# First Busey Corp: Form 10-Q for the period ended Sep 30, 2022

- Company: [First Busey Corp](/companies/buse.md) (CIK 314489)
- Form: 10-Q
- Filed: 2022-11-03
- Accepted by EDGAR: Nov 3, 2022, 16:05 ET
- Period: 2022-09-30
- Accession: 0000314489-22-000018
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/314489/000031448922000018/buse-20220930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/314489/000031448922000018/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2022-07-01 to 2022-09-30 | $9.1m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2022-01-01 to 2022-09-30 | $21.8m | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-07-01 to 2022-09-30 | $8.5m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-01-01 to 2022-09-30 | $22.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-07-01 to 2022-09-30 | $35.7m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-01-01 to 2022-09-30 | $93.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-07-01 to 2022-09-30 | $0.64 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-01-01 to 2022-09-30 | $1.67 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-07-01 to 2022-09-30 | $0.64 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-01-01 to 2022-09-30 | $1.70 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-07-01 to 2022-09-30 | 56,073,164 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-01-01 to 2022-09-30 | 56,123,756 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-01-01 to 2022-09-30 | $118.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-01-01 to 2022-09-30 | $4.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2022-01-01 to 2022-09-30 | $38.2m | us-gaap:PaymentsOfDividends |
| Share repurchases | 9 months, 2022-01-01 to 2022-09-30 | $9.9m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2022-09-30 | $347.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2022-09-30 | $12.50bn | us-gaap:Assets |
| Total liabilities | at 2022-09-30 | $11.39bn | us-gaap:Liabilities |
| Short-term borrowings | at 2022-09-30 | $16.2m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2022-09-30 | $1.11bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 83,866 characters.

|  |  |
| --- | ---: |
| OVERVIEW | 57 |
| CURRENT EVENTS | 57 |
| EXECUTIVE SUMMARY | 58 |
| Operating Results | 58 |
| Acquisitions | 58 |
| Non-operating Expenses and Non-GAAP Measures | 58 |
| Banking Center Markets | 59 |
| Net Interest Income | 59 |
| Noninterest Income | 64 |
| Noninterest Expense | 66 |
| FINANCIAL CONDITION | 69 |
| Balance Sheet | 69 |
| Portfolio Loans | 69 |
| Deposits | 74 |
| LIQUIDITY | 74 |
| OFF-BALANCE SHEET ARRANGEMENTS | 75 |
| CAPITAL RESOURCES | 75 |
| NON-GAAP FINANCIAL INFORMATION | 76 |
| FORWARD LOOKING STATEMENTS | 83 |
| CRITICAL ACCOUNTING ESTIMATES | 83 |
| Fair Value of Debt Securities Available for Sale | 83 |
| Fair Value of Assets Acquired and Liabilities Assumed in Business Combinations | 84 |
| Goodwill | 84 |
| Income Taxes | 85 |
| Allowance for Credit Losses | 85 |

56

### OVERVIEW

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

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

The following discussion and analysis are intended to assist readers in understanding First Busey’s financial condition and results of operations during the three and nine months ended September 30, 2022, and should be read in conjunction with our unaudited consolidated financial statements and notes thereto included in this Quarterly Report, as well as our 2021 Annual Report.

### CURRENT EVENTS

### Hurricane Ian

On September 28, 2022, Hurricane Ian made landfall in southwest Florida impacting our operations in the region. We are focused on assisting our clients and employees as they navigate the challenges from this historic storm. Efforts undertaken to date include: 1) financial assistance for associates impacted by the storm; 2) creation of a relief center for associates to access much needed supplies; 3) staffing resource reallocation to support our southwest Florida operations; 4) fee waivers for impacted customers; and 5) loan modification programs for impacted commercial and residential customers. These are but a few of the initiatives and efforts implemented to date.

### Efficiency Initiative

Early in the fourth quarter of 2022, we implemented a targeted restructuring and efficiency optimization plan that is expected to generate annual salary and benefits savings of $4.0 million to $4.4 million. We also expect to incur one-time severance-related costs associated with this initiative of $1.1 million to $1.3 million, most of which are expected to be realized in the fourth quarter. We expect to largely reinvest the anticipated savings to support ongoing growth initiatives across our franchise over the next several quarters.

