FIRST BUSEY CORP NV
For the period ended Sep 30, 2024. Filed Nov 5, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 5, 2024
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
First Busey Corporation, a Nevada corporation organized in 1980, is an $11.99 billion financial holding company headquartered in Champaign, Illinois. Busey’s common stock is traded on The Nasdaq Global Select Market under the symbol “BUSE.”
Busey operates and reports its business inthree segments: Banking, Wealth Management, and FirsTech.
The Banking operating segment provides a full range of banking services to individual and corporate customers through its banking center network in Illinois; the St. Louis, Missouri metropolitan area; southwest Florida; and Indianapolis, Indiana.
The Wealth Management operating segment provides a full range of asset management, investment, brokerage, fiduciary, philanthropic advisory, tax preparation, and farm management services to individuals, businesses, and foundations.
The FirsTech operating segment provides comprehensive and innovative payment technology solutions including online, mobile, and voice-recognition bill payments; money management and credit card networks; direct debit services; lockbox remittance processing for payments made by mail; and walk-in payments. FirsTech also provides additional tools to help clients with billing, reconciliation, bill reminders, and treasury services.
For additional information about First Busey's operating segments, see“Note 16. Operating Segments and Related Information.”
Basis of Financial Statement Presentation
These unaudited consolidated financial statements and related notes should be read in conjunction with theaudited consolidated financial statements included in Busey's 2023 Annual Report. These interim unaudited consolidated financial statements serve to update our 2023 Annual Report and may not include all information and notes necessary to constitute a complete set of financial statements.
We prepared these unaudited consolidated financial statements in conformity with GAAP. We have eliminated intercompany accounts and transactions. We have also reclassified certain prior year amounts to conform to the current period presentation. These reclassifications did not have a material impact on our consolidated financial condition or results of operations.
In our opinion, the unaudited consolidated financial statements reflect all normal, recurring adjustments needed to present fairly our results for the interim periods. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.
Use of Estimates
In preparing the accompanying unaudited consolidated financial statements in conformity with GAAP, Busey’s management is required to make estimates and assumptions that affect the amounts reported in the financial statements and the disclosures provided. Actual results could differ from those estimates. Material estimates which are particularly susceptible to significant change in the near term relate to the fair value of debt securities available for sale, fair value of assets acquired and liabilities assumed in business combinations, goodwill, income taxes, and the determination of the ACL.
Income Taxes
During the nine months ended September 30, 2024, Busey recorded an estimated one-time deferred tax valuation adjustment of $1.4 million resulting from a change to our Illinois apportionment rate due to recently enacted regulations. These new regulations are expected to lower our ongoing tax obligation in future periods, but create a negative adjustment to the carrying value of our deferred tax asset in the current year.
As of September 30, 2024, Busey Bank is under examination by the Florida Department of Revenue for its 2020 to 2022 corporate income tax filings.
Impact of Recently Adopted Accounting Standards
In March 2023, the FASB issued ASU 2023‑02“Investments—Equity Method and Joint Ventures (Topic 323),” permitting an election to use the proportional amortization method to account for equity investments made primarily for the purpose of receiving income tax credits and other income tax benefits, regardless of the tax credit program from which the income tax credits are received, provided that certain conditions are met. The proportional amortization method results in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization of the investment and the income tax credits being presented net in the income statement as a component of income tax expense. Busey adopted this standard on a modified retrospective basis on January 1, 2024. Upon adoption, Busey recorded an after-tax decrease to retained earnings of $1.4 million for the cumulative effect of adopting ASU 2023‑02. This transition adjustment included a $2.4 million decrease in other assets, a $0.5 million decrease in other liabilities, and a $0.5 million increase in deferred tax assets.
In March 2023, the FASB issued ASU 2023‑01 “Leases (Topic 842): Common Control Arrangements,” which requires amortization over the useful life of leasehold improvements (not the lease term) when the lease is between entities under common control, and any value of such leasehold improvements remaining at the end of the lease term is to be accounted for as a transfer between entities under common control. Busey adopted this standard on a prospective basis on January 1, 2024. Adoption of this standard did not have a material impact on Busey’s financial position or results of operations.
In June 2022, the FASB issued ASU 2022-03“Fair Value Measurements (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions,” which clarifies that contractual restrictions on the sale of equity securities are not considered in measuring the fair value of those equity securities, and further that contractual sale restrictions cannot be recognized and measured as a separate unit of account. Busey adopted this standard on a prospective basis on January 1, 2024. Adoption of this standard did not have a material impact on Busey’s financial position or results of operations.
Recently Issued Accounting Standards Not Yet Adopted
In March 2024, the FASB issued ASU 2024-01 “Compensation-Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards” to clarify that certain “profits interests” are within the scope of Topic 718 by amending the language and providing illustrative examples on how the scope guidance in paragraph 718-10-15-3 should be applied. This update is intended to improve clarity of the accounting standards codification, not to change the guidance. This update may be applied on a retrospective or prospective basis and will be effective for Busey for annual and interim periods beginning January 1, 2025. Early adoption is permitted. Busey is currently evaluating the potential effects of adoption of this ASU on its financial position and results of operations.
In December 2023, the FASB issued ASU 2023‑09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires more detailed disclosures of income taxes paid net of refunds received, income from continuing operations before income tax expense or benefit, and income tax expense from continuing operations. This standard is to be applied on a prospective basis, with retrospective application permitted, and will be effective for Busey for annual reporting periods beginning with the fiscal year ending December 31, 2025. Busey does not expect adoption of this standard to have a material impact on its financial position or results of operations.
In November 2023, the FASB issued ASU 2023‑07 “Segment Reporting (Topic 820): Improvements to Reportable Segment Disclosures” requiring enhanced disclosures related to significant segment expenses. This standard is to be applied on a retrospective basis and is effective for Busey for annual reporting periods beginning with the fiscal year ending December 31, 2024, and for interim reporting periods within fiscal years starting January 1, 2025. Busey does not expect adoption of this standard to have a material impact on the Company’s financial position or results of operations.
In October 2023, the FASB issued ASU 2023‑06 “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative” which aligns certain GAAP disclosure requirements with the SEC’s disclosure requirements, in order to better facilitate comparisons between entities that are subject to the SEC’s existing disclosures with entities that were not previously subject to the SEC’s requirements. Amendments in this update should be applied prospectively, and the effective date for Busey for each amendment in this ASU will be the date on which the SEC removes the related disclosure from Regulation S‑X or Regulation S‑K. Early adoption is prohibited. Busey does not expect adoption of this standard to have a material impact on its financial position or results of operations.
Subsequent Events
Busey has evaluated subsequent events for potential recognition and/or disclosure through the date the unaudited consolidated financial statements included in this Quarterly Report were issued. There were no significant events subsequent to the quarter ended September 30, 2024, through the filing date of these unaudited consolidated financial statements.
NOTE 2. MERGERS AND ACQUISITIONS
CrossFirst Bankshares, Inc.
On August 26, 2024, Busey and CrossFirst, a Kansas corporation, entered into an Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, CrossFirst will merge with and into Busey, with Busey as the surviving corporation in the merger (the “Merger”). The Merger Agreement further provides that at a date and time following the Merger as determined by Busey, CrossFirst Bank, a Kansas state-chartered bank and a wholly owned subsidiary of CrossFirst, will merge with and into Busey Bank, with Busey Bank as the surviving bank (the “Bank Merger”). Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of CrossFirst common stock outstanding immediately prior to the Effective Time, other than certain shares held by CrossFirst or Busey, will be converted into the right to receive 0.6675 of a share of Busey common stock. Upon completion of the Merger, holders of Busey common stock (“Busey stockholders”) will own approximately 63.5% of the combined company and holders of CrossFirst common stock (“CrossFirst stockholders”) will own approximately 36.5% of the combined company, on a fully-diluted basis.
Completion of the merger is subject to customary closing conditions, including the approval of both Busey stockholders and CrossFirst stockholders and the requisite regulatory approvals for the Merger and the Bank Merger. With approvals, the parties expect to close the merger in the first or second quarter of 2025. In connection with the Merger, Busey incurred one-time pre-tax acquisition-related expenses of $1.3 million and $1.5 million during the three and nine months months ended September 30, 2024, respectively.
Merchants and Manufacturers Bank Corporation
Effective April 1, 2024, Busey completed its previously announced acquisition of M&M, pursuant to which Busey acquired M&M and its wholly-owned subsidiary, M&M Bank, through a merger transaction. This partnership added M&M’s Life Equity Loan® products to Busey’s existing suite of services and expands Busey’s presence in the suburban Chicago market. M&M’s results of operations were included in Busey’s results of operation beginning April 1, 2024.
Merger of M&M Bank into Busey Bank
Busey operated M&M Bank as a separate banking subsidiary of Busey until it was merged with Busey Bank on June 21, 2024. At the time of the bank merger, M&M Bank’s banking centers became banking centers of Busey Bank, except for M&M’s banking center located at 990 Essington Rd., Joliet, Illinois, which was closed in connection with the bank merger.
Merger Consideration
At the effective time of the Merger, each share of M&M common stock converted to the right to receive, at the election of each stockholder and subject to proration and adjustment as provided in the Merger Agreement, either (1) $117.74 in cash (“Cash Election”), (2)5.7294 shares of Busey common stock (“Share Election”), or (3) mixed consideration of $34.55 in cash and 4.0481 shares of Busey common stock (“Mixed Election”).
Most of the M&M common stockholders who submitted an election form by the election deadline made the Share Election to receive their Merger consideration solely in the form of shares of Busey common stock. As a result of the elections of M&M common stockholders, and in accordance with the proration and adjustment provisions of the Merger Agreement, the Merger consideration paid to M&M common stockholders was comprised of an aggregate of 1,429,304 shares of Busey common stock and an aggregate of $12.2 million in cash, allocated as follows for each share of M&M stock: (1) $117.74 in cash for the Cash Election, (2) $5.3966 in cash and 5.4668 shares of Busey common stock for the Share Election, and (3) $34.55 in cash and 4.0481 shares of Busey common stock for the Mixed Election. Pursuant to the terms of the Merger Agreement, M&M common stockholders that did not make an election or submit a properly completed election form by the election deadline of March 29, 2024, received cash consideration of $117.74 for each share of M&M common stock held. No fractional shares of Busey common stock were issued in the Merger. Fractional shares were paid in cash at the rate of $23.32 per share.
Additional Merger consideration of $3.0 million was paid to redeem 300 shares of M&M preferred stock.
Acquisition Accounting
This transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair values on April 1, 2024, the date of acquisition. Fair values, including initial accounting for deferred taxes, are subject to refinement for up to one year after the closing date as additional information regarding the closing date fair values becomes available.
As the total consideration paid for M&M exceeded the estimated fair value of net assets acquired, goodwill of $15.6 million was recorded as a result of the acquisition. Goodwill recorded for this transaction reflects synergies expected from the acquisition and expansion within the Chicago metropolitan market, and was assigned to the Banking operating segment. None of the goodwill recognized in the M&M acquisition is expected to be tax deductible.
Acquisition Date Fair Values
Estimated acquisition-date fair values of the assets acquired and liabilities assumed, as well as the fair value of consideration transferred, were as follows(dollars in thousands):
| April 1, 2024 | |
|---|---|
| Assets acquired | |
| Cash and cash equivalents | $33,577 |
| Securities | 8,086 |
| Portfolio loans, net of ACL | 417,230 |
| Right of use assets | 253 |
| Premises and equipment | 2,045 |
| Other intangible assets | 6,346 |
| Accrued interest receivable | 4,992 |
| Prepaid assets | 185 |
| Deferred tax assets | 582 |
| Accounts receivable | 42 |
| Mortgage servicing rights | 55 |
| Other assets | 4,632 |
| Total assets acquired | 478,024 |
| Liabilities assumed | |
| Deposits | 392,838 |
| Borrowings | 43,887 |
| Lease liabilities | 253 |
| Other liabilities | 7,096 |
| Total liabilities assumed | 444,074 |
| Net assets acquired | $33,950 |
| Consideration paid | |
| Cash | $15,200 |
| Common stock | 34,375 |
| Total consideration paid | $49,575 |
| Goodwill | $15,625 |
Loans Purchased with Credit Deterioration
A small portion of the acquired loans were PCD. The following table provides a reconciliation between the purchase price and the fair value of these loans(dollars in thousands):
| As of April 1, 2024 | |
|---|---|
| PCD Financial Assets | |
| Gross contractual receivable for PCD financial assets | $29,290 |
| ACL recorded for estimated uncollectible contractual cash flows specific to PCD financial assets | (1,243) |
| Interest premium (discount) specific to PCD financial assets | (1,773) |
| Fair value of PCD financial assets | $26,274 |
Other Acquisition Costs
In connection with the M&M acquisition, Busey incurred $0.6 million and $2.9 million in pre-tax acquisition expenses during the three and nine months ended September 30, 2024, respectively, comprised primarily of salaries, wages and employee benefits; data processing; and professional fees, which are reported as components of noninterest expense on the accompanying Consolidated Statements of Income (Unaudited).
NOTE 3. DEBT SECURITIES
Busey's portfolio of debt securities includes both available for sale and held to maturity securities. The tables below provide the amortized cost, unrealized or unrecognized gains and losses, and fair values of debt securities summarized by major category(dollars in thousands):
| As of September 30, 2024 | ||||
|---|---|---|---|---|
| AmortizedCost · Unrealized · FairValue | ||||
| Gross Gains | Gross Losses | |||
| Debt securities available for sale | ||||
| U.S. Treasury securities1 | $250 | $— | $— | $250 |
| Obligations of U.S. government corporations and agencies2 | 1,515 | — | (7) | 1,508 |
| Obligations of states and political subdivisions3 | 168,052 | 144 | (13,144) | 155,052 |
| Asset-backed securities3 | 405,280 | 92 | — | 405,372 |
| Commercial mortgage-backed securities | 106,543 | 228 | (12,492) | 94,279 |
| Residential mortgage-backed securities | 1,161,213 | 179 | (159,225) | 1,002,167 |
| Corporate debt securities | 166,818 | 118 | (7,447) | 159,489 |
| Total debt securities available for sale | $2,009,671 | $761 | $(192,315) | $1,818,117 |
| AmortizedCost · Unrecognized · FairValue | ||||
|---|---|---|---|---|
| Gross Gains | Gross Losses | |||
| Debt securities held to maturity | ||||
| Commercial mortgage-backed securities | $419,685 | $— | $(64,780) | $354,905 |
| Residential mortgage-backed securities | 419,198 | — | (61,734) | 357,464 |
| Total debt securities held to maturity | $838,883 | $— | $(126,514) | $712,369 |
Gross losses were insignificant, rounding to zero thousand.
Gross gains were insignificant, rounding to zero thousand.
