Risk Factors Dashboard
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Risk Factors - BUSE
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Item 1A. Risk Factors” below.
•Ongoing monitoring and assessment of third-party vendors' cybersecurity practices, including regular audits, compliance checks, and incident reporting requirements;
•Engaging third-party cybersecurity consultants, who conduct periodic penetration testing, vulnerability assessments, and other procedures to identify potential weaknesses in Busey’s systems and processes; Busey’s security and privacy policies and procedures are in effect across all of its businesses and geographic locations. Busey adheres to various regulatory requirements and standards, including the Gramm-Leach-Bliley Act to ensure compliance with data protection laws. Additionally, Busey maintains cybersecurity insurance coverage to mitigate potential financial impacts from cyber incidents.Busey’s board of directors , as a whole and through its Enterprise Risk Committee (the “Risk Committee”), is responsible for the oversight of risk management. In that role, Busey’s board of directors and its Risk Committee, with support from Busey’s cybersecurity advisors, are responsible for ensuring that the risk management processes developed and implemented by management are adequate and functioning as designed. In that role, Busey’s board of directors and Risk Committee, with support from Busey’s cybersecurity advisors, are responsible for ensuring that the risk management processes developed and implemented by management are adequate and functioning as designed. To carry out those duties, both the board of directors and the Risk Committee receive quarterly reports from Busey’s management team regarding cybersecurity risks, and Busey’s efforts to prevent, detect, mitigate, and remediate any cybersecurity incidents. Busey’s historical data indicates that while Busey has encountered cybersecurity threats and incidents, none have materially affected the Company. Still, Busey faces a number of cybersecurity risks in connection with its business, and it is possible that threats and incidents identified in the future could have a material adverse effect on Busey’s business strategy, results of operations, and financial condition. For additional information on the risks that cybersecurity threats pose to Busey see “Item 1A. Risk Factors—Operational Risks.”
Busey Bank is expected to have active board and senior management oversight; adequate policies, procedures, and limits; adequate risk measurement, monitoring, and management information systems; and comprehensive internal controls. Busey Bank is expected to have active board and senior management oversight; adequate policies, procedures, and limits; adequate risk measurement, monitoring, and management information systems; and comprehensive internal controls. The federal banking agencies also have released specific risk management guidance on certain topics, including third-party relationships, in response to the proliferation of relationships between banking organizations and financial technology companies (although the guidance applies more broadly).
Privacy and Cybersecurity
Busey Bank is subject to numerous U.S. federal and state laws and regulations aimed at protecting non-public, personal and other confidential information of its customers. These laws require Busey Bank to periodically disclose its privacy policies and practices regarding the sharing of non-public customer information and, in certain circumstances, permit consumers to opt out of the sharing of information with unaffiliated third parties. These laws require Busey Bank to periodically disclose its privacy policies and practices relating to sharing such information and permit consumers to opt out of their ability to share information with unaffiliated third parties under certain circumstances. They also limit Busey Bank’s ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes, or to contact customers with marketing offers. In addition, Busey Bank is required to implement a comprehensive information security program that includes administrative, technical, and physical safeguards to ensure the security and confidentiality of customer records and information. These security and privacy policies and procedures, for the protection of personal and confidential information, are in effect across all businesses and geographic locations.
Busey Bank and First Busey Corporation also are subject to a number of federal and state laws and regulations requiring notifications and disclosures regarding certain cybersecurity incidents. Busey Bank and Busey also are subject to a number of federal and state laws and regulations requiring notifications and disclosures regarding certain cybersecurity incidents. In addition, Busey Bank must consider and address cybersecurity considerations and risks as part of its risk management processes, including implementing and maintaining appropriate safeguards, monitoring and testing systems, and overseeing the cybersecurity practices of its service providers. Regulatory guidance emphasizes that cybersecurity should be integrated into overall enterprise risk management and business continuity planning.
Federal Home Loan Bank System
Busey Bank is a member of the FHLB, which serves as a central credit facility for its members. The FHLB is funded primarily from proceeds from the sale of obligations of the FHLB system. It makes loans to member banks in the form of FHLB advances. All advances from the FHLB are required to be fully collateralized as determined by the FHLB.
Community Reinvestment Act Requirements
The CRA imposes on Busey Bank a continuing and affirmative obligation, consistent with safe and sound operations, to help meet the credit needs of the entire community, including low- and moderate-income neighborhoods. Federal banking agencies regularly assess Busey Bank’s record of meeting these credit needs through periodic CRA examinations. Federal banking agencies regularly assess Busey Bank’s record of meeting the credit needs of its communities in dedicated examinations. Busey Bank’s CRA ratings derived from these examinations can have significant impacts on the activities in which Busey Bank and First Busey Corporation may engage. For example, a low CRA rating may impact the review of applications for acquisitions by Busey Bank, or Busey’s financial holding company status.
In 2023, the federal banking agencies issued a final rule intended to strengthen and modernize the CRA regulations (the "CRA Rule").On October 24, 2023, the banking agencies issued a final rule to strengthen and modernize the CRA regulations (the "CRA Rule"). The CRA Rule was subsequently challenged in court, which affected its implementation. In 2025, the federal banking agencies issued a proposed rule to rescind the CRA Rule and reinstate the prior CRA regulatory framework adopted in 1995.
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In 2022, Busey Bank, as an Illinois chartered bank, became subject to state-level CRA standards, following passage of the Illinois Community Reinvestment Act. As a result, in addition to federal CRA examinations, the DFPR also assesses Busey Bank’s record of meeting the credit needs of its communities. Similar to the potential impact under the federal CRA regime, Busey Bank’s Illinois Community Reinvestment Act performance may affect applications for additional acquisitions or activities.
Anti-Money Laundering/Countering the Financing of Terrorism/Sanctions
The Bank Secrecy Act is a U.S. federal statutory framework, as amended and supplemented by additional laws and implemented through regulations, which is designed to combat money laundering, the financing of terrorism, and other illicit financial activity. The Bank Secrecy Act and related anti-money laundering/countering the financing of terrorism (“AML/CFT”) laws and regulations are intended to prevent terrorists and criminals from accessing the U.S. financial system and have significant implications for FDIC-insured institutions and other businesses involved in the transmissions of funds. Together, this regulatory framework provides a foundation to promote financial transparency and deter and detect efforts to misuse the U.S. financial system to launder criminal proceeds, finance terrorist acts, or facilitate other illicit conduct. The Bank Secrecy Act and related regulations require financial institutions to establish and maintain policies and procedures for addressing: (1) customer identification and customer due diligence; (2) the prevention and detection of money laundering and terrorist financing; (3) the identification and reporting of suspicious activities and certain currency transactions; (4) compliance with laws relating to currency crimes; and (5) cooperation with law enforcement authorities. Busey Bank also must comply with stringent economic and trade sanctions regimes administered and enforced by the Office of Foreign Assets Control.
Although core AML/CFT statutory requirements and regulatory expectations remain unchanged, federal banking agencies and the Financial Crimes Enforcement Network appear to be pursuing efforts to modernize and streamline AML/CFT compliance through a more risk-based approach. These efforts include revised examination expectations, increased focus on program effectiveness, and initiatives intended to reduce unnecessary compliance burden where institutions can demonstrate strong risk governance and effective controls.
Concentrations in Commercial Real Estate
Concentration risk exists when FDIC-insured institutions allocate a disproportionate amount of assets to a single industry or economic segment. Concentration in CRE lending is one area of regulatory focus that has, in recent years, been subject to additional scrutiny by federal banking agencies as well as the SEC for publicly-traded banking organizations. A concentration in CRE is one example of regulatory concern that has, in recent years, been subject to additional scrutiny by federal banking agencies as well as the SEC for publicly-traded banking organizations. The interagency CRE Guidance provides supervisory criteria, including the following numerical indicators, to assist bank examiners in identifying banks with potentially significant CRE loan concentrations that may warrant greater supervisory scrutiny. The interagency CRE Guidance provides supervisory criteria, including the following numerical indicators, to assist bank examiners in identifying banks with potentially significant CRE loan concentrations that may warrant greater supervisory scrutiny: (1) CRE loans exceeding 300% of capital and increasing 50% or more in the preceding three years; or (2) construction and land development loans exceeding 100% of capital. These indicators include: (1) total CRE loans exceeding 300% of capital and increasing 50% or more in the preceding three years; or (2) construction and land development loans exceeding 100% of capital. The CRE Guidance does not establish binding limits on CRE lending activities, but rather is intended to inform supervisory assessments of whether an institution’s risk profile, earnings capacity, and capital levels are commensurate with its CRE exposure. The CRE Guidance does not limit banks’ levels of CRE lending activities, but rather guides institutions in developing risk management practices and levels of capital that are commensurate with the level and nature of their CRE concentrations.
