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Portfolio Loans
 6 Months Ended
Jun. 30, 2023
Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]  
Portfolio Loans Portfolio Loans
Loan Categories
Busey’s lending can be summarized in two primary categories: commercial and retail. Lending is further classified into five primary areas of loans: commercial loans, commercial real estate loans, real estate construction loans, retail real estate loans, and retail other loans. Distributions of the loan portfolio by loan category and class is presented in the following table (dollars in thousands):
As of
June 30,
2023		December 31,
2022
Commercial loans
Commercial$1,899,718 $1,974,154 
Commercial real estate3,361,308 3,261,873 
Real estate construction532,400 530,469 
Total commercial loans5,793,426 5,766,496 
Retail loans
Retail real estate1,703,057 1,657,082 
Retail other308,801 302,124 
Total retail loans2,011,858 1,959,206 
Total portfolio loans7,805,284 7,725,702 
ACL(91,639)(91,608)
Portfolio loans, net$7,713,645 $7,634,094 
Net deferred loan origination costs included in the balances above were $13.4 million as of June 30, 2023, compared to $14.0 million as of December 31, 2022. Net accretable purchase accounting adjustments included in the balances above reduced loans by $5.1 million as of June 30, 2023, and $5.9 million as of December 31, 2022. Commercial balances include loans originated under the PPP with an amortized cost of $0.7 million as of June 30, 2023, and $0.8 million as of December 31, 2022.
Busey did not purchase any retail real estate loans during the three or six months ended June 30, 2023, or 2022.
Pledged Loans
Busey had loans pledged to the FHLB and Federal Reserve for liquidity as set forth in the table below (dollars in thousands):
As of
June 30,
2023		December 31,
2022
Pledged loans
FHLB$4,817,800 $5,095,448 
Federal Reserve Bank793,823 804,718 
Total pledged loans$5,611,623 $5,900,166 
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 the Company’s credit position at some future date.
•Substandard – This category includes “Substandard” loans, determined in accordance with regulatory guidelines, for which the accrual of interest has not been stopped. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
•Substandard non-accrual – This category includes loans that have all the characteristics of a “Substandard” loan with additional factors that make collection in full highly questionable and improbable. Such loans are placed on non-accrual status and may be dependent on collateral with a value that is difficult to determine.
All loans are graded at their inception. Commercial lending relationships that are $1.0 million or less are usually processed through an expedited underwriting process. Most commercial loans greater than $1.0 million are included in a portfolio review at least annually. Commercial loans greater than $0.35 million that have a grading of special mention or worse are typically reviewed on a quarterly basis. Interim reviews may take place if circumstances of the borrower warrant a more frequent review.
The following table is a summary of risk grades segregated by category and class of portfolio loans (dollars in thousands):
As of June 30, 2023
PassWatchSpecial
Mention		SubstandardSubstandard
Non-accrual		Total
Commercial loans
Commercial$1,552,632 $267,583 $30,528 $42,812 $6,163 $1,899,718 
Commercial real estate2,954,169 341,825 44,247 16,001 5,066 3,361,308 
Real estate construction515,598 11,423 — 5,379 — 532,400 
Total commercial loans5,022,399 620,831 74,775 64,192 11,229 5,793,426 
Retail loans
Retail real estate1,686,591 10,162 497 1,897 3,910 1,703,057 
Retail other308,731 — — — 70 308,801 
Total retail loans1,995,322 10,162 497 1,897 3,980 2,011,858 
Total portfolio loans$7,017,721 $630,993 $75,272 $66,089 $15,209 $7,805,284 
As of December 31, 2022
PassWatchSpecial
Mention		SubstandardSubstandard
Non-accrual		Total
Commercial loans
Commercial $1,668,495 $201,758 $46,540 $51,187 $6,174 $1,974,154 
Commercial real estate2,851,709 326,455 43,526 34,539 5,644 3,261,873 
Real estate construction502,904 25,164 1 2,400 — 530,469 
Total commercial loans5,023,108 553,377 90,067 88,126 11,818 5,766,496 
Retail loans
