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.

Busey’s accounting and reporting policies conform to GAAP. The Consolidated Financial Statements include the accounts of First Busey Corporation and its subsidiaries, which include Deed of Trust Services Corporation, and Busey Bank, including Busey Bank’s wholly-owned subsidiaries FirsTech, Pulaski Service Corporation, and Busey Capital Management, Inc. Further, until its dissolution on December 18, 2023, First Busey Risk Management was a subsidiary of First Busey Corporation and included in the Company’s Consolidated Financial Statements. 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, Pulaski Financial Statutory Trust II, and Merchants and Manufacturers Bank Statutory Trust I.

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 on 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 assets acquired and liabilities assumed in business combinations, goodwill, income taxes, and the determination of the ACL.

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. Further, management assumptions require consideration of future growth rates, future attrition, discount rates, multiples of earnings or other relevant factors.

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.

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.

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 on debt securities available for sale in 2024, 2023, or 2022.

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 of credit loss related to mortgage-backed securities issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises is considered zero, therefore requiring no allowance to be recorded.

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.

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 $582.5 million as of December 31, 2024, and $1.49 billion as of December 31, 2023, and are not included in the accompanying Consolidated Balance Sheets. During the first quarter of 2024, Busey sold the mortgage servicing rights on approximately $923.5 million of one- to four-family mortgage loans for an estimated pre-tax gain of $7.5 million, which enabled Busey to sell available-for-sale debt securities with a book value of approximately $108.2 million for a pre-tax loss of $6.8 million.

Servicing rights are initially recorded at estimated 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 loan servicing rights is included in other income.

Servicing rights are periodically evaluated for impairment based on the fair value of those rights as compared to the carrying amount. 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, 2024 and 2023.

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.

Busey’s loan portfolio includes certain loans that have been modified in accordance with 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” for borrowers experiencing financial difficulty. For additional information about loan modifications for borrowers experiencing financial difficulty, see “Note 4. P ortfolio Loans.”

The ACL is a significant estimate on 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 loan balance is uncollectible. 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 net of charge-offs, 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. Further, as permitted under the practical expedient provided within ASC 326-20-35-6, Busey did not record an ACL for its Life Equity Loan® portfolio due to no expected credit loss at default. 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 20. Fair Value Measurements.”

Busey’s 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, Busey may conclude that 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.

For PCD loans, an ACL is determined at the date of acquisition using the same methodology as other loans held for investment. This initial ACL, when determined on a collective basis, is allocated to the individual loans, and the sum of each loan’s purchase price and ACL becomes its initial amortized cost basis. 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 as a charge to the provision for credit losses.

Upon adoption of ASC Topic 326 “Financial Instruments-Credit Losses” Busey applied the prospective transition approach for financial assets considered 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. The amortized cost basis of these PCD assets was adjusted to reflect an ACL for any remaining credit discount. The noncredit discount is being accreted into interest income using the January 1, 2020, effective interest rate. Subsequent changes in expected cash flows will be adjusted through the ACL.

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.

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.

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 the rate implicit in the lease or Busey’s incremental borrowing rate.

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.

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. A separate goodwill impairment assessment is performed for each reporting unit on the goodwill that has been allocated to it. A reporting unit is a component of an operating segment that constitutes a business for which discrete financial information is available, and segment management regularly reviews the operating results of that component. Busey’s reporting units are the same as its operating segments. Busey has established December 31 as the annual impairment assessment date for each of its reporting units. As part of this assessment, each reporting unit's carrying value is compared to its fair value.

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 $5.7 million as of December 31, 2024, and $5.6 million as of December 31, 2023. Liabilities for post-employment benefits are included in other liabilities on the Consolidated Balance Sheets.

During the fourth quarter of 2024 Busey Bank became a member of the Federal Reserve System. Federal Reserve member banks are required to own a certain amount of Federal Reserve Bank stock. Busey's investment in Federal Reserve Bank stock was $43.9 million as of December 31, 2024. Busey’s investment in Federal Reserve Bank stock represents approximately half of the total required subscription, and the remaining half is unpaid and remains subject to call by the Federal Reserve Bank. As such, Busey reserved cash of $43.9 million as of December 31, 2024.

Federal Reserve Bank stock and FHLB stock are carried at cost in restricted bank stock on the Consolidated Balance Sheets. Cash reserves are included in interest-bearing deposits as part of Busey’s total cash and cash equivalents balances reported on the Consolidated Balance Sheets. Dividends are reported as interest income on the Consolidated Statements of Income. Dividend income is accrued on Federal Reserve Bank stock and is recognized when declared on FHLB stock.

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. When transfers of financial assets fail to meet these criteria, those transfers are accounted for as secured borrowings.

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, which requires significant judgment. Busey is no longer subject to U.S. federal, state, or local income tax examinations by tax authorities for the years before 2021.

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.

In 2024, Busey recorded a one-time deferred tax valuation adjustment of $1.4 million resulting from a change to the Illinois apportionment rate due to recently enacted regulations. These new regulations are expected to lower Busey’s ongoing tax obligation in future periods, but created a negative adjustment to the carrying value of Busey’s deferred tax asset in 2024. 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, 2024, or 2023.

