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What changed in FIRST BUSEY CORP /NV/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of FIRST BUSEY CORP /NV/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+375 added−372 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-23)

Top changes in FIRST BUSEY CORP /NV/'s 2023 10-K

375 paragraphs added · 372 removed · 255 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

77 edited+35 added−17 removed19 unchanged
Biggest changeWithin 1 Year After 1 Year Through 5 Years After 5 Years Through 15 Years After 15 Years Total Selected Loans Commercial $ 1,037,306 $ 628,431 $ 288,086 $ 20,412 $ 1,974,235 Commercial real estate 956,694 1,492,092 814,381 35 3,263,202 Real estate construction 342,924 138,112 48,730 2,820 532,586 Total selected loans $ 2,336,924 $ 2,258,635 $ 1,151,197 $ 23,267 $ 5,770,023 Interest Rate Structure Selected loans maturing after one year are summarized below by interest rate structure and loan category, as of December 31, 2022, (dollars in thousands) : Fixed Rate Adjustable Rate Total Selected loans maturing after 1 year Commercial $ 896,637 $ 40,292 $ 936,929 Commercial real estate 2,198,122 108,386 2,306,508 Real estate construction 170,692 18,970 189,662 Total selected loans maturing after 1 year $ 3,265,451 $ 167,648 $ 3,433,099 66 Table of Contents Allowance for Credit Losses The following table summarizes, by loan category, activity affecting the ACL and average portfolio loans outstanding for the year ended December 31, 2022, as well as the related ratios of net charge-offs (recoveries) to average portfolio loans (dollars in thousands) : ACL Average Portfolio Loans Outstanding Ratio of Net Charge-offs (Recoveries) To Average Portfolio Loans ACL balance, December 31, 2019 $ 53,748 Adoption of ASC 326-30 16,833 Net (charge-offs) recoveries and average portfolio loans by loan category: Commercial (5,972) $ 2,123,550 0.28 % Commercial real estate (1,777) 2,840,592 0.06 % Real estate construction 583 447,503 (0.13) % Retail real estate (845) 1,552,297 0.05 % Retail other (319) 43,004 0.74 % Net (charge-offs) recoveries and average portfolio loans (8,330) $ 7,006,946 0.12 % Provision for credit losses 38,797 ACL balance, December 31, 2020 101,048 Day 1 PCD 1 4,178 Net (charge-offs) recoveries and average portfolio loans by loan category: Commercial (1,397) $ 1,985,511 0.07 % Commercial real estate (666) 2,953,944 0.02 % Real estate construction 89 450,713 (0.02) % Retail real estate (76) 1,446,673 0.01 % Retail other (188) 132,966 0.14 % Net (charge-offs) recoveries and average portfolio loans (2,238) $ 6,969,807 0.03 % Provision for credit losses (15,101) ACL balance, December 31, 2021 87,887 Net (charge-offs) recoveries and average portfolio loans by loan category: Commercial (492) $ 1,919,227 0.03 % Commercial real estate (842) 3,200,166 0.03 % Real estate construction 213 466,045 (0.05) % Retail real estate 385 1,584,859 (0.02) % Retail other (166) 275,665 0.06 % Net (charge-offs) recoveries and average portfolio loans (902) $ 7,445,962 0.01 % Provision for credit losses 4,623 ACL balance, December 31, 2022 $ 91,608 67 Table of Contents The following table presents ACL to portfolio loan ratios, as of the periods indicated (dollars in thousands) : As of December 31, 2022 2021 Portfolio loans $ 7,725,702 $ 7,188,998 PPP loans amortized cost (845) (74,958) Core loans 1 $ 7,724,857 $ 7,114,040 ACL $ 91,608 $ 87,887 Ratios ACL to portfolio loans 1.19 % 1.22 % ACL to core loans 1 1.19 % 1.24 % ___________________________________________ 1.
Biggest changeMD&A The following table summarizes, by loan category, activity affecting the ACL and average portfolio loans outstanding for the years indicated, as well as the related ratios of net charge-offs (recoveries) to average portfolio loans (dollars in thousands) : ACL Average Portfolio Loans Outstanding Ratio of Net Charge-offs (Recoveries) To Average Portfolio Loans ACL balance, December 31, 2020 $ 101,048 Day 1 PCD 1 4,178 Net (charge-offs) recoveries and average portfolio loans by loan category: Commercial (1,397) $ 1,985,511 0.07 % Commercial real estate (666) 2,953,944 0.02 % Real estate construction 89 450,713 (0.02) % Retail real estate (76) 1,446,673 0.01 % Retail other (188) 132,966 0.14 % Net (charge-offs) recoveries and average portfolio loans (2,238) $ 6,969,807 0.03 % Provision for credit losses (15,101) ACL balance, December 31, 2021 87,887 Net (charge-offs) recoveries and average portfolio loans by loan category: Commercial (492) $ 1,919,227 0.03 % Commercial real estate (842) 3,200,166 0.03 % Real estate construction 213 466,045 (0.05) % Retail real estate 385 1,584,859 (0.02) % Retail other (166) 275,665 0.06 % Net (charge-offs) recoveries and average portfolio loans (902) $ 7,445,962 0.01 % Provision for credit losses 4,623 ACL balance, December 31, 2022 91,608 Net (charge-offs) recoveries and average portfolio loans by loan category: Commercial (1,877) $ 1,910,008 0.10 % Commercial real estate (379) 3,316,633 0.01 % Real estate construction 171 536,280 (0.03) % Retail real estate 183 1,689,868 (0.01) % Retail other (365) 306,683 0.12 % Net (charge-offs) recoveries and average portfolio loans (2,267) $ 7,759,472 0.03 % Provision for credit losses 2,399 ACL balance, December 31, 2023 $ 91,740 ___________________________________________ 1.
Retail Other Loans Retail other loans consist of installment loans to individuals, including automotive loans and indirect lending. These loans are centrally underwritten utilizing the borrower’s financial history, including credit scores, as well as information about the underlying collateral. Retail other loans also include whole-life loans which are secured by the cash value of life insurance policies.
Retail Other Loans Retail other loans consist of installment loans to individuals, including automotive loans and indirect lending. These loans are centrally underwritten utilizing the borrower’s financial history, including credit scores, as well as information about the underlying collateral. Retail other loans also include whole-life loans which are secured by the cash value of underlying life insurance policies.
We redeemed all $60.0 million of the outstanding 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, we issued $125.0 million of fixed-to-floating rate subordinated notes that mature on June 1, 2030.
We redeemed all $60.0 million of the outstanding 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, Busey issued $125.0 million of fixed-to-floating rate subordinated notes that mature on June 1, 2030.
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.
Loans to related parties, including executive officers and directors of First Busey Corporation and its subsidiaries, are reviewed for compliance with regulatory guidelines. Busey maintains an independent loan review department that reviews loans for compliance with our loan policy on a periodic basis.
Proceeds from such issuances were used by the trusts to purchase junior subordinated notes of First Busey, which are the sole assets of each trust. Concurrent with the issuance of the trust preferred securities, we issued guarantees for the benefit of the holders of the trust preferred securities.
Proceeds from such issuances were used by the trusts to purchase junior subordinated notes of Busey, which are the sole assets of each trust. Concurrent with the issuance of the trust preferred securities, we issued guarantees for the benefit of the holders of the trust preferred securities.
We consider many factors in determining the composition of our investment portfolio including, but not limited to, credit quality, duration, interest rate risk, liquidity, tax-equivalent yield, regulatory considerations, and overall portfolio allocation. As of December 31, 2022, we did not hold general obligation bonds of any single issuer, the aggregate of which exceeded 10% of the Company’s stockholders’ equity.
We consider many factors in determining the composition of our investment portfolio including, but not limited to, credit quality, duration, interest rate risk, liquidity, tax-equivalent yield, regulatory considerations, and overall portfolio allocation. As of December 31, 2023, we did not hold general obligation bonds of any single issuer, the aggregate of which exceeded 10% of the Company’s stockholders’ equity.
Unrecognized losses are included in OCI, and amortized into income over the contractual lives of the securities. An ACL balance will be established for debt securities held to maturity when applicable. As of December 31, 2022, no ACL was recorded for our portfolio of debt securities held to maturity.
Unrecognized losses are included in OCI, and amortized into income over the contractual lives of the securities. An ACL balance will be established for debt securities held to maturity when applicable. No ACL was recorded for our portfolio of debt securities held to maturity as of December 31, 2023 or 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 December 31, 2022, 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.
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 December 31, 2023, management identified no other loans that represent or result from trends or uncertainties that would be expected to materially impact future operating results, liquidity, or capital resources.
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, which qualify as Tier 2 capital for regulatory purposes, bear interest at an annual rate of 5.25% for the first five years after issuance and thereafter bear interest at a floating rate equal to a three-month benchmark rate plus a spread of 5.11%, as calculated on each applicable determination date.
Commercial Real Estate Loans The commercial environment, along with the academic presence in some of our markets, provides for the majority of our commercial lending opportunities to be commercial real estate related, including multi-unit housing.
MD&A Commercial Real Estate Loans The commercial environment, along with the academic presence in some of our markets, provides for the majority of our commercial lending opportunities to be commercial real estate related, including multi-unit housing.
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.
Interest on the subordinated notes will accrue at a rate equal to (1) 5.000% per annum from the original issue date to, but excluding, June 15, 2027, payable semiannually in arrears, and (2) 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 performance and the value of the underlying property may be adversely affected by economic factors or geographical and/or industry specific factors. These loans are subject to other industry guidelines which we closely monitor. 62 Table of Contents Real Estate Construction Loans Real estate construction loans are primarily commercial in nature.
The performance and the value of the underlying property may be adversely affected by economic factors or geographical and/or industry specific factors. These loans are subject to other industry guidelines which we closely monitor. Real Estate Construction Loans Real estate construction loans are primarily commercial in nature.
Contractual Obligations We have entered into certain contractual obligations and other commitments which generally relate to funding of operations through deposits, debt issuance, and property and equipment leases.
Contractual Obligations We have entered into certain contractual obligations and other commitments that generally relate to funding of operations through deposits, debt issuance, and property and equipment leases.
The trust preferred securities are instruments that qualify, and are treated by First Busey, as Tier 1 regulatory capital. First Busey owns all of the common securities of each trust.
The trust preferred securities are instruments that qualify, and are treated, as Tier 1 regulatory capital. Busey owns all of the common securities of each trust.
In connection with the Pulaski acquisition in 2016, we acquired similar statutory trusts previously maintained by Pulaski and the fair value adjustment is being accreted over their weighted average remaining life, with a balance remaining to be accreted of $2.8 million at December 31, 2022.
In connection with the Pulaski acquisition in 2016, we acquired similar statutory trusts previously maintained by Pulaski and the fair value adjustment is being accreted over their weighted average remaining life, with a balance remaining to be accreted of $2.6 million at December 31, 2023.
We had $71.8 million and $71.6 million of junior subordinated debt owed to unconsolidated trusts at December 31, 2022, and 2021, respectively. 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.
We had $72.0 million and $71.8 million of junior subordinated debt owed to unconsolidated trusts at December 31, 2023, and 2022, respectively. 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.
Our ability to pay cash dividends to our stockholders and to service our debt is dependent on the receipt of cash dividends from our subsidiaries. Busey Bank paid dividends to First Busey totaling $95.0 million and $60.0 million for the years ended December 31, 2022, and 2021, respectively.
Our ability to pay cash dividends to our stockholders and to service our debt is dependent on the receipt of cash dividends from our subsidiaries. Busey Bank paid dividends to First Busey Corporation totaling $90.0 million and $95.0 million for the years ended December 31, 2023, and 2022, respectively.
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.
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.
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 to $89.2 million at December 31, 2022, compared to $70.5 million at December 31, 2021.
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 decreased to $64.3 million at December 31, 2023, compared to $89.2 million at December 31, 2022.
Unamortized debt issuance costs related to senior notes and subordinated notes are presented in the following table (dollars in thousands) : As of December 31, 2022 2021 Unamortized debt issuance costs Senior notes issued in 2017 $ — $ 56 Subordinated notes issued in 2017 — 549 Subordinated notes issued in 2020 1,220 1,678 Subordinated notes issued in 2022 1,742 — Total unamortized debt issuance costs $ 2,962 $ 2,283 Junior Subordinated Debt Owed to Unconsolidated Trusts First Busey maintains statutory trusts for the sole purpose of issuing and servicing trust preferred securities and related trust common securities.
Unamortized debt issuance costs related to subordinated notes are presented in the following table (dollars in thousands) : As of December 31, 2023 2022 Unamortized debt issuance costs Subordinated notes issued in 2020 $ 735 $ 1,220 Subordinated notes issued in 2022 1,383 1,742 Total unamortized debt issuance costs $ 2,118 $ 2,962 Junior Subordinated Debt Owed to Unconsolidated Trusts Busey maintains statutory trusts for the sole purpose of issuing and servicing trust preferred securities and related trust common securities.
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.
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.
Commercial loans will generally be guaranteed, in full or a material percentage, by the primary owners of the business. Commercial loans are made based primarily on the historical and projected cash flow of the underlying borrower and secondarily on the underlying assets pledged as collateral by the borrower.
Commercial loans will generally be guaranteed, in full or a material percentage, by the primary owners of the business. Commercial loans are made based primarily on the borrower’s historical and projected cash flows and secondarily on the underlying assets pledged as collateral by the borrower. Cash flows of the borrower, however, may not perform consistently with historical or projected information.
As of December 31, 2022, the fair value of debt securities available for sale was $2.5 billion, and the amortized cost was $2.8 billion. There were $0.1 million of gross unrealized gains and $311.2 million of gross unrealized losses, for a net unrealized loss of $311.1 million.
As of December 31, 2023, the fair value of debt securities available for sale was $2.1 billion, and the amortized cost was $2.3 billion. There were $0.2 million of gross unrealized gains and $247.2 million of gross unrealized losses, resulting in a net unrealized loss of $247.1 million.
For additional information regarding interest rates and changes in net interest income see “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operation — Three Years Ended December 31, 2022—Consolidated Average Balance Sheets and Interest Rates ” and “ Item 7A. Quantitative and Qualitative Disclosures About Market Risk .” 77 Table of Contents
For additional information regarding interest rates and changes in net interest income see “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operation — Three Years Ended December 31, 2023—Consolidated Average Balance Sheets and Interest Rates ” and “ Item 7A.
Retail Real Estate Loans Retail real estate loans are comprised of direct consumer loans that include residential real estate, home equity lines of credit, and home equity loans. In 2022, the Company retained a larger percentage of originated retail real estate loans in our portfolio over selling to secondary market purchasers.
Retail Real Estate Loans Retail real estate loans are comprised of direct consumer loans that include residential real estate, home equity lines of credit, and home equity loans. In 2023, Busey retained a larger percentage of originated retail real estate loans in our portfolio, electing to sell a smaller percentage to secondary market purchasers.
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.
First Busey Corporation | 2023 — 86 Table of Contents Contents of Item 7. MD&A 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.
While a financial institution’s operating expenses, particularly salaries, wages, and employee benefits, are affected by general inflation, the asset and liability structure of a financial institution consists largely of monetary items.
MD&A EFFECTS OF INFLATION The effect of inflation on a financial institution differs significantly from the effect on an industrial company. While a financial institution’s operating expenses, particularly salaries, wages, and employee benefits, are affected by general inflation, the asset and liability structure of a financial institution consists largely of monetary items.
Minimum Capital Requirements with Capital Buffer As of December 31, 2022 First Busey Corporation Busey Bank Common Equity Tier 1 Capital to Risk Weighted Assets 7.00 % 11.96 % 14.49 % Tier 1 Capital to Risk Weighted Assets 8.50 % 12.78 % 14.49 % Total Capital to Risk Weighted Assets 10.50 % 16.12 % 15.35 % Leverage Ratio of Tier 1 Capital to Average Assets 6.50 % 9.45 % 10.72 % Management believes that no conditions or events have occurred since December 31, 2022, that would materially adversely change First Busey’s or Busey Bank’s capital classifications.
Minimum Capital Requirements with Capital Buffer As of December 31, 2023 First Busey Busey Bank Common Equity Tier 1 Capital to Risk Weighted Assets 7.00 % 13.09 % 15.48 % Tier 1 Capital to Risk Weighted Assets 8.50 % 13.93 % 15.48 % Total Capital to Risk Weighted Assets 10.50 % 17.44 % 16.45 % Leverage Ratio of Tier 1 Capital to Average Assets 6.50 % 10.08 % 11.19 % Management believes that no conditions or events have occurred since December 31, 2023, that would materially adversely change First Busey’s or Busey Bank’s capital classifications.
Business—Non-GAAP Financial Information ." The following table sets forth the ACL by loan categories and percentage of loans to total loans as of December 31 for each of the years indicated (dollars in thousands) : As of December 31, 2022 2021 ACL % of Loans to Total Loans ACL % of Loans to Total Loans Loan Category Commercial $ 23,860 25.6 % $ 23,855 27.0 % Commercial real estate 38,299 42.2 % 38,249 43.4 % Real estate construction 6,457 6.9 % 5,102 5.4 % Retail real estate 18,193 21.4 % 17,589 21.0 % Retail other 4,799 3.9 % 3,092 3.2 % Total $ 91,608 100.0 % $ 87,887 100.0 % The ongoing impacts of CECL will be dependent upon changes in economic conditions and forecasts, originated and acquired loan portfolio composition, credit performance trends, portfolio duration, and other factors.
MD&A The following table sets forth the ACL by loan categories and percentage of loans to total loans as of December 31 for each of the years indicated (dollars in thousands) : As of December 31, 2023 2022 ACL % of Loans to Total Loans ACL % of Loans to Total Loans Loan Category Commercial $ 21,256 24.0 % $ 23,860 25.6 % Commercial real estate 35,465 43.6 % 38,299 42.2 % Real estate construction 5,163 6.0 % 6,457 6.9 % Retail real estate 26,298 22.5 % 18,193 21.4 % Retail other 3,558 3.9 % 4,799 3.9 % Total $ 91,740 100.0 % $ 91,608 100.0 % The ongoing impacts of CECL will be dependent upon changes in economic conditions and forecasts, originated and acquired loan portfolio composition, credit performance trends, portfolio duration, and other factors.
The subordinated notes are unsecured obligations of First Busey. 73 Table of Contents 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.
MD&A On June 2, 2022, Busey issued $100.0 million aggregate principal amount of 5.000% fixed-to-floating rate subordinated notes maturing June 15, 2032, which qualify as Tier 2 Capital for regulatory purposes. The price to the public for the subordinated notes was 100% of the principal amount of the subordinated notes.
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.
