen (15) days of making such election or all Restricted Shares shall be forfeited.

Issuance of Restricted Shares .

(a)

The Company shall issue the Restricted Shares as of the Grant Date in either manner described below, as determined by the Committee in its sole discretion:

(i)

by the issuance of share certificate(s) evidencing Restricted Shares to the Secretary of the Company or such other agent of the Company as may be designated by the Committee or the Secretary (the “Share Custodian”); or

(ii)

by documenting the issuance in uncertificated or book entry form on the Company’s stock records.

Evidence of the Restricted Shares either in the form of share certificate(s) or book entry, as the case may be, shall be held by the Company or Share Custodian, as applicable, until the Restricted Shares become Vested Shares in accordance with the Vesting Schedule.

(b)

If the shares of Common Stock are registered under the Securities Act of 1933, as amended (the “Securities Act”) and the Employee is determined by the Committee to be an “affiliate” of the Company, as such term is defined in Rule 144 (“Rule 144”) under the Securities Act, the Restricted Shares (and the Vested Shares resulting therefrom) shall be evidenced only by physical share certificates.

(c)

When the Restricted Shares become Vested Shares, the Company or the Share Custodian, as the case may be, shall deliver the Vested Shares to the Employee or, at the Company’s election, to a broker designated by the Company (the “Designated Broker”) by either physical delivery of the share certificate(s) or book entry transfer, as applicable, for the benefit of an account established in the name of the Employee, in either case, after, to the extent applicable, payment by the Employee of the tax withholding obligations pursuant to Section 1(a) and/or reduced by any Vested Shares withheld and returned to the Company pursuant to Section 1(b) above or delivered to a broker, dealer or other “creditor” as contemplated by Section 1(c) above (such reduced number of Vested Shares are referred to in this Section 2(c) as the “Net Vested Shares”). If the number of Vested Shares includes a fraction of a share, neither the Company nor the Share Custodian shall be required to deliver

the fractional share to the Employee, and the Company shall pay the Employee the amount determined by the Company to be the estimated fair market value therefor. At any time after receipt by the Designated Broker, the Employee may require that the Designated Broker deliver the Net Vested Shares to the Employee pursuant to such arrangements or agreements as may exist between the Designated Broker and the Employee.

(d)

In the event that the Employee forfeits any of the Restricted Shares, the Company shall cancel the issuance on its stock records and, if applicable, the Share Custodian shall promptly deliver the share certificate(s) representing the forfeited shares to the Company.

(e)

Employee hereby irrevocably appoints the Share Custodian, and any successor thereto, as the true and lawful attorney-in-fact of Employee with full power and authority to execute any stock transfer power or other instrument necessary to transfer any Restricted Shares to the Company in accordance with this Award, in the name, place, and stead of the Employee. The term of such appointment shall commence on the Grant Date of this Award and shall continue until the last of the Restricted Shares are delivered to the Employee as Vested Shares or are returned to the Company as forfeited Restricted Shares or as Vested Shares withheld and returned to the Company pursuant to Section 1(b), as provided by the applicable terms of this Award.

(f)

Until the Restricted Shares become Vested Shares, the Employee shall be entitled to all rights applicable to holders of shares of Common Stock including, without limitation, the right to vote such shares and to receive dividends or other distributions thereon as provided by Section 3, except as otherwise expressly provided in this Award.

(g)

In the event the number of shares of Common Stock is increased or reduced as a result of a subdivision or combination of shares of Common Stock or the payment of a stock dividend or any other increase or decrease in the number of shares of Common Stock or other transaction such as a merger, reorganization or other change in the capital structure of the Company, the Employee agrees that any certificate representing shares of Common Stock or other securities of the Company issued as a result of any of the foregoing shall be delivered to the Share Custodian or recorded in book entry form, as applicable, and shall be subject to all of the provisions of this Award as if initially granted hereunder.

Dividends . The Employee shall be entitled to dividends or other distributions paid or made on Restricted Shares but only as and when the Restricted Shares to which the dividends or other distributions are attributable become Vested Shares. Dividends paid on Restricted Shares will be held by the Company and transferred to the Employee, without interest, on such date as the Restricted Shares become Vested Shares. Dividends or other distributions paid on Restricted Shares that are forfeited shall be retained by the Company.

Restrictions on Transfer of Restricted Shares .

(a)

General Restrictions . Except as provided by this Award, the Employee shall not have the right to make or permit to exist any transfer or hypothecation, whether outright or as security, with or without consideration, voluntary or involuntary, of all or any part of any right, title or interest in or to any Restricted Shares. Any such disposition not made in accordance with this Award shall be deemed null and void. The Company will not

recognize, or have the duty to recognize, any disposition not made in accordance with the Plan and this Award, and any Restricted Shares so transferred will continue to be bound by the Plan and this Award . The Employee (and any subsequent holder of Restricted Shares) may not sell, pledge or otherwise directly or indirectly transfer (whether with or without consideration and whether voluntarily or involuntarily or by operation of law) any interest in or any beneficial interest in any Restricted Shares except pursuant to the provisions of this Award. Any sale, pledge or other transfer (or any attempt to effect the same) of any Restricted Shares in violation of any provision of the Plan or this Award shall be void, and the Company shall not record such transfer, assignment, pledge or other disposition on its books or treat any purported transferee or pledgee of such Restricted Shares as the owner or pledgee of such Restricted Shares for any purpose.

(b)

Certain Permitted Transfers . The restrictions contained in this Section 4 will not apply with respect to transfers of the Restricted Shares pursuant to applicable laws of descent and distribution; provided that the restrictions contained in this Section 4 will continue to be applicable to the Restricted Shares after any such transfer; and provided further that the transferee(s) of such Restricted Shares must agree in writing to be bound by the provisions of the Plan and this Award.

Additional Restrictions on Transfer .

(a)

Certificates evidencing the Restricted Shares shall have noted conspicuously on the certificate a legend required under applicable securities laws and reflecting the transfer restrictions set forth herein in addition to any other legend(s) as the Company deems appropriate and the Employee shall not make any transfer of the Restricted Shares without first complying with the restrictions on transfer described in such legend(s). Such legend(s) may include the following:

TRANSFER IS RESTRICTED

T HE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE S ECURITIES A CT OF 1933, AS AMENDED ( THE “A CT ”) OR APPLICABLE STATE SECURITIES LAWS ( THE “S TATE A CTS ”), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE A CT, THE S TATE A CTS AND ANY OTHER APPLICABLE SECURITIES LAWS UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE C OMPANY, IN FORM AND SUBSTANCE SATISFACTORY TO THE C OMPANY, SUCH OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH THE A CT, THE S TATE A CTS AND ANY OTHER APPLICABLE SECURITIES LAWS.

(b)

In addition to any legends required under applicable securities laws, the certificates representing the Restricted Shares shall be endorsed with the following legend and the Employee shall not make any transfer of the Restricted Shares without first complying with the restrictions on transfer described in such legend:

TRANSFER IS RESTRICTED

T HE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND FORFEITURE PROVISIONS WHICH ALSO APPLY TO ANY PERMITTED TRANSFEREE AS SET FORTH IN A RESTRICTED STOCK A WARD, DATED ____________________, A COPY OF WHICH IS AVAILABLE FROM THE C OMPANY.

(c) Opinion of Counsel . No holder of Restricted Shares may sell, transfer, assign, pledge or otherwise dispose of (whether with or without consideration and whether voluntarily or involuntarily or by operation of law) any interest in or any beneficial interest in any Restricted Shares, except (i) pursuant to an effective registration statement under the Securities Act or (ii) in a transaction that fully complies with Rule 144, without first delivering to the Company an opinion of counsel (reasonably acceptable in form and substance to the Company) that neither registration nor qualification under the Securities Act and applicable state securities laws is required in connection with such transfer.

Change in Capitalization .

(a)

The number and kind of Restricted Shares shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a subdivision or combination of shares or the payment of a stock dividend in shares of Common Stock to holders of outstanding shares of Common Stock or any other increase or decrease in the number of shares of Common Stock outstanding effected without receipt of consideration by the Company. No fractional shares shall be issued in making such adjustment.

(b)

In the event of a merger, consolidation, extraordinary dividend (including a spin-off), reorganization, recapitalization, sale of substantially all of the Company’s assets, other change in the capital structure of the Company, tender offer for shares of Common Stock, a Change in Control or similar transaction, an appropriate adjustment may be made with respect to the Restricted Shares such that other securities, cash or other property may be substituted for the Common Stock held by the Share Custodian or recorded in book entry form pursuant to this Award.

(c)

All determinations and adjustments made by the Committee pursuant to this Section will be final and binding on the Employee. Any action taken by the Committee need not treat all recipients of awards under the Plan equally.

(d)

The existence of the Plan and the Award shall not affect the right or power of the Company to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Common Stock or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or part of its business or assets, or any other corporate act or proceeding.

Governing Laws . This Award shall be construed, administered and enforced according to the laws of the State of Wisconsin; provided, however, no Restricted Shares shall be issued except, in the reasonable judgment of the Committee, in compliance with exemptions under

applicable state securities laws of the state in which the Employee resides, and/or any other applicable securities laws.

Successors . This Award shall be binding upon and inure to the benefit of the heirs, legal representatives, successors, and permitted assigns of the parties.

Notice . All notices, requests, waivers and other communications required or permitted hereunder shall be in writing and shall be either personally delivered, sent by facsimile or by reputable overnight courier service or mailed by first class mail, return receipt requested, to the recipient at the address below indicated:

If to the Company:

Nicolet Bankshares, Inc.

Attn: Secretary

111 N. Washington Street

Green Bay, Wisconsin 54301

If to the Recipient:

_________________________

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. All such notices, requests, waivers and other communications shall be deemed to have been effectively given: (a) when personally delivered to the party to be notified; (b) when sent by confirmed facsimile to the party to be notified; (c) five (5) business days after deposit in the United States Mail postage prepaid by certified or registered mail with return receipt requested at any time other than during a general discontinuance of postal service due to strike, lockout, or otherwise (in which case such notice, request, waiver or other communication shall be effectively given upon receipt) and addressed to the party to be notified as set forth above; or (d) two (2) business days after deposit with a national overnight delivery service, postage prepaid, addressed to the party to be notified as set forth above with next-business-day delivery guaranteed. A party may change its or his notice address given above by giving the other party ten (10) days’ written notice of the new address in the manner set forth above.

10.

Severability . In the event that any one or more of the provisions or portion thereof contained in this Award shall for any reason be held to be invalid, illegal, or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of this Award, and this Award shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein.

11.

Entire Agreement . Subject to the terms and conditions of the Plan, this Award expresses the entire understanding and agreement of the parties with respect to the subject matter. This Award may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.

12.

Headings and Capitalized Terms . Paragraph headings used herein are for convenience of reference only and shall not be considered in construing this Award. Capitalized terms used, but not defined, in this Award shall be given the meaning ascribed to them in Section 15 or the Plan, as applicable.

13.

Specific Performance . In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Award, the party or parties who are thereby aggrieved shall have the right to specific performance and injunction in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.

14.

No Right to Continued Employment . Neither the establishment of the Plan nor the grant of the Award made pursuant to this Award shall be construed as giving Employee the right to any continued service relationship with the Company or any Affiliate.

15.

Special Definitions . For purposes of this Award, the term “Change in Control” means any one of the following events that occurs after the Grant Date:

(a)

the acquisition by any one person, or more than one person acting as a group (other than any person or more than one person acting as a group who is considered to own more than fifty percent (50%) of the total fair market of the stock of the Company prior to such acquisition), of stock of the Company that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company;

(b)

within any twelve-month period (beginning on or after the Grant Date) the date a majority of members of Board of Directors is replaced by directors whose appointment or election is not endorsed by a majority of the members of the Board of Directors before the date of the appointment or election;

(c)

within any twelve-month period (beginning on or after the Grant Date) the acquisition by any one person, or more than one person acting as a group, of ownership of stock of the Company possessing thirty percent (30%) or more of the total voting power of the stock of the Company;

(d)

within any twelve-month period (beginning on or after the Grant Date) the acquisition by any one person, or more than one person acting as a group, of the assets of the Company and its Affiliates, that have a total gross fair market value of eighty-five percent (85%) or more of the total gross fair market value of all of the assets of the Company And its Affiliates, immediately before such acquisition or acquisitions; provided, however, that transfers to the following entities or person(s) shall not be deemed to result in a Change in Control under this subsection (d):

(i)

an entity that is controlled by the shareholders of the Company or an Affiliate, as applicable, immediately after the transfer;

(ii)

a shareholder (determined immediately before the asset transfer) of the Company or an Affiliate, as applicable, in exchange for or with respect to its stock;

(iii)

an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company or an Affiliate, as applicable;

(iv)

a person, or more than one person acting as a group, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the

outstanding stock of the Company or an Affiliate, as applicable; or

(v)

an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a person described in the above subsection (d)(iv).

For purposes of this Section 15, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company or an Affiliate, as applicable. Notwithstanding the foregoing, no Change in Control shall be deemed to have occurred for purposes of this Award by reason of any actions or events in which the Employee participates in a capacity other than in the Employee’s capacity as an employee or director of the Company or an Affiliate or as a shareholder of the Company.

EXHIBIT A

NOTICE OF WITHHOLDING ELECTION

NICOLET BANKSHARES, INC.

RESTRICTED STOCK AWARD

TO:

Nicolet Bankshares, Inc.

FROM:________________________________

SSN:________________________________

RE:

Withholding Election

This election relates to the Restricted Stock Award identified in Paragraph 3 below. I hereby certify that:

(1)

My correct name and social security number and my current address are set forth at the end of this document.

(2)

I am (check one, whichever is applicable).

[ ]

the original recipient of the Restricted Stock Award.

[ ]

the legal representative of the estate of the original recipient of the Restricted Stock Award.

[ ]

a legatee of the original recipient of the Restricted Stock Award.

[ ]

the legal guardian of the original recipient of the Restricted Stock Award.

(3)

The Restricted Stock Award pursuant to which this election relates was issued under the Nicolet Bankshares, Inc. 2011 Long-Term Incentive Plan in the name of _________________ for a total of ______________ shares of Common Stock. This election relates to ______ shares of Common Stock to be delivered upon the vesting of a portion of the Restricted Shares, provided that the numbers set forth above shall be deemed changed as appropriate to reflect stock splits and other adjustments contemplated by the applicable provisions of the Restricted Stock Award and the Plan.

(4)

In connection with the vesting of all or a portion of the Restricted Shares, I hereby elect:

[ ]

to have certain of the Vested Shares withheld and returned to the Company, rather than delivered to me, for the purpose of having the value of such shares applied to pay minimum required federal, state and local, if any, tax withholding obligations arising from the vesting event. The fair market value of the Vested Shares to be withheld and returned to the Company shall be equal to the minimum statutory tax withholding requirements under federal, state and local law in connection with the vesting event, reduced by the amount of any cash or certified check payment tendered by me to the Company in partial payment of such tax withholding obligations;

Exhibit A - Page 1 of 2

[ ]

to deliver to the Company, in cash or cash equivalents, the amount necessary to pay minimum required federal, state and local, if any, tax withholding obligations arising from the vesting event; or

[ ]

to have the Company withhold from other wages payable to me the amount necessary to pay minimum required federal, state and local, if any, tax withholding obligations arising from the vesting event.

(5)

I understand that this Withholding Election is made prior to the Vesting Date and is otherwise timely made pursuant to Section 1 of the Restricted Stock Award and Section 5.1 of the Plan. I understand that the Company may disapprove and give no effect to an election choosing either the first or third alternative provided above.

(6)

With respect to the first alternative above, I understand that, if this Withholding Election is not disapproved by the Committee, the Company shall withhold from the Vested Shares a whole number of shares of Common Stock having the value specified in Paragraph 4 above.

(7)

I understand that if provisions for the satisfaction of applicable tax withholding obligations, in a form acceptable to the Company, are not made on a timely basis, any Restricted Shares that otherwise would have become Vested Shares due to the vesting event shall be forfeited, unless, at the discretion of the Company, the Company elects to withhold from other wages payable to me the amount necessary to pay minimum required federal, state and local, if any, tax withholding obligations arising from the vesting event.

(8)

The Plan has been made available to me by the Company. I have read and understand the Plan and the provisions of the Restricted Stock Award and I have no reason to believe that any of the conditions therein to the making of this Withholding Election have not been met. Capitalized terms used in this Notice of Withholding Election without definition shall have the meanings given to them in the Plan or Section 15 of the Restricted Stock Award, as applicable.

Dated: __________________________________

Signature:________________________________

________________________________________

Name (Printed)

________________________________________

Street Address

________________________________________

City, State, Zip Code

________________________________________

Social Security Number

Exhibit A - Page 2 of 2

Exhibit 10.6

NICOLET NATIONAL BANK DEFERRED COMPENSATION PLAN EFFECTIVE JANUARY 1, 2002

NICOLET NATIONAL BANK DEFERRED COMPENSATION PLAN ARTICLE I The Plan 1.1. Establishment of Plan. Nicolet National Bank ("Nicolet"), a Wisconsin corporation, establishes a non-qualified deferred compensation plan for a select group of highly compensated employees, effective January 1, 2002. This document defines the provisions of such non-qualified plan and shall be known as the Nicolet National Bank Deferred Compensation Plan. 1.2. Purpose. The purpose of the Plan is to describe the terms of the arrangement under which those employees selected by Nicolet may elect to defer annually the receipt of a portion of the compensation otherwise payable to them by Nicolet in any Plan Year. The Plan is intended to be outside the scope of §457 of the Internal Revenue Code of 1986 ("Code"). 1.3. Lack of Tax Qualification. The Plan is a non-qualified deferred compensation plan. It is not intended to meet the tax qualification requirements of §40l(a) of the Code. Participants are not intended to be taxed on their deferred compensation, however, until they are entitled to receive it. ARTICLE II Definitions 2.1. "Administrator" means the person appointed by Nicolet, from time to time, to administer the Plan. 2. 2. "Beneficiary" means a person or persons (including a trust) designated by a Participant to receive any benefits under the Plan following his death. The initial designation shall be made by the Participant through a beneficiary designation provided to the Administrator. A Participant may change his or her Beneficiary through the beneficiary designation. 2.3. "Compensation" means the total cash compensation earned in a Plan Year by a Participant, including base pay and bonuses.

2.4. "Compensation Deferral Agreement" means the agreement a Participant must execute as a condition to Nicolet's obligation to make a Compensation Reduction Contribution. 2.5. "Compensation Deferral Contribution" means the amount of compensation that Participant elects under a Compensation Reduction Agreement to defer and contribute to this Plan for a Plan Year. 2.6. "Deferral Account" means the sum of all Compensation Reduction Contributions and any earnings thereon. 2.7. "Participant" means an individual who meets the eligibility requirements of Article III. 2.8. "Plan Year" means the twelve (12)-month period beginning January 1, 2002, and ending December 31, 2002, and each twelve (12)-month period thereafter. ARTICLE III Participation and Eligibility This Plan is for the exclusive benefit of certain key employees. Therefore, only those Nicolet employees designated by Nicolet are eligible to obtain defined compensation benefits under this Plan for a Plan Year and thereby become a Participant. The limitation of eligibility to certain key employees of Nicolet is intended to result in the Plan covering only a "select group of Management or highly compensated employees" as described in Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income Security Act of 1974 (ERISA), because such limited coverage exempts the Plan from the participation, vesting, funding, and fiduciary standards of ERISA. ARTICLE IV Deferral Accounts 4.1. Participant Deferral Accounts. Nicolet shall establish and maintain a Deferral Account for each Participant. The Deferral Account is to be credited with all Compensation Deferral Contributions and any earnings thereon. The date of each such credit for a particular Plan Year will be determined by Nicolet and applied consistently to all Participants in that year.

4.2. Participant's Deferral Account. A Participant's Deferral Account shall be maintained and invested as follows: (a) Any funds credited to a Participant's Deferral Account may be kept in cash or invested and reinvested in mutual funds, stocks, bonds, securities or any other assets as may be selected by Nicolet in its discretion. In the exercise of the foregoing discretionary investment powers, Nicolet may engage investment counsel and, if it so desires, may delegate to such counsel full or limited authority to select the assets in which the fm1ds are to be invested. (b) The Participant agrees on behalf of himself and his designated Beneficiary to assume all risk in connection with any decrease in value of the funds which are invested or which continue to be invested in accordance with the provisions of this Agreement. (c) Title to and beneficial ownership of any assets, whether cash or investments which the Corporation may earmark to pay the contingent deferred compensation hereunder, shall at all times remain in the Corporation and the Employee and his designated beneficiary shall not have any property interest whatsoever in any specific assets of the Corporation. 4.3. lnterest With regard to any funds kept in cash, Nicolet shall quarterly credit to the Deferral Account an amount of interest equal to the prime lending rate published in the Wall Street Journal (Midwest Edition) as of the first day of each quarter less two and one-half percent (2Yz%) until distributed to the Participant. Such interest shall be computed as if credit to the Deferral Account was made as of the first day of each quarter. It is the intent of this Plan that the interest be compounded. 4.4. Investment Ownership. Nicolet shall retain title to and beneficial ownership of all assets, whether cash or investments, which it may earmark to pay the Participant's deferred compensation. Neither the Participant nor his or her designated beneficiary shall have any property interest in the Nicolet's specific assets. 4.5. Contractual Obligation. Nicolet has a contractual obligation to make payments from a Participant's account in accordance with Article V. Payment of account balances, when due, shall be made out of the general funds of Nicolet.

4.6. Unsecured Interest. This Plan does not give a Participant or Beneficiary any interest whatsoever in any specific asset of Nicolet.. To the extent that any person acquires a right to receive payments under this Plan, such right shall be no greater than the right of any unsecured general creditor of Nicolet. 4.7. No Trust. Nothing contained in this Agreement and no action taken pursuant to the provisions of this Agreement shall create or be construed to create a trust of any kind, or a fiduciary relationship between Nicolet and the Participant, his or her designated Beneficiary or any other person. ARTICLE V Payment of Benefits 5.1. Retirement. Upon the retirement of the Participant, Nicolet shall deliver to the Participant in cash or in-kind an amount equal to the fair market value of the Participant's Deferral Account in five (5) equal annual installments. Such installments shall commence within thirty (30) days of the Participant's date of retirement, and the annual anniversary date of such payment thereafter. 5.2. Effect of Termination of Employment. In the event of termination of the Participant's employment with Nicolet (for any reason) prior to the Participant's retirement, the Deferral Account established hereunder shall be payable to the Participant in cash or in-kind an amount equal to the fair market value of the Participant's Deferral Account in five (5) equal annual installments. Such installments shall commence within thirty (30) days of the Participant's termination date, and the annual anniversary date of such payment thereafter. 5.3. Death. If the Participant shall die, the Deferral Account established hereunder shall be paid to the applicable Beneficiary designated by the Participant under the Compensation Deferral Agreement (or, if all such Beneficiaries so designated predecease the Participant or if no such Beneficiary is designated, to the legal representative of the Participant's estate) in cash or in-kind an amount equal to the fair market value of the Participant's Deferral Account in five (5) equal annual installments in five (5) equal annual installments. Such installments shall commence within thirty (30) days of the Participant's date of death, and the annual anniversary date of such payment thereafter.

ARTICLE VI Administration 6.1. Administration. This Plan shall be administered by Nicolet or its designee. Nicolet, or its designee, may establish rules for the administration of this Plan which are not inconsistent with the provisions of the Plan. Neither Nicolet nor its designees shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Plan unless attributable to willful misconduct or lack of good faith. 6.2. Finality of Determination. The dete1mination of Nicolet, or its designee, as to any questions arising under this Plan, including questions of construction and interpretation, shall be final, binding, and conclusive upon all persons. 6.3. Tax Withholding. Nicolet may withhold, or require the withholding of, any federal, state, or local taxes required to be withheld with respect to any benefit payment. Upon discharge or settlement of such tax liability, Nicolet shall distribute the balance of such sum, if any, to the Participant from whose payment it was withheld, or, if such Participant is then deceased, to the Beneficiary or Contingent Beneficiary of such Participant. ARTICLE VII Miscellaneous 7.1. No Right to Employment. Nothing contained in the Plan shall be deemed to give any Participant or employee the right to be retained in the service of Nicolet, or to interfere with the right of Nicolet to discharge any Participant or employee at any time, regardless of the effect which the discharge shall have upon such individual as a Participant in the Plan. 7.2. Non-Transferability. In no event shall Nicolet make any payment under this Plan to any assignee or creditor of a Participant or of a Beneficiary. Prior to the time of payment hereunder, a Participant or a Beneficiary shall have no rights, by way of anticipation or otherwise, to assign, pledge, encumber, or otherwise dispose of any interest under this Plan, or shall such rights be assigned or transferred by operation of law.

7.3. Amendment and Termination. Nicolet expects the Plan to be permanent, but reserves the right to amend, modify, or terminate the Plan at any time by action of its Board of Directors. No amendment or termination shall operate to decrease any Participant account balances then in existence. 7.4. Applicable Law. This Plan shall be governed and interpreted in accordance with the laws of the State of Wisconsin. 7. 5. Severability. If the Internal Revenue Service shall, at any time, interpret this Plan to be ineffective with regard to deferral of the Participant's income, and that interpretation becomes final and unappealable, then only those amounts in the Deferral Account which would be treated as taxable income by the Service at the time of such final interpretation, shall be paid over to the Participant. All other assets in the Deferral Account at the time of the final interpretation shall be distributed to the Participant according to Article VI. NICOLET NATIONAL BANK By:_______________________

Michael E. Daniels

NICOLET NATIONAL BANK
FIRST AMENDMENT TO THE NICOLET NATIONAL BANK DEFERRED COMPENSATION PLAN THIS AMENDMENT is made as of the 21st day of December, 2010 by Nicolet National Bank, a Wisconsin corporation ("Nicolet"). RECITALS WHEREAS, Nicolet established the Nicolet National Bank Deferred Compensation Plan effective January 1, 2002 (the "Plan"); WHEREAS, Nicolet, pursuant to Section 7.3 of the Plan, reserved the right to amend, modify, or terminate the Plan at any time by action of its Board of Directors so long as any amendment or termination shall not operate to decrease any Participant account balances then in existence; WHEREAS, the Board of Directors has determined that certain provisions of the Plan should be amended as set forth herein to provide clarity pursuant to the final regulations of Section 409A of the Internal Revenue Code and IRS Notice 2010-6. NOW, THEREFORE, effective as of January 1, 2009, the Plan is amended as follows: 1. By replacing the phrase "Compensation Reduction Agreement" with the phrase "Compensation Deferral Agreement" wherever it appears in the Plan. 2. By replacing the phrase "Compensation Reduction Contribution" with the phrase "Compensation Deferral Contribution" wherever it appears in the Plan. 3. By deleting Sections 2.3 and 2.4 in their entirety and substituting therefor the following: "2.3 'Compensation' means the total cash compensation payable to a Participant in a Plan Year, including base pay and bonuses. 2.4 'Compensation Deferral Agreement' means the agreement a Participant must execute, in accordance with the limitations set forth in Section 4.1, as a condition to Nicolet's obligation to make a Compensation Deferral Contribution." 4. By capitalizing "Compensation" in Section 2.5. 5. By deleting Section 4.1 in its entirety and substituting therefor the following: "4.1 Participant Deferral Accounts.

(a) Nicolet shall establish and maintain a Deferral Account for each Participant. The Deferral Account is to be credited with all Compensation Deferral Contributions (and any earnings thereon). The date of each such credit for a particular Plan Year will be determined by Nicolet and applied consistently to all Participants in that year. (b) Except as provided in Subsection (c) below, a Participant's election to defer compensation must be made by completing and delivering to Nicolet a Compensation Deferral Agreement on or before the last day of the Plan Year immediately preceding the Plan Year in which the Compensation Deferral Agreement shall be effective. Any such election shall be irrevocable during the Plan Year for which it is effective. (c) A newly eligible Participant may elect to defer compensation by completing and delivering to Nicolet a Compensation Deferral Agreement within thirty (30) days after the Participant becomes eligible to participate in the Plan. Such Compensation Deferral Agreement shall be effective and irrevocable on the date it is delivered to Nicolet and shall only apply to Compensation earned after Compensation Deferral Agreement becomes effective." 5. The following new Sections 5.4 and 5.5 shall be inserted under Article V Payment of Benefits: "5.4. Retirement and Termination of Employment Defined. For purposes of this Plan, the phrases 'termination of employment,' 'termination,' 'retirement,' and similar terminology all refer to a 'separation from service' within the meaning of Code Section 409A and all regulations and guidance thereunder, and the terms of the Plan shall be interpreted as necessary to comply with the requirements of Code Section 409A and all regulations and guidance thereunder. 5.5 Delay of Payment for Specified Employees. In the event Nicolet becomes a publicly-traded corporation as contemplated by Code Section 409A, any payments that are otherwise payable to a Participant within the first six ( 6) months after the Participant's termination of employment shall be suspended if, immediately prior to the Participant's termination of employment, the Participant is a 'specified employee,' as defined in Treasury Regulations Section 1.409A-l(i), of Nicolet or any related 'service recipient' within the meaning of Code Section 409A and the regulations thereunder. Any payments suspended by operation of the foregoing sentence shall be paid as a lump sum in the seventh month following the effective date of the Participant's termination of employment or, if later, the first pay date after July I, 2010. Payments (or portions thereof) that would be paid latest in time during the six-month period will be suspended first."

6. By deleting the phrase "(for any reason)" from the first sentence of Section 5.2. 7. By deleting the duplicative phrase "in five (5) equal annual installments" from the end of the first sentence in Section 5.3. 8. By adding the following to the end of Section 7.3: "If the Plan is terminated, all benefits under the Plan will be paid according to the terms of the Plan in effect at the time of termination and shall not be paid prior to the date they would have been paid if the Plan had not been terminated; provided, however, if the Plan is terminated as provided in Treasury Regulations Section 1.409A-3(j)( 4)(ix), benefits under the Plan shall be paid in accordance with Treasury Regulations Section 1.409A- 3(j)(4)(ix)." Except as specifically amended hereby, the Plan shall remain in full force and effect as prior to this First Amendment. IN WITNESS WHEREOF, this First Amendment to the Plan has been duly executed by the undersigned as of the date first above written. NICOLET NATIONAL BANK By:____________________________________ Robert B. Atwell Chief Executive Officer and Chairman

Exhibit 10.7

NICOLET NATIONAL BANK
DEFERRED COMPENSATION PLAN FOR
NON-EMPLOYEE DIRECTORS
Revised and Restated effective January 1, 2009

NICOLET NATIONAL BANK DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS ARTICLE I The Plan 1.1. Establishment of Plan. Nicolet National Bank ("Nicolet"), a Wisconsin corporation, establishes a non-qualified deferred compensation plan for members of the Board of Directors who are not employed by Nicolet. This document defines the provisions of such non-qualified plan and shall be known as the Nicolet National Bank Deferred Compensation Plan for Non-Employee Directors (the "Plan"). 1.2. Purpose. The purpose of the Plan is to describe the terms of the arrangement under which certain directors of Nicolet may elect to defer a portion of their compensation as a director. 1.3. Effective Date. The Plan was originally effective as of January 1,2006. This Restatement is effective as of January 1, 2009. 1.4. Lack of Tax Qualification. The Plan is a non-qualified deferred compensation plan. It is not intended to meet the tax qualification requirements of S401(a) of the Internal Revenue Code of 1986 ("Code"). Participants are not intended to be taxed on their deferred compensation, however, until they are entitled to receive it. ARTICLE II Definitions 2.1. "Administrator" means the person appointed by Nicolet, from time to time, to administer the Plan. 2.2. "Beneficiary" means a person or persons (including a trust) designated by a Participant to receive any benefits under the Plan following his her death. The initial designation shall be made by the Participant through a beneficiary designation provided to the Administrator. A Participant may change his or her Beneficiary through the beneficiary designation. 2.3. "Deferral Account" means the sum of all Voluntary Deferrals and any earnings thereon. 2.4 "Director" means a non-employee member of the Board of Directors of Nicolet. 2.5. "Election Form" means the agreement a Participant must execute as a condition to Nicolet's obligation to contribute a Voluntary Deferral to a Participant's Deferral Account.

2.6. "Participant" means any Director who elects to make Voluntary Deferrals under the Plan. 2.7. "Plan Year" means the twelve (l2)-month period beginning January 1, 2006, and ending December 31, 2006, and each twelve (12)-month period thereafter. 2.8. "Trust" means the document entitled Trust in Conjunction with the Nicolet National Bank Deferred Compensation Plan for Non-Employee Directors which was created and executed coincident with the Plan." 2.9. "Voluntary Deferral" means all or a specified portion of the annual retainer and meeting fees receivable for service as a Director of Nicolet, but not any other compensation or expense reimbursement, that a Participant elects to defer and contribute to this Plan for a Plan Year. ARTICLE III Deferral Accounts 3.1. Participant Deferral Accounts. Nicolet shall establish and maintain a Deferral Account for each Participant. The Deferral Account is to be credited with all Voluntary Deferrals and any earnings thereon. The date of each such credit for a particular Plan Year will be determined by Nicolet and applied consistently to all Participants in that year. 3.2. Investment in Nicolet Stock. Any Voluntary Deferrals shall be transferred to the Trust established by Nicolet in conjunction with the Plan. The trustee of the Trust will invest the Voluntary Deferrals in shares of common stock of Nicolet, as set forth in the Trust. 3.3. Time of Election. Elections with respect to Voluntary Deferrals may be made at the following times: (a) A nominee for election for Director (who is not at the time of nomination a sitting director) may make an election to contribute a Voluntary Deferral any time before election to the Board and at any time within thirty (30) days after such nominee is elected to the Board. An election to make a Voluntary Deferral shall be effective upon such person's election to the Board, or at such time that the election is made if the election has been made within the aforementioned thirty (30) day period following the nominee's election to the Board; and shall be irrevocable as of the date it becomes effective; and shall only be effective with respect to annual retainer and meeting fees payable for the portion of the Plan Year after the election becomes effective. (b) A sitting Director who has never elected to make a Voluntary Deferral may elect to make a Voluntary Deferral at any time during the year. Such Voluntary Deferral election shall not, however, be effective until January 1 of the following year and shall be irrevocable as provided in Subsection (d) below.