### EXECUTIVE SUMMARY

### Operating Results

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

|  |  | Three Months Ended September 30, 2022 | 2021 | Nine Months Ended September 30, 2022 | 2021 |
| --- | --- | ---: | ---: | ---: | ---: |
| **Reported:** | Net income | $35,661 | $25,941 | $93,924 | $93,523 |
| **Adjusted:** | Net income1 | $36,435 | $32,845 | $95,620 | $102,831 |
| **Reported:** | Diluted earnings per common share | $0.64 | $0.46 | $1.67 | $1.67 |
| **Adjusted:** | Diluted earnings per common share1 | $0.65 | $0.58 | $1.70 | $1.84 |
| **Reported:** | Return on average assets2 | 1.13% | 0.81% | 1.00% | 1.08% |
| **Adjusted:** | Return on average assets1, 2 | 1.15% | 1.03% | 1.02% | 1.19% |
| **Reported:** | Return on average tangible common equity1, 2 | 17.41% | 10.60% | 14.81% | 13.12% |
| **Adjusted:** | Return on average tangible common equity1, 2 | 17.79% | 13.43% | 15.08% | 14.43% |
| **Reported:** | Pre-provision net revenue1 | $46,498 | $30,470 | $122,133 | $104,698 |
| **Adjusted:** | Pre-provision net revenue1 | $48,800 | $39,409 | $129,421 | $119,648 |
| **Reported:** | Pre-provision net revenue to average assets1, 2 | 1.47% | 0.95% | 1.30% | 1.21% |
| **Adjusted:** | Pre-provision net revenue to average assets1, 2 | 1.54% | 1.23% | 1.38% | 1.38% |

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

2\. Annualized measure.

### Acquisitions

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

### Non-operating Expenses and Non-GAAP Measures

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

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

### Banking Center Markets

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

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

Busey Bank has three banking centers in southwest Florida, an area which has experienced strong population growth, job growth, and an expanded housing market over the last several years.

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

### Net Interest Income

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

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

#### Consolidated Average Balance Sheets and Interest Rates (Unaudited)

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

| Assets | Three Months Ended September 30, 2022 Average Balance | Income/ Expense | Yield/ Rate5 | 2021 Average Balance | Income/ Expense | Yield/ Rate5 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest-bearing bank deposits and federal funds sold | $207,917 | $1,085 | 2.07% | $860,200 | $462 | 0.21% |
| Investment securities: |  |  |  |  |  |  |
| U.S. Government obligations | 174,357 | 267 | 0.61% | 251,553 | 416 | 0.66% |
| Obligations of states and political subdivisions1 | 284,069 | 1,900 | 2.65% | 299,024 | 1,900 | 2.52% |
| Other securities | 3,209,327 | 16,298 | 2.01% | 3,171,163 | 10,167 | 1.27% |
| Loans held for sale | 4,195 | 53 | 5.01% | 15,589 | 99 | 2.52% |
| Portfolio loans1, 2 | 7,617,918 | 76,355 | 3.98% | 7,133,108 | 65,418 | 3.64% |
| Total interest-earning assets1, 3 | $11,497,783 | $95,958 | 3.31% | $11,730,637 | $78,462 | 2.65% |
| Cash and due from banks | 123,480 |  |  | 149,550 |  |  |
| Premises and equipment | 130,367 |  |  | 144,334 |  |  |
| ACL | (89,019) |  |  | (96,682) |  |  |
| Other assets | 869,245 |  |  | 769,956 |  |  |
| Total assets | $12,531,856 |  |  | $12,697,795 |  |  |
| **Liabilities and Stockholders’ Equity** |  |  |  |  |  |  |
| Interest-bearing transaction deposits | $2,880,802 | $1,582 | 0.22% | $2,809,669 | $522 | 0.07% |
| Savings and money market deposits | 3,311,327 | 1,058 | 0.13% | 3,369,482 | 811 | 0.10% |
| Time deposits | 800,996 | 925 | 0.46% | 1,074,091 | 1,726 | 0.64% |
| Federal funds purchased and repurchase agreements | 233,032 | 459 | 0.78% | 221,813 | 60 | 0.11% |
| Borrowings4 | 307,255 | 4,300 | 5.55% | 296,185 | 3,262 | 4.37% |
| Junior subordinated debt issued to unconsolidated trusts | 71,736 | 786 | 4.35% | 71,565 | 728 | 4.04% |
| Total interest-bearing liabilities | $7,605,148 | $9,110 | 0.48% | $7,842,805 | $7,109 | 0.36% |
| Net interest spread1 |  |  | 2.83% |  |  | 2.29% |
| Noninterest-bearing deposits | 3,583,693 |  |  | 3,365,823 |  |  |
| Other liabilities | 161,567 |  |  | 137,751 |  |  |
| Stockholders’ equity | 1,181,448 |  |  | 1,351,416 |  |  |
| Total liabilities and stockholders’ equity | $12,531,856 |  |  | $12,697,795 |  |  |
| Interest income / earning assets1, 3 | $11,497,783 | $95,958 | 3.31% | $11,730,637 | $78,462 | 2.65% |
| Interest expense / earning assets | 11,497,783 | $9,110 | 0.31% | $11,730,637 | $7,109 | 0.24% |
| Net interest margin1 |  | $86,848 | 3.00% |  | $71,353 | 2.41% |

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

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

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

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

5\. Annualized.

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

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

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

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

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

5\. Annualized.