Non-Performing Loans and 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.
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.
As of December 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.
Short-term borrowings include FHLB advances which mature in less than one year from the date of origination, and the current portion of long-term debt due within 12 months. 72 Table of Contents The following table sets forth the distribution of securities sold under agreements to repurchase and short-term borrowings, as well as the weighted average interest rates thereon (dollars in thousands) : Years Ended December 31, 2022 2021 2020 Securities sold under agreements to repurchase Balance at end of period $ 229,806 $ 270,139 $ 175,614 Weighted average interest rate at end of period 1.91 % 0.08 % 0.13 % Maximum outstanding at any month end in year-to-date period $ 283,664 $ 270,139 $ 210,529 Average daily balance for the year-to-date period $ 243,690 $ 218,454 $ 187,032 Weighted average interest rate during period (1) 0.60 % 0.10 % 0.35 % FHLB advances, current portion due within 12 months Balance at end of period $ 339,054 $ 5,678 $ 4,658 Weighted average interest rate at end of period 4.28 % 0.36 % 0.43 % Maximum outstanding at any month end in year-to-date period $ 339,054 $ 5,678 $ 4,658 Average daily balance for the year-to-date period $ 25,845 $ 4,934 $ 3,556 Weighted average interest rate during period (1) 4.28 % 0.41 % 0.53 % Term loan, current portion due within 12 months Balance at end of period $ 12,000 $ 12,000 $ — Weighted average interest rate at end of period 5.92 % 1.88 % — % Maximum outstanding at any month end in year-to-date period $ 12,000 $ 12,000 $ — Average daily balance for the year-to-date period $ 12,000 $ 7,167 $ — Weighted average interest rate during period (1) 3.55 % 1.79 % — % ___________________________________________ 1.
MD&A The following table sets forth the distribution of securities sold under agreements to repurchase and short-term borrowings, as well as the weighted average interest rates thereon (dollars in thousands) : Years Ended December 31, 2023 2022 2021 Securities sold under agreements to repurchase Balance at end of period $ 187,396 $ 229,806 $ 270,139 Weighted average interest rate at end of period 3.26 % 1.91 % 0.08 % Maximum outstanding at any month end in year-to-date period $ 248,850 $ 283,664 $ 270,139 Average daily balance for the year-to-date period 200,702 243,690 218,454 Weighted average interest rate during period 1 2.58 % 0.60 % 0.10 % FHLB advances, current portion due within 12 months Balance at end of period $ — $ 339,054 $ 5,678 Weighted average interest rate at end of period — % 4.28 % 0.36 % Maximum outstanding at any month end in year-to-date period $ 603,881 $ 339,054 $ 5,678 Average daily balance for the year-to-date period 241,382 25,845 4,934 Weighted average interest rate during period 1 4.90 % 4.28 % 0.41 % Term Loan, current portion due within 12 months Balance at end of period $ 12,000 $ 12,000 $ 12,000 Weighted average interest rate at end of period 7.14 % 5.92 % 1.88 % Maximum outstanding at any month end in year-to-date period $ 12,000 $ 12,000 $ 12,000 Average daily balance for the year-to-date period 12,000 12,000 7,167 Weighted average interest rate during period 1 6.88 % 3.55 % 1.79 % ___________________________________________ 1.
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 residential mortgage loans originated for sale in the secondary market or loans to existing customers of Busey Bank.
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.
The balance of commitments to extend credit represents future cash requirements and some of these commitments may expire without being drawn upon. 75 Table of Contents The following table summarizes our outstanding commitments and reserves for unfunded commitments (dollars in thousands) : As of December 31, 2022 2021 Outstanding loan commitments and standby letters of credit 2,024,777 2,016,207 Reserve for unfunded commitments 6,601 6,540 The following table summarizes our provision for unfunded commitments expenses (releases) for the periods presented (dollars in thousands) : Years Ended December 31, 2022 2021 2020 Provision for unfunded commitments expense (release) $ 61 $ (774) $ 1,822 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.
The following table summarizes our outstanding commitments and reserves for unfunded commitments (dollars in thousands) : As of December 31, 2023 2022 Outstanding loan commitments and standby letters of credit $ 2,176,496 $ 2,024,777 Reserve for unfunded commitments 7,062 6,601 The following table summarizes our provision for unfunded commitments expenses (releases) for the periods presented (dollars in thousands) : Years Ended December 31, 2023 2022 2021 Provision for unfunded commitments expense (release) $ 461 $ 61 $ (774) 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.
The table below presents minimum capital ratios with capital buffer and capital ratios for First Busey and Busey Bank as of December 31, 2022.
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 December 31, 2023.
Provision expenses (releases) were recorded as follows for each of the years indicated (dollars in thousands) : Years Ended December 31, 2022 2021 2020 Provision for credit losses $ 4,623 $ (15,101) $ 38,797 The relatively high expense in 2020 was attributed to the adoption of CECL in combination with the impacts of the COVID-19 pandemic on the economy, followed by a provision release in 2021 reflecting improvements in macroeconomic conditions and asset quality.
Provision expenses (releases) were recorded as follows for each of the years indicated (dollars in thousands) : Years Ended December 31, 2023 2022 2021 Provision for credit losses $ 2,399 $ 4,623 $ (15,101) The provision release in 2021 reflected improvements in macroeconomic conditions and asset quality, following a build-up of the ACL in the prior year attributable to the adoption of CECL in combination with the economic impacts of the COVID-19 pandemic.
Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Typically, loans are secured by collateral.
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.
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.
Interest on the subordinated notes is 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.
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.
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.
As of December 31, 2022, management believed the level of the allowance to be appropriate based upon the information available. However, additional losses may be identified in our loan portfolio as new information is obtained. Provision for Credit Losses The ACL is a significant estimate in our Consolidated Balance Sheet, affecting both earnings and capital.
As of December 31, 2023, Busey management believed the level of the allowance to be appropriate based upon the information available. However, additional losses may be identified in our loan portfolio as new information is obtained.
Securities are presented based upon final contractual maturity or pre-refunded date. 2. Weighted average yield calculated on a tax-equivalent basis, assuming a federal income tax rate of 21.0%. 60 Table of Contents Debt Securities Held to Maturity In 2022, a portion of the debt securities available for sale were transferred to debt securities held to maturity.
Securities are presented based upon final contractual maturity or pre-refunded date. 2. Weighted average yield calculated on a tax-equivalent basis, assuming a federal income tax rate of 21.0%. First Busey Corporation | 2023 — 70 Table of Contents Contents of Item 7. MD&A Debt Securities Held to Maturity Debt securities held to maturity are carried at amortized cost.
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.
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.
Debt securities held to maturity are carried at amortized cost. As of December 31, 2022, the amortized cost of debt securities held to maturity was $918.3 million, and the fair value was $785.3 million. There were no gross unrecognized gains and $133.0 million of gross unrecognized losses.
As of December 31, 2023, the amortized cost of debt securities held to maturity was $872.6 million, and the fair value was $730.4 million. There were no gross unrecognized gains and $142.2 million of gross unrecognized losses.
In addition, the loan review department reviews the 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.
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. Within these primary categories, loans are further classified into five primary lending areas.
Busey Bank’s lending can be summarized into five primary areas: commercial loans, commercial real estate loans, real estate construction loans, retail real estate loans, and retail other loans. Commercial Loans Commercial loans typically comprise working capital loans or business expansion loans, including loans for asset purchases and other business loans.
The commercial category includes commercial loans, commercial real estate loans, and real estate construction loans. The retail category includes retail real estate loans and retail other loans. Commercial Loans Commercial loans typically comprise working capital loans or business expansion loans, including loans for asset purchases and other business loans.
Cash flows of the underlying borrower, however, may not perform consistently with historical or projected information. Further, collateral securing loans may fluctuate in value due to individual economic or other factors. Busey Bank has established minimum standards and underwriting guidelines for all commercial loan types.
Further, collateral securing loans may fluctuate in value due to individual economic or other factors. Busey Bank has established minimum standards and underwriting guidelines for all commercial loan types. First Busey Corporation | 2023 — 72 Table of Contents Contents of Item 7.
NEW ACCOUNTING PRONOUNCEMENTS We review new accounting standards as issued. Information relating to accounting pronouncements applicable to First Busey appears in “ Note 1. Significant Accounting Policies ” in the Notes to the Consolidated Financial Statements. EFFECTS OF INFLATION The effect of inflation on a financial institution differs significantly from the effect on an industrial company.
NEW ACCOUNTING PRONOUNCEMENTS We review new accounting standards as issued. Information relating to accounting pronouncements applicable to Busey appears in “ Note 1. Significant Accounting Policies ” in the Notes to the Consolidated Financial Statements. First Busey Corporation | 2023 — 88 Table of Contents Contents of Item 7.
Securities Sold Under Agreements to Repurchase and Short-term Borrowings Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature daily.
The revolving credit facility incurs a non-usage fee based on any undrawn amounts. Securities Sold Under Agreements to Repurchase and Short-term Borrowings Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature daily.
The composition of debt securities held to maturity was as follows (dollars in thousands): As of December 31, 2022 2021 Debt securities held to maturity Commercial mortgage-backed securities $ 474,820 $ — Residential mortgage-backed securities 443,492 — Debt securities held to maturity, amortized cost $ 918,312 $ — Debt securities held to maturity, fair value $ 785,295 $ — Fair value as a percentage of amortized cost 85.52 % N/A By maturity date, fair values, and weighted average yields of debt securities held to maturity as of December 31, 2022, were (dollars in thousands) : Due in 1 year or less Due after 1 year through 5 years Due after 5 years through 10 years Due after 10 years Fair Value Weighted Average Yield Fair Value Weighted Average Yield Fair Value Weighted Average Yield Fair Value Weighted Average Yield Debt securities held to maturity 1 Commercial mortgage-backed securities $ — — % $ 41,483 2.25 % $ 57,955 2.20 % $ 311,644 2.31 % Residential mortgage-backed securities — — % — — % — — % 374,213 2.25 % Debt securities held to maturity $ — — % $ 41,483 2.25 % $ 57,955 2.20 % $ 685,857 2.28 % ___________________________________________ 1.
The composition of debt securities held to maturity was as follows (dollars in thousands) : As of December 31, 2023 2022 Debt securities held to maturity Commercial mortgage-backed securities $ 428,526 $ 474,820 Residential mortgage-backed securities 444,102 443,492 Debt securities held to maturity, amortized cost $ 872,628 $ 918,312 Debt securities held to maturity, fair value $ 730,397 $ 785,295 Fair value as a percentage of amortized cost 83.70 % 85.52 % By maturity date, fair values and weighted average yields of debt securities held to maturity as of December 31, 2023, are presented in the following table (dollars in thousands) : Due after 1 year through 5 years Due after 5 years through 10 years Due after 10 years Fair Value Weighted Average Yield Fair Value Weighted Average Yield Fair Value Weighted Average Yield Debt securities held to maturity 1 Commercial mortgage-backed securities $ 69,373 2.23 % $ 25,824 2.20 % $ 262,329 2.43 % Residential mortgage-backed securities — — % — — % 372,871 2.21 % Debt securities held to maturity $ 69,373 2.23 % $ 25,824 2.20 % $ 635,200 2.30 % ___________________________________________ 1.
The net unrealized loss, net of tax, is recorded in stockholders’ equity through AOCI. 59 Table of Contents The composition of debt securities available for sale was as follows (dollars in thousands): As of December 31, 2022 2021 Debt securities available for sale U.S.
The composition of debt securities available for sale was as follows (dollars in thousands) : As of December 31, 2023 2022 Debt securities available for sale U.S.
Pledged securities totaled $746.7 million, or 22.1% of total debt securities, as of December 31, 2022, and $708.9 million, or 17.8% of total debt securities, as of December 31, 2021. Debt Securities Available for Sale Debt securities available for sale are carried at fair value.
Pledged securities totaled $837.4 million, or 28.3% of total debt securities, as of December 31, 2023, and $746.7 million, or 22.1% of total debt securities, as of December 31, 2022. Debt Securities Available for Sale Debt securities available for sale are carried at fair value. Net unrealized gains or losses, net of tax, are recorded in stockholders’ equity, through AOCI.
As of December 31, 2022, there was no balance outstanding on the revolving credit facility and a total of $42.0 million outstanding on the term loan, of which $12.0 million was short-term and $30.0 million was long-term. The revolving credit facility incurs a non-usage fee based on any undrawn amounts.
The total outstanding balance on the Term Loan was $30.0 million as of December 31, 2023, of which $12.0 million was short-term and $18.0 million was long-term. Quarterly payments on the Term Loan reduce the outstanding principal balance by $3.0 million each quarter. As of December 31, 2023, there was no balance outstanding on the revolving credit facility.
Net cash used to originate mortgage loans held for sale totaled $24.3 million in 2022, compared to $31.7 million of in 2021. Fluctuations in sales are a function of changes in market rates for mortgage loans, which influence refinance activity.
Fluctuations in sales of loans held for sale are a function of changes in market rates for mortgage loans, which influence refinance activity. Net cash provided by investing activities totaled $551.0 million in 2023, compared to $291.0 million used in investing activities in 2022. Significant investing activities are those associated with managing Busey’s investment and loan portfolios.
Furthermore, net charge-offs in 2022 totaled $0.9 million, representing 0.01% of average loans, compared with net charge-offs in 2021 of $2.2 million, representing 0.03% of average loans. If economic conditions were to deteriorate, we would expect the credit quality of our loan portfolio to decline and loan defaults to increase.
If economic conditions were to deteriorate, we would expect the credit quality of our loan portfolio to decline and loan defaults to increase.
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. GSB’s policies were similar in nature to Busey Bank’s policies, and we are migrating the legacy GSB portfolio toward Busey Bank’s policies.
MD&A Portfolio Loans We believe that making sound and profitable loans is a necessary and desirable means of employing funds available for investment. 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.
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.
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 are based on a careful consideration of all significant factors affecting the collectability as of the evaluation date.
Business—Non-GAAP Financial Information ” included in this Annual Report. 71 Table of Contents Deposits are federally insured up to the FDIC insurance limit of $250,000. When a portion of a deposit account exceeds the FDIC insurance limit, that portion is uninsured.
Deposits are federally insured up to the FDIC insurance limit of $250,000. When a portion of a deposit account exceeds the FDIC insurance limit, that portion is uninsured. Estimated uninsured deposits were $3.8 billion at December 31, 2023.
The following table presents estimates of the uninsured portion of time deposits by maturity date (dollars in thousands) : As of December 31, 2022 Uninsured time deposits by schedule of maturities 3 months or less $ 21,908 Over 3 months through 6 months 16,926 Over 6 months through 12 months 31,888 Thereafter 49,929 Uninsured time deposits $ 120,651 Borrowings Term Loan On May 28, 2021, the Company entered into a Second Amended and Restated Credit Agreement, pursuant to which we have access to (i) a $40.0 million revolving line of credit with an initial termination date of April 30, 2022, and (ii) a $60.0 million term loan with a maturity date of May 31, 2026.
MD&A Borrowings Term Loan On May 28, 2021, Busey entered into a Second Amended and Restated Credit Agreement, pursuant to which we have access to (1) a $40.0 million revolving line of credit with an initial termination date of April 30, 2022, and (2) a $60.0 million Term Loan with a maturity date of May 31, 2026.
Balances of these assets are dependent on our operating, investing, lending, and financing activities during any given period. 74 Table of Contents Average liquid assets are summarized in the table below (dollars in thousands) : Years Ended December 31, 2022 2021 2020 Average liquid assets Cash and due from banks $ 120,910 $ 133,711 $ 118,739 Interest-bearing bank deposits 290,875 630,687 488,786 Federal funds sold — — — Total average liquid assets $ 411,785 $ 764,398 $ 607,525 Average liquid assets as a percent of average total assets 3.3 % 6.4 % 5.9 % First Busey’s primary sources of funds consist of deposits, investment maturities and sales, loan principal repayments, and capital funds.
MD&A Average liquid assets are summarized in the table below (dollars in thousands) : Years Ended December 31, 2023 2022 2021 Average liquid assets Cash and due from banks $ 116,530 $ 120,910 $ 133,711 Interest-bearing bank deposits 214,422 290,875 630,687 Total average liquid assets $ 330,952 $ 411,785 $ 764,398 Average liquid assets as a percent of average total assets 2.7 % 3.3 % 6.4 % Cash and unencumbered securities on our Consolidated Balance Sheets are summarized as follows for the periods presented (dollars in thousands) : As of December 31, 2023 2022 Cash and unencumbered securities Total cash and cash equivalents $ 719,581 $ 227,164 Debt securities available for sale 2,087,571 2,461,393 Debt securities available for sale pledged as collateral (649,769) (746,675) Cash and unencumbered securities $ 2,157,383 $ 1,941,882 Busey’s primary sources of funds consist of deposits, investment maturities and sales, loan principal repayments, and capital funds.
The determination of loan maturities is based on contractual loan terms. For the purposes of categorization within the table below, demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are considered to mature within one year. Maturities for non-contractual rollovers or extensions are determined based on the rate review date.
Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are considered to mature within one year.
Core loans is a non-GAAP financial measure. For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, see " Item 1.
For a reconciliation of non-GAAP measures to the most directly comparable GAAP financial measures, see “ Item 1. Business—Non-GAAP Financial Information ” included in this Annual Report. First Busey Corporation | 2023 — 82 Table of Contents Contents of Item 7.
Our loan portfolio is collateralized primarily by real estate. 69 Table of Contents The following table sets forth information concerning non-performing loans and performing restructured loans (dollars in thousands) : As of December 31, 2022 2021 Portfolio loans $ 7,725,702 $ 7,188,998 Non-GAAP adjustments: PPP loans amortized cost (845) (74,958) Core loans 1 $ 7,724,857 $ 7,114,040 Loans 30 – 89 days past due $ 6,548 $ 6,261 Total assets 12,336,677 12,859,689 Non-performing assets Non-performing loans: Non-accrual loans $ 15,067 $ 15,946 Loans 90+ days past due and still accruing 673 906 Total non-performing loans 15,740 16,852 OREO and other repossessed assets 850 4,416 Total non-performing assets 16,590 21,268 Substandard (excludes 90+ days past due) 90,489 70,565 Classified assets $ 107,079 $ 91,833 Performing TDRs (includes 30 – 89 days past due) $ 3,032 $ 1,801 ACL 91,608 87,887 Bank Tier 1 Capital 1,306,716 1,241,303 Ratios ACL to non-accrual loans 608.00 % 551.15 % ACL to non-performing loans 582.01 % 521.52 % ACL to non-performing assets 552.19 % 413.24 % Non-accrual loans to portfolio loans 0.20 % 0.22 % Non-performing loans to portfolio loans 0.20 % 0.23 % Non-performing loans to core loans 1 0.20 % 0.24 % Non-performing assets to total assets 0.13 % 0.17 % Non-performing assets to portfolio loans and OREO 0.21 % 0.30 % Classified assets to Bank Tier 1 Capital and ACL 7.66 % 6.91 % ___________________________________________ 1.
