UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q


þ			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended ~~September 30, 2022~~March 31, 2023


o			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 0-15950

FIRST BUSEY CORPORATION

(Exact name of registrant as specified in its charter)


Nevada			37-1078406
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
100 W. University Ave. Champaign, Illinois			61820
(Address of principal executive offices)			(Zip code)

Registrant’s telephone number, including area code: (217) 365-4544

N/A

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol (s)

Name of each exchange on which registered

Common Stock, $.001 par value

BUSE

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

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


Large accelerated filer	þ	Accelerated filer o	Non-accelerated filer o
Smaller reporting company ☐	o	Emerging growth company o ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class

Outstanding at ~~November 3, 2022~~May 4, 2023

Common Stock, $.001 par value

~~55,232,434~~55,300,614

Table of Contents

FIRST BUSEY CORPORATION

FORM 10-Q

~~September 30, 2022~~March 31, 2023

Table of Contents


GLOSSARY		3

~~Part~~PART I	FINANCIAL INFORMATION	5

Item 1.	FINANCIAL STATEMENTS (UNAUDITED)	5
	CONSOLIDATED BALANCE SHEETS	6
	CONSOLIDATED STATEMENTS OF INCOME	7
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (L ~~OSS)~~ (LOSS)	8
	CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	9
	CONSOLIDATED STATEMENTS OF CASH FLOWS	1110
	NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS	1312
	Note 1: Significant Accounting Policies	1312
	Note 2: ~~Acquisitions~~Securities	1514
	Note 3: ~~Securities~~Portfolio Loans	18
	Note 4: ~~Portfolio Loans~~Leases	2228
	Note 5: Deposits	3129
	Note 6: Borrowings	3230
	Note 7: Regulatory Capital	3432
	Note 8: Stock-Based Compensation	3634
	Note 9: Outstanding Commitments and Contingent Liabilities	3938
	Note 10: Derivative Financial Instruments	4038
	Note 11: Fair Value Measurements	4442
	Note 12: Earnings per Common Share	4847
	Note 13: Accumulated Other Comprehensive Income (Loss)	5048
	Note 14: Operating Segments and Related Information	5148
	~~Note 15: Leases~~	54
Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	5651
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	8579
Item 4.	CONTROLS AND PROCEDURES	8680

~~Part~~PART II	OTHER INFORMATION	8781

Item 1.	LEGAL PROCEEDINGS	8781
Item 1A.	RISK FACTORS	8781
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	8781
Item 3.	DEFAULTS UPON SENIOR SECURITIES	8781
Item 4.	MINE SAFETY DISCLOSURES	8781
Item 5.	OTHER INFORMATION	8781
Item 6.	EXHIBITS	8882

SIGNATURES		8983

Table of Contents

GLOSSARY

We use acronyms, abbreviations, and other terms throughout this Quarterly Report, as defined in the glossary below:


Term						Definition
2020 Equity Plan						First Busey's 2020 Equity Incentive Plan
ACL						Allowance for credit losses
Annual Report						Annual report filed with the SEC on Form 10-K pursuant to Section 13 or 15(d) of the Exchange Act
AOCI						Accumulated other comprehensive income (loss)

ASC						Accounting Standards Codification
ASU						Accounting Standards Update

Basel III						2010 capital accord adopted by the international Basel Committee on Banking Supervision
Basel III Rule						Regulations promulgated by U.S. federal banking agencies – the OCC, the Federal Reserve, and the FDIC – to both enforce implementation of certain aspects of the Basel III capital reforms and effect certain changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act

bps						basis points
CAC						Cummins-American Corp.
CARES Act						Coronavirus Aid, Relief, and Economic Security Act
CECL						ASU 2016-13, codified as ASC Topic 326 “Financial Instruments-Credit Losses,” which established the Current Expected Credit Losses methodology for measuring credit losses on financial instruments


COVID-19						Coronavirus disease 2019







DSU						Deferred stock unit

ESPP						Employee Stock Purchase Plan
Exchange Act						Securities Exchange Act of 1934, as amended
Fair value						The price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date, as defined in ASC Topic 820 “~~Fair~~“Fair Value ~~Measurement~~Measurement”
”FASB						Financial Accounting Standards Board
FDIC						Federal Deposit Insurance Corporation
Federal Reserve						Board of Governors of the Federal Reserve System
FHLB						Federal Home Loan Bank
First Busey						First Busey Corporation, ~~and~~together with its wholly-owned consolidated subsidiaries; also, “Busey,” the “Company,” “we,” “us,” and “our”
First Busey Risk Management						First Busey Risk Management, Inc.

FirsTech						FirsTech, Inc.
FOMC						Federal Open Market Committee
GAAP						U.S. Generally Accepted Accounting Principles
GSB						Glenview State Bank
Interagency Statement						Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus, issued on March 22, 2020, and revised on April 7, 2020

LIBOR						London Interbank Offered Rate
LOCOM						Lower of Cost or Market, an accounting approach under which ~~loans~~assets are carried at amortized historical cost less ~~loan~~ write-offs and downward ~~market~~fair value adjustments, as may be applicable
Nasdaq						National Association of Securities Dealers Automated Quotations
NM						Not meaningful
~~NMTC~~						~~New Markets Tax Credit~~
~~OCI~~						~~Other comprehensive income (loss)~~
~~OREO~~						~~Other real estate owned~~

Table of Contents


Term						Definition
NMTC						New Markets Tax Credit


OCI						Other comprehensive income (loss)
OREO						Other real estate owned
PCD						Purchased credit deteriorated

PPP						Paycheck Protection Program
PSU						Performance-based restricted stock unit

Quarterly Report						Quarterly report filed with the SEC on Form 10-Q pursuant to Section 13 or 15(d) of the Exchange Act
Regulatory Relief Act						Economic Growth, Regulatory Relief, and Consumer Protection Act
RSU						Restricted stock unit
SBA						U.S. Small Business Administration
SEC						U.S. Securities and Exchange Commission

SOFR						Secured Overnight Financing Rate published by the Federal Reserve
TDR						Troubled debt restructuring

U.S.						United States of America
U.S. Treasury						U.S. Department of the Treasury

Table of Contents

PART ~~I -~~ I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Table of Contents

FIRST BUSEY CORPORATION

CONSOLIDATED BALANCE SHEETS (Unaudited)

(dollars in thousands)


		As of					As of
		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Assets	Assets					Assets
Cash and cash equivalents:	Cash and cash equivalents:					Cash and cash equivalents:
Cash and due from banks	Cash and due from banks	$	121,419	$	102,983	Cash and due from banks	$	126,577	$	117,513
Interest-bearing deposits	Interest-bearing deposits	225,730		733,112		Interest-bearing deposits	148,992		109,651
Total cash and cash equivalents	Total cash and cash equivalents	347,149		836,095		Total cash and cash equivalents	275,569		227,164

Debt securities available for sale	Debt securities available for sale	2,547,041		3,981,251		Debt securities available for sale	2,383,550		2,461,393
Debt securities held to maturity	Debt securities held to maturity	936,328		—		Debt securities held to maturity	907,559		918,312
Equity securities	Equity securities	11,341		13,571		Equity securities	10,915		11,535
Loans held for sale (2022 at LOCOM, 2021 at fair value)		4,546		23,875
Portfolio loans (net of ACL of $90,722 at September 30, 2022, and $87,887 at December 31, 2021)		7,579,392		7,101,111
Loans held for sale						Loans held for sale	2,714		1,253
Portfolio loans (net of ACL of $91,727 at March 31, 2023, and $91,608 at December 31, 2022)						Portfolio loans (net of ACL of $91,727 at March 31, 2023, and $91,608 at December 31, 2022)	7,692,081		7,634,094
Premises and equipment, net	Premises and equipment, net	128,175		136,147		Premises and equipment, net	126,515		126,524
Right of use assets	Right of use assets	10,202		10,533		Right of use assets	12,291		12,829
Goodwill	Goodwill	317,873		317,873		Goodwill	317,873		317,873
Other intangible assets, net	Other intangible assets, net	49,218		58,051		Other intangible assets, net	43,694		46,423
Cash surrender value of bank owned life insurance	Cash surrender value of bank owned life insurance	179,533		176,940		Cash surrender value of bank owned life insurance	180,187		180,485
Other assets	Other assets	386,590		204,242		Other assets	391,607		398,792
Total assets	Total assets	$	12,497,388	$	12,859,689	Total assets	$	12,344,555	$	12,336,677

Liabilities and Stockholders’ Equity
Liabilities and stockholders’ equity						Liabilities and stockholders’ equity
Liabilities	Liabilities					Liabilities
Deposits:	Deposits:					Deposits:
Noninterest-bearing	Noninterest-bearing	$	3,628,169	$	3,670,267	Noninterest-bearing	$	3,173,783	$	3,393,666
Interest-bearing	Interest-bearing	6,973,228		7,098,310		Interest-bearing	6,627,386		6,677,614
Total deposits	Total deposits	10,601,397		10,768,577		Total deposits	9,801,169		10,071,280

Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	234,597		270,139		Securities sold under agreements to repurchase	210,977		229,806
Short-term borrowings	Short-term borrowings	16,225		17,678		Short-term borrowings	615,881		351,054
Long-term debt	Long-term debt	33,000		46,056		Long-term debt	27,000		30,000
Senior notes, net of unamortized issuance costs		—		39,944

Subordinated notes, net of unamortized issuance costs	Subordinated notes, net of unamortized issuance costs	221,835		182,773		Subordinated notes, net of unamortized issuance costs	222,245		222,038
Junior subordinated debt owed to unconsolidated trusts	Junior subordinated debt owed to unconsolidated trusts	71,765		71,635		Junior subordinated debt owed to unconsolidated trusts	71,855		71,810
Lease liabilities	Lease liabilities	10,311		10,591		Lease liabilities	12,515		12,995
Other liabilities	Other liabilities	201,670		133,184		Other liabilities	184,355		201,717
Total liabilities	Total liabilities	11,390,800		11,540,577		Total liabilities	11,145,997		11,190,700

Outstanding commitments and contingent liabilities (see Notes 9 and 15)
Outstanding commitments and contingent liabilities (see Notes 4 and 9)						Outstanding commitments and contingent liabilities (see Notes 4 and 9)

Stockholders’ Equity
Stockholders’ equity						Stockholders’ equity
Common stock, ($.001 par value; 100,000,000 shares authorized)	Common stock, ($.001 par value; 100,000,000 shares authorized)	58		58		Common stock, ($.001 par value; 100,000,000 shares authorized)	58		58
Additional paid-in capital	Additional paid-in capital	1,319,921		1,316,984		Additional paid-in capital	1,322,407		1,320,980
Retained earnings	Retained earnings	147,358		92,463		Retained earnings	191,924		168,769
AOCI	AOCI	(288,995)		(23,758)		AOCI	(245,784)		(273,278)
Total stockholders’ equity before treasury stock	Total stockholders’ equity before treasury stock	1,178,342		1,385,747		Total stockholders’ equity before treasury stock	1,268,605		1,216,529

Treasury stock at cost	Treasury stock at cost	(71,754)		(66,635)		Treasury stock at cost	(70,047)		(70,552)
Total stockholders’ equity	Total stockholders’ equity	1,106,588		1,319,112		Total stockholders’ equity	1,198,558		1,145,977
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	12,497,388	$	12,859,689	Total liabilities and stockholders’ equity	$	12,344,555	$	12,336,677

Shares	Shares					Shares
Common shares issued	Common shares issued	58,116,970		58,116,970		Common shares issued	58,116,970		58,116,970
Less treasury shares		(2,884,536)		(2,682,060)
Less: Treasury shares						Less: Treasury shares	(2,822,515)		(2,837,846)
Common shares outstanding	Common shares outstanding	55,232,434		55,434,910		Common shares outstanding	55,294,455		55,279,124

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

FIRST BUSEY CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(dollars in thousands, except per share amounts)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Interest income	Interest income									Interest income
Interest and fees on loans	Interest and fees on loans	$	76,081	$	65,163	$	202,530	$	189,132	Interest and fees on loans		$	89,775	$	60,882
Interest and dividends on investment securities:	Interest and dividends on investment securities:									Interest and dividends on investment securities:
Taxable interest income	Taxable interest income	17,436		11,324		47,370		29,016		Taxable interest income		19,599		14,094
Non-taxable interest income	Non-taxable interest income	813		915		2,482		2,878		Non-taxable interest income		743		838
Other interest income	Other interest income	1,085		462		1,720		857		Other interest income		988		277
Total interest income	Total interest income	95,415		77,864		254,102		221,883		Total interest income		111,105		76,091

Interest expense	Interest expense									Interest expense
Deposits	Deposits	3,565		3,059		7,835		10,086		Deposits		14,740		2,124
Federal funds purchased and securities sold under agreements to repurchase	Federal funds purchased and securities sold under agreements to repurchase	459		60		665		177		Federal funds purchased and securities sold under agreements to repurchase		1,222		59
Short-term borrowings	Short-term borrowings	190		112		426		195		Short-term borrowings		4,822		89
Long-term debt	Long-term debt	372		270		859		415		Long-term debt		454		226
Senior notes	Senior notes	—		400		637		1,199		Senior notes		—		400
Subordinated notes	Subordinated notes	3,738		2,480		9,243		7,436		Subordinated notes		3,097		2,483
Junior subordinated debt owed to unconsolidated trusts	Junior subordinated debt owed to unconsolidated trusts	786		728		2,148		2,185		Junior subordinated debt owed to unconsolidated trusts		913		654
Total interest expense	Total interest expense	9,110		7,109		21,813		21,693		Total interest expense		25,248		6,035

Net interest income	Net interest income	86,305		70,755		232,289		200,190		Net interest income		85,857		70,056
Provision for credit losses	Provision for credit losses	2,364		(1,869)		3,764		(10,365)		Provision for credit losses		953		(253)
Net interest income after provision for credit losses	Net interest income after provision for credit losses	83,941		72,624		228,525		210,555		Net interest income after provision for credit losses		84,904		70,309

Noninterest income	Noninterest income									Noninterest income
Wealth management fees	Wealth management fees	12,508		13,749		42,422		39,335		Wealth management fees		14,797		15,779
Fees for customer services	Fees for customer services	7,627		9,288		26,122		25,936		Fees for customer services		6,819		8,907
Payment technology solutions	Payment technology solutions	5,080		4,620		15,045		13,771		Payment technology solutions		5,315		5,077
Mortgage revenue	Mortgage revenue	438		1,740		1,697		6,153		Mortgage revenue		288		975
Income on bank owned life insurance	Income on bank owned life insurance	958		999		2,716		3,439		Income on bank owned life insurance		1,652		884
Realized net gains (losses) on securities	Realized net gains (losses) on securities	(74)		(5)		52		114		Realized net gains (losses) on securities		4		106
Unrealized net gains (losses) recognized on equity securities	Unrealized net gains (losses) recognized on equity securities	78		62		(2,376)		2,482		Unrealized net gains (losses) recognized on equity securities		(620)		(720)
Other income	Other income	4,318		2,806		12,046		6,485		Other income		3,593		4,764
Total noninterest income	Total noninterest income	30,933		33,259		97,724		97,715		Total noninterest income		31,848		35,772

Noninterest expense	Noninterest expense									Noninterest expense
Salaries, wages, and employee benefits	Salaries, wages, and employee benefits	39,762		41,949		117,226		107,222		Salaries, wages, and employee benefits		40,331		39,354
Data processing	Data processing	5,447		7,782		15,800		16,881		Data processing		5,640		4,978
Net occupancy expense of premises	Net occupancy expense of premises	4,705		4,797		14,492		13,606		Net occupancy expense of premises		4,762		5,067
Furniture and equipment expenses	Furniture and equipment expenses	1,799		2,208		5,874		6,300		Furniture and equipment expenses		1,746		2,030
Professional fees	Professional fees	1,579		1,361		4,693		5,617		Professional fees		2,058		1,507
Amortization of intangible assets	Amortization of intangible assets	2,871		3,149		8,833		8,200		Amortization of intangible assets		2,729		3,011
Interchange expense	Interchange expense	1,574		1,434		4,606		4,360		Interchange expense		1,853		1,545
Other expense	Other expense	12,999		10,807		38,680		28,425		Other expense		11,284		12,884
Total noninterest expense	Total noninterest expense	70,736		73,487		210,204		190,611		Total noninterest expense		70,403		70,376

Income before income taxes	Income before income taxes	44,138		32,396		116,045		117,659		Income before income taxes		46,349		35,705
Income taxes	Income taxes	8,477		6,455		22,121		24,136		Income taxes		9,563		7,266
Net income	Net income	$	35,661	$	25,941	$	93,924	$	93,523	Net income		$	36,786	$	28,439

Basic earnings per common share	Basic earnings per common share	$	0.64	$	0.46	$	1.70	$	1.69	Basic earnings per common share		$	0.66	$	0.51
Diluted earnings per common share	Diluted earnings per common share	$	0.64	$	0.46	$	1.67	$	1.67	Diluted earnings per common share		0.65		0.51
Dividends declared per share of common stock	Dividends declared per share of common stock	$	0.23	$	0.23	$	0.69	$	0.69	Dividends declared per share of common stock		0.24		0.23

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

FIRST BUSEY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(dollars in thousands)

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Net income $ 35,661 $ 25,941 $ 93,924 $ 93,523
OCI:
Unrealized gains (losses) on debt securities available for sale:
Net unrealized holding gains (losses) on debt securities available for sale, net of taxes of $27,631, $4,902, $84,519, and $14,195, respectively (69,306) (12,296) (211,988) (35,606)
Unrealized gains (losses) on debt securities transferred to held to maturity from available for sale, net of taxes of $—, $—, $13,812, and $—, respectively — — (34,644) —
Reclassification adjustment for realized (gains) losses on debt securities available for sale included in net income, net of taxes of $(21), $(1), $8, and $7, respectively 53 4 (20) (16)
Amortization of unrealized losses on securities transferred to held to maturity, net of taxes of $(515), $—, $(1,396), and $—, respectively 1,291 — 3,500 —
Net change in unrealized gains (losses) on debt securities available for sale (67,962) (12,292) (243,152) (35,622)
Unrealized gains (losses) on cash flow hedges:
Net unrealized holding gains (losses) on cash flow hedges, net of taxes of $4,061, $2, $8,604, and $(134), respectively (10,192) (5) (21,587) 336
Reclassification adjustment for realized (gains) losses on cash flow hedges included in net income, net of taxes of $(104), ($82), $199, and ($243), respectively 266 206 (498) 611
Net change in unrealized gains (losses) on cash flow hedges (9,926) 201 (22,085) 947
Net change in AOCI (77,888) (12,091) (265,237) (34,675)
Total comprehensive income (loss) $ (42,227) $ 13,850 $ (171,313) $ 58,848


	Three Months Ended March 31,
		2023		2022
Net income		$	36,786	$	28,439
OCI:
Unrealized/Unrecognized gains (losses) on debt securities:
Net unrealized holding gains (losses) on debt securities available for sale, net of taxes of $(8,749), and $29,726, respectively		21,944		(74,556)
Net unrealized gains (losses) on debt securities transferred to held to maturity from available for sale, net of taxes of $0, and $13,812, respectively		—		(34,644)
Reclassification adjustment for realized (gains) losses on debt securities available for sale included in net income, net of taxes of $1, and $30, respectively		(3)		(76)
Amortization of unrecognized losses on securities transferred to held to maturity, net of taxes of $(483), and $(252), respectively		1,210		631
Net change in unrealized/unrecognized gains (losses) on debt securities		23,151		(108,645)
Unrealized gains (losses) on cash flow hedges:
Net unrealized holding gains (losses) on cash flow hedges, net of taxes of $(1,214), and $1,931, respectively		3,050		(4,845)
Reclassification adjustment for realized (gains) losses on cash flow hedges included in net income, net of taxes of $(516), and $143, respectively		1,293		(357)
Net change in unrealized gains (losses) on cash flow hedges		4,343		(5,202)
Net change in AOCI		27,494		(113,847)
Total comprehensive income (loss)		$	64,280	$	(85,408)

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

FIRST BUSEY CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(dollars in thousands, except per share amounts)

Three Months Ended September 30, 2022
Shares Common
Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Treasury
Stock Total
Stockholders'
Equity
Balance, June 30, 2022 55,335,703 $ 58 $ 1,317,675 $ 124,685 $ (211,107) $ (69,354) $ 1,161,957
Net income — — — 35,661 — — 35,661
OCI, net of tax — — — — (77,888) — (77,888)
Repurchase of stock (130,000) — — — — (3,088) (3,088)
Issuance of treasury stock for ESPP 10,993 — (77) — — 283 206
Net issuance of treasury stock for RSU/DSU vesting and related tax 15,738 — (434) — — 405 (29)
Cash dividends on common stock at $0.23 per share — — — (12,707) — — (12,707)
Stock dividend equivalents on RSUs at $0.23 per share — — 281 (281) — — —
Stock-based compensation — — 2,476 — — — 2,476
Balance, September 30, 2022 55,232,434 $ 58 $ 1,319,921 $ 147,358 $ (288,995) $ (71,754) $ 1,106,588


		Nine Months Ended September 30, 2022														Three Months Ended March 31, 2023
		Shares	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Stockholders' Equity			Shares	Common Stock		Additional Paid-in Capital		Retained Earnings		AOCI		Treasury Stock		Total Stockholders' Equity
Balance, December 31, 2021		55,434,910	$	58	$	1,316,984	$	92,463	$	(23,758)	$	(66,635)	$	1,319,112
Balance, December 31, 2022															Balance, December 31, 2022	55,279,124	$	58	$	1,320,980	$	168,769	$	(273,278)	$	(70,552)	$	1,145,977
Net income	Net income	—	—		—		93,924		—		—		93,924		Net income	—	—		—		36,786		—		—		36,786
OCI, net of tax	OCI, net of tax	—	—		—		—		(265,237)		—		(265,237)		OCI, net of tax	—	—		—		—		27,494		—		27,494
Repurchase of stock	Repurchase of stock	(388,614)	—		—		—		—		(9,912)		(9,912)		Repurchase of stock	(25,000)	—		—		—		—		(534)		(534)
Issuance of treasury stock for ESPP	Issuance of treasury stock for ESPP	50,033	—		(271)		—		—		1,288		1,017		Issuance of treasury stock for ESPP	30,360	—		(257)		—		—		782		525
Net issuance of treasury stock for RSU/DSU vesting and related tax		136,105	—		(4,383)		—		—		3,505		(878)
Cash dividends on common stock at $0.69 per share		—	—		—		(38,159)		—		—		(38,159)
Stock dividend equivalents on RSUs at $0.69 per share		—	—		870		(870)		—		—		—
Net issuance of treasury stock for RSU/PSU/DSU vesting and related tax															Net issuance of treasury stock for RSU/PSU/DSU vesting and related tax	8,977	—		(331)		—		—		231		(100)

Net issuance of treasury stock for warrants exercised															Net issuance of treasury stock for warrants exercised	994			(17)						26		9
Cash dividends on common stock at $0.24 per share															Cash dividends on common stock at $0.24 per share	—	—		—		(13,268)		—		—		(13,268)
Stock dividend equivalents on RSUs/PSUs/DSUs															Stock dividend equivalents on RSUs/PSUs/DSUs	—	—		363		(363)		—		—		—
Stock-based compensation	Stock-based compensation	—	—		6,721		—		—		—		6,721		Stock-based compensation	—	—		1,669		—		—		—		1,669
Balance, September 30, 2022		55,232,434	$	58	$	1,319,921	$	147,358	$	(288,995)	$	(71,754)	$	1,106,588
Balance, March 31, 2023															Balance, March 31, 2023	55,294,455	$	58	$	1,322,407	$	191,924	$	(245,784)	$	(70,047)	$	1,198,558

~~Table of Contents~~

~~FIRST BUSEY CORPORATION~~

~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)~~

~~(dollars in thousands, except per share amounts)~~

Three Months Ended September 30, 2021
Shares Common
Stock Additional
Paid-in
Capital Retained
Earnings
(Accumulated
Deficit) Accumulated
Other
Comprehensive
Income (Loss) Treasury
Stock Total
Stockholders'
Equity
Balance, June 30, 2021 56,330,616 $ 58 $ 1,316,716 $ 62,926 $ 10,725 $ (44,734) $ 1,345,691
Net income — — — 25,941 — — 25,941
OCI, net of tax — — — — (12,091) — (12,091)
Stock issued in acquisition, net of stock issuance costs — — (29) — — — (29)
Repurchase of stock (625,000) — — — — (14,790) (14,790)
Issuance of treasury stock for ESPP 14,658 — (70) — — 377 307
Net issuance of treasury stock for RSU/DSU vesting and related tax 106,710 (3,738) — — 2,850 (888)
Cash dividends on common stock at $0.23 per share — — — (12,956) — — (12,956)
Stock dividend equivalents on RSUs at $0.23 per share — — 268 (268) — — —
Stock-based compensation — — 1,891 — — — 1,891
Balance, September 30, 2021 55,826,984 $ 58 $ 1,315,038 $ 75,643 $ (1,366) $ (56,297) $ 1,333,076


		Nine Months Ended September 30, 2021														Three Months Ended March 31, 2022
		Shares	Common Stock		Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Stockholders' Equity			Shares	Common Stock		Additional Paid-in Capital		Retained Earnings		AOCI		Treasury Stock		Total Stockholders' Equity
Balance, December 31, 2020		54,404,379	$	56	$	1,253,360	$	20,830	$	33,309	$	(37,486)	$	1,270,069
Balance, December 31, 2021															Balance, December 31, 2021	55,434,910	$	58	$	1,316,984	$	92,463	$	(23,758)	$	(66,635)	$	1,319,112
Net income	Net income	—	—		—		93,523		—		—		93,523		Net income	—	—		—		28,439		—		—		28,439
OCI, net of tax	OCI, net of tax	—	—		—		—		(34,675)		—		(34,675)		OCI, net of tax	—	—		—		—		(113,847)		—		(113,847)
Stock issued in acquisition, net of stock issuance costs		2,206,237	2		58,953								58,955

Repurchase of stock	Repurchase of stock	(905,000)	—		—		—		—		(22,038)		(22,038)		Repurchase of stock	(188,614)	—		—		—		—		(5,220)		(5,220)
Issuance of treasury stock for ESPP	Issuance of treasury stock for ESPP	14,658	—		(70)		—		—		377		307		Issuance of treasury stock for ESPP	25,140	—		(106)		—		—		647		541
Net issuance of treasury stock for RSU/DSU vesting and related tax	Net issuance of treasury stock for RSU/DSU vesting and related tax	106,710	—		(3,738)		—		—		2,850		(888)		Net issuance of treasury stock for RSU/DSU vesting and related tax	7,349	—		(359)		—		—		189		(170)
Cash dividends on common stock at $0.69 per share		—	—		—		(37,953)		—		—		(37,953)
Stock dividend equivalents on RSUs at $0.69 per share		—	—		757		(757)		—		—		—
Cash dividends on common stock at $0.23 per share															Cash dividends on common stock at $0.23 per share	—	—		—		(12,739)		—		—		(12,739)
Stock dividend equivalents on RSUs/DSUs															Stock dividend equivalents on RSUs/DSUs	—	—		273		(273)		—		—		—
Stock-based compensation	Stock-based compensation	—	—		5,776		—		—		—		5,776		Stock-based compensation	—	—		1,909		—		—		—		1,909
Balance, September 30, 2021		55,826,984	$	58	$	1,315,038	$	75,643	$	(1,366)	$	(56,297)	$	1,333,076
Balance, March 31, 2022															Balance, March 31, 2022	55,278,785	$	58	$	1,318,701	$	107,890	$	(137,605)	$	(71,019)	$	1,218,025

See accompanying notes to unaudited consolidated financial statements.

109

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FIRST BUSEY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(dollars in thousands)

Nine Months Ended September 30,
2022 2021
Cash Flows Provided by (Used in) Operating Activities
Net income $ 93,924 $ 93,523
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit losses 3,764 (10,365)
Amortization of intangible assets 8,833 8,200
Amortization of mortgage servicing rights 2,757 4,202
Amortization of NMTC 4,668 4,308
Depreciation and amortization of premises and equipment 8,035 8,723
Net amortization (accretion) on portfolio loans 2,524 (4,860)
Net amortization (accretion) of premium (discount) on investment securities 15,820 17,263
Net amortization (accretion) of premium (discount) on time deposits (318) (929)
Net amortization (accretion) of premium (discount) on FHLB advances and other borrowings 1,152 620
Impairment of OREO and other repossessed assets 611 —
Impairment of fixed assets held for sale 427 —
Impairment of mortgage servicing rights (9) (542)
Impairment of leases 84 —
Unrealized (gains) losses recognized on equity securities, net 2,376 (2,482)
(Gain) loss on sales of equity securities, net (24) —
(Gain) loss on sales of debt securities, net (28) (114)
(Gain) loss on sales of loans, net (1,777) (8,202)
(Gain) loss on sales of OREO 56 163
(Gain) loss on sales of premises and equipment (666) (1,007)
(Gain) loss on life insurance proceeds — (493)
(Increase) decrease in cash surrender value of bank owned life insurance (2,716) (2,946)
Provision for deferred income taxes (3) 2,326
Stock-based compensation 6,721 5,776
Mortgage loans originated for sale (63,986) (214,096)
Proceeds from sales of mortgage loans 84,732 244,356
(Increase) decrease in other assets (45,575) (17,099)
Increase (decrease) in other liabilities (3,364) (23,829)
Net cash provided by (used in) operating activities $ 118,018 $ 102,496
Cash Flows Provided by (Used in) Investing Activities
Purchases of equity securities $ (14,820) $ (11,017)
Purchases of debt securities available for sale (279,831) (2,048,554)
Proceeds from sales of equity securities 15,418 7,254
Proceeds from sales of debt securities available for sale — 290,955
Proceeds from paydowns and maturities of debt securities held to maturity 51,552 —
Proceeds from paydowns and maturities of debt securities available for sale 370,274 641,754
Proceeds from the redemption of FHLB stock 225 —
Net cash received in (paid for) acquisitions (see Note 2) — 228,279
Net (increase) decrease in loans (484,701) 114,729
Cash paid for premiums on bank-owned life insurance (101) (118)
Proceeds from life insurance 219 3,232
Purchases of premises and equipment (4,006) (4,041)
Proceeds from disposition of premises and equipment 4,182 6,519
Proceeds from sales of OREO 2,662 1,452
Net cash provided by (used in) investing activities $ (338,927) $ (769,556)


	Three Months Ended March 31,
	2023		2022
Cash flows provided by (used in) operating activities
Net income	$	36,786	$	28,439
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit losses	953		(253)
Amortization of intangible assets	2,729		3,011
Amortization of mortgage servicing rights	749		980
Amortization of NMTC	2,221		1,341
Depreciation and amortization of premises and equipment	2,371		2,756
Net amortization (accretion) on portfolio loans	1,803		(36)
Net amortization (accretion) of premium (discount) on investment securities	4,231		5,930
Net amortization (accretion) of premium (discount) on time deposits	(80)		(124)
Net amortization (accretion) of premium (discount) on FHLB advances and other borrowings	252		212
Impairment of OREO and other repossessed assets	113		611

Impairment of mortgage servicing rights	1		(9)

Unrealized (gains) losses recognized on equity securities, net	620		720

(Gain) loss on sales of debt securities, net	(4)		(106)
(Gain) loss on sales of loans, net	(159)		(1,089)

(Gain) loss on sales of premises and equipment	(266)		(838)
(Gain) loss on life insurance proceeds	(707)		1
(Increase) decrease in cash surrender value of bank owned life insurance	(945)		(885)
Provision for deferred income taxes	(1,617)		(157)
Stock-based compensation	1,669		1,909

Mortgage loans originated for sale	(9,524)		(33,506)
Proceeds from sales of mortgage loans	8,219		51,350
(Increase) decrease in other assets	(2,119)		(16,429)
Increase (decrease) in other liabilities	(2,000)		(1,323)
Net cash provided by (used in) operating activities	45,296		42,505

Cash flows provided by (used in) investing activities
Purchases of equity securities	$	(14)	$	(5,948)
Purchases of debt securities available for sale	(2,449)		(274,964)
Proceeds from sales of equity securities	14		—

Proceeds from paydowns and maturities of debt securities held to maturity	11,708		9,585
Proceeds from paydowns and maturities of debt securities available for sale	107,492		166,709
Purchases of FHLB and other bank stock	(17,891)		—
Proceeds from the redemption of FHLB and other bank stock	6,086		—

Net (increase) decrease in loans	(60,807)		(83,392)
Cash paid for premiums on bank-owned life insurance	(76)		(96)
Proceeds from life insurance	2,026		217
Purchases of premises and equipment	(2,380)		(734)
Proceeds from disposition of premises and equipment	284		1,305
Proceeds from sales of OREO	42		331
Net cash provided by (used in) investing activities	44,035		(186,987)

11(continued)

Table of Contents

FIRST BUSEY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Continued)

(dollars in thousands)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022
Cash Flows Provided by (Used in) Financing Activities
Cash flows provided by (used in) financing activities						Cash flows provided by (used in) financing activities
Net increase (decrease) in deposits	Net increase (decrease) in deposits	$	(166,862)	$	816,551	Net increase (decrease) in deposits	$	(270,031)	$	(176,617)
Net change in federal funds purchased and securities sold under agreements to repurchase	Net change in federal funds purchased and securities sold under agreements to repurchase	(35,542)		48,977		Net change in federal funds purchased and securities sold under agreements to repurchase	(18,829)		(14,471)
Proceeds from FHLB advances	Proceeds from FHLB advances	—		5,000		Proceeds from FHLB advances	265,000		—
Repayment of FHLB advances	Repayment of FHLB advances	(5,507)		(4,492)		Repayment of FHLB advances	(173)		(168)
Proceeds from other borrowings, net of debt issuance costs		98,094		72,500

Repayment of other borrowings	Repayment of other borrowings	(109,000)		(15,500)		Repayment of other borrowings	(3,000)		(3,000)
Cash dividends paid	Cash dividends paid	(38,159)		(37,953)		Cash dividends paid	(13,268)		(12,739)
Purchase of treasury stock	Purchase of treasury stock	(9,912)		(22,038)		Purchase of treasury stock	(534)		(5,220)
Cash paid for withholding taxes on stock-based payments	Cash paid for withholding taxes on stock-based payments	(878)		(888)		Cash paid for withholding taxes on stock-based payments	(100)		(170)
Issuance of treasury stock for ESPP		(271)		361
Common stock issuance costs		—		(150)

Proceeds from stock warrants exercised						Proceeds from stock warrants exercised	9		—

Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	$	(268,037)	$	862,368	Net cash provided by (used in) financing activities	(40,926)		(212,385)

Net increase (decrease) in cash and cash equivalents	Net increase (decrease) in cash and cash equivalents	(488,946)		195,308		Net increase (decrease) in cash and cash equivalents	$	48,405	$	(356,867)
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	836,095		688,537		Cash and cash equivalents, beginning of period	227,164		836,095

Cash and cash equivalents, ending of period	Cash and cash equivalents, ending of period	$	347,149	$	883,845	Cash and cash equivalents, ending of period	$	275,569	$	479,228

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION	SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION					SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash payments for:	Cash payments for:					Cash payments for:
Interest	Interest	$	19,465	$	16,257	Interest	$	19,961	$	3,647
Income taxes		30,506		19,586

Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:
OREO acquired in settlement of loans	OREO acquired in settlement of loans	132		228		OREO acquired in settlement of loans	64		132

Transfer of debt securities available for sale to held to maturity	Transfer of debt securities available for sale to held to maturity	985,199		—		Transfer of debt securities available for sale to held to maturity	—		985,199

See accompanying notes to unaudited consolidated financial statements.

1211

Table of Contents

FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1: Significant Accounting Policies

Nature of Operations

First Busey Corporation, a Nevada corporation organized in 1980, is a ~~$12.5~~$12.3 billion financial holding company headquartered in Champaign, Illinois. Our common stock is traded on The Nasdaq Global Select Market under the symbol “BUSE.”

The Company operates and reports its business in three segments: Banking, FirsTech, and Wealth Management.