Includes securities marked at par, with no gain or loss to report.
| As of December 31, 2023 | ||||
|---|---|---|---|---|
| AmortizedCost · Unrealized · FairValue | ||||
| Gross Gains · Gross Losses | ||||
| Debt securities available for sale | ||||
| U.S. Treasury securities | $16,031 | $— | $(85) | $15,946 |
| Obligations of U.S. government corporations and agencies | 5,889 | 1 | (58) | 5,832 |
| Obligations of states and political subdivisions1 | 190,819 | 52 | (18,026) | 172,845 |
| Asset-backed securities | 470,046 | — | (1,823) | 468,223 |
| Commercial mortgage-backed securities | 119,044 | — | (15,535) | 103,509 |
| Residential mortgage-backed securities | 1,306,854 | 5 | (195,547) | 1,111,312 |
| Corporate debt securities | 225,947 | 128 | (16,171) | 209,904 |
| Total debt securities available for sale | $2,334,630 | $186 | $(247,245) | $2,087,571 |
| AmortizedCost · Unrecognized · FairValue | ||||
|---|---|---|---|---|
| Gross Gains | Gross Losses | |||
| Debt securities held to maturity | ||||
| Commercial mortgage-backed securities | $428,526 | $— | $(71,000) | $357,526 |
| Residential mortgage-backed securities | 444,102 | — | (71,231) | 372,871 |
| Total debt securities held to maturity | $872,628 | $— | $(142,231) | $730,397 |
- Includes securities marked at par, with no gain or loss to report.
Maturities of Debt Securities
Amortized cost and fair value of debt securities, by contractual maturity or pre-refunded date, are shown below. Mortgages underlying mortgage-backed securities and asset-backed securities may be called or prepaid; therefore, actual maturities could differ from the contractual maturities. All mortgage-backed securities were issued by U.S. government corporations and agencies(dollars in thousands):
| As of September 30, 2024 | ||
|---|---|---|
| AmortizedCost | FairValue | |
| Debt securities available for sale | ||
| Due in one year or less | $86,812 | $85,513 |
| Due after one year through five years | 128,399 | 123,444 |
| Due after five years through ten years | 558,784 | 539,952 |
| Due after ten years | 1,235,676 | 1,069,208 |
| Debt securities available for sale | $2,009,671 | $1,818,117 |
| Debt securities held to maturity | ||
|---|---|---|
| Due after one year through five years | $83,464 | $80,274 |
| Due after five years through ten years | 14,678 | 13,103 |
| Due after ten years | 740,741 | 618,992 |
| Debt securities held to maturity | $838,883 | $712,369 |
Gains and Losses on Debt Securities Available for Sale
Realized gains and losses related to sales and calls of debt securities available for sale are summarized as follows(dollars in thousands):
| Three Months Ended September 30, · Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|
| 2024 · 2023 · 2024 · 2023 | |||||||
| Realized gains and losses on debt securities | |||||||
| Gross gains on debt securities | $— | $10 | $1 | $20 | |||
| Gross (losses) on debt securities1 | (11) | (43) | (6,818) | (227) | |||
| Realized net gains (losses) on debt securities | $(11) | $(33) | $(6,817) | $(207) | |||
- During the first quarter of 2024, Busey sold available-for-sale debt securities with a book value of approximately $108.2 million for a pre-tax loss of $6.8 million, as part of a balance sheet repositioning strategy. The loss on the sale of securities was offset by a pre-tax gain of $7.5 million realized on the sale of mortgage servicing rights on approximately $923.5 million of one- to four-family mortgage loans.
Debt securities with carrying amounts of $906.8 million on September 30, 2024, and $837.4 million on December 31, 2023, were pledged as collateral for public deposits, securities sold under agreements to repurchase, and for other purposes as required.
Debt Securities in an Unrealized or Unrecognized Loss Position
The following information pertains to debt securities with gross unrealized or unrecognized losses, aggregated by investment category and the length of time that individual securities have been in a continuous loss position(dollars in thousands):
| As of September 30, 2024 | ||||||
|---|---|---|---|---|---|---|
| Less than 12 months | 12 months or more | Total | ||||
| FairValue | UnrealizedLosses | FairValue | UnrealizedLosses | FairValue | UnrealizedLosses | |
| Debt securities available for sale | ||||||
| U.S. Treasury securities1 | $— | $— | $250 | $— | $250 | $— |
| Obligations of U.S. government corporations and agencies | — | — | 1,425 | (7) | 1,425 | (7) |
| Obligations of states and political subdivisions | 2,518 | (97) | 134,373 | (13,047) | 136,891 | (13,144) |
| Commercial mortgage-backed securities | — | — | 89,272 | (12,492) | 89,272 | (12,492) |
| Residential mortgage-backed securities | 877 | (2) | 993,631 | (159,223) | 994,508 | (159,225) |
| Corporate debt securities | 784 | (9) | 150,295 | (7,438) | 151,079 | (7,447) |
| Debt securities available for sale with gross unrealized losses | $4,179 | $(108) | $1,369,246 | $(192,207) | $1,373,425 | $(192,315) |
| 12 months or more | Total | |||
|---|---|---|---|---|
| FairValue | UnrecognizedLosses | FairValue | UnrecognizedLosses | |
| Debt securities held to maturity | ||||
| Commercial mortgage-backed securities | $354,905 | $(64,780) | $354,905 | $(64,780) |
| Residential mortgage-backed securities | 357,464 | (61,734) | 357,464 | (61,734) |
| Debt securities held to maturity with gross unrecognized losses | $712,369 | $(126,514) | $712,369 | $(126,514) |
- Gross losses were insignificant, rounding to zero thousand.
| As of December 31, 2023 | ||||||
|---|---|---|---|---|---|---|
| Less than 12 months | 12 months or more | Total | ||||
| FairValue | UnrealizedLosses | FairValue | UnrealizedLosses | FairValue | UnrealizedLosses | |
| Debt securities available for sale | ||||||
| U.S. Treasury securities | $— | $— | $15,946 | $(85) | $15,946 | $(85) |
| Obligations of U.S. government corporations and agencies | — | — | 5,709 | (58) | 5,709 | (58) |
| Obligations of states and political subdivisions | 11,442 | (54) | 146,797 | (17,972) | 158,239 | (18,026) |
| Asset-backed securities | — | — | 468,223 | (1,823) | 468,223 | (1,823) |
| Commercial mortgage-backed securities | — | — | 103,509 | (15,535) | 103,509 | (15,535) |
| Residential mortgage-backed securities | 141 | (1) | 1,110,906 | (195,546) | 1,111,047 | (195,547) |
| Corporate debt securities | 1,450 | (10) | 198,694 | (16,161) | 200,144 | (16,171) |
| Debt securities available for sale with gross unrealized losses | $13,033 | $(65) | $2,049,784 | $(247,180) | $2,062,817 | $(247,245) |
| 12 months or more | Total | |||
|---|---|---|---|---|
| FairValue | UnrecognizedLosses | FairValue | UnrecognizedLosses | |
| Debt securities held to maturity | ||||
| Commercial mortgage-backed securities | $357,526 | $(71,000) | $357,526 | $(71,000) |
| Residential mortgage-backed securities | 372,871 | (71,231) | 372,871 | (71,231) |
| Debt securities held to maturity with gross unrecognized losses | $730,397 | $(142,231) | $730,397 | $(142,231) |
Additional information about debt securities in an unrealized or unrecognized loss position is presented in the tables below(dollars in thousands):
| As of September 30, 2024 | |||
|---|---|---|---|
| Available for Sale | Held to Maturity | Total | |
| Debt securities with gross unrealized or unrecognized losses, fair value | $1,373,425 | $712,369 | $2,085,794 |
| Gross unrealized or unrecognized losses on debt securities | 192,315 | 126,514 | 318,829 |
| Ratio of gross unrealized or unrecognized losses to debt securities with gross unrealized or unrecognized losses | 14.0% | 17.8% | 15.3% |
| Count of debt securities | 704 | 55 | 759 |
| Count of debt securities in an unrealized or unrecognized loss position | 572 | 55 | 627 |
| As of December 31, 2023 | |||
|---|---|---|---|
| Available for Sale | Held to Maturity | Total | |
| Debt securities with gross unrealized or unrecognized losses, fair value | $2,062,817 | $730,397 | $2,793,214 |
| Gross unrealized or unrecognized losses on debt securities | 247,245 | 142,231 | 389,476 |
| Ratio of gross unrealized or unrecognized losses to debt securities with gross unrealized or unrecognized losses | 12.0% | 19.5% | 13.9% |
| Count of debt securities | 835 | 55 | 890 |
| Count of debt securities in an unrealized or unrecognized loss position | 779 | 55 | 834 |
Unrealized and unrecognized losses are related to changes in market interest rates and market conditions that do not represent credit-related impairments. Unless part of a corporate strategy or restructuring plan, Busey does not intend to sell securities that are in an unrealized or unrecognized loss position, and it is more likely than not that Busey will recover the amortized cost prior to being required to sell the debt securities. Full collection of the amounts due according to the contractual terms of the debt securities is expected; therefore, no ACL has been recorded in relation to debt securities, and the impairment related to noncredit factors on debt securities available for sale is recognized in AOCI, net of applicable taxes. As of September 30, 2024, Busey did not hold general obligation bonds of any single issuer, the aggregate of which exceeded 10% of Busey’s stockholders’ equity.
NOTE 4. PORTFOLIO LOANS
Loan Categories
Busey’s lending can be summarized in two primary categories: commercial and retail. Loans within these categories are further classified by lending activity: C&I and other commercial, commercial real estate, real estate construction, retail real estate, and retail other. Distributions of the loan portfolio by loan category and activity is presented in the following table(dollars in thousands):
| As of | ||
|---|---|---|
| September 30,2024 | December 31,2023 | |
| Commercial loans | ||
| C&I and other commercial | $1,877,497 | $1,835,994 |
| Commercial real estate | 3,355,807 | 3,337,337 |
| Real estate construction | 397,977 | 461,717 |
| Total commercial loans | 5,631,281 | 5,635,048 |
| Retail loans | ||
| Retail real estate | 1,708,771 | 1,720,455 |
| Retail other | 469,045 | 295,531 |
| Total retail loans | 2,177,816 | 2,015,986 |
| Total portfolio loans | 7,809,097 | 7,651,034 |
| ACL | (84,981) | (91,740) |
| Portfolio loans, net | $7,724,116 | $7,559,294 |
Net deferred loan origination costs included in the balances above were $12.0 million as of September 30, 2024, compared to $13.5 million as of December 31, 2023. Net accretable purchase accounting adjustments included in the balances above reduced loans by $9.7 million as of September 30, 2024, and $4.5 million as of December 31, 2023.
Busey didnot purchase any retail real estate loans during the three months ended September 30, 2024, and elected to purchase $6.9 million of retail real estate loans during the nine months ended September 30, 2024. Busey didnot purchase any retail real estate loans during the corresponding periods of 2023.
Pledged Loans
The principal balance of loans Busey has pledged as collateral to the FHLB and Federal Reserve Bank for liquidity as set forth in the table below(dollars in thousands):
| As of | ||
|---|---|---|
| September 30,2024 | December 31,2023 | |
| Pledged loans | ||
| FHLB | $4,935,257 | $4,865,481 |
| Federal Reserve Bank | 755,936 | 722,914 |
| Total pledged loans | $5,691,193 | $5,588,395 |
Risk Grading
Busey utilizes a loan grading scale to assign a risk grade to all of its loans. A description of the general characteristics of each grade is as follows:
Pass– This category includes loans that are all considered acceptable credits, ranging from investment or near investment grade, to loans made to borrowers who exhibit credit fundamentals that meet or exceed industry standards.
Watch– This category includes loans that warrant a higher-than-average level of monitoring to ensure that weaknesses do not cause the inability of the credit to perform as expected. These loans are not necessarily a problem due to other inherent strengths of the credit, such as guarantor strength, but have above average concern and monitoring.
Special mention– This category is for “Other Assets Specially Mentioned” loans that have potential weaknesses, which may, if not checked or corrected, weaken the asset or inadequately protect Busey’s credit position at some future date.
Substandard– This category includes “Substandard” loans, determined in accordance with regulatory guidelines, for which the accrual of interest has not been stopped. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that Busey will sustain some loss if the deficiencies are not corrected.
Substandard non-accrual– This category includes loans that have all the characteristics of a “Substandard” loan with additional factors that make collection in full highly questionable and improbable. Such loans are placed on non-accrual status and may be dependent on collateral with a value that is difficult to determine.
All loans are graded at their inception. Commercial lending relationships that are $1.0 million or less are usually processed through an expedited underwriting process. Most commercial loans greater than $1.0 million are included in a portfolio review at least annually. Commercial loans greater than $0.35 million that have a grading of special mention or worse are typically reviewed on a quarterly basis. Interim reviews may take place if circumstances of the borrower warrant a more frequent review.
