First Busey Corp: Form 10-K for the period ended Dec 31, 2024

Contents of Item 1. Business

ORGANIZATION

First Busey Corporation is a $12.05 billion financial holding company. Organized in Nevada in 1980, First Busey Corporation is headquartered in Champaign, Illinois. First Busey Corporation’s common stock is traded on The Nasdaq Global Select Market under the symbol “BUSE.”

Busey conducts the business of banking and provides related banking services, asset management, brokerage, and fiduciary services through Busey Bank, and provides payment technology solutions through FirsTech. Busey also has various other subsidiaries that are not significant to the consolidated entity.

Busey Bank

Busey Bank is an Illinois state-chartered bank organized in 1868 with its headquarters in Champaign, Illinois. Busey Bank has 50 banking centers in Illinois, eight in Missouri, three in southwest Florida, and one in Indianapolis, Indiana.

Busey Bank offers a range of diversified financial products and services for consumers and businesses, including online and mobile banking capabilities to conveniently serve its customers’ needs. Commercial services include commercial, CRE, real estate construction, and agricultural loans, as well as commercial depository services such as cash management. Retail banking services include residential real estate, home equity lines of credit, consumer loans, customary types of demand and savings deposits, money transfers, safe deposit services, and individual retirement accounts and other fiduciary services through Busey Bank’s banking center, automated teller machines, and technology-based networks.

Busey Bank’s principal sources of income are interest and fees on loans and investments, wealth management fees, service fees, and payment technology solutions revenue. Principal expenses are interest paid on deposits and borrowings and general operating expenses. Busey Bank’s primary markets are central Illinois; northern Illinois, including the Chicago metropolitan area; the St. Louis, Missouri, metropolitan area; southwest Florida; and central Indiana.

Busey Bank provides a full range of asset management, investment, brokerage, fiduciary, philanthropic advisory, tax preparation, and farm management services to individuals, businesses, and foundations through its Wealth Management business. As of December 31, 2024, $13.83 billion of assets were under care. For individuals, Busey Bank provides investment management, trust and estate advisory services, and financial planning. For businesses, it provides investment management, business succession planning, and employee retirement plan services. For foundations, Busey Bank provides investment management, investment strategy consulting, and fiduciary services. Brokerage-related services are offered by Busey Investment Services, a division of Busey Bank, through a third-party arrangement. In addition, Busey Bank provides professional farm management and brokerage services to the agricultural industry.

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FirsTech

FirsTech, a wholly-owned subsidiary of Busey Bank, provides comprehensive and innovative payment technology solutions. FirsTech's multi-channel payment platform allows businesses to collect payments from their customers in a variety of ways to enable fast, frictionless payments. Payment method vehicles include text-based mobile bill pay; interactive voice response; electronic payment concentration delivered to Automated Clearing House networks, money management, and credit card networks; walk-in payment processing for customers at retail pay agents; customer service payments made over a telephone; direct debit services; and lockbox remittance processing for customers to make payments by mail. FirsTech also provides additional tools to help clients with billing, reconciliation, bill reminders, and treasury services. FirsTech's client base represents a diverse set of industries, with a higher concentration in highly regulated industries, such as financial institutions, utility, insurance, and telecommunications industries.

MERGERS AND ACQUISITIONS

Over the last several years, Busey completed the following acquisitions as part of its strategy to expand into new service areas and to provide broader coverage in areas where Busey already maintains a presence:

Further information related to acquisitions made prior to January 1, 2024, has been presented in the Annual Reports previously filed with the SEC corresponding to each year of each acquisition.

Planned Partnership with CrossFirst

On August 26, 2024, Busey and CrossFirst entered into an agreement and plan of merger (the “merger agreement”) pursuant to which CrossFirst will merge with and into Busey (the “merger”) and CrossFirst’s wholly-owned subsidiary, CrossFirst Bank, will merge with and into Busey Bank (the “bank merger”). The combined holding company will continue to operate under the First Busey Corporation name and the combined bank will operate under the Busey Bank name. This partnership will create a premier commercial bank in the Midwest, Southwest, and Florida, with 77 full-service locations across 10 states—Arizona, Colorado, Florida, Illinois, Indiana, Kansas, Missouri, New Mexico, Oklahoma, and Texas—and approximately $20 billion in combined assets, $17 billion in total deposits, $14 billion in total loans, and $14 billion in wealth assets under care.

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Under the terms of the merger agreement, CrossFirst stockholders will have the right to receive for each share of CrossFirst common stock 0.6675 of a share of Busey’s common stock. Upon completion of the transaction, Busey’s stockholders will own approximately 63.5% of the combined company and CrossFirst’s stockholders will own approximately 36.5% of the combined company, on a fully-diluted basis. Busey common stock will continue to trade on the Nasdaq under the “BUSE” stock ticker symbol.

On December 20, 2024, Busey and CrossFirst stockholders voted to approve the merger. On January 16, 2025, Busey received regulatory approval from the Board of Governors of the Federal Reserve System for the merger. The transaction has also been approved by the Illinois Department of Financial and Professional Regulation and the Kansas Office of the State Bank Commissioner. Busey and CrossFirst intend to close the merger on March 1, 2025, subject to the satisfaction of the remaining customary closing conditions. It is anticipated that CrossFirst Bank will merge with and into Busey Bank in mid-2025. At the time of the bank merger, CrossFirst Bank locations will become banking centers of Busey Bank.

In connection with the merger, Busey incurred one-time pretax acquisition-related expenses of $3.9 million in 2024.

For further details on the merger, see Busey’s Current Report on Form 8‑K announcing the merger, which was filed with the SEC on August 27, 2024.

2024 Acquisition of Merchants and Manufacturers Bank Corporation

On April 1, 2024, Busey completed its acquisition of M&M and its wholly-owned subsidiary, M&M Bank, through a merger transaction. This partnership added M&M’s Life Equity Loan® products to Busey’s existing suite of services and expanded Busey’s presence in the suburban Chicago market. M&M’s results of operations were included in Busey’s results of operation beginning April 1, 2024.

For further information regarding these acquisitions, see “Note 2. Mergers and Acquisitions” in the Notes to the Consolidated Financial Statements.

BANKING CENTER MARKETS

Busey Bank serves the Illinois banking market with 50 banking centers. Seventeen of Busey’s Illinois banking centers are positioned to serve the suburban Chicago market, 21 banking centers serve central Illinois markets, and 12 banking centers in Illinois are located within the St. Louis Metropolitan Statistical Area. Busey’s 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.

Busey Bank has eight banking centers in Missouri. St. Louis, Missouri has a diverse economy with major employment sectors including health care, financial services, professional and business services, and retail. Busey has 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, as well as the benefits of a tourism and winter resort economy.

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

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Market Competition

Busey Bank competes actively with national and state banks, savings and loan associations, and credit unions for deposits and loans mainly in Illinois; the St. Louis, Missouri, metropolitan area; southwest Florida; and central Indiana. Busey Bank competes for real estate and other loans primarily on the basis of type of loan, interest rates and loan fees, and the quality of services provided. Busey Bank and FirsTech compete with other financial institutions, including asset management and trust companies, security broker/dealers, personal loan companies, insurance companies, finance companies, leasing companies, mortgage companies, payment technology solution companies, financial technology companies, and certain governmental agencies, all of which actively engage in marketing various types of loans, deposit accounts, wealth management, and other products and services.

Busey Bank faces substantial competition in attracting deposits from other commercial banks, savings institutions, digital banks, money market and mutual funds, credit unions, insurance agencies, brokerage firms, and other investment vehicles. Customers for banking services are generally influenced by convenience, quality of service, personal contacts, price of services, and availability of products. Busey Bank attracts a significant amount of deposits through its banking centers, primarily from the communities in which those banking centers are located; therefore, competition for those deposits is principally from other commercial banks, savings institutions, and credit unions located in the same communities. Busey Bank competes for deposits by offering a variety of deposit accounts at competitive rates, high-quality customer service, convenient business hours, technology enabled solutions including internet and mobile banking, and convenient banking centers with inter-branch deposit and withdrawal privileges.

Based on information obtained from the FDIC Summary of Deposits dated June 30, 2024, the most recent report available, out of 355 financial institutions headquartered in the State of Illinois, Busey Bank ranked fourth in total deposits within the Illinois market. Further, Busey Bank ranked in the top 10 in total deposits in nine Illinois counties:

HUMAN CAPITAL

Busey is built upon a strong commitment to associate, customer, stockholder, and community, with its associates as the cornerstone of this unwavering commitment. Busey’s vision, Service Excellence in Everything We Do, starts with Busey’s dedication to its associates. Busey is deeply humbled to be consistently recognized nationally and locally throughout the Company’s footprint, including being named nationally among the World’s Best Banks and America’s Best Banks by Forbes; the Best Banks to Work For by American Banker; and the Best Places to Work in Money Management by Pension and Investments. Locally, Busey was once again voted among the Best Places to Work in Illinois and a Best Company to Work For in Florida. From exceeding the needs of customers and colleagues to serving their communities selflessly, Busey associates show unmatched dedication to the Company. Their shared experiences are what make these and other awards possible. Since Busey opened its doors 157 years ago, Busey has maintained its core values, creating a strong foundation and shaping its inclusive culture.

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Busey remains committed to fostering a welcoming and supportive environment within its organization, the banking profession, and the communities in which it operates. Busey is dedicated to attracting and retaining talent across a variety of backgrounds and experiences. Teams with varying beliefs and opinions promote productivity, creativity, and innovation, while better meeting and exceeding the needs of Busey’s customer base. Recruiting, supporting, and retaining a workforce with varying perspectives and ideas, while maintaining a welcoming culture, is the foundation of Busey’s core values—One Busey. Busey’s endeavors in this regard are reported to the Employee Benefit and Compensation Committee and to the Board's Enterprise Risk Committee, which hold the organization accountable to this core value at the highest levels of management.

Associate engagement is an important barometer of Busey’s cultural health. Busey regularly solicits feedback to understand the views of its associates about their work environment and Busey’s culture. The results from engagement surveys are used to implement programs and processes designed to enhance engagement and improve the associate experience. With a strong 91% participation rate and an approach focused on continuous improvement, 2024 results increased to the highest scores in Busey’s history. One such way to keep associates informed and engaged is through quarterly update calls, which are conducted by Busey leadership. These calls provide important information about the financial health of the Company, but more importantly they provide a cultural touchpoint to solidify Busey’s commitment to its number one asset – its associates. A tenet of Busey’s engaged culture is a commitment to investing in associates through unique, award-winning training and development programs. In 2024, 59% of Busey’s associate base engaged in talent and leadership development programs. Since 2017, Busey has been a proud recipient of the Association for Talent Development’s BEST Award, which is presented to organizations that demonstrate enterprise-wide success as a result of employee talent development.

Additionally, Busey cares about the health and well-being of its associates and their families, as evidenced by a strong investment and an 85% participation rate in Busey’s innovative, holistic health and wellness program, B Well. Investments in B Well include a stress management and mental wellness component, lifesaving biometric screenings, a corporate health and wellness coach, onsite wellness center, health club reimbursements, on-demand wellness streaming service and Health Savings Account investments funded by the Company. In 2024, Busey was honored to be recognized among the Illinois' Healthiest Employers by global health insurer Cigna and Crain’s Content Studio, marking the seventh year the Company was named among this elite group.

As of December 31, 2024, Busey and its subsidiaries had a total of 1,509 full-time equivalents. Geographic distribution of Busey associates is as follows:

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CORPORATE GOVERNANCE

Information about Busey’s Board of Directors and Executive Officers is presented under “Officers & Directors” on Busey’s Investor Relations website at ir.busey.com. Additionally, a listing of Busey’s executive officers is presented in Part III, Item 10 of this Form 10‑K under the caption “Executive Officers.”

Busey has adopted a code of ethics applicable to all Busey associates, officers, and directors. The text of this code of ethics is presented under “Governance Documents” on Busey’s Investor Relations website at ir.busey.com.

Reference to Busey’s Investor Relations website does not constitute incorporation by reference of the information contained on the website and it should not be considered part of this document.

SUPERVISION, REGULATION, AND OTHER FACTORS

General

FDIC-insured institutions, like Busey Bank, as well as their holding companies and affiliates, are extensively regulated under federal and state law. As a result, Busey’s growth and earnings performance may be affected not only by management decisions, competitive dynamics, and general economic conditions, but also by the requirements of federal and state statutes and by the regulations and policies of various banking agencies, including the DFPR, the Federal Reserve, the FDIC and the CFPB. Furthermore, taxation laws administered by the Internal Revenue Service and state taxing authorities, accounting rules developed by the FASB, securities laws administered by the SEC and state securities authorities, and anti-money laundering laws and sanctions enforced by the U.S. Treasury have an impact on Busey’s business. The effect of these statutes, regulations, regulatory policies, and accounting rules are significant to Busey’s operations and results.

Federal and state banking laws impose a comprehensive system of supervision, regulation, and enforcement on the operations of FDIC-insured institutions, their holding companies, and affiliates that is intended primarily for the protection of the FDIC-insured deposits and depositors of banks, rather than stockholders. These laws, and the regulations of the banking agencies issued under them, affect, among other things, the scope of Busey’s business; the kinds and amounts of investments that Busey and Busey Bank may make; required capital levels relative to assets; the nature and amount of collateral for loans; the establishment of branches; the ability of Busey and Busey Bank to merge, consolidate and acquire; dealings with Busey’s and Busey Bank’s insiders and affiliates; and Busey’s payment of dividends.

In reaction to the global financial crisis and particularly following the passage of the Dodd-Frank Act in 2010, Busey experienced heightened regulatory requirements and scrutiny. Although the reforms primarily targeted large banking organizations and systemically important financial institutions (at the time, those with assets of $50 billion and greater), certain provisions of the law triggered at $10 billion in assets and the influence of other provisions filtered down in varying degrees to community banks over time, causing Busey’s compliance and risk management processes, and the costs thereof, to increase. The Regulatory Relief Act provided meaningful relief for banks and their holding companies that were not considered systemically important (amended to be those with assets under $250 billion). However, the $10 billion threshold remained in place for certain Dodd-Frank Act reforms that are applicable to Busey, as discussed below. It is anticipated that the current presidential administration and the current U.S. Congress likely will not increase the regulatory burden on banking organizations. At this time, however, it is not possible to predict with any certainty the actual impact that the current political climate may have on the banking industry or the operations of Busey or Busey Bank.

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The supervisory framework for U.S. banking organizations subjects banks and bank holding companies to regular examination by their respective banking agencies, which results in examination reports and ratings that are not publicly available and that can impact the conduct and growth of their businesses. These examinations consider not only compliance with applicable laws and regulations, but also capital levels, asset quality and risk, management ability and performance, earnings, liquidity, and various other factors. The regulatory agencies generally have broad discretion to impose restrictions and limitations on the operations of a regulated entity where the agencies determine, among other things, that such operations are unsafe or unsound, fail to comply with applicable law, or are otherwise inconsistent with laws and regulations. The approach to supervision adopted by each banking agency may have significant impacts on the operations and results of Busey and Busey Bank, as well as the banking industry in general. Based on statements made by congressional leaders and the acting leaders of certain federal banking agencies, there may be changes in the supervisory processes and approach made by the banking agencies, but it is not possible at this time to predict the specific changes (or the timing of any such changes) that may be made.

The following is a summary of the material elements of the supervisory and regulatory framework applicable to First Busey and Busey Bank. It does not describe all of the statutes, regulations, and regulatory policies that apply, nor does it restate all of the requirements of those that are described. The descriptions are qualified in their entirety by reference to particular statutory and regulatory provisions.

The $10 billion Threshold

As indicated above, the Dodd-Frank Act included a number of requirements that were triggered when a banking entity crossed over $10 billion in assets. Those included requirements for stress testing capital, maintenance of a risk committee, adherence to the Volcker Rule’s complicated prohibitions on proprietary trading and ownership of private funds, limitations on interchange fees for certain debit transactions, clearing of swap agreements, and examination and enforcement related to consumer financial services by the CFPB, in addition to a number of heightened reporting requirements. The Regulatory Relief Act eliminated the stress test and risk committee requirements for banking entities between $10 billion and $50 billion, but the other regulations and reporting requirements under the Dodd-Frank Act were not changed.