MD&A The following table sets forth information concerning non-performing loans and performing restructured loans (dollars in thousands) : As of December 31, 2023 2022 Portfolio loans $ 7,651,034 $ 7,725,702 Loans 30 – 89 days past due 5,779 6,548 Total assets 12,283,415 12,336,677 Non-performing assets Non-performing loans: Non-accrual loans $ 7,441 $ 15,067 Loans 90+ days past due and still accruing 375 673 Total non-performing loans 7,816 15,740 OREO and other repossessed assets 125 850 Total non-performing assets 7,941 16,590 Substandard (excludes 90+ days past due) 64,347 90,489 Classified assets $ 72,288 $ 107,079 ACL $ 91,740 $ 91,608 Bank Tier 1 Capital 1,362,962 1,306,716 Ratios ACL to portfolio loans 1.20 % 1.19 % ACL to non-accrual loans 1,232.90 % 608.00 % ACL to non-performing loans 1,173.75 % 582.01 % ACL to non-performing assets 1,155.27 % 552.19 % Non-accrual loans to portfolio loans 0.10 % 0.20 % Non-performing loans to portfolio loans 0.10 % 0.20 % Non-performing assets to total assets 0.06 % 0.13 % Non-performing assets to portfolio loans and OREO and other repossessed assets 0.10 % 0.21 % Classified assets to Bank Tier 1 Capital and ACL 4.97 % 7.66 % Asset quality remains strong by both Busey’s historical and current industry trends, and our operating mandate and focus have been on emphasizing credit quality over asset growth.
Asset quality metrics remain dependent upon market-specific economic conditions, and specific measures may fluctuate from period to period. Continued disciplined credit management resulted in non-performing loans as a percentage of portfolio loans of 0.20% at December 31, 2022, compared with 0.23% at December 31, 2021.
Net charge-offs totaled $2.3 million in 2023, representing 0.03% of average loans, compared with net charge-offs of $0.9 million in 2022, representing 0.01% of average loans. Asset quality metrics remain dependent upon market-specific economic conditions, and specific measures may fluctuate from period to period.
Deposits The following table shows the deposit mix for each of the periods presented (dollars in thousands) : As of December 31, 2022 2021 Balance % Total Balance % Total Change % Change Deposits Non-maturity deposits: Noninterest-bearing demand deposits $ 3,393,666 33.7 % $ 3,670,267 34.1 % $ (276,601) (7.5) % Interest-bearing transaction deposits 2,857,818 28.4 % 2,720,417 25.2 % 137,401 5.1 % Saving deposits and money market deposits 2,964,421 29.4 % 3,442,244 32.0 % (477,823) (13.9) % Total non-maturity deposits 9,215,905 91.5 % 9,832,928 91.3 % (617,023) (6.3) % Time deposits 855,375 8.5 % 935,649 8.7 % (80,274) (8.6) % Total deposits $ 10,071,280 100.0 % $ 10,768,577 100.0 % $ (697,297) (6.5) % We focus on deepening our relationship with customers to foster core deposit 4 growth, allowing us to reduce our reliance on wholesale funding.
MD&A Deposits The following table shows the deposit mix for each of the periods presented (dollars in thousands) : As of December 31, 2023 2022 Balance % Total Balance % Total Change % Change Deposits Non-maturity deposits: Noninterest-bearing demand deposits $ 2,834,655 27.5 % $ 3,393,666 33.7 % $ (559,011) (16.5) % Interest-bearing transaction deposits 2,717,139 26.4 % 2,857,818 28.4 % (140,679) (4.9) % Saving deposits and money market deposits 2,920,088 28.4 % 2,964,421 29.4 % (44,333) (1.5) % Total non-maturity deposits 8,471,882 82.3 % 9,215,905 91.5 % (744,023) (8.1) % Time deposits 1,819,274 17.7 % 855,375 8.5 % 963,899 112.7 % Total deposits $ 10,291,156 100.0 % $ 10,071,280 100.0 % $ 219,876 2.2 % Total deposits increased by 2.2% to $10.3 billion as of December 31, 2023, compared to $10.1 billion as of December 31, 2022.
Repayment of retail other loans is expected from the cash flow of the borrower.
Repayment of retail other loans is expected from the borrower’s cash flows. First Busey Corporation | 2023 — 73 Table of Contents Contents of Item 7.
Loan Commitments Commitments to extend credit and standby letters of credit increased by $8.6 million, or 0.4%, to a total of $2.0 billion as of December 31, 2022. 3 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 1.
MD&A Loan Commitments Commitments to extend credit and standby letters of credit increased by $151.7 million, or 7.5%, to a total of $2.2 billion as of December 31, 2023, compared to $2.0 billion as of December 31, 2022. Loan Maturities The determination of loan maturities is based on contractual loan terms.
Securities are presented based upon final contractual maturity or pre-refunded date. Equity Securities Equity securities are carried at fair value.
Securities are presented based upon final contractual maturity or pre-refunded date. Equity Securities Equity securities are carried at fair value. The fair value of equity securities was $9.8 million as of December 31, 2023, compared to $11.5 million as of December 31, 2022. First Busey Corporation | 2023 — 71 Table of Contents Contents of Item 7.
We did not have any funds borrowed from the FHLB included in long-term debt as of December 31, 2022. Senior and Subordinated Notes On May 25, 2017, we issued $40.0 million of 3.75% senior notes that matured and were redeemed on May 25, 2022.
The weighted average interest rate is computed by dividing total interest for the period by the average daily balance outstanding. Senior and Subordinated Notes On May 25, 2017, we issued $40.0 million of 3.75% senior notes that matured and were redeemed on May 25, 2022.
Treasury securities $ 114,061 $ 165,762 Obligations of U.S. government corporations and agencies 19,779 38,470 Obligations of states and political subdivisions 257,512 306,869 Asset-backed securities 469,875 492,186 Commercial mortgage-backed securities 108,394 614,998 Residential mortgage-backed securities 1,243,256 2,069,313 Corporate debt securities 248,516 293,653 Debt securities available for sale, fair value $ 2,461,393 $ 3,981,251 Debt securities available for sale, amortized cost $ 2,772,453 $ 4,013,523 Fair value as a percentage of amortized cost 88.78 % 99.20 % By maturity date, fair values, and weighted average yields of debt securities available for sale as of December 31, 2022, were (dollars in thousands) : Due in 1 year or less Due after 1 year through 5 years Due after 5 years through 10 years Due after 10 years Fair Value Weighted Average Yield Fair Value Weighted Average Yield Fair Value Weighted Average Yield Fair Value Weighted Average Yield Debt securities available for sale 1 U.S.
Treasury securities $ 15,946 $ 114,061 Obligations of U.S. government corporations and agencies 5,832 19,779 Obligations of states and political subdivisions 172,845 257,512 Asset-backed securities 468,223 469,875 Commercial mortgage-backed securities 103,509 108,394 Residential mortgage-backed securities 1,111,312 1,243,256 Corporate debt securities 209,904 248,516 Debt securities available for sale, fair value $ 2,087,571 $ 2,461,393 Debt securities available for sale, amortized cost $ 2,334,630 $ 2,772,453 Fair value as a percentage of amortized cost 89.42 % 88.78 % First Busey Corporation | 2023 — 69 Table of Contents Contents of Item 7.
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.
The ACL is established through the provision for credit loss expense charged to income.
Portfolio Loans by Loan Category The composition of our portfolio loans as of the dates indicated was as follows (dollars in thousands) : As of December 31, 2022 2021 Change % Change Portfolio loans Commercial $ 1,974,154 $ 1,943,886 $ 30,268 1.6 % Commercial real estate 3,261,873 3,119,807 142,066 4.6 % Real estate construction 530,469 385,996 144,473 37.4 % Retail real estate 1,657,082 1,512,976 144,106 9.5 % Retail other 302,124 226,333 75,791 33.5 % Total portfolio loans $ 7,725,702 $ 7,188,998 $ 536,704 7.5 % ACL (91,608) (87,887) (3,721) 4.2 % Portfolio loans, net $ 7,634,094 $ 7,101,111 $ 532,983 7.5 % 63 Table of Contents Geographic distributions of portfolio loans, based on origination, by category were as follows (dollars in thousands) : December 31, 2022 Illinois Missouri Florida Indiana Total Portfolio loans Commercial $ 1,401,165 $ 466,904 $ 52,925 $ 53,160 $ 1,974,154 Commercial real estate 2,180,767 680,532 220,939 179,635 3,261,873 Real estate construction 326,154 131,782 31,212 41,321 530,469 Retail real estate 1,253,069 210,048 122,397 71,568 1,657,082 Retail other 296,719 2,565 1,788 1,052 302,124 Total portfolio loans $ 5,457,874 $ 1,491,831 $ 429,261 $ 346,736 $ 7,725,702 ACL (91,608) Portfolio loans, net of ACL $ 7,634,094 December 31, 2021 Illinois Missouri Florida Indiana Total Portfolio loans Commercial $ 1,372,584 $ 463,085 $ 55,180 $ 53,037 $ 1,943,886 Commercial real estate 2,063,681 691,969 191,303 172,854 3,119,807 Real estate construction 199,471 120,785 31,265 34,475 385,996 Retail real estate 1,124,486 235,083 96,563 56,844 1,512,976 Retail other 219,000 3,684 2,181 1,468 226,333 Total portfolio loans $ 4,979,222 $ 1,514,606 $ 376,492 $ 318,678 $ 7,188,998 ACL (87,887) Portfolio loans, net of ACL $ 7,101,111 64 Table of Contents Loan Growth The Company generated $610.8 million, or 8.6%, in core loan 3 growth during 2022.
MD&A December 31, 2022 Illinois Missouri Florida Indiana Total Commercial loans Commercial $ 1,401,165 $ 466,904 $ 52,925 $ 53,160 $ 1,974,154 Commercial real estate 2,180,767 680,532 220,939 179,635 3,261,873 Real estate construction 326,154 131,782 31,212 41,321 530,469 Total commercial loans 3,908,086 1,279,218 305,076 274,116 5,766,496 Retail loans Retail real estate 1,253,069 210,048 122,397 71,568 1,657,082 Retail other 296,719 2,565 1,788 1,052 302,124 Total retail loans 1,549,788 212,613 124,185 72,620 1,959,206 Total portfolio loans $ 5,457,874 $ 1,491,831 $ 429,261 $ 346,736 $ 7,725,702 ACL (91,608) Portfolio loans, net of ACL $ 7,634,094 Commercial real estate loans are made across a variety of industries, as depicted in the table below (dollars in thousands) .
The following table summarizes significant contractual obligations and other commitments, excluding short-term borrowings and the current portion of long-term debt, as of December 31, 2022, (dollars in thousands) : Certificates of Deposit Operating Leases Junior Subordinated Debt Owed to Unconsolidated Trusts Long-term Debt Subordinated Notes, Net of Unamortized Issuance Costs Total Contractual obligations by schedule of maturities 2023 $ 560,147 $ 2,254 $ — $ — $ — $ 562,401 2024 229,263 1,942 — 12,000 — 243,205 2025 34,307 1,719 — 12,000 — 48,026 2026 16,637 1,442 — 6,000 — 24,079 2027 14,301 1,277 — — — 15,578 Thereafter 720 6,699 71,810 — 222,038 301,267 Contractual obligations $ 855,375 $ 15,333 $ 71,810 $ 30,000 $ 222,038 $ 1,194,556 Commitments to extend credit and standby letters of credit $ 2,024,777 Cash Flows Net cash flows provided by operating activities totaled $165.8 million in 2022, compared to $162.0 million in 2021.
The following table summarizes significant contractual obligations and other commitments, excluding short-term borrowings and the current portion of long-term debt, as of December 31, 2023, (dollars in thousands) : Certificates of Deposit Operating Leases Junior Subordinated Debt Owed to Unconsolidated Trusts Long-term Debt Subordinated Notes, Net of Unamortized Issuance Costs Total Contractual obligations by schedule of maturities 2024 $ 1,705,846 $ 2,023 $ — $ — $ — $ 1,707,869 2025 68,738 1,768 — 12,000 — 82,506 2026 21,222 1,443 — 6,000 — 28,665 2027 12,470 1,277 — — — 13,747 2028 10,451 1,255 — — — 11,706 Thereafter 547 5,478 71,993 — 222,882 300,900 Contractual obligations $ 1,819,274 $ 13,244 $ 71,993 $ 18,000 $ 222,882 $ 2,145,393 Commitments to extend credit and standby letters of credit $ 2,176,496 First Busey Corporation | 2023 — 87 Table of Contents Contents of Item 7.
Changes in portfolio loan balances, by loan category, were as follows (dollars in thousands) : As of December 31, 2022 2021 Change % Change Portfolio loans Commercial loans: Commercial $ 1,974,154 $ 1,943,886 $ 30,268 1.6 % Commercial real estate 3,261,873 3,119,807 142,066 4.6 % Real estate construction 530,469 385,996 144,473 37.4 % Commercial loan balances 5,766,496 5,449,689 316,807 5.8 % Retail loans: Retail real estate 1,657,082 1,512,976 144,106 9.5 % Retail other 302,124 226,333 75,791 33.5 % Retail loan balances 1,959,206 1,739,309 219,897 12.6 % Total portfolio loans 7,725,702 7,188,998 536,704 7.5 % ACL (91,608) (87,887) (3,721) 4.2 % Portfolio loans, net of ACL $ 7,634,094 $ 7,101,111 $ 532,983 7.5 % Excluding the amortized cost of PPP loans, changes in commercial loan balances were as follows: As of December 31, 2022 2021 Change % Change Commercial loan balances $ 5,766,496 $ 5,449,689 $ 316,807 5.8 % Less: PPP loans amortized cost (845) (74,958) 74,113 (98.9) % Commercial loan balances, excluding PPP loans $ 5,765,651 $ 5,374,731 $ 390,920 7.3 % Commercial balances—consisting of commercial, commercial real estate, and real estate construction loans—excluding PPP loans, increased by $390.9 million, or 7.3%, during the year ended December 31, 2022.
MD&A Portfolio Composition The composition of our loan portfolio as of the dates indicated, as well as changes in portfolio loan balances, were as follows (dollars in thousands) : As of December 31, 2023 2022 Change % Change Commercial loans Commercial $ 1,835,994 $ 1,974,154 $ (138,160) (7.0) % Commercial real estate 3,337,337 3,261,873 75,464 2.3 % Real estate construction 461,717 530,469 (68,752) (13.0) % Total commercial loans 5,635,048 5,766,496 (131,448) (2.3) % Retail loans Retail real estate 1,720,455 1,657,082 63,373 3.8 % Retail other 295,531 302,124 (6,593) (2.2) % Total retail loans 2,015,986 1,959,206 56,780 2.9 % Total portfolio loans 7,651,034 7,725,702 (74,668) (1.0) % ACL (91,740) (91,608) (132) (0.1) % Portfolio loans, net of ACL $ 7,559,294 $ 7,634,094 $ (74,800) (1.0) % Commercial balances decreased by $131.4 million, or 2.3%, during the year ended December 31, 2023.
Cash and unencumbered securities on our Consolidated Balance Sheets are summarized as follows for the periods presented (dollars in thousands) : As of December 31, 2022 2021 Cash and unencumbered securities Total cash and cash equivalents $ 227,164 $ 836,095 Debt securities available for sale 2,461,393 3,981,251 Debt securities pledged as collateral (746,675) (708,939) Cash and unencumbered securities $ 1,941,882 $ 4,108,407 Additional liquidity is provided by the ability to borrow from the FHLB, the Federal Reserve Bank, First Busey’s revolving credit facility, or to utilize brokered deposits, as summarized in the table below (dollars in thousands) : As of December 31, 2022 2021 Additional borrowing capacity available from: FHLB $ 1,765,388 $ 1,536,019 Federal Reserve Bank 659,680 624,627 Revolving credit facility 40,000 40,000 Additional borrowing capacity $ 2,465,068 $ 2,200,646 As of December 31, 2022, management believed that adequate liquidity existed to meet all projected cash flow obligations.
Additional liquidity is provided by the ability to borrow from the FHLB, the Federal Reserve Bank, and our revolving credit facility, as summarized in the table below (dollars in thousands) : As of December 31, 2023 2022 Additional available borrowing capacity FHLB $ 1,898,737 $ 1,765,388 Federal Reserve Bank 598,878 659,680 Federal funds purchased 482,500 482,500 Revolving credit facility 40,000 40,000 Additional borrowing capacity $ 3,020,115 $ 2,947,568 Further, the company could utilize brokered deposits as additional sources of liquidity, as needed.
Allowance coverage of non-performing loans increased to 582.0% at December 31, 2022, compared to 521.5% at December 31, 2021. 70 Table of Contents Classified assets, which includes non-performing assets and substandard loans, increased to $107.1 million at December 31, 2022, compared to $91.8 million at December 31, 2021.
MD&A Classified assets, which includes non-performing assets and substandard loans, decreased to $72.3 million as of December 31, 2023, compared to $107.1 million as of December 31, 2022. Classified assets represented 4.97% of Busey Bank’s Tier 1 capital and ACL at December 31, 2023, down from 7.66% at December 31, 2022.
Business—Non-GAAP Financial Information. ” 58 Table of Contents FINANCIAL CONDITION Balance Sheet Changes in significant items included in our Consolidated Balance Sheets are summarized in the table below (dollars in thousands) : As of December 31, 2022 2021 Change % Change Assets Debt securities available for sale $ 2,461,393 $ 3,981,251 $ (1,519,858) (38.2) % Debt securities held to maturity 918,312 — 918,312 NM Portfolio loans, net of ACL 7,634,094 7,101,111 532,983 7.5 % Total assets 12,336,677 12,859,689 (523,012) (4.1) % Liabilities Deposits: Noninterest-bearing 3,393,666 3,670,267 (276,601) (7.5) % Interest-bearing 6,677,614 7,098,310 (420,696) (5.9) % Total deposits 10,071,280 10,768,577 (697,297) (6.5) % Securities sold under agreements to repurchase 229,806 270,139 (40,333) (14.9) % Short-term borrowings 351,054 17,678 333,376 1,885.8 % Subordinated notes, net of unamortized issuance costs 222,038 182,773 39,265 21.5 % Total liabilities 11,190,700 11,540,577 (349,877) (3.0) % Stockholders’ Equity 1,145,977 1,319,112 (173,135) (13.1) % Investment Securities Primary purposes of our investment securities portfolio are to provide a source of earnings by deploying funds which are not needed to fulfill loan demand, deposit redemptions, or other liquidity purposes; to serve as a tool for interest rate risk positioning; and to provide collateral for pledging purposes against public deposits and repurchase agreements, all while providing a source of liquidity.