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

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

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

62

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

| Net interest income | Three Months Ended September 30, 2022 | 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Interest income, on a tax-equivalent basis1 | $95,958 | $78,462 | $17,496 | 22.3% |
| Interest expense | (9,110) | (7,109) | (2,001) | 28.1% |
| Net interest income, on a tax-equivalent basis1 | $86,848 | $71,353 | $15,495 | 21.7% |
| Net interest margin1, 2 | 3.00% | 2.41% | 59 bps |  |

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

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

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

The FOMC raised rates by 150 basis points during the third quarter of 2022, and a total of 300 basis points during the first three quarters of 2022. 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. Given the timing of the FOMC meetings in September, the full benefit of the associated movement in rates to our net interest margin will be realized in subsequent quarters. In general, net interest margins have been impacted over the last two years by PPP loans, significant growth in the Company’s liquidity position, organic portfolio loan growth over the past six quarters, and the issuance of debt, with more recent impacts resulting from rate increases.

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

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

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

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

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

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

### Noninterest Income

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

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

64

| Noninterest income Wealth management and payment technology income: | Nine Months Ended September 30, 2022 | 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Wealth management fees | $42,422 | $39,335 | $3,087 | 7.8% |
| Payment technology solutions | 15,045 | 13,771 | 1,274 | 9.3% |
| Combined, wealth management fees and payment technology solutions | 57,467 | 53,106 | 4,361 | 8.2% |
| Fees for customer services | 26,122 | 25,936 | 186 | 0.7% |
| Mortgage revenue | 1,697 | 6,153 | (4,456) | (72.4)% |
| Income on bank owned life insurance | 2,716 | 3,439 | (723) | (21.0)% |
| Securities income: |  |  |  |  |
| Realized net gains (losses) on securities | 52 | 114 | (62) | (54.4)% |
| Unrealized net gains (losses) recognized on equity securities | (2,376) | 2,482 | (4,858) | (195.7)% |
| Net securities gains (losses) | (2,324) | 2,596 | (4,920) | (189.5)% |
| Other income | 12,046 | 6,485 | 5,561 | 85.8% |
| Total noninterest income | $97,724 | $97,715 | $9 | —% |

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

Wealth management fees were $12.5 million for the three months ended September 30, 2022, a 9.0% decrease from the comparable period in 2021, and were $42.4 million for the nine months ended September 30, 2022, a 7.8% increase from the comparable period for 2021. First Busey’s Wealth Management division ended the third quarter of 2022 with $10.7 billion in assets under care, compared to $12.7 billion as of December 31, 2021. The decrease in assets under care was principally due to a reduction in market valuations. Our portfolio management team continues to produce solid results in the face of very volatile markets. In the third quarter, Busey's core investment strategy outperformed its blended benchmark, which consists of 60% MSCI All Country World Index and 40% Bloomberg Intermediate Government/Credit Index.

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

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

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

Income on bank owned life insurance was $1.0 million for the three months ended September 30, 2022, a 4.1% decrease from the comparable period in 2021, and was $2.7 million for the nine months ended September 30, 2022, a 21.0% decrease from the comparable period in 2021. Decreases resulted from lower life insurance proceeds and a decline in earnings on the cash surrender value of the policies.

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

### Noninterest Expense

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

| Noninterest expense | Three Months Ended September 30, 2022 | 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Salaries, wages, and employee benefits | $39,762 | $41,949 | $(2,187) | (5.2)% |
| Data processing | 5,447 | 7,782 | (2,335) | (30.0)% |
| Premises expenses: |  |  |  |  |
| Net occupancy expense of premises | 4,705 | 4,797 | (92) | (1.9)% |
| Furniture and equipment expenses | 1,799 | 2,208 | (409) | (18.5)% |
| Combined, net occupancy expense of premises and furniture and equipment expenses | 6,504 | 7,005 | (501) |  |
| Professional fees | 1,579 | 1,361 | 218 | 16.0% |
| Amortization of intangible assets | 2,871 | 3,149 | (278) | (8.8)% |
| Interchange expense | 1,574 | 1,434 | 140 | 9.8% |
| Other expense | 12,999 | 10,807 | 2,192 | 20.3% |
| Total noninterest expense | $70,736 | $73,487 | $(2,751) | (3.7)% |
| Income taxes | $8,477 | $6,455 | $2,022 | 31.3% |
| Effective income tax rate | 19.2% | 19.9% | (70) bps |  |
| Efficiency ratio1 | 57.6% | 67.3% | (970) bps |  |
| Adjusted efficiency ratio1 | 56.8% | 59.0% | (220) bps |  |

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

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

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

Total noninterest expense was $70.7 million for the three months ended September 30, 2022, a 3.7% decrease from the comparable period in 2021, and was $210.2 million for the nine months ended September 30, 2022, a 10.3% increase from the comparable period in 2021. Results for the nine months ended September 30, 2021, included four months of operating expenses for GSB, whereas results for the same period in 2022 reflect the fully integrated acquisition for the complete period.