Busey crossed the $10 billion threshold in 2020. The material consequences to Busey of crossing the $10 billion threshold are as follows:

Interchange Fees

The Durbin Amendment to the Dodd-Frank Act required the Federal Reserve to establish a maximum permissible interchange fee for many types of debit transactions. Interchange fees, also known as “swipe” fees, are charges that merchants pay to card-issuing banks, such as Busey Bank, for processing electronic payment transactions. The Federal Reserve set the maximum interchange fee at 21 cents, plus five bps of the transaction value. The Federal Reserve also adopted a rule to allow a debit card issuer to recover one cent per transaction for fraud prevention purposes if the issuer complies with certain fraud-related requirements required by the Federal Reserve. Fee limits imposed by the Durbin Amendment are applicable to any banking organization with over $10 billion in assets and became applicable to Busey Bank on July 1, 2022, following a six-month transition period. Compliance with the Durbin Amendment has reduced Busey Bank’s earnings on the covered debit transactions.

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Volcker Rule

The Volcker Rule (also a part of the Dodd-Frank Act) restricts the ability of banking organizations (holding companies and their affiliates) with over $10 billion in assets to sponsor or invest in private funds, or to engage in certain types of proprietary trading. In October 2019, the Federal Reserve, OCC, FDIC, Commodity Futures Trading Commission, and SEC finalized rules to tailor the application of the Volcker Rule based on the size and scope of a banking organization’s trading activities and to clarify and amend certain definitions, requirements, and exemptions. Banking organizations have two years (with a possibility of extensions) to comply with the Volcker requirements after crossing the $10 billion threshold. Busey does not materially engage in the activities prohibited by the Volcker Rule; therefore, the application of the rule will not have a material effect on Busey’s operations.

CFPB Examination and Enforcement

Although most of the CFPB’s rules issued under federal consumer financial protection laws are applicable to all providers of consumer financial services, the CFPB only has examination and enforcement authority over banks with more than $10 billion in assets (measured over four consecutive quarters). Busey Bank is under CFPB oversight for consumer banking transactions and continues to be examined for compliance with consumer laws by its primary federal regulator, the Federal Reserve.

Clearing Swaps Agreements

Banks with over $10 billion in assets are required to clear swaps agreements on exchanges. Busey Bank began to comply with the exchange requirement beginning in 2021.

Risk Committee

The Dodd-Frank Act required publicly traded bank holding companies with more than $10 billion in total consolidated assets to establish and maintain a risk committee. Pursuant to the Federal Reserve’s final rules issued under the Regulatory Relief Act, that threshold was increased to $50 billion. Although it is not yet required to have a risk committee in place, Busey established a committee comprised of holding company directors in 2018 to oversee risk matters in preparation for future growth.

The Role of Capital

Regulatory capital represents the net assets of a banking organization available to absorb losses. Because of the risks attendant to their business, FDIC-insured institutions, such as Busey Bank, as well as their holding companies (i.e., banking organizations), generally are required to hold more capital than other businesses. These requirements directly affect Busey’s earnings capabilities. Although capital historically has been one of the key measures of the financial health of both bank holding companies and banks, its role became fundamentally more important in the wake of the global financial crisis, as the banking regulators recognized that the amount and quality of capital held by banking organizations prior to that crisis was insufficient to absorb losses during periods of severe stress.

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Capital Levels

Banking organizations have been required to hold minimum levels of capital based on guidelines established by the banking agencies since 1983. The minimum capital levels for banking organizations have been expressed in terms of ratios of “capital” divided by “total assets.” Beginning in 1989, capital guidelines for U.S. banking organizations have been based upon international capital accords, known as “Basel” accords, adopted by the Basel Committee on Banking Supervision, a committee of central banks and bank supervisors that acts as the primary global standard-setter for prudential regulation, as implemented by the U.S. federal banking agencies on an interagency basis. These accords recognized that bank assets for the purpose of the capital ratio calculations needed to be risk weighted (the theory being that riskier assets should require more capital) and that off-balance sheet exposures needed to be factored into the calculations. Following the global financial crisis, the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, announced an agreement on a strengthened set of capital requirements for banking organizations around the world, known as the Basel III accords, to address deficiencies recognized in connection with the global financial crisis.

The Basel III Rule

U.S. federal banking agencies adopted the Basel III Rule in regulations that were effective (with a number of phase-ins) in 2015. The Basel III Rule established capital standards for banks and bank holding companies that are meaningfully more stringent than those established previously and are still in effect today. The Basel III Rule is applicable to all banking organizations that are subject to minimum capital requirements, including national banks, state banks, and savings and loan associations, as well as to most bank and savings and loan holding companies. First Busey and Busey Bank are each subject to the Basel III Rule as described below.

Risk-Weighting Assets

Three of the required Basel III capital ratios, as discussed immediately below, are calculated using a denominator of total “risk-weighted” assets. In the calculation of so-called “risk weights,” which was introduced in the first Basel accord, bank assets were divided into four basic risk-weighted categories of zero, 20, 50, and 100%. Basel III required a more complex, detailed and calibrated assessment of risk in the calculation of risk weightings. Although it uses the same technique introduced by the Basel I accord in assigning assets to risk-weight categories, it significantly increases the number of categories and adds conditions to the assignment of certain risk weights. Risk weights were established as high as 250% for certain CRE exposures, and higher for certain derivatives.

The assignment of risk weights is likely to continue to be under review by federal banking agencies as they seek to implement certain remaining elements of Basel III. In July 2023, the Biden Administration banking agencies had proposed wide-ranging and significant changes to the Basel III Rules (the “Basel III Endgame Proposal”), which would have, among other requirements, imposed structural changes to the calculation of capital requirements and risk-weighted assets. The Basel III Endgame Proposal would generally have impacted the capital requirements applicable to banking organizations with $100 billion or more in total assets and, as a general matter, would not impact Busey. The Basel III Endgame Proposal has not been, and is not expected to be, adopted in a form substantially similar to the Basel III Endgame Proposal. The banking agencies may issue their own version of this proposal.

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Minimum Capital Ratio Requirements

The Basel III Rule also increased the required quantity and quality of capital. Not only did it increase most of the required minimum capital ratios in effect prior to January 1, 2015, but in requiring that forms of capital be of higher quality to absorb loss, it also introduced the concept of Common Equity Tier 1 Capital, which consists primarily of common stock, related surplus (net of Treasury stock), retained earnings, and Common Equity Tier 1 minority interests subject to certain regulatory adjustments. The Basel III Rule also changed the definition of capital by establishing more stringent criteria that instruments must meet to be considered Additional Tier 1 Capital (primarily non-cumulative perpetual preferred stock that meets certain requirements) and Tier 2 Capital (primarily other types of preferred stock and subordinated debt, subject to limitations). The Basel III Rule also constrained the inclusion of minority interests, mortgage-servicing assets, and deferred tax assets in capital and required deductions from Common Equity Tier 1 Capital if such assets exceeded a percentage of a banking organization’s Common Equity Tier 1 Capital.

The Basel III Rule requires banking organizations to maintain minimum capital ratios as follows:

• A ratio of Common Equity Tier 1 Capital equal to 4.5% of risk-weighted assets;
• A ratio of Tier 1 Capital equal to 6% of risk-weighted assets;
• A continuation of the minimum required amount of Total Capital (Tier 1 plus Tier 2) at 8% of risk-weighted assets; and
• A leverage ratio of Tier 1 Capital to total quarterly average assets equal to 4% in all circumstances.

Capital Conservation Buffer

In addition, banking organizations that want to make capital distributions (including for dividends and repurchases of stock) and pay discretionary bonuses to executive officers without restriction also must maintain 2.5% in Common Equity Tier 1 Capital attributable to a capital conservation buffer. The purpose of the conservation buffer is to ensure that banking institutions maintain a buffer of capital that can be used to absorb losses during periods of financial and economic stress. Factoring in the conservation buffer increases the minimum ratios depicted above to 7% for Common Equity Tier 1 Capital, 8.5% for Tier 1 Capital and 10.5% for Total Capital.

Well-Capitalized Requirements

The ratios described above are minimum standards for banking organizations to be considered “adequately capitalized.” Banking agencies uniformly encourage banking organizations to hold more capital and be “well-capitalized” and, to that end, federal law and regulations provide various incentives for banking organizations to maintain regulatory capital at levels in excess of minimum regulatory requirements. For example, a banking organization that is well-capitalized may: (1) qualify for exemptions from prior notice or application requirements otherwise applicable to certain types of activities; (2) qualify for expedited processing of other required notices or applications; and (3) accept, roll-over or renew brokered deposits. Higher capital levels also could be required if warranted by the particular circumstances or risk profiles of individual banking organizations. For example, the Federal Reserve’s capital guidelines contemplate that additional capital may be required to take adequate account of, among other things, interest rate risk or the risks posed by concentrations of credit, nontraditional activities, or securities trading activities. Further, any banking organization experiencing or anticipating significant growth would be expected to maintain capital ratios, including tangible capital positions (i.e., Tier 1 Capital less all intangible assets), well above the minimum levels.

Under the capital regulations of the Federal Reserve, in order to be well-capitalized, a banking organization must maintain all of the following:

• A Common Equity Tier 1 Capital ratio to risk-weighted assets of 6.5% or more;

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• A ratio of Tier 1 Capital to total risk-weighted assets of 8% or more;
• A ratio of Total Capital to total risk-weighted assets of 10% or more; and
• A leverage ratio of Tier 1 Capital to total adjusted average quarterly assets of 5% or greater.

It is possible under the Basel III Rule to be well-capitalized while remaining out of compliance with the capital conservation buffer discussed above.

As of December 31, 2024: (1) Busey Bank was not subject to a directive from the Federal Reserve or the DFPR to increase its capital, and (2) Busey Bank was well-capitalized, as defined by Federal Reserve regulations. As of December 31, 2024, Busey had regulatory capital in excess of the Federal Reserve’s requirements and met the Basel III Rule requirements to be well-capitalized. First Busey also is in compliance with the capital conservation buffer.

Prompt Corrective Action

The concept of a banking organization being “well-capitalized” is part of a regulatory enforcement regime that provides the federal banking agencies with broad power to take “prompt corrective action” to resolve the problems of depository institutions based on the capital level of each particular institution. The extent of the regulators’ powers depends on whether the banking organization in question is “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” in each case as defined by regulation. Depending upon the capital category to which a banking organization is assigned, the banking agencies’ corrective powers include: (1) requiring the institution to submit a capital restoration plan; (2) limiting the institution’s asset growth and restricting its activities; (3) requiring the institution to issue additional capital stock (including additional voting stock) or to sell itself; (4) restricting transactions between the institution and its affiliates; (5) restricting the interest rate that the institution may pay on deposits; (6) ordering a new election of directors of the institution; (7) requiring that senior executive officers or directors be dismissed; (8) prohibiting the institution from accepting deposits from correspondent banks; (9) requiring the institution to divest certain subsidiaries; (10) prohibiting the payment of principal or interest on subordinated debt; and (11) ultimately, appointing a receiver for the institution.

Supervision and Regulation of First Busey Corporation

General

First Busey Corporation, as the sole stockholder of Busey Bank, is a bank holding company. As a bank holding company, First Busey Corporation is registered with, and subject to regulation, supervision, and enforcement by, the Federal Reserve under the BHCA. First Busey Corporation is legally obligated to act as a source of financial and managerial strength to Busey Bank and to commit resources to support it in circumstances where First Busey Corporation might not otherwise do so. Under the BHCA, First Busey Corporation is subject to periodic examination by the Federal Reserve and is required to file with the Federal Reserve periodic reports of its operations and such additional information regarding First Busey Corporation and Busey Bank as the Federal Reserve may require.

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Acquisitions, Activities and Financial Holding Company Election

The primary purpose of a bank holding company is to control and manage banks. The BHCA generally requires the prior approval of the Federal Reserve for any merger involving a bank holding company or any acquisition by a bank holding company of another bank or bank holding company. Subject to certain conditions (including deposit concentration limits established by the BHCA), the Federal Reserve may allow a bank holding company to acquire banks located in any state of the United States. In approving interstate acquisitions, the Federal Reserve is required to give effect to applicable state law limitations on the aggregate amount of deposits that may be held by the acquiring bank holding company and its FDIC-insured institution affiliates in the state in which the target bank is located (provided that those limits do not discriminate against out-of-state institutions or their holding companies) and state laws that require that the target bank have been in existence for a minimum period of time (not to exceed five years) before being acquired by an out-of-state bank holding company. Furthermore, in accordance with the Dodd-Frank Act, bank holding companies must be well-capitalized and well-managed in order to effect interstate mergers or acquisitions. For a discussion of the capital requirements, see “Item 1. Business—Supervision, Regulation and Other Factors—The Role of Capital” above.

The BHCA generally prohibits bank holding companies from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company that is not a bank and from engaging in any business other than that of banking, managing, and controlling banks, or furnishing services to banks and their subsidiaries. This general prohibition is subject to a number of exceptions. The principal exception allows bank holding companies to engage in, and to own shares of companies engaged in, certain businesses found by the Federal Reserve prior to November 11, 1999, to be “so closely related to banking ... as to be a proper incident thereto.” This authority permits First Busey Corporation to engage in a variety of banking-related businesses, including the ownership and operation of a savings association, or any entity engaged in consumer finance, equipment leasing, and mortgage banking and brokerage services. The BHCA does not place territorial restrictions on the domestic activities of nonbank subsidiaries of bank holding companies.

Additionally, bank holding companies that meet certain eligibility requirements prescribed by the BHCA and elect to operate as financial holding companies may engage in, or own shares in companies engaged in, a wider range of nonbanking activities, including securities and insurance underwriting and sales, merchant banking and any other activity that the Federal Reserve, in consultation with the Secretary of the Treasury, determines by regulation or order is financial in nature or incidental to any such financial activity, or that the Federal Reserve determines by order to be complementary to any such financial activity, as long as the activity does not pose a substantial risk to the safety or soundness of FDIC-insured institutions or the financial system generally. First Busey Corporation has elected to operate as a financial holding company. In order to maintain its status as a financial holding company, First Busey and Busey Bank must be well-capitalized, well-managed, and Busey Bank must have a least a satisfactory CRA rating. If the Federal Reserve determines that a financial holding company is not well-capitalized or well-managed, the Federal Reserve will provide a period of time in which to re-achieve compliance with those requirements, but during the period of noncompliance the Federal Reserve may place any limitations on the financial holding company that it deems appropriate. Furthermore, if the Federal Reserve determines that a financial holding company’s subsidiary bank has not received a satisfactory CRA rating, that financial holding company will not be able to commence any new financial activities or acquire a company that engages in such activities.

Change in Control

Federal law also prohibits any person or company from acquiring “control” of an FDIC-insured depository institution or its holding company without prior notice to the appropriate federal banking agency. “Control” is conclusively presumed to exist upon the acquisition of 25% or more of the outstanding voting securities of a bank or bank holding company but may arise under certain circumstances between 10% and 24.99% ownership.

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Capital Requirements

Bank holding companies are required to maintain capital in accordance with Federal Reserve capital adequacy requirements. For a discussion of capital requirements, see “Item 1. Business—Supervision, Regulation and Other Factors—The Role of Capital” above.

Dividend Payments

First Busey Corporation's ability to pay dividends to its stockholders may be affected by both general corporate law considerations and the policies and capital requirements of the Federal Reserve applicable to bank holding companies. As a Nevada corporation, First Busey Corporation is subject to the limitations of Nevada law, which allows First Busey Corporation to pay dividends unless, after such dividend, (1) First Busey Corporation would not be able to pay its debts as they become due in the usual course of business or (2) First Busey Corporation’s total assets would be less than the sum of its total liabilities plus any amount that would be needed, if First Busey Corporation were to be dissolved at the time of the dividend payment, to satisfy the preferential rights upon dissolution of stockholders whose rights are superior to the rights of the stockholders receiving the distribution.

As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company should eliminate, defer, or significantly reduce dividends to stockholders if: (1) the company’s net income available to stockholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; (2) the prospective rate of earnings retention is inconsistent with the company’s capital needs and overall current and prospective financial condition; or (3) the company will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios. The Federal Reserve also possesses enforcement powers over bank holding companies and their nonbank subsidiaries to prevent or remedy actions that represent unsafe or unsound practices or violations of applicable statutes and regulations. Among these powers is the ability to proscribe the payment of dividends by banks and bank holding companies. In addition, under the Basel III Rule, banking organizations that want to pay unrestricted dividends must maintain 2.5% in Common Equity Tier 1 Capital attributable to the capital conservation buffer. See “Item 1. Business—Supervision, Regulation and Other Factors—The Role of Capital” above.

