FIRST BUSEY CORP /NV/ 10-K/A

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Contents of Item 8. Financial Statements & Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 49 ) 92 CONSOLIDATED FINANCIAL STATEMENTS 94 Consolidated Balance Sheets 94 Consolidated Statements of Income 95 Consolidated Statements of Comprehensive Income (Loss) 96 Consolidated Statements of Stockholders’ Equity 97 Consolidated Statements of Cash Flows 98 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 100 Note 1. Significant Accounting Policies 100 Note 2. Debt Securities 117 Note 3. Portfolio Loans 123 Note 4. Other Real Estate Owned and Other Repossessed Assets 135 Note 5. Premises and Equipment 136 Note 6. Leases 136 Note 7. Goodwill and Other Intangible Assets 138 Note 8. Deposits 139 Note 9. Borrowings 140 Note 10. Junior Subordinated Debt Owed to Unconsolidated Trusts 142 Note 11. Regulatory Capital 143 Note 12. Income Taxes 146 Note 13. Employee Benefit Plans 148 Note 14. Stock-based Compensation 149 Note 15. Transactions with Related Parties 153 Note 16. Outstanding Commitments and Contingent Liabilities 153 Note 17. Derivative Financial Instruments 154 Note 18. Fair Value Measurements 161 Note 19. Earnings Per Share 167 Note 20. Accumulated Other Comprehensive Income (Loss) 168 Note 21. Operating Segments and Related Information 170 Note 22. Parent Company Only Financial Information 173 Note 23. Acquisitions 176 First Busey Corporation | 2023 — 91 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of First Busey Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of First Busey Corporation and its subsidiaries (the Company) as of December 31, 2023 and 2022, 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, 2023, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated February 22, 2024, expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. 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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. First Busey Corporation | 2023 — 92 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data Allowance for Credit Losses on Loans—Adjustments to Historical Loss Factors As described in Notes 1 and 3 to the financial statements, the Company’s allowance for credit losses totaled $91.7 million, which consists of a reserve on loans collectively evaluated for impairment (a/k/a general reserve) of $90.8 million and a reserve on loans individually evaluated (a/k/a specific reserve) of $.9 million at December 31, 2023. The allowance for credit losses is measured on a collective loan pool basis when similar risk characteristics exist. On a case‑by‑case basis, a loan may be evaluated on an individual basis based on disparate risk characteristics. The measurement of expected credit losses on collectively evaluated loans is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the amortized cost basis. Adjustments to historical loss information are made for differences in current loan‑specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions such as changes in unemployment rates, property values and other relevant factors. The calculation also contemplates that the Company 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. We identified the adjustments to historical loss factors component of the allowance for credit losses as a critical audit matter, as auditing the underlying adjustments required significant auditor judgment as amounts determined by management rely on analysis that is highly subjective and includes significant estimation uncertainty. Our audit procedures related to the adjustments to historical factors within the allowance for credit losses include the following, among others: • We obtained an understanding of the relevant controls related to the adjustments to historical factors in the calculation of the allowance for credit losses and tested such controls for design and operating effectiveness. • We tested the completeness and accuracy of data used by management in determining adjustments to historical loss factors including testing the supporting data for agreement to internal or external source data. • We tested management’s conclusions regarding the appropriateness of the adjustments, including magnitude and directional consistency, to historical loss factors included in the allowance for credit losses calculation. /s/ RSM US LLP We or our predecessor firms have served as the Company’s auditor since at least 1980; however, an earlier year could not be established. Champaign, Illinois February 22, 2024 First Busey Corporation | 2023 — 93 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS (dollars in thousands) As of December 31, 2023 2022 Assets Cash and cash equivalents: Cash and due from banks $ 134,680 $ 117,513 Interest-bearing deposits 584,901 109,651 Total cash and cash equivalents 719,581 227,164 Debt securities available for sale 2,087,571 2,461,393 Debt securities held to maturity 872,628 918,312 Equity securities 9,812 11,535 Loans held for sale 2,379 1,253 Portfolio loans (net of ACL of $ 91,740 at December 31, 2023; $ 91,608 at December 31, 2022) 7,559,294 7,634,094 Premises and equipment, net 122,594 126,524 Right of use assets 11,027 12,829 Goodwill 317,873 317,873 Other intangible assets, net 35,991 46,423 Cash surrender value of bank owned life insurance 182,975 180,485 Other assets 361,690 398,792 Total assets $ 12,283,415 $ 12,336,677 Liabilities and stockholders’ equity Liabilities Deposits: Noninterest-bearing $ 2,834,655 $ 3,393,666 Interest-bearing 7,456,501 6,677,614 Total deposits 10,291,156 10,071,280 Securities sold under agreements to repurchase 187,396 229,806 Short-term borrowings 12,000 351,054 Long-term debt 18,000 30,000 Subordinated notes, net of unamortized issuance costs 222,882 222,038 Junior subordinated debt owed to unconsolidated trusts 71,993 71,810 Lease liabilities 11,308 12,995 Other liabilities 196,699 201,717 Total liabilities 11,011,434 11,190,700 Outstanding commitments and contingent liabilities (see Notes 6 and 16 ) Stockholders’ equity Common stock, ($ 0.001 par value; 100,000,000 shares authorized) 58 58 Additional paid-in capital 1,323,595 1,320,980 Retained earnings 237,197 168,769 AOCI ( 218,803 ) ( 273,278 ) Total stockholders’ equity before treasury stock 1,342,047 1,216,529 Treasury stock at cost ( 70,066 ) ( 70,552 ) Total stockholders’ equity 1,271,981 1,145,977 Total liabilities and stockholders’ equity $ 12,283,415 $ 12,336,677 Shares Common shares issued 58,116,969 58,116,970 Less: Treasury shares ( 2,872,850 ) ( 2,837,846 ) Common shares outstanding 55,244,119 55,279,124 See accompanying Notes to Consolidated Financial Statements. First Busey Corporation | 2023 — 94 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except per share amounts) Year Ended December 31, 2023 2022 2021 Interest income Interest and fees on loans $ 385,848 $ 287,477 $ 252,097 Interest and dividends on investment securities: Taxable interest income 80,316 66,140 41,787 Non-taxable interest income 2,678 3,272 3,765 Other interest income 10,531 3,097 1,151 Total interest income 479,373 359,986 298,800 Interest expense Deposits 123,985 16,112 12,583 Federal funds purchased and securities sold under agreements to repurchase 5,203 1,475 227 Short-term borrowings 12,775 1,647 279 Long-term debt 1,700 1,310 657 Senior notes — 637 1,598 Subordinated notes 12,406 12,338 9,918 Junior subordinated debt owed to unconsolidated trusts 3,853 3,029 2,840 Total interest expense 159,922 36,548 28,102 Net interest income 319,451 323,438 270,698 Provision for credit losses 2,399 4,623 ( 15,101 ) Net interest income after provision for credit losses 317,052 318,815 285,799 Noninterest income Wealth management fees 57,309 55,378 53,086 Fees for customer services 29,044 33,111 35,604 Payment technology solutions 21,192 20,067 18,347 Mortgage revenue 1,089 1,895 7,239 Income on bank owned life insurance 4,701 3,663 5,166 Realized net gains (losses) on securities ( 28 ) 50 29 Unrealized net gains (losses) recognized on equity securities ( 2,171 ) ( 2,183 ) 3,041 Other income 11,248 14,822 10,292 Total noninterest income 122,384 126,803 132,804 Noninterest expense Salaries, wages, and employee benefits 162,597 159,016 145,312 Data processing 23,708 21,648 21,862 Net occupancy expense of premises 18,214 19,130 18,346 Furniture and equipment expenses 6,759 7,645 8,301 Professional fees 7,147 6,125 7,549 Amortization of intangible assets 10,432 11,628 11,274 Interchange expense 6,864 6,298 5,792 FDIC insurance 5,650 4,058 3,083 Other expense 44,161 48,333 40,261 Total noninterest expense 285,532 283,881 261,780 Income before income taxes 153,904 161,737 156,823 Income taxes 31,339 33,426 33,374 Net income $ 122,565 $ 128,311 $ 123,449 Basic earnings per common share $ 2.21 $ 2.32 $ 2.23 Diluted earnings per common share 2.18 2.29 2.20 Dividends declared per share of common stock 0.96 0.92 0.92 See accompanying Notes to Consolidated Financial Statements. First Busey Corporation | 2023 — 95 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (dollars in thousands) Years Ended December 31, 2023 2022 2021 Net income $ 122,565 $ 128,311 $ 123,449 OCI: Unrealized/Unrecognized gains (losses) on debt securities: Net unrealized holding gains (losses) on debt securities available for sale, net of taxes of $( 16,674 ), $ 79,460 , and $ 23,367 41,824 ( 199,302 ) ( 58,610 ) Net unrecognized gains (losses) on debt securities transferred to held to maturity from available for sale, net of taxes of $ — , $ 13,812 , and $ — , respectively — ( 34,644 ) — Reclassification adjustment for realized (gains) losses on debt securities available for sale included in net income, net of taxes of $( 1,569 ), $ 7 , and $( 17 ), respectively 3,934 ( 19 ) 44 Amortization of unrecognized losses on securities transferred to held to maturity, net of taxes of $( 1,763 ), $( 1,893 ), and $ — , respectively 4,426 4,745 — Net change in unrealized/unrecognized gains (losses) on debt securities 50,184 ( 229,220 ) ( 58,566 ) Unrealized gains (losses) on cash flow hedges: Net unrealized holding gains (losses) on cash flow hedges, net of taxes of $ 732 , $ 8,258 , and $( 294 ), respectively ( 1,835 ) ( 20,717 ) 736 Reclassification adjustment for realized (gains) losses on cash flow hedges included in net income, net of taxes of $( 2,443 ), $( 166 ), and $( 304 ), respectively 6,126 417 763 Net change in unrealized gains (losses) on cash flow hedges 4,291 ( 20,300 ) 1,499 Net change in AOCI 54,475 ( 249,520 ) ( 57,067 ) Total comprehensive income (loss) $ 177,040 $ ( 121,209 ) $ 66,382 See accompanying Notes to Consolidated Financial Statements. First Busey Corporation | 2023 — 96 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (dollars in thousands, except per share amounts) Shares Common Stock Additional Paid-in Capital Retained Earnings AOCI Treasury Stock Total Stockholders' Equity Balance, December 31, 2020 54,404,379 $ 56 $ 1,253,360 $ 20,830 $ 33,309 $ ( 37,486 ) $ 1,270,069 Net income — — — 123,449 — — 123,449 OCI, net of tax — — — — ( 57,067 ) — ( 57,067 ) Stock issued in acquisition, net of stock issuance costs 2,206,237 2 58,953 — — — 58,955 Repurchase of stock ( 1,323,000 ) — — — — ( 33,043 ) ( 33,043 ) Issuance of treasury stock for the 2021 ESPP 30,390 — ( 136 ) — — 782 646 Net issuance of treasury stock for RSU/PSU/DSU vesting and related tax 116,904 — ( 4,109 ) — — 3,112 ( 997 ) Cash dividends common stock at $ 0.92 per share — — — ( 50,764 ) — — ( 50,764 ) Stock dividend equivalents on RSUs/PSUs/DSUs — — 1,052 ( 1,052 ) — — — Stock-based compensation — — 7,864 — — — 7,864 Balance, December 31, 2021 55,434,910 58 1,316,984 92,463 ( 23,758 ) ( 66,635 ) 1,319,112 Net income — — — 128,311 — — 128,311 OCI, net of tax — — — — ( 249,520 ) — ( 249,520 ) Repurchase of stock ( 388,614 ) — — — — ( 9,912 ) ( 9,912 ) Issuance of treasury stock for the 2021 ESPP 57,385 — ( 320 ) — — 1,477 1,157 Net issuance of treasury stock for RSU/PSU/DSU vesting and related tax 175,225 — ( 5,789 ) — — 4,513 ( 1,276 ) Issuance of treasury stock for stock options exercised, net of shares redeemed and related tax 218 — ( 5 ) — — 5 — Cash dividends common stock at $ 0.92 per share — — — ( 50,863 ) — — ( 50,863 ) Stock dividend equivalents on RSUs/PSUs/DSUs — — 1,142 ( 1,142 ) — — — Stock-based compensation — — 8,968 — — — 8,968 Balance, December 31, 2022 55,279,124 58 1,320,980 168,769 ( 273,278 ) ( 70,552 ) 1,145,977 Net income — — — 122,565 — — 122,565 OCI, net of tax — — — — 54,475 — 54,475 Repurchase of stock ( 227,935 ) — — — — ( 4,482 ) ( 4,482 ) Issuance of treasury stock for the 2021 ESPP 59,845 — ( 530 ) — — 1,541 1,011 Net issuance of treasury stock for RSU/PSU/DSU vesting and related tax 132,091 — ( 4,494 ) — — 3,401 ( 1,093 ) Net issuance of treasury stock for warrants exercised 994 — ( 17 ) — — 26 9 Cash dividends common stock at $ 0.96 per share — — — ( 53,076 ) — — ( 53,076 ) Stock dividend equivalents on RSUs/PSUs/DSUs — — 1,061 ( 1,061 ) — — — Stock-based compensation — — 6,595 — — — 6,595 Balance, December 31, 2023 55,244,119 $ 58 $ 1,323,595 $ 237,197 $ ( 218,803 ) $ ( 70,066 ) $ 1,271,981 See accompanying Notes to Consolidated Financial Statements. First Busey Corporation | 2023 — 97 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) Years Ended December 31, 2023 2022 2021 Cash flows provided by (used in) operating activities Net income $ 122,565 $ 128,311 $ 123,449 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision for credit losses 2,399 4,623 ( 15,101 ) Amortization of intangible assets 10,432 11,628 11,274 Amortization of mortgage servicing rights 2,785 3,540 5,292 Amortization of NMTC 8,999 6,333 5,563 Depreciation and amortization of premises and equipment 9,488 10,482 11,610 Net amortization (accretion) on portfolio loans 6,971 3,932 ( 11,545 ) Net amortization (accretion) of premium (discount) on investment securities 14,406 20,799 24,251 Net amortization (accretion) of premium (discount) on time deposits ( 270 ) ( 403 ) ( 1,142 ) Net amortization (accretion) of premium (discount) on FHLB advances and other borrowings 1,027 1,400 826 Impairment of OREO and other repossessed assets 100 611 1 Impairment of fixed assets held for sale — 427 3,227 Impairment of mortgage servicing rights 1 ( 8 ) ( 639 ) Impairment of leases — 84 — Unrealized (gains) losses recognized on equity securities, net 2,171 2,183 ( 3,041 ) (Gain) loss on sales of equity securities, net ( 5,475 ) ( 24 ) — (Gain) loss on sales of debt securities, net 5,503 ( 26 ) ( 29 ) (Gain) loss on sales of loans, net ( 733 ) ( 1,944 ) ( 9,323 ) (Gain) loss on sales of OREO and other repossessed assets ( 46 ) 54 174 (Gain) loss on sales of premises and equipment ( 450 ) ( 825 ) ( 1,023 ) (Gain) loss on life insurance proceeds ( 759 ) — ( 1,257 ) (Increase) decrease in cash surrender value of bank owned life insurance ( 3,942 ) ( 3,663 ) ( 3,909 ) Provision for deferred income taxes ( 2,920 ) ( 1,272 ) 4,665 Stock-based compensation 6,595 8,968 7,864 Mortgage loans originated for sale ( 35,413 ) ( 70,953 ) ( 274,356 ) Proceeds from sales of mortgage loans 35,018 95,289 306,074 (Increase) decrease in other assets ( 17,888 ) ( 56,284 ) 7,203 Increase (decrease) in other liabilities 12,826 2,633 ( 28,096 ) Net cash provided by (used in) operating activities $ 173,390 $ 165,895 $ 162,012 Cash flows provided by (used in) investing activities Purchases of equity securities $ ( 6,617 ) $ ( 14,820 ) $ ( 11,017 ) Purchases of debt securities available for sale ( 10,436 ) ( 280,083 ) ( 2,298,055 ) Proceeds from sales of equity securities 11,644 15,418 7,254 Proceeds from sales of debt securities available for sale 105,044 — 290,955 Proceeds from paydowns and maturities of debt securities held to maturity 48,927 70,116 — Proceeds from paydowns and maturities of debt securities available for sale 326,252 470,134 868,083 Purchases of FHLB and other bank stock ( 30,957 ) ( 12,969 ) — Proceeds from the redemption of FHLB and other bank stock 43,926 225 — Net cash received in (paid for) acquisitions — — 228,279 Net (increase) decrease in loans 65,240 ( 541,713 ) 76,826 Cash paid for premiums on bank-owned life insurance ( 80 ) ( 106 ) ( 124 ) Proceeds from life insurance 2,292 219 4,755 Purchases of premises and equipment ( 9,533 ) ( 4,989 ) ( 5,042 ) Proceeds from disposition of premises and equipment 4,425 4,528 7,306 Proceeds from sales of OREO and other repossessed assets, including cash payments collected 860 3,076 1,590 Net cash provided by (used in) investing activities $ 550,987 $ ( 290,964 ) $ ( 829,190 ) (continued) First Busey Corporation | 2023 — 98 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (dollars in thousands) Years Ended December 31, 2023 2022 2021 Cash flows provided by (used in) financing activities Net increase (decrease) in deposits $ 220,146 $ ( 696,894 ) $ 767,474 Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase ( 42,410 ) ( 40,333 ) 77,874 Net increase (decrease) in short-term borrowings ( 335,000 ) 330,000 1,000 Proceeds from other borrowings, net of debt issuance costs — 98,094 72,500 Repayment of other borrowings ( 16,054 ) ( 112,678 ) ( 19,158 ) Cash dividends paid ( 53,076 ) ( 50,863 ) ( 50,764 ) Purchase of treasury stock ( 4,482 ) ( 9,912 ) ( 33,043 ) Cash paid for withholding taxes on stock-based payments ( 1,093 ) ( 1,276 ) ( 997 ) Proceeds from stock warrants exercised 9 — — Common stock issuance costs — — ( 150 ) Net cash provided by (used in) financing activities $ ( 231,960 ) $ ( 483,862 ) $ 814,736 Net increase (decrease) in cash and cash equivalents $ 492,417 $ ( 608,931 ) $ 147,558 Cash and cash equivalents, beginning of period 227,164 836,095 688,537 Cash and cash equivalents, ending of period $ 719,581 $ 227,164 $ 836,095 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest $ 135,482 $ 35,297 $ 25,374 Income taxes 25,408 30,676 22,487 Non-cash investing and financing activities: OREO acquired in settlement of loans $ 189 $ 175 $ 1,610 Transfer of loans held for sale to portfolio loans — — ( 4,808 ) Transfer of debt securities available for sale to held to maturity — 985,199 — See accompanying Notes to Consolidated Financial Statements. First Busey Corporation | 2023 — 99 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SIGNIFICANT ACCOUNTING POLICIES Nature of Operations First Busey Corporation is a financial holding company organized under the laws of Nevada. First Busey Corporation’s subsidiaries provide retail and commercial banking services and payment technology solutions, and offer a full range of financial products and services including depository, lending, security brokerage, investment management, and fiduciary services, to individual, corporate, institutional, and governmental customers through their locations in Illinois, Missouri, southwest Florida and Indianapolis, Indiana. First Busey Corporation and its subsidiaries are subject to the regulations of certain regulatory agencies and undergo periodic examinations by those regulatory agencies. Significant accounting and reporting policies for First Busey Corporation and its subsidiaries follow: Principles of Consolidation Busey’s Consolidated Financial Statements include the accounts of First Busey Corporation and its subsidiaries, which include First Busey Risk Management (dissolved December 18, 2023), Deed of Trust Services Corporation, and Busey Bank, including Busey Bank’s wholly-owned subsidiaries FirsTech, Pulaski Service Corporation, and Busey Capital Management, Inc. Operating results generated from acquired businesses are included with Busey’s results of operations starting from each date of acquisition. First Busey Corporation and its subsidiaries maintain various limited liability companies that hold specific assets for risk mitigation purposes and are consolidated into Busey’s Consolidated Financial Statements . Intercompany balances and transactions have been eliminated in consolidation. Because Busey is not the primary beneficiary, the Consolidated Financial Statements exclude the following wholly-owned variable interest entities: First Busey Statutory Trust II, First Busey Statutory Trust III, First Busey Statutory Trust IV, Pulaski Financial Statutory Trust I, and Pulaski Financial Statutory Trust II. Use of Estimates In preparing the accompanying Consolidated Financial Statements in conformity with GAAP, Busey’s management is required to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the disclosures provided. Actual results could differ from those estimates. Material estimates which are particularly susceptible to significant change in the near-term relate to the fair value of debt securities available for sale, fair value of assets acquired and liabilities assumed in business combinations, goodwill, income taxes, and the determination of the ACL. Comprehensive Income (Loss) Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale debt securities and unrealized gains and losses on cash flow hedges, are reported net of taxes as a separate component within the equity section of the balance sheet, such items, along with net income, are components of comprehensive income (loss). First Busey Corporation | 2023 — 100 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Trust Assets Assets held for customers in a fiduciary or agency capacity, other than trust cash on deposit at Busey Bank, are not Busey’s assets and, accordingly, are not included in the accompanying Consolidated Financial Statements . Busey had assets under care of $ 12.1 billion at December 31, 2023, and $ 11.1 billion at December 31, 2022. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, cash items in process of collection, amounts due from other banks, interest-bearing deposits held with other financial institutions, and federal funds sold. The carrying amount of these instruments is considered a reasonable estimate of fair value. Busey maintains its cash in deposit accounts, the balance of which, at times, may exceed federally insured limits. Busey has not experienced any losses in such accounts. Management believes Busey is not exposed to any significant credit risk on cash and cash equivalents. Securities Debt Securities Available for Sale Debt securities classified as available for sale are those debt securities that Busey intends to hold for an indefinite period of time, but not necessarily to maturity. Any decision to sell a security classified as available for sale would be based on factors including significant movements in interest rates, changes in the maturity mix of Busey's assets and liabilities, liquidity needs, regulatory capital considerations, and other similar factors. Debt securities available for sale are carried at fair value, with unrealized gains and losses reported in OCI, net of taxes. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. The amortization period for certain callable debt securities held at a premium are amortized to the earliest call date, while discounts on debt securities are amortized to maturity. Gains and losses on the sale of debt securities available for sale are recorded on the trade date and are determined using the specific identification method. Debt securities available for sale are not within the scope of the current expected credit losses methodology, however, the accounting for credit losses on these securities is affected by ASC Subtopic 326-30 “Financial Instruments-Credit Losses—Available-for-Sale Debt Securities.” A debt security available for sale is impaired if the fair value of the security declines below its amortized cost basis. To determine the appropriate accounting, Busey must first determine if it intends to sell the security or if it is more likely than not that it will be required to sell the security before the fair value increases to at least the amortized cost basis. If either of those selling events is expected, Busey will write down the amortized cost basis of the security to its fair value. This is achieved by writing off any previously recorded allowance, if applicable, and recognizing any incremental impairment through earnings. If Busey neither intends to sell the security nor believes it is more likely than not that the Company will be required to sell the security before the fair value recovers to the amortized cost basis, Busey must determine whether any of the decline in fair value has resulted from a credit loss, or if it is entirely the result of noncredit factors. Busey considers the following factors in assessing whether the decline is due to a credit loss: • Extent to which the fair value is less than the amortized cost basis; • Adverse conditions specifically related to the security, an industry, or a geographic area (for example, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, in the financial condition of the underlying loan obligors); First Busey Corporation | 2023 — 101 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS • Payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future; • Failure of the issuer of the security to make scheduled interest or principal payments; and • Any changes to the rating of the security by a rating agency. Impairment related to a credit loss must be measured using the discounted cash flow method. Credit loss recognition is limited to the fair value of the security. Impairment is recognized by establishing an allowance for the debt security through the provision for credit losses. Impairment related to noncredit factors is recognized in AOCI, net of applicable taxes. Busey did not recognize any credit impairment in 2023, 2022, or 2021. Debt Securities Held to Maturity Debt securities classified as held to maturity are those debt securities that Busey has the intent and ability to hold to maturity and are carried at amortized cost. In 2022, Busey elected to transfer a portion of the agency mortgage-backed securities portfolio from available for sale to held to maturity. While held to maturity securities are within the scope of CECL, the standard allows for an assumption of zero credit losses when the expectation of non-payment is zero. The risk related to mortgage-backed securities issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises is considered low, therefore requiring no allowance to be recorded. Accrued interest receivable for debt securities totaled $ 13.6 million at December 31, 2023, and is excluded from the estimate of credit losses. Accrued interest receivable is reported in other assets on the Consolidated Balance Sheets . Equity Securities Equity securities are carried at fair value with changes in fair value recognized in earnings. Loans Held for Sale Loans held for sale include mortgage loans which Busey intends to sell to investors and/or the secondary mortgage market. Busey accounts for loans held for sale at LOCOM. Loans held for sale are carried at amortized historical cost less loan write-offs and downward fair value adjustments, as may be applicable. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income. Gains and losses on sales of loans are recognized at settlement dates and are determined by the difference between the sales proceeds and the carrying amount, net of the value of any servicing assets for loans that were sold with servicing rights retained. Loan Servicing Servicing assets are recognized when servicing rights are acquired or retained through the sale of mortgage and government-guaranteed commercial loans. The unpaid principal balances of loans serviced by Busey for the benefit of others totaled $ 1.5 billion as of December 31, 2023, and $ 1.7 billion as of December 31, 2022, and are not included in the accompanying Consolidated Balance Sheets . Servicing rights are initially recorded at fair value, which is determined using a valuation model that calculates the present value of estimated future net servicing income. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. The amortization of mortgage servicing rights is included in mortgage revenue. The amortization of government-guaranteed commercial loans is included in other income. First Busey Corporation | 2023 — 102 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Servicing rights are periodically evaluated for impairment based on the fair value of those rights as compared to book value. Fair values are estimated using discounted cash flows based on expected prepayment rates and other inputs. For purposes of measuring impairment, servicing rights are stratified by one or more predominant characteristics of the underlying loans. A valuation allowance is recognized in the amount by which the amortized cost of the rights for each stratum exceeds its fair value, if any. If Busey later determines that all or a portion of the impairment no longer exists for a particular group of loans, a reversal of the allowance may be recorded in current period earnings. Busey had an immaterial amount of impairment recorded at December 31, 2023 and 2022. Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal and are recorded as income when earned. Portfolio Loans Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or pay-off, are reported at the principal balance outstanding, net of purchase premiums and discounts, deferred origination fees and costs, charge-offs, and the ACL. Loan origination fees, net of certain direct loan origination costs, are deferred and the net amount is amortized as an adjustment of the related loan’s yield. Busey amortizes the net amount over the contractual life of the related loan. Interest income is accrued daily on outstanding loan balances. 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 provisions. Loans may be placed on non-accrual status regardless of whether or not such loans are considered past due. Past due status is based on the contractual terms of the loan. Interest accrued but not collected for loans that are charged-off or placed on non-accrual status is reversed against interest income. The interest on non-accrual loans is accounted for on the cost-recovery method, until returned to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. PPP Loans Busey had $ 0.3 million in PPP loans outstanding as of December 31, 2023. In comparison, Busey had $ 0.9 million in PPP loans outstanding as of December 31, 2022, with an amortized cost of $ 0.8 million. Busey received an immaterial amount of fees related to these loans for the year ended December 31, 2023, and received fees totaling $ 2.5 million and $ 20.1 million for the years ended December 31, 2022, and 2021, respectively. Incremental direct origination costs Busey incurred were immaterial for the year ended December 31, 2023, and were $ 0.6 million and $ 4.2 million for the years ended December 31, 2022, and 2021, respectively. Both the fees received and the origination costs were deferred and are amortized over the contractual life of these loans, subject to prepayment. Busey recognized an immaterial amount in net interest income for fees, net of deferred cost, during the year ended December 31, 2023, and recognized $ 1.9 million and $ 14.0 million during the years ended December 31, 2022, and 2021, respectively. As of December 31, 2023, the remaining amount of fees to be recognized, net of deferred costs, was immaterial. PPP loans contain a forgiveness feature for funds spent on covered expenses, including both principal and accrued interest. Any remaining balance after loan forgiveness maintains a 100 % government guarantee for the remaining term of the loan. First Busey Corporation | 2023 — 103 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Loan Modifications On January 1, 2023, Busey adopted ASU 2022-02 “Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures,” which eliminated the TDR accounting model for creditors that have already adopted CECL. In lieu of the TDR accounting model, loan refinancing and restructuring guidance in ASC Subtopic 310-20-35-9 through 35-11 “Receivables—Nonrefundable Fees and Other Costs—Subsequent Measurement—Loan Refinancing or Restructuring” will apply to all loan modifications, including those made for borrowers experiencing financial difficulty. This standard also enhances disclosure requirements related to certain loan modifications. Assets Purchased with Credit Deterioration On January 1, 2020, Busey adopted ASC Topic 326 “Financial Instruments-Credit Losses” using the prospective transition approach for financial assets PCD that were previously classified as PCI and accounted for under ASC Subtopic 310-30 “Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality.” In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. In accordance with ASC Topic 326, the amortized cost basis of PCD assets were adjusted to reflect an ACL for any remaining credit discount. Subsequent changes in expected cash flows will be adjusted through the ACL. The noncredit discount will be accreted into interest income using the January 1, 2020, effective interest rate. Subsequent to the adoption of ASC Topic 326, acquired loans are separated into two categories based on the credit risk characteristics of the underlying borrowers as either PCD, for loans which have experienced more than insignificant credit deterioration since origination, or all other loans. At the date of acquisition, an ACL on PCD loans is determined and netted against the amortized cost basis of the individual loans. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. The ACL on PCD loans is recorded in the acquisition accounting and no provision for credit losses is recognized at the acquisition date. Subsequent changes to the ACL are recorded through provision expense. For all other loans, an ACL is established immediately after the acquisition through a charge to the provision for credit losses. Allowance for Credit Losses The ACL is a significant estimate in Busey’s Consolidated Financial Statements , affecting both earnings and capital. The ACL is a valuation account that is deducted from the portfolio loans’ amortized cost bases to present the net amount expected to be collected on the portfolio loans. Portfolio loans are charged off against the ACL when management believes the uncollectibility of a loan balance is confirmed. Recoveries will be recognized up to the aggregate amount of previously charged-off balances. The ACL is established through the provision for credit loss charged to income. A loan’s amortized cost basis is comprised of the unpaid principal balance of the loan, accrued interest receivable, purchase premiums or discounts, and net deferred origination fees or costs. Busey has estimated its allowance on the amortized cost basis, exclusive of government guaranteed loans and accrued interest receivable. Busey writes-off uncollectible accrued interest receivable in a timely manner and has elected to not measure an allowance for accrued interest receivable. Busey presents the aggregate amount of accrued interest receivable for all financial instruments in other assets on the Consolidated Balance Sheets and the balance of accrued interest receivable is disclosed in “ Note 18. Fair Value Measurements. ” First Busey Corporation | 2023 — 104 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Our methodology influences, and is influenced by, Busey’s overall credit risk management processes. The ACL is managed in accordance with GAAP to provide an adequate reserve for expected credit losses that is reflective of management’s best estimate of what is expected to be collected. The ACL must be determined on a collective (pool) basis when similar risk characteristics exist. On a case-by-case basis, we may conclude a loan should be evaluated on an individual basis based on disparate risk characteristics. The 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 amortized cost basis. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions such as changes in unemployment rates, property values, and other relevant factors. 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. Due to the continued economic uncertainty in the markets in which the Company operates, Busey will continue to utilize a forecast period of 12 months with an immediate reversion to historical loss rates beyond this forecast period in its ACL estimate. Ongoing impacts of CECL will be dependent upon changes in economic conditions and forecasts, originated and acquired loan portfolio composition, prepayment speeds, credit performance trends, portfolio duration, and other factors. Premises and Equipment Land is carried at cost less accumulated depreciation of depreciable land improvements. Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed by the straight-line method over the estimated useful lives of the assets. The estimated useful lives for premises and equipment are: Asset Description Estimated Useful Life Buildings and improvements 3 — 40 years Furniture and equipment 3 — 10 years Leases A determination is made at inception if an arrangement contains a lease. For arrangements containing leases, Busey recognizes leases on the Consolidated Balance Sheets as right of use assets and corresponding lease liabilities. Lease-related assets, or right of use assets, are recognized on the lease commencement date at amounts equal to the respective lease liabilities, adjusted for prepaid lease payments, initial direct costs, and lease incentives received. Lease-related liabilities are recognized at the present value of the remaining contractual fixed lease payments, discounted using our incremental borrowing rate. Busey’s lease agreements often include one or more options to renew at Busey’s discretion. When Busey considers the exercise of a renewal option to be reasonably certain, that renewal term is included in the calculation of the right of use asset and lease liability. Operating lease expense is recognized on a straight-line basis over the lease term, including any renewal terms available through options to renew that Busey is reasonably certain to exercise. Variable lease payments are expensed as incurred. First Busey Corporation | 2023 — 105 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ASC Topic 842 “Leases” requires the use of the rate implicit in the lease whenever this rate is readily determinable. If not readily determinable, Busey uses its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. For operating leases existing prior to Busey’s adoption of ASC Topic 842 on January 1, 2019, Busey used a borrowing rate that corresponded to the lease term remaining as of the date of adoption of ASC Topic 842. Long-Lived Assets Long-lived assets, including premises and equipment, right of use assets, and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An impairment loss is recognized when estimated undiscounted future cash flows from operations of the asset are less than the carrying value of the asset. Cash flows used for this analysis are those directly associated with, and that are expected to arise as a direct result of, the use and eventual disposition of the asset. Any impairment loss is measured as the amount by which the carrying value of the asset exceeds its fair value. Other Real Estate Owned and Other Repossessed Assets OREO and other repossessed assets represent properties and other assets acquired through foreclosure or other proceedings in settlement of loans. OREO and other repossessed assets are recorded at the fair value of the property or asset, less estimated costs of disposal, which establishes a new cost basis. Any adjustment to fair value at the time of transfer to OREO or other repossessed assets is charged to the ACL. OREO property and other repossessed assets are evaluated regularly to ensure the recorded amount is supported by its current fair value; write downs or valuation allowances to reduce the carrying amount to fair value less estimated costs to dispose are recorded, as necessary. OREO and other repossessed assets are included in other assets on the Consolidated Balance Sheets . Revenue, expense, gains, and losses from the operations of foreclosed assets are included in earnings. Goodwill and Other Intangibles Goodwill represents the excess of consideration transferred in a business combination over the fair value of the net assets acquired. Goodwill is not amortized but is subject to at least annual impairment assessments. Busey has established December 31 as the annual impairment assessment date. As part of this analysis, each reporting unit's carrying value is compared to its fair value. Busey estimates the fair value of its reporting units as of the measurement date utilizing valuation methodologies including comparable company analysis and precedent transaction analysis. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. There was no impairment as of December 31, 2023, or 2022. See “ Note 7. Goodwill and Other Intangible Assets ” for further discussion. Other intangible assets consist of core deposit and acquired customer relationship intangible assets arising from acquisitions. Other intangible assets are amortized over their estimated useful lives. Cash Surrender Value of Bank Owned Life Insurance Busey has purchased, or acquired through acquisitions, life insurance policies on certain executives and senior officers. Life insurance is recorded at its cash surrender value, which approximates its fair value. First Busey Corporation | 2023 — 106 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Busey maintains a liability for post-employment benefits related to split-dollar life insurance arrangements. In an endorsement split-dollar life insurance arrangement, the employer owns and controls the policy, and the employer and employee split the life insurance policy’s cash surrender value and/or death benefits. If the employer agrees to maintain a life insurance policy during the employee’s retirement, the present value of the cost of maintaining the insurance policy is accrued over the employee’s active service period. Similarly, if the employer agrees to provide the employee with a death benefit, the present value of the death benefit is accrued over the employee’s active service period. Busey accrued liabilities for these arrangements totaling $ 5.6 million as of both December 31, 2023, and 2022. Liabilities for post-employment benefits are included in other liabilities on the Consolidated Balance Sheets . FHLB Stock Busey Bank is a member of the FHLB system. FHLB members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost in other assets in our Consolidated Balance Sheet . Dividends are reported as income. Busey Bank's investment in FHLB stock was $ 6.0 million as of December 31, 2023, and $ 19.0 million as of December 31, 2022. Other Asset Investments Busey has invested in certain tax-advantaged projects promoting affordable housing, new markets, and historic rehabilitation. These investments are designed to generate returns primarily though the realization of federal and state income tax credits and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods. These investments are considered to be variable interest entities, and are accounted for under the equity, deferral, or proportional amortization practical expedient methods, as appropriate. Busey is not required to consolidate variable interest entities in which it has concluded it does not have a controlling financial interest, and is not the primary beneficiary. Busey’s maximum exposure to loss related to its investments in these unconsolidated variable interest entities is limited to the carrying amount of the investment, net of any unfunded capital commitments and previously recorded tax credits which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level. Busey believes potential losses from these investments are remote. In addition, Busey has private equity investments, which are primarily in funds that invest in small businesses across diverse sectors including, but not limited to, financial technology, business services, manufacturing, agribusiness, healthcare, software as a service, and environmental, or supporting the preservation of affordable housing. The following table summarizes the impact of Busey’s other asset investments on the Company’s Consolidated Balance Sheets for the periods indicated (dollars in thousands) : As of December 31, Location 2023 2022 Other asset investments Funded investments Other assets $ 68,516 $ 58,912 Unfunded investments Other assets 58,552 67,437 Other asset investments $ 127,068 $ 126,349 Unfunded investment obligations Other liabilities $ 58,552 $ 67,437 During 2023, Busey sold all 16,878 shares of Visa Class B common shares it previously held for a pre-tax gain of approximately $ 5.5 million. First Busey Corporation | 2023 — 107 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Transfers of Financial Assets Transfers of financial assets are accounted for as sales only when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when: (1) the assets have been isolated from Busey’s assets, (2) the transferee obtains the right to pledge or exchange the assets it receives, and no condition both constrains the transferee from taking advantage of its right to pledge or exchange and provides more than a trivial benefit to the transferor, and (3) Busey does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets. Income Taxes Busey is subject to income taxes in U.S. federal and various state jurisdictions. First Busey Corporation and its subsidiaries file consolidated federal and state income tax returns with each subsidiary computing its taxes on a separate entity basis. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. Busey is no longer subject to U.S. federal, state, or local income tax examinations by tax authorities for the years before 2020. Under GAAP, a valuation allowance is required to be recognized if it is more likely than not that the deferred tax assets will not be realized. The determination of the recoverability of the deferred tax assets is highly subjective and dependent upon judgment concerning management’s evaluation of both positive and negative evidence, the forecasts of future income, applicable tax planning strategies, and assessments of current and future economic and business conditions. Management believes that it is more likely than not that the deferred tax assets included in the accompanying Consolidated Financial Statements will be fully realized. Busey determined that no valuation allowance was required as of December 31, 2023, or 2022. Positions taken in tax returns may be subject to challenge upon examination by the taxing authorities. Uncertain tax positions are initially recognized in the Consolidated Financial Statements when it is more likely than not the position will not be sustained upon examination by the tax authorities. Such tax positions are both initially and subsequently measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement with the tax authority, assuming full knowledge of the position and all relevant facts. When applicable, Busey recognizes interest accrued related to unrecognized tax benefits and penalties in operating expenses. Busey had no accruals for payments of interest and penalties at December 31, 2023, or 2022. At December 31, 2023, Busey was not under any income tax examination by any income tax authority. Treasury Stock Treasury stock acquired is recorded at cost. Treasury stock issued is valued based on the “first-in, first-out” method. Gains and losses on issuance are recorded as increases or decreases to additional paid-in capital. Stock-Based Employee Compensation Busey’s equity incentive plans are designed to encourage ownership of its common stock by its employees and directors, to provide additional incentive for them to promote the success of Busey’s business, and to attract and retain talented personnel. All of Busey’s employees and directors and those of its subsidiaries are eligible to receive awards under the plans. First Busey Corporation | 2023 — 108 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2020 Equity Plan The 2020 Equity Plan was originally approved by stockholders at the 2020 Annual Meeting of Stockholders. A description of the 2020 Equity Plan, as originally approved, can be found in Appendix A within Busey’s Proxy Statement for the 2020 Annual Meeting of Stockholders filed on April 9, 2020 . Upon the 2020 Equity Plan’s original approval, it replaced the 2010 Equity Incentive Plan and the First Community 2016 Equity Incentive Plan, which, from time to time, Busey used to grant equity awards to legacy employees of First Community. Under the terms of the 2020 Equity Plan, Busey has granted RSU, DSU, and PSU awards. An amendment to and restatement of the 2020 Equity Plan was approved by stockholders at the 2023 Annual Meeting of Stockholders. The terms of the amended and restated 2020 Equity Plan are substantially identical to those of the originally approved 2020 Equity Plan, other than a 1,350,000 increase in the number of shares authorized for issuance under the plan. More information can be found in Appendix A within Busey’s Proxy Statement for the 2023 Annual Meeting of Stockholders filed on April 14, 2023 . RSU Awards Busey grants RSU awards to members of management periodically throughout the year. RSU awards are stock-based awards for which vesting is conditional upon meeting established service criteria. Each RSU is equivalent to one share of Busey’s common stock. Busey’s RSUs have requisite service periods ranging from one year to five years , and are subject to accelerated vesting upon eligible retirement from Busey. Recipients earn quarterly dividend equivalents on their respective RSUs, which entitle the recipients to additional units. Therefore, dividends earned each quarter compound based upon the updated unit balances. PSU Awards Busey grants PSU awards to members of management periodically throughout the year. PSU awards are stock-based awards for which vesting is conditional upon meeting established performance criteria. Each PSU is equivalent to one share of Busey’s common stock. The number of PSUs that ultimately vest will be determined based on the extent to which market or other performance goals are achieved. Busey’s PSUs are subject to accelerated service-based vesting conditions upon eligible retirement from Busey. After performance determination, dividend equivalents are compounded based upon the updated PSU balances at each dividend date during the performance period. DSU Awards Busey grants DSU awards to its directors and advisory directors. DSU awards are stock-based awards with a deferred settlement date. Each DSU is equivalent to one share of Busey’s common stock. DSUs vest over a one-year period following the grant date. Under the 2020 Equity Plan, DSUs are generally subject to the same terms as RSUs, except that following vesting of DSUs, settlement occurs within 30 days following the earlier of separation from the board or a change in control of the Company. After vesting and prior to delivery, DSUs will continue to earn dividend equivalents. Stock Options Busey has outstanding stock options assumed from acquisitions. All stock options that remained outstanding as of December 31, 2023, were fully vested. First Busey Corporation | 2023 — 109 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2021 Employee Stock Purchase Plan The 2021 ESPP was approved at Busey’s 2021 Annual Meeting of Stockholders and details can be found in Appendix A within First Busey’s Definitive Proxy Statement filed with the SEC on April 8, 2021 . One of the primary purposes of the 2021 ESPP is to provide a means through which our associates may acquire a proprietary interest in Busey by purchasing shares of our common stock at a discounted price through voluntary payroll deductions, further incentivizing Busey associates to exert maximum effort toward Busey’s success. Because the 2021 ESPP provides opportunity for Busey associates to purchase Busey’s common stock at a 15 % discount from the market price, the plan is considered to be a compensatory plan under current accounting guidance. Therefore, the entire amount of the discount is recognized in salaries, wages, and employee benefits on the Consolidated Statements of Income . See “ Note 14. Stock-based Compensation ” for further discussion. Segment Disclosure Operating segments are components of a business that (1) engage in business activities from which the component may earn revenues and incur expenses; (2) have operating results that are reviewed regularly by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segments and assess their performance; and (3) for which discrete financial information is available. Busey’s operations are managed along three operating segments consisting of Banking, Wealth Management, and FirsTech. See “ Note 21. Operating Segments and Related Information ” for further discussion. Business Combinations Business combinations are accounted for under ASC Topic 805 “Business Combinations” using the acquisition method of accounting. The acquisition method of accounting requires that the assets acquired and the liabilities assumed are recognized, measured at their estimated fair values, as of the date Busey obtains control of the acquiree (the acquisition date). To estimate fair values of assets acquired and liabilities assumed, Busey may utilize third-party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques. Operating results generated from acquired businesses are included with Busey’s results of operations starting from each acquisition date. Acquisition related costs are costs that Busey incurs to effect a business combination, and may include legal, accounting, valuation, other professional or consulting fees, system conversions, and marketing costs. Busey accounts for acquisition related costs by recording them as expenses in the periods in which the costs are incurred and the services are received. Costs that Busey expects, but is not obligated to incur in the future, to effect its plan to exit an activity of an acquiree or to terminate the employment of an acquiree’s employees are not liabilities at the acquisition date. Instead, Busey recognizes these costs in its post-combination Consolidated Financial Statements in accordance with other applicable accounting guidance. Derivative Financial Instruments Busey utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. Additionally, Busey enters into derivative financial instruments, including interest rate lock commitments issued to residential loan customers for loans that will be held for sale, forward sales commitments to sell residential mortgage loans to investors, and interest rate swaps with customers and other third parties. First Busey Corporation | 2023 — 110 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Interest Rate Swaps Designated as Cash Flow Hedges Busey entered into derivative instruments designated as cash flow hedges. For a derivative instrument that qualifies and is designated as a cash flow hedge, the change in fair value of the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Changes in fair value of components excluded from the assessment of effectiveness are recognized in current earnings. Interest Rate Swaps Not Designated as Hedges Busey may offer derivative contracts to its customers in connection with their risk management needs. Busey manages the risk associated with these contracts by entering into equal and offsetting derivatives with third-party dealers. Generally, these derivatives have worked together as an economic interest rate hedge, but Busey did not designate them for hedge accounting treatment. Consequently, changes in fair value of the corresponding derivative financial asset or liability were recorded as either a charge or credit to current earnings during the period in which the changes occurred. Interest Rate Lock Commitments Interest rate lock commitments that meet the definition of derivative financial instruments under ASC Topic 815 “Derivatives and Hedging” are carried at their fair values in other assets or other liabilities in the Consolidated Financial Statements , with changes in the fair values of the corresponding derivative financial assets or liabilities recorded as either a charge or credit to current earnings during the period in which the changes occurred. Forward Sales Commitments Busey economically hedges mortgage loans held for sale and interest rate lock commitments issued to its residential loan customers related to loans that will be held for sale by obtaining corresponding forward sales commitments with an investor to sell the loans at an agreed-upon price at the time the interest rate locks are issued to the customers. Forward sales commitments that meet the definition of derivative financial instruments under ASC Topic 815 “Derivatives and Hedging” are carried at their fair values in other assets or other liabilities in the Consolidated Financial Statements . While such forward sales commitments generally served as an economic hedge to mortgage loans held for sale and interest rate lock commitments, Busey did not designate them for hedge accounting treatment. Changes in fair value of the corresponding derivative financial asset or liability were recorded as either a charge or credit to current earnings during the period in which the changes occurred. Risk Participation Agreements Busey has entered into risk participation agreements to manage the credit risk of its derivative position. These agreements transfer credit risk related to an interest rate swap to another financial institution. Risk participation agreements that Busey has entered into are structured as follows: • Busey has a swap agreement with a customer. Busey (purchaser) entered into a risk participation agreement with a counterparty (seller), under which the counterparty receives a fee to accept a portion of the credit risk. If Busey’s customer defaults on the swap contract, the counterparty to the risk participation agreement must reimburse Busey for the counterparty's percentage of the positive fair value of the customer swap as of the default date. If the customer swap has a negative fair value, the counterparty has no reimbursement requirements. If Busey’s customer defaults on the swap contract and the counterparty (seller) fulfills its payment obligations under the risk participation agreement, the counterparty (seller) is entitled to a pro rata share of Busey’s claim against the customer under the terms of the swap agreement. First Busey Corporation | 2023 — 111 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS • A counterparty has a swap agreement with a customer. Busey (seller) entered into a risk participation with a counterparty (purchaser), under which Busey receives a fee to accept a portion of the credit risk. If the counterparty’s customer defaults on the swap contract, Busey must reimburse the counterparty (purchaser) for Busey's percentage of the positive fair value of the customer swap as of the default date. If the customer swap has a negative fair value, Busey has no reimbursement requirements. If the counterparty’s customer defaults on the swap contract and Busey (seller) fulfills its payment obligations under the risk participation agreement, Busey (seller) is entitled to a pro rata share of the counterparty’s claim against the customer under the terms of the swap agreement. Foreign Currency Forward Contracts Busey entered into foreign currency exchange contracts to support the business requirements of its customers. Foreign currency contracts involve the exchange of one currency for another on a specified date and at a specified rate. These contracts are executed on behalf of Busey's customers and are used by customers to manage fluctuations in foreign exchange rates. Busey minimizes its exposure by entering into similar offsetting positions with other financial institutions. Busey is subject to the credit risk that another party will fail to perform. Off-Balance Sheet Arrangements In the normal course of business, to meet the financing needs of its customers, Busey is a party to credit-related financial instruments with off-balance-sheet risk, including commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheets . Busey’s exposure to credit loss is represented by the contractual amount of the commitments. Busey uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. Commitments to extend credit are agreements to lend to a customer as long as no condition established in the contract has been violated. These commitments are generally at variable interest rates, they generally have fixed expiration dates or other termination clauses, and they may require the customer to pay a fee. Commitments for equity lines of credit may expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements. These commitments may be secured based on management’s credit evaluation of the borrower. Standby letters of credit are conditional commitments Busey has issued to guarantee the performance of a customer’s obligation to a third-party. Those guarantees are primarily issued to support public and private borrowing arrangements, including bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Busey holds collateral, which may include accounts receivable, inventory, property and equipment, and income producing properties, supporting those commitments if deemed necessary. In the event the customer does not perform in accordance with the terms of the agreement with the third-party, Busey would be required to fund the commitment. If the commitment is funded, Busey would be entitled to seek recovery from the customer. First Busey Corporation | 2023 — 112 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Busey estimates expected credit losses for off-balance sheet arrangements over the contractual period during which it is exposed to credit risk via a present contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the issuer. To be considered unconditionally cancellable for accounting purposes, Busey must have the ability to, at any time, with or without cause, refuse to extend credit under the commitment. Off-balance-sheet credit exposure segments share the same risk characteristics as portfolio loans. Busey incorporates a probability of funding and utilizes the ACL loss rates to calculate a reserve for off-balance-sheet credit exposure, which is carried on the Consolidated Balance Sheets in other liabilities rather than as a component of the ACL. The reserve for off-balance-sheet credit exposure is adjusted as a provision for off-balance-sheet credit exposure and is reported as a component of noninterest expense in the accompanying Consolidated Statements of Income . Liabilities recorded as reserves for Busey’s off-balance sheet credit exposure under these commitments totaled $ 7.1 million as of December 31, 2023, and $ 6.6 million as of December 31, 2022. Fair Value of Financial Instruments Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in “ Note 18. Fair Value Measurements .” Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates. Revenue ASC Topic 606 “Revenue from Contracts with Customers” outlines a single model for companies to use in accounting for revenue arising from contracts with customers and supersedes most prior revenue recognition guidance, including industry-specific guidance. ASC Topic 606 requires that companies recognize revenue based on the value of transferred goods or services as they occur in the contract and establishes additional disclosures. Busey’s revenue is comprised of net interest income, which is explicitly excluded from the scope of ASC Topic 606, and noninterest income. Busey has evaluated its noninterest income and the nature of its contracts with customers and determined that further disaggregation of revenue beyond what is presented in the accompanying Consolidated Financial Statements is not necessary. Busey satisfies its performance obligations on its contracts with customers as services are rendered, so there is limited judgment involved in applying ASC Topic 606 that affects the determination of the timing and amount of revenue from contracts with customers. Descriptions of Busey’s primary revenue generating activities that are within the scope of ASC Topic 606, and are presented in the accompanying Consolidated Statements of Income as components of noninterest income, include wealth management fees, payment technology solutions, and fees for customer services. Wealth Management Fees Wealth management fees represent fees due from wealth management customers as consideration for managing the customers' assets. Wealth management and trust services include custody of assets, investment management, fees for trust services, and other fiduciary activities. Also included are fees received from a third-party broker-dealer as part of a revenue sharing agreement for fees earned from customers that Busey refers to the third party. Revenue is recognized when the performance obligation is completed, which is generally monthly. Payment Technology Solutions Payment technology solutions revenue represents transaction-based fees for technology-driven payment solutions primarily for walk-in, lockbox, interactive voice recognition, and online bill payments through Busey Bank’s subsidiary, FirsTech. Revenue is recognized when the performance obligation is completed, which is generally monthly. First Busey Corporation | 2023 — 113 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fees for Customer Services Fees for customer services consist of time-based revenue from service fees for account maintenance, item-based revenue from fee-based activity, and transaction-based fee revenue. Revenue is recognized when the performance obligation is completed, which is generally monthly for account maintenance services, or when a transaction has been completed. Payments for such performance obligations are generally received at the time the performance obligations are satisfied. Reclassifications Reclassifications have been made to certain prior year account balances, with no effect on net income or stockholders’ equity, to be consistent with the classifications adopted as of and for the year ended December 31, 2023. Impact of Recently Adopted Accounting Standards In July 2023, the FASB issued ASU 2023‑03 “Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718)” pursuant to: (1) SEC Staff Accounting Bulletin No. 120, which provided interpretive guidance related to estimating the fair value of share-based payment transactions while in possession of material non-public information; (2) an SEC Staff Announcement at the March 24, 2022, Emerging Issues Task Force Meeting, which provided interpretive guidance on accounting for share-based payments to employees and non-employees; and (3) Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock, which provided interpretive guidance on the reporting of income or loss applicable to common stock. This update was reflected in the Accounting Standards Codification upon issuance. Adoption of this standard did not have a material impact on Busey’s financial position or results of operations. In March 2022, the FASB issued ASU 2022‑02 “Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures,” which eliminates the TDR accounting model for creditors that have already adopted CECL. In lieu of the TDR accounting model, loan refinancing and restructuring guidance in ASC Subtopic 310-20-35-9 through 35-11 “Receivables—Nonrefundable Fees and Other Costs—Subsequent Measurement—Loan Refinancing or Restructuring” will apply to all loan modifications, including those made for borrowers experiencing financial difficulty. This standard also enhances disclosure requirements related to certain loan modifications. Additionally, this standard introduces new requirements to disclose gross write-off information in the vintage disclosures of financing receivables by credit quality indicator and class of financing receivable by year of origination. This standard applies prospectively. For the transition method related to the recognition and measurement of TDRs, there is an option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. This standard became effective for Busey beginning January 1, 2023. Adoption of this standard did not have a material impact on Busey’s financial position or results of operations. First Busey Corporation | 2023 — 114 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In March 2022, the FASB issued ASU 2022‑01 “Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method,” which replaces the current last-of-layer hedge accounting method with an expanded portfolio layer method that permits multiple hedged layers of a single closed portfolio. The scope of the portfolio layer method is also expanded to include non-prepayable financial assets. This update also provides additional guidance on the accounting for and disclosure of hedge basis adjustments that are applicable to the portfolio layer method, and specifies how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. Amendments related to hedge basis adjustments which are included in this standard apply on a modified retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings on the initial application date. Amendments related to disclosure which are included in this standard may be applied on a prospective basis from the initial application date, or on a retrospective basis to each prior period presented after the date of adoption of the amendments in ASU 2017-12 “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” This standard became effective for Busey beginning January 1, 2023. Adoption of this standard did not have a material impact on Busey’s financial position or results of operations. ASU 2021‑08 “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” requires measurement and recognition in accordance with ASC Topic 606 “Revenue from Contracts with Customers” for contract assets and contract liabilities acquired in a business combination. This update became effective for Busey beginning January 1, 2023. This standard applied prospectively to all business combinations that occurred on or after the date of adoption. Adoption of this standard did not have an impact on Busey’s financial position or results of operations. Recently Issued Accounting Standards Not Yet Adopted In December 2023, the FASB issued ASU 2023‑09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires more detailed disclosures of income taxes paid net of refunds received, income from continuing operations before income tax expense or benefit, and income tax expense from continuing operations. This standard is to be applied on a prospective basis, with retrospective application permitted, and will be effective for Busey for annual periods beginning on January 1, 2025. Busey does not expect adoption of this standard to have a material impact on the Company’s financial position or results of operations. In November 2023, the FASB issued ASU 2023‑07 “Segment Reporting Topic 820): Improvements to Reportable Segment Disclosures” requiring enhanced disclosures related to significant segment expenses. This standard is to be applied on a retrospective basis, and is effective for Busey beginning with its fiscal year starting on January 1, 2024, and for interim reporting periods within fiscal years starting January 1, 2025. Busey does not expect adoption of this standard to have a material impact on the Company’s financial position or results of operations. In October 2023, the FASB issued ASU 2023‑06 “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative” which aligns certain GAAP disclosure requirements with the SEC’s disclosure requirements, in order to better facilitate comparisons between entities that are subject to the SEC’s existing disclosures with entities that were not previously subject to the SEC’s requirements. Amendments in this update should be applied prospectively, and the effective date for Busey for each amendment in this accounting standards update will be the date on which the SEC removes the related disclosure from Regulation S‑X or Regulation S‑K. Early adoption is prohibited. Busey does not expect adoption of this standard to have a material impact on the Company’s financial position or results of operations. First Busey Corporation | 2023 — 115 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In March 2023, the FASB issued ASU 2023‑02 “Investments—Equity Method and Joint Ventures (Topic 323),” permitting an election to use the proportional amortization method to account for equity investments made primarily for the purpose of receiving income tax credits and other income tax benefits, regardless of the tax credit program from which the income tax credits are received, provided that certain conditions are met. The proportional amortization method results in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization of the investment and the income tax credits being presented net in the income statement as a component of income tax expense. This standard must be applied on a retrospective or modified retrospective basis, and became effective for Busey beginning on January 1, 2024. Busey recorded an after-tax decrease to retained earnings of $ 1.4 million as of January 1, 2024, for the cumulative effect of adopting ASU 2023‑02. This transition adjustment included a $ 2.4 million decrease in other assets, a $ 0.5 million decrease in other liabilities, and a $ 0.5 million increase in deferred tax assets. In March 2023, the FASB issued ASU 2023‑01 “Leases (Topic 842): Common Control Arrangements,” which requires amortization over the useful life of leasehold improvements (not the lease term) when the lease is between entities under common control, and any value of such leasehold improvements remaining at the end of the lease term is to be accounted for as a transfer between entities under common control. This standard may be adopted either prospectively, or retrospectively, and became effective for Busey beginning January 1, 2024. Busey does not expect adoption of this standard to have a material impact on the Company’s financial position or results of operations. In June 2022, the FASB issued ASU 2022‑03 “Fair Value Measurements (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions,” which clarifies that contractual restrictions on the sale of equity securities are not considered in measuring the fair value of those equity securities, and further that contractual sale restrictions cannot be recognized and measured as a separate unit of account. This standard applies prospectively, and became effective for Busey beginning January 1, 2024. Busey does not expect adoption of this standard to have a material impact on the Company’s financial position or results of operations. Subsequent Events Busey has evaluated subsequent events for potential recognition and/or disclosure through the date the Consolidated Financial Statements included in this Annual Report on Form 10-K were issued. There were no significant subsequent events for the year ended December 31, 2023, through the filing date of these Consolidated Financial Statements . First Busey Corporation | 2023 — 116 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2. DEBT SECURITIES Busey's portfolio of debt securities includes both available for sale and held to maturity securities. The tables below provides the amortized cost, unrealized and unrecognized gains and losses, and fair values of debt securities, summarized by major category (dollars in thousands) : As of December 31, 2023 Amortized Cost Unrealized Fair Value Gross Gains Gross Losses Debt securities available for sale U.S. Treasury securities $ 16,031 $ — $ ( 85 ) $ 15,946 Obligations of U.S. government corporations and agencies 5,889 1 ( 58 ) 5,832 Obligations of states and political subdivisions 1 190,819 52 ( 18,026 ) 172,845 Asset-backed securities 470,046 — ( 1,823 ) 468,223 Commercial mortgage-backed securities 119,044 — ( 15,535 ) 103,509 Residential mortgage-backed securities 1,306,854 5 ( 195,547 ) 1,111,312 Corporate debt securities 225,947 128 ( 16,171 ) 209,904 Total debt securities available for sale $ 2,334,630 $ 186 $ ( 247,245 ) $ 2,087,571 Amortized Cost Unrecognized Fair Value Gross Gains Gross Losses Debt securities held to maturity Commercial mortgage-backed securities $ 428,526 $ — $ ( 71,000 ) $ 357,526 Residential mortgage-backed securities 444,102 — ( 71,231 ) 372,871 Total debt securities held to maturity $ 872,628 $ — $ ( 142,231 ) $ 730,397 ___________________________________________ 1. Includes securities marked at par, with no gain or loss to report. First Busey Corporation | 2023 — 117 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2022 Amortized Cost Unrealized Fair Value Gross Gains Gross Losses Debt securities available for sale U.S. Treasury securities $ 117,805 $ — $ ( 3,744 ) $ 114,061 Obligations of U.S. government corporations and agencies 20,097 3 ( 321 ) 19,779 Obligations of states and political subdivisions 283,481 106 ( 26,075 ) 257,512 Asset-backed securities 489,558 — ( 19,683 ) 469,875 Commercial mortgage-backed securities 124,423 — ( 16,029 ) 108,394 Residential mortgage-backed securities 1,463,971 2 ( 220,717 ) 1,243,256 Corporate debt securities 273,118 33 ( 24,635 ) 248,516 Total debt securities available for sale $ 2,772,453 $ 144 $ ( 311,204 ) $ 2,461,393 Amortized Cost Unrecognized Fair Value Gross Gains Gross Losses Debt securities held to maturity Commercial mortgage-backed securities $ 474,820 $ — $ ( 63,738 ) $ 411,082 Residential mortgage-backed securities 443,492 — ( 69,279 ) 374,213 Total debt securities held to maturity $ 918,312 $ — $ ( 133,017 ) $ 785,295 Amortized cost and fair value of debt securities, by contractual maturity or pre-refunded date, are shown below. Mortgages underlying mortgage-backed securities and asset-backed securities may be called or prepaid; therefore, actual maturities could differ from the contractual maturities. All mortgage-backed securities were issued by U.S. government corporations and agencies (dollars in thousands) : As of December 31, 2023 Amortized Cost Fair Value Debt securities available for sale Due in one year or less $ 71,960 $ 71,429 Due after one year through five years 244,231 230,299 Due after five years through ten years 418,655 388,864 Due after ten years 1,599,784 1,396,979 Debt securities available for sale $ 2,334,630 $ 2,087,571 Debt securities held to maturity Due after one year through five years $ 73,943 $ 69,373 Due after five years through ten years 28,489 25,824 Due after ten years 770,196 635,200 Debt securities held to maturity $ 872,628 $ 730,397 First Busey Corporation | 2023 — 118 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Realized gains and losses related to sales and calls of debt securities available for sale are summarized as follows (dollars in thousands) : Years Ended December 31, 2023 2022 2021 Realized gains and losses on debt securities Gross gains on debt securities $ 20 $ 115 $ 543 Gross (losses) on debt securities ( 5,523 ) ( 89 ) ( 514 ) Realized net gains (losses) on debt securities 1 $ ( 5,503 ) $ 26 $ 29 ___________________________________________ 1. Net gains (losses) on sales of securities reported on the Consolidated Statements of Income include the sale of equity securities, excluded in this table. Debt securities with carrying amounts of $ 837.4 million on December 31, 2023, and $ 746.7 million on December 31, 2022, were pledged as collateral for public deposits, securities sold under agreements to repurchase, and for other purposes as required. First Busey Corporation | 2023 — 119 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following information pertains to debt securities with gross unrealized or unrecognized losses, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (dollars in thousands) : As of December 31, 2023 Less than 12 months 12 months or more Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Debt securities available for sale U.S. Treasury securities $ — $ — $ 15,946 $ ( 85 ) $ 15,946 $ ( 85 ) Obligations of U.S. government corporations and agencies — — 5,709 ( 58 ) 5,709 ( 58 ) Obligations of states and political subdivisions 11,442 ( 54 ) 146,797 ( 17,972 ) 158,239 ( 18,026 ) Asset-backed securities — — 468,223 ( 1,823 ) 468,223 ( 1,823 ) Commercial mortgage-backed securities — — 103,509 ( 15,535 ) 103,509 ( 15,535 ) Residential mortgage-backed securities 141 ( 1 ) 1,110,906 ( 195,546 ) 1,111,047 ( 195,547 ) Corporate debt securities 1,450 ( 10 ) 198,694 ( 16,161 ) 200,144 ( 16,171 ) Debt securities available for sale with gross unrealized losses $ 13,033 $ ( 65 ) $ 2,049,784 $ ( 247,180 ) $ 2,062,817 $ ( 247,245 ) 12 months or more Total Fair Value Unrecognized Losses Fair Value Unrecognized Losses Debt securities held to maturity Commercial mortgage-backed securities $ 357,526 $ ( 71,000 ) $ 357,526 $ ( 71,000 ) Residential mortgage-backed securities 372,871 ( 71,231 ) 372,871 ( 71,231 ) Debt securities held to maturity with gross unrecognized losses $ 730,397 $ ( 142,231 ) $ 730,397 $ ( 142,231 ) First Busey Corporation | 2023 — 120 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2022 Less than 12 months 12 months or more Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Debt securities available for sale U.S. Treasury securities 1 $ 74 $ — $ 113,987 $ ( 3,744 ) $ 114,061 $ ( 3,744 ) Obligations of U.S. government corporations and agencies 19,603 ( 321 ) — — 19,603 ( 321 ) Obligations of states and political subdivisions 166,147 ( 10,059 ) 75,217 ( 16,016 ) 241,364 ( 26,075 ) Asset-backed securities 390,164 ( 15,648 ) 79,711 ( 4,035 ) 469,875 ( 19,683 ) Commercial mortgage-backed securities 89,428 ( 12,623 ) 18,966 ( 3,406 ) 108,394 ( 16,029 ) Residential mortgage-backed securities 366,221 ( 38,111 ) 876,668 ( 182,606 ) 1,242,889 ( 220,717 ) Corporate debt securities 39,037 ( 5,079 ) 204,310 ( 19,556 ) 243,347 ( 24,635 ) Debt securities available for sale with gross unrealized losses $ 1,070,674 $ ( 81,841 ) $ 1,368,859 $ ( 229,363 ) $ 2,439,533 $ ( 311,204 ) Less than 12 months 12 months or more Total Fair Value Unrecognized Losses Fair Value Unrecognized Losses Fair Value Unrecognized Losses Debt securities held to maturity Commercial mortgage-backed securities $ 58,065 $ ( 8,009 ) $ 353,017 $ ( 55,729 ) $ 411,082 $ ( 63,738 ) Residential mortgage-backed securities — — 374,213 ( 69,279 ) 374,213 ( 69,279 ) Debt securities held to maturity with gross unrecognized losses $ 58,065 $ ( 8,009 ) $ 727,230 $ ( 125,008 ) $ 785,295 $ ( 133,017 ) ___________________________________________ 1. Unrealized losses for U.S. Treasury securities that have been in a continuous loss position for less than 12 months were insignificant, rounding to zero thousand. First Busey Corporation | 2023 — 121 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Additional information about debt securities in an unrealized or unrecognized loss position is presented in the tables below (dollars in thousands) : As of December 31, 2023 Available for Sale Held to Maturity Total Debt securities with gross unrealized or unrecognized losses, fair value $ 2,062,817 $ 730,397 $ 2,793,214 Gross unrealized or unrecognized losses on debt securities 247,245 142,231 389,476 Ratio of gross unrealized or unrecognized losses to debt securities with gross unrealized or unrecognized losses 12.0 % 19.5 % 13.9 % Count of debt securities 835 55 890 Count of debt securities in an unrealized or unrecognized loss position 779 55 834 As of December 31, 2022 Available for Sale Held to Maturity Total Debt securities with gross unrealized or unrecognized losses, fair value $ 2,439,533 $ 785,295 $ 3,224,828 Gross unrealized or unrecognized losses on debt securities 311,204 133,017 444,221 Ratio of gross unrealized or unrecognized losses to debt securities with gross unrealized or unrecognized losses 12.8 % 16.9 13.8 % Count of debt securities 1,091 55 1,146 Count of debt securities in an unrealized or unrecognized loss position 1,032 55 1,087 Unrealized and unrecognized losses were related to changes in market interest rates and market conditions that do not represent credit-related impairments. Unless part of a corporate strategy or restructuring plan, Busey does not intend to sell securities that are in an unrealized or unrecognized loss position, and it is more likely than not that Busey will recover the amortized cost prior to being required to sell the debt securities. Full collection of the amounts due according to the contractual terms of the debt securities is expected; therefore, no ACL was recorded in relation to debt securities, and the impairment related to noncredit factors on debt securities available for sale is recognized in AOCI, net of applicable taxes. As of December 31, 2023, Busey did not hold general obligation bonds of any single issuer, the aggregate of which exceeded 10% of the Company’s stockholders’ equity. First Busey Corporation | 2023 — 122 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3. PORTFOLIO LOANS Loan Categories Busey’s lending can be summarized into two primary categories: commercial and retail. Lending is further disaggregated into five primary classes of loans: commercial loans, commercial real estate loans, real estate construction loans in the commercial category, and retail real estate loans and retail other loans in the retail category. Distributions of the loan portfolio by loan category and class is presented in the following table (dollars in thousands) : As of December 31, 2023 2022 Commercial loans Commercial $ 1,835,994 $ 1,974,154 Commercial real estate 3,337,337 3,261,873 Real estate construction 461,717 530,469 Total commercial loans 5,635,048 5,766,496 Retail loans Retail real estate 1,720,455 1,657,082 Retail other 295,531 302,124 Total retail loans 2,015,986 1,959,206 Total portfolio loans 7,651,034 7,725,702 ACL ( 91,740 ) ( 91,608 ) Portfolio loans, net $ 7,559,294 $ 7,634,094 Net deferred loan origination costs included in the balances above were $ 13.5 million as of December 31, 2023, compared to $ 14.0 million as of December 31, 2022. Net accretable purchase accounting adjustments included in the balances above reduced loans by $ 4.5 million as of December 31, 2023, and by $ 5.9 million as of December 31, 2022. Commercial balances include loans originated under the PPP with an amortized cost of $ 0.3 million as of December 31, 2023, compared to $ 0.8 million as of December 31, 2022. Busey did not purchase any retail real estate loans during the years ended December 31, 2023, or 2022, and purchased $ 32.2 million of retail real estate loans during the year ended December 31, 2021. Pledged Loans The principal balance of loans Busey has pledged as collateral to the FHLB and Federal Reserve Bank for liquidity as set forth in the table below (dollars in thousands) : As of December 31, 2023 2022 Pledged loans FHLB $ 4,865,481 $ 5,095,448 Federal Reserve Bank 722,914 804,718 Total pledged loans $ 5,588,395 $ 5,900,166 First Busey Corporation | 2023 — 123 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Risk Grading Busey utilizes a loan grading scale to assign a risk grade to all of its loans. A description of the general characteristics of each grade is as follows: • Pass – This category includes loans that are all considered acceptable credits, ranging from investment or near investment grade, to loans made to borrowers who exhibit credit fundamentals that meet or exceed industry standards. • Watch – This category includes loans that warrant a higher-than-average level of monitoring to ensure that weaknesses do not cause the inability of the credit to perform as expected. These loans are not necessarily a problem due to other inherent strengths of the credit, such as guarantor strength, but have above average concern and monitoring. • Special mention – This category is for “Other Assets Specially Mentioned” loans that have potential weaknesses, which may, if not checked or corrected, weaken the asset, or inadequately protect Busey’s credit position at some future date. • Substandard – This category includes “Substandard” loans, determined in accordance with regulatory guidelines, for which the accrual of interest has not been stopped. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that Busey will sustain some loss if the deficiencies are not corrected. • Substandard non-accrual – This category includes loans that have all the characteristics of a “Substandard” loan with additional factors that make collection in full highly questionable and improbable. Such loans are placed on non-accrual status and may be dependent on collateral with a value that is difficult to determine. All loans are graded at their inception. Commercial lending relationships that are $ 1.0 million or less are usually processed through an expedited underwriting process. Most commercial loans greater than $ 1.0 million are included in a portfolio review at least annually. Commercial loans greater than $ 0.35 million that have a grading of special mention or worse are typically reviewed on a quarterly basis. Interim reviews may take place if circumstances of the borrower warrant a more frequent review. First Busey Corporation | 2023 — 124 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table is a summary of risk grades segregated by category of portfolio loans (dollars in thousands) : As of December 31, 2023 Pass Watch Special Mention Substandard Substandard Non-accrual Total Commercial loans Commercial $ 1,462,755 $ 296,416 $ 46,488 $ 27,733 $ 2,602 $ 1,835,994 Commercial real estate 2,827,030 431,427 48,545 29,492 843 3,337,337 Real estate construction 448,011 8,135 — 5,327 244 461,717 Total commercial loans 4,737,796 735,978 95,033 62,552 3,689 5,635,048 Retail loans Retail real estate 1,702,897 11,144 1,024 1,795 3,595 1,720,455 Retail other 295,374 — — — 157 295,531 Total retail loans 1,998,271 11,144 1,024 1,795 3,752 2,015,986 Total portfolio loans $ 6,736,067 $ 747,122 $ 96,057 $ 64,347 $ 7,441 $ 7,651,034 As of December 31, 2022 Pass Watch Special Mention Substandard Substandard Non-accrual Total Commercial loans Commercial $ 1,668,495 $ 201,758 $ 46,540 $ 51,187 $ 6,174 $ 1,974,154 Commercial real estate 2,851,709 326,455 43,526 34,539 5,644 3,261,873 Real estate construction 502,904 25,164 1 2,400 — 530,469 Total commercial loans 5,023,108 553,377 90,067 88,126 11,818 5,766,496 Retail loans Retail real estate 1,639,599 10,520 1,338 2,529 3,096 1,657,082 Retail other 301,971 — — — 153 302,124 Total retail loans 1,941,570 10,520 1,338 2,529 3,249 1,959,206 Total portfolio loans $ 6,964,678 $ 563,897 $ 91,405 $ 90,655 $ 15,067 $ 7,725,702 Risk grades of portfolio loans and net charge-offs are presented in the tables below by loan class, further sorted by origination year (dollars in thousands) : First Busey Corporation | 2023 — 125 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of and For The Year Ended December 31, 2023 Term Loans Amortized Cost Basis by Origination Year Revolving Loans Total Risk Grade Ratings 2023 2022 2021 2020 2019 Prior Commercial Pass $ 306,578 $ 220,847 $ 159,130 $ 71,025 $ 35,927 $ 143,078 $ 526,170 $ 1,462,755 Watch 78,603 65,703 21,421 23,919 7,035 21,293 78,442 296,416 Special Mention 792 8,224 2,917 1,076 686 3,274 29,519 46,488 Substandard 8,715 765 942 426 3,734 1,859 11,292 27,733 Substandard non-accrual 166 — 117 84 128 407 1,700 2,602 Total commercial 394,854 295,539 184,527 96,530 47,510 169,911 647,123 1,835,994 Current period charge-offs $ 284 $ — $ 420 $ — $ 316 $ 1,409 $ — $ 2,429 Commercial real estate Pass 395,644 824,506 720,052 399,195 271,078 199,662 16,893 2,827,030 Watch 166,795 47,070 92,848 34,010 68,196 19,396 3,112 431,427 Special Mention 14,313 10,507 12,446 4,968 3,297 3,014 — 48,545 Substandard 1,796 188 18,862 2,938 1,802 3,856 50 29,492 Substandard non-accrual 47 79 85 23 — 609 — 843 Total commercial real estate 578,595 882,350 844,293 441,134 344,373 226,537 20,055 3,337,337 Current period charge-offs — — — — — 953 — 953 Real estate construction Pass 204,952 128,462 85,086 2,616 1,323 2,934 22,638 448,011 Watch 2,859 4,406 507 322 41 — — 8,135 Substandard 5,327 — — — — — — 5,327 Substandard non-accrual — — — — — 244 — 244 Total real estate construction 213,138 132,868 85,593 2,938 1,364 3,178 22,638 461,717 Current period charge-offs — — — — — — — — Retail real estate Pass 243,400 376,922 411,723 156,762 70,099 256,571 187,420 1,702,897 Watch 1,096 4,137 2,442 954 536 234 1,745 11,144 Special Mention 286 358 — — — 380 — 1,024 Substandard 69 72 292 49 80 997 236 1,795 Substandard non-accrual — 528 121 267 100 1,960 619 3,595 Total retail real estate 244,851 382,017 414,578 158,032 70,815 260,142 190,020 1,720,455 Current period charge-offs — 5 — 29 72 301 — 407 Retail other Pass 88,885 92,931 23,019 6,701 4,597 854 78,387 295,374 Substandard non-accrual — 93 62 — — 2 — 157 Total retail other 88,885 93,024 23,081 6,701 4,597 856 78,387 295,531 Current period charge-offs 5 71 172 5 3 373 — 629 Total portfolio loans $ 1,520,323 $ 1,785,798 $ 1,552,072 $ 705,335 $ 468,659 $ 660,624 $ 958,223 $ 7,651,034 Total current period charge-offs $ 289 $ 76 $ 592 $ 34 $ 391 $ 3,036 $ — $ 4,418 First Busey Corporation | 2023 — 126 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2022 Term Loans Amortized Cost Basis by Origination Year Revolving Loans Total Risk Grade Ratings 2022 2021 2020 2019 2018 Prior Commercial Pass $ 479,893 $ 266,122 $ 136,445 $ 52,046 $ 50,764 $ 135,000 $ 548,225 $ 1,668,495 Watch 54,195 49,382 3,288 7,201 1,258 2,160 84,274 201,758 Special Mention 1,958 937 1,642 974 1,000 17,024 23,005 46,540 Substandard 8,926 1,165 570 6,671 2,382 5,191 26,282 51,187 Substandard non-accrual 21 3,292 226 135 — 100 2,400 6,174 Total commercial 544,993 320,898 142,171 67,027 55,404 159,475 684,186 1,974,154 Commercial real estate Pass 883,688 819,133 478,452 297,525 161,409 198,419 13,083 2,851,709 Watch 77,346 56,113 64,282 96,664 21,592 5,758 4,700 326,455 Special Mention 11,943 5,389 12,386 1,420 6,917 5,471 — 43,526 Substandard 5,340 13,528 3,454 1,907 10,248 62 — 34,539 Substandard non-accrual — 3,959 33 — 1,647 5 — 5,644 Total commercial real estate 978,317 898,122 558,607 397,516 201,813 209,715 17,783 3,261,873 Real estate construction Pass 219,112 191,724 68,015 1,490 1,901 1,751 18,911 502,904 Watch 8,530 12,019 3,169 48 — 1,398 — 25,164 Special Mention — — — 1 — — — 1 Substandard 2,400 — — — — — — 2,400 Total real estate construction 230,042 203,743 71,184 1,539 1,901 3,149 18,911 530,469 Retail real estate Pass 396,547 456,158 175,148 77,569 56,887 267,387 209,903 1,639,599 Watch 2,928 2,991 1,846 1,444 1,063 27 221 10,520 Special Mention 945 — — — — 393 — 1,338 Substandard 77 732 198 81 141 1,293 7 2,529 Substandard non-accrual 10 191 107 32 390 1,708 658 3,096 Total retail real estate 400,507 460,072 177,299 79,126 58,481 270,808 210,789 1,657,082 Retail other Pass 134,567 43,512 13,141 13,086 5,646 991 91,028 301,971 Substandard non-accrual 14 134 3 — — 2 — 153 Total retail other 134,581 43,646 13,144 13,086 5,646 993 91,028 302,124 Total portfolio loans $ 2,288,440 $ 1,926,481 $ 962,405 $ 558,294 $ 323,245 $ 644,140 $ 1,022,697 $ 7,725,702 First Busey Corporation | 2023 — 127 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Past Due and Non-Accrual Loans An analysis of the amortized cost basis of portfolio loans that are past due and still accruing, or on non-accrual status, is as follows (dollars in thousands) : As of December 31, 2023 Loans past due, still accruing Non-accrual Loans 30-59 Days 60-89 Days 90+Days Past due and non-accrual loans Commercial loans: Commercial $ — $ 214 $ — $ 2,602 Commercial real estate 752 — — 843 Real estate construction 24 — — 244 Past due and non-accrual commercial loans 776 214 — 3,689 Retail loans: Retail real estate 2,781 927 366 3,595 Retail other 886 195 9 157 Past due and non-accrual retail loans 3,667 1,122 375 3,752 Total past due and non-accrual loans $ 4,443 $ 1,336 $ 375 $ 7,441 As of December 31, 2022 Loans past due, still accruing Non-accrual Loans 30-59 Days 60-89 Days 90+Days Past due and non-accrual loans Commercial loans: Commercial $ 2 $ — $ — $ 6,174 Commercial real estate 124 — — 5,644 Past due and non-accrual commercial loans 126 — — 11,818 Retail loans: Retail real estate 4,709 1,239 673 3,096 Retail other 414 60 — 153 Past due and non-accrual retail loans 5,123 1,299 673 3,249 Total past due and non-accrual loans $ 5,249 $ 1,299 $ 673 $ 15,067 Gross interest income recorded on 90+ days past due loans, and that would have been recorded on non-accrual loans if they had been accruing interest in accordance with their original terms, was $ 1.1 million, $ 1.2 million, and $ 1.6 million for the years ended December 31, 2023, 2022, and 2021, respectively. Interest collected on those loans and recognized on a cash basis that was included in interest income was $ 0.4 million for each of the years ended December 31, 2023, 2022, and 2021. First Busey Corporation | 2023 — 128 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Loan Modification Disclosures Pursuant to ASU 2022-02 The following table presents the amortized cost basis of loans that were modified for borrowers experiencing financial difficulty during the periods indicated, disaggregated by class of financing receivable and type of concession granted (dollars in thousands) : Year Ended December 31, 2023 Interest Rate Reduction 1 % of Total Class of Financing Receivable 2 Term Extension 3 % of Total Class of Financing Receivable 2 Modified Loans Commercial $ — — % $ 16,586 0.9 % Commercial real estate 872 — % 923 — % Real estate construction — — % 5,327 1.2 % Total of loans modified during the period 4 $ 872 — % $ 22,836 0.3 % ___________________________________________ 1. For one loan, the default rate was removed once forbearance was entered. 