~~Banking~~

•The Banking operating segment provides a full range of banking services to individual and corporate customers through ~~the Company’s wholly-owned bank subsidiary, Busey Bank, with 58~~its banking ~~centers~~center network in Illinois; the St. Louis, Missouri metropolitan area; southwest Florida; and Indianapolis, Indiana.

~~FirsTech~~

•The FirsTech operating segment provides comprehensive and innovative payment technology solutions ~~that include, but are not limited to, text-based~~including online, mobile, and voice-recognition bill ~~pay; electronic payment concentration delivered to Automated Clearing House networks,~~payments; 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; ~~and~~ lockbox remittance processing for ~~customers to make~~ payments made by ~~mail.~~mail; and walk-in payments. FirsTech also provides additional tools to help clients with billing, reconciliation, bill reminders, and treasury services.

•The Wealth Management

~~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.

For additional information about the Company's operating segments, see “N ote 14 . Operating Segments and Related Information.”

Basis of Financial Statement Presentation

These unaudited consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements included in our ~~2021~~2022 Annual Report. These interim unaudited consolidated financial statements serve to update our ~~2021~~2022 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, the Company’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.

1312

Table of Contents

FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

~~Change in Accounting Principle~~

Effective January 1, 2022, the Company elected to account for all newly originated loans held for sale at LOCOM. Prior to this change, the Company accounted for loans held for sale at fair value. This change did not have a material impact on our results of operations during the three or nine months ended September 30, 2022.

Impact of Recently Adopted Accounting Standards

~~ASU 2021-10~~ ~~“Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance”~~ establishes disclosure requirements for transactions with a government that have been accounted for by analogizing to a grant or contribution accounting model. Disclosures required under this standard include 1)In March 2022, the types of transactions, 2) the accounting for those transactions, and 3) the effect of those transactions on the consolidated financial statements. This update was effective for annual periods beginning January 1, 2022, and applies prospectively to all transactions within the scope of the amendments that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application. Adoption of this standard did not have a material impact on First Busey’s financial position or results of operations.

~~ASU 2021-05~~ ~~“Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments”~~ amends the lessor’s classification of certain leases under ASC Topic 842. Under this updated guidance, leases that would otherwise be classified as a sales-type or direct financing lease must be classified by a lessor as an operating lease when the following conditions are met: 1) the contract includes variable lease payments that do not depend on an index or rate and 2) classification as a sales-type or direct financing lease would result in recognition of a selling loss at lease commencement. This guidance was effective for First Busey beginning January 1, 2022, and was applied on a prospective basis. Adoption of this standard did not have a material impact on the Company’s financial position or results of operations.

~~ASU 2021-04~~ “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” clarifies how an issuer should account for modifications or exchanges of equity-classified written call options (i.e. a warrant to purchase the issuer’s common stock). This accounting standard requires the issuer to treat a modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the warrant or as termination of the original warrant and issuance of a new warrant. This guidance was effective for First Busey beginning January 1, 2022, and was applied on a prospective basis. Adoption of this standard did not have a material impact on the Company’s financial position or results of operations.

~~Recently Issued Accounting Standards~~

~~ASU 2022-03~~ ~~“Fair Value Measurements (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”~~ 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. This standard applies prospectively, and is effective for First Busey beginning January 1, 2024. Early adoption is permitted. First Busey is currently evaluating the potential effect on the Company’s financial position and results of operations.

FASB issued ASU 2022-02 “Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage ~~Disclosures”~~Disclosures,” which eliminates the TDR accounting model for creditors that have already adopted CECL. In lieu of the TDR accounting model, loan refinancing and restructuring guidance in ASC Subtopic ~~310-20 “Investments—Debt Securities”~~310-20-35-9 through 35-11 “Receivables—Nonrefundable Fees and Other Costs—Subsequent Measurement—Loan Refinancing or Restructuring” will apply to all loan modifications, including those made for borrowers experiencing financial difficulty. This standard also enhances disclosure requirements related to certain loan modifications. Additionally, this standard introduces new requirements to disclose gross write-off information in the vintage disclosures of financing receivables by credit quality indicator and class of financing receivable by year of origination. This standard applies prospectively. For the transition method related to the recognition and measurement of TDRs, there is an option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. This standard isbecame effective for First Busey beginning January 1, 2023. ~~Early adoption is permitted. First Busey is currently evaluating the potential effect~~Adoption of this standard did not have a material impact on ~~the Company’s~~our financial position ~~and~~or results of operations.

~~Table of Contents~~

~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

In March 2022, the FASB issued ASU 2022-01 “Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer ~~Method”~~Method,” which replaces the current last-of-layer hedge accounting method with an expanded portfolio layer method that permits multiple hedged layers of a single closed portfolio. The scope of the portfolio layer method is also expanded to include non-prepayable financial assets. This update also provides additional guidance on the accounting for and disclosure of hedge basis adjustments that are applicable to the portfolio layer method, and specifies how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. Amendments related to hedge basis adjustments which are included in this standard apply on a modified retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings on the initial application date. Amendments related to disclosure which are included in this standard may be applied on a prospective basis from the initial application date, or on a retrospective basis to each prior period presented after the date of adoption of the amendments in ASU 2017-12 ~~“Derivatives~~“Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” This standard isbecame effective for First Busey beginning January 1, ~~2023, and may be early adopted. First Busey is currently evaluating the potential effect~~2023. Adoption of this standard did not have a material impact on ~~the Company’s~~our financial position ~~and~~or results of operations.

ASU 2021-08 “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” requires measurement and recognition in accordance with ASC Topic 606 “Revenue from Contracts with Customers” for contract assets and contract liabilities acquired in a business combination. This update isbecame effective for First Busey beginning January 1, ~~2023, and may be adopted early.~~2023. This standard applies prospectively to all business combinations that occur on or after the date it is ~~adopted~~adopted. Adoption of this standard did not have an impact on our financial position or results of operations.

Recently Issued Accounting Standards Not Yet Adopted

In March 2023, the FASB issued ASU 2023-02 “Investments—Equity Method and ~~if applicable, retrospectively~~Joint Ventures (Topic 323),” permitting an election to ~~all business combinations~~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 ~~acquisition date occurs on or after~~income tax credits are received, provided that certain conditions are met. The proportional amortization method results in the ~~beginning~~cost of the ~~fiscal year that includes~~investment being amortized in proportion to the ~~interim period~~income tax credits and other income tax benefits received, with the amortization of ~~early application.~~the investment and the income tax credits being presented net in the income statement as a component of income tax expense. This standard must be applied on a retrospective or modified retrospective basis, and is applicable for First Busey beginning on January 1, 2024. Early adoption is permitted. First Busey is currently evaluating the potential effect on the Company’s financial position and results of operations.

~~COVID-19~~

~~Throughout~~In March 2023, the ~~COVID-19 pandemic,~~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. This standard may be adopted either prospectively, or retrospectively, and is effective for First Busey operated as an essential community resource, providing approximately $1.1 billion in payroll assistance for small businesses and select nonprofits through low-interest, 100% government-guaranteed loans as part of the PPP.beginning January 1, 2024. Early adoption is permitted. First Busey ~~had $1.5 million~~is currently evaluating the potential effect on the Company’s financial position and results of operations.

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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 ~~PPP loans outstanding, with an amortized cost~~measuring the fair value of ~~$1.4 million,~~those equity securities, and further that contractual sale restrictions cannot be recognized and measured as a separate unit of ~~September 30, 2022. In comparison,~~account. This standard applies prospectively, and is effective for First Busey ~~had $76.9 million in PPP loans outstanding, with an amortized cost~~beginning January 1, 2024. Early adoption is permitted. First Busey is currently evaluating the potential effect on the Company’s financial position and results of ~~$75.0 million, as of December 31, 2021.~~operations.

Subsequent Events

The Company 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. Early in the fourth quarter of 2022, we implemented a targeted restructuring and efficiency optimization plan that is expected to generate annual salary and benefits savings of $4.0 million to $4.4 million. We also expect to incur one-time severance-related costs associated with this initiative of $1.1 million to $1.3 million, most of which are expected to be realized in the fourth quarter of 2022. We expect to largely reinvest the anticipated savings to support ongoing growth initiatives across our franchise over the next several quarters. Other than this item, thereThere were no significant subsequent events for the quarter ended ~~September 30, 2022,~~March 31, 2023, through the filing date of these unaudited consolidated financial statements.

Note 2: ~~Acquisitions~~

~~Cummins-American Corp.~~

Effective May 31, 2021, the Company completed its acquisition of CAC, the holding company for GSB. The partnership enhanced the Company’s existing deposit, commercial banking, and wealth management presence in the Chicago-Naperville-Elgin, IL-IN-WI Metropolitan Statistical Area. GSB’s results of operations were included in the Company’s results of operations beginning June 1, 2021. First Busey operated GSB as a separate banking subsidiary until August 14, 2021, when it was merged with and into Busey Bank. At that time, all GSB banking centers became branches of Busey Bank.

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~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

Under the terms of the definitive agreement, each share of CAC common stock issued and outstanding as of the effective date was converted into the right to receive 444.4783 shares of First Busey common stock and $14,173.96 in cash, which reflects adjustments made to the cash consideration in accordance with the terms of the definitive agreement. The fair value of the common shares of First Busey issued as part of the consideration paid to the holders of CAC common stock was determined on the basis of the closing price of First Busey’s common stock on May 28, 2021, the last trading day immediately preceding the acquisition date of May 31, 2021. As additional consideration provided to CAC’s shareholders in the merger, CAC paid a special dividend to its shareholders in the amount of $60.0 million, or $12,087.58 per share of CAC common stock, on May 28, 2021.

This transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged was recorded at estimated fair values on the date of acquisition. Fair values were subject to refinement for up to one year after the closing date, as additional information regarding the closing date fair values became available, and were final as of May 31, 2022. The Company did not record any fair value adjustments during 2022.

As the total consideration paid for CAC exceeded the estimated fair value of net assets acquired, goodwill of $6.3 million was recorded as a result of the acquisition. The amount of goodwill recognized as a result of this transaction was fully tax deductible for federal income tax purposes in accordance with the Company’s election pursuant to Section 338(h)(10) of the Internal Revenue Code. Goodwill recorded for this transaction reflects synergies expected from the acquisition and expansion within the Chicago-Naperville-Elgin, IL-IN-WI Metropolitan Statistical Area, and was assigned to the Banking operating segment.

During the three months ended September 30, 2022, First Busey did not incur any pre-tax acquisition expenses related to the acquisition of CAC. During the nine months ended September 30, 2022, First Busey incurred $0.8 million in pre-tax acquisition expenses related to the acquisition of CAC, comprised primarily of compensation expense and data processing expense.

~~Fair values of the assets acquired and liabilities assumed, as well as the fair value of consideration transferred, were as follows~~ ~~(dollars in thousands)~~:

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~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~


	~~CAC~~
	~~May 31, 2021~~
~~Assets acquired~~
~~Cash and cash equivalents~~	$	~~298,637~~
~~Securities~~	~~702,367~~
~~Portfolio loans, net of ACL~~	~~430,470~~
~~Premises and equipment~~	~~17,034~~
~~Other intangible assets~~	~~17,340~~
~~Mortgage servicing rights~~	~~629~~
~~Other assets~~	~~8,176~~
~~Total assets acquired~~	~~1,474,653~~

~~Liabilities assumed~~
~~Deposits~~	~~1,315,671~~
~~Other borrowings~~	~~16,651~~
~~Other liabilities~~	~~19,205~~
~~Total liabilities assumed~~	~~1,351,527~~

~~Net assets acquired~~	$	~~123,126~~

~~Consideration paid:~~
~~Cash~~	$	~~70,358~~
~~Common stock~~	~~59,105~~
~~Total consideration paid~~	$	~~129,463~~

~~Goodwill~~	$	~~6,337~~

The fair value of PCD financial assets was $60.5 million on the date of acquisition. Gross contractual amounts receivable relating to the PCD financial assets was $65.2 million. The Company estimated, on the date of acquisition, that $4.2 million of the contractual cash flows specific to the PCD financial assets will not be collected.

~~Table of Contents~~

~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~Note 3:~~ Debt Securities

The Company's portfolio of debt securities includes both available for sale and held to maturity securities. The tables below provide the amortized cost, unrealized gains and losses, and fair values of debt securities summarized by major category (dollars in thousands):


		As of September 30, 2022									As of March 31, 2023
		Amortized Cost		Unrealized				Fair Value			Amortized Cost		Unrealized				Fair Value
				Gross Gains		Gross Losses							Gross Gains		Gross Losses
Debt securities available for sale	Debt securities available for sale									Debt securities available for sale
U.S. Treasury securities	U.S. Treasury securities	$	145,495	$	—	$	(4,653)	$	140,842	U.S. Treasury securities	$	87,182	$	—	$	(2,550)	$	84,632
Obligations of U.S. government corporations and agencies	Obligations of U.S. government corporations and agencies	25,287		4		(358)		24,933		Obligations of U.S. government corporations and agencies	11,855		3		(231)		11,627
Obligations of states and political subdivisions	Obligations of states and political subdivisions	298,653		35		(27,853)		270,835		Obligations of states and political subdivisions	274,858		193		(20,790)		254,261
Asset-backed securities	Asset-backed securities	490,076		—		(23,552)		466,524		Asset-backed securities	488,234		—		(19,087)		469,147
Commercial mortgage-backed securities	Commercial mortgage-backed securities	98,719		—		(10,968)		87,751		Commercial mortgage-backed securities	123,720		—		(14,893)		108,827
Residential mortgage-backed securities	Residential mortgage-backed securities	1,538,308		1		(233,995)		1,304,314		Residential mortgage-backed securities	1,426,529		4		(200,599)		1,225,934
Corporate debt securities	Corporate debt securities	279,310		20		(27,488)		251,842		Corporate debt securities	251,543		12		(22,433)		229,122
Total debt securities available for sale	Total debt securities available for sale	$	2,875,848	$	60	$	(328,867)	$	2,547,041	Total debt securities available for sale	$	2,663,921	$	212	$	(280,583)	$	2,383,550

Debt securities held to maturity
Commercial mortgage-backed securities		$	486,116	$	—	$	(60,341)	$	425,775
Residential mortgage-backed securities		450,212		—		(67,102)		383,110
Total debt securities held to maturity		$	936,328	$	—	$	(127,443)	$	808,885

As of December 31, 2021
Amortized
Cost Unrealized Fair
Value
Gross Gains Gross Losses
Debt securities available for sale
U.S. Treasury securities $ 166,768 $ 41 $ (1,047) $ 165,762
Obligations of U.S. government corporations and agencies 37,579 891 — 38,470
Obligations of states and political subdivisions 300,602 7,760 (1,493) 306,869
Asset-backed securities 492,055 295 (164) 492,186
Commercial mortgage-backed securities 625,339 3,425 (13,766) 614,998
Residential mortgage-backed securities 2,095,104 8,889 (34,680) 2,069,313
Corporate debt securities 296,076 1,081 (3,504) 293,653
Total debt securities available for sale $ 4,013,523 $ 22,382 $ (54,654) $ 3,981,251



	Amortized Cost		Unrecognized				Fair Value
			Gross Gains		Gross Losses
Debt securities held to maturity
Commercial mortgage-backed securities	$	470,138	$	—	$	(63,198)	$	406,940
Residential mortgage-backed securities	437,421		—		(63,708)		373,713
Total debt securities held to maturity	$	907,559	$	—	$	(126,906)	$	780,653

1814

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


	As of December 31, 2022
	Amortized Cost		Unrealized				Fair Value
			Gross Gains		Gross Losses
Debt securities available for sale
U.S. Treasury securities	$	117,805	$	—	$	(3,744)	$	114,061
Obligations of U.S. government corporations and agencies	20,097		3		(321)		19,779
Obligations of states and political subdivisions	283,481		106		(26,075)		257,512
Asset-backed securities	489,558		—		(19,683)		469,875
Commercial mortgage-backed securities	124,423		—		(16,029)		108,394
Residential mortgage-backed securities	1,463,971		2		(220,717)		1,243,256
Corporate debt securities	273,118		33		(24,635)		248,516
Total debt securities available for sale	$	2,772,453	$	144	$	(311,204)	$	2,461,393



	Amortized Cost		Unrecognized				Fair Value
			Gross Gains		Gross Losses
Debt securities held to maturity
Commercial mortgage-backed securities	$	474,820	$	—	$	(63,738)	$	411,082
Residential mortgage-backed securities	443,492		—		(69,279)		374,213
Total debt securities held to maturity	$	918,312	$	—	$	(133,017)	$	785,295

Maturities of ~~debt securities~~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, 2022					As of March 31, 2023
		Amortized Cost		Fair Value			Amortized Cost		Fair Value
Debt securities available for sale	Debt securities available for sale					Debt securities available for sale
Due in one year or less	Due in one year or less	$	176,516	$	174,227	Due in one year or less	$	105,794	$	103,746
Due after one year through five years	Due after one year through five years	410,372		379,095		Due after one year through five years	363,407		340,503
Due after five years through ten years	Due after five years through ten years	353,968		319,381		Due after five years through ten years	369,029		337,071
Due after ten years	Due after ten years	1,934,992		1,674,338		Due after ten years	1,825,691		1,602,230
Debt securities available for sale	Debt securities available for sale	$	2,875,848	$	2,547,041	Debt securities available for sale	$	2,663,921	$	2,383,550

Debt securities held to maturity
Due after one year through five years		46,961		43,738
Due after five years through ten years		65,516		58,346
Due after ten years		823,851		706,801
Debt securities held to maturity		$	936,328	$	808,885




Debt securities held to maturity

Due after one year through five years	$	43,594	$	41,147
Due after five years through ten years	63,632		57,859
Due after ten years	800,333		681,647
Debt securities held to maturity	$	907,559	$	780,653

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Gains and ~~losses~~Losses on ~~debt securities~~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,
2022 2021 2022 2021
Realized gains and losses on debt securities
Gross gains on debt securities $ — $ — $ 114 $ 524
Gross (losses) on debt securities (74) (5) (86) (410)
Realized net gains (losses) on debt securities1
$ (74) $ (5) $ 28 $ 114

1.~~Net gains (losses) on sales of securities reported in the unaudited Consolidated Statements of Income include sales of equity securities, excluded in this table.~~


	Three Months Ended March 31,
		2023		2022
Realized gains and losses on debt securities
Gross gains on debt securities		$	10	$	113
Gross (losses) on debt securities		(6)		(7)
Realized net gains (losses) on debt securities		$	4	$	106

Debt securities with carrying amounts of ~~$675.8~~$764.9 million on ~~September 30, 2022,~~March 31, 2023, and ~~$708.9~~$746.7 million on December 31, ~~2021,~~2022, were pledged as collateral for public deposits, securities sold under agreements to repurchase, and for other purposes as required.

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~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

Debt ~~securities~~Securities in an ~~unrealized loss position~~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, 2022													As of March 31, 2023
		Less than 12 months				12 months or more				Total					Less than 12 months				12 months or more				Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Debt securities available for sale	Debt securities available for sale													Debt securities available for sale
U.S. Treasury securities	U.S. Treasury securities	$	2,067	$	(5)	$	138,775	$	(4,648)	$	140,842	$	(4,653)	U.S. Treasury securities	$	964	$	(32)	$	83,668	$	(2,518)	$	84,632	$	(2,550)
Obligations of U.S. government corporations and agencies	Obligations of U.S. government corporations and agencies	21,629		(358)		—		—		21,629		(358)		Obligations of U.S. government corporations and agencies	11,262		(223)		196		(8)		11,458		(231)
Obligations of states and political subdivisions	Obligations of states and political subdivisions	220,960		(20,029)		41,779		(7,824)		262,739		(27,853)		Obligations of states and political subdivisions	80,541		(755)		133,343		(20,035)		213,884		(20,790)
Asset-backed securities	Asset-backed securities	441,896		(21,681)		24,628		(1,871)		466,524		(23,552)		Asset-backed securities	16,954		(346)		452,193		(18,741)		469,147		(19,087)
Commercial mortgage-backed securities	Commercial mortgage-backed securities	74,334		(8,761)		13,417		(2,207)		87,751		(10,968)		Commercial mortgage-backed securities	7,634		(290)		101,193		(14,603)		108,827		(14,893)
Residential mortgage-backed securities	Residential mortgage-backed securities	557,046		(72,807)		747,141		(161,188)		1,304,187		(233,995)		Residential mortgage-backed securities	103,167		(5,778)		1,122,195		(194,821)		1,225,362		(200,599)
Corporate debt securities	Corporate debt securities	75,608		(9,426)		173,266		(18,062)		248,874		(27,488)		Corporate debt securities	17,362		(1,213)		209,280		(21,220)		226,642		(22,433)
Debt securities available for sale with gross unrealized losses	Debt securities available for sale with gross unrealized losses	$	1,393,540	$	(133,067)	$	1,139,006	$	(195,800)	$	2,532,546	$	(328,867)	Debt securities available for sale with gross unrealized losses	$	237,884	$	(8,637)	$	2,102,068	$	(271,946)	$	2,339,952	$	(280,583)

Debt securities held to maturity
Commercial mortgage-backed securities		$	109,085	$	(15,592)	$	316,690	$	(44,749)	$	425,775	$	(60,341)
Residential mortgage-backed securities		162,575		(29,243)		220,535		(37,859)		383,110		(67,102)
Debt securities held to maturity with gross unrealized losses		$	271,660	$	(44,835)	$	537,225	$	(82,608)	$	808,885	$	(127,443)

As of December 31, 2021
Less than 12 months 12 months or more Total
Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses
Debt securities available for sale
U.S. Treasury securities $ 163,653 $ (1,047) $ — $ — $ 163,653 $ (1,047)
Obligations of states and political subdivisions 92,680 (1,493) — — 92,680 (1,493)
Asset-backed securities 89,983 (164) — — 89,983 (164)
Commercial mortgage-backed securities 389,078 (10,186) 85,905 (3,580) 474,983 (13,766)
Residential mortgage-backed securities 1,700,187 (33,453) 20,538 (1,227) 1,720,725 (34,680)
Corporate debt securities 241,153 (3,504) — — 241,153 (3,504)
Debt securities available for sale with gross unrealized losses $ 2,676,734 $ (49,847) $ 106,443 $ (4,807) $ 2,783,177 $ (54,654)



	12 months or more			Total
		Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses
Debt securities held to maturity
Commercial mortgage-backed securities		$	406,940	$	(63,198)	$	406,940	$	(63,198)
Residential mortgage-backed securities		373,713		(63,708)		373,713		(63,708)
Debt securities held to maturity with gross unrecognized losses		$	780,653	$	(126,906)	$	780,653	$	(126,906)

2016

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


	As of December 31, 2022
	Less than 12 months				12 months or more				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Debt securities available for sale
U.S. Treasury securities1	$	74	$	—	$	113,987	$	(3,744)	$	114,061	$	(3,744)
Obligations of U.S. government corporations and agencies	19,603		(321)		—		—		19,603		(321)
Obligations of states and political subdivisions	166,147		(10,059)		75,217		(16,016)		241,364		(26,075)
Asset-backed securities	390,164		(15,648)		79,711		(4,035)		469,875		(19,683)
Commercial mortgage-backed securities	89,428		(12,623)		18,966		(3,406)		108,394		(16,029)
Residential mortgage-backed securities	366,221		(38,111)		876,668		(182,606)		1,242,889		(220,717)
Corporate debt securities	39,037		(5,079)		204,310		(19,556)		243,347		(24,635)
Debt securities available for sale with gross unrealized losses	$	1,070,674	$	(81,841)	$	1,368,859	$	(229,363)	$	2,439,533	$	(311,204)



	Less than 12 months				12 months or more				Total
	Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses
Debt securities held to maturity
Commercial mortgage-backed securities	$	58,065	$	(8,009)	$	353,017	$	(55,729)	$	411,082	$	(63,738)
Residential mortgage-backed securities	—		—		374,213		(69,279)		374,213		(69,279)
Debt securities held to maturity with gross unrecognized losses	$	58,065	$	(8,009)	$	727,230	$	(125,008)	$	785,295	$	(133,017)

1.Unrealized losses for U.S. Treasury securities that have been in a continuous unrealized loss position for less than 12 months were insignificant, rounding to zero thousand.

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, 2022
Available for Sale Held to Maturity Total
Debt securities with gross unrealized losses, fair value $ 2,532,546 $ 808,885 $ 3,341,431
Gross unrealized losses on debt securities $ 328,867 $ 127,443 $ 456,310
Ratio of gross unrealized losses to debt securities with gross unrealized losses 13.0 % 15.8 % 13.7 %
Count of debt securities 1,145 55 1,200
Count of debt securities in an unrealized loss position 1,109 55 1,164


	As of March 31, 2023
	Available for Sale			Held to Maturity			Total
Debt securities with gross unrealized or unrecognized losses, fair value	$	2,339,952		$	780,653		$	3,120,605
Gross unrealized or unrecognized losses on debt securities	280,583			126,906			407,489
Ratio of gross unrealized or unrecognized losses to debt securities with gross unrealized or unrecognized losses	12.0		%	16.3		%	13.1		%

Count of debt securities	1,058			55			1,113
Count of debt securities in an unrealized or unrecognized loss position	947			55			1,002

As of December 31, 2021
Available for Sale Held to Maturity Total
Debt securities with gross unrealized losses, fair value $ 2,783,177 $ — $ 2,783,177
Gross unrealized losses on debt securities $ 54,654 $ — $ 54,654
Ratio of gross unrealized losses to debt securities with gross unrealized losses 2.0 % — 2.0 %
Count of debt securities 1,252 — 1,252
Count of debt securities in an unrealized loss position 373 — 373

Table of Contents

FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


	As of December 31, 2022
	Available for Sale			Held to Maturity			Total
Debt securities with gross unrealized or unrecognized losses, fair value	$	2,439,533		$	785,295		$	3,224,828
Gross unrealized or unrecognized losses on debt securities	311,204			133,017			444,221
Ratio of gross unrealized or unrecognized losses to debt securities with gross unrealized or unrecognized losses	12.8		%	16.9		%	13.8		%

Count of debt securities	1,091			55			1,146
Count of debt securities in an unrealized or unrecognized loss position	1,032			55			1,087

Unrealized and unrecognized losses were related to changes in market interest rates and market conditions that do not represent credit-related impairments. The Company does not intend to sell securities that are in an unrealized or unrecognized loss position, and it is more likely than not that the Company 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 was recorded in relation to debt securities, and the impairment related to noncredit factors is recognized in AOCI, net of applicable taxes. As of ~~September 30, 2022,~~March 31, 2023, the Company did not hold general obligation bonds of any single issuer, the aggregate of which exceeded 10% of the Company’s stockholders’ equity.

~~Table of Contents~~

~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

Note 4:3: Portfolio Loans

Loan Categories

The Company’s lending can be summarized in two primary categories: commercial and retail. Lending is further classified into five primary ~~categories:~~areas of loans: commercial loans, commercial real estate loans, real estate construction loans, retail real estate loans, and retail other loans. Distributions of the loan portfolio by loan category ~~were as follows~~and class is presented in the following table (dollars in thousands):


		As of					As of
		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Portfolio loans
Commercial loans						Commercial loans
Commercial	Commercial	$	1,945,893	$	1,943,886	Commercial	$	1,937,158	$	1,974,154
Commercial real estate	Commercial real estate	3,278,684		3,119,807		Commercial real estate	3,324,536		3,261,873
Real estate construction	Real estate construction	499,560		385,996		Real estate construction	554,009		530,469
Total commercial loans						Total commercial loans	5,815,703		5,766,496
Retail loans						Retail loans
Retail real estate	Retail real estate	1,643,099		1,512,976		Retail real estate	1,667,537		1,657,082
Retail other	Retail other	302,878		226,333		Retail other	300,568		302,124
Total retail loans						Total retail loans	1,968,105		1,959,206

Total portfolio loans	Total portfolio loans	7,670,114		7,188,998		Total portfolio loans	7,783,808		7,725,702
ACL	ACL	(90,722)		(87,887)		ACL	(91,727)		(91,608)
Portfolio loans, net	Portfolio loans, net	$	7,579,392	$	7,101,111	Portfolio loans, net	$	7,692,081	$	7,634,094

Net deferred loan origination costs included in the balances above were $13.7 million as of ~~September 30, 2022,~~March 31, 2023, compared to ~~$9.0~~$14.0 million as of December 31, ~~2021.~~2022. Net accretable purchase accounting adjustments included in the balances above reduced loans by ~~$6.4~~$5.5 million as of ~~September 30, 2022,~~March 31, 2023, and ~~$8.8~~$5.9 million as of December 31, ~~2021.~~2022. Commercial balances include loans originated under the PPP with an amortized cost of ~~$1.4~~$0.8 million as of ~~September 30, 2022,~~both March 31, 2023, and ~~$75.0 million as of~~ December 31, ~~2021.~~2022.

There were no retail real estate loans purchased during the three or nine months ended September 30, 2022. There were also no retail real estate loans purchased during the three months ended September 30, 2021. The Company ~~purchased $32.2 million of~~did not purchase any retail real estate loans during the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2023, or 2022.

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Pledged Loans

The Company had loans pledged to the FHLB and Federal Reserve for liquidity as set forth in the table below (dollars in thousands):


	As of
	March 31, 2023		December 31, 2022
Pledged loans
FHLB	$	5,065,913	$	5,095,448
Federal Reserve Bank	825,410		804,718
Total pledged loans	$	5,891,323	$	5,900,166

Risk Grading

The Company 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 the Company’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 the Company 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.

~~Table of Contents~~

~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

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 segregated by category of portfolio loans (dollars in thousands):~~

As of September 30, 2022
Pass Watch Special
Mention Substandard Substandard
Non-accrual Total
Portfolio loans
Commercial $ 1,707,528 $ 135,254 $ 58,189 $ 38,695 $ 6,227 $ 1,945,893
Commercial real estate 2,889,804 299,638 42,728 40,722 5,792 3,278,684
Real estate construction 475,099 22,011 2 2,400 48 499,560
Retail real estate 1,625,702 8,601 2,087 3,469 3,240 1,643,099
Retail other 302,760 — — — 118 302,878
Total portfolio loans $ 7,000,893 $ 465,504 $ 103,006 $ 85,286 $ 15,425 $ 7,670,114

As of December 31, 2021
Pass Watch Special
Mention Substandard Substandard
Non-accrual Total
Portfolio loans
Commercial $ 1,747,756 $ 93,582 $ 69,427 $ 26,117 $ 7,004 $ 1,943,886
Commercial real estate 2,682,441 343,304 49,695 38,394 5,973 3,119,807
Real estate construction 369,797 13,793 6 2,400 — 385,996
Retail real estate 1,491,845 12,374 1,992 3,867 2,898 1,512,976
Retail other 226,262 — — — 71 226,333
Total portfolio loans $ 6,518,101 $ 463,053 $ 121,120 $ 70,778 $ 15,946 $ 7,188,998

2319

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

~~Risk~~The following table is a summary of risk grades segregated by category and class of portfolio loans ~~further sorted by origination year are as follows~~ (dollars in thousands):

As of September 30, 2022
Term Loans Amortized Cost Basis by Origination Year Revolving
Loans Total
Risk Grade Ratings 2022 2021 2020 2019 2018 Prior
Commercial
Pass $ 403,643 $ 315,433 $ 145,695 $ 60,284 $ 53,197 $ 149,627 $ 579,649 $ 1,707,528
Watch 27,665 18,423 4,263 8,372 1,404 3,144 71,983 135,254
Special Mention 1,772 691 1,325 1,078 3,102 17,538 32,683 58,189
Substandard 9,075 1,292 695 6,999 433 5,402 14,799 38,695
Substandard non-accrual — 3,586 306 137 — 198 2,000 6,227
Total commercial 442,155 339,425 152,284 76,870 58,136 175,909 701,114 1,945,893
Commercial real estate
Pass 765,398 880,522 501,085 332,768 171,177 222,947 15,907 2,889,804
Watch 69,877 44,756 50,799 95,446 18,821 13,338 6,601 299,638
Special Mention 3,010 4,737 15,598 1,517 6,994 10,872 — 42,728
Substandard 14,349 12,681 497 1,841 10,412 942 — 40,722
Substandard non-accrual — 4,092 41 — 1,650 9 — 5,792
Total commercial real estate 852,634 946,788 568,020 431,572 209,054 248,108 22,508 3,278,684
Real estate construction
Pass 176,071 191,006 84,748 1,570 2,012 1,949 17,743 475,099
Watch 3,100 3,666 3,269 10,533 — 1,443 — 22,011
Special Mention — — — 2 — — — 2
Substandard 2,400 — — — — — — 2,400
Substandard non-accrual — — 48 — — — — 48
Total real estate construction 181,571 194,672 88,065 12,105 2,012 3,392 17,743 499,560
Retail real estate
Pass 344,033 464,066 180,543 79,304 58,925 281,430 217,401 1,625,702
Watch 2,881 1,163 1,875 1,469 1,146 67 — 8,601
Special Mention 148 1,864 — — — — 75 2,087
Substandard — 1,163 207 82 142 1,868 7 3,469
Substandard non-accrual — 150 110 — 390 1,985 605 3,240
Total retail real estate 347,062 468,406 182,735 80,855 60,603 285,350 218,088 1,643,099
Retail other
Pass 121,375 47,136 14,999 15,909 7,677 2,124 93,540 302,760
Substandard non-accrual 14 89 3 — 10 2 — 118
Total retail other 121,389 47,225 15,002 15,909 7,687 2,126 93,540 302,878
Total portfolio loans $ 1,944,811 $ 1,996,516 $ 1,006,106 $ 617,311 $ 337,492 $ 714,885 $ 1,052,993 $ 7,670,114


	As of March 31, 2023
	Pass			Watch		Special Mention		Substandard		Substandard Non-accrual		Total
Commercial loans
Commercial	$	1,624,656		$	208,613	$	42,827	$	55,652	$	5,410	$	1,937,158
Commercial real estate	2,888,970			362,187		43,195		24,623		5,561		3,324,536
Real estate construction	531,786			16,819		—		5,404		—		554,009
Total commercial loans	5,045,412			587,619		86,022		85,679		10,971		5,815,703
Retail loans
Retail real estate	1,649,407			11,722		503		2,206		3,699		1,667,537
Retail other	300,524			—		—		—		44		300,568
Total retail loans	1,949,931		1,949,931	11,722		503		2,206		3,743		1,968,105
Total portfolio loans	$	6,995,343		$	599,341	$	86,525	$	87,885	$	14,714	$	7,783,808


	As of December 31, 2022
	Pass			Watch		Special Mention		Substandard		Substandard Non-accrual		Total
Commercial loans
Commercial	$	1,668,495		$	201,758	$	46,540	$	51,187	$	6,174	$	1,974,154
Commercial real estate	2,851,709			326,455		43,526		34,539		5,644		3,261,873
Real estate construction	502,904			25,164		1		2,400		—		530,469
Total commercial loans	5,023,108			553,377		90,067		88,126		11,818		5,766,496
Retail loans
Retail real estate	1,639,599			10,520		1,338		2,529		3,096		1,657,082
Retail other	301,971			—		—		—		153		302,124
Total retail loans	1,941,570		1,941,570	10,520		1,338		2,529		3,249		1,959,206
Total portfolio loans	$	6,964,678		$	563,897	$	91,405	$	90,655	$	15,067	$	7,725,702

Risk grades of portfolio loans and net charge-offs are presented in the tables below by loan class, further sorted by origination year (dollars in thousands):