Retail real estate1,639,599 10,520 1,338 2,529 3,096 1,657,082 
Retail other301,971 — — — 153 302,124 
Total retail loans1,941,570 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):
As of and For The Six Months Ended June 30, 2023
Term Loans Amortized Cost Basis by Origination YearRevolving
Loans		Total
Risk Grade Ratings20232022202120202019Prior
Commercial
Pass$238,885 $258,601 $210,737 $84,565 $52,048 $189,011 $518,785 $1,552,632 
Watch53,019 66,345 45,506 23,440 6,017 15,102 58,154 267,583 
Special Mention1,081 1,166 786 1,175 2,362 7,047 16,911 30,528 
Substandard5,664 1,056 1,182 490 4,168 5,053 25,199 42,812 
Substandard non-accrual1,050 — 2,797 184 132 — 2,000 6,163 
Total commercial299,699 327,168 261,008 109,854 64,727 216,213 621,049 1,899,718 
Current period charge-offs— — 420 — 16 539 — 975 
Commercial real estate
Pass275,324 862,753 800,484 412,069 290,406 296,497 16,636 2,954,169 
Watch64,094 41,392 64,833 36,255 79,265 50,306 5,680 341,825 
Special Mention6,507 1,631 14,350 14,527 3,393 3,839 — 44,247 
Substandard4,363 198 1,969 3,036 1,827 4,558 50 16,001 
Substandard non-accrual225 1,174 3,074 28 — 565 — 5,066 
Total commercial real estate350,513 907,148 884,710 465,915 374,891 355,765 22,366 3,361,308 
Current period charge-offs— — — — 137 936 — 1,073 
Real estate construction
Pass112,757 183,359 131,457 55,596 1,407 2,978 28,044 515,598 
Watch860 3,879 3,329 3,311 44 — — 11,423 
Substandard5,379 — — — — — — 5,379 
Total real estate construction118,996 187,238 134,786 58,907 1,451 2,978 28,044 532,400 
Current period charge-offs— — — — — — — — 
Retail real estate
Pass143,072 391,593 429,040 166,221 73,904 289,770 192,991 1,686,591 
Watch529 2,764 2,915 990 597 865 1,502 10,162 
Special Mention54 56 — — — 387 — 497 
Substandard123 74 297 58 82 1,022 241 1,897 
Substandard non-accrual— 368 377 98 103 2,215 749 3,910 
Total retail real estate143,778 394,855 432,629 167,367 74,686 294,259 195,483 1,703,057 
Current period charge-offs— 5 — 29 — 74 — 108 
Retail other
Pass62,466 113,226 28,921 9,702 8,400 2,634 83,382 308,731 
Substandard non-accrual— 63 — 3 3 1 — 70 
Total retail other62,466 113,289 28,921 9,705 8,403 2,635 83,382 308,801 
Current period charge-offs2 64 137 1 — 168 — 372 
Total portfolio loans$975,452 $1,929,698 $1,742,054 $811,748 $524,158 $871,850 $950,324 $7,805,284 
Total current period charge-offs$2 $69 $557 $30 $153 $1,717 $— $2,528 
As of December 31, 2022
Term Loans Amortized Cost Basis by Origination YearRevolving
Loans		Total
Risk Grade Ratings20222021202020192018Prior
Commercial
Pass$479,893 $266,122 $136,445 $52,046 $50,764 $135,000 $548,225 $1,668,495 
Watch54,195 49,382 3,288 7,201 1,258 2,160 84,274 201,758 
Special Mention1,958 937 1,642 974 1,000 17,024 23,005 46,540 
Substandard8,926 1,165 570 6,671 2,382 5,191 26,282 51,187 
Substandard non-accrual21 3,292 226 135 — 100 2,400 6,174 
Total commercial544,993 320,898 142,171 67,027 55,404 159,475 684,186 1,974,154 
Commercial real estate
Pass883,688 819,133 478,452 297,525 161,409 198,419 13,083 2,851,709 
Watch77,346 56,113 64,282 96,664 21,592 5,758 4,700 326,455 
Special Mention11,943 5,389 12,386 1,420 6,917 5,471 — 43,526 
Substandard5,340 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 estate978,317 898,122 558,607 397,516 201,813 209,715 17,783 3,261,873 
Real estate construction
Pass219,112 191,724 68,015 1,490 1,901 1,751 18,911 502,904 
Watch8,530 12,019 3,169 48 — 1,398 — 25,164 
Special Mention— — — 1 — — — 1 
Substandard2,400 — — — — — — 2,400 
Total real estate construction230,042 203,743 71,184 1,539 1,901 3,149 18,911 530,469 
Retail real estate
Pass396,547 456,158 175,148 77,569 56,887 267,387 209,903 1,639,599 
Watch2,928 2,991 1,846 1,444 1,063 27 221 10,520 
Special Mention945 — — — — 393 — 1,338 
Substandard77 732 198 81 141 1,293 7 2,529 
Substandard non-accrual10 191 107 32 390 1,708 658 3,096 
Total retail real estate400,507 460,072 177,299 79,126 58,481 270,808 210,789 1,657,082 
Retail other
Pass134,567 43,512 13,141 13,086 5,646 991 91,028 301,971 
Substandard non-accrual14 134 3 — — 2 — 153 
Total retail other134,581 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 
Past Due and Non-accrual Loans