In recent years, the federal banking agencies have issued statements to reinforce prudent risk-management practices related to CRE lending, in response to observed growth in many CRE markets, increased competitive pressures, rising CRE concentrations, and an easing of CRE underwriting standards. In other statements, the federal banking agencies have reminded FDIC-insured institutions to maintain underwriting discipline and to identify, measure, monitor, and manage the risks arising from CRE lending, including by holding capital commensurate with those risks. As of December 31, 2025, Busey Bank did not exceed these guidelines.
Consumer Financial Services
The historical structure of federal consumer protection regulation applicable to all providers of consumer financial products and services changed significantly on July 21, 2011, when the CFPB commenced operations to supervise and enforce consumer protection laws. The CFPB has broad rulemaking authority for a wide range of consumer protection laws that apply to all providers of consumer products and services, including Busey Bank, as well as the authority to prohibit “unfair, deceptive or abusive” acts and practices. The CFPB has examination and enforcement authority over providers with more than $10 billion in assets. Busey Bank is under CFPB oversight for consumer banking transactions.
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In response to mortgage-related abuses that contributed to the global financial crisis, the Dodd-Frank Act and CFPB rulemaking significantly expanded underwriting, disclosure, and anti-predatory lending requirements for residential mortgage loans, including by imposing ability-to-repay standards and establishing a presumption of compliance for certain “qualified mortgages.” The CFPB has continued to refine these requirements through additional rulemaking addressing qualified mortgages ability-to-repay standards.
Over the last several years, the CFPB has taken an aggressive approach to the regulation and supervision, where applicable, of providers of consumer financial products and services. However, more recently, changes in leadership and policy direction at the CFPB have led to: (1) shifts in regulatory priorities, including the rescission or reconsideration of certain CFPB guidance and rules; (2) a reduction in CFPB enforcement activity; and (3) constraints on the CFPB’s budget and resources, although the CFPB continues to retain statutory authority to administer, supervise, and enforce federal consumer financial protection laws. In addition, state banking and other financial services regulatory agencies retain authority to administer and enforce state consumer financial protection laws, which may apply to Busey Bank, and could increase supervisory or enforcement activity in response to changes in federal regulatory priorities.
Consumer protection rules have an impact on Busey Bank’s operations, including by increasing compliance costs and potentially negatively affecting earnings. Busey Bank also must comply with certain state consumer protection laws and requirements in the states in which it operates.
SECURITIES AND EXCHANGE COMMISSION REPORTING AND OTHER INFORMATION
Busey makes its Annual Reports, Quarterly Reports, Current Reports, and any amendments thereto available, free of charge, on its website at busey.com as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. Reference to Busey’s website does not constitute incorporation by reference of the information contained on the website and it should not be considered part of this document.
The SEC maintains an internet site at sec.gov, which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, and from which Busey’s SEC filings may be accessed.
NON-GAAP FINANCIAL INFORMATION
This Annual Report contains certain financial information determined by methods other than in accordance with GAAP. Management uses these non-GAAP financial measures and non-GAAP ratios, together with the related GAAP financial measures, in analysis of Busey’s performance and in making business decisions, as well as for comparison to Busey’s peers. Busey believes the adjusted measures are useful for investors and management to understand the effects of certain non-core and non-recurring items and provide additional perspective on Busey’s performance over time. Busey believes the adjusted measures are useful for investors and management to understand the effects of certain non-core and non-recurring noninterest items and provide additional perspective on Busey’s performance over time.
Non-GAAP disclosures have inherent limitations and are not audited. They should not be considered in isolation or as a substitute for the results reported in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Tax effected numbers included in these non-GAAP disclosures are based on estimated federal income tax rates or effective tax rates as noted with the tables below. Tax effected numbers included in these non-GAAP disclosures are based on estimated statutory rates, estimated federal income tax rates, or effective tax rates as noted with the tables below.
The following tables present reconciliations between these non-GAAP measures and what management believes to be the most directly comparable GAAP financial measures.
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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)
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1.Beginning in 2025, Busey revised its presentation, for all periods presented, to reclassify the provision for unfunded commitments so that it is now included within the provision for credit losses; therefore, it is no longer included within total noninterest expense.
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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)
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1.The Day 2 provision represents the initial provision for credit losses recorded in connection with the CrossFirst acquisition to establish an allowance on non-PCD loans and unfunded commitments and is reflected within the provision for credit losses line on the Consolidated Statements of Income.
2.In the second quarter of 2025, Busey recorded an adjustment to the initial provision for unfunded commitments for CrossFirst acquisition-date balances based on revised estimates resulting from implementation of a new Current Expected Credit Losses model.
3.Tax benefits were calculated by using tax rates of 26.3%, 24.9%, and 20.4% for the years ended December 31, 2025, 2024, and 2023, respectively.
4.A deferred valuation tax adjustment in 2025 was recorded in connection with the CrossFirst acquisition. Additionally, 2025 includes a write-off of deferred tax assets related to non-deductible compensation and acquisition-related expenses. A deferred tax valuation adjustment in 2024 resulted from a change to Busey’s Illinois apportionment rate due to recently enacted regulations. Deferred tax adjustments are reflected within the income taxes line on the Consolidated Statements of Income.
5.Beginning in 2025, Busey revised its calculation of adjusted net income for all periods presented to include, as applicable, adjustments for net securities gains and losses, realized net gains and losses on the sale of mortgage servicing rights, and one-time deferred tax valuation adjustments.
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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)
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1.Tax-equivalent adjustments were calculated using an estimated federal income tax rate of 21%, applied to non-taxable interest income on investments and loans.
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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)
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1.Tax-equivalent adjustments were calculated using an estimated federal income tax rate of 21%, applied to non-taxable interest income on investments and loans.
2.Beginning in 2025, Busey revised its presentation, for all periods presented, to reclassify the provision for unfunded commitments so that it is now included within the provision for credit losses; therefore, it is no longer included within total noninterest expense. This change affects all measures and ratios derived from total noninterest expense.
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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)
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1.Beginning in 2025, Busey revised its calculation of tangible assets and tangible common equity for all periods presented to exclude any tax adjustment.
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FORWARD-LOOKING STATEMENTS
Statements contained in or incorporated by reference into this Annual Report that are not historical facts may constitute forward-looking statements within the meaning of Section 27A Securities Act, and Section 21E of the Exchange Act. These forward-looking statements are covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. These statements, which are based on certain assumptions and estimates and describe Busey’s future plans, strategies, and expectations, can generally be identified by the use of the words “may,” “will,” “should,” “could,” “would,” “goal,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” “aim” and similar expressions. These forward-looking statements include statements relating to Busey’s projected growth, anticipated future financial performance, financial condition, credit quality, and management’s long-term performance goals, as well as statements relating to the anticipated effects on results of operations and financial condition from expected developments or events, business and growth strategies, and any other statements that are not historical facts.