Positions taken in tax returns may be subject to challenge upon examination by the taxing authorities. Uncertain tax positions are initially recognized on 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.

At December 31, 2024, Busey Bank was under examination by the Florida Department of Revenue for its 2020 to 2022 corporate income tax filings. Busey Bank accrued $0.1 million related to potential assessment adjustments and interest. Other than this, Busey had no accruals for payments of interest and penalties related to uncertain tax positions at December 31, 2024, or 2023. Further, in February of 2025, Busey received notice of audit initiation from the Illinois Department of Revenue for M&M’s tax filings for the tax years 2022 and 2023.

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, cost, or proportional amortization practical expedient methods, as appropriate. These investments involve significant management judgments, including a determination of which entities have the power to direct activities, and whether these entities are variable interest entities. Busey is required to evaluate whether to consolidate a variable interest entity at both inception and on an ongoing basis. 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.

Upon adoption of ASU 2023-02 on January 1, 2024, Busey elected to apply the proportional amortization method in accounting for investments in tax-advantaged projects. Income tax credits and other tax benefits, net of investment amortization, were included as a component of Busey’s estimated annual effective tax rate used for the calculation of income taxes presented on the Consolidated Statements of Income.

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.

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.

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 for the applicable performance period and remaining employed through the end of such performance period. 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 the established performance criteria 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 each dividend date during the performance period.

Busey grants DSU awards to its non-employee 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.

The First Busey Corporation 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. The purpose of the ESPP is to provide a means through which Busey associates may acquire a proprietary interest in the Company by purchasing shares of its common stock at a discounted price through voluntary payroll deductions, to assist in retaining the services of current associates and securing and retaining the services of new associates, and to provide incentives for Busey associates to exert maximum efforts toward the Company’s success.

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 on 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.

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 $6.0 million as of December 31, 2024, and $7.1 million as of December 31, 2023.

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.

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.

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 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 on 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 mortgage revenue during the period in which the changes occurred.

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 on 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 mortgage revenue during the period in which the changes occurred.

•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 (from the purchaser’s perspective) of the customer swap as of the default date. If the customer swap has a negative fair value (from the purchaser’s perspective), 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.

•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 (from the purchaser’s perspective) of the customer swap as of the default date. If the customer swap has a negative fair value (from the purchaser’s perspective), 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.

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in “Note 20. 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.

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).

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 chief executive officer is its chief operating decision maker. Busey’s has three reportable segments: Banking, Wealth Management, and FirsTech. See “Note 23. Operating Segments and Related Information” for further discussion.

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.

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.

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.

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 was adopted on a retrospective basis beginning with the annual reporting period ending December 31, 2024. Adoption of this standard did not have a material impact on Busey’s financial position or results of operations, but resulted in enhanced disclosures.

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. Busey adopted this standard on a modified retrospective basis on January 1, 2024. Upon adoption, Busey recorded an after-tax decrease to retained earnings of $1.4 million 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. Busey adopted this standard on a prospective basis on January 1, 2024. Adoption of this standard did not have a material impact on Busey’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. Busey adopted this standard on a prospective basis on January 1, 2024. Adoption of this standard did not have a material impact on Busey’s financial position or results of operations.

In November 2024, the FASB issued ASU 2024-04 “Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments” to clarify when certain settlements of convertible debt instruments should be accounted for as an induced conversion. The amendments in this update may be applied on either a prospective or retrospective basis and will be effective for Busey for annual and interim reporting periods beginning January 1, 2026. Because Busey does not currently have any convertible debt, the Company does not expect adoption of this ASU to have any impact on its financial position or results of operations.

In March 2024, the FASB issued ASU 2024-01 “Compensation-Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards” to clarify that certain “profits interests” are within the scope of Topic 718 by amending the language and providing illustrative examples on how the scope guidance in paragraph 718-10-15-3 should be applied. This update is intended to improve clarity of the accounting standards codification, not to change the guidance. This update may be applied on a retrospective or prospective basis and will be effective for Busey for annual and interim reporting periods beginning January 1, 2025. Early adoption is permitted. Busey does not currently have any Profit Interest and Similar Awards, so does not expect adoption of this ASU to have any impact on its financial position and results of operations.

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 reporting periods beginning with the fiscal year ending December 31, 2025. Busey does not expect adoption of this ASU to have a material impact on its 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 ASU will be the date on which the SEC removes the related disclosure from Regulation S‑X or Regulation S‑K. Early adoption is prohibited. If the SEC has not removed the related disclosures from Regulation S‑X or Regulation S‑K by June 30, 2027, the pending content of this update will be removed from the ASC and will not become effective for any entity. Busey does not expect adoption of this ASU to have a material impact on its financial position or results of operations.

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. Busey issued a For m 8 ‑K o n February 21, 2025, regarding the departure of a named executive officer, and during the first quarter of 2025 expects to record related severance expenses according to Schedule 1 of the Separation Letter that was fi led as Exhibit 10.1 to the Form 8‑K. Other than this, there were no significant subsequent events for the year ended December 31, 2024, through the filing date of these Consolidated Financial Statements.