MD&A FINANCIAL CONDITION Balance Sheet Changes in significant items included in our Consolidated Balance Sheets are summarized in the table below (dollars in thousands) : As of December 31, 2023 2022 Change % Change Assets Debt securities available for sale $ 2,087,571 $ 2,461,393 $ (373,822) (15.2) % Debt securities held to maturity 872,628 918,312 (45,684) (5.0) % Portfolio loans, net of ACL 7,559,294 7,634,094 (74,800) (1.0) % Total assets 12,283,415 12,336,677 (53,262) (0.4) % Liabilities Deposits: Noninterest-bearing 2,834,655 3,393,666 (559,011) (16.5) % Interest-bearing 7,456,501 6,677,614 778,887 11.7 % Total deposits 10,291,156 10,071,280 219,876 2.2 % Securities sold under agreements to repurchase 187,396 229,806 (42,410) (18.5) % Short-term borrowings 12,000 351,054 (339,054) (96.6) % Subordinated notes, net of unamortized issuance costs 222,882 222,038 844 0.4 % Total liabilities 11,011,434 11,190,700 (179,266) (1.6) % Stockholders’ equity 1,271,981 1,145,977 126,004 11.0 % Busey executed a two-part balance sheet repositioning strategy During the fourth quarter of 2023, Busey sold all 16,878 shares of Visa Class B common stock it previously held (the “Visa Sale”) resulting in a pre-tax gain of approximately $5.5 million, and also executed a balance sheet repositioning of its available-for-sale securities portfolio (the “Repositioning”).
Removed
Treasury securities $ 69,480 0.15 % $ 44,581 0.34 % $ — — % $ — — % Obligations of U.S. government corporations and agencies 8,947 2.31 % 7,733 2.75 % 3,099 3.48 % — — % Obligations of states and political subdivisions 2 27,473 2.02 % 92,449 2.23 % 93,704 2.16 % 43,886 2.50 % Asset-backed securities — — % — — % 72,729 5.53 % 397,146 5.19 % Commercial mortgage-backed securities — — % 23,643 2.24 % 18,584 2.19 % 66,167 2.15 % Residential mortgage-backed securities 223 2.48 % 15,532 2.67 % 106,308 1.85 % 1,121,193 1.68 % Corporate debt securities 27,844 0.62 % 184,816 1.21 % 35,856 3.55 % — — % Debt securities available for sale $ 133,967 0.78 % $ 368,754 1.51 % $ 330,280 2.92 % $ 1,628,392 2.50 % ___________________________________________ 1.
Added
Item 1. Business—Non-GAAP Financial Information. ” First Busey Corporation | 2023 — 67 Table of Contents Contents of Item 7.
Removed
The fair value of equity securities was $11.5 million as of December 31, 2022, compared to $13.6 million as of December 31, 2021. 61 Table of Contents Portfolio Loans We believe that making sound and profitable loans is a necessary and desirable means of employing funds available for investment.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeCyber-attacks or other breaches, whether affecting the Company or others, could intensify consumer concern and regulatory focus and result in breach and fraud-related losses as well as increased costs, all of which could have a material adverse effect on the Company’s business. 40 Table of Contents Penetration or circumvention of the Company’s security systems could result in serious negative consequences for the Company, including significant disruption of the Company’s operations, misappropriation of confidential information of the Company or that of its customers or employees, or damage to computers or systems of the Company and those of its customers and counterparties.
Biggest changeCyber-attacks or other breaches, whether affecting Busey or others, could intensify consumer concern and regulatory focus and result in breach and fraud-related losses as well as increased costs, all of which could have a material adverse effect on Busey’s business.
It is also possible that governmental responses to the current inflation environment could adversely affect our business, such as changes to monetary and fiscal policy that are too strict, or the imposition or threatened imposition of price controls. The duration and severity of the current inflationary period cannot be estimated with precision.
It is also possible that governmental responses to the current inflation environment, such as changes to monetary and fiscal policy that are too strict, or the imposition or threatened imposition of price controls, could adversely affect our business. The duration and severity of the current inflationary period cannot be estimated with precision.
The collateral securing other loans may depreciate over time, may be difficult to appraise, and may fluctuate in value based on the success of the business.
Collateral securing other loans may depreciate over time, may be difficult to appraise, and may fluctuate in value based on the success of the business.
An inability by our third-party providers, and their third-party providers, known as “supply chain risk,” to anticipate, detect, or adequately mitigate, breaches of security could result in a number of negative events, including losses to us or our clients, loss of business or clients, damage to our reputation, the incurrence of additional expenses, additional regulatory scrutiny or penalties, or exposure to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.
An inability by our third-party providers, and their third-party providers, to anticipate, detect, or adequately mitigate, breaches of security, known as “supply chain risk,” could result in a number of negative events, including losses to us or our clients, loss of business or clients, damage to our reputation, the incurrence of additional expenses, additional regulatory scrutiny or penalties, or exposure to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.
Nonetheless, shifts in Illinois and Missouri law legalizing cannabis use, along with shifts in Florida law allowing medicinal use and decriminalizing possession, have increased the number of direct and indirect cannabis-related businesses in some of the states in which the Company operates, and therefore increases the likelihood that Busey Bank could interact with such businesses, as well as their owners and employees.
Nonetheless, shifts in Illinois and Missouri law legalizing cannabis use, along with shifts in Florida law allowing medicinal use and decriminalizing possession, have increased the number of direct and indirect cannabis-related businesses in some of the states in which Busey operates, and therefore increases the likelihood that Busey Bank could interact with such businesses, as well as their owners and employees.
Accordingly, the Company cannot guarantee that it will be able to raise additional capital if needed or on terms acceptable to the Company. In particular, if the Company is required to raise additional capital in the current interest rate environment, we believe the pricing and other terms investors may require in such an offering may not be attractive to us.
Accordingly, Busey cannot guarantee that it will be able to raise additional capital if needed or on terms acceptable to the Company. In particular, if Busey is required to raise additional capital in the current interest rate environment, we believe the pricing and other terms investors may require in such an offering may not be attractive to us.
The ultimate realization of the tax credits and other tax benefits depends upon having sufficient taxable income and on many factors outside of the Company’s control, including changes in the applicable tax code and the ability of the projects to be completed. OPERATIONAL RISKS The Company’s framework for managing risks may not be effective in mitigating risk and loss.
The ultimate realization of the tax credits and other tax benefits depends upon having sufficient taxable income and on many factors outside of the Company’s control, including changes in the applicable tax code and the ability of the projects to be completed. OPERATIONAL RISKS Busey’s framework for managing risks may not be effective in mitigating risk and loss.
The Company currently conducts its banking operations in central and suburban Chicago, Illinois; the St. Louis, Missouri, metropolitan area; central Indiana; and southwest Florida. In addition, the Company currently offers fiduciary and wealth management services, which account for a significant portion of its non-interest income.
Busey currently conducts its banking operations in central and suburban Chicago, Illinois; the St. Louis, Missouri, metropolitan area; central Indiana; and southwest Florida. In addition, the Company currently offers fiduciary and wealth management services, which account for a significant portion of its non-interest income.
Changes in tax laws at national or state levels could have an effect on the Company’s short-term and long-term earnings. Tax law changes are both difficult to predict and are beyond the Company’s control. Changes in tax laws could affect the Company’s earnings as well as its customers’ financial positions, or both.
Changes in tax laws at national or state levels could have an effect on Busey’s short-term and long-term earnings. Tax law changes are both difficult to predict and are beyond the Company’s control. Changes in tax laws could affect Busey’s earnings as well as its customers’ financial positions, or both.
The Company may also experience greater than anticipated customer losses even if the integration process is successful. • We are subject to due diligence expenses which may not result in an acquisition. • To finance an acquisition, we may borrow funds, thereby increasing our leverage and diminishing our liquidity, or issue capital stock to the sellers in an acquisition or to third-parties to raise capital, which could dilute the interests of our existing stockholders. • The time period in which anticipated benefits of a merger are fully realized may take longer than anticipated, or we may be unsuccessful in realizing the anticipated benefits from mergers and future acquisitions.
Busey may also experience greater than anticipated customer losses even if the integration process is successful. • We are subject to due diligence expenses which may not result in an acquisition. • To finance an acquisition, we may borrow funds, thereby increasing our leverage and diminishing our liquidity, or issue capital stock to the sellers in an acquisition or to third-parties to raise capital, which could dilute the interests of our existing stockholders. • The time period in which anticipated benefits of a merger are fully realized may take longer than anticipated, or we may be unsuccessful in realizing the anticipated benefits from mergers and future acquisitions.
Accordingly, digital asset service providers—which, at present are not subject to the same degree of scrutiny and oversight as banking organizations and other financial institutions—are becoming active competitors to more traditional financial institutions. Rapid speed of disruptive innovations enabled by new and emerging technologies and/or other market forces may outpace the Company’s ability to compete.
Accordingly, digital asset service providers—which, at present are not subject to the same degree of scrutiny and oversight as banking organizations and other financial institutions—are becoming active competitors to more traditional financial institutions. Rapid speed of disruptive innovations enabled by new and emerging technologies and/or other market forces may outpace Busey’s ability to compete.
The Company’s failure to continue to maintain capital ratios in excess of the amounts necessary to be considered “well-capitalized” for bank regulatory purposes could affect customer confidence, its ability to grow, its costs of funds and FDIC insurance costs, its ability to pay dividends to its stockholders on outstanding stock, its ability to make acquisitions, and its business, results of operations, and financial condition.
Busey’s failure to continue to maintain capital ratios in excess of the amounts necessary to be considered “well-capitalized” for bank regulatory purposes could affect customer confidence, its ability to grow, its costs of funds and FDIC insurance costs, its ability to pay dividends to its stockholders on outstanding stock, its ability to make acquisitions, and its business, results of operations, and financial condition.
Access to funding sources in amounts adequate to finance or capitalize the Company’s activities or on terms that are acceptable to the Company could be impaired by factors that affect it directly or the financial services industry or economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for the financial services industry.
Access to funding sources in amounts adequate to finance or capitalize Busey’s activities or on terms that are acceptable to the Company could be impaired by factors that affect it directly or the financial services industry or economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for the financial services industry.
Any future goodwill or other intangible assets impairment charges, based on the current balances or future balances arising out of acquisitions, could have a material adverse effect on the results of operations by reducing net income or increasing net losses. The Company is subject to changes in accounting principles, policies, or guidelines.
Any future goodwill or other intangible assets impairment charges, based on the current balances or future balances arising out of acquisitions, could have a material adverse effect on the results of operations by reducing net income or increasing net losses. Busey is subject to changes in accounting principles, policies, or guidelines.
The Company’s general financial performance is highly dependent upon the business environment in the markets where it operates and, in particular, the ability of borrowers to pay interest on, and repay principal of, outstanding loans, and value of collateral securing those loans, as well as demand for loans and other products and services it offers.
Busey’s general financial performance is highly dependent upon the business environment in the markets where it operates and, in particular, the ability of borrowers to pay interest on, and repay principal of, outstanding loans, and value of collateral securing those loans, as well as demand for loans and other products and services it offers.
The Company’s ability to raise additional capital, when and if needed, will depend on conditions in the capital markets, economic conditions, and a number of other factors, including investor perceptions regarding the banking industry and market condition, and governmental activities, many of which are outside the Company’s control, and on its financial condition and performance.
Busey’s ability to raise additional capital, when and if needed, will depend on conditions in the capital markets, economic conditions, and a number of other factors, including investor perceptions regarding the banking industry and market condition, and governmental activities, many of which are outside Busey’s control, and on its financial condition and performance.
If the Company is forced to foreclose on a project prior to or at completion due to a default, there can be no assurance that it will be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs.
If Busey is forced to foreclose on a project prior to or at completion due to a default, there can be no assurance that it will be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs.
The Company also faces fraud risk associated with the origination of loans, including the intentional misstatement of information in property appraisals or other underwriting documentation provided to it by customers or by third-parties. Customers may expose the Company to certain fraud risks associated with the compromise of their computing systems or accounts, as well.
Busey also faces fraud risk associated with the origination of loans, including the intentional misstatement of information in property appraisals or other underwriting documentation provided to it by customers or by third-parties. Customers may expose Busey to certain fraud risks associated with the compromise of their computing systems or accounts, as well.
The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. Increased competition in the Company’s markets may result in reduced loans, deposits, and commissions and brokers’ fees, as well as reduced net interest margin and profitability.
The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. Increased competition in Busey’s markets may result in reduced loans, deposits, and commissions and brokers’ fees, as well as reduced net interest margin and profitability.
The Company’s risk management framework seeks to mitigate risk and loss. It has established processes and procedures intended to identify, measure, monitor, report, and analyze the types of risk to which it is subject, compliance risk and reputational risk, among others. However, as with any risk management framework, there are inherent limitations.
Busey’s risk management framework seeks to mitigate risk and loss. It has established processes and procedures intended to identify, measure, monitor, report, and analyze the types of risk to which it is subject, compliance risk and reputational risk, among others. However, as with any risk management framework, there are inherent limitations.
The unexpected loss of services of key personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on the Company’s business, financial condition, and results of operation. Damage resulting from negative publicity could harm the Company’s reputation and adversely impact its business and financial condition.
The unexpected loss of services of key personnel or the inability to recruit and retain qualified personnel in the future could have an adverse effect on Busey’s business, financial condition, and results of operation. Damage resulting from negative publicity could harm Busey’s reputation and adversely impact its business and financial condition.
The Company attempts to reduce its credit risk through loan application approval procedures, monitoring the concentration of loans within specific industries and geographic locations, and periodic independent reviews of outstanding loans by its loan review and audit departments as well as external parties.
Busey attempts to reduce its credit risk through loan application approval procedures, monitoring the concentration of loans within specific industries and geographic locations, and periodic independent reviews of outstanding loans by its loan review and audit departments as well as external parties.
Risks may exist, or emerge in the future, that have not been appropriately identified or anticipated. As it continues to grow, the Company’s ability to successfully identify and manage the risks it faces is an important factor that can significantly impact results.
Risks may exist, or emerge in the future, that have not been appropriately identified or anticipated. As it continues to grow, Busey’s ability to successfully identify and manage the risks it faces is an important factor that can significantly impact results.
The results of such actual or alleged misconduct could include customer dissatisfaction, inability to attract potential acquisition prospects, litigation, and heightened regulatory scrutiny, all of which could lead to lost revenue, higher operating costs, and harm to the Company’s reputation.
The results of such actual or alleged misconduct could include customer dissatisfaction, inability to attract potential acquisition prospects, litigation, and heightened regulatory scrutiny, all of which could lead to lost revenue, higher operating costs, and harm to Busey’s reputation.
ACCOUNTING AND TAX RISKS Financial statements are created, in part, by estimates, assumptions, and methods used by management, which, if incorrect, could cause unexpected losses in the future. The Company’s financial performance is impacted by accounting principles, policies, and guidelines.
ACCOUNTING AND TAX RISKS Financial statements are created, in part, by estimates, assumptions, and methods used by management, which, if incorrect, could cause unexpected losses in the future. Busey’s financial performance is impacted by accounting principles, policies, and guidelines.
While the Company has determined that no valuation allowance is currently required for any deferred tax assets, if future events differ significantly from our current forecasts, it may need to establish a valuation allowance against its net deferred tax assets, which would have a material adverse effect on its results of operations and financial condition.
While Busey has determined that no valuation allowance is currently required for any deferred tax assets, if future events differ significantly from current forecasts, the Company may need to establish a valuation allowance against its net deferred tax assets, which would have a material adverse effect on its results of operations and financial condition.
If such estimates or assumptions underlying the Company’s Consolidated Financial Statements are incorrect, the Company may experience material losses. One such assumption and estimate is the valuation analysis of its goodwill and other intangible assets.
If such estimates or assumptions underlying Busey’s Consolidated Financial Statements are incorrect, the Company may experience material losses. One such assumption and estimate is the valuation analysis of its goodwill and other intangible assets.
Credit support provided by the borrower for most of these loans and the probability of repayment is based on the liquidation of the pledged collateral and enforcement of a personal guarantee, which the Company requires whenever appropriate on commercial loans.
Credit support provided by the borrower for most of these loans and the probability of repayment is based on the liquidation of the pledged collateral and enforcement of a personal guarantee, which Busey requires whenever appropriate on commercial loans.
Periodically, agencies such as the FASB or the SEC change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of the Company’s Financial Statements. These changes are beyond the Company’s control, can be difficult to predict, and could materially impact how the Company reports its financial condition and results of operations.
Periodically, agencies such as the FASB or the SEC change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of Busey’s Financial Statements. These changes are beyond the Company’s control, can be difficult to predict, and could materially impact how Busey reports its financial condition and results of operations.
If the Company’s appraisal of the value of the completed project proves to be overstated, or market values or rental rates decline, there may be inadequate security for the repayment of the loan upon completion of construction of the project.
If Busey’s appraisal of the value of the completed project proves to be overstated, or market values or rental rates decline, there may be inadequate security for the repayment of the loan upon completion of construction of the project.
The Company’s investments in these projects are designed to generate a return primarily through the realization of federal and state income tax credits, and other tax benefits, over specified time periods.
Busey’s investments in these projects are designed to generate a return primarily through the realization of federal and state income tax credits, and other tax benefits, over specified time periods.
Ultimately, the Company may not be able to compete successfully against current and future competitors. If the Company is unable to attract and retain banking and wealth management customers, it may be unable to grow its loan and deposit portfolios or its wealth management commissions, which could adversely affect its business, results of operations, and financial condition.
Ultimately, Busey may not be able to compete successfully against current and future competitors. If Busey is unable to attract and retain banking and wealth management customers, it may be unable to grow its loan and deposit portfolios or its wealth management commissions, which could adversely affect its business, results of operations, and financial condition.
Any decline in available funding and/or capital could adversely impact the Company’s ability to originate loans, invest in securities, meet its expenses, pay dividends to its stockholders, or meet deposit withdrawal demands, any of which could have a material adverse impact on its liquidity, business, financial condition, and results of operations.
Any decline in available funding and/or capital could adversely impact Busey’s ability to originate loans, invest in securities, meet its expenses, pay dividends to its stockholders, or meet deposit withdrawal demands, any of which could have a material adverse impact on its liquidity, business, financial condition, and results of operations.
