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DERIVATIVE FINANCIAL INSTRUMENTS | 9 Months Ended
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Sep. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE FINANCIAL INSTRUMENTS | NOTE 12. 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 and risk participation agreements with customers and other third parties. See “Note 13: 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:
|  | As of
(dollars in thousands) |  | September 30, 2025 |  | December 31, 2024
Cash pledged to secure obligations under derivative contracts |  | $ | 14,400 |  |  | $ | 21,900 |
Collateral held to secure obligations under derivative contracts |  | 8,140 |  |  | 20,260 |
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. Interest Rate Swaps Designated as Cash Flow Hedges Interest rate swaps with notional amounts totaling $500.0 million as of both September 30, 2025, and December 31, 2024, were designated as cash flow hedges. Busey entered into a $300.0 million receive-fixed, pay-floating interest rate swap to reduce Busey’s asset sensitivity (Prime Loan Swap). Duration was added to Busey’s loan portfolio by fixing a portion of 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. Further, Busey entered into forward-starting SOFR-based receive-fixed pay-floating interest rate swaps totaling $200.0 million to reduce Busey’s asset sensitivity (SOFR Loan Swaps). 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 the fair value of these interest rate swaps were recorded net of tax in OCI. A summary of the interest-rate swaps designated as cash flow hedges is presented below:
|  |  |  | As of
(dollars in thousands) |  | Location |  | September 30, 2025 |  | December 31, 2024
Prime Loan Swap |  |  |  |  |  |
Notional amount |  |  |  | $ | 300,000 |  |  | $ | 300,000 |
Weighted average rate: receive-fixed |  |  |  | 4.81 | % |  | 4.81 | %
Weighted average variable Prime pay rates |  |  |  | 7.37 | % |  | 7.62 | %
Weighted average maturity |  |  |  | 3.35 years |  | 4.10 years
SOFR Loan Swaps |  |  |  |  |  |
Notional amount |  |  |  | $ | 200,000 |  |  | $ | 200,000 |
Weighted average rate: receive-fixed |  |  |  | 3.78 | % |  | 3.78 | %
Weighted average variable 1-month CME Term SOFR pay rates |  |  |  | 4.25 | % |  | — |
Weighted average maturity |  |  |  | 4.01 years |  | 4.76 years
Gross aggregate fair value of the swaps |  |  |  |  |  |
Gross aggregate fair value of swap assets |  | Other assets |  | $ | 3,617 |  |  | $ | — |
Gross aggregate fair value of swap liabilities |  | Other liabilities |  | 15,670 |  |  | 27,770 |
Balances carried in AOCI |  |  |  |  |  |
Unrealized gains (losses) on cash flow hedges, net of tax |  | AOCI |  | $ | (8,010) |  |  | $ | (19,805) |
During the next 12 months, Busey expects to reclassify unrealized gains and losses from OCI to interest income as shown in the following table. 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 September 30, 2025.
(dollars in thousands) |  | As of September 30, 2025
Unrealized gains (losses) expected to be reclassified from OCI to interest income |  | $ | (716) |
Interest income and interest expense recorded on these swap transactions is presented in the following table:
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(dollars in thousands) |  | 2025 |  | 2024 |  | 2025 |  | 2024
Interest on swap transactions |  |  |  |  |  |  |  |
Increase (decrease) in interest income on swap transactions |  | $ | (2,304) |  |  | $ | (2,776) |  |  | $ | (6,629) |  |  | $ | (8,366) |
(Increase) decrease in interest expense on swap transactions |  | — |  |  | 412 |  |  | — |  |  | 1,378 |
Net increase (decrease) in net interest income on swap transactions |  | $ | (2,304) |  |  | $ | (2,364) |  |  | $ | (6,629) |  |  | $ | (6,988) |
Net gains (losses) relating to cash flow derivative instruments that were recorded in OCI on the Consolidated Statements of Income (Unaudited) are presented in the table below:
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(dollars in thousands) |  | 2025 |  | 2024 |  | 2025 |  | 2024
Unrealized gains (losses) on cash flow hedges |  |  |  |  |  |  |  |
Net gain (loss) recognized in OCI, net of tax |  | $ | (363) |  |  | $ | 7,439 |  |  | $ | 6,876 |  |  | $ | 211 |
(Gain) loss reclassified from OCI to interest income, net of tax |  | 1,721 |  |  | 1,984 |  |  | 4,919 |  |  | 5,981 |
(Gain) loss reclassified from OCI to interest expense, net of tax |  | — |  |  | (294) |  |  | — |  |  | (985) |
Net change in unrealized gains (losses) on cash flow hedges, net of tax |  | $ | 1,358 |  |  | $ | 9,129 |  |  | $ | 11,795 |  |  | $ | 5,207 |
Derivative Instruments Not Designated as Hedges 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 derivative agreements with third-party dealers. These contracts supported variable rate, commercial loan relationships totaling $1.01 billion as of September 30, 2025, and $719.2 million as of December 31, 2024. 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 derivative liabilities related to customer interest rate swaps recorded on the Consolidated Balance Sheets (Unaudited) are summarized as follows:
|  |  |  | As of September 30, 2025 |  | As of December 31, 2024
(dollars in thousands) |  | Location |  | Notional Amount |  | Fair Value |  | Notional Amount |  | Fair Value
Derivative assets not designated as hedging instruments |  |  |  |  |  |  |  |  |  |