These forward-looking statements are subject to significant risks, assumptions, and uncertainties, and could be affected by many factors. Factors that could have a material adverse effect on Busey’s financial condition, results of operations, and future prospects can be found under “Item 1A. Risk Factors” in this Annual Report and elsewhere in Busey’s periodic and Current Reports filed with the SEC. These factors include, but are not limited to, the following:
1.the strength of the local, state, national, and international economies and financial markets (including effects of inflationary pressures, the threat or implementation of tariffs, trade wars, and changes to immigration policy);
2.changes in, and the interpretation and prioritization of, local, state, and federal laws, regulations, and governmental policies (including those concerning Busey's general business);
3.the economic impact of any future terrorist threats or attacks, widespread disease or pandemics, military conflicts, acts of war or threats thereof, or other adverse external events that could cause economic deterioration or instability in credit markets (including Russia’s invasion of Ukraine, the conflicts in the Middle East, and recent military activity in Venezuela);
4.unexpected results of acquisitions, including the acquisition of CrossFirst, which may include the failure to realize the anticipated benefits of the acquisitions and the possibility that the transaction and integration costs may be greater than anticipated;
5.the imposition of tariffs or other governmental policies impacting the value of products produced by Busey's commercial borrowers;
6.new or revised accounting policies and practices as may be adopted by state and federal regulatory banking agencies, the FASB, the SEC, or the PCAOB;
7.changes in interest rates and prepayment rates of Busey’s assets (including the impact of sustained elevated interest rates);
8.increased competition in the financial services sector (including from non-bank competitors such as credit unions, private credit, and fintech companies) and the inability to attract new customers;
9.technological changes implemented by us and other parties, including our third-party vendors, which may have unforeseen consequences to us and our customers, including the development and implementation of tools incorporating artificial intelligence;
10.the loss of key executives or associates, talent shortages, and employee turnover;
11.unexpected outcomes and costs of existing or new litigation, investigations, or other legal proceedings, inquiries, and regulatory actions involving Busey (including with respect to Busey’s Illinois franchise taxes);
12.fluctuations in the value of securities held in Busey’s securities portfolio, including as a result of changes in interest rates;
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13.credit risk and risk from concentrations (by type of borrower, geographic area, collateral, and industry), within Busey's loan portfolio and large loans to certain borrowers (including CRE loans);
14.the concentration of large deposits from certain clients who have balances above current FDIC insurance limits and may withdraw deposits to diversify their exposure;
15.the level of non-performing assets on Busey’s balance sheets;
16.interruptions involving information technology and communications systems or third-party servicers;
17.breaches or failures of information security controls or cybersecurity-related incidents;
18.the economic impact on Busey and its customers of climate change, natural disasters, and exceptional weather occurrences such as tornadoes, hurricanes, floods, blizzards, and droughts;
19.the ability to successfully manage liquidity risk, which may increase dependence on non-core funding sources such as brokered deposits, and may negatively impact Busey's cost of funds;
20.the ability to maintain an adequate level of allowance for credit losses on loans;
21.the effectiveness of Busey’s risk management framework;
22.the ability of Busey to manage the risks associated with the foregoing; and
Because of those risks and other uncertainties, Busey’s actual future results, performance, achievement, or industry results, may be materially different from the results indicated by these forward-looking statements. In addition, Busey’s past results of operations are not necessarily indicative of its future results.
You should not place undue reliance on any forward-looking statements, which speak only as of the dates on which they were made. Busey does not undertake an obligation to update these forward-looking statements, even though circumstances may change in the future, except as required under federal securities law. Busey qualifies all of its forward-looking statements by these cautionary statements.
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ITEM 1A. RISK FACTORS
This section highlights the risks management believes could adversely affect Busey’s financial performance. Additional risks that could affect Busey adversely and cannot be predicted may arise at any time. Further, risks that are immaterial at this time may have an adverse impact on Busey’s future financial condition.
Contents of Item 1A. Risk Factors
ECONOMIC AND MARKET RISKS
Economic and financial market conditions, including conditions in the states in which it operates, may adversely affect Busey’s business.
Busey’s general financial performance is highly dependent upon the business environment in the markets where it operates and, in particular, the ability of borrowers to pay interest on, and repay principal of, outstanding loans, and the value of collateral securing those loans, as well as demand for loans and other products and services it offers. A favorable business environment is characterized by, among other factors, economic growth, efficient capital markets, low and stable inflation, full employment, high business and investor confidence, and strong business earnings. A favorable business environment is generally characterized by, among other factors, economic growth, efficient capital markets, low inflation, low unemployment, high business and investor confidence, and strong business earnings. Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity, or investor or business confidence; limitations on the availability, or increases in the cost, of credit and capital; increases in inflation or interest rates; high unemployment; natural disasters; or a combination of these or other factors. Current conditions reflect elevated interest rates and persistent inflation above the Federal Reserve’s 2% target, which continue to pressure borrowing costs and consumer confidence. Fiscal imbalances, including a large federal deficit and rising debt-service obligations, add longer-term uncertainty. Geopolitical conflicts across the globe, including conflicts in the Middle East, the Russian invasion of Ukraine, and the recent military activity in Venezuela, sustain volatility in energy and trade markets, while domestic labor markets remain tight in key sectors despite slowing job growth. Supply chain disruptions, though improved, persist due to structural and geopolitical factors. Policy uncertainty—including tariffs, immigration enforcement, and regulatory changes—further complicates planning. These factors may adversely affect Busey’s business, financial condition, results of operations, and growth prospects.
Shifts in consumer and business behavior during economic uncertainty may impact Busey’s business.
Uncertainty regarding economic conditions may result in changes in consumer and business spending, borrowing, and savings habits. Downturns in the markets where Busey’s banking operations occur could result in a decrease in demand for Busey’s products and services, an increase in loan delinquencies and defaults, high or increased levels of problem assets and foreclosures, and reduced wealth management fees resulting from lower asset values. Such conditions could adversely affect Busey’s asset quality, financial condition, and results of operations. Such conditions could adversely affect the credit quality of Busey’s loans, financial condition, and results of operations.
Regional economic vulnerabilities may heighten risks.
Busey conducts banking operations across ten states, including Illinois, Missouri, Texas, Colorado, Florida, Kansas, Oklahoma, Arizona, Indiana, and New Mexico, with a focus in the major metropolitan areas in these states, which can be more susceptible to economic cycles, real estate market volatility, and localized downturns. Urban markets often experience sharper volatility in employment, housing demand, and commercial development, which can affect credit quality and loan demand. These regional and metropolitan exposures could adversely impact Busey’s financial condition and results of operations. These factors could result in realized losses, negatively impacting Busey’s financial condition and results of operations.
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Changes in interest rates and yield‑curve dynamics may compress net interest margin, affect asset valuations, and create liquidity pressures.
Busey’s financial performance depends heavily on the level, direction, and volatility of interest rates. Movements in short‑term or long‑term rates—and changes in the shape of the yield curve—may materially affect net interest income and the value of interest‑earning assets and funding sources. Rising rates can increase funding costs faster than earning‑asset yields reprice, compressing net interest margin, reducing fair values of fixed‑rate assets, and slowing loan demand. Conversely, declining rates may reduce yields on loans and securities more quickly than deposit costs decline, accelerate prepayments on fixed‑rate loans and securities, and require reinvestment at lower rates. In addition, inverted or flattened yield curves may limit opportunities to profitably deploy funds and can discourage borrowers from seeking longer‑term credit. Busey’s interest‑rate risk management strategies may not fully mitigate these impacts. Sustained interest‑rate volatility, rapid shifts in the yield curve, or an inability to effectively manage interest‑rate sensitivity could materially and adversely affect Busey’s net interest income, liquidity position, financial condition, and results of operations.
REGULATORY AND LEGAL RISKS
Changes in government policies and regulatory frameworks could adversely affect operations and profitability.
The banking regulatory environment is a complex mix of increased deferment to local regulatory authorities relative to international rulemaking, adapting to digital innovation (e.g., AI, digital assets, etc.), and potential easing of federal regulatory oversight. Key risks in 2026 include implementation of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, managing fintech/crypto risks, and evolving technological, geopolitical, and economic pressures, all requiring an agile regulatory management system.
More specifically, Busey Bank's focus on commercial banking and wealth management increases risk for customers to seek out opportunities in digital assets and real time payments, requiring enhanced risk oversight and compliance practices to ensure rapid adoption when appropriate.
In addition, the geopolitical risk from global conflicts increases the operational burden of complying with dynamic sanctions placed and eased on various foreign countries, foreign nationals, and foreign companies despite limited exposure to foreign customers and transactions. These evolving regulatory, technological, and geopolitical dynamics could increase compliance costs, operational complexity, and strategic risk for the Company, which in turn could adversely affect Busey’s financial condition and results of operations.