In evaluating the need for a valuation allowance, the Company estimates future taxable income based on management forecasts and tax planning strategies that may be available to us.
In evaluating the need for a valuation allowance, Busey estimates future taxable income based on management forecasts and tax planning strategies that may be available to us.
The Company has grown steadily over the past several years, increasing size through both organic growth and strategic acquisitions. As financial institutions grow, so do the expectations of regulatory agencies regarding the financial institution’s ability to control for increasingly complex and sophisticated business operations.
Busey has grown steadily over the past several years, increasing in size through both organic growth and strategic acquisitions. As financial institutions grow, so do the expectations of regulatory agencies regarding the financial institution’s ability to control for increasingly complex and sophisticated business operations.
CAPITAL AND LIQUIDITY RISKS The Company is required to maintain capital to meet regulatory requirements, and if it fails to maintain sufficient capital, whether as a result of losses, inability to raise additional capital, or otherwise, its financial condition, liquidity, and results of operations, as well as its ability to maintain regulatory compliance would be adversely affected.
CAPITAL AND LIQUIDITY RISKS Busey is required to maintain capital to meet regulatory requirements, and if it fails to maintain sufficient capital, whether as a result of losses, inability to raise additional capital, or otherwise, its financial condition, liquidity, and results of operations, as well as its ability to maintain regulatory compliance would be adversely affected.
Many competitors offer the same, or a wider variety of, banking and wealth management services within the Company’s market areas. These competitors include national banks, regional banks, and other community banks.
Many competitors offer the same, or a wider variety of, banking and wealth management services within Busey’s market areas. These competitors include national banks, regional banks, and other community banks.
In addition to the expense and uncertainty related to increased regulation, the financial services industry in recent years has faced more intense scrutiny from regulatory agencies in the examination process and more aggressive enforcement of regulations on both the federal and state levels, particularly with respect to mortgage-related practices; fee-based products and other consumer compliance matters; and compliance with the Bank Secrecy Act, anti-money laundering laws, and the USA PATRIOT Act, which focuses on money laundering in the form of terrorist financing.
In addition to these challenges, and the added uncertainty related to potentially increased regulation, the financial services industry in recent years has faced more intense scrutiny from regulatory agencies in the examination process and more aggressive enforcement of regulations on both the federal and state levels, particularly with respect to mortgage-related practices; fee-based products and other consumer compliance matters; and compliance with the Bank Secrecy Act, anti-money laundering laws, and the USA PATRIOT Act, which focuses on money laundering in the form of terrorist financing.
The Company is subject to the risk that previously recorded tax credits, which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level, will fail to meet certain government compliance requirements and will not be able to be realized.
Busey is subject to the risk that previously recorded tax credits, which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level, will fail to meet certain government compliance requirements and will not be realized.
Such events could result in violations of applicable privacy and other laws, financial loss to the Company or its customers, loss of confidence in the Company’s security measures, customer dissatisfaction, significant litigation exposure, and harm to the Company’s reputation, all of which would adversely affect the Company.
Such events could result in violations of applicable privacy and other laws, financial loss to Busey or its customers, loss of confidence in Busey’s security measures, customer dissatisfaction, significant litigation exposure, and harm to Busey’s reputation, all of which would adversely affect the Company.
Communications and information systems are essential to conduct the Company’s business, as it uses such systems to manage customer transactions and relationships, the general ledger, and deposits, loans, and investments.
Communications and information systems are essential to conduct Busey’s business, as it uses such systems to manage customer transactions and relationships; the general ledger; and deposits, loans, and investments.
Customer or employee misconduct or fraud may affect operations, result in significant financial loss, and have an adverse impact on the Company’s reputation. Misconduct by employees and customers could include hiding unauthorized activities, conducting improper or unauthorized activities, or improper use of confidential information.
Customer or employee misconduct or fraud may affect operations, result in significant financial loss, and have an adverse impact on Busey’s reputation. Misconduct by employees and customers could include hiding unauthorized activities, conducting improper or unauthorized activities, or improper use of confidential information.
If the Company were the subject of an enforcement action, it could have an adverse impact on the Company. As the Company continues to grow in asset size and complexity, regulatory expectations and scrutiny will increase and could have a potential impact on the Company’s operations and business.
If Busey were the subject of an enforcement action, it could have an adverse impact on the Company. As Busey continues to grow in asset size and complexity, regulatory expectations and scrutiny will increase and could have a potential impact on Busey’s operations and business.
First Busey and Busey Bank must meet regulatory capital requirements and maintain sufficient liquidity.
Busey and Busey Bank must meet regulatory capital requirements and maintain sufficient liquidity.
Liquidity is essential to the Company’s business. An inability to raise funds through deposits, borrowings, sales of securities, sales of loans, and other sources could have a substantial negative effect on liquidity. The Company’s primary sources of funds consist of deposits and funds from sales of investment securities, investment maturities and sales, and cash from operations.
Liquidity is essential to Busey’s business. An inability to raise funds through deposits, borrowings, sales of securities, sales of loans, and other sources could have a substantial negative effect on liquidity. Busey’s primary sources of funds consist of deposits and funds from sales of investment securities, investment maturities and sales, and cash from operations.
ITEM 1A. RISK FACTORS This section highlights the risks management believes could adversely affect our financial performance. Additional possible risks that could affect the Company adversely and cannot be predicted may arise at any time. Other risks that are immaterial at this time may also have an adverse impact on our future financial condition.
ITEM 1A. RISK FACTORS This section highlights the risks management believes could adversely affect our financial performance. Additional possible risks that could affect Busey adversely and cannot be predicted may arise at any time. Other risks that are immaterial at this time may also have an adverse impact on our future financial condition. Contents of Item 1A.
It is Busey Bank’s current practice to avoid knowingly providing banking products or services to entities or individuals that: (i) directly or indirectly manufacture, distribute, or dispense marijuana or hemp products, or those with a significant financial interest in such entities; or (ii) derive a material amount of revenue from providing products or services to, or other involvement with, such entities.
It is Busey Bank’s current practice to avoid knowingly providing banking products or services to entities or individuals that: (1) directly or indirectly manufacture, distribute, or dispense marijuana or hemp products, or those with a significant financial interest in such entities; or (2) derive a material amount of revenue from providing products or services to, or other involvement with, such entities.
The Company’s commercial loans are made primarily based on the identified cash flow of the borrower and secondarily on the underlying collateral provided by the borrower.
Busey’s commercial loans are made primarily based on the identified cash flow of the borrower and secondarily on the underlying collateral provided by the borrower.
In addition, the Company may be required to fund additional amounts to complete the project and may have to hold the property for an unspecified period of time while it attempts to dispose of it. Credit risk associated with concentration of securities in the Company’s investment portfolio may increase the potential for loss.
In addition, Busey may be required to fund additional amounts to complete the project and may have to hold the property for an unspecified period of time while it attempts to dispose of it. Credit risk associated with concentration of securities in Busey’s investment portfolio may increase the potential for loss.
Such interactions could create additional legal, regulatory, strategic, and reputational risk to Busey Bank and the Company. The Company is or may become involved from time to time in suits, legal proceedings, information-gathering requests, investigations, and proceedings by governmental and self-regulatory agencies that may lead to adverse consequences.
Such interactions could create additional legal, regulatory, strategic, and reputational risk to Busey Bank and First Busey Corporation. Busey is or may become involved from time to time in suits, legal proceedings, information-gathering requests, investigations, and proceedings by governmental and self-regulatory agencies that may lead to adverse consequences.
Any of the foregoing factors could result in realized losses, which could adversely affect the Company’s financial condition and results of operations.
Any of the foregoing factors could result in realized losses, which could adversely affect Busey’s financial condition and results of operations.
Despite the Company’s significant investment in security resources and its continued efforts to prevent or limit the effects of potential threats, it is possible that the Company may not be able to anticipate or implement effective preventative measures against all security incidents.
Despite Busey’s significant investment in security resources and its continued efforts to prevent or limit the effects of potential threats, it is possible that Busey may not be able to anticipate or implement effective preventative measures against all security incidents.
The Company also faces competition from many other types of financial institutions, including savings and loan institutions, finance companies, brokerage firms, insurance companies, credit unions, mortgage banks, digital banks and online lenders, and other financial intermediaries. In addition, a number of out-of-state financial intermediaries have opened production offices or otherwise solicit deposits in the Company’s market areas.
Busey also faces competition from many other types of financial institutions, including savings and loan institutions, finance companies, brokerage firms, insurance companies, credit unions, mortgage banks, digital banks and online lenders, and other financial intermediaries. In addition, a number of out-of-state financial intermediaries have opened production offices or otherwise solicit deposits in Busey’s market areas.
The Company also faces risks related to cyber-attacks and other security breaches in connection with credit card, debit card, and other payment-related transactions that typically involve the transmission of sensitive information regarding the Company’s customers through various third-parties, including merchant acquiring banks, payment processors, payment card networks, and its processors.
Busey also faces risks related to cyber-attacks and other security breaches in connection with credit card, debit card, and other payment-related transactions that typically involve the transmission of sensitive information regarding Busey’s customers through various third-parties, including merchant acquiring banks, payment processors, payment card networks, and processors.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline. 36 Table of Contents The Company faces strong competition from financial service companies and other companies that offer banking and wealth management services, which could harm its business.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline. Busey faces strong competition from financial service companies and other companies that offer banking and wealth management services, which could harm its business.
Although management believes the reserves are adequate to absorb losses on existing loans that may become uncollectible, management cannot guarantee that additional provisions for credit losses will not be required in the future. Non-performing assets take significant time to resolve and adversely affect the Company’s results of operations and financial condition and could result in further losses in the future.
Although management believes the ACL is adequate to absorb losses on existing loans that may become uncollectible, management cannot guarantee that additional provisions for credit losses will not be required in the future. Non-performing assets take significant time to resolve and adversely affect Busey’s results of operations and financial condition and could result in further losses in the future.
Similarly, the Company is reliant upon its employees. Such dependencies create risks for potential losses resulting from employee errors, breakdowns in process or control, failures to properly execute change management, negligence, or a number of other factors outside the Company’s control.
Similarly, Busey is reliant upon its employees. Such dependencies create risks for potential losses resulting from employee errors, breakdowns in process or control, failures to properly execute change management, negligence, or a number of other factors outside Busey’s control.
Furthermore, under FDIC rules, if the Company ceases to meet the requirements to be considered a “well-capitalized” institution for bank regulatory purposes, the interest rates it pays on deposits and its ability to accept, renew, or rollover deposits, particularly brokered deposits, may be restricted. 35 Table of Contents Liquidity risks could affect operations and jeopardize the Company’s business, financial condition, and results of operations.
Furthermore, under FDIC rules, if Busey ceases to meet the requirements to be considered a “well-capitalized” institution for bank regulatory purposes, the interest rates it pays on deposits and its ability to accept, renew, or rollover deposits, particularly brokered deposits, may be restricted. Liquidity risks could affect operations and jeopardize Busey’s business, financial condition, and results of operations.
CREDIT AND LENDING RISKS Heightened credit risk associated with lending activities may result in insufficient loan loss provisions, which could have material adverse effect on the Company’s results of operations and financial condition.
CREDIT AND LENDING RISKS Heightened credit risk associated with lending activities may result in insufficient credit loss provisions, which could have material adverse effect on Busey’s results of operations and financial condition.
If these issues or liabilities exceed our estimates, our earnings and financial condition may be materially and adversely affected. 37 Table of Contents • Prices at which acquisitions can be made fluctuate with market conditions.
If these issues or liabilities exceed our estimates, our earnings and financial condition may be materially and adversely affected. • Prices at which acquisitions can be made fluctuate with market conditions.
Although the Company’s analysis does not indicate impairments exist, the Company is required to perform additional impairment assessments on at least an annual basis, which could result in further impairment charges.
Although Busey’s analysis does not indicate impairments exist, the Company is required to perform additional impairment assessments on at least an annual basis, which could result in future impairment charges.
Although the Company devotes significant resources to maintain and regularly upgrade systems and processes designed to protect the security of its computer systems, software, networks, and other technology assets, these measures do not provide absolute security in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, cyber-attacks, and other means.
Although Busey devotes significant resources to maintain and regularly upgrade systems and processes designed to protect the security of its computer systems, software, networks, and other technology assets, these measures do not provide absolute security for the Company’s websites or other systems, some of which have been targeted with sophisticated intended to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, cyber-attacks, and other means.
A breach in the security of the Company’s systems could disrupt its businesses, result in the disclosure of confidential information, damage its reputation, and create significant financial and legal exposure for the Company.
A breach in the security of Busey’s systems could disrupt its businesses, result in the disclosure of confidential information, damage its reputation, and create significant financial and legal exposure for Busey.
Further, the Company’s investments in certain tax-advantaged projects may not generate returns as anticipated and may have an adverse impact on the Company’s financial results. The Company invests in certain tax-advantaged projects promoting affordable housing, community development, and other community revitalization projects.
Further, Busey’s investments in certain tax-advantaged projects may not generate returns as anticipated and may have an adverse impact on Busey’s financial results. Busey invests in certain tax-advantaged projects promoting affordable housing, community development, and other community revitalization projects.
For example, as further discussed in the Supervision and Regulation section, the Dodd-Frank Act included a number of requirements that trigger when a banking entity crosses over $10.0 billion in assets. 32 Table of Contents Beginning on July 1, 2022, the Company became subject to Durbin.
For example, as further discussed in the Supervision and Regulation section, the Dodd-Frank Act included a number of requirements that trigger when a banking entity crosses over $10 billion in assets. Beginning on July 1, 2022, Busey became subject to the Durbin Amendment.
The Company maintains a system of internal controls and insurance coverage to mitigate operational risks, including data processing system failures and errors, customer or employee fraud, and other disruptions which might impact its business. In addition, the Company’s Internal Audit department routinely reviews operations and high-risk areas for error, deficient controls, and failure to adhere to policy.
Busey maintains a system of internal controls and insurance coverage to mitigate operational risks, including data processing system failures and errors, customer or employee fraud, and other disruptions which might impact its business. Further, Busey’s Internal Audit department routinely reviews operations and high-risk areas for error, deficient controls, and failure to adhere to policy.
The Company’s investment portfolio consists, in part, of securities issued by government or government sponsored agencies and non-government entities.
Busey’s investment portfolio consists, in part, of securities issued by government or government sponsored agencies and non-government entities.
Changes in these standards are continuously occurring and the implementation of such changes could have a material adverse effect on the Company’s financial condition and results of operations. 38 Table of Contents The Company is subject to changes in tax law and may not realize tax benefits which could adversely affect our results of operations.
Changes in these standards are continuously occurring and the implementation of such changes could have a material adverse effect on Busey’s financial condition and results of operations. Busey is subject to changes in tax law and may not realize tax benefits which could adversely affect our results of operations.
For example, the cumulative effects of decreased economic activity, changes in the economy and overall business environment, labor availability shortages, and supply chain constraints as a result of the COVID-19 pandemic have adversely affected commercial loans, and we expect this trend to continue for certain portions of our loan portfolio, depending on the strength and speed of economic recovery and other factors, particularly if general economic conditions worsen.
For example, the cumulative effects of decreased economic activity, changes in the economy and overall business environment, labor availability shortages, and supply chain constraints which began as a result of the COVID-19 pandemic, but have continued due to inflationary concerns and significant increases in the interest rate, have adversely affected commercial loans, and we expect this trend to continue for certain portions of our loan portfolio, depending on the strength and speed of economic recovery and other factors, particularly if general economic conditions worsen.
The possible inability to realize these tax credit and other tax benefits can have a negative impact on the Company’s financial results.
The possible inability to realize these tax credit and other tax benefits could have a negative impact on Busey’s financial results.
As a result of the larger average size of each commercial loan, as well as collateral that is generally less readily-marketable, losses incurred on a small number of commercial loans could have a material adverse impact on the Company’s financial condition and results of operations. A significant portion of the Company’s loans are collateralized by real estate.
As a result of the larger average size of each commercial loan, as well as collateral that is generally less readily-marketable, losses incurred on a small number of commercial loans could have a material adverse impact on Busey’s financial condition and results of operations.
Such conditions could adversely affect the credit quality of our loans, financial condition, and results of operations. The Company currently conducts its banking operations in central and suburban Chicago, Illinois; the St. Louis, Missouri metropolitan area; central Indiana; and southwest Florida.
Such conditions could adversely affect the credit quality of our loans, financial condition, and results of operations. Busey currently conducts its banking operations in central and suburban Chicago, Illinois; the St. Louis, Missouri metropolitan area; central Indiana; and southwest Florida. Busey operates in markets with a significant university and healthcare presence.
These estimates may be inaccurate, and the Company may be exposed to significant losses on loans for these projects. Construction, land acquisition, and development loans involve additional risks because funds are advanced upon the security of the project, which is of uncertain value prior to its completion, and costs may exceed realizable values in declining real estate markets.
Construction, land acquisition, and development loans involve additional risks because funds are advanced upon the security of the project, which is of uncertain value prior to its completion, and costs may exceed realizable values in declining real estate markets.
For example, customers can maintain funds that would have historically been held as bank deposits in brokerage accounts or mutual funds, can apply for and receive credit, and can also complete transactions such as paying bills and/or transferring funds without the assistance of banks.
For example, customers can maintain funds that would have historically been held as bank deposits in brokerage accounts or mutual funds, can apply for and receive credit, and can also complete First Busey Corporation | 2023 — 42 Table of Contents Contents of Item 1A. Risk Factors transactions such as paying bills and/or transferring funds without the assistance of banks.
However, the computer systems and network infrastructure the Company uses could be vulnerable to unforeseen problems as operations are dependent upon the protection of computer equipment against damage from physical theft, fire, power loss, telecommunications failure, or a similar catastrophic event, as well as from security events. 39 Table of Contents In addition, the Company outsources certain processing functions to third-party providers.
However, the computer systems and network infrastructure Busey uses could be vulnerable to unforeseen problems as operations are dependent upon the protection of computer equipment against damage from physical theft, fire, power loss, telecommunications failure, or a similar catastrophic event, as well as from security events.
Accordingly, our ultimate losses may be higher, and possibly significantly so, than the amounts accrued for legal loss contingencies, which could adversely affect our financial condition and results of operations.
Risk Factors be higher, and possibly significantly so, than the amounts accrued for legal loss contingencies, which could adversely affect our financial condition and results of operations. See “Note 16.
The Company’s ability to attract and maintain customers, investors, and employees is contingent upon maintaining trust.
Busey’s ability to attract and retain customers, investors, and employees is contingent upon maintaining trust.