(c) A sitting Director who has discontinued a Voluntary Deferral may again elect to make a Voluntary Deferral at any time during the year, but the election will not be effective until January I of the following year and shall be irrevocable as provided in Subsection (d) below. (d) Except as provided in Section 3.3(a) above, an initial election to defer compensation to be earned in a particular year must be made in the prior calendar year. An election to participate in the Plan shall be in the form of a document executed by the Director and filed with Nicolet. An election related to cash compensation otherwise payable in any particular calendar year shall become irrevocable on the last day prior to the beginning of such calendar year. An election shall continue until the Director ceases to be a Director or until s/he terminates or modifies such election by written notice. Any such termination or modification shall become effective as of the end of the calendar year in which such notice is given with respect to all cash compensation otherwise payable in subsequent calendar years. A Director who has filed a termination of election may thereafter again file an election to participate for any calendar year or years subsequent to the filing of such election. ARTICLE IV Payment of Benefits 4.1. End of Service on Board. If a Participant experiences a termination of service other than due to death (hereinafter referred to as "Separation Date"), Nicolet shall deliver to the Participant in-kind a lump sum amount equal to the fair market value of the Participant's Deferral Account held by the Trust in the form as set forth in section 4.3 below. Said distribution shall be made between January I and July I of the year immediately following the year of the Separation Date (the "Distribution Period"). For purposes of this Plan, the phrases "termination of service" and similar terminology all refer to a "separation from service" within the meaning of Code Section 409A and all regulations and guidance thereunder, and the terms of the Plan shall be interpreted as necessary to comply with the requirements of Code Section 409A and all regulations and guidance thereunder, provided that a Participant will not have experienced a "separation from service" if the Participant performs services for Nicolet as an independent contractor, employee, or otherwise at a level of service of more than 20% of the average level of service performed by the Participant during the 36 month period preceding the Separation Date. 4.2. Death. If the Participant's termination of service is due to death, the Deferral Account established hereunder shall be paid to the applicable Beneficiary designated by the Participant (or, if all such Beneficiaries so designated predecease the Participant or if no such Beneficiary is designated, to the legal representative of the Participant's estate) in-kind a lump sum amount equal to the fair market value of the Participant's Deferral Account held by the Trust in the form as set forth in section 4.3 below. Said distribution shall be made within 90 days of the date of the Participant's death.

4.3 Form of Payment. Payments from the Deferral Account will be made in whole shares of Nicolet common stock. The value of any fractional shares shall be made in cash. ARTICLE V Administration 5.1. Administration. This Plan shall be administered by Nicolet or its designee. Nicolet, or its designee, may establish rules for the administration of this Plan which are not inconsistent with the provisions of the Plan. Neither Nicolet nor its designees shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Plan unless attributable to willful misconduct or lack of good faith. 5.2. Finality of Determination. The determination of Nicolet, or its designee, as to any questions arising under this Plan, including questions of construction and interpretation, shall be final, binding, and conclusive upon all persons. 5.3. Tax Withholding. Nicolet may withhold, or require the withholding of, any federal, state, or local taxes required to be withheld with respect to any benefit payment. Upon discharge or settlement of such tax liability, Nicolet shall distribute the balance of such sum, if any, to the Participant from whose payment it was withheld, or, if such Participant is then deceased, to the Beneficiary or contingent Beneficiary of such Participant. ARTICLE VI Miscellaneous 6.1 Investment Ownership. Nicolet shall retain title to and beneficial ownership of all assets, whether cash or investments, which it may earmark to pay the Participant's deferred compensation. Neither the Participant nor his or her designated beneficiary shall have any property interest in Nicolet's specific assets. 6.2. Contractual Obligation. Nicolet has a contractual obligation to make payments from a Participant's account in accordance with Article IV. Payment of account balances, when due, shall be made out of the general funds of Nicolet. 6.3. Unsecured Interest. This Plan does not give a Participant or Beneficiary any interest whatsoever in any specific asset of Nicolet. To the extent that any person acquires a right to receive payments under this Plan, such right shall be no greater than the right of any unsecured general creditor of Nicolet. 6.4. No Trust. Nothing contained in this Agreement and no action taken pursuant to the provisions of this Agreement shall create or be construed to create a trust of any kind, or a fiduciary relationship between Nicolet and the Participant, his or her designated Beneficiary or any other person.

6.5. Non-Transferability. In no event shall Nicolet make any payment under this Plan to any assignee or creditor of a Participant or of a Beneficiary. Prior to the time of payment hereunder, a Participant or a Beneficiary shall have no rights, by way of anticipation or otherwise, to assign, pledge, encumber, or otherwise dispose of any interest under this Plan, nor shall such rights be assigned or transferred by operation of law. 6.6. Amendment and Termination. Nicolet expects the Plan to be permanent, but reserves the right to amend, modify, or terminate the Plan at any time by action of its Board of Directors. No amendment or termination shall operate to decrease any Participant account balances then in existence. If the Plan is terminated, all benefits under the Plan will be paid according to the terms of the Plan in effect at the time of termination and shall not be paid prior to the date they would have been paid if the Plan had not been terminated; provided, however, if the Plan is terminated as provided in Treasury Regulations Section 1.409A-3(j)(4)(ix), benefits under the Plan shall be paid in accordance with Treasury Regulations Section 1.409A-3(j)(4)(ix). 6.7. Applicable Law. This Plan shall be governed and interpreted in accordance with the laws of the State of Wisconsin. 6.8. Severability. If the Internal Revenue Service shall, at any time, interpret this Plan to be ineffective with regard to deferral of the Participant's income, and that interpretation becomes final and unappealable, then only those amounts in the Deferral Account which would be treated as taxable income by the Service at the time of such final interpretation shall be paid over to the Participant. All other assets in the Deferral Account at the time of the final interpretation shall be distributed to the Participant according to Article IV. IN WITNESS WHEREOF, Nicolet has caused this indenture to be executed as of the 21st day of December, 2010. NICOLET NATIONAL BANK By: ______________________________________ Robert B. Atnell, Chairman $ CEO

Exhibit 10.8

REVISED AND RESTATED EMPLOYMENT AGREEMENT

THIS REVISED AND RESTATED EMPLOYMENT AGREEMENT is made as of the 17th day of April, 2012 (as so revised and restated, the “Agreement”), revising and restating that certain Employment Agreement dated April 7, 2000 as later amended on November 28, 2008 and December 29, 2010 (collectively the “Original Agreement”), by and between NICOLET NATIONAL BANK (the "Bank"), and MICHAEL E. DANIELS, a resident of the State of Wisconsin (the "Executive").

INTRODUCTION :

This Agreement is intended to amend, replace and supersede the rights and obligations of the parties under the Employment Agreement dated April 7, 2000 as later amended on November 28, 2008 and December 29, 2010 (collectively the “Original Agreement”) with respect to the subject matter thereof. The Bank and the Executive now desire to amend the Original Agreement with respect to its Non-Competition and Non-Solicitation provisions in response to the growth and expansion of the Bank into geographic areas not contemplated in the Original Agreement and to reflect the current status of the Executive’s position and compensation and to make certain other administrative changes.

In consideration of the Executive’s continued employment by the Bank, additional monetary consideration and the mutual agreements hereinafter set forth, the parties hereby agree to amend the Original Agreement, effective as of April 1, 2012, except as otherwise provided below, as follows:

Definitions . Whenever used in this Agreement, the following terms and their variant forms shall have the meaning set forth below:

1.1

" Agreement " shall mean this Agreement and any exhibits incorporated herein together with any amendments hereto made in the manner described in this Agreement.

1.2

" Area " shall mean the geographic area within the boundaries of the State of Wisconsin and the Upper Peninsula of the State of Michigan. It is the express intent of the parties that the Area as defined herein is the area where the Executive performs or performed services on behalf of the Bank under this Agreement as of, or within a reasonable time prior to, the termination of the Executive's employment hereunder.

1.3

" Bank Information " means Confidential Information and Trade Secrets.

1.4

" Business of the Bank " shall mean the business conducted by the Bank, which is the business of commercial banking.

1.5

" Cause " shall mean:

1.5.1

With respect to termination by the Bank:

(a)

a material breach of the terms of this Agreement by the Executive, including, without limitation, failure by the Executive to perform his duties and responsibilities in the manner and to the extent required under this Agreement, which remains uncured after the expiration of thirty (30) days following the delivery of written notice of such breach to the Executive by the Bank. Such notice shall (i) specifically identify the duties that the Board of Directors of the Bank believes the Executive has failed to perform, (ii) state the facts upon which such Board of Directors made such determination, and (iii) be approved by a resolution passed by two-thirds (2/3) of the directors then in office;

(b)

conduct by the Executive that amounts to fraud, dishonesty or willful misconduct in the performance of his duties and responsibilities hereunder;

(c)

arrest for, charged in relation to (by criminal information, indictment or otherwise), or conviction of the Executive during the Term of this Agreement of a crime involving breach of trust or moral turpitude;

(d)

conduct by the Executive that amounts to gross and willful insubordination or inattention to his duties and responsibilities hereunder; or

(e)

conduct by the Executive that results in removal from his position as an officer or executive of the Bank pursuant to a written order by any regulatory agency with authority or jurisdiction over the Bank.

1.5.2

With respect to termination by the Executive, the following conditions will establish good reason for the Executive to terminate his employment and receive compensation as set forth in section 4.1 of the Agreement so long as the termination occurs during a period of time not to exceed two years following the occurrence of any of the conditions without the Executive’s consent, the Executive provides notice to the Bank of the good reason condition within 90 days after the condition arises and the Bank has 30 days to cure the condition:

(a)

a material diminution to the scope of the Executive’s authority (including supervisory authority), duties or responsibility;

(b)

following a Change of Control, a material diminution of reporting relationship (e.g., Executive reports to another executive or officer of the Bank rather than the Board of Directors);

(c)

following a Change of Control, a material change in the geography where the Executive must perform his service (e.g. a location that is beyond a 50-mile radius from the Executive’s office location immediately prior to the Change of Control);

(d)

following a Change of Control, any material decrease in base compensation, bonus opportunity or other benefits provided for in Section 4 from the level in effect immediately prior to the Change of Control;

(e)

any other material breach in the Agreement.

1.6

" Change of Control " means any one of the following events:

(a)

When one person or a group acquires stock of the Bank that, combined with stock previously owned, controls more than 50% of the value or voting power of the stock of the Bank;

(b)

On the date that, during any 12-month period, either [1] any person or group acquires stock possessing 30% of the voting power of the Bank, or [2] the majority of the board is replaced by persons whose appointment or election is not endorsed by a majority of the board;

(c)

When a person or group acquires, during any 12-month period, assets of the Bank having a total gross fair market value equal to 40% or more of the total gross fair market value of all of the Bank’s assets.

1.6A

" Company " shall mean Nicolet Bankshares, Inc., a bank holding company incorporated under the laws of the State of Wisconsin.

1.7

“ Confidential Information " means data and information relating to the business of the Bank (which does not rise to the status of a Trade Secret) which is or has been disclosed to the Executive or of which the Executive became aware as a consequence of or through the Executive's relationship to the Bank and which has value to the Bank and is not generally known to its competitors. Confidential Information shall not include any data or information that has been voluntarily disclosed to the public by the Bank (except where such public disclosure has been made by the Executive without authorization) or that has been independently developed and

disclosed by others, or that otherwise enters the public domain through lawful means.

1.8

" Disability " shall mean the inability of the Executive to perform each of his material duties under this Agreement for the duration of the short-term disability period under the Bank's policy then in effect (or, if no such policy is in effect, a period of one-hundred eighty (180) consecutive days) as certified by a physician chosen by the Bank and reasonably acceptable to the Executive.

1.9

" Effective Date " shall mean the date the Bank opens for business.

1.10

" Initial Term " shall mean that period of time commencing on the date of this Agreement and running until the close of business on the last business day immediately preceding the third anniversary of the date of this Agreement or any earlier termination of employment of the Executive under this Agreement as provided for in Section 3.

1.10A

“ Separation from Service ” shall mean a termination of the Executive’s employment with the Bank and all affiliated companies that, together with the Bank, constitute the ‘service recipient’ within the meaning of Code Section 409A and the regulations thereunder that constitutes a ‘separation from service’ within the meaning of Code Section 409A and the regulations thereunder.

1.11

" Term " shall mean the last day of the Initial Term or most recent subsequent renewal period.

1.12

" Trade Secrets " means Bank information including, but not limited to, technical or nontechnical data, formulas, patterns, compilations, programs, devices, methods, techniques, drawings, processes, financial data, financial plans, product plans or lists of actual or potential customers or suppliers which:

(a)

derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(b)

is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Duties .

2.1

Position . The Executive is employed as the President and Chief Operating Officer of the Bank, subject to the direction of the Board of Directors of the Bank or its designee(s) and shall perform and discharge well and faithfully the duties which may be assigned to him from time to time by the Bank in connection with the conduct of its business. The duties and responsibilities of the Executive are set forth on Exhibit A attached hereto.

2.2

Full-Time Status . In addition to the duties and responsibilities specifically assigned to the Executive pursuant to Section 2.1 hereof, the Executive shall:

(a)

devote substantially all of his time, energy and skill during regular business hours to the performance of the duties of his employment (reasonable vacations and reasonable absences due to illness excepted) and faithfully and industriously perform such duties;

(b)

diligently follow and implement all reasonable and lawful management policies and decisions communicated to him by the Board of Directors of the Bank; and

(c)

timely prepare and forward to the Board of Directors of the Bank all reports and accountings as may be requested of the Executive.

2.3

Permitted Activities . The Executive shall devote his entire business time, attention and energies to the Business of the Bank and shall not during the Term be engaged (whether or not during normal business hours) in any other business or professional activity, whether or not such activity is pursued for gain, profit or other pecuniary advantage; but this shall not be construed as preventing the Executive from:

(a)

investing his personal assets in businesses which (subject to clause (b) below) are not in competition with the Business of the Bank and which will not require any services on the part of the Executive in their operation or affairs and in which his participation is solely that of an investor;

(b)

purchasing securities in any corporation whose securities are regularly traded provided that such purchase shall not result in him collectively owning beneficially at any time five percent (5%) or more of the equity securities of any business in competition with the Business of the Bank; and

(c)

participating in civic and professional affairs and organizations and conferences, preparing or publishing papers or books or teaching so long as the Board of Directors of the Bank approves of such activities prior to the Executive's engaging in them.

Term and Termination .

3.1

Term . This Agreement shall remain in effect for the Term. While this Agreement remains in effect, it shall automatically renew each day after the date of this Agreement so that the Term remains a three-year term from day-to-day hereafter unless the Bank or the Executive gives written notice to the other of its intent that the automatic renewals shall cease. In the event such notice of non-renewal is properly given, this Agreement and the Term shall expire on the third anniversary of the thirtieth (30th) day following the date such written notice is received.

3.2

Termination . During the Term, the employment of the Executive under this Agreement may be terminated only as follows:

3.2.1

By the Bank:

(a)

Reserved;

(b)

For Cause, upon written notice to the Executive pursuant to Section 1.5.1 hereof, where the notice has been approved by a resolution passed by twothirds (2/3) of the directors of the Bank then in office;

(c)

Without Cause at any time, provided that the Bank shall give the Executive thirty (30) days' prior written notice of its intent to terminate, in which event the Bank shall be required to continue to meet its obligations to the Executive under Section 4.1 for a period equal to the lesser of (i) twelve (12) months following the termination or (ii) the remaining Term of the Agreement; or

(d)

Upon the Disability of Executive at any time, provided that the Bank shall give the Executive thirty (30) days' prior written notice of its intent to terminate, in which event, the Bank shall be required to continue to meet its obligations under Section 4.1 for a period of six (6) months following the termination or until the Executive begins receiving payments under the Bank's long-term disability policy, whichever occurs first.

3.2.2

By the Executive:

(a)

For Cause, in which event the Bank shall be required to continue to meet its obligations under Section 4.1 for a period equal to the lesser of (i) twelve (12) months following the termination or (ii) the remaining Term of the Agreement; or

(b)

Without Cause or upon the Disability of the Executive, provided that the Executive shall give the Bank sixty (60) days' prior written notice of his intent to terminate.

3.2.3

At any time upon mutual, written agreement of the parties.

3.2.4

Notwithstanding anything in this Agreement to the contrary, the Term shall end automatically upon the Executive's death.

3.3

Change of Control .

(a)

If, within six (6) months after a Change of Control as defined in Section 1.6(a) or (c), the Executive terminates his employment with the Bank under this Agreement for Cause, the Executive, or in the event of his subsequent death, his designated beneficiaries or his estate, as the case may be, shall receive, as liquidated damages, in lieu of all other claims, a severance payment equal to one and one-half (1.5) times the Executive’s then current Base Salary and bonus then in effect, if any, paid in a lump sum cash payment in accordance with Section 3.3A.

(b)

If, within six (6) months after a Change of Control as defined in Section 1.6(b), the Executive terminates his employment with the Bank under this Agreement for Cause, the Executive, or in the event of his subsequent death, his designated beneficiaries or his estate, as the case may be, shall receive, as liquidated damages, in lieu of all other claims, a severance payment equal to one and one-half (1.5) times the Executive’s then current Base Salary and bonus then in effect, if any, paid in equal installments in accordance with the Bank’s normal payroll practices over a period equal to the lesser of twelve (12) months or, determined as of the date of the Executive’s termination of employment, the remaining Term of the Agreement, and paid in accordance with Section 3.3A.

(c)

In no event shall the payment(s) described in this Section 3.3 exceed the amount permitted by Section 280G of the Internal Revenue Code, as amended (the ‘Code’). Therefore, if the aggregate present value (determined as of the date of the Change of Control in accordance with the provisions of Section 280G of the Code) of both the severance payment and all other payments to the Executive in the nature of compensation which are contingent on a change in ownership or effective control off the Bank or in the ownership of a substantial portion of the assets of the Bank (the ‘Aggregate Severance’) would result in a ‘parachute payment,’ as defined under Section 280G of the Code, then the Aggregate Severance shall not be greater than an amount equal to 2.99 multiplied by the Executive’s ‘base amount’ for the ‘base period,’ as those terms are defined under Section 280G of the Code. In the event the Aggregate Severance is required to be reduced pursuant to this Section 3.3, the latest payments in time shall be reduced first and if multiple portions of the Aggregate Severance to be reduced are paid at the same time, any non-cash payments will be reduced before any cash payments, and any remaining cash payments will be reduced pro rata.

3.3A

Severance .

(a)

Payment of severance amounts due upon the Executive’s termination of employment pursuant to Sections 3.2.1(c) or (d); Section 3.2.2(a); or Section 3.3, as applicable, including any reimbursements to which the Executive is entitled pursuant to Section 4.4, shall commence or be made, as applicable, within ninety (90) days after the Executive experiences a Separation from Service on or after the date the Executive’s employment is terminated.

(b)

Notwithstanding any provision in the Agreement to the contrary, to the extent necessary to avoid the imposition of tax on the Executive under Code Section 409A, any payments that are otherwise payable to the Executive within the first six (6) months following the effective date of the Executive’s Separation from Service, shall be suspended and paid as soon as practicable following the end of the six-month period following such effective date if, immediately prior to the Executive’s Separation from Service, the Executive is determined to be a ‘specified employee’ (within the meaning of Code Section 409A(a)(2)(B)(i)) of the Bank (or any related ‘service recipient’ within the meaning of Code Section 409A and the regulations thereunder). Any payments suspended by operation of the foregoing sentence shall be paid as a lump sum in the seventh month following such effective date. Payments (or portions thereof) that would be paid latest in time during the six-month period will be suspended first.

3.4

Effect of Termination . Upon termination of the Executive's employment hereunder, the Bank shall have no further obligations to the Executive or the Executive's estate with respect to this Agreement, except for the payment of salary and bonus amounts, if any, accrued pursuant to Sections 4.1 and 4.2 hereof and unpaid as of the effective date of the termination of employment and payments set forth in Sections 3.2.1(a), (c) or (d); Section 3.2.2(a); Section 3.3; and Section 4.4, as applicable. Nothing contained herein shall limit or impinge upon any other rights or remedies of the Bank or the Executive under any other agreement or plan to which the Executive is a party or of which the Executive is a beneficiary.

Compensation . The Executive shall receive the following salary and benefits during the Term, except as otherwise provided below:

4.1

Base Salary . During the Term in effect at the time of this Agreement, the Executive shall be compensated at a base rate of $295,000 per year (the "Base Salary"). The Executive's Base Salary shall be reviewed by the Executive Committee of the Board of Directors of the Bank at least annually, and based on its evaluation of Executive's performance, the Compensation Committee may recommend to the entire Board of Directors of the Bank that the Executive's Base Salary be increased in such amount, if any, as may be determined by the Board of Directors of the Bank. Base Salary shall be payable in accordance with the Bank's normal payroll practices.

4.2

Incentive Compensation .

The Executive shall be eligible to receive annual bonus compensation, if any, as determined by the Board of Directors of the Bank pursuant to any incentive compensation program as may be adopted from time to time by the Bank.

4.3

Reserved.

4.4

Health Insurance .

(a)

In the event of termination by the Executive for Cause (Section 3.2.3(a)) or following a Change of Control (Section 3.3), the Bank shall reimburse Executive for the cost of premium payments paid by the Executive to continue his then existing health insurance for himself and his eligible dependents as provided by the Bank for a period of twelve (12) months following the date of termination of employment.

(b)

In the event of a termination by the Bank without Cause (Section 3.2.l(c)), the Bank shall reimburse the Executive for the cost of premium payments paid by the Executive to continue his then existing health insurance for himself and his eligible dependents as provided by Bank for a period of twelve (12) months following the date of termination of employment.

(c)

In no event shall any reimbursement pursuant to this Section 4.4 be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of reimbursable expenses incurred in one taxable year shall not affect the expenses eligible for reimbursement in any other taxable year. Such right to reimbursement is not subject to liquidation or exchange for another benefit.

4.5

Automobile . Beginning as of the Effective Date, the Bank will provide Executive with an automobile to be used for business and personal purposes. The make and model of the automobile shall be determined by the Bank. The Bank will pay expenses associated with the operation, maintenance, repair and insurance for the automobile.

4.6

Business Expenses; Memberships . The Bank specifically agrees to reimburse the Executive for:

(a)

reasonable and necessary business (including travel) expenses incurred by him in the performance of his duties hereunder, as approved by the Board of Directors of the Bank; and

(b)

reasonable dues and business related expenditures, including initiation fees, associated with memberships, as selected by the Executive, including country clubs and professional associations which are commensurate with his position.

(c)

Reserved.

provided, however, that the Executive shall, as a condition of reimbursement, submit verification of the nature and amount of such expenses in accordance with reimbursement policies from time to time adopted by the Bank and in sufficient detail to comply with rules and regulations promulgated by the Internal Revenue Service.

4.7

Vacation . On a non-cumulative basis, the Executive shall be entitled to four (4) weeks of vacation in each successive twelve-month period during the Term, during which his compensation shall be paid in full.

4.8

Life Insurance . Beginning as of the Effective Date, the Bank will provide the Executive with term life insurance coverage providing a death benefit of not less than $1,500,000, payable to such beneficiary or beneficiaries as the Executive may designate.

4.9

Benefits . In addition to the benefits specifically described in this Agreement, the Executive shall be entitled to such benefits as may be available from time to time to executives of the Bank similarly situated to the Executive. All such benefits shall be awarded and administered in accordance with the Bank's standard policies and practices. Such benefits may include, by way of example only, profit-sharing plans, retirement or investment funds, dental, health, life and disability insurance benefits and such other benefits as the Bank deems appropriate.

4.10

Withholding . The Bank may deduct from each payment of compensation hereunder all amounts required to be deducted and withheld in accordance with applicable federal and state income, FICA and other withholding requirements.

4.11

Reimbursement of Expenses; In-Kind Benefits . All expenses eligible for reimbursement under this Agreement must be incurred by the Executive during the Term of this Agreement to be eligible for reimbursement. All in-kind benefits described in this Agreement must be provided by the Bank during the Term of this Agreement. The amount of reimbursable expenses incurred, and the amount of in-kind benefits provided, in one taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits provided, in any other taxable year. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the calendar year following the calendar year in which the expense was incurred. Such right to reimbursement or in-kind benefits are not subject to liquidation or exchange for another benefit.

Bank Information .

5.1 Ownership of Bank Information . All Bank Information received or developed by the Executive while employed by the Bank will remain the sole and exclusive property of the Bank.

5.2

Obligations of the Executive . The Executive agrees:

(a)

to hold Bank Information in strictest confidence;

(b)

not to use, duplicate, reproduce, distribute, disclose or otherwise disseminate Bank Information or any physical embodiments of Bank Information; and

(c)

in any event, not to take any action causing or fail to take any action necessary in order to prevent any Bank Information from losing its character or ceasing to qualify as Confidential Information or a Trade Secret.

In the event that the Executive is required by law to disclose any Bank Information, the Executive will not make such disclosure unless (and then only to the extent that) the Executive has been advised by independent legal counsel that such disclosure is required by law and then only after prior written notice is given to the Bank when the Executive becomes aware that such disclosure has been requested and is required by law. This Section 5 shall survive for a period of twelve (12) months following termination of this Agreement for any reason with respect to Confidential Information, and shall survive termination of this Agreement for any reason for so long as is permitted by applicable law, with respect to Trade Secrets.

5.3 Delivery upon Request or Termination . Upon request by the Bank, and in any event upon termination of his employment with the Bank, the Executive will promptly deliver to the Bank all property belonging to the Bank, including, without limitation, all Bank Information then in his possession or control.

Non-Competition . The Executive agrees that during his employment by the Bank hereunder and, in the event of his termination:

• by the Bank for Cause pursuant to Section 3.2.l(b),

• by the Executive without Cause pursuant to Section 3.2.2(b), or

• by the Executive in connection with a Change of Control pursuant to Section 3.3,

for a period of twelve (12) months thereafter, he will not (except on behalf of or with the prior written consent of the Bank), within the Area, either directly or indirectly, on his own behalf or in the service or on behalf of others, as an executive employee or in any other capacity which involves duties and responsibilities similar to those undertaken for the Bank (including as an organizer or proposed executive officer of a new financial institution), engage in any business which is the same as or essentially the same as the Business of the Bank.

Non-Solicitation of Customers . The Executive agrees that during his employment by the Bank hereunder and, in the event of his termination:

• by the Bank for Cause pursuant to Section 3.2.l(b),

• by the Executive without Cause pursuant to Section 3.2.2(b), or

• by the Executive in connection with a Change of Control pursuant to Section 3.3,

for a period of twelve (12) months thereafter, he will not (except on behalf of or with the prior written consent of the Bank), within the Area, on his own behalf or in the service or on behalf of others, solicit, divert or appropriate or attempt to solicit, divert or appropriate, any business from any of the Bank's customers, including actively sought prospective customers, with whom the Executive has or had material contact during the last two (2) years of his employment, for purposes of providing products or services that are competitive with the Business of the Bank.

Non-Solicitation of Employees . The Executive agrees that during his employment by the Bank hereunder and, in the event of his termination:

• by the Bank for Cause pursuant to Section 3.2.1(b),

• by the Executive without Cause pursuant to Section 3.2.2(b), or

• by the Executive in connection with a Change of Control pursuant to Section 3.3,

for a period of twelve (12) months thereafter, he will not, within the Area, on his own behalf or in the service or on behalf of others, solicit, recruit or hire away or attempt to solicit, recruit or hire away, any employee of the Bank to another person or entity providing products or services that are competitive with the Business of the Bank, whether or not:

• such employee is a full-time employee or a temporary employee of the Bank,

• such employment is pursuant to written agreement, and

• such employment is for a determined period or is at will.

Remedies . The Executive agrees that the covenants contained in Sections 5 through 8 of this Agreement are of the essence of this Agreement; that each of the covenants is reasonable and necessary to protect the business, interests and properties of the Bank, and that irreparable loss and damage will be suffered by the Bank should he breach any of the covenants. Therefore, the Executive agrees and consents that, in addition to all the remedies provided by law or in equity, the Bank shall be entitled to a temporary restraining order and temporary and permanent injunctions to prevent a breach or contemplated breach of any of the covenants. The Bank and the Executive agree that all remedies available to the Bank or the Executive, as applicable, shall be cumulative.

10.

Severability . The parties agree that each of the provisions included in this Agreement is separate, distinct and severable from the other provisions of this Agreement and that the invalidity or unenforceability of any Agreement provision shall not affect the validity or enforceability of any other provision of this Agreement. Further, if any provision of this Agreement is ruled invalid or unenforceable by a court of competent jurisdiction because of a conflict between the provision and any applicable law or public policy, the provision shall be redrawn to make the provision consistent with and valid and enforceable under the law or public policy.

11.

No Set-Off by the Executive . The existence of any claim, demand, action or cause of action by the Executive against the Bank whether predicated upon this Agreement or otherwise, shall not constitute a defense to the enforcement by the Bank of any of its rights hereunder.

12.

Notice . All notices and other communications required or permitted under this Agreement shall be in writing and, if mailed by prepaid first-class mail or certified mail, return receipt requested, shall be deemed to have been received on the earlier of the date shown on the receipt or three (3) business days after the postmarked date thereof. In addition, notices hereunder may be delivered by hand or overnight courier, in which event the notice shall be deemed effective when delivered. All notices and other communications under this Agreement shall be given to the parties hereto at the following addresses:

(i)

If to the Bank, to it at:

Post Office Box 23900

Green Bay, Wisconsin 54305-3900

(ii)

If to the Executive, to him at:

2421 Wandering Springs Circle

Green Bay, Wisconsin 54311

13.

Assignment . Neither party hereto may assign or delegate this Agreement or any of its rights and obligations hereunder without the written consent of the other party to this Agreement; provided, however, that the rights and obligations of the Bank shall apply to its successor(s) and the rights of the Executive shall inure to the benefit of the heirs or the estate of the Executive.

14.

Waiver . A waiver by one party to this Agreement of any breach of this Agreement by the other party to this Agreement shall not be effective unless in writing, and no waiver shall operate or be construed as a waiver of the same or another breach on a subsequent occasion.

15.

Arbitration . Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Judgment upon the award rendered by the arbitrator may be entered only in a state court of Wisconsin or the federal court for the Eastern District of Wisconsin. The Bank and the Executive agree to share equally the fees and expenses associated with the arbitration proceedings.

16.

Attorneys' Fees . In the event that the parties have complied with this Agreement with respect to arbitration of disputes and litigation ensues between the parties concerning the enforcement of an arbitration award, the party prevailing in such litigation shall be entitled to receive from the other party all reasonable costs and expenses, including without limitation attorneys’ fees, incurred by the prevailing party in connection with such litigation, and the other party shall pay such costs and expenses to the prevailing party within sixty (60) days after a final determination (excluding any appeals) is made with respect to the litigation.

17.

Applicable Law . This Agreement shall be construed and enforced under and in accordance with the laws of the State of Wisconsin.

18.

Interpretation . Words importing any gender include all genders. Words importing the singular form shall include the plural and vice versa. The terms "herein", "hereunder", "hereby", "hereto", "hereof' and any similar terms refer to this Agreement. Any captions, titles or headings preceding the text of any article, section or subsection herein are solely for convenience of reference and shall not constitute part of this Agreement or affect its meaning, construction or effect.

19.

Entire Agreement . This Agreement embodies the entire and final agreement of the parties on the subject matter stated in this Agreement. No amendment or modification of this Agreement shall be valid or binding upon the Bank or the Executive unless made in writing and signed by both parties. All prior understandings and agreements relating to the subject matter of this Agreement, including, but not limited to, that certain employment agreement between the Bank and the Executive previously signed by the parties and also dated as of April 7, 2000, are hereby expressly terminated and superseded.

20.

Rights of Third Parties . Nothing herein expressed is intended to or shall be construed to confer upon or give to any person, firm or other entity, other than the parties hereto and their permitted assigns, any rights or remedies under or by reason of this Agreement.

21.

Survival . The obligations of the Executive pursuant to Sections 5, 6, 7, 8 and 9 shall survive the termination of the employment of the Executive hereunder for the period designated under each of those respective sections.

IN WITNESS WHEREOF, the parties have caused this Revised and Restated Employment Agreement to be executed on the day and year first above written.

THE BANK:

THE EXECUTIVE:

By: /s/ Donald J. Long, Jr.

/s/ Michael E. Daniels

Print Name: Donald J. Long, Jr.