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

Data processing expense was $5.4 million for the three months ended September 30, 2022, a 30.0% decrease from the comparable period in 2021, and was $15.8 million for the nine months ended September 30, 2022, a 6.4% decrease from the comparable period in 2021. Decreases were primarily attributable to higher expenses in 2021 related to the CAC acquisition. Excluding non-operating expenses, data processing expenses increased by $0.8 million and $2.3 million for the three and nine months ended September 30, 2022, compared to the same periods in 2021.

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

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

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

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

Other expense was $13.0 million for the three months ended September 30, 2022, a $2.2 million increase from the comparable period in 2021, and was $38.7 million for the nine months ended September 30, 2022, an $10.3 million increase from the comparable period in 2021. Increases were across multiple expense categories including marketing and business development, NMTC amortization, regulatory expenses, and fluctuations in provision for unfunded commitments.

The efficiency ratio2, which is a measure commonly used by management and the banking industry, measures the amount of expense incurred to generate a dollar of revenue. Our efficiency ratios2 were 57.6% and 60.3% for the three and nine months ended September 30, 2022, respectively, compared to 67.3% and 61.4% for the three and nine months ended September 30, 2021, respectively.

Our adjusted efficiency ratios2 were 56.8% and 59.7% for the three and nine months ended September 30, 2022, respectively, compared to 59.0% and 57.5% for three and nine months ended September 30, 2021. The Company remains focused on expense discipline, while making necessary investments to promote the organic growth of our key business lines and related support and risk management functions.

#### Taxes

Effective income tax rates of 19.2% and 19.9% for the three and nine months ended September 30, 2022, respectively, 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 federal and state tax credits. We continue to monitor evolving federal and state tax legislation and its potential impact on operations on an ongoing basis. As of September 30, 2022, we were not under examination by any tax authority; however, we have received an inquiry from the State of Illinois regarding our prior franchise tax filings. In the event the Company is required to amend our prior franchise tax filings, we could incur additional expenses.

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

### FINANCIAL CONDITION

### Balance Sheet

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

| Assets | As of September 30, 2022 | December 31, 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Debt securities available for sale | $2,547,041 | $3,981,251 | $(1,434,210) | (36.0)% |
| Debt securities held to maturity | 936,328 | — | 936,328 | N/A |
| Portfolio loans, net of ACL | 7,579,392 | 7,101,111 | 478,281 | 6.7% |
| Total assets | $12,497,388 | $12,859,689 | $(362,301) | (2.8)% |
| **Liabilities** |  |  |  |  |
| Deposits: |  |  |  |  |
| Noninterest-bearing | $3,628,169 | $3,670,267 | $(42,098) | (1.1)% |
| Interest-bearing | 6,973,228 | 7,098,310 | (125,082) | (1.8)% |
| Total deposits | $10,601,397 | $10,768,577 | $(167,180) | (1.6)% |
| Securities sold under agreements to repurchase | $234,597 | $270,139 | $(35,542) | (13.2)% |
| Subordinated notes, net of unamortized issuance costs | 221,835 | 182,773 | 39,062 | 21.4% |
| Junior subordinated debt owed to unconsolidated trusts | 71,765 | 71,635 | 130 | 0.2% |
| Total liabilities | $11,390,800 | $11,540,577 | $(149,777) | (1.3)% |
| **Stockholders’ Equity** | $1,106,588 | $1,319,112 | $(212,524) | (16.1)% |

### Portfolio Loans

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

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

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

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

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

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

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

| Portfolio loans | September 30, 2022 Illinois | Missouri | Florida | Indiana | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Commercial | $1,371,973 | $475,655 | $47,527 | $50,738 | $1,945,893 |
| Commercial real estate | 2,211,923 | 680,607 | 202,927 | 183,227 | 3,278,684 |
| Real estate construction | 290,248 | 135,102 | 41,062 | 33,148 | 499,560 |
| Retail real estate | 1,240,568 | 210,693 | 121,881 | 69,957 | 1,643,099 |
| Retail other | 297,772 | 2,177 | 1,699 | 1,230 | 302,878 |
| Total portfolio loans | $5,412,484 | $1,504,234 | $415,096 | $338,300 | $7,670,114 |
| ACL |  |  |  |  | (90,722) |
| Portfolio loans, net of ACL |  |  |  |  | $7,579,392 |

| Portfolio loans | December 31, 2021 Illinois | Missouri | Florida | Indiana | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| 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 |