Evolving privacy, data protection, and information security laws and regulations present operational and legal challenges.
In the normal course of business, Busey collects, processes, and retains sensitive and confidential information regarding its customers, and Busey’s collection and handling of such information is subject to regulatory scrutiny. There has been a heightened legislative and regulatory focus on privacy, data protection, and information security. New or revised laws and regulations, including with respect to the use of artificial intelligence by financial institutions and service providers, may significantly impact Busey’s current and planned privacy, data protection, and information security-related practices; the collection, use, retention, and safeguarding of customer and employee information; and current or planned business activities. New or revised laws and regulations, including with the respect to the use of artificial intelligence by financial institutions and service providers, may significantly impact Busey’s current and planned privacy, data protection, and information security-related practices; the collection, use, retention, and safeguarding of customer and employee information; and current or planned business activities. Compliance with current or future privacy, data protection, and information security laws could result in higher compliance and technology costs and could restrict Busey’s ability to provide certain products and services, which could materially and adversely affect Busey’s business, financial condition, and results of operations. Compliance with current or future privacy, data protection, and information security laws could result in higher compliance and technology costs and could restrict Busey’s ability to provide certain products and services, which could adversely affect Busey’s business.
Laws impacting cannabis-related businesses may have an impact on Busey’s operations and risk profile.
Executive Order 14370, "Increasing Medical Marijuana and Cannabidiol Research," directs federal agencies to work towards rescheduling marijuana from Schedule I to Schedule III under the Controlled Substances Act. This includes instructing the Attorney General to expedite the rulemaking process, following a Department of Justice proposed rule based on a Health and Human Services recommendation that marijuana has an accepted medical use. The executive order itself does not change cannabis's legal status under the Controlled Substances Act; it only directs the Attorney General to expedite the formal rulemaking process. The outlook is encouraging more commercial investment into cannabis related businesses with anticipation of rescheduling of cannabis.
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It is Busey Bank’s current practice to avoid knowingly providing banking products or services to entities or individuals that: (1) directly or indirectly manufacture, distribute, or dispense marijuana or hemp products, or those with a significant financial interest in such entities; or (2) derive a material amount of revenue from providing products or services to, or other involvement with, such entities. Busey Bank uses reasonable measures, including appropriate new account screening and customer due diligence measures, to ensure that existing and potential customers that operate in the states in which the Bank operates do not engage in any such activities. Nonetheless, shifts in state laws legalizing cannabis use and decriminalizing possession have increased the number of direct and indirect cannabis-related businesses in the states in which Busey operates, and therefore increases the likelihood that Busey Bank could interact with such businesses, as well as their owners and employees. Nonetheless, shifts in Illinois and Missouri law legalizing cannabis use, along with shifts in Florida law allowing medicinal use and decriminalizing possession, have increased the number of direct and indirect cannabis-related businesses in some of the states in which Busey operates, and therefore increases the likelihood that Busey Bank could interact with such businesses, as well as their owners and employees. Such interactions could create additional legal, regulatory, strategic, and reputational risk to Busey Bank and First Busey Corporation. Any such legal, regulatory, or reputational exposure could adversely affect Busey’s financial condition and results of operations.
Busey is or may become involved from time to time in suits, legal proceedings, information-gathering requests, investigations, and proceedings by governmental and self-regulatory agencies that may lead to adverse consequences. Risk FactorsBusey is or may become involved from time to time in suits, legal proceedings, information-gathering requests, investigations, and proceedings by governmental and self-regulatory agencies that may lead to adverse consequences.
Busey may be subject to lawsuits, governmental inquiries, or self-regulatory reviews. These proceedings could result in penalties, adverse judgments, or operational restrictions. While accruals are established for legal contingencies when losses are probable and estimable, outcomes may exceed these amounts, and accordingly, Busey’s ultimate losses may be higher, possibly significantly so, than the amounts accrued for legal loss contingencies, which may materially and adversely affect Busey’s financial condition and results of operations.
See “Note 18. Outstanding Commitments and Contingent Liabilities” in the Notes to the Consolidated Financial Statements for information regarding an ongoing dispute regarding the amount of franchise taxes, penalties, interest, fees, and charges purportedly due from First Busey Corporation to the Illinois Secretary of State.
CREDIT AND LENDING RISKS
Heightened credit risk associated with lending activities may result in insufficient credit loss provisions, which could have material adverse effects on Busey’s results of operations and financial condition.
Busey’s lending activities involve inherent risks, including borrower nonpayment, fluctuations in collateral value, and the effects of economic and market conditions. These risks have been amplified by certain economic factors, such as elevated interest rates above the Federal Reserve’s 2% target, inflationary pressures, tariffs, geopolitics, and increased economic uncertainty. Busey employs rigorous underwriting standards, monitors portfolio performance, including industry and geographic loan concentrations, and conducts both internal and external independent loan reviews to mitigate these risks. Busey employs rigorous underwriting standards, monitors industry and geographic loan concentrations, and conducts both internal and external independent loan reviews to mitigate these risks. Additionally, Busey leverages stress testing at both the borrower and portfolio levels to proactively identify potential vulnerabilities. Despite these efforts, credit risks cannot be eliminated, and increased borrower stress could lead to increased delinquencies, non-performing loans, higher ACL provisions, and charge-offs. Despite these efforts, credit risks cannot be entirely eliminated, and borrower defaults could lead to increased non-performing loans, charge-offs, delinquencies, and higher ACL provisions.
Busey establishes the ACL based on detailed analyses of the loan portfolio and broader market conditions, incorporating forward-looking forecasts and management judgments. While management considers the ACL adequate to absorb probable losses, unforeseen economic disruptions or borrower-specific events could necessitate additional provisions and adversely affect Busey’s financial condition and results of operations. While management considers the ACL adequate to absorb probable losses, unforeseen economic disruptions or borrower-specific events could necessitate additional provisions, adversely affecting financial performance.
Elevated levels of non-performing assets could reduce Busey’s profitability and strain operational resources.High levels of non-performing assets could reduce Busey’s profitability and strain operational resources.
Non-performing assets negatively impact Busey’s financial condition through lost interest income, increased loan administration costs, and adverse effects on efficiency ratios. The resolution of these assets demands significant management attention and regulatory compliance, which can divert resources from other priorities. Non-performing loans and OREO properties elevate Busey’s risk profile and require ongoing vigilance to minimize financial and operational disruptions, which may adversely affect Busey’s financial condition and results of operations. Non-performing loans and OREO properties elevate Busey’s risk profile and require ongoing vigilance to minimize financial and operational disruptions.
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Loan concentrations in volatile markets could increase Busey’s exposure to adverse economic conditions and heighten credit risk.
Busey may face elevated credit risks, or experience increased credit losses, when its loan portfolio is concentrated by loan type, industry segment, borrower characteristics, or the geographic location of borrowers or collateral.Busey may have higher credit risk, or experience higher credit losses, to the extent its loans are concentrated by loan type, industry segment, borrower type, or geographic location of the borrower or collateral. CRE is a significant component of Busey’s loan portfolio and is inherently sensitive to broader economic and market fluctuations. CRE represents an important component of Busey’s loan portfolio and is inherently sensitive to economic fluctuations. Busey’s CRE portfolio primarily consists of (1) owner occupied CRE and (2) non-owner occupied CRE, each with distinct risk profiles:
•Owner occupied CRE: Repayment of owner occupied CRE loans depends on the financial performance and operational stability of the business occupying the property. Financial stress, cash flow constraints, or operational disruptions at the borrower level may impair repayment capacity. However, these loans may benefit from the borrower’s incentive to maintain the property to support its ongoing business operations.
•Non-owner occupied CRE: Non-owner occupied CRE loans rely on rental income generated by third party tenants. These loans are more vulnerable to changes in market demand, tenant turnover, rising vacancy rates, reduced rental income, and potential regulatory shifts affecting commercial leasing or property use. Economic downturns or weakened tenant performance can materially impact the borrower’s ability to meet repayment obligations.
If concentrations within the loan portfolio are not effectively monitored and managed, Busey could face heightened credit losses, increased earnings volatility, and reduced capital flexibility, which could materially and adversely affect its financial condition and results of operations.