Incentive Compensation

There have been a number of developments in recent years focused on incentive compensation plans sponsored by bank holding companies and their subsidiary banks, reflecting recognition by federal banking agencies and U.S. Congress that flawed incentive compensation practices in the financial industry were one of many factors contributing to the global financial crisis. The result is interagency guidance on sound incentive compensation practices for banking organizations.

The interagency guidance recognized three core principles. Effective incentive plans should: (1) provide employees with incentives that appropriately balance risk and reward; (2) be compatible with effective controls and risk-management; and (3) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors. Much of the guidance is directed at large banking organizations and, because of the size and complexity of their operations, the regulators expect those organizations to maintain systematic and formalized policies, procedures, and systems for ensuring that the incentive compensation arrangements for all executive and non-executive employees covered by this guidance are identified and reviewed, and appropriately balance risks and rewards. Under the interagency guidance, smaller banking organizations, like Busey, that use incentive compensation arrangements are expected to implement less extensive, formalized, and detailed policies, procedures, and systems than those of larger banks.

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In May 2024, certain of the federal banking and other financial services agencies released a proposed rule regarding certain incentive-based compensation arrangements at certain financial institutions with at least $1 billion in assets, as required under Section 956 of the Dodd-Frank Act. This proposal was largely based on an earlier 2016 proposal. The Federal Reserve and the SEC, however, did not join this proposal, signaling potential interagency misalignment and raising doubts regarding the likelihood of the proposed rule being finalized in its current form. The FDIC has indicated that the agencies will continue to coordinate to reach consensus, but it is not yet clear whether this initiative will continue during the current president’s administration.

Monetary Policy

The monetary policy of the Federal Reserve has a significant effect on the operating results of bank holding companies and their subsidiaries. Among the tools available to the Federal Reserve to affect the money supply are open market transactions in U.S. government securities and changes in the discount rate on bank borrowings. These tools are used in varying combinations to influence overall growth and distribution of bank loans, investments, and deposits, and their use may affect interest rates charged on loans or paid on deposits, which may impact the business and operations of Busey and Busey Bank.

Federal Securities Regulation

First Busey Corporation’s common stock is registered with the SEC under the Securities Act and the Exchange Act. Consequently, First Busey Corporation is subject to the information, proxy solicitation, insider trading and other restrictions and requirements of the SEC under the Exchange Act.

Corporate Governance

The Dodd-Frank Act addressed many investor protection, corporate governance, and executive compensation matters that will affect most U.S. publicly traded companies. It increased stockholder influence over boards of directors by requiring companies to give stockholders a nonbinding vote on executive compensation and so-called “golden parachute” payments, and it authorized the SEC to promulgate rules that would allow stockholders to nominate and solicit voters for their own candidates using a company’s proxy materials. The Dodd-Frank Act also directed the Federal Reserve, together with the other federal banking and financial services agencies, to promulgate rules prohibiting excessive compensation paid to executives of bank holding companies, regardless of whether such companies are publicly traded. As discussed in the “Incentive Compensation” section above, the federal banking and financial services agencies have proposed rules regarding incentive-based compensation arrangements for certain financial institutions, but no rule has been adopted at this time.

Supervision and Regulation of Busey Bank

General

Busey Bank is an Illinois-chartered bank. Its deposit accounts are insured by the FDIC’s Deposit Insurance Fund to the maximum extent provided under federal law and FDIC regulations, currently $250,000 per insured depositor category. As an Illinois-chartered FDIC-insured bank, Busey Bank is subject to the examination, supervision, reporting, and enforcement requirements of the DFPR, the chartering authority for Illinois banks. In October 2024, Busey Bank became a member of the Federal Reserve System, and as a result, Busey Bank became subject to the examination, reporting, regulatory, and enforcement requirements of the Federal Reserve. In addition, the FDIC, as administrator of its Deposit Insurance Fund, has regulatory authority over Busey Bank.

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Deposit Insurance

As an FDIC-insured institution, Busey Bank is required to pay deposit insurance premium assessments to the FDIC. The FDIC has adopted a risk-based assessment system whereby FDIC-insured institutions pay insurance premiums at rates based on their risk classification. For institutions like Busey Bank that are not considered large and highly complex banking organizations, the risk classification is based on examination ratings and financial ratios. A bank’s assessment is then calculated by multiplying its assessment rate by its assessment base (average consolidated total assets minus its average tangible equity). The total base assessment rates, effective as of January 1, 2023, currently range from 2.5 bps to 32 bps on an annualized basis. However, the maximum rate is 18 bps for FDIC-insured institutions in the top two categories of examination composite ratings.

At least semi-annually, the FDIC updates its loss and income projections for its Deposit Insurance Fund and, if needed, increases or decreases the assessment rates, following a notice and comment period on proposed rule making. For this purpose, the reserve ratio is the Deposit Insurance Fund balance divided by estimated insured deposits. In response to the global financial crisis, the Dodd-Frank Act increased the minimum reserve ratio from 1.15% to 1.35% of the estimated amount of total insured deposits. In its October 2024 semiannual update, the FDIC stated that the reserve ratio likely will reach the statutory minimum by the September 30, 2028, deadline, and no adjustments to the base assessment rates is currently projected.

In addition, because the total cost of the failures of Silicon Valley Bank and Signature Bank was approximately $24.1 billion, the FDIC adopted a special assessment for banking organizations with assets of $5 billion or more, at an annual rate of 13.4 bps beginning with the first quarterly assessment period of 2024 and an invoice payment date of June 28, 2024. The FDIC will continue to collect special assessments for an anticipated total of eight quarterly assessment periods. The base for the special assessment is equal to an insured depository institution’s estimated uninsured deposits for the December 31, 2022, reporting period, adjusted to exclude the first $5 billion in estimated uninsured deposits. Busey Bank, as part of a banking organization with assets of $5 billion or more, was technically subject to the FDIC special assessment; however, Busey Bank did not have to pay this assessment due to uninsured deposits being below the $5 billion exclusion threshold.

Supervisory Assessments

All Illinois-chartered banks are required to pay supervisory assessments to the DFPR to fund the operations of that agency. The amount of the assessment is calculated on the basis of each bank’s total assets. During the year ended December 31, 2024, Busey Bank paid supervisory assessments to the DFPR totaling approximately $0.8 million.

Capital Requirements

Banks are generally required to maintain capital levels in excess of other businesses. For a discussion of capital requirements, see “Item 1. Business—Supervision, Regulation and Other Factors—The Role of Capital” above.

Liquidity Requirements

Liquidity is a measure of the ability and ease with which bank assets may be converted to meet financial obligations to pay deposits or other funding sources. Banks are required to implement liquidity risk management frameworks that ensure they maintain sufficient liquidity, including a cushion of unencumbered, high quality, liquid assets to withstand a range of stress events. The level and speed of deposit outflows contributing to the failures of Silicon Valley Bank, Signature Bank, and First Republic Bank in the first half of 2023 was unprecedented and contributed to acute liquidity and funding strain on the financial industry. These events have further underscored the importance of liquidity risk management and contingency funding planning by insured depository institutions like Busey Bank, as highlighted in a 2023 addendum to interagency guidance on funding and liquidity risk management.

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Primary roles of liquidity risk management are to: (1) prospectively assess the need for funds to meet obligations; and (2) ensure the availability of cash or collateral to fulfill those needs at the appropriate time by coordinating the various sources of funds available to the institution under normal and stressed conditions. Basel III includes a liquidity framework that requires the largest insured institutions to measure their liquidity against specific liquidity tests. One test, referred to as the liquidity coverage ratio, is designed to ensure that the banking entity has an adequate stock of unencumbered high-quality liquid assets that can be converted easily and immediately in private markets into cash to meet liquidity needs for a 30-calendar day liquidity stress scenario. The other test, known as the net stable funding ratio, is designed to promote more medium- and long-term funding of the assets and activities of FDIC-insured institutions over a one-year horizon. These tests provide an incentive for banks and holding companies to increase their holdings in Treasury securities and other sovereign debt as a component of assets, increase the use of long-term debt as a funding source and rely on stable funding like core deposits (in lieu of brokered deposits).

Although these tests do not apply to Busey Bank, management continues to review its liquidity risk management framework in light of regulatory and industry developments. For instance, in July 2024, the FDIC released a request for information on deposits, soliciting information on whether, and to what extent, certain types of deposits may behave differently from each other (particularly during periods of economic or financial stress). At the present time, it is unclear how the FDIC may use the information that it gathered pursuant to this request, if at all. However, the possibility remains that the information obtained through this request, or through other requests by the FDIC or other banking agencies, may be used to make regulatory changes that could have a future impact on liquidity monitoring and risk management requirements applicable to Busey Bank.

Dividend Payments

The primary source of funds for First Busey Corporation is dividends from Busey Bank. Under Illinois banking law, Illinois-chartered banks generally may pay dividends only out of undivided profits. The DFPR may restrict the declaration or payment of a dividend by an Illinois-chartered bank. The Federal Reserve Act also imposes limitations on the amount of dividends paid by state member banks, such as Busey Bank. Without Federal Reserve approval, a state member bank may not pay dividends in any calendar year that, in the aggregate, exceed that bank’s calendar year-to-date net income plus the bank’s retained income for the two preceding calendar years.

The payment of dividends by any FDIC-insured institution is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations, and an FDIC-insured institution generally is prohibited from paying any dividends if, following payment thereof, the institution would be undercapitalized. Notwithstanding the availability of funds for dividends, the Federal Reserve, the FDIC, and the DFPR may prohibit the payment of dividends by Busey Bank if any of these banking agencies determines that such payment would constitute an unsafe or unsound practice. In addition, under the Basel III Rule, FDIC-insured institutions that want to pay unrestricted dividends must maintain 2.5% in Common Equity Tier 1 Capital attributable to the capital conservation buffer.

State Bank Investments, Activities, and Acquisitions

Busey Bank is permitted to make investments and engage in activities directly or through subsidiaries as authorized by Illinois law. However, under federal law and FDIC regulations, FDIC-insured state banks are prohibited, subject to certain exceptions, from making or retaining equity investments of a type, or in an amount, that are not permissible for a national bank. Federal law and FDIC regulations also prohibit FDIC-insured state banks and their subsidiaries, subject to certain exceptions, from engaging as principal in any activity that is not permitted for a national bank unless the bank meets, and continues to meet, its minimum regulatory capital requirements, and the FDIC determines that the activity would not pose a significant risk to the Deposit Insurance Fund. These restrictions have not had, and are not currently expected to have, a material impact on the operations of Busey Bank.

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Busey Bank may be required to seek approval from their applicable state regulator and the Federal Reserve (or in some cases, the FDIC) before engaging in certain acquisitions or mergers under applicable state and federal law. In 2024, each of the OCC and the FDIC separately released updated policy statements—and in the case of the OCC, a final rule—regarding how each banking agency reviews applications submitted pursuant to the Bank Merger Act based on statutory factors. The acting chairperson of the FDIC has indicated that the FDIC may seek to reverse the FDIC’s 2024 policy statement. Although the Federal Reserve, Busey Bank’s primary federal regulator, did not release any updated policy statement or rules regarding its review process under the Bank Merger Act in recent years, management of Busey Bank and Busey has considered the impact that the OCC’s and FDIC’s rules and guidance may have on the review of any relevant transactions that Busey Bank undertakes.

Insider Transactions

Busey Bank is subject to certain restrictions imposed by federal law on “covered transactions” between Busey Bank and its “affiliates.” First Busey Corporation is an affiliate of Busey Bank for purposes of these restrictions, and covered transactions subject to the restrictions include extensions of credit to First Busey Corporation, investments in the stock or other securities of First Busey Corporation, and the acceptance of the stock or other securities of First Busey Corporation as collateral for loans made by Busey Bank. The Dodd-Frank Act enhanced the requirements for certain transactions with affiliates, including an expansion of the definition of “covered transactions” and an increase in the amount of time for which collateral requirements regarding covered transactions must be maintained.

Certain limitations and reporting requirements are also placed on extensions of credit by Busey Bank to its directors and officers, to directors and officers of First Busey Corporation and its subsidiaries, to principal stockholders of First Busey Corporation, and to “related interests” of such directors, officers, and principal stockholders. In addition, federal law and regulations may affect the terms upon which any person who is a director or officer of First Busey Corporation or Busey Bank, or a principal stockholder of First Busey Corporation, may obtain credit from banks with which Busey Bank maintains a correspondent relationship.

Safety and Soundness Standards/Risk Management

Federal banking agencies have adopted operational and managerial standards to promote the safety and soundness of FDIC-insured institutions. The standards apply to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, asset quality, and earnings.

In general, the safety and soundness standards prescribe the goals to be achieved in each area, and each institution is responsible for establishing its own procedures to achieve those goals. Although regulatory standards do not have the force of law, if an institution operates in an unsafe and unsound manner, the FDIC-insured institution’s primary federal regulator may require the institution to submit a plan for achieving and maintaining compliance. If an FDIC-insured institution fails to submit an acceptable compliance plan, or fails in any material respect to implement a compliance plan that has been accepted by its primary federal regulator, the banking agency is required to issue an order directing the institution to cure the deficiency. Until the deficiency cited in the agency’s order is cured, the agency may restrict the FDIC-insured institution’s rate of growth, require the FDIC-insured institution to increase its capital, restrict the rates the institution pays on deposits, or require the institution to take any action that the agency deems appropriate under the circumstances. Noncompliance with safety and soundness may also constitute grounds for other enforcement action by the federal banking agencies, including cease and desist orders and civil money penalty assessments.

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During the past decade, banking agencies have increasingly emphasized the importance of sound risk management processes and strong internal controls when evaluating the activities of the FDIC-insured institutions they supervise. Properly managing risk has been identified as critical to the conduct of safe and sound banking activities, and has become even more important as new technologies, product innovation, and the size and speed of financial transactions have changed the nature of banking markets. The banking agencies have identified a spectrum of risks facing a banking organization including, but not limited to, credit, market, liquidity, operational, legal, and reputational risk. The key risk themes identified by Busey for 2024 are discussed under “Item 1A. Risk Factors” below. Busey Bank is expected to have active board and senior management oversight; adequate policies, procedures, and limits; adequate risk measurement, monitoring, and management information systems; and comprehensive internal controls. The federal banking agencies also have released specific risk management guidance on certain topics, including third-party relationships, in response to the proliferation of relationships between banking organizations and financial technology companies (although the guidance applies more broadly).

Privacy and Cybersecurity

Busey Bank is subject to many U.S. federal and state laws and regulations governing requirements for maintaining policies and procedures to protect non-public personal and other confidential information of its customers. These laws require Busey Bank to periodically disclose its privacy policies and practices relating to sharing such information and permit consumers to opt out of their ability to share information with unaffiliated third parties under certain circumstances. They also impact Busey Bank’s ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes, or to contact customers with marketing offers. In addition, Busey Bank is required to implement a comprehensive information security program that includes administrative, technical, and physical safeguards to ensure the security and confidentiality of customer records and information. These security and privacy policies and procedures, for the protection of personal and confidential information, are in effect across all businesses and geographic locations. Busey Bank and Busey also are subject to a number of federal and state laws and regulations requiring notifications and disclosures regarding certain cybersecurity incidents. Busey Bank must also consider and address cybersecurity considerations as part of its risk management processes.

Branching Authority

Illinois banks, such as Busey Bank, have the authority under Illinois law to establish branches anywhere in the State of Illinois, subject to receipt of all required regulatory approvals. The Dodd-Frank Act permits well-capitalized and well-managed banks to establish new interstate branches or acquire individual branches of a bank in another state (rather than the acquisition of an out-of-state bank in its entirety) without impediments. Federal law permits state and national banks to merge with banks in other states subject to: (1) regulatory approval; (2) federal and state deposit concentration limits; and (3) state law limitations requiring the merging bank to have been in existence for a minimum period of time (not to exceed five years) prior to the merger.