70

Changes in portfolio loan balances were as follows *(dollars in thousands):*

| Portfolio loans Commercial loans: | As of September 30, 2022 | December 31, 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Commercial | $1,945,893 | $1,943,886 | $2,007 | 0.1% |
| Commercial real estate | 3,278,684 | 3,119,807 | 158,877 | 5.1% |
| Real estate construction | 499,560 | 385,996 | 113,564 | 29.4% |
| Commercial loan balances | 5,724,137 | 5,449,689 | 274,448 | 5.0% |
| Retail loans: |  |  |  |  |
| Retail real estate | 1,643,099 | 1,512,976 | 130,123 | 8.6% |
| Retail other | 302,878 | 226,333 | 76,545 | 33.8% |
| Retail loan balances | 1,945,977 | 1,739,309 | 206,668 | 11.9% |
| Total portfolio loans | 7,670,114 | 7,188,998 | 481,116 | 6.7% |
| ACL | (90,722) | (87,887) | (2,835) | 3.2% |
| Portfolio loans, net of ACL | $7,579,392 | $7,101,111 | $478,281 | 6.7% |

Excluding the amortized cost of PPP loans, changes in commercial loan balances were as follows:

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

As of September 30, 2022, the Company has experienced its sixth consecutive quarter of strong core loan3 growth. As has been our practice, we remain steadfast in our disciplined underwriting.

#### Allowance and Provision for Credit Losses

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

Provision for credit loss expenses increased for the three months ended September 30, 2022, due to a provision expense of $2.4 million, compared to a provision release of $1.9 million for the same period in 2021. Provision expense increased for the nine months ended September 30, 2022, due to a provision expense of $3.8 million, compared to a provision release of $10.4 million for the same period in 2021. Releases in 2021 reflect a normalization of the reserve balances following a build-up at the onset of the COVID-19.

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 2. Management’s Discussion and Analysis—Non-GAAP Financial Information”* included in this Quarterly Report.

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

|  |  | As of September 30, 2022 | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 |
| --- | --- | ---: | ---: | ---: | ---: | ---: |
| **Portfolio loans** | \[a\] | $7,670,114 | $7,497,778 | $7,272,873 | $7,188,998 | $7,150,635 |
| Non-GAAP adjustments: |  |  |  |  |  |  |
| PPP loans amortized cost |  | (1,426) | (7,616) | (31,769) | (74,958) | (178,231) |
| Core loans1 | \[b\] | $7,668,688 | $7,490,162 | $7,241,104 | $7,114,040 | $6,972,404 |
| **ACL** | \[c\] | $90,722 | $88,757 | $88,213 | $87,887 | $92,802 |
| **Ratios** |  |  |  |  |  |  |
| ACL to portfolio loans | \[c÷a\] | 1.18% | 1.18% | 1.21% | 1.22% | 1.30% |
| ACL to core loans1 | \[c÷b\] | 1.18% | 1.18% | 1.22% | 1.24% | 1.33% |

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

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

#### 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. Loans may be placed on non-accrual status regardless of whether or not such loans are considered past due. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

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

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

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

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

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

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

#### Potential Problem Loans

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

#### COVID-19 Modifications

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

### Deposits

Total deposits decreased by 1.6% to $10.6 billion as of September 30, 2022, compared to $10.8 billion as of December 31, 2021. We focus on deepening our relationships with customers to foster core deposit4 growth, allowing us to reduce our reliance on wholesale funding. Core deposits include non-brokered transaction accounts, money market deposit accounts, and time deposits of $250,000 or less. Fluctuations in deposit balances can be attributed to the retention of PPP loan funding in customer deposit accounts, the impacts of fiscal stimulus, inflation and related economic effects on our customers, as well as typical seasonality aspects within our portfolio.

### LIQUIDITY

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

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

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

| Additional borrowing capacity available from: | As of September 30, 2022 | December 31, 2021 |
| --- | ---: | ---: |
| FHLB | $1,824,424 | $1,536,019 |
| Federal Reserve | 752,733 | 624,627 |
| Revolving credit facility | 40,000 | 40,000 |
| Additional borrowing capacity | $2,617,157 | $2,200,646 |

As of September 30, 2022, 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.

### OFF-BALANCE-SHEET ARRANGEMENTS

Busey Bank routinely enters into commitments to extend credit and standby letters of credit in the normal course of business to meet the financing needs of its customers. We had outstanding loan commitments and standby letters of credit of $2.1 billion as of both September 30, 2022, and December 31, 2021. The balance of commitments to extend credit represents future cash requirements and some of these commitments may expire without being drawn upon. We anticipate we will have sufficient funds available to meet current loan commitments, including loan applications received and in process prior to the issuance of firm commitments.