No assurance can be made, despite the cost or efforts made by the Company to address the issues arising from reputational harm, that results could not adversely affect the Company’s business, financial condition, and results of operations. 41 Table of Contents Climate change or other adverse external events could significantly impact the Company’s business.
No assurance can be made, despite the cost or efforts made by the Company to address the issues arising from reputational harm, that results could not adversely affect Busey’s business, financial condition, and results of operations.
In addition, increased competition with the largest banks and Fintechs for retail deposits may impact our ability to raise funds through deposits and could have a negative effect on our liquidity.
In addition, increased competition with the largest banks and First Busey Corporation | 2023 — 41 Table of Contents Contents of Item 1A. Risk Factors Fintechs for retail deposits may impact our ability to raise funds through deposits and could have a negative effect on our liquidity.
Durbin requires the Federal Reserve to establish a maximum permissible interchange fee for many types of debit transactions, which reduced the Company’s fee income during the second half of 2022. Further in August 2022, the Company came under the oversight of the CFPB.
The Durbin Amendment requires the Federal Reserve to establish a maximum permissible interchange fee for many types of debit transactions, which reduced Busey’s fee income during the second half of 2022 and throughout 2023. Further in August 2022, Busey became subject to oversight of the CFPB for consumer transactions.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeFirst Busey and its subsidiaries also own or lease other facilities, such as banking centers of Busey Bank, for business operations. The Company considers its properties to be suitable and adequate for its present needs. None of the properties are subject to any material encumbrance.
Biggest changeFirst Busey Corporation and its subsidiaries also own or lease other facilities, such as banking centers of Busey Bank, for business operations. Busey considers its properties to be suitable and adequate for its present needs. None of the properties are subject to any material encumbrance.
ITEM 2. PROPERTIES First Busey and Busey Bank’s headquarters are located at 100 West University Avenue, Champaign, Illinois. FirsTech’s headquarters is located at 130 North Water Street, Decatur, Illinois. These facilities, which are owned by the Company, house the executive and primary administrative offices of each respective entity.
ITEM 2. PROPERTIES First Busey Corporation’s and Busey Bank’s headquarters are located at 100 West University Avenue, Champaign, Illinois. FirsTech’s headquarters is located at 130 North Water Street, Decatur, Illinois. These facilities, which are owned by the Company, house the executive and primary administrative offices of each respective entity.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFurthermore, 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.
Biggest changeFurthermore, there is no pending legal proceeding that is adverse to Busey in which any director, officer, or affiliate of Busey, or any associate of any such director or officer, is a party, or has a material interest.
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.
There is no material pending litigation, other than ordinary routine litigation incidental to its business, in which First Busey Corporation or any of its subsidiaries is involved or of which any of their property is the subject.
ITEM 3. 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.
ITEM 3. LEGAL PROCEEDINGS As part of the ordinary course of business, First Busey Corporation and its subsidiaries are parties to litigation that is incidental to their regular business activities.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAdditionally, there were an estimated 12,064 beneficial holders whose stock was held in street name by brokerage houses and nominees as of that date. STOCK REPURCHASES 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.
Biggest changeFirst Busey Corporation | 2023 — 50 Table of Contents As of February 22, 2024, First Busey Corporation had 55,247,094 shares of common stock outstanding held by 1,804 holders of record. Additionally, there were an estimated 10,830 beneficial holders whose stock was held in street name by brokerage houses and nominees as of that date.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES COMMON STOCK First Busey’s common stock is traded on The Nasdaq Global Select Market under the symbol “BUSE.” The Company’s board of directors and management are currently committed to continue paying regular cash dividends; however, no guarantee can be given with respect to future dividends, as they are dependent on certain regulatory restrictions, future earnings, capital requirements, and financial condition of the Company and its subsidiaries.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES COMMON STOCK Busey’s common stock is traded on The Nasdaq Global Select Market under the symbol “BUSE.” Busey’s board of directors and management are currently committed to continue paying regular cash dividends; however, no guarantee can be given with respect to future dividends, as they are dependent on certain regulatory restrictions, future earnings, capital requirements, and the financial condition of First Busey Corporation and its subsidiaries.
BMI Banks - Midwest Region Index represent all Major Exchange Traded Banks in S&P Capital IQ’s coverage universe headquartered in Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Ohio, South Dakota, and Wisconsin.
BMI Banks – Midwest Region for the five years ended December 31, 2023. Banks in the S&P U.S. BMI Banks – Midwest Region Index represent all Major Exchange Traded Banks in S&P Capital IQ’s coverage universe that are headquartered in Colorado, Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Ohio, South Dakota, and Wisconsin.
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 October 1-31, 2022 — $ — — 147,210 November 1-30, 2022 — $ — — 147,210 December 1-31, 2022 — $ — — 147,210 Three months ended December 31, 2022 — $ — — Year ended December 31, 2022 388,614 $ 25.50 388,614 43 Table of Contents PERFORMANCE GRAPH The following graph compares First Busey’s performance, as measured by the change in price of its common stock plus reinvested dividends, with the Nasdaq Composite and the S&P US BMI Banks – Midwest Region for the five years ended December 31, 2022.
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 October 1-31, 2023 95,001 $ 19.17 95,001 1,942,086 November 1-30, 2023 22,811 19.82 22,811 1,919,275 December 1-31, 2023 — — — 1,919,275 Three months ended December 31, 2023 117,812 $ 19.30 117,812 Year ended December 31, 2023 227,935 $ 19.67 227,935 First Busey Corporation | 2023 — 51 Table of Contents STOCK PERFORMANCE GRAPH The following graph compares Busey’s performance, as measured by the change in price of its common stock plus reinvested dividends, with the Nasdaq Composite and the S&P U.S.
See “ Item 1. Business—Supervision, Regulation, and Other Factors—Supervision and Regulation of the Company—Dividend Payments ” and “ Item 1. Business—Supervision, Regulation, and Other Factors—Supervision and Regulation of Busey Bank—Dividend Payments ” for further discussion of these matters. As of February 23, 2023, First Busey Corporation had 55,288,101 shares of common stock outstanding held by 2,205 holders of record.
See “ Item 1. Business—Supervision, Regulation, and Other Factors—Supervision and Regulation of the Company—Dividend Payments ” and “ Item 1. Business—Supervision, Regulation, and Other Factors—Supervision and Regulation of Busey Bank—Dividend Payments ” for further discussion of these matters.
During the fourth quarter of 2022, the Company purchased no shares under the plan. As of December 31, 2022, the Company had 147,210 shares that may still be purchased under the plan.
As of December 31, 2023, Busey had 1,919,275 shares that may still be purchased under the Stock Repurchase Plan.
Removed
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.
Added
STOCK REPURCHASE PLAN On February 3, 2015, First Busey Corporation's board of directors approved the Stock Repurchase Plan to enable Busey to purchase shares of its common stock through various means including purchases executed on the open market, through block trades or otherwise, and in privately negotiated transactions.
Removed
Index 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 First Busey Corporation $ 100.00 $ 84.11 $ 97.39 $ 79.89 $ 104.46 $ 98.80 S&P U.S. BMI Banks – Midwest Region 100.00 85.39 97.39 95.52 126.19 108.91 Nasdaq Composite 100.00 97.16 132.81 192.47 235.15 158.64 Banks in the S&P U.S.
Added
The Stock Repurchase Plan provides Busey with treasury shares from which stock-based compensation can be issued, and limits the number of outstanding shares that may be actively traded. The Stock Repurchase Plan does not obligate Busey to purchase any shares of its common stock, and has no expiration date.
Added
The Stock Repurchase Plan may be terminated, or the number of shares authorized for repurchase may be increased or decreased by Busey's board of directors at its discretion at any time.
Added
Under the Stock Repurchase Plan, Busey's board of directors has authorized shares for repurchase as shown in the table below: Number of Shares Authorized February 3, 2015 666,667 May 22, 2019 1,000,000 February 5, 2020 2,000,000 May 24, 2023 2,000,000 Total shares that have been authorized for repurchase under the plan 5,666,667 During the fourth quarter of 2023, Busey purchased 117,812 shares of its common stock pursuant to the Stock Repurchase Plan, as reflected in the table below.
Added
As of December 31, Index 2018 2019 2020 2021 2022 2023 First Busey Corporation $ 100.00 $ 115.78 $ 94.98 $ 124.19 $ 117.47 $ 123.44 S&P U.S. BMI Banks – Midwest Region 100.00 130.10 111.85 147.78 127.53 130.20 Nasdaq Composite 100.00 136.69 198.09 242.03 163.27 236.16

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

51 edited+32 added−33 removed8 unchanged
Biggest changeGovernment obligations (5) (608) (613) 765 (1,988) (1,223) Obligations of state and political subdivisions (337) 254 (83) 168 (827) (659) Other securities 5,544 18,881 24,425 22,213 (14,904) 7,309 Loans held for sale (515) 201 (314) (1,430) (248) (1,678) Portfolio loans 17,870 17,799 35,669 (1,499) (29,861) (31,360) Change in interest income $ 21,636 $ 39,394 $ 61,030 $ 20,627 $ (48,810) $ (28,183) Increase (decrease) in interest expense Interest-bearing transaction deposits $ 129 $ 5,099 $ 5,228 $ 855 $ (3,651) $ (2,796) Savings and money market deposits 151 1,269 1,420 931 (4,074) (3,143) Time deposits (1,303) (1,816) (3,119) (3,923) (8,246) (12,169) Federal funds purchased and repurchase agreements 30 1,218 1,248 95 (528) (433) Borrowings 1,611 1,869 3,480 2,289 811 3,100 Junior subordinated debt owed to unconsolidated trusts 7 182 189 7 (127) (120) Change in interest expense $ 625 $ 7,821 $ 8,446 $ 254 $ (15,815) $ (15,561) Increase (decrease) in net interest income $ 21,011 $ 31,573 $ 52,584 $ 20,373 $ (32,995) $ (12,622) Percentage increase (decrease) in net interest income over prior period 19.3 % (4.4) % Notable changes in average assets and average liabilities are summarized as follows for the periods presented (dollars in thousands) : Years Ended December 31, 2022 2021 Change % Change Average interest-earning assets $ 11,473,063 $ 10,978,116 $ 494,947 4.5 % Average interest-bearing liabilities 7,583,331 7,312,409 270,922 3.7 % Average noninterest-bearing deposits 3,550,517 3,142,155 408,362 13.0 % Total average deposits 10,508,953 9,895,798 613,155 6.2 % Total average liabilities 11,297,777 10,580,073 717,704 6.8 % Average noninterest-bearing deposits as a percent of total average deposits 33.8 % 31.8 % 200 bps Total average deposits as a percent of total average liabilities 93.0 % 93.5 % (50) bps 52 Table of Contents Changes in net interest income and net interest margin are summarized as follows for the periods presented (dollars in thousands) : Years Ended December 31, 2022 2021 Change % Change Net interest income Interest income, on a tax-equivalent basis 1 $ 362,185 $ 301,155 $ 61,030 20.3 % Interest expense (36,548) (28,102) (8,446) 30.1 % Net interest income, on a tax-equivalent basis 1 $ 325,637 $ 273,053 $ 52,584 19.3 % Net interest margin 1, 2 2.84 % 2.49 % 35 bps ___________________________________________ 1.
Biggest changeGovernment obligations (691) 190 (501) (5) (608) (613) Obligations of state and political subdivisions (1,466) 415 (1,051) (337) 254 (83) Other securities (8,026) 23,003 14,977 5,544 18,881 24,425 Loans held for sale (161) 85 (76) (515) 201 (314) Portfolio loans 12,598 85,980 98,578 17,870 17,799 35,669 Change in interest income 1,241 118,120 119,361 21,636 39,394 61,030 Increase (decrease) in interest expense Interest-bearing transaction deposits (27) 36,145 36,118 129 5,099 5,228 Savings and money market deposits (752) 33,553 32,801 151 1,269 1,420 Time deposits 4,932 34,022 38,954 (1,303) (1,816) (3,119) Federal funds purchased and repurchase agreements (304) 4,032 3,728 30 1,218 1,248 Borrowings 9,485 1,464 10,949 1,611 1,869 3,480 Junior subordinated debt owed to unconsolidated trusts 8 816 824 7 182 189 Change in interest expense 13,342 110,032 123,374 625 7,821 8,446 Increase (decrease) in net interest income $ (12,101) $ 8,088 $ (4,013) $ 21,011 $ 31,573 $ 52,584 Percentage increase (decrease) in net interest income over prior period (1.2) % 19.3 % First Busey Corporation | 2023 — 60 Table of Contents Contents of Item 7.
Acquired loans are in the scope of ASC Topic 326 “Financial Instruments-Credit Losses.” However, the offset to record the allowance at the date of acquisition on acquired loans depends on whether or not the loan is classified as PCD.
Acquired loans are in the scope of ASC Topic 326 “Financial Instruments-Credit Losses.” However, the offset to record the allowance on acquired loans at the date of acquisition depends on whether or not the loan is classified as PCD.
A provision for credit losses is charged to current expense and acts to replenish the ACL in order to maintain the allowance at a level that management deems adequate. Determining the allowance 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.
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.
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 is recognized by establishing an allowance through provision for credit losses. Impairment related to noncredit factors is recognized in AOCI, net of applicable taxes.
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. Impairment is recognized by establishing an allowance for the debt security through the provision for credit losses. Impairment related to noncredit factors is recognized in AOCI, net of applicable taxes.
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 the disparate risk characteristics. Loans deemed uncollectible are charged against and reduce the allowance.
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 the disparate risk characteristics. Loans deemed uncollectible are charged against and reduce the ACL.
Rising rates have a positive impact on net interest margin, as assets, in particular commercial loans, reprice more quickly and to a greater extent than liabilities.
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.
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 we do not expect to collect.
Allowance for Credit Losses Busey calculates the ACL at each reporting date. We recognize an allowance for the lifetime expected credit losses for the amount we do not expect to collect.
Efficiency Ratio 2 The efficiency ratio is calculated as total noninterest expense, less amortization charges, as a percentage of tax-equivalent net interest income plus noninterest income, less security gains and losses. The efficiency ratio, which is a measure commonly used by management and the banking industry, measures the amount of expense incurred to generate a dollar of revenue.
Efficiency Ratio 3 The efficiency ratio is calculated as total noninterest expense, less amortization charges, as a percentage of tax-equivalent net interest income plus noninterest income, less security gains and losses. The efficiency ratio, which is a measure commonly used by management and the banking industry, measures the amount of expense incurred to generate a dollar of revenue.
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 allowance, if applicable, and recognizing any incremental impairment through earnings.
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 allowance related to the debt security, if applicable, and recognizing any incremental impairment through earnings.
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 allowance, management relies predominantly on a disciplined credit review and approval process that extends to the full range of First Busey’s credit exposure.
The calculation also contemplates that 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 Busey’s credit exposure.
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 use of different judgments and estimates to determine the fair value of securities could result in a different fair value estimate. Realized securities gains or losses are reported in the Consolidated Statements of Income.
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. Different fair value estimates could result from the use of different judgments and estimates to determine the fair values of securities. Realized securities gains or losses are reported in the Consolidated Statements of Income .
On a tax-equivalent basis, assuming a federal income tax rate of 21.0%. 2. Non-accrual loans have been included in average portfolio loans. 3. Interest income includes a tax-equivalent adjustment of $2.2 million, $2.4 million, and $2.7 million for 2022, 2021 and 2020, respectively.
On a tax-equivalent basis, assuming a federal income tax rate of 21.0%. 2. Non-accrual loans have been included in average portfolio loans. 3. Interest income includes tax-equivalent adjustments of $2.2 million for 2023, $2.2 million for 2022, and $2.4 million for 2021.
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.
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.
On a combined basis, revenue from these two critical operating areas was $75.5 million for the year ended December 31, 2022, a 5.6% increase from $71.4 million for the year ended December 31, 2021. Wealth management fees increased by 4.3% to $55.4 million in 2022, compared to $53.1 million in 2021.
On a combined basis, revenue from these two critical operating areas was $78.5 million for the year ended December 31, 2023, a 4.1% increase from $75.4 million for the year ended December 31, 2022. Wealth management fees increased by 3.5% to $57.3 million in 2023, compared to $55.4 million in 2022.
Accrued and deferred taxes, as reported in other assets or other liabilities in the Consolidated Balance Sheets, represent the net estimated amount due to or to be received from taxing jurisdictions either currently or in the future.
Estimated income tax expense is reported in the Consolidated Statements of Income . Accrued and deferred taxes, as reported in other assets or other liabilities in the Consolidated Balance Sheets , represent the net estimated amount due to or to be received from taxing jurisdictions either currently or in the future.
The following policies could be deemed critical: Fair Value of Debt Securities Available for Sale The 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.
MD&A Fair Value of Debt Securities Available for Sale 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.
Revenues from wealth management fees and payment technology solutions represented 59.5% and 53.8% of noninterest income for the years ended December 31, 2022, and December 31, 2021, respectively, providing a complement to spread-based revenue from traditional banking activities.
Combined, revenues from wealth management fees and payment technology solutions represented 64.1% and 59.5% of Busey’s noninterest income for the years ended December 31, 2023, and December 31, 2022, respectively, providing a complement to spread-based revenue from traditional banking activities.
Non-operating pretax adjustments were as follows for the periods presented (dollars in thousands) : Years Ended December 31, 2022 2021 2020 Non-operating costs Acquisition related expenses 1 $ 1,059 $ 13,646 $ 1,399 Restructuring charges 2 3,478 3,705 9,312 Total non-operating costs $ 4,537 $ 17,351 $ 10,711 ___________________________________________ 1.
Non-operating pretax adjustments were as follows for the periods presented (dollars in thousands) : Years Ended December 31, 2023 2022 2021 Non-operating costs Acquisition related expenses 1 $ 357 $ 1,059 $ 13,646 Restructuring charges 2 3,971 3,478 3,705 Total non-operating costs $ 4,328 $ 4,537 $ 17,351 ___________________________________________ 1.
It should be read in conjunction with “ Item 1. Business ,” the Consolidated Financial Statements , and the related Notes to the Consolidated Financial Statements included in this Annual Report. Detailed discussion and analysis of the financial condition and results of operation for 2022 as compared to 2021 can be found below.
Business ,” the Consolidated Financial Statements , and the related Notes to the Consolidated Financial Statements included in this Annual Report. Detailed discussion and analysis of the financial condition and results of operation for 2023 as compared to 2022 can be found below. Comparison of 2022 to 2021 can be found in “ Item 7.
Our efficiency ratio was 59.9% for the year ended December 31, 2022, compared to 62.2% for the year ended December 31, 2021. Operating costs have been influenced by acquisition expenses and other restructuring costs, and the adjusted efficiency ratio 1 was 58.9% for the year ended December 31, 2022, compared to 57.9% for the year ended December 31, 2021.