Title: Chairman, Compensation Committee

Exhibit A

Duties and Responsibilities of the Executive

Function:

Has overall responsibility for Bank’s loan portfolio and overall asset quality. Provides operational guidance in analyzing and appraising the effectiveness of organizational operations.

Principal Accountabilities :

Plans, develops, and directs financial policies and practices of bank to ensure that financial objectives, goals, and institutional growth are met and in accordance with policies of board of directors and government regulations.

Collaborates in the planning and development of investment, loan, interest, and reserve policies to ensure optimum monetary returns in accordance with availability of investment funds, government restrictions, and sound financial practices. Monitors interest rate risk exposure particularly as relates to the commercial loan portfolio and pricing.

Responsible for overseeing Bank’s commercial lending and credit function and loan committee process. Develops strategy on any deteriorating credit situations and makes recommendations for improving the Bank’s position. Assists senior managers with complex and/or problem credits to resolution. Meets directly with customers as needed.

Coordinates communication and reporting activities between departments and branch offices to ensure availability of data required for efficient daily operations. Delegates to subordinate corporate officers authority for administering activities and operations under their control.

Participates in the planning, development, implementation, and evaluation of strategic business and performance goals, short- and long-term objectives, plans, budgets, programs, and policies. Evaluates operating results throughout the organization to ensure that organization growth and objectives are being met.

Monitors the capital expenditure and asset redeployment activities.

Reviews reports and financial statements to determine policy changes due to changes in economic conditions.

Serves as bank representative in professional, business, and community organizations to promote bank services.

Serves on Board of Directors and Committees as appropriate.

10.

Performs other activities as necessary or as requested by Board of Directors or CEO to contribute to the continued growth, profitability and viability of the Bank.

Exhibit 10.9

REVISED AND RESTATED EMPLOYMENT AGREEMENT

THIS REVISED AND RESTATED EMPLOYMENT AGREEMENT is made as of the 17th day of April, 2012 (as so revised and restated, the “Agreement”), revising and restating that certain Employment Agreement dated April 7, 2000 as later amended on November 28, 2008 and December 29, 2010 (collectively the “Original Agreement”), by and between NICOLET NATIONAL BANK (the "Bank"), and ROBERT B. ATWELL, a resident of the State of Wisconsin (the "Executive").

INTRODUCTION :

1 .

Definitions . Whenever used in this Agreement, the following terms and their variant forms shall have the meaning set forth below:

1.1

" Agreement " shall mean this Agreement and any exhibits incorporated herein together with any amendments hereto made in the manner described in this Agreement.

1.2

" Area " shall mean the geographic area within the boundaries of the State of Wisconsin and the Upper Peninsula of the State of Michigan. It is the express intent of the parties that the Area as defined herein is the area where the Executive performs or performed services on behalf of the Bank under this Agreement as of, or within a reasonable time prior to, the termination of the Executive's employment hereunder.

1.3

" Bank Information " means Confidential Information and Trade Secrets.

1.4

" Business of the Bank " shall mean the business conducted by the Bank, which is the business of commercial banking.

1.5

" Cause " shall mean:

1.5.1

With respect to termination by the Bank:

(a)

(b)

conduct by the Executive that amounts to fraud, dishonesty or willful misconduct in the performance of his duties and responsibilities hereunder;

(c)

(d)

conduct by the Executive that amounts to gross and willful insubordination or inattention to his duties and responsibilities hereunder; or

(e)

1.5.2

(a)

a material diminution to the scope of the Executive’s authority (including supervisory authority), duties or responsibility;

(b)

following a Change of Control, a material diminution of reporting relationship (e.g., Executive reports to another executive or officer of the Bank rather than the Board of Directors);

(c)

(d)

(e)

any other material breach in the Agreement.

1.6

" Change of Control " means any one of the following events:

(a)

When one person or a group acquires stock of the Bank that, combined with stock previously owned, controls more than 50% of the value or voting power of the stock of the Bank;

(b)

(c)

1.6A

" Company " shall mean Nicolet Bankshares, Inc., a bank holding company incorporated under the laws of the State of Wisconsin.

1.7

“ Confidential Information " means data and information relating to the business of the Bank (which does not rise to the status of a Trade Secret) which is or has been disclosed to the Executive or of which the Executive became aware as a consequence of or through the Executive's relationship to the Bank and which has value to the Bank and is not generally known to its competitors. Confidential Information shall not include any data or information that has been voluntarily disclosed to the public by the Bank (except where such public disclosure has been made by the Executive without authorization) or that has been independently developed and

disclosed by others, or that otherwise enters the public domain through lawful means.

1.8

" Disability " shall mean the inability of the Executive to perform each of his material duties under this Agreement for the duration of the short-term disability period under the Bank's policy then in effect (or, if no such policy is in effect, a period of one-hundred eighty (180) consecutive days) as certified by a physician chosen by the Bank and reasonably acceptable to the Executive.

1.9

" Effective Date " shall mean the date the Bank opens for business.

1.10

" Initial Term " shall mean that period of time commencing on the date of this Agreement and running until the close of business on the last business day immediately preceding the third anniversary of the date of this Agreement or any earlier termination of employment of the Executive under this Agreement as provided for in Section 3.

1.10A

“ Separation from Service ” shall mean a termination of the Executive’s employment with the Bank and all affiliated companies that, together with the Bank, constitute the ‘service recipient’ within the meaning of Code Section 409A and the regulations thereunder that constitutes a ‘separation from service’ within the meaning of Code Section 409A and the regulations thereunder.

1.11

" Term " shall mean the last day of the Initial Term or most recent subsequent renewal period.

1.12

" Trade Secrets " means Bank information including, but not limited to, technical or nontechnical data, formulas, patterns, compilations, programs, devices, methods, techniques, drawings, processes, financial data, financial plans, product plans or lists of actual or potential customers or suppliers which:

(a)

(b)

is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Duties .

2.1

Position . The Executive is employed as the Chairman of the Board and Chief Executive Officer of the Bank, subject to the direction of the Board of Directors of the Bank or its designee(s) and shall perform and discharge well and faithfully the duties which may be assigned to him from time to time by the Bank in connection with the conduct of its business. The duties and responsibilities of the Executive are set forth on Exhibit A attached hereto.

2.2

Full-Time Status . In addition to the duties and responsibilities specifically assigned to the Executive pursuant to Section 2.1 hereof, the Executive shall:

(a)

(b)

diligently follow and implement all reasonable and lawful management policies and decisions communicated to him by the Board of Directors of the Bank; and

(c)

timely prepare and forward to the Board of Directors of the Bank all reports and accountings as may be requested of the Executive.

2.3

Permitted Activities . The Executive shall devote his entire business time, attention and energies to the Business of the Bank and shall not during the Term be engaged (whether or not during normal business hours) in any other business or professional activity, whether or not such activity is pursued for gain, profit or other pecuniary advantage; but this shall not be construed as preventing the Executive from:

(a)

(b)

(c)

Term and Termination .

3.1

Term . This Agreement shall remain in effect for the Term. While this Agreement remains in effect, it shall automatically renew each day after the date of this Agreement so that the Term remains a three-year term from day-to-day hereafter unless the Bank or the Executive gives written notice to the other of its intent that the automatic renewals shall cease. In the event such notice of non-renewal is properly given, this Agreement and the Term shall expire on the third anniversary of the thirtieth (30th) day following the date such written notice is received.

3.2

Termination . During the Term, the employment of the Executive under this Agreement may be terminated only as follows:

3.2.1

By the Bank:

(a)

Reserved;

(b)

(c)

(d)

3.2.2

By the Executive:

(a)

(b)

Without Cause or upon the Disability of the Executive, provided that the Executive shall give the Bank sixty (60) days' prior written notice of his intent to terminate.

3.2.3

At any time upon mutual, written agreement of the parties.

3.2.4

Notwithstanding anything in this Agreement to the contrary, the Term shall end automatically upon the Executive's death.

3.3

Change of Control .

(a)

(b)

(c)

3.3A

Severance .

(a)

(b)

3.4

Effect of Termination . Upon termination of the Executive's employment hereunder, the Bank shall have no further obligations to the Executive or the Executive's estate with respect to this Agreement, except for the payment of salary and bonus amounts, if any, accrued pursuant to Sections 4.1 and 4.2 hereof and unpaid as of the effective date of the termination of employment and payments set forth in Sections 3.2.1(a), (c) or (d); Section 3.2.2(a); Section 3.3; and Section 4.4, as applicable. Nothing contained herein shall limit or impinge upon any other rights or remedies of the Bank or the Executive under any other

agreement or plan to which the Executive is a party or of which the Executive is a beneficiary.

Compensation . The Executive shall receive the following salary and benefits during the

Term, except as otherwise provided below:

4.1

Base Salary . During the Term in effect at the time of this Agreement, the Executive shall be compensated at a base rate of $350,000 per year (the "Base Salary"). The Executive's Base Salary shall be reviewed by the Executive Committee of the Board of Directors of the Bank at least annually, and based on its evaluation of Executive's performance, the Compensation Committee may recommend to the entire Board of Directors of the Bank that the Executive's Base Salary be increased in such amount, if any, as may be determined by the Board of Directors of the Bank. Base Salary shall be payable in accordance with the Bank's normal payroll practices.

4.2

Incentive Compensation .

4.3

Reserved.

4.4

Health Insurance .

(a)

(b)

(c)

4.5

Automobile . Beginning as of the Effective Date, the Bank will provide Executive with an automobile to be used for business and personal purposes. The make and model of the automobile shall be determined by the Bank. The Bank will pay expenses associated with the operation, maintenance, repair and insurance for the automobile.

4.6

Business Expenses; Memberships . The Bank specifically agrees to reimburse the Executive for:

(a)

reasonable and necessary business (including travel) expenses incurred by him in the performance of his duties hereunder, as approved by the Board of Directors of the Bank; and

(b)

(c)

Reserved.

4.7

Vacation . On a non-cumulative basis, the Executive shall be entitled to four (4) weeks of vacation in each successive twelve-month period during the Term, during which his compensation shall be paid in full.

4.8

Life Insurance . Beginning as of the Effective Date, the Bank will provide the Executive with term life insurance coverage providing a death benefit of not less than $1,500,000, payable to such beneficiary or beneficiaries as the Executive may designate.

4.9

Benefits . In addition to the benefits specifically described in this Agreement, the Executive shall be entitled to such benefits as may be available from time to time to executives of the Bank similarly situated to the Executive. All such benefits shall be awarded and administered in accordance with the Bank's standard policies and practices. Such benefits may include, by way of example only, profit-sharing plans, retirement or investment funds, dental, health, life and disability insurance benefits and such other benefits as the Bank deems appropriate.

4.10

Withholding . The Bank may deduct from each payment of compensation hereunder all amounts required to be deducted and withheld in accordance with applicable federal and state income, FICA and other withholding requirements.

4.11

Reimbursement of Expenses; In-Kind Benefits . All expenses eligible for reimbursement under this Agreement must be incurred by the Executive during the Term of this Agreement to be eligible for reimbursement. All in-kind benefits described in this Agreement must be provided by the Bank during the Term of this Agreement. The amount of reimbursable expenses incurred, and the amount of in-kind benefits provided, in one taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits provided, in any other taxable

year. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the calendar year following the calendar year in which the expense was incurred. Such right to reimbursement or in-kind benefits are not subject to liquidation or exchange for another benefit.

Bank Information .

5.1

Ownership of Bank Information . All Bank Information received or developed by the Executive while employed by the Bank will remain the sole and exclusive property of the Bank.

5.2

Obligations of the Executive . The Executive agrees:

(a)

to hold Bank Information in strictest confidence;

(b)

not to use, duplicate, reproduce, distribute, disclose or otherwise disseminate Bank Information or any physical embodiments of Bank Information; and

(c)

5.3

Delivery upon Request or Termination . Upon request by the Bank, and in any event upon termination of his employment with the Bank, the Executive will promptly deliver to the Bank all property belonging to the Bank, including, without limitation, all Bank Information then in his possession or control.

Non-Competition . The Executive agrees that during his employment by the Bank hereunder and, in the event of his termination:

• by the Bank for Cause pursuant to Section 3.2.l(b),

• by the Executive without Cause pursuant to Section 3.2.2(b), or

• by the Executive in connection with a Change of Control pursuant to Section 3.3,

for a period of twelve (12) months thereafter, he will not (except on behalf of or with the prior written consent of the Bank), within the Area, either directly or indirectly, on his own behalf or

in the service or on behalf of others, as an executive employee or in any other capacity which involves duties and responsibilities similar to those undertaken for the Bank (including as an organizer or proposed executive officer of a new financial institution), engage in any business which is the same as or essentially the same as the Business of the Bank.

Non-Solicitation of Customers . The Executive agrees that during his employment by the Bank hereunder and, in the event of his termination:

• by the Bank for Cause pursuant to Section 3.2.l(b),

• by the Executive without Cause pursuant to Section 3.2.2(b), or

• by the Executive in connection with a Change of Control pursuant to Section 3.3,

Non-Solicitation of Employees . The Executive agrees that during his employment by the Bank hereunder and, in the event of his termination:

• by the Bank for Cause pursuant to Section 3.2.1(b),

• by the Executive without Cause pursuant to Section 3.2.2(b), or

• by the Executive in connection with a Change of Control pursuant to Section 3.3,

• such employee is a full-time employee or a temporary employee of the Bank,

• such employment is pursuant to written agreement, and

• such employment is for a determined period or is at will.

Remedies . The Executive agrees that the covenants contained in Sections 5 through 8 of this Agreement are of the essence of this Agreement; that each of the covenants is reasonable and necessary to protect the business, interests and properties of the Bank, and that irreparable loss and damage will be suffered by the Bank should he breach any of the covenants. Therefore, the Executive agrees and consents that, in addition to all the remedies provided by law or in equity, the Bank shall be entitled to a temporary restraining order and temporary and permanent injunctions to prevent a breach or contemplated breach of any of the covenants. The Bank and the Executive agree that all remedies available to the Bank or the Executive, as applicable, shall be cumulative.

10.

Severability . The parties agree that each of the provisions included in this Agreement is separate, distinct and severable from the other provisions of this Agreement and that the invalidity or unenforceability of any Agreement provision shall not affect the validity or enforceability of any other provision of this Agreement. Further, if any provision of this Agreement is ruled invalid or unenforceable by a court of competent jurisdiction because of a conflict between the provision and any applicable law or public policy, the provision shall be redrawn to make the provision consistent with and valid and enforceable under the law or public policy.

11.

No Set-Off by the Executive . The existence of any claim, demand, action or cause of action by the Executive against the Bank whether predicated upon this Agreement or otherwise, shall not constitute a defense to the enforcement by the Bank of any of its rights hereunder.

12.

Notice . All notices and other communications required or permitted under this Agreement shall be in writing and, if mailed by prepaid first-class mail or certified mail, return receipt requested, shall be deemed to have been received on the earlier of the date shown on the receipt or three (3) business days after the postmarked date thereof. In addition, notices hereunder may be delivered by hand or overnight courier, in which event the notice shall be deemed effective when delivered. All notices and other communications under this Agreement shall be given to the parties hereto at the following addresses:

(i)

If to the Bank, to it at:

Post Office Box 23900

Green Bay, Wisconsin 54305-3900

(ii)

If to the Executive, to him at:

3486 Solitude Rd.

De Pere, Wisconsin 54115

13.

Assignment . Neither party hereto may assign or delegate this Agreement or any of its rights and obligations hereunder without the written consent of the other party to this Agreement; provided, however, that the rights and obligations of the Bank shall apply to its successor(s) and the rights of the Executive shall inure to the benefit of the heirs or the estate of the Executive.

14.

Waiver . A waiver by one party to this Agreement of any breach of this Agreement by the other party to this Agreement shall not be effective unless in writing, and no waiver shall operate or be construed as a waiver of the same or another breach on a subsequent occasion.

15.

Arbitration . Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Judgment upon the award rendered by the arbitrator may be entered only in a state court of Wisconsin or the federal court for the Eastern District of Wisconsin. The Bank and the Executive agree to share equally the fees and expenses associated with the arbitration proceedings.

16.

Attorneys' Fees. In the event that the parties have complied with this Agreement with respect to arbitration of disputes and litigation ensues between the parties concerning the enforcement of an arbitration award, the party prevailing in such litigation shall be entitled to receive from the other party all reasonable costs and expenses, including without limitation attorneys’ fees, incurred by the prevailing party in connection with such litigation, and the other party shall pay such costs and expenses to the prevailing party within sixty (60) days after a final determination (excluding any appeals) is made with respect to the litigation.

17.

Applicable Law . This Agreement shall be construed and enforced under and in accordance with the laws of the State of Wisconsin.

18.

Interpretation . Words importing any gender include all genders. Words importing the singular form shall include the plural and vice versa. The terms "herein", "hereunder", "hereby", "hereto", "hereof' and any similar terms refer to this Agreement. Any captions, titles or headings preceding the text of any article, section or subsection herein are solely for convenience of reference and shall not constitute part of this Agreement or affect its meaning, construction or effect.

19.

Entire Agreement . This Agreement embodies the entire and final agreement of the parties on the subject matter stated in this Agreement. No amendment or modification of this Agreement shall be valid or binding upon the Bank or the Executive unless made in writing and signed by both parties. All prior understandings and agreements relating to the subject matter of this Agreement, including, but not limited to, that certain employment agreement between the Bank and the Executive previously signed by the parties and also dated as of April 7, 2000, are hereby expressly terminated and superseded.

20.

Rights of Third Parties . Nothing herein expressed is intended to or shall be construed to confer upon or give to any person, firm or other entity, other than the parties hereto and their permitted assigns, any rights or remedies under or by reason of this Agreement.

21.

Survival . The obligations of the Executive pursuant to Sections 5, 6, 7, 8 and 9 shall survive the termination of the employment of the Executive hereunder for the period designated under each of those respective sections.

IN WITNESS WHEREOF, the parties have caused this Revised and Restated Employment Agreement to be executed on the day and year first above written.

THE BANK:

THE EXECUTIVE:

By: /s/ Donald J. Long, Jr.

/s/ Robert B. Atwell

Print Name: Donald J. Long, Jr.

Title: Chairman, Compensation Committee

Exhibit A

Duties and Responsibilities of the Executive

Function :

Has overall responsibility for the leadership of the Bank in all aspects of its activities to ensure safety and soundness, maximize return to the shareholders, and meet the needs of its various constituencies (shareholders, Board of Directors, customers, employees, regulators, and communities). Is entrusted with the responsibility of chairing the Board of Directors and governing in accordance with the bylaws of the organization.

Principal Accountabilities :

Serves as the liaison between the employees of the organization and the Board of Directors. Formulates policies and carries out recommendations or suggestions made by the Board. Responsible for advising the Board and keeping its directors informed on any changes relative to the company’s mission, goals, strategies, and finances.

Works closely with the Board of Directors in the planning, implementation and control of long-term and short-term goals and strategic plans. This includes the maintenance and expenditure plans of capital, expansion plans, annual budgeting and forecasting and overall profitability.

Develops and implements the overall business strategy of the Bank, its culture and mission statement. Proactively communicates expectations, mission and strategy internally and externally.

Has overall responsibility for managing the interest rate risk exposure of the Bank by monitoring the Bank's liquidity position, net interest margin, deposit levels and pricing, asset levels and pricing and portfolio investment decisions.

Works closely with the organization’s management team and provides leadership in the development of internal policies and procedures such as credit policy, investment policy, risk tolerance levels, marketing strategies and operational procedures. Is directly responsible for overseeing and providing leadership to the trust/wealth management, finance/accounting and human resources functions of the Bank.

Works closely with the Chief Financial Officer to ensure appropriate financial reporting and proper utilization of accounting procedures. Establishes guidelines and budget to manage the Bank’s capital and expenditures and monitors financial results compared to plan. Monitors all measures of profitability based on results.

Works closely with the Chief Investment Officer/Trust Department Manager in the overall direction and growth strategies of the trust and wealth management function. Ensures that investment options and allocation strategies for customers are in line with Bank’s risk

tolerance and in compliance with all applicable regulations.

Works closely with the Human Resources Director in maintaining a highly efficient and positive culture. Facilitates or participates in team building exercises as deemed necessary. Ensures internal communication is effective and appropriate.

Maintains status of industry leader by continued active involvement in community and civic activities in such a manner as to create and maintain a positive public perception of the Bank. Shares knowledge of industry at macro and micro levels with community through speaking engagements and informal publications.

10.

Responsible for maintaining sound relationships with the various regulatory agencies and managing the Bank to meet or exceed all regulatory guidelines.

11.

Monitors and manages legal risk to the Bank and takes appropriate action to mitigate legal risk to the fullest extent.

12.

Serves on Board of Directors and Committees as appropriate.

13.

Performs other activities as necessary or as requested by Board of Directors to contribute to the continued growth, profitability and viability of the Bank.

EXHIBIT 10.10

5-30-00

LEASE

THIS LEASE, made and entered into as of the 31st day of May, 2000, by and between Washington Square Green Bay LLC, 660 W. Washington Avenue, Suite 303, Madison, Wisconsin 53703, (hereinafter referred to as the "Lessor"), and Green Bay Financial Corporation (hereinafter referred to as the "Lessee").

WITNESSETH:

WHEREAS, the Lessor has the legal right to lease the parcel of land and building located at 118 South Washington Street, Green Bay, Wisconsin, 54301, (hereinafter referred as the "Property"); and,

WHEREAS, Lessee wishes to lease premises consisting of approximately 7,150 square feet, more or less, located on the first floor of the Property, all as outlined on the floor plans marked as Exhibit "A", attached hereto and incorporated herein by reference (the "Leased Premises");

NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, Lessee does hereby take and hire from Lessor and does hereby covenant, promise, and agree as follows:

1) LEASED PREMISES : The Lessor does hereby demise and lease to the Lessee and the Lessee leases and takes from the Lessor, subject to the conditions of this Lease, that part of the Property defined above as the "Leased Premises", together with non-exclusive rights, in common with such others as Lessor shall solely determine, of ingress and egress through all common entrances and exits now existing or from time to time hereafter established by Lessor.

Lessee acknowledges that Lessor requires the consent of Green Bay Title & Abstract, Inc. to modification of the condominium plan to relocate certain common areas. Lessor shall have three (3) days after approval of Lessee's plans and specifications for the Internal Improvements to provide the required consent to any amendment of the condominium documents to accommodate Lessee's plans for the Interior Improvements. If Lessor does not provide Lessee with a copy of such consent within such three (3) days or if Lessor is otherwise unable to accommodate approved plans and specifications of Lessee, Lessee, at Lessee's option, may declare this Lease null and void and Lessor shall reimburse Lessee for all costs and fees incurred by Lessee in the preparation of all of the plans and specifications for the Interior Improvements.

2) TERM AND RIGHT TO RENEW : The term of this Lease shall be for be for five (5) years commencing on September 1, 2000. This date shall be hereinafter referred to as the "Occupancy Date". Lessee shall have two (2) options to renew this Lease for additional term of three (3) years each. Said option shall be deemed exercised if Lessee gives Lessor written notice of its election to renew this Lease on or before one hundred eighty (180) days prior to the

expiration of the original or extended lease term. Said lease renewal shall be on the same terms and conditions as are set forth herein. Base Rent for the renewal terms shall be as set forth in Exhibit "B", attached hereto and incorporated herein by reference. The term Lease Year shall be defined as a period of twelve (12) consecutive calendar months commencing on the Occupancy Date.

Upon execution of this Lease, Lessee and its designated architects, contractors, materialmen and any other persons reasonably required to make the Interior Improvements as defined herein shall be allowed access to the premises.

3) ACCEPTANCE OF PREMISES : The execution hereof by the Lessee shall constitute an acceptance of the Leased Premises and an acknowledgement by the Lessee that the Leased Premises are in the condition provided for under this Lease and are acceptable to Lessee. This paragraph shall not be construed so as to relieve the Lessor from his obligation to repair and maintain in accordance with paragraph (7)(b) below.

4) RENT AND SECURITY DEPOSIT : The Lessee will pay the Lessor the Rent and Security Deposit set forth in Exhibit "B", attached hereto and incorporated herein by reference, and any additional rent described in this Lease, at the dates and times prescribed. The obligation to pay rent shall commence on the Occupancy Date. All other rental payments to the Lessor shall be made in advance on the first day of each month.

5) INSURANCE AND INDEMNITY:

As additional rent:

i) Insurance and Indemnity:

a) Lessee shall procure and maintain policies of liability insurance, at its own cost and expense, throughout the term of this Lease, insuring Lessor and Lessee from all claims, demands or actions made by or on behalf of any person or persons, firm or corporation and arising from, related to or connected with the Leased Premises, for bodily injury to or personal injury to or death of any person, or more than one person, or for damage to property in an amount of not less than $1,000,000.00 combined single limit per occurrence. Said insurance shall be written on an "occurrence" basis and not a "claims made" basis. If at any time during the term of this Lease, Lessee owns or rents more than one location, its liability policy shall contain an endorsement to the effect that the aggregate limit in the policy shall apply separately to each location owned or rented by Lessee. Said insurance shall also fully cover the indemnity set forth in subparagraph (e) below. Lessor shall provide liability insurance in amounts at least equal as those required of the Lessee and the Lessor shall maintain in force casualty insurance providing replacement value coverage for physical damage to the Building for incidences not required to be covered by Lessee's insurance.

b) The Lessee agrees to notify the Lessor in writing if it is unable to procure all or some part of the insurance, and if the Lessor shall procure such insurance, then the Lessee

will, within three (3) days after receiving written notice, pay the Lessor the amount of the premiums paid.

c) All policies of insurance provided for or contemplated by this paragraph shall name the Lessor and the Lessee as insureds or additional insureds, as their respective interests may appear. In addition, all of such policies shall contain endorsements by the respective insurance companies waiving all rights of subrogation, if any, against the Lessor. Said policies shall further provide that they are not cancelable except upon thirty (30) days written notice to Lessor. On or before Lessee occupies the Leased Premises, Lessee shall provide Lessor the endorsements evidencing the coverage required of Lessee hereunder.

d) If Lessee, with express written permission of Lessor, occupies all or any part of the Leased premises prior to the Occupancy Date, Lessee's obligations hereunder shall commence as of said date, and all terms, covenants and conditions of this Lease, except with respect to payment of Base Rent, shall be deemed in full force and effect as of said date.

e) The Lessee shall defend, indemnify, and hold the Lessor harmless against any and all claims, damages and lawsuits arising after the execution hereof, and any orders, decrees or judgments which may be entered therein, brought for damages or alleged damages resulting from any injury to person or property or from loss of life sustained in or about the Leased Premises of whatever nature, caused by, or resulting from any act, omission or negligence of the Lessee or any employee or agent of the Lessee. In addition, the Lessee agrees to save the Lessor harmless from, and indemnify the Lessor against, any and all injury, loss, or damage, including any reasonable attorney fees incurred by Lessor in connection with any such matter or claim for injury, loss or damage, of whatever nature, to any person or property caused by, or resulting from any act, omission or negligence of the Lessee or any employee or agent of the Lessee. In addition, the Lessee hereby releases the Lessor from any and all liability for any loss or damage caused by fire or any of the extended coverage casualties except in cases of Lessors negligence. In addition, the Lessor shall be exempt from any and all liability for any damage or, injury to persons or property caused by or resulting from steam, electricity, gas, water, rain, ice or snow, or any leak or flow from or into any part of said building or from any damage or injury resulting or arising from any cause or happening, except in cases of Lessors negligence.

6) SUBLEASING OR ASSIGNMENT : The Lessee may sublease, sell, assign, or transfer the whole or any part of its interest in this Lease or the Leased Premises to a service business other than retail food and beverage vending business with the prior written consent of the Lessor, which consent Lessor shall not unreasonably withhold. Specifically, without limitation, Lessee may assign this Lease to Nicolet National Bank. Lessor will not allow a sublease, sale, assignment or transfer to an adult entertainment type business including but not limited to an adult bookstore and/or pornographic video retailer. Lessee shall not permit any interest in the Leased Premises to be transferred by law or otherwise.

7) REPAIRS AND MAINTENANCE :

a) Lessee covenants and agrees to keep and maintain in good order, condition and repair the interior of the Leased Premises during the term of the Lease, and further agrees that the Lessor shall be under no obligation to make any repairs or perform any maintenance to the interior of the Leased Premises unless specifically provided for herein or unless such repairs or maintenance are necessitated by the negligent acts of Lessor. The Lessee covenants and agrees that it shall be responsible for janitorial service and window cleaning to the Leased Premises of such frequency as may be required to maintain the interior of the Leased Premises and the interior and exterior glass in a neat and clean condition. Lessee shall be responsible for maintenance and repair of non-structural interior walls, plate glass (including display windows), ceiling, and any trade fixtures or other personal property, Interior Improvements (as defined in paragraph (22) below) mechanical equipment which Lessee installs or, has as part of the final finish, placed in the Leased Premises. Lessee, if not in default under this Lease, may upon termination hereof remove all of Lessee's trade fixtures, personal property and equipment from the Leased Premises provided that Lessee repairs any damage caused by such removal and restores the Leased Premises to the condition existing as of the date said items were installed in the Leased Premises. Upon termination of this Lease for any reason, Lessee shall not remove any Interior Improvements, as that term is defined in paragraph (22) below. All such Interior Improvements shall remain to and for the benefit of the Lessor, and Lessor shall be deemed to own said Interior Improvements free and clear of all liens and encumbrances effective on the date this Lease terminates. Failure to remove any property which Lessee is obligated or entitled to remove upon termination hereof on or before thirty (30) days after termination of this Lease shall be conclusive evidence of abandonment of said property by Lessee and title to the same shall immediately vest in Lessor.

b) Lessor agrees to be responsible for maintenance and repair of all structural components of the Property and the common areas of the Property.

c) If the Lessee refuses or neglects to commence or complete repairs required of Lessee under Paragraph (7)(a) above, promptly and adequately, the Lessor may, but shall not be required to, do so and the Lessee shall pay the cost thereof to Lessor upon demand as additional rent, provided such repairs are consistent with the nature and quality of the damaged item(s). The Lessee further covenants and agrees that Lessee shall not permit material alterations of or upon any part of the Leased Premises except by and with the prior written consent of the Lessor. Any permitted alterations and additions to the Leased Premises shall be made in accordance with all applicable laws, codes and ordinances, and shall remain for the benefit of the Lessor except as otherwise provided for in this Lease or in said written consent; and the Lessee further agrees, in the event of making such alterations as herein provided, to indemnify and save harmless the Lessor from all expense, liens, claims or damages to either persons or property or the Leased Premises arising out of or resulting from the undertaking or making of said alterations or additions, except to the extent they result from the acts or omissions of Lessor, and to allow no liens or other encumbrances to be placed against said Leased Premises as a result thereof.

8) TAXES : Lessor shall be responsible for the prompt payment of all real estate taxes in regard to the Leased Premises and any special assessments or other charges assessed against the Leased Premises for which the owner of the real estate would otherwise be liable. Lessee shall promptly pay all personal property taxes attributable to the personal property and trade fixtures of Lessee and shall pay all sales taxes that may be assessed in the conduct of Lessee's business.

9) COMPLIANCE WITH LAWS AND REGULATIONS : The Lessee will comply with all statutes, ordinances, rules, order, regulations and requirements of all federal, state, city and local governments, and with all rules, orders, and regulations of the applicable Board of Fire Underwriters.

10) SIGNS : The Lessee shall have the right, at Lessee's sole cost and expense, to install and maintain a sign advertising the Lessee's business. Any sign shall conform to the Lessor's Sign Criteria and shall be properly permitted by all governmental entities having jurisdiction. The exact size, design, configuration and location of the sign shall be subject to Lessor's prior written approval, which approval shall not be unreasonably withheld.

11) SUBORDINATION :

a) The Lessor reserves the right and privilege to subject and subordinate this Lease at all times to the lien of any mortgage or mortgages, or other security interest, now or hereafter placed upon the Lessor's interest in the Leased Premises and on the land and buildings of which the Leased Premises are a part, and to any and all advances to be made under such mortgages, and all renewals, modifications, extensions, consolidations and replacements thereof provided that, notwithstanding such subordination, as long as Lessee is in compliance with the terms of this Lease, Lessee shall have the right to the quiet enjoyment of the Premises and the full benefits of this Lease for the initial term and any renewal thereof.

b) The subordination provision contained in this paragraph shall be self-operative, and no other instrument shall be required hereunder. However, the Lessee covenants and agrees to execute and deliver, upon demand, such further instrument or instruments subordinating this Lease on the foregoing basis to the lien of any such mortgage or mortgages as shall be desired by the Lessor and hereby irrevocably appoints Lessor the attorney-in-fact of Lessee to execute and deliver such instrument or instruments for and in the name of the Lessee, in the event Lessee shall fail to execute such instrument or instruments within ten (10) days after written notice, to so do in Lessee's place and stead.

12) CONDEMNATION OR EMINENT DOMAIN :

a) In the event that all of the Leased Premises shall be condemned or taken by eminent domain by any authority having the right of eminent domain, or if purchased by such authority in lieu of condemnation of said Leased Premises, then the term of this Lease shall cease and terminate as of the date title vests in the condemnor and all rentals shall be paid up to that date, and the Lessee shall have no claim against the Lessor for the value of any unexpired term

of the Lease but Lessee shall be entitled to the portion of the condemnation award attributed to the leasehold improvements.

b) In the event part of the Leased Premises shall be taken by eminent domain by any authority having the right of eminent domain, or if purchased by such authority in lieu of condemnation of said Leased Premises, and such purchase or taking shall, in the reasonably exercised opinion of Lessor and Lessee, render the remainder of the Leased Premises unsuitable for the business of the Lessee, then the term of this Lease shall cease and terminate at the same time and in the same manner as if the entire Leased Premises had been taken, and the Lessee shall have no claim against the Lessor for the value of any unexpired term of the Lease but Lessee shall be entitled to the portion of the condemnation award attributed to the leasehold improvements.

c) In the event a partial taking of the Leased Premises does not render the remainder of the Leased Premises unsuitable, in the reasonably exercised opinion of the Lessor and the Lessee, for the business of the Lessee, this Lease shall continue in force subject only to a reasonable adjustment of rental for the portion taken which adjustment shall not be less than the pro-rata amount of the rent based on the ratio between the total original square footage and the square footage taken.

d) In the event that the Lessee and the Lessor cannot agree on whether the Leased Premises has been rendered unsuitable by a partial taking or on what constitutes a reasonable adjustment of rental, as required by subparagraph (c), the amount of such adjustment shall be determined by arbitration according to the Wisconsin Arbitration Act. The arbitrator's decision and award of a dispute and/or controversy shall be in writing and shall be final and binding on the Lessee and Lessor, and the decision of the arbitrator shall be deemed to be a judgment and/or decree and may be entered as such in any court of competent jurisdiction. Green Bay, Wisconsin shall be the place of any arbitration proceeding held hereunder.

13) RIGHT TO INSPECT : The Lessor reserves the right to enter upon, inspect and examine the Leased premises at any time, upon reasonable notification to Lessee of not fewer than 24 hours, and the Lessee agrees, within one hundred twenty (120) days of the termination of the Lease, to allow the Lessor access to the Leased Premises to show the premises and to place a 3 feet by 4 feet "For Rent" signs on the Leased Premises which shall not unreasonably obstruct the Lessee's storefront appearance.

14) DESTRUCTION OF PREMISES :

a) If, during the term of this Lease, the Leased Premises or the Property is totally or partially destroyed by fire or the elements, so as to render the Leased Premises wholly unfit for occupancy, or makes it impossible to conduct the business of the Lessee thereon, and if the Leased Premises cannot be repaired within ninety (90) days from the date of the damage, or if Lessor decides, within a reasonable time, not to exceed thirty (30) days, not to rebuild, then the Lessee or the Lessor shall have the right to terminate this Lease from the date of such damage or destruction by giving the other party written notice. Upon the giving of such notice, the Lessee shall immediately surrender the Leased premises and all interest therein to the Lessor, and in

case of any such termination, the Lessor may re-enter and repossess the Leased Premises discharged of this Lease, and may dispossess all parties then in possession thereof, provided, however, that Lessee shall have a period of thirty (30) days from termination to remove all personal property/trade fixtures from the Leased Premises. In the event the Leased Premises shall be repaired, restored and rebuilt by Lessor at its own sole cost and expense, within ninety (90) days from the date of destruction, then all rents payable by the Lessee shall be terminated during the period of repair and restoration. In no event shall the Lessor be required to repair, rebuild and restore the Leased Premises at a cost greater than the net proceeds of monies received from any insurance policy or policies covering such loss or damages. The Lessor shall repair the Leased Premises with all reasonable speed, and the rents shall recommence on the date that the repairs are completed and the Lessor has given five days prior written notice to Lessee that the Premises are again fit for occupancy.

b) If the damage does not render the Leased Premises unfit for occupancy, then the Lessor agrees that the damage shall be repaired as soon as practicable and in that case, the Lessee shall pay pro-rata rent during the repair period. All repairs resulting from fire or the elements shall be paid for by the Lessor out of any insurance proceeds received. All improvements placed by the Lessee on the Leased Premises shall, however, in any event, be repaired and replaced by the Lessee at Lessee's own expense and not at the expense of the Lessor.

15) DEFAULT AND REMEDIES :

a) Acts of Default of Lessee : Each of the following shall be deemed a default by the Lessee and a breach of this Lease:

1) Failure to pay any of the rent or additional rent herein reserved, or any party thereof, for a period of ten (10) days after written notice.

2) Failure to do, observe, keep and perform any term, covenant, condition, agreement or provision in this Lease to be done, observed, kept and performed by the Lessee (except concerning the payment of rent or additional rent) for a period of ten (10) days after written notice, unless such default cannot be cured within 10 days and Lessee is making a diligent additional 60 days.

3) The abandonment of the Leased Premises by the Lessee.

4) The filing by the Lessee of a petition for any relief under Chapter 7 or Chapter 11 of the Bankruptcy Act of the United States, as amended, or any other provisions of such act, or the filing by Lessee or a petition for relief under any State bankruptcy, receivership, or any insolvency statute, or the making by the Lessee of any assignment for the benefit or its creditors, or any appointment of a receiver or trustee for the Lessee for all or part of this property, or the taking by execution of any of the Lessee's rights hereunder shall at the sole discretion of the Lessor forthwith render this Lease null and void. Upon the happening of any of the events set forth in this subparagraph, Lessor shall have the right without notice to forthwith terminate all of the Lessee's interest herein.

b) Acts of Default of Lessor : The following shall be deemed a default by the Lessor and a breach of this Lease:

1) The failure of Lessor to observe, keep or perform any term, covenant, agreement or provision in this Lease to be done, reserved, kept and performed by the Lessor for a period of ten (10) days after written notice from Lessee, provided, however, that if a cure cannot be accomplished within thirty days and Lessor has diligently attempted to cure within such thirty days, Lessor shall have a reasonable time to accomplish such cure but shall not exceed an additional sixty days.

c) Remedies : Upon the happening of any of the acts of default set forth above, which acts remain uncured after expiration of the time periods provided for above, the Lessor or Lessee, as appropriate, shall have the right to elect any one or more of such remedies as may be allowed by applicable law.

16) TRADE FIXTURES : The Lessee shall furnish and pay for any and all equipment, furniture, trade fixtures and signs to be used in or installed upon the Premises and the same shall at all times remain the property of Lessee.

17) LIENS : The Lessee shall not do or cause anything to be done whereby the Leased Premises may be encumbered by any mechanic's or other liens. Whenever and as often as any mechanic's or other lien is filed against said Leased Premises purporting to be for labor or materials furnished or to be furnished to the Lessee, the Lessee shall remove the lien by payment or by bonding with a surety company authorized to do business in the State of Wisconsin, within ten (10) days from the date of the filing of said mechanic's or other lien and delivery of notice thereof to the Lessee of the Lessee's obligation under this Lease. Should the Lessee fail to take the foregoing steps within said period, then the Lessor shall have the right, among other things, to pay said lien without inquiring into the validity thereof, and the Lessee shall forthwith reimburse the Lessor for without inquiring into the validity thereof, and the Lessee shall forthwith reimburse the Lessor for the total expense incurred by it in discharging said lien as additional rent hereunder.

18) NO WAIVER BY LESSOR EXCEPT IN WRITING : No agreement to accept a surrender of the Leased Premises shall be valid unless in writing signed by the Lessor. The delivery of keys to any employee of the Lessor or the Lessor's agents shall not operate as a termination of the Lease or a surrender of the Leased Premises. The failure of the Lessor to seek redress for violation of, or to insist upon the strict performance of any covenant or condition of this Lease, or of any rule or regulation, shall not prevent a subsequent act, which would have originally constituted a violation, from constituting a violation or act of default hereunder. No payment by the Lessee or receipt by the Lessor of a lesser amount than the rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement on any check nor any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and the Lessor may accept such check or payment without prejudice to the Lessor's right to recover the balance of such rent or pursue any other remedy provided in this Lease. This Lease contains the entire agreement between the parties,

and any executory agreement hereafter made shall be ineffective to change, modify or discharge it in whole or in part unless such executory agreement is in writing and signed by the party against whom enforcement of the change, modification or discharge is sought.

19) BREACH - PAYMENT OF COSTS AND ATTORNEYS' FEES : Each party agrees to pay and discharge all reasonable costs and reasonable attorneys' fees and expenses that shall be incurred by the other party in enforcing the covenants, conditions and terms of this Lease, including, in the case of the Lessor, the costs of reletting.

20) WAIVER OF SUBROGATION : Nothing in this Lease shall be construed so as to authorize or permit any insurer of Lessee to be subrogated to any right of Lessee against Lessor arising out of this Lease. Lessee hereby releases Lessor to the extent of any perils to be insured against by Lessee under the terms of this Lease, whether or not such insurance has actually been secured, and to the extent of its insurance coverage for any loss or damage caused by any such casualty, unless such incidents shall be brought about by the fault or negligence of Lessor. Lessee shall endeavor to obtain appropriate waivers of subrogation from its insurance carrier giving affect to this paragraph.

21) UTILITIES; USE OF PREMISES :

a) Lessee agrees to provide and pay for water, sewer, gas and electric utility services attributable to Lessee's use and occupancy of the Leased Premises. With respect to electric utility services, Lessee's obligation to pay for the same shall extend to charges payable under the following meters, which at the time of execution of this Lease are separately billed to Lessee: electric meter number __________. With respect to gas utility services, Lessee's obligation to pay for the same shall extend to charges payable under the following meters, which at the time of execution of this Lease are separately billed to Lessee: gas meter number ________. Lessee shall pay water and sewer utility services on a proration of the bills for such services calculated on the ratio of the square footage of the Leased Premises to the square footage of the total first floor commercial space in the building in which the Leased Premises are located.

b) Lessee agrees to operate and use the Leased Premises as professional office space for a Bank. Lessee shall conduct its business in the Leased Premises in full compliance with all applicable laws, rules, ordinances and regulations, and shall conduct its business in such a way so as not to disturb any other tenants of the Property.

c) Notwithstanding anything else set forth in this Lease, Lessor, and its employees, agents or contractors, shall have the unlimited right to enter the Leased Premises without prior notice, twenty-four (24) hours per day, for the purpose of access to the Leased Premises, for emergencies, without the same constituting a breach or violation of this Lease or applicable law.

22) LESSEE'S IMPROVEMENTS; LESSOR'S IMPROVEMENTS :

a) Lessee may undertake, at Lessee's sole cost and expense, improvements to the Leased Premises (the "Interior Improvements"), and shall undertake and complete all other additional work necessary for the opening of Lessee's business in the Leased Premises, provided Lessee first procures the advance written consent of Lessor to all Interior Improvements, which shall not be unreasonably withheld. Lessor shall give its approval or indicate that it is withholding approval of the plans and specifications no later than seven (7) days after submission of the plans and specifications to Lessor by Lessee. All Interior Improvements shall be evidenced by written plans and specifications, a complete copy of which shall be provided to Lessor as a precondition to Lessor's approval. In addition, Lessee shall pay for all design and construction costs incurred to alter the current common areas and Lessors leasing office to fit Lessee's final space layout and Lessor's requirement for an additional exit to Washington Street provided such costs are incurred as a result of the construction according to Lessee's plans and specifications for the Interior Improvements.

If Lessor withholds its consent to any of the planned improvements by Lessee, Lessor shall within three (3) days of submission to Lessor of the planned plans and specifications for the planned improvements identify all aspects of the planned improvements to which it objects, and, at Lessee's option, Lessor and Lessee shall within ten (10) days of Lessor's rejection of the improvements participate in an arbitration hearing to resolve the disputed issues as identified by Lessor. Lessor and Lessee shall agree on an arbitrator, and, if they cannot agree, each shall select one arbitrator and those two arbitrators shall select a third arbitrator, and the three arbitrators shall together render a decision on the disputed issues which shall be binding on Lessor and Lessee. Alternatively, if Lessee in good faith submits two sets of plans and specifications which differ in material aspects and Lessor withholds its consent to both sets of plans and specifications, Lessee may declare this Lease terminated with no further liability under this Lease.

b) All of Lessee's or Lessor's improvements shall be performed in full compliance with all applicable laws, rules, ordinances and regulations and in a good workmanlike manner. All of Lessee's improvements shall be subject to paragraph (16), above, relating to mechanic and materialmen liens.

23) MISCELLANEOUS PROVISIONS :

a) Unless otherwise required by law, all written notices shall be delivered by certified United States mail or the equivalent to the Lessee at 110 South Washington Street, Green Bay, Wisconsin, 54301 or to Lessor at c/o The Alexander Company, Inc., 660 West Washington Ave., #303, Madison, Wisconsin, 53703. The Lessor and the Lessee may, from time to time, change these addresses by notifying each other of any change in writing as per this section.

b) The terms, condition and covenants contained in this Lease and any riders and Plans attached hereto shall bind and inure to the benefit of the Lessor and the Lessee and their respective successors, heirs, and assigns.

c) This Lease shall be governed by and construed under the laws of the State of Wisconsin.

d) In the event that any provision of this Lease shall be held invalid or unenforceable, no other provision of this Lease shall be affected by such holding, and all of the remaining provisions of this Lease shall continue in full force and effect pursuant to the terms hereof.

e) The paragraph captions are inserted only for convenience and reference, and are not intended, in any way, to define, limit, or describe the scope, intent and language of this Lease or its provisions.

f) This Lease contains the entire agreement between the parties and shall not be modified in any manner except by an instrument in writing executed by the parties or their respective successors in interest.

g) This Lease may be executed in any number of counterparts with the same effect as if all parties executed a single instrument.

h) FDIC Clause: Notwithstanding any other provisions contained in this Lease, in the event (a) Tenant or its successors or assignees shall become insolvent or bankrupt, or if it or their interest under this Lease shall be levied upon or sold under execution or other legal any depository institution supervisory authority ("Authority"), Landlord may, in either such event, terminate this Lease only with the concurrence of any receiver or liquidator appointed by such Authority, provided, that in the event this Lease is terminated by the receiver or liquidator, the maximum claim of Landlord for rent, damages or indemnity for injury resulting from the termination, rejection or abandonment of the unexpired Lease shall be by law no greater than an amount equal to all accrued and unpaid rent to the date of termination.

i) Parking. Lessor shall provide Lessee at no additional cost eight (8) surface parking stalls located adjacent and immediately west of the Leased Premises and exclusively dedicated to the customers of Lessee during the hours of 7:30 a.m. to 5:30 p.m. Monday through Friday with appropriate signage indicating the same. In addition, Lessor shall provide to Lessee ten (10) underground parking stalls at an additional cost of $20.00 per month for each such stall. Annual increases for such parking stalls shall be no more than $1.00 per month. In addition, Lessor shall provide Lessee ten (10) underground parking stalls at no additional charge for as long as Lessor has not received a bona fide offer to lease the same. If Lessor receives a bona fide offer to lease any of the ten (10) free underground parking stalls from a person or entity other than a tenant or condominium owner of the building within which the Leased Premises are located, Lessor shall offer to lease each of the affected parking stalls to Lessee at the then current market rate for such stalls and, in any event, no more than Lessor was to have charged the offering party for such parking stall(s). Lessee shall have a period of ten (10) days to advise Lessor of its exercise of its right of first refusal as to such parking stalls. If Lessee exercises its right of first refusal, lease payments for the affected parking stall(s) shall commence on the first day of the next month in which rent would be due under this Lease.

If the aggregate number of parking stalls available to Lessee at any time proves insufficient for Lessee's needs, Lessor shall mark each parking stall for which Lessee is paying rent "Reserved for Nicolet National Bank" and shall police such parking spaces to ensure the exclusive use of such parking spaces for the benefit of Lessee provided that such period of exclusivity shall be between the hours of 7:30 a.m. and 5:30 p.m. Monday through Friday. For purposes of this Lease, the underground parking stalls used by Lessee shall be considered to be insufficient if three (3) days during any monthly period employees of Lessee are unable to locate parking stalls within the underground parking facility beneath the Leased Premises.

For each underground parking stall, Lessee shall pay a one time $50.00 fee for each automatic door opener for access to the underground parking. If any of the underground parking stalls are surrendered by Lessee hereunder before termination of the Lease because of Lessor's rental of the same to third parties, Lessor shall refund the door opener fee for each stall so surrendered.

j) Lessee shall be allowed to install an Automated Teller Machine and a Night Depository Drop-Box as per Lessee's plans and specifications provided their installation does not adversely affect the structural integrity of the Building.

k) Termination for Lack of Federal Approval. The obligation of Lessee to be bound for the full term of this Lease is conditioned on Lessee obtaining all necessary approvals to operate as a national bank. Immediately upon approval by Lessor of Lessee's plans and specifications for the Interior Improvements, Lessee shall be allowed to make the Interior Improvements and take all other action necessary to ready the Premises for occupancy during the pendency of Lessee's approvals. If Lessee has not received all necessary approvals for its application to operate as a national bank by November 1, 2000, Lessee may declare this Lease terminated, provided, however, (a) that all Interior Improvements Lessee has caused to be made to the Premises shall be deemed abandoned and shall become the sole property of Lessor, free and clear of any liens or encumbrances created or arising out of any request for labor or materials or any other act of Lessee, and Lessee shall indemnify and hold harmless Lessee of and from any and all such lien claims and (b) Lessee shall be responsible for rents that have accrued to the date of termination. Lessee shall promptly pursue all necessary approvals for it to operate as a national bank. This paragraph shall not be constructed to relieve Lessee of any liability Lessee may have for personal injury or property damage arising out of the negligence of Lessee or any of Lessee's agents or contractors in regard to their activities upon the Premises.

IN WITNESS WHEREOF, the Lessor and Lessee have respectively signed and sealed this Lease of the day and year first above written.

LESSOR

WASHINGTON SQUARE GREEN BAY, LLC

/s/ Randall P. Alexander

---------------------------------

By: Randall P. Alexander

Its: Managing Member

LESSEE

GREEN BAY FINANCIAL CORPORATION

/s/ Michael E. Daniels

--------------------------------

By: Michael E. Daniels

Its: Executive Vice President

EXHIBIT A

[SCHEMATIC OF LEASED PREMISES]

EXHIBIT"B"

DATE OF LEASE:

May 31, 2000

ADDRESS OF LEASED PREMISES:

110 South Washington Street,

Green Bay, WI

LESSOR:

Washington Square Green Bay LLC

LESSEE:

Green Bay Financial Corporation

BASE RENT:

$ 9.75 per square foot of Premises per year for the first lease year paid in equal monthly installments of $5,809.38 with the first payment due upon September 1, 2000. Base Rent shall increase 4.0% per year during the original and extended term(s) of the Lease.

SECURITY DEPOSIT:

Lessee shall pay a Security Deposit equal to one months rent upon Lease signing.

LEASE AMENDMENT #1

The Lease made and entered into as of the 31st day of May, 2000, by and between Washington Square Green Bay LLC, hereinafter referred to as the "Lessor' and Green Bay Financial Corporation, hereinafter referred to as "Lessee" is amended as follows:

PAGE 1 SECOND "WHEREAS" IS AMENDED AS FOLLOWS:

". . .lease premises consisting of approximately 7,574 square feet (See attached Exhibit A) . . . ".

SECTION 21) UTILITIES; USE OF PREMISES IS AMENDED AS FOLLOWS:

". . .Electric Meter Numbers are 179898 and 187042. . . "

". . .Gas Meter Numbers are 318818 and 318819. . . "

SECTION 22) LESSEE'S IMPROVEMENTS; LESSOR'S IMPROVEMENTS AT THE END OF THE FIRST PARAGRAPH IN SUBSECTION A), ADD THE FOLLOWING:

". . . Lessee agrees to pay the following Lessors' costs of providing the Premises, upon of the execution of this amendment:

A&A Fire and Security (Door Intercom)

$ 2,887.50

A&A Fire and Security (Cameras)

$ 3,931.10

Urban Resources Architectural Design

$ 1,080.00

Mau & Associates (Condo document revisions)

$ 227.50

STS Consultants (Engineering services)

$ 135.00

Total:

$ 8,261.10

. . ."

SECTION 23). SUBSECTION K) TERMINATION FOR LACK OF FEDERAL APPROVAL. "DELETE THIS SUBSECTION".

EXHIBIT A: REPLACE EXHIBIT A WITH THE ATTACHED AMENDED EXHIBIT A

EXHIBIT B: REPLACE EXHIBIT B WITH THE ATTACHED AMENDED EXHIBIT B

The original Lease, dated May 31, 2000 shall remain in full force and effect, except as amended above.

*LESSOR*

WASHINGTON SQUARE GREEN BAY LLC

By:

/s/ Randall P. Alexander

3-22-01

Randall P. Alexander, Managing Member

Date

*Lessee*

GREEN BAY FINANCIAL CORPORATION

By:

/s/ Michael E. Daniels

3/7/01

Michael E. Daniels

Date

By:

/s/ Robert B. Atwell

3/7/01

Robert B. Atwell

Date

AGREEMENT TO AVAILABILITY OF LEASE

Agreement made this 30th day of November, 2001, by and between Development Associates, LLC (d/b/a Port Plaza Mall), a Wisconsin limited liability company, of Green Bay, Wisconsin (hereinafter referred to as the "Lessor") and Nicolet National Bank, a Wisconsin corporation, of Green Bay, Wisconsin, (hereinafter referred to as the "Lessee").

WITNESSETH:

In the event of a disaster (commonly defined as natural disaster, terrorism, act of war, civil unrest, fire, etc.) that renders the lessee's principal business facility (located at 110 South Washington Street, Green Bay, WI) incapable of normal operations, the lessor agrees to provide space in the Port Plaza Mall which will act as a back-up location for the resumption of business operations of the lessee.

Rent, location of space, length of occupancy, and other terms will be negotiated as part of an Agreement of Lease in the event of a declaration of disaster by the lessee at its principal business facility.

Lessee understands that availability of space is not guaranteed and will regularly keep in contact with the lessor to determine if alternate locations need to be sought to accomplish their business resumption objectives.

As an act of good faith, lessor agrees to immediately provide enough space for the storage of two 55 gallon containers which will hold various basic provisions (tools, supplies, etc.) to be used in the event the lessee needs to execute their business resumption plan. Specifically, these containers would contain such items as batteries, flashlights, basic tools, radios, first aid kits, water, office supplies, blank bank documents, and a copy of the lessee's business resumption plan.

Lessor also agrees to allow lessee to perform a business resumption test on an annual basis to insure the lessee's ability to use lessor's facility as a viable business resumption location. Tests performed will be non-intrusive and invisible from other tenants located in the lessor's facility (Port Plaza Mall).

TERM: The term of this agreement shall be (5) five years commencing on December 1, 2001 and ending on midnight, November 30, 2006.

TERMINATION: Lessor or Lessee reserve the right to cancel this agreement for whatever reason at any time during the term noted above.

CONSTRUCTION: The terms and conditions of this agreement shall be construed in accordance with the laws of the State of Wisconsin.

IN WITNESS WHEREOF, the parties hereto have set their hands and seals the day and year first above written.

LESSOR:

DEVELOPMENT ASSOCIATES, LLC

By: /s/ Russell J. DeMille

Russell J. DeMille, Managing Member

LESSEE:

NICOLET NATIONAL BANK

By: /s/ Thomas L. Jensen

Thomas L. Jensen, Vice President

SECOND AMENDMENT OF LEASE

This Second Amendment is attached to and incorporated into the "Lease Agreement" entered into the 31st day of May 2000 by and between WASHINGTON SQUARE GREEN BAY LLC - C/O MANAGEMENT AGENT OAKBROOK CORPORATION, 2 SCIENCE COURT, MADISON, WI 53711 (hereinafter referred to as "Lessor") as Landlord and GREEN BAY FINANCIAL CORPORATION D\B\A NICOLET NATIONAL BANK (hereinafter referred to as "Lessee"), as Tenant. To the extent that the terms of this Second Amendment conflict with or contradict the terms and conditions of the Lease Agreement to which it is attached, the terms of this Second Amendment shall supersede and control. All other provisions of said Lease shall remain the same and shall continue in full force and effect.

This Addendum hereby adds 1,137 square feet to Lessee's existing 7,574 square feet, for a total leased square footage of 8,71 1 square feet. Lessee agrees to accept the 1,137 square feet in "AS IS" condition. Lessee will be responsible for all tenant improvement costs and related expenses associated with the added space. All improvements completed shall be done in a workmanlike manner, and meet all state, city and local codes. Lessor shall have the right to approve or deny all improvement plans and approval shall not be unreasonably withheld. This agreement is contingent upon the subject space's existing occupant agreeing to terminate and vacate the subject space on or before April 30th, 2002. Lessor and Lessee agree that the leased premise is 8,711 sq. ft. for the purposes of this agreement.

1. Term . This lease shall begin the 1st day of May 2002 and end on the 31st day of August 2005.

2. Rent . Figures Are Stated In Monthly Rates

BASE RENT FROM

8,711 SQ. FT.

(11) STALLS

(1) STORAGE

05/01/2002 to 08/31/2002

$7,361

$220

$20

09/01/2002 to 08/31/2003

$7,655

$352

$20

09/01/2003 to 08/31/2004

$7,961

$484

$20

09/01/2004 to 08/31/2005

$8,280

$616

$20

Lessee shall have two(2) consecutive options to renew said lease for three (3) years each. Each year a 4% annual escalator will be applied to the prior years rental rates. Lessee must provide a written notice of its election to renew or vacate a minimum of 180 days prior to any lease expiration of the original or renewal periods.

3. No Other Change . All other provisions of said Lease shall remain the same and shall continue in full force and effect.

4. Incorporation Into Lease . Landlord and Tenant agree that executed counterparts of this Second Amendment shall be attached to, and become a part of, the respective copies of said Lease now in the possession of each party hereto.

IN WITNESS HEREOF, Landlord and Tenant have duly executed this Second Amendment.

LESSEE:

LESSOR:

GREEN BAY FINANCIAL CORPORATION

WASHINGTON SQUARE GREEN BAY LLC

d\b\a Nicolet National Bank

By: /s/ Bob Atwell, President

By: /s/ Randall P. Alexander

Bob Atwell, President

Randall P. Alexander,

Managing Member

Date: 4/5/02

Date: April 10, 2002

AMENDED EXHIBIT "A"

[AMENDED SCHEMATIC OF LEASED PREMISES]

AMENDED EXHIBIT"B"

DATE OF LEASE:

May 31, 2000

ADDRESS OF LEASED PREMISES:

110 South Washington Street, Green Bay, WI.

LESSOR:

Washington Square Green Bay LLC

LESSEE:

Nicolet National Bank

BASE RENT:

$ 9.75 per square foot of Premises per year for the first lease year paid in equal monthly installments of $6,153.88 with the first payment due upon September 1, 2000. Base Rent shall increase 4.0 % per year during the original and extended term(s) of the Lease.

SECURITY DEPOSIT:

Lessee shall pay a Security Deposit equal to one month's rent upon Lease signing.

THIRD AMENDMENT TO MULTI-TENANT OFFICE LEASE AGREEMENT
111 NORTH WASHINGTON STREET, GREEN BAY, WISCONSIN
THIS THIRD AMENDMENT TO MULTI-TENANT OFFICE LEASE AGREEMENT (this "Agreement") is made as of this 1st day of October, 2009, by and between NICOLET JOINT VENTURES, LLC ("Landlord") and NICOLET NATIONAL BANK ("Tenant").
RECITALS
A. Landlord and Tenant entered into that certain Multi-Tenant Office Lease Agreement for certain premises located at 111 North Washington Street, Green Bay, Wisconsin, dated as of April 29, 2004, as amended by that First Amendment to Multi-tenant Office Lease Agreement dated December 13, 2005 and that Second Amendment to Multitenant Office Lease Agreement dated August 1, 2006 (as amended, the "Lease").
B. Landlord and Tenant desire to amend the Lease through this Agreement to add to the Premises approximately 4,315 square feet of rentable area on the north-west corner of the second floor of the Building (as defined in the Lease), which additional footage is depicted on Exhibit A attached hereto and. incorporated herein (the "Additional Second Floor Area"). As a result, Tenant will be the sole occupant of the second floor.
C. Landlord and Tenant now desire to amend the Lease to memorialize the terms and conditions of the addition of the Additional Second Floor Area to the Lease.
AGREEMENTS
IN CONSIDERATION of the Recitals, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant agree as follows:
1. Effective as of the date of this Agreement, the Additional Second Floor Area is added to the Lease definition of the "Premises" being leased from Landlord to Tenant. This results in the addition of 4,315 square feet of rentable area to the Premises, for a total of 38,024 square feet of rentable area (i.e. the Premises consists of the entire 1st and 2nd floors of the Building). As a result of the addition of the Additional Second Floor Area, Tenant's Share of Expense Percentage shall be increased to 49.7%. The Additional Second Floor Area shall be delivered by Landlord to Tenant "as is." Base Rent on the Additional Second Floor Area for the balance of the current Lease Year shall be calculated at a rate of $15.16 per square foot of rentable area ($65,415.40 per Lease Year- $5,451.28 per month). Thereafter, Base Rent on Additional Second Floor Area will increase two percent (2%) each Lease Year for the remainder of the Initial Term.
2. Except as amended by this Agreement, the Lease shall remain unmodified and in full force and effect, and Tenant hereby acknowledges and agrees that Landlord is, as of the

date of this Agreement, in full compliance under the terms and conditions of the Lease. The Lease and this Agreement may not be amended, except by written agreement entered into by the parties hereto. This Agreement shall binding upon the parties and their respective successors, heirs and assigns.
LANDLORD:
NICOLET JOINT VENTURES, LLC
BY:____________________________
Jeffrey J. Weyers, Manager
TENANT:
NICOLET NATIONAL BANK, a National Bank
Organized Under the Laws of the United
of America
BY:____________________________
Mike E. Daniels, President

EXHIBIT A
(Floor Plan Showing the Additional Second Floor Area)

111 NORTH WASHINGTON STREET, GREEN BAY, WISCONSIN
OFFICE LEASE AGREEMENT
This Office Lease Agreement is made and entered into as of the Effective Date by and between NICOLET JOINT VENTURES, LLC, a Wisconsin limited liability company, as Landlord, and NICOLET NATIONAL BANK, a national bank organized under the laws of the United States of America, as Tenant.
DEFINITIONS
Capitalized terms used in this Lease have the meanings ascribed to them on the attached EXHIBIT "A".
BASIC TERMS
The following Basic Terms are applied under and governed by the particular section(s) in this Lease pertaining to the following information:
1. Premises: Approximately thirty-eight thousand six hundred seventy (38,670) rentable square feet and located on the first and second floors of the Building located at 111 North Washington Street, Green Bay, Wisconsin 54301. The Premises is depicted on EXHIBIT "C" (See Section 1.1)
2. Lease Term: Fifteen Lease Years (See Section 1.2)
Renewal Options: Three five-year renewals (See Section 1.2.5)
3. Delivery Date: Estimated to be June 14, 2005 (See Section 1.2)
4. Basic Rent:
Years 1-15 Annual Basic Rent per Monthly Installments
rentable square foot of
the Premises
(See the Project Cost/Rent Worksheet attached hereto and incorporated herein as Schedule 1.]
Basic rent shall increase by two percent (2%), compounded annually during the Lease Term, effective on each year anniversary of the Commencement Date.
Renewal Term:
Rent determined in accordance Section 1.2.5
5. Initial Tenant's Share of Expenses Percentage:
Approximately fifty-one percent (51%) (See Section 3. 7)
6. Improvement Allowance:
N/A

Exhibit 10.11

SMALL BUSINESS LENDING FUND – SECURITIES PURCHASE AGREEMENT


NICOLET BANKSHARES, INC.					0240
Name of Company					SBLF No.
111 North Washington Street				Corporation
Street Address for Notices				Organizational Form (e.g., corporation, national bank)
Green Bay	Wisconsin		54301	Wisconsin
City	State		Zip Code	Jurisdiction of Organization
Ann Lawson				Federal Reserve
Name of Contact Person to Receive Notices				Appropriate Federal Banking Agency
920-617-5594		920-617-5325		September 1 , 2011
Fax Number for Notices		Phone Number for Notices		Effective Date

THIS SECURITIES PURCHASE AGREEMENT (the “ Agreement ”) is made as of the Effective Date set forth above (the “ Signing Date ”) between the Secretary of the Treasury (“ Treasury ”) and the Company named above (the “ Company ”), an entity existing under the laws of the Jurisdiction of Organization stated above in the Organizational Form stated above. The Company has elected to participate in Treasury’s Small Business Lending Fund program (“ SBLF ”). This Agreement contains the terms and conditions on which the Company intends to issue preferred stock to Treasury, which Treasury will purchase using SBLF funds.

This Agreement consists of the following attached parts, all of which together constitute the entire agreement of Treasury and the Company (the “ Parties ”) with respect to the subject matter hereof, superseding all prior written and oral agreements and understandings between the Parties with respect to such subject matter:

Annex A:

Information Specific to

the Company and the Investment

Annex B:

Definitions

Annex C:

General Terms and Conditions

Annex D:

Disclosure Schedule

Annex E:

Registration Rights

Annex F:

Form of Certificate of Designation

Annex G:

Form of Officer’s Certificate

Annex H:

Form of Supplemental Reports

Annex I:

Form of Annual Certification

Annex J:

Form of Opinion

Annex K:

Form of Repayment Document

This Agreement may be executed in any number of counterparts, each being deemed to be an original instrument, and all of which will together constitute the same agreement. Executed signature pages to this Agreement may be delivered by facsimile or electronic mail attachment.

IN WITNESS WHEREOF , this Agreement has been duly executed and delivered by the duly authorized representatives of the parties hereto as of the Effective Date.


THE SECRETARY OF THE TREASURY		NICOLET BANKSHARES, INC.
By:	/s/ Don Graves _____________	By:	/s/ Robert B. Atwell _____
Name:	Don Graves	Name:	Robert B. Atwell
Title:	Deputy Assistant Secretary	Title:	Chairman, President and Chief Executive Officer

ANNEX A

INFORMATION SPECIFIC TO THE COMPANY AND THE INVESTMENT

Purchase Information


Terms of the Purchase:
Series of Preferred Stock Purchased:	Non-Cumulative Perpetual Preferred Stock, Series C
Per Share Liquidation Preference of Preferred Stock:	$1,000 per share
Number of Shares of Preferred Stock Purchased:	24,400
Dividend Payment Dates on the Preferred Stock:	Payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year.
Purchase Price:	$24,400,000
Closing:
Location of Closing:	Virtual
Time of Closing:	10:00 a.m. (EST)
Date of Closing:	September 1, 2011

Redemption Information

( Only complete if the Company was a CPP or CDCI participant; leave blank otherwise. )


Prior Program:	X CPP ☐ CDCI
Series of Previously Acquired Preferred Stock:	Fixed Rate Cumulative Perpetual Preferred Stock, Series A Fixed Rate Cumulative Perpetual Preferred Stock, Series B
Number of Shares of Previously Acquired Preferred Stock:	15,712 (14,964 shares of Series A and 748 shares of Series B)
Repayment Amount ¹ :	$15,748,245.33
Residual Amount ² :	0

________________

¹ The Repayment Amount is the aggregate amount of principal and dividends due by the Company with respect to the CPP repurchase obligation.

Annex A (Information Specific to the Company and the Investment)

Page 1

Matching Private Investment Information


Treasury investment is contingent on the Company raising Matching Private Investment (check one): If Yes, complete the following (leave blank otherwise) :	☐ Yes X No
Aggregate Dollar Amount of Matching Private Investment Required:
Aggregate Dollar Amount of Matching Private Investment Received:
Class of securities representing Matching Private Investment:
Date of issuance of Matching Private Investment:

________________

² If the Repayment Amount is greater than the SBLF funding amount, insert the difference. If the Repurchase Amount is less than the SBLF funding amount, insert -0-.

Annex A (Information Specific to the Company and the Investment)

Page 2

ANNEX B

DEFINITIONS

Definitions . Except as otherwise specified herein or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Agreement.

“ Affiliate ” means, with respect to any person, any person directly or indirectly controlling, controlled by or under common control with, such other person. For purposes of this definition, “ control ” (including, with correlative meanings, the terms “ controlled by ” and “ under common control with ”) when used with respect to any person, means the possession, directly or indirectly through one or more intermediaries, of the power to cause the direction of management and/or policies of such person, whether through the ownership of voting securities by contract or otherwise.

“ Application Date ” means the date of the Company’s completed application to participate in SBLF.

“ Appropriate Federal Banking Agency ” means the “appropriate Federal banking agency” with respect to the Company or such Company Subsidiaries, as applicable, as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)). The Appropriate Federal Banking Agency is identified on the cover page of this Agreement.

“ Appropriate State Banking Agency ” means, if the Company is a State-chartered bank, the Company’s State bank supervisor (as defined in Section 3(r) of the Federal Deposit Insurance Act, 12 U.S.C. § 1813(q).

“ Bank Holding Company ” means a company registered as such with the Federal Reserve pursuant to 12 U.S.C. §1842 and the regulations of the Federal Reserve promulgated thereunder.

“ Call Report ” has the meaning assigned thereto in Section 4102(4) of the SBJA. If the Company is a Bank Holding Company or a Savings and Loan Holding Company, unless the context clearly indicates otherwise: (a) the term “Call Report” shall mean the Call Report(s) (as defined in Section 4102(4) of the SBJA) of the IDI Subsidiary(ies); and (b) if there are multiple IDI Subsidiaries, all references herein or in any document executed or delivered in connection herewith (including the Certificate of Designation, the Initial Supplemental Report and all Quarterly Supplemental Reports) to any data reported in a Call Report shall refer to the aggregate of such data across the Call Reports for all such IDI Subsidiaries.

“ CDCI ” means the Community Development Capital Initiative, as authorized under the Emergency Economic Stabilization Act of 2008.

“ Company Material Adverse Effect ” means a material adverse effect on (i) the business, results of operation or condition (financial or otherwise) of the Company and its consolidated subsidiaries taken as a whole; provided , however , that Company Material Adverse Effect shall not be deemed to include the effects of (A) changes after the Signing Date in general business, economic or market conditions (including changes generally in prevailing interest rates, credit availability and liquidity, currency exchange rates and price levels or trading volumes in the United States or foreign securities or credit markets), or any outbreak or escalation of hostilities, declared or undeclared acts of war or terrorism, in each case generally affecting the industries in which the Company and its subsidiaries operate, (B) changes or proposed changes after the Signing Date in GAAP, or authoritative interpretations

Annex B (Definitions)

Page 1

thereof, or (C) changes or proposed changes after the Signing Date in securities, banking and other laws of general applicability or related policies or interpretations of Governmental Entities (in the case of each of these clauses (A), (B) and (C), other than changes or occurrences to the extent that such changes or occurrences have or would reasonably be expected to have a materially disproportionate adverse effect on the Company and its consolidated subsidiaries taken as a whole relative to comparable U.S. banking or financial services organizations); or (ii) the ability of the Company to consummate the Purchase and other transactions contemplated by this Agreement and perform its obligations hereunder and under the Certificate of Designation on a timely basis and declare and pay dividends on the Dividend Payment Dates set forth in the Certificate of Designations.

“ CPP ” means the Capital Purchase Program, as authorized under the Emergency Economic Stabilization Act of 2008.

“ Disclosure Schedule” means that certain schedule to this Agreement delivered to Treasury on or prior to the Signing Date, setting forth, among other things, items the disclosure of which is necessary or appropriate in response to an express disclosure requirement contained in a provision hereof. The Disclosure Schedule is contained in Annex D of this Agreement.

“ Executive Officers ” means the Company's “executive officers” as defined in 12 C.F.R. § 215.2(e)(1) (regardless of whether or not such regulation is applicable to the Company).

“ Federal Reserve ” means the Board of Governors of the Federal Reserve System.

“ GAAP ” means generally accepted accounting principles in the United States.

“ General Terms and Conditions ” and “ General T&C ” each mean Annex C of this Agreement.

“ IDI Subsidiary ” means any Company Subsidiary that is an insured depository institution.

“ Junior Stock ” means Common Stock and any other class or series of stock of the Company the terms of which expressly provide that it ranks junior to the Preferred Shares as to dividend and redemption rights and/or as to rights on liquidation, dissolution or winding up of the Company.

“ knowledge of the Company ” or “ Company’s knowledge ” means the actual knowledge after reasonable and due inquiry of the “ officers ” (as such term is defined in Rule 3b-2 under the Exchange Act) of the Company.

“ Matching Private Investment-Supported, ” when used to describe the Company (if applicable), means the Company’s eligibility for participation in the SBLF program is conditioned upon the Company or an Affiliate of the Company acceptable to Treasury receiving Matching Private Investment, as contemplated by Section 4103(d)(3)(B) of the SBJA.

“ Original Letter Agreement ” means, if applicable, the Letter Agreement (and all terms incorporated therein) pursuant to which Treasury purchased from the Company, and the Company issued to Treasury, the Previously Acquired Preferred Shares (or warrants exercised to acquire the Previously Acquired Preferred Shares or the securities exchanged for the Previously Acquired Preferred Stock).

Annex B (Definitions)

Page 2

“ Oversight Officials ” means, interchangeably and collectively as context requires, the Special Deputy Inspector General for SBLF Program Oversight, the Inspector General of the Department of the Treasury, and the Comptroller General of the United States.

“ Parity Stock ” means any class or series of stock of the Company the terms of which do not expressly provide that such class or series will rank senior or junior to the Preferred Shares as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Company (in each case without regard to whether dividends accrue cumulatively or non-cumulatively).

“ Preferred Shares ” means the number of shares of Preferred Stock identified in the “Purchase Information” section of Annex A opposite “Number of Shares of Preferred Stock Purchased.”

“ Preferred Stock ” means the series of the Company’s preferred stock identified in the “Purchase Information” section of Annex A opposite “Series of Preferred Stock Purchased.”

“Previously Acquired Preferred Shares ” means, if the Company participated in CPP or CDCI, the number of shares of Previously Acquired Preferred Stock identified in the “Redemption Information” section of Annex A opposite “Number of Shares of Previously Acquired Preferred Stock.”

“ Previously Acquired Preferred Stock ” means, if the Company participated in CPP or CDCI, the series of the Company’s preferred stock identified in the “Redemption Information” section of Annex A opposite “Series of Previously Acquired Preferred Stock.”

“ Previously Disclosed ” means information set forth on the Disclosure Schedule or the Disclosure Update, as applicable; provided , however , that disclosure in any section of such Disclosure Schedule or Disclosure Update, as applicable, shall apply only to the indicated section of this Agreement; provided , further , that the existence of Previously Disclosed information, pursuant to a Disclosure Update, shall neither obligate Treasury to consummate the Purchase nor limit or affect any rights of or remedies available to Treasury.

“ Prior Program ” means (a) CPP, if the Company is a participant in CPP immediately prior to the Closing, or (b) CDCI, if the Company is a participant in CDCI immediately prior to the Closing.

“ Publicly-traded ” means a company that (i) has a class of securities that is traded on a national securities exchange and (ii) is required to file periodic reports with either the Securities and Exchange Commission or its primary federal bank regulator.

“ Purchase ” means the purchase of the Preferred Shares by Treasury from the Company pursuant to this Agreement.

“Repayment ” has the meaning set forth in the Repayment Document.

“ Repayment Amount ” means, if the Company participated in CPP or CDCI, the aggregate amount payable by the Company as of the Closing Date to redeem the Previously Acquired Preferred Stock in accordance with its terms, which amount is set forth in the “Redemption Information” section of Annex A .

“ Savings and Loan Holding Company ” means a company registered as such with the Office of Thrift Supervision or any successor thereto pursuant to 12 U.S.C. §1467(a) and the regulations of the Office of Thrift Supervision promulgated thereunder.

Annex B (Definitions)

Page 3

“ SBJA ” means the Small Business Jobs Act of 2010, as it may be amended from time to time.

“ Subsidiary ” means any corporation, partnership, joint venture, limited liability company or other entity (A) of which such person or a subsidiary of such person is a general partner or (B) of which a majority of the voting securities or other voting interests, or a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the board of directors or persons performing similar functions with respect to such entity, is directly or indirectly owned by such person and/or one or more subsidiaries thereof.

“ Tax ” or “ Taxes ” means any federal, state, local or foreign income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add-on minimum, ad valorem , transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest, penalty or addition imposed by any Governmental Entity.

“ Total Assets ” means, with respect to an insured depository institution, the total assets of such insured depository institution.

“ Total Risk-Weighted Assets ” means, with respect to an insured depository institution, the risk-weighted assets of such insured depository institution.

“ Warrant ” has the meaning set forth in the Repayment Document.

Index of Definitions . The following table, which is provided solely for convenience of reference and shall not affect the interpretation of this Agreement, identifies the location where capitalized terms are defined in this Agreement:

Location of
Term

Definition

Affiliate

Annex B, §1

Agreement

Cover Page

Appropriate Federal Banking Agency

Annex B, §1

Appropriate State Banking Agency

Annex B, §1

Bank Holding Company

Annex B, §1

Bankruptcy Exceptions

General T&C, §2.5(a)

Board of Directors

General T&C, §2.6

Business Combination

General T&C, §5.8

business day

General T&C, §5.12

Call Report

Annex B, §1

Capitalization Date

General T&C, §2.2

CDCI

Annex B, §1

Certificate of Designation

General T&C, §1.3(d)

Charter

General T&C, §1.3(d)

Closing

General T&C, §1.2(a)

Closing Date

General T&C, §1.2(a)

Closing Deadline

General T&C, §5.1(a)(i)

Code

General T&C, §2.14

Common Stock

General T&C, §2.2

Company

Cover Page

Company Financial Statements

General T&C, §1.3(i)

Annex B (Definitions)

Page 4

Company Material Adverse Effect

Annex B, §1

Company Reports

General T&C, §2.9

Company Subsidiary; Company Subsidiaries

General T&C, §2.5(b)

control; controlled by; under common control with

Annex B, §1

CPP

Annex B, §1

Disclosure Schedule

Annex B, §1

Disclosure Update

General T&C, §1.3(h)

ERISA

General T&C, §2.14

Exchange Act

General T&C, §4.3

Federal Reserve

Annex B, §1

GAAP

Annex B, §1

Governmental Entities

General T&C, §1.3(a)

Holders

General T&C, §4.4(a)

Indemnitee

General T&C, §4.4(b)

Information

General T&C, §3.1(c)(iii)

Initial Supplemental Report

General T&C, §1.3(j)

Treasury

Cover Page

Junior Stock

Annex B, §1

knowledge of the Company; Company’s knowledge

Annex B, §1

Matching Private Investment

General T&C, §1.3(l)

Matching Private Investment-Supported

Annex B, § 1

Matching Private Investors

General T&C, §1.3(l)

officers

Annex B, §1

Parity Stock

Annex B, §1

Parties

Cover Page

Plan

General T&C, §2.14

Preferred Shares

Annex B, §1

Preferred Stock

Annex B, §1

Previously Acquired Preferred Shares

Annex B, §1

Previously Acquired Preferred Stock

Annex B, §1

Previously Disclosed

Annex B, §1

Prior Program

General T&C, §1.2(c)

Proprietary Rights

General T&C, §2.21

Purchase

Annex B, §1

Purchase Price

General T&C, §1.1(a)

Regulatory Agreement

General T&C, §2.19

Related Party

General T&C, §2.25

Repayment Document

General T&C, §1.2(b)(ii)(E)

Residual Amount

General T&C, §1.2(b)(ii)(B)

Savings and Loan Holding Company

Annex B, §1

SBJA

Annex B, §1

SBLF

Cover Page

SEC

General T&C, §2.11

Securities Act

General T&C, §2.1

Signing Date

Cover Page

subsidiary

Annex B, §1

Quarterly Supplemental Report

General T&C, §3.1(d)(i)

Tax; Taxes

Annex B, §1

Transfer

General T&C, §4.3

Annex B (Definitions)

Page 5

Defined Terms in Annex K . Except for defined terms in Annex K that are expressly cross-referenced in another part of this Agreement, terms defined in Annex K are defined therein solely for purposes of Annex K and are not applicable to other parts of this Agreement.

Annex B (Definitions)

Page 6

ANNEX C

GENERAL TERMS AND CONDITIONS

CONTENTS OF GENERAL TERMS AND CONDITIONS

Page

ARTICLE I

PURCHASE; CLOSING

1.1

Purchase

1.2

Closing

1.3

Closing Conditions

ARTICLE II

REPRESENTATIONS AND WARRANTIES

2.1

Organization, Authority and Significant Subsidiaries

2.2

Capitalization

2.3

Preferred Shares

2.4

Compliance With Identity Verification Requirements

2.5

Authorization; Enforceability

2.6

Anti-takeover Provisions and Rights Plan

2.7

No Company Material Adverse Effect

2.8

Company Financial Statements

2.9

Reports

2.10

No Undisclosed Liabilities

2.11

Offering of Securities

2.12

Litigation and Other Proceedings

2.13

Compliance with Laws

2.14

Employee Benefit Matters

2.15

Taxes

2.16

Properties and Leases

2.17

Environmental Liability

2.18

Risk Management Instruments

2.19

Agreements with Regulatory Agencies

2.20

Insurance

2.21

Intellectual Property

2.22

Brokers and Finders

2.23

Disclosure Schedule

2.24

Previously Acquired Preferred Shares

2.25

Related Party Transactions

2.26

Ability to Pay Dividends

ARTICLE III

COVENANTS

3.1

Affirmative Covenants

3.2

Negative Covenants

ARTICLE IV

ADDITIONAL AGREEMENTS

4.1

Purchase for Investment

Annex C (General Terms and Conditions)

Page 1

4.2

Legends

4.3

Transfer of Preferred Shares

4.4

Rule 144; Rule 144A; 4(1½) Transactions

4.5

Depositary Shares

4.6

Expenses and Further Assurances

ARTICLE V

MISCELLANEOUS

5.1

Termination

5.2

Survival

5.3

Amendment

5.4

Waiver of Conditions

5.5

Governing Law; Submission to Jurisdiction; etc.

5.6

No Relationship to TARP

5.7

Notices

5.8

Assignment

5.9

Severability

5.10

No Third Party Beneficiaries

5.11

Specific Performance

5.12

Interpretation

Annex C (General Terms and Conditions)

Page 2

ARTICLE I

PURCHASE; CLOSING

1.1

Purchase . On the terms and subject to the conditions set forth in this Agreement, the Company agrees to sell to Treasury, and Treasury agrees to purchase from the Company, at the Closing, the Preferred Shares for the aggregate price set forth on Annex A (the “ Purchase Price ”).

1.2

Closing . (a) On the terms and subject to the conditions set forth in this Agreement, the closing of the Purchase (the “ Closing ”) will take place at the location specified in Annex A , at the time and on the date set forth in Annex A or as soon as practicable thereafter, or at such other place, time and date as shall be agreed between the Company and Treasury. The time and date on which the Closing occurs is referred to in this Agreement as the “ Closing Date ”.

(b)

Subject to the fulfillment or waiver of the conditions to the Closing in Section 1.3, at the Closing:

(i)

if Treasury holds Previously Acquired Preferred Shares:

(A)

the Purchase Price shall first be applied to pay the Repayment Amount;

(B)

if the Purchase Price is less than the Repayment Amount, the Company shall pay the positive difference (if any) between the Repayment Amount and the Purchase Price (a “ Residual Amount ”) to Treasury’s Office of Financial Stability by wire transfer of immediately available United States funds to an account designated in writing by Treasury; and

(C)

upon receipt of the full Repayment Amount (by application of the Purchase Price and, if applicable, the Company’s payment of the Residual Amount), Treasury and the Company will consummate the Repayment;

(D)

the Company will deliver to Treasury a statement of adjustment as contemplated by Section 13(J) of the Warrant; and

(E)

the Company and Treasury will execute and deliver a properly completed repurchase document in the form attached hereto as Annex K , (the “ Repayment Document ”).

(ii)

the Company will deliver the Preferred Shares as evidenced by one or more certificates dated the Closing Date and bearing appropriate legends as hereinafter provided for, in exchange for payment in full of the Purchase Price by application of the Purchase Price to the Repayment and by wire transfer of immediately available United States funds to a bank account designated by the Company in the Initial Supplemental Report, as applicable.

1.3

Closing Conditions . The obligation of Treasury to consummate the Purchase is subject to the fulfillment (or waiver by Treasury) at or prior to the Closing of each of the following conditions:

(a)

(i) any approvals or authorizations of all United States federal, state, local, foreign and other governmental, regulatory or judicial authorities (collectively, “ Governmental Entities ”) required for the consummation of the Purchase shall have been obtained or made in form and substance reasonably satisfactory to each party and shall be in full force and effect and all waiting periods required by United States and other applicable law, if any, shall have expired and (ii) no provision of any

Annex C (General Terms and Conditions)

Page 3

applicable United States or other law and no judgment, injunction, order or decree of any Governmental Entity shall prohibit the purchase and sale of the Preferred Shares as contemplated by this Agreement;

(b)

(i) the representations and warranties of the Company set forth in (A) Sections 2.7 and 2.26 shall be true and correct in all respects as though made on and as of the Closing Date; (B) Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.19, 2.22, 2.23, 2.24 and 2.25 shall be true and correct in all material respects as though made on and as of the Closing Date (other than representations and warranties that by their terms speak as of another date, which representations and warranties shall be true and correct in all respects as of such other date); and (C) Sections 2.8 through 2.18 and Sections 2.20 through 2.21 (disregarding all qualifications or limitations set forth in such representations and warranties as to “materiality”, “Company Material Adverse Effect” and words of similar import) shall be true and correct as though made on and as of the Closing Date (other than representations and warranties that by their terms speak as of another date, which representations and warranties shall be true and correct as of such other date), except to the extent that the failure of such representations and warranties referred to in this Section 1.3(b)(i)(C) to be so true and correct, individually or in the aggregate, does not have and would not reasonably be expected to have a Company Material Adverse Effect; and (ii) the Company shall have performed in all respects all obligations required to be performed by it under this Agreement at or prior to the Closing;

(c)

the Company shall have delivered to Treasury a certificate signed on behalf of the Company by an Executive Officer certifying to the effect that the conditions set forth in Section 1.3(b) have been satisfied, in substantially the form of Annex G ;

(d)

the Company shall have duly adopted and filed with the Secretary of State of its jurisdiction of organization or other applicable Governmental Entity an amendment to its certificate or articles of incorporation, articles of association, or similar organizational document (“ Charter ”) in substantially the form of Annex F (the “ Certificate of Designation ”) and the Company shall have delivered to Treasury a copy of the filed Certificate of Designation with appropriate evidence from the Secretary of State or other applicable Governmental Entity that the filing has been accepted, or if a filed copy is unavailable, a certificate signed on behalf of the Company by an Executive Officer certifying to the effect that the filing of the Certificate of Designation has been accepted, in substantially the form attached hereto as Annex F ;

(e)

the Company shall have delivered to Treasury true, complete and correct certified copies of the Charter and bylaws of the Company;

(f)

the Company shall have delivered to Treasury a written opinion from counsel to the Company (which may be internal counsel), addressed to Treasury and dated as of the Closing Date, in substantially the form of Annex J ;

(g)

the Company shall have delivered certificates in proper form or, with the prior consent of Treasury, evidence of shares in book-entry form, evidencing the Preferred Shares to Treasury or its designee(s);

(h)

the Company shall have delivered to Treasury a copy of the Disclosure Schedule on or prior to the Signing Date and, to the extent that any information set forth on the Disclosure Schedule needs to be updated or supplemented to make it true, complete and correct as of the Closing Date, (i) the Company shall have delivered to Treasury an update to the Disclosure Schedule (the “ Disclosure Update ”), setting forth any information necessary to make the Disclosure Schedule true, correct and complete as of the Closing Date and (ii) Treasury, in its sole discretion, shall have approved

Annex C (General Terms and Conditions)

Page 4

the Disclosure Update, provided , however , that the delivery and acceptance of the Disclosure Update shall not limit or affect any rights of or remedies available to Treasury;

(i)

the Company shall have delivered to Treasury on or prior to the Signing Date each of the consolidated financial statements of the Company and its consolidated subsidiaries for each of the last three completed fiscal years of the Company (which shall be audited to the extent audited financial statements are available prior to the Signing Date) (together with the Call Reports filed by the Company or the IDI Subsidiary(ies) for each completed quarterly period since the last completed fiscal year, the “ Company Financial Statements ”);

(j)

the Company shall have delivered to Treasury, not later than five (5) business days prior to the Closing Date, a certificate (the “ Initial Supplemental Report ”) in substantially the form attached hereto as Annex H setting forth a complete and accurate statement of loans held by the Company (or if the Company is a Bank Holding Company or a Savings and Loan Holding Company, by the IDI Subsidiary(ies)) in each of the categories described therein, for the time periods specified therein, (A) including a signed certification of the Chief Executive Officer, the Chief Financial Officer and all directors or trustees of the Company or the IDI Subsidiary(ies) who attested to the Call Reports for the quarters covered by such certificate, that such certificate (x) has been prepared in conformance with the instructions issued by Treasury and (y) is true and correct to the best of their knowledge and belief; and (B) completed for the last full calendar quarter prior to the Closing Date and the four (4) quarters ended September 30, 2009, December 31, 2009, March 31, 2010 and June 30, 2010;

(k)

prior to the Signing Date, the Company shall have delivered to Treasury, the Appropriate Federal Banking Agency and, if the Company is a State-chartered bank, the Appropriate State Banking Agency, a small business lending plan describing how the Company’s business strategy and operating goals will allow it to address the needs of small businesses in the area it serves, as well as a plan to provide linguistically and culturally appropriate outreach, where appropriate; and

(l)

if the Company is Matching Private Investment-Supported, on or after September 27, 2010 the Company or an Affiliate of the Company acceptable to Treasury shall (i) have received equity capital (“ Matching Private Investment ”) from one or more non-governmental investors (“ Matching Private Investors ”) (A) in an amount equal to or greater than the Aggregate Dollar Amount of Matching Private Investment Required set forth on Annex A (net of all dividends paid with respect to, and all repurchases and redemptions of, the Company’s equity securities), (B) that is subordinate in right of payment of dividends, liquidation preference and redemption rights to the Preferred Shares and (C) that is acceptable in form and substance to Treasury, in its sole discretion and (ii) have satisfied the following requirements reasonably in advance of the Closing Date: (A) delivery of copies of the definitive documentation for the Matching Private Investment to Treasury, (B) delivery of the organizational charts of such non-governmental investors to Treasury, each certified by the applicable non-governmental investor and demonstrating that such non-governmental investor is not an Affiliate of the Company, (C) delivery of any other documents or information as Treasury may reasonably request, in its sole discretion and (D) any other terms and conditions imposed by Treasury or the Appropriate Federal Banking Agency, in their sole discretion.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

The Company represents and warrants to Treasury that as of the Signing Date and as of the Closing Date (or such other date specified herein):

Annex C (General Terms and Conditions)

Page 5

2.1

Organization, Authority and Significant Subsidiaries . The Company has been duly incorporated and is validly existing and in good standing under the laws of its jurisdiction of organization, with the necessary power and authority to own, operate and lease its properties and conduct its business as it is being currently conducted, and except as has not, individually or in the aggregate, had and would not reasonably be expected to have a Company Material Adverse Effect, has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification; each subsidiary of the Company that would be considered a “significant subsidiary” within the meaning of Rule 1-02(w) of Regulation S-X under the Securities Act of 1933 (the “ Securities Act ”), has been duly organized and is validly existing in good standing under the laws of its jurisdiction of organization. The Charter and bylaws of the Company, copies of which have been provided to Treasury prior to the Signing Date, are true, complete and correct copies of such documents as in full force and effect as of the Signing Date and as of the Closing Date.

2.2

Capitalization . The outstanding shares of capital stock of the Company have been duly authorized and are validly issued and outstanding, fully paid and nonassessable, and subject to no preemptive or similar rights (and were not issued in violation of any preemptive rights). As of the Signing Date, the Company does not have outstanding any securities or other obligations providing the holder the right to acquire its common stock (“ Common Stock ”) or other capital stock that is not reserved for issuance as specified in Part 2.2 of the Disclosure Schedule, and the Company has not made any other commitment to authorize, issue or sell any Common Stock or other capital stock. Since the last day of the fiscal period covered by the last Call Report filed by the Company or the IDI Subsidiary(ies) prior to the Application Date (the “ Capitalization Date ”), the Company has not (a) declared, and has no present intention of declaring, any dividends on its Common Stock in a per-share amount greater than the per-share amount of declared dividends that are reflected in such Call Report; (b) declared, and has no present intention of declaring (except as contemplated by the Certificate of Designation) any dividends on any of its preferred stock in a per-share amount greater than the per-share amount of declared dividends that are reflected in such Call Report; or (c) issued any shares of Common Stock or other capital stock, other than (i) shares issued upon the exercise of stock options or delivered under other equity-based awards or other convertible securities or warrants which were issued and outstanding on the Capitalization Date and disclosed in Part 2.2 of the Disclosure Schedule, (ii) shares disclosed in Part 2.2 of the Disclosure Schedule, and (iii) if the Company is Matching Private Investment-Supported, shares or other capital stock representing Matching Private Investment disclosed in the “Matching Private Investment” section of Annex A . Except as disclosed in Part 2.2 of the Disclosure Schedule, the Company has no agreements providing for the accelerated exercise, settlement or exchange of any capital stock of the Company for Common Stock. Each holder of 5% or more of any class of capital stock of the Company and such holder’s primary address are set forth in Part 2.2 of the Disclosure Schedule. The Company has received a representation from each Matching Private Investor that such Matching Private Investor has not received or applied for any investment from the SBLF, and the Company has no reason to believe that any such representation is inaccurate. If the Company is a Bank Holding Company or a Savings and Loan Holding Company, (x) the percentage of each IDI Subsidiary’s issued and outstanding capital stock that is owned by the Company is set forth on Part 2.2 of the Disclosure Schedule; and (y) all shares of issued and outstanding capital stock of the IDI Subsidiary(ies) owned by the Company are free and clear of all liens, security interests, charges or encumbrances. Since the Application Date, there has been no change in the organizational hierarchy information regarding the Company that was available on the Application Date from the National Information Center of the Federal Reserve System.

2.3

Preferred Shares . The Preferred Shares have been duly and validly authorized, and, when issued and delivered pursuant to this Agreement, such Preferred Shares will be duly and validly issued and fully paid and non-assessable, will not be issued in violation of any preemptive rights, and will rank pari passu with or senior to all other series or classes of preferred stock, whether or not designated, issued

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or outstanding, with respect to the payment of dividends and the distribution of assets in the event of any dissolution, liquidation or winding up of the Company.

2.4

Compliance with Identity Verification Requirements . The Company and the Company Subsidiaries (to the extent such regulations are applicable to the Company Subsidiaries) are in compliance with the requirements of Section 103.121 of title 31, Code of Federal Regulations.

2.5

Authorization, Enforceability .

(a)

The Company has the corporate power and authority to execute and deliver this Agreement and to carry out its obligations hereunder (which includes the issuance of the Preferred Shares). The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company and its stockholders, and no further approval or authorization is required on the part of the Company. This Agreement is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to any limitations of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles, regardless of whether such enforceability is considered in a proceeding at law or in equity (“ Bankruptcy Exceptions ”).

(b)

The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby and compliance by the Company with the provisions hereof, will not (i) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration of, or result in the creation of, any lien, security interest, charge or encumbrance upon any of the properties or assets of the Company or any subsidiary of the Company (each subsidiary, a “ Company Subsidiary ” and, collectively, the “ Company Subsidiaries ”) under any of the terms, conditions or provisions of (A) its organizational documents or (B) any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which the Company or any Company Subsidiary is a party or by which it or any Company Subsidiary may be bound, or to which the Company or any Company Subsidiary or any of the properties or assets of the Company or any Company Subsidiary may be subject, or (ii) subject to compliance with the statutes and regulations referred to in the next paragraph, violate any statute, rule or regulation or any judgment, ruling, order, writ, injunction or decree applicable to the Company or any Company Subsidiary or any of their respective properties or assets except, in the case of clauses (i)(B) and (ii), for those occurrences that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.

(c)

Other than the filing of the Certificate of Designation with the Secretary of State of its jurisdiction of organization or other applicable Governmental Entity, such filings and approvals as are required to be made or obtained under any state “blue sky” laws and such as have been made or obtained, no notice to, filing with, exemption or review by, or authorization, consent or approval of, any Governmental Entity is required to be made or obtained by the Company in connection with the consummation by the Company of the Purchase except for any such notices, filings, exemptions, reviews, authorizations, consents and approvals the failure of which to make or obtain would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

2.6

Anti-takeover Provisions and Rights Plan . The Board of Directors of the Company (the “ Board of Directors ”) has taken all necessary action to ensure that the transactions contemplated by this Agreement and the consummation of the transactions contemplated hereby will be exempt from any anti-

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takeover or similar provisions of the Company’s Charter and bylaws, and any other provisions of any applicable “moratorium”, “control share”, “fair price”, “interested stockholder” or other anti-takeover laws and regulations of any jurisdiction.

2.7

No Company Material Adverse Effect . Since the last day of the fiscal period covered by the last Call Report filed by the Company or the IDI Subsidiary(ies) prior to the Application Date, no fact, circumstance, event, change, occurrence, condition or development has occurred that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect.

2.8

Company Financial Statements . The Company Financial Statements present fairly in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the dates indicated therein and the consolidated results of their operations for the periods specified therein; and except as stated therein, such financial statements (a) were prepared in conformity with GAAP applied on a consistent basis (except as may be noted therein) and (b) have been prepared from, and are in accordance with, the books and records of the Company and the Company Subsidiaries.

2.9

Reports .

(a)

Since December 31, 2007, the Company and each Company Subsidiary has filed all reports, registrations, documents, filings, statements and submissions, together with any amendments thereto, that it was required to file with any Governmental Entity (the foregoing, collectively, the “ Company Reports ”) and has paid all fees and assessments due and payable in connection therewith, except, in each case, as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. As of their respective dates of filing, the Company Reports complied in all material respects with all statutes and applicable rules and regulations of the applicable Governmental Entities.

(b)

The records, systems, controls, data and information of the Company and the Company Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of the Company or the Company Subsidiaries or their accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a material adverse effect on the system of internal accounting controls described below in this Section 2.9(b). The Company (i) has implemented and maintains adequate disclosure controls and procedures to ensure that material information relating to the Company, including the consolidated Company Subsidiaries, is made known to the chief executive officer and the chief financial officer of the Company by others within those entities, and (ii) has disclosed, based on its most recent evaluation prior to the Signing Date, to the Company’s outside auditors and the audit committee of the Board of Directors (A) any significant deficiencies and material weaknesses in the design or operation of internal controls that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.

2.10

No Undisclosed Liabilities . Neither the Company nor any of the Company Subsidiaries has any liabilities or obligations of any nature (absolute, accrued, contingent or otherwise) which are not properly reflected in the Company Financial Statements to the extent required to be so reflected and, if applicable, reserved against in accordance with GAAP applied on a consistent basis, except for (a) liabilities that have arisen since the last fiscal year end in the ordinary and usual course of business and consistent with past practice and (b) liabilities that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.

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2.11

Offering of Securities . Neither the Company nor any person acting on its behalf has taken any action (including any offering of any securities of the Company under circumstances which would require the integration of such offering with the offering of any of the Preferred Shares under the Securities Act, and the rules and regulations of the Securities and Exchange Commission (the “ SEC ”) promulgated thereunder), which might subject the offering, issuance or sale of any of the Preferred Shares to Treasury pursuant to this Agreement to the registration requirements of the Securities Act.

2.12

Litigation and Other Proceedings . Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, there is no (a) pending or, to the knowledge of the Company, threatened, claim, action, suit, investigation or proceeding, against the Company or any Company Subsidiary or to which any of their assets are subject nor is the Company or any Company Subsidiary subject to any order, judgment or decree or (b) unresolved violation, criticism or exception by any Governmental Entity with respect to any report or relating to any examinations or inspections of the Company or any Company Subsidiaries. There is no claim, action, suit, investigation or proceeding pending or, to the Company’s knowledge, threatened against any institution-affiliated party (as defined in 12 U.S.C. §1813(u)) of the Company or any of the IDI Subsidiaries that, if determined or resolved in a manner adverse to such institution-affiliated party, could result in such institution-affiliated party being prohibited from participation in the conduct of the affairs of any financial institution or holding company of any financial institution and, to the Company’s knowledge, there are no facts or circumstances could reasonably be expected to provide a basis for any such claim, action, suit, investigation or proceeding.

2.13

Compliance with Laws . Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the Company and the Company Subsidiaries have all permits, licenses, franchises, authorizations, orders and approvals of, and have made all filings, applications and registrations with, Governmental Entities that are required in order to permit them to own or lease their properties and assets and to carry on their business as presently conducted and that are material to the business of the Company or such Company Subsidiary. Except as set forth in Part 2.13 of the Disclosure Schedule, the Company and the Company Subsidiaries have complied in all respects and are not in default or violation of, and none of them is, to the knowledge of the Company, under investigation with respect to or, to the knowledge of the Company, have been threatened to be charged with or given notice of any violation of, any applicable domestic (federal, state or local) or foreign law, statute, ordinance, license, rule, regulation, policy or guideline, order, demand, writ, injunction, decree or judgment of any Governmental Entity, other than such noncompliance, defaults or violations that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Except for statutory or regulatory restrictions of general application, no Governmental Entity has placed any restriction on the business or properties of the Company or any Company Subsidiary that would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

2.14

Employee Benefit Matters . Except as would not reasonably be expected to have, either individually or in the aggregate, a Company Material Adverse Effect: (a) each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)) providing benefits to any current or former employee, officer or director of the Company or any member of its “ Controlled Group ” (defined as any organization which is a member of a controlled group of corporations within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the “ Code ”)) that is sponsored, maintained or contributed to by the Company or any member of its Controlled Group and for which the Company or any member of its Controlled Group would have any liability, whether actual or contingent (each, a “ Plan ”) has been maintained in compliance with its terms and with the requirements of all applicable statutes, rules and regulations, including ERISA and the Code; (b) with respect to each Plan subject to Title IV of ERISA (including, for

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purposes of this clause (b), any plan subject to Title IV of ERISA that the Company or any member of its Controlled Group previously maintained or contributed to in the six years prior to the Signing Date), (1) no “reportable event” (within the meaning of Section 4043(c) of ERISA), other than a reportable event for which the notice period referred to in Section 4043(c) of ERISA has been waived, has occurred in the three years prior to the Signing Date or is reasonably expected to occur, (2) no “accumulated funding deficiency” (within the meaning of Section 302 of ERISA or Section 412 of the Code), whether or not waived, has occurred in the three years prior to the Signing Date or is reasonably expected to occur, (3) the fair market value of the assets under each Plan exceeds the present value of all benefits accrued under such Plan (determined based on the assumptions used to fund such Plan) and (4) neither the Company nor any member of its Controlled Group has incurred in the six years prior to the Signing Date, or reasonably expects to incur, any liability under Title IV of ERISA (other than contributions to the Plan or premiums to the Pension Benefit Guaranty Corporation in the ordinary course and without default) in respect of a Plan (including any Plan that is a “multiemployer plan”, within the meaning of Section 4001(c)(3) of ERISA); and (c) each Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service with respect to its qualified status that has not been revoked, or such a determination letter has been timely applied for but not received by the Signing Date, and nothing has occurred, whether by action or by failure to act, which could reasonably be expected to cause the loss, revocation or denial of such qualified status or favorable determination letter.

2.15

Taxes . Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (a) the Company and the Company Subsidiaries have filed all federal, state, local and foreign income and franchise Tax returns (together with any schedules and attached thereto) required to be filed through the Signing Date, subject to permitted extensions, and have paid all Taxes due thereon, (b) all such Tax returns (together with any schedules and attached thereto) are true, complete and correct in all material respects and were prepared in compliance with all applicable laws and (c) no Tax deficiency has been determined adversely to the Company or any of the Company Subsidiaries, nor does the Company have any knowledge of any Tax deficiencies.

2.16

Properties and Leases . Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the Company and the Company Subsidiaries have good and marketable title to all real properties and all other properties and assets owned by them, in each case free from liens (including, without limitation, liens for Taxes), encumbrances, claims and defects that would affect the value thereof or interfere with the use made or to be made thereof by them. Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the Company and the Company Subsidiaries hold all leased real or personal property under valid and enforceable leases with no exceptions that would interfere with the use made or to be made thereof by them.

2.17

Environmental Liability . Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect:

(a)

there is no legal, administrative, or other proceeding, claim or action of any nature seeking to impose, or that would reasonably be expected to result in the imposition of, on the Company or any Company Subsidiary, any liability relating to the release of hazardous substances as defined under any local, state or federal environmental statute, regulation or ordinance, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980, pending or, to the Company’s knowledge, threatened against the Company or any Company Subsidiary;

(b)

to the Company’s knowledge, there is no reasonable basis for any such proceeding, claim or action; and

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(c)

neither the Company nor any Company Subsidiary is subject to any agreement, order, judgment or decree by or with any court, Governmental Entity or third party imposing any such environmental liability.

2.18

Risk Management Instruments . Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, all derivative instruments, including, swaps, caps, floors and option agreements, whether entered into for the Company’s own account, or for the account of one or more of the Company Subsidiaries or its or their customers, were entered into (i) only in the ordinary course of business, (ii) in accordance with prudent practices and in all material respects with all applicable laws, rules, regulations and regulatory policies and (iii) with counterparties believed to be financially responsible at the time; and each of such instruments constitutes the valid and legally binding obligation of the Company or one of the Company Subsidiaries, enforceable in accordance with its terms, except as may be limited by the Bankruptcy Exceptions. Neither the Company or the Company Subsidiaries, nor, to the knowledge of the Company, any other party thereto, is in breach of any of its obligations under any such agreement or arrangement other than such breaches that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

2.19

Agreements with Regulatory Agencies . Except as set forth in Part 2.19 of the Disclosure Schedule, neither the Company nor any Company Subsidiary is subject to any cease-and-desist or other similar order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any capital directive by, or since December 31, 2007, has adopted any board resolutions at the request of, any Governmental Entity that currently restricts the conduct of its business or that in any material manner relates to its capital adequacy, its liquidity and funding policies and practices, its ability to pay dividends, its credit, risk management or compliance policies or procedures, its internal controls, its management or its operations or business (each item in this sentence, a “ Regulatory Agreement ”), nor has the Company or any Company Subsidiary been advised since December 31, 2007, by any such Governmental Entity that it is considering issuing, initiating, ordering, or requesting any such Regulatory Agreement. The Company and each Company Subsidiary is in compliance with each Regulatory Agreement to which it is party or subject, and neither the Company nor any Company Subsidiary has received any notice from any Governmental Entity indicating that either the Company or any Company Subsidiary is not in compliance with any such Regulatory Agreement.

2.20

Insurance . The Company and the Company Subsidiaries are insured with reputable insurers against such risks and in such amounts as the management of the Company reasonably has determined to be prudent and consistent with industry practice. The Company and the Company Subsidiaries are in material compliance with their insurance policies and are not in default under any of the material terms thereof, each such policy is outstanding and in full force and effect, all premiums and other payments due under any material policy have been paid, and all claims thereunder have been filed in due and timely fashion, except, in each case, as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

2.21

Intellectual Property . Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (i) the Company and each Company Subsidiary owns or otherwise has the right to use, all intellectual property rights, including all trademarks, trade dress, trade names, service marks, domain names, patents, inventions, trade secrets, know-how, works of authorship and copyrights therein, that are used in the conduct of their existing businesses and all rights relating to the plans, design and specifications of any of its branch facilities (“ Proprietary Rights ”) free and clear of all liens and any claims of ownership by current or former employees, contractors, designers or others and (ii) neither the Company nor any of the Company Subsidiaries is materially infringing, diluting, misappropriating or violating, nor has the Company or any of the Company Subsidiaries

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received any written (or, to the knowledge of the Company, oral) communications alleging that any of them has materially infringed, diluted, misappropriated or violated, any of the Proprietary Rights owned by any other person. Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, to the Company’s knowledge, no other person is infringing, diluting, misappropriating or violating, nor has the Company or any or the Company Subsidiaries sent any written communications since December 31, 2007, alleging that any person has infringed, diluted, misappropriated or violated, any of the Proprietary Rights owned by the Company and the Company Subsidiaries.

2.22

Brokers and Finders . Treasury has no liability for any amounts that any broker, finder or investment banker is entitled to for any financial advisory, brokerage, finder’s or other fee or commission in connection with this Agreement or the transactions contemplated hereby based upon arrangements made by or on behalf of the Company or any Company Subsidiary.

2.23

Disclosure Schedule . The Company has delivered the Disclosure Schedule and, if applicable, the Disclosure Update to Treasury and the information contained in the Disclosure Schedule, as modified by the information contained in the Disclosure Update, if applicable, is true, complete and correct.

2.24

Previously Acquired Preferred Shares . If Treasury holds Previously Acquired Preferred Shares:

(a)

The Company has not breached any representation, warranty or covenant set forth in the Original Letter Agreement or any of the other documents governing the Previously Acquired Preferred Stock.

(b)

The Company has paid to Treasury: (i) if the Previously Acquired Preferred Stock is cumulative, all accrued and unpaid dividends and/or interest then due on the Previously Acquired Preferred Stock; or (ii) if the Previously Acquired Preferred Stock is non-cumulative, all unpaid dividends and/or interest due on the Previously Acquired Preferred Shares for the fiscal quarter prior to the Closing Date plus the accrued and unpaid dividends and/or interest due on the Previously Acquired Preferred Shares as of the Closing Date for the fiscal quarter in which the Closing shall occur.

2.25

Related Party Transactions . Neither the Company nor any Company Subsidiary has made any extension of credit to any director or Executive Officer of the Company or any Company Subsidiary, any holder of 5% or more of the Company’s issued and outstanding capital stock, or any of their respective spouses or children or to any Affiliate of any of the foregoing (each, a “ Related Party ”), other than in compliance with 12 C.F.R Part 215 (Regulation O). Except as set forth in Part 2.25 of the Disclosure Schedule, to the Company’s knowledge, no Related Party has any (i) material commercial, industrial, banking, consulting, legal, accounting, charitable or familial relationship with any vendor or material customer of the Company or any Company Subsidiary that is not on arms-length terms, or (ii) direct or indirect ownership interest in any person or entity with which the Company or any Company Subsidiary has a material business relationship that is not on arms-length terms (not including Publicly-traded entities in which such person owns less than two percent (2%) of the outstanding capital stock).

2.26

Ability to Pay Dividends . The Company has all permits, licenses, franchises, authorizations, orders and approvals of, and has made all filings, applications and registrations with, Governmental Entities and third parties that are required in order to permit the Company to declare and pay dividends on the Preferred Shares on the Dividend Payment Dates set forth in the Certificate of Designation.

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ARTICLE III

COVENANTS

3.1

Affirmative Covenants . The Company hereby covenants and agrees with Treasury that:

(a)

Commercially Reasonable Efforts . Subject to the terms and conditions of this Agreement, each of the parties will use its commercially reasonable efforts in good faith to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or desirable, or advisable under applicable laws, so as to permit consummation of the Purchase as promptly as practicable and otherwise to enable consummation of the transactions contemplated hereby and shall use commercially reasonable efforts to cooperate with the other party to that end.

(b)

Certain Notifications until Closing . From the Signing Date until the Closing, the Company shall promptly notify Treasury of (i) any fact, event or circumstance of which it is aware and which would reasonably be expected to cause any representation or warranty of the Company contained in this Agreement to be untrue or inaccurate in any material respect or to cause any covenant or agreement of the Company contained in this Agreement not to be complied with or satisfied in any material respect and (ii) except as Previously Disclosed, any fact, circumstance, event, change, occurrence, condition or development of which the Company is aware and which, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect; provided , however , that delivery of any notice pursuant to this Section 3.1(b) shall not limit or affect any rights of or remedies available to Treasury.

(c)

Access, Information and Confidentiality .

(i)

From the Signing Date until the date on which all of the Preferred Shares have been redeemed in whole, the Company will permit, and shall cause each of the Company’s Subsidiaries to permit, Treasury, the Oversight Officials and their respective agents, consultants, contractors and advisors to (x) examine any books, papers, records, Tax returns (including all schedules attached thereto), data and other information; (y) make copies thereof; and (z) discuss the affairs, finances and accounts of the Company and the Company Subsidiaries with the personnel of the Company and the Company Subsidiaries, all upon reasonable notice; provided , that:

(A)

any examinations and discussions pursuant to this Section 3.1(c)(i) shall be conducted during normal business hours and in such manner as not to interfere unreasonably with the conduct of the business of the Company;

(B)

neither the Company nor any Company Subsidiary shall be required by this Section 3.1(c)(i) to disclose any information to the extent (x) prohibited by applicable law or regulation, or (y) that such disclosure would reasonably be expected to cause a violation of any agreement to which the Company or any Company Subsidiary is a party or would cause a risk of a loss of privilege to the Company or any Company Subsidiary ( provided that the Company shall use commercially reasonable efforts to make appropriate substitute disclosure arrangements under circumstances where the restrictions in this clause (B) apply);

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(C)

the obligations of the Company and the Company Subsidiaries to disclose information pursuant to this Section 3.1(c)(i) to any Oversight Official or any agent, consultant, contractor and advisor thereof, such Oversight Official shall have agreed, with respect to documents obtained under this Section 3.1(c)(i), to follow applicable law and regulation (and the applicable customary policies and procedures) regarding the dissemination of confidential materials, including redacting confidential information from the public version of its reports and soliciting input from the Company as to information that should be afforded confidentiality, as appropriate; and

(D)

for avoidance of doubt, such examinations and discussions may, at Treasury’s option, be conducted on site at any office of the Company or any Company Subsidiary.

(ii)

From the Signing Date until the date on which all of the Preferred Shares have been redeemed in whole, the Company will deliver, or will cause to be delivered, to Treasury:

(A)

as soon as available after the end of each fiscal year of the Company, and in any event within 90 days thereafter, a consolidated balance sheet of the Company as of the end of such fiscal year, and consolidated statements of income, retained earnings and cash flows of the Company for such year, in each case prepared in accordance with GAAP applied on a consistent basis and setting forth in each case in comparative form the figures for the previous fiscal year of the Company and which shall be audited to the extent audited financial statements are available; ³

(B)

as soon as available after the end of the first, second and third quarterly periods in each fiscal year of the Company, a copy of any quarterly reports provided to other stockholders of the Company or Company management by the Company;

(C)

as soon as available after the Company receives any assessment of the Company’s internal controls, a copy of such assessment (other than assessments provided by the Appropriate Federal Banking Agency or the Appropriate State Banking Agency that the Company is prohibited by applicable law or regulation from disclosing to Treasury);

(D)

annually on a date specified by Treasury, a completed survey, in a form specified by Treasury, providing, among other things, a description of how the Company has utilized the funds the Company received hereunder in connection with the sale of the Preferred Shares and the effects of such funds on the operations and status of the Company;

________________

³ To the extent that the Company informed the Treasury on the Signing Date that it does not prepare financial statements in accordance with GAAP in the ordinary course, the Treasury may consider other annual financial reporting packages acceptable to it in its sole discretion.

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(E)

as soon as such items become effective, any amendments to the Charter, bylaws or other organizational documents of the Company; and

(F)

at the same time as such items are sent to any stockholders of the Company, copies of any information or documents sent by the Company to its stockholders.

(iii)

Treasury will use reasonable best efforts to hold, and will use reasonable best efforts to cause its agents, consultants, contractors and advisors and United States executive branch officials and employees, to hold, in confidence all non-public records, books, contracts, instruments, computer data and other data and information (collectively, “ Information ”) concerning the Company furnished or made available to it by the Company or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (A) previously known by such party on a non-confidential basis, (B) in the public domain through no fault of such party or (C) later lawfully acquired from other sources by the party to which it was furnished (and without violation of any other confidentiality obligation)); provided that nothing herein shall prevent Treasury from disclosing any Information to the extent required by applicable laws or regulations or by any subpoena or similar legal process. Treasury understands that the Information may contain commercially sensitive confidential information entitled to an exception from a Freedom of Information Act request.

(iv)

Treasury’s information rights pursuant to Section 3.1(c)(ii)(A), (B), (C), (E) and (F) and Treasury’s right to receive certifications from the Company pursuant to Section 3.1(d)(i) may be assigned by Treasury to a transferee or assignee of the Preferred Shares with a liquidation preference of no less than an amount equal to 2% of the initial aggregate liquidation preference of the Preferred Shares.

(v)

Nothing in this Section shall be construed to limit the authority that any Oversight Official or any other applicable regulatory authority has under law.

(vi)

The Company shall provide to Treasury all such information as Treasury may request from time to time for the purpose of carrying out the study required by Section 4112 of the SBJA.

(d)

Quarterly Supplemental Reports and Annual Certifications .

(i)

Concurrently with the submission of Call Reports by the Company or the IDI Subsidiary(ies) (as the case may be) for each quarter ending after the Closing Date, the Company shall deliver to Treasury a certificate in substantially the form attached hereto as Annex H setting forth a complete and accurate statement of loans held by the Company in each of the categories described therein, for the time periods specified therein, (A) including a signed certification of the Chief Executive Officer, the Chief Financial Officer and all directors or trustees of the Company or the IDI Subsidiary(ies) who attested to the Call Report for the quarter covered by such certificate, that such certificate (x) has been prepared in conformance with the instructions issued by Treasury and (y) is true and correct to the best of their knowledge and belief; (B) completed for such quarter (each, a “ Quarterly Supplemental Report ”).

(ii)

Within ninety (90) days after the end of each fiscal year of the Company during which the Initial Supplemental Report is submitted pursuant to Section 1.3(j) or the first ten (10) Quarterly Supplemental Reports are submitted pursuant to Section 3.1(d)(i), the Company shall deliver to Treasury a certification from the Company’s independent auditors that the Initial Supplemental Report

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and/or Quarterly Supplemental Reports during such fiscal year are complete and accurate with respect to accounting matters, including policies and procedures and controls over such.

(iii)

Until the date on which the Preferred Shares are redeemed pursuant to Section 5 of the Certificate of Designation, within ninety (90) days after the end of each fiscal year of the Company, the Company shall deliver to Treasury a certificate in substantially the form attached hereto as Annex I , signed on behalf of the Company by an Executive Officer.

(iv)

If any Initial Supplemental Report or Quarterly Supplemental Report is inaccurate, Treasury shall be entitled to recover from the Company, upon demand, the amount of any difference between (x) the amount of the dividend payment(s) actually made to Treasury based on such inaccurate report and (y) the correct amount of the dividend payment(s) that should have been made, but for such inaccuracy. The Company shall provide Treasury with a written description of any such inaccuracy within three (3) business days after the Company’s discovery thereof.

(v)

Treasury shall have the right from time to time to modify Annex H , by posting an amended and restated version of Annex H on Treasury’s web site, to conform Annex H to (A) reflect changes in GAAP, (B) reflect changes in the form or content of, or definitions used in, Call Reports, or (C) to make clarifications and/or technical corrections as Treasury determines to be reasonably necessary. Notwithstanding anything herein to the contrary, upon posting by Treasury on its web site, Annex H shall be deemed to be amended and restated as so posted, without the need for any further act on the part of any person or entity. If any such modification includes a change to the caption or number of any line item of Annex H , any reference herein to such line item shall thereafter be a reference to such re-captioned or re-numbered line item.

(e)

Bank and Thrift Holding Company Status . If the Company is a Bank Holding Company or a Savings and Loan Holding Company on the Signing Date, then the Company shall maintain its status as a Bank Holding Company or Savings and Loan Holding Company, as the case may be, for as long as Treasury owns any Preferred Shares. The Company shall redeem all Preferred Shares held by Treasury prior to terminating its status as a Bank Holding Company or Savings and Loan Holding Company, as applicable.

(f)

Predominantly Financial . For as long as Treasury owns any Preferred Shares, the Company, to the extent it is not itself an insured depository institution, agrees to remain predominantly engaged in financial activities. A company is predominantly engaged in financial activities if the annual gross revenues derived by the company and all subsidiaries of the company (excluding revenues derived from subsidiary depository institutions), on a consolidated basis, from engaging in activities that are financial in nature or are incidental to a financial activity under subsection (k) of Section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)) represent at least 85 percent of the consolidated annual gross revenues of the company.

(g)

Capital Covenant . From the Signing Date until the date on which all of the Preferred Shares have been redeemed in whole, the Company and the Company Subsidiaries shall maintain such capital as may be necessary to meet the minimum capital requirements of the Appropriate Federal Banking Agency, as in effect from time to time.

(h)

Reporting Requirements . Prior to the date on which all of the Preferred Shares have been redeemed in whole, the Company covenants and agrees that, at all times on or after the Closing Date, (i) to the extent it is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, it shall comply with the terms and conditions set forth in Annex E or (ii) as soon as practicable after

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the date that the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, it shall comply with the terms and conditions set forth in Annex E .

(i)

Transfer of Proceeds to Depository Institutions . If the Company is a Bank Holding Company or a Savings and Loan Holding Company, the Company shall immediately transfer to the IDI Subsidiaries, as equity capital contributions (in a manner that will cause such equity capital contributions to qualify for inclusion in the Tier 1 capital of the IDI Subsidiaries), not less than ninety percent (90%) of the proceeds it receives in connection with the sale of Preferred Shares; provided, however , that:

(A)

no IDI Subsidiary shall receive any amount pursuant to this Section 3.1(i) in excess of (A) three percent (3%) of the insured depository institution’s Total Risk-Weighted Assets as reported in its Call Report filed immediately prior to the Application Date, if the insured depository institution has Total Assets of more than $1,000,000,000 and less than $10,000,000,000 as of December 31, 2009 or (B) five percent (5%) of the IDI Subsidiary’s Total Risk-Weighted Assets as reported in its Call Report filed immediately prior to the Application Date, if the IDI Subsidiary has Total Assets of $1,000,000,000 or less as of December 31, 2009; and

(B)

if Treasury held Previously Acquired Preferred Shares immediately prior to the Closing Date, the amount required to be transferred pursuant this Section 3.1(i) shall be the difference obtained by subtracting the Repayment Amount from the Purchase Price (unless the Purchase Price is less than the Repayment Amount, in which case no amount shall be required to be transferred pursuant to this Section 3.1(i)).

(j)

Outreach to Minorities, Women and Veterans . The Company shall comply with Section 4103(d)(8) of the SBJA.

(k)

Certification Related to Sex Offender Registration and Notification Act . The Company shall obtain from any business to which it makes a loan that is funded in whole or in part using funds from the Purchase Price a written certification that no principal of such business has been convicted of a sex offense against a minor (as such terms are defined in section 111 of the Sex Offender Registration and Notification Act, 42 U.S.C. §16911). The Company shall retain all such certifications in accordance with standard recordkeeping practices established by the Appropriate Federal Banking Agency.

3.2

Negative Covenants . The Company hereby covenants and agrees with Treasury that:

(a)

Certain Transactions .

(i)

The Company shall not merge or consolidate with, or sell, transfer or lease all or substantially all of its property or assets to, any other party unless the successor, transferee or lessee party (or its ultimate parent entity), as the case may be (if not the Company), expressly assumes the due and punctual performance and observance of each and every covenant, agreement and condition of this Agreement to be performed and observed by the Company.

(ii)

Without the prior written consent of Treasury, until such time as Treasury shall cease to own any Preferred Shares, the Company shall not permit any of its “significant subsidiaries” (as such term is defined in Rule 12b-2 promulgated under the Exchange Act) to (A) engage in any merger, consolidation, statutory share exchange or similar transaction following the consummation of which such significant subsidiary is not wholly-owned by the Company, (B) dissolve or sell all or

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substantially all of its assets or property other than in connection with an internal reorganization or consolidation involving wholly-owned subsidiaries of the Company or (C) issue or sell any shares of its capital stock or any securities convertible or exercisable for any such shares, other than issuances or sales in connection with an internal reorganization or consolidation involving wholly-owned subsidiaries of the Company.

(b)

Restriction on Dividends and Repurchases . The Company covenants and agrees that it shall not violate any of the restrictions on dividends, distributions, redemptions, repurchases, acquisitions and related actions set forth in the Certificate of Designation, which are incorporated by reference herein as if set forth in full.

(c)

Related Party Transactions . Until such time as Treasury ceases to own any debt or equity securities of the Company, including the Preferred Shares, the Company and the Company Subsidiaries shall not enter into transactions with Affiliates or related persons (within the meaning of Item 404 under the SEC’s Regulation S-K) unless (A) such transactions are on terms no less favorable to the Company and the Company Subsidiaries than could be obtained from an unaffiliated third party, and (B) have been approved by the audit committee of the Board of Directors or comparable body of independent directors of the Company, or if there are no independent directors, the Board of Directors, provided that the Board of Directors shall maintain written documentation which supports its determination that the transaction meets the requirements of clause (A) of this Section 3.2(c).

ARTICLE IV

ADDITIONAL AGREEMENTS

4.1

Purchase for Investment . Treasury acknowledges that the Preferred Shares have not been registered under the Securities Act or under any state securities laws. Treasury (a) is acquiring the Preferred Shares pursuant to an exemption from registration under the Securities Act solely for investment with no present intention to distribute them to any person in violation of the Securities Act or any applicable U.S. state securities laws, (b) will not sell or otherwise dispose of any of the Preferred Shares, except in compliance with the registration requirements or exemption provisions of the Securities Act and any applicable U.S. state securities laws, and (c) has such knowledge and experience in financial and business matters and in investments of this type that it is capable of evaluating the merits and risks of the Purchase and of making an informed investment decision.

4.2

Legends . (a) Treasury agrees that all certificates or other instruments representing the Preferred Shares will bear a legend substantially to the following effect:

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.

THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS. EACH PURCHASER OF THE SECURITIES REPRESENTED BY THIS INSTRUMENT IS NOTIFIED THAT THE SELLER MAY BE RELYING ON THE

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EXEMPTION FROM SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER (THE “144A EXEMPTION”). IF ANY TRANSFEREE OF THE SECURITIES REPRESENTED BY THIS INSTRUMENT IS ADVISED BY THE TRANSFEROR THAT SUCH TRANSFEROR IS RELYING ON THE 144A EXEMPTION, SUCH TRANSFEREE BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2) AGREES THAT IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THE SECURITIES REPRESENTED BY THIS INSTRUMENT EXCEPT (A) PURSUANT TO A REGISTRATION STATEMENT WHICH IS THEN EFFECTIVE UNDER THE SECURITIES ACT, (B) FOR SO LONG AS THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO THE ISSUER OR (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.

THIS INSTRUMENT IS ISSUED SUBJECT TO THE RESTRICTIONS ON TRANSFER AND OTHER PROVISIONS OF A SECURITIES PURCHASE AGREEMENT BETWEEN THE ISSUER OF THESE SECURITIES AND TREASURY, A COPY OF WHICH IS ON FILE WITH THE ISSUER. THE SECURITIES REPRESENTED BY THIS INSTRUMENT MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH SAID AGREEMENT. ANY SALE OR OTHER TRANSFER NOT IN COMPLIANCE WITH SAID AGREEMENT WILL BE VOID.”

(b)

In the event that any Preferred Shares (i) become registered under the Securities Act or (ii) are eligible to be transferred without restriction in accordance with Rule 144 or another exemption from registration under the Securities Act (other than Rule 144A), the Company shall issue new certificates or other instruments representing such Preferred Shares, which shall not contain the applicable legends in Section 4.2(a) above; provided that Treasury surrenders to the Company the previously issued certificates or other instruments.

4.3

Transfer of Preferred Shares . Subject to compliance with applicable securities laws, Treasury shall be permitted to transfer, sell, assign or otherwise dispose of (“ Transfer ”) all or a portion of the Preferred Shares at any time, and the Company shall take all steps as may be reasonably requested by Treasury to facilitate the Transfer of the Preferred Shares, including without limitation, as set forth in Section 4.4, provided that Treasury shall not Transfer any Preferred Shares if such transfer would require the Company to be subject to the periodic reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “ Exchange Act ”) and the Company was not already subject to such requirements. In furtherance of the foregoing, the Company shall provide reasonable cooperation to facilitate any Transfers of the Preferred Shares, including, as is reasonable under the circumstances, by furnishing such information concerning the Company and its business as a proposed transferee may reasonably request and making management of the Company reasonably available to respond to questions

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of a proposed transferee in accordance with customary practice, subject in all cases to the proposed transferee agreeing to a customary confidentiality agreement.

4.4

Rule 144; Rule 144A; 4(1½) Transactions . (a) At all times after the Signing Date, the Company covenants that (1) it will, upon the request of Treasury or any subsequent holders of the Preferred Shares (“ Holders ”), use its reasonable best efforts to (x), to the extent any Holder is relying on Rule 144 under the Securities Act to sell any of the Preferred Shares, make “current public information” available, as provided in Section (c)(1) of Rule 144 (if the Company is a “Reporting Issuer” within the meaning of Rule 144) or in Section (c)(2) of Rule 144 (if the Company is a “Non-Reporting Issuer” within the meaning of Rule 144), in either case for such time period as necessary to permit sales pursuant to Rule 144, (y), to the extent any Holder is relying on the so-called “Section 4(1½)” exemption to sell any of its Preferred Shares, prepare and provide to such Holder such information, including the preparation of private offering memoranda or circulars or financial information, as the Holder may reasonably request to enable the sale of the Preferred Shares pursuant to such exemption, or (z) to the extent any Holder is relying on Rule 144A under the Securities Act to sell any of its Preferred Shares, prepare and provide to such Holder the information required pursuant to Rule 144A(d)(4), and (2) it will take such further action as any Holder may reasonably request from time to time to enable such Holder to sell Preferred Shares without registration under the Securities Act within the limitations of the exemptions provided by (i) the provisions of the Securities Act or any interpretations thereof or related thereto by the SEC, including transactions based on the so-called “Section 4(1½)” and other similar transactions, (ii) Rule 144 or 144A under the Securities Act, as such rules may be amended from time to time, or (iii) any similar rule or regulation hereafter adopted by the SEC; provided that the Company shall not be required to take any action described in this Section 4.4(a) that would cause the Company to become subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act if the Company was not subject to such requirements prior to taking such action. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements and, if not, the specifics thereof.

(b)

The Company agrees to indemnify Treasury, Treasury’s officials, officers, employees, agents, representatives and Affiliates, and each person, if any, that controls Treasury within the meaning of the Securities Act (each, an “ Indemnitee ”), against any and all losses, claims, damages, actions, liabilities, costs and expenses (including reasonable fees, expenses and disbursements of attorneys and other professionals incurred in connection with investigating, defending, settling, compromising or paying any such losses, claims, damages, actions, liabilities, costs and expenses), joint or several, arising out of or based upon any untrue statement or alleged untrue statement of material fact contained in any document or report provided by the Company pursuant to this Section 4.4 or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

(c)

If the indemnification provided for in Section 4.4(b) is unavailable to an Indemnitee with respect to any losses, claims, damages, actions, liabilities, costs or expenses referred to therein or is insufficient to hold the Indemnitee harmless as contemplated therein, then the Company, in lieu of indemnifying such Indemnitee, shall contribute to the amount paid or payable by such Indemnitee as a result of such losses, claims, damages, actions, liabilities, costs or expenses in such proportion as is appropriate to reflect the relative fault of the Indemnitee, on the one hand, and the Company, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, actions, liabilities, costs or expenses as well as any other relevant equitable considerations. The relative fault of the Company, on the one hand, and of the Indemnitee, on the other hand, shall be determined by reference to, among other factors, whether the untrue statement of a material fact or omission to state a material fact relates to information supplied by the Company or by the Indemnitee and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or

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omission; the Company and Treasury agree that it would not be just and equitable if contribution pursuant to this Section 4.4(c) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in Section 4.4(b). No Indemnitee guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from the Company if the Company was not guilty of such fraudulent misrepresentation.

4.5

Depositary Shares . Upon request by Treasury at any time following the Closing Date, the Company shall promptly enter into a depositary arrangement, pursuant to customary agreements reasonably satisfactory to Treasury and with a depositary reasonably acceptable to Treasury, pursuant to which the Preferred Shares may be deposited and depositary shares, each representing a fraction of a Preferred Share, as specified by Treasury, may be issued. From and after the execution of any such depositary arrangement, and the deposit of any Preferred Shares, as applicable, pursuant thereto, the depositary shares issued pursuant thereto shall be deemed “Preferred Shares” and, as applicable, “Registrable Securities” for purposes of this Agreement.

4.6

Expenses and Further Assurances . (a) Unless otherwise provided in this Agreement, each of the parties hereto will bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated under this Agreement, including fees and expenses of its own financial or other consultants, investment bankers, accountants and counsel.

(b)

The Company shall, at the Company’s sole cost and expense, (i) furnish to Treasury all instruments, documents and other agreements required to be furnished by the Company pursuant to the terms of this Agreement, including, without limitation, any documents required to be delivered pursuant to Section 4.4 above, or which are reasonably requested by Treasury in connection therewith; (ii) execute and deliver to Treasury such documents, instruments, certificates, assignments and other writings, and do such other acts necessary or desirable, to evidence, preserve and/or protect the Preferred Shares purchased by Treasury, as Treasury may reasonably require; and (iii) do and execute all and such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and purposes of this Agreement, as Treasury shall reasonably require from time to time.

ARTICLE V

MISCELLANEOUS

5.1

Termination . This Agreement shall terminate upon the earliest to occur of:

(a)

termination at any time prior to the Closing:

(i)

by either Treasury or the Company if the Closing shall not have occurred on or before the 30th calendar day following the date on which Treasury issued its preliminary approval of the Company’s application to participate in SBLF (the “ Closing Deadline ”); provided , however , that in the event the Closing has not occurred by the Closing Deadline, the parties will consult in good faith to determine whether to extend the term of this Agreement, it being understood that the parties shall be required to consult only until the fifth calendar day after the Closing Deadline and not be under any obligation to extend the term of this Agreement thereafter; provided , further , that the right to terminate this Agreement under this Section 5.1(a)(i) shall not be available to any party whose breach of any representation or warranty or failure to perform any obligation under this Agreement shall have caused or resulted in the failure of the Closing to occur on or prior to such date; or

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(ii)

by either Treasury or the Company in the event that any Governmental Entity shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other action shall have become final and nonappealable; or

(iii)

by the mutual written consent of Treasury and the Company; or

(b)

the date on which all of the Preferred Shares have been redeemed in whole; or

(c)

the date on which Treasury has transferred all of the Preferred Shares to third parties which are not Affiliates of Treasury.

In the event of termination of this Agreement as provided in this Section 5.1, this Agreement shall forthwith become void and there shall be no liability on the part of either party hereto except that nothing herein shall relieve either party from liability for any breach of this Agreement.

5.2

Survival .

(a)

This Agreement and all representations, warranties, covenants and agreements made herein shall survive the Closing without limitation.

(b)

The covenants set forth in Article III and Annex E and the agreements set forth in Article IV shall, to the extent such covenants do not explicitly terminate at such time as Treasury no longer owns any Preferred Shares, survive the termination of this Agreement pursuant to Section 5.1(c) without limitation until the date on which all of the Preferred Shares have been redeemed in whole.

(c)

The rights and remedies of Treasury with respect to the representations, warranties, covenants and obligations of the Company herein shall not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time by Treasury or any of its personnel or agents with respect to the accuracy or inaccuracy of, or compliance with, any such representation, warranty, covenant or obligation.

5.3

Amendment . No amendment of any provision of this Agreement will be effective unless made in writing and signed by an officer or a duly authorized representative of each party, except as set forth in Section 3.1(d)(v). No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative of any rights or remedies provided by law.

5.4

Waiver of Conditions . The conditions to each party’s obligation to consummate the Purchase are for the sole benefit of such party and may be waived by such party in whole or in part to the extent permitted by applicable law. No waiver will be effective unless it is in a writing signed by a duly authorized officer of the waiving party that makes express reference to the provision or provisions subject to such waiver.

5.5

Governing Law; Submission to Jurisdiction, etc . This Agreement and any claim, controversy or dispute arising under or related to this Agreement, the relationship of the parties, and/or the interpretation and enforcement of the rights and duties of the parties shall be enforced, governed, and construed in all respects (whether in contract or in tort) in accordance with the federal law of the United States if and to the extent such law is applicable, and otherwise in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State. Each of the

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parties hereto agrees (a) to submit to the exclusive jurisdiction and venue of the United States District Court for the District of Columbia and the United States Court of Federal Claims for any and all civil actions, suits or proceedings arising out of or relating to this Agreement or the Purchase contemplated hereby and (b) that notice may be served upon (i) the Company at the address and in the manner set forth for notices to the Company in Section 5.7 and (ii) Treasury at the address and in the manner set forth for notices to the Company in Section 5.7, but otherwise in accordance with federal law. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY CIVIL LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE PURCHASE CONTEMPLATED HEREBY.

5.6

No Relationship to TARP . The parties acknowledge and agree that (i) the SBLF program is separate and distinct from the Troubled Asset Relief Program established by the Emergency Economic Stabilization Act of 2008; and (ii) the Company shall not, by virtue of the investment contemplated hereby, be considered a recipient under the Troubled Asset Relief Program.

5.7

Notices . Any notice, request, instruction or other document to be given hereunder by any party to the other will be in writing and will be deemed to have been duly given (a) on the date of delivery if delivered personally, or by facsimile, upon confirmation of receipt, or (b) on the second business day following the date of dispatch if delivered by a recognized next day courier service. All notices to the Company shall be delivered as set forth on the cover page of this Agreement, or pursuant to such other instruction as may be designated in writing by the Company to Treasury. All notices to Treasury shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by Treasury to the Company.

If to Treasury:

United States Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Attention: Small Business Lending Fund, Office of Domestic Finance

E-mail: SBLFComplSubmissions@treasury.gov

5.8

Assignment . Neither this Agreement nor any right, remedy, obligation nor liability arising hereunder or by reason hereof shall be assignable by any party hereto without the prior written consent of the other party, and any attempt to assign any right, remedy, obligation or liability hereunder without such consent shall be void, except (a) an assignment, in the case of a merger, consolidation, statutory share exchange or similar transaction that requires the approval of the Company’s stockholders (a “ Business Combination ”) where such party is not the surviving entity, or a sale of substantially all of its assets, to the entity which is the survivor of such Business Combination or the purchaser in such sale, (b) an assignment of certain rights as provided in Sections 3.1(c) or 3.1(h) or Annex E or (c) an assignment by Treasury of this Agreement to an Affiliate of Treasury; provided that if Treasury assigns this Agreement to an Affiliate, Treasury shall be relieved of its obligations under this Agreement but (i) all rights, remedies and obligations of Treasury hereunder shall continue and be enforceable by such Affiliate, (ii) the Company’s obligations and liabilities hereunder shall continue to be outstanding and (iii) all references to Treasury herein shall be deemed to be references to such Affiliate.

5.9

Severability . If any provision of this Agreement, or the application thereof to any person or circumstance, is determined by a court of competent jurisdiction to be invalid, void or unenforceable,

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the remaining provisions hereof, or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties.

5.10

No Third Party Beneficiaries . Other than as expressly provided herein, nothing contained in this Agreement, expressed or implied, is intended to confer upon any person or entity other than the Company and Treasury (and any Indemnitee) any benefit, right or remedies.

5.11

Specific Performance . The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties shall be entitled (without the necessity of posting a bond) to specific performance of the terms hereof, this being in addition to any other remedies to which they are entitled at law or equity.

5.12

Interpretation . When a reference is made in this Agreement to “Articles” or “Sections” such reference shall be to an Article or Section of the Annex of this Agreement in which such reference is contained, unless otherwise indicated. When a reference is made in this Agreement to an “Annex”, such reference shall be to an Annex to this Agreement, unless otherwise indicated. The terms defined in the singular have a comparable meaning when used in the plural, and vice versa. References to “herein”, “hereof”, “hereunder” and the like refer to this Agreement as a whole and not to any particular section or provision, unless the context requires otherwise. The table of contents and headings contained in this Agreement are for reference purposes only and are not part of this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”. No rule of construction against the draftsperson shall be applied in connection with the interpretation or enforcement of this Agreement, as this Agreement is entered into between sophisticated parties advised by counsel. All references to “ $ ” or “ dollars ” mean the lawful currency of the United States of America. Except as expressly stated in this Agreement, all references to any statute, rule or regulation are to the statute, rule or regulation as amended, modified, supplemented or replaced from time to time (and, in the case of statutes, include any rules and regulations promulgated under the statute) and to any section of any statute, rule or regulation include any successor to the section. References to a “ business day ” shall mean any day except Saturday, Sunday and any day on which banking institutions in the State of New York or the District of Columbia generally are authorized or required by law or other governmental actions to close.

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ANNEX D

DISCLOSURE SCHEDULE

Part 2.2

Capitalization


Capital stock reserved for issuance in connection with securities or obligations giving the holder thereof the right to acquire such capital:	The Company has the following shares of common stock authorized and reserved for issuance pursuant to the following plans: 2000 Stock Incentive Plan: No future grants from this plan; 2,750 shares subject to currently outstanding options 2002 Stock Incentive Plan: 426,260 shares available for future grants, and 712,907 shares subject to currently outstanding options 2011 Long-Term Incentive Plan: 500,000 shares available for future grants, and no shares subject to outstanding grants.
Shares issued since the Capitalization Date upon exercise of options or pursuant to equity-based awards, warrants, or convertible securities:	10,500 (option exercises)
All other shares issued since the Capitalization Date:	1,542 (Director Deferred Stock Plan)
Holders of 5% or more of any class of capital stock	None

If the Company is a Bank Holding Company or Savings and Loan Holding Company, complete the following (leave blank otherwise):
Name of IDI Subsidiary	Percentage of IDI Subsidiary’s capital stock owned by the Company
NICOLET NATIONAL BANK	100%

Annex D (Disclosure Schedule)

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Part 2.13

Compliance With Laws

List any exceptions to the representation and warranty in the second sentence of Section 2.13 of the General Terms and Conditions. If none, please so indicate by checking the box: X .

List any exceptions to the representation and warranty in the last sentence of Section 2.13 of the General Terms and Conditions. If none, please so indicate by checking the box: X .

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Part 2.19

Regulatory Agreements

List any exceptions to the representation and warranty in Section 2.19 of the General Terms and Conditions. If none, please so indicate by checking the box: ☐.

Pursuant to a letter issued to Nicolet National Bank (the “Bank”) by the Office of the Comptroller of the Currency in November 2002, the Bank is required to maintain an 8% Tier 1 leverage ratio.

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Part 2.25

Related Party Transactions

List any exceptions to the representation and warranty in Section 2.25 of the General Terms and Conditions. If none, please so indicate by checking the box: X

Annex D (Disclosure Schedule)

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ANNEX E

REGISTRATION RIGHTS

Definitions . Terms not defined in this Annex shall have the meaning ascribed to such terms in the Agreement. As used in this Annex E , the following terms shall have the following respective meanings:

(a)

“ Holder ” means Treasury and any other holder of Registrable Securities to whom the registration rights conferred by this Agreement have been transferred in compliance with Section 9 of this Annex E .

(b)

“ Holders’ Counsel ” means one counsel for the selling Holders chosen by Holders holding a majority interest in the Registrable Securities being registered.

(c)

“ Pending Underwritten Offering ” means, with respect to any Holder forfeiting its rights pursuant to Section 11 of this Annex E , any underwritten offering of Registrable Securities in which such Holder has advised the Company of its intent to register its Registrable Securities either pursuant to Section 2(b) or 2(d) of this Annex E prior to the date of such Holder’s forfeiture.

(d)

“ Register ”, “ registered ”, and “ registration ” shall refer to a registration effected by preparing and (A) filing a registration statement or amendment thereto in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of effectiveness of such registration statement or amendment thereto or (B) filing a prospectus and/or prospectus supplement in respect of an appropriate effective registration statement on Form S-3.

(e)

“ Registrable Securities ” means (A) all Preferred Shares and (B) any equity securities issued or issuable directly or indirectly with respect to the securities referred to in the foregoing clause (A) by way of conversion, exercise or exchange thereof, or share dividend or share split or in connection with a combination of shares, recapitalization, reclassification, merger, amalgamation, arrangement, consolidation or other reorganization, provided that, once issued, such securities will not be Registrable Securities when (1) they are sold pursuant to an effective registration statement under the Securities Act, (2) they shall have ceased to be outstanding or (3) they have been sold in any transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of the securities. No Registrable Securities may be registered under more than one registration statement at any one time.

(f)

“ Registration Expenses ” mean all expenses incurred by the Company in effecting any registration pursuant to this Agreement (whether or not any registration or prospectus becomes effective or final) or otherwise complying with its obligations under this Annex E , including all registration, filing and listing fees, printing expenses, fees and disbursements of counsel for the Company, blue sky fees and expenses, expenses incurred in connection with any “road show”, the reasonable fees and disbursements of Holders’ Counsel, and expenses of the Company’s independent accountants in connection with any regular or special reviews or audits incident to or required by any such registration, but shall not include Selling Expenses.

(g)

“ Rule 144 ”, “ Rule 144A ”, “ Rule 159A ”, “ Rule 405 ” and “ Rule 415 ” mean, in each case, such rule promulgated under the Securities Act (or any successor provision), as the same shall be amended from time to time.

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(h)

“ Selling Expenses ” mean all discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities and fees and disbursements of counsel for any Holder (other than the fees and disbursements of Holders’ Counsel included in Registration Expenses).

(i)

“ Special Registration ” means the registration of (A) equity securities and/or options or other rights in respect thereof solely registered on Form S-4 or Form S-8 (or successor form) or (B) shares of equity securities and/or options or other rights in respect thereof to be offered to directors, members of management, employees, consultants, customers, lenders or vendors of the Company or Company Subsidiaries or in connection with dividend reinvestment plans.

Registration .

(a)

The Company covenants and agrees that as promptly as practicable after the date that the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act (and in any event no later than 30 days thereafter), the Company shall prepare and file with the SEC a Shelf Registration Statement covering all Registrable Securities (or otherwise designate an existing shelf registration on an appropriate form under Rule 415 under the Securities Act (a “ Shelf Registration Statement ”) filed with the SEC to cover the Registrable Securities), and, to the extent the Shelf Registration Statement has not theretofore been declared effective or is not automatically effective upon such filing, the Company shall use reasonable best efforts to cause such Shelf Registration Statement to be declared or become effective and to keep such Shelf Registration Statement continuously effective and in compliance with the Securities Act and usable for resale of such Registrable Securities for a period from the date of its initial effectiveness until such time as there are no Registrable Securities remaining (including by refiling such Shelf Registration Statement (or a new Shelf Registration Statement) if the initial Shelf Registration Statement expires). Notwithstanding the foregoing, if the Company is not eligible to file a registration statement on Form S-3, then the Company shall not be obligated to file a Shelf Registration Statement unless and until requested to do so in writing by Treasury.

(b)

Any registration pursuant to Section 2(a) of this Annex E shall be effected by means of a Shelf Registration Statement on an appropriate form under Rule 415 under the Securities Act (a “ Shelf Registration Statement ”). If any Holder intends to distribute any Registrable Securities by means of an underwritten offering it shall promptly so advise the Company and the Company shall take all reasonable steps to facilitate such distribution, including the actions required pursuant to Section 2(d) of this Annex E ; provided that the Company shall not be required to facilitate an underwritten offering of Registrable Securities unless (i) the expected gross proceeds from such offering exceed $200,000 or (ii) such underwritten offering includes all of the outstanding Registrable Securities held by such Holder. The lead underwriters in any such distribution shall be selected by the Holders of a majority of the Registrable Securities to be distributed.

(c)

The Company shall not be required to effect a registration (including a resale of Registrable Securities from an effective Shelf Registration Statement) or an underwritten offering pursuant to Section 2 of this Annex E : (A) with respect to securities that are not Registrable Securities; or (B) if the Company has notified all Holders that in the good faith judgment of the Board of Directors, it would be materially detrimental to the Company or its security holders for such registration or underwritten offering to be effected at such time, in which event the Company shall have the right to defer such registration for a period of not more than 45 days after receipt of the request of any Holder; provided that such right to delay a registration or underwritten offering shall be exercised by the Company (1) only if the Company has generally exercised (or is concurrently exercising) similar black-out rights against holders of similar securities that have registration rights and (2) not more than three times in any 12-month period and not more than 90 days in the aggregate in any 12-month period.

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(d)

If during any period when an effective Shelf Registration Statement is not available, the Company proposes to register any of its equity securities, other than a registration pursuant to Section 2(a) of this Annex E or a Special Registration, and the registration form to be filed may be used for the registration or qualification for distribution of Registrable Securities, the Company will give prompt written notice to all Holders of its intention to effect such a registration (but in no event less than ten days prior to the anticipated filing date) and will include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within ten business days after the date of the Company’s notice (a “ Piggyback Registration ”). Any such person that has made such a written request may withdraw its Registrable Securities from such Piggyback Registration by giving written notice to the Company and the managing underwriter, if any, on or before the fifth business day prior to the planned effective date of such Piggyback Registration. The Company may terminate or withdraw any registration under this Section 2(d) of this Annex E prior to the effectiveness of such registration, whether or not any Holders have elected to include Registrable Securities in such registration.

(e)

If the registration referred to in Section 2(d) of this Annex E is proposed to be underwritten, the Company will so advise all Holders as a part of the written notice given pursuant to Section 2(d) of this Annex E . In such event, the right of all Holders to registration pursuant to Section 2 of this Annex E will be conditioned upon such persons’ participation in such underwriting and the inclusion of such person’s Registrable Securities in the underwriting if such securities are of the same class of securities as the securities to be offered in the underwritten offering, and each such person will (together with the Company and the other persons distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company; provided that Treasury (as opposed to other Holders) shall not be required to indemnify any person in connection with any registration. If any participating person disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the Company, the managing underwriters and Treasury (if Treasury is participating in the underwriting).

(f)

If either (x) the Company grants “piggyback” registration rights to one or more third parties to include their securities in an underwritten offering under the Shelf Registration Statement pursuant to Section 2(b) of this Annex E or (y) a Piggyback Registration under Section 2(d) of this Annex E relates to an underwritten offering on behalf of the Company, and in either case the managing underwriters advise the Company that in their reasonable opinion the number of securities requested to be included in such offering exceeds the number which can be sold without adversely affecting the marketability of such offering (including an adverse effect on the per share offering price), the Company will include in such offering only such number of securities that in the reasonable opinion of such managing underwriters can be sold without adversely affecting the marketability of the offering (including an adverse effect on the per share offering price), which securities will be so included in the following order of priority: (A) first, in the case of a Piggyback Registration under Section 2(d) of this Annex E , the securities the Company proposes to sell, (B) then the Registrable Securities of all Holders who have requested inclusion of Registrable Securities pursuant to Section 2(b) or Section 2(d) of this Annex E , as applicable, pro rata on the basis of the aggregate number of such securities or shares owned by each such Holder and (C) lastly, any other securities of the Company that have been requested to be so included, subject to the terms of this Agreement; provided , however , that if the Company has, prior to the Signing Date, entered into an agreement with respect to its securities that is inconsistent with the order of priority contemplated hereby then it shall apply the order of priority in such conflicting agreement to the extent that it would otherwise result in a breach under such agreement.

Expenses of Registration . All Registration Expenses incurred in connection with any registration, qualification or compliance hereunder shall be borne by the Company. All Selling Expenses

Annex E (Registration Rights)

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incurred in connection with any registrations hereunder shall be borne by the holders of the securities so registered pro rata on the basis of the aggregate offering or sale price of the securities so registered.

Obligations of the Company . Whenever required to effect the registration of any Registrable Securities or facilitate the distribution of Registrable Securities pursuant to an effective Shelf Registration Statement, the Company shall, as expeditiously as reasonably practicable:

(a)

Prepare and file with the SEC a prospectus supplement or post-effective amendment with respect to a proposed offering of Registrable Securities pursuant to an effective registration statement, subject to Section 4 of this Annex E , keep such registration statement effective and keep such prospectus supplement current until the securities described therein are no longer Registrable Securities.

(b)

Prepare and file with the SEC such amendments and supplements to the applicable registration statement and the prospectus or prospectus supplement used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement.

(c)

Furnish to the Holders and any underwriters such number of copies of the applicable registration statement and each such amendment and supplement thereto (including in each case all exhibits) and of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned or to be distributed by them.

(d)

Use its reasonable best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders or any managing underwriter(s), to keep such registration or qualification in effect for so long as such registration statement remains in effect, and to take any other action which may be reasonably necessary to enable such seller to consummate the disposition in such jurisdictions of the securities owned by such Holder; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.

(e)

Notify each Holder of Registrable Securities at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the applicable prospectus, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing.

(f)

Give written notice to the Holders:

(i)

when any registration statement or any amendment thereto has been filed with the SEC (except for any amendment effected by the filing of a document with the SEC pursuant to the Exchange Act) and when such registration statement or any post-effective amendment thereto has become effective;

(ii)

of any request by the SEC for amendments or supplements to any registration statement or the prospectus included therein or for additional information;

(iii)

of the issuance by the SEC of any stop order suspending the effectiveness of any registration statement or the initiation of any proceedings for that purpose;

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(iv)

of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the applicable Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose;

(v)

of the happening of any event that requires the Company to make changes in any effective registration statement or the prospectus related to the registration statement in order to make the statements therein not misleading (which notice shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made); and

(vi)

if at any time the representations and warranties of the Company contained in any underwriting agreement contemplated by Section 4(j) of this Annex E cease to be true and correct.

(g)

Use its reasonable best efforts to prevent the issuance or obtain the withdrawal of any order suspending the effectiveness of any registration statement referred to in Section 4(f)(iii) of this Annex E at the earliest practicable time.

(h)

Upon the occurrence of any event contemplated by Section 4(e) or 4(f)(v) of this Annex E , promptly prepare a post-effective amendment to such registration statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to the Holders and any underwriters, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Holders in accordance with Section 4(f)(v) to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Holders and any underwriters shall suspend use of such prospectus and use their reasonable best efforts to return to the Company all copies of such prospectus (at the Company’s expense) other than permanent file copies then in such Holders’ or underwriters’ possession. The total number of days that any such suspension may be in effect in any 12-month period shall not exceed 90 days.

(i)

Use reasonable best efforts to procure the cooperation of the Company’s transfer agent in settling any offering or sale of Registrable Securities, including with respect to the transfer of physical stock certificates into book-entry form in accordance with any procedures reasonably requested by the Holders or any managing underwriter(s).

(j)

If an underwritten offering is requested pursuant to Section 2(b) of this Annex E , enter into an underwriting agreement in customary form, scope and substance and take all such other actions reasonably requested by the Holders of a majority of the Registrable Securities being sold in connection therewith or by the managing underwriter(s), if any, to expedite or facilitate the underwritten disposition of such Registrable Securities, and in connection therewith in any underwritten offering (including making members of management and executives of the Company available to participate in “road shows”, similar sales events and other marketing activities), (A) make such representations and warranties to the Holders that are selling stockholders and the managing underwriter(s), if any, with respect to the business of the Company and its subsidiaries, and the Shelf Registration Statement, prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in customary form, substance and scope, and, if true, confirm the same if and when requested, (B) use its reasonable best efforts to furnish the underwriters with opinions of counsel to the Company, addressed to the managing underwriter(s), if any, covering the matters customarily covered in such opinions requested in underwritten offerings, (C) use its reasonable best efforts to obtain “cold comfort” letters from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any business acquired by the Company for which financial statements and financial data are included in the Shelf Registration Statement) who have certified the

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financial statements included in such Shelf Registration Statement, addressed to each of the managing underwriter(s), if any, such letters to be in customary form and covering matters of the type customarily covered in “cold comfort” letters, (D) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures customary in underwritten offerings ( provided that Treasury shall not be obligated to provide any indemnity), and (E) deliver such documents and certificates as may be reasonably requested by the Holders of a majority of the Registrable Securities being sold in connection therewith, their counsel and the managing underwriter(s), if any, to evidence the continued validity of the representations and warranties made pursuant to clause (A) above and to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company.

(k)

Make available for inspection by a representative of Holders that are selling stockholders, the managing underwriter(s), if any, and any attorneys or accountants retained by such Holders or managing underwriter(s), at the offices where normally kept, during reasonable business hours, financial and other records, pertinent corporate documents and properties of the Company, and cause the officers, directors and employees of the Company to supply all information in each case reasonably requested (and of the type customarily provided in connection with due diligence conducted in connection with a registered public offering of securities) by any such representative, managing underwriter(s), attorney or accountant in connection with such Shelf Registration Statement.

(l)

Use reasonable best efforts to cause all such Registrable Securities to be listed on each national securities exchange on which similar securities issued by the Company are then listed or, if no similar securities issued by the Company are then listed on any national securities exchange, use its reasonable best efforts to cause all such Registrable Securities to be listed on such securities exchange as Treasury may designate.

(m)

If requested by Holders of a majority of the Registrable Securities being registered and/or sold in connection therewith, or the managing underwriter(s), if any, promptly include in a prospectus supplement or amendment such information as the Holders of a majority of the Registrable Securities being registered and/or sold in connection therewith or managing underwriter(s), if any, may reasonably request in order to permit the intended method of distribution of such securities and make all required filings of such prospectus supplement or such amendment as soon as practicable after the Company has received such request.

(n)

Timely provide to its security holders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.

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Suspension of Sales . Upon receipt of written notice from the Company that a registration statement, prospectus or prospectus supplement contains or may contain an untrue statement of a material fact or omits or may omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that circumstances exist that make inadvisable use of such registration statement, prospectus or prospectus supplement, each Holder of Registrable Securities shall forthwith discontinue disposition of Registrable Securities until such Holder has received copies of a supplemented or amended prospectus or prospectus supplement, or until such Holder is advised in writing by the Company that the use of the prospectus and, if applicable, prospectus supplement may be resumed, and, if so directed by the Company, such Holder shall deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in such Holder’s possession, of the prospectus and, if applicable, prospectus supplement covering such Registrable Securities current at the time of receipt of such notice. The total number of days that any such suspension may be in effect in any 12-month period shall not exceed 90 days.

Termination of Registration Rights . A Holder’s registration rights as to any securities held by such Holder (and its Affiliates, partners, members and former members) shall not be available unless such securities are Registrable Securities.

Furnishing Information .

(a)

No Holder shall use any free writing prospectus (as defined in Rule 405) in connection with the sale of Registrable Securities without the prior written consent of the Company.

(b)

It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 4 of this Annex E that the selling Holders and the underwriters, if any, shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be required to effect the registered offering of their Registrable Securities.

Indemnification .

(a)

The Company agrees to indemnify each Holder and, if a Holder is a person other than an individual, such Holder’s officers, directors, employees, agents, representatives and Affiliates, and in the case of Treasury, Treasury’s officials, and each person, if any, that controls a Holder within the meaning of the Securities Act (each, an “ Indemnitee ”), against any and all losses, claims, damages, actions, liabilities, costs and expenses (including reasonable fees, expenses and disbursements of attorneys and other professionals incurred in connection with investigating, defending, settling, compromising or paying any such losses, claims, damages, actions, liabilities, costs and expenses), joint or several, arising out of or based upon any untrue statement or alleged untrue statement of material fact contained in any registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto or any documents incorporated therein by reference or contained in any free writing prospectus (as such term is defined in Rule 405) prepared by the Company or authorized by it in writing for use by such Holder (or any amendment or supplement thereto); or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided , that the Company shall not be liable to such Indemnitee in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon (A) an untrue statement or omission made in such registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto or contained in any free writing prospectus (as such term is defined in Rule 405) prepared by the Company or authorized by it in writing for use by such Holder (or any amendment or

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supplement thereto), in reliance upon and in conformity with information regarding such Indemnitee or its plan of distribution or ownership interests which was furnished in writing to the Company by such Indemnitee for use in connection with such registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto, or (B) offers or sales effected by or on behalf of such Indemnitee “by means of” (as defined in Rule 159A) a “free writing prospectus” (as defined in Rule 405) that was not authorized in writing by the Company.

(b)

If the indemnification provided for in Section 8(a) of this Annex E is unavailable to an Indemnitee with respect to any losses, claims, damages, actions, liabilities, costs or expenses referred to therein or is insufficient to hold the Indemnitee harmless as contemplated therein, then the Company, in lieu of indemnifying such Indemnitee, shall contribute to the amount paid or payable by such Indemnitee as a result of such losses, claims, damages, actions, liabilities, costs or expenses in such proportion as is appropriate to reflect the relative fault of the Indemnitee, on the one hand, and the Company, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, actions, liabilities, costs or expenses as well as any other relevant equitable considerations. The relative fault of the Company, on the one hand, and of the Indemnitee, on the other hand, shall be determined by reference to, among other factors, whether the untrue statement of a material fact or omission to state a material fact relates to information supplied by the Company or by the Indemnitee and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; the Company and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 8(b) of this Annex E were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in Section 8(a) of this Annex E . No Indemnitee guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from the Company if the Company was not guilty of such fraudulent misrepresentation.

Assignment of Registration Rights . The rights of Treasury to registration of Registrable Securities pursuant to Section 2 of this Annex E may be assigned by Treasury to a transferee or assignee of Registrable Securities; provided , however , the transferor shall, within ten days after such transfer, furnish to the Company written notice of the name and address of such transferee or assignee and the number and type of Registrable Securities that are being assigned.

10.

Clear Market . With respect to any underwritten offering of Registrable Securities by Holders pursuant to this Annex E , the Company agrees not to effect (other than pursuant to such registration or pursuant to a Special Registration) any public sale or distribution, or to file any Shelf Registration Statement (other than such registration or a Special Registration) covering any preferred stock of the Company or any securities convertible into or exchangeable or exercisable for preferred stock of the Company, during the period not to exceed ten days prior and 60 days following the effective date of such offering or such longer period up to 90 days as may be requested by the managing underwriter for such underwritten offering. The Company also agrees to cause such of its directors and senior executive officers to execute and deliver customary lock-up agreements in such form and for such time period up to 90 days as may be requested by the managing underwriter.

11.

Forfeiture of Rights . At any time, any holder of Registrable Securities (including any Holder) may elect to forfeit its rights set forth in this Annex E from that date forward; provided , that a Holder forfeiting such rights shall nonetheless be entitled to participate under Section 2(d) – (f) of this Annex E in any Pending Underwritten Offering to the same extent that such Holder would have been entitled to if the Holder had not withdrawn; and provided , further , that no such forfeiture shall terminate a Holder’s rights or obligations under Section 7 of this Annex E with respect to any prior registration or Pending Underwritten Offering.

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12.

Specific Performance . The parties hereto acknowledge that there would be no adequate remedy at law if the Company fails to perform any of its obligations under this Annex E and that Holders from time to time may be irreparably harmed by any such failure, and accordingly agree that such Holders, in addition to any other remedy to which they may be entitled at law or in equity, to the fullest extent permitted and enforceable under applicable law shall be entitled to compel specific performance of the obligations of the Company under this Annex E in accordance with the terms and conditions of this Annex E .

13.

No Inconsistent Agreements . The Company shall not, on or after the Signing Date, enter into any agreement with respect to its securities that may impair the rights granted to Holders under this Annex E or that otherwise conflicts with the provisions hereof in any manner that may impair the rights granted to Holders under this Annex E . In the event the Company has, prior to the Signing Date, entered into any agreement with respect to its securities that is inconsistent with the rights granted to Holders under this Annex E (including agreements that are inconsistent with the order of priority contemplated by Section 2(f) of Annex E ) or that may otherwise conflict with the provisions hereof, the Company shall use its reasonable best efforts to amend such agreements to ensure they are consistent with the provisions of this Annex E .

14.

Certain Offerings by Treasury . An “underwritten” offering or other disposition shall include any distribution of such securities on behalf of Treasury by one or more broker-dealers, an “underwriting agreement” shall include any purchase agreement entered into by such broker-dealers, and any “registration statement” or “prospectus” shall include any offering document approved by the Company and used in connection with such distribution.

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ANNEX F

FORM OF CERTIFICATE OF DESIGNATION

[SEE ATTACHED]

Annex F (Form of Certificate of Designations)

Page 1

ANNEX G

FORM OF OFFICER’S CERTIFICATE

OFFICER’S CERTIFICATE

OF

[COMPANY]

In connection with that certain Securities Purchase Agreement, dated [ ____________ ] , 2011 (the “ Agreement ”) by and between [ COMPANY ] (the “ Company ”) and the Secretary of the Treasury, the undersigned does hereby certify as follows:

I am a duly elected/appointed [ ____________ ] of the Company.

Attached as Exhibit A hereto is a true, complete and correct copy of the articles of incorporation, articles of association, or similar organizational document of the Company and any amendments thereto as presently on file with the [Secretary of State] of the State of [State].

Attached as Exhibit B hereto is a true, complete and correct copy of the by-laws of the Company as presently in effect.