An analysis of the amortized cost basis of portfolio loans that are past due and still accruing, or on a non-accrual status, is as follows (dollars in thousands):
As of June 30, 2023
Loans past due, still accruingNon-accrual
Loans
30-59 Days60-89 Days90+Days
Past due and non-accrual loans
Commercial loans:
Commercial $53 $— $— $6,163 
Commercial real estate610 — 18 5,066 
Past due and non-accrual commercial loans663 — 18 11,229 
Retail loans:
Retail real estate2,736 1,424 551 3,910 
Retail other276 70 — 70 
Past due and non-accrual retail loans3,012 1,494 551 3,980 
Total past due and non-accrual loans$3,675 $1,494 $569 $15,209 
As of December 31, 2022
Loans past due, still accruingNon-accrual
Loans
30-59 Days60-89 Days90+Days
Past due and non-accrual loans
Commercial loans:
Commercial$2 $— $— $6,174 
Commercial real estate124 — — 5,644 
Past due and non-accrual commercial loans126 — — 11,818 
Retail loans:
Retail real estate4,709 1,239 673 3,096 
Retail other414 60 — 153 
Past due and non-accrual retail loans5,123 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 $0.3 million and $0.7 million for the three and six months ended June 30, 2023, respectively, and was $0.3 million and $0.5 million for the three and six months ended June 30, 2022, respectively. The amount of interest collected on those loans and recognized on a cash basis that was included in interest income was insignificant for the three and six months ended June 30, 2023. Interest collected on these loans and recognized on a cash basis was insignificant for the three months ended June 30, 2022, and was $0.4 million for the six months ended June 30, 2022.
Loan Modification Disclosures Pursuant to ASU 2022-02
The followings table show the amortized cost basis of loans that were modified for borrowers experiencing financial difficulty during the periods indicated, disaggregated by class of financing receivable and type of concession granted (dollars in thousands):
Three Months Ended June 30, 2023
Payment Deferral1
% of Total Class of Financing Receivable2
Term Extension3
% of Total Class of Financing Receivable
Loan class:
Commercial$— — %$2,717 0.1 %
Commercial real estate225 — %3,031 0.1 %
Real estate construction— — %5,379 1.0 %
Total of loans modified during the period4
$225 — %$11,127 0.1 %
Six Months Ended June 30, 2023
Payment Deferral1
% of Total Class of Financing Receivable2
Term Extension3
% of Total Class of Financing Receivable
Loan class:
Commercial$— — %$16,594 0.9 %
Commercial real estate225 — %4,586 0.1 %
Real estate construction— — %5,379 1.0 %
Total of loans modified during the period4
$225 — %$26,559 0.3 %
___________________________________________
1.A loan with payment deferral was modified to defer all principal payments until the end of the loan term, which was shortened.
2.Loans with payment deferrals represent an insignificant portion of commercial loans and total 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 two loans on non-accrual status, one on special mention 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:
Three Months Ended June 30, 2023Six Months Ended June 30, 2023
Weighted Average Term ExtensionWeighted Average Term Extension
Loan class:
Commercial
11.5 months
11.4 months
Commercial real estate
6.0 months
8.2 months
Real estate construction
12.0 months
12.0 months
Total financial effect
10.3 months
11.0 months
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 June 30, 2023
Current30-89 Days90+ DaysNon-accrual
Loan class:
Commercial$15,636 $— $— $958 
Commercial real estate4,586 — — 225 
Real estate construction5,379 — — — 
Amortized cost of modified loans$25,601 $— $— $1,183 
TDR Disclosures Prior to the Adoption of ASU 2022-02
At December 31, 2022, performing TDR’s were $3.0 million and non-performing TDR’s were $0.5 million.
One loan was newly designated as a TDR during the three and six months ended June 30, 2022. There were no TDRs entered into during the 12 months ended June 30, 2022, that had subsequent defaults during the three or six months ended June 30, 2022. Gross interest income that would have been recorded in the three and six months ended June 30, 2022, if TDRs had performed in accordance with their original terms compared with their modified terms, was insignificant.