Federal Home Loan Bank System

Busey Bank is a member of a FHLB, which serves as a central credit facility for its members. The FHLB is funded primarily from proceeds from the sale of obligations of the FHLB system. It makes loans to member banks in the form of FHLB advances. All advances from the FHLB are required to be fully collateralized as determined by the FHLB.

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Community Reinvestment Act Requirements

The CRA requires Busey Bank to have a continuing and affirmative obligation in a safe and sound manner to help meet the credit needs of the entire community, including low- and moderate-income neighborhoods. Federal banking agencies regularly assess Busey Bank’s record of meeting the credit needs of its communities in dedicated examinations. Busey Bank’s CRA ratings derived from these examinations can have significant impacts on the activities in which Busey Bank and Busey may engage. For example, a low CRA rating may impact the review of applications for acquisitions by Busey Bank, or Busey’s financial holding company status.

On October 24, 2023, the banking agencies issued a final rule to strengthen and modernize the CRA regulations (the "CRA Rule"). Management of Busey Bank has effectively assessed the impact of the CRA Rule on its CRA lending and investment activities in its respective markets and continues to align its program with current and future expectations.

The CRA Rule is designed to update how CRA activities qualify for consideration, where CRA activities are considered, and how CRA activities are evaluated. More specifically, the banking agencies described the goals of the CRA Rule as follows: (1) to expand access to credit, investment, and basic banking services in low and moderate-income communities; (2) to adapt to changes in the banking industry, including mobile and internet banking by modernizing assessment areas while maintaining a focus on branch-based areas; (3) to provide greater clarity, consistency, and transparency in the application of the regulations through the use of standardized metrics as part of CRA evaluations and clarifying eligible CRA activities focused on low- and moderate-income communities and under-served rural communities; (4) to tailor CRA rules and data collection to bank size and business model; and (5) to maintain a unified approach among the regulators.

In 2022, Busey Bank, like all Illinois chartered banks, became subject to state-level CRA standards, following passage of the Illinois CRA. This means that, in addition to the federal CRA review, Busey Bank will be reviewed by the DFPR to assess Busey Bank’s record of meeting the credit needs of its communities. Like the potential impact under the federal CRA, applications for additional acquisitions or activities would be affected by the evaluation of Busey Bank’s effectiveness in meeting its Illinois CRA requirements.

Anti-Money Laundering/Countering the Financing of Terrorism/Sanctions

The Bank Secrecy Act is the common name for a series of laws and regulations enacted in the United States to combat money laundering and the financing of terrorism. These laws and regulations are designed to deny terrorists and criminals the ability to obtain access to the U.S. financial system and have significant implications for FDIC-insured institutions and other businesses involved in the transfer of money. The so-called Anti-Money Laundering/Countering the Financing of Terrorism regime under the Bank Secrecy Act provides a foundation to promote financial transparency and deter and detect those who seek to misuse the U.S. financial system to launder criminal proceeds, finance terrorist acts, or move funds for other illicit purposes. The laws mandate financial services companies to have policies and procedures with respect to measures designed to address the following matters: (1) customer identification programs; (2) money laundering; (3) terrorist financing; (4) identifying and reporting suspicious activities and currency transactions; (5) currency crimes; and (6) cooperation between FDIC-insured institutions and law enforcement authorities. Busey Bank must also comply with stringent economic and trade sanctions regimes administered and enforced by the Office of Foreign Assets Control.

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Concentrations in Commercial Real Estate

Concentration risk exists when FDIC-insured institutions deploy too many assets to any one industry or segment. A concentration in CRE is one example of regulatory concern that has, in recent years, been subject to additional scrutiny by federal banking agencies as well as the SEC for publicly-traded banking organizations. The interagency CRE Guidance provides supervisory criteria, including the following numerical indicators, to assist bank examiners in identifying banks with potentially significant CRE loan concentrations that may warrant greater supervisory scrutiny: (1) CRE loans exceeding 300% of capital and increasing 50% or more in the preceding three years; or (2) construction and land development loans exceeding 100% of capital. The CRE Guidance does not limit banks’ levels of CRE lending activities, but rather guides institutions in developing risk management practices and levels of capital that are commensurate with the level and nature of their CRE concentrations. On December 18, 2015, and again in more recent years, the federal banking agencies have issued statements to reinforce prudent risk-management practices related to CRE lending, having observed substantial growth in many CRE asset and lending markets, increased competitive pressures, rising CRE concentrations in banks, and an easing of CRE underwriting standards. The federal banking agencies have reminded FDIC-insured institutions to maintain underwriting discipline and exercise prudent risk-management practices to identify, measure, monitor, and manage the risks arising from CRE lending. In addition, FDIC-insured institutions must maintain capital commensurate with the level and nature of their CRE concentration risk. As of December 31, 2024, Busey Bank did not exceed these guidelines.

Consumer Financial Services

The historical structure of federal consumer protection regulation applicable to all providers of consumer financial products and services changed significantly on July 21, 2011, when the CFPB commenced operations to supervise and enforce consumer protection laws. The CFPB has broad rulemaking authority for a wide range of consumer protection laws that apply to all providers of consumer products and services, including Busey Bank, as well as the authority to prohibit “unfair, deceptive or abusive” acts and practices. The CFPB has examination and enforcement authority over providers with more than $10 billion in assets. Busey Bank is under CFPB oversight for consumer banking transactions.

Because abuses in connection with residential mortgages were a significant factor contributing to the global financial crisis, many initial rules issued by the CFPB and required by the Dodd-Frank Act addressed mortgage and mortgage-related products, their underwriting, origination, servicing, and sales. The Dodd-Frank Act significantly expanded underwriting requirements applicable to loans secured by 1-4 family residential real property and augmented federal law combating predatory lending practices. In addition to numerous disclosure requirements, the Dodd-Frank Act and the CFPB’s enabling regulations imposed new standards for mortgage loan originations on all lenders, including banks and savings associations, in an effort to strongly encourage lenders to verify a borrower’s ability to repay, while also establishing a presumption of compliance for certain “qualified mortgages.” The CFPB has from time to time released additional rules as to qualified mortgages and the borrower’s ability to repay.

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Over the last several years, the CFPB has taken an aggressive approach to the regulation and supervision, where applicable, of providers of consumer financial products and services. In particular, the CFPB has taken, or attempted to take, a proactive, multi-front approach to protect consumers from excessive overdraft and non-sufficient funds fees. This includes proposed and final rules, interpretive opinions, and enforcement actions. In 2024, the CFPB finalized a rule that eliminated an exemption for overdraft fees from lending laws (the “Overdraft Rule”). The Overdraft Rule, which has an effective date of October 1, 2025, applies to financial institutions, such as FDIC-insured institutions, with over $10 billion in assets , like Busey Bank, and provides several different options on how to approach charging overdraft fees. Busey expects that the implementation of this rule may result in a decrease in fee income. Several banks and trade associations have sued the CFPB regarding the Overdraft Rule, claiming that the CFPB has exceeded its regulatory authority. The CFPB is now under new acting leadership and has paused much of its existing work. It remains unclear what this will mean for the agency and its oversight of consumer protection laws and regulations. Though some of the CFPB’s rulemakings are under review, the laws, rules, and regulations that the agency has enforced since its inception currently remain intact and could be enforced by other banking agencies.

Consumer protection rules have an impact on Busey Bank’s operations, including by increasing compliance costs and potentially negatively affecting earnings. Busey Bank must also comply with certain state consumer protection laws and requirements in the states in which it operates.

SECURITIES AND EXCHANGE COMMISSION REPORTING AND OTHER INFORMATION

Busey makes its Annual Reports, Quarterly Reports, Current Reports, and any amendments thereto available, free of charge, on its website at busey.com as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. Reference to Busey’s website does not constitute incorporation by reference of the information contained on the website and it should not be considered part of this document.

The SEC maintains an internet site at sec.gov, which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, and from which Busey’s SEC filings may be accessed.

NON-GAAP FINANCIAL INFORMATION

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

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

The following tables present reconciliations between these non-GAAP measures and what management believes to be the most directly comparable GAAP financial measures.

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)

Pre-Provision Net Revenue and Related Measures

(dollars in thousands)

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)

Adjusted Net Income, Average Tangible Common Equity, and Related Ratios

(dollars in thousands, except per share amounts)

1. Tax benefits were calculated by multiplying acquisition expenses and other restructuring expenses by tax rates of 24.9%, 20.4%, and 20.7% for the years ended December 31, 2024, 2023, and 2022, respectively.

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)

Tax-Equivalent Net Interest Income, Adjusted Net Interest Income, Net Interest Margin, and Adjusted Net Interest Margin

(dollars in thousands)

1. Tax-equivalent adjustments were calculated using an estimated federal income tax rate of 21%, applied to non-taxable interest income on investments and loans.

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)

Adjusted Noninterest Income, Revenue Measures, Adjusted Noninterest Expense, Adjusted Core Expense, and Efficiency Ratios

(dollars in thousands)

1. The tax-equivalent adjustments were calculated using an estimated federal income tax rate of 21%, applied to non-taxable interest income on investments and loans.

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)

Tangible Book Value and Tangible Book Value Per Common Share

(dollars in thousands, except per share amounts)

Tangible Assets, Tangible Common Equity, and Tangible Common Equity to Tangible Assets

(dollars in thousands)

1. Net of estimated deferred tax liability, calculated using an estimated tax rate of 26.73% as of December 31, 2024, and 28.0% as of December 31, 2023.

2. Tax-effected measure.

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)

Core Deposits and Related Ratios

(dollars in thousands)

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SPECIAL CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements contained in or incorporated by reference into this Annual Report that are not historical facts may constitute forward-looking statements within the meaning of Section 27A Securities Act, and Section 21E of the Exchange Act. These forward-looking statements are covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. These statements, which are based on certain assumptions and estimates and describe Busey’s future plans, strategies, and expectations, can generally be identified by the use of the words “may,” “will,” “should,” “could,” “would,” “goal,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” “aim” and similar expressions. These forward-looking statements include statements relating to Busey’s projected growth, anticipated future financial performance, financial condition, credit quality, and management’s long-term performance goals, as well as statements relating to the anticipated effects on results of operations and financial condition from expected developments or events, business and growth strategies, and any other statements that are not historical facts.

These forward-looking statements are subject to significant risks, assumptions, and uncertainties, and could be affected by many factors. Factors that could have a material adverse effect on Busey’s financial condition, results of operations, and future prospects can be found under “Item 1A. Risk Factors” in this Annual Report and elsewhere in Busey’s periodic and Current Reports filed with the SEC. These factors include, but are not limited to, the following:

1. risks related to the proposed transaction with CrossFirst, including (i) the possibility that the proposed transaction will not close when expected or at all because conditions to the closing are not satisfied on a timely basis or at all; (ii) the possibility that the anticipated benefits of the proposed transaction will not be realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where Busey and CrossFirst do business; (iii) the possibility that the merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events; (iv) diversion of management's attention from ongoing business operations and opportunities; (v) the possibility that Busey may be unable to achieve expected synergies and operating efficiencies in the merger within the expected timeframes or at all; (vi) the possibility that Busey may be unable to successfully integrate CrossFirst's operations with those of Busey or that such integration may be more difficult, time consuming, or costly than expected; (vii) revenues following the proposed transaction may be lower than expected; and (viii) stockholder litigation that could prevent or delay the closing of the proposed transaction or otherwise negatively impact Busey's business and operations;

2. the strength of the local, state, national, and international economies and financial markets (including effects of inflationary pressures and supply chain constraints);

3. effects on the U.S. economy resulting from the implementation of policies proposed by the new presidential administration, including tariffs, mass deportations, and tax regulations;

4. the economic impact of any future terrorist threats or attacks, widespread disease or pandemics, or other adverse external events that could cause economic deterioration or instability in credit markets (including Russia’s invasion of Ukraine and the conflict in the Middle East);

5. changes in state and federal laws, regulations, and governmental policies concerning Busey's general business (including changes in response to the bank failures in 2023 or as a result of changes in policies implemented by the new presidential administration);

6. the imposition of tariffs or other governmental policies impacting the value of products produced by the Company's commercial borrowers;

7. new or revised accounting policies and practices as may be adopted by state and federal regulatory banking agencies, the FASB, the SEC, or the PCAOB;

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8. changes in interest rates and prepayment rates of Busey’s assets (including the impact of sustained elevated interest rates);

9. increased competition in the financial services sector (including from non-bank competitors such as credit unions and fintech companies) and the inability to attract new customers;

10. changes in technology and the ability to develop and maintain secure and reliable electronic systems;

11. the loss of key executives or associates, talent shortages, and employee turnover;

12. changes in consumer spending;

13. unexpected outcomes and costs of existing or new litigation, investigations, or other legal proceedings, inquiries, and regulatory actions involving Busey (including with respect to Busey’s Illinois franchise taxes);

14. fluctuations in the value of securities held in Busey’s securities portfolio, including as a result of changes in interest rates;

15. credit risk and risk from concentrations (by type of borrower, geographic area, collateral, and industry), within Busey's loan portfolio and large loans to certain borrowers (including CRE loans);

16. the overall health of the local and national real estate market;

17. the ability to maintain an adequate level of allowance for credit losses on loans;

18. the concentration of large deposits from certain clients who have balances above current FDIC insurance limits and may withdraw deposits to diversify their exposure;

19. the ability to successfully manage liquidity risk, which may increase dependence on non-core funding sources such as brokered deposits, and may negatively impact Busey's cost of funds;

20. the level of non-performing assets on Busey’s balance sheets;

21. interruptions involving information technology and communications systems or third-party servicers;

22. breaches or failures of information security controls or cybersecurity-related incidents;

23. the economic impact on Busey and its customers of climate change, natural disasters, and exceptional weather occurrences such as tornadoes, hurricanes, floods, blizzards, and droughts; and

24. other factors and risks described under “Item 1A. Risk Factors” herein.

Because of those risks and other uncertainties, Busey’s actual future results, performance, achievement, or industry results, may be materially different from the results indicated by these forward-looking statements. In addition, Busey’s past results of operations are not necessarily indicative of its future results.

You should not place undue reliance on any forward-looking statements, which speak only as of the dates on which they were made. Busey does not undertake an obligation to update these forward-looking statements, even though circumstances may change in the future, except as required under federal securities law. Busey qualifies all of its forward-looking statements by these cautionary statements.

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This section highlights the risks management believes could adversely affect Busey’s financial performance. Additional risks that could affect Busey adversely and cannot be predicted may arise at any time. Further, risks that are immaterial at this time may have an adverse impact on Busey’s future financial condition.

Contents of Item 1A. Risk Factors

ECONOMIC AND MARKET RISKS

Conditions in the financial market and economic conditions, including conditions in the states in which it operates, generally may adversely affect Busey’s business.

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 the value of collateral securing those loans, as well as demand for loans and other products and services it offers. A favorable business environment is generally characterized by, among other factors, economic growth, efficient capital markets, low inflation, low unemployment, high business and investor confidence, and strong business earnings. Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity, or investor or business confidence; limitations on the availability, or increases in the cost, of credit and capital; increases in inflation or interest rates; high unemployment; natural disasters; or a combination of these or other factors.

Given the complex factors affecting the strength of the U.S. economy, including uncertainties regarding the persistence of inflation; geopolitical developments, such as ongoing conflicts in the Middle East and the Russian invasion of Ukraine, and resulting disruptions in the global energy market; tight labor market conditions domestically; supply chain issues both domestically and internationally; and the potential effects of the new presidential administration, including its response to the foregoing, potential imposition of new tariffs, mass deportations and changes to tax or other financial regulations, uncertainty surrounding future changes may adversely affect Busey’s operating environment and therefore its business, financial condition, results of operations, and growth prospects.

Shifts in consumer and business behavior during economic uncertainty may impact Busey’s business.

Uncertainty regarding economic conditions may result in changes in consumer and business spending, borrowing, and savings habits. Downturns in the markets where Busey’s banking operations occur could result in a decrease in demand for Busey’s products and services, an increase in loan delinquencies and defaults, high or increased levels of problem assets and foreclosures, and reduced wealth management fees resulting from lower asset values. Such conditions could adversely affect the credit quality of Busey’s loans, financial condition, and results of operations.

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Regional economic vulnerabilities and reliance on key industries may heighten risks.