The following table is a summary of risk grades of our portfolio loans, segregated by loan category and lending activity(dollars in thousands):
| As of September 30, 2024 | ||||||
|---|---|---|---|---|---|---|
| Pass | Watch | SpecialMention | Substandard | SubstandardNon-accrual | Total | |
| Commercial loans | ||||||
| C&I and other commercial | $1,535,598 | $257,892 | $38,374 | $41,291 | $4,342 | $1,877,497 |
| Commercial real estate | 2,814,481 | 454,016 | 55,178 | 31,582 | 550 | 3,355,807 |
| Real estate construction | 356,722 | 27,637 | 8,368 | 5,250 | — | 397,977 |
| Total commercial loans | 4,706,801 | 739,545 | 101,920 | 78,123 | 4,892 | 5,631,281 |
| Retail loans | ||||||
| Retail real estate | 1,692,828 | 9,378 | 872 | 2,581 | 3,112 | 1,708,771 |
| Retail other | 468,857 | — | — | — | 188 | 469,045 |
| Total retail loans | 2,161,685 | 9,378 | 872 | 2,581 | 3,300 | 2,177,816 |
| Total portfolio loans | $6,868,486 | $748,923 | $102,792 | $80,704 | $8,192 | $7,809,097 |
| As of December 31, 2023 | ||||||
|---|---|---|---|---|---|---|
| Pass | Watch | SpecialMention | Substandard | SubstandardNon-accrual | Total | |
| Commercial loans | ||||||
| C&I and other commercial | $1,462,755 | $296,416 | $46,488 | $27,733 | $2,602 | $1,835,994 |
| Commercial real estate | 2,827,030 | 431,427 | 48,545 | 29,492 | 843 | 3,337,337 |
| Real estate construction | 448,011 | 8,135 | — | 5,327 | 244 | 461,717 |
| Total commercial loans | 4,737,796 | 735,978 | 95,033 | 62,552 | 3,689 | 5,635,048 |
| Retail loans | ||||||
| Retail real estate | 1,702,897 | 11,144 | 1,024 | 1,795 | 3,595 | 1,720,455 |
| Retail other | 295,374 | — | — | — | 157 | 295,531 |
| Total retail loans | 1,998,271 | 11,144 | 1,024 | 1,795 | 3,752 | 2,015,986 |
| Total portfolio loans | $6,736,067 | $747,122 | $96,057 | $64,347 | $7,441 | $7,651,034 |
Risk grades of portfolio loans and gross charge-offs are presented in the tables below by lending activity, further sorted by origination year(dollars in thousands):
| Term Loans Amortized Cost Basis by Origination Year · RevolvingLoans · Total | ||||||||
|---|---|---|---|---|---|---|---|---|
| Risk Grade Ratings · 2024 · 2023 · 2022 · 2021 · 2020 · Prior | ||||||||
| C&I and other commercial | ||||||||
| Pass | $168,607 | $223,091 | $177,527 | $135,226 | $78,049 | $132,258 | $620,840 | $1,535,598 |
| Watch | 36,362 | 34,787 | 48,383 | 18,543 | 2,021 | 28,452 | 89,344 | 257,892 |
| Special Mention | 1,574 | 2,431 | 6,417 | 2,897 | 315 | 2,648 | 22,092 | 38,374 |
| Substandard | 15,561 | 7,227 | 894 | 713 | 406 | 2,495 | 13,995 | 41,291 |
| Substandard non-accrual | 76 | 72 | 484 | — | 45 | 1,368 | 2,297 | 4,342 |
| Total commercial | 222,180 | 267,608 | 233,705 | 157,379 | 80,836 | 167,221 | 748,568 | 1,877,497 |
| Gross charge-offs | $— | $14,980 | $128 | $22 | $— | $303 | $— | $15,433 |
| Commercial real estate | ||||||||
| Pass | 211,288 | 373,175 | 819,235 | 651,901 | 370,205 | 365,236 | 23,441 | 2,814,481 |
| Watch | 97,909 | 142,283 | 54,179 | 93,691 | 28,618 | 36,417 | 919 | 454,016 |
| Special Mention | 27,889 | 1,435 | 8,085 | 1,796 | 8,958 | 7,007 | 8 | 55,178 |
| Substandard | 19,829 | 2,068 | 4,667 | 51 | 131 | 4,786 | 50 | 31,582 |
| Substandard non-accrual | — | 40 | — | — | 18 | 492 | — | 550 |
| Total commercial real estate | 356,915 | 519,001 | 886,166 | 747,439 | 407,930 | 413,938 | 24,418 | 3,355,807 |
| Gross charge-offs | — | — | — | — | — | 315 | — | 315 |
| Real estate construction | ||||||||
| Pass | 156,726 | 120,079 | 14,450 | 54,133 | 2,344 | 1,192 | 7,798 | 356,722 |
| Watch | 1,686 | 6,471 | — | 19,480 | — | — | — | 27,637 |
| Special Mention | — | 8,306 | — | 62 | — | — | — | 8,368 |
| Substandard | 5,250 | — | — | — | — | — | — | 5,250 |
| Substandard non-accrual | — | — | — | — | — | — | — | — |
| Total real estate construction | 163,662 | 134,856 | 14,450 | 73,675 | 2,344 | 1,192 | 7,798 | 397,977 |
| Gross charge-offs | — | — | — | — | — | — | — | — |
| Retail real estate | ||||||||
| Pass | 66,952 | 244,309 | 374,402 | 363,006 | 150,835 | 283,136 | 210,188 | 1,692,828 |
| Watch | 804 | 634 | 2,780 | 3,419 | 891 | 130 | 720 | 9,378 |
| Special Mention | 150 | — | 347 | — | — | 375 | — | 872 |
| Substandard | — | 254 | 1,028 | 509 | — | 786 | 4 | 2,581 |
| Substandard non-accrual | — | — | 159 | 92 | 241 | 1,732 | 888 | 3,112 |
| Total retail real estate | 67,906 | 245,197 | 378,716 | 367,026 | 151,967 | 286,159 | 211,800 | 1,708,771 |
| Gross charge-offs | — | — | — | — | — | 159 | — | 159 |
| Retail other | ||||||||
| Pass | 4,455 | 65,336 | 66,707 | 15,016 | 3,559 | 1,198 | 312,586 | 468,857 |
| Watch | — | — | — | — | — | — | — | — |
| Special Mention | — | — | — | — | — | — | — | — |
| Substandard | — | — | — | — | — | — | — | — |
| Substandard non-accrual | — | 110 | 67 | — | — | 11 | — | 188 |
| Total retail other | 4,455 | 65,446 | 66,774 | 15,016 | 3,559 | 1,209 | 312,586 | 469,045 |
| Gross charge-offs | 7 | 30 | 88 | 72 | 4 | 302 | — | 503 |
| Total portfolio loans | $815,118 | $1,232,108 | $1,579,811 | $1,360,535 | $646,636 | $869,719 | $1,305,170 | $7,809,097 |
| Total gross charge-offs | $7 | $15,010 | $216 | $94 | $4 | $1,079 | $— | $16,410 |
| Term Loans Amortized Cost Basis by Origination Year · RevolvingLoans · Total | ||||||||
|---|---|---|---|---|---|---|---|---|
| Risk Grade Ratings · 2023 · 2022 · 2021 · 2020 · 2019 · Prior | ||||||||
| C&I and other commercial | ||||||||
| Pass | $306,578 | $220,847 | $159,130 | $71,025 | $35,927 | $143,078 | $526,170 | $1,462,755 |
| Watch | 78,603 | 65,703 | 21,421 | 23,919 | 7,035 | 21,293 | 78,442 | 296,416 |
| Special Mention | 792 | 8,224 | 2,917 | 1,076 | 686 | 3,274 | 29,519 | 46,488 |
| Substandard | 8,715 | 765 | 942 | 426 | 3,734 | 1,859 | 11,292 | 27,733 |
| Substandard non-accrual | 166 | — | 117 | 84 | 128 | 407 | 1,700 | 2,602 |
| Total commercial | 394,854 | 295,539 | 184,527 | 96,530 | 47,510 | 169,911 | 647,123 | 1,835,994 |
| Gross charge-offs | $284 | $— | $420 | $— | $316 | $1,409 | $— | $2,429 |
| Commercial real estate | ||||||||
| Pass | 395,644 | 824,506 | 720,052 | 399,195 | 271,078 | 199,662 | 16,893 | 2,827,030 |
| Watch | 166,795 | 47,070 | 92,848 | 34,010 | 68,196 | 19,396 | 3,112 | 431,427 |
| Special Mention | 14,313 | 10,507 | 12,446 | 4,968 | 3,297 | 3,014 | — | 48,545 |
| Substandard | 1,796 | 188 | 18,862 | 2,938 | 1,802 | 3,856 | 50 | 29,492 |
| Substandard non-accrual | 47 | 79 | 85 | 23 | — | 609 | — | 843 |
| Total commercial real estate | 578,595 | 882,350 | 844,293 | 441,134 | 344,373 | 226,537 | 20,055 | 3,337,337 |
| Gross charge-offs | — | — | — | — | — | 953 | — | 953 |
| Real estate construction | ||||||||
| Pass | 204,952 | 128,462 | 85,086 | 2,616 | 1,323 | 2,934 | 22,638 | 448,011 |
| Watch | 2,859 | 4,406 | 507 | 322 | 41 | — | — | 8,135 |
| Substandard | 5,327 | — | — | — | — | — | — | 5,327 |
| Substandard non-accrual | — | — | — | — | — | 244 | — | 244 |
| Total real estate construction | 213,138 | 132,868 | 85,593 | 2,938 | 1,364 | 3,178 | 22,638 | 461,717 |
| Gross charge-offs | — | — | — | — | — | — | — | — |
| Retail real estate | ||||||||
| Pass | 243,400 | 376,922 | 411,723 | 156,762 | 70,099 | 256,571 | 187,420 | 1,702,897 |
| Watch | 1,096 | 4,137 | 2,442 | 954 | 536 | 234 | 1,745 | 11,144 |
| Special Mention | 286 | 358 | — | — | — | 380 | — | 1,024 |
| Substandard | 69 | 72 | 292 | 49 | 80 | 997 | 236 | 1,795 |
| Substandard non-accrual | — | 528 | 121 | 267 | 100 | 1,960 | 619 | 3,595 |
| Total retail real estate | 244,851 | 382,017 | 414,578 | 158,032 | 70,815 | 260,142 | 190,020 | 1,720,455 |
| Gross charge-offs | — | 5 | — | 29 | 72 | 301 | — | 407 |
| Retail other | ||||||||
| Pass | 88,885 | 92,931 | 23,019 | 6,701 | 4,597 | 854 | 78,387 | 295,374 |
| Substandard non-accrual | — | 93 | 62 | — | — | 2 | — | 157 |
| Total retail other | 88,885 | 93,024 | 23,081 | 6,701 | 4,597 | 856 | 78,387 | 295,531 |
| Gross charge-offs | 5 | 71 | 172 | 5 | 3 | 373 | — | 629 |
| Total portfolio loans | $1,520,323 | $1,785,798 | $1,552,072 | $705,335 | $468,659 | $660,624 | $958,223 | $7,651,034 |
| Total gross charge-offs | $289 | $76 | $592 | $34 | $391 | $3,036 | $— | $4,418 |
Past Due and Non-accrual Loans
An analysis of the amortized cost basis of portfolio loans that were past due and still accruing, or on a non-accrual status, is presented in the table below(dollars in thousands):
| As of September 30, 2024 | ||||
|---|---|---|---|---|
| Loans past due, still accruing · Non-accrualLoans | ||||
| 30-59 Days · 60-89 Days · 90+Days | ||||
| Commercial loans | ||||
| C&I and other commercial | $1,579 | $— | $— | $4,342 |
| Commercial real estate | 1,286 | 10 | — | 550 |
| Real estate construction | 23 | — | — | — |
| Past due and non-accrual commercial loans | 2,888 | 10 | — | 4,892 |
| Retail loans | ||||
| Retail real estate | 4,423 | 620 | 25 | 3,112 |
| Retail other | 2,120 | 80 | — | 188 |
| Past due and non-accrual retail loans | 6,543 | 700 | 25 | 3,300 |
| Total past due and non-accrual loans | $9,431 | $710 | $25 | $8,192 |
| As of December 31, 2023 | ||||
|---|---|---|---|---|
| Loans past due, still accruing · Non-accrualLoans | ||||
| 30-59 Days · 60-89 Days · 90+Days | ||||
| Commercial loans | ||||
| C&I and other commercial | $— | $214 | $— | $2,602 |
| Commercial real estate | 752 | — | — | 843 |
| Real estate construction | 24 | — | — | 244 |
| Past due and non-accrual commercial loans | 776 | 214 | — | 3,689 |
| Retail loans | ||||
| Retail real estate | 2,781 | 927 | 366 | 3,595 |
| Retail other | 886 | 195 | 9 | 157 |
| Past due and non-accrual retail loans | 3,667 | 1,122 | 375 | 3,752 |
| Total past due and non-accrual loans | $4,443 | $1,336 | $375 | $7,441 |
Gross interest income recorded on 90+ days past due loans, and that would have been recorded on non-accrual loans if they had been accruing interest in accordance with their original terms, was $0.1 million and $0.6 million for the three and nine months ended September 30, 2024, respectively, and was $0.2 million and $0.9 million for the three and nine months ended September 30, 2023, respectively. The amount of interest collected on those loans and recognized on a cash basis that was included in interest income wasimmaterial for the three and nine months ended September 30, 2024 and 2023.
Loan Modifications for Borrowers Experiencing Financial Difficulty
The following tables present the amortized cost basis of loans that were modified—specifically in the form of (1) principal forgiveness, (2) an interest rate reduction, (3) an other-than-insignificant payment deferral, and/or (4) a term extension—for borrowers experiencing financial difficulty during the periods indicated, disaggregated by lending activity and the type of modification(dollars in thousands):
| Three Months Ended September 30, 2024 | ||||
|---|---|---|---|---|
| Payment Deferral | % of Total Class of Financing Receivable1 | Term Extension2 | % of Total Class of Financing Receivable | |
| Modified Loans | ||||
| C&I and other commercial | $325 | —% | $14,537 | 0.8% |
| Commercial real estate | — | —% | 18,448 | 0.5% |
| Real estate construction | — | —% | 5,250 | 1.3% |
| Total of loans modified during the period3 | $325 | —% | $38,235 | 0.5% |
Modified loans represent an insignificant portion of C&I and other commercial loans, rounding tozero percent.
Modifications to extend loan terms also included, in some cases, interest rate increases during the extension period.
All modifications were for loans classified as substandard.
| Three Months Ended September 30, 2023 | ||||
|---|---|---|---|---|
| Interest Rate Reduction1 | % of Total Class of Financing Receivable2 | Term Extension3 | % of Total Class of Financing Receivable2 | |
| Modified Loans | ||||
| C&I and other commercial | $— | —% | $12,026 | 0.6% |
| Commercial real estate | 880 | —% | 553 | —% |
| Total of loans modified during the period4 | $880 | —% | $12,579 | 0.2% |
For one loan, the default rate was removed once forbearance was entered.
Modified loans represented an insignificant portion of commercial real estate loans, rounding to zero percent.
Modifications to extend loan terms also included, in some cases, interest rate increases during the extension period.
All modifications were for loans classified as substandard.
| Nine Months Ended September 30, 2024 | ||||
|---|---|---|---|---|
| Payment Deferral1 | % of Total Class of Financing Receivable2 | Term Extension1 | % of Total Class of Financing Receivable | |
| Modified Loans | ||||
| C&I and other commercial | $325 | —% | $28,073 | 1.5% |
| Commercial real estate | — | —% | 19,782 | 0.6% |
| Real estate construction | — | —% | 5,250 | 1.3% |
| Total of loans modified during the period3 | $325 | —% | $53,105 | 0.7% |
Modifications to extend loan terms also included, in some cases, interest rate increases during the extension period.
Modified loans represent an insignificant portion of C&I and other commercial loans, rounding to zero percent.
All modifications were for loans classified as substandard.
| Nine Months Ended September 30, 2023 | ||||||
|---|---|---|---|---|---|---|
| Interest Rate Reduction1 | % of Total Class of Financing Receivable2 | Payment Deferral3 | % of Total Class of Financing Receivable2 | Term Extension4 | % of Total Class of Financing Receivable2 | |
| Modified Loans | ||||||
| C&I and other commercial | $— | —% | $— | —% | $17,334 | 0.9% |
| Commercial real estate | 880 | —% | 225 | —% | 1,003 | —% |
| Real estate construction | — | —% | — | —% | 5,353 | 1.0% |
| Total of loans modified during the period5 | $880 | —% | $225 | —% | $23,690 | 0.3% |
For one loan, the default rate was removed once forbearance was entered.
Modified loans represented an insignificant portion of commercial real estate loans, rounding to zero percent.
A loan with payment deferral was modified to defer all principal payments until the end of the loan term, which was shortened.
Modifications to extend loan terms also included, in some cases, interest rate increases during the extension period.
Modifications included two loans on non-accrual status, and the remaining loans were classified as substandard.