Interest rate swaps: receive-fixed, pay-floating |  | Other assets |  | $ | 521,477 |  |  | $ | 10,746 |  |  | $ | 156,539 |  |  | $ | 1,465 |
Interest rate swaps: receive-floating, pay-fixed |  | Other assets |  | 487,107 |  |  | 19,420 |  |  | 562,697 |  |  | 28,854 |
Derivative assets not designated as hedging instruments |  |  |  | $ | 1,008,584 |  |  | $ | 30,166 |  |  | $ | 719,236 |  |  | $ | 30,319 |
Derivative liabilities not designated as hedging instruments |  |  |  |  |  |  |  |  |  |
Interest rate swaps: receive-fixed, pay-floating |  | Other liabilities |  | $ | 487,107 |  |  | $ | 19,420 |  |  | $ | 562,697 |  |  | $ | 28,854 |
Interest rate swaps: receive-floating, pay-fixed |  | Other liabilities |  | 521,477 |  |  | 10,746 |  |  | 156,539 |  |  | 1,465 |
Derivative liabilities not designated as hedging instruments |  |  |  | $ | 1,008,584 |  |  | $ | 30,166 |  |  | $ | 719,236 |  |  | $ | 30,319 |
Changes in fair value of these derivative assets and liabilities are included in the Consolidated Statements of Income (Unaudited) and are summarized as follows:
|  |  |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(dollars in thousands) |  | Location |  | 2025 |  | 2024 |  | 2025 |  | 2024
Interest rate swaps |  |  |  |  |  |  |  |  |  |
Receive-fixed, pay-floating |  | Noninterest expense |  | $ | (1,083) |  |  | $ | (9,224) |  |  | $ | (21) |  |  | $ | (3,050) |
Receive-floating, pay-fixed |  | Noninterest expense |  | 1,083 |  |  | 9,224 |  |  | 21 |  |  | 3,050 |
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 credit risk participation, paying an up-front fee to a counterparty to accept a portion of its credit exposure, and will receive a payment from the counterparty if the swap customer defaults on its obligations. Busey also assumed additional risk participation agreements entered into by CrossFirst, in which CrossFirst purchased credit risk participation, and Busey will receive a payment from the counterparty if the swap customer defaults on its obligations. In connection with the CrossFirst acquisition, Busey assumed risk participation agreements entered into by CrossFirst, under which CrossFirst sold credit risk participation, receiving an up-front fee from a counterparty in exchange for accepting a portion of the counterparty’s credit exposure. Under these agreements, Busey will be required to make a payment to the counterparty if the swap customer defaults on its obligations. Notional amounts of the risk participation agreements reflect the participating banks’ pro-rata shares of the derivative instruments, consistent with their shares of the related participated loans. The risk participation agreements mature between October 2025 and August 2030, and are summarized as follows:
|  | As of
(dollars in thousands) |  | September 30, 2025 |  | December 31, 2024
Risk participation agreements purchased |  |  |  |
Number of risk participation agreements |  | 12 |  |  | 5 |
Notional amount |  | $ | 73,919 |  |  | $ | 40,092 |
Fair value |  | 39 |  |  | 5 |
Risk participation agreements sold |  |  |  |
Number of risk participation agreements |  | 12 |  |  | — |
Notional amount |  | $ | 106,453 |  |  | $ | — |
Fair value |  | 59 |  |  | — |
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 on the Consolidated Balance Sheets (Unaudited), 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 on the Consolidated Balance Sheets (Unaudited). 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. Amounts and fair values of mortgage banking derivatives included on the Consolidated Balance Sheets (Unaudited) are summarized as follows:
|  |  |  | As of September 30, 2025 |  | As of December 31, 2024
(dollars in thousands) |  | Location |  | Notional Amount |  | Fair Value |  | Notional Amount |  | Fair Value
Mortgage banking derivative assets |  |  |  |  |  |  |  |  |  |
Interest rate lock commitments |  | Other assets |  | $ | 6,515 |  |  | $ | 132 |  |  | $ | 2,430 |  |  | $ | 28 |
Forward sales commitments |  | Other assets |  | 4,679 |  |  | 19 |  |  | 3,457 |  |  | 21 |
Mortgage banking derivative assets |  |  |  | $ | 11,194 |  |  | $ | 151 |  |  | $ | 5,887 |  |  | $ | 49 |
Mortgage banking derivative liabilities |  |  |  |  |  |  |  |  |  |
Interest rate lock commitments |  | Other liabilities |  | $ | — |  |  | $ | — |  |  | $ | 436 |  |  | $ | 4 |
Forward sales commitments |  | Other liabilities |  | 9,290 |  |  | 78 |  |  | 1,955 |  |  | 6 |
Mortgage banking derivative liabilities |  |  |  | $ | 9,290 |  |  | $ | 78 |  |  | $ | 2,391 |  |  | $ | 10 |
Gains and losses relating to these derivative instruments are reported in noninterest income, and are summarized as follows for the periods presented:
|  |  |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(dollars in thousands) |  | Location |  | 2025 |  | 2024 |  | 2025 |  | 2024
Net gains (losses) on mortgage banking derivatives |  |  |  |  |  |  |  |  |  |
Gains (losses) on interest rate lock commitments |  | Mortgage revenue |  | $ | 177 |  |  | $ | 121 |  |  | $ | 658 |  |  | $ | 569 |
Gains (losses) on forward sales commitments |  | Mortgage revenue |  | (14) |  |  | (91) |  |  | (75) |  |  | (165) |
Net gains (losses) on mortgage banking derivatives |  |  |  | $ | 163 |  |  | $ | 30 |  |  | $ | 583 |  |  | $ | 404 |

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