FIRST BUSEY CORP /NV/

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. 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.

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.

Elevated 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.

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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. CRE is a significant component of Busey’s loan portfolio and is inherently sensitive to broader economic and market 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. Credit enhancements—such as pledged collateral and personal guarantees—are often used to improve 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. 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. 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.

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.