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 industries rely heavily on state and federal funding and contracts. Timely payments by the State of Illinois to its vendors and government-sponsored entities, as well as potential federal changes to healthcare laws, could affect Busey’s primary market areas, which could in turn affect its financial condition and results of operations. A small part of Busey’s business resides in Florida, which can be affected by inclement weather.

Prolonged elevated interest rates followed by easing cycles create financial volatility.

Prolonged periods of elevated interest rates followed by an easing cycle pose significant challenges and opportunities for Busey. While an easing cycle, which is characterized by the FOMC taking action to reduce interest rates, can alleviate some funding pressures and encourage borrowing, it also introduces risks to the banking sector. A rapid shift in rates can compress net interest margins, disrupt asset-liability management, and affect the valuation of financial instruments.

After a series of rate hikes starting in March 2022, the FOMC began an easing cycle in September 2024, responding to slowing inflation and economic growth. As of December 2024, the federal funds target range was reduced to 4.25%–4.5%, marking a gradual reversal from the peak of 5.25%–5.5% in 2023. This shift reflects a softening economic environment, with the FOMC aiming to balance inflation reduction while avoiding a sharp contraction in economic activity.

Declining interest rates result in reduced income from lending and investment activities, and may drive consumers to seek higher-yielding alternatives outside of traditional banking, both of which could negatively impact Busey’s liquidity and results of operations.

While rate cuts can stimulate loan demand, they also create potential threats to the banking sector. Falling interest rates may reduce yields on loans and securities more quickly than the cost of deposits declines, narrowing margins. Deposit outflows could accelerate if customers seek higher-yielding alternatives outside traditional banking, further challenging liquidity. Lower rates can lead to prepayments on fixed-rate loans, impacting the value of interest-earning assets and requiring adjustments to portfolios.

Despite these risks, the easing cycle may present opportunities for growth. Lower rates can revitalize loan demand, particularly in key areas such as mortgages, auto loans, and small business lending, while providing some relief to borrowers under stress. However, the broader economic environment, including rising consumer debt levels, increasing delinquencies, and persistent inflation risks could still impact Busey’s financial condition, liquidity, and overall performance.

REGULATORY AND LEGAL RISKS

Changes in government policies and regulatory frameworks could adversely affect operations and profitability.

Changes in policy and at banking agencies, including changes in interpretation and prioritization, occur over time through policy and personnel changes following federal- and state-level elections, which lead to changes involving the level of oversight and focus on the financial services industry. The nature, timing, and economic and political effects of potential changes to the current legal and regulatory framework affecting financial institutions remain highly uncertain in connection with a change in presidential administration.

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Economic conditions, including interest rates, inflation, and consumer spending, may be influenced by shifts in government leadership and policies, affecting Busey’s operations. Additionally, heightened regulatory scrutiny, particularly in consumer compliance, anti-money laundering, and cybersecurity increases operational and compliance burdens for Busey.

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.

As Busey’s assets grow, so do regulatory expectations. The planned acquisition of CrossFirst amplifies the complexity of compliance. Certain regulations and laws have embedded asset thresholds that increase scrutiny, reporting requirements, and operational demands. For example, the Dodd-Frank Act includes thresholds for asset size that trigger enhanced oversight. Busey’s continued expansion necessitates adapting its compliance frameworks to meet these increasing demands. Failure to manage compliance risks effectively could result in regulatory violations, leading to significant fines, penalties, and legal costs. Additionally, non-compliance could damage Busey's reputation, erode customer trust, and undermine investor confidence, resulting in a negative impact to Busey’s market valuation. It could also lead to further scrutiny from regulators, potentially hindering future growth opportunities.

Evolving privacy, data protection, and information security laws and regulations present operational and legal challenges.

In the normal course of business, Busey collects, processes, and retains sensitive and confidential information regarding its customers, and Busey’s collection and handling of such information is subject to regulatory scrutiny. There has been a heightened legislative and regulatory focus on privacy, data protection, and information security. New or revised laws and regulations, including with the respect to the use of artificial intelligence by financial institutions and service providers, may significantly impact Busey’s current and planned privacy, data protection, and information security-related practices; the collection, use, retention, and safeguarding of customer and employee information; and current or planned business activities. Compliance with current or future privacy, data protection, and information security laws could result in higher compliance and technology costs and could restrict Busey’s ability to provide certain products and services, which could adversely affect Busey’s business.

Laws impacting cannabis-related businesses may have an impact on Busey’s operations and risk profile.

The Controlled Substances Act makes it illegal under federal law to manufacture, distribute, or dispense marijuana. Starting January 1, 2020, however, the Illinois Cannabis Regulation and Tax Act began permitting adults 21 years or older to legally purchase marijuana for recreational use from licensed dispensaries. Further, voters in Missouri approved an amendment to the state constitution that began permitting adults 21 years and older to legally purchase marijuana for recreational use from licensed dispensaries starting February 3, 2023. 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. Busey Bank uses reasonable measures, including appropriate new account screening and customer due diligence measures, to ensure that existing and potential customers that operate in the states in which the Bank operates do not engage in any such activities. 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. Such interactions could create additional legal, regulatory, strategic, and reputational risk to Busey Bank and First Busey Corporation.

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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.

Busey may be subject to lawsuits, governmental inquiries, or self-regulatory reviews. These proceedings could result in penalties, adverse judgments, or operational restrictions. While accruals are established for legal contingencies when losses are probable and estimable, outcomes may exceed these amounts, and accordingly, Busey’s ultimate losses may be higher, possibly significantly so, than the amounts accrued for legal loss contingencies, which could adversely affect Busey’s financial condition and results of operations.

See “Note 18. Outstanding Commitments and Contingent Liabilities” in the Notes to the Consolidated Financial Statements for information regarding an inquiry from the Illinois Secretary of State, pursuant to which the Illinois Secretary of State asked for additional information regarding certain of Busey’s franchise tax filings and the calculation of amounts due thereunder.

CREDIT AND LENDING RISKS

Heightened credit risk associated with lending activities may result in insufficient credit loss provisions, which could have material adverse effects on Busey’s results of operations and financial condition.

Busey’s lending activities involve inherent risks, including borrower nonpayment, fluctuations in collateral value, and the effects of economic and market conditions. These risks have been amplified by recent economic factors, such as elevated interest rates, inflationary pressures, and a more cautious economic outlook. Busey employs rigorous underwriting standards, monitors industry and geographic loan concentrations, and conducts both internal and external independent loan reviews to mitigate these risks. Despite these efforts, credit risks cannot be entirely eliminated, and borrower defaults could lead to increased non-performing loans, charge-offs, delinquencies, and higher ACL provisions.

Busey’s commercial loan portfolio reflects a strategic focus on maintaining robust credit quality. However, there are inherent risks in any lending activity, including uncertainties in collateral values, borrower cash flows, and broader economic conditions. To mitigate credit risk, Busey employs rigorous loan approval procedures, monitors concentrations within industries and geographic locations, and conducts independent reviews through internal and external assessments. Stress testing at both the borrower and portfolio levels helps identify vulnerabilities, but such measures cannot fully eliminate credit risks. Borrowers across various industries may face challenges due to sector-specific pressures or macroeconomic factors, which could lead to elevated non-performing loans, charge-offs, or provisioning needs.

Busey establishes the ACL based on detailed analyses of the loan portfolio and broader market conditions, incorporating management judgments and forward-looking forecasts. While management considers the ACL adequate to absorb probable losses, unforeseen economic disruptions or borrower-specific events could necessitate additional provisions, adversely affecting financial performance.

High levels of non-performing assets could reduce Busey’s profitability and strain operational resources.

Non-performing assets negatively impact Busey’s financial condition through lost interest income, increased loan administration costs, and adverse effects on efficiency ratios. The resolution of these assets demands significant management attention and regulatory compliance, which can divert resources from other priorities. Non-performing loans and OREO properties elevate Busey’s risk profile and require ongoing vigilance to minimize financial and operational disruptions.

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Loan concentrations in volatile markets could increase Busey’s exposure to economic downturns, adversely impacting financial stability.

Busey may have higher credit risk, or experience higher credit losses, to the extent its loans are concentrated by loan type, industry segment, borrower type, or geographic location of the borrower or collateral. CRE represents an important component of Busey’s loan portfolio and is inherently sensitive to economic fluctuations. Busey’s two primary categories of CRE are (1) CRE that is occupied by the property owner, and (2) CRE that is held as investment property. The risks associated with these categories differ, as provided below:

• Occupant owned CRE: The repayment of occupant owned CRE loans is largely dependent on the performance of the underlying business occupying the property. If the borrower’s business experiences financial challenges or operational disruptions, it may impact their ability to service the loan. However, occupant owned CRE loans generally benefit from the borrower’s vested interest in maintaining the property for their own business operations, which may reduce the risk of customer default.
• Investor owned CRE: In contrast, investor owned CRE loans are primarily reliant on property cash flows generated by third-party tenants. These loans are particularly sensitive to factors such as reduced rental income, higher vacancy rates, and regulatory changes. Declines in market demand, economic downturns, or increased tenant defaults could significantly impact the borrower’s ability to repay these loans.

Declining borrower cash flows and fluctuating collateral values may lead to significant losses across Busey’s commercial loan portfolio.

Busey’s commercial loans are primarily underwritten based on the identified cash flow of the borrower, with collateral serving as secondary support. Credit enhancements often include pledged collateral and personal guarantees, which enhance the likelihood of repayment. However, the availability of funds for repayment—particularly for loans secured by accounts receivable—may depend significantly on the borrower’s ability to collect from their customers. In periods of economic recession, this capacity could decline, increasing repayment risks.

Collateral securing loans may depreciate over time, be difficult to appraise, or fluctuate in value based on the borrower’s business performance. With larger commercial loans and the less readily marketable nature of collateral, even a small number of loan loss incidents could materially impact Busey’s financial condition and operational results.

Real estate construction, land acquisition, and development loans are based upon estimates of costs and values associated with the complete project. These estimates may be inaccurate, and Busey 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. Because of the uncertainties inherent in estimating construction costs and the realizable market value of the completed project, and the effects of governmental regulation on real property, it is relatively difficult to evaluate accurately the total funds required to complete a project and to estimate the related loan-to-value ratio. As a result, construction loans often involve the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project and the ability of the borrower to sell or lease the property, rather than the ability of the borrower or guarantor to repay principal and interest. 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. 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. 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.

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Credit quality deterioration in investment securities may result in significant realized losses, impacting Busey’s financial performance.

Busey’s investment portfolio includes securities issued by government-sponsored agencies and non-government entities. While these securities offer portfolio diversification, they are subject to risks such as credit downgrades, collateral underperformance, and issuer defaults. These factors could result in realized losses, negatively impacting Busey’s financial condition and results of operations.

CAPITAL AND LIQUIDITY RISKS

Failure to maintain sufficient capital to meet regulatory requirements could have material adverse effects on financial condition, liquidity, results of operations, and regulatory compliance.

Busey must meet regulatory capital requirements and maintain sufficient liquidity. Busey’s ability to raise additional capital as needed will depend on conditions in the capital markets, economic conditions, and a number of other factors, including investor perceptions regarding the banking industry, market conditions, and governmental activities, many of which are outside Busey’s control, as well as on its financial condition and performance. 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, Busey believes the pricing and other terms investors may require in such an offering may not be attractive to the Company.

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, the cost of FDIC insurance, 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. 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.

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. Additional liquidity is available through repurchase agreements, brokered deposits, and the ability to borrow from the Federal Reserve Bank and the FHLB. 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. In addition, increased competition with the largest banks and fintechs for retail deposits may impact Busey’s ability to raise funds through deposits and could have a negative effect on Busey’s liquidity. 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.

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COMPETITIVE AND STRATEGIC RISKS

If securities or industry analysts do not publish or cease publishing research reports about Busey, if they adversely change their recommendations regarding Busey’s stock, or if Busey’s operating results do not meet their expectations, the price of Busey’s stock could decline.

The trading market for Busey’s common stock is significantly influenced by research and reports from industry analysts. Limited or negative analyst coverage could reduce the stock’s demand, market price, and trading volume. Downgrades, unfavorable comparisons with competitors, or operating results that fall short of analyst expectations may further negatively affect stock performance. The cessation of analyst coverage could exacerbate these challenges, diminishing interest in Busey’s stock.

Intense competition from traditional banks and fintech companies threatens market share.

Busey operates in highly competitive markets across Illinois, Missouri, Indiana, and Florida, with competitors ranging from national and regional banks to fintech companies offering digital-first solutions. The rise of financial technology has introduced new challengers, including non-banks and large technology corporations, that offer services traditionally provided by banks, such as credit issuance, payment processing, and deposit alternatives.

Technological innovations, such as digital wallets, peer-to-peer lending, and blockchain-based transactions attract consumer interest and present a risk of disintermediation, where banks are bypassed as intermediaries. To remain competitive, Busey must continuously invest in innovation and adapt to evolving customer preferences. Failure to do so could lead to reduced loans, deposits, commissions, and profitability, adversely impacting Busey’s financial performance.

Failure to adapt to rapid technological advancements could erode competitiveness.

Technological advancements are reshaping the financial services industry, requiring organizations to balance external competitiveness with internal technological efficiency. Meeting evolving customer expectations for convenience, security, and personalization requires significant investment in innovation and adaptation. Falling behind in the adoption of innovative technologies could result in difficulties attracting new customers, retaining existing ones, and maintaining competitiveness.

Emerging trends, such as generative artificial intelligence, have the potential to disrupt the industry. Although generative artificial intelligence offers opportunities to enhance operational efficiency, it also introduces risks, including fraud, security vulnerabilities, and compliance challenges. While incorporating new technologies into Busey’s business is important in maintaining competitiveness, implementation of such technologies must prioritize security and compliance, which may delay its adoption.

Busey’s strategy of pursuing acquisitions exposes Busey to financial, execution, and operational risks that could negatively affect Busey.

Acquisitions remain a cornerstone of Busey’s growth strategy, exemplified by the planned CrossFirst acquisition. While acquisitions provide opportunities for earnings enhancement and market expansion, they also involve significant risks:

• Integration Risks: Aligning systems, procedures, and personnel as well as harmonizing organizational cultures can be complex and disruptive, potentially negatively impacting customers. To realize anticipated benefits from a merger, Busey must successfully integrate an acquired company into its existing businesses, risk management framework, compliance systems, and corporate culture, in a manner that permits the anticipated benefits to be realized and that does not materially disrupt existing client relationships or result in decreased revenues due to the loss of clients.

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• Credit Quality and Unknown Liabilities: Acquired assets may carry hidden risks that adversely affect financial performance. Insufficient or inadequate due diligence, beyond credit quality, could exacerbate these challenges.
• Market Conditions: The price of acquisitions fluctuates with market conditions. Busey has experienced times during which acquisitions could not be made in specific markets at prices that Busey’s management considered acceptable, and Busey expects that it will experience this condition in the future in one or more markets.
• Employee Attrition: The integration process can lead to employee turnover, particularly among key personnel. The success of a merger is dependent, in part, on Busey’s ability to retain the talents and dedication of key employees. During an acquisition, it is possible that key employees may decide not to remain with the acquired company while the merger is pending or with Busey after the merger. If Busey is unable to retain key employees, including management, who are critical to the successful integration and future operations of the combined company, Busey could face disruptions in its operations, loss of key information, expertise, or know-how, and unanticipated additional recruitment costs. In addition, following a merger, if key employees terminate their employment, Busey’s business activities may be adversely affected, and management’s attention may be diverted from successfully hiring suitable replacements, all of which may cause Busey’s business to suffer.
• Financing Challenges: Acquisitions often require incurring debt or issuing new shares, thereby increasing Busey’s leverage and diminishing its liquidity. Issuing capital stock to the sellers in an acquisition or to third-parties to raise capital could dilute the interests of Busey’s existing stockholders. Issuance of new shares of Busey common stock may result in fluctuations in the market price of Busey common stock, including a stock price decrease.
• Substantial acquisition costs: With any acquisition, Busey may incur a number of non-recurring costs associated with the merger and integration. These costs include legal, financial advisory, accounting, consulting and other advisory fees, severance/employee benefit-related costs, public company filing fees and other regulatory fees, printing costs, system conversion costs, added facilities costs, and other related costs. Further, Busey could incur due diligence expenses which may not result in an acquisition.
• Delayed or unrealized benefits: The time period in which anticipated benefits of a merger are fully realized may take longer than anticipated, or Busey may be unsuccessful in realizing the anticipated benefits from mergers and future acquisitions.