2420

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


		As of December 31, 2021																		As of and For The Three Months Ended March 31, 2023
		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans			Total			Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Total
Risk Grade Ratings	Risk Grade Ratings	2021		2020		2019		2018		2017		Prior				Risk Grade Ratings			2023		2022		2021		2020		2019		Prior
Commercial	Commercial																			Commercial
Pass	Pass	$	512,729	$	228,811	$	107,877	$	84,873	$	74,351	$	122,418	$	616,697		$	1,747,756	Pass	$	193,301	$	326,112	$	237,528	$	130,503	$	45,737	$	152,200	$	539,275	$	1,624,656
Watch	Watch	13,847		5,913		14,274		5,060		1,361		2,866		50,261			93,582		Watch	19,141		44,289		47,474		2,758		6,384		5,162		83,405		208,613
Special Mention	Special Mention	7,062		898		5,961		4,025		6,790		11,845		32,846			69,427		Special Mention	—		1,682		2,811		1,340		652		17,343		18,999		42,827
Substandard	Substandard	3,595		3,362		3,136		1,855		1,125		5,459		7,585			26,117		Substandard	19,386		1,360		1,143		526		6,229		2,030		24,978		55,652
Substandard non-accrual	Substandard non-accrual	4,126		364		142		—		320		52		2,000			7,004		Substandard non-accrual	94		—		2,976		205		133		2		2,000		5,410
Total commercial	Total commercial	541,359		239,348		131,390		95,813		83,947		142,640		709,389			1,943,886		Total commercial	231,922		373,443		291,932		135,332		59,135		176,737		668,657		1,937,158
Current period charge-offs																			Current period charge-offs	—		—		400		—		—		—		—		400

Commercial real estate	Commercial real estate																		Commercial real estate
Pass	Pass	969,548		637,550		425,850		235,928		200,373		198,002		15,190			2,682,441		Pass	139,599		882,834		810,278		457,122		279,737		306,763		12,637		2,888,970
Watch	Watch	51,560		38,820		123,324		48,088		46,761		32,608		2,143			343,304		Watch	29,344		65,687		75,032		57,391		89,469		40,302		4,962		362,187
Special Mention	Special Mention	9,542		7,060		6,585		10,098		6,357		9,870		183			49,695		Special Mention	816		7,001		4,365		15,293		3,743		11,977		—		43,195
Substandard	Substandard	21,002		3,781		1,218		11,451		521		421		—			38,394		Substandard	11,604		5,975		1,095		3,394		1,888		667		—		24,623
Substandard non-accrual	Substandard non-accrual	112		181		359		1,893		3,407		21		—			5,973		Substandard non-accrual	—		604		3,847		30		—		1,080		—		5,561
Total commercial real estate	Total commercial real estate	1,051,764		687,392		557,336		307,458		257,419		240,922		17,516			3,119,807		Total commercial real estate	181,363		962,101		894,617		533,230		374,837		360,789		17,599		3,324,536
Current period charge-offs																			Current period charge-offs	—		—		—		—		—		539		—		539

Real estate construction	Real estate construction																		Real estate construction
Pass	Pass	202,082		123,491		31,927		3,155		738		1,223		7,181			369,797		Pass	38,451		219,520		179,369		69,767		1,447		3,510		19,722		531,786
Watch	Watch	7,886		4,159		54		—		1,574		120		—			13,793		Watch	12		4,454		9,230		3,077		46		—		—		16,819
Special Mention		—		—		6		—		—		—		—			6

Substandard	Substandard	—		2,400		—		—		—		—		—			2,400		Substandard	—		5,404		—		—		—		—		—		5,404

Total real estate construction	Total real estate construction	209,968		130,050		31,987		3,155		2,312		1,343		7,181			385,996		Total real estate construction	38,463		229,378		188,599		72,844		1,493		3,510		19,722		554,009
Current period charge-offs																			Current period charge-offs	—		—		—		—		—		—		—		—

Retail real estate	Retail real estate																		Retail real estate
Pass	Pass	523,541		215,068		96,617		79,158		82,478		281,737		213,246			1,491,845		Pass	62,890		394,383		439,515		171,450		75,296		307,826		198,047		1,649,407
Watch	Watch	4,100		2,460		1,780		1,312		343		150		2,229			12,374		Watch	546		2,989		2,952		1,332		1,423		974		1,506		11,722
Special Mention	Special Mention	1,965		27		—		—		—		—		—			1,992		Special Mention	55		58		—		—		—		390		—		503
Substandard	Substandard	1,369		232		12		71		165		1,687		331			3,867		Substandard	—		75		361		189		82		1,256		243		2,206
Substandard non-accrual	Substandard non-accrual	235		63		—		16		227		1,705		652			2,898		Substandard non-accrual	—		10		238		159		104		2,387		801		3,699
Total retail real estate	Total retail real estate	531,210		217,850		98,409		80,557		83,213		285,279		216,458			1,512,976		Total retail real estate	63,491		397,515		443,066		173,130		76,905		312,833		200,597		1,667,537
Current period charge-offs																			Current period charge-offs	—		—		—		—		—		5		—		5

Retail other	Retail other																		Retail other
Pass	Pass	59,366		22,305		26,126		16,189		7,180		1,326		93,770			226,262		Pass	35,635		123,857		32,214		11,275		10,581		4,278		82,684		300,524

Substandard non-accrual	Substandard non-accrual	34		10		—		14		13		—		—			71		Substandard non-accrual	—		6		35		3		—		—		—		44
Total retail other	Total retail other	59,400		22,315		26,126		16,203		7,193		1,326		93,770			226,333		Total retail other	35,635		123,863		32,249		11,278		10,581		4,278		82,684		300,568
Current period charge-offs																			Current period charge-offs	$	—	$	36	$	102	$	1	$	—	$	98	$	—	$	237

Total portfolio loans	Total portfolio loans	$	2,393,701	$	1,296,955	$	845,248	$	503,186	$	434,084	$	671,510	$	1,044,314		$	7,188,998	Total portfolio loans	$	550,874	$	2,086,300	$	1,850,463	$	925,814	$	522,951	$	858,147	$	989,259	$	7,783,808
Total current period charge-offs																			Total current period charge-offs	$	—	$	36	$	502	$	1	$	—	$	642	$	—	$	1,181

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


	As of and For The Year Ended December 31, 2022
	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Total
Risk Grade Ratings	2022		2021		2020		2019		2018		Prior
Commercial
Pass	$	479,893	$	266,122	$	136,445	$	52,046	$	50,764	$	135,000	$	548,225	$	1,668,495
Watch	54,195		49,382		3,288		7,201		1,258		2,160		84,274		201,758
Special Mention	1,958		937		1,642		974		1,000		17,024		23,005		46,540
Substandard	8,926		1,165		570		6,671		2,382		5,191		26,282		51,187
Substandard non-accrual	21		3,292		226		135		—		100		2,400		6,174
Total commercial	544,993		320,898		142,171		67,027		55,404		159,475		684,186		1,974,154

Commercial real estate
Pass	883,688		819,133		478,452		297,525		161,409		198,419		13,083		2,851,709
Watch	77,346		56,113		64,282		96,664		21,592		5,758		4,700		326,455
Special Mention	11,943		5,389		12,386		1,420		6,917		5,471		—		43,526
Substandard	5,340		13,528		3,454		1,907		10,248		62		—		34,539
Substandard non-accrual	—		3,959		33		—		1,647		5		—		5,644
Total commercial real estate	978,317		898,122		558,607		397,516		201,813		209,715		17,783		3,261,873

Real estate construction
Pass	219,112		191,724		68,015		1,490		1,901		1,751		18,911		502,904
Watch	8,530		12,019		3,169		48		—		1,398		—		25,164
Special Mention	—		—		—		1		—		—		—		1
Substandard	2,400		—		—		—		—		—		—		2,400

Total real estate construction	230,042		203,743		71,184		1,539		1,901		3,149		18,911		530,469

Retail real estate
Pass	396,547		456,158		175,148		77,569		56,887		267,387		209,903		1,639,599
Watch	2,928		2,991		1,846		1,444		1,063		27		221		10,520
Special Mention	945		—		—		—		—		393		—		1,338
Substandard	77		732		198		81		141		1,293		7		2,529
Substandard non-accrual	10		191		107		32		390		1,708		658		3,096
Total retail real estate	400,507		460,072		177,299		79,126		58,481		270,808		210,789		1,657,082

Retail other
Pass	134,567		43,512		13,141		13,086		5,646		991		91,028		301,971



Substandard non-accrual	14		134		3		—		—		2		—		153
Total retail other	134,581		43,646		13,144		13,086		5,646		993		91,028		302,124

Total portfolio loans	$	2,288,440	$	1,926,481	$	962,405	$	558,294	$	323,245	$	644,140	$	1,022,697	$	7,725,702

Table of Contents

FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Past Due and Non-accrual Loans

An analysis of the amortized cost basis of portfolio loans that are past due and still accruing, or on a non-accrual status, is as follows (dollars in thousands):


		As of September 30, 2022									As of March 31, 2023
		Loans past due, still accruing						Non-accrual Loans			Loans past due, still accruing						Non-accrual Loans
		30-59 Days		60-89 Days		90+Days					30-59 Days		60-89 Days		90+Days
Past due and non-accrual loans	Past due and non-accrual loans									Past due and non-accrual loans
Commercial loans:										Commercial loans:
Commercial	Commercial	$	19	$	45	$	625	$	6,227	Commercial	$	78	$	1	$	—	$	5,410
Commercial real estate	Commercial real estate	411		—		349		5,792		Commercial real estate	444		—		—		5,561
Real estate construction		—		—		—		48

Past due and non-accrual commercial loans										Past due and non-accrual commercial loans	522		1		—		10,971
Retail loans:										Retail loans:
Retail real estate	Retail real estate	3,734		1,831		255		3,240		Retail real estate	3,120		1,169		472		3,699
Retail other	Retail other	262		5		—		118		Retail other	653		7		28		44
Past due and non-accrual retail loans										Past due and non-accrual retail loans	3,773		1,176		500		3,743
Total past due and non-accrual loans	Total past due and non-accrual loans	$	4,426	$	1,881	$	1,229	$	15,425	Total past due and non-accrual loans	$	4,295	$	1,177	$	500	$	14,714


		As of December 31, 2021									As of December 31, 2022
		Loans past due, still accruing						Non-accrual Loans			Loans past due, still accruing						Non-accrual Loans
		30-59 Days		60-89 Days		90+Days					30-59 Days		60-89 Days		90+Days
Past due and non-accrual loans	Past due and non-accrual loans									Past due and non-accrual loans
Commercial loans:										Commercial loans:
Commercial	Commercial	$	363	$	10	$	213	$	7,004	Commercial	$	2	$	—	$	—	$	6,174
Commercial real estate	Commercial real estate	151		441		—		5,973		Commercial real estate	124		—		—		5,644
Real estate construction		56		—		—		—

Past due and non-accrual commercial loans										Past due and non-accrual commercial loans	126		—		—		11,818
Retail loans:										Retail loans:
Retail real estate	Retail real estate	3,312		1,830		693		2,898		Retail real estate	4,709		1,239		673		3,096
Retail other	Retail other	82		16		—		71		Retail other	414		60		—		153
Past due and non-accrual retail loans										Past due and non-accrual retail loans	5,123		1,299		673		3,249
Total past due and non-accrual loans	Total past due and non-accrual loans	$	3,964	$	2,297	$	906	$	15,946	Total past due and non-accrual loans	$	5,249	$	1,299	$	673	$	15,067

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 ~~$0.3~~$0.4 million and ~~$0.8~~$0.2 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023, and 2022, respectively. 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 $0.3 million and $1.2 million for the three and nine months ended September 30, 2021, respectively. The amount of interest collected on those loans and recognized on a cash basis that was included in interest income was insignificant for the three months ended ~~September 30, 2022,~~March 31, 2023, and was $0.4 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022. ~~The amount of interest collected on those loans and recognized on a cash basis that was included in interest income was $0.4 million for the three and nine months ended September 30, 2021.~~

~~Troubled Debt Restructurings~~

~~TDR loan balances are summarized as follows~~ ~~(dollars in thousands)~~:

As of
September 30,
2022 December 31, 2021
TDRs
In compliance with modified terms $ 1,940 $ 1,801
30 – 89 days past due — —
Non-performing TDRs 483 551
Total TDRs $ 2,423 $ 2,352

2623

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Loan Modification Disclosures Pursuant to ASU 2022-02

The following table shows the amortized cost basis of loans that were modified during the three months ended March 31, 2023, for borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted (dollars in thousands):


	As of March 31, 2023
	Payment Deferral1		% of Total Class of Financing Receivable2		Term Extension3		% of Total Class of Financing Receivable
Loan class:
Commercial	$	489	—	%	$	25,155	1.3	%
Commercial real estate	—		—	%	12,698		0.4	%



Total of loans modified during the period4	$	489	—	%	$	37,853	0.5	%

___________________________________________

1.Loans with payment deferrals were modified to defer all principal payments until the end of the loan terms, which were shortened. Regular interest payments continue to be required during the deferral period.

2.Loans with payment deferrals represent an insignificant portion of of commercial loans and total loans, rounding to zero percent.

3.Modifications to extend loan terms also included, in most cases, interest rate increases during the extension period.

4.All modifications were for loans classified as substandard.

The following table summarizes the financial effects of loan modifications made during the three months ended March 31, 2023, for borrowers experiencing financial difficulty:

Weighted Average Term Extension

Loan class:

Commercial

9.1 months

Commercial real estate

5.8 months

Total financial effect

8.0 months

First 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 on or after January 1, 2023, the date we adopted ASU 2022-02 (dollars in thousands):


	As of March 31, 2023
	Current		30-89 Days		90+ Days
Loan class:
Commercial	$	25,644	$	—	$	—
Commercial real estate	12,698		—		—



Amortized cost of modified loans	$	38,342	$	—	$	—

Table of Contents

FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

TDR Disclosures Prior to the Adoption of ASU 2022-02

At December 31, 2022, performing TDR’s were $3.0 million and non-performing TDR’s were $0.5 million.

No loans were newly designated as TDRs during the ~~periods presented, are summarized as follows~~ ~~(dollars in thousands)~~:

Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022
Recorded Investment Recorded Investment
Number of
Contracts
Rate
Modification1
Payment
Modification1
Number of
Contracts
Rate
Modification1
Payment
Modification1
Commercial — $ — $ — 1 $ — $ 381

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021
Recorded Investment Recorded Investment
Number of
Contracts
Rate
Modification1
Payment
Modification1
Number of
Contracts
Rate
Modification1
Payment
Modification1
Commercial — $ — $ — 1 $ 444 $ —

1.~~TDRs may include multiple concessions; those that include an interest rate concession and payment concession are shown in the rate modification column.~~

three months ended March 31, 2022. There were no TDRs entered into during the 12 months ended ~~September 30,~~March 31, 2022, ~~or 2021,~~ that had subsequent defaults during the three ~~or nine~~ months ended ~~September 30, 2022, or 2021. A default occurs when a loan is 90 days or more past due or transferred to non-accrual.~~

March 31, 2022. Gross interest income that would have been recorded in the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, ~~and 2021,~~ if TDRs had performed in accordance with their original terms compared with their modified terms, was insignificant.

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 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 underlying collateral, less estimated costs to sell. The Company had ~~$14.8~~$13.3 million and ~~$7.9~~$14.0 million of collateral dependent loans secured by real estate or business assets as of ~~September 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, respectively.

Foreclosures

As of ~~September 30, 2022,~~March 31, 2023, the Company had ~~$1.0~~$1.1 million of residential real estate in the process of foreclosure. The Company follows Federal Housing Finance Agency guidelines on single-family foreclosures and real estate owned evictions on portfolio loans.

~~Table of Contents~~

~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~Loans Modified Under the CARES Act or Interagency Statement~~

The CARES Act provided financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time to account for the effects of COVID-19. Federal regulatory agencies, in consultation with FASB, also issued an Interagency Statement to encourage financial institutions to work with borrowers affected by COVID-19, and to update guidance which allowed banks to modify loans of customers stressed by COVID-19 without having to classify the loan as a TDR. The Company’s TDR loan totals do not include the following modified loans with payment deferrals that fall under the CARES Act or Interagency Statement, which suspended GAAP requirements related to TDR classification ~~(dollars in thousands)~~:

As of September 30, 2022 As of December 31, 2021
Number of
Contracts Recorded
Investment Number of
Contracts Recorded
Investment
COVID-19 loan modifications
Commercial loans:
Interest-only deferrals 8 $ 20,556 32 $ 128,730
Retail loans:
Mortgage and personal loan deferrals 1 99 2 137
Total COVID-19 loans modifications 9 $ 20,655 34 $ 128,867

Loans Evaluated Individually

The Company evaluates loans with disparate risk characteristics on an individual basis. The following tables provide details of loans evaluated individually, segregated by ~~category.~~loan category and class. 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, 2022																	As of March 31, 2023
		Unpaid Principal Balance			Recorded Investment											Average Recorded Investment			Unpaid Principal Balance			Recorded Investment								Average Recorded Investment
				With No Allowance			With Allowance			Total			Related Allowance					With No Allowance				With Allowance		Total		Related Allowance
Loans evaluated individually	Loans evaluated individually																				Loans evaluated individually
Commercial loans:																		Commercial loans:
Commercial	Commercial	$	9,455		$	547		$	5,892		$	6,439		$	2,806	$	7,488	Commercial	$	8,761		$	564	$	5,181	$	5,745	$	1,825	$	6,512
Commercial real estate	Commercial real estate	7,497			1,663			4,035			5,698			2,000		5,216		Commercial real estate	8,421			2,286		3,794		6,080		1,344		5,285
Real estate construction	Real estate construction	255			255			—			255			—		266		Real estate construction	—			—		—		—		—		206
Commercial loans evaluated individually																		Commercial loans evaluated individually	17,182			2,850		8,975		11,825		3,169		12,003
Retail loans:																		Retail loans:
Retail real estate	Retail real estate	2,258			2,089			25			2,114			25		2,526		Retail real estate	1,249			1,080		25		1,105		25		2,058

Retail loans evaluated individually																		Retail loans evaluated individually	1,249			1,080		25		1,105		25		2,058
Total loans evaluated individually	Total loans evaluated individually	$	19,465		$	4,554		$	9,952		$	14,506		$	4,831	$	15,496	Total loans evaluated individually	$	18,431		$	3,930	$	9,000	$	12,930	$	3,194	$	14,061

2825

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


		As of December 31, 2021																	As of December 31, 2022
		Unpaid Principal Balance			Recorded Investment											Average Recorded Investment			Unpaid Principal Balance			Recorded Investment								Average Recorded Investment
				With No Allowance			With Allowance			Total			Related Allowance					With No Allowance				With Allowance		Total		Related Allowance
Loans evaluated individually	Loans evaluated individually																				Loans evaluated individually
Commercial loans:																		Commercial loans:
Commercial	Commercial	$	10,247		$	498		$	6,490		$	6,988		$	3,564	$	8,791	Commercial	$	9,589		$	656	$	5,918	$	6,574	$	2,476	$	6,761
Commercial real estate	Commercial real estate	6,456			5,750			—			5,750			—		6,390		Commercial real estate	8,039			2,334		3,903		6,237		2,000		5,219
Real estate construction	Real estate construction	272			272			—			272			—		282		Real estate construction	247			247		—		247		—		260
Commercial loans evaluated individually																		Commercial loans evaluated individually	17,875			3,237		9,821		13,058		4,476		12,240
Retail loans:																		Retail loans:
Retail real estate	Retail real estate	2,514			2,345			25			2,370			25		4,093		Retail real estate	2,733			2,564		25		2,589		25		2,311

Retail loans evaluated individually																		Retail loans evaluated individually	2,733			2,564		25		2,589		25		2,311
Total loans evaluated individually	Total loans evaluated individually	$	19,489		$	8,865		$	6,515		$	15,380		$	3,589	$	19,556	Total loans evaluated individually	$	20,608		$	5,801	$	9,846	$	15,647	$	4,501	$	14,551

Allowance for Credit Losses

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 the Company’s historical loss experience beginning in 2010. Due to the continued economic uncertainty in the markets in which the Company operates, ~~in particular the levels of delinquencies,~~ the Company 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. ~~PPP loans were excluded from the ACL calculation as they are 100% government guaranteed.~~

The following tables summarize activity in the ~~ACL.~~ACL attributable to each class of loan. Allocation of a portion of the ACL to one ~~category~~class does not preclude its availability to absorb losses in other ~~categories~~classes (dollars in thousands):


		Three Months Ended September 30, 2022													Three Months Ended March 31, 2023
		Commercial		Commercial Real Estate		Real Estate Construction		Retail Real Estate		Retail Other		Total			Commercial		Commercial Real Estate		Real Estate Construction		Retail Real Estate		Retail Other		Total
ACL balance, June 30, 2022		$	23,359	$	37,182	$	5,669	$	17,984	$	4,563	$	88,757
ACL balance, December 31, 2022														ACL balance, December 31, 2022	$	23,860	$	38,299	$	6,457	$	18,193	$	4,799	$	91,608
Provision for credit losses	Provision for credit losses	615		598		216		684		251		2,364		Provision for credit losses	695		(3,359)		(1,329)		5,948		(1,002)		953
Charged-off	Charged-off	(381)		—		—		(220)		(218)		(819)		Charged-off	(400)		(539)		—		(5)		(237)		(1,181)
Recoveries	Recoveries	102		19		86		172		41		420		Recoveries	121		20		31		119		56		347
ACL balance, September 30, 2022		$	23,695	$	37,799	$	5,971	$	18,620	$	4,637	$	90,722
ACL balance, March 31, 2023														ACL balance, March 31, 2023	$	24,276	$	34,421	$	5,159	$	24,255	$	3,616	$	91,727


		Nine Months Ended September 30, 2022													Three Months Ended March 31, 2022
		Commercial		Commercial Real Estate		Real Estate Construction		Retail Real Estate		Retail Other		Total			Commercial		Commercial Real Estate		Real Estate Construction		Retail Real Estate		Retail Other		Total
ACL balance, December 31, 2021	ACL balance, December 31, 2021	$	23,855	$	38,249	$	5,102	$	17,589	$	3,092	$	87,887	ACL balance, December 31, 2021	$	23,855	$	38,249	$	5,102	$	17,589	$	3,092	$	87,887

Provision for credit losses	Provision for credit losses	123		408		663		826		1,744		3,764		Provision for credit losses	251		(1,218)		510		(170)		374		(253)
Charged-off	Charged-off	(589)		(1,372)		—		(253)		(409)		(2,623)		Charged-off	—		—		—		(16)		(109)		(125)
Recoveries	Recoveries	306		514		206		458		210		1,694		Recoveries	67		308		93		152		84		704
ACL balance, September 30, 2022		$	23,695	$	37,799	$	5,971	$	18,620	$	4,637	$	90,722
ACL balance, March 31, 2022														ACL balance, March 31, 2022	$	24,173	$	37,339	$	5,705	$	17,555	$	3,441	$	88,213

Table of Contents

FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following tables present the ACL and amortized cost of portfolio loans by loan category and class (dollars in thousands):


	As of March 31, 2023
	Portfolio Loans						ACL Attributed to Portfolio Loans
	Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Total		Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Total
Portfolio loans and related ACL
Commercial loans:
Commercial	$	1,931,413	$	5,745	$	1,937,158	$	22,451	$	1,825	$	24,276
Commercial real estate	3,318,456		6,080		3,324,536		33,077		1,344		34,421
Real estate construction	554,009		—		554,009		5,159		—		5,159
Commercial loans and related ACL	5,803,878		11,825		5,815,703		60,687		3,169		63,856
Retail loans:
Retail real estate	1,666,432		1,105		1,667,537		24,230		25		24,255
Retail other	300,568		—		300,568		3,616		—		3,616
Retail loans and related ACL	1,967,000		1,105		1,968,105		27,846		25		27,871
Portfolio loans and related ACL	$	7,770,878	$	12,930	$	7,783,808	$	88,533	$	3,194	$	91,727


	As of December 31, 2022
	Portfolio Loans						ACL Attributed to Portfolio Loans
	Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Total		Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Total
Portfolio loans and related ACL
Commercial loans:
Commercial	$	1,967,580	$	6,574	$	1,974,154	$	21,384	$	2,476	$	23,860
Commercial real estate	3,255,636		6,237		3,261,873		36,299		2,000		38,299
Real estate construction	530,222		247		530,469		6,457		—		6,457
Commercial loans and related ACL	5,753,438		13,058		5,766,496		64,140		4,476		68,616
Retail loans:
Retail real estate	1,654,493		2,589		1,657,082		18,168		25		18,193
Retail other	302,124		—		302,124		4,799		—		4,799
Retail loans and related ACL	1,956,617		2,589		1,959,206		22,967		25		22,992
Portfolio loans and related ACL	$	7,710,055	$	15,647	$	7,725,702	$	87,107	$	4,501	$	91,608

Table of Contents

FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 4: Leases

Busey as the Lessee

The Company 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 information and balances the Company reported in its unaudited Consolidated Balance Sheets for the periods presented (dollars in thousands):


	As of
	March 31, 2023			December 31, 2022
Lease balances
Right of use assets	$	12,291		$	12,829
Lease liabilities	12,515			12,995

Supplemental information
Year through which lease terms extend	2037			2037
Weighted average remaining lease term, in years	8.82 years			8.90 years
Weighted average discount rate	3.49		%	3.45		%

The following table represents lease costs and cash flows related to leases for the periods presented (dollars in thousands):


	Three Months Ended March 31,
		2023		2022
Lease costs
Operating lease costs		$	628	$	617
Variable lease costs		5		128
Short-term lease costs		6		4
Total lease cost1		$	639	$	749

Cash flows related to leases
Cash paid for amounts included in the measurement of lease liabilities:
Operating lease cash flows – Fixed payments		$	570	$	631
Operating lease cash flows – Liability reduction		479		585
Right of use assets obtained during the period in exchange for operating lease liabilities		4		55

1.Lease costs are included in net occupancy and equipment expense in the Consolidated Statements of Income.

Table of Contents

FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The Company was obligated under noncancelable operating leases for office space and other commitments, as follows (dollars in thousands):


	As of March 31, 2023
Rent commitments
Remainder of 2023	$	1,650
2024	1,933
2025	1,716
2026	1,441
2027	1,276
2028	1,255
Thereafter	5,477
Total undiscounted cash flows	14,748
Less: Amounts representing interest	2,233
Present value of net future minimum lease payments	$	12,515

Busey as the Lessor

Busey occasionally leases parking lots and office space to outside parties. Further, in connection with the acquisition of CAC in the second quarter of 2021, the Company acquired office buildings in Glenview, IL and Northbrook, IL, along with operating leases for space within these buildings that is rented to third parties. Revenues recorded in connection with these leases and reported in other income on our unaudited Consolidated Statements of Income are summarized as follows (dollars in thousands):


	Three Months Ended March 31,
		2023		2022
Rental income		$	191	$	230

Note 5: Deposits

The composition of deposits is as follows (dollars in thousands):


	As of
	March 31, 2023		December 31, 2022
Deposits
Noninterest-bearing demand deposits	$	3,173,783	$	3,393,666
Interest-bearing transaction deposits	2,648,116		2,857,818
Saving deposits and money market deposits	2,830,599		2,964,421
Time deposits	1,148,671		855,375
Total deposits	$	9,801,169	$	10,071,280

Table of Contents

FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Three Months Ended September 30, 2021
Commercial Commercial
Real Estate Real Estate
Construction Retail
Real Estate Retail Other Total
ACL balance, June 30, 2021 $ 24,356 $ 39,974 $ 7,599 $ 20,505 $ 2,976 $ 95,410
Provision for credit losses 657 (25) (1,503) (1,155) 157 (1,869)
Charged-off (764) (191) — (155) (98) (1,208)
Recoveries 157 73 25 157 57 469
ACL balance, September 30, 2021 $ 24,406 $ 39,831 $ 6,121 $ 19,352 $ 3,092 $ 92,802

Nine Months Ended September 30, 2021
Commercial Commercial
Real Estate Real Estate
Construction Retail
Real Estate Retail Other Total
ACL balance, December 31, 2020 $ 23,866 $ 46,230 $ 8,193 $ 21,992 $ 767 $ 101,048
Day 1 PCD1
3,546 336 — 129 167 4,178
Provision for credit losses (1,428) (6,109) (2,082) (3,028) 2,282 (10,365)
Charged-off (2,026) (812) (209) (315) (349) (3,711)
Recoveries 448 186 219 574 225 1,652
ACL balance, September 30, 2021 $ 24,406 $ 39,831 $ 6,121 $ 19,352 $ 3,092 $ 92,802

1.~~The Day 1 PCD is attributable to the CAC acquisition in the second quarter of 2021.~~

~~The following tables present the ACL and amortized cost of portfolio loans by category~~ ~~(dollars in thousands)~~:

As of September 30, 2022
Portfolio Loans ACL Attributed to Portfolio Loans
Collectively
Evaluated for
Impairment Individually
Evaluated for
Impairment Total Collectively
Evaluated for
Impairment Individually
Evaluated for
Impairment Total
Portfolio loan category
Commercial $ 1,939,454 $ 6,439 $ 1,945,893 $ 20,889 $ 2,806 $ 23,695
Commercial real estate 3,272,986 5,698 3,278,684 35,799 2,000 37,799
Real estate construction 499,305 255 499,560 5,971 — 5,971
Retail real estate 1,640,985 2,114 1,643,099 18,595 25 18,620
Retail other 302,878 — 302,878 4,637 — 4,637
Portfolio loans and related ACL $ 7,655,608 $ 14,506 $ 7,670,114 $ 85,891 $ 4,831 $ 90,722

~~Table of Contents~~

~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

As of December 31, 2021
Portfolio Loans ACL Attributed to Portfolio Loans
Collectively
Evaluated for
Impairment Individually
Evaluated for
Impairment Total Collectively
Evaluated for
Impairment Individually
Evaluated for
Impairment Total
Portfolio loan category
Commercial $ 1,936,898 $ 6,988 $ 1,943,886 $ 20,291 $ 3,564 $ 23,855
Commercial real estate 3,114,057 5,750 3,119,807 38,249 — 38,249
Real estate construction 385,724 272 385,996 5,102 — 5,102
Retail real estate 1,510,606 2,370 1,512,976 17,564 25 17,589
Retail other 226,333 — 226,333 3,092 — 3,092
Portfolio loans and related ACL $ 7,173,618 $ 15,380 $ 7,188,998 $ 84,298 $ 3,589 $ 87,887

~~Note 5: Deposits~~

~~The composition of deposits is as follows~~ ~~(dollars in thousands)~~:

As of
September 30,
2022 December 31,
2021
Deposits
Demand deposits, noninterest-bearing $ 3,628,169 $ 3,670,267
Interest-bearing transaction deposits 2,952,414 2,720,417
Saving deposits and money market deposits 3,220,627 3,442,244
Time deposits 800,187 935,649
Total deposits $ 10,601,397 $ 10,768,577

Additional information about our deposits is as follows (dollars in thousands):

As of
September 30,
2022 December 31,
2021
Brokered savings deposits and money market deposits $ 2,006 $ 2,248
Brokered time deposits 273 266
Aggregate amount of time deposits with a minimum denomination of $100,000 379,136 454,649
Aggregate amount of time deposits with a minimum denomination that meets or exceeds the FDIC insurance limit of $250,000 103,534 137,449

~~Table of Contents~~

~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~


	As of
	March 31, 2023		December 31, 2022
Brokered savings deposits and money market deposits	$	6,005	$	1,303
Brokered time deposits	278		275
Aggregate amount of time deposits with a minimum denomination of $100,000	630,529		416,445
Aggregate amount of time deposits with a minimum denomination that meets or exceeds the FDIC insurance limit of $250,000	200,898		120,377

Scheduled maturities of time deposits are as follows (dollars in thousands):


		As of September 30, 2022			As of March 31, 2023
Time deposits by schedule of maturities	Time deposits by schedule of maturities			Time deposits by schedule of maturities
Remainder of 2022		$	188,332
2023		431,060
Remainder of 2023				Remainder of 2023	$	474,277
2024	2024	126,309		2024	596,731
2025	2025	23,078		2025	42,344
2026	2026	17,910		2026	17,183
2027	2027	12,844		2027	13,746
2028				2028	3,851
Thereafter	Thereafter	654		Thereafter	539
Time deposits	Time deposits	$	800,187	Time deposits	$	1,148,671

Note 6: 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 the Company’s safekeeping agent. The Company 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							As of
		September 30, 2022			December 31, 2021				March 31, 2023			December 31, 2022
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	$	234,597		$	270,139		Securities sold under agreements to repurchase	$	210,977		$	229,806
Weighted average rate for securities sold under agreements to repurchase	Weighted average rate for securities sold under agreements to repurchase	0.98		%	0.08		%	Weighted average rate for securities sold under agreements to repurchase	2.44		%	1.91		%

Term Loan

On May 28, 2021, the Company entered into a Second Amended and Restated Credit Agreement, pursuant to which the Company has access to (i) a $40.0 million revolving line of credit with a termination date of April 30, 2022, and (ii) 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 loans now have an annual interest rate of 1.80% plus the one-month forward-looking term rate based on SOFR. On April 30, 2023, the agreement was further amended to extend the term for the revolving line of credit to April 30, 2024.

Table of Contents

FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Proceeds of the term loan were used to fund a part of the cash portion of the merger consideration related to the acquisition of CAC in the second quarter of 2021, and for general corporate purposes. As of ~~September 30, 2022,~~March 31, 2023, there was no balance outstanding on the revolving credit facility and a total of ~~$45.0~~$39.0 million outstanding on the term loan, of which $12.0 million was short-term and ~~$33.0~~$27.0 million was long-term. The revolving credit facility incurs a non-usage fee based on any undrawn amounts. Quarterly payments on the term loan reduce the outstanding principal balance by $3.0 million each quarter.

~~Table of Contents~~

~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

Short-term Borrowings

First Busey’s short-term borrowings include loans maturing within one year of the loan origination date, as well as 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					As of
		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Short-term borrowings	Short-term borrowings					Short-term borrowings

FHLB advances maturing in less than one year from date of origination, and the current portion of long-term FHLB advances due within 12 months	FHLB advances maturing in less than one year from date of origination, and the current portion of long-term FHLB advances due within 12 months	$	4,225	$	5,678	FHLB advances maturing in less than one year from date of origination, and the current portion of long-term FHLB advances due within 12 months	$	603,881	$	339,054

Term Loan, current portion due within 12 months	Term Loan, current portion due within 12 months	12,000		12,000		Term Loan, current portion due within 12 months	12,000		12,000
Total short-term debt	Total short-term debt	$	16,225	$	17,678	Total short-term debt	$	615,881	$	351,054

Funds borrowed from the FHLB, listed above, consisted of four notes with a weighted average interest rate of 4.81% and a weighted average maturity period of four days as of March 31, 2023, and four notes with a weighted average interest rate of 4.28% and a weighted average maturity period of five days as of December 31, 2022.

Federal funds purchased are short-term borrowings that generally mature between one day and 90 days. During the first quarter of 2023, the Company purchased federal funds to test operational availability to access funds if needed. The Company had no federal funds purchased as of ~~September 30, 2022,~~March 31, 2023, or December 31, ~~2021.~~2022.

Long-term Debt

First 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,
2022 December 31,
2021
Long-term debt
Notes payable, FHLB, original maturity of 5 years, collateralized by FHLB deposits, residential and commercial real estate loans and FHLB stock $ — $ 4,056
Term Loan 33,000 42,000
Total long-term debt $ 33,000 $ 46,056

As of December 31, 2021, funds borrowed from the FHLB, listed above, consisted of one variable-rate note maturing in May 2023, with an interest rate of 3.04%. This note became due within 12 months during the second quarter of 2022, and the balance is now fully reflected in short-term borrowings.


	As of
	March 31, 2023		December 31, 2022
Long-term debt

Term Loan	$	27,000	$	30,000

Senior and Subordinated Notes

On May 25, 2017, the Company issued $40.0 million of 3.75% senior notes that matured and were redeemed on May 25, 2022. Additionally, on May 25, 2017, the Company issued $60.0 million of fixed-to-floating rate subordinated notes that were scheduled to mature on May 25, 2027,with an optional redemption in whole or in part on any interest payment date on or after May 25, 2022. The Company redeemed all outstanding $60.0 million fixed-to-floating rate subordinated notes during the third quarter of 2022. At the time of redemption, the redeemed subordinated notes carried interest at a floating rate of 3-month LIBOR plus 2.919%.

On June 1, 2020, the Company 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 First Busey, 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. The subordinated notes are payable semi-annually on each June 1 and December 1 during the five-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.

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

On June 2, 2022, the Company 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 will accrue 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 basis points 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.