Busey’s commercial lending activities expose it to repayment risks that may increase during periods of economic stress.
Busey primarily underwrites commercial loans based on the borrower’s projected cash flows, with collateral serving as secondary support.Busey’s commercial loans are primarily underwritten based on the identified cash flow of the borrower, with collateral serving as secondary support. Credit enhancements—such as pledged collateral and personal guarantees—are often used to improve the likelihood of repayment. Credit enhancements often include pledged collateral and personal guarantees, which enhance the likelihood of repayment. However, repayment capacity, particularly for loans secured by accounts receivable, may depend heavily on the borrower’s ability to collect payments from its own customers. However, the availability of funds for repayment—particularly for loans secured by accounts receivable—may depend significantly on the borrower’s ability to collect from their customers. During periods of economic stress or industry‑specific downturns, borrowers may experience weakened collections, which can elevate repayment risk.
Collateral securing commercial loans may depreciate over time, be difficult to accurately value, or fluctuate in response to changes in the borrower’s financial condition or business performance. Given the size of certain commercial loan exposures and the often less‑marketable nature of related collateral, even a limited number of credit losses within this portfolio could result in a disproportionately negative impact on the Company.
Failure to effectively manage these risks could lead to higher credit losses, reduced asset quality, and increased operational costs, any of which could materially and adversely affect Busey’s financial condition and results of operations.
Construction, land acquisition, and development loans involve heightened risks that could adversely affect Busey’s credit performance.
Construction, land acquisition, and development lending carries additional risk because loan proceeds are advanced based on the projected value of a property that will not be realized until the project is completed.Construction, land acquisition, and development loans involve additional risks because funds are advanced upon the security of the project, which is of uncertain value prior to its completion, and costs may exceed realizable values in declining real estate markets. In periods of declining real estate markets conditions, construction costs may exceed expected values, resulting in diminished collateral coverage. Due to uncertainties in estimating total construction costs, timelines, and the ultimate market value of the completed property—and given the potential impact of zoning, permitting, environmental requirements, and other governmental regulations—accurately assessing required funding levels and the resulting loan‑to‑value ratio can be difficult.
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Repayment of these loans is often dependent on the successful completion and stabilization of the project, including the borrower’s ability to sell or lease the property, rather than solely on the borrower’s or guarantor’s financial capacity. If Busey’s appraisal of the completed project proves overstated, or if market values or rental rates decline, the collateral securing the loan may be insufficient at completion. In the event of default, foreclosure prior to or at completion may not result in full recovery of principal, interest, or associated foreclosure and holding costs, and Busey may be required to advance additional funds to complete the project or retain the property for an extended period.
Failure to effectively manage these risks could result in increased nonperforming assets, elevated expenses, and higher credit losses, which could materially and adversely affect Busey’s financial condition and results of operations.
Credit exposure to the energy industry may increase Busey’s vulnerability to sector-specific volatility.
Busey has limited credit exposure to energy-related loans across its western markets and throughout the United States. A downturn or prolonged stagnation in the energy sector could adversely affect borrowers engaged in energy production, services, and related activities, potentially resulting in higher delinquencies and increased charge‑offs. Pricing pressures on oil and natural gas may also contribute to elevated credit stress within the energy portfolio, higher loss expectations, greater utilization of unfunded commitments, and reduced demand for new energy-related credit.
Sustained uncertainty and price volatility in the energy sector may produce additional adverse effects that are difficult to quantify, and responses to climate change—whether through regulation, market shifts, or technological transition—may further weaken the financial condition of Busey’s energy‑sector clients, thereby increasing associated credit risk.
Failure to effectively manage these exposures could lead to increased nonperforming assets, greater operational costs, and higher credit losses, any of which could materially and adversely impact Busey’s financial condition and results of operations.
Credit quality deterioration in investment securities may result in significant realized losses, impacting Busey’s financial performance. Risk FactorsCredit quality deterioration in investment securities may result in significant realized losses, impacting Busey’s financial performance.
Busey’s investment portfolio includes securities issued by government-sponsored agencies and non-government entities. While these securities offer portfolio diversification, they are subject to risks such as credit downgrades, collateral underperformance, and issuer defaults. These factors could result in realized losses, negatively impacting Busey’s financial condition and results of operations.
CAPITAL AND LIQUIDITY RISKS
Failure to maintain sufficient capital to meet regulatory requirements could have material adverse effects on financial condition, liquidity, results of operations, and regulatory compliance.
Busey is required to satisfy regulatory capital standards and to maintain sufficient liquidity to support ongoing operations and strategic objectives. Its ability to raise additional capital when needed depends on conditions in the capital markets, broader economic trends, investor sentiment toward the banking industry, governmental actions, and other factors outside Busey’s control, as well as Busey’s own financial performance and condition. As a result, Busey cannot guarantee that it will be able to obtain additional capital on favorable terms, or at all, if circumstances require it.
Failure to maintain capital ratios at levels sufficient to be considered “well‑capitalized” for regulatory purposes could negatively affect customer confidence, constrain growth opportunities, increase funding costs, raise FDIC insurance premiums, restrict the ability to pay dividends, limit acquisition capacity, and otherwise adversely affect business operations. In addition, under FDIC regulations, if Busey no longer meets the standards to be deemed “well‑capitalized,” it may face restrictions on the interest rates it may pay on deposits and on its ability to accept, renew, or roll over deposits, particularly brokered deposits. Furthermore, under FDIC rules, if Busey ceases to meet the requirements to be considered a “well-capitalized” institution for bank regulatory purposes, the interest rates it pays on deposits and its ability to accept, renew, or rollover deposits, particularly brokered deposits, may be restricted.
Failure to effectively manage capital and liquidity levels could result in higher funding costs, reduced operational flexibility, and diminished competitive positioning, any of which could materially and adversely affect Busey’s financial condition and results of operations.
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Liquidity risks could affect operations and jeopardize Busey’s business, financial condition, and results of operations.
Maintaining sufficient liquidity is essential to Busey’s business model and ongoing operations. Busey relies on a variety of funding sources—including deposits, borrowings, sales or maturities of securities, loan sales, and operating cash flows—to support lending activity, meet obligations, and manage daily liquidity needs. Additional liquidity is available through repurchase agreements, brokered deposits, and borrowing capacity with the FHLB and the Federal Reserve Bank. Additional liquidity is available through repurchase agreements, brokered deposits, and the ability to borrow from the Federal Reserve Bank and the FHLB. An inability to access these funding sources in adequate amounts or on acceptable terms could materially impair liquidity.
Access to funding may be negatively affected by factors specific to Busey, as well as broader conditions in the banking industry or the economy, many of which are beyond Busey’s control. Increasing competition from large banks and fintech firms for retail deposits may further pressure Busey’s ability to attract and retain deposits, which could adversely affect liquidity.
A reduction in available funding or capital could constrain Busey’s ability to originate new loans, purchase investment securities, meet operating expenses, satisfy deposit withdrawal demands, or pay dividends to stockholders. Failure to effectively manage liquidity needs could materially and adversely affect Busey’s liquidity position, overall financial condition, and results of operations.
Busey may face challenges accessing contingent liquidity during times of market stress.
Busey’s ability to access contingent liquidity during periods of market stress depends on its operational readiness to utilize central‑bank and other secured funding facilities. Operational readiness includes maintaining current and complete legal documentation, ensuring proper internal controls and procedures, and pre-positioning eligible collateral with the Federal Reserve Banks or other liquidity providers. The Federal Reserve periodically updates collateral requirements, valuation methodologies, and margin schedules, which can affect the type and value of assets considered eligible for borrowing. Institutions that regularly pre‑pledge collateral and test operational access have been observed to access the Federal Reserve’s discount window more promptly during periods of financial stress, thereby reducing liquidity pressures and stabilizing funding profiles. Failure to maintain adequate preparedness—including insufficient collateral, incomplete documentation, or inadequate operational testing—could limit Busey’s ability to access these facilities when needed, increase the cost of contingent funding, and heighten the risk of liquidity shortfalls. Any such limitations could materially and adversely affect Busey’s liquidity position, financial condition, results of operations, and ability to meet its obligations as they come due.