Introduction of new products and services carries financial and strategic risks.

Busey strives to serve customers with a competitive product set and relevant services. While introducing new lines of business or innovative products and services supports this goal, these efforts carry inherent risks. Competitive pressures, underdeveloped markets, or unforeseen challenges can lead to delayed timelines and missed profitability targets. Significant investments in technology and marketing may not yield the desired outcomes, potentially negatively affecting operating results.

Digital asset trends introduce regulatory, competitive and scalability challenges.

While Busey does not currently offer digital asset products, such as cryptocurrencies or stablecoins, the global adoption of digital assets presents competitive and regulatory challenges. The appeal of digital assets lies in their transaction speed, cross-border capabilities, and anonymity. However, these attributes also introduce risks, including fraud, volatility, and limited regulatory oversight.

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As digital asset adoption grows, Busey must remain vigilant to market dynamics and regulatory developments. Additionally, the ability to effectively and efficiently scale operations to meet customer demand is critical. Failure to scale effectively could constrain Busey’s ability to invest in competitive products, hampering long-term growth and competitiveness.

Busey’s ability to navigate competitive pressures and strategic challenges depends on proactive investments in innovation, efficient integration of acquisitions, and the ability to anticipate and adapt to emerging trends.

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. Some of these policies require the use of estimates and assumptions that may affect the value of assets or liabilities and financial results. Certain accounting policies are critical and require management to make subjective and complex judgments about matters that are inherently uncertain, and materially different amounts could be reported under different conditions or using different assumptions. 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 Busey’s goodwill and other intangible assets. 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. Any future impairment of goodwill or other intangible assets, whether 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.

Changes in accounting principles or guidelines could adversely affect financial reporting.

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 Busey’s control, can be difficult to predict, and could materially impact how Busey reports its financial condition and results of operations. In addition, trends in financial and business reporting, including environmental, social, and governance related disclosures, could require Busey to incur additional reporting expense. 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 its results of operations.

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 beyond Busey’s control. Changes in tax laws could affect Busey’s earnings, its customers’ financial positions, or both.

Deferred tax assets are designed to reduce subsequent period income tax expense. They arise, in part, as a result of net loss carry-overs, and other book accounting to tax accounting differences, for items such as expected credit losses, stock-based compensation, and deferred compensation. Deferred tax assets are recorded for such items when it is anticipated that the tax consequences will be recognized in earnings in future periods. A valuation allowance is established against a deferred tax asset when it is unlikely the future tax effects will be realized. Significant judgment by management about matters that are, by nature, uncertain is required to record a deferred tax asset and establish a valuation allowance.

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 the Company.

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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. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods prior to the expiration of the related net operating losses and may be limited by Section 382 of the Internal Revenue Code.

Investments in 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. These investments are designed to generate a return primarily through the realization of federal and state income tax credits and other tax benefits over specified periods. Busey is subject to the risk that previously recorded tax credits, which remain subject to recapture by taxing authorities based on compliance features required at the project level, may fail to meet certain government compliance requirements and may not be realized.

The potential inability to realize these tax credits and other tax benefits could negatively impact Busey’s financial results. The ultimate realization of these benefits depends upon having sufficient taxable income and on many other factors outside of Busey’s control, including changes in the applicable tax code and the ability of the projects to be completed. Busey continues to monitor tax law developments and compliance with applicable regulations to mitigate these risks.

OPERATIONAL RISKS

Busey’s framework for managing risks may not be fully effective in mitigating risk and loss.

Busey’s risk management framework is designed to identify, measure, monitor, and analyze a broad spectrum of risks, including compliance, operational, and reputational risks. However, as with any framework, inherent limitations exist, particularly as new risks emerge or previously unidentified vulnerabilities become apparent.

The effectiveness of this framework depends on its alignment with Busey’s evolving risk profile, especially in light of the planned CrossFirst merger. As the organization grows in complexity, risks related to integration, system coordination, and operational oversight may challenge the framework's capacity to adapt. Failures to effectively manage these risks could adversely impact Busey’s financial condition, regulatory standing, and overall operational stability.

To address these challenges, Busey continuously refines its processes, leveraging advanced risk assessment tools and seeking alignment with industry best practices. Despite these efforts, no risk management framework is foolproof, and unforeseen losses or disruptions remain a possibility.

Technological investments drive efficiency but introduce cybersecurity risks.

Busey’s ongoing investments in technology infrastructure have strengthened operational efficiency, enhanced client service delivery, and supported the scaling of key business functions. Initiatives such as enterprise-wide automation, cloud integration, and enhanced data analytics capabilities have positioned Busey as a forward-thinking financial institution. However, these advancements introduce vulnerabilities, including the risk of cyber-attacks and operational disruptions.

The Federal Reserve’s November 2024 Financial Stability Report has emphasized growing threats posed by sophisticated cyber-attacks. These threats not only compromise data integrity but also pose significant reputational and financial risks. For example:

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• Supply Chain Risk Amplification: Third-party vendors and their subcontractors introduce multi-layered risks, complicating oversight and heightening the likelihood of service interruptions or compliance breaches.
• Advanced Cyber Threats: As bad actors deploy increasingly sophisticated tactics, including artificial intelligence-driven impersonation and malware, the effectiveness of traditional cybersecurity defenses is diminished.

To mitigate these risks, Busey has implemented robust cybersecurity protocols, regular system audits, and incident response plans. The use of artificial intelligence-powered tools, such as Verafin, provide additional layers of fraud detection, enabling proactive threat management. However, as cybersecurity threats evolve, the possibility of system penetration persists even with robust security protocols in place.

Outsourcing dependencies could disrupt operations and increase compliance risks.

Busey’s reliance on secure and resilient systems to manage customer relationships, transactions, and data underscores the critical importance of operational stability. Outsourcing arrangements introduce risks tied to service disruptions, compliance violations, and vulnerabilities stemming from subcontractors in downstream supply chains.

This cascading outsourcing structure adds complexity to communication and coordination, particularly when vendors operate in regions with varying regulatory standards. Risks are further amplified by geopolitical tensions, trade restrictions, or cyberattacks targeting these external partners.

Failures or breaches in these systems could disrupt Busey’s operations, damage its reputation, or result in significant legal exposure. While Busey conducts rigorous due diligence when selecting third-party providers, residual risks from subsequent outsourcing tiers remain challenging to eliminate entirely.

Fraudulent activities could erode financial stability and customer trust.

The rising sophistication of fraudulent schemes poses a persistent challenge for financial institutions, with Busey being no exception. Fraudulent activities, such as identity theft, phishing, and unauthorized transactions, could result in financial losses, regulatory penalties, and erosion of customer trust.

Busey employs a multi-layered approach to fraud prevention, including internal controls, insurance coverage, and advanced fraud detection tools, like Verafin. However, even robust frameworks may not fully eliminate risks, particularly as threat actors adapt their tactics to exploit emerging vulnerabilities.

Busey’s ability to attract and retain key personnel may affect future growth and earnings.

Busey’s ability to attract and retain experienced management and qualified personnel is critical to sustaining growth and executing its strategic objectives. The leadership transitions associated with the CrossFirst merger highlight the importance of talent management in preserving operational continuity.

In addition to retaining key leaders, Busey’s ability to build a diverse and skilled workforce is essential to implementing its community-based strategy effectively. The unexpected departure of high-performing employees or difficulty in recruiting specialized talent could disrupt operations, delay strategic initiatives, or increase costs associated with workforce realignment.

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Damage resulting from negative publicity could harm Busey’s reputation and adversely impact its business and financial condition.

Busey’s ability to attract and retain customers, investors, and employees is contingent upon maintaining trust. Negative public opinion could result from the Company’s actual or alleged conduct in a number of activities, including, but not limited to, employee misconduct, failure or perceived failure to deliver appropriate standards of service and quality, faulty lending practices, compliance failures, security breaches, corporate governance, sharing or inadequate protection of customer information, failure to comply with laws or regulations, and actions taken by government regulators and community organizations in response to that conduct.

The CrossFirst merger further underscores the importance of preserving a positive reputation during this period of transformation. Mergers often attract heightened scrutiny from regulators, investors, and the public, amplifying the potential for reputational risks. Missteps in integration, such as service disruptions, a perceived decline in quality, or employee dissatisfaction could adversely impact public perception.

The results of such actual or alleged misconduct or missteps could include customer dissatisfaction, inability to attract potential acquisition prospects, litigation, and heightened regulatory scrutiny. These outcomes may lead to lost revenue, higher operating costs, and harm to Busey’s reputation. Despite the cost or efforts made by the Company to address issues arising from reputational harm, there is no assurance that these efforts could fully mitigate adverse impacts on Busey’s business, financial condition, and results of operations.

Rapid adoption of generative artificial intelligence technologies introduces operational vulnerabilities.

The rapid adoption of generative artificial intelligence technologies introduces a range of operational risks, including intellectual property disputes, compliance challenges, and data privacy concerns. The use of artificial intelligence in fraud schemes, such as impersonation attacks and social engineering, underscores the urgency of proactive governance.

Busey remains committed to addressing these risks through advanced technological tools, regular assessments, and collaboration with industry peers to stay ahead of evolving threats.

Busey maintains a cyber security risk management program designed to prevent, detect, and respond to information security threats. The program is designed to align with the Cyber Risk Institute’s Profile framework, which is based on the National Institute of Standards and Technology’s Cybersecurity Framework. The program is led by Busey’s Chief Information Security Officer (“CISO”). Busey’s CISO has been in the role since September 2020 and has over 15 years of experience across external and internal audit, technology risk management, and cybersecurity matters, spanning various industries primarily within the financial services sector, but also including healthcare, technology, consumer products, and manufacturing for both regional and multinational corporations. Busey’s cyber security risk management program is a key part of the Company’s overall risk management system, which is administered by the Chief Risk Officer.

Busey’s cyber security risk management program includes administrative, technical, and physical safeguards to help ensure the security and confidentiality of customer records and information. Busey has long devoted significant resources to assessing, identifying, and managing risks associated with cybersecurity threats, including:

• Establishing an internal cybersecurity team that is responsible for conducting regular assessments of Busey’s information systems, existing controls, vulnerabilities, and potential improvements;

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• Employing continuous monitoring tools that can detect and help respond to cybersecurity threats in real-time;
• Performing due diligence with respect to third-party service providers, including their cybersecurity practices, and requiring contractual commitments from Busey’s service providers to take certain cybersecurity measures;
• Ongoing monitoring and assessment of third-party vendors' cybersecurity practices, including regular audits, compliance checks, and incident reporting requirements;
• Engaging third-party cybersecurity consultants, who conduct periodic penetration testing, vulnerability assessments, and other procedures to identify potential weaknesses in Busey’s systems and processes;
• Mandating periodic cybersecurity training for Busey’s workforce, which includes awareness programs on phishing, social engineering, and other common cyber threats;
• Implementing access control measures such as multi-factor authentication, role-based access controls, and regular access reviews to ensure that only authorized personnel have access to critical systems and data;
• Using data encryption for both data at rest and data in transit to protect sensitive information; and
• Creating an incident response plan that outlines the steps to contain, mitigate, and remediate the impact of cybersecurity incidents, including communication protocols and post-incident analysis.

Busey’s security and privacy policies and procedures are in effect across all of its businesses and geographic locations. Busey adheres to various regulatory requirements and standards, including the Gramm-Leach-Bliley Act to ensure compliance with data protection laws. Additionally, Busey maintains cybersecurity insurance coverage to mitigate potential financial impacts from cyber incidents.

Busey’s board of directors, as a whole and through its Enterprise Risk Committee (the “Risk Committee”), is responsible for the oversight of risk management. In that role, Busey’s board of directors and Risk Committee, with support from Busey’s cybersecurity advisors, are responsible for ensuring that the risk management processes developed and implemented by management are adequate and functioning as designed. To carry out those duties, both the board of directors and the Risk Committee receive quarterly reports from Busey’s management team regarding cybersecurity risks, and Busey’s efforts to prevent, detect, mitigate, and remediate any cybersecurity incidents.

Busey’s historical data indicates that while Busey has encountered cybersecurity threats and incidents, none have materially affected the Company. Still, Busey faces a number of cybersecurity risks in connection with its business, and it is possible that threats and incidents identified in the future could have a material adverse effect on Busey’s business strategy, results of operations, and financial condition. For additional information on the risks that cybersecurity threats pose to Busey see “Item 1A. Risk Factors—Operational Risks.”

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. First Busey Corporation and its subsidiaries also own or lease other facilities, such as banking centers of Busey Bank, for business operations.

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Busey considers its properties to be suitable and adequate for its present needs. None of the properties are subject to any material encumbrance.

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.

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. Furthermore, 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.

Contents of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) (“MD&A”)

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SCOPE OF DISCUSSION

The following is management’s discussion and analysis of the financial condition as of December 31, 2024, and 2023, and the results of operations for the years ended December 31, 2024, 2023, and 2022, of First Busey Corporation and its subsidiaries. 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 Busey’s financial condition and results of operation for 2024 as compared to 2023 can be found below. Comparison of 2023 to 2022 can be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Busey's 2023 Annual Report.

BUSEY’S CONSERVATIVE BANKING STRATEGY

Busey’s financial strength is built on a long-term conservative operating approach. The quality of Busey’s core deposit franchise is a critical value driver of the institution. Busey remains substantially core deposit1 funded, with robust liquidity and significant market share in the communities Busey serves. As of December 31, 2024, Busey’s loan to deposit ratio was 77.1% and core deposits1 represented 96.5% of total deposits. Furthermore, Busey has sufficient on- and off-balance sheet liquidity to manage deposit fluctuations and the liquidity needs of its customers.

Busey’s credit performance reflects its highly diversified, conservatively underwritten loan portfolio, which has been originated predominantly to established customers with tenured relationships with Busey. Busey’s approach to lending and its underwriting standards are designed to emphasize relationship banking rather than transactional banking. In addition, as a matter of both policy and practice, Busey limits 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 its capital base. Busey strives 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. At December 31, 2024, Busey’s leverage ratio of Tier 1 capital to average assets was 11.1%, its common equity Tier 1 capital to risk weighted assets ratio was 14.1%, and its total capital to risk weighted assets ratio was 18.5%.

Busey executed a two-part balance sheet repositioning strategy in 2024

During the first quarter of 2024, Busey sold the mortgage servicing rights on approximately $923.5 million of one- to four-family mortgage loans for a pre-tax gain of $7.7 million, which enabled Busey to sell available-for-sale investment securities with a book value of approximately $108.2 million for a pre-tax loss of $6.8 million with no resulting negative impact to tangible capital. At the time of the sale, the securities sold yielded a weighted average rate of 1.98% and had a weighted-average life of 2.3 years.

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.

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.”

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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 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 Busey’s critical accounting estimates. Management has reviewed these critical accounting estimates and related disclosures with Busey’s Audit Committee. The following estimates could be deemed critical:

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 determination of fair values is based on valuations using management’s assumptions of future growth rates, future attrition, discount rates, multiples of earnings or other relevant factors. In addition, Busey engages third party specialists to assist in the development of fair values.

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 within 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. 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.

Goodwill

Goodwill represents the excess of purchase price over the fair value of net assets acquired using the acquisition method of accounting. Goodwill is not amortized; instead, Busey assesses the potential for impairment on an annual basis or more frequently if events and circumstances indicate that goodwill might be impaired. Management applies significant judgement when testing goodwill for impairment, such as the valuation approach chosen, market multiples for competitors used in the calculation, and forecasts of business outlook.

Income Taxes

Busey is subject to the income tax laws of U.S., as well as the tax laws of the individual states and municipalities in which the Company conducts its operations. These laws are often complex and subject to nuanced interpretations.

Income taxes are estimated for the tax effects of the transactions reported on Busey’s Consolidated Financial Statements and consist of an expense for taxes currently due plus assets and/or liabilities for deferred taxes. Deferred taxes represent the future tax consequences of differences between the tax basis and accounting basis of certain assets and liabilities, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets and liabilities are estimates that are reflected at income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. Deferred taxes are reported in other assets or other liabilities on the Consolidated Balance Sheets. Estimated income tax expense is reported on the Consolidated Statements of Income.