Unamortized debt issuance costs related to senior notes and subordinated notes are presented in the following table (dollars in thousands):


		As of					As of
		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Unamortized debt issuance costs	Unamortized debt issuance costs					Unamortized debt issuance costs
Senior notes issued in 2017		$	—	$	56
Subordinated notes issued in 2017		—		549
Subordinated notes issued in 2020	Subordinated notes issued in 2020	1,337		1,678		Subordinated notes issued in 2020	$	1,101	$	1,220
Subordinated notes issued in 2022	Subordinated notes issued in 2022	1,828		—		Subordinated notes issued in 2022	1,654		1,742
Total unamortized debt issuance costs	Total unamortized debt issuance costs	$	3,165	$	2,283	Total unamortized debt issuance costs	$	2,755	$	2,962

Note 7: Regulatory Capital

The Company and its subsidiary 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 the Company'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, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, all capital ratios of the Company and its subsidiary 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, 2022,~~March 31, 2023, that would change this designation.

Current Expected Credit Loss Model

On March 27, 2020, the FDIC and other federal banking agencies published an interim final rule that provides those banking organizations adopting 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. On August 26, 2020, the CECL final rule was finalized and was substantially similar to the interim final rule. Under this final rule, because the Company has 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, until January 1, 2022. 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, has been added to the deferred transition amounts (“adjusted transition amounts”) and deferred for the two-year period. 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.

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

~~Changes in Capital Relating to Subordinated Debt~~

On May 25, 2017, the Company issued $60.0 million of fixed-to-floating rate subordinated notes that were scheduled to mature on May 25, 2027. The full balance of the subordinated note qualified as Tier 2 Capital for First Busey for the first five years, with a phase out beginning in the second quarter of 2022. The subordinated notes had an optional redemption in whole or in part on any interest payment date on or after May 25, 2022, and the Company redeemed them in full during the third quarter of 2022.

On June 2, 2022, the Company issued $100.0 million aggregate principal amount of 5.000% fixed-to-floating rate subordinated notes that mature on June 15, 2032, which qualify as Tier 2 Capital for regulatory purposes.

Capital Amounts and Ratios

The following tables summarize regulatory capital requirements applicable to the Company and its subsidiary bank (dollars in thousands):

As of September 30, 2022
Actual Minimum
Capital Requirement Minimum
To Be Well
Capitalized
Amount Ratio Amount Ratio Amount Ratio
Common Equity Tier 1 Capital to Risk Weighted Assets
Consolidated $ 1,056,206 11.79 % $ 403,047 4.50 % $ 582,179 6.50 %
Busey Bank $ 1,288,945 14.45 % $ 401,307 4.50 % $ 579,665 6.50 %
Tier 1 Capital to Risk Weighted Assets
Consolidated $ 1,130,206 12.62 % $ 537,396 6.00 % $ 716,528 8.00 %
Busey Bank $ 1,288,945 14.45 % $ 535,076 6.00 % $ 713,434 8.00 %
Total Capital to Risk Weighted Assets
Consolidated $ 1,431,308 15.98 % $ 716,528 8.00 % $ 895,660 10.00 %
Busey Bank $ 1,365,046 15.31 % $ 713,434 8.00 % $ 891,793 10.00 %
Leverage Ratio of Tier 1 Capital to Average Assets
Consolidated $ 1,130,206 9.15 % $ 494,124 4.00 % N/A N/A
Busey Bank $ 1,288,945 10.47 % $ 492,534 4.00 % $ 615,668 5.00 %


	As of March 31, 2023
	Actual				Minimum Capital Requirement				Minimum To Be Well Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
Common equity Tier 1 capital to risk weighted assets
First Busey	$	1,103,960	12.18	%	$	407,938	4.50	%	$	589,243	6.50	%
Busey Bank	$	1,325,556	14.66	%	$	406,788	4.50	%	$	587,582	6.50	%

Tier 1 capital to risk weighted assets
First Busey	$	1,177,960	12.99	%	$	543,917	6.00	%	$	725,222	8.00	%
Busey Bank	$	1,325,556	14.66	%	$	542,383	6.00	%	$	723,178	8.00	%

Total capital to risk weighted assets
First Busey	$	1,486,577	16.40	%	$	725,222	8.00	%	$	906,528	10.00	%
Busey Bank	$	1,409,173	15.59	%	$	723,178	8.00	%	$	903,972	10.00	%

Leverage ratio of Tier 1 capital to average assets
First Busey	$	1,177,960	9.71	%	$	485,472	4.00	%	N/A		N/A
Busey Bank	$	1,325,556	10.95	%	$	484,256	4.00	%	$	605,320	5.00	%

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of December 31, 2021
Actual Minimum
Capital Requirement Minimum
To Be Well
Capitalized
Amount Ratio Amount Ratio Amount Ratio
Common Equity Tier 1 Capital to Risk Weighted Assets
Consolidated $ 995,874 11.85 % $ 378,334 4.50 % $ 546,482 6.50 %
Busey Bank $ 1,241,303 14.81 % $ 377,096 4.50 % $ 544,695 6.50 %
Tier 1 Capital to Risk Weighted Assets
Consolidated $ 1,069,874 12.73 % $ 504,445 6.00 % $ 672,594 8.00 %
Busey Bank $ 1,241,303 14.81 % $ 502,795 6.00 % $ 670,394 8.00 %
Total Capital to Risk Weighted Assets
Consolidated $ 1,320,187 15.70 % $ 672,594 8.00 % $ 840,742 10.00 %
Busey Bank $ 1,306,616 15.59 % $ 670,394 8.00 % $ 837,992 10.00 %
Leverage Ratio of Tier 1 Capital to Average Assets
Consolidated $ 1,069,874 8.52 % $ 502,336 4.00 % N/A N/A
Busey Bank $ 1,241,303 9.91 % $ 501,104 4.00 % $ 626,379 5.00 %


	As of December 31, 2022
	Actual				Minimum Capital Requirement				Minimum To Be Well Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
Common equity Tier 1 capital to risk weighted assets
First Busey	$	1,081,686	11.96	%	$	406,980	4.50	%	$	587,861	6.50	%
Busey Bank	$	1,306,716	14.49	%	$	405,736	4.50	%	$	586,063	6.50	%

Tier 1 capital to risk weighted assets
First Busey	$	1,155,686	12.78	%	$	542,640	6.00	%	$	723,521	8.00	%
Busey Bank	$	1,306,716	14.49	%	$	540,981	6.00	%	$	721,308	8.00	%

Total capital to risk weighted assets
First Busey	$	1,457,994	16.12	%	$	723,521	8.00	%	$	904,401	10.00	%
Busey Bank	$	1,384,024	15.35	%	$	721,308	8.00	%	$	901,635	10.00	%

Leverage ratio of Tier 1 capital to average assets
First Busey	$	1,081,686	9.45	%	$	489,124	4.00	%	N/A		N/A
Busey Bank	$	1,306,716	10.72	%	$	487,541	4.00	%	$	609,426	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 (i) Common Equity Tier 1 Capital to risk-weighted assets of at least 7.0%, (ii) Tier 1 Capital to risk-weighted assets of at least 8.5%, and (iii) Total capital to risk-weighted assets of at least 10.5%.

Note 8: Stock-Based Compensation

Stock Options

The Company 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~~three months ended ~~September 30, 2022,~~March 31, 2023, follows:

Shares Weighted-
Average
Exercise
Price Weighted-
Average
Remaining
Contractual
Life
Options outstanding at December 31, 2021 31,386 $ 23.53 4.88
Expired (440) 23.53
Options outstanding at September 30, 2022 30,946 $ 23.53 4.13
Options exercisable at September 30, 2022 30,946 $ 23.53 4.13


	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life
Options outstanding at December 31, 2022	26,106	$	23.53	3.88

Forfeited	(3,300)	23.53

Options outstanding at March 31, 2023	22,806	23.53		3.63

Options exercisable at March 31, 2023	22,806	23.53		3.63

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

2020 Equity Plan

Under the terms of the 2020 Equity Plan, the Company has granted RSU, PSU, and DSU awards. Upon ~~vesting/~~vesting and delivery, shares are expected (though not required) to be issued from treasury. There were 200,774 shares available for issuance under the 2020 Equity Plan as of March 31, 2023.

RSU Awards

The Company grants RSUs to members of management periodically throughout the year. Each RSU is equivalent to one share of the Company’s common stock. These units have requisite service periods ranging from one year to five years, subject to accelerated vesting upon eligible retirement from the Company. Recipients earn quarterly dividend equivalents on their respective units which entitle the recipients to additional units. Therefore, dividends earned each quarter compound based upon the updated unit balances.

On March 22, 2023, under the terms of the 2020 Equity Plan, the Company granted 224,316 RSUs to members of management. The grant date fair value of the award totaled $4.6 million and will be recognized as compensation expense over the requisite service period ranging from one year to five years. The terms of these awards included an accelerated vesting provision upon eligible retirement from the Company, after a one-year minimum requisite service period. Subsequent to the requisite service period, the awards will become 100% vested.

A summary of changes in the Company’s RSU awards for the three months ended March 31, 2023, is as follows:


	RSU Awards
	Shares	Weighted- Average Grant Date Fair Value
Nonvested at December 31, 2022	1,096,931	$	23.61
Granted	224,316	20.44
Dividend equivalents earned	11,509	22.85
Vested	(4,308)	25.79
Forfeited	(6,863)	20.88
Nonvested at March 31, 2023	1,321,585	23.07

PSU Awards

The Company ~~also~~ grants ~~PSU awards~~PSUs, which are restricted stock units that are subject to certain performance criteria, to members of management periodically throughout the year. Each PSU is equivalent to one share of the Company’s common stock. The number of units that ultimately vest will be determined based on the achievement of the market or other performance goals, subject to accelerated service-based vesting conditions upon eligible retirement from the Company.

On March 22, 2023, the Company granted a target of 104,643 PSUs with a maximum award of 167,429 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 estimated grant date fair value of the award is $2.1 million and will be recognized in compensation expense over the performance period ending December 31, 2025. The Company expects to finalize the grant date fair value of these awards in the second quarter of 2023.

On March 22, 2023, the Company granted a target of 104,643 PSUs with a maximum award of 167,429 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 is $2.1 million and will be recognized in compensation expense over the performance period ending December 31, 2025. The actual amount of compensation expense recognized may vary, subject to achievement of the performance goal.

Table of Contents

FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Further, on March 22, 2023, the Company granted a target of 15,045 PSUs with a maximum award of 30,090 units. The actual number of units issued at the vesting date could range from 0% to 200% of the initial grant, depending on attaining a performance goal based upon the compounded annual revenue growth rate of the FirsTech operating segment. The grant date fair value of the award is $0.3 million and will be recognized in compensation expense over the performance period ending December 31, 2025, subject to achievement of the performance goal.

A summary of changes in the Company’s PSU awards for the three months ended March 31, 2023, is as follows:


	PSU Awards
	Shares1	Weighted- Average Grant Date Fair Value
Nonvested at December 31, 2022	285,351	$	25.40
Granted	224,331	20.44
Dividend equivalents earned	92	22.85
Vested	(92)	22.85
Forfeited	(36,345)	25.24

Nonvested at March 31, 2023	473,337	23.06

1.Shares for PSU awards represent target shares at grant date.

DSU Awards

The Company grants DSUs, which are restricted stock units with a deferred settlement date, to its directors and advisory directors. Each DSU is equivalent to one share of the Company’s common stock. DSUs vest over a one-year period following the grant date. These units generally are subject to the same terms as RSUs under the 2020 Equity Plan, except that, following vesting, settlement occurs within 30 days following the earlier of separation from the board or a change in control of the Company. After vesting and prior to delivery, these units will continue to earn dividend equivalents.

~~Award Grants and Activity~~

~~A summary of changes in the Company’s RSU, PSU, and DSU awards for the nine months ended September 30, 2022, is as follows:~~

RSU Awards PSU Awards DSU Awards
Shares Weighted-
Average
Grant Date
Fair Value
Shares1
Weighted-
Average
Grant Date
Fair Value Shares Weighted-
Average
Grant Date
Fair Value
Nonvested at December 31, 2021 1,147,927 $ 23.97 113,915 $ 22.86 34,135 $ 24.59
Granted 156,483 25.79 195,240 26.14 32,658 25.79
Dividend equivalents earned 33,690 24.56 — — 4,156 24.47
Vested (152,992) 28.93 — — (40,140) 24.67
Forfeited (35,172) 23.51 (4,556) 24.86 — —
Nonvested at September 30, 2022 1,149,936 $ 23.59 304,599 $ 24.93 30,809 $ 25.75
Vested and outstanding at September 30, 2022 116,285 $ 22.82

1.~~Shares for PSU awards represent target shares at grant date.~~

~~Table of Contents~~

~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

On March ~~23, 2022, under the terms of the 2020 Equity Plan,~~22, 2023, the Company granted 156,483 RSUs to members of management. The grant date fair value of the award totaled $4.0 million and will be recognized as compensation expense over the requisite service period ranging from one year to five years. The terms of these awards included an accelerated vesting provision upon eligible retirement from the Company, after a one-year minimum requisite service period. Subsequent to the requisite service period, the awards will become 100% vested.

On March 23, 2022, the Company granted a target of 78,233 market-based PSUs with a maximum award of 125,173 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 shareholder return performance goal. The grant date fair value of the award is $2.1 million and will be recognized in compensation expense over the performance period ending December 31, 2024.

On March 23, 2022, the Company granted a target of 78,233 performance-based PSUs with a maximum award of 125,173 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 core return on average tangible common equity performance goal. The grant date fair value of the award is $2.0 million and will be recognized in compensation expense over the performance period ending December 31, 2024. The actual amount of compensation expense recognized may vary, subject to achievement of the performance goal.

Further, on March 23, 2022, the Company granted a target of 38,774 PSUs with a maximum award of 77,548 units. The actual number of units issued at the vesting date could range from 0% to 200% of the initial grant, depending on attaining a performance goal based upon the compounded annual revenue growth rate of the FirsTech operating segment. The grant date fair value of the award is $1.0 million and will be recognized in compensation expense over the performance period ending December 31, 2024, subject to achievement of the performance goal.

~~On March 23, 2022, the Company granted 32,658~~41,548 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 of one year. Subsequent to the requisite service period, the awards will become 100% vested.

A summary of changes in the Company’s DSU awards for the three months ended March 31, 2023, is as follows:


	DSU Awards
	Shares	Weighted- Average Grant Date Fair Value
Nonvested at December 31, 2022	31,085	$	25.75
Granted	41,548	20.44
Dividend equivalents earned	1,507	22.86
Vested	(32,592)	25.61

Nonvested at March 31, 2023	41,548	20.44

Vested and outstanding at March 31, 2023	145,026	23.66

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

2021 Employee Stock Purchase Plan

The First Busey Corporation 2021 ESPP was approved at the Company’s 2021 Annual Meeting of Stockholders and details can be found within First Busey’s Definitive Proxy Statement filed with the SEC on April 8, 2021. The purpose of the 2021 ESPP is to provide a means through which our employees may acquire a proprietary interest in the Company 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 ~~plan~~2021 ESPP initially reserved for issuance and purchase an aggregate of 600,000 shares of the Company’s common stock. The first offering under ~~this plan~~the 2021 ESPP began on July 1, 2021. There were 481,865 shares available for issuance under the 2021 ESPP as of March 31, 2023.

Stock-based Compensation Expense

The Company did not record any stock option compensation expense for the three ~~or nine~~ months ended ~~September 30, 2022,~~March 31, 2023, or ~~2021.~~2022. As of ~~September 30, 2022,~~March 31, 2023, the Company did not have any unrecognized stock option compensation expense.

The Company recognized compensation expense related to nonvested RSU, PSU, and DSU awards, as well as the 2021 ESPP, as summarized in the table below (dollars in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Stock-based compensation expense	Stock-based compensation expense									Stock-based compensation expense

RSU awards	RSU awards	$	1,072	$	1,316	$	3,521	$	4,362	RSU awards		$	1,020	$	1,176
PSU awards1	PSU awards1	1,172		290		2,342		619		PSU awards1		360		412
DSU awards	DSU awards	196		231		679		741		DSU awards		196		226
2021 ESPP	2021 ESPP	36		54		179		54		2021 ESPP		93		95
Total stock-based compensation expense	Total stock-based compensation expense	$	2,476	$	1,891	$	6,721	$	5,776	Total stock-based compensation expense		$	1,669	$	1,909

1.Expense for market-based PSU awards represents amounts based on target shares at grant date. Expense for performance-based PSU awards represents amounts based on target shares at grant date, adjusted for performance expectations as of the date indicated.

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~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

Unamortized compensation expense related to nonvested RSU, PSU, and DSU awards is summarized in the table below (dollars in thousands):


		As of					As of
		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Unamortized stock-based compensation	Unamortized stock-based compensation					Unamortized stock-based compensation
RSU awards	RSU awards	$	9,966	$	10,204	RSU awards	$	12,005	$	8,570
PSU awards1	PSU awards1	5,279		1,547		PSU awards1	8,632		4,279
DSU awards	DSU awards	371		209		DSU awards	829		175
Total unamortized stock-based compensation	Total unamortized stock-based compensation	$	15,616	$	11,960	Total unamortized stock-based compensation	$	21,466	$	13,024

Weighted average period over which expense is to be recognized	Weighted average period over which expense is to be recognized	2.6 yrs		2.9 yrs		Weighted average period over which expense is to be recognized	2.8 years		2.5 years

1.Unamortized expense for market-based PSU awards represents amounts based on target shares at grant date. Unamortized expense for performance-based PSU awards represents amounts based on target shares at grant date, adjusted for performance expectations as of the date indicated.

~~Shares Available for Issuance Under Stock-based Compensation Plans~~

~~Shares remaining available for issuance pursuant to authorized stock-based compensation plans were as follows as of September 30, 2022:~~


~~Plan~~						Shares Remaining Available for Issuance Pursuant to the Plan
~~2020 Equity Plan~~						~~645,563~~
~~2021 Employee Stock Purchase Plan~~						~~519,577~~

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 9: Outstanding Commitments and Contingent Liabilities

Legal Matters

The Company is a party to legal actions which arise in the normal course of its business activities. In the opinion of management, the ultimate resolution of these matters is not expected to have a material effect on the Company’s financial position or results of operations.

Credit Commitments and Contingencies

A summary of the contractual amount of the Company’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,
2022 December 31,
2021
Financial instruments whose contract amounts represent credit risk
Commitments to extend credit $ 2,024,255 $ 1,983,655
Standby letters of credit 31,933 32,552
Total commitments $ 2,056,188 $ 2,016,207


	As of
	March 31, 2023		December 31, 2022
Financial instruments whose contract amounts represent credit risk
Commitments to extend credit	$	2,066,438	$	1,991,769
Standby letters of credit	37,472		33,008
Total commitments	$	2,103,910	$	2,024,777

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~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

Note 10: Derivative Financial Instruments

The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. Additionally, the Company 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 with customers and other third parties. See “Note 11: Fair Value Measurements” for further discussion of the fair value measurement of such derivatives.

To secure its obligations under derivative contracts, the Company pledged cash and held collateral as follows (dollars in thousands):


		As of					As of
		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Cash pledged to secure obligations under derivative contracts	Cash pledged to secure obligations under derivative contracts	$	36,048	$	27,300	Cash pledged to secure obligations under derivative contracts	$	37,827	$	38,609
Collateral held to secure obligations under derivative contracts	Collateral held to secure obligations under derivative contracts	31,550		—		Collateral held to secure obligations under derivative contracts	22,650		29,830

Derivative Instruments Designated as ~~Cash Flow~~ Hedges

The Company 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.

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Interest Rate Swaps Designated as Cash Flow Hedges

Interest rate swaps with notional amounts totaling $350.0 million as of ~~September 30, 2022,~~both March 31, 2023, and ~~$50.0 million as of~~ December 31, ~~2021,~~2022, were designated as cash flow hedges. The Company entered into one $50.0 million interest rate swap to hedge the risks of variability in cash flows ~~(future~~for future interest ~~payments)~~payments attributable to changes in the contractually specified 3-month LIBOR benchmark interest rate on the Company’s junior subordinated debt owed to unconsolidated trusts (Debt Swap). In addition, ~~during the first quarter of 2022,~~ the Company entered into one $300.0 million receive fixed pay floating interest rate swap to reduce ~~our~~the Company’s asset sensitivity (Loan Swap). WeDuration was added ~~duration~~ to our loan portfolio by fixing a portion of ~~our~~ floating prime based loans. Interest rates had risen above their historical lows allowing usthe Company to lock in a portion of ~~our~~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 the Company expects its hedges to remain highly effective during the remaining terms of the swaps. Changes in fair value were recorded net of tax in OCI.

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~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

A summary of the interest-rate swaps designated as cash flow hedges is presented below (dollars in thousands):


			As of								As of
		Location	September 30, 2022			December 31, 2021				Location	March 31, 2023			December 31, 2022
Debt Swap	Debt Swap								Debt Swap
Notional amount	Notional amount		$	50,000		$	50,000		Notional amount		$	50,000		$	50,000
Weighted average fixed pay rates	Weighted average fixed pay rates		1.79		%	1.79		%	Weighted average fixed pay rates		1.79		%	1.79		%
Weighted average variable 3-month LIBOR receive rates	Weighted average variable 3-month LIBOR receive rates		3.29		%	0.20		%	Weighted average variable 3-month LIBOR receive rates		4.87		%	4.77		%
Weighted average maturity, in years	Weighted average maturity, in years		1.96 yrs			2.71 yrs			Weighted average maturity, in years		1.46 years			1.71 years

Loan Swap	Loan Swap								Loan Swap
Notional amount	Notional amount		$	300,000		N/A			Notional amount		$	300,000		$	300,000
Weighted average fixed receive rates	Weighted average fixed receive rates		4.81		%	N/A			Weighted average fixed receive rates		4.81		%	4.81		%
Weighted average variable Prime pay rates	Weighted average variable Prime pay rates		5.80		%	N/A			Weighted average variable Prime pay rates		7.85		%	7.32		%
Weighted average maturity, in years	Weighted average maturity, in years		6.35 yrs			N/A			Weighted average maturity, in years		5.85 years			6.10 years

Gross aggregate fair value of the swaps	Gross aggregate fair value of the swaps								Gross aggregate fair value of the swaps
Gross aggregate fair value of swap assets	Gross aggregate fair value of swap assets	Other assets	$	2,486		$	—		Gross aggregate fair value of swap assets	Other assets	$	2,062		$	2,535
Gross aggregate fair value of swap liabilities	Gross aggregate fair value of swap liabilities	Other liabilities	$	34,515		$	958		Gross aggregate fair value of swap liabilities	Other liabilities	25,970			32,367

Balances carried in AOCI	Balances carried in AOCI								Balances carried in AOCI
Unrealized gains (losses) on cash flow hedges, net of tax	Unrealized gains (losses) on cash flow hedges, net of tax	AOCI	$	(22,770)		$	(685)		Unrealized gains (losses) on cash flow hedges, net of tax	AOCI	$	(16,642)		$	(20,985)

The Company 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, 2022.~~March 31, 2023.


	As of
	~~September 30,~~ ~~2022~~March 31, 2023
Unrealized gains (losses) in OCI expected to be recognized in income
Unrealized gains expected to be reclassified from OCI to interest income	$	~~190~~393
Unrealized losses expected to be reclassified from OCI to interest expense	~~(247)~~(783)
Net unrealized gains (losses) in OCI expected to be recognized in net interest income	$	~~(57)~~(390)

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Interest expense recorded on these swap transactions was as follows for the periods presented (dollars in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Interest income (expense) on swap transactions $ (370) $ (288) $ 697 $ (854)

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~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~


	Three Months Ended March 31,
		2023		2022
Interest on swap transactions
Interest income on swap transactions		$	383	$	685
Interest expense on swap transactions		(2,192)		(185)
Net interest income (expense) on swap transactions		$	(1,809)	$	500

The following table reflects the net gains (losses) relating to cash flow derivative instruments that were recorded in AOCI and the unaudited Consolidated Statements of Income during the periods presented (dollars in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Unrealized gains (losses) on cash flow hedges	Unrealized gains (losses) on cash flow hedges									Unrealized gains (losses) on cash flow hedges
Gain (loss) recognized in OCI, net of tax		$	(10,192)	$	(5)	$	(21,587)	$	336
Net gain (loss) recognized in OCI, net of tax										Net gain (loss) recognized in OCI, net of tax		$	3,050	$	(4,845)
(Gain) loss reclassified from OCI to interest income, net of tax										(Gain) loss reclassified from OCI to interest income, net of tax		(274)		(489)
(Gain) loss reclassified from OCI to interest expense, net of tax	(Gain) loss reclassified from OCI to interest expense, net of tax	266		206		(498)		611		(Gain) loss reclassified from OCI to interest expense, net of tax		1,567		132
Net change in unrealized gains (losses) on cash flow hedges		$	(9,926)	$	201	$	(22,085)	$	947
Net change in unrealized gains (losses) on cash flow hedges, net of tax										Net change in unrealized gains (losses) on cash flow hedges, net of tax		$	4,343	$	(5,202)

Derivative Instruments Not Designated as Hedges

Interest Rate Swaps Not Designated as Hedges

The Company may offer derivative contracts to its customers in connection with their risk management needs. The Company manages the risk associated with these contracts by entering into equal and offsetting derivative agreements with a third-party dealer. These contracts support variable rate, commercial loan relationships totaling ~~$547.9~~$648.3 million and ~~$491.4~~as of March 31, 2023, and $576.9 million as of ~~September 30, 2022, and~~ December 31, ~~2021, respectively.~~2022. These derivatives generally worked together as an economic interest rate hedge, but the Company 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 liabilities related to customer interest rate swaps recorded in the unaudited Consolidated Balance Sheets are summarized as follows (dollars in thousands):

As of September 30, 2022
Derivative Asset Derivative Liability
Notional
Amount Fair
Value Notional
Amount Fair
Value
Derivatives not designated as hedging instruments
Interest rate swaps – pay floating, receive fixed $ 4,668 $ 46 $ 543,207 $ 42,001
Interest rate swaps – pay fixed, receive floating 543,207 42,001 4,668 46
Total derivatives not designated as hedging instruments $ 547,875 $ 42,047 $ 547,875 $ 42,047


		As of December 31, 2021									As of March 31, 2023
		Derivative Asset				Derivative Liability					Derivative Asset				Derivative Liability
		Notional Amount		Fair Value		Notional Amount		Fair Value			Notional Amount		Fair Value		Notional Amount		Fair Value
Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments									Derivatives not designated as hedging instruments
Interest rate swaps – pay floating, receive fixed	Interest rate swaps – pay floating, receive fixed	$	404,572	$	17,839	$	86,784	$	2,259	Interest rate swaps – pay floating, receive fixed	$	161,772	$	2,256	$	486,488	$	30,226
Interest rate swaps – pay fixed, receive floating	Interest rate swaps – pay fixed, receive floating	86,784		2,259		404,572		17,839		Interest rate swaps – pay fixed, receive floating	486,488		30,226		161,772		2,256
Total derivatives not designated as hedging instruments	Total derivatives not designated as hedging instruments	$	491,356	$	20,098	$	491,356	$	20,098	Total derivatives not designated as hedging instruments	$	648,260	$	32,482	$	648,260	$	32,482

4240

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


	As of December 31, 2022
	Derivative Asset				Derivative Liability
	Notional Amount		Fair Value		Notional Amount		Fair Value
Derivatives not designated as hedging instruments
Interest rate swaps – pay floating, receive fixed	$	48,728	$	370	$	528,183	$	39,685
Interest rate swaps – pay fixed, receive floating	528,183		39,685		48,728		370
Total derivatives not designated as hedging instruments	$	576,911	$	40,055	$	576,911	$	40,055

Changes in fair value of these derivative assets and liabilities are recorded in noninterest expense in the unaudited Consolidated Statements of Income and summarized as follows (dollars in thousands):


			Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended March 31,
		Location	2022		2021		2022		2021			Location		2023		2022
Interest rate swaps	Interest rate swaps										Interest rate swaps
Pay floating, receive fixed	Pay floating, receive fixed	Noninterest expense	$	18,317	$	(2,024)	$	21,792	$	(11,355)	Pay floating, receive fixed	Noninterest expense		$	(7,667)	$	(3,550)
Pay fixed, receive floating	Pay fixed, receive floating	Noninterest expense	(18,317)		2,024		(21,792)		11,355		Pay fixed, receive floating	Noninterest expense		7,667		3,550
Net change in fair value of interest rate swaps	Net change in fair value of interest rate swaps		$	—	$	—	$	—	$	—	Net change in fair value of interest rate swaps			$	—	$	—

Risk Participation ~~Agreement~~Agreements

To manage the credit risk exposure related to a customer-facing swap, the Company entered into ~~two~~ risk participation agreements in conjunction with loan participation arrangements with other financial institutions. The risk participation agreements mature inbetween 2026 and ~~2028,~~2029, and are summarized as follows (dollars in thousands):


		As of					As of
		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Risk participation agreements	Risk participation agreements					Risk participation agreements
Number of risk participation agreements						Number of risk participation agreements	3		2
Notional amount	Notional amount	$	18,921	$	3,990	Notional amount	$	34,320	$	18,899
Fair value	Fair value	4		11		Fair value	24		5

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 in the unaudited Consolidated Balance Sheets, 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.

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Forward Sales Commitments

The Company 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 in the ~~unaudited~~ Consolidated Balance Sheets. While such forward sales commitments generally served as an economic hedge to mortgage loans held for sale and interest rate lock commitments, the Company 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.

~~Table of Contents~~

~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

Amounts and fair values of mortgage banking derivatives included in the unaudited Consolidated Balance Sheets are summarized as follows (dollars in thousands):


			As of September 30, 2022				As of December 31, 2021						As of March 31, 2023				As of December 31, 2022
		Location	Notional Amount		Fair Value		Notional Amount		Fair Value			Location	Notional Amount		Fair Value		Notional Amount		Fair Value
Derivatives with positive fair value	Derivatives with positive fair value										Derivatives with positive fair value
Interest rate lock commitments	Interest rate lock commitments	Other assets	$	3,434	$	42	$	19,384	$	206	Interest rate lock commitments	Other assets	$	2,955	$	53	$	1,517	$	16
Forward sales commitments	Forward sales commitments	Other assets	4,107		134		1,884		10		Forward sales commitments	Other assets	697		3		83		1
Mortgage banking derivatives recorded in other assets	Mortgage banking derivatives recorded in other assets		$	7,541	$	176	$	21,268	$	216	Mortgage banking derivatives recorded in other assets		$	3,652	$	56	$	1,600	$	17

Derivatives with negative fair value	Derivatives with negative fair value										Derivatives with negative fair value
Interest rate lock commitments	Interest rate lock commitments	Other liabilities	$	408	$	4	$	499	$	6	Interest rate lock commitments	Other liabilities	$	36	$	—	$	83	$	1
Forward sales commitments	Forward sales commitments	Other liabilities	4,342		52		41,002		439		Forward sales commitments	Other liabilities	4,983		95		2,757		39
Mortgage banking derivatives recorded in other liabilities	Mortgage banking derivatives recorded in other liabilities		$	4,750	$	56	$	41,501	$	445	Mortgage banking derivatives recorded in other liabilities		$	5,019	$	95	$	2,840	$	40

Net gains (losses) relating to these derivative instruments are summarized as follows for the periods presented (dollars in thousands):


			Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended March 31,
		Location	2022		2021		2022		2021			Location		2023		2022
Net gains (losses)	Net gains (losses)										Net gains (losses)
Interest rate lock commitments	Interest rate lock commitments	Mortgage revenue	$	(111)	$	537	$	38	$	1,502	Interest rate lock commitments	Mortgage revenue		$	37	$	15
Forward sales commitments	Forward sales commitments	Mortgage revenue	295		(1,438)		82		(3,616)		Forward sales commitments	Mortgage revenue		(54)		106
Net gains (losses)	Net gains (losses)		$	184	$	(901)	$	120	$	(2,114)	Net gains (losses)			$	(17)	$	121

Note 11: 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.

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

•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, volatilities, 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 determining 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.

~~Table of Contents~~

~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

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 those Company assets and liabilities that are carried at fair value.

In general, fair value is based upon quoted market prices, when available. If such quoted market prices are not available, fair values are measured utilizing independent valuation techniques of 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 fair value. 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 the Company's valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine 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 utilizing Level 2 ~~measurements.~~inputs. The Company 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, focusing on observable market data such as benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing, to prepare evaluations.

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 utilizing Level 1 or Level 2 ~~measurements. As applicable, for~~inputs. Fair value measurements of mutual funds, when held, are determined using unadjusted quoted prices in active markets for identical assets ~~are utilized to determine fair value~~ at the measurement date and are classified as Level 1. For stock, quoted prices for identical or similar assets in markets that are not active are utilized and classified as Level 2.

~~Loans Held for Sale~~

Table of Contents

Loans held for sale that were reported at fair value utilized Level 2 measurements at December 31, 2021. The fair values of the mortgage loans held for sale were measured using observable quoted market or contract prices or market price equivalents and were classified as Level 2.FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Derivative Assets and Derivative Liabilities

~~Derivative~~The majority of our derivative assets and derivative liabilities are reported at fair value utilizing Level 2 or Level 3 ~~measurements. As applicable, fair~~inputs. Fair values of derivative assets and liabilities are determined 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 ~~agreement~~agreements are classified as Level 3.

~~Table of Contents~~

~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

The following tables summarize financial assets and financial liabilities measured at fair value on a recurring basis as of ~~September 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (dollars in thousands):


		As of September 30, 2022									As of March 31, 2023
		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value			Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
Debt securities available for sale:	Debt securities available for sale:									Debt securities available for sale:
U.S. Treasury securities	U.S. Treasury securities	$	—	$	140,842	$	—	$	140,842	U.S. Treasury securities	$	—	$	84,632	$	—	$	84,632
Obligations of U.S. government corporations and agencies	Obligations of U.S. government corporations and agencies	—		24,933		—		24,933		Obligations of U.S. government corporations and agencies	—		11,627		—		11,627
Obligations of states and political subdivisions	Obligations of states and political subdivisions	—		270,835		—		270,835		Obligations of states and political subdivisions	—		254,261		—		254,261
Asset-backed securities	Asset-backed securities	—		466,524		—		466,524		Asset-backed securities	—		469,147		—		469,147
Commercial mortgage-backed securities	Commercial mortgage-backed securities	—		87,751		—		87,751		Commercial mortgage-backed securities	—		108,827		—		108,827
Residential mortgage-backed securities	Residential mortgage-backed securities	—		1,304,314		—		1,304,314		Residential mortgage-backed securities	—		1,225,934		—		1,225,934
Corporate debt securities	Corporate debt securities	—		251,842		—		251,842		Corporate debt securities	—		229,122		—		229,122
Equity securities	Equity securities	—		11,341		—		11,341		Equity securities	—		10,915		—		10,915
Derivative assets	Derivative assets	—		44,709		4		44,713		Derivative assets	—		34,600		24		34,624
Derivative liabilities	Derivative liabilities	—		76,589		—		76,589		Derivative liabilities	—		58,547		—		58,547


		As of December 31, 2021									As of December 31, 2022
		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value			Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
Debt securities available for sale:	Debt securities available for sale:									Debt securities available for sale:
U.S. Treasury securities	U.S. Treasury securities	$	—	$	165,762	$	—	$	165,762	U.S. Treasury securities	$	—	$	114,061	$	—	$	114,061
Obligations of U.S. government corporations and agencies	Obligations of U.S. government corporations and agencies	—		38,470		—		38,470		Obligations of U.S. government corporations and agencies	—		19,779		—		19,779
Obligations of states and political subdivisions	Obligations of states and political subdivisions	—		306,869		—		306,869		Obligations of states and political subdivisions	—		257,512		—		257,512
Asset-backed securities	Asset-backed securities	—		492,186		—		492,186		Asset-backed securities	—		469,875		—		469,875
Commercial mortgage-backed securities	Commercial mortgage-backed securities	—		614,998		—		614,998		Commercial mortgage-backed securities	—		108,394		—		108,394
Residential mortgage-backed securities	Residential mortgage-backed securities	—		2,069,313		—		2,069,313		Residential mortgage-backed securities	—		1,243,256		—		1,243,256
Corporate debt securities	Corporate debt securities	—		293,653		—		293,653		Corporate debt securities	—		248,516		—		248,516
Equity securities	Equity securities	—		13,571		—		13,571		Equity securities	—		11,535		—		11,535
Loans held for sale		—		23,875		—		23,875
Derivative assets	Derivative assets	—		20,314		—		20,314		Derivative assets	—		42,607		5		42,612
Derivative liabilities	Derivative liabilities	—		21,501		—		21,501		Derivative liabilities	—		72,462		—		72,462

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

Table of Contents

FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Loans Evaluated Individually

The Company does not record portfolio loans at fair value on a recurring basis. However, periodically, a loan is evaluated individually and is reported at the fair value of the underlying collateral, less estimated costs to sell, if repayment is expected solely from the collateral. If the 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.