COMPETITIVE AND STRATEGIC RISKS
If securities or industry analysts do not publish or cease publishing research reports about Busey, if they adversely change their recommendations regarding Busey’s stock, or if Busey’s operating results do not meet their expectations, the price of Busey’s stock could decline.
The trading market for Busey’s common stock is significantly influenced by research and reports from industry analysts. Limited or negative analyst coverage could reduce the stock’s demand, market price, and trading volume. Downgrades, unfavorable comparisons with competitors, or operating results that fall short of analyst’s expectations may further negatively affect stock performance. The cessation of analyst coverage could exacerbate these challenges, diminishing interest in Busey’s stock and affecting stock performance. The cessation of analyst coverage could exacerbate these challenges, diminishing interest in Busey’s stock.
Busey faces significant competition from traditional financial institutions and emerging non‑bank competitors threatening market share.
Busey operates in highly competitive markets across its geographic footprint, competing with national and regional banks, community banks, credit unions, and a range of non‑bank financial services providers, including fintech companies offering digital‑first products and platforms. Advances in financial technology have enabled non‑banks and large technology firms to provide services historically offered by regulated financial institutions, such as payment processing, credit products, and deposit‑like alternatives. The rise of financial technology has introduced new challengers, including non-banks and large technology corporations, that offer services traditionally provided by banks, such as credit issuance, payment processing, and deposit alternatives.
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Innovations including digital wallets, peer‑to‑peer lending platforms, and blockchain‑enabled financial services continue to reshape customer expectations and may increase the risk of disintermediation. To remain competitive, Busey must continue to invest in technology, enhance digital capabilities, and respond to evolving customer preferences. To remain competitive, Busey must continuously invest in innovation and adapt to evolving customer preferences.
Failure to effectively manage competitive pressures could result in reduced loan and deposit balances, lower fee income, and diminished profitability, any of which could materially and adversely affect Busey’s financial condition and results of operations.
Rapid technological change, digital innovation, and emerging artificial intelligence capabilities present competitive, operational, and compliance risks.
The financial services industry is undergoing significant digital transformation, requiring continual investment to meet evolving customer expectations for convenience, personalization, security, and speed. Failure to effectively adopt, integrate, or govern new technologies—including generative AI—may impair Busey’s ability to attract and retain customers, compete with technologically advanced financial firms, or achieve anticipated efficiencies. The increasing use of artificial intelligence across the industry also introduces risks related to cybersecurity, data privacy, intellectual property, fraud prevention, model governance, and evolving regulatory requirements. Generative AI, in particular, enables more sophisticated impersonation, social‑engineering, and fraud schemes, increasing the need for robust controls, monitoring, and oversight.
Busey relies on third‑party technology providers for critical functions, and deficiencies in their performance, security practices, or Busey’s oversight could result in operational disruptions, service interruptions, or compliance failures. Inadequate management of these technology‑related risks—including risks arising from rapid adoption of artificial intelligence—could lead to operational inefficiencies, elevated costs, regulatory exposure, diminished competitiveness, or cybersecurity incidents, and could materially and adversely affect Busey’s financial condition and results of operations.
Acquisitions and strategic combinations are important to Busey’s growth strategy, but they involve significant regulatory, operational, financial, and strategic risks.
Acquisitions and strategic combinations offer opportunities to expand market presence, diversify revenue streams, and enhance operational scale. However, acquisitions inherently involve significant uncertainties and risks. Each transaction requires extensive evaluation of financial, operational, cultural, and regulatory factors, and Busey must successfully integrate acquired operations while maintaining service quality, customer relationships, and internal controls. The execution and integration challenges associated with acquisitions can affect multiple areas of the business. These risks may be heightened by differences in business models, product offerings, compliance programs, or organizational cultures between Busey and the acquired institution.
Regulatory Approvals and Conditions:
•Bank mergers and acquisitions require approvals from multiple regulators and may be delayed, conditioned, or denied.
•Approvals may impose restrictions on operations, capital, or business practices that reduce expected benefits.
•Timing uncertainty around regulatory processes can increase integration costs and execution risk.
Due Diligence Limitations and Legacy Liabilities:
•Pre‑closing diligence has inherent limits and may not identify all credit, operational, legal, tax, compliance, Bank Secrecy Act and Anti-Money Laundering regulations, fair lending, environmental, or cybersecurity issues.
•Post‑closing discovery of legacy risks, including litigation, contractual obligations, off‑balance‑sheet exposures, or regulatory remediation, can increase costs and reduce anticipated returns.
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Integration, Technology, Data, and Cybersecurity:
•Integrating systems, data, processes, models, and vendors is complex and may create operational disruptions or control gaps.
•Data conversions and core or digital platform migrations present risks related to data integrity, customer experience, and business continuity.
•Integration periods can heighten vulnerability to cyber incidents, fraud, and third‑party risk, including from new or inherited vendors.
Customer, Cultural, and Talent Retention:
•Harmonizing organizational cultures and compensation structures is challenging and may affect morale and productivity.
•Loss of key personnel or relationship managers, or deterioration in customer experience, can lead to client attrition and reduced business volumes.
•Retention and severance arrangements may increase expenses and dilute near‑term results.
Credit Quality, Valuation, and Purchase Accounting:
•Acquired portfolios may perform below expectations due to borrower‑specific, collateral, or concentration risks, among others.
•Fair value marks, credit loss allowances, and other purchase accounting adjustments may be larger than expected and affect earnings.
•Subsequent adverse performance could require additional provisions, write‑downs, or other valuation adjustments.
Financing, Capital, and Dilution:
•Transactions may require new debt or equity financing, increasing leverage, reducing liquidity, or diluting existing stockholder positions.
•Use of capital for acquisitions may reduce flexibility for other strategic investments or stockholder returns.
•Financing terms, covenants, or market conditions may limit post‑closing operating discretion.
Contractual, Legal, and Reputational Risk:
•Change‑of‑control provisions in customer, vendor, or employment contracts may trigger renegotiations, terminations, or penalties.
•Disputes, litigation, or claims related to the transaction or legacy activities may arise.
•Missteps in execution can damage brand and stakeholder trust, affecting customer acquisition and retention.
Internal Controls, Compliance, and Governance:
•Integrating control environments, policies, and risk management frameworks—including compliance with the Sarbanes-Oxley Act of 2002 and model risk management—may expose gaps or require material remediation efforts.
•Misalignment in risk appetite or governance practices can impair decision‑making and oversight.
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Synergies, Timing, and Strategic Fit:
•Cost savings, revenue synergies, and strategic benefits may be smaller than projected, take longer to realize, or not materialize.
•Management distraction during the transaction and integration phases can adversely affect ongoing operations and strategic execution.
•Market availability and pricing of targets may limit opportunities or require terms that reduce expected returns.
Goodwill and Intangible Assets:
•Acquisitions typically result in goodwill and other intangibles, which are subject to periodic assessments and potential impairment.
•Any impairment charges could negatively affect reported earnings.
The risks above can lead to higher operating and integration costs, reduced revenue, credit losses, increased provisions, system and control remediation expenses, customer attrition, litigation, regulatory burdens, capital strain, and dilution. Individually or in the aggregate, these factors could disrupt operations, reduce profitability, and impair capital and liquidity, any of which could materially and adversely affect Busey’s financial condition and results of operations.
Introduction of new products and services carries financial and strategic risks.
Busey strives to serve customers with a competitive product set and relevant services. While introducing new lines of business or innovative products and services supports this goal, these efforts carry inherent risks. Competitive pressures, underdeveloped markets, or unforeseen challenges can lead to delayed timelines and missed profitability targets. Significant investments in technology and marketing may not yield the desired outcomes. Significant investments in technology and marketing may not yield the desired outcomes, potentially negatively affecting operating results. These risks may materially adversely affect Busey’s financial condition and results of operations.
The rapid evolution of digital assets and emerging regulatory frameworks introduces new competitive, compliance, and operational risks for Busey.