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In establishing its provision for income taxes and its estimates of deferred tax assets and liabilities, Busey must make judgments and interpretations about the application of inherently complex tax laws. Busey must also make estimates about when in the future certain items will affect taxable income. Disputes over interpretations of the tax laws may be subject to review and adjudication by the court systems of the various tax jurisdictions or may be settled with the taxing authority upon examination or audit. Although Busey’s management believes that its judgments are sound and its tax estimates are reasonable, interpretations of tax law applied by the taxing jurisdictions could differ. As such, Busey may be exposed to losses or gains, which could be material. An unfavorable tax settlement would result in an increase in Busey’s effective income tax rate in the period of resolution. A favorable tax settlement would result in a reduction in Busey’s effective income tax rate in the period of resolution.

Allowance for Credit Losses

Busey calculates the ACL at each reporting date. Busey recognizes an allowance for the lifetime expected credit losses for the amount it 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 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. The ACL must be determined on a collective (pool) basis when similar risk characteristics exist. On a case-by-case basis, Busey may conclude that 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. Macroeconomic forecasts provided by a third party and the economic indices sourced are significant judgments used in determining the allowance. Changes in these economic forecasts could significantly affect the ACL and lead to materially different amounts from one period to the next. Additionally, prepayment assumptions impact model output. Further, Busey completes a quarterly evaluation of several qualitative factors to determine if there should be adjustments made to the ACL. These factors include economic conditions, collateral, concentrations, delinquency trends, portfolio composition, underwriting, and certain other risks. Significant downturns relating to loan quality and economic conditions could result in a requirement for an additional allowance. Likewise, an upturn in loan quality and improved economic conditions may allow for a reduction in the required allowance. Because of the nature of the judgments and assumptions made by management, actual results may differ from these judgments and assumptions.

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RESULTS OF OPERATIONS — THREE YEARS ENDED DECEMBER 31, 2024

Net Income

Results of Busey’s operations are presented below, segregated by operating segment (dollars in thousands):

Operating Performance Metrics

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

1. See “Item 1. Business—Non-GAAP Financial Information.”

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Non-Operating Expenses and Non-GAAP Measures

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

1. Acquisition expenses in 2024 were related to the acquisition of M&M, which was completed on April 1, 2024, as well as the planned merger with CrossFirst. For 2023, acquisition expenses were related to the then planned acquisition of M&M, as well as to exploratory costs. For 2022, acquisition expenses related to the integration of Cummins-American Corp. and its wholly-owned subsidiary, Glenview State Bank, following completion of this acquisition in 2021, as well as to exploratory costs.

2. Restructuring expenses were related to previously disclosed restructuring and efficiency plans and to corporate strategy advisement.

A reconciliation of non-GAAP measures, which Busey believes facilitates the assessment of its financial results and peer comparability, is included in tabular form in this Annual Report. See “Item 1. 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. Net interest margin is tax-equivalent net interest income as a percent of average interest-earning assets.

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

Consolidated Average Balance Sheets and Interest Rates

The table below presents Busey’s Consolidated Average Balance Sheets, detailing average balances for each major category of assets and liabilities, the interest income earned on interest-earning assets, the interest expense paid for interest-bearing liabilities, and the related interest yields for the periods indicated. Average information is provided on a daily average basis (dollars in thousands):

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1. 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 $1.7 million for 2024, $2.2 million for each of 2023 and 2022. Interest income includes an immaterial amount of fees, net of deferred costs, related to Paycheck Protection Program loans for 2024 and 2023, and $1.9 million for 2022.

4. Borrowings include short-term borrowings, long-term debt, senior notes, and subordinated notes. Interest expense includes a non-usage fee on the revolving credit facility.

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The following table presents, for the major components of interest-earning assets and interest-bearing liabilities, a breakout of changes in interest income and interest expense attributable to (1) changes in average volume and (2) changes in average yield. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on changes due to rate and changes due to volume (dollars in thousands):

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

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

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.

After raising federal funds rates by a total of 525 bps between March 2022 and July 2023, the FOMC lowered rates by 100 bps beginning in September 2024. During 2024, in anticipation of the FOMC pivot to an easing cycle, Busey limited its exposure to term funding structures and intentionally priced savings specials to encourage maturing CD balances to migrate to managed rate non-maturity products. Beginning in September 2024 Busey began lowering rates on special priced deposit accounts and other managed rate products to benefit from the FOMC rate cuts. Busey continues to offer CD specials with shorter term structures as well as offering attractive premium savings rates to encourage rotation of maturing CD deposits into nimble pricing products. Beginning in the second quarter of 2024, Busey also saw the full benefit of the December 2023 and March 2024 targeted balance sheet repositioning in its net interest margin.

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:

1. Calculated on a tax-equivalent basis.

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The net interest margin discussion above is based upon the results and average balances for the years ended December 31, 2024, 2023, and 2022. Annualized net interest margins for the quarterly periods indicated were as follows:

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.

Noninterest Income

Changes in noninterest income are summarized in the tables below for the periods presented (dollars in thousands):

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Total noninterest income was $139.7 million for the year ended December 31, 2024, an increase of 15.2% when compared with $121.2 million for the year ended December 31, 2023. Total noninterest income represented 30.2% of total revenue2 in 2024, compared to 27.4% in 2023.

Wealth management fees increased by 11.0% to $63.6 million in 2024, compared to $57.3 million in 2023. Busey’s Wealth Management division had $13.83 billion in assets under care as of December 31, 2024, compared to $12.14 billion as of December 31, 2023. Busey’s 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 Busey’s payment processing company, FirsTech. Payment technology solutions revenue increased by 3.7% to $22.0 million in 2024, compared to $21.2 million in 2023. Results for 2024 marked a new record high reported annual revenue for FirsTech.

Combined, revenues from wealth management fees and payment technology solutions represented 61.3% and 64.8% of Busey’s noninterest income for the years ended December 31, 2024, and December 31, 2023, respectively, providing a complement to spread-based revenue from traditional banking activities. On a combined basis, revenue from these two critical operating areas was $85.6 million for the year ended December 31, 2024, a 9.1% increase from $78.5 million for the year ended December 31, 2023.

Fees for customer services increased by 6.5% to $30.9 million in 2024, compared to $29.0 million in 2023.

Mortgage revenue was $2.1 million in 2024, compared to $1.1 million in 2023. Increases were primarily related to sold-loan mortgage volume. General economic conditions and interest rate volatility may impact future mortgage revenue.

Income on bank owned life insurance increased by 9.1% to $5.1 million in 2024, compared to $4.7 million in 2023, resulting from a $0.1 million increase in earnings on death proceeds and a $0.3 million increase in the cash surrender value of the insurance policies.

A realized gain on the sale of mortgage servicing rights of $7.7 million was recognized in connection with Busey’s strategic two-part balance sheet repositioning completed during 2024. Busey sold the mortgage servicing rights on approximately $923.5 million of one- to four-family mortgage loans, which enabled Busey to sell available for sale investment securities with a book value of approximately $108.2 million for a pre-tax loss of $6.8 million with no resulting negative impact to tangible capital.

Other income increased by 42.0% to $14.3 million in 2024, compared to $10.1 million in 2023. Increases in other income were primarily attributable to increases in commercial loan sales gains and venture capital income, as well as the addition of Life Equity Loan® servicing income beginning in the second quarter of 2024.

2 Total revenue consists of net interest income plus noninterest income.

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Noninterest Expense

Changes in noninterest expense are summarized in the tables below for the periods presented (dollars in thousands):

1. 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 $300.4 million for the year ended December 31, 2024, compared to $285.5 million for the year ended December 31, 2023, representing a year-over-year increase of 5.2%. Non-operating acquisition and other restructuring expenses increased to $8.1 million in 2024, compared to $4.3 million in 2023. The remaining increases can be attributed primarily to operating M&M Bank as a stand-alone bank from April 1, 2024, through June 21, 2024, and general inflationary pressures on compensation and benefits and to a lesser extent certain other expense categories. Busey expects to continue to prudently manage its expenses and to realize the full extent of M&M acquisition synergies in 2025.

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Salaries, wages, and employee benefits increased to $175.6 million in 2024, compared to $162.6 million in 2023. Busey’s total associate base consisted of 1,509 full-time equivalents as of December 31, 2024, compared to 1,479 at December 31, 2023, with the increase largely relating to the M&M acquisition. Busey recorded $1.6 million and $3.8 million of non-operating expenses during 2024 and 2023, respectively. Current trends continue to reflect a competitive labor market, maintaining pressure on costs related to attracting and maintaining Busey’s skilled workforce.

Data processing expense increased to $27.1 million in 2024, compared to $23.7 million in 2023. Increases were primarily attributable to 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 $25.5 million in 2024, compared to $25.0 million in 2023. Primary cost drivers in these expense categories include lease costs, repairs and maintenance, depreciation expense, real estate taxes, and utilities.

Professional fees increased to $12.8 million in 2024, compared to $7.1 million in 2023. Busey recorded $4.9 million and $0.4 million of non-operating expenses during 2024 and 2023, respectively. The significant increase in non-operating professional fees related primarily to the acquisition of M&M, which was completed in the second quarter of 2024, and the planned merger with CrossFirst, which is expected to be completed in the first quarter of 2025.

Amortization of intangible assets decreased to $10.1 million in 2024, compared to $10.4 million in 2023. Decreases in 2024 were due to the use of an accelerated amortization methodology and were partially offset by the addition of $6.3 million of intangible assets related to the M&M acquisition.

Interchange expense decreased to $6.0 million in 2024, compared to $6.9 million in 2023. Fluctuations in interchange expense relate to payment and volume activity at FirsTech.

FDIC insurance expense decreased to $5.6 million in 2024, compared to $5.7 million in 2023.

Other expense decreased to $37.6 million in 2024, compared to $44.2 million in 2023. In connection with Busey’s adoption of ASU 2023-02 on January 1, 2024, Busey began recording amortization of New Markets Tax Credits as income tax expense instead of other noninterest expense, resulting in decreases in other noninterest expense of $9.0 million for the year ended December 31, 2024. Further changes in other noninterest expense are attributable to multiple items, including the provision for unfunded commitments, sales of other real estate owned, fixed asset impairment, marketing, and business development expenses.

Efficiency Ratio

The efficiency ratio3 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. Busey’s efficiency ratio was 61.8% for the year ended December 31, 2024, compared to 61.7% for the year ended December 31, 2023.

Operating costs have been influenced by acquisition expenses and other restructuring costs, and the adjusted efficiency ratio3 was 61.0% for the year ended December 31, 2024, compared to 60.7% for the year ended December 31, 2023.

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 “Item 1. Business—Non-GAAP Financial Information.”

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Income Taxes

Effective income tax rates, calculated by dividing income taxes by income before taxes, were 25.8%, 20.4%, and 20.7% for the years ended December 31, 2024, 2023, and 2022, respectively. Busey’s effective tax rates increased in 2024 due to the adoption of ASU 2023-02 in January 2024, yet remained 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.

Busey’s effective income tax rate for the year ended December 31, 2024, includes an estimated one-time deferred tax valuation adjustment of $1.4 million resulting from a change to the Illinois apportionment rate due to recently enacted regulations. These new regulations are expected to lower Busey’s ongoing tax obligation in future periods.

Busey continues to monitor evolving federal and state tax legislation and its potential impact on operations on an ongoing basis. As of December 31, 2024, Busey Bank is under examination by the Florida Department of Revenue for its 2020 to 2022 corporate income tax filings. Further, in February of 2025, Busey received a notice of audit initiation from the Illinois Department of Revenue for M&M’s tax filings for the tax years 2022 and 2023.

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FINANCIAL CONDITION

Balance Sheet

Changes in significant items included on Busey’s Consolidated Balance Sheets are summarized in the table below (dollars in thousands):

Investment Securities

The primary purposes of Busey’s investment securities portfolio are to provide a source of earnings by deploying funds that 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.

Busey considers many factors in determining the composition of its 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, 2024, Busey did not hold general obligation bonds of any single issuer, the aggregate of which exceeded 10% of Busey’s stockholders’ equity.

Pledged securities totaled $871.4 million, or 33.0% of total debt securities, as of December 31, 2024, and $837.4 million, or 28.3% of total debt securities, as of December 31, 2023.

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, 2024, the fair value of debt securities available for sale was $1.81 billion, and the amortized cost was $2.04 billion. There were $0.6 million of gross unrealized gains and $230.3 million of gross unrealized losses, resulting in a net unrealized loss of $229.7 million.

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The composition of debt securities available for sale was as follows (dollars in thousands):

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By maturity date, fair values and weighted average yields of debt securities available for sale as of December 31, 2024, are presented in the following table (dollars in thousands):

1. 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%.

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Debt Securities Held to Maturity

Debt securities held to maturity are carried at amortized cost. 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 Busey’s portfolio of debt securities held to maturity as of December 31, 2024 or 2023.

As of December 31, 2024, the amortized cost of debt securities held to maturity was $826.6 million, and the fair value was $675.1 million. There were no gross unrecognized gains and $151.6 million of gross unrecognized losses.

The composition of debt securities held to maturity was as follows (dollars in thousands):

By maturity date, fair values and weighted average yields of debt securities held to maturity as of December 31, 2024, are presented in the following table (dollars in thousands):

1. 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 $15.9 million as of December 31, 2024, compared to $9.8 million as of December 31, 2023.

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Portfolio Loans

Busey believes 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. M&M’s policies were similar in nature to Busey Bank’s policies, and Busey is in the process of migrating the legacy M&M portfolio toward Busey Bank’s policies. While not specifically limited, Busey attempts to focus its lending on short to intermediate-term loans (0-10 years) in geographic areas within 125 miles of its lending offices. Loans originated outside of these areas are generally to existing customers of Busey Bank. Busey attempts 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. Busey’s 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.

At no time is a borrower’s total borrowing relationship permitted to exceed Busey Bank’s regulatory lending limit. Busey generally limits such relationships to amounts substantially less than the regulatory limit. 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 Busey’s loan policy on a periodic basis. In addition, the loan review department reviews risk assessments made by Busey’s 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 can be summarized into five primary lending activities, which can be further categorized as either commercial or retail lending. Commercial lending activities consist of C&I and other commercial loans, CRE loans, and real estate construction loans while retail lending activities consist of retail real estate loans and retail other loans.

C&I and Other Commercial Loans

C&I and other commercial loans typically comprise working capital loans or business expansion loans, including loans for asset purchases and other business loans. C&I and other commercial loans will generally be guaranteed, in full or a material percentage, by the primary owners of the business. C&I and other 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. 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 C&I and other commercial loan types.

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Commercial Real Estate Loans

The commercial environment, along with the academic presence in some of the markets in which Busey operates, provides for the majority of Busey’s commercial lending opportunities to be CRE related, including multi-unit housing. As the majority of Busey’s loan portfolio is within the CRE class, Busey’s goal is to maintain a high quality, geographically diverse portfolio of CRE loans. CRE loans are subject to underwriting standards and guidelines similar to commercial loans. CRE loans are generally guaranteed, in full or a material percentage, by the primary owners of the business. Repayment of these loans is primarily dependent on the cash flows of the underlying property. However, CRE loans generally must be supported by an adequate underlying collateral value. 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 Busey closely monitors.

Real Estate Construction Loans

Real estate construction loans are primarily commercial in nature. Loan proceeds are monitored by Busey and advanced for the improvement of real estate in which Busey holds a mortgage. Real estate construction loans will generally be guaranteed, in full or a material percentage, by the developer or primary owners of the business. These loans are subject to underwriting standards and guidelines similar to commercial loans. The loan generally must be supported by an adequate “as completed” value of the underlying project. In addition to the underlying project, the financial history of the developer and business owners weighs significantly in determining approval. Repayment of these loans is typically through permanent financing following completion of the construction. Real estate construction loans are inherently more risky than loans on completed properties as the unimproved nature and the financial risks of construction significantly enhance the risks of commercial real estate loans. These loans are closely monitored and subject to other industry guidelines.