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

### CAPITAL RESOURCES

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

|  | Minimum Capital Requirements with Capital Buffer First Busey Corporation | As of September 30, 2022 Busey Bank |  |
| --- | ---: | ---: | ---: |
| Common Equity Tier 1 Capital to Risk Weighted Assets | 7.00% | 11.79% | 14.45% |
| Tier 1 Capital to Risk Weighted Assets | 8.50% | 12.62% | 14.45% |
| Total Capital to Risk Weighted Assets | 10.50% | 15.98% | 15.31% |
| Leverage Ratio of Tier 1 Capital to Average Assets | 6.50% | 9.15% | 10.47% |

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

### NON-GAAP FINANCIAL INFORMATION

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

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

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

### RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)

*Pre-Provision Net Revenue, Adjusted Pre-Provision Net Revenue, Pre-Provision Net Revenue to Average Assets, and Adjusted Pre-Provision Net Revenue to Average Assets*

*(dollars in thousands)*

| PRE-PROVISION NET REVENUE |  | Three Months Ended September 30, 2022 | September 30, 2021 | Nine Months Ended September 30, 2022 | September 30, 2021 |
| --- | --- | ---: | ---: | ---: | ---: |
| Net interest income |  | $86,305 | $70,755 | $232,289 | $200,190 |
| Total noninterest income |  | 30,933 | 33,259 | 97,724 | 97,715 |
| Net security (gains) losses |  | (4) | (57) | 2,324 | (2,596) |
| Total noninterest expense |  | (70,736) | (73,487) | (210,204) | (190,611) |
| Pre-provision net revenue |  | 46,498 | 30,470 | 122,133 | 104,698 |
| Non-GAAP adjustments: |  |  |  |  |  |
| Acquisition and other restructuring expenses |  | 957 | 8,677 | 2,095 | 11,710 |
| Provision for unfunded commitments |  | (320) | (978) | 525 | (1,068) |
| Amortization of New Markets Tax Credits |  | 1,665 | 1,240 | 4,668 | 4,308 |
| Adjusted pre-provision net revenue |  | $48,800 | $39,409 | $129,421 | $119,648 |
| Pre-provision net revenue, annualized | \[a\] | $184,476 | $120,886 | $163,291 | $139,981 |
| Adjusted pre-provision net revenue, annualized | \[b\] | 193,609 | 156,351 | 173,035 | 159,969 |
| Average total assets | \[c\] | 12,531,856 | 12,697,795 | 12,547,816 | 11,571,270 |
| Reported: Pre-provision net revenue to average assets1 | \[a÷c\] | 1.47% | 0.95% | 1.30% | 1.21% |
| Adjusted: Pre-provision net revenue to average assets1 | \[b÷c\] | 1.54% | 1.23% | 1.38% | 1.38% |

1\. Annualized measure.

### RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)

*Adjusted Net Income, Adjusted Diluted Earnings Per Share, Adjusted Return on Average Assets, Return on Average Tangible Common Equity, and Adjusted Return on Average Tangible Common Equity*

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

| NET INCOME ADJUSTED FOR NON-OPERATING ITEMS |  | Three Months Ended September 30, 2022 | September 30, 2021 | Nine Months Ended September 30, 2022 | September 30, 2021 |
| --- | --- | ---: | ---: | ---: | ---: |
| **Net income** | \[a\] | $35,661 | $25,941 | $93,924 | $93,523 |
| Non-GAAP adjustments: |  |  |  |  |  |
| Acquisition expenses: |  |  |  |  |  |
| Salaries, wages, and employee benefits |  | — | 4,462 | 587 | 5,587 |
| Data processing |  | — | 3,182 | 214 | 3,557 |
| Loss on leases or fixed asset impairment |  | — | — | — | — |
| Professional fees, occupancy, and other |  | 4 | 776 | 242 | 2,309 |
| Other restructuring expenses: |  |  |  |  |  |
| Salaries, wages, and employee benefits |  | — | 257 | — | 257 |
| Data processing |  | — | — | — | — |
| Loss on leases or fixed asset impairment |  | 877 | — | 976 | — |
| Professional fees, occupancy, and other |  | 76 | — | 76 | — |
| MSR valuation impairment |  | — | — | — | — |
| Related tax benefit |  | (183) | (1,773) | (399) | (2,402) |
| TJCA related adjustment |  | $— | $— | $— | $— |
| Adjusted net income | \[b\] | $36,435 | $32,845 | $95,620 | $102,831 |
| **DILUTED EARNINGS PER SHARE** |  |  |  |  |  |
| Diluted average common shares outstanding | \[c\] | 56,073,164 | 56,832,518 | 56,123,756 | 55,872,835 |
| Reported: Diluted earnings per share | \[a÷c\] | $0.64 | $0.46 | $1.67 | $1.67 |
| Adjusted: Diluted earnings per share | \[b÷c\] | $0.65 | $0.58 | $1.70 | $1.84 |
| **RETURN ON AVERAGE ASSETS** |  |  |  |  |  |
| Net income, annualized | \[d\] | $141,481 | $102,918 | $125,576 | $125,040 |
| Adjusted net income, annualized | \[e\] | 144,552 | 130,309 | 127,844 | 137,485 |
| Average total assets | \[f\] | 12,531,856 | 12,697,795 | 12,547,816 | 11,571,270 |
| Reported: Return on average assets1 | \[d÷f\] | 1.13% | 0.81% | 1.00% | 1.08% |
| Adjusted: Return on average assets1 | \[e÷f\] | 1.15% | 1.03% | 1.02% | 1.19% |
| **RETURN ON AVERAGE TANGIBLE COMMON EQUITY** |  |  |  |  |  |
| Average common equity |  | $1,181,448 | $1,351,416 | $1,219,645 | $1,323,571 |
| Average goodwill and other intangible assets, net |  | (368,981) | (380,885) | (371,873) | (370,829) |
| Average tangible common equity | \[g\] | $812,467 | $970,531 | $847,772 | $952,742 |
| Reported: Return on average tangible common equity1 | \[d÷g\] | 17.41% | 10.60% | 14.81% | 13.12% |
| Adjusted: Return on average tangible common equity1 | \[e÷g\] | 17.79% | 13.43% | 15.08% | 14.43% |