The following table summarizes loan modifications made during the periods indicated for borrowers experiencing financial difficulty:
| Three Months Ended September 30, | |||
|---|---|---|---|
| 2024 · 2023 | |||
| Weighted Average Term Extension | Weighted Average Interest Rate Reduction | Weighted Average Term Extension | |
| Loan Modifications | |||
| C&I and other commercial | 6.3 months | — | 15.3 months |
| Commercial real estate | 4.1 months | 2.50% | 9.0 months |
| Real estate construction | 6.0 months | — | — |
| Weighted average modifications | 5.2 months | 2.50% | 15.0 months |
| Nine Months Ended September 30, | |||
|---|---|---|---|
| 2024 · 2023 | |||
| Weighted Average Term Extension | Weighted Average Interest Rate Reduction | Weighted Average Term Extension | |
| Loan Modifications | |||
| C&I and other commercial | 14.1 months | — | 14.3 months |
| Commercial real estate | 3.9 months | 2.50% | 11.2 months |
| Real estate construction | 6.0 months | — | 12.0 months |
| Weighted average modifications | 9.5 months | 2.50% | 13.7 months |
Performance of Modified Loans
Busey closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table depicts the payment performance of loans modified during the last twelve months(dollars in thousands):
| As of September 30, 2024 | ||||
|---|---|---|---|---|
| Current | 30-89 Days | 90+ Days | Non-accrual | |
| Modified Loans | ||||
| C&I and other commercial | $29,547 | $— | $— | $— |
| Commercial real estate | 20,082 | — | — | — |
| Real estate construction | 5,250 | — | — | — |
| Amortized cost of modified loans | $54,879 | $— | $— | $— |
No loans had a payment default during the three months ended September 30, 2023, or during the three or nine months ended September 30, 2024, after having been modified during the 12 months before that default for borrowers experiencing financial difficulty. The following table provides the amortized cost basis of loans that had a payment default during the nine months ended September 30, 2023, after having been modified during the 12 months before default for borrowers experiencing financial difficulty(dollars in thousands). A default occurs when a loan is 90 days or more past due or transferred to non-accrual status.
| Nine Months Ended September 30, 2023 | ||
|---|---|---|
| 2023 | ||
| Payment Deferral | Term Extension | |
| Loans with Subsequent Defaults | ||
| C&I and other commercial | $— | $500 |
| Commercial real estate | 225 | — |
| Amortized cost of modified loans with subsequent defaults | $225 | $500 |
Collateral Dependent Loans
Management's evaluation as to the ultimate collectability of loans includes estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral. These estimates are affected by changing economic conditions and the economic prospects of borrowers. Collateral dependent loans are loans in which repayment is expected to be provided solely by the operation or sale of the underlying collateral and there are no other available and reliable sources of repayment. Loans are written down to the lower of cost or fair value of the underlying collateral, less estimated costs to sell. Busey had $5.2 million and $6.1 million of collateral dependent loans secured by real estate or business assets as of September 30, 2024, and December 31, 2023, respectively.
Foreclosures
As of September 30, 2024, Busey had $0.8 million of residential real estate loans in the process of foreclosure. Busey follows Federal Housing Finance Agency guidelines on single-family foreclosures and real estate owned evictions on portfolio loans.
Loans Evaluated Individually
Busey evaluates loans with disparate risk characteristics on an individual basis. The following tables provide details of loans evaluated individually, segregated by loan category and lending activity. The unpaid principal balance represents customer outstanding contractual principal balances excluding any partial charge-offs. Recorded investment represents the amortized cost of customer balances net of any partial charge-offs recognized on the loan. Average recorded investment is calculated using the most recent four quarters(dollars in thousands):
| As of September 30, 2024 | ||||||
|---|---|---|---|---|---|---|
| UnpaidPrincipalBalance · Recorded Investment · AverageRecordedInvestment | ||||||
| With NoAllowance · WithAllowance · Total · RelatedAllowance | ||||||
| Loans evaluated individually | ||||||
| Commercial loans | ||||||
| C&I and other commercial | $7,821 | $1,758 | $2,479 | $4,237 | $1,863 | $5,379 |
| Commercial real estate | 516 | 492 | — | 492 | — | 1,163 |
| Commercial loans evaluated individually | 8,337 | 2,250 | 2,479 | 4,729 | 1,863 | 6,542 |
| Retail loans | ||||||
| Retail real estate | — | — | — | — | — | 67 |
| Retail loans evaluated individually | — | — | — | — | — | 67 |
| Total loans evaluated individually | $8,337 | $2,250 | $2,479 | $4,729 | $1,863 | $6,609 |
| As of December 31, 2023 | ||||||
|---|---|---|---|---|---|---|
| UnpaidPrincipalBalance · Recorded Investment · AverageRecordedInvestment | ||||||
| With NoAllowance · WithAllowance · Total · RelatedAllowance | ||||||
| Commercial loans | ||||||
| C&I and other commercial | $7,283 | $585 | $1,785 | $2,370 | $785 | $5,244 |
| Commercial real estate | 2,600 | 610 | 85 | 695 | 85 | 3,865 |
| Real estate construction | — | — | — | — | — | 49 |
| Commercial loans evaluated individually | 9,883 | 1,195 | 1,870 | 3,065 | 870 | 9,158 |
| Retail loans | ||||||
| Retail real estate | 213 | 61 | 25 | 86 | 25 | 790 |
| Retail loans evaluated individually | 213 | 61 | 25 | 86 | 25 | 790 |
| Total loans evaluated individually | $10,096 | $1,256 | $1,895 | $3,151 | $895 | $9,948 |
Allowance for Credit Losses
The ACL is a valuation account that is deducted from the portfolio loans’ amortized cost bases to present the net amount expected to be collected on the portfolio loans. The ACL is established through the provision for credit losses charged to income. Portfolio loans are charged off against the ACL when management believes the uncollectibility of a loan balance is confirmed. Recoveries are recognized up to the aggregate amount of previously charged-off balances.
Management estimates the ACL balance using relevant available information from internal and external sources relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. The cumulative loss rate used as the basis for the estimate of credit losses is comprised of Busey’s historical loss experience beginning in 2010. Due to the continued economic uncertainty in the markets in which the Company operates, Busey will continue to utilize a forecast period of 12 months with an immediate reversion to historical loss rates beyond this forecast period in its ACL estimate.
The following tables summarize activity in the ACL attributable to each lending activity. Allocation of a portion of the ACL to one lending activity does not preclude its availability to absorb losses from other lending activities(dollars in thousands):
| Three Months Ended September 30, 2024 | ||||||
|---|---|---|---|---|---|---|
| C&I and Other Commercial | CommercialReal Estate | Real EstateConstruction | RetailReal Estate | Retail Other | Total | |
| ACL balance, June 30, 2024 | $20,286 | $35,104 | $3,722 | $23,729 | $2,385 | $85,226 |
| Provision for credit losses | 715 | (1,158) | 39 | 120 | 286 | 2 |
| Charged-off | (202) | (215) | — | (32) | (225) | (674) |
| Recoveries | 210 | 4 | 10 | 162 | 41 | 427 |
| ACL balance, September 30, 2024 | $21,009 | $33,735 | $3,771 | $23,979 | $2,487 | $84,981 |
| Nine Months Ended September 30, 2024 | ||||||
|---|---|---|---|---|---|---|
| C&I and Other Commercial | CommercialReal Estate | Real EstateConstruction | RetailReal Estate | Retail Other | Total | |
| ACL balance, December 31, 2023 | $21,256 | $35,465 | $5,163 | $26,298 | $3,558 | $91,740 |
| Day 1 PCD1 | 824 | 322 | — | 96 | 1 | 1,243 |
| Provision for credit losses | 13,958 | (1,882) | (1,449) | (2,624) | (686) | 7,317 |
| Charged-off | (15,433) | (315) | — | (159) | (503) | (16,410) |
| Recoveries | 404 | 145 | 57 | 368 | 117 | 1,091 |
| ACL balance, September 30, 2024 | $21,009 | $33,735 | $3,771 | $23,979 | $2,487 | $84,981 |
- The Day 1 PCD is attributable to the M&M acquisition (see“Note 2. Mergers and Acquisitions.”)
| Three Months Ended September 30, 2023 | ||||||
|---|---|---|---|---|---|---|
| C&I and Other Commercial | CommercialReal Estate | Real EstateConstruction | RetailReal Estate | Retail Other | Total | |
| ACL balance, June 30, 2023 | $24,510 | $33,656 | $5,071 | $24,675 | $3,727 | $91,639 |
| Provision for credit losses | (1,306) | 745 | 104 | 674 | 147 | 364 |
| Charged-off | (758) | (102) | — | (144) | (111) | (1,115) |
| Recoveries | 187 | 392 | 31 | 128 | 84 | 822 |
| ACL balance, September 30, 2023 | $22,633 | $34,691 | $5,206 | $25,333 | $3,847 | $91,710 |
| Nine Months Ended September 30, 2023 | ||||||
|---|---|---|---|---|---|---|
| C&I and Other Commercial | CommercialReal Estate | Real EstateConstruction | RetailReal Estate | Retail Other | Total | |
| ACL balance, December 31, 2022 | $23,860 | $38,299 | $6,457 | $18,193 | $4,799 | $91,608 |
| Provision for credit losses | 79 | (3,006) | (1,404) | 6,975 | (700) | 1,944 |
| Charged-off | (1,733) | (1,175) | — | (252) | (483) | (3,643) |
| Recoveries | 427 | 573 | 153 | 417 | 231 | 1,801 |
| ACL balance, September 30, 2023 | $22,633 | $34,691 | $5,206 | $25,333 | $3,847 | $91,710 |
The following tables present the ACL and amortized cost of portfolio loans by loan category and lending activity(dollars in thousands):
| As of September 30, 2024 | ||||||
|---|---|---|---|---|---|---|
| Portfolio Loans | ACL Attributed to Portfolio Loans | |||||
| CollectivelyEvaluated forImpairment | IndividuallyEvaluated forImpairment | Total | CollectivelyEvaluated forImpairment | IndividuallyEvaluated forImpairment | Total | |
| Commercial loans | ||||||
| C&I and other commercial | $1,873,260 | $4,237 | $1,877,497 | $19,146 | $1,863 | $21,009 |
| Commercial real estate | 3,355,315 | 492 | 3,355,807 | 33,735 | — | 33,735 |
| Real estate construction | 397,977 | — | 397,977 | 3,771 | — | 3,771 |
| Commercial loans and related ACL | 5,626,552 | 4,729 | 5,631,281 | 56,652 | 1,863 | 58,515 |
| Retail loans | ||||||
| Retail real estate | 1,708,771 | — | 1,708,771 | 23,979 | — | 23,979 |
| Retail other | 469,045 | — | 469,045 | 2,487 | — | 2,487 |
| Retail loans and related ACL | 2,177,816 | — | 2,177,816 | 26,466 | — | 26,466 |
| Portfolio loans and related ACL | $7,804,368 | $4,729 | $7,809,097 | $83,118 | $1,863 | $84,981 |
| As of December 31, 2023 | ||||||
|---|---|---|---|---|---|---|
| Portfolio Loans | ACL Attributed to Portfolio Loans | |||||
| CollectivelyEvaluated forImpairment | IndividuallyEvaluated forImpairment | Total | CollectivelyEvaluated forImpairment | IndividuallyEvaluated forImpairment | Total | |
| Commercial loans | ||||||
| C&I and other commercial | $1,833,624 | $2,370 | $1,835,994 | $20,471 | $785 | $21,256 |
| Commercial real estate | 3,336,642 | 695 | 3,337,337 | 35,380 | 85 | 35,465 |
| Real estate construction | 461,717 | — | 461,717 | 5,163 | — | 5,163 |
| Commercial loans and related ACL | 5,631,983 | 3,065 | 5,635,048 | 61,014 | 870 | 61,884 |
| Retail loans | ||||||
| Retail real estate | 1,720,369 | 86 | 1,720,455 | 26,273 | 25 | 26,298 |
| Retail other | 295,531 | — | 295,531 | 3,558 | — | 3,558 |
| Retail loans and related ACL | 2,015,900 | 86 | 2,015,986 | 29,831 | 25 | 29,856 |
| Portfolio loans and related ACL | $7,647,883 | $3,151 | $7,651,034 | $90,845 | $895 | $91,740 |
NOTE 5. LEASES
Busey as the Lessee
Busey has operating leases consisting primarily of equipment leases and real estate leases for banking centers, ATM locations, and office space. The following table summarizes lease-related balances that Busey reported on its Consolidated Balance Sheets (Unaudited) (dollars in thousands) and lease terms:
| As of | ||
|---|---|---|
| September 30,2024 | December 31,2023 | |
| Lease balances | ||
| Right of use assets | $11,100 | $11,027 |
| Lease liabilities | 11,470 | 11,308 |
| Lease terms | ||
| Year through which lease terms extend | 2037 | 2037 |
| Weighted average remaining lease term | 7.62 years | 8.39 years |
| Weighted average discount rate | 3.74% | 3.59% |
The following table presents lease costs, which are included in net occupancy and equipment expense in the Consolidated Statements of Income (Unaudited), and lease-related cash flows(dollars in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| Lease costs | ||||
| Operating lease costs | $608 | $615 | $1,702 | $1,836 |
| Variable lease costs | 15 | 9 | 43 | 27 |
| Short-term lease costs | 12 | 15 | 70 | 37 |
| Total lease cost | $635 | $639 | $1,815 | $1,900 |
| Cash flows related to leases | ||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||
| Operating lease cash flows – Fixed payments | $568 | $586 | $1,605 | $1,720 |
| Operating lease cash flows – Liability reduction | 466 | 483 | 1,310 | 1,423 |
| Right of use assets obtained during the period in exchange for operating lease liabilities1 | 469 | 199 | 1,478 | 208 |
- The nine months ended September 30, 2024, included $0.3 million right of use assets recognized during the second quarter of 2024 in connection with the acquisition of M&M (see“Note 2. Mergers and Acquisitions”), and an additional $0.7 million recognized in the second quarter of 2024 in connection with a lease amendment that was executed subsequent to the acquisition for a lease that was obtained in the acquisition.