Our efficiency ratio was 61.7% for the year ended December 31, 2023, compared to 59.9% for the year ended December 31, 2022. Operating costs have been influenced by acquisition expenses and other restructuring costs, and the adjusted efficiency ratio 3 was 60.7% for the year ended December 31, 2023, compared to 58.9% for the year ended December 31, 2022.
Annualized net interest margins for the quarterly periods indicated were as follows: 2022 2021 2020 First Quarter 2.45 % 2.72 % 3.20 % Second Quarter 2.68 % 2.50 % 3.03 % Third Quarter 3.00 % 2.41 % 2.86 % Fourth Quarter 3.24 % 2.36 % 3.06 % Management attempts to mitigate the effects of an unpredictable interest-rate environment through effective portfolio management, prudent loan underwriting and operational efficiencies. 1 Core deposits is a non-GAAP financial measure.
Annualized net interest margins for the quarterly periods indicated were as follows: 2023 2022 2021 First Quarter 3.13 % 2.45 % 2.72 % Second Quarter 2.86 % 2.68 % 2.50 % Third Quarter 2.80 % 3.00 % 2.41 % Fourth Quarter 2.74 % 3.24 % 2.36 % Management attempts to mitigate the effects of an unpredictable interest-rate environment through effective portfolio management, prudent loan underwriting and pricing discipline, and operational efficiencies.
See “ Item 1. Business—Non-GAAP Financial Information .” Non-operating Items First Busey views certain non-operating items, including acquisition-related and restructuring charges, as adjustments to net income reported under GAAP.
See “ Item 1. Business—Non-GAAP Financial Information .” First Busey Corporation | 2023 — 57 Table of Contents Contents of Item 7. MD&A Non-Operating Expenses and Non-GAAP Measures Busey views certain non-operating items, including acquisition-related and restructuring charges, as adjustments to net income reported under GAAP.
Other income benefited primarily from increases in other asset investment values and check sales, partially offset by smaller gains on commercial loan sales. 55 Table of Contents Noninterest Expense Changes in noninterest expense are summarized in the tables below for the periods presented (dollars in thousands) : Years Ended December 31, 2022 2021 Change % Change Noninterest expense Salaries, wages, and employee benefits $ 159,016 $ 145,312 $ 13,704 9.4 % Data processing 21,648 21,862 (214) (1.0) % Premises expenses: Net occupancy expense of premises 19,130 18,346 784 4.3 % Furniture and equipment expenses 7,645 8,301 (656) (7.9) % Combined, net occupancy expense of premises and furniture and equipment expenses 26,775 26,647 128 0.5 % Professional fees 6,125 7,549 (1,424) (18.9) % Amortization of intangible assets 11,628 11,274 354 3.1 % Interchange expense 6,298 5,792 506 8.7 % Other expense 52,391 43,344 9,047 20.9 % Total noninterest expense $ 283,881 $ 261,780 $ 22,101 8.4 % Income taxes $ 33,426 $ 33,374 $ 52 0.2 % Effective income tax rate 20.7 % 21.3 % (60) bps Efficiency ratio 1 59.9 % 62.2 % (230) bps Adjusted efficiency ratio 1 58.9 % 57.9 % 100 bps Full-time equivalent employees as of period-end 1,497 1,463 34 2.3 % ___________________________________________ 1.
MD&A Years Ended December 31, 2022 2021 Change % Change Noninterest expense Salaries, wages, and employee benefits $ 159,016 $ 145,312 $ 13,704 9.4 % Data processing 21,648 21,862 (214) (1.0) % Premises expenses: Net occupancy expense of premises 19,130 18,346 784 4.3 % Furniture and equipment expenses 7,645 8,301 (656) (7.9) % Combined, net occupancy expense of premises and furniture and equipment expenses 26,775 26,647 128 0.5 % Professional fees 6,125 7,549 (1,424) (18.9) % Amortization of intangible assets 11,628 11,274 354 3.1 % Interchange expense 6,298 5,792 506 8.7 % FDIC insurance 4,058 3,083 975 31.6 % Other expense 48,333 40,261 8,072 20.0 % Total noninterest expense $ 283,881 $ 261,780 $ 22,101 8.4 % Income taxes $ 33,426 $ 33,374 $ 52 0.2 % Effective income tax rate 20.7 % 21.3 % (60) bps Efficiency ratio 1 59.9 % 62.2 % (230) bps Adjusted efficiency ratio 1 58.9 % 57.9 % 100 bps Full-time equivalent associates as of period-end 1,497 1,463 34 2.3 % ___________________________________________ 1.
EXECUTIVE SUMMARY Operating Results Results of our operations are presented below, segregated by operating segment (dollars in thousands) : Years Ended December 31, 2022 2021 2020 Net income by operating segment Banking $ 131,596 $ 117,844 $ 101,226 FirsTech 847 1,527 2,372 Wealth Management 18,543 18,570 13,181 Other (22,675) (14,492) (16,435) Net income $ 128,311 $ 123,449 $ 100,344 48 Table of Contents Operating Performance Operating performance metrics presented in the table below have been derived from information used by management to monitor and manage our financial performance (dollars in thousands, except per share amounts) : Years Ended December 31, 2022 2021 2020 Reported: Net income $ 128,311 $ 123,449 $ 100,344 Adjusted: Net income 1 131,910 137,108 108,728 Reported: Diluted earnings per common share $ 2.29 $ 2.20 $ 1.83 Adjusted: Diluted earnings per common share 1 2.35 2.45 1.98 Reported: Return on average assets 1.03 % 1.04 % 0.97 % Adjusted: Return on average assets 1 1.06 % 1.15 % 1.06 % Reported: Return on average tangible common equity 1 15.56 % 12.96 % 11.51 % Adjusted: Return on average tangible common equity 1 15.99 % 14.40 % 12.47 % Reported: Pre-provision net revenue 1 $ 168,493 $ 138,652 $ 165,672 Adjusted: Pre-provision net revenue 1 179,424 160,792 180,516 Reported: Pre-provision net revenue to average assets 1 1.35 % 1.16 % 1.61 % Adjusted: Pre-provision net revenue to average assets 1 1.44 % 1.35 % 1.75 % ___________________________________________ 1.
MD&A RESULTS OF OPERATIONS — THREE YEARS ENDED DECEMBER 31, 2023 Net Income Results of our operations are presented below, segregated by operating segment (dollars in thousands) : Years Ended December 31, 2023 2022 2021 Net income by operating segment Banking $ 123,853 $ 131,596 $ 117,844 Wealth Management 18,804 18,543 18,570 FirsTech 830 847 1,527 Other (20,922) (22,675) (14,492) Net income $ 122,565 $ 128,311 $ 123,449 Operating Performance Metrics Operating performance metrics presented in the table below have been derived from information used by management to monitor and manage our financial performance (dollars in thousands, except per share amounts) : Years Ended December 31, 2023 2022 2021 Reported: Net income $ 122,565 $ 128,311 $ 123,449 Adjusted: Net income 1 126,012 131,910 137,108 Reported: Diluted earnings per common share $ 2.18 $ 2.29 $ 2.20 Adjusted: Diluted earnings per common share 1 2.24 2.35 2.45 Reported: Return on average assets 1.00 % 1.03 % 1.04 % Adjusted: Return on average assets 1 1.03 % 1.06 % 1.15 % Reported: Return on average tangible common equity 1 14.62 % 15.56 % 12.96 % Adjusted: Return on average tangible common equity 1 15.03 % 15.99 % 14.40 % Reported: Pre-provision net revenue 1 $ 158,502 $ 168,493 $ 138,652 Adjusted: Pre-provision net revenue 1 172,290 179,424 160,792 Reported: Pre-provision net revenue to average assets 1 1.29 % 1.35 % 1.16 % Adjusted: Pre-provision net revenue to average assets 1 1.41 % 1.44 % 1.35 % ___________________________________________ 1.
Assuming a federal income tax rate of 21.0%. 2. Net interest income expressed as a percentage of average earning assets, stated on a tax-equivalent basis. The FOMC raised rates by a total of 425 basis points during 2022.
Assuming a federal income tax rate of 21.0%. 2. Net interest income expressed as a percentage of average earning assets, stated on a tax-equivalent basis.
Income Taxes The effective income tax rate, or income taxes divided by income before taxes, was 20.7%, 21.3%, and 21.7% for the years ended December 31, 2022, 2021, and 2020, respectively.
Income Taxes Effective income tax rates, calculated by dividing income taxes by income before taxes, were 20.4%, 20.7%, and 21.3% for the years ended December 31, 2023, 2022, and 2021, respectively.
The Company's effective tax rate 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.
Busey's effective tax rates were 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 tax credits. We continue to monitor evolving federal and state tax legislation and its potential impact on operations on an ongoing basis.
Government obligations 179,557 1,079 0.60 % 180,041 1,692 0.94 % 135,204 2,915 2.16 % Obligations of states and political subdivisions 1 286,220 7,611 2.66 % 299,064 7,694 2.57 % 293,070 8,353 2.85 % Other securities 3,265,271 61,591 1.89 % 2,876,714 37,166 1.29 % 1,411,826 29,857 2.11 % Loans held for sale 5,178 192 3.71 % 21,803 506 2.32 % 82,106 2,184 2.66 % Portfolio loans 1, 2 7,445,962 288,615 3.88 % 6,969,807 252,946 3.63 % 7,006,946 284,306 4.06 % Total interest-earning assets 1, 3 $ 11,473,063 $ 362,185 3.16 % $ 10,978,116 $ 301,155 2.74 % $ 9,417,938 $ 329,338 3.50 % Cash and due from banks 120,910 133,711 118,739 Premises and equipment 131,657 138,731 146,144 ACL (89,387) (97,397) (88,248) Other assets 856,705 751,774 697,683 Total assets $ 12,492,948 $ 11,904,935 $ 10,292,256 Liabilities and Stockholders’ Equity Interest-bearing transaction deposits $ 2,785,439 $ 7,150 0.26 % $ 2,619,942 $ 1,922 0.07 % $ 2,153,230 $ 4,718 0.22 % Savings and money market deposits 3,326,259 4,237 0.13 % 3,092,992 2,817 0.09 % 2,567,962 5,960 0.23 % Time deposits 846,738 4,725 0.56 % 1,040,709 7,844 0.75 % 1,356,347 20,013 1.48 % Federal funds purchased and repurchase agreements 244,004 1,475 0.60 % 218,454 227 0.10 % 187,811 660 0.35 % Borrowings 4 309,175 15,932 5.15 % 268,767 12,452 4.63 % 217,702 9,352 4.30 % Junior subordinated debt issued to unconsolidated trusts 71,716 3,029 4.22 % 71,545 2,840 3.97 % 71,376 2,960 4.15 % Total interest-bearing liabilities $ 7,583,331 $ 36,548 0.48 % $ 7,312,409 $ 28,102 0.38 % $ 6,554,428 $ 43,663 0.67 % Net interest spread 1 2.68 % 2.36 % 2.83 % Noninterest-bearing deposits 3,550,517 3,142,155 2,364,442 Other liabilities 163,929 125,509 133,012 Stockholders’ equity 1,195,171 1,324,862 1,240,374 Total liabilities and stockholders’ equity $ 12,492,948 $ 11,904,935 $ 10,292,256 Interest income / earning assets 1, 3 $ 11,473,063 $ 362,185 3.16 % $ 10,978,116 $ 301,155 2.74 % $ 9,417,938 $ 329,338 3.50 % Interest expense / earning assets 11,473,063 36,548 0.32 % $ 10,978,116 28,102 0.25 % $ 9,417,938 43,663 0.47 % Net interest margin 1 $ 325,637 2.84 % $ 273,053 2.49 % $ 285,675 3.03 % ___________________________________________ 1.
Government obligations 79,669 578 0.73 % 179,557 1,079 0.60 % 180,041 1,692 0.94 % Obligations of states and political subdivisions 1 233,377 6,560 2.81 % 286,220 7,611 2.66 % 299,064 7,694 2.57 % Other securities 2,875,769 76,568 2.66 % 3,265,271 61,591 1.89 % 2,876,714 37,166 1.29 % Loans held for sale 1,885 116 6.13 % 5,178 192 3.71 % 21,803 506 2.32 % Portfolio loans 1, 2 7,759,472 387,193 4.99 % 7,445,962 288,615 3.88 % 6,969,807 252,946 3.63 % Total interest-earning assets 1, 3 11,164,594 $ 481,546 4.31 % 11,473,063 $ 362,185 3.16 % 10,978,116 $ 301,155 2.74 % Cash and due from banks 116,530 120,910 133,711 Premises and equipment 124,565 131,657 138,731 ACL (92,991) (89,387) (97,397) Other assets 933,520 856,705 751,774 Total assets $ 12,246,218 $ 12,492,948 $ 11,904,935 Liabilities and stockholders’ equity Interest-bearing transaction deposits $ 2,775,045 $ 43,268 1.56 % $ 2,785,439 $ 7,150 0.26 % $ 2,619,942 $ 1,922 0.07 % Savings and money market deposits 2,870,397 37,038 1.29 % 3,326,259 4,237 0.13 % 3,092,992 2,817 0.09 % Time deposits 1,406,928 43,679 3.10 % 846,738 4,725 0.56 % 1,040,709 7,844 0.75 % Federal funds purchased and repurchase agreements 200,894 5,203 2.59 % 244,004 1,475 0.60 % 218,454 227 0.10 % Borrowings 4 500,301 26,881 5.37 % 309,175 15,932 5.15 % 268,767 12,452 4.63 % Junior subordinated debt issued to unconsolidated trusts 71,894 3,853 5.36 % 71,716 3,029 4.22 % 71,545 2,840 3.97 % Total interest-bearing liabilities 7,825,459 $ 159,922 2.04 % 7,583,331 $ 36,548 0.48 % 7,312,409 $ 28,102 0.38 % Net interest spread 1 2.27 % 2.68 % 2.36 % Noninterest-bearing deposits 3,018,563 3,550,517 3,142,155 Other liabilities 204,685 163,929 125,509 Stockholders’ equity 1,197,511 1,195,171 1,324,862 Total liabilities and stockholders’ equity $ 12,246,218 $ 12,492,948 $ 11,904,935 Interest income / earning assets 1, 3 $ 11,164,594 $ 481,546 4.31 % $ 11,473,063 $ 362,185 3.16 % $ 10,978,116 $ 301,155 2.74 % Interest expense / earning assets 11,164,594 159,922 1.43 % 11,473,063 36,548 0.32 % 10,978,116 28,102 0.25 % Net interest margin 1 $ 321,624 2.88 % $ 325,637 2.84 % $ 273,053 2.49 % ___________________________________________ 1.
Business—Non-GAAP Financial Information .” 53 Table of Contents Noninterest Income Changes in noninterest income are summarized in the tables below for the periods presented (dollars in thousands) : Years Ended December 31, 2022 2021 Change % Change Noninterest income Wealth management and payment technology solutions income: Wealth management fees $ 55,378 $ 53,086 $ 2,292 4.3 % Payment technology solutions 20,067 18,347 1,720 9.4 % Combined, wealth management fees and payment technology solutions 75,445 71,433 4,012 5.6 % Fees for customer services 33,111 35,604 (2,493) (7.0) % Mortgage revenue 1,895 7,239 (5,344) (73.8) % Income on bank owned life insurance 3,663 5,166 (1,503) (29.1) % Securities income: Realized net gains (losses) on securities 50 29 21 72.4 % Unrealized net gains (losses) recognized on equity securities (2,183) 3,041 (5,224) (171.8) % Net securities gains (losses) (2,133) 3,070 (5,203) (169.5) % Other income 14,822 10,292 4,530 44.0 % Total noninterest income $ 126,803 $ 132,804 $ (6,001) (4.5) % Years Ended December 31, 2021 2020 Change % Change Noninterest income Wealth management and payment technology solutions income: Wealth management fees $ 53,086 $ 42,928 $ 10,158 23.7 % Payment technology solutions 18,347 15,628 2,719 17.4 % Combined, wealth management fees and payment technology solutions 71,433 58,556 12,877 22.0 % Fees for customer services 35,604 31,604 4,000 12.7 % Mortgage revenue 7,239 13,038 (5,799) (44.5) % Income on bank owned life insurance 5,166 5,380 (214) (4.0) % Securities income: Realized net gains (losses) on securities 29 1,724 (1,695) (98.3) % Unrealized net gains (losses) recognized on equity securities 3,041 (393) 3,434 873.8 % Net securities gains (losses) 3,070 1,331 1,739 130.7 % Other income 10,292 8,356 1,936 23.2 % Total noninterest income $ 132,804 $ 118,265 $ 14,539 12.3 % 54 Table of Contents Total noninterest income was $126.8 million for the year ended December 31, 2022, a decrease of 4.5% when compared with $132.8 million for the year ended December 31, 2021.
