v3.26.1
DERIVATIVE FINANCIAL INSTRUMENTS
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS
NOTE 12. DERIVATIVE FINANCIAL INSTRUMENTS
Busey utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. Additionally, Busey enters into derivative financial instruments, including interest rate lock commitments issued to residential loan customers for loans that will be held for sale; forward sales commitments to sell residential mortgage loans to investors; and interest rate swaps and risk participation agreements with customers and other third parties. See “Note 13: Fair Value Measurements” for further discussion of the fair value measurement of such derivatives.
To secure its obligations under derivative contracts, Busey pledged cash and held collateral as follows:
As of
(dollars in thousands)June 30,
2026		December 31,
2025
Cash pledged to secure obligations under derivative contracts$14,400 $14,400 
Collateral held to secure obligations under derivative contracts7,720 5,050 
Derivative Instruments Designated as Hedges
Busey entered into derivative instruments designated as cash flow hedges. For a derivative instrument that is designated and qualifies as a cash flow hedge, the change in fair value of the derivative instrument is reported as a component of OCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Changes in fair value of components excluded from the assessment of effectiveness are recognized in current earnings.
Interest Rate Swaps Designated as Cash Flow Hedges
Interest rate swaps with notional amounts totaling $800.0 million as of June 30, 2026, and $500.0 million as of December 31, 2025, were designated as cash flow hedges. Busey entered into a $300.0 million receive-fixed, pay-floating interest rate swap to reduce Busey’s asset sensitivity (“Prime Loan Swap”). Duration was added to Busey’s loan portfolio by fixing a portion of floating prime-based loans. Interest rates had risen above their historical lows allowing Busey to lock in a portion of its loan portfolio to reduce asset sensitivity while creating a more stable margin in a volatile rate market. These hedges were determined to be highly effective during the period, and Busey expects its hedges to remain highly effective during the remaining terms of the swaps. Further, Busey entered into forward-starting SOFR-based receive-fixed pay-floating interest rate swaps totaling $500.0 million to reduce Busey’s asset sensitivity (“SOFR Loan Swaps”). These hedges were determined to be highly effective during the period, and Busey expects its hedges to remain highly effective during the remaining terms of the swaps. Changes in fair value were recorded net of tax in OCI.
A summary of the interest-rate swaps designated as cash flow hedges is presented below:
As of
(dollars in thousands)LocationJune 30,
2026		December 31,
2025
Prime Loan Swap
Notional amount$300,000 $300,000 
Weighted average receive rate, fixed4.81 %4.81 %
Weighted average pay rate, variable Prime6.75 %6.81 %
Weighted average maturity
2.60 years
3.10 years
 
SOFR Loan Swaps
Notional amount$500,000 $200,000 
Weighted average receive rate, fixed3.72 %3.78 %
Weighted average pay rate, variable 1-month CME Term SOFR1
3.63 %3.82 %
Weighted average maturity4.53 years3.76 years
 
Gross aggregate fair value of the swaps
Gross aggregate fair value of swap assetsOther assets$43 $3,215 
Gross aggregate fair value of swap liabilitiesOther liabilities19,820 14,589 
 
Balances carried in AOCI
Unrealized gains (losses) on cash flow hedges, net of taxAOCI$(13,972)$(7,616)
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1.As of June 30, 2026, a pay rate was not yet established for a 6-month forward-starting SOFR loan swap with a notional amount of $200 million, which was entered into during the first quarter of 2026. For purposes of the weighted average pay rate calculation, Busey used the rate that would have been applicable for this loan swap as of June 30, 2026, if not for the deferred period.
During the next 12 months, Busey expects to reclassify unrealized gains and losses from OCI to interest income as shown in the following table. