FIRST BUSEY CORP NV
For the period ended Dec 31, 2023. Filed Feb 23, 2024.
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FY2023 · Filed Feb 23, 2024
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Net Interest Income
Net interest income is the difference between interest income and fees earned on loans and investments (“interest-earning assets”) and interest expense incurred on deposits and borrowings (“interest-bearing liabilities”). Interest rate levels and volume fluctuations within interest-earning assets and interest-bearing liabilities impact net interest income. Net interest margin is tax-equivalent net interest income as a percent of average interest-earning assets.
Certain assets with tax favorable treatment are evaluated on a tax-equivalent basis, assuming a federal income tax rate of 21.0%. Tax favorable assets generally have lower contractual pre-tax yields than fully taxable assets. A tax-equivalent analysis is performed by adding the tax savings to the earnings on tax favorable assets. After factoring in the tax favorable effects of these assets, the yields may be more appropriately evaluated against alternative earning assets. In addition to yield, various other risks are factored into the evaluation process.
Consolidated Average Balance Sheets and Interest Rates
The table below presents our Consolidated Average Balance Sheets, detailing average balances for each major category of assets and liabilities, the interest income earned on interest-earning assets, the interest expense paid for interest-bearing liabilities, and the related interest yields for the periods indicated. Average information is provided on a daily average basis(dollars in thousands):
First Busey Corporation | 2023 — 58
| Years Ended December 31, | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 · 2022 · 2021 | ||||||||||||||||
| AverageBalance · Income/Expense · Yield/Rate · AverageBalance · Income/Expense · Yield/Rate · AverageBalance · Income/Expense · Yield/Rate | ||||||||||||||||
| Assets | ||||||||||||||||
| Interest-bearing bank deposits and federal funds sold | $214,422 | $10,531 | 4.91% | $290,875 | $3,097 | 1.06% | $630,687 | $1,151 | 0.18% | |||||||
| Investment securities: | ||||||||||||||||
| U.S. Government obligations | 79,669 | 578 | 0.73% | 179,557 | 1,079 | 0.60% | 180,041 | 1,692 | 0.94% | |||||||
| Obligations of states and political subdivisions1 | 233,377 | 6,560 | 2.81% | 286,220 | 7,611 | 2.66% | 299,064 | 7,694 | 2.57% | |||||||
| Other securities | 2,875,769 | 76,568 | 2.66% | 3,265,271 | 61,591 | 1.89% | 2,876,714 | 37,166 | 1.29% | |||||||
| Loans held for sale | 1,885 | 116 | 6.13% | 5,178 | 192 | 3.71% | 21,803 | 506 | 2.32% | |||||||
| Portfolio loans1, 2 | 7,759,472 | 387,193 | 4.99% | 7,445,962 | 288,615 | 3.88% | 6,969,807 | 252,946 | 3.63% | |||||||
| Total interest-earning assets1, 3 | 11,164,594 | $481,546 | 4.31% | 11,473,063 | $362,185 | 3.16% | 10,978,116 | $301,155 | 2.74% | |||||||
| Cash and due from banks | 116,530 | 120,910 | 133,711 | |||||||||||||
| Premises and equipment | 124,565 | 131,657 | 138,731 | |||||||||||||
| ACL | (92,991) | (89,387) | (97,397) | |||||||||||||
| Other assets | 933,520 | 856,705 | 751,774 | |||||||||||||
| Total assets | $12,246,218 | $12,492,948 | $11,904,935 | |||||||||||||
| Liabilities and stockholders’ equity | ||||||||||||||||
| Interest-bearing transaction deposits | $2,775,045 | $43,268 | 1.56% | $2,785,439 | $7,150 | 0.26% | $2,619,942 | $1,922 | 0.07% | |||||||
| Savings and money market deposits | 2,870,397 | 37,038 | 1.29% | 3,326,259 | 4,237 | 0.13% | 3,092,992 | 2,817 | 0.09% | |||||||
| Time deposits | 1,406,928 | 43,679 | 3.10% | 846,738 | 4,725 | 0.56% | 1,040,709 | 7,844 | 0.75% | |||||||
| Federal funds purchased and repurchase agreements | 200,894 | 5,203 | 2.59% | 244,004 | 1,475 | 0.60% | 218,454 | 227 | 0.10% | |||||||
| Borrowings4 | 500,301 | 26,881 | 5.37% | 309,175 | 15,932 | 5.15% | 268,767 | 12,452 | 4.63% | |||||||
| Junior subordinated debt issued to unconsolidated trusts | 71,894 | 3,853 | 5.36% | 71,716 | 3,029 | 4.22% | 71,545 | 2,840 | 3.97% | |||||||
| Total interest-bearing liabilities | 7,825,459 | $159,922 | 2.04% | 7,583,331 | $36,548 | 0.48% | 7,312,409 | $28,102 | 0.38% | |||||||
| Net interest spread1 | 2.27% | 2.68% | 2.36% | |||||||||||||
| Noninterest-bearing deposits | 3,018,563 | 3,550,517 | 3,142,155 | |||||||||||||
| Other liabilities | 204,685 | 163,929 | 125,509 | |||||||||||||
| Stockholders’ equity | 1,197,511 | 1,195,171 | 1,324,862 | |||||||||||||
| Total liabilities and stockholders’ equity | $12,246,218 | $12,492,948 | $11,904,935 | |||||||||||||
| Interest income / earning assets1, 3 | $11,164,594 | $481,546 | 4.31% | $11,473,063 | $362,185 | 3.16% | $10,978,116 | $301,155 | 2.74% | |||||||
| Interest expense / earning assets | 11,164,594 | 159,922 | 1.43% | 11,473,063 | 36,548 | 0.32% | 10,978,116 | 28,102 | 0.25% | |||||||
| Net interest margin1 | $321,624 | 2.88% | $325,637 | 2.84% | $273,053 | 2.49% | ||||||||||
On a tax-equivalent basis, assuming a federal income tax rate of 21.0%.
Non-accrual loans have been included in average portfolio loans.
Interest income includes tax-equivalent adjustments of $2.2 million for 2023, $2.2 million for 2022, and $2.4 million for 2021. Interest income includes an immaterial amount of fees, net of deferred costs, related to PPP loans for 2023, $1.9 million for 2022, and $14.0 million for 2021.
Borrowings include short-term borrowings, long-term debt, senior notes, and subordinated notes. Interest expense includes a non-usage fee on our revolving credit facility.
First Busey Corporation | 2023 — 59
The following table presents, for the major components of interest-earning assets and interest-bearing liabilities, a breakout of changes in interest income and interest expense attributable to (1) changes in average volume and (2) changes in average yield. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on changes due to rate and changes due to volume(dollars in thousands):
| Years Ended December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2023 vs. 2022 Change Due To · 2022 vs. 2021 Change Due To | ||||||||
| AverageVolume · AverageYield/Rate · TotalChange · AverageVolume · AverageYield/Rate · TotalChange | ||||||||
| Increase (decrease) in interest income | ||||||||
| Interest-bearing bank deposits and federal funds sold | $(1,013) | $8,447 | $7,434 | $(921) | $2,867 | $1,946 | ||
| Investment securities: | ||||||||
| U.S. Government obligations | (691) | 190 | (501) | (5) | (608) | (613) | ||
| Obligations of state and political subdivisions | (1,466) | 415 | (1,051) | (337) | 254 | (83) | ||
| Other securities | (8,026) | 23,003 | 14,977 | 5,544 | 18,881 | 24,425 | ||
| Loans held for sale | (161) | 85 | (76) | (515) | 201 | (314) | ||
| Portfolio loans | 12,598 | 85,980 | 98,578 | 17,870 | 17,799 | 35,669 | ||
| Change in interest income | 1,241 | 118,120 | 119,361 | 21,636 | 39,394 | 61,030 | ||
| Increase (decrease) in interest expense | ||||||||
| Interest-bearing transaction deposits | (27) | 36,145 | 36,118 | 129 | 5,099 | 5,228 | ||
| Savings and money market deposits | (752) | 33,553 | 32,801 | 151 | 1,269 | 1,420 | ||
| Time deposits | 4,932 | 34,022 | 38,954 | (1,303) | (1,816) | (3,119) | ||
| Federal funds purchased and repurchase agreements | (304) | 4,032 | 3,728 | 30 | 1,218 | 1,248 | ||
| Borrowings | 9,485 | 1,464 | 10,949 | 1,611 | 1,869 | 3,480 | ||
| Junior subordinated debt owed to unconsolidated trusts | 8 | 816 | 824 | 7 | 182 | 189 | ||
| Change in interest expense | 13,342 | 110,032 | 123,374 | 625 | 7,821 | 8,446 | ||
| Increase (decrease) in net interest income | $(12,101) | $8,088 | $(4,013) | $21,011 | $31,573 | $52,584 | ||
| Percentage increase (decrease) in net interest income over prior period | (1.2)% | 19.3% | ||||||
First Busey Corporation | 2023 — 60
Notable changes in average assets and average liabilities are summarized as follows for the periods presented(dollars in thousands):
| Years Ended December 31, | ||||
|---|---|---|---|---|
| 2023 | 2022 | Change | % Change | |
| Average interest-earning assets | $11,164,594 | $11,473,063 | $(308,469) | (2.7)% |
| Average interest-bearing liabilities | 7,825,459 | 7,583,331 | 242,128 | 3.2% |
| Average noninterest-bearing deposits | 3,018,563 | 3,550,517 | (531,954) | (15.0)% |
| Total average deposits | 10,070,933 | 10,508,953 | (438,020) | (4.2)% |
| Total average liabilities | 11,048,707 | 11,297,777 | (249,070) | (2.2)% |
| Average noninterest-bearing deposits as a percent of total average deposits | 30.0% | 33.8% | (380) bps | |
| Total average deposits as a percent of total average liabilities | 91.2% | 93.0% | (180) bps | |
Changes in net interest income and net interest margin are summarized as follows for the periods presented(dollars in thousands):
| Years Ended December 31, | ||||
|---|---|---|---|---|
| 2023 | 2022 | Change | % Change | |
| Net interest income | ||||
| Interest income, on a tax-equivalent basis1 | $481,546 | $362,185 | $119,361 | 33.0% |
| Interest expense | (159,922) | (36,548) | (123,374) | (337.6)% |
| Net interest income, on a tax-equivalent basis1 | $321,624 | $325,637 | $(4,013) | (1.2)% |
| Net interest margin1, 2 | 2.88% | 2.84% | 4 bps | |
Assuming a federal income tax rate of 21.0%.
Net interest income expressed as a percentage of average earning assets, stated on a tax-equivalent basis.
The FOMC raised rates by a total of 100 basis points during 2023, and by a total of 525 basis points since the onset of the current FOMC tightening cycle that began in the first quarter of 2022. Rising rates initially have a positive impact on net interest margin, as assets, in particular commercial loans, reprice more quickly and to a greater extent than liabilities. As deposit and funding costs increase in response to the tightening rate cycle, and we experience deposit migration into higher cost offerings and funding alternatives, some of the net interest margin expansion is reversed.
Net interest spread represents the difference between the average rate earned on earning assets and the average rate paid on interest-bearing liabilities, and is presented in the table below for the periods indicated:
| Years Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| Net interest spread1 | 2.27% | 2.68% | 2.36% |
- Calculated on a tax-equivalent basis.
First Busey Corporation | 2023 — 61
The net interest margin discussion above is based upon the results and average balances for the years ended December 31, 2023, 2022, and 2021. Annualized net interest margins for the quarterly periods indicated were as follows:
| 2023 | 2022 | 2021 | |
|---|---|---|---|
| First Quarter | 3.13% | 2.45% | 2.72% |
| Second Quarter | 2.86% | 2.68% | 2.50% |
| Third Quarter | 2.80% | 3.00% | 2.41% |
| Fourth Quarter | 2.74% | 3.24% | 2.36% |
Management attempts to mitigate the effects of an unpredictable interest-rate environment through effective portfolio management, prudent loan underwriting and pricing discipline, and operational efficiencies.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.