1\. Annualized measure.

### RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)

*Adjusted Net Interest Income and Adjusted Net Interest Margin*

*(dollars in thousands)*

|  |  | Three Months Ended September 30, 2022 | September 30, 2021 | Nine Months Ended September 30, 2022 | September 30, 2021 |
| --- | --- | ---: | ---: | ---: | ---: |
| **Net interest income** |  | $86,305 | $70,755 | $232,289 | $200,190 |
| Non-GAAP adjustments: |  |  |  |  |  |
| Tax-equivalent adjustment |  | 543 | 598 | 1,635 | 1,778 |
| Tax-equivalent net interest income |  | 86,848 | 71,353 | 233,924 | 201,968 |
| Purchase accounting accretion related to business combinations |  | (830) | (1,799) | (2,588) | (5,682) |
| Adjusted net interest income |  | $86,018 | $69,554 | $231,336 | $196,286 |
| Tax-equivalent net interest income, annualized | \[a\] | $344,560 | $283,085 | $312,756 | $270,030 |
| Adjusted net interest income, annualized | \[b\] | 341,267 | 275,948 | 309,295 | 262,434 |
| Average interest-earning assets | \[c\] | 11,497,783 | 11,730,637 | 11,550,887 | 10,651,386 |
| Reported: Net interest margin1 | \[a÷c\] | 3.00% | 2.41% | 2.71% | 2.54% |
| Adjusted: Net interest margin1 | \[b÷c\] | 2.97% | 2.35% | 2.68% | 2.46% |

1\. Annualized measure.

### RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)

*Adjusted Noninterest Expense, Adjusted Core Expense, Efficiency Ratio, Adjusted Efficiency Ratio, and Adjusted Core Efficiency Ratio*

*(dollars in thousands)*

|  |  | Three Months Ended September 30, 2022 | September 30, 2021 | Nine Months Ended September 30, 2022 | September 30, 2021 |
| --- | --- | ---: | ---: | ---: | ---: |
| **Net interest income** |  | $86,305 | $70,755 | $232,289 | $200,190 |
| Non-GAAP adjustments: |  |  |  |  |  |
| Tax-equivalent adjustment |  | 543 | 598 | 1,635 | 1,778 |
| Tax-equivalent net interest income |  | 86,848 | 71,353 | 233,924 | 201,968 |
| **Total noninterest income** |  | 30,933 | 33,259 | 97,724 | 97,715 |
| Non-GAAP adjustments: |  |  |  |  |  |
| Net security (gains) losses |  | (4) | (57) | 2,324 | (2,596) |
| Noninterest income excluding net securities gains and losses |  | 30,929 | 33,202 | 100,048 | 95,119 |
| Tax-equivalent net interest income plus noninterest income excluding net securities gains and losses | \[a\] | $117,777 | $104,555 | $333,972 | $297,087 |
| **Total noninterest expense** |  | 70,736 | 73,487 | 210,204 | 190,611 |
| Non-GAAP adjustments: |  |  |  |  |  |
| Amortization of intangible assets | \[b\] | (2,871) | (3,149) | (8,833) | (8,200) |
| Non-interest expense excluding amortization of intangible assets | \[c\] | 67,865 | 70,338 | 201,371 | 182,411 |
| Non-operating adjustments: |  |  |  |  |  |
| Salaries, wages, and employee benefits |  | — | (4,719) | (587) | (5,844) |
| Data processing |  | — | (3,182) | (214) | (3,557) |
| Impairment, professional fees, occupancy, and other |  | (957) | (776) | (1,294) | (2,309) |
| Adjusted noninterest expense | \[f\] | 66,908 | 61,661 | 199,276 | 170,701 |
| Provision for unfunded commitments |  | 320 | 978 | (525) | 1,068 |
| Amortization of New Markets Tax Credits |  | (1,665) | (1,240) | (4,668) | (4,308) |
| Adjusted core expense | \[g\] | $65,563 | $61,399 | $194,083 | $167,461 |
| Noninterest expense, excluding non-operating adjustments | \[f-b\] | 69,779 | 64,810 | 208,109 | 178,901 |
| Reported: Efficiency ratio | \[c÷a\] | 57.62% | 67.27% | 60.30% | 61.40% |
| Adjusted: Efficiency ratio | \[f÷a\] | 56.81% | 58.97% | 59.67% | 57.46% |
| Adjusted: Core efficiency ratio | \[g÷a\] | 55.67% | 58.72% | 58.11% | 56.37% |