Busey was obligated under noncancelable operating leases for office space and other commitments. Future undiscounted lease payments with initial terms of one year or more, are as follows(dollars in thousands):
| As of September 30, 2024 | |
|---|---|
| Rent commitments | |
| Remainder of 2024 | $590 |
| 2025 | 2,088 |
| 2026 | 1,766 |
| 2027 | 1,549 |
| 2028 | 1,494 |
| 2029 | 1,503 |
| Thereafter | 4,303 |
| Total undiscounted cash flows | 13,293 |
| Less: Amounts representing interest | 1,823 |
| Present value of net future minimum lease payments | $11,470 |
Busey as the Lessor
Busey leases office and parking spaces to outside parties. Revenues recorded in connection with these leases, reported in other income on our Consolidated Statements of Income (Unaudited), are summarized as follows(dollars in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| Rental income | $206 | $152 | $612 | $526 |
Noncancellable terms for these leases, all of which are operating leases, extend through 2028. Under the terms of these lease agreements, Busey is entitled to receive aggregate future minimum lease payments as shown in the table below(dollars in thousands):
| As of September 30, 2024 | |
|---|---|
| Rents to be received | |
| Remainder of 2024 | $207 |
| 2025 | 665 |
| 2026 | 503 |
| 2027 | 301 |
| 2028 | 185 |
| Total lease payments from operating leases | $1,861 |
NOTE 6. DEPOSITS
The composition of Busey’s deposits is presented in the table below(dollars in thousands):
| As of | ||
|---|---|---|
| September 30,2024 | December 31,2023 | |
| Deposits | ||
| Noninterest-bearing demand deposits | $2,683,543 | $2,834,655 |
| Interest-bearing transaction deposits | 2,455,217 | 2,717,139 |
| Saving deposits and money market deposits | 3,284,556 | 2,920,088 |
| Time deposits | 1,519,925 | 1,819,274 |
| Total deposits | $9,943,241 | $10,291,156 |
Additional information about Busey’s deposits follows(dollars in thousands):
| As of | ||
|---|---|---|
| September 30,2024 | December 31,2023 | |
| Brokered savings deposits and money market deposits | $6,001 | $6,001 |
| Brokered time deposits | 7,088 | 285 |
| Aggregate amount of time deposits with a minimum denomination of $100,000 | 873,754 | 1,072,189 |
| Aggregate amount of time deposits with a minimum denomination that meets or exceeds the FDIC insurance limit of $250,000 | 338,808 | 386,286 |
Scheduled maturities of time deposits are as follows(dollars in thousands):
| As of September 30, 2024 | |
|---|---|
| Time deposits by schedule of maturities | |
| Remainder of 2024 | $547,111 |
| 2025 | 914,253 |
| 2026 | 30,592 |
| 2027 | 13,689 |
| 2028 | 8,715 |
| 2029 | 5,116 |
| Thereafter | 449 |
| Time deposits | $1,519,925 |
NOTE 7. BORROWINGS
Securities Sold Under Agreements to Repurchase
Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature daily. Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction. The underlying securities are held by Busey’s safekeeping agent. Busey may be required to provide additional collateral based on fluctuations in the fair value of the underlying securities. Securities sold under agreements to repurchase were as follows(dollars in thousands):
| As of | ||
|---|---|---|
| September 30,2024 | December 31,2023 | |
| Securities sold under agreements to repurchase | $128,429 | $187,396 |
| Weighted average rate for securities sold under agreements to repurchase | 2.77% | 3.26% |
Term Loan and Revolving Line of Credit
On May 28, 2021, Busey entered into a Second Amended and Restated Credit Agreement, pursuant to which Busey has access to (1) a $40.0 million revolving line of credit with an initial termination date of April 30, 2022, and (2) a $60.0 million Term Loan with a maturity date of May 31, 2026. The loans had an annual interest rate of 1.75% plus the one-month LIBOR rate. On April 30, 2022, the agreement was amended, effecting an extension of the termination date for the revolving line of credit to April 30, 2023, and providing for the transition from a LIBOR-indexed interest rate to a SOFR-indexed interest rate. Under the terms of the amendment, the annual interest rate for the loans was established at 1.80% plus the one-month forward-looking term rate based on SOFR. The agreement has subsequently been amended twice to extend the termination date for the revolving line of credit, which is currently April 30, 2025.
During the first quarter of 2024, Busey paid the full $30.0 million balance remaining on the Term Loan, at which time the Term Loan carried interest at a rate of 7.13%. As of September 30, 2024, there wasno balance outstanding on the revolving credit facility. The revolving credit facility incurs an insignificant non-usage fee based on any undrawn amounts.
Short-term Borrowings
Busey’s short-term borrowings include loans maturing within one year of the loan origination date and, when applicable, the current portion of long-term debt that is due within 12 months. Short-term borrowings are summarized as follows(dollars in thousands):
| As of | ||
|---|---|---|
| September 30,2024 | December 31,2023 | |
| Short-term borrowings | ||
| Term Loan, current portion due within 12 months | $— | $12,000 |
| Total short-term debt | $— | $12,000 |
Federal funds purchased are short-term borrowings that generally mature betweenone day and 90 days. During the first quarter of 2024, Busey purchased federal funds to test operational availability to access funds if needed. Busey hadno federal funds purchased as of September 30, 2024, or December 31, 2023.
Long-term Debt
Busey’s long-term debt consists of loans maturing more than one year from the loan origination date, excluding the current portion that is due within 12 months. Long-term debt is summarized as follows(dollars in thousands):
| As of | ||
|---|---|---|
| September 30,2024 | December 31,2023 | |
| Long-term debt | ||
| Term Loan | $— | $18,000 |
| Total long-term debt | $— | $18,000 |
Subordinated Notes
On June 1, 2020, Busey issued $125.0 million of fixed-to-floating rate subordinated notes that mature on June 1, 2030. The subordinated notes, which qualify as Tier 2 capital for regulatory purposes, bear interest at an annual rate of 5.25% for the first five years after issuance and thereafter bear interest at a floating rate equal to a three-month benchmark rate plus a spread of 5.11%, as calculated on each applicable determination date. Interest on the subordinated notes is payable semi-annually on each June 1 and December 1 during thefive-year fixed-term, and thereafter on March 1, June 1, September 1, and December 1 of each year, commencing on September 1, 2025. The subordinated notes have an optional redemption, in whole or in part, on any interest payment date on or after June 1, 2025. The subordinated notes are unsecured obligations of the Company.
On June 2, 2022, Busey issued $100.0 million aggregate principal amount of 5.000% fixed-to-floating rate subordinated notes maturing June 15, 2032, which qualify as Tier 2 capital for regulatory purposes. The price to the public for the subordinated notes was 100% of the principal amount of the subordinated notes. Interest on the subordinated notes accrues at a rate equal to (i)5.000% per annum from the original issue date to, but excluding, June 15, 2027, payable semiannually in arrears, and (ii) a floating rate per annum equal to a benchmark rate, which is expected to be the Three-Month Term SOFR (as defined in the subordinated notes), plus a spread of 252 bps from and including June 15, 2027, payable quarterly in arrears. The subordinated notes have an optional redemption, in whole or in part, on any interest payment date on or after June 15, 2027.
Associated with the M&M acquisition completed on April 1, 2024 (see“Note 2. Mergers and Acquisitions”), Busey acquired $4.0 million of 5.25% fixed-to-floating rate subordinated notes maturing December 4, 2030, which qualify as Tier 2 capital for regulatory purposes. Interest on the subordinated notes accrues at a rate equal to (i)5.25% per annum from the original issue date to December 4, 2025, and (ii) a floating rate per annum equal to a benchmark rate, which is expected to be the Three-Month Term SOFR (as defined in the subordinated notes), plus a spread of 497 bps from December 4, 2025. The subordinated notes have an optional redemption, in whole or in part, on or after December 4, 2025. At September 30, 2024, there was $0.1 million of fair value discount outstanding, to be accreted through the earliest optional redemption date.
Unamortized debt issuance costs related to Busey’s subordinated notes are presented in the following table(dollars in thousands):
| As of | ||
|---|---|---|
| September 30,2024 | December 31,2023 | |
| Unamortized debt issuance costs | ||
| Subordinated notes issued in 2020 | $353 | $735 |
| Subordinated notes issued in 2022 | 1,101 | 1,383 |
| Total unamortized debt issuance costs | $1,454 | $2,118 |
NOTE 8. REGULATORY CAPITAL
First Busey and Busey Bank are subject to various regulatory capital requirements administered by 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 First Busey's consolidated financial statements. Capital amounts and classification also are subject to qualitative judgments by regulators about components, risk weightings, and other factors.
Banking regulations identify five capital categories for insured depository institutions: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. As of September 30, 2024, and December 31, 2023, all capital ratios of First Busey and Busey Bank exceeded well capitalized levels under the applicable regulatory capital adequacy guidelines. Management believes that no events or changes have occurred subsequent to September 30, 2024, that would change this designation.
Current Expected Credit Loss Model
On August 26, 2020, the FDIC and other federal banking agencies adopted a final rule which provided banking organizations that adopted CECL during 2020 with the option to delay for two years the estimated impact of CECL on regulatory capital and to phase in the aggregate impact of the deferral on regulatory capital over a subsequent three-year period. Under this final rule, because First Busey elected to use the deferral option, the regulatory capital impact of our transition adjustments recorded on January 1, 2020, arising from the adoption of CECL, was deferred for two years. In addition, 25 percent of the ongoing impact of CECL on our ACL, retained earnings, and average total consolidated assets from January 1, 2020, through the end of the two-year deferral period, each as reported for regulatory capital purposes, was added to the deferred transition amounts (“adjusted transition amounts”) and deferred for the two-year period. On January 1, 2022, at the conclusion of the two-year period, the adjusted transition amounts began to be phased-in for regulatory capital purposes at a rate of 25 percent per year, with the phased-in amounts included in regulatory capital at the beginning of each year.
Capital Amounts and Ratios
The following tables summarize regulatory capital requirements applicable to First Busey and Busey Bank(dollars in thousands):
| As of September 30, 2024 | ||||||
|---|---|---|---|---|---|---|
| Actual | MinimumCapital Requirement | MinimumTo Be WellCapitalized | ||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | |
| Common equity Tier 1 capital to risk weighted assets | ||||||
| First Busey | $1,219,574 | 13.78% | $398,365 | 4.50% | $575,416 | 6.50% |
| Busey Bank | $1,425,762 | 16.17% | $396,739 | 4.50% | $573,068 | 6.50% |
| Tier 1 capital to risk weighted assets | ||||||
| First Busey | $1,296,574 | 14.65% | $531,153 | 6.00% | $708,204 | 8.00% |
| Busey Bank | $1,425,762 | 16.17% | $528,985 | 6.00% | $705,314 | 8.00% |
| Total capital to risk weighted assets | ||||||
| First Busey | $1,610,247 | 18.19% | $708,204 | 8.00% | $885,255 | 10.00% |
| Busey Bank | $1,510,436 | 17.13% | $705,314 | 8.00% | $881,642 | 10.00% |
| Leverage ratio of Tier 1 capital to average assets | ||||||
| First Busey | $1,296,574 | 10.97% | $472,629 | 4.00% | N/A | N/A |
| Busey Bank | $1,425,762 | 12.10% | $471,202 | 4.00% | $589,003 | 5.00% |
| As of December 31, 2023 | ||||||
|---|---|---|---|---|---|---|
| Actual | MinimumCapital Requirement | MinimumTo Be WellCapitalized | ||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | |
| Common equity Tier 1 capital to risk weighted assets | ||||||
| First Busey | $1,155,973 | 13.09% | $397,331 | 4.50% | $573,923 | 6.50% |
| Busey Bank | $1,362,962 | 15.48% | $396,128 | 4.50% | $572,185 | 6.50% |
| Tier 1 capital to risk weighted assets | ||||||
| First Busey | $1,229,973 | 13.93% | $529,775 | 6.00% | $706,367 | 8.00% |
| Busey Bank | $1,362,962 | 15.48% | $528,171 | 6.00% | $704,228 | 8.00% |
| Total capital to risk weighted assets | ||||||
| First Busey | $1,540,318 | 17.44% | $706,367 | 8.00% | $882,958 | 10.00% |
| Busey Bank | $1,448,307 | 16.45% | $704,228 | 8.00% | $880,285 | 10.00% |
| Leverage ratio of Tier 1 capital to average assets | ||||||
| First Busey | $1,229,973 | 10.08% | $488,315 | 4.00% | N/A | N/A |
| Busey Bank | $1,362,962 | 11.19% | $487,103 | 4.00% | $608,879 | 5.00% |
Capital Conservation Buffer
In July 2013, U.S. federal banking authorities approved the Basel III Rule for strengthening international capital standards. The Basel III Rule introduced a capital conservation buffer, composed entirely of common equity Tier 1 capital, which is added to the minimum risk-weighted asset ratios. The capital conservation buffer is not a minimum capital requirement; however, banking institutions with a ratio of common equity Tier 1 capital to risk-weighted assets below the capital conservation buffer will face constraints on dividends, equity repurchases, and discretionary bonus payments based on the amount of the shortfall. In order to refrain from restrictions on dividends, equity repurchases, and discretionary bonus payments, banking institutions must maintain minimum ratios of (1) common equity Tier 1 capital to risk-weighted assets of at least 7.0%, which First Busey exceeded by 678 bps as of September 30, 2024, (2) Tier 1 capital to risk-weighted assets of at least 8.5%, which First Busey exceeded by 615 bps as of September 30, 2024, and (3) total capital to risk-weighted assets of at least 10.5%, which First Busey exceeded by 769 bps as of September 30, 2024.
NOTE 9. TAX CREDIT AND OTHER INVESTMENTS IN UNCONSOLIDATED ENTITIES
Busey has invested in certain tax-advantaged projects promoting affordable housing, new markets, and historic rehabilitation. These investments are designed to generate returns primarily though the realization of federal and state income tax credits and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods. These investments are considered to be variable interest entities, and are accounted for under the equity, deferral, or proportional amortization practical expedient methods, as appropriate. Busey is not required to consolidate variable interest entities in which it has concluded it does not have a controlling financial interest and is not the primary beneficiary. Busey’s maximum exposure to loss related to its investments in these unconsolidated variable interest entities is limited to the carrying amount of the investment, net of any unfunded capital commitments and previously recorded tax credits which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level. Busey believes potential losses from these investments are remote.
In addition, Busey has private equity investments, which are primarily in funds that invest in small businesses across diverse sectors including, but not limited to, financial technology, business services, manufacturing, agribusiness, healthcare, software as a service, environmental, and those that support the preservation of affordable housing.
Busey’s investments in these unconsolidated entities and related unfunded investment obligations are reflected in other assets and other liabilities on the Consolidated Balance Sheets (Unaudited), and are summarized in the table below for the periods indicated(dollars in thousands):
| As of | |||
|---|---|---|---|
| Location | September 30,2024 | December 31,2023 | |
| Investments in unconsolidated entities | |||
| Funded investments | Other assets | $68,164 | $68,516 |
| Unfunded investments | Other assets | 68,200 | 58,552 |
| Investments in unconsolidated entities | $136,364 | $127,068 | |
| Unfunded investment obligations | Other liabilities | $68,200 | $58,552 |
Upon adoption of ASU 2023-02 on January 1, 2024, Busey elected to apply the proportional amortization method in accounting for investments in tax-advantaged projects. Estimated income tax credits and other tax benefits related to these investments, net of investment amortization, are included as a component of our estimated annual effective tax rate used for the calculation of income taxes presented on the Consolidated Statements of Income (Unaudited). Actual amounts of income tax credits and other benefits, along with the investment amortization, are presented in the table below(dollars in thousands):
| Three Months Ended September 30, 2024 | Nine Months Ended September 30, 2024 | |
|---|---|---|
| Income tax credits and other tax benefits | $4,040 | $11,941 |
| Amortization of investments in tax-advantaged projects | 3,575 | 10,593 |
NOTE 10. STOCK-BASED COMPENSATION
Stock Options
Busey has outstanding stock options assumed from acquisitions. A summary of the status of, and changes in, the Company's stock option awards for the nine months ended September 30, 2024, follows:
| Options | Shares | Weighted-AverageExercisePrice | Weighted-AverageRemainingContractualLife |
|---|---|---|---|
| Outstanding at December 31, 2023 | 21,266 | $23.53 | 2.88 years |
| Exercised | (440) | 23.53 | |
| Forfeited | (3,520) | 23.53 | |
| Outstanding at September 30, 2024 | 17,306 | 23.53 | 2.13 years |
| Exercisable at September 30, 2024 | 17,306 | 23.53 | 2.13 years |
2020 Equity Plan
The 2020 Equity Plan was originally approved by stockholders at the 2020 Annual Meeting of Stockholders. A description of the 2020 Equity Plan, as originally approved, can be found in Appendix A within Busey’s Proxy Statement for the 2020 Annual Meeting of Stockholders filed on April 9, 2020. An amendment and restatement of the 2020 Equity Plan was approved by stockholders at the 2023 Annual Meeting of Stockholders. Terms of the amended and restated 2020 Equity Plan are substantially identical to those of the originally approved 2020 Equity Plan, other than a 1,350,000 increase in the number of shares authorized for issuance under the plan. More information can be found in Appendix A within Busey’s Proxy Statement for the 2023 Annual Meeting of Stockholders filed on April 14, 2023.