2. Modified loans represent an insignificant portion of commercial real estate loans, rounding to zero percent. 3. Modifications to extend loan terms also included, in some cases, interest rate increases during the extension period. 4. Modifications include one loan on non-accrual status, and the remaining loans were classified as substandard. The following table summarizes the effects of loan modifications made during the periods indicated, for borrowers experiencing financial difficulty: Year Ended December 31, 2023 Weighted Average Interest Rate Reduction Weighted Average Term Extension Effects of Loan Modifications Commercial — 18.1 months Commercial real estate 2.50 % 21.0 months Real estate construction — 12.0 months Total financial effect 2.50 % 16.8 months The following table provides the amortized cost basis of financing receivables that had a payment default during the year ended December 31, 2023, after having been modified during the 12 months before default for borrowers experiencing financial difficulty (dollars in thousands) . A default occurs when a loan is 90 days or more past due or transferred to non-accrual status. Years Ended December 31, 2023 Term Extension Loans with Subsequent Defaults Commercial $ 88 First Busey Corporation | 2023 — 129 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Busey closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table depicts the payment performance of loans modified on or after January 1, 2023, the date we adopted ASU 2022-02 (dollars in thousands) : As of December 31, 2023 Current Non-accrual Modified Loans Commercial $ 16,498 $ 88 Commercial real estate 1,795 — Real estate construction 5,327 — Amortized cost of modified loans $ 23,620 $ 88 Troubled Debt Restructurings Disclosures Prior to the Adoption of ASU 2022-02 TDR loan balances are summarized as follows (dollars in thousands) : As of December 31, 2022 TDRs In compliance with modified terms $ 3,032 Non-performing TDRs 537 Total TDRs $ 3,569 Loans that were designated as TDRs during the years ended as of the dates indicated are summarized as follows (dollars in thousands) : Newly Designated TDRs Recorded Investment 1 Number of Contracts Rate Modification 2 Payment Modification 2 December 31, 2022 Commercial 3 $ 136 $ 996 Retail real estate 1 — 517 Total 4 $ 136 $ 1,513 December 31, 2021 Commercial 1 $ 364 $ — Total 1 $ 364 $ — ___________________________________________ 1. Recorded investment for newly designated TDR’s that were still outstanding as of the dates indicated. 2. TDRs may have included multiple concessions; those that included an interest rate concession and payment concession are shown in the rate modification column. There were no TDRs entered into during the 12 months ended December 31, 2022, or 2021, that had subsequent defaults. Gross interest income that would have been recorded during the years ended December 31, 2022, and 2021, if TDRs had performed in accordance with their original terms compared with their modified terms, was insignificant. First Busey Corporation | 2023 — 130 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Collateral Dependent Loans Management's evaluation as to the ultimate collectability of loans includes estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral. These estimates are affected by changing economic conditions and the economic prospects of borrowers. Collateral dependent loans are loans in which repayment is expected to be provided solely by the underlying collateral and there are no other available and reliable sources of repayment. Loans are written down to the lower of cost or fair value of underlying collateral, less estimated costs to sell. Busey had $ 6.1 million and $ 14.0 million of collateral dependent loans secured by real estate or business assets as of December 31, 2023, and December 31, 2022, respectively. First Busey Corporation | 2023 — 131 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Loans Evaluated Individually Busey evaluates loans with disparate risk characteristics on an individual basis. The following tables provide details of loans evaluated individually, segregated by category. The unpaid principal balance represents the customer outstanding contractual principal balance excluding any partial charge-offs. Recorded investment represents the amortized cost of customer balances net of any partial charge-offs recognized on the loan. Average recorded investment is calculated using the most recent four quarters (dollars in thousands) : As of December 31, 2023 Unpaid Principal Balance Recorded Investment Average Recorded Investment With No Allowance With Allowance Total Related Allowance Loans evaluated individually Commercial loans: Commercial $ 7,283 $ 585 $ 1,785 $ 2,370 $ 785 $ 5,244 Commercial real estate 2,600 610 85 695 85 3,865 Real estate construction — — — — — 49 Commercial loans evaluated individually 9,883 1,195 1,870 3,065 870 9,158 Retail loans: Retail real estate 213 61 25 86 25 790 Retail loans evaluated individually 213 61 25 86 25 790 Total loans evaluated individually $ 10,096 $ 1,256 $ 1,895 $ 3,151 $ 895 $ 9,948 As of December 31, 2022 Unpaid Principal Balance Recorded Investment Average Recorded Investment With No Allowance With Allowance Total Related Allowance Loans evaluated individually Commercial loans: Commercial $ 9,589 $ 656 $ 5,918 $ 6,574 $ 2,476 $ 6,761 Commercial real estate 8,039 2,334 3,903 6,237 2,000 5,219 Real estate construction 247 247 — 247 — 260 Commercial loans evaluated individually 17,875 3,237 9,821 13,058 4,476 12,240 Retail loans: Retail real estate 2,733 2,564 25 2,589 25 2,311 Retail loans evaluated individually 2,733 2,564 25 2,589 25 2,311 Total loans evaluated individually $ 20,608 $ 5,801 $ 9,846 $ 15,647 $ 4,501 $ 14,551 First Busey Corporation | 2023 — 132 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Allowance for Credit Losses Management estimates the ACL balance using relevant available information from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. The cumulative loss rate used as the basis for the estimate of credit losses is comprised of Busey’s historical loss experience beginning in 2010. Due to the continued economic uncertainty in the markets in which the Company operates, Busey will continue to utilize a forecast period of 12 months with an immediate reversion to historical loss rates beyond this forecast period in its ACL estimate. PPP loans were excluded from the ACL calculation as they are 100% government guaranteed. The following table summarizes activity in the ACL attributable to each loan class. Allocation of a portion of the ACL to one loan class does not preclude its availability to absorb losses in other loan classes (dollars in thousands) : Commercial Commercial Real Estate Real Estate Construction Retail Real Estate Retail Other Total ACL Balance, December 31, 2020 $ 23,866 $ 46,230 $ 8,193 $ 21,992 $ 767 $ 101,048 Day 1 PCD 1 3,546 336 — 129 167 4,178 Provision for credit losses ( 2,160 ) ( 7,651 ) ( 3,180 ) ( 4,456 ) 2,346 ( 15,101 ) Charged-off ( 2,026 ) ( 925 ) ( 209 ) ( 1,145 ) ( 478 ) ( 4,783 ) Recoveries 629 259 298 1,069 290 2,545 ACL balance, December 31, 2021 23,855 38,249 5,102 17,589 3,092 87,887 Provision for credit losses 497 892 1,142 219 1,873 4,623 Charged-off ( 1,069 ) ( 1,375 ) ( 23 ) ( 251 ) ( 461 ) ( 3,179 ) Recoveries 577 533 236 636 295 2,277 ACL balance, December 31, 2022 23,860 38,299 6,457 18,193 4,799 91,608 Provision for credit losses ( 727 ) ( 2,455 ) ( 1,465 ) 7,922 ( 876 ) 2,399 Charged-off ( 2,429 ) ( 953 ) — ( 407 ) ( 629 ) ( 4,418 ) Recoveries 552 574 171 590 264 2,151 ACL balance, December 31, 2023 $ 21,256 $ 35,465 $ 5,163 $ 26,298 $ 3,558 $ 91,740 __________________________________________ 1. The Day 1 PCD is attributable to the CAC acquisition, finalized May 31, 2021. First Busey Corporation | 2023 — 133 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following tables present the ACL and amortized cost of portfolio loans by loan category and class (dollars in thousands) : As of December 31, 2023 Portfolio Loans ACL Attributed to Portfolio Loans Collectively Evaluated for Impairment Individually Evaluated for Impairment Total Collectively Evaluated for Impairment Individually Evaluated for Impairment Total Portfolio loans and related ACL Commercial loans: Commercial $ 1,833,624 $ 2,370 $ 1,835,994 $ 20,471 $ 785 $ 21,256 Commercial real estate 3,336,642 695 3,337,337 35,380 85 35,465 Real estate construction 461,717 — 461,717 5,163 — 5,163 Commercial loans and related ACL 5,631,983 3,065 5,635,048 61,014 870 61,884 Retail loans: Retail real estate 1,720,369 86 1,720,455 26,273 25 26,298 Retail other 295,531 — 295,531 3,558 — 3,558 Retail loans and related ACL 2,015,900 86 2,015,986 29,831 25 29,856 Portfolio loans and related ACL $ 7,647,883 $ 3,151 $ 7,651,034 $ 90,845 $ 895 $ 91,740 As of December 31, 2022 Portfolio Loans ACL Attributed to Portfolio Loans Collectively Evaluated for Impairment Individually Evaluated for Impairment Total Collectively Evaluated for Impairment Individually Evaluated for Impairment Total Portfolio loans and related ACL Commercial loans: Commercial $ 1,967,580 $ 6,574 $ 1,974,154 $ 21,384 $ 2,476 $ 23,860 Commercial real estate 3,255,636 6,237 3,261,873 36,299 2,000 38,299 Real estate construction 530,222 247 530,469 6,457 — 6,457 Commercial loans and related ACL 5,753,438 13,058 5,766,496 64,140 4,476 68,616 Retail loans: Retail real estate 1,654,493 2,589 1,657,082 18,168 25 18,193 Retail other 302,124 — 302,124 4,799 — 4,799 Retail loans and related ACL 1,956,617 2,589 1,959,206 22,967 25 22,992 Portfolio loans and related ACL $ 7,710,055 $ 15,647 $ 7,725,702 $ 87,107 $ 4,501 $ 91,608 First Busey Corporation | 2023 — 134 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4. OTHER REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS OREO and other repossessed assets represent properties and other assets acquired through foreclosure or other proceedings in settlement of loans and is included in other assets in the accompanying Consolidated Balance Sheets . The following table summarizes the composition of Busey’s OREO and other repossessed asset balances as of the periods presented (dollars in thousands) : As of December 31, 2023 2022 OREO Residential $ 125 $ 70 Total OREO 125 70 Other repossessed assets — 780 OREO and other repossessed assets $ 125 $ 850 The following table summarizes changes in the balance OREO and other repossessed assets (dollars in thousands) : Years Ended December 31, 2023 2022 2021 OREO and other repossessed assets at January 1 $ 850 $ 4,416 $ 4,571 Additions, transfers from loans 189 175 1,610 Sales ( 770 ) ( 2,565 ) ( 1,721 ) Cash payments collected ( 44 ) ( 565 ) ( 43 ) Impairment of OREO and other repossessed assets ( 100 ) ( 611 ) ( 1 ) OREO and other repossessed assets at December 31 $ 125 $ 850 $ 4,416 Busey had residential real estate in the process of foreclosure totaling $ 0.3 million as of December 31, 2023, and $ 1.1 million as of December 31, 2022. Busey has elected to follow Federal Housing Finance Agency guidelines on single-family foreclosures and real estate owned evictions on portfolio loans. Busey incurs operating expenses for, and may have income from, OREO and other repossessed assets. Upon sale, Busey may recognize a gain or loss on the sale of OREO and other repossessed assets. The table below summarizes the effect of these activities, included in Other expense on Busey’s Consolidated Statements of Income (dollars in thousands) : Years Ended December 31, 2023 2022 2021 Activity for OREO and other repossessed assets Net loss (gain) on sales $ 54 $ 665 $ 173 Operating expenses, net of income 67 248 468 Activity for OREO and other repossessed assets $ 121 $ 913 $ 641 First Busey Corporation | 2023 — 135 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5. PREMISES AND EQUIPMENT Premises and equipment are summarized as follows (dollars in thousands) : As of December 31, 2023 2022 Premises and equipment Land and improvements $ 43,076 $ 44,193 Buildings and improvements 128,322 128,669 Furniture and equipment 51,077 52,991 Premises and equipment, gross 222,475 225,853 Accumulated depreciation 99,881 99,329 Premises and equipment, net $ 122,594 $ 126,524 Depreciation expense is presented in the table below for the periods indicated (dollars in thousands) : Years Ended December 31, 2023 2022 2021 Depreciation expense $ 9,488 $ 10,482 $ 11,610 NOTE 6. LEASES Busey as The Lessee Busey has operating leases consisting primarily of equipment leases and real estate leases for banking centers, ATM locations, and office space. The following table summarizes lease related information and balances Busey reported in its Consolidated Balance Sheets for the periods presented (dollars in thousands) : As of December 31, 2023 2022 Lease balances Right of use assets $ 11,027 $ 12,829 Lease liabilities 11,308 12,995 Supplemental information Year through which lease terms extend 2037 2037 Weighted average remaining lease term 8.39 years 8.90 years Weighted average discount rate 3.59 % 3.45 % First Busey Corporation | 2023 — 136 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table represents lease costs and cash flows related to leases for the periods presented (dollars in thousands) : Years Ended December 31, 2023 2022 2021 Lease costs Operating lease costs $ 2,395 $ 2,495 $ 2,464 Variable lease costs 38 365 540 Short-term lease costs 50 22 49 Total lease cost 1 $ 2,483 $ 2,882 $ 3,053 Cash flows related to leases Cash paid for amounts included in the measurement of lease liabilities: Operating lease cash flows – Fixed payments $ 2,290 $ 3,080 $ 2,417 Operating lease cash flows – Liability reduction 1,883 2,285 2,217 Right of use assets obtained during the period in exchange for operating lease liabilities 2 231 6,206 5,818 ___________________________________________ 1. Lease costs are included in net occupancy and equipment expense in the Consolidated Statements of Income . 2. The year ended December 31, 2021, includes $ 0.4 million related to a lease obtained in the acquisition of CAC. Busey was obligated under noncancelable operating leases for office space and other commitments. Future undiscounted lease payments with initial terms of one year or more, are as follows (dollars in thousands) : As of December 31, 2023 Rent commitments 2024 $ 2,023 2025 1,768 2026 1,443 2027 1,277 2028 1,255 Thereafter 5,478 Total undiscounted cash flows 13,244 Less: Amounts representing interest 1,936 Present value of net future minimum lease payments $ 11,308 Busey as The Lessor Busey occasionally leases parking lots and office space to outside parties. Revenues recorded in connection with these leases, reported in other income on our Consolidated Statements of Income , are summarized as follows (dollars in thousands) : Years Ended December 31, 2023 2022 2021 Rental income $ 724 $ 707 $ 566 First Busey Corporation | 2023 — 137 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill Busey’s goodwill is associated with its three operating segments, Banking, Wealth Management, and FirsTech. Goodwill is tested annually for impairment, and as part of this analysis, the reporting unit's carrying value is compared to its estimated fair value. Based on the impairment testing performed at December 31, 2023, there were no indicators of potential impairment. Busey did not record any new goodwill during the years ended December 31, 2023, or 2022. The carrying amount of goodwill by operating segment is as follows (dollars in thousands) : As of December 31, 2023 2022 Goodwill Banking $ 294,773 $ 294,773 Wealth Management 14,108 14,108 FirsTech 8,992 8,992 Total goodwill $ 317,873 $ 317,873 Indefinite-lived intangible assets, such as goodwill, are not amortized. Goodwill is Busey's only indefinite-lived intangible asset. Intangible Assets Core deposit and customer relationship intangible assets are amortized over the estimated period during which Busey expects to benefit from the assets. Intangible asset disclosures are as follows (dollars in thousands) : As of December 31, 2023 Core deposit intangible Customer relationship intangible Total Intangible Assets Intangible assets, gross $ 99,065 $ 33,138 $ 132,203 Accumulated amortization 71,092 25,120 96,212 Intangible assets, net $ 27,973 $ 8,018 $ 35,991 As of December 31, 2022 Core deposit intangible Customer relationship intangible Total Intangible Assets Intangible assets, gross $ 99,065 $ 33,138 $ 132,203 Accumulated amortization 63,476 22,304 85,780 Intangible assets, net $ 35,589 $ 10,834 $ 46,423 First Busey Corporation | 2023 — 138 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Amortization expense related to intangible assets, as reflected in Busey's Consolidated Statements of Income , is presented in the table below (dollars in thousands) : Years Ended December 31, 2023 2022 2021 Amortization Expense Core deposit intangible $ 7,616 $ 8,315 $ 8,253 Customer relationship intangible 2,816 3,313 3,021 Amortization of intangible assets $ 10,432 $ 11,628 $ 11,274 Future expense for the amortization of intangible assets, as estimated, is summarized in the table below (dollars in thousands) : As of December 31, 2023 Core deposit intangible Customer relationship intangible Total Estimated amortization expense 2024 $ 6,902 $ 2,318 $ 9,220 2025 5,956 1,887 7,843 2026 5,227 1,479 6,706 2027 4,490 1,091 5,581 2028 3,740 703 4,443 Thereafter 1,658 540 2,198 Total estimated amortization expense $ 27,973 $ 8,018 $ 35,991 NOTE 8. DEPOSITS The composition of Busey’s deposits is as follows (dollars in thousands) : As of December 31, 2023 2022 Deposits Noninterest-bearing demand deposits $ 2,834,655 $ 3,393,666 Interest-bearing transaction deposits 2,717,139 2,857,818 Saving deposits and money market deposits 2,920,088 2,964,421 Time deposits 1,819,274 855,375 Total deposits $ 10,291,156 $ 10,071,280 Additional information about Busey’s deposits follows (dollars in thousands) : As of December 31, 2023 2022 Brokered savings deposits and money market deposits $ 6,001 $ 1,303 Brokered time deposits 285 275 Total time deposits with a minimum denomination of $100,000 1,072,189 416,445 Total time deposits with a minimum denomination that meets or exceeds the FDIC insurance limit of $250,000 386,286 120,377 First Busey Corporation | 2023 — 139 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Scheduled maturities of time deposits are as follows (dollars in thousands) : As of December 31, 2023 Time deposits by schedule of maturities 2024 $ 1,705,846 2025 68,738 2026 21,222 2027 12,470 2028 10,451 Thereafter 547 Time deposits $ 1,819,274 NOTE 9. BORROWINGS Securities Sold Under Agreements to Repurchase Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature daily. Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction. The underlying securities are held by Busey’s safekeeping agent. Busey may be required to provide additional collateral based on fluctuations in the fair value of the underlying securities. Securities sold under agreements to repurchase were as follows (dollars in thousands) : As of December 31, 2023 2022 Securities sold under agreements to repurchase $ 187,396 $ 229,806 Weighted average rate for securities sold under agreements to repurchase 3.26 % 1.91 % Term Loan On May 28, 2021, Busey entered into a Second Amended and Restated Credit Agreement, pursuant to which Busey has access to (1) a $ 40.0 million revolving line of credit with an initial termination date of April 30, 2022, and (2) a $ 60.0 million Term Loan with a maturity date of May 31, 2026. The loans had an annual interest rate of 1.75 % plus the one-month LIBOR rate. On April 30, 2022, the agreement was amended, effecting an extension of the termination date for the revolving line of credit to April 30, 2023, and providing for the transition from a LIBOR-indexed interest rate to a SOFR-indexed interest rate. Under the terms of the amendment, the loans now have an annual interest rate of 1.80 % plus the one-month forward-looking term rate based on SOFR. On April 30, 2023, the agreement was further amended to extend the term for the revolving line of credit to April 30, 2024. Proceeds of the Term Loan were used to fund a part of the cash portion of the merger consideration related to the acquisition of CAC in the second quarter of 2021, and for general corporate purposes. The total outstanding balance on the Term Loan was $ 30.0 million as of December 31, 2023, of which $ 12.0 million was short-term and $ 18.0 million was long-term. Quarterly payments on the Term Loan reduce the outstanding principal balance by $ 3.0 million each quarter. As of December 31, 2023, there was no balance outstanding on the revolving credit facility. The revolving credit facility incurs a non-usage fee based on any undrawn amounts. First Busey Corporation | 2023 — 140 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Short-Term Borrowings Busey’s short-term borrowings include loans maturing within one year of the loan origination date, as well as the current portion of long-term debt that is due within 12 months. Short-term borrowings are summarized as follows (dollars in thousands) : As of December 31, 2023 2022 Short-term borrowings FHLB advances maturing in less than one year from date of origination, and the current portion of long-term FHLB advances due within 12 months $ — $ 339,054 Term Loan, current portion due within 12 months 12,000 12,000 Total short-term debt $ 12,000 $ 351,054 Funds borrowed from the FHLB, listed above, consisted of four notes with a weighted average interest rate of 4.28 % and a weighted average maturity period of five days as of December 31, 2022. Federal funds purchased are short-term borrowings that generally mature between one day and 90 days. During the first quarter of 2023, Busey purchased federal funds to test operational availability to access funds if needed. Busey had no federal funds purchased as of December 31, 2023, or 2022. Long-Term Debt Busey’s long-term debt consists of loans maturing more than one year from the loan origination date, excluding the current portion that is due within 12 months. Long-term debt is summarized as follows (dollars in thousands) : As of December 31, 2023 2022 Long-term debt Term Loan $ 18,000 $ 30,000 Total long-term debt $ 18,000 $ 30,000 Subordinated Notes On June 1, 2020, Busey issued $ 125.0 million of fixed-to-floating rate subordinated notes that mature on June 1, 2030. The subordinated notes, which qualify as Tier 2 capital for regulatory purposes, bear interest at an annual rate of 5.25 % for the first five years after issuance and thereafter bear interest at a floating rate equal to a three-month benchmark rate plus a spread of 5.11 %, as calculated on each applicable determination date. The subordinated notes are payable semi-annually on each June 1 and December 1 during the five-year fixed-term, and thereafter on March 1, June 1, September 1, and December 1 of each year, commencing on September 1, 2025. The subordinated notes have an optional redemption in whole or in part on any interest payment date on or after June 1, 2025. The subordinated notes are unsecured obligations of the Company. First Busey Corporation | 2023 — 141 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 basis points from and including, June 15, 2027, payable quarterly in arrears. The subordinated notes have an optional redemption in whole or in part on any interest payment date on or after June 15, 2027. Unamortized debt issuance costs related to Busey’s subordinated notes are presented in the following table (dollars in thousands) : As of December 31, 2023 2022 Unamortized debt issuance costs Subordinated notes issued in 2020 $ 735 $ 1,220 Subordinated notes issued in 2022 1,383 1,742 Total unamortized debt issuance costs $ 2,118 $ 2,962 NOTE 10. 