~~Table of Contents~~

~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

OREO and Other Repossessed Assets

Non-financial assets measured at fair value include OREO and other repossessed assets (upon initial recognition or subsequent impairment). OREO properties and other repossessed assets are measured using a combination of observable inputs, including recent appraisals, and unobservable inputs. Due to the significance of unobservable inputs, the fair values of all OREO ~~fair values~~and other repossessed assets have been classified as Level 3.

Bank Property Held for Sale

Bank property held for sale represents certain banking center office buildings which the Company has closed and consolidated with other existing banking centers. Bank property held for sale is measured at the lower of amortized cost or fair value less estimated costs to sell. Fair values were based upon discounted appraisals or real estate listing prices. Due to the significance of unobservable inputs, fair values of all bank property held for sale have been classified as Level 3.

The following tables summarize assets and liabilities measured at fair value on a non-recurring basis for the periods presented, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (dollars in thousands):


		As of September 30, 2022									As of March 31, 2023
		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value			Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
Loans evaluated individually, net of related allowance	Loans evaluated individually, net of related allowance	$	—	$	—	$	5,121	$	5,121	Loans evaluated individually, net of related allowance	$	—	$	—	$	5,806	$	5,806
OREO with subsequent impairment		—		—		274		274
OREO and other repossessed assets with subsequent impairment										OREO and other repossessed assets with subsequent impairment	—		—		639		639
Bank property held for sale with impairment	Bank property held for sale with impairment	—		—		7,923		7,923		Bank property held for sale with impairment	—		—		7,923		7,923


		As of December 31, 2021									As of December 31, 2022
		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value			Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
Loans evaluated individually, net of related allowance	Loans evaluated individually, net of related allowance	$	—	$	—	$	2,926	$	2,926	Loans evaluated individually, net of related allowance	$	—	$	—	$	5,345	$	5,345
OREO with subsequent impairment		—		—		51		51

Bank property held for sale with impairment	Bank property held for sale with impairment	—		—		10,103		10,103		Bank property held for sale with impairment	—		—		7,923		7,923

The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis for which the Company has utilized Level 3 inputs to determine fair value (dollars in thousands):

As of ~~September 30, 2022~~March 31, 2023

Fair Value

Valuation
Techniques

Unobservable
Input

Range
(Weighted Average)

Loans evaluated individually, net of related allowance

~~5,121~~5,806

Appraisal of collateral

Appraisal adjustments

~~-41.8%~~-20.8% to -100.0%

~~(-48.5)~~(-35.5)%

OREO and other repossessed assets with subsequent impairment

~~274~~639

Appraisal of collateral

Appraisal adjustments

~~-16.0% to -33.0%~~-13.6%

~~(-19.8)~~(-13.6)%

Bank property held for sale with impairment

7,923

Appraisal of collateral or real estate listing price

Appraisal adjustments

-0.7% to -70.1%

(-35.1)%

Table of Contents

FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of December 31, ~~2021~~2022

Fair Value

Valuation

Techniques

Unobservable

Input

Range

(Weighted Average)

Loans evaluated individually, net of related allowance

~~2,926~~5,345

Appraisal of collateral

Appraisal adjustments

~~-50.0%~~-22.7% to -100.0%

~~(-55.1)~~(-45.7)%

~~OREO with subsequent impairment~~

~~Appraisal of collateral~~

~~Appraisal adjustments~~

~~-33.0% to -100.0%~~

~~(-67.9)%~~

Bank property held for sale with impairment

~~10,103~~7,923

Appraisal of collateral or real estate listing price

Appraisal adjustments

-0.7% to -70.1%

~~(-41.3)~~(-35.1)%

~~Table of Contents~~

~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

Financial Assets and Financial Liabilities That Are Not Carried at Fair Value

Estimated fair values of financial instruments that are not carried at fair value in the Company’s unaudited Consolidated Balance Sheets, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value, were as follows (dollars in thousands):


		As of September 30, 2022				As of December 31, 2021					As of March 31, 2023				As of December 31, 2022
		Carrying Amount		Fair Value		Carrying Amount		Fair Value			Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets	Financial assets									Financial assets
Level 1 inputs:	Level 1 inputs:									Level 1 inputs:
Cash and cash equivalents	Cash and cash equivalents	$	347,149	$	347,149	$	836,095	$	836,095	Cash and cash equivalents	$	275,569	$	275,569	$	227,164	$	227,164
Level 2 inputs:	Level 2 inputs:									Level 2 inputs:
Debt securities held to maturity	Debt securities held to maturity	936,328		808,885		—		—		Debt securities held to maturity	907,559		780,653		918,312		785,295
Loans held for sale1		4,546		4,555		—		—
Loans held for sale										Loans held for sale	2,714		2,756		1,253		1,276
Accrued interest receivable	Accrued interest receivable	37,409		37,409		31,064		31,064		Accrued interest receivable	42,854		42,854		43,372		43,372
Level 3 inputs:	Level 3 inputs:									Level 3 inputs:
Portfolio loans, net	Portfolio loans, net	7,579,392		7,319,530		7,101,111		7,161,466		Portfolio loans, net	7,692,081		7,431,580		7,634,094		7,320,422
Mortgage servicing rights	Mortgage servicing rights	6,564		18,815		8,608		12,133		Mortgage servicing rights	5,158		17,748		5,861		18,284
Other servicing rights	Other servicing rights	1,862		2,253		1,830		2,268		Other servicing rights	1,813		2,242		1,914		2,331

Financial liabilities	Financial liabilities									Financial liabilities
Level 2 inputs:	Level 2 inputs:									Level 2 inputs:
Time deposits	Time deposits	$	800,187	$	775,441	$	935,649	$	935,778	Time deposits	$	1,148,671	$	1,122,686	$	855,375	$	830,596
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	234,597		234,597		270,139		270,139		Securities sold under agreements to repurchase	210,977		210,977		229,806		229,806
Short-term borrowings	Short-term borrowings	16,225		16,255		17,678		17,673		Short-term borrowings	615,881		615,899		351,054		351,085
Long-term debt	Long-term debt	33,000		33,071		46,056		46,164		Long-term debt	27,000		27,025		30,000		30,052
Junior subordinated debt owed to unconsolidated trusts	Junior subordinated debt owed to unconsolidated trusts	71,765		60,603		71,635		63,586		Junior subordinated debt owed to unconsolidated trusts	71,855		56,640		71,810		59,111
Accrued interest payable	Accrued interest payable	5,075		5,075		2,728		2,728		Accrued interest payable	9,265		9,265		3,978		3,978
Level 3 inputs:	Level 3 inputs:									Level 3 inputs:
Senior notes, net of unamortized issuance costs		—		—		39,944		40,400

Subordinated notes, net of unamortized issuance costs	Subordinated notes, net of unamortized issuance costs	221,835		209,000		182,773		195,600		Subordinated notes, net of unamortized issuance costs	222,245		199,375		222,038		208,562

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.~~Effective January 1, 2022, recorded at LOCOM.~~

Note 12: 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 the Company’s outstanding stock options and warrants were exercised, stock units were vested, and ESPP shares were issued.

~~Table of Contents~~

~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

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,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Net income	Net income	$	35,661	$	25,941	$	93,924	$	93,523	Net income		$	36,786	$	28,439

Weighted average number of common shares outstanding, basic	Weighted average number of common shares outstanding, basic	55,349,547		56,227,816		55,399,424		55,256,348		Weighted average number of common shares outstanding, basic		55,397,989		55,427,696
Dilutive effect of common stock equivalents:	Dilutive effect of common stock equivalents:									Dilutive effect of common stock equivalents:
Options	Options	249		122		1,606		1,009		Options		—		4,568
Warrants	Warrants	1,708		1,704		1,749		1,732		Warrants		1,296		1,855
RSU awards	RSU awards	624,576		577,611		661,173		602,311		RSU awards		651,777		703,574
PSU awards	PSU awards	81,268		4,915		37,393		2,601		PSU awards		90,645		16,378
DSU awards	DSU awards	10,414		12,796		14,275		6,316		DSU awards		24,345		29,373
ESPP	ESPP	5,402		7,554		8,136		2,518		ESPP		13,554		11,502
Weighted average number of common shares outstanding, diluted	Weighted average number of common shares outstanding, diluted	56,073,164		56,832,518		56,123,756		55,872,835		Weighted average number of common shares outstanding, diluted		56,179,606		56,194,946

Basic earnings per common share	Basic earnings per common share	$	0.64	$	0.46	$	1.70	$	1.69	Basic earnings per common share		$	0.66	$	0.51
Diluted earnings per common share	Diluted earnings per common share	$	0.64	$	0.46	$	1.67	$	1.67	Diluted earnings per common share		0.65		0.51

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,			Three Months Ended March 31,
		2022	2021	2022	2021			2023	2022
Anti-dilutive common stock equivalents	Anti-dilutive common stock equivalents					Anti-dilutive common stock equivalents
Options	Options	—	—	10,389	—	Options		22,806	—

RSU awards		—	47,805	51,883	86,744

PSU awards	PSU awards	160,391	85,571	226,771	95,511	PSU awards		265,459	241,452
DSU awards		—	—	—	10,323

Total anti-dilutive common stock equivalents	Total anti-dilutive common stock equivalents	160,391	133,376	289,043	192,578	Total anti-dilutive common stock equivalents		288,265	241,452

4947

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 13: Accumulated Other Comprehensive Income (Loss)

The following ~~table represents~~tables present changes in AOCI by component, net of tax, for the period below (dollars in thousands):

Three Months Ended September 30,
2022 2021
Before Tax Tax Effect Net of Tax Before Tax Tax Effect Net of Tax
Unrealized gains (losses) on debt securities available for sale
Balance at beginning of period $ (277,310) $ 79,047 $ (198,263) $ 17,013 $ (4,850) $ 12,163
Unrealized holding gains (losses) on debt securities available for sale, net (96,937) 27,631 (69,306) (17,198) 4,902 (12,296)
Amounts reclassified from AOCI, net 74 (21) 53 5 (1) 4
Amortization of unrealized losses on securities transferred to held to maturity 1,806 (515) 1,291 — — —
Balance at end of period $ (372,367) $ 106,142 $ (266,225) $ (180) $ 51 $ (129)
Unrealized gains (losses) on cash flow hedges
Balance at beginning of period $ (17,963) $ 5,119 $ (12,844) $ (2,012) $ 574 $ (1,438)
Unrealized holding gains (losses) on cash flow hedges, net (14,253) 4,061 (10,192) (7) 2 (5)
Amounts reclassified from AOCI, net 370 (104) 266 288 (82) 206
Balance at end of period $ (31,846) $ 9,076 $ (22,770) $ (1,731) $ 494 $ (1,237)
Total AOCI $ (404,213) $ 115,218 $ (288,995) $ (1,911) $ 545 $ (1,366)

~~Table of Contents~~

~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~


		Nine Months Ended September 30,													Three Months Ended March 31,
		2022						2021							2023						2022
		Before Tax		Tax Effect		Net of Tax		Before Tax		Tax Effect		Net of Tax			Before Tax		Tax Effect		Net of Tax		Before Tax		Tax Effect		Net of Tax
Unrealized gains (losses) on debt securities available for sale
Unrealized/Unrecognized gains (losses) on debt securities														Unrealized/Unrecognized gains (losses) on debt securities
Balance at beginning of period	Balance at beginning of period	$	(32,272)	$	9,199	$	(23,073)	$	49,644	$	(14,151)	$	35,493	Balance at beginning of period	$	(352,878)	$	100,585	$	(252,293)	$	(32,272)	$	9,199	$	(23,073)
Unrealized holding gains (losses) on debt securities available for sale, net	Unrealized holding gains (losses) on debt securities available for sale, net	(296,507)		84,519		(211,988)		(49,801)		14,195		(35,606)		Unrealized holding gains (losses) on debt securities available for sale, net	30,693		(8,749)		21,944		(104,282)		29,726		(74,556)
Unrealized losses on debt securities transferred to held to maturity from available for sale		(48,456)		13,812		(34,644)		—		—		—
Unrecognized losses on debt securities transferred to held to maturity from available for sale														Unrecognized losses on debt securities transferred to held to maturity from available for sale	—		—		—		(48,456)		13,812		(34,644)
Amounts reclassified from AOCI, net	Amounts reclassified from AOCI, net	(28)		8		(20)		(23)		7		(16)		Amounts reclassified from AOCI, net	(4)		1		(3)		(106)		30		(76)
Amortization of unrealized losses on securities transferred to held to maturity		4,896		(1,396)		3,500		—		—		—
Amortization of unrecognized losses on securities transferred to held to maturity														Amortization of unrecognized losses on securities transferred to held to maturity	1,693		(483)		1,210		883		(252)		631
Balance at end of period	Balance at end of period	$	(372,367)	$	106,142	$	(266,225)	$	(180)	$	51	$	(129)	Balance at end of period	(320,496)		91,354		(229,142)		(184,233)		52,515		(131,718)

Unrealized gains (losses) on cash flow hedges	Unrealized gains (losses) on cash flow hedges													Unrealized gains (losses) on cash flow hedges
Balance at beginning of period	Balance at beginning of period	$	(958)	$	273	$	(685)	$	(3,055)	$	871	$	(2,184)	Balance at beginning of period	(29,350)		8,365		(20,985)		(958)		273		(685)
Unrealized holding gains (losses) on cash flow hedges, net	Unrealized holding gains (losses) on cash flow hedges, net	(30,191)		8,604		(21,587)		470		(134)		336		Unrealized holding gains (losses) on cash flow hedges, net	4,264		(1,214)		3,050		(6,776)		1,931		(4,845)
Amounts reclassified from AOCI, net	Amounts reclassified from AOCI, net	(697)		199		(498)		854		(243)		611		Amounts reclassified from AOCI, net	1,809		(516)		1,293		(500)		143		(357)
Balance at end of period	Balance at end of period	$	(31,846)	$	9,076	$	(22,770)	$	(1,731)	$	494	$	(1,237)	Balance at end of period	(23,277)		6,635		(16,642)		(8,234)		2,347		(5,887)

Total AOCI	Total AOCI	$	(404,213)	$	115,218	$	(288,995)	$	(1,911)	$	545	$	(1,366)	Total AOCI	$	(343,773)	$	97,989	$	(245,784)	$	(192,467)	$	54,862	$	(137,605)

Note 14: Operating Segments and Related Information

The Company has three reportable operating segments: Banking, FirsTech, and Wealth Management. The Company’s three 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 ~~its~~the Company’s wholly-owned bank subsidiary, Busey Bank, with 58 banking ~~center network~~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.

Table of Contents

FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The FirsTech Operating Segment

The FirsTech operating segment provides ~~solutions~~comprehensive and innovative payment technology solutions. 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 ~~online, mobile,~~customers at retail pay agents; customer service payments made over a telephone; direct debit services; and ~~voice-recognition~~lockbox remittance processing for customers to make payments by mail. FirsTech also provides additional tools to help clients with billing, reconciliation, bill ~~payments; lockbox;~~reminders, and ~~walk-in payments.~~ 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.

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.

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.

Segment Financial Information

The segment financial information provided below has been derived from information used by management to monitor and manage the financial performance of the Company. The accounting policies of the three operating segments are the same as those described in the summary of significant accounting policies in “Note 1. Significant Accounting Policies” in the Company’s ~~2021~~2022 Annual Report. The Company accounts for intersegment revenue and transfers at current market value.

~~Table of Contents~~

~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

Following is a summary of selected financial information for the Company’s operating segments. The “other” category included in the tables below consists of the parent company, First Busey Risk Management, and the elimination of intercompany transactions (dollars in thousands):


		Goodwill				Total Assets					Goodwill				Total Assets
		As of				As of					As of				As of
		September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Operating segment	Operating segment									Operating segment
Banking	Banking	$	294,773	$	294,773	$	12,352,413	$	12,746,833	Banking	$	294,773	$	294,773	$	12,206,562	$	12,199,960
FirsTech	FirsTech	8,992		8,992		48,499		47,481		FirsTech	8,992		8,992		47,750		48,715
Wealth Management	Wealth Management	14,108		14,108		80,082		65,587		Wealth Management	14,108		14,108		87,878		84,082
Other	Other	—		—		16,394		(212)		Other	—		—		2,365		3,920
Consolidated total	Consolidated total	$	317,873	$	317,873	$	12,497,388	$	12,859,689	Consolidated total	$	317,873	$	317,873	$	12,344,555	$	12,336,677

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FIRST BUSEY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Net interest income	Net interest income									Net interest income
Banking	Banking	$	90,916	$	74,672	$	244,820	$	211,377	Banking		$	89,890	$	73,832
FirsTech	FirsTech	15		19		50		60		FirsTech		13		18

Other	Other	(4,626)		(3,936)		(12,581)		(11,247)		Other		(4,046)		(3,794)
Total net interest income	Total net interest income	$	86,305	$	70,755	$	232,289	$	200,190	Total net interest income		$	85,857	$	70,056

Noninterest income	Noninterest income									Noninterest income
Banking	Banking	$	13,559	$	14,976	$	42,827	$	42,798	Banking		$	12,421	$	15,286
FirsTech	FirsTech	5,578		5,030		16,333		14,700		FirsTech		5,674		5,419
Wealth Management	Wealth Management	12,514		13,746		42,425		39,333		Wealth Management		14,926		15,776
Other	Other	(718)		(493)		(3,861)		884		Other		(1,173)		(709)
Total noninterest income	Total noninterest income	$	30,933	$	33,259	$	97,724	$	97,715	Total noninterest income		$	31,848	$	35,772

Noninterest expense	Noninterest expense									Noninterest expense
Banking	Banking	$	55,273	$	59,520	$	165,220	$	150,032	Banking		$	54,651	$	55,567
FirsTech	FirsTech	5,109		4,519		14,601		13,086		FirsTech		5,739		4,683
Wealth Management	Wealth Management	7,682		7,679		23,533		20,961		Wealth Management		8,534		8,265
Other	Other	2,672		1,769		6,850		6,532		Other		1,479		1,861
Total noninterest expense	Total noninterest expense	$	70,736	$	73,487	$	210,204	$	190,611	Total noninterest expense		$	70,403	$	70,376

Income before income taxes	Income before income taxes									Income before income taxes
Banking	Banking	$	46,838	$	31,996	$	118,663	$	114,507	Banking		$	46,707	$	33,804
FirsTech	FirsTech	484		530		1,782		1,674		FirsTech		(52)		754
Wealth Management	Wealth Management	4,832		6,068		18,892		18,373		Wealth Management		6,392		7,511
Other	Other	(8,016)		(6,198)		(23,292)		(16,895)		Other		(6,698)		(6,364)
Total income before income taxes	Total income before income taxes	$	44,138	$	32,396	$	116,045	$	117,659	Total income before income taxes		$	46,349	$	35,705

Net income	Net income									Net income
Banking	Banking	$	37,082	$	25,123	$	94,032	$	89,889	Banking		$	36,835	$	26,451
FirsTech	FirsTech	353		384		1,300		1,214		FirsTech		(38)		550
Wealth Management	Wealth Management	3,756		4,719		14,688		14,285		Wealth Management		4,858		5,840
Other	Other	(5,530)		(4,285)		(16,096)		(11,865)		Other		(4,869)		(4,402)
Total net income	Total net income	$	35,661	$	25,941	$	93,924	$	93,523	Total net income		$	36,786	$	28,439

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~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~Note 15: Leases~~

~~Busey as the Lessee~~

As of
September 30,
2022 December 31,
2021
Lease balances
Right of use assets $ 10,202 $ 10,533
Lease liabilities 10,311 10,591
Supplemental information
Year through which lease terms extend 2037 2031
Weighted average remaining lease term (in years) 8.61 6.47
Weighted average discount rate 2.91 % 2.16 %

~~The following table represents lease costs and cash flows related to leases for the periods presented~~ ~~(dollars in thousands)~~:

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Lease costs
Operating lease costs $ 563 $ 656 $ 1,762 $ 1,828
Variable lease costs 214 94 436 394
Short-term lease costs 5 9 15 43
Total lease cost1
$ 782 $ 759 $ 2,213 $ 2,265
Cash flows related to leases
Cash paid for amounts included in the measurement of lease liabilities:
Operating lease cash flows – Fixed payments $ 1,076 $ 620 $ 2,445 $ 1,756
Operating lease cash flows – Liability reduction 464 569 1,741 1,610
Right of use assets obtained during the period in exchange for operating lease liabilities 1,127 3,408 1,182 5,018

1.~~Lease costs are included in net occupancy and equipment expense in the unaudited Consolidated Statements of Income.~~

~~Table of Contents~~

~~FIRST BUSEY CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~The Company was obligated under noncancelable operating leases for office space and other commitments, as follows~~ ~~(dollars in thousands)~~:

As of
September 30, 2022
Rent commitments
Remainder of 2022 $ 539
2023 1,857
2024 1,573
2025 1,349
2026 1,059
2027 886
Thereafter 4,626
Total undiscounted cash flows 11,889
Less: Amounts representing interest 1,578
Present value of net future minimum lease payments $ 10,311

~~Busey as the Lessor~~

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Rental income $ 146 $ 208 $ 519 $ 339

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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OVERVIEW

First Busey is a ~~$12.5~~$12.3 billion financial holding company headquartered in Champaign, Illinois. Our common stock is traded on The Nasdaq Global Select Market under the symbol “BUSE.”

Our three operating segments provide a full range of banking, payment technology solutions, and wealth management services through our subsidiaries, Busey Bank and FirsTech, in Illinois; the St. Louis, Missouri metropolitan area; southwest Florida; and Indianapolis, Indiana.

The following discussion and analysis are intended to assist readers in understanding First Busey’s financial condition and results of operations during the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, and should be read in conjunction with our ~~unaudited consolidated financial statements~~C onsolidated F inancial S tatements (unaudited) and ~~notes thereto~~the related Notes to the Consolidated Financial Statements (unaudited) included in this Quarterly Report, as well as our ~~2021~~2022 Annual Report.

Busey’s Conservative Banking Strategy

~~CURRENT EVENTS~~The quality of our core deposit franchise is a critical value driver of our institution. Despite recent turmoil experienced in certain sectors of the banking industry, we have seen relative stability in our deposit franchise. We have sufficient on- and off-balance sheet liquidity to manage deposit fluctuations and the liquidity needs of our customers.

~~Hurricane Ian~~

~~On September 28, 2022, Hurricane Ian made landfall in southwest Florida impacting our operations~~Our operating mandate and focus have been on offering convenient products and services to customers while emphasizing credit quality over asset growth. First Busey’s financial strength is built on a sound business strategy of conservative banking, and that focus will not change now or in the region. We are focused on assisting our clients and employees as they navigate the challenges from this historic storm. Efforts undertaken to date include: 1) financial assistance for associates impacted by the storm; 2) creation of a relief center for associates to access much needed supplies; 3) staffing resource reallocation to support our southwest Florida operations; 4) fee waivers for impacted customers; and 5) loan modification programs for impacted commercial and residential customers. These are but a few of the initiatives and efforts implemented to date.future.

Efficiency Initiative

~~Early in the fourth quarter of 2022,~~Late last year we implemented a targeted restructuring and efficiency optimization plan that is ~~expected~~projected to generate ~~annual salary and benefits savings of~~approximately $4.0 million of annual savings. These initiatives are anticipated to ~~$4.4 million. We also expect~~help offset some of the inflationary pressures that exist today while allowing us to ~~incur one-time severance-related costs associated with this initiative~~invest back into other parts of ~~$1.1 million to $1.3 million, most of which are expected to be realized in the fourth quarter. We expect to largely reinvest the anticipated savings to support ongoing growth initiatives across~~ our ~~franchise over the next several quarters.~~organization.

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EXECUTIVE SUMMARY

Operating ~~Results~~Performance

Operating performance metrics presented in the table below have been derived from information used by management to monitor and manage the financial performance of the Company (dollars in thousands, except per share amounts):


			Three Months Ended September 30,						Nine Months Ended September 30,								Three Months Ended March 31,
			2022			2021			2022			2021						2023			2022
Reported:	Reported:	Net income	$	35,661		$	25,941		$	93,924		$	93,523		Reported:	Net income		$	36,786		$	28,439
Adjusted:	Adjusted:	Net income1	$	36,435		$	32,845		$	95,620		$	102,831		Adjusted:	Net income1		$	36,786		$	29,104

Reported:	Reported:	Diluted earnings per common share	$	0.64		$	0.46		$	1.67		$	1.67		Reported:	Diluted earnings per common share		$	0.65		$	0.51
Adjusted:	Adjusted:	Diluted earnings per common share1	$	0.65		$	0.58		$	1.70		$	1.84		Adjusted:	Diluted earnings per common share1		$	0.65		$	0.52

Reported:	Reported:	Return on average assets2	1.13		%	0.81		%	1.00		%	1.08		%	Reported:	Return on average assets2		1.22		%	0.91		%
Adjusted:	Adjusted:	Return on average assets1, 2	1.15		%	1.03		%	1.02		%	1.19		%	Adjusted:	Return on average assets1, 2		1.22		%	0.93		%

Reported:	Reported:	Return on average tangible common equity1, 2	17.41		%	10.60		%	14.81		%	13.12		%	Reported:	Return on average tangible common equity1, 2		18.48		%	12.72		%
Adjusted:	Adjusted:	Return on average tangible common equity1, 2	17.79		%	13.43		%	15.08		%	14.43		%	Adjusted:	Return on average tangible common equity1, 2		18.48		%	13.02		%

Reported:	Reported:	Pre-provision net revenue1	$	46,498		$	30,470		$	122,133		$	104,698		Reported:	Pre-provision net revenue1		$	47,918		$	36,066
Adjusted:	Adjusted:	Pre-provision net revenue1	$	48,800		$	39,409		$	129,421		$	119,648		Adjusted:	Pre-provision net revenue1		$	49,504		$	39,354

Reported:	Reported:	Pre-provision net revenue to average assets1, 2	1.47		%	0.95		%	1.30		%	1.21		%	Reported:	Pre-provision net revenue to average assets1, 2		1.58		%	1.16		%
Adjusted:	Adjusted:	Pre-provision net revenue to average assets1, 2	1.54		%	1.23		%	1.38		%	1.38		%	Adjusted:	Pre-provision net revenue to average assets1, 2		1.64		%	1.26		%

1.A non-GAAP financial measure. For a reconciliation of non-GAAP measures to the most directly comparable GAAP financial measures, see “Item 2. Management’s Discussion and Analysis—Non-GAAP Financial ~~Information~~”Information” included in this Quarterly Report.

2.Annualized measure.

Non-Operating Expenses and Non-GAAP Measures

First Busey views certain non-operating items, including acquisition-related and restructuring charges, as adjustments to net income reported under GAAP. Non-operating pretax adjustments were as follows for the periods presented (dollars in thousands):


	Three Months Ended March 31,
		2023		2022
Non-operating costs
Acquisition related expenses1		$	—	$	835
Restructuring charges2		—		—
Total non-operating costs		$	—	$	835

___________________________________________

1.Acquisition expenses related to completed acquisitions and exploratory due diligence.

2.Restructuring charges related to previously disclosed restructuring and efficiency plans.

Table of Contents

A reconciliation of non-GAAP measures—including pre-provision net revenue, adjusted pre-provision net revenue, pre-provision net revenue to average assets, adjusted pre-provision net revenue to average assets, adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, average tangible common equity, return on average tangible common equity, adjusted return on average tangible common equity, tax-equivalent net interest income, net interest margin, adjusted net interest income, adjusted net interest margin, tax-equivalent revenue, non-interest expense excluding amortization of intangible assets, adjusted noninterest expense, adjusted core expense, efficiency ratio, adjusted efficiency ratio, adjusted core efficiency ratio, noninterest expense excluding non-operating adjustments, tangible assets, tangible common equity, tangible common equity to tangible assets, tangible book value, tangible book value per common share, core loans, core loans to portfolio loans, core deposits, core deposits to total deposits, and core loans to core deposits—which First Busey believes facilitates the assessment of its financial results and peer comparability, is included in tabular form in this Quarterly Report. See “Item 2. Management’s Discussion and Analysis—Non-GAAP Financial Information.”

Acquisitions

On May 31, 2021, First Busey completed its acquisition of CAC, the holding company for GSB. GSB was operated as a separate banking subsidiary from June 1, 2021, until August 14, 2021, when it was merged with and into Busey Bank. At that time GSB’s banking centers became banking centers of Busey Bank. Upon completion of the GSB acquisition, we reset the baseline for the future financial performance of First Busey in a multitude of positive ways.

~~Non-operating Expenses and Non-GAAP Measures~~

First Busey views certain non-operating items, including acquisition-related and restructuring charges, as adjustments to net income reported under GAAP. Non-operating pre-tax adjustments for the three and nine months ended September 30, 2022, included $1.0 million and $2.1 million of expenses, respectively, related to acquisitions and restructuring.

~~Table of Contents~~

A reconciliation of non-GAAP measures—including pre-provision net revenue, adjusted pre-provision net revenue, pre-provision net revenue to average assets, adjusted pre-provision net revenue to average assets, adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, return on average tangible common equity, adjusted return on average tangible common equity, adjusted net interest income, adjusted net interest margin, adjusted noninterest expense, adjusted core expense, efficiency ratio, adjusted efficiency ratio, adjusted core efficiency ratio, tangible book value per common share, tangible common equity, tangible common equity to tangible assets, core loans, core loans to portfolio loans, core deposits, core deposits to total deposits, and core loans to core deposits—which First Busey believes facilitates the assessment of its financial results and peer comparability, is included in tabular form in ~~“Item 2. Management’s Discussion and Analysis—Non-GAAP Financial Information”~~ ~~included in this Quarterly Report.~~

Banking Center Markets

~~We serve~~Busey Bank serves the Illinois banking market with 46 ~~Busey Bank~~ banking centers. Our Illinois markets feature several Fortune 1000 companies. Those organizations, coupled with large healthcare and higher education sectors, anchor the communities in which they are located and have provided a comparatively stable foundation for housing, employment, and small business. Ten of our banking centers in Illinois are located within the Chicago Metropolitan Statistical Area, and 12 of our banking centers in Illinois are located within the St. Louis Metropolitan Statistical Area.

Busey Bank has eight banking centers in ~~Missouri, all within the St. Louis Metropolitan Statistical Area.~~Missouri. St. Louis, Missouri has a diverse economy with major employment sectors including health care, financial services, professional and business services, and retail. We have a total of 20 banking centers within the boundaries of the St. Louis Metropolitan Statistical Area, including branches in both Illinois and Missouri.

Busey Bank has three banking centers in southwest Florida, an area which has experienced strong population growth, job growth, and an expanded housing market, ~~over~~as well as the ~~last several years.~~benefits of a tourism and winter resort economy.

Busey Bank has one banking center in the Indianapolis, Indiana area, which is the most populous city of Indiana with a diverse economy, ~~including~~due in part to it serving as the headquarters of many large corporations.

Net Interest Income

Net interest income is the difference between interest income and fees earned on earning assets and interest expense incurred on interest-bearing liabilities. Interest rate levels and volume fluctuations within earning assets and interest-bearing liabilities impact net interest income. Net interest margin is tax-equivalent net interest income as a percent of average earning assets.

Certain assets with tax favorable treatment are evaluated on a tax-equivalent basis, assuming a federal income tax rate of 21.0%. Tax favorable assets generally have lower contractual pre-tax yields than fully taxable assets. A tax-equivalent analysis is performed by adding the tax savings to the earnings on tax favorable assets. After factoring in the tax favorable effects of these assets, the yields may be more appropriately evaluated against alternative earning assets. In addition to yield, various other risks are factored into the evaluation process.

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Consolidated Average Balance Sheets and Interest Rates (Unaudited)

The following tables show our unaudited Consolidated Average Balance Sheets (dollars in thousands), and details the major categories of assets and liabilities, the interest income earned on interest-earning assets, the interest expense paid for interest-bearing liabilities, and the related interest yields for the periods shown. Average information is provided on a daily average basis.


		Three Months Ended September 30,													Three Months Ended March 31,
		2022						2021							2023						2022
		Average Balance		Income/ Expense		Yield/ Rate5		Average Balance		Income/ Expense		Yield/ Rate5			Average Balance		Income/ Expense		Yield/ Rate		Average Balance		Income/ Expense		Yield/ Rate
Assets	Assets													Assets
Interest-bearing bank deposits and federal funds sold	Interest-bearing bank deposits and federal funds sold	$	207,917	$	1,085	2.07	%	$	860,200	$	462	0.21	%	Interest-bearing bank deposits and federal funds sold	$	108,051	$	988	3.71	%	$	560,824	$	277	0.20	%
Investment securities:	Investment securities:													Investment securities:
U.S. Government obligations	U.S. Government obligations	174,357		267		0.61	%	251,553		416		0.66	%	U.S. Government obligations	125,218		195		0.63	%	197,590		288		0.59	%
Obligations of states and political subdivisions1	Obligations of states and political subdivisions1	284,069		1,900		2.65	%	299,024		1,900		2.52	%	Obligations of states and political subdivisions1	254,403		1,765		2.81	%	302,336		1,915		2.57	%
Other securities	Other securities	3,209,327		16,298		2.01	%	3,171,163		10,167		1.27	%	Other securities	2,980,364		18,579		2.53	%	3,470,430		12,951		1.51	%
Loans held for sale	Loans held for sale	4,195		53		5.01	%	15,589		99		2.52	%	Loans held for sale	1,650		23		5.65	%	11,930		83		2.82	%
Portfolio loans1, 2	Portfolio loans1, 2	7,617,918		76,355		3.98	%	7,133,108		65,418		3.64	%	Portfolio loans1, 2	7,710,876		90,113		4.74	%	7,160,837		61,123		3.46	%
Total interest-earning assets1, 3	Total interest-earning assets1, 3	$	11,497,783	$	95,958	3.31	%	$	11,730,637	$	78,462	2.65	%	Total interest-earning assets1, 3	11,180,562		$	111,663	4.05	%	11,703,947		$	76,637	2.66	%

Cash and due from banks	Cash and due from banks	123,480						149,550						Cash and due from banks	115,145						126,631
Premises and equipment	Premises and equipment	130,367						144,334						Premises and equipment	127,094						135,377
ACL	ACL	(89,019)						(96,682)						ACL	(92,693)						(88,454)
Other assets	Other assets	869,245						769,956						Other assets	933,610						783,438
Total assets	Total assets	$	12,531,856					$	12,697,795					Total assets	$	12,263,718					$	12,660,939

Liabilities and Stockholders’ Equity
Liabilities and stockholders’ equity														Liabilities and stockholders’ equity
Interest-bearing transaction deposits	Interest-bearing transaction deposits	$	2,880,802	$	1,582	0.22	%	$	2,809,669	$	522	0.07	%	Interest-bearing transaction deposits	$	2,767,507	$	6,938	1.02	%	$	2,680,333	$	364	0.06	%
Savings and money market deposits	Savings and money market deposits	3,311,327		1,058		0.13	%	3,369,482		811		0.10	%	Savings and money market deposits	2,911,194		3,952		0.55	%	3,429,909		560		0.07	%
Time deposits	Time deposits	800,996		925		0.46	%	1,074,091		1,726		0.64	%	Time deposits	958,704		3,850		1.63	%	917,244		1,200		0.53	%
Federal funds purchased and repurchase agreements	Federal funds purchased and repurchase agreements	233,032		459		0.78	%	221,813		60		0.11	%	Federal funds purchased and repurchase agreements	230,351		1,222		2.15	%	271,095		59		0.09	%
Borrowings4	Borrowings4	307,255		4,300		5.55	%	296,185		3,262		4.37	%	Borrowings4	675,349		8,373		5.03	%	284,430		3,198		4.56	%
Junior subordinated debt issued to unconsolidated trusts	Junior subordinated debt issued to unconsolidated trusts	71,736		786		4.35	%	71,565		728		4.04	%	Junior subordinated debt issued to unconsolidated trusts	71,825		913		5.16	%	71,650		654		3.70	%
Total interest-bearing liabilities	Total interest-bearing liabilities	$	7,605,148	$	9,110	0.48	%	$	7,842,805	$	7,109	0.36	%	Total interest-bearing liabilities	7,614,930		$	25,248	1.34	%	7,654,661		$	6,035	0.32	%

Net interest spread1	Net interest spread1					2.83	%					2.29	%	Net interest spread1					2.71	%					2.34	%

Noninterest-bearing deposits	Noninterest-bearing deposits	3,583,693						3,365,823						Noninterest-bearing deposits	3,272,745						3,589,952
Other liabilities	Other liabilities	161,567						137,751						Other liabilities	205,224						134,791
Stockholders’ equity	Stockholders’ equity	1,181,448						1,351,416						Stockholders’ equity	1,170,819						1,281,535
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	12,531,856					$	12,697,795					Total liabilities and stockholders’ equity	$	12,263,718					$	12,660,939

Interest income / earning assets1, 3	Interest income / earning assets1, 3	$	11,497,783	$	95,958	3.31	%	$	11,730,637	$	78,462	2.65	%	Interest income / earning assets1, 3	$	11,180,562	$	111,663	4.05	%	$	11,703,947	$	76,637	2.66	%
Interest expense / earning assets	Interest expense / earning assets	11,497,783		$	9,110	0.31	%	$	11,730,637	$	7,109	0.24	%	Interest expense / earning assets	11,180,562		25,248		0.92	%	11,703,947		6,035		0.21	%
Net interest margin1	Net interest margin1			$	86,848	3.00	%			$	71,353	2.41	%	Net interest margin1			$	86,415	3.13	%			$	70,602	2.45	%

1.On a tax-equivalent basis and assuming a federal income tax rate of 21.0%. For a reconciliation of non-GAAP measures to the most directly comparable GAAP financial measures, see “Item 2. Management’s Discussion and Analysis—Non-GAAP Financial Information” included in this Quarterly Report.