Busey has granted RSU, PSU, and DSU awards under the terms of the 2020 Equity Plan. Upon vesting and delivery, shares are expected, though not required, to be issued from treasury stock. There were 1,311,251 shares available for issuance under the 2020 Equity Plan as of September 30, 2024.
A description of RSU, PSU, and DSU awards granted in 2024 under the terms of the 2020 Equity Plan is provided below. Further information related to awards granted in prior years has been presented in the Annual Reports previously filed with the SEC corresponding to the year of each award grant.
RSU Awards
Busey grants RSU awards to members of management periodically throughout the year. RSU awards are stock-based awards for which vesting is conditional upon meeting established service criteria. Each RSU is equivalent toone share of Busey’s common stock. Busey’s RSUs have requisite service periods ranging fromone year tofive years, and are subject to accelerated vesting upon eligible retirement from Busey. Recipients earn quarterly dividend equivalents on their respective RSUs, which entitle the recipients to additional units. Therefore, dividends earned each quarter compound based upon the updated unit balances.
On March 20, 2024, under the terms of the 2020 Equity Plan, Busey granted 189,179 RSUs to members of management. The grant date fair value of the award was $4.4 million, which will be recognized as compensation expense over the requisite service period ranging fromone year tofive years. The terms of these awards included an accelerated vesting provision upon eligible retirement from Busey, after aone-year minimum requisite service period. Subsequent to the requisite service period, the awards will become 100% vested.
On May 22, 2024, under the terms of the 2020 Equity Plan, Busey granted 12,864 RSUs to members of management. The grant date fair value of the award was $0.3 million, which will be recognized as compensation expense over the requisite service period ofthree years. The terms of these awards included an accelerated vesting provision upon eligible retirement from Busey, after aone-year minimum requisite service period. Subsequent to the requisite service period, the awards will become 100% vested.
A summary of changes in Busey’s RSU awards for the nine months ended September 30, 2024, is as follows:
| RSU Awards | Shares | Weighted-AverageGrant DateFair Value |
|---|---|---|
| Nonvested at December 31, 2023 | 1,041,444 | $22.05 |
| Granted | 202,043 | 23.35 |
| Dividend equivalents earned | 32,239 | 24.92 |
| Vested | (172,822) | 25.72 |
| Forfeited | (13,692) | 23.28 |
| Nonvested at September 30, 2024 | 1,089,212 | 21.77 |
PSU Awards
Busey grants PSU awards to members of management periodically throughout the year. PSU awards are stock-based awards for which vesting is conditional upon meeting established performance criteria. Each PSU is equivalent toone share of Busey’s common stock. The number of PSUs that ultimately vest will be determined based on the extent to which market or other performance goals are achieved. Busey’s PSUs are subject to accelerated service-based vesting conditions upon eligible retirement from Busey. After performance determination, dividend equivalents are compounded based upon the updated PSU balances at each dividend date during the performance period.
On March 20, 2024, under the terms of the 2020 Equity Plan, Busey granted a target of 94,604 PSUs with a maximum award of 151,366 units. The actual number of units issued at the vesting date could range from 0% to 160% of the initial grant, depending on attaining a market-based total stockholder return performance goal. The grant date fair value of the award was $2.0 million, which will be recognized in compensation expense over the performance period ending December 31, 2026.
On March 20, 2024, under the terms of the 2020 Equity Plan, Busey granted a target of 94,604 PSUs with a maximum award of 151,366 units. The actual number of units issued at the vesting date could range from 0% to 160% of the initial grant, depending on attaining an adjusted return on average tangible common equity performance goal. The grant date fair value of the award was $2.2 million, which will be recognized in compensation expense over the performance period ending December 31, 2026. The actual amount of compensation expense recognized for these awards may vary, subject to achievement of the performance goal.
A summary of changes in Busey’s PSU awards for the nine months ended September 30, 2024, is as follows:
| PSU Awards | Shares1 | Weighted-AverageGrant DateFair Value |
|---|---|---|
| Nonvested at December 31, 2023 | 341,700 | $22.67 |
| Granted | 189,208 | 22.32 |
| Dividend equivalents earned2 | 4,264 | 22.95 |
| Vested2 | (4,264) | 22.95 |
| Forfeited | (6,306) | 22.43 |
| Nonvested at September 30, 2024 | 524,602 | 22.54 |
Shares for PSU awards represent target shares at the grant date.
PSUs granted in 2021 vested on December 31, 2023, with performance determination and settlement activity in the first quarter of 2024. Final performance was determined to be at 50% of target.
DSU Awards
Busey grants DSU awards to its directors and advisory directors. DSU awards are stock-based awards with a deferred settlement date. Each DSU is equivalent toone share of Busey’s common stock. DSUs vest over aone-year period following the grant date. Under the 2020 Equity Plan, DSUs are generally subject to the same terms as RSUs, except that following vesting of DSUs, settlement occurs within 30 days following the earlier of separation from the board or a change in control of the Company. Recipients earn quarterly dividend equivalents on their respective DSUs, which entitle the recipients to additional units. Therefore, dividends earned each quarter compound based upon the updated unit balances. After vesting and prior to delivery, DSUs will continue to earn dividend equivalents.
On March 20, 2024, under the terms of the 2020 Equity Plan, Busey granted 35,847 DSUs to directors and advisory directors. The grant date fair value of the award totaled $0.8 million and will be recognized as compensation expense over the requisite service period ofone year. Subsequent to the requisite service period, the awards will become 100% vested.
A summary of changes in Busey’s DSU awards for the nine months ended September 30, 2024, is as follows:
| DSU Awards | Shares | Weighted-AverageGrant DateFair Value |
|---|---|---|
| Nonvested at December 31, 2023 | 43,026 | $20.41 |
| Granted | 35,847 | 23.35 |
| Dividend equivalents earned | 6,032 | 25.02 |
| Vested | (47,351) | 20.92 |
| Forfeited | (1,025) | 20.44 |
| Nonvested at September 30, 2024 | 36,529 | 23.39 |
| Vested and outstanding at September 30, 2024 | 183,124 | 22.84 |
Employee Stock Purchase Plan
The First Busey Corporation ESPP was approved at Busey’s 2021 Annual Meeting of Stockholders and details can be found in Appendix A within Busey’s Definitive Proxy Statement filed with the SEC on April 8, 2021. The purpose of the ESPP is to provide a means through which our employees may acquire a proprietary interest in Busey by purchasing shares of our common stock at a 15% discount through voluntary payroll deductions, to assist us in retaining the services of our employees and securing and retaining the services of new employees, and to provide incentives for our employees to exert maximum efforts toward our success.
The ESPP initially reserved for issuance and purchase an aggregate of 600,000 shares of Busey’s common stock. The first offering under the ESPP began on July 1, 2021. There were 406,700 shares available for issuance under the ESPP as of September 30, 2024.
Stock-based Compensation Expense
Busey didnot record any stock option compensation expense for the three or nine months ended September 30, 2024, or 2023. Busey didnot have any unrecognized stock option compensation expense as of September 30, 2024.
Busey recognized compensation expense related to non-vested RSU, PSU, and DSU awards, as well as the ESPP, as summarized in the table below(dollars in thousands):
| Three Months Ended September 30, · Nine Months Ended September 30, | |||||
|---|---|---|---|---|---|
| Location | 2024 | 2023 | 2024 | 2023 | |
| Stock-based compensation expense | |||||
| RSU awards | Salaries, wages, and employee benefits | $1,057 | $1,177 | $3,012 | $3,428 |
| PSU awards1 | Salaries, wages, and employee benefits | 976 | 1,180 | 2,037 | 2,724 |
| DSU awards | Other expense | 211 | 213 | 615 | 620 |
| ESPP | Salaries, wages, and employee benefits | 47 | 33 | 164 | 156 |
| Total stock-based compensation expense | $2,291 | $2,603 | $5,828 | $6,928 | |
- Expense for PSU awards with a market-based total stockholder return performance goal represents amounts based on target shares at the grant date. Expense for PSU awards with return on average tangible common equity and compounded annual revenue growth rate performance goals represents amounts based on target shares at the grant date, adjusted for performance expectations as of the date indicated.
Unamortized compensation expense related to nonvested RSU, PSU, and DSU awards is summarized in the table below(dollars in thousands):
| As of | ||
|---|---|---|
| September 30,2024 | December 31,2023 | |
| Unamortized stock-based compensation | ||
| RSU awards | $8,267 | $6,842 |
| PSU awards1 | 4,068 | 3,607 |
| DSU awards | 392 | 190 |
| Total unamortized stock-based compensation | $12,727 | $10,639 |
| Weighted average period over which expense is to be recognized | 2.5 years | 2.4 years |
- Unamortized expense for PSU awards with a market-based total stockholder return performance goal represents amounts based on target shares at grant date. Unamortized expense for PSU awards with return on average tangible common equity and compounded annual revenue growth rate performance goals represents amounts based on target shares at grant date, adjusted for performance expectations as of the date indicated.
NOTE 11. OUTSTANDING COMMITMENTS AND CONTINGENT LIABILITIES
Legal Matters
Busey is a party to legal actions which arise in the normal course of its business activities. Legal and administrative proceedings are subject to inherent uncertainties, and while unfavorable outcomes could occur, Busey does not believe at this time that any potential liabilities relating to pending or potential legal matters are likely to have a material impact on Busey's results of operations or financial position.
Credit Commitments and Contingencies
A summary of the contractual amount of Busey’s exposure to off-balance-sheet risk relating to the Company’s commitments to extend credit and standby letters of credit follows(dollars in thousands):
| As of | ||
|---|---|---|
| September 30,2024 | December 31,2023 | |
| Financial instruments whose contract amounts represent credit risk | ||
| Commitments to extend credit | $2,503,727 | $2,132,500 |
| Standby letters of credit | 36,612 | 43,996 |
| Total commitments | $2,540,339 | $2,176,496 |
Franchise Tax Matter
In 2021, Busey received an inquiry from the Illinois Secretary of State (“ISOS”), pursuant to which the ISOS asked for additional information regarding certain of our franchise tax filings and the calculation of amounts due thereunder. The franchise tax is established by the Illinois Business Corporation Act (“BCA”) 805 ILCS 5/1 et seq., and is a tax imposed on foreign and domestic corporations for the privilege of conducting business in Illinois. Busey has been cooperating with the inquiry and has agreed to prepare additional BCA forms requested by the ISOS, with a full reservation of rights by Busey, including seeking judicial relief, if necessary, with respect to any potential dispute regarding Busey’s preparation of the BCA forms and the calculation of the franchise taxes due. Where a loss is believed to be reasonably possible, but not probable, or the loss cannot be reasonably estimated, as is the case with this matter, no accrual is required. It is reasonably possible that this matter could require us to pay additional taxes, including potential penalties and interest, or make other expenditures or accrue liabilities in amounts that could not be reasonably estimated as of September 30, 2024. If the likelihood of potential liabilities elevates, requiring an accrual, the potential future liabilities could be material in the period(s) in which they are recorded.
NOTE 12. DERIVATIVE FINANCIAL INSTRUMENTS
Busey utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. Additionally, Busey enters into derivative financial instruments, including interest rate lock commitments issued to residential loan customers for loans that will be held for sale; forward sales commitments to sell residential mortgage loans to investors; and interest rate swaps, risk participation agreements, and foreign currency exchange contracts with customers and other third parties. See “Note 13: Fair Value Measurements” for further discussion of the fair value measurement of such derivatives.
To secure its obligations under derivative contracts, Busey pledged cash and held collateral as follows(dollars in thousands):
| As of | ||
|---|---|---|
| September 30,2024 | December 31,2023 | |
| Cash pledged to secure obligations under derivative contracts | $17,270 | $34,210 |
| Collateral held to secure obligations under derivative contracts | 9,380 | 19,280 |
Derivative Instruments Designated as Hedges
Busey entered into derivative instruments designated as cash flow hedges. For a derivative instrument that is designated and qualifies as a cash flow hedge, the change in fair value of the derivative instrument is reported as a component of OCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Changes in fair value of components excluded from the assessment of effectiveness are recognized in current earnings.
Interest Rate Swaps Designated as Cash Flow Hedges
Interest rate swaps with notional amounts totaling $400.0 million as of September 30, 2024, and $350.0 million as of December 31, 2023, were designated as cash flow hedges. Busey entered into one $300.0 million receive-fixed, pay-floating interest rate swap to reduce Busey’s asset sensitivity (Prime Loan Swap). Duration was added to our loan portfolio by fixing a portion of floating prime-based loans. Interest rates had risen above their historical lows allowing Busey to lock in a portion of its loan portfolio to reduce asset sensitivity while creating a more stable margin in a volatile rate market. These hedges were determined to be highly effective during the period, and Busey expects its hedges to remain highly effective during the remaining terms of the swaps. Further, in 2024 Busey entered intoone $100.0 million one year forward-starting SOFR-based receive-fixed pay-floating interest rate swap, with an effective date of March 5, 2025, to reduce Busey’s asset sensitivity (SOFR Loan Swap). During the three months ended September 30, 2024, one interest rate swap to hedge the risks of variability in cash flows for future interest payments attributable to changes in the 3-month CME Term SOFR benchmark interest rate on Busey’s junior subordinated debt owed to unconsolidated trusts (Debt Swap) matured. Changes in the fair value of these interest rate swaps were recorded net of tax in OCI.