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 issued by 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. In connection with the Pulaski acquisition in 2016, Busey acquired similar statutory trusts previously maintained by Pulaski and the fair value adjustment is being accreted over their weighted average remaining life, with a balance of $ 2.6 million remaining to be accreted. Busey had $ 72.0 million and $ 71.8 million of junior subordinated debt owed to unconsolidated trusts at December 31, 2023, and 2022, respectively, maturing in 2034 through 2036. Busey’s trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the junior subordinated notes at par value at the stated maturity date or upon redemption. Each trust’s ability to pay amounts due on the trust preferred securities is solely dependent upon Busey making payments on the related junior subordinated notes. Busey’s obligations under the junior subordinated notes and other relevant trust agreements, in aggregate, constitute a full and unconditional guarantee by Busey of each trust’s obligations under the trust preferred securities issued by each trust. Busey has the right to defer payment of interest on the notes, in which case the distributions on the trust preferred securities will also be deferred, for up to five years , but not beyond the stated maturity date. For regulatory capital purposes, current banking regulations allow for the inclusion in Tier 1 Capital of qualifying trust preferred securities issued prior to May 19, 2010, by bank holding companies with less than $ 15.0 billion of assets, but do not allow for additional Tier 1 Capital to be raised through the future issuance of trust preferred securities. As of December 31, 2023, 100 % of the trust preferred securities qualified as Tier 1 Capital; however, once Busey reaches $ 15.0 billion in assets, its trust preferred securities will no longer quality as Tier 1 Capital. First Busey Corporation | 2023 — 142 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11. REGULATORY CAPITAL Busey and its subsidiary bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory—and possibly additional discretionary—actions by regulators that, if undertaken, could have a direct material effect on Busey's Consolidated Financial Statements . Capital amounts and classification also are subject to qualitative judgments by regulators about components, risk weightings, and other factors. Banking regulations identify five capital categories for insured depository institutions: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. As of December 31, 2023, and December 31, 2022, all capital ratios of Busey and its subsidiary bank exceeded well capitalized levels under the applicable regulatory capital adequacy guidelines. Management believes that no events or changes have occurred subsequent to December 31, 2023, that would change this designation. Current Expected Credit Loss Model On August 26, 2020, the FDIC and other federal banking agencies adopted a final rule which provided banking organizations that adopted CECL during 2020 with the option to delay for two years the estimated impact of CECL on regulatory capital and to phase in the aggregate impact of the deferral on regulatory capital over a subsequent three-year period. Under this final rule, because Busey elected to use the deferral option, the regulatory capital impact of our transition adjustments recorded on January 1, 2020, arising from the adoption of CECL was deferred for two years. In addition, 25 percent of the ongoing impact of CECL on our ACL, retained earnings, and average total consolidated assets from January 1, 2020, through the end of the two-year deferral period, each as reported for regulatory capital purposes, has been added to the deferred transition amounts (“adjusted transition amounts”) and deferred for the two-year period. On January 1, 2022, at the conclusion of the two-year period, the adjusted transition amounts began to be phased-in for regulatory capital purposes at a rate of 25 percent per year, with the phased-in amounts included in regulatory capital at the beginning of each year. First Busey Corporation | 2023 — 143 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Capital Amounts and Ratios The following tables summarize regulatory capital requirements applicable to Busey and its subsidiary bank (dollars in thousands) : As of December 31, 2023 Actual Minimum Capital Requirement Minimum To Be Well Capitalized Amount Ratio Amount Ratio Amount Ratio Common equity Tier 1 capital to risk weighted assets First Busey $ 1,155,973 13.09 % $ 397,331 4.50 % $ 573,923 6.50 % Busey Bank $ 1,362,962 15.48 % $ 396,128 4.50 % $ 572,185 6.50 % Tier 1 capital to risk weighted assets First Busey $ 1,229,973 13.93 % $ 529,775 6.00 % $ 706,367 8.00 % Busey Bank $ 1,362,962 15.48 % $ 528,171 6.00 % $ 704,228 8.00 % Total capital to risk weighted assets First Busey $ 1,540,318 17.44 % $ 706,367 8.00 % $ 882,958 10.00 % Busey Bank $ 1,448,307 16.45 % $ 704,228 8.00 % $ 880,285 10.00 % Leverage ratio of Tier 1 capital to average assets First Busey $ 1,229,973 10.08 % $ 488,315 4.00 % N/A N/A Busey Bank $ 1,362,962 11.19 % $ 487,103 4.00 % $ 608,879 5.00 % First Busey Corporation | 2023 — 144 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2022 Actual Minimum Capital Requirement Minimum To Be Well Capitalized Amount Ratio Amount Ratio Amount Ratio Common equity Tier 1 capital to risk weighted assets First Busey $ 1,081,686 11.96 % $ 406,980 4.50 % $ 587,861 6.50 % Busey Bank $ 1,306,716 14.49 % $ 405,736 4.50 % $ 586,063 6.50 % Tier 1 capital to risk weighted assets First Busey $ 1,155,686 12.78 % $ 542,640 6.00 % $ 723,521 8.00 % Busey Bank $ 1,306,716 14.49 % $ 540,981 6.00 % $ 721,308 8.00 % Total capital to risk weighted assets First Busey $ 1,457,994 16.12 % $ 723,521 8.00 % $ 904,401 10.00 % Busey Bank $ 1,384,024 15.35 % $ 721,308 8.00 % $ 901,635 10.00 % Leverage ratio of Tier 1 capital to average assets First Busey $ 1,155,686 9.45 % $ 489,124 4.00 % N/A N/A Busey Bank $ 1,306,716 10.72 % $ 487,541 4.00 % $ 609,426 5.00 % Capital Conservation Buffer In July 2013, U.S. federal banking authorities approved the Basel III Rule for strengthening international capital standards. The Basel III Rule introduced a capital conservation buffer, composed entirely of common equity Tier 1 capital, which is added to the minimum risk-weighted asset ratios. The capital conservation buffer is not a minimum capital requirement; however, banking institutions with a ratio of common equity Tier 1 capital to risk-weighted assets below the capital conservation buffer will face constraints on dividends, equity repurchases, and discretionary bonus payments based on the amount of the shortfall. In order to refrain from restrictions on dividends, equity repurchases, and discretionary bonus payments, banking institutions must maintain minimum ratios of (1) common equity Tier 1 capital to risk-weighted assets of at least 7.0%, (2) Tier 1 capital to risk-weighted assets of at least 8.5%, and (3) total capital to risk-weighted assets of at least 10.5%. Subsidiary Dividend Payments First Busey Corporation’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. Under applicable regulatory requirements, an Illinois state-chartered bank, such as Busey Bank, may not pay dividends in excess of its net profits. Busey Bank paid $ 90.0 million, $ 95.0 million, and $ 60.0 million in dividends to First Busey Corporation during the years ended December 31, 2023, 2022, and 2021, respectively. First Busey Corporation | 2023 — 145 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 12. INCOME TAXES Components of Busey’s income tax expense consist of the following (dollars in thousands) : Years Ended December 31, 2023 2022 2021 Income tax expense Current expense: Federal $ 20,139 $ 20,815 $ 20,261 State 14,120 13,883 8,448 Deferred expense: Federal ( 1,557 ) ( 700 ) 3,644 State ( 1,363 ) ( 572 ) 1,021 Total income tax expense $ 31,339 $ 33,426 $ 33,374 A reconciliation of federal and state income taxes at statutory rates to Busey’s income taxes included in the accompanying Consolidated Statements of Income is as follows: Years Ended December 31, 2023 2022 2021 Percent of pretax income Income tax at federal statutory rate 21.0 % 21.0 % 21.0 % Effect of: Tax-exempt interest, net ( 1.0 ) % ( 1.1 ) % ( 1.1 ) % Stock incentive 0.2 % 0.1 % — % State income taxes, net 6.5 % 6.5 % 4.5 % Income on bank owned life insurance ( 0.6 ) % ( 0.5 ) % ( 0.7 ) % Tax credit investments ( 6.0 ) % ( 5.6 ) % ( 3.6 ) % Other, net 0.3 % 0.3 % 1.2 % Effective income tax rate 20.4 % 20.7 % 21.3 % First Busey Corporation | 2023 — 146 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Net deferred taxes, reported in other assets or other liabilities in Busey’s Consolidated Balance Sheets , include the following amounts of deferred tax assets and liabilities (dollars in thousands) : As of December 31, 2023 2022 Deferred taxes Deferred tax assets: ACL $ 27,068 $ 26,979 Unrealized loss on cash flow hedge 6,654 8,365 Unrealized losses on securities available for sale, net 70,423 88,666 Unrealized losses on securities held to maturity 10,156 11,919 Stock-based compensation 5,767 5,504 Deferred compensation — 53 Purchase accounting adjustments 764 656 Accrued vacation 456 411 Lease liabilities 3,092 3,564 Employee costs 4,789 3,298 Unrealized loss on equity securities 75 — Other 67 376 Total deferred tax assets 129,311 149,791 Deferred tax liabilities: Basis in premises and equipment ( 2,830 ) ( 1,541 ) Affordable housing partnerships and other investments ( 8,341 ) ( 6,669 ) Purchase accounting adjustments ( 1,133 ) ( 1,207 ) Mortgage servicing assets ( 1,336 ) ( 2,132 ) Basis in core deposit, customer intangible assets, and asset purchase goodwill ( 4,709 ) ( 6,956 ) Deferred loan origination costs ( 3,691 ) ( 3,845 ) Right of use assets ( 3,015 ) ( 3,518 ) Unrealized gain on equity securities — ( 512 ) Other ( 251 ) ( 586 ) Total deferred tax liabilities ( 25,306 ) ( 26,966 ) Net deferred tax asset $ 104,005 $ 122,825 Management believes that it is more likely than not that the other deferred tax assets included in the accompanying Consolidated Balance Sheets will be fully realized. Busey has determined that no valuation allowance is required for any deferred tax assets as of December 31, 2023, or 2022. First Busey Corporation | 2023 — 147 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 13. EMPLOYEE BENEFIT PLANS 401(k) Plan Busey provides retirement benefits under its 401(k) Plan. All Busey associates who meet certain age requirements are eligible to participate in the 401(k) Plan. There is no waiting period for participation in the 401(k) Plan. The 401(k) Plan is funded primarily through participant contributions via payroll deductions. The 401(k) Plan offers two contribution options: (1) the traditional option allows plan participants to elect pre-tax contributions, and (2) the Roth option allows plan participants to elect after tax contributions. Plan participants may elect to make traditional and/or Roth 401(k) contributions, up to the annual deferral and catch-up limits established by the Internal Revenue Service. Busey supplements participant contributions by making Safe Harbor matching and discretionary profit sharing contributions to the 401(k) Plan. Safe Harbor Match Busey makes Safe Harbor matching contributions to the 401(k) Plan equal to 100 % of the first 3 % of eligible participant contributions and 50 % of the next 2 % of eligible participant contributions. The rights of participants in Safe Harbor matching contributions vest immediately. Profit Sharing All associates who meet certain age and service requirements are eligible to participate in Busey's profit-sharing contributions. Discretionary profit-sharing contributions and related expenses, if any, are approved solely by the First Busey Corporation board of directors, and in no case may annual contributions be greater than the amounts deductible for federal income tax purposes for that year. The rights of participants in profit-sharing contributions vest ratably over a five-year period. 401(k) Plan Expenses Expenses related to Busey’s employee benefit plans, reported in salaries, wages, and employee benefits in the accompanying Consolidated Statements of Income , are summarized in the table below (dollars in thousands) : Years Ended December 31, 2023 2022 2021 401(k) Plan expenses Safe Harbor match expenses $ 3,745 $ 4,094 $ 3,708 Profit-sharing expenses 3,031 2,960 2,823 Total 401(k) Plan expenses $ 6,776 $ 7,054 $ 6,531 First Busey Corporation | 2023 — 148 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 14. STOCK-BASED COMPENSATION Stock Options Busey has outstanding stock options that were issued under the First Community 2016 Equity Incentive Plan and assumed from acquisitions. A summary of the status of, and changes in, Busey's stock option awards follows (dollars in thousands, except weighted-average exercise price) : Options Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Life Intrinsic Value Outstanding at December 31, 2022 26,106 $ 23.53 3.88 $ 31 Forfeited ( 4,840 ) 23.53 Outstanding at December 31, 2023 21,266 23.53 2.88 27 Exercisable at December 31, 2023 21,266 23.53 2.88 27 2020 Equity Plan The 2020 Equity Plan was originally approved by stockholders at the 2020 Annual Meeting of Stockholders. A description of the 2020 Equity Plan, as originally approved, can be found in Appendix A within Busey’s Proxy Statement for the 2020 Annual Meeting of Stockholders filed on April 9, 2020 . An amendment and restatement of the 2020 Equity Plan was approved by stockholders at the 2023 Annual Meeting of Stockholders. Terms of the amended and restated 2020 Equity Plan are substantially identical to those of the originally approved 2020 Equity Plan, other than a 1,350,000 increase in the number of shares authorized for issuance under the plan. More information can be found in Appendix A within Busey’s Proxy Statement for the 2023 Annual Meeting of Stockholders filed on April 14, 2023 . Under the terms of the 2020 Equity Plan, Busey has granted RSU, PSU, and DSU awards. Upon vesting and delivery, shares are expected, though not required, to be issued from treasury. A description of RSU, PSU, and DSU awards granted in 2023 under the terms of the 2020 Equity Plan is provided below. A description of RSU, PSU, and DSU awards granted in 2022 and 2021 under the terms of the 2020 Equity Plan can be found in Busey’s Annual Reports for the years ended December 31, 2022, and 2021, respectively. Busey issued 132,091 treasury shares in conjunction with the vesting of RSUs and PSUs, and settlement of DSUs in 2023. The difference between the number of shares issued and the number of vested units is due to shares issued under a net share settlement option. There were 1,723,343 shares available for issuance under the 2020 Equity Plan as of December 31, 2023. RSU Awards Busey grants RSU awards to members of management periodically throughout the year. RSU awards are stock-based awards for which vesting is conditional upon meeting established service criteria. Each RSU is equivalent to one share of Busey’s common stock. Busey’s RSUs have requisite service periods ranging from one year to five years , and are subject to accelerated vesting upon eligible retirement from Busey. Recipients earn quarterly dividend equivalents on their respective RSUs, which entitle the recipients to additional units. Therefore, dividends earned each quarter compound based upon the updated unit balances. First Busey Corporation | 2023 — 149 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On March 22, 2023, under the terms of the 2020 Equity Plan, Busey granted 224,316 RSUs to members of management. The grant date fair value of the award was $ 4.6 million, which will be recognized as compensation expense over the requisite service period ranging from one year to five years . The terms of these awards included an accelerated vesting provision upon eligible retirement from Busey, after a one-year minimum requisite service period. Subsequent to the requisite service period, the awards will become 100 % vested. A summary of changes in Busey’s RSU awards for the year ended December 31, 2023, is as follows: RSU Awards Shares Weighted- Average Grant Date Fair Value Nonvested at December 31, 2022 1,096,931 $ 23.61 Granted 224,316 20.44 Dividend equivalents earned 58,930 20.16 Vested ( 154,995 ) 29.71 Forfeited ( 183,738 ) 22.33 Nonvested at December 31, 2023 1,041,444 $ 22.05 PSU Awards Busey grants PSU awards to members of management periodically throughout the year. PSU awards are stock-based awards for which vesting is conditional upon meeting established performance criteria. Each PSU is equivalent to one share of Busey’s common stock. The number of PSUs that ultimately vest will be determined based on the extent to which market or other performance goals are achieved. Busey’s PSUs are subject to accelerated service-based vesting conditions upon eligible retirement from Busey. After performance determination, dividend equivalents are compounded based upon the updated PSU balances at each dividend date during the performance period. On March 22, 2023, under the terms of the 2020 Equity Plan, Busey granted a target of 104,643 PSUs with a maximum award of 167,429 units. The actual number of units issued at the vesting date could range from 0 % to 160 % of the initial grant, depending on attaining a market-based total stockholder return performance goal. The grant date fair value of the award was $ 2.0 million, which will be recognized in compensation expense over the performance period ending December 31, 2025. On March 22, 2023, under the terms of the 2020 Equity Plan, Busey granted a target of 104,643 PSUs with a maximum award of 167,429 units. The actual number of units issued at the vesting date could range from 0 % to 160 % of the initial grant, depending on attaining an adjusted return on average tangible common equity performance goal. The grant date fair value of the award was $ 2.1 million, which will be recognized in compensation expense over the performance period ending December 31, 2025. The actual amount of compensation expense recognized is subject to adjustment based on the extent to which performance goals are expected to be achieved. On March 22, 2023, under the terms of the 2020 Equity Plan, Busey granted a target of 15,045 PSUs with a maximum award of 30,090 units. The actual number of units issued at the vesting date could range from 0 % to 200 % of the initial grant, depending on attaining a performance goal based upon the compounded annual revenue growth rate of the FirsTech operating segment. The grant date fair value of the award was $ 0.3 million, which will be recognized in compensation expense over the performance period ending December 31, 2025. The actual amount of compensation expense recognized is subject to adjustment based on the extent to which performance goals are expected to be achieved. First Busey Corporation | 2023 — 150 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A summary of changes in Busey’s PSU awards for the year ended December 31, 2023, is as follows: PSU Awards Shares 1 Weighted- Average Grant Date Fair Value Nonvested at December 31, 2022 285,351 $ 25.40 Granted 224,331 20.04 Dividend equivalents earned 1,728 23.28 Vested ( 83,399 ) 23.86 Forfeited ( 88,923 ) 23.80 Adjustment for performance conditions 2 2,612 25.52 Nonvested at December 31, 2023 341,700 $ 22.67 Vested and outstanding at December 31, 2023³ 65,996 $ 23.48 ___________________________________________ 1. Shares for PSU awards represent target shares at grant date. 2. Adjustments for performance conditions represent the difference between the number of target shares at grant date and the number of actual shares earned for the performance period completed. 