2.Non-accrual loans have been included in average portfolio loans.

3.Interest income includes a tax-equivalent adjustment of ~~$0.5~~$0.6 million and ~~$0.6~~$0.5 million for the three months ended ~~September 30,~~March 31, 2023, and 2022, ~~and 2021,~~ respectively.

4.Includes short-term and long-term borrowings. Interest expense includes a non-usage fee on a revolving loan.

5.Annualized.

~~Table of Contents~~

Nine Months Ended September 30,
2022 2021
Average
Balance Income/
Expense
Yield/
Rate5
Average
Balance Income/
Expense
Yield/
Rate5
Assets
Interest-bearing bank deposits and federal funds sold $ 331,664 $ 1,720 0.69 % $ 597,960 $ 857 0.19 %
Investment securities:
U.S. Government obligations 186,493 836 0.60 % 166,300 1,375 1.11 %
Obligations of states and political subdivisions1
293,161 5,762 2.63 % 297,094 5,772 2.60 %
Other securities 3,345,611 43,913 1.75 % 2,645,746 25,513 1.29 %
Loans held for sale 6,376 168 3.52 % 23,060 401 2.32 %
Portfolio loans1, 2
7,387,582 203,338 3.68 % 6,921,226 189,743 3.67 %
Total interest-earning assets1, 3
$ 11,550,887 $ 255,737 2.96 % $ 10,651,386 $ 223,661 2.81 %
Cash and due from banks 123,881 134,998
Premises and equipment 132,977 138,257
ACL (88,744) (98,522)
Other assets 828,815 745,151
Total assets $ 12,547,816 $ 11,571,270
Liabilities and Stockholders’ Equity
Interest-bearing transaction deposits $ 2,742,105 $ 2,446 0.12 % $ 2,534,979 $ 1,529 0.08 %
Savings and money market deposits 3,399,782 2,310 0.09 % 2,981,559 2,151 0.10 %
Time deposits 855,219 3,079 0.48 % 1,060,993 6,406 0.81 %
Federal funds purchased and repurchase agreements 246,481 665 0.36 % 203,777 177 0.12 %
Borrowings4
296,034 11,165 5.04 % 262,024 9,245 4.72 %
Junior subordinated debt issued to unconsolidated trusts 71,693 2,148 4.01 % 71,524 2,185 4.08 %
Total interest-bearing liabilities $ 7,611,314 $ 21,813 0.38 % $ 7,114,856 $ 21,693 0.41 %
Net interest spread1
2.58 % 2.40 %
Noninterest-bearing deposits 3,569,562 3,010,999
Other liabilities 147,295 121,844
Stockholders’ equity 1,219,645 1,323,571
Total liabilities and stockholders’ equity $ 12,547,816 $ 11,571,270
Interest income / earning assets1, 3
$ 11,550,887 $ 255,737 2.96 % $ 10,651,386 $ 223,661 2.81 %
Interest expense / earning assets $ 11,550,887 $ 21,813 0.25 % $ 10,651,386 $ 21,693 0.27 %
Net interest margin1
$ 233,924 2.71 % $ 201,968 2.54 %

1.~~On a tax-equivalent basis and assuming a federal income tax rate of 21.0%. For a reconciliation of non-GAAP measures to the most directly comparable GAAP financial measures, see~~ ~~“Item 2. Management’s Discussion and Analysis—Non-GAAP Financial Information”~~ ~~included in this Quarterly Report.~~

2.~~Non-accrual loans have been included in average portfolio loans.~~

3.~~Interest income includes a tax-equivalent adjustment of $1.6 million and $1.8 million for the nine months ended September 30, 2022, and 2021, respectively.~~

4.~~Includes short-term and long-term borrowings. Interest expense includes a non-usage fee on a revolving loan.~~

5.~~Annualized.~~

6155

Table of Contents

Notable changes in average assets and average liabilities are summarized as follows for the periods presented (dollars in thousands):

Three Months Ended September 30,
2022 2021 Change % Change
Average interest-earning assets $ 11,497,783 $ 11,730,637 $ (232,854) (2.0) %
Average interest-bearing liabilities 7,605,148 7,842,805 (237,657) (3.0) %
Average noninterest-bearing deposits 3,583,693 3,365,823 217,870 6.5 %
Total average deposits 10,576,818 10,619,065 (42,247) (0.4) %
Total average liabilities 11,350,408 11,346,379 4,029 — %
Average noninterest-bearing deposits as a percent of total average deposits 33.9 % 31.7 % 220 bps
Total average deposits as a percent of total average liabilities 93.2 % 93.6 % (40) bps

Nine Months Ended September 30,
2022 2021 Change % Change
Average interest-earning assets $ 11,550,887 $ 10,651,386 $ 899,501 8.4 %
Average interest-bearing liabilities 7,611,314 7,114,856 496,458 7.0 %
Average noninterest-bearing deposits 3,569,562 3,010,999 558,563 18.6 %
Total average deposits 10,566,668 9,588,530 978,138 10.2 %
Total average liabilities 11,328,171 10,247,699 1,080,472 10.5 %
Average noninterest-bearing deposits as a percent of total average deposits 33.8 % 31.4 % 240 bps
Total average deposits as a percent of total average liabilities 93.3 % 93.6 % (30) bps

~~Table of Contents~~


	Three Months Ended March 31,
	2023			2022			Change		% Change
Average interest-earning assets	$	11,180,562		$	11,703,947		$	(523,385)	(4.5)	%
Average interest-bearing liabilities	7,614,930			7,654,661			(39,731)		(0.5)	%
Average noninterest-bearing deposits	3,272,745			3,589,952			(317,207)		(8.8)	%

Total average deposits	9,910,150			10,617,438			(707,288)		(6.7)	%
Total average liabilities	11,092,899			11,379,404			(286,505)		(2.5)	%

Average noninterest-bearing deposits as a percent of total average deposits	33.0		%	33.8		%	(80) bps
Total average deposits as a percent of total average liabilities	89.3		%	93.3		%	(400) bps

Changes in net interest income and net interest margin are summarized as follows for the periods presented (dollars in thousands):


		Three Months Ended September 30,											Three Months Ended March 31,
		2022			2021			Change		% Change			2023			2022			Change		% Change
Net interest income	Net interest income											Net interest income
Interest income, on a tax-equivalent basis1	Interest income, on a tax-equivalent basis1	$	95,958		$	78,462		$	17,496	22.3	%	Interest income, on a tax-equivalent basis1	$	111,663		$	76,637		$	35,026	45.7	%
Interest expense	Interest expense	(9,110)			(7,109)			(2,001)		28.1	%	Interest expense	(25,248)			(6,035)			(19,213)		318.4	%
Net interest income, on a tax-equivalent basis1	Net interest income, on a tax-equivalent basis1	$	86,848		$	71,353		$	15,495	21.7	%	Net interest income, on a tax-equivalent basis1	$	86,415		$	70,602		$	15,813	22.4	%

Net interest margin1, 2	Net interest margin1, 2	3.00		%	2.41		%	59 bps				Net interest margin1, 2	3.13		%	2.45		%	68 bps

Nine Months Ended September 30,
2022 2021 Change % Change
Net interest income
Interest income, on a tax-equivalent basis1
$ 255,737 $ 223,661 $ 32,076 14.3 %
Interest expense (21,813) (21,693) (120) 0.6 %
Net interest income, on a tax-equivalent basis1
$ 233,924 $ 201,968 $ 31,956 15.8 %
Net interest margin1, 2
2.71 % 2.54 % 17 bps

1.Assuming a federal income tax rate of 21.0%. For a reconciliation of non-GAAP measures to the most directly comparable GAAP financial measures, see “Item 2. Management’s Discussion and Analysis—Non-GAAP Financial Information” included in this Quarterly Report.

2.Net interest income expressed as a percentage of average earning assets, stated on a tax-equivalent basis.

The FOMC raised rates by ~~150 basis points during the third quarter of 2022, and a total of 300~~50 basis points during the first ~~three quarters~~quarter of 2023, and by a total of 475 basis points since the onset of the current FOMC tightening cycle that began in the first quarter of 2022. Rising rates initially have a positive impact on net interest margin, as assets, in particular commercial loans, reprice more quickly and to a greater extent than liabilities. ~~Given~~As deposit and funding costs increase in response to the ~~timing of the FOMC meetings in September, the full benefit of the associated movement in rates to our~~tightening rate cycle, we will see pressure on net interest margin which will ~~be realized in subsequent quarters. In general, net interest margins have been impacted over~~lead to periods of declining performance, which we experienced during the ~~last two years by PPP loans, significant growth in the Company’s liquidity position, organic portfolio loan growth over the past six quarters, and the issuance~~first quarter of ~~debt, with more recent impacts resulting from rate increases.~~2023.

First Busey remains substantially core deposit1 funded, with robust liquidity and significant market share in the communities we serve. As of ~~September 30, 2022,~~March 31, 2023, our loan to deposit ratio was ~~72.4%~~79.4% and core deposits represented ~~99.0%~~97.9% of total deposits.

Net interest spread, which represents the difference between the average rate earned on earning assets and the average rate paid on interest-bearing liabilities, was ~~2.83% and 2.58%~~2.71% for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023, compared to ~~2.29% and 2.40%~~2.34% for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, each on a tax-equivalent basis.

Table of Contents

The net interest margin discussion above is based upon the results and average balances for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, and ~~2021.~~2022. Annualized net interest margins for the quarterly periods indicated were as follows:

2022 2021
First Quarter 2.45 % 2.72 %
Second Quarter 2.68 % 2.50 %
Third Quarter 3.00 % 2.41 %
Fourth Quarter 2.36 %

1~~Core deposits is a non-GAAP financial measure. For a reconciliation of non-GAAP measures to the most directly comparable GAAP financial measures, see~~ ~~“Item 2. Management’s Discussion and Analysis—Non-GAAP Financial Information”~~ ~~included in this Quarterly Report.~~

~~Table of Contents~~


	2023		2022
First Quarter	3.13	%	2.45	%
Second Quarter			2.68	%
Third Quarter			3.00	%
Fourth Quarter			3.24	%

Management attempts to mitigate the effects of an unpredictable interest-rate environment through effective portfolio management, prudent loan underwriting and pricing discipline, and operational efficiencies. For a description of accounting policies underlying the recognition of interest income and expense, refer to the Notes to Consolidated Financial Statements in the Company’s ~~2021~~2022 Annual Report.

Noninterest Income

Changes in noninterest income are summarized as follows for the periods presented (dollars in thousands):

Three Months Ended September 30,
2022 2021 Change % Change
Noninterest income
Wealth management and payment technology income:
Wealth management fees $ 12,508 $ 13,749 $ (1,241) (9.0) %
Payment technology solutions 5,080 4,620 460 10.0 %
Combined, wealth management fees and payment technology solutions 17,588 18,369 (781) (4.3) %
Fees for customer services 7,627 9,288 (1,661) (17.9) %
Mortgage revenue 438 1,740 (1,302) (74.8) %
Income on bank owned life insurance 958 999 (41) (4.1) %
Securities income:
Realized net gains (losses) on securities (74) (5) (69) NM
Unrealized net gains (losses) recognized on equity securities 78 62 16 25.8 %
Net securities gains (losses) 4 57 (53) (93.0) %
Other income 4,318 2,806 1,512 53.9 %
Total noninterest income $ 30,933 $ 33,259 $ (2,326) (7.0) %

~~Table of Contents~~


		Nine Months Ended September 30,									Three Months Ended March 31,
		2022		2021		Change		% Change			2023		2022		Change		% Change
Noninterest income	Noninterest income									Noninterest income
Wealth management and payment technology income:
Wealth management and payment technology solutions income:										Wealth management and payment technology solutions income:
Wealth management fees	Wealth management fees	$	42,422	$	39,335	$	3,087	7.8	%	Wealth management fees	$	14,797	$	15,779	$	(982)	(6.2)	%
Payment technology solutions	Payment technology solutions	15,045		13,771		1,274		9.3	%	Payment technology solutions	5,315		5,077		238		4.7	%
Combined, wealth management fees and payment technology solutions	Combined, wealth management fees and payment technology solutions	57,467		53,106		4,361		8.2	%	Combined, wealth management fees and payment technology solutions	20,112		20,856		(744)		(3.6)	%

Fees for customer services	Fees for customer services	26,122		25,936		186		0.7	%	Fees for customer services	6,819		8,907		(2,088)		(23.4)	%
Mortgage revenue	Mortgage revenue	1,697		6,153		(4,456)		(72.4)	%	Mortgage revenue	288		975		(687)		(70.5)	%
Income on bank owned life insurance	Income on bank owned life insurance	2,716		3,439		(723)		(21.0)	%	Income on bank owned life insurance	1,652		884		768		86.9	%

Securities income:	Securities income:									Securities income:
Realized net gains (losses) on securities	Realized net gains (losses) on securities	52		114		(62)		(54.4)	%	Realized net gains (losses) on securities	4		106		(102)		(96.2)	%
Unrealized net gains (losses) recognized on equity securities	Unrealized net gains (losses) recognized on equity securities	(2,376)		2,482		(4,858)		(195.7)	%	Unrealized net gains (losses) recognized on equity securities	(620)		(720)		100		13.9	%
Net securities gains (losses)	Net securities gains (losses)	(2,324)		2,596		(4,920)		(189.5)	%	Net securities gains (losses)	(616)		(614)		(2)		(0.3)	%

Other income	Other income	12,046		6,485		5,561		85.8	%	Other income	3,593		4,764		(1,171)		(24.6)	%
Total noninterest income	Total noninterest income	$	97,724	$	97,715	$	9	—	%	Total noninterest income	$	31,848	$	35,772	$	(3,924)	(11.0)	%

Total noninterest income was ~~$30.9~~$31.8 million for the three months ended ~~September 30, 2022,~~March 31, 2023, a ~~7.0%~~ decrease of 11.0% from the comparable period in 2021, and was $97.7 million for the nine months ended September 30, 2022, consistent with the comparable period in 2021. Results for the nine months ended September 30, 2021, included four months of operating income for GSB, whereas results for the same period in 2022 reflect the fully integrated acquisition for the complete period. Revenues2022. Combined, revenues from wealth management fees and payment technology solutions represented ~~56.9% and 58.8%~~63.1% of the Company’s noninterest income for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023, providing a complement to spread-based revenue from traditional banking activities. On a combined basis, revenue from these two critical operating areas was ~~$17.6~~$20.1 million for the three months ended ~~September 30, 2022,~~March 31, 2023, a ~~4.3%~~3.6% decrease from the comparable period in ~~2021, and was $57.5 million for the nine months ended September 30, 2022, an 8.2% increase from the comparable period in 2021.~~2022.

Wealth management fees were ~~$12.5~~$14.8 million for the three months ended ~~September 30, 2022,~~March 31, 2023, a ~~9.0%~~6.2% decrease from the comparable period in ~~2021, and were $42.4 million for the nine months ended September 30, 2022, a 7.8% increase from the comparable period for 2021.~~2022. First Busey’s Wealth Management division ended the ~~third~~first quarter of ~~2022~~2023 with ~~$10.7~~$11.2 billion in assets under care, compared to ~~$12.7~~$11.1 billion as of December 31, ~~2021. The decrease in assets under care was principally due to a reduction in market valuations.~~2022, and $12.3 billion at March 31, 2022. Our portfolio management team continues to produce solid results in the face of ~~very~~ volatile markets. ~~In the third quarter, Busey's core investment strategy outperformed its blended benchmark, which consists~~

Table of ~~60% MSCI All Country World Index and 40% Bloomberg Intermediate Government/Credit Index.~~Contents

Payment technology solutions revenue relates to our payment processing company, FirsTech. Payment technology solutions revenue was ~~$5.1~~$5.3 million for the three months ended ~~September 30, 2022,~~March 31, 2023, a ~~10.0%~~4.7% increase from the comparable period in 2021, and was $15.0 million for the nine months ended September 30, 2022, a 9.3% increase from the comparable period in 2021. FirsTech segment revenue was $5.6 million for the three months ended September 30, 2022, a 10.8% increase from the comparable period of 2021, and was $16.4 million for the nine months ended September 30, 2022, an 11.0% increase from the comparable period in 2021. FirsTech operations add important diversity2022. We continue to ~~our revenue stream while widening our array of service offerings to larger commercial clients both within our footprint and nationally. We are currently making~~make strategic investments in FirsTech to enhance future growth, including further upgrades to the product and engineering teams to build an Application Programming Interface (API) cloud-based platform to provide for fully integrated payment capabilities as well as the continued development of our Banking as a Service (BaaS) platform.

~~Table of Contents~~

Fees for customer services were ~~$7.6~~$6.8 million for the three months ended ~~September 30, 2022,~~March 31, 2023, a ~~17.9%~~23.4% decrease from the comparable period in ~~2021, and were $26.1 million for the nine months ended September 30, 2022, a 0.7% increase from the comparable period in 2021.~~2022. Beginning on July 1, 2022, we became subject to the Durbin Amendment of the Dodd-Frank Act. The Durbin Amendment requires the Federal Reserve to establish a maximum permissible interchange fee for many types of debit transactions, which resulted in a ~~$2.4~~$2.3 million reduction in fee income during the three months ended ~~September 30,~~March 31, 2023. Excluding the impact of the Durbin Amendment, fees for customer services would have shown an increase of 2.0% from the comparable period in 2022.

Mortgage revenue was ~~$0.4~~$0.3 million for the three months ended ~~September 30, 2022,~~March 31, 2023, a ~~74.8%~~70.5% decrease from the comparable period in ~~2021, and was $1.7 million for the nine months ended September 30, 2022, a 72.4% decrease from the comparable period in 2021.~~2022. Decreases primarily resulted from declines in mortgage origination and sold-loan mortgage volume, ~~and~~combined with a decrease in net gain on sale ~~premiums.~~yields. General economic conditions and interest rate volatility may impact fees in future quarters.

Income on bank owned life insurance was ~~$1.0~~$1.7 million for the three months ended ~~September 30, 2022,~~March 31, 2023, an 86.9% increase from the comparable period in 2022. Increases resulted from earnings on death proceeds of $0.7 million.

Other income was $3.6 million for the three months ended March 31, 2023, a ~~4.1%~~$1.2 million decrease from the comparable period in 2021, and was $2.7 million for the nine months ended September 30, 2022, a 21.0% decrease from the comparable period in 2021. Decreases resulted from lower life insurance proceeds and a decline in earnings on the cash surrender value of the policies.

2022. Other income was $4.3 million for the three months ended September 30, 2022, a $1.5 million increase from the comparable period in 2021, and was $12.0 million for the nine months ended September 30, 2022, a $5.6 million increase from the comparable period in 2021. Other income benefited from higherfluctuations were primarily attributable to lower income recognized on venture capital investments ~~check sales, and swap origination fees, partially offset by losses on fixed asset disposal and lower commercial loan sale gains recorded~~ during the three ~~and nine~~ months ended ~~September 30, 2022.~~March 31, 2023.

Table of Contents

Noninterest Expense

Changes in noninterest expense are summarized as follows for the periods presented (dollars in thousands):


		Three Months Ended September 30,											Three Months Ended March 31,
		2022			2021			Change		% Change			2023			2022			Change		% Change
Noninterest expense	Noninterest expense											Noninterest expense
Salaries, wages, and employee benefits	Salaries, wages, and employee benefits	$	39,762		$	41,949		$	(2,187)	(5.2)	%	Salaries, wages, and employee benefits	$	40,331		$	39,354		$	977	2.5	%
Data processing	Data processing	5,447			7,782			(2,335)		(30.0)	%	Data processing	5,640			4,978			662		13.3	%

Premises expenses:	Premises expenses:											Premises expenses:
Net occupancy expense of premises	Net occupancy expense of premises	4,705			4,797			(92)		(1.9)	%	Net occupancy expense of premises	4,762			5,067			(305)		(6.0)	%
Furniture and equipment expenses	Furniture and equipment expenses	1,799			2,208			(409)		(18.5)	%	Furniture and equipment expenses	1,746			2,030			(284)		(14.0)	%
Combined, net occupancy expense of premises and furniture and equipment expenses	Combined, net occupancy expense of premises and furniture and equipment expenses	6,504			7,005			(501)				Combined, net occupancy expense of premises and furniture and equipment expenses	6,508			7,097			(589)		(8.3)	%

Professional fees	Professional fees	1,579			1,361			218		16.0	%	Professional fees	2,058			1,507			551		36.6	%
Amortization of intangible assets	Amortization of intangible assets	2,871			3,149			(278)		(8.8)	%	Amortization of intangible assets	2,729			3,011			(282)		(9.4)	%
Interchange expense	Interchange expense	1,574			1,434			140		9.8	%	Interchange expense	1,853			1,545			308		19.9	%
Other expense	Other expense	12,999			10,807			2,192		20.3	%	Other expense	11,284			12,884			(1,600)		(12.4)	%
Total noninterest expense	Total noninterest expense	$	70,736		$	73,487		$	(2,751)	(3.7)	%	Total noninterest expense	$	70,403		$	70,376		$	27	—	%

Income taxes	Income taxes	$	8,477		$	6,455		$	2,022	31.3	%	Income taxes	$	9,563		$	7,266		$	2,297	31.6	%
Effective income tax rate	Effective income tax rate	19.2		%	19.9		%	(70) bps				Effective income tax rate	20.6		%	20.4		%	20 bps

Efficiency ratio1	Efficiency ratio1	57.6		%	67.3		%	(970) bps				Efficiency ratio1	56.9		%	63.0		%	(610) bps
Adjusted efficiency ratio1	Adjusted efficiency ratio1	56.8		%	59.0		%	(220) bps				Adjusted efficiency ratio1	56.9		%	62.2		%	(530) bps

Full-time equivalent employees as of period-end												Full-time equivalent employees as of period-end	1,473			1,465			8		0.5	%

1.~~The efficiency ratio and adjusted efficiency ratio are non-GAAP financial measures. For a reconciliation of non-GAAP measures to the most directly comparable financial GAAP measures, see~~ “~~Item 2. Management’s Discussion and Analysis—Non-GAAP Financial Information~~” ~~included in this Quarterly Report.~~

~~Table of Contents~~

Nine Months Ended September 30,
2022 2021 Change % Change
Noninterest expense
Salaries, wages, and employee benefits $ 117,226 $ 107,222 $ 10,004 9.3 %
Data processing 15,800 16,881 (1,081) (6.4) %
Premises expenses:
Net occupancy expense of premises 14,492 13,606 886 6.5 %
Furniture and equipment expenses 5,874 6,300 (426) (6.8) %
Combined, net occupancy expense of premises and furniture and equipment expenses 20,366 19,906 460
Professional fees 4,693 5,617 (924) (16.5) %
Amortization of intangible assets 8,833 8,200 633 7.7 %
Interchange expense 4,606 4,360 246 5.6 %
Other expense 38,680 28,425 10,255 36.1 %
Total noninterest expense $ 210,204 $ 190,611 $ 19,593 10.3 %
Income taxes $ 22,121 $ 24,136 $ (2,015) (8.3) %
Effective income tax rate 19.1 % 20.5 % (140) bps
Efficiency ratio1
60.3 % 61.4 % (110) bps
Adjusted efficiency ratio1
59.7 % 57.5 % 220 bps
Full-time equivalent employees as of period-end 1,513 1,462 51 3.5 %

1.The efficiency ratio and adjusted efficiency ratio are non-GAAP financial measures. For a reconciliation of non-GAAP measures to the most directly comparable financial GAAP measures, see “Item 2. Management’s Discussion and Analysis—Non-GAAP Financial Information” included in this Quarterly Report.

Total noninterest expense was ~~$70.7~~$70.4 million for the three months ended ~~September 30,~~March 31, 2023, and 2022. We remain focused on expense discipline, and have been purposeful in our efforts to rationalize our expense base given our economic outlook and our view on the future of banking. In particular, we have reduced the number of service centers from 87 to 58, representing a one-third reduction in the number of service centers we operate. Additionally, in late 2022, we implemented a ~~3.7% decrease from the comparable period in 2021,~~targeted restructuring and was $210.2 million for the nine months ended September 30, 2022, a 10.3% increase from the comparable period in 2021. Results for the nine months ended September 30, 2021, included four months of operating expenses for GSB, whereas results for the same period in 2022 reflect the fully integrated acquisition for the complete period.efficiency optimization plan.

Salaries, wages, and employee benefits were ~~$39.8~~$40.3 million for the three months ended ~~September 30, 2022,~~March 31, 2023, a ~~5.2% decrease from the comparable period in 2021, and were $117.2 million for the nine months ended September 30, 2022, a 9.3%~~2.5% increase from the comparable period in ~~2021.~~2022. Full-time equivalents were ~~1,513~~1,473 as of ~~September 30, 2022,~~March 31, 2023, compared to ~~1,462~~1,465 at ~~September 30, 2021. The Company continues to invest in talent across our business lines and our risk management infrastructure.~~March 31, 2022. Labor market trends over the past year reflected a ~~shrinking~~tight labor supply, while job ~~growth~~gains resulted in increased demands for a skilled workforce, ~~putting further~~maintaining upward pressure on salaries, wages, and employee benefits.

Data processing expense was ~~$5.4~~$5.6 million for the three months ended ~~September 30, 2022,~~March 31, 2023, a ~~30.0% decrease~~13.3% increase from the comparable period in ~~2021, and was $15.8 million for the nine months ended September 30, 2022, a 6.4% decrease from the comparable period in 2021. Decreases~~2022. Increases were primarily attributable to ~~higher expenses~~Company-wide investments in 2021 related to the CAC acquisition. Excluding non-operating expenses, data processing expenses increased by $0.8 million and $2.3 million for the three and nine months ended September 30, 2022, compared to the same periods in 2021.technology enhancements as well as inflation-driven price increases.

Combined, net occupancy expense of premises and furniture and equipment expense totaled $6.5 million for the three months ended ~~September 30, 2022, a 7.2%~~March 31, 2023, an 8.3% decrease from the comparable period in ~~2021, and $20.4 million for the nine months ended September 30, 2022, a 2.3% increase from the comparable period in 2021.~~2022. Year-over-year ~~increases~~decreases are primarily attributable to ~~higher~~lower maintenance costs ~~elevated utility costs,~~ and ~~increased real estate taxes.~~declines in depreciation expense.

6759

Table of Contents

Professional fees were ~~$1.6~~$2.1 million for the three months ended ~~September 30, 2022,~~March 31, 2023, a ~~16.0%~~36.6% increase from the comparable period in ~~2021,~~2022 due to increases in consulting and $4.7 million for the nine months ended September 30, 2022, a 16.5% decrease from the comparable period in 2021. Excluding non-operating expenses, professional fees increased by $0.3 million and $0.2 million for the three and nine months ended September 30, 2022, compared to the same periods in 2021.legal fees.

Amortization of intangible assets was ~~$2.9~~$2.7 million for the three months ended ~~September 30, 2022, an 8.8%~~March 31, 2023, a 9.4% decrease from the comparable period ~~in 2021, and $8.8 million~~ for 2022, due to the ~~nine months ended September 30, 2022, a 7.7% increase from the comparable period for 2021. Year-over-year increases primarily related to intangible assets acquired in the acquisition~~use of ~~CAC during the second quarter of 2021.~~an accelerated amortization methodology.

Interchange expense was ~~$1.6~~$1.9 million for the three months ended ~~September 30, 2022,~~March 31, 2023, a ~~9.8%~~19.9% increase from the comparable period in ~~2021, and was $4.6 million for the nine months ended September 30, 2022, a 5.6% increase from the comparable period in 2021.~~2022. Fluctuations in interchange expense were primarily the result of increased payment and volume activity at FirsTech.

Other expense was ~~$13.0~~$11.3 million for the three months ended ~~September 30, 2022, a $2.2~~March 31, 2023, an $1.6 million ~~increase~~decrease from the comparable period in ~~2021, and was $38.7 million for the nine months ended September 30, 2022, an $10.3 million increase from the comparable period in 2021. Increases~~2022. Decreases were across multiple expense categories including ~~marketing~~fluctuations in OREO and ~~business development, NMTC amortization, regulatory expenses, and fluctuations in~~the provision for unfunded ~~commitments.~~commitments, partially offset by increases in New Markets Tax Credits amortization and regulatory expenses resulting from the increase in the FDIC insurance assessment base rate that became effective January 1, 2023.

The efficiency ratio21, which is a measure commonly used by management and the banking industry, measures the amount of expense incurred to generate a dollar of revenue. Our efficiency ~~ratios~~2 ~~were 57.6% and 60.3%~~ratio was 56.9% for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023, compared to ~~67.3% and 61.4%~~63.0% for the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~

March 31, 2022. Our adjusted efficiency ~~ratios~~ratio21 ~~were 56.8% and 59.7%~~was 56.9% for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023, compared to ~~59.0% and 57.5%~~62.2% for three ~~and nine~~ months ended September 30, 2021. The Company remains focused on expense discipline, while making necessary investments to promote the organic growth of our key business lines and related support and risk management functions.March 31, 2022.

Taxes

~~Effective~~The effective income tax ~~rates~~rate of ~~19.2% and 19.9%~~20.6% for the three ~~and nine~~ months ended ~~September 30, 2022, respectively, were~~March 31, 2023, was lower than the combined federal and state statutory rate of approximately 28.0% due to tax exempt interest income, such as municipal bond interest and bank owned life insurance income, and investments in various ~~federal and state~~ tax credits. We continue to monitor evolving federal and state tax legislation and its potential impact on operations on an ongoing basis. As of ~~September 30, 2022,~~March 31, 2023, we were not under examination by any tax authority; however, we have received an inquiry from the State of Illinois regarding our prior franchise tax filings. In the event the Company is required to amend our prior franchise tax filings, we could incur additional expenses.

21 The efficiency ratio and adjusted efficiency ratio are non-GAAP financial measures. For a reconciliation of non-GAAP measures to the most directly comparable GAAP financial measures, see “Item 2. Management’s Discussion and Analysis—Non-GAAP Financial Information” included in this Quarterly Report.

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FINANCIAL CONDITION

Balance Sheet

Changes in significant items included in our unaudited Consolidated Balance Sheets are summarized as follows as of each of the dates indicated (dollars in thousands):


		As of									As of
		September 30, 2022		December 31, 2021		Change		% Change			March 31, 2023		December 31, 2022		Change		% Change
Assets	Assets									Assets
Debt securities available for sale	Debt securities available for sale	$	2,547,041	$	3,981,251	$	(1,434,210)	(36.0)	%	Debt securities available for sale	$	2,383,550	$	2,461,393	$	(77,843)	(3.2)	%
Debt securities held to maturity	Debt securities held to maturity	936,328		—		936,328		N/A		Debt securities held to maturity	907,559		918,312		(10,753)		(1.2)	%
Portfolio loans, net of ACL	Portfolio loans, net of ACL	7,579,392		7,101,111		478,281		6.7	%	Portfolio loans, net of ACL	7,692,081		7,634,094		57,987		0.8	%
Total assets	Total assets	$	12,497,388	$	12,859,689	$	(362,301)	(2.8)	%	Total assets	$	12,344,555	$	12,336,677	$	7,878	0.1	%

Liabilities	Liabilities									Liabilities
Deposits:	Deposits:									Deposits:
Noninterest-bearing	Noninterest-bearing	$	3,628,169	$	3,670,267	$	(42,098)	(1.1)	%	Noninterest-bearing	$	3,173,783	$	3,393,666	$	(219,883)	(6.5)	%
Interest-bearing	Interest-bearing	6,973,228		7,098,310		(125,082)		(1.8)	%	Interest-bearing	6,627,386		6,677,614		(50,228)		(0.8)	%
Total deposits	Total deposits	$	10,601,397	$	10,768,577	$	(167,180)	(1.6)	%	Total deposits	$	9,801,169	$	10,071,280	$	(270,111)	(2.7)	%
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	$	234,597	$	270,139	$	(35,542)	(13.2)	%	Securities sold under agreements to repurchase	$	210,977	$	229,806	$	(18,829)	(8.2)	%

Short-term borrowings										Short-term borrowings	615,881		351,054		264,827		75.4	%

Subordinated notes, net of unamortized issuance costs	Subordinated notes, net of unamortized issuance costs	221,835		182,773		39,062		21.4	%	Subordinated notes, net of unamortized issuance costs	222,245		222,038		207		0.1	%
Junior subordinated debt owed to unconsolidated trusts		71,765		71,635		130		0.2	%

Total liabilities	Total liabilities	$	11,390,800	$	11,540,577	$	(149,777)	(1.3)	%	Total liabilities	$	11,145,997	$	11,190,700	$	(44,703)	(0.4)	%

Stockholders’ Equity		$	1,106,588	$	1,319,112	$	(212,524)	(16.1)	%
Stockholders’ equity										Stockholders’ equity	$	1,198,558	$	1,145,977	$	52,581	4.6	%

Portfolio Loans

We believe that making sound and profitable loans is a necessary and desirable means of employing funds available for investment. First Busey maintains lending policies and procedures designed to focus lending efforts on the types, locations, and duration of loans most appropriate for its business model and markets. While not specifically limited, we attempt to focus our lending on short to intermediate-term (0-10 years) loans in geographic areas within 125 miles of our lending offices. Loans originated outside of these areas are generally to existing customers of Busey Bank. We attempt to utilize government-assisted lending programs, such as the SBA and U.S. Department of Agriculture lending programs, when prudent. Generally, loans are collateralized by assets, primarily real estate, and guaranteed by individuals. Loans are expected to be repaid primarily from cash flows of the borrowers or from proceeds from the sale of selected assets of the borrowers.