A summary of the interest-rate swaps designated as cash flow hedges is presented below(dollars in thousands):
| As of | ||||
|---|---|---|---|---|
| Location · September 30,2024 · December 31,2023 | ||||
| Debt Swap | ||||
| Notional amount | — | $50,000 | ||
| Weighted average rate: pay-fixed | — | 1.79% | ||
| Weighted average variable 3-month Fallback Rate (SOFR) receive rates | — | 5.61% | ||
| Weighted average maturity | — | 0.71 years | ||
| Prime Loan Swap | ||||
| Notional amount | $300,000 | $300,000 | ||
| Weighted average rate: receive-fixed | 4.81% | 4.81% | ||
| Weighted average variable Prime pay rates | 8.25% | 8.50% | ||
| Weighted average maturity | 4.35 years | 5.10 years | ||
| SOFR Loan Swap | ||||
| Notional amount | $100,000 | $— | ||
| Weighted average rate: receive-fixed | 3.72% | — | ||
| Weighted average maturity | 4.43 years | — | ||
| Gross aggregate fair value of the swaps | ||||
| Gross aggregate fair value of swap assets | Other assets | $2,332 | $1,293 | |
| Gross aggregate fair value of swap liabilities | Other liabilities | 19,176 | 25,411 | |
| Balances carried in AOCI | ||||
| Unrealized gains (losses) on cash flow hedges, net of tax | AOCI | $(11,487) | $(16,694) | |
Busey expects to reclassify unrealized gains and losses from OCI to interest income and interest expense as shown in the following table, during the next 12 months(dollars in thousands). Amounts actually recognized could differ from these expectations due to changes in interest rates, hedge de-designations, and the addition of other hedges subsequent to September 30, 2024.
| As of September 30, 2024 | |
|---|---|
| Unrealized losses expected to be reclassified from OCI to interest income | $(859) |
Interest income and interest expense recorded on these swap transactions is presented in the following table(dollars in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| Interest on swap transactions | ||||
| Increase (decrease) in interest income on swap transactions | $(2,776) | $(2,771) | $(8,366) | $(7,500) |
| (Increase) decrease in interest expense on swap transactions | 412 | 481 | 1,378 | 1,268 |
| Net increase (decrease) in net interest income on swap transactions | $(2,364) | $(2,290) | $(6,988) | $(6,232) |
Net gains (losses) relating to cash flow derivative instruments that were recorded in OCI on the Consolidated Statements of Income (Unaudited) are presented in the table below(dollars in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| Unrealized gains (losses) on cash flow hedges | ||||
| Net gain (loss) recognized in OCI, net of tax | $7,439 | $(5,577) | $211 | $(8,563) |
| (Gain) loss reclassified from OCI to interest income, net of tax | 1,984 | 1,982 | 5,981 | 5,362 |
| (Gain) loss reclassified from OCI to interest expense, net of tax | (294) | (344) | (985) | (906) |
| Net change in unrealized gains (losses) on cash flow hedges, net of tax | $9,129 | $(3,939) | $5,207 | $(4,107) |
Derivative Instruments Not Designated as Hedges
Interest Rate Swaps Not Designated as Hedges
Busey may offer derivative contracts to its customers in connection with their risk management needs. Busey manages the risk associated with these contracts by entering into equal and offsetting derivative agreements with third-party dealers. These contracts supported variable rate, commercial loan relationships totaling $711.2 million as of September 30, 2024, and $663.1 million as of December 31, 2023. These derivatives generally worked together as an economic interest rate hedge, but Busey did not designate them for hedge accounting treatment. Consequently, changes in fair value of the corresponding derivative financial asset or liability were recorded as either a charge or credit to current earnings during the period in which the changes occurred.
Amounts and fair values of derivative assets and derivative liabilities related to customer interest rate swaps recorded on the Consolidated Balance Sheets (Unaudited), are summarized as follows (dollars in thousands):
| As of September 30, 2024 · As of December 31, 2023 | |||||
|---|---|---|---|---|---|
| Location | NotionalAmount | FairValue | NotionalAmount | FairValue | |
| Derivative assets not designated as hedging instruments | |||||
| Interest rate swaps: receive-fixed, pay-floating | Other assets | $333,545 | $6,730 | $177,883 | $2,375 |
| Interest rate swaps: receive-floating, pay-fixed | Other assets | 377,609 | 18,648 | 485,253 | 26,289 |
| Derivative assets not designated as hedging instruments | $711,154 | $25,378 | $663,136 | $28,664 | |
| Derivative liabilities not designated as hedging instruments | |||||
| Interest rate swaps: receive-fixed, pay-floating | Other liabilities | $377,609 | $18,648 | $485,253 | $26,289 |
| Interest rate swaps: receive-floating, pay-fixed | Other liabilities | 333,545 | 6,730 | 177,883 | 2,375 |
| Derivative liabilities not designated as hedging instruments | $711,154 | $25,378 | $663,136 | $28,664 | |
Changes in fair value of these derivative assets and liabilities are included in the Consolidated Statements of Income (Unaudited) and are summarized as follows(dollars in thousands):
| Three Months Ended September 30, · Nine Months Ended September 30, | |||||
|---|---|---|---|---|---|
| Location | 2024 | 2023 | 2024 | 2023 | |
| Interest rate swaps | |||||
| Receive-fixed, pay-floating | Noninterest expense | $(9,224) | $9,007 | $(3,050) | $4,646 |
| Receive-floating, pay-fixed | Noninterest expense | 9,224 | (9,007) | 3,050 | (4,646) |
| Net change in fair value of interest rate swaps | $— | $— | $— | $— | |
Risk Participation Agreements
To manage the credit risk exposure related to customer-facing swaps, Busey entered into risk participation agreements in conjunction with loan participation arrangements with other financial institutions. Under these risk participation agreements, Busey purchased credit risk participation, paying an up-front fee to a counterparty to accept a portion of its credit exposure, and will receive a payment from the counterparty if the swap customer defaults on its obligations.
Busey also entered into a risk participation agreement under which Busey sold credit risk participation, receiving an up-front fee from a counterparty in exchange for accepting a portion of the counterparty’s credit exposure. This agreement matured on June 30, 2024. The swap customer did not default on its obligations, and Busey was not required to make a payment to the counterparty of the risk participation agreement.
Notional amounts of the risk participation agreements reflect the participating banks’ pro-rata shares of the derivative instruments, consistent with their shares of the related participated loans. The risk participation agreements mature between August 2026 and January 2029, and are summarized as follows(dollars in thousands):
| As of | ||
|---|---|---|
| September 30,2024 | December 31,2023 | |
| Risk participation agreements purchased | ||
| Number of risk participation agreements | 6 | 3 |
| Notional amount | $41,110 | $34,251 |
| Fair value | 16 | 15 |
| Risk participation agreements sold | ||
| Number of risk participation agreements | — | 1 |
| Notional amount | — | $20,001 |
| Fair value | — | — |
Mortgage Banking Derivatives
Interest Rate Lock Commitments
Interest rate lock commitments that meet the definition of derivative financial instruments under ASC Topic 815“Derivatives and Hedging” are carried at their fair values in other assets or other liabilities on the Consolidated Balance Sheets (Unaudited), with changes in the fair values of the corresponding derivative financial assets or liabilities recorded as either a charge or credit to current earnings during the period in which the changes occurred.
Forward Sales Commitments
Busey economically hedges mortgage loans held for sale and interest rate lock commitments issued to its residential loan customers related to loans that will be held for sale by obtaining corresponding forward sales commitments with an investor to sell the loans at an agreed-upon price at the time the interest rate locks are issued to the customers. Forward sales commitments that meet the definition of derivative financial instruments under ASC Topic 815“Derivatives and Hedging” are carried at their fair values in other assets or other liabilities on the Consolidated Balance Sheets (Unaudited). While such forward sales commitments generally served as an economic hedge to mortgage loans held for sale and interest rate lock commitments, Busey did not designate them for hedge accounting treatment. Changes in fair value of the corresponding derivative financial asset or liability were recorded as either a charge or credit to current earnings during the period in which the changes occurred.
Amounts and fair values of mortgage banking derivatives included on the Consolidated Balance Sheets (Unaudited) are summarized as follows(dollars in thousands):
| As of September 30, 2024 · As of December 31, 2023 | |||||
|---|---|---|---|---|---|
| Location | NotionalAmount | FairValue | NotionalAmount | FairValue | |
| Mortgage banking derivative assets | |||||
| Interest rate lock commitments | Other assets | $4,666 | $76 | $3,477 | $25 |
| Forward sales commitments | Other assets | 3,887 | 9 | 1,761 | 11 |
| Mortgage banking derivative assets | $8,553 | $85 | $5,238 | $36 | |
| Mortgage banking derivative liabilities | |||||
| Interest rate lock commitments | Other liabilities | $309 | $2 | $1,615 | $10 |
| Forward sales commitments | Other liabilities | 10,430 | 80 | 5,216 | 47 |
| Mortgage banking derivative liabilities | $10,739 | $82 | $6,831 | $57 | |
Gains and losses relating to these derivative instruments are reported in noninterest income, and are summarized as follows for the periods presented(dollars in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| Net gains (losses) on mortgage banking derivatives | ||||
| Gains (losses) on interest rate lock commitments | $121 | $(16) | $569 | $(28) |
| Gains (losses) on forward sales commitments | (91) | 60 | (165) | 92 |
| Net gains (losses) on mortgage banking derivatives | $30 | $44 | $404 | $64 |
NOTE 13. FAIR VALUE MEASUREMENTS
The fair value of an asset or liability is the price that would be received by selling that asset or paid in transferring that liability (exit price) in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. ASC Topic 820“Fair Value Measurement” establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
Level 1 Inputs—Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 Inputs—Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatility, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.
Level 3 Inputs—Unobservable inputs for estimating the fair values of assets or liabilities that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to Busey’s assets and liabilities that are carried at fair value.
In general, fair value estimates are based upon quoted market prices, when available. If such quoted market prices are not available, fair values are estimated utilizing independent valuation techniques that consider identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable data. Valuation adjustments may be made to ensure that financial instruments are recorded at their estimated fair values. These adjustments may include amounts to reflect, among other things, counterparty credit quality and the company's creditworthiness as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. While management believes Busey's valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to estimate the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
Financial Assets and Financial Liabilities Measured at Fair Value on a Recurring Basis
Debt Securities Available for Sale
Debt securities classified as available for sale are reported at fair value, which is estimated using Level 2 inputs. Busey obtains fair value measurements from an independent pricing service. The independent pricing service utilizes evaluated pricing models that vary by asset class and incorporate available trade, bid, and other market information. Because many fixed income securities do not trade on a daily basis, the independent pricing service applies available information to prepare evaluations, with a focus on observable market data such as benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing.
The independent pricing service uses model processes, such as the Option Adjusted Spread model, to assess interest rate impact and develop prepayment scenarios. Models and processes take into account market conventions. For each asset class, a team of evaluators gathers information from market sources and integrates relevant credit information, perceived market movements, and sector news into the evaluated pricing applications and models.
Market inputs that the independent pricing service normally seeks for evaluations of securities, listed in approximate order of priority, include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. The independent pricing service also monitors market indicators, industry, and economic events. For certain security types, additional inputs may be used or some of the market inputs may not be applicable. Evaluators may prioritize inputs differently on any given day for any security based on market conditions, and not all inputs listed are available for use in the evaluation process for each security evaluation on a given day. Because the data utilized was observable, the securities have been classified as Level 2.
Equity Securities
Equity securities are reported at fair value, which is estimated using Level 1 or Level 2 inputs. Fair value measurements of mutual funds, when held, are estimated using unadjusted quoted prices in active markets for identical assets at the measurement date and are classified as Level 1. Fair value measurements of stock use quoted prices for identical or similar assets in markets that are not active and are classified as Level 2.
Derivative Assets and Derivative Liabilities
Busey’s derivative assets and derivative liabilities are reported at fair value, which is measured using Level 2 or Level 3 inputs. Fair values of derivative assets and liabilities are estimated based on prices that are obtained from a third-party which uses observable market inputs and, with the exception of our risk participation agreements, are classified as Level 2. Due to the significance of unobservable inputs, derivative assets related to our risk participation agreements are classified as Level 3.
The following tables summarize financial assets and financial liabilities measured at estimated fair value on a recurring basis(dollars in thousands):
| As of September 30, 2024 | ||||
|---|---|---|---|---|
| Level 1Inputs | Level 2Inputs | Level 3Inputs | TotalFair Value | |
| Debt securities available for sale: | ||||
| U.S. Treasury securities | $— | $250 | $— | $250 |
| Obligations of U.S. government corporations and agencies | — | 1,508 | — | 1,508 |
| Obligations of states and political subdivisions | — | 155,052 | — | 155,052 |
| Asset-backed securities | — | 405,372 | — | 405,372 |
| Commercial mortgage-backed securities | — | 94,279 | — | 94,279 |
| Residential mortgage-backed securities | — | 1,002,167 | — | 1,002,167 |
| Corporate debt securities | — | 159,489 | — | 159,489 |
| Equity securities | 40 | 10,275 | — | 10,315 |
| Derivative assets | — | 27,795 | 16 | 27,811 |
| Derivative liabilities | — | 44,636 | — | 44,636 |
| As of December 31, 2023 | ||||
|---|---|---|---|---|
| Level 1Inputs | Level 2Inputs | Level 3Inputs | TotalFair Value | |
| Debt securities available for sale: | ||||
| U.S. Treasury securities | $— | $15,946 | $— | $15,946 |
| Obligations of U.S. government corporations and agencies | — | 5,832 | — | 5,832 |
| Obligations of states and political subdivisions | — | 172,845 | — | 172,845 |
| Asset-backed securities | — | 468,223 | — | 468,223 |
| Commercial mortgage-backed securities | — | 103,509 | — | 103,509 |
| Residential mortgage-backed securities | — | 1,111,312 | — | 1,111,312 |
| Corporate debt securities | — | 209,904 | — | 209,904 |
| Equity securities | 448 | 9,364 | — | 9,812 |
| Derivative assets | — | 29,993 | 15 | 30,008 |
| Derivative liabilities | — | 54,132 | — | 54,132 |
Activity for risk participation agreements, which are financial assets measured at estimated fair value on a recurring basis using Level 3, is summarized in the tables below(dollars in thousands):
| Three Months Ended September 30, · Nine Months Ended September 30, | |||||
|---|---|---|---|---|---|
| Location | 2024 | 2023 | 2024 | 2023 | |
| Beginning Balance | $8 | $15 | $15 | $5 | |
| Gains (losses) recognized in earnings | Other expense | (5) | (8) | (15) | (68) |
| Purchases | 13 | — | 16 | 70 | |
| Ending Balance | $16 | $7 | $16 | $7 | |
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain financial assets and financial liabilities are measured at estimated fair value on a non-recurring basis; that is, the instruments are not measured at estimated fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).
Loans Evaluated Individually
Busey does not record portfolio loans at estimated fair value on a recurring basis. However, periodically, a loan is evaluated individually and is reported at the estimated fair value of the underlying collateral, less estimated costs to sell, if repayment is expected solely from the collateral. If the estimated collateral value is not sufficient, a specific reserve is recorded. Collateral values are estimated using a combination of observable inputs, including recent appraisals, and unobservable inputs based on customized discounting criteria. Due to the significance of unobservable inputs, fair values of individually evaluated collateral dependent loans have been classified as Level 3.