Collateral Dependent Loans
Management's evaluation as to the ultimate collectability of loans includes estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral. These estimates are affected by changing economic conditions and the economic prospects of borrowers. Collateral dependent loans are loans in which repayment is expected to be provided solely by the underlying collateral and there are no other available and reliable sources of repayment. Loans are written down to the lower of cost or fair value of underlying collateral, less estimated costs to sell. The Company had $13.6 million and $14.0 million of collateral dependent loans secured by real estate or business assets as of June 30, 2023, and December 31, 2022, respectively.
Foreclosures
As of June 30, 2023, Busey had $1.1 million of residential real estate in the process of foreclosure. Busey follows Federal Housing Finance Agency guidelines on single-family foreclosures and real estate owned evictions on portfolio loans.
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 loan category and class. The unpaid principal balance represents customer outstanding contractual principal balances excluding any partial charge-offs. Recorded investment represents the amortized cost of customer balances net of any partial charge-offs recognized on the loan. Average recorded investment is calculated using the most recent four quarters (dollars in thousands):
As of June 30, 2023
Unpaid
Principal
Balance		Recorded InvestmentAverage
Recorded
Investment
With No
Allowance		With
Allowance		TotalRelated
Allowance
Loans evaluated individually
Commercial loans:
Commercial$9,583 $90 $5,938 $6,028 $2,582 $6,362 
Commercial real estate7,536 4,909 — 4,909 — 5,789 
Real estate construction— — — — — 153 
Commercial loans evaluated individually17,119 4,999 5,938 10,937 2,582 12,304 
Retail loans:
Retail real estate213 60 25 85 25 1,608 
Retail loans evaluated individually213 60 25 85 25 1,608 
Total loans evaluated individually$17,332 $5,059 $5,963 $11,022 $2,607 $13,912 
As of December 31, 2022
Unpaid
Principal
Balance		Recorded InvestmentAverage
Recorded
Investment
With No
Allowance		With
Allowance		TotalRelated
Allowance
Loans evaluated individually
Commercial loans:
Commercial$9,589 $656 $5,918 $6,574 $2,476 $6,761 
Commercial real estate8,039 2,334 3,903 6,237 2,000 5,219 
Real estate construction247 247 — 247 — 260 
Commercial loans evaluated individually17,875 3,237 9,821 13,058 4,476 12,240 
Retail loans:
Retail real estate2,733 2,564 25 2,589 25 2,311 
Retail loans evaluated individually2,733 2,564 25 2,589 25 2,311 
Total loans evaluated individually$20,608 $5,801 $9,846 $15,647 $4,501 $14,551 
The following tables present the ACL and amortized cost of portfolio loans by loan category and class (dollars in thousands):
As of June 30, 2023
Portfolio LoansACL Attributed to Portfolio Loans
Collectively
Evaluated for
Impairment		Individually
Evaluated for
Impairment		TotalCollectively
Evaluated for
Impairment		Individually
Evaluated for
Impairment		Total
Portfolio loans and related ACL
Commercial loans:
Commercial$1,893,690 $6,028 $1,899,718 $21,928 $2,582 $24,510 
Commercial real estate3,356,399 4,909 3,361,308 33,656 — 33,656 
Real estate construction532,400 — 532,400 5,071 — 5,071 
Commercial loans and related ACL5,782,489 10,937 5,793,426 60,655 2,582 63,237 
Retail loans:
Retail real estate1,702,972 85 1,703,057 24,650 25 24,675 
Retail other308,801 — 308,801 3,727 — 3,727 
Retail loans and related ACL2,011,773 85 2,011,858 28,377 25 28,402 
Portfolio loans and related ACL$7,794,262 $11,022 $7,805,284 $89,032 $2,607 $91,639 
As of December 31, 2022
Portfolio LoansACL Attributed to Portfolio Loans
Collectively
Evaluated for
Impairment		Individually
Evaluated for
Impairment		TotalCollectively
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 estate3,255,636 6,237 3,261,873 36,299 2,000 38,299 
Real estate construction530,222 247 530,469 6,457 — 6,457 
Commercial loans and related ACL5,753,438 13,058 5,766,496 64,140 4,476 68,616 
Retail loans:
Retail real estate1,654,493 2,589 1,657,082 18,168 25 18,193 
Retail other302,124 — 302,124 4,799 — 4,799 
Retail loans and related ACL1,956,617 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