MD&A Years Ended December 31, 2022 2021 Change % Change Noninterest income Wealth management and payment technology solutions income: Wealth management fees $ 55,378 $ 53,086 $ 2,292 4.3 % Payment technology solutions 20,067 18,347 1,720 9.4 % Combined, wealth management fees and payment technology solutions 75,445 71,433 4,012 5.6 % Fees for customer services 33,111 35,604 (2,493) (7.0) % Mortgage revenue 1,895 7,239 (5,344) (73.8) % Income on bank owned life insurance 3,663 5,166 (1,503) (29.1) % Securities income: Realized net gains (losses) on securities 50 29 21 72.4 % Unrealized net gains (losses) recognized on equity securities (2,183) 3,041 (5,224) (171.8) % Net securities gains (losses) (2,133) 3,070 (5,203) (169.5) % Other income 14,822 10,292 4,530 44.0 % Total noninterest income $ 126,803 $ 132,804 $ (6,001) (4.5) % Assets under care $ 11,061,831 $ 12,731,319 $ (1,669,488) (13.1) % Total noninterest income was $122.4 million for the year ended December 31, 2023, a decrease of 3.5% when compared with $126.8 million for the year ended December 31, 2022.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Table of Contents SCOPE OF DISCUSSION 46 CURRENT EVENTS 46 CRITICAL ACCOUNTING ESTIMATES 46 Fair Value of Debt Securities Available for Sale 47 Fair Value of Assets Acquired and Liabilities Assumed in Business Combinations 47 Goodwill 48 Income Taxes 48 Allowance for Credit Losses 48 EXECUTIVE SUMMARY 48 Operating Results 48 Operating Performance 49 RESULTS OF OPERATIONS — THREE YEARS ENDED DECEMBER 31, 2022 50 Net Interest Income 50 Noninterest Income 54 Noninterest Expense 56 Efficiency Ratio 58 Income Taxes 58 FINANCIAL CONDITION 59 Balance Sheet 59 Investment Securities 59 Portfolio Loans 62 Deposits 71 Borrowings 72 Liquidity 74 Off-Balance-Sheet Arrangements 75 Contractual Obligations 76 Cash Flows 76 Capital Resources 77 NEW ACCOUNTING PRONOUNCEMENTS 77 EFFECTS OF INFLATION 77 45 Table of Contents SCOPE OF DISCUSSION The following is management’s discussion and analysis of the financial condition as of December 31, 2022, and 2021, and the results of operations for the years ended December 31, 2022, 2021, and 2020, of First Busey and its subsidiaries.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) SCOPE OF DISCUSSION 54 CRITICAL ACCOUNTING ESTIMATES 54 Fair Value of Debt Securities Available for Sale 55 Fair Value of Assets Acquired and Liabilities Assumed in Business Combinations 55 Goodwill 56 Income Taxes 56 Allowance for Credit Losses 56 RESULTS OF OPERATIONS — THREE YEARS ENDED DECEMBER 31, 2023 57 Net Income 57 Operating Performance Metrics 57 Net Interest Income 58 Noninterest Income 62 Noninterest Expense 65 Efficiency Ratio 67 Income Taxes 67 FINANCIAL CONDITION 68 Balance Sheet 68 Investment Securities 69 Portfolio Loans 72 Deposits 82 Borrowings 83 Liquidity 85 Off-Balance-Sheet Arrangements 87 Contractual Obligations 87 Cash Flows 88 Capital Resources 88 NEW ACCOUNTING PRONOUNCEMENTS 88 EFFECTS OF INFLATION 89 First Busey Corporation | 2023 — 53 Table of Contents Contents of Item 7.
The allowance for PCD loans is recorded through a gross-up effect, while the allowance for acquired non-PCD loans is recorded through provision expense, consistent with originated loans.
The allowance for PCD loans is recorded through a gross-up effect, while the 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.
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.
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.
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.
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.” First Busey Corporation | 2023 — 55 Table of Contents Contents of Item 7.
Interest income includes $1.9 million, $14.0 million, and $15.2 million of fees, net of deferred costs related to PPP loans for 2022, 2021, and 2020, respectively. 4. Includes short-term borrowings, long-term debt, senior notes, and subordinated notes.
Interest income includes an immaterial amount of fees, net of deferred costs, related to PPP loans for 2023, $1.9 million for 2022, and $14.0 million for 2021. 4. Borrowings include short-term borrowings, long-term debt, senior notes, and subordinated notes. Interest expense includes a non-usage fee on our revolving credit facility.
Significant Accounting Policies ” in the Notes to the Consolidated Financial Statements. 46 Table of Contents 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.
Critical accounting estimates are those that are critical to the portrayal and understanding of 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.
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. Tax-equivalent basis assumes a federal income tax rate of 21.0%.
Net interest margin is tax-equivalent net interest income as a percent of average interest-earning assets. Certain assets with tax favorable treatment are evaluated on a tax-equivalent basis, assuming a federal income tax rate of 21.0%. Tax favorable assets generally have lower contractual pre-tax yields than fully taxable assets.
In comparison, First Busey had $76.9 million in PPP loans outstanding, with an amortized cost of $75.0 million, as of December 31, 2021. CRITICAL ACCOUNTING ESTIMATES First Busey has established various accounting policies that govern the application of GAAP in the preparation of its Consolidated Financial Statements. Significant accounting policies are described in “ Note 1.
CRITICAL ACCOUNTING ESTIMATES Busey has established various accounting policies that govern the application of GAAP in the preparation of its Consolidated Financial Statements . Significant accounting policies are described in “ Note 1. Significant Accounting Policies ” in the Notes to the Consolidated Financial Statements .
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 2.68% in 2022 compared to 2.36% in 2021 and 2.83% in 2020, each on a tax equivalent basis.
Net interest spread represents the difference between the average rate earned on earning assets and the average rate paid on interest-bearing liabilities, and is presented in the table below for the periods indicated: Years Ended December 31, 2023 2022 2021 Net interest spread 1 2.27 % 2.68 % 2.36 % ___________________________________________ 1. Calculated on a tax-equivalent basis.
The efficiency ratio and adjusted efficiency ratio are both non-GAAP financial measures. For a reconciliation of non-GAAP financial measure to the most directly comparable GAAP financial measures, see “ Item 1. Business—Non-GAAP Financial Information .” Total noninterest expense increased to $283.9 million for the year ended December 31, 2022, compared to $261.8 million for the year ended December 31, 2021.
The efficiency ratio and adjusted efficiency ratio are both non-GAAP financial measures. For a reconciliation of non-GAAP financial measure to the most directly comparable GAAP financial measures, see “ Item 1. Business—Non-GAAP Financial Information .” First Busey Corporation | 2023 — 65 Table of Contents Contents of Item 7.
Interest expense includes a non-usage fee on our revolving credit facility. 51 Table of Contents The following table presents a breakout of changes in net interest income attributable to changes in average volume and changes in average yield (dollars in thousands) : Years Ended December 31, 2022 vs. 2021 Change Due To 2021 vs. 2020 Change Due To Average Volume Average Yield/Rate Total Change Average Volume Average Yield/Rate Total Change Increase (decrease) in interest income Interest-bearing bank deposits and federal funds sold $ (921) $ 2,867 $ 1,946 $ 410 $ (982) $ (572) Investment securities: U.S.
For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on changes due to rate and changes due to volume (dollars in thousands) : Years Ended December 31, 2023 vs. 2022 Change Due To 2022 vs. 2021 Change Due To Average Volume Average Yield/Rate Total Change Average Volume Average Yield/Rate Total Change Increase (decrease) in interest income Interest-bearing bank deposits and federal funds sold $ (1,013) $ 8,447 $ 7,434 $ (921) $ 2,867 $ 1,946 Investment securities: U.S.
All average information is provided on a daily average basis. 50 Table of Contents Consolidated Average Balance Sheets and Interest Rates Average balances, income and expense, and yield rates are presented below for the periods indicated (dollars in thousands) : Years Ended December 31, 2022 2021 2020 Average Balance Income/ Expense Yield/ Rate Average Balance Income/ Expense Yield/ Rate Average Balance Income/ Expense Yield/ Rate Assets Interest-bearing bank deposits and federal funds sold $ 290,875 $ 3,097 1.06 % $ 630,687 $ 1,151 0.18 % $ 488,786 $ 1,723 0.35 % Investment securities: U.S.
MD&A Years Ended December 31, 2023 2022 2021 Average Balance Income/ Expense Yield/ Rate Average Balance Income/ Expense Yield/ Rate Average Balance Income/ Expense Yield/ Rate Assets Interest-bearing bank deposits and federal funds sold $ 214,422 $ 10,531 4.91 % $ 290,875 $ 3,097 1.06 % $ 630,687 $ 1,151 0.18 % Investment securities: U.S.
Amortization of intangible assets included 12 months of amortization in 2022 in connection with intangible assets obtained in the acquisition of CAC, compared to seven months in 2021. Interchange expense increased to $6.3 million in 2022, compared to $5.8 million in 2021. Fluctuations in interchange expense were primarily the result of increased payment and volume activity at FirsTech.
Fluctuations in interchange expense were primarily the result of increased payment and volume activity at FirsTech. FDIC insurance expense increased to $5.7 million in 2023, compared to $4.1 million in 2022.
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.
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. Income Taxes Busey estimates income tax expense based on amounts expected to be owed to federal and state tax jurisdictions.
Fees for customer services decreased by 7.0% to $33.1 million in 2022, compared to $35.6 million in 2021. Beginning on July 1, 2022, we became subject to the Durbin Amendment of the Dodd-Frank Act.
MD&A Fees for customer services decreased by 12.3% to $29.0 million in 2023, compared to $33.1 million in 2022. Beginning on July 1, 2022, we became subject to the Durbin Amendment, which requires the Federal Reserve to establish a maximum permissible interchange fee for many types of debit transactions.
In addition to yield, various other risks are factored into the evaluation process. The following tables (dollars in thousands) show our Consolidated Average Balance Sheets, detailing the major categories of assets and liabilities, the interest income earned on interest-earning assets, the interest expense paid for the interest-bearing liabilities, and the related interest rates for the periods shown.
Consolidated Average Balance Sheets and Interest Rates The table below presents our Consolidated Average Balance Sheets, detailing average balances for each major category of assets and liabilities, the interest income earned on interest-earning assets, the interest expense paid for interest-bearing liabilities, and the related interest yields for the periods indicated.
For a reconciliation of non-GAAP measures to the most directly comparable financial GAAP measures, see “ Item 1.
The following policies could be deemed critical: 1 Core deposits is a non-GAAP financial measure. For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, see “ Item 1. Business—Non-GAAP Financial Information. ” First Busey Corporation | 2023 — 54 Table of Contents Contents of Item 7.
First Busey remains substantially funded by core deposits 1 , with robust liquidity and significant market share in the communities we serve. As of December 31, 2022, our loan to deposit ratio was 76.7% and core deposits represented 98.8% of total deposits.
Since March 31, 2023, our deposit base has grown by $490.0 million, allowing us to reduce our higher cost FHLB borrowings to zero. Busey remains substantially core deposit 1 funded, with robust liquidity and significant market share in the communities we serve.
Our portfolio management team continues to produce solid results in the face of very volatile markets. Payment technology solutions revenue relates to our payment processing company, FirsTech. Payment technology solutions revenue increased by 9.4% to $20.1 million in 2022, compared to $18.3 million in 2021.
Busey’s Wealth Management division had $12.1 billion in assets under care as of December 31, 2023, compared to $11.1 billion as of December 31, 2022. Our portfolio management team continues to focus on long-term returns and managing risk in the face of volatile markets. Payment technology solutions revenue relates to our payment processing company, FirsTech.
In the event the Company is required to amend our prior franchise tax filings, we could incur additional expenses. 2 For a reconciliation of the efficiency ratio and the adjusted efficiency ratio, both of which are non-GAAP financial measures, see “
As of December 31, 2023, we were not under income tax examination by any income tax authority. 3 The efficiency ratio and adjusted efficiency ratio are both non-GAAP financial measures. For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, see “
Decreases were primarily attributable to higher expenses in 2021 related to the CAC acquisition, offset by increased expenses for FirsTech related to transaction volume and continued Company-wide investments in technology enhancements, as well as inflation-driven price increases. Combined, net occupancy expense of premises and furniture and equipment expenses increased to $26.8 million in 2022, compared to $26.6 million in 2021.
Data processing expense increased to $23.7 million in 2023, compared to $21.6 million in 2022. Increases were primarily attributable to Company-wide investments in technology enhancements, as well as inflation-driven price increases. First Busey Corporation | 2023 — 66 Table of Contents Contents of Item 7.
Income on bank owned life insurance decreased by 29.1% to $3.7 million in 2022, compared to $5.2 million in 2021, primarily as a result of a decrease in life insurance proceeds. Other income increased by 44.0% to $14.8 million in 2022, compared to $10.3 million in 2021.
General economic conditions and interest rate volatility may impact future fee income. Income on bank owned life insurance increased by 28.3% to $4.7 million in 2023, compared to $3.7 million in 2022, resulting from a $0.8 million increase in earnings on death proceeds and a $0.2 million increase in the cash surrender value of the insurance policies.
Removed
Comparison of 2021 to 2020 can be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2021 Annual Report. CURRENT EVENTS Hurricane Ian On September 28, 2022, Hurricane Ian made landfall in southwest Florida, impacting our operations in the region.
Added
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Contents of Item 7.
Removed
We remain focused on assisting our clients and employees as they navigate the challenges from this historic storm. As of February 23, 2023, two of our three branches are fully operational, and services have been restored at a temporary facility for our third location.
Added
MD&A SCOPE OF DISCUSSION The following is management’s discussion and analysis of the financial condition as of December 31, 2023, and 2022, and the results of operations for the years ended December 31, 2023, 2022, and 2021, of First Busey Corporation and its subsidiaries. It should be read in conjunction with “ Item 1.
Removed
Efforts undertaken to date include: (i) financial assistance for associates impacted by the storm; (ii) creation of a relief center for associates to access much needed supplies; (iii) staffing resource reallocation to support our southwest Florida operations; (iv) fee waivers for impacted customers; and (v) loan modification program for impacted commercial and retail real estate customers.
Added
Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of our 2022 Annual Report . BUSEY’S CONSERVATIVE BANKING STRATEGY Busey’s financial strength is built on a long-term conservative operating approach. The quality of our core deposit franchise is a critical value driver of our institution.
Removed
In 2022, we recognized $0.2 million in noninterest income resulting from a gain on hurricane related disposal of fixed assets, partially offset by waived service charges, and $0.4 million in noninterest expense in connection with these initiatives.
Added
As of December 31, 2023, our loan to deposit ratio was 74.4% and core deposits 1 represented 96.2% of total deposits. Furthermore, we have sufficient on- and off-balance sheet liquidity to manage deposit fluctuations and the liquidity needs of our customers.
Removed
Efficiency Optimization Plan & FirsTech Leadership Change 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 approximately $4.0 million.
Added
Our credit performance reflects our highly diversified, conservatively underwritten loan portfolio, which has been originated predominantly to established customers with tenured relationships with our Company. Our approach to lending and our underwriting standards are designed to emphasize relationship banking rather than transactional banking.
Removed
Approximately 33% of the quarterly run-rate for savings was reflected in our results for the fourth quarter of 2022, and we anticipate our savings to be at a 100% run-rate by the first quarter of 2023. We expect to largely reinvest the anticipated savings to support ongoing growth initiatives across our franchise over the next several quarters.
Added
In addition, as a matter of both policy and practice, we limit concentration exposures in any particular loan segment. As a result, asset quality remains strong by both Busey’s historical and current industry trends. Busey’s conservative banking strategy is reflected in the strength of our capital base.
Removed
Late in the fourth quarter of 2022, we instituted a leadership change at our wholly-owned payments subsidiary, FirsTech, that reflects our continued commitment to scaling and growing this business. Robin Elliott replaces Farhan Yasin as President & CEO of FirsTech and all other leadership remains unchanged.
Added
We strive to consistently maintain capital ratios well in excess of thresholds required to be designated as well capitalized by applicable regulatory guidelines, thereby ensuring financial strength and flexibility across economic and operating cycles.
Removed
In less than two years, FirsTech has been re-energized, revenue has increased, talent has been upgraded across the enterprise, and the technology stack has been redesigned and modernized, positioning the company for scalable growth.
Added
At December 31, 2023, our leverage ratio of Tier 1 capital to average assets was 10.1%, our common equity Tier 1 capital to risk weighted assets ratio was 13.1%, and our total capital to risk weighted assets ratio was 17.4%.
Removed
Going forward we are squarely focused on executing on our growth strategy to provide comprehensive and innovative payment technology solutions that enable businesses to connect with their customers in a multitude of ways on a single, highly-configurable, secure platform.
Added
MD&A 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.
Removed
The Company incurred one-time severance-related costs of $2.4 million during the fourth quarter of 2022, primarily related to the efficiency optimization plan and FirsTech leadership change.
Added
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.
Removed
COVID-19 Throughout the COVID-19 pandemic, 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. First Busey had $0.9 million in PPP loans outstanding, with an amortized cost of $0.8 million, as of December 31, 2022.
Added
First Busey Corporation | 2023 — 56 Table of Contents Contents of Item 7.
Removed
Thus, the determination of which loans are PCD and non-PCD can have a significant effect on the accounting for these loans. 47 Table of Contents Goodwill Goodwill represents the excess of purchase price over the fair value of net assets acquired using the acquisition method of accounting.
Added
Acquisition expenses related to completed acquisitions, exploratory due diligence, and for 2023 the planned merger with M&M. 2. Restructuring charges related to previously disclosed restructuring and efficiency plans. A reconciliation of non-GAAP measures, which we believe facilitate the assessment of our financial results and peer comparability, is included in tabular form in this Annual Report. See “ Item 1.
Removed
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 Consolidated Statements of Income.
Added
Business—Non-GAAP Financial Information . ” Net Interest Income Net interest income is the difference between interest income and fees earned on loans and investments (“interest-earning assets”) and interest expense incurred on deposits and borrowings (“interest-bearing liabilities”). Interest rate levels and volume fluctuations within interest-earning assets and interest-bearing liabilities impact net interest income.
Removed
Acquisition expenses related to completed acquisitions and exploratory due diligence. 2. Restructuring charges related to previously disclosed restructuring plans.
Added
Average information is provided on a daily average basis (dollars in thousands) : First Busey Corporation | 2023 — 58 Table of Contents Contents of Item 7.
Removed
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 earnings per share, adjusted return on average assets, adjusted net interest margin, adjusted noninterest expense, efficiency ratio, adjusted efficiency ratio, tangible common equity, tangible common equity to tangible assets, tangible book value per share, and return on average tangible common equity—which First Busey believes facilitates the assessment of its financial results and peer comparability, is included in tabular form in this Annual Report.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe 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 -400 -300 -200 - 100 +100 +200 +300 +400 December 31, 2022 (21.24) % (14.74) % (8.08) % (3.95)% 3.05% 6.11% 9.18% 12.27% December 31, 2021 NM NM NM NM 8.77% 17.19% 25.64% 33.87% Year-Two: Basis Point Changes -400 -300 -200 - 100 +100 +200 +300 +400 December 31, 2022 (27.82) % (19.56) % (10.76) % (5.27)% 3.94% 7.91% 11.94% 16.02% December 31, 2021 NM NM NM NM 9.51% 18.22% 26.84% 35.35% 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.
Biggest changeBusey’s interest rate risk resulting from 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 Year-Two: Basis Point Changes December 31, 2023 December 31, 2022 December 31, 2023 December 31, 2022 +400 7.38 % 12.27 % 8.55 % 16.02 % +300 5.49 % 9.18 % 6.34 % 11.94 % +200 3.64 % 6.11 % 4.20 % 7.91 % +100 1.81 % 3.05 % 2.10 % 3.94 % - 100 (1.91) % (3.95) % (2.98) % (5.27) % -200 (3.86) % (8.08) % (6.12) % (10.76) % -300 (5.60) % (14.74) % (9.17) % (19.56) % -400 (6.91) % (21.24) % (11.36) % (27.82) % 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.
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.
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.
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.
Interest rate risk is the most significant market risk affecting 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 Busey’s business activities.
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. 78 Table of Contents
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.
Removed
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.
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First Busey Corporation | 2023 — 90 Table of Contents

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