Management reviews and approves Busey Bank’s lending policies and procedures on a regular basis. Management routinely (at least quarterly) reviews the ACL in conjunction with reports related to loan production, loan quality, concentrations of credit, loan delinquencies, non-performing loans, and potential problem loans. Our underwriting standards are designed to encourage relationship banking rather than transactional banking. Relationship banking implies a primary banking relationship with the borrower that includes, at a minimum, an active deposit banking relationship in addition to the lending relationship. Significant underwriting factors, in addition to location, duration, a sound and profitable cash flow basis, and the borrower’s character, include the quality of the borrower’s financial history, the liquidity of the underlying collateral, and the reliability of the valuation of the underlying collateral.

~~The Company~~Busey Bank maintains a well-diversified loan portfolio and, as a matter of policy and practice, limits concentration exposure in any particular loan segment.

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At no time is a borrower’s total borrowing relationship permitted to exceed Busey Bank’s regulatory lending limit. We generally limit such relationships to amounts substantially less than the regulatory limit. Loans to related parties, including executive officers and directors of First Busey and its subsidiaries, are reviewed for compliance with regulatory guidelines.

First Busey maintains an independent loan review department that reviews loans for compliance with our loan policy on a periodic basis. In addition, the loan review department reviews risk assessments made by our credit department, lenders, and loan committees. Results of these reviews are presented to management and the audit committee at least quarterly.

Busey Bank’s lending activities can be summarized into two primary categories: commercial and retail. Lending is further classified into five primary areas: commercial loans, commercial real estate loans, real estate construction loans, retail real estate loans, and retail other loans. A description of each of the ~~lending~~five primary areas can be found in the Company’s ~~2021~~2022 Annual Report. A significant majority of our portfolio lending activity occurs in the Illinois and Missouri markets, with the remainder in the Florida and Indiana markets.

Geographic distributions of portfolio loans, based on originations, by category and class were as follows (dollars in thousands):


		September 30, 2022											March 31, 2023
		Illinois		Missouri		Florida		Indiana		Total			Illinois		Missouri		Florida		Indiana		Total
Portfolio loans
Commercial loans												Commercial loans
Commercial	Commercial	$	1,371,973	$	475,655	$	47,527	$	50,738	$	1,945,893	Commercial	$	1,410,180	$	423,124	$	47,569	$	56,285	$	1,937,158
Commercial real estate	Commercial real estate	2,211,923		680,607		202,927		183,227		3,278,684		Commercial real estate	2,243,896		670,339		228,839		181,462		3,324,536
Real estate construction	Real estate construction	290,248		135,102		41,062		33,148		499,560		Real estate construction	327,899		138,588		38,160		49,362		554,009
Total commercial loans												Total commercial loans	3,981,975		1,232,051		314,568		287,109		5,815,703
Retail loans												Retail loans
Retail real estate	Retail real estate	1,240,568		210,693		121,881		69,957		1,643,099		Retail real estate	1,243,370		228,455		123,575		72,137		1,667,537
Retail other	Retail other	297,772		2,177		1,699		1,230		302,878		Retail other	294,843		2,798		1,639		1,288		300,568
Total retail loans												Total retail loans	1,538,213		231,253		125,214		73,425		1,968,105
Total portfolio loans	Total portfolio loans	$	5,412,484	$	1,504,234	$	415,096	$	338,300	$	7,670,114	Total portfolio loans	$	5,520,188	$	1,463,304	$	439,782	$	360,534	$	7,783,808
ACL	ACL									(90,722)		ACL									(91,727)
Portfolio loans, net of ACL	Portfolio loans, net of ACL									$	7,579,392	Portfolio loans, net of ACL									$	7,692,081


		December 31, 2021											December 31, 2022
		Illinois		Missouri		Florida		Indiana		Total			Illinois		Missouri		Florida		Indiana		Total
Portfolio loans
Commercial loans												Commercial loans
Commercial	Commercial	$	1,372,584	$	463,085	$	55,180	$	53,037	$	1,943,886	Commercial	$	1,401,165	$	466,904	$	52,925	$	53,160	$	1,974,154
Commercial real estate	Commercial real estate	2,063,681		691,969		191,303		172,854		3,119,807		Commercial real estate	2,180,767		680,532		220,939		179,635		3,261,873
Real estate construction	Real estate construction	199,471		120,785		31,265		34,475		385,996		Real estate construction	326,154		131,782		31,212		41,321		530,469
Total commercial loans												Total commercial loans	3,908,086		1,279,218		305,076		274,116		5,766,496
Retail loans												Retail loans
Retail real estate	Retail real estate	1,124,486		235,083		96,563		56,844		1,512,976		Retail real estate	1,253,069		210,048		122,397		71,568		1,657,082
Retail other	Retail other	219,000		3,684		2,181		1,468		226,333		Retail other	296,719		2,565		1,788		1,052		302,124
Total retail loans												Total retail loans	1,549,788		212,613		124,185		72,620		1,959,206
Total portfolio loans	Total portfolio loans	$	4,979,222	$	1,514,606	$	376,492	$	318,678	$	7,188,998	Total portfolio loans	$	5,457,874	$	1,491,831	$	429,261	$	346,736	$	7,725,702
ACL	ACL									(87,887)		ACL									(91,608)
Portfolio loans, net of ACL	Portfolio loans, net of ACL									$	7,101,111	Portfolio loans, net of ACL									$	7,634,094

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The Company experienced its eighth consecutive quarter of core loan2 growth, generating $58.2 million, or 0.8%, in core loan growth during three months ended March 31, 2023. Like prior periods, most of the loan growth occurred within the Company’s existing client base. Changes in portfolio loan balances were as follows (dollars in thousands):


		As of									As of
		September 30, 2022		December 31, 2021		Change		% Change			March 31, 2023		December 31, 2022		Change		% Change
Portfolio loans
Commercial loans:
Commercial loans										Commercial loans
Commercial	Commercial	$	1,945,893	$	1,943,886	$	2,007	0.1	%	Commercial	$	1,937,158	$	1,974,154	$	(36,996)	(1.9)	%
Commercial real estate	Commercial real estate	3,278,684		3,119,807		158,877		5.1%		Commercial real estate	3,324,536		3,261,873		62,663		1.9%
Real estate construction	Real estate construction	499,560		385,996		113,564		29.4%		Real estate construction	554,009		530,469		23,540		4.4%
Commercial loan balances		5,724,137		5,449,689		274,448		5.0%

Retail loans:
Total commercial loans										Total commercial loans	5,815,703		5,766,496		49,207		0.9%
Retail loans										Retail loans
Retail real estate	Retail real estate	1,643,099		1,512,976		130,123		8.6%		Retail real estate	1,667,537		1,657,082		10,455		0.6%
Retail other	Retail other	302,878		226,333		76,545		33.8%		Retail other	300,568		302,124		(1,556)		(0.5)%
Retail loan balances		1,945,977		1,739,309		206,668		11.9%

Total retail loans										Total retail loans	1,968,105		1,959,206		8,899		0.5%
Total portfolio loans	Total portfolio loans	7,670,114		7,188,998		481,116		6.7%		Total portfolio loans	7,783,808		7,725,702		58,106		0.8%
ACL	ACL	(90,722)		(87,887)		(2,835)		3.2	%	ACL	(91,727)		(91,608)		(119)		0.1	%
Portfolio loans, net of ACL	Portfolio loans, net of ACL	$	7,579,392	$	7,101,111	$	478,281	6.7%		Portfolio loans, net of ACL	$	7,692,081	$	7,634,094	$	57,987	0.8%

Excluding the amortized cost of PPP loans, changes in commercial loan balances were as ~~follows:~~follows (dollars in thousands):

As of
September 30,
2022 December 31,
2021 Change % Change
Commercial loan balances $ 5,724,137 $ 5,449,689 $ 274,448 5.0%
PPP loans amortized cost (1,426) (74,958) 73,532 (98.1) %
Commercial loan balances, excluding PPP loans $ 5,722,711 $ 5,374,731 $ 347,980 6.5%


	As of
	March 31, 2023		December 31, 2022		Change		% Change
Total commercial loans	$	5,815,703	$	5,766,496	$	49,207	0.9%
Less: PPP loans amortized cost	(750)		(845)		95		(11.2)	%
Commercial loan balances, excluding PPP loans	$	5,814,953	$	5,765,651	$	49,302	0.9%

~~As of September 30, 2022, the Company has experienced its sixth consecutive quarter of strong core loan~~3 ~~growth.~~ As has been our practice, we remain steadfast in our conservative approach to underwriting and disciplined ~~underwriting.~~approach to pricing, particularly given our outlook for the economy in the coming quarters. Given this outlook, loan growth is likely to slow compared to the Company’s results of the last twelve months and our previous expectations.

Allowance and Provision for Credit Losses

The ACL is a significant estimate in our unaudited consolidated financial statements, affecting both earnings and capital. The methodology adopted influences, and is influenced by, Busey Bank’s overall credit risk management processes. The ACL is recorded in accordance with GAAP to provide an adequate reserve for expected credit losses that is reflective of management’s best estimate of what is expected to be collected. All estimates of credit losses should be based on a careful consideration of all significant factors affecting the collectability as of the evaluation date. The ACL is established through the provision for credit loss expense charged to income. Provision expenses (releases) were recorded as follows for each of the periods indicated (dollars in thousands):

~~Provision for credit loss expenses increased for the three months ended September 30, 2022, due to a provision expense of $2.4 million, compared to a~~


	Three Months Ended March 31,
		2023		2022
Provision for credit losses		$	953	$	(253)

The provision release during the first quarter of ~~$1.9 million for the same period in 2021.~~2022 reflected strong asset quality performance metrics as well as improved macro-economic outlooks at that time. Provision expense ~~increased for~~during the ~~nine months ended September 30, 2022, due to~~first quarter of 2023 reflects a ~~provision expense of $3.8 million, compared to a provision release of $10.4 million for the same period in 2021. Releases in 2021 reflect a normalization~~stabilization of the ~~reserve balances following a build-up at the onset of the COVID-19.~~provision expense.

32 Core loans is a non-GAAP financial measure. For a reconciliation of non-GAAP measures to the most directly comparable GAAP financial measures, see “Item 2. Management’s Discussion and Analysis—Non-GAAP Financial Information” included in this Quarterly Report.

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The relationship between our portfolio loan balances and our ACL is summarized as follows, as of each of the dates indicated (dollars in thousands):


			As of												As of
			September 30, 2022		June 30, 2022		March 31, 2022		December 31, 2021		September 30, 2021				March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
Portfolio loans	Portfolio loans	[a]	$	7,670,114	$	7,497,778	$	7,272,873	$	7,188,998	$	7,150,635	Portfolio loans	[a]	$	7,783,808		$	7,725,702		$	7,670,114		$	7,497,778		$	7,272,873
Non-GAAP adjustments:	Non-GAAP adjustments:												Non-GAAP adjustments:
PPP loans amortized cost	PPP loans amortized cost		(1,426)		(7,616)		(31,769)		(74,958)		(178,231)		PPP loans amortized cost		(750)			(845)			(1,426)			(7,616)			(31,769)

Core loans1	Core loans1	[b]	$	7,668,688	$	7,490,162	$	7,241,104	$	7,114,040	$	6,972,404	Core loans1	[b]	$	7,783,058		$	7,724,857		$	7,668,688		$	7,490,162		$	7,241,104

ACL	ACL	[c]	$	90,722	$	88,757	$	88,213	$	87,887	$	92,802	ACL	[c]	$	91,727		$	91,608		$	90,722		$	88,757		$	88,213

Ratios	Ratios												Ratios
ACL to portfolio loans	ACL to portfolio loans	[c÷a]	1.18%		1.18%		1.21%		1.22%		1.30%		ACL to portfolio loans	[c÷a]	1.18		%	1.19		%	1.18		%	1.18		%	1.21		%
ACL to core loans1	ACL to core loans1	[c÷b]	1.18%		1.18%		1.22%		1.24%		1.33%		ACL to core loans1	[c÷b]	1.18		%	1.19		%	1.18		%	1.18		%	1.22		%

1.Core loans is a non-GAAP financial measure. ~~For a reconciliation of non-GAAP measures to the most directly comparable GAAP financial measures, see~~ ~~“Item 2. Management’s Discussion and Analysis—Non-GAAP Financial Information”~~ ~~included in this Quarterly Report.~~

As of ~~September 30, 2022,~~March 31, 2023, management believed the level of the ACL to be appropriate based upon the information available. However, additional losses may be identified in our loan portfolio as new information is obtained. The ongoing impacts of CECL will be dependent upon changes in economic conditions and forecasts, originated and acquired loan portfolio composition, prepayment speeds, credit performance trends, portfolio duration, and other factors.

~~Non-performing~~Non-Performing Loans and ~~Non-performing~~Non-Performing Assets

Loans are considered past due if the required principal or interest payments have not been received as of the date such payments were due. Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory guidelines. Loans may be placed on non-accrual status regardless of whether or not such loans are considered past due. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Typically, loans are secured by collateral. When a loan is classified as non-accrual and determined to be collateral dependent, it is appropriately reserved or charged down through the ACL to the fair value of our interest in the underlying collateral less estimated costs to sell. Our loan portfolio is collateralized primarily by real estate.

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The following table sets forth information concerning non-performing loans and performing restructured loans, as of each of the dates indicated (dollars in thousands):

As of
September 30,
2022 June 30,
2022 March 31,
2022 December 31,
2021 September 30,
2021
Portfolio loans [a] $ 7,670,114 $ 7,497,778 $ 7,272,873 $ 7,188,998 $ 7,150,635
Non-GAAP adjustments:
PPP loans amortized cost (1,426) (7,616) (31,769) (74,958) (178,231)
Core loans1
[b] $ 7,668,688 $ 7,490,162 $ 7,241,104 $ 7,114,040 $ 6,972,404
Loans 30 – 89 days past due $ 6,307 $ 5,157 $ 3,916 $ 6,261 $ 6,446
Total assets [c] 12,497,388 12,356,433 12,567,509 12,859,689 12,899,330
Non-performing assets
Non-performing loans:
Non-accrual loans [d] 15,425 15,840 12,488 15,946 25,369
Loans 90+ days past due and still accruing 1,229 1,654 197 906 491
Total non-performing loans [e] 16,654 17,494 12,685 16,852 25,860
OREO and other repossessed assets [f] 1,219 1,429 3,606 4,416 3,184
Total non-performing assets [g] $ 17,873 $ 18,923 $ 16,291 $ 21,268 $ 29,044
Substandard (excludes 90+ days past due) 84,148 84,411 79,962 70,565 51,740
Classified assets [h] $ 102,021 $ 103,334 $ 96,253 $ 91,833 $ 80,784
Performing TDRs (includes 30 – 89 days past due) $ 1,940 $ 2,029 $ 1,771 $ 1,801 $ 2,083
ACL [i] $ 90,722 $ 88,757 $ 88,213 $ 87,887 $ 92,802
Bank Tier 1 Capital [j] $ 1,288,945 $ 1,265,418 $ 1,247,370 $ 1,241,303 $ 1,238,060
Ratios
ACL to non-accrual loans [i÷d] 588.15 % 560.33 % 706.38 % 551.15 % 365.81 %
ACL to non-performing loans [i÷e] 544.75 % 507.36 % 695.41 % 521.52 % 358.86 %
ACL to non-performing assets [i÷g] 507.59 % 469.04 % 541.48 % 413.24 % 319.52 %
Non-accrual loans to portfolio loans [d÷a] 0.20 % 0.21 % 0.17 % 0.22 % 0.35 %
Non-performing loans to portfolio loans [e÷a] 0.22 % 0.23 % 0.17 % 0.23 % 0.36 %
Non-performing loans to core loans1
[e÷b] 0.22 % 0.23 % 0.18 % 0.24 % 0.37 %
Non-performing assets to total assets [g÷c] 0.14 % 0.15 % 0.13 % 0.17 % 0.23 %
Non-performing assets to portfolio loans and OREO [g÷(a+f)] 0.23 % 0.25 % 0.22 % 0.30 % 0.41 %
Classified assets to Bank Tier 1 Capital and ACL [h÷(i+j)] 7.39 % 7.63 % 7.21 % 6.91 % 6.07 %


		As of
		March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
Portfolio loans	[a]	$	7,783,808		$	7,725,702		$	7,670,114		$	7,497,778		$	7,272,873
Non-GAAP adjustments:
PPP loans amortized cost		(750)			(845)			(1,426)			(7,616)			(31,769)

Core loans1	[b]	$	7,783,058		$	7,724,857		$	7,668,688		$	7,490,162		$	7,241,104

Loans 30 – 89 days past due		$	5,472		$	6,548		$	6,307		$	5,157		$	3,916
Total assets	[c]	12,344,555			12,336,677			12,497,388			12,356,433			12,567,509

Non-performing assets
Non-performing loans:
Non-accrual loans	[d]	14,714			15,067			15,425			15,840			12,488
Loans 90+ days past due and still accruing		500			673			1,229			1,654			197
Total non-performing loans	[e]	15,214			15,740			16,654			17,494			12,685
OREO and other repossessed assets	[f]	759			850			1,219			1,429			3,606
Total non-performing assets	[g]	15,973			16,590			17,873			18,923			16,291

Substandard (excludes 90+ days past due)		87,886			90,489			84,148			84,411			79,962
Classified assets	[h]	$	103,859		$	107,079		$	102,021		$	103,334		$	96,253


ACL	[i]	91,727			91,608			90,722			88,757			88,213
Bank Tier 1 Capital	[j]	1,325,556			1,306,716			1,288,945			1,265,418			1,247,370

Ratios


ACL to non-accrual loans	[i÷d]	623.40		%	608.00		%	588.15		%	560.33		%	706.38		%
ACL to non-performing loans	[i÷e]	602.91		%	582.01		%	544.75		%	507.36		%	695.41		%
ACL to non-performing assets	[i÷g]	574.26		%	552.19		%	507.59		%	469.04		%	541.48		%
Non-accrual loans to portfolio loans	[d÷a]	0.19		%	0.20		%	0.20		%	0.21		%	0.17		%
Non-performing loans to portfolio loans	[e÷a]	0.20		%	0.20		%	0.22		%	0.23		%	0.17		%
Non-performing loans to core loans1	[e÷b]	0.20		%	0.20		%	0.22		%	0.23		%	0.18		%
Non-performing assets to total assets	[g÷c]	0.13		%	0.13		%	0.14		%	0.15		%	0.13		%
Non-performing assets to portfolio loans and OREO and other repossessed assets	[g÷(a+f)]	0.21		%	0.21		%	0.23		%	0.25		%	0.22		%
Classified assets to Bank Tier 1 Capital and ACL	[h÷(i+j)]	7.33		%	7.66		%	7.39		%	7.63		%	7.21		%

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Asset quality remains strong by both historical ~~as well as present-day~~and current industry ~~standards.~~trends. Non-performing loan balances decreased by ~~1.2%~~3.3% to ~~$16.7~~$15.2 million as of ~~September 30, 2022,~~March 31, 2023, compared with ~~$16.9~~$15.7 million as of December 31, ~~2021.~~2022. Continued disciplined credit management resulted in non-performing loans as a percentage of portfolio loans of ~~0.22%~~0.20% as of ~~September 30, 2022,~~both March 31, 2023, and ~~0.23% as of~~ December 31, ~~2021.~~2022.

Asset quality metrics remain dependent upon market-specific economic conditions, ~~which~~and specific measures may fluctuate from period to period. If economic conditions were to deteriorate, we would expect the credit quality of our loan portfolio to decline and loan defaults to increase.

Potential Problem Loans

Potential problem loans are loans classified as substandard which are not individually evaluated, ~~restructured,~~ non-accrual, or 90+ days past due, but where current information indicates that the borrower may not be able to comply with loan repayment terms. Management assesses the potential for loss on such loans and considers the effect of any potential loss in determining its provision for expected credit losses. Potential problem loans ~~increased~~decreased to ~~$83.7~~$86.8 million as of ~~September 30, 2022,~~March 31, 2023, compared to ~~$70.5~~$89.2 million as of December 31, ~~2021.~~2022. Management continues to monitor these credits and anticipates that restructurings, guarantees, additional collateral, or other planned actions will result in full repayment of the debts. As of ~~September 30, 2022,~~March 31, 2023, management identified no other loans that represent or result from trends or uncertainties which would be expected to materially impact future operating results, liquidity, or capital resources.

COVID-19 Modifications

To alleviate some of the financial hardships faced as a result of COVID-19, the Company offered a Financial Relief Program to qualifying customers. The program included options for short-term loan payment deferrals and certain fee waivers. As of ~~September 30, 2022,~~March 31, 2023, the Company had no commercial loans remaining ~~on full~~in the program, and one payment ~~deferral, 8~~deferred retail loan representing $0.1 million in loans. In comparison, the Company had eight commercial loans on interest-only payment deferral representing $20.6 million in loans, and one payment deferred retail ~~loan representing $0.1 million in loans. In comparison, the Company had 32 commercial loans on interest-only payment deferral representing $128.7 million in loans, and two payment deferred retail~~ loans representing $0.1 million as of December 31, ~~2021.~~2022. As these deferrals expire, the Company will continue to monitor credits for potential problem loans.

Deposits

Total deposits decreased by ~~1.6%~~2.7% to ~~$10.6~~$9.8 billion as of ~~September 30, 2022,~~March 31, 2023, compared to ~~$10.8~~$10.1 billion as of December 31, ~~2021.~~ 2022. Deposit trends were driven by a number of elements, including (i) anticipated seasonal factors, including ordinary course public fund outflows and fluctuations in the normal course of business operations of certain core commercial customers, (ii) the macroeconomic environment, including prevailing interest rates and anticipated future FOMC rate moves, as well as inflationary pressures, (iii) depositors moving some funds to accounts at competitors offering above-market rates, including state-sponsored investment programs for public sector deposits that provide rates in excess of where we can borrow in the wholesale marketplace, and (iv) deposits moving within the Busey ecosystem from the bank to our wealth management group in the first quarter of 2023.

We focus on deepening our relationships with customers to ~~foster~~strengthen our core deposit43 ~~growth, allowing us to reduce our reliance on wholesale funding.~~franchise. Core deposits include non-brokered transaction accounts, money market deposit accounts, and time deposits of $250,000 or less. ~~Fluctuations~~Core deposits represented 97.9% of total deposits as of March 31, 2023, compared to 98.8% as of December 31, 2022. Estimated uninsured deposits—consisting of account balances in ~~deposit balances can be attributed~~excess of the $250 thousand FDIC insurance limit, less intercompany accounts and collateralized accounts (including preferred deposits)—represented 27% of total deposits as of March 31, 2023.

3Core deposits is a non-GAAP financial measure. For a reconciliation of non-GAAP measures to the ~~retention~~most directly comparable GAAP financial measures, see “Item 2. Management’s Discussion and Analysis—Non-GAAP Financial Information” included in this Quarterly Report.

Table of ~~PPP loan funding in customer deposit accounts, the impacts of fiscal stimulus, inflation and related economic effects on our customers, as well as typical seasonality aspects within our portfolio.~~Contents

LIQUIDITY

Liquidity management is the process by which we ensure that adequate liquid funds are available to meet the present and future cash flow obligations arising in the daily operations of our business. These financial obligations consist of needs for funds to meet commitments to borrowers for extensions of credit, fund capital expenditures, honor withdrawals by customers, pay dividends to stockholders, and pay operating expenses. Our most liquid assets are cash and due from banks, interest-bearing bank deposits, and federal funds sold. Balances of these assets are dependent on our operating, investing, lending, and financing activities during any given period. Average liquid assets are summarized in the table below (dollars in thousands):


	Three Months Ended March 31,
		2023			2022
Average liquid assets
Cash and due from banks		$	115,145		$	126,631
Interest-bearing bank deposits		108,051			$	560,824
Federal funds sold		—			—
Total average liquid assets		223,196			687,455

Average liquid assets as a percent of average total assets		1.8		%	5.4		%

4Cash and unencumbered securities on our Consolidated Balance Sheets are summarized as follows (dollars in thousands)~~Core deposits is a non-GAAP financial measure. For a reconciliation of non-GAAP measures to the most directly comparable GAAP financial measures, see~~ ~~“Item 2. Management’s Discussion and Analysis—Non-GAAP Financial Information”~~ ~~included in this Quarterly Report.~~:

~~Table of Contents~~


	As of
	March 31, 2023		December 31, 2022
Cash and unencumbered securities
Total cash and cash equivalents	$	275,569	$	227,164
Debt securities available for sale	2,383,550		2,461,393
Debt securities available for sale pledged as collateral	(568,244)		(746,675)
Cash and unencumbered securities	$	2,090,875	$	1,941,882

First Busey’s primary sources of funds consist of deposits, investment maturities and sales, loan principal repayments, and capital funds. Additional liquidity is provided by the ability to borrow from the FHLB, the Federal Reserve, and First Busey’s revolving credit facility, ~~or to utilize brokered deposits,~~ as summarized in the table below (dollars in thousands):


		As of					As of
		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Additional borrowing capacity available from:	Additional borrowing capacity available from:					Additional borrowing capacity available from:
FHLB	FHLB	$	1,824,424	$	1,536,019	FHLB	$	1,442,093	$	1,765,388
Federal Reserve		752,733		624,627
Federal Reserve Bank						Federal Reserve Bank	683,123		659,680
Federal funds purchased						Federal funds purchased	482,500		482,500
Revolving credit facility	Revolving credit facility	40,000		40,000		Revolving credit facility	40,000		40,000
Additional borrowing capacity	Additional borrowing capacity	$	2,617,157	$	2,200,646	Additional borrowing capacity	$	2,647,716	$	2,947,568

Further, the company could utilize brokered deposits as additional sources of liquidity, as needed.

As of ~~September 30, 2022,~~March 31, 2023, management believed that adequate liquidity existed to meet all projected cash flow obligations. We seek to achieve a satisfactory degree of liquidity by actively managing both assets and liabilities. Asset management guides the proportion of liquid assets to total assets, while liability management monitors future funding requirements and prices liabilities accordingly.

Table of Contents

OFF-BALANCE-SHEET ARRANGEMENTS

Busey Bank routinely enters into commitments to extend credit and standby letters of credit in the normal course of business to meet the financing needs of its customers. ~~We had outstanding loan commitments and standby letters of credit of $2.1 billion as of both September 30, 2022, and December 31, 2021.~~ The balance of commitments to extend credit represents future cash requirements and some of these commitments may expire without being drawn upon.

The following table summarizes our outstanding commitments and reserves for unfunded commitments (dollars in thousands):


	As of
	March 31, 2023		December 31, 2022
Outstanding loan commitments and standby letters of credit	$	2,103,910	$	2,024,777
Reserve for unfunded commitments	5,967		6,601

The following table summarizes our provision for unfunded commitments expenses (releases) for the periods presented (dollars in thousands):


	Three Months Ended March 31,
		2023		2022
Provision for unfunded commitments expense (release)		$	(635)	$	1,112

We anticipate we will have sufficient funds available to meet current loan commitments, including loan applications received and in process prior to the issuance of firm commitments.

As of September 30, 2022, our reserve for unfunded commitments was $7.1 million, compared to $6.5 million as of December 31, 2021. We recorded a $0.3 million release of the provision for unfunded commitments for the three months ended September 30, 2022, compared with a provision release of $1.0 million for the same period in 2021. We recorded $0.5 million of expenses for the provision for unfunded commitments for the nine months ended September 30, 2022, compared to provision releases totaling $1.1 million for the same period in 2021.

CAPITAL RESOURCES

Our capital ratios are in excess of those required to be considered “well-capitalized” pursuant to applicable regulatory guidelines. The Federal Reserve Board uses capital adequacy guidelines in its examination and regulation of bank holding companies and their subsidiary banks. Risk-based capital ratios are established by allocating assets and certain off-balance-sheet commitments into risk-weighted categories. These balances are then multiplied by the factor appropriate for that risk-weighted category. In order to refrain from restrictions on dividends, equity repurchases, and discretionary bonus payments, banking institutions must maintain capital in excess of regulatory minimum capital requirements. The table below presents minimum capital ratios that include the capital conservation buffer in comparison to the capital ratios for First Busey and Busey Bank as of ~~September 30, 2022:~~March 31, 2023:


		Minimum Capital Requirements with Capital Buffer				As of September 30, 2022							Minimum Capital Requirements with Capital Buffer					As of March 31, 2023
				First Busey Corporation				Busey Bank								First Busey				Busey Bank
Common Equity Tier 1 Capital to Risk Weighted Assets	Common Equity Tier 1 Capital to Risk Weighted Assets			7.00	%			11.79	%			14.45	%	Common Equity Tier 1 Capital to Risk Weighted Assets		7.00	%			12.18	%			14.66	%
Tier 1 Capital to Risk Weighted Assets	Tier 1 Capital to Risk Weighted Assets	8.50	%			12.62	%			14.45	%	Tier 1 Capital to Risk Weighted Assets	8.50		%			12.99	%			14.66	%
Total Capital to Risk Weighted Assets	Total Capital to Risk Weighted Assets	10.50	%			15.98	%			15.31	%	Total Capital to Risk Weighted Assets	10.50		%			16.40	%			15.59	%
Leverage Ratio of Tier 1 Capital to Average Assets	Leverage Ratio of Tier 1 Capital to Average Assets	6.50	%			9.15	%			10.47	%	Leverage Ratio of Tier 1 Capital to Average Assets	6.50		%			9.71	%			10.95	%

For further discussion of capital resources and requirements, see “Note 7: Regulatory Capital.”

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NON-GAAP FINANCIAL INFORMATION

This Quarterly Report contains certain financial information determined by methods other than in accordance with GAAP. Management uses these non-GAAP financial measures and non-GAAP ratios, together with the related GAAP financial measures, in analysis of the Company’s performance and in making business decisions, as well as for comparison to the Company’s peers. The Company believes the adjusted measures are useful for investors and management to understand the effects of certain non-recurring noninterest items and provide additional perspective on the Company’s performance over time.

A reconciliation of non-GAAP financial measures to what management believes to be the most directly comparable GAAP financial measures—specifically, net interest income, total noninterest income, net security gains and losses, and total noninterest expense in the case of pre-provision net revenue, adjusted pre-provision net revenue, pre-provision net revenue to average assets, and adjusted pre-provision net revenue to average assets; net income in the case of adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, return on average tangible common equity, and adjusted return on average tangible common equity; net interest income in the case of adjusted net interest income and adjusted net interest margin; net interest income, total noninterest income, and total noninterest expense in the case of adjusted noninterest expense, adjusted core expense, efficiency ratio, adjusted efficiency ratio, and adjusted core efficiency ratio; total stockholders’ equity in the case of tangible book value per common share; total assets and total stockholders’ equity in the case of tangible common equity and tangible common equity to tangible assets; portfolio loans in the case of core loans and core loans to portfolio loans; total deposits in the case of core deposits and core deposits to total deposits; and portfolio loans and total deposits in the case of core loans to core deposits—appears below.

~~These non-GAAP~~Non-GAAP disclosures have inherent limitations and are not audited. They should not be considered in isolation or as a substitute for ~~operating~~the results reported in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Tax effected numbers included in these non-GAAP disclosures are based on estimated statutory rates orand effective rates as appropriate.

A listing of the Company's non-GAAP financial measures and ratios are shown in the table below, together with the related GAAP financial measures.

Table of Contents

GAAP Financial Measures

Related Non-GAAP Financial Measures

Related Non-GAAP Ratios

Net interest income
Total noninterest income
Net security gains and losses
Total noninterest expense

Pre-provision net revenue

Pre-provision net revenue to average assets

Adjusted pre-provision net revenue

Adjusted pre-provision net revenue to average assets

Net income

Adjusted net income

Adjusted diluted earnings per share

Adjusted return on average assets

Adjusted return on average tangible common equity

Average common equity

Average tangible common equity

Return on average tangible common equity

Adjusted return on average tangible common equity

Net interest income

Tax-equivalent net interest income

Net interest margin

Adjusted net interest income

Adjusted net interest margin

Net interest income
Total noninterest income
Net security gains and losses

Tax-equivalent revenue

Efficiency ratio

Adjusted efficiency ratio

Adjusted core efficiency ratio

Total noninterest expense
Amortization of intangible assets

Non-interest expense excluding amortization of intangible assets

Efficiency ratio

Adjusted noninterest expense

Adjusted efficiency ratio

Adjusted core expense

Adjusted core efficiency ratio

Total noninterest expense

Noninterest expense, excluding non-operating adjustments

Total assets
Goodwill and other intangible assets, net

Tangible assets

Tangible common equity to tangible assets

Total stockholders’ equity
Goodwill and other intangible assets, net

Tangible common equity

Tangible common equity to tangible assets

Tangible book value

Tangible book value per common share

Portfolio loans

Core loans

Core loans to portfolio loans

Core loans to core deposits

Total deposits

Core deposits

Core deposits to total deposits

Core loans to core deposits

A reconciliation of non-GAAP financial measures to what management believes to be the most directly comparable GAAP financial measures appears below.

Table of Contents

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)


Pre-Provision Net Revenue, Adjusted Pre-Provision Net Revenue, Pre-Provision Net Revenue to Average Assets, and Adjusted Pre-Provision Net Revenue to Average Assets	Pre-Provision Net Revenue, Adjusted Pre-Provision Net Revenue, Pre-Provision Net Revenue to Average Assets, and Adjusted Pre-Provision Net Revenue to Average Assets								Pre-Provision Net Revenue, Adjusted Pre-Provision Net Revenue, Pre-Provision Net Revenue to Average Assets, and Adjusted Pre-Provision Net Revenue to Average Assets
(dollars in thousands)	(dollars in thousands)								(dollars in thousands)

			Three Months Ended		Nine Months Ended									Three Months Ended March 31,
			September 30, 2022		September 30, 2021		September 30, 2022			September 30, 2021					2023			2022
PRE-PROVISION NET REVENUE	PRE-PROVISION NET REVENUE											PRE-PROVISION NET REVENUE
Net interest income	Net interest income		$	86,305	$	70,755	$	232,289		$	200,190	Net interest income			$	85,857		$	70,056
Total noninterest income	Total noninterest income		30,933		33,259		97,724			97,715		Total noninterest income			31,848			35,772
Net security (gains) losses	Net security (gains) losses		(4)		(57)		2,324			(2,596)		Net security (gains) losses			616			614
Total noninterest expense	Total noninterest expense		(70,736)		(73,487)		(210,204)			(190,611)		Total noninterest expense			(70,403)			(70,376)
Pre-provision net revenue	Pre-provision net revenue		46,498		30,470		122,133			104,698		Pre-provision net revenue			47,918			36,066
Non-GAAP adjustments:	Non-GAAP adjustments:											Non-GAAP adjustments:
Acquisition and other restructuring expenses	Acquisition and other restructuring expenses		957		8,677		2,095			11,710		Acquisition and other restructuring expenses			—			835
Provision for unfunded commitments	Provision for unfunded commitments		(320)		(978)		525			(1,068)		Provision for unfunded commitments			(635)			1,112
Amortization of New Markets Tax Credits	Amortization of New Markets Tax Credits		1,665		1,240		4,668			4,308		Amortization of New Markets Tax Credits			2,221			1,341
Adjusted pre-provision net revenue	Adjusted pre-provision net revenue		$	48,800	$	39,409	$	129,421		$	119,648	Adjusted pre-provision net revenue			$	49,504		$	39,354

Pre-provision net revenue, annualized	Pre-provision net revenue, annualized	[a]	$	184,476	$	120,886	$	163,291		$	139,981	Pre-provision net revenue, annualized	[a]		$	194,334		$	146,268
Adjusted pre-provision net revenue, annualized	Adjusted pre-provision net revenue, annualized	[b]	193,609		156,351		173,035			159,969		Adjusted pre-provision net revenue, annualized	[b]		200,766			159,602
Average total assets	Average total assets	[c]	12,531,856		12,697,795		12,547,816			11,571,270		Average total assets	[c]		12,263,718			12,660,939

Reported: Pre-provision net revenue to average assets1	Reported: Pre-provision net revenue to average assets1	[a÷c]	1.47%		0.95%		1.30%			1.21%		Reported: Pre-provision net revenue to average assets1	[a÷c]		1.58		%	1.16		%
Adjusted: Pre-provision net revenue to average assets1	Adjusted: Pre-provision net revenue to average assets1	[b÷c]	1.54%		1.23%		1.38%			1.38%		Adjusted: Pre-provision net revenue to average assets1	[b÷c]		1.64		%	1.26		%

1.Annualized measure.