Bank Property Held for Sale
Bank property held for sale represents certain banking center office buildings which Busey has closed and consolidated with other existing banking centers. Bank property held for sale is measured at the lower of amortized cost or estimated fair value less estimated costs to sell. Fair value estimates were based upon discounted appraisals or real estate listing prices. Due to the significance of unobservable inputs, estimated fair values of all bank property held for sale have been classified as Level 3. Bank property held for sale is included in premises and equipment, net on Busey’s Consolidated Balance Sheets (Unaudited).
The following tables summarize financial assets and financial liabilities measured at estimated fair value on a non-recurring basis(dollars in thousands):
| As of September 30, 2024 | ||||
|---|---|---|---|---|
| Level 1Inputs | Level 2Inputs | Level 3Inputs | TotalFair Value | |
| Loans evaluated individually, net of related allowance | $— | $— | $616 | $616 |
| Bank property held for sale with impairment | — | — | 3,205 | 3,205 |
| As of December 31, 2023 | ||||
|---|---|---|---|---|
| Level 1Inputs | Level 2Inputs | Level 3Inputs | TotalFair Value | |
| Loans evaluated individually, net of related allowance | $— | $— | $1,000 | $1,000 |
| Bank property held for sale with impairment | — | — | 4,286 | 4,286 |
The following table presents additional quantitative information about assets measured at estimated fair value on a non-recurring basis using Level 3 inputs(dollars in thousands):
| As of September 30, 2024 | ||||
|---|---|---|---|---|
| Fair Value | ValuationTechniques | UnobservableInput | Range(Weighted Average) | |
| Loans evaluated individually, net of related allowance | $616 | Appraisal of collateral | Appraisal adjustments | -25.0% to -100.0%(-75.2)% |
| Bank property held for sale with impairment | 3,205 | Appraisal of collateral or real estate listing price | Appraisal adjustments | -9.0% to -76.7%(-50.6)% |
| As of December 31, 2023 | ||||
|---|---|---|---|---|
| Fair Value | ValuationTechniques | UnobservableInput | Range(Weighted Average) | |
| Loans evaluated individually, net of related allowance | $1,000 | Appraisal of collateral | Appraisal adjustments | -41.2% to -100.0%(-47.2)% |
| Bank property held for sale with impairment | 4,286 | Appraisal of collateral or real estate listing price | Appraisal adjustments | -6.2% to -64.9%(-38.4)% |
Financial Assets and Financial Liabilities That Are Not Carried at Fair Value
Fair values of financial instruments that are not carried at fair value on Busey’s Consolidated Balance Sheets (Unaudited) were estimated as follows(dollars in thousands):
| As of September 30, 2024 | As of December 31, 2023 | |||
|---|---|---|---|---|
| CarryingAmount | FairValue | CarryingAmount | FairValue | |
| Financial assets | ||||
| Level 1 inputs: | ||||
| Cash and cash equivalents | $553,709 | $553,709 | $719,581 | $719,581 |
| Level 2 inputs: | ||||
| Debt securities held to maturity | 838,883 | 712,369 | 872,628 | 730,397 |
| Loans held for sale | 11,523 | 11,810 | 2,379 | 2,401 |
| Accrued interest receivable | 48,822 | 48,822 | 45,288 | 45,288 |
| Level 3 inputs: | ||||
| Portfolio loans, net | 7,724,116 | 7,597,736 | 7,559,294 | 7,276,905 |
| Mortgage servicing rights | 1,008 | 4,963 | 3,289 | 18,079 |
| Other servicing rights | 1,479 | 1,505 | 1,597 | 2,062 |
| Financial liabilities | ||||
| Level 2 inputs: | ||||
| Time deposits | $1,519,925 | $1,511,069 | $1,819,274 | $1,804,905 |
| Securities sold under agreements to repurchase | 128,429 | 128,429 | 187,396 | 187,396 |
| Short-term borrowings | — | — | 12,000 | 12,034 |
| Long-term debt | — | — | 18,000 | 18,020 |
| Junior subordinated debt owed to unconsolidated trusts | 74,754 | 61,840 | 71,993 | 57,153 |
| Accrued interest payable | 33,447 | 33,447 | 28,418 | 28,418 |
| Level 3 inputs: | ||||
| Subordinated notes, net of unamortized issuance costs | 227,482 | 216,713 | 222,882 | 200,000 |
NOTE 14. EARNINGS PER COMMON SHARE
Basic earnings per share is computed by dividing net income for the period by the weighted average number of common shares outstanding, which include DSUs that are vested but not delivered. Diluted earnings per common share is computed using the treasury stock method and reflects the potential dilution that could occur if Busey’s outstanding stock options and warrants were exercised, stock units were vested, and ESPP shares were issued.
Earnings per common share have been computed as follows(dollars in thousands, except per share amounts):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| Net income | $32,004 | $30,666 | $85,586 | $96,816 |
| Weighted average number of common shares outstanding, basic | 57,033,359 | 55,486,700 | 56,458,430 | 55,441,980 |
| Dilutive effect of common stock equivalents: | ||||
| Options | 1,714 | — | 572 | — |
| Warrants | — | — | — | 432 |
| RSU awards | 655,224 | 640,714 | 662,609 | 638,495 |
| PSU awards | 254,365 | 165,868 | 264,451 | 126,787 |
| DSU awards | 16,766 | 16,792 | 18,390 | 14,996 |
| ESPP | 6,420 | 5,418 | 6,847 | 7,934 |
| Weighted average number of common shares outstanding, diluted | 57,967,848 | 56,315,492 | 57,411,299 | 56,230,624 |
| Basic earnings per common share | $0.56 | $0.55 | $1.52 | $1.75 |
| Diluted earnings per common share | $0.55 | $0.54 | $1.49 | $1.72 |
Average shares that were excluded from the computation of diluted earnings per common share because their effect would have been anti-dilutive are summarized in the table below for the periods presented:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| Anti-dilutive common stock equivalents | ||||
| Options | — | 21,926 | 12,784 | 22,219 |
| RSU awards | — | — | 4,288 | 52,594 |
| PSU awards | 107,065 | 85,074 | 103,001 | 137,918 |
| Total anti-dilutive common stock equivalents | 107,065 | 107,000 | 120,073 | 212,731 |
NOTE 15. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following tables present changes in AOCI by component, net of tax, for the periods indicated(dollars in thousands):
| Three Months Ended September 30, | ||||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | |||||
| Before Tax | Tax Effect | Net of Tax | Before Tax | Tax Effect | Net of Tax | |
| Unrealized/Unrecognized gains (losses) on debt securities | ||||||
| Balance at beginning of period | $(279,334) | $79,624 | $(199,710) | $(335,359) | $95,591 | $(239,768) |
| Unrealized holding gains (losses) on debt securities available for sale, net | 54,950 | (15,664) | 39,286 | (37,696) | 10,746 | (26,950) |
| Amounts reclassified from AOCI, net | 11 | (3) | 8 | 33 | (9) | 24 |
| Amortization of unrecognized losses on securities transferred to held to maturity | 1,384 | (394) | 990 | 1,476 | (420) | 1,056 |
| Balance at end of period | $(222,989) | $63,563 | $(159,426) | $(371,546) | $105,908 | $(265,638) |
| Unrealized gains (losses) on cash flow hedges | ||||||
| Balance at beginning of period | $(28,833) | $8,217 | $(20,616) | $(29,586) | $8,433 | $(21,153) |
| Unrealized holding gains (losses) on cash flow hedges, net | 10,404 | (2,965) | 7,439 | (7,797) | 2,220 | (5,577) |
| Amounts reclassified from AOCI, net | 2,364 | (674) | 1,690 | 2,290 | (652) | 1,638 |
| Balance at end of period | $(16,065) | $4,578 | $(11,487) | $(35,093) | $10,001 | $(25,092) |
| Total AOCI | $(239,054) | $68,141 | $(170,913) | $(406,639) | $115,909 | $(290,730) |
| Nine Months Ended September 30, | ||||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | |||||
| Before Tax | Tax Effect | Net of Tax | Before Tax | Tax Effect | Net of Tax | |
| Unrealized/Unrecognized gains (losses) on debt securities | ||||||
| Balance at beginning of period | $(282,688) | $80,579 | $(202,109) | $(352,878) | $100,585 | $(252,293) |
| Unrealized holding gains (losses) on debt securities available for sale, net | 48,688 | (13,878) | 34,810 | (23,600) | 6,728 | (16,872) |
| Amounts reclassified from AOCI, net | 6,817 | (1,943) | 4,874 | 207 | (59) | 148 |
| Amortization of unrecognized losses on securities transferred to held to maturity | 4,194 | (1,195) | 2,999 | 4,725 | (1,346) | 3,379 |
| Balance at end of period | $(222,989) | $63,563 | $(159,426) | $(371,546) | $105,908 | $(265,638) |
| Unrealized gains (losses) on cash flow hedges | ||||||
| Balance at beginning of period | $(23,348) | $6,654 | $(16,694) | $(29,350) | $8,365 | $(20,985) |
| Unrealized holding gains (losses) on cash flow hedges, net | 295 | (84) | 211 | (11,975) | 3,412 | (8,563) |
| Amounts reclassified from AOCI, net | 6,988 | (1,992) | 4,996 | 6,232 | (1,776) | 4,456 |
| Balance at end of period | $(16,065) | $4,578 | $(11,487) | $(35,093) | $10,001 | $(25,092) |
| Total AOCI | $(239,054) | $68,141 | $(170,913) | $(406,639) | $115,909 | $(290,730) |
NOTE 16. OPERATING SEGMENTS AND RELATED INFORMATION
Busey hasthree reportable operating segments: Banking, Wealth Management, and FirsTech. Busey’sthree operating segments are strategic business units that are separately managed, as they offer different products and services and have different marketing strategies.
The Banking Operating Segment
The Banking operating segment provides a full range of banking services to individual and corporate customers through First Busey Corporation’s wholly-owned bank subsidiary, Busey Bank, with 62 banking centers in Illinois; the St. Louis, Missouri, metropolitan area; southwest Florida; and Indianapolis, Indiana.
Banking services offered to individual customers include customary types of demand and savings deposits, money transfers, safe deposit services, individual retirement accounts and other fiduciary services, automated teller machines, and technology-based networks, as well as a variety of loan products including residential real estate, home equity lines of credit, and consumer loans. Banking services offered to corporate customers include commercial, commercial real estate, real estate construction, and agricultural loans, as well as commercial depository services such as cash management.
The Wealth Management Operating Segment
The Wealth Management operating segment provides a full range of asset management, investment, brokerage, fiduciary, philanthropic advisory, tax preparation, and farm management services to individuals, businesses, and foundations. Services are provided through Busey Capital Management, Inc., a wholly-owned subsidiary of Busey Bank, and Busey Wealth Management, a division of Busey Bank.
Wealth management services tailored to individuals include trust and estate advisory services and financial planning. Business services include business succession planning and employee retirement plan services. Services for foundations include investment strategy consulting and fiduciary services.
The FirsTech Operating Segment
The FirsTech operating segment provides comprehensive and innovative payment technology solutions through Busey Bank’s wholly-owned subsidiary, FirsTech. FirsTech's multi-channel payment platform allows businesses to collect payments from their customers in a variety of ways to enable fast, frictionless payments. Payment method vehicles include, but are not limited to, text-based mobile bill pay; interactive voice response; electronic payment concentration delivered to Automated Clearing House networks, money management, and credit card networks; walk-in payment processing for customers at retail pay agents; customer service payments made over a telephone; direct debit services; merchant services referral solutions serving partner Financial Institutions and their business customers; and lockbox remittance processing for customers to make payments by mail. FirsTech also provides additional tools to help clients with billing, reconciliation, bill reminders, and treasury services.
FirsTech's client base represents a diverse set of industries, with a higher concentration in highly regulated industries, such as financial institutions, utility, insurance, and telecommunications industries.
Segment Financial Information
The segment financial information provided below has been derived from information used by management to monitor and manage Busey’s financial performance. The accounting policies of thethree operating segments are the same as those described in the summary of significant accounting policies in “Note 1. Significant Accounting Policies” of Busey’s 2023 Annual Report. Busey accounts for intersegment revenue and transfers at current market value.
Following is a summary of selected financial information for Busey’s operating segments. The “other” category included in the tables below consists of the parent company, First Busey Risk Management, Inc. until its dissolution on December 18, 2023, and the elimination of intercompany transactions (dollars in thousands):
| Goodwill · Total Assets | ||||
|---|---|---|---|---|
| As of | As of | |||
| September 30,2024 | December 31,2023 | September 30,2024 | December 31,2023 | |
| Operating segment | ||||
| Banking | $310,398 | $294,773 | $11,806,647 | $12,125,298 |
| Wealth Management | 14,108 | 14,108 | 119,801 | 103,147 |
| FirsTech | 8,992 | 8,992 | 51,474 | 51,600 |
| Other | — | — | 8,917 | 3,370 |
| Consolidated total | $333,498 | $317,873 | $11,986,839 | $12,283,415 |
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| Net interest income | ||||
| Banking | $86,425 | $81,794 | $252,200 | $254,394 |
| FirsTech | 12 | 14 | 37 | 41 |
| Other | (3,896) | (4,017) | (11,495) | (12,117) |
| Net interest income | $82,541 | $77,791 | $240,742 | $242,318 |
| Noninterest income | ||||
| Banking | $14,056 | $11,983 | $39,962 | $34,716 |
| Wealth Management | 16,169 | 14,350 | 47,989 | 43,993 |
| FirsTech | 5,551 | 5,665 | 17,700 | 16,954 |
| Other | 175 | (990) | (899) | (4,795) |
| Total noninterest income | $35,951 | $31,008 | $104,752 | $90,868 |
| Noninterest expense | ||||
| Banking | $56,740 | $55,172 | $167,724 | $163,314 |
| Wealth Management | 8,777 | 8,059 | 26,704 | 24,821 |
| FirsTech | 5,648 | 5,245 | 17,666 | 16,303 |
| Other | 4,761 | 2,469 | 10,138 | 6,115 |
| Total noninterest expense | $75,926 | $70,945 | $222,232 | $210,553 |
| Income before income taxes | ||||
| Banking | $43,739 | $38,241 | $117,121 | $123,852 |
| Wealth Management | 7,392 | 6,291 | 21,285 | 19,172 |
| FirsTech | (85) | 434 | 71 | 692 |
| Other | (8,482) | (7,476) | (22,532) | (23,027) |
| Income before income taxes | $42,564 | $37,490 | $115,945 | $120,689 |
| Net income | ||||
| Banking | $33,221 | $31,189 | $86,410 | $98,689 |
| Wealth Management | 5,618 | 4,781 | 16,177 | 14,571 |
| FirsTech | (61) | 317 | 53 | 505 |
| Other | (6,774) | (5,621) | (17,054) | (16,949) |
| Net income | $32,004 | $30,666 | $85,586 | $96,816 |
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.