3. PSUs granted in 2021 vested on December 31, 2023. Shares are reported at target amounts. Performance determination and settlement activity will take place in the first quarter of 2024. DSU Awards Busey grants DSU awards to its directors and advisory directors. DSU awards are stock-based awards with a deferred settlement date. Each DSU is equivalent to one share of Busey’s common stock. DSUs vest over a one-year period following the grant date. Under the 2020 Equity Plan, DSUs are generally subject to the same terms as RSUs, except that following vesting of DSUs, settlement occurs within 30 days following the earlier of separation from the board or a change in control of the Company. After vesting and prior to delivery, DSUs will continue to earn dividend equivalents. On March 22, 2023, under the terms of the 2020 Equity Plan, Busey granted 41,548 DSUs to directors and advisory directors. The grant date fair value of the award totaled $ 0.8 million and will be recognized as compensation expense over the requisite service period of one year . Subsequent to the requisite service period, the awards will become 100 % vested. A summary of changes in Busey’s DSU awards for the year ended December 31, 2023, is as follows: DSU Awards Shares Weighted- Average Grant Date Fair Value Nonvested at December 31, 2022 31,085 $ 25.75 Granted 41,548 20.44 Dividend equivalents earned 8,334 20.09 Vested ( 37,868 ) 24.76 Forfeited ( 73 ) 20.44 Nonvested at December 31, 2023 43,026 $ 20.41 Vested and outstanding at December 31, 2023 144,137 $ 23.52 First Busey Corporation | 2023 — 151 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2021 Employee Stock Purchase Plan The 2021 ESPP was approved at Busey’s 2021 Annual Meeting of Stockholders. The purpose of the 2021 ESPP is to provide a means through which our employees may acquire a proprietary interest in Busey by purchasing shares of our common stock at a 15 % discount through voluntary payroll deductions, to assist us in retaining the services of our employees and securing and retaining the services of new employees, and to provide incentives for our employees to exert maximum efforts toward our success. Under the terms of the 2021 ESPP, all participating employees have equal rights and privileges. Substantially all of our employees are eligible to participate in the 2021 ESPP. Further details can be found in Appendix A within Busey’s Definitive Proxy Statement filed with the SEC on April 8, 2021 . The 2021 ESPP initially reserved for issuance and purchase an aggregate of 600,000 shares of Busey’s common stock. The first offering under the 2021 ESPP began on July 1, 2021. There were 452,379 shares available for issuance under the 2021 ESPP as of December 31, 2023. Stock-Based Compensation Expense Busey did not record any stock option compensation expense for the years ended December 31, 2023, 2022, or 2021. Busey did not have any unrecognized stock option compensation expense as of December 31, 2023. Busey recognized compensation expense related to non-vested RSU, PSU, and DSU awards, as well as the 2021 ESPP, as summarized in the table below (dollars in thousands) : Years Ended December 31, 2023 2022 2021 Stock-based compensation expense RSU awards $ 2,622 $ 4,648 $ 5,809 PSU awards 1 2,962 3,240 979 DSU awards 833 876 962 2021 ESPP 178 204 114 Total stock-based compensation expense $ 6,595 $ 8,968 $ 7,864 ___________________________________________ 1. Expense for PSU awards with a market-based total stockholder return performance goal represents amounts based on target shares at the grant date. Expense for PSU awards with return on average tangible common equity and compounded annual revenue growth rate performance goals represents amounts based on target shares at the grant date, adjusted for performance expectations as of the date indicated. Unamortized stock-based compensation expense is presented in the table below (dollars in thousands) : As of December 31, 2023 2022 Unamortized stock-based compensation RSU awards $ 6,842 $ 8,570 PSU awards 1 3,607 4,279 DSU awards 190 175 Total unamortized stock-based compensation $ 10,639 $ 13,024 Weighted average period over which expense is to be recognized 2.4 years 2.5 years ___________________________________________ 1. Unamortized expense for PSU awards with a market-based total stockholder return performance goal represents amounts based on target shares at grant date. Unamortized expense for PSU awards with return on average tangible common equity and compounded annual revenue growth rate performance goals represents amounts based on target shares at grant date, adjusted for performance expectations as of the date indicated. First Busey Corporation | 2023 — 152 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 15. TRANSACTIONS WITH RELATED PARTIES Busey has had, and may be expected to have in the future, banking transactions in the ordinary course of business with related parties which include directors, executive officers, chief credit officers, their immediate families, and affiliated companies in which they have 10% or more beneficial ownership, on the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with others. The following table presents changes in loans to related parties, as a group (dollars in thousands) : As of and for the Year Ended December 31, 2023 Balance of loans to related parties, December 31, 2022 $ 55,341 Change in relationship 9,247 New loans/advances 34,116 Repayments ( 21,055 ) Balance of loans to related parties, December 31, 2023 $ 77,649 Unused commitments to directors and executive officers $ 4,692 Loans to related parties did not include significant amounts that were past due, non-accrual, or modified. NOTE 16. OUTSTANDING COMMITMENTS AND CONTINGENT LIABILITIES Legal Matters Busey is a party to legal actions which arise in the normal course of its business activities. Legal and administrative proceedings are subject to inherent uncertainties, and while unfavorable outcomes could occur, Busey does not believe at this time that any potential liabilities relating to pending or potential legal matters are likely to have a material impact on Busey's results of operations or financial position. Credit Commitments and Contingencies A summary of the contractual amount of Busey’s exposure to off-balance-sheet risk relating to the Company’s commitments to extend credit and standby letters of credit follows (dollars in thousands) : As of December 31, 2023 2022 Financial instruments whose contract amounts represent credit risk Commitments to extend credit $ 2,132,500 $ 1,991,769 Standby letters of credit 43,996 33,008 Total commitments $ 2,176,496 $ 2,024,777 First Busey Corporation | 2023 — 153 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Franchise Tax Matter In 2021, Busey received an inquiry from the ISOS, pursuant to which the ISOS asked for additional information regarding certain of our franchise tax filings and the calculation of amounts due thereunder. The franchise tax is established by the Illinois Business Corporation Act (“BCA”) 805 ILCS 5/1 et seq., and is a tax imposed on foreign and domestic corporations for the privilege of conducting business in Illinois. Busey has been cooperating with the inquiry and has agreed to prepare additional BCA forms requested by the ISOS, with a full reservation of rights by Busey, including seeking judicial relief, if necessary, with respect to any potential dispute regarding Busey’s preparation of the BCA forms and the calculation of the franchise taxes due. Where a loss is believed to be reasonably possible, but not probable, or the loss cannot be reasonably estimated, as is the case with this matter, no accrual is required. It is reasonably possible that this matter could require us to pay additional taxes, including potential penalties and interest, or make other expenditures or accrue liabilities in amounts that could not be reasonably estimated as of December 31, 2023. If the likelihood of potential liabilities elevates, requiring an accrual, the potential future liabilities could be material in the period(s) in which they are recorded. NOTE 17. DERIVATIVE FINANCIAL INSTRUMENTS Busey utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. Additionally, Busey enters into derivative financial instruments, including interest rate lock commitments issued to residential loan customers for loans that will be held for sale; forward sales commitments to sell residential mortgage loans to investors; and interest rate swaps, risk participation agreements, and foreign currency exchange contracts with customers and other third parties. See “ Note 18. Fair Value Measurements ” for further discussion of the fair value measurement of such derivatives. To secure its obligations under derivative contracts, Busey pledged cash and held collateral as follows (dollars in thousands) : As of December 31, 2023 2022 Cash pledged to secure obligations under derivative contracts $ 34,210 $ 38,609 Collateral held to secure obligations under derivative contracts 19,280 29,830 Derivative Instruments Designated as Hedges Busey entered into derivative instruments designated as cash flow hedges. For a derivative instrument that is designated and qualifies as a cash flow hedge, the change in fair value of the derivative instrument is reported as a component of OCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Changes in fair value of components excluded from the assessment of effectiveness are recognized in current earnings. First Busey Corporation | 2023 — 154 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Interest Rate Swaps Designated as Cash Flow Hedges Interest rate swaps with notional amounts totaling $ 350.0 million as of both December 31, 2023, and December 31, 2022, were designated as cash flow hedges. Busey entered into one $ 50.0 million interest rate swap to hedge the risks of variability in cash flows for future interest payments attributable to changes in the contractually specified 3-month LIBOR benchmark interest rate on Busey’s junior subordinated debt owed to unconsolidated trusts (“Debt Swap”). In addition, Busey entered into one $ 300.0 million receive fixed pay floating interest rate swap to reduce Busey's asset sensitivity (“Loan Swap”). Duration was added to our loan portfolio by fixing a portion of our floating prime-based loans. Interest rates had risen above their historical lows allowing Busey to lock in a portion of its loan portfolio to reduce asset sensitivity while creating a more stable margin in a volatile rate market. These hedges were determined to be highly effective during the period, and Busey expects its hedges to remain highly effective during the remaining terms of the swaps. Changes in fair value were recorded net of tax in OCI. A summary of the interest-rate swaps designated as cash flow hedges is presented below (dollars in thousands) : As of December 31, Location 2023 2022 Debt Swap Notional amount $ 50,000 $ 50,000 Weighted average fixed pay rates 1.79 % 1.79 % Weighted average variable 3-month LIBOR receive rates 5.61 % 4.77 % Weighted average maturity 0.71 years 1.71 years Loan Swap Notional amount $ 300,000 $ 300,000 Weighted average fixed receive rates 4.81 % 4.81 % Weighted average variable Prime pay rates 8.50 % 7.32 % Weighted average maturity 5.10 years 6.10 years Gross aggregate fair value of the swaps Gross aggregate fair value of swap assets Other assets $ 1,293 $ 2,535 Gross aggregate fair value of swap liabilities Other liabilities $ 25,411 $ 32,367 Balances carried in AOCI Unrealized gains (losses) on cash flow hedges, net of tax AOCI $ ( 16,694 ) $ ( 20,985 ) First Busey Corporation | 2023 — 155 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Busey expects to reclassify unrealized gains and losses from OCI to interest income and interest expense as shown in the following table, during the next 12 months (dollars in thousands) . Amounts actually recognized could differ from these expectations due to changes in interest rates, hedge de-designations, and the addition of other hedges subsequent to December 31, 2023. As of December 31, 2023 Unrealized gains (losses) in OCI expected to be recognized in income Unrealized losses expected to be reclassified from OCI to interest income $ ( 952 ) Unrealized gains expected to be reclassified from OCI to interest expense 483 Net unrealized gains (losses) in OCI expected to be recognized in net interest income $ ( 469 ) Interest income (expense) recorded on swap transactions was as follows for the periods presented (dollars in thousands) : Years Ended December 31, 2023 2022 2021 Interest on swap transactions Increase (decrease) in interest income on swap transactions $ ( 10,326 ) $ ( 553 ) $ — (Increase) decrease in interest expense on swap transactions 1,757 ( 30 ) ( 1,067 ) Net increase (decrease) in net interest income on swap transactions $ ( 8,569 ) $ ( 583 ) $ ( 1,067 ) The following table reflects the net gains (losses) recorded in AOCI and the Consolidated Statements of Comprehensive Income relating to cash flow derivative instruments for the periods presented (dollars in thousands) : Years Ended December 31, 2023 2022 2021 Unrealized gains (losses) on cash flow hedges Net gain (loss) recognized in OCI, net of tax $ ( 1,835 ) $ ( 20,717 ) $ 736 (Gain) loss reclassified from OCI to interest income, net of tax 7,382 395 — (Gain) loss reclassified from OCI to interest expense, net of tax ( 1,256 ) 22 763 Net change in unrealized gains (losses) on cash flow hedges, net of tax $ 4,291 $ ( 20,300 ) $ 1,499 First Busey Corporation | 2023 — 156 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Derivative Instruments Not Designated as Hedges Interest Rate Swaps Busey may offer derivative contracts to its customers in connection with their risk management needs. Busey manages the risk associated with these contracts by entering into equal and offsetting derivative agreements with a third-party dealer. These contracts supported variable rate, commercial loan relationships totaling $ 663.1 million and $ 576.9 million as of December 31, 2023, and 2022, respectively. These derivatives generally worked together as an economic interest rate hedge, but Busey did not designate them for hedge accounting treatment. Consequently, changes in fair value of the corresponding derivative financial asset or liability were recorded as either a charge or credit to current earnings during the period in which the changes occurred. Amounts and fair values of derivative assets and liabilities related to customer interest rate swaps, included in other assets and other liabilities in the Consolidated Balance Sheets , are summarized as follows (dollars in thousands) : As of December 31, 2023 Derivative Asset Derivative Liability Notional Amount Fair Value Notional Amount Fair Value Derivatives not designated as hedging instruments Interest rate swaps – pay floating, receive fixed $ 177,883 $ 2,375 $ 485,253 $ 26,289 Interest rate swaps – pay fixed, receive floating 485,253 26,289 177,883 2,375 Total derivatives not designated as hedging instruments $ 663,136 $ 28,664 $ 663,136 $ 28,664 As of December 31, 2022 Derivative Asset Derivative Liability Notional Amount Fair Value Notional Amount Fair Value Derivatives not designated as hedging instruments Interest rate swaps – pay floating, receive fixed $ 48,728 $ 370 $ 528,183 $ 39,685 Interest rate swaps – pay fixed, receive floating 528,183 39,685 48,728 370 Total derivatives not designated as hedging instruments $ 576,911 $ 40,055 $ 576,911 $ 40,055 First Busey Corporation | 2023 — 157 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Changes in fair value of these derivative assets and liabilities were recorded in noninterest expense in the Consolidated Statements of Income and are summarized as follows (dollars in thousands) : Years Ended December 31, Location 2023 2022 2021 Interest rate swaps Pay floating, receive fixed Noninterest expense $ ( 11,525 ) $ 19,308 $ ( 12,587 ) Pay fixed, receive floating Noninterest expense 11,525 ( 19,308 ) 12,587 Net change in fair value of interest rate swaps $ — $ — $ — Risk Participation Agreements To manage the credit risk exposure related to customer-facing swaps, Busey entered into risk participation agreements in conjunction with loan participation arrangements with other financial institutions. Under these risk participation agreements, Busey purchased a portion of the credit exposure, paying an up-front fee, and will receive a payment from the counterparty if the loan customer defaults on its obligations. Busey also entered into a risk participation agreement under which Busey sold a portion of its credit exposure, receiving an up-front fee, and will be required to make a payment to the counterparty if the loan customer defaults on its obligations. The notional amount of the risk participation agreements reflect Busey's pro-rata share of the derivative instrument, consistent with its share of the related participated loan. The risk participation agreements mature between 2024 and 2029, and are summarized as follows (dollars in thousands) : As of December 31, 2023 2022 Risk participation agreements purchased Number of risk participation agreements 3 2 Notional amount $ 34,251 $ 18,899 Fair value 15 5 Risk participation agreements sold Number of risk participation agreements 1 — Notional amount $ 20,001 — Fair value — — First Busey Corporation | 2023 — 158 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Foreign Currency Forward Contracts In 2023, Busey entered into foreign currency exchange contracts to support the business requirements of its customers. Foreign currency contracts involve the exchange of one currency for another on a specified date and at a specified rate. These contracts were executed on behalf of Busey's customers and were used by customers to manage fluctuations in foreign exchange rates. Busey minimized its exposure by entering into similar offsetting positions with other financial institutions. Busey was subject to the credit risk that another party would fail to perform. As of December 31, 2023, Busey had no derivative assets or derivative liabilities related to foreign currency contracts recorded in its Consolidated Balance Sheets . Mortgage Banking Derivatives Interest Rate Lock Commitments Interest rate lock commitments that meet the definition of derivative financial instruments under ASC Topic 815 “Derivatives and Hedging” are carried at their fair values in other assets or other liabilities in the Consolidated Balance Sheets , with changes in the fair values of the corresponding derivative financial assets or liabilities recorded as either a charge or credit to current earnings during the period in which the changes occurred. Forward Sales Commitments Busey economically hedges mortgage loans held for sale and interest rate lock commitments issued to its residential loan customers related to loans that will be held for sale by obtaining corresponding forward sales commitments with an investor to sell the loans at an agreed-upon price at the time the interest rate locks are issued to the customers. Forward sales commitments that meet the definition of derivative financial instruments under ASC Topic 815 “Derivatives and Hedging” are carried at their fair values in other assets or other liabilities in the Consolidated Balance Sheets . While such forward sales commitments generally served as an economic hedge to mortgage loans held for sale and interest rate lock commitments, Busey did not designate them for hedge accounting treatment. Changes in fair value of the corresponding derivative financial asset or liability were recorded as either a charge or credit to current earnings during the period in which the changes occurred. First Busey Corporation | 2023 — 159 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Amounts and fair values of mortgage banking derivatives included in the Consolidated Balance Sheets are summarized as follows (dollars in thousands) : As of December 31, 2023 As of December 31, 2022 Location Notional Amount Fair Value Notional Amount Fair Value Mortgage banking derivative assets Interest rate lock commitments Other assets $ 3,477 $ 25 $ 1,517 $ 16 Forward sales commitments Other assets 1,761 11 83 1 Mortgage banking derivative assets $ 5,238 $ 36 $ 1,600 $ 17 Mortgage banking derivative liabilities Interest rate lock commitments Other liabilities $ 1,615 $ 10 $ 83 $ 1 Forward sales commitments Other liabilities 5,216 47 2,757 39 Mortgage banking derivative liabilities $ 6,831 $ 57 $ 2,840 $ 40 Net gains (losses) relating to these derivative instruments are summarized as follows for the periods presented (dollars in thousands) : Years Ended December 31, Location 2023 2022 2021 Net gains (losses) Interest rate lock commitments Mortgage revenue $ — $ 15 $ 1,702 Forward sales commitments Mortgage revenue 2 ( 38 ) ( 4,045 ) Net gains (losses) $ 2 $ ( 23 ) $ ( 2,343 ) In 2021, the impact of the net gains or losses recognized in earnings on interest rate lock commitments and forward sales commitments was almost entirely offset by the recognition of a corresponding change in the fair value of loans held for sale. In 2022, Busey began carrying loans held for sale at LOCOM, so while Busey will continue to recognize gains or losses on these mortgage banking derivative instruments in earnings, any corresponding increase in the fair value of loans held for sale will not be recognized in earnings until the loans are sold, at which time the increase is factored into the calculated gain on sale. Decreases in the market value of loans held for sale will continue to be recognized in earnings at each measurement period. First Busey Corporation | 2023 — 160 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 18. FAIR VALUE MEASUREMENTS The fair value of an asset or liability is the price that would be received by selling that asset or paid in transferring that liability (exit price) in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. ASC Topic 820 “Fair Value Measurement” establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows: • Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. • Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means. • Level 3 Inputs – Unobservable inputs for determining the fair values of assets or liabilities that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities. A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to Busey’s assets and liabilities that are carried at fair value. In general, fair value is based upon quoted market prices, when available. If such quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable data. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect, among other things, counterparty credit quality and the company's creditworthiness as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. While management believes Busey's valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis Debt Securities Available for Sale Debt securities classified as available for sale are reported at fair value utilizing Level 2 inputs. Busey obtains fair value measurements from an independent pricing service. The independent pricing service utilizes evaluated pricing models that vary by asset class and incorporate available trade, bid, and other market information. Because many fixed income securities do not trade on a daily basis, the independent pricing service applies available information, focusing on observable market data such as benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing, to prepare evaluations. The independent pricing service uses model processes, such as the Option Adjusted Spread model, to assess interest rate impact and develop prepayment scenarios. Models and processes take into account market conventions. For each asset class, a team of evaluators gathers information from market sources and integrates relevant credit information, perceived market movements, and sector news into the evaluated pricing applications and models. First Busey Corporation | 2023 — 161 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Market inputs that the independent pricing service normally seeks for evaluations of securities, listed in approximate order of priority, include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. The independent pricing service also monitors market indicators, industry, and economic events. For certain security types, additional inputs may be used or some of the market inputs may not be applicable. Evaluators may prioritize inputs differently on any given day for any security based on market conditions, and not all inputs listed are available for use in the evaluation process for each security evaluation on a given day. Because the data utilized was observable, the securities have been classified as Level 2. Equity Securities Equity securities are reported at fair value utilizing Level 1 or Level 2 inputs. Fair value measurements of mutual funds, when held, are determined using unadjusted quoted prices in active markets for identical assets at the measurement date and are classified as Level 1. For stock, quoted prices for identical or similar assets in markets that are not active are utilized and classified as Level 2. Derivative Assets and Derivative Liabilities The majority of our derivative assets and derivative liabilities are reported at fair value utilizing Level 2 or Level 3 inputs. Derivative balances are included in other assets or other liabilities on the Consolidated Balance Sheets , and consist of interest rate swaps and risk participation agreements where there is no significant deterioration in the counterparties (loan customers) credit risk since origination of the interest rate swap or risk participation agreement, as well as mortgage banking derivatives, including interest rate lock commitments and forward sales commitments. Fair values of derivative assets and liabilities are determined based on prices that are obtained from a third-party which uses observable market inputs and, with the exception of our risk participation agreements, are classified as Level 2. For purposes of potential valuation adjustments to our derivative positions, Busey evaluates the credit risk of its counterparties as well as its own credit risk. Accordingly, Busey has considered factors such as the likelihood of default, expected loss given default, net exposures, and remaining contractual life, among other things, in determining if any estimated fair value adjustments related to credit risk are required. Busey reviews counterparty exposure quarterly, and when necessary, appropriate adjustments are made to reflect the exposure. No changes in counterparty credit were identified. Due to the significance of unobservable inputs, derivative assets related to our risk participation agreements are classified as Level 3. First Busey Corporation | 2023 — 162 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following tables summarize financial assets and financial liabilities measured at fair value on a recurring basis as of December 31, 2023, and 2022, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (dollars in thousands) : As of December 31, 2023 Level 1 Inputs Level 2 Inputs Level 3 Inputs Total Fair Value Debt securities available for sale: U.S. Treasury securities $ — $ 15,946 $ — $ 15,946 Obligations of U.S. government corporations and agencies — 5,832 — 5,832 Obligations of states and political subdivisions — 172,845 — 172,845 Asset-backed securities — 468,223 — 468,223 Commercial mortgage-backed securities — 103,509 — 103,509 Residential mortgage-backed securities — 1,111,312 — 1,111,312 Corporate debt securities — 209,904 — 209,904 Equity securities 448 9,364 — 9,812 Derivative assets — 29,993 15 30,008 Derivative liabilities — 54,132 — 54,132 As of December 31, 2022 Level 1 Inputs Level 2 Inputs Level 3 Inputs Total Fair Value Debt securities available for sale: U.S. Treasury securities $ — $ 114,061 $ — $ 114,061 Obligations of U.S. government corporations and agencies — 19,779 — 19,779 Obligations of states and political subdivisions — 257,512 — 257,512 Asset-backed securities — 469,875 — 469,875 Commercial mortgage-backed securities — 108,394 — 108,394 Residential mortgage-backed securities — 1,243,256 — 1,243,256 Corporate debt securities — 248,516 — 248,516 Equity securities — 11,535 — 11,535 Derivative assets — 42,607 5 42,612 Derivative liabilities — 72,462 — 72,462 Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). First Busey Corporation | 2023 — 163 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Loans Evaluated Individually Busey does not record portfolio loans at fair value on a recurring basis. However, periodically, a loan is evaluated individually and is reported at the fair value of the underlying collateral, less estimated costs to sell, if repayment is expected solely from the collateral. If the collateral value is not sufficient, a specific reserve is recorded. Collateral values are estimated using a combination of observable inputs, including recent appraisals, and unobservable inputs based on customized discounting criteria. Due to the significance of unobservable inputs, fair values of individually evaluated collateral dependent loans have been classified as Level 3. Bank Property Held for Sale Bank property held for sale represents certain banking center office buildings which Busey has closed and consolidated with other existing banking centers. Bank property held for sale is measured at the lower of amortized cost or fair value less estimated costs to sell, and is included in premises and equipment, net on the Consolidated Balance Sheets . Fair values were based upon discounted appraisals or real estate listing prices. Due to the significance of unobservable inputs, fair values of all bank property held for sale have been classified as Level 3. The following tables summarize assets and liabilities measured at fair value on a non-recurring basis for the periods presented, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (dollars in thousands) : As of December 31, 2023 Level 1 Inputs Level 2 Inputs Level 3 Inputs Total Fair Value Loans evaluated individually, net of related allowance $ — $ — $ 1,000 $ 1,000 Bank property held for sale with impairment — — 4,286 4,286 As of December 31, 2022 Level 1 Inputs Level 2 Inputs Level 3 Inputs Total Fair Value Loans evaluated individually, net of related allowance $ — $ — $ 5,345 $ 5,345 Bank property held for sale with impairment — — 7,923 7,923 First Busey Corporation | 2023 — 164 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis for which the Company has utilized Level 3 inputs to determine fair value (dollars in thousands) : As of December 31, 2023 Fair Value Valuation Techniques Unobservable Input Range (Weighted Average) Loans evaluated individually, net of related allowance $ 1,000 Appraisal of collateral Appraisal adjustments - 41.2 % to - 100.0 % (- 47.2 )% Bank property held for sale with impairment 4,286 Appraisal of collateral or real estate listing price Appraisal adjustments - 6.2 % to - 64.9 % (- 38.4 )% As of December 31, 2022 Fair Value Valuation Techniques Unobservable Input Range (Weighted Average) Loans evaluated individually, net of related allowance $ 5,345 Appraisal of collateral Appraisal adjustments - 22.7 % to - 100.0 % (- 45.7 )% Bank property held for sale with impairment 7,923 Appraisal of collateral or real estate listing price Appraisal adjustments - 0.7 % to - 70.1 % (- 35.1 )% First Busey Corporation | 2023 — 165 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Financial Assets and Financial Liabilities That Are Not Carried at Fair Value Estimated fair values of financial instruments that are not carried at fair value in the Company’s Consolidated Balance Sheets, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value, were as follows (dollars in thousands) : As of December 31, 2023 As of December 31, 2022 Carrying Amount Fair Value Carrying Amount Fair Value Financial assets Level 1 inputs: Cash and cash equivalents $ 719,581 $ 719,581 $ 227,164 $ 227,164 Level 2 inputs: Debt securities held to maturity 872,628 730,397 918,312 785,295 Loans held for sale 2,379 2,401 1,253 1,276 Accrued interest receivable 45,288 45,288 43,372 43,372 Level 3 inputs: Portfolio loans, net 7,559,294 7,276,905 7,634,094 7,320,422 Mortgage servicing rights 3,289 18,079 5,861 18,284 Other servicing rights 1,597 2,062 1,914 2,331 Financial liabilities Level 2 inputs: Time deposits $ 1,819,274 $ 1,804,905 $ 855,375 $ 830,596 Securities sold under agreements to repurchase 187,396 187,396 229,806 229,806 Short-term borrowings 12,000 12,034 351,054 351,085 Long-term debt 18,000 18,020 30,000 30,052 Junior subordinated debt owed to unconsolidated trusts 71,993 57,153 71,810 59,111 Accrued interest payable 28,418 28,418 3,978 3,978 Level 3 inputs: Subordinated notes, net of unamortized issuance costs 222,882 200,000 222,038 208,562 First Busey Corporation | 2023 — 166 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 19. EARNINGS PER SHARE Basic earnings per share is computed by dividing net income for the period by the weighted average number of common shares outstanding, which include DSUs that are vested but not delivered. Diluted earnings per common share is computed using the treasury stock method and reflects the potential dilution that could occur if Busey’s outstanding stock options and warrants were exercised, stock units were vested, and shares were issued under the 2021 ESPP. Earnings per common share have been computed as follows (dollars in thousands, except per share amounts) : Years Ended December 31, 2023 2022 2021 Net income $ 122,565 $ 128,311 $ 123,449 Weighted average number of common shares outstanding, basic 55,432,322 55,387,073 55,369,476 Dilutive effect of common stock equivalents: Options — 1,632 1,639 Warrants 324 1,753 1,753 RSU awards 647,217 665,998 615,759 PSU awards 151,190 58,206 5,429 DSU awards 18,154 15,532 10,641 2021 ESPP 6,941 6,970 4,108 Weighted average number of common shares outstanding, diluted 56,256,148 56,137,164 56,008,805 Basic earnings per common share $ 2.21 $ 2.32 $ 2.23 Diluted earnings per common share 2.18 2.29 2.20 Average shares that were excluded from the computation of diluted earnings per common share because their effect would have been anti-dilutive are summarized in the table below for the periods presented: Years Ended December 31, 2023 2022 2021 Anti-dilutive common stock equivalents Options 21,981 7,792 — RSU awards 39,445 38,912 65,058 PSU awards 106,955 189,000 93,026 DSU awards — — 7,742 Total anti-dilutive common stock equivalents 168,381 235,704 165,826 First Busey Corporation | 2023 — 167 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 20. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following tables present changes in AOCI by component, net of tax, for the periods below (dollars in thousands) : Year Ended December 31, 2023 Before Tax Tax Effect Net of Tax Unrealized/Unrecognized gains (losses) on debt securities Balance at beginning of period $ ( 352,878 ) $ 100,585 $ ( 252,293 ) Unrealized holding gains (losses) on debt securities available for sale, net 58,498 ( 16,674 ) 41,824 Amounts reclassified from AOCI, net 5,503 ( 1,569 ) 3,934 Amortization of unrecognized losses on securities transferred to held to maturity 6,189 ( 1,763 ) 4,426 Balance at end of period $ ( 282,688 ) $ 80,579 $ ( 202,109 ) Unrealized gains (losses) on cash flow hedges Balance at beginning of period $ ( 29,350 ) $ 8,365 $ ( 20,985 ) Unrealized holding gains (losses) on cash flow hedges, net ( 2,567 ) 732 ( 1,835 ) Amounts reclassified from AOCI, net 8,569 ( 2,443 ) 6,126 Balance at end of period $ ( 23,348 ) $ 6,654 $ ( 16,694 ) Total AOCI $ ( 306,036 ) $ 87,233 $ ( 218,803 ) Year Ended December 31, 2022 Before Tax Tax Effect Net of Tax Unrealized/Unrecognized gains (losses) on debt securities Balance at beginning of period $ ( 32,272 ) $ 9,199 $ ( 23,073 ) Unrealized holding gains (losses) on debt securities available for sale, net ( 278,762 ) 79,460 ( 199,302 ) Unrecognized losses on debt securities transferred to held to maturity from available for sale ( 48,456 ) 13,812 ( 34,644 ) Amounts reclassified from AOCI, net ( 26 ) 7 ( 19 ) Amortization of unrecognized losses on securities transferred to held to maturity 6,638 ( 1,893 ) 4,745 Balance at end of period $ ( 352,878 ) $ 100,585 $ ( 252,293 ) Unrealized gains (losses) on cash flow hedges Balance at beginning of period $ ( 958 ) $ 273 $ ( 685 ) Unrealized holding gains (losses) on cash flow hedges, net ( 28,975 ) 8,258 ( 20,717 ) Amounts reclassified from AOCI, net 583 ( 166 ) 417 Balance at end of period $ ( 29,350 ) $ 8,365 $ ( 20,985 ) Total AOCI $ ( 382,228 ) $ 108,950 $ ( 273,278 ) First Busey Corporation | 2023 — 168 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2021 Before Tax Tax Effect Net of Tax Unrealized/Unrecognized gains (losses) on debt securities Balance at beginning of period $ 49,644 $ ( 14,151 ) $ 35,493 Unrealized holding gains (losses) on debt securities available for sale, net ( 81,977 ) 23,367 ( 58,610 ) Amounts reclassified from AOCI, net 61 ( 17 ) 44 Balance at end of period $ ( 32,272 ) $ 9,199 $ ( 23,073 ) Unrealized gains (losses) on cash flow hedges Balance at beginning of period $ ( 3,055 ) $ 871 $ ( 2,184 ) Unrealized holding gains (losses) on cash flow hedges, net 1,030 ( 294 ) 736 Amounts reclassified from AOCI, net 1,067 ( 304 ) 763 Balance at end of period $ ( 958 ) $ 273 $ ( 685 ) Total AOCI $ ( 33,230 ) $ 9,472 $ ( 23,758 ) First Busey Corporation | 2023 — 169 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 21. OPERATING SEGMENTS AND RELATED INFORMATION Busey has three reportable operating segments: Banking, Wealth Management, and FirsTech. Busey’s three operating segments are strategic business units that are separately managed, as they offer different products and services and have different marketing strategies. The Banking Operating Segment The Banking operating segment provides a full range of banking services to individual and corporate customers through First Busey Corporation’s wholly-owned bank subsidiary, Busey Bank, with 58 banking centers in Illinois; the St. Louis, Missouri, metropolitan area; southwest Florida; and Indianapolis, Indiana. Banking services offered to individual customers include customary types of demand and savings deposits, money transfers, safe deposit services, individual retirement accounts and other fiduciary services, automated teller machines, and technology-based networks, as well as a variety of loan products including residential real estate, home equity lines of credit, and consumer loans. Banking services offered to corporate customers include commercial, commercial real estate, real estate construction, and agricultural loans, as well as commercial depository services such as cash management. The Wealth Management Operating Segment The Wealth Management operating segment provides a full range of asset management, investment, brokerage, fiduciary, philanthropic advisory, tax preparation, and farm management services to individuals, businesses, and foundations. Services are provided through Busey Capital Management, Inc., a wholly-owned subsidiary of Busey Bank, and Busey Wealth Management, a division of Busey Bank. Wealth management services tailored to individuals include trust and estate advisory services and financial planning. Business services include business succession planning and employee retirement plan services. Services for foundations include investment strategy consulting and fiduciary services. The FirsTech Operating Segment The FirsTech operating segment provides comprehensive and innovative payment technology solutions through Busey Bank’s wholly-owned subsidiary, FirsTech. FirsTech's multi-channel payment platform allows businesses to collect payments from their customers in a variety of ways to enable fast, frictionless payments. Payment method vehicles include, but are not limited to, text-based mobile bill pay; interactive voice response; electronic payment concentration delivered to Automated Clearing House networks, money management, and credit card networks; walk-in payment processing for customers at retail pay agents; customer service payments made over a telephone; direct debit services; and lockbox remittance processing for customers to make payments by mail. FirsTech also provides additional tools to help clients with billing, reconciliation, bill reminders, and treasury services. FirsTech's client base represents a diverse set of industries, with a higher concentration in highly regulated industries, such as financial institutions, utility, insurance, and telecommunications industries. Segment Financial Information The segment financial information provided below has been derived from information used by management to monitor and manage Busey’s financial performance. The accounting policies of the three operating segments are the same as those described in the summary of significant accounting policies in “ Note 1. Significant Accounting Policies. ” Busey accounts for intersegment revenue and transfers at current market prices. First Busey Corporation | 2023 — 170 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Following is a summary of selected financial information for Busey’s operating segments. The “other” category included in the tables below consists of the parent company, First Busey Risk Management until its dissolution on December 18, 2023, and the elimination of intercompany transactions (dollars in thousands) : Goodwill Total Assets As of December 31, As of December 31, 2023 2022 2023 2022 Operating segment Banking $ 294,773 $ 294,773 $ 12,125,298 $ 12,199,960 Wealth Management 14,108 14,108 103,147 84,082 FirsTech 8,992 8,992 51,600 48,715 Other — — 3,370 3,920 Consolidated total $ 317,873 $ 317,873 $ 12,283,415 $ 12,336,677 First Busey Corporation | 2023 — 171 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 2023 2022 2021 Net interest income Banking $ 335,345 $ 340,083 $ 285,678 FirsTech 54 65 79 Other ( 15,948 ) ( 16,710 ) ( 15,059 ) Total net interest income $ 319,451 $ 323,438 $ 270,698 Noninterest income Banking $ 46,701 $ 54,154 $ 59,393 Wealth Management 57,823 55,394 53,082 FirsTech 22,746 21,720 19,629 Other ( 4,886 ) ( 4,465 ) 700 Total noninterest income $ 122,384 $ 126,803 $ 132,804 Noninterest expense Banking $ 223,451 $ 221,997 $ 205,905 Wealth Management 33,081 31,545 29,198 FirsTech 21,653 20,619 17,574 Other 7,347 9,720 9,103 Total noninterest expense $ 285,532 $ 283,881 $ 261,780 Income before income taxes Banking $ 156,196 $ 167,617 $ 154,267 Wealth Management 24,742 23,849 23,884 FirsTech 1,147 1,166 2,134 Other ( 28,181 ) ( 30,895 ) ( 23,462 ) Total income before income taxes $ 153,904 $ 161,737 $ 156,823 Net income Banking $ 123,853 $ 131,596 $ 117,844 Wealth Management 18,804 18,543 18,570 FirsTech 830 847 1,527 Other ( 20,922 ) ( 22,675 ) ( 14,492 ) Total net income $ 122,565 $ 128,311 $ 123,449 First Busey Corporation | 2023 — 172 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 22. PARENT COMPANY ONLY FINANCIAL INFORMATION Condensed financial data for First Busey Corporation is presented below. CONDENSED BALANCE SHEETS (dollars in thousands) As of December 31, 2023 2022 Assets Cash and cash equivalents $ 100,098 $ 91,812 Debt securities 987 — Equity securities 9,364 11,535 Investments in subsidiaries: Bank 1,478,118 1,369,261 Non-bank — 2,181 Premises and equipment, net 7 18 Other assets 20,100 22,316 Total assets $ 1,608,674 $ 1,497,123 Liabilities and stockholders' equity Liabilities: Short-term borrowings $ 12,000 $ 12,000 Long-term debt 18,000 30,000 Subordinated notes, net of unamortized issuance costs 222,882 222,038 Junior subordinated debentures owed to unconsolidated trusts 71,993 71,810 Other liabilities 11,818 15,298 Total liabilities 336,693 351,146 Total stockholders' equity 1,271,981 1,145,977 Total liabilities and stockholders' equity $ 1,608,674 $ 1,497,123 First Busey Corporation | 2023 — 173 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED STATEMENTS OF INCOME (dollars in thousands) Years Ended December 31, 2023 2022 2021 Operating income Dividends from subsidiaries: Bank $ 90,000 $ 95,000 $ 60,000 Non-bank 900 1,630 1,745 Income from dissolution of non-bank subsidiary 733 — — Interest income 2,956 1,094 79 Gains (losses) recognized on equity securities, net ( 2,171 ) ( 2,159 ) 3,041 Other income 14,130 15,195 12,109 Total operating income 106,548 110,760 76,974 Expense Salaries, wages, and employee benefits 17,766 20,964 17,914 Interest expense 19,005 17,854 15,163 Operating expense 8,009 7,294 7,429 Total expense 44,780 46,112 40,506 Income (loss) before income tax benefit and equity in undistributed (in excess of) net income of subsidiaries 61,768 64,648 36,468 Income tax benefit 7,310 8,286 8,974 Income (loss) before equity in undistributed (in excess of) net income of subsidiaries 69,078 72,934 45,442 Equity in undistributed (in excess of) net income of subsidiaries Bank 53,487 55,986 77,941 Non-bank — ( 609 ) 66 Net income $ 122,565 $ 128,311 $ 123,449 First Busey Corporation | 2023 — 174 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED STATEMENTS OF CASH FLOWS (dollars in thousands) Years Ended December 31, 2023 2022 2021 Cash flows provided by (used in) operating activities Net income $ 122,565 $ 128,311 $ 123,449 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,038 1,423 882 Distributions more (less) than net income of subsidiaries ( 53,487 ) ( 55,377 ) ( 78,007 ) (Gains) losses recognized on equity securities, net 2,171 2,159 ( 3,041 ) Stock-based compensation 6,595 8,968 7,864 (Increase) decrease in other assets 6,253 ( 17,754 ) ( 1,186 ) Increase (decrease) in other liabilities ( 7,687 ) 21,233 ( 3,302 ) Net cash provided by (used in) operating activities 77,448 88,963 46,659 Cash flows provided by (used in) investing activities Sales (purchases) of equity securities, net — 598 ( 5,000 ) Net cash paid for acquisitions — — ( 61,656 ) Purchases of premises and equipment — ( 9 ) ( 15 ) Repayments of investments in subsidiaries 1,480 — — Net cash provided by (used in) investing activities 1,480 589 ( 66,671 ) Cash flows provided by (used in) financing activities Cash paid for withholding taxes on stock-based payments ( 1,093 ) ( 1,276 ) ( 997 ) Cash dividends paid ( 53,076 ) ( 50,863 ) ( 50,764 ) Repayments of borrowings ( 12,000 ) ( 112,000 ) ( 18,500 ) Proceeds from issuance of debt — 98,094 72,500 Proceeds from the exercise of stock options and warrants 9 — — Purchase of treasury stock ( 4,482 ) ( 9,912 ) ( 33,043 ) Common stock issuance costs — — ( 150 ) Net cash provided (used in) by financing activities ( 70,642 ) ( 75,957 ) ( 30,954 ) Net increase (decrease) in cash and cash equivalents 8,286 13,595 ( 50,966 ) Cash and cash equivalents, beginning of period 91,812 78,217 129,183 Cash and cash equivalents, ending of period $ 100,098 $ 91,812 $ 78,217 First Busey Corporation | 2023 — 175 Table of Contents Contents of Item 8. Financial Statements & Supplementary Data FIRST BUSEY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 23. ACQUISITIONS Merchants and Manufacturers Bank Corporation On November 27, 2023, First Busey Corporation announced the signing of a definitive agreement with M&M, pursuant to which Busey will acquire M&M and its wholly-owned subsidiary, M&M Bank, through a merger transaction. This partnership will add M&M’s Life Equity Loan ® products to Busey’s existing suite of services, and expand Busey’s presence in the Chicago Metropolitan Statistical Area. Under the terms of the merger agreement, M&M’s stockholders will have the right to receive for each share of M&M common stock, at the election of each stockholder and subject to proration and adjustment, either (1) $ 117.74 in cash, (2) 5.7294 shares of Busey common stock, or (3) mixed consideration of $ 34.55 in cash and 4.0481 shares of Busey common stock, with total consideration to consist of approximately 71 % stock and 29 % cash. Based upon Busey’s 20‑day volume-weighted average closing price as of November 24, 2023, the aggregate implied transaction value is approximately $ 41.6 million. The merger is expected to be finalized in the second quarter of 2024, subject to customary closing conditions and required approvals, including regulatory approvals and the approval of M&M’s stockholders. It is anticipated that M&M Bank will be merged with and into Busey Bank at a date following the completion of the merger. At the time of the bank merger, M&M Bank’s banking centers will become banking centers of Busey Bank, except for M&M’s banking center located at 990 Essington Rd., Joliet, Illinois, which is expected to be closed in connection with the bank merger. This transaction will be accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged will be recorded at estimated fair values on the date of acquisition. Fair values will be subject to refinement for up to one year after the closing date as additional information regarding the closing date fair values becomes available. During 2023, Busey incurred $ 0.3 million in pre-tax acquisition expenses, comprised primarily of legal expenses, related to the planned acquisition of M&M. First Busey Corporation | 2023 — 176 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.