The rapid evolution of digital assets and emerging regulatory frameworks introduces new competitive, compliance, and operational risks for Busey. While Busey does not currently offer digital asset products such as cryptocurrencies or stablecoins, increasing global adoption of digital assets and distributed‑ledger technologies continues to influence customer expectations and competitive dynamics. Recent U.S. legislative and regulatory initiatives—including the enactment of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act in 2025, which establishes federal standards for payment stablecoin issuers, and ongoing Congressional efforts to finalize broader crypto‑market structure legislation such as the Digital Asset Market Clarity Act—signal a shift toward more comprehensive oversight of digital‑asset activities.
These regulatory developments may affect Busey even without offering digital‑asset products, including through increased expectations related to cybersecurity, anti‑money‑laundering controls, sanctions compliance, custody arrangements, data governance, and vendor‑risk management.
The competitive landscape is also evolving as traditional financial institutions, fintech companies, and technology firms leverage innovations such as stablecoin‑based payments, blockchain settlements, and digital‑wallet ecosystems. These developments may accelerate disintermediation risks or shift customer behavior toward alternative financial platforms that offer new capabilities, higher transaction speeds, or programmable payment features. To remain competitive, Busey must assess emerging technologies, invest in modern infrastructure, and maintain the flexibility to scale operational capabilities in response to changing market demand. Failure to do so could impede Busey’s ability to offer competitive products, attract and retain customers, or respond to strategic opportunities.
Inadequate oversight or adaptation to these developments could lead to increased operational complexity, reduced competitiveness, and financial impacts that materially and adversely affect Busey’s financial condition and results of operations.
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ACCOUNTING AND TAX RISKS
Financial statements are created, in part, using estimates, assumptions, and management judgments, which, if incorrect, could result in material misstatement and adverse effect on Busey’s financial position.
Busey’s financial performance is impacted by accounting principles, policies, and guidelines. Some of these policies require the use of estimates and assumptions that may affect the value of assets or liabilities and financial results. Certain accounting policies are critical and require management to make subjective and complex judgments about matters that are inherently uncertain, and materially different amounts could be reported under different conditions or using different assumptions. If such estimates or assumptions underlying Busey’s Consolidated Financial Statements are incorrect, Busey may experience material losses.
One such assumption and estimate is the valuation analysis of Busey’s goodwill and other intangible assets. Although Busey’s analysis does not indicate impairments exist, Busey is required to perform additional impairment assessments on at least an annual basis, which could result in future impairment charges. Although Busey’s analysis does not indicate impairments exist, the Company is required to perform additional impairment assessments on at least an annual basis, which could result in future impairment charges. Any future impairment of goodwill or other intangible assets, whether based on the current balances or future balances arising out of acquisitions, could have a material adverse effect on Busey’s financial condition or results of operations.
Changes in accounting principles or guidelines could adversely affect financial reporting.
Periodically, agencies such as the FASB or the SEC change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of Busey’s Financial Statements. These changes are beyond Busey’s control, can be difficult to predict, and could materially impact how Busey reports its financial condition and results of operations. Changes in these standards are continuously occurring, and the implementation of such changes could have a material adverse effect on Busey’s financial condition and results of operations.
Busey is subject to changes in tax law and may not realize tax benefits which could adversely affect its results of operations.
Changes in tax laws at federal or state levels could influence Busey’s short-term and long-term earnings.Changes in tax laws at national or state levels could have an effect on Busey’s short-term and long-term earnings. Tax law changes are both difficult to predict and beyond Busey’s control. These laws are complex and subject to different interpretations by the taxpayer and the various taxing authorities. In determining the provision for income taxes and filing tax returns, management makes judgments and estimates about the application of these inherently complex laws, related regulations, and case law. These interpretations are subject to challenge by taxing authorities upon audit and may result in adjustments to our tax return filings, resulting in similar adverse impacts to our financial position. Changes in tax laws could affect Busey’s earnings, its customers’ financial positions, or both.
Deferred tax assets are future tax benefits carried on the balance sheet that allow for tax savings by reducing taxable income in subsequent periods. They arise, in part, as a result of net loss carry-overs, and other book accounting to tax accounting timing differences, for items such as expected credit losses, stock-based compensation, and deferred compensation. They arise, in part, as a result of net loss carry-overs, and other book accounting to tax accounting differences, for items such as expected credit losses, stock-based compensation, and deferred compensation. Deferred tax assets are recorded for such items when it is anticipated that the tax benefits will be recognized in earnings in future periods. Deferred tax assets are recorded for such items when it is anticipated that the tax consequences will be recognized in earnings in future periods. A valuation allowance is established against a deferred tax asset when it is more-likely-than-not that some or all of the future tax benefit will not be realized. A valuation allowance is established against a deferred tax asset when it is unlikely the future tax effects will be realized.
In evaluating the need for a valuation allowance, Busey estimates future taxable income based on management forecasts and tax planning strategies that may be available to the Company.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods prior to the expiration of the related net operating losses and may be limited by ownership change rules under Section 382 of the Internal Revenue Code. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods prior to the expiration of the related net operating losses and may be limited by Section 382 of the Internal Revenue Code.
If future events differ significantly from current forecasts, Busey may need to establish an additional valuation allowance against its deferred tax assets, which could have a material adverse effect on its financial condition and results of operations.
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Investments in tax-advantaged projects may not generate returns as anticipated and may have an adverse impact on Busey’s financial results.
Busey invests in certain tax-advantaged projects promoting renewable energy, affordable housing, community development, and other community revitalization projects.Busey invests in certain tax-advantaged projects promoting affordable housing, community development, and other community revitalization projects. These investments are designed to generate a return primarily through the realization of federal and state income tax credits and other tax benefits over specified periods. Busey is subject to the risk that previously recorded tax credits, which remain subject to recapture by taxing authorities based on compliance features required at the project level, may fail to meet certain government compliance requirements and may not be realized.
The ultimate realization of these benefits depends upon having sufficient taxable income and on many other factors outside of Busey’s control, including changes in the applicable tax code and the ability of the projects to be completed. The ultimate realization of these benefits depends upon having sufficient taxable income and on many other factors outside of Busey’s control, including changes in the applicable tax code and the ability of the projects to be completed. Busey continues to monitor tax law developments and compliance with applicable regulations to mitigate these risks. The potential inability to realize these tax credits and other tax benefits could negatively impact Busey’s earnings and financial condition.
OPERATIONAL RISKS
Busey’s framework for managing risks may not be fully effective in mitigating risk and loss.
Busey’s risk management framework is designed to identify, measure, monitor, and analyze a broad spectrum of risks, including compliance, operational, and reputational risks. However, as with any framework, inherent limitations exist, particularly as new risks emerge or previously unidentified vulnerabilities become apparent.
The effectiveness of this framework depends on its alignment with Busey’s evolving risk profile, especially following the completion of the CrossFirst merger. As the organization grows in complexity, risks related to system integration, process harmonization, and operational oversight may challenge the framework's capacity to adapt in a timely and effective manner. As the organization grows in complexity, risks related to integration, system coordination, and operational oversight may challenge the framework's capacity to adapt. Failures to identify and manage these risks could adversely affect Busey’s financial condition, regulatory standing, and overall operational stability. Failures to effectively manage these risks could adversely impact Busey’s financial condition, regulatory standing, and overall operational stability.
To address these challenges, Busey continuously refines its risk management processes, leveraging enhanced risk assessment tools, investing in automation and analytics, and aligning with industry best practices.To address these challenges, Busey continuously refines its processes, leveraging advanced risk assessment tools and seeking alignment with industry best practices. Despite these efforts, no risk management framework is foolproof, and unforeseen losses or disruptions remain a possibility, which may materially and adversely affect Busey’s financial condition and results of operations. Despite these efforts, no risk management framework is foolproof, and unforeseen losses or disruptions remain a possibility.
Technological investments drive efficiency but introduce cybersecurity risks.
Busey’s ongoing investments in technology infrastructure have strengthened operational efficiency, enhanced client service delivery, and supported the scaling of key business functions. Initiatives such as enterprise-wide automation, cloud integration, and enhanced data analytics capabilities have positioned Busey as a forward-thinking financial institution. However, these advancements introduce vulnerabilities, including the risk of cyber-attacks and operational disruptions.