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)


Adjusted Net Income, Adjusted Diluted Earnings Per Share, Adjusted Return on Average Assets, Return on Average Tangible Common Equity, and Adjusted Return on Average Tangible Common Equity
Adjusted Net Income, Adjusted Diluted Earnings Per Share, Adjusted Return on Average Assets, Average Tangible Common Equity, Return on Average Tangible Common Equity, and Adjusted Return on Average Tangible Common Equity																Adjusted Net Income, Adjusted Diluted Earnings Per Share, Adjusted Return on Average Assets, Average Tangible Common Equity, Return on Average Tangible Common Equity, and Adjusted Return on Average Tangible Common Equity
(dollars in thousands, except per share amounts)	(dollars in thousands, except per share amounts)											(dollars in thousands, except per share amounts)

			Three Months Ended			Nine Months Ended												Three Months Ended March 31,
			September 30, 2022			September 30, 2021			September 30, 2022				September 30, 2021						2023			2022
NET INCOME ADJUSTED FOR NON-OPERATING ITEMS	NET INCOME ADJUSTED FOR NON-OPERATING ITEMS															NET INCOME ADJUSTED FOR NON-OPERATING ITEMS
Net income	Net income	[a]	$	35,661		$	25,941		$	93,924			$	93,523		Net income	[a]		$	36,786		$	28,439
Non-GAAP adjustments:	Non-GAAP adjustments:															Non-GAAP adjustments:
Acquisition expenses:	Acquisition expenses:															Acquisition expenses:
Salaries, wages, and employee benefits	Salaries, wages, and employee benefits		—			4,462			587				5,587			Salaries, wages, and employee benefits			—			587
Data processing	Data processing		—			3,182			214				3,557			Data processing			—			214
Loss on leases or fixed asset impairment			—			—			—				—

Professional fees, occupancy, and other	Professional fees, occupancy, and other		4			776			242				2,309			Professional fees, occupancy, and other			—			34
Other restructuring expenses:
Salaries, wages, and employee benefits			—			257			—				257
Data processing			—			—			—				—
Loss on leases or fixed asset impairment			877			—			976				—
Professional fees, occupancy, and other			76			—			76				—
MSR valuation impairment			—			—			—				—

Related tax benefit	Related tax benefit		(183)			(1,773)			(399)				(2,402)			Related tax benefit			—			(170)
TJCA related adjustment			$	—		$	—		$	—			$	—

Adjusted net income	Adjusted net income	[b]	$	36,435		$	32,845		$	95,620			$	102,831		Adjusted net income	[b]		$	36,786		$	29,104

DILUTED EARNINGS PER SHARE	DILUTED EARNINGS PER SHARE															DILUTED EARNINGS PER SHARE
Diluted average common shares outstanding	Diluted average common shares outstanding	[c]	56,073,164			56,832,518			56,123,756				55,872,835			Diluted average common shares outstanding	[c]		56,179,606			56,194,946

Reported: Diluted earnings per share	Reported: Diluted earnings per share	[a÷c]	$	0.64		$	0.46		$	1.67			$	1.67		Reported: Diluted earnings per share	[a÷c]		$	0.65		$	0.51
Adjusted: Diluted earnings per share	Adjusted: Diluted earnings per share	[b÷c]	$	0.65		$	0.58		$	1.70			$	1.84		Adjusted: Diluted earnings per share	[b÷c]		$	0.65		$	0.52

RETURN ON AVERAGE ASSETS	RETURN ON AVERAGE ASSETS															RETURN ON AVERAGE ASSETS
Net income, annualized	Net income, annualized	[d]	$	141,481		$	102,918		$	125,576			$	125,040		Net income, annualized	[d]		$	149,188		$	115,336
Adjusted net income, annualized	Adjusted net income, annualized	[e]	144,552			130,309			127,844				137,485			Adjusted net income, annualized	[e]		149,188			118,033
Average total assets	Average total assets	[f]	12,531,856			12,697,795			12,547,816				11,571,270			Average total assets	[f]		12,263,718			12,660,939

Reported: Return on average assets1	Reported: Return on average assets1	[d÷f]	1.13		%	0.81		%	1.00		%		1.08		%	Reported: Return on average assets1	[d÷f]		1.22		%	0.91		%
Adjusted: Return on average assets1	Adjusted: Return on average assets1	[e÷f]	1.15		%	1.03		%	1.02		%		1.19		%	Adjusted: Return on average assets1	[e÷f]		1.22		%	0.93		%

RETURN ON AVERAGE TANGIBLE COMMON EQUITY	RETURN ON AVERAGE TANGIBLE COMMON EQUITY															RETURN ON AVERAGE TANGIBLE COMMON EQUITY
Average common equity	Average common equity		$	1,181,448		$	1,351,416		$	1,219,645			$	1,323,571		Average common equity			$	1,170,819		$	1,281,535
Average goodwill and other intangible assets, net	Average goodwill and other intangible assets, net		(368,981)			(380,885)			(371,873)				(370,829)			Average goodwill and other intangible assets, net			(363,354)			(374,811)
Average tangible common equity	Average tangible common equity	[g]	$	812,467		$	970,531		$	847,772			$	952,742		Average tangible common equity	[g]		$	807,465		$	906,724

Reported: Return on average tangible common equity1	Reported: Return on average tangible common equity1	[d÷g]	17.41		%	10.60		%	14.81		%		13.12		%	Reported: Return on average tangible common equity1	[d÷g]		18.48		%	12.72		%
Adjusted: Return on average tangible common equity1	Adjusted: Return on average tangible common equity1	[e÷g]	17.79		%	13.43		%	15.08		%		14.43		%	Adjusted: Return on average tangible common equity1	[e÷g]		18.48		%	13.02		%

1.Annualized measure.

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)


Adjusted Net Interest Income and Adjusted Net Interest Margin	Adjusted Net Interest Income and Adjusted Net Interest Margin											Adjusted Net Interest Income and Adjusted Net Interest Margin
(dollars in thousands)	(dollars in thousands)											(dollars in thousands)

			Three Months Ended			Nine Months Ended												Three Months Ended March 31,
			September 30, 2022			September 30, 2021			September 30, 2022				September 30, 2021						2023			2022
Net interest income	Net interest income		$	86,305		$	70,755		$	232,289			$	200,190		Net interest income			$	85,857		$	70,056
Non-GAAP adjustments:	Non-GAAP adjustments:															Non-GAAP adjustments:
Tax-equivalent adjustment	Tax-equivalent adjustment		543			598			1,635				1,778			Tax-equivalent adjustment			558			546
Tax-equivalent net interest income	Tax-equivalent net interest income		86,848			71,353			233,924				201,968			Tax-equivalent net interest income			86,415			70,602
Purchase accounting accretion related to business combinations	Purchase accounting accretion related to business combinations		(830)			(1,799)			(2,588)				(5,682)			Purchase accounting accretion related to business combinations			(403)			(1,159)
Adjusted net interest income	Adjusted net interest income		$	86,018		$	69,554		$	231,336			$	196,286		Adjusted net interest income			$	86,012		$	69,443

Tax-equivalent net interest income, annualized	Tax-equivalent net interest income, annualized	[a]	$	344,560		$	283,085		$	312,756			$	270,030		Tax-equivalent net interest income, annualized	[a]		$	350,461		$	286,330
Adjusted net interest income, annualized	Adjusted net interest income, annualized	[b]	341,267			275,948			309,295				262,434			Adjusted net interest income, annualized	[b]		348,826			281,630
Average interest-earning assets	Average interest-earning assets	[c]	11,497,783			11,730,637			11,550,887				10,651,386			Average interest-earning assets	[c]		11,180,562			11,703,947

Reported: Net interest margin1	Reported: Net interest margin1	[a÷c]	3.00		%	2.41		%	2.71		%		2.54		%	Reported: Net interest margin1	[a÷c]		3.13		%	2.45		%
Adjusted: Net interest margin1	Adjusted: Net interest margin1	[b÷c]	2.97		%	2.35		%	2.68		%		2.46		%	Adjusted: Net interest margin1	[b÷c]		3.12		%	2.41		%

1.Annualized measure.

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)


Adjusted Noninterest Expense, Adjusted Core Expense, Efficiency Ratio, Adjusted Efficiency Ratio, and Adjusted Core Efficiency Ratio
Noninterest Expense Excluding Amortization of Intangible Assets, Adjusted Noninterest Expense, Adjusted Core Expense, Noninterest Expense Excluding Non-operating Adjustments, Efficiency Ratio, Adjusted Efficiency Ratio, and Adjusted Core Efficiency Ratio																Noninterest Expense Excluding Amortization of Intangible Assets, Adjusted Noninterest Expense, Adjusted Core Expense, Noninterest Expense Excluding Non-operating Adjustments, Efficiency Ratio, Adjusted Efficiency Ratio, and Adjusted Core Efficiency Ratio
(dollars in thousands)	(dollars in thousands)											(dollars in thousands)

			Three Months Ended			Nine Months Ended												Three Months Ended March 31,
			September 30, 2022			September 30, 2021			September 30, 2022				September 30, 2021						2023			2022
Net interest income	Net interest income		$	86,305		$	70,755		$	232,289			$	200,190		Net interest income			$	85,857		$	70,056
Non-GAAP adjustments:	Non-GAAP adjustments:															Non-GAAP adjustments:
Tax-equivalent adjustment	Tax-equivalent adjustment		543			598			1,635				1,778			Tax-equivalent adjustment			558			546
Tax-equivalent net interest income	Tax-equivalent net interest income		86,848			71,353			233,924				201,968			Tax-equivalent net interest income			86,415			70,602

Total noninterest income	Total noninterest income		30,933			33,259			97,724				97,715			Total noninterest income			31,848			35,772
Non-GAAP adjustments:	Non-GAAP adjustments:															Non-GAAP adjustments:
Net security (gains) losses	Net security (gains) losses		(4)			(57)			2,324				(2,596)			Net security (gains) losses			616			614
Noninterest income excluding net securities gains and losses	Noninterest income excluding net securities gains and losses		30,929			33,202			100,048				95,119			Noninterest income excluding net securities gains and losses			32,464			36,386

Tax-equivalent net interest income plus noninterest income excluding net securities gains and losses		[a]	$	117,777		$	104,555		$	333,972			$	297,087
Tax-equivalent revenue																Tax-equivalent revenue	[a]		$	118,879		$	106,988

Total noninterest expense	Total noninterest expense		70,736			73,487			210,204				190,611			Total noninterest expense			$	70,403		$	70,376
Non-GAAP adjustments:	Non-GAAP adjustments:															Non-GAAP adjustments:
Amortization of intangible assets	Amortization of intangible assets	[b]	(2,871)			(3,149)			(8,833)				(8,200)			Amortization of intangible assets	[b]		(2,729)			(3,011)
Non-interest expense excluding amortization of intangible assets	Non-interest expense excluding amortization of intangible assets	[c]	67,865			70,338			201,371				182,411			Non-interest expense excluding amortization of intangible assets	[c]		67,674			67,365
Non-operating adjustments:	Non-operating adjustments:															Non-operating adjustments:
Salaries, wages, and employee benefits	Salaries, wages, and employee benefits		—			(4,719)			(587)				(5,844)			Salaries, wages, and employee benefits			—			(587)
Data processing	Data processing		—			(3,182)			(214)				(3,557)			Data processing			—			(214)
Impairment, professional fees, occupancy, and other			(957)			(776)			(1,294)				(2,309)

Professional fees and other																Professional fees and other			—			(34)
Adjusted noninterest expense	Adjusted noninterest expense	[f]	66,908			61,661			199,276				170,701			Adjusted noninterest expense	[f]		67,674			66,530
Provision for unfunded commitments	Provision for unfunded commitments		320			978			(525)				1,068			Provision for unfunded commitments			635			(1,112)
Amortization of New Markets Tax Credits	Amortization of New Markets Tax Credits		(1,665)			(1,240)			(4,668)				(4,308)			Amortization of New Markets Tax Credits			(2,221)			(1,341)
Adjusted core expense	Adjusted core expense	[g]	$	65,563		$	61,399		$	194,083			$	167,461		Adjusted core expense	[g]		$	66,088		$	64,077

Noninterest expense, excluding non-operating adjustments	Noninterest expense, excluding non-operating adjustments	[f-b]	69,779			64,810			208,109				178,901			Noninterest expense, excluding non-operating adjustments	[f-b]		$	70,403		$	69,541

Reported: Efficiency ratio	Reported: Efficiency ratio	[c÷a]	57.62		%	67.27		%	60.30		%		61.40		%	Reported: Efficiency ratio	[c÷a]		56.93		%	62.97		%
Adjusted: Efficiency ratio	Adjusted: Efficiency ratio	[f÷a]	56.81		%	58.97		%	59.67		%		57.46		%	Adjusted: Efficiency ratio	[f÷a]		56.93		%	62.18		%
Adjusted: Core efficiency ratio	Adjusted: Core efficiency ratio	[g÷a]	55.67		%	58.72		%	58.11		%		56.37		%	Adjusted: Core efficiency ratio	[g÷a]		55.59		%	59.89		%

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)


Tangible Book Value Per Common Share
Tangible Book Value and Tangible Book Value Per Common Share							Tangible Book Value and Tangible Book Value Per Common Share
(dollars in thousands, except per share amounts)	(dollars in thousands, except per share amounts)						(dollars in thousands, except per share amounts)

			As of						As of
			September 30, 2022		December 31, 2021				March 31, 2023		December 31, 2022
Total stockholders' equity	Total stockholders' equity		$	1,106,588	$	1,319,112	Total stockholders' equity		$	1,198,558	$	1,145,977
Goodwill and other intangible assets, net	Goodwill and other intangible assets, net		(367,091)		(375,924)		Goodwill and other intangible assets, net		(361,567)		(364,296)
Tangible book value	Tangible book value	[a]	$	739,497	$	943,188	Tangible book value	[a]	$	836,991	$	781,681

Ending number of common shares outstanding	Ending number of common shares outstanding	[b]	55,232		55,435		Ending number of common shares outstanding	[b]	55,294,455		55,279,124

Tangible book value per common share	Tangible book value per common share	[a÷b]	$	13.39	$	17.01	Tangible book value per common share	[a÷b]	$	15.14	$	14.14


Tangible Common Equity and Tangible Common Equity to Tangible Assets	Tangible Common Equity and Tangible Common Equity to Tangible Assets						Tangible Common Equity and Tangible Common Equity to Tangible Assets
(dollars in thousands)	(dollars in thousands)						(dollars in thousands)

			As of						As of
			September 30, 2022		December 31, 2021				March 31, 2023		December 31, 2022
Total assets	Total assets		$	12,497,388	$	12,859,689	Total assets		$	12,344,555	$	12,336,677
Non-GAAP adjustments:	Non-GAAP adjustments:						Non-GAAP adjustments:
Goodwill and other intangible assets, net	Goodwill and other intangible assets, net		(367,091)		(375,924)		Goodwill and other intangible assets, net		(361,567)		(364,296)
Tax effect of other intangible assets1	Tax effect of other intangible assets1		9,369		16,254		Tax effect of other intangible assets1		8,335		8,847
Tangible assets	Tangible assets	[a]	$	12,139,666	$	12,500,019	Tangible assets	[a]	$	11,991,323	$	11,981,228

Total stockholders' equity	Total stockholders' equity		$	1,106,588	$	1,319,112	Total stockholders' equity		$	1,198,558	$	1,145,977
Non-GAAP adjustments:	Non-GAAP adjustments:						Non-GAAP adjustments:
Goodwill and other intangible assets, net	Goodwill and other intangible assets, net		(367,091)		(375,924)		Goodwill and other intangible assets, net		(361,567)		(364,296)
Tax effect of other intangible assets1	Tax effect of other intangible assets1		9,369		16,254		Tax effect of other intangible assets1		8,335		8,847
Tangible common equity	Tangible common equity	[b]	$	748,866	$	959,442	Tangible common equity	[b]	$	845,326	$	790,528

Tangible common equity to tangible assets2	Tangible common equity to tangible assets2	[b÷a]	6.17%		7.68%		Tangible common equity to tangible assets2	[b÷a]	7.05%		6.60%

1.Net of estimated deferred tax liability.

2.Tax-effected measure.

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)


Core Loans, Core Loans to Portfolio Loans, Core Deposits, Core Deposits to Total Deposits, and Core Loans to Core Deposits	Core Loans, Core Loans to Portfolio Loans, Core Deposits, Core Deposits to Total Deposits, and Core Loans to Core Deposits						Core Loans, Core Loans to Portfolio Loans, Core Deposits, Core Deposits to Total Deposits, and Core Loans to Core Deposits
(dollars in thousands)	(dollars in thousands)						(dollars in thousands)

			As of						As of
			September 30, 2022		December 31, 2021				March 31, 2023		December 31, 2022
Portfolio loans	Portfolio loans	[a]	$	7,670,114	$	7,188,998	Portfolio loans	[a]	$	7,783,808	$	7,725,702
Non-GAAP adjustments:	Non-GAAP adjustments:						Non-GAAP adjustments:
PPP loans amortized cost	PPP loans amortized cost		(1,426)		(74,958)		PPP loans amortized cost		(750)		(845)
Loans acquired in business combinations, prior to integration			—		—

Core loans	Core loans	[b]	$	7,668,688	$	7,114,040	Core loans	[b]	$	7,783,058	$	7,724,857

Total deposits	Total deposits	[c]	10,601,397		10,768,577		Total deposits	[c]	$	9,801,169	$	10,071,280
Non-GAAP adjustments:	Non-GAAP adjustments:						Non-GAAP adjustments:
Brokered transaction accounts	Brokered transaction accounts		(2,006)		(2,248)		Brokered transaction accounts		(6,005)		(1,303)
Time deposits of $250,000 or more	Time deposits of $250,000 or more		(103,534)		(137,449)		Time deposits of $250,000 or more		(200,898)		(120,377)
Deposits acquired in business combinations, prior to integration			—		—

Core deposits	Core deposits	[d]	$	10,495,857	$	10,628,880	Core deposits	[d]	$	9,594,266	$	9,949,600

RATIOS	RATIOS						RATIOS
Core loans to portfolio loans	Core loans to portfolio loans	[b÷a]	99.98%		98.96%		Core loans to portfolio loans	[b÷a]	99.99%		99.99%
Core deposits to total deposits	Core deposits to total deposits	[d÷c]	99.00%		98.70%		Core deposits to total deposits	[d÷c]	97.89%		98.79%
Core loans to core deposits	Core loans to core deposits	[b÷d]	73.06%		66.93%		Core loans to core deposits	[b÷d]	81.12%		77.64%

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FORWARD-LOOKING STATEMENTS

Statements made in this document, other than those concerning historical financial information, may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to First Busey’s financial condition, results of operations, plans, objectives, future performance, and business. Forward-looking statements, which may be based upon beliefs, expectations, and assumptions of the Company’s management, and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should,” or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and we undertake no obligation to update any statement in light of new information or future events. A number of factors, many of which are beyond our ability to control or predict, could cause actual results to differ materially from those in our forward-looking statements. These factors include, among others, the following: (i) the strength of the local, state, national, and international economy (including effects of inflationary pressures and supply chain constraints); (ii) the economic impact of any future terrorist threats or attacks, widespread disease or pandemics (including the ~~COVID-19~~Coronavirus Disease 2019 pandemic), or other adverse external events that could cause economic deterioration or instability in credit markets (including Russia’s invasion of Ukraine); (iii) changes in state and federal laws, regulations, and governmental policies concerning First Busey’s general ~~business;~~business (including changes in response to the recent failures of other banks); (iv) changes in accounting policies and practices (v) changes in interest rates and prepayment rates of First Busey’s assets (including the impact of the LIBOR phase-out) ~~(v)~~; (vi) increased competition in the financial services sector (including from non-bank competitors such as credit unions and fintech companies) and the inability to attract new customers; ~~(vi)~~(vii) changes in technology and the ability to develop and maintain secure and reliable electronic systems; ~~(vii)~~(viii) the loss of key executives or associates; ~~(viii)~~(ix) changes in consumer spending; ~~(ix)~~(x) unexpected results of current and/or future acquisitions, which may include failure to realize the anticipated benefits of any acquisition and the possibility that transaction costs may be greater than anticipated; ~~(x)~~(xi) unexpected outcomes of existing or new litigation involving First Busey; ~~(xi)~~(xii) fluctuations in the value of securities held in our securities portfolio; (xiii) concentrations within our loan portfolio, large loans to certain borrowers, and large deposits from certain clients; (xiv) the concentration of large deposits from certain clients who have balances above current FDIC insurance limits and may withdraw deposits to diversify their exposure; (xv) the level of non-performing assets on our balance sheets; (xvi) interruptions involving our information technology and communications systems or third-party servicers; (xvii) breaches or failures of our information security controls or cybersecurity-related incidents; and (xviii) the economic impact of exceptional weather occurrences such as tornadoes, hurricanes, floods, and ~~blizzards; and (xii) changes in accounting policies and practices.~~blizzards. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning First Busey and our business, including additional factors that could materially affect our financial results, is included in our filings with the SEC.

CRITICAL ACCOUNTING ESTIMATES

First Busey has established various accounting policies that govern the application of GAAP in the preparation of its unaudited consolidated financial statements. Significant accounting policies are described in “Note 1. Significant Accounting Policies” of the Company’s ~~2021~~2022 Annual Report.

Critical accounting estimates are those that are critical to the portrayal and understanding of First Busey’s financial condition and results of operations and require management to make assumptions that are difficult, subjective, or complex. These estimates involve judgments, assumptions, and uncertainties that are susceptible to change. In the event that different assumptions or conditions were to prevail, and depending on the severity of such changes, the possibility of a materially different financial condition or materially different results of operations is a reasonable likelihood. Further, changes in accounting standards could impact our critical accounting estimates. Management has reviewed these critical accounting estimates and related disclosures with our Audit Committee. The following accounting policies could be deemed critical:

Fair Value of Debt Securities Available for Sale

~~The fair~~Fair values of debt securities available for sale are measurements from an independent pricing service and are based on observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the security’s terms and conditions, among other things. ~~The~~Different fair value estimates could result from the use of different judgments and estimates to determine the fair ~~value~~values of ~~securities could result in a different fair value estimate.~~securities.

Realized securities gains or losses are reported in the unaudited Consolidated Statements of Income. The cost of securities sold is based on the specific identification method.

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A debt security available for sale is impaired if the fair value of the security declines below its amortized cost basis. To determine the appropriate accounting, we must first determine if we intend to sell the security or if it is more likely than not that we will be required to sell the security before the fair value increases to at least the amortized cost basis. If either of those selling events is expected, we will write down the amortized cost basis of the security to its fair value. This is achieved by writing off any previously recorded ~~ACL balance~~allowance related to the debt security, if applicable, and recognizing any incremental impairment through earnings. If we do not intend to sell the security, nor believe it more likely than not that we will be required to sell the security before the fair value recovers to the amortized cost basis, we must determine whether any of the decline in fair value has resulted from a credit loss, or if it is entirely the result of noncredit factors.

We consider the following factors in assessing whether the decline is due to a credit loss:

•Extent to which the fair value is less than the amortized cost basis;

•Adverse conditions specifically related to the security, an industry, or a geographic area (for example, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, in the financial condition of the underlying loan obligors);

•Payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future;

•Failure of the issuer of the security to make scheduled interest or principal payments; and

•Any changes to the rating of the security by a rating agency.

Impairment related to a credit loss must be measured using the discounted cash flow method. Credit loss recognition is limited to the fair value of the security. ~~The impairment~~Impairment is recognized by establishing an ~~ACL balance~~allowance for the debt security through the provision for credit losses. Impairment related to noncredit factors is recognized in AOCI, net of applicable taxes.

Fair Value of Assets Acquired and Liabilities Assumed in Business Combinations

Business combinations are accounted for using the acquisition method of accounting. Under the acquisition method of accounting, assets acquired and liabilities assumed are recorded at their estimated fair value on the date of acquisition. Fair values are determined based on the definition of “fair value” defined in ASC Topic 820 “Fair Value Measurement” as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”

The fair value of a loan portfolio acquired in a business combination generally requires greater levels of management estimates and judgment than other assets acquired or liabilities assumed. Acquired loans are in the scope of ASC Topic 326 “Financial Instruments—Credit Losses.” However, the offset to record the ~~ACL~~allowance on acquired loans at the date of acquisition depends on whether or not the loan is classified as PCD. The ~~ACL~~allowance for PCD loans is recorded through a gross-up effect, while the ~~ACL~~allowance for acquired non-PCD loans is recorded through provision expense, consistent with originated loans. Thus, the determination of which loans are PCD and non-PCD can have a significant effect on the accounting for these loans.

Goodwill

Goodwill represents the excess of purchase price over the fair value of net assets acquired using the acquisition method of accounting. Determining the fair value often involves estimates based on third-party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques. Goodwill is not amortized. Instead, we assess the potential for impairment on an annual basis or more frequently if events and circumstances indicate that goodwill might be impaired.

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Income Taxes

First Busey estimates income tax expense based on amounts expected to be owed to federal and state tax jurisdictions. Estimated income tax expense is reported in the unaudited Consolidated Statements of Income. Accrued and deferred taxes, as reported in other assets or other liabilities in the unaudited Consolidated Balance Sheets, represent the net estimated amount due to or to be received from taxing jurisdictions either currently or in the future. Management judgment is involved in estimating accrued and deferred taxes, as it may be necessary to evaluate the risks and merits of the tax treatment of transactions, filing positions, and taxable income calculations after considering tax-related statutes, regulations, and other relevant factors. Because of the complexity of tax laws and interpretations, interpretation is subject to judgment.

Allowance for Credit Losses

First Busey calculates the ACL at each reporting date. We recognize an allowance for the lifetime expected credit losses for the amount ~~the Company does~~we do not expect to collect. Measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported book value. The calculation also contemplates that First Busey may not be able to make or obtain such forecasts for the entire life of the financial assets and requires a reversion to historical credit loss information.

In determining the ACL, management relies predominantly on a disciplined credit review and approval process that extends to the full range of First Busey’s credit exposure. The ACL must be determined on a collective (pool) basis when similar risk characteristics exist. On a case-by-case basis, we may conclude a loan should be evaluated on an individual basis based on disparate risk characteristics.

Loans deemed uncollectible are charged against and reduce the ACL. A provision for credit losses is charged to current expense and acts to replenish the ACL in order to maintain the ACL at a level that management deems adequate. Determining the ACL involves significant judgments and assumptions by management. Because of the nature of the judgments and assumptions made by management, actual results may differ from these judgments and assumptions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of changes in asset values due to movements in underlying market rates and prices. Interest rate risk is a type of market risk to earnings and capital arising from movements in interest rates. Interest rate risk is the most significant market risk affecting First Busey as other types of market risk, such as foreign currency exchange rate risk and commodity price risk, have minimal impact or do not arise in the normal course of First Busey’s business activities.

First Busey has an asset-liability committee, whose policy is to meet at least quarterly, to review current market conditions and to structure the Consolidated Balance Sheets to optimize stability in net interest income in consideration of projected future changes in interest rates.

As interest rate changes do not impact all categories of assets and liabilities equally or simultaneously, the asset-liability committee primarily relies on balance sheet and income simulation analysis to determine the potential impact of changes in market interest rates on net interest income. In these standard simulation models, the balance sheet is projected over a one-year and a two-year time horizon and net interest income is calculated under current market rates and assuming permanent instantaneous shifts of +/-100, +/-200, +/-300, and +/~~-300~~-400 basis points. ~~As of December 31, 2021, a downward adjustment in federal fund rates was not meaningful due to the low interest rate environment at that time.~~ The model assumes immediate and sustained shifts in the federal funds rate and other market rate indices and corresponding shifts in other non-market rate indices based on their historical changes relative to changes in the federal funds rate and other market indices. Assets and liabilities are assumed to remain constant as of the measurement date; variable-rate assets and liabilities are repriced based on repricing frequency; and prepayment speeds on loans are projected for both declining and rising rate environments.

The interest rate risk of First Busey as a result of immediate and sustained changes in interest rates, expressed as a change in net interest income as a percentage of the net interest income calculated in the constant base model, was as follows:

Year-One: Basis Point Changes
-300 -200 - 100 +100 +200 +300
September 30, 2022 (22.39) % (13.99)% (5.83) % 4.60% 9.17% 13.76%
December 31, 2021 NM NM NM 8.77% 17.19% 25.64%


	Year-One: Basis Point Changes
	-400		-300	-200		- 100	+100	+200	+300	+400
March 31, 2023	(13.66)	%	(10.08)%	(6.03)	%	(2.92)%	2.14%	4.34%	6.54%	8.77%
December 31, 2022	(21.24)	%	(14.74)%	(8.08)	%	(3.95)%	3.05%	6.11%	9.18%	12.27%

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Year-Two: Basis Point Changes
-300 -200 - 100 +100 +200 +300
September 30, 2022 (27.75) % (17.09)% (7.21) % 5.52% 11.12% 16.78%
December 31, 2021 NM NM NM 9.51% 18.22% 26.84%


	Year-Two: Basis Point Changes
	-400		-300	-200		- 100	+100	+200	+300	+400
March 31, 2023	(18.87)	%	(14.35)%	(8.54)	%	(4.12)%	2.76%	5.59%	8.48%	11.43%
December 31, 2022	(27.82)	%	(19.56)%	(10.76)	%	(5.27)%	3.94%	7.91%	11.94%	16.02%

Interest rate risk is monitored and managed within approved policy limits and any temporary exceptions to policy in periods of rapid rate movement are approved and documented. The calculation of potential effects of hypothetical interest rate changes is based on numerous assumptions and should not be relied upon as indicative of actual results. Actual results would likely differ from simulated results due to the timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act, was carried out as of ~~September 30, 2022,~~March 31, 2023, under the supervision and with the participation of our Chief Executive Officer, Chief Financial Officer, and several other members of our senior management. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September 30, 2022,~~March 31, 2023, our disclosure controls and procedures were effective in ensuring that the information we are required to disclose in the reports we file or submit under the Exchange Act was (i) accumulated and communicated to our management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure, and (ii) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

During the three months ended ~~September 30, 2022,~~March 31, 2023, no change occurred in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART ~~II -~~ II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

As part of the ordinary course of business, First Busey and its subsidiaries are parties to litigation that is incidental to their regular business activities.

There is no material pending litigation, other than ordinary routine litigation incidental to its business, in which First Busey or any of its subsidiaries is involved or of which any of their property is the subject. Furthermore, there is no pending legal proceeding that is adverse to First Busey in which any director, officer, or affiliate of First Busey, or any associate of any such director or officer, is a party, or has a material interest.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in Part I—Item 1A of First Busey’s ~~2021~~2022 Annual Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On February 3, 2015, First Busey’s board of directors authorized the Company to repurchase up to an aggregate of 666,667 shares of its common stock. The repurchase plan has no expiration date. On May 22, 2019, First Busey’s board of directors approved an amendment to increase the authorized shares under the repurchase program by 1,000,000 shares, and on February 5, 2020, First Busey’s board of directors approved another amendment to increase the authorized shares under the repurchase program by an additional 2,000,000 shares. During the ~~third~~first quarter of ~~2022,~~2023, the Company purchased ~~130,000~~25,000 shares under the plan. As of ~~September 30, 2022,~~March 31, 2023, the Company had ~~147,210~~122,210 shares that may still be purchased under the plan.

Period Total Number of Shares Purchased Weighted Average Price Paid per Common Share Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
July 1-31, 2022 106,000 $ 23.58 106,000 171,210
August 1-31, 2022 24,000 $ 24.50 24,000 147,210
September 1-30, 2022 — $ — — 147,210
Three months ended September 30, 2022 130,000 $ 23.75 130,000
Nine months ended September 30, 2022 388,614 $ 25.50 388,614


Period	Total Number of Shares Purchased	Weighted Average Price Paid per Common Share		Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
January 1-31, 2023	—	$	—	—	147,210
February 1-28, 2023	—	$	—	—	147,210
March 1-31, 2023	25,000	$	21.34	25,000	122,210

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Exhibit
Number

Description of Exhibit

Filed
Herewith

31.1

Certification of Principal Executive Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a)

31.2

Certification of Principal Financial Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a)

32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, from First Busey’s Chief Executive Officer

32.2

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, from First Busey’s Chief Financial Officer

101.INS

iXBRL Instance Document

101.SCH

iXBRL Taxonomy Extension Schema

101.CAL

iXBRL Taxonomy Extension Calculation Linkbase

101.LAB

iXBRL Taxonomy Extension Label Linkbase

101.PRE

iXBRL Taxonomy Extension Presentation Linkbase

101.DEF

iXBRL Taxonomy Extension Definition Linkbase

104.0

Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

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SIGNATURES

Pursuant to the requirements of the Exchange Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date: ~~November 3, 2022~~May 4, 2023	FIRST BUSEY CORPORATION (Registrant)

	By:	/s/ VAN A. DUKEMAN
		Van A. Dukeman
		Chairman, President and Chief Executive Officer (Principal Executive Officer)

	By:	/s/ JEFFREY D. JONES
		Jeffrey D. Jones
		Chief Financial Officer (Principal Financial Officer)

	By:	/s/ ~~LYNETTE M. STRODE~~SCOTT A. PHILLIPS
		~~Lynette M. Strode~~Scott A. Phillips
		Principal Accounting Officer

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	Three Months Ended September 30, 2021
	Shares	Common Stock		Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Stockholders' Equity
Balance, June 30, 2021	56,330,616	$	58	$	1,316,716	$	62,926	$	10,725	$	(44,734)	$	1,345,691
Net income	—	—		—		25,941		—		—		25,941
OCI, net of tax	—	—		—		—		(12,091)		—		(12,091)
Stock issued in acquisition, net of stock issuance costs	—	—		(29)		—		—		—		(29)
Repurchase of stock	(625,000)	—		—		—		—		(14,790)		(14,790)
Issuance of treasury stock for ESPP	14,658	—		(70)		—		—		377		307
Net issuance of treasury stock for RSU/DSU vesting and related tax	106,710			(3,738)		—		—		2,850		(888)
Cash dividends on common stock at $0.23 per share	—	—		—		(12,956)		—		—		(12,956)
Stock dividend equivalents on RSUs at $0.23 per share	—	—		268		(268)		—		—		—
Stock-based compensation	—	—		1,891		—		—		—		1,891
Balance, September 30, 2021	55,826,984	$	58	$	1,315,038	$	75,643	$	(1,366)	$	(56,297)	$	1,333,076


	As of September 30, 2022			As of December 31, 2021
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
COVID-19 loan modifications
Commercial loans:

Interest-only deferrals	8	$	20,556	32	$	128,730


Retail loans:
Mortgage and personal loan deferrals	1	99		2	137

Total COVID-19 loans modifications	9	$	20,655	34	$	128,867


OVERVIEW		57

~~CURRENT EVENTS~~		5752

EXECUTIVE SUMMARY		5853
	Operating ~~Results~~Performance	5853

	Acquisitions	58
	~~Non-operating Expenses and Non-GAAP Measures~~	5854
	Banking Center Markets	5954
	Net Interest Income	5954
	Noninterest Income	6457
	Noninterest Expense	6659

FINANCIAL CONDITION		6961
	Balance Sheet	6961
	Portfolio Loans	6961
	Deposits	7466

LIQUIDITY		7467

OFF-BALANCE SHEET ARRANGEMENTS		7568

CAPITAL RESOURCES		7568

NON-GAAP FINANCIAL INFORMATION		7669

FORWARD LOOKING STATEMENTS		8377

CRITICAL ACCOUNTING ESTIMATES		8377
	Fair Value of Debt Securities Available for Sale	8377
	Fair Value of Assets Acquired and Liabilities Assumed in Business Combinations	8478
	Goodwill	8478
	Income Taxes	8579
	Allowance for Credit Losses	8579