Attached as Exhibit C hereto is a true, complete and correct copy of resolutions adopted [at a duly convened meeting at which a quorum was present and acting /by unanimous written consent] of the Board of Directors of the Company (the “ Board ”). Such resolutions are now in full force and effect and have not been modified, amended or revoked and are the only resolutions of the Board relating to the Agreement.

Attached as Exhibit D hereto is a true, complete and correct copy of the resolutions adopted [at a duly convened meeting at which a quorum was present and acting /by unanimous written consent] of the [shareholders] of the Company (the “ [Shareholders] ”). Such resolutions are now in full force and effect and have not been modified, amended or revoked and are the only resolutions of the [Shareholders] relating to the Agreement. –OR- Shareholder consent is not required in connection with the execution, delivery and performance of the Agreement by the Company.

Attached as Exhibit E is a true, complete and correct copy of the Certificate of Designation, which has been filed with, and accepted by, the Secretary of State of the State of [ ___________ ] .

The representations and warranties of the Company set forth in Article II of Annex C of the Agreement are true and correct in all respects as though as of the date hereof (other than representations and warranties that by their terms speak as of another date, which representations and warranties shall be true and correct in all respects as of such other date) and the Company has performed in all material respects all obligations required to be performed by it under the Agreement.

The foregoing certifications are made and delivered as of [ ________ _] pursuant to Section 1.3 of Annex C of the Agreement.

Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Agreement.

[SIGNATURE PAGE FOLLOWS]

Annex G (Form of Officer’s Certificate)

Page 1

IN WITNESS WHEREOF, this Officer’s Certificate has been duly executed and delivered as of the [ __ ] day of [ __________ ] , 2011.

[COMPANY]

By:________________________________

Name:
Title:

Annex G (Form of Officer’s Certificate)

Page 2

EXHIBIT A

Annex G (Form of Officer’s Certificate)

Page 3

EXHIBIT B

Annex G (Form of Officer’s Certificate)

Page 4

EXHIBIT C

Annex G (Form of Officer’s Certificate)

Page 5

EXHIBIT D

Annex G (Form of Officer’s Certificate)

Page 6

EXHIBIT E

Annex G (Form of Officer’s Certificate)

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ANNEX H

FORM OF SUPPLEMENTAL REPORTS

[SEE ATTACHED FORM OF INITIAL SUPPLEMENTAL REPORT]

Annex H (Form of Supplemental Reports)

Page 1

[SEE ATTACHED FORM OF QUARTERLY SUPPLEMENTAL REPORT]

Annex H (Form of Supplemental Reports)

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ANNEX I

FORM OF ANNUAL CERTIFICATION

ANNUAL CERTIFICATION

OF

[ COMPANY ]

In connection with that certain Securities Purchase Agreement, dated [ ___________ _] , 2011 (the “ Agreement ”) by and between [ COMPANY ] (the “ Company ”) and the Secretary of the Treasury (“ Treasury ”), the undersigned does hereby certify as follows:

I am a duly elected/appointed [ ____________ ] of the Company.

For each loan originated by the Company or any of its Affiliates that was funded in whole or in part using funds from the Purchase Price, the Company has obtained from the business to which it made such loan a written certification that no principal of such business has been convicted of a sex offense against a minor (as such terms are defined in section 111 of the Sex Offender Registration and Notification Act, 42 U.S.C. §16911). The Company shall retain all such certifications in accordance with standard recordkeeping practices established by the Appropriate Federal Banking Agency.

The Company is in compliance with the requirements of Section 103.121 of title 31, Code of Federal Regulations.

The foregoing certifications are made and delivered as of [ _________ ] pursuant to Section 3.1(d)(iii) of Annex C of the Agreement.

Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Agreement.

[SIGNATURE PAGE FOLLOWS]

Annex I (Form of Annual Certification)

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IN WITNESS WHEREOF, this Certificate has been duly executed and delivered as of the [ __ ] day of [ __________ ] , 20 [ __ ] .

[COMPANY]

By:________________________________

Name:
Title:

Annex I (Form of Annual Certification)

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ANNEX J

FORM OF OPINION

Secretary of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Attention: Small Business Lending Fund, Office of Domestic Finance

Re:

[Institution Name]

[SBLF Identification No.]

Ladies and/or Gentlemen:

We have acted as counsel for [insert Institution Name] (the “Company”) in connection with the sale and issuance of [insert number] shares of [Senior] Non-Cumulative Perpetual Preferred Stock, Series [___] (the “Preferred Shares”) to the Secretary of the Treasury (the “Treasury”) pursuant to and in accordance with the terms of that certain Small Business Lending Fund - Securities Purchase Agreement, dated [____________, 2011] (the “Agreement”). This letter is rendered to you pursuant to Section 1.3(f) of the Agreement and Annex J attached thereto. Unless otherwise defined herein, capitalized terms used herein shall have the meaning set forth in the Agreement.

(a)

The Company has been duly formed and is validly existing as a [TYPE OF ORGANIZATION] and is in good standing under the laws of the jurisdiction of its organization. The Company has all necessary power and authority to own, operate and lease its properties and to carry on its business as it is being conducted.

(b)

The Company has been duly qualified as a foreign entity for the transaction of business and is in good standing under the laws of [_ ____________ ] , [ ____________ _] and [ ____________ _] .

(c)

The Preferred Shares have been duly and validly authorized, and, when issued and delivered pursuant to the Agreement, the Preferred Shares will be duly and validly issued and fully paid and non-assessable, will not be issued in violation of any preemptive rights, and will rank pari passu with or senior to all other series or classes of designated preferred stock authorized on the Closing Date with respect to the payment of dividends and the distribution of assets in the event of any dissolution, liquidation or winding up of the Company.

(d)

The Company has the corporate power and authority to execute and deliver the Agreement and to carry out its obligations thereunder (which includes the issuance of the Preferred Shares).

(e)

The execution, delivery and performance by the Company of the Agreement and the consummation of the transactions contemplated thereby have been duly authorized by all necessary corporate action on the part of the Company and its stockholders, and no further approval or authorization is required on the part of the Company, including, without limitation, by any rule or requirement of any national stock exchange.

(f)

The Agreement is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of

Annex J (Form of Opinion)

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creditors’ rights generally and general equitable principles, regardless of whether such enforceability is considered in a proceeding at law or in equity.

(g)

The execution and delivery by the Company of this Agreement and the performance by the Company of its obligations thereunder (i) do not require any approval by any Governmental Entity to be obtained on the part of the Company, except those that have been obtained, (ii) do not violate or conflict with any provision of the Charter, (iii) do not violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration of, or result in the creation of, any lien, security interest, charge or encumbrance upon any of the properties or assets of the Company or any Company Subsidiary under any of the terms, conditions or provisions of its organizational documents or under any agreement, contract, indenture, lease, mortgage, power of attorney, evidence of indebtedness, letter of credit, license, instrument, obligation, purchase or sales order, or other commitment, whether oral or written, to which it is a party or by which it or any of its properties is bound or (iv) do not conflict with, breach or result in a violation of, or default under any judgment, decree or order known to us that is applicable to the Company and, pursuant to any applicable laws, is issued by any Governmental Entity having jurisdiction over the Company.

(h)

Other than the filing of the Certificate of Designation with the [Secretary of State] of its jurisdiction of organization or other applicable Governmental Entity, such filings and approvals as are required to be made or obtained under any state “blue sky” laws and such consents and approvals that have been made or obtained, no notice to, filing with, exemption or review by, or authorization, consent or approval of, any Governmental Entity is required to be made or obtained by the Company in connection with the consummation by the Company of the Purchase.

Annex J (Form of Opinion)

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ANNEX K

FORM OF REPAYMENT DOCUMENT

UNITED STATES DEPARTMENT OF THE TREASURY
1500 PENNSYLVANIA AVENUE, NW
WASHINGTON, D.C. 20220

Dear Ladies and Gentlemen:

Reference is made to that certain Letter Agreement incorporating the Securities Purchase Agreement – Standard Terms (the “ Securities Purchase Agreement ”), dated as of the date set forth on Schedule A hereto, between the United States Department of the Treasury (the “ Investor ”) and the company set forth on Schedule A hereto (the “ Company ”). Capitalized terms used but not defined herein shall have the meanings assigned to them in the Securities Purchase Agreement. Pursuant to the Securities Purchase Agreement, at the Closing, the Company issued to the Investor the number of shares of the series of its preferred stock set forth on Schedule A hereto (the “ Preferred Shares ”) and a warrant (the “ Warrant ”) to purchase the number of shares of [ To be included for private issuers: the series of its preferred stock set forth on Schedule A hereto (such shares, the “ Warrant Shares ”), which was exercised by the Investor at Closing. ] [ To be included for public issuers: its common stock set forth on Schedule A hereto. ]

In connection with the consummation of the repurchase (the “ Repurchase ”) by the Company from the Investor, on the date hereof, of the number of Preferred Shares listed on Schedule A hereto (the “ Repurchased Preferred Shares ”) [ To be included for private issuers who are repurchasing some or all of the Warrant Shares: and the number of Warrant Shares listed on Schedule A hereto (the “ Repurchased Warrant Shares ”) ] , as permitted by the Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act of 2009:

(a)

The Company hereby acknowledges receipt from the Investor of the share certificate(s) set forth on Schedule A hereto representing the Preferred Shares; [and]

(b)

The Investor hereby acknowledges receipt from the Company of a wire transfer for the account of the Investor in immediately available funds of the aggregate purchase price set forth on Schedule A hereto, representing payment in full for the Repurchased Preferred Shares at a price per share equal to the Liquidation Amount per share, together with any accrued and unpaid dividends to, but excluding, the date hereof;

[ Paragraphs (c) and (d) to be included for private issuers who are repurchasing some or all of the Warrant Shares: (c) The Company hereby acknowledges receipt from the Investor of the share certificate(s) set forth on Schedule A hereto representing the Warrant Shares; [and]

(d)

The Investor hereby acknowledges receipt from the Company of a wire transfer for the account of the Investor in immediately available funds of the aggregate purchase price set forth on Schedule A hereto, representing payment in full for the Repurchased Warrant Shares at a price per share equal to the Liquidation Amount per share, together with any accrued and unpaid dividends to, but excluding, the date hereof [; and] ]

[ Paragraph (e) to be included for private issuers who are repurchasing less than all of the Warrant Shares: (e) The Investor hereby acknowledges receipt from the Company of a share certificate for the number of Warrant Shares set forth on Schedule A hereto, equal to the

Annex K (Form of Repurchase Document)

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difference between the Warrant Shares represented by the certificate referenced in clause (c) above and the Repurchased Warrant Shares.]

[ To be included for public issuers: The Investor and the Company hereby agree that, notwithstanding Section 4.4 of the Securities Purchase Agreement, immediately following consummation of the Repurchase, but subject to compliance with applicable securities laws, the Investor shall be permitted to Transfer all or a portion of the Warrant with respect to, and/or exercise the Warrant for, all or a portion of the number of shares of Common Stock issuable thereunder, at any time and without limitation, and Section 4.4 of the Securities Purchase Agreement shall be deemed to be amended in order to permit the foregoing. The Company shall take all steps as may be reasonably requested by the Investor to facilitate any such Transfer.

In addition, the Company agrees that in the event it elects to repurchase the Warrant, it shall deliver to the Investor within 15 calendar days of the date hereof a notice of intent to repurchase the Warrant, which notice shall be in accordance with Section 4.9(b) of the Securities Purchase Agreement (the “ Warrant Repurchase Notice ”). In the event the Company does not deliver the Warrant Repurchase Notice to the Investor within 15 calendar days of the date hereof, the Investor hereby provides notice, pursuant to Section 4.5(p) of the Securities Purchase Agreement, of its intention to sell the Warrant, such notice to be effective as of the first day following the end of such 15-day period.

In the event that the Company delivers a Warrant Repurchase Notice and the Company and the Investor fail to agree on the Fair Market Value of the Warrant pursuant to the procedures (including the Appraisal Procedure), and in accordance with the time periods, set forth in Section 4.9(c) of the Securities Purchase Agreement or the Company revokes the delivery of such Warrant Repurchase Notice, then the Investor hereby provides notice of its intention to sell the Warrant. ]

This letter agreement will be governed by and construed in accordance with the federal law of the United States if and to the extent such law is applicable, and otherwise in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.

This letter agreement may be executed in any number of separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement. Executed signature pages to this letter agreement may be delivered by facsimile and such facsimiles will be deemed sufficient as if actual signature pages had been delivered

[ Remainder of this page intentionally left blank ]

Annex K (Form of Repurchase Document)

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In witness whereof, the parties have duly executed this letter agreement as of the date first written above.

UNITED STATES DEPARTMENT OF THE TREASURY

By:________________________________

Name:
Title:

COMPANY: ________________________

By:________________________________

Name:
Title:

Annex K (Form of Repurchase Document)

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SCHEDULE A

[ Version to be used by public issuers ]

General Information:

Date of Letter Agreement incorporating the Securities Purchase Agreement:

Name of the Company:

Corporate or other organizational form of the Company:

Jurisdiction of organization of the Company:

Number and series of preferred stock issued to the Investor at the Closing:

Number of Initial Warrant Shares:

Terms of the Repurchase:

Number of Preferred Shares repurchased by the Company:

Share certificate number (representing the Preferred Shares previously issued to the Investor at the Closing):

Per share Liquidation Amount of Preferred Shares:

Accrued and unpaid dividends on Preferred Shares:

Aggregate purchase price for Repurchased Preferred Shares:

Investor wire information for payment of purchase price :

ABA Number:

Bank:

Account Name:

Account Number:

Annex K (Form of Repurchase Document)

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SCHEDULE A

[ Version to be used by private issuers ]

General Information:

Date of Letter Agreement incorporating the Securities Purchase Agreement:

Name of the Company:

Corporate or other organizational form of the Company:

Jurisdiction of organization of the Company:

Number and series of preferred stock issued to the Investor at the Closing (Preferred Shares):

Number and series of preferred stock underlying the Warrant issued to the Investor at the Closing (Warrant Shares):

Terms of the Repurchase of Preferred Shares:

Number of Preferred Shares purchased by the Company:

Share certificate number (representing the Preferred Shares previously issued to the Investor at the Closing):

Per share Liquidation Amount of Preferred Shares:

Accrued and unpaid dividends on Preferred Shares:

Aggregate purchase price for Repurchased Preferred Shares:

[ To be included for private issuers who are repurchasing some or all of the Warrant Shares: Terms of the Repurchase of the Warrant Shares:

Number of Warrant Shares purchased by the Company:

Annex K (Form of Repurchase Document)

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Share certificate (representing the Warrant Shares previously issued to the Investor at the Closing):

Per share Liquidation Amount of Warrant Shares:

Accrued and unpaid dividends on Warrant Shares;

Aggregate purchase price for Repurchased Warrant Shares:

[ To be included for issuers who are repurchasing less than all of the Warrant Shares: Difference between the Warrant Shares and the Repurchased Warrant Shares: ] ]

Investor wire information for payment of purchase price :

ABA Number:

Bank:

Account Name:

Account Number:

Beneficiary:

Annex K (Form of Repurchase Document)

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Exhibit 21.1

Subsidiaries of Nicolet Bankshares, Inc.:

Name and jurisdiction of incorporation/organization

Equity Interest Held by Registrant

Nicolet National Bank, organized under the laws

100%

of the United States of America

Brookfield Investment Partners, LLC,

100%

a Wisconsin limited liability company

Nicolet Joint Ventures, LLC,

50%

a Wisconsin limited liability company.

In addition to the subsidiaries listed above, the Registrant owns all of the common stock of Nicolet Bankshares Statutory Trust I, which represents an approximate 3% equity interest in the trust, with preferred shareholders holding the remaining equity interest.

Subsidiary of Nicolet National Bank:

Name and jurisdiction of incorporation/organization

Equity Interest Held by Nicolet National Bank

Nicolet Investments, Inc., a Nevada corporation

100%

Exhibit 23.3

[EX233001.JPG]

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We consent to the inclusion in this Registration Statement on Form S-4 (this "Registration Statement") of Nicolet Bankshares, Inc. and its subsidiaries of our report dated March 19, 2012, relating to our audit of the consolidated fmancial statements of Mid-Wisconsin Financial Services, Inc. and subsidiary for the year ended December 31, 2011, which appear in the joint proxy statement-prospectus, which is part of this Registration Statement.

We also consent to the reference to our ftrm under the caption "Experts" in the proxy-statement-prospectus, which is part of this Registration Statement.

[EX233002.JPG]

WipfliLLP
Green Bay, Wisconsin

January 31, 2013

Exhibit 23.4

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in this Registration Statement on Form S-4 of Nicolet Bankshares, Inc. of our report dated February 29, 2012 except for Note 19, as to which the date is February 1, 2013, with respect to the consolidated financial statements as of December 31, 2011 and 2010 and for each of the years in the three-year period ended December 31, 2011, which are included in this Registration Statement.

We also consent to the use of our name as it appears under the caption “Experts.”

/s/ PORTER KEADLE MOORE, LLC

Atlanta, Georgia
February 1, 2013

Exhibit 99.3

Rule 438 Consent

In accordance with Rule 438 promulgated under the Securities Act of 1933, as amended, I will become a director of Nicolet Bankshares, Inc. (“Nicolet”) after consummation of the merger of Mid-Wisconsin Financial Services, Inc. with and into Nicolet and am so designated in the Registration Statement on Form S-4, and all amendments and supplements thereto, filed by Nicolet with the Securities and Exchange Commission (the “Registration Statement”). I hereby consent to being so designated in the Registration Statement and to the filing of this consent with the Registration Statement.

/s/ Kim A. Gowey

Kim A. Gowey

January 30, 2013

Exhibit 99.4

Rule 438 Consent

/s/ Christopher Ghidorzi

Christopher Ghidorzi

January 31, 2013

	Amortized Cost		Fair Value
	($ in thousands)
Due in one year or less	$	1,820	$	1,823
Due after one year but within five years		18,346		19,119
Due after five years but within ten years		13,358		14,183
Due after ten years or more		1,357		1,401
Mortgage-backed securities		72,565		73,658
Total debt securities available-for-sale	$	107,446	$	110,184

	September 30, 2012		December 31, 2011
($ in thousands)
Commercial business	$	38,149	$	41,347
Commercial real estate		120,153		123,868
Real estate construction		20,679		28,708
Agricultural		44,833		45,351
Real estate residential		79,474		85,614
Installment		4,301		4,975
Total loans	$	307,589	$	329,863

	Beginning Balance at 1/1/2011				Recoveries		Provision		Ending Balance at 9/30/2011		Ending balance: individually evaluated for impairment		Ending balance: collectively evaluated for impairment
September 30, 2011	($ in thousands)
Commercial business	$	536	($100	)	$	34	$	465	$	935	$	225	$	710
Commercial real estate		4,320	(1,856	)		132		772		3,368		911		2,457
Real estate construction		1,278	(1,149	)		14		1,166		1,309		147		1,162
Agricultural		1,146	(373	)		107		371		1,251		34		1,217
Real estate residential		2,060	(855	)		41		1,053		2,299		614		1,685
Installment		131	(73	)		39		23		120		10		110
Total	$	9,471	($4,406	)	$	367	$	3,850	$	9,282	$	1,941	$	7,341

	September 30, 2012		December 31, 2011
	($ in thousands)
Commercial business	$	1,168	$	734
Commercial real estate		6,777		4,076
Real estate construction		357		2,519
Agricultural		294		134
Real estate residential		4,557		3,726
Installment		4		5
Total nonaccrual loans	$	13,157	$	11,194

September 30, 2012	Highest Quality		High Quality		Quality		Moderate Risk		Acceptable		Special Mention		Substandard		Doubtful		Loss	Total
Commercial business	$	83	$	3,906	$	5,280	$	8,320	$	11,201	$	7,611	$	1,661	$	87	$	$	38,149
Commercial real estate		11		1,397		13,577		35,850		33,250		12,944		15,728		7,396			120,153
Real estate construction		159		1,352		3,857		2,947		7,195		1,524		3,288		357			20,679
Agricultural		85		366		3,358		6,050		26,030		4,745		3,906		293			44,833
Real estate residential		326		4,953		18,420		17,494		21,518		7,566		4,462		4,735			79,474
Installment		0		290		883		2,002		780		151		187		8			4,301
Total	$	664	$	12,264	$	45,375	$	72,663	$	99,974	$	34,541	$	29,232	$	12,876	$	$	307,589

	Three Months Ended September 30, 2012						Nine Months Ended September 30, 2012
	Number of Loans		Pre-Modification Recorded Balance		Post-Modification Recorded Balance		Number of Loans		Pre-Modification Recorded Balance		Post-Modification Recorded Balance
($ in thousands)
Commercial business		1	$	1,050	$	1,050		3	$	1,730	$	1,730
Commercial real estate		0		0		0		21		9,103		9,103
Real estate construction		0		0		0		8		2,633		2,633
Agricultural		0		0		0		5		621		621
Real estate residential		3		166		166		15		2,313		2,313
Installment		0		0		0		1		22		22
		4	$	1,216	$	1,216		53	$	16,422	$	16,422

	As of September 30, 2012		As of December 31, 2011
	($ in thousands)
FHLB advances	$	26,061	$	30,061
Other borrowed funds		10,000		10,000
Total long-term borrowings	$	36,061	$	40,061

Assets Measured at Fair Value Using Significant Unobservable Inputs (Level 3)
($ in thousands)
	Investment Securities Available-for-Sale
Balance at December 31, 2010	$	2,299
Unrealized holding losses arising during the period:
Included in earnings		(55	)
Included in other comprehensive income		7
Principal repayments		(146	)
Sales		(641	)
Transfers in to/out of Level 3		0
Balance at December 31, 2011		1,464

Unrealized holding losses arising during the period:
Included in earnings		0
Included in other comprehensive income		1
Principal repayments		(13	)
Sales		0
Transfers in to/out of Level 3		0
Balance at September 30, 2012	$	1,452

	Nine months ended September 30, 2012								Nine months ended September 30, 2011
	Average Balance			Interest Income/Expense		Average Yield/Rate			Average Balance			Interest Income/Expense		Average Yield/Rate
ASSETS
Earning Assets
Loans (1) (2) (3)	$	323,509		$	12,964		5.35	%	$	339,460		$	14,154		5.57	%
Investment securities:
Taxable		94,522			1,539		2.17	%		92,804			1,980		2.85	%
Tax-exempt (2)		11,814			273		3.09	%		12,278			448		4.88	%
Interest-bearing deposits in other financial institutions		13,520			26		0.26	%		9			0		0.00	%
Federal funds sold		1,732			2		0.15	%		11,491			11		0.13	%
Securities purchased under agreements to sell		0			0		0.00	%		10,783			108		1.34	%
Other interest-earning assets		2,948			32		1.45	%		3,515			29		1.10	%
Total earning assets	$	448,045		$	14,836		4.42	%	$	470,340		$	16,730		4.76	%
Cash and due from banks	$	12,793							$	7,781
Other assets		23,309								26,914
Allowance for loan losses		(10,297	)							(9,144	)
Total assets	$	473,850							$	495,891
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities
Interest-bearing demand	$	38,488		$	91		0.32	%	$	36,308		$	127		0.47	%
Savings deposits		123,199			502		0.54	%		115,935			671		0.77	%
Time deposits		141,584			1,731		1.63	%		174,326			2,775		2.13	%
Short-term borrowings		14,526			68		0.63	%		11,543			87		1.01	%
Long-term borrowings		37,316			1,129		4.04	%		41,682			1,223		3.92	%
Subordinated debentures		10,310			150		1.94	%		10,310			135		1.75	%
Total interest-bearing liabilities	$	365,423		$	3,671		1.34	%	$	390,104		$	5,018		1.72	%
Noninterest-bearing demand deposits		66,752								60,029
Other liabilities		3,089								2,706
Stockholders’ equity		38,586								43,052
Total liabilities and stockholders’ equity	$	473,850							$	495,891
Net interest income and rate spread				$	11,165		3.08	%				$	11,712		3.04	%
Net interest margin							3.33	%							3.33	%

	Volume
	($ in thousands)
Loans (2)		($665	)	($525	)	($1,190	)
Taxable investments		37		(478	)	(441	)
Tax-exempt investments (2)		(17	)	(158	)	(175	)
Interest-bearing deposits in other financial institutions		0		26		26
Federal funds sold		(9	)	0		(9	)
Securities purchased under agreements to sell		(108	)	0		(108	)
Other interest-earning assets		(5	)	8		3
Total earning assets		(767	)	(1,127	)	(1,894	)
Interest-bearing demand		8		(44	)	(36	)
Savings deposits		42		(211	)	(169	)
Time deposits		(522	)	(522	)	(1,044	)
Short-term borrowings		23		(42	)	(19	)
Long-term borrowings		(128	)	34		(94	)
Subordinated debenture		0		15		15
Total interest-bearing liabilities		(577	)	(770	)	(1,347	)
Net interest income		($190	)	($357	)	($547	)

	Due to
	Volume			Rate			Net
	($ in thousands)
Loans (1)(2)		($343	)		($111	)		($454	)
Taxable investments		8			(169	)		(161	)
Tax-exempt investments (2)		(11	)		(51	)		(62	)
Interest-bearing deposits in other financial institutions		0			12			12
Federal funds sold		(5	)		0			(5	)
Securities purchased under agreements to sell		(2	)		0			(2	)
Other interest-earning assets		(2	)		4			2
Total earning assets		(355	)		(315	)		(670	)
Interest-bearing demand		5			(27	)		(22	)
Savings deposits		8			(139	)		(131	)
Time deposits		(155	)		(160	)		(315	)
Short-term borrowings		3			(28	)		(25	)
Long-term borrowings		(41	)		3			(38	)
Subordinated debenture		0			4			4
Total interest-bearing liabilities		(180	)		(347	)		(527	)
Net interest income		($175	)	$	32			($143	)

($ in thousands)	September 30, 2012					June 30, 2012					March 31, 2012					December 31, 2011					September 30, 2011
ALL allocation:
Commercial business	$	946		12	%	$	1,056		13	%	$	834		14	%	$	1,004		12	%	$	935		12	%
Commercial real estate		5,146		39	%		5,184		39	%		3,984		38	%		3,685		37	%		3,368		37	%
Real estate construction		1,397		7	%		1,602		8	%		1,073		8	%		1,320		9	%		1,309		9	%
Agricultural		516		15	%		513		14	%		1,069		13	%		1,139		14	%		1,251		14	%
Total commercial		8,005		73	%		8,355		74	%		6,960		73	%		7,148		72	%		6,863		72	%
Real estate residential		2,417		26	%		2,477		25	%		3,009		26	%		2,530		26	%		2,299		26	%
Installment		107		1	%		111		1	%		99		1	%		138		2	%		120		2	%
Total allowance for loan losses	$	10,529		100	%	$	10,943		100	%	$	10,068		100	%	$	9,816		100	%	$	9,282		100	%
ALL category as a percent of total ALL:
Commercial business		9.0	%				9.7	%				8.3	%				10.2	%				10.1	%
Commercial real estate		48.8	%				47.4	%				39.6	%				37.6	%				36.2	%
Real estate construction		13.3	%				14.6	%				10.7	%				13.4	%				14.1	%
Agricultural		4.9	%				4.7	%				10.6	%				11.6	%				13.5	%
Total commercial		76.0	%				76.4	%				69.2	%				72.8	%				73.9	%
Real estate residential		23.0	%				22.6	%				29.8	%				25.8	%				24.8	%
Installment		1.0	%				1.0	%				1.0	%				1.4	%				1.3	%
Total allowance for loan losses		100.0	%				100.0	%				100.0	%				100.0	%				100.0	%

	Payments due by period
	Total		< 1year		1-3 years		3-5 years		> 5 years
	($ in thousands)
Subordinated debentures	$	10,310	$	0	$	0	$	0	$	10,310
Other long-term borrowings		10,000		0		10,000		0		0
FHLB borrowings		26,061		2,000		21,061		3,000		0
Total long-term borrowing obligations	$	46,371	$	2,000	$	31,061	$	3,000	$	10,310

				MID-WISCONSIN FINANCIAL SERVICES, INC.

Date: November 6, 2012				/s/ SCOT G. THOMPSON
				Scot G. Thompson
				Principal Executive Officer

Date: November 6, 2012				/s/ RHONDA R. KELLEY
				Rhonda R. Kelley
				Principal Accounting Officer

				NICOLET BANKSHARES, INC.

				By:				/s/ Robert B. Atwell
								Robert B. Atwell, Chairman and Chief Executive Officer

								/s/ Robert B. Atwell
								Robert B. Atwell
								Chairman and Chief Executive Officer
								(Principal Executive Officer)

								/s/ Ann K. Lawson
								Ann K. Lawson
								Chief Financial Officer
								(Principal Financial and Accounting Officer)

								/s/ Michael E. Daniels
								Michael E. Daniels
								President and Chief Operating Officer, Director

								/s/ John N. Dykema
								John N. Dykema
								Director

								/s/ Gary L. Fairchild
								Gary L. Fairchild
								Director

								/s/ Michael F. Felhofer
								Michael F. Felhofer
								Director

								/s/ Andrew W. Hetzel, Jr.
								Andrew W. Hetzel, Jr.
								Director

								/s/ Donald J. Long, Jr.
								Donald J. Long, Jr.
								Director

								/s/ Benjamin P. Meeuwsen
								Benjamin P. Meeuwsen
								Director

								/s/ Susan L. Merkatoris
								Susan L. Merkatoris
								Director

								/s/ Therese B. Pandl
								Therese B. Pandl
								Director

								/s/ Randy J. Rose
								Randy J. Rose
								Director

								/s/ Robert J. Weyers
								Robert J. Weyers
								Director

Exhibit				Description of Exhibit
2.1				Agreement and Plan of Merger by and among Nicolet Bankshares, Inc. and Mid-Wisconsin Financial Services, Inc., dated November 28, 2012, as amended by Amendment No. 1 thereto dated January 17, 2013 (attached as Appendix A to the proxy statement-prospectus, which is part of this registration statement, and incorporated herein by reference).
3.1				Amended and Restated Articles of Incorporation of Nicolet Bankshares, Inc.
3.2				Bylaws of Nicolet Bankshares, Inc.
4.1				Form of Common Stock Certificate of Nicolet Bankshares, Inc.
4.2				Indenture dated July 21, 2004, between Nicolet Bankshares, Inc., as Issuer and U.S. Bank National Association, as Trustee, including the form of Junior Subordinated Debenture as Exhibit A thereto.
4.3				Guarantee Agreement, dated July 21, 2004, between Nicolet Bankshares, Inc., as Guarantor, and U.S. Bank National Association, as Guarantee Trustee
4.4				Indenture, dated October 14, 2005, between Mid-Wisconsin Financial Services, Inc., as Issuer, and Wilmington Trust Company, as Trustee, including the form of Junior Subordinated Debenture as Exhibit A thereto.
4.5				Guarantee Agreement, dated October 14, 2005, between Mid-Wisconsin Financial Services, Inc., as Guarantor, and Wilmington Trust Company, as Guarantee Trustee.
4.6				Form of Supplemental Indenture.*
5.1				Opinion of Godfrey Kahn, LLP regarding legality of securities being registered (including its consent).*
8.1				Opinion of Bryan Cave LLP regarding certain tax matters (including its consent).*
10.1 †				Mid-Wisconsin Financial Services, Inc. 2011 Directors Deferred Compensation Plan, as amended and restated effective December 16, 2010.
10.2 †				Mid-Wisconsin Financial Services, Inc. Director Retirement Benefit Policy, as amended July 25, 2007.
10.3 †				Mid-Wisconsin Financial Services, Inc. 1999 Stock Option Plan, as amended April 22, 2008.
10.4 †				Nicolet Bankshares, Inc. 2002 Stock Incentive Plan, as amended, and forms of award documents.
10.5 †				Nicolet Bankshares, Inc. 2011 Long-term Incentive Plan and forms of award documents.
10.6 †				Nicolet National Bank 2002 Deferred Compensation Plan, as amended.
10.7 †				Nicolet National Bank 2009 Deferred Compensation Plan for Non-Employee Directors.
10.8 †				Revised and Restated Employment Agreement dated as of April 17, 2012 between Nicolet National Bank and Michael E. Daniels.
10.9 †				Revised and Restated Employment Agreement dated as of April 17, 2012 between Nicolet National Bank and Robert B. Atwell.
10.10				Lease, dated May 31, 2000, between Washington Square Green Bay, LLC and Green Bay Financial Corporation D/B/A/ Nicolet National Bank, as amended.
10.11				Small Business Lending Fund Securities Purchase Agreement, dated September 1, 2011, between Nicolet Bankshares, Inc. and the Secretary of the United States Treasury.
21.1				Subsidiaries of Nicolet Bankshares, Inc.
23.1				Consent of Godfrey & Kahn, LLP (included as part of Exhibit 5.1).*

Exhibit				Description of Exhibit
23.2				Consent of Bryan Cave LLP (included as part of Exhibit 8.1).*
23.3				Consent of Wipfli LLP.
23.4				Consent of Porter Keadle Moore, LLC.
99.1				Form of Proxy of Mid-Wisconsin.*
99.2				Form of Proxy of Nicolet.*
99.3				Rule 438 Consent of Dr. Kim Gowey.
99.4				Rule 438 Consent of Mr. Christopher Ghidorzi.
101				Interactive data files pursuant to Rule 405 of Regulation S-T