The Federal Reserve’s November 2025 Financial Stability Report has emphasized growing threats posed by sophisticated cyber-attacks. These threats not only compromise data integrity but also pose significant reputational and financial risks. The outcomes of such risks include:
•Amplification of Vendor Risk: Third-party vendors and their subcontractors introduce multi-layered risks, complicating oversight and heightening the likelihood of service interruptions or compliance breaches.
•Need for Advanced Cyber Protections: As bad actors deploy increasingly sophisticated tactics, including artificial intelligence-driven impersonation and malware, the effectiveness of traditional cybersecurity defenses is diminished.
To mitigate these risks, Busey has implemented robust cybersecurity protocols, regular system audits, and incident response plans. The use of artificial intelligence-powered tools provide additional layers of fraud and threat detection, enabling proactive management. The use of artificial intelligence-powered tools, such as Verafin, provide additional layers of fraud detection, enabling proactive threat management. However, as cybersecurity threats evolve, the possibility of system penetration persists even with robust security protocols in place. As a result, successful or attempted cyber intrusions, vendor failures, or operational disruptions stemming from these evolving threats could materially and adversely impact Busey’s financial condition and results of operations.
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Outsourcing dependencies could disrupt operations and increase compliance risks.
Busey’s reliance on secure and resilient systems to manage customer relationships, transactions, and data underscores the critical importance of operational stability. Outsourcing arrangements introduce risks tied to service disruptions, compliance violations, and vulnerabilities stemming from subcontractors in downstream supply chains.
This cascading outsourcing structure adds complexity to communication and coordination, particularly when vendors operate in regions with varying regulatory standards. Risks are further amplified by geopolitical tensions, trade restrictions, or cyberattacks targeting these external partners.
While Busey conducts rigorous due diligence when selecting third-party providers, residual risks, especially from indirect outsourcing (fourth parties), remain challenging to eliminate entirely. Failures or breaches in these systems could disrupt Busey’s operations, damage its reputation, and materially and adversely affect its financial conditions and results of operations.
Fraudulent activities could erode financial stability and customer trust.
The rising sophistication of fraudulent schemes poses a persistent challenge for financial institutions, with Busey being no exception. Fraudulent activities, such as identity theft, phishing, and unauthorized transactions, could result in financial losses, regulatory penalties, and erosion of customer trust.
Busey employs a multi-layered approach to fraud prevention, including internal controls, advanced fraud detection tools, and insurance coverage.Busey employs a multi-layered approach to fraud prevention, including internal controls, insurance coverage, and advanced fraud detection tools, like Verafin. However, even robust frameworks may not fully eliminate risks, particularly as threat actors adapt their tactics to exploit emerging industry vulnerabilities and customer vulnerabilities. However, even robust frameworks may not fully eliminate risks, particularly as threat actors adapt their tactics to exploit emerging vulnerabilities. Accordingly, successful fraud attempts or failures in our fraud‑prevention controls could result in financial losses, increased operational costs, regulatory consequences, and reputational harm that could adversely affect Busey’s financial condition and results of operations.
Busey’s ability to attract and retain key personnel may affect future growth and earnings.
Busey’s ability to attract and retain experienced management and qualified personnel remains critical to sustaining growth and executing its strategic objectives.Busey’s ability to attract and retain experienced management and qualified personnel is critical to sustaining growth and executing its strategic objectives. Despite continued investment in leadership development, succession planning, and employee engagement, competitive labor markets and evolving employee expectations pose ongoing challenges.
Beyond executive leadership, Busey's ability to build and maintain a diverse and skilled workforce is essential to implementing its community-based strategy and serving an expanded geographic footprint. The unexpected departure of high-performing employees or difficulty in recruiting specialized talent could disrupt operations, delay strategic initiatives, or increase costs associated with workforce realignment, all of which may materially and adversely affect Busey’s financial condition and results of operations.
Damage resulting from negative publicity could harm Busey’s reputation and adversely impact its business and financial condition. Risk FactorsDamage resulting from negative publicity could harm Busey’s reputation and adversely impact its business and financial condition.
Busey’s ability to attract and retain customers, investors, employees, and business partners depends significantly on the trust placed in its brand, business practices, and commitment to responsible conduct. Negative public opinion may arise from actual or alleged issues across a wide range of activities, including employee misconduct, customer service failures, loan origination or servicing practices, compliance or regulatory violations, cybersecurity incidents, data‑protection lapses, corporate governance concerns, product suitability issues, or perceived shortfalls in Busey’s community and stakeholder engagement. Even isolated incidents—whether substantiated or not—can be rapidly amplified through social media, news outlets, or regulatory commentary, increasing the speed and scale at which reputational harm may occur.
Reputation risk is heightened by Busey’s relationship‑based operating model, in which customer loyalty and business development rely heavily on personal trust and perceived service quality. Busey is also exposed to reputational impacts arising from its third‑party relationships, including vendors, fintech partners, and other service providers, whose failures or misconduct may be attributed to Busey.
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Reputational harm can lead to customer attrition, reduced deposit and loan growth, lower fee income, diminished employee morale or retention challenges, increased regulatory scrutiny, delays in obtaining regulatory approvals, reduced investor confidence, and exposure to litigation or enforcement actions. These effects may also limit Busey’s ability to pursue strategic initiatives or partnerships. Any failure to effectively identify, monitor, and manage reputational risks could result in lost business opportunities, elevated costs, and operational disruptions, and could materially and adversely affect Busey’s financial condition and results of operations.
Severe weather, natural disasters, pandemics or other health crises, acts of war or terrorism and other external events could significantly impact Busey’s business.
Adverse external events—including severe weather, natural disasters, wildfires, pandemics or other public‑health crises, acts of war or terrorism, and other large‑scale disruptions—could significantly affect Busey’s operations and the ability of customers, counterparties, and third‑party providers to conduct business. Such events may interrupt business activity, damage physical assets, disrupt supply chains, reduce demand for financial services, impair borrowers’ repayment capacity, increase vacancy rates in commercial properties, and reduce the value of collateral supporting Busey’s loan portfolio. They may also lead to financial‑market volatility, elevated credit losses, and operational challenges stemming from facility closures, evacuations, or interruptions in access to banking channels. Geopolitical conflicts can further influence energy prices, commodity markets, and financial‑market stability, while regulatory responses to these events may impose additional compliance or operational requirements.
Although Busey maintains business‑continuity plans and risk‑management processes, the occurrence of one or more such adverse events could disrupt operations, increase costs, reduce revenue, and materially and adversely affect Busey’s financial condition and results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Busey maintains a cyber security risk management program designed to prevent, detect, and respond to information security threats. The program is designed to align with the Cyber Risk Institute’s Profile framework, which is based on the National Institute of Standards and Technology’s Cybersecurity Framework. The program is led by Busey’s Chief Information Security Officer (“CISO”) . Busey’s CISO has been in the role since September 2020 and has over 15 years of experience across external and internal audit, technology risk management, and cybersecurity matters, primarily within the financial services sector, and also including additional industries such as healthcare, technology, consumer products, and manufacturing for both regional and multinational corporations. Busey’s cyber security risk management program is a key part of the Company’s overall risk management system, which is administered by the Chief Risk Officer.
Busey’s cyber security risk management program includes administrative, technical, and physical safeguards to help ensure the security and confidentiality of customer records and information. Busey has long devoted significant resources to assessing, identifying, and managing risks associated with cybersecurity threats, including:
•Establishing an internal cybersecurity team that is responsible for conducting regular assessments of Busey’s information systems, existing controls, vulnerabilities, and potential improvements;
•Employing continuous monitoring tools that can detect and help respond to cybersecurity threats in real-time;
•Performing due diligence with respect to third-party service providers , including their cybersecurity practices, and requiring contractual commitments from Busey’s service providers to take certain cybersecurity measures;
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•Mandating periodic cybersecurity training for Busey’s workforce, which includes awareness programs on phishing, social engineering, and other common cyber threats;
•Implementing access control measures such as multi-factor authentication, role-based access controls, and regular access reviews to ensure that only authorized personnel have access to critical systems and data;
•Using data encryption for both data at rest and data in transit to protect sensitive information; and
•Creating an incident response plan that outlines the steps to contain, mitigate, and remediate the impact of cybersecurity incidents, including communication protocols and post-incident analysis.
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