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 2024, Busey retained a smaller percentage of originated retail real estate loans in its portfolio, electing to sell a larger percentage to secondary market purchasers. As retail real estate loan underwriting is subject to specific regulations, Busey typically underwrites retail real estate loans to conform to widely accepted standards. Several factors are considered in underwriting including the debt-to-income ratio and credit history of the borrower, as well as the value of the underlying real estate.

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. Repayment of retail other loans is expected from the borrower’s cash flows.

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Portfolio Composition

The composition of Busey’s loan portfolio as of the dates indicated, as well as changes in portfolio loan balances, were as follows (dollars in thousands):

Portfolio loan growth in 2024 was due to the M&M acquisition. As has been Busey’s practice, the Company remains steadfast in its conservative approach to underwriting and disciplined approach to pricing, particularly given Busey’s outlook for the economy in the coming quarters. This posture will continue to impact loan growth, which Busey expects to remain modest over the next several quarters.

Concentration of Credit Risk

As a matter of policy and practice, Busey limits the level of concentration exposure in any particular loan segment with the goal of maintaining a well-diversified loan portfolio. The following table presents the percentage of total portfolio loans for each lending activity.

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A significant majority of Busey’s portfolio lending activity occurs in the Illinois and Missouri markets, with the remainder in the Florida and Indiana markets. The geographic distribution of loans originated in each of these markets is presented in the tables below (dollars in thousands):

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CRE loans made up 42.5% of Busey’s total loan portfolio as of December 31, 2024, and were 27.9% owner occupied. CRE loans are made across a variety of industries, as depicted in the table below (dollars in thousands). Balances reflected in the table below do not include loan origination fees or costs, purchase accounting adjustments, SBA discounts, or negative escrow amounts.

Loan Commitments

Commitments to extend credit and standby letters of credit increased by $371.7 million, or 17.1%, to a total of $2.55 billion as of December 31, 2024, compared to $2.18 billion as of December 31, 2023.

Loan Maturities

The determination of loan maturities is based on contractual loan terms. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are considered to mature within one year.

The following table sets forth the remaining maturities of portfolio loans at December 31, 2024, (dollars in thousands):

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Interest Rate Structure

Portfolio loans maturing after one year are summarized below by interest rate structure and lending activity, as of December 31, 2024, (dollars in thousands):

Allowance and Provision for Credit Losses

The ACL is a significant estimate on Busey’s Consolidated Financial Statements, affecting both earnings and capital. The methodology adopted influences, and is influenced by, Busey’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. Estimates of credit losses are based on a careful consideration of all significant factors affecting the collectability as of the evaluation date. The ACL is established through the provision for credit loss expense charged to income. Provision expenses (releases) were recorded as follows for each of the years indicated (dollars in thousands):

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The following table summarizes, by lending activity, net charge-off and recovery activity affecting the ACL balance, together with average portfolio loans outstanding and the related ratios of net charge-offs (recoveries) to average portfolio loans (dollars in thousands):

1. The Day 1 PCD is attributable to the M&M acquisition.

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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):

Busey did not record an allowance for credit loss for its Life Equity Loan® portfolio, a component of its retail other lending activity, due to no expected credit loss at default, as permitted under the practical expedient provided within ASC 326-20-35-6. The Life Equity Loan® portfolio balance was $264.2 million as of December 31, 2024.

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. As of December 31, 2024, Busey management believed the level of the allowance to be appropriate based upon the information available. However, additional losses may be identified in the loan portfolio as new information is obtained.

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 Busey’s interest in the underlying collateral less estimated costs to sell. Busey’s loan portfolio is collateralized primarily by real estate.

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The following table sets forth information concerning non-performing loans and performing restructured loans (dollars in thousands):

Asset quality remains strong by both Busey’s historical and current industry trends, and Busey’s operating mandate and focus have been on emphasizing credit quality over asset growth.

Non-performing loan balances increased by 197.30% to $23.2 million as of December 31, 2024, compared to $7.8 million as of December 31, 2023. The increase was primarily related to one CRE loan that was classified in the fourth quarter of 2023 and was moved to non-accrual during the fourth quarter of 2024. This loan carries a remaining balance of $15.0 million following a $3.0 million charge-off in the fourth quarter of 2024. Non-performing loans represented 0.30% of portfolio loans as of December 31, 2024, compared to 0.10% as of December 31, 2023. Busey’s ACL coverage decreased to 3.59 times its non-performing loan balance at December 31, 2024, compared to 11.74 times its non-performing loan balance at December 31, 2023.

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Non-performing assets, which includes non-performing loans, OREO, and other repossessed assets, increased by 193.41% to $23.3 million as of December 31, 2024, compared to $7.9 million as of December 31, 2023. Non-performing assets represented 0.19% of total assets as of December 31, 2024, compared to 0.06% as of December 31, 2023. Busey’s ACL provided coverage of 3.58 times its non-performing assets at December 31, 2024, down from 11.55 times its non-performing assets at December 31, 2023.

Classified assets, which include non-performing assets and substandard loans, increased to $85.3 million as of December 31, 2024, compared to $72.3 million as of December 31, 2023. Classified assets represented 5.61% of Busey Bank’s Tier 1 capital and ACL at December 31, 2024, up from 4.97% at December 31, 2023.

Net charge-offs totaled $18.2 million in 2024, representing 0.23% of average loans, compared with net charge-offs of $2.3 million in 2023, representing 0.03% of average loans. Increases in net charge-offs during the year ended December 31, 2024, were significantly attributable to a single C&I credit relationship and the CRE loan relationship mentioned above.

Asset quality metrics remain dependent upon market-specific economic conditions, and specific measures may fluctuate from period to period. If economic conditions were to deteriorate, Busey would expect the credit quality of its 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, 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 decreased to $62.0 million at December 31, 2024, compared to $64.3 million at December 31, 2023. Management continues to monitor these loans and work with the borrowers on restructurings, guarantees, additional collateral, or other planned actions. As of December 31, 2024, 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.

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Deposits

The following table shows the deposit mix for each of the periods presented (dollars in thousands):

Total deposits decreased by 3.0% to $9.98 billion as of December 31, 2024, compared to $10.29 billion as of December 31, 2023. The quality of Busey’s core deposit4 franchise coupled with cash flows from its securities portfolio allows Busey to fund loan growth while limiting its reliance on higher cost wholesale funding alternatives. Busey focuses on deepening its customer relationships to maintain and protect its strong core deposit franchise. As of December 31, 2024, Busey average customer tenure was 16.9 years for retail customers and 12.8 years for commercial customers. Core deposits include non-brokered transaction accounts, money market and savings deposit accounts, and time deposits of $250,000 or less. Core deposits represented 96.5% of total deposits as of December 31, 2024, compared to 96.2% as of December 31, 2023.

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 $3.78 billion at December 31, 2024. The portion of Busey’s deposit base that was uninsured and not otherwise collateralized was estimated to be $2.96 billion at December 31, 2024, which represented 30% of total deposits. Of that amount, $286.4 million represented time deposits. The following table presents estimates of the uninsured portion of time deposits by maturity date (dollars in thousands):

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 1. Business—Non-GAAP Financial Information” included in this Annual Report.

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Borrowings

Term Loan

On May 28, 2021, Busey entered into a Second Amended and Restated Credit Agreement, pursuant to which it has access to (1) a $40.0 million revolving line of credit with an initial termination date of April 30, 2022, and (2) a $60.0 million Term Loan with a maturity date of May 31, 2026. The loans had an annual interest rate of 1.75% plus the one-month LIBOR rate. On April 30, 2022, the agreement was amended, effecting an extension of the termination date for the revolving line of credit to April 30, 2023, and providing for the transition from a LIBOR-indexed interest rate to a SOFR-indexed interest rate. Under the terms of the amendment, the annual interest rate for the loans was established at 1.80% plus the one-month forward-looking term rate based on SOFR. The agreement has subsequently been amended twice to extend the termination date for the revolving line of credit, which is currently April 30, 2025.

During the first quarter of 2024, Busey paid the full $30.0 million balance remaining on the Term Loan, at which time the Term Loan carried interest at a rate of 7.13%. As of December 31, 2024, there was no balance outstanding on the revolving credit facility. The revolving credit facility incurs a non-usage fee based on any undrawn amounts.

Short-term Borrowings and Securities Sold Under Agreements to Repurchase

Short-term borrowings include FHLB advances that mature in less than one year from the date of origination, and the current portion of long-term debt due within 12 months. Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature daily.

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The following table sets forth the distribution of short-term borrowings and securities sold under agreements to repurchase, as well as the weighted average interest rates thereon (dollars in thousands):

1. The weighted average interest rate is computed by dividing total interest for the period by the average daily balance outstanding.

Subordinated Notes

On June 1, 2020, Busey issued $125.0 million of fixed-to-floating rate subordinated notes that mature on June 1, 2030. The subordinated notes, which qualify as Tier 2 capital for regulatory purposes, bear interest at an annual rate of 5.25% for the first five years after issuance and thereafter bear interest at a floating rate equal to a three-month benchmark rate plus a spread of 5.11%, as calculated on each applicable determination date. Interest on the subordinated notes is payable semi-annually on each June 1 and December 1 during the five-year fixed-term, and thereafter on March 1, June 1, September 1, and December 1 of each year, commencing on September 1, 2025. The subordinated notes have an optional redemption in whole or in part on any interest payment date on or after June 1, 2025. The subordinated notes are unsecured obligations of the Company.

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On June 2, 2022, Busey issued $100.0 million aggregate principal amount of 5.000% fixed-to-floating rate subordinated notes maturing June 15, 2032, which qualify as Tier 2 Capital for regulatory purposes. The price to the public for the subordinated notes was 100% of the principal amount of the subordinated notes. Interest on the subordinated notes accrues at a rate equal to (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 bps from and including June 15, 2027, payable quarterly in arrears. The subordinated notes have an optional redemption in whole or in part on any interest payment date on or after June 15, 2027.

Associated with the M&M acquisition completed on April 1, 2024 (see “Note 2. Mergers and Acquisitions”), Busey acquired $4.0 million of 5.25% fixed-to-floating rate subordinated notes maturing December 4, 2030, which qualify as Tier 2 capital for regulatory purposes. Interest on the subordinated notes accrues at a rate equal to (1) 5.25% per annum from the original issue date to December 4, 2025, 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 497 bps from December 4, 2025. The subordinated notes have an optional redemption, in whole or in part, on or after December 4, 2025. At December 31, 2024, there was $0.1 million of fair value discount outstanding, to be accreted through the earliest optional redemption date.

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

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. 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, Busey issued guarantees for the benefit of the holders of the trust preferred securities. 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. The trust preferred securities issued by each trust rank equally with the common securities in right of payment, except that if an event of default under the indenture governing the notes has occurred and is continuing, the preferred securities will rank senior to the common securities in right of payment. Busey had $74.8 million and $72.0 million of junior subordinated debt owed to unconsolidated trusts at December 31, 2024, and 2023, respectively. In connection with its acquisitions of Pulaski Financial Corp. in 2016 and M&M in 2024, Busey has acquired similar statutory trusts and the fair value adjustment is being accreted over their weighted average remaining lives, with a balance remaining to be accreted of $2.9 million and $2.6 million at December 31, 2024, and 2023, respectively.

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Liquidity

Liquidity management is the process by which Busey ensures that adequate liquid funds are available to meet the present and future cash flow obligations arising in the daily operations of its 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. Busey’s most liquid assets are cash and due from banks, interest-bearing bank deposits, and federal funds sold. Balances of these assets are dependent on Busey’s operating, investing, lending, and financing activities during any given period.

Average liquid assets are summarized in the table below (dollars in thousands):

Cash and unencumbered securities on Busey’s Consolidated Balance Sheets are summarized as follows for the periods presented (dollars in thousands):

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 Bank, and Busey’s revolving credit facility, as summarized in the table below (dollars in thousands):

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

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As of December 31, 2024, management believed that adequate liquidity existed to meet all projected cash flow obligations. Busey seeks 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.

Busey’s ability to pay cash dividends to its stockholders and to service its debt is dependent on the receipt of cash dividends from its subsidiaries. Busey Bank paid dividends to First Busey Corporation totaling $100.0 million and $90.0 million for the years ended December 31, 2024, and 2023, respectively.

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. The balance of commitments to extend credit represents future cash requirements and some of these commitments may expire without being drawn upon.

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

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

Busey anticipates that it will have sufficient funds available to meet current loan commitments, including loan applications received and in process prior to the issuance of firm commitments.

Contractual Obligations

Busey has entered into certain contractual obligations and other commitments that generally relate to funding of operations through deposits, debt issuance, and property and equipment leases.

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The following table summarizes significant contractual obligations and other commitments, excluding, when applicable, short-term borrowings and the current portion of long-term debt, as of December 31, 2024, (dollars in thousands):

Cash Flows

Busey’s cash flows consist of operating activities, investing activities, and financing activities.

Net cash flows provided by operating activities totaled $178.3 million in 2024, compared to $173.4 million provided by operating activities in 2023. Significant operating activities affecting cash flows include net income, depreciation and amortization, the provision for credit losses, stock-based compensation, and mortgage loan sale 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 $657.9 million in 2024, compared to $551.0 million provided by investing activities in 2023. Significant investing activities are those associated with managing Busey’s investment and loan portfolios.

Net cash used in financing activities totaled $858.1 million in 2024, compared to $232.0 million used in financing activities in 2023. Significant financing activities affecting cash flows include deposit and other borrowings, as well as cash dividends paid.

For additional detail, see the Consolidated Statements of Cash Flows.

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Capital Resources

Busey’s capital ratios are in excess of those required to be considered “well-capitalized” pursuant to applicable regulatory guidelines. The Federal Reserve 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 December 31, 2024.

Management believes that no conditions or events have occurred since December 31, 2024, that would materially adversely change First Busey’s or Busey Bank’s capital classifications.

NEW ACCOUNTING PRONOUNCEMENTS

Busey reviews 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.

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. Monetary items, such as cash, loans, and deposits, are those assets and liabilities which are or will be converted into a fixed number of dollars regardless of changes in prices. As a result, changes in interest rates have a more significant impact on a financial institution’s performance than does general inflation. 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, 2024—Consolidated Average Balance Sheets and Interest Rates” and “Item 7A. Quantitative and Qualitative Disclosures About Market Risk.”

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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 Busey as other types of market risk, such as foreign currency exchange rate risk and commodity price risk, have a minimal impact or do not arise in the normal course of Busey’s business activities.

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

As interest rate changes do not impact all categories of assets and liabilities equally or simultaneously, the asset-liability committee primarily relies on balance sheet and income simulation analysis to determine the potential impact of changes in market interest rates on net interest income. In these standard simulation models, the balance sheet is projected over a one-year and a two-year time horizon and net interest income is calculated under current market rates and assuming permanent instantaneous shifts of +/-100, +/-200, +/-300, and +/-400 bps. 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.

Busey’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:

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.

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EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

An evaluation of Busey’s disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act, was carried out as of December 31, 2024, under the supervision and with the participation of its Chief Executive Officer, Chief Financial Officer, and several other members of senior management. Based on this evaluation, Busey’s Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2024, Busey’s disclosure controls and procedures were effective in ensuring that the information Busey is required to disclose in the reports Busey files or submits under the Exchange Act was (1) accumulated and communicated to Busey’s management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure, and (2) 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 December 31, 2024, no change occurred in Busey’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, Busey’s internal control over financial reporting.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Busey’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Busey’s internal control over financial reporting is a process designed under the supervision of Busey’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Busey’s Consolidated Financial Statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

As of December 31, 2024, management assessed the effectiveness of Busey’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “Internal Control—Integrated Framework,” issued by the COSO in 2013. Based on this assessment, management determined that Busey maintained effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.

RSM US LLP, an independent registered public accounting firm that audited Busey’s Consolidated Financial Statements included in this Annual Report, has issued an audit opinion on the effectiveness of Busey’s internal control over financial reporting as of December 31, 2024. The report, which expresses an unqualified opinion on the effectiveness of Busey’s internal control over financial reporting as of December 31, 2024, is included in this Item under the heading “Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting.”

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of First Busey Corporation and Subsidiaries

Opinion on the Internal Control Over Financial Reporting

We have audited First Busey Corporation and Subsidiaries' (the Company) internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes to the consolidated financial statements and our report dated February 27, 2025 expressed an unqualified opinion.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

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Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ RSM US LLP

Champaign, Illinois

February 27, 2025

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