80

### RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)

*Tangible Book Value Per Common Share*

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

|  |  | As of September 30, 2022 | December 31, 2021 |
| --- | --- | ---: | ---: |
| **Total stockholders' equity** |  | $1,106,588 | $1,319,112 |
| Goodwill and other intangible assets, net |  | (367,091) | (375,924) |
| Tangible book value | \[a\] | $739,497 | $943,188 |
| Ending number of common shares outstanding | \[b\] | 55,232 | 55,435 |
| Tangible book value per common share | \[a÷b\] | $13.39 | $17.01 |

*Tangible Common Equity and Tangible Common Equity to Tangible Assets*

*(dollars in thousands)*

|  |  | As of September 30, 2022 | December 31, 2021 |
| --- | --- | ---: | ---: |
| **Total assets** |  | $12,497,388 | $12,859,689 |
| Non-GAAP adjustments: |  |  |  |
| Goodwill and other intangible assets, net |  | (367,091) | (375,924) |
| Tax effect of other intangible assets1 |  | 9,369 | 16,254 |
| Tangible assets | \[a\] | $12,139,666 | $12,500,019 |
| **Total stockholders' equity** |  | $1,106,588 | $1,319,112 |
| Non-GAAP adjustments: |  |  |  |
| Goodwill and other intangible assets, net |  | (367,091) | (375,924) |
| Tax effect of other intangible assets1 |  | 9,369 | 16,254 |
| Tangible common equity | \[b\] | $748,866 | $959,442 |
| Tangible common equity to tangible assets2 | \[b÷a\] | 6.17% | 7.68% |

1\. Net of estimated deferred tax liability.

2\. Tax-effected measure.

### RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)

*Core Loans, Core Loans to Portfolio Loans, Core Deposits, Core Deposits to Total Deposits, and Core Loans to Core Deposits*

*(dollars in thousands)*

|  |  | As of September 30, 2022 | December 31, 2021 |
| --- | --- | ---: | ---: |
| **Portfolio loans** | \[a\] | $7,670,114 | $7,188,998 |
| Non-GAAP adjustments: |  |  |  |
| PPP loans amortized cost |  | (1,426) | (74,958) |
| Loans acquired in business combinations, prior to integration |  | — | — |
| Core loans | \[b\] | $7,668,688 | $7,114,040 |
| **Total deposits** | \[c\] | 10,601,397 | 10,768,577 |
| Non-GAAP adjustments: |  |  |  |
| Brokered transaction accounts |  | (2,006) | (2,248) |
| Time deposits of $250,000 or more |  | (103,534) | (137,449) |
| Deposits acquired in business combinations, prior to integration |  | — | — |
| Core deposits | \[d\] | $10,495,857 | $10,628,880 |
| **RATIOS** |  |  |  |
| Core loans to portfolio loans | \[b÷a\] | 99.98% | 98.96% |
| Core deposits to total deposits | \[d÷c\] | 99.00% | 98.70% |
| Core loans to core deposits | \[b÷d\] | 73.06% | 66.93% |

82

### FORWARD-LOOKING STATEMENTS

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

### CRITICAL ACCOUNTING ESTIMATES

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

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

### Fair Value of Debt Securities Available for Sale

The fair values of debt securities available for sale are measurements from an independent pricing service and are based on observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the security’s terms and conditions, among other things. The 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 unaudited Consolidated Statements of Income. The cost of securities sold is based on the specific identification method.

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

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

- Extent to which the fair value is less than the amortized cost basis;
- Adverse conditions specifically related to the security, an industry, or a geographic area (for example, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, in the financial condition of the underlying loan obligors);
- Payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future;
- Failure of the issuer of the security to make scheduled interest or principal payments; and
- Any changes to the rating of the security by a rating agency.

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

### Fair Value of Assets Acquired and Liabilities Assumed in Business Combinations

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

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

### Goodwill

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

### Income Taxes

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

### Allowance for Credit Losses

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

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

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

## Market risk

As filed, 3,434 characters.

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

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

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

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

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

85

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

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

## Controls and procedures

As filed, 1,253 characters.

### Evaluation of Disclosure Controls and Procedures

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

### Changes in Internal Control over Financial Reporting

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

## Risk factors

As filed, 122 characters.

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

Filed Nov 3, 2022.
Source: SEC EDGAR, the filing index for accession 0000314489-22-000018. Last ingested by Listed: Nov 6, 2026, 16:26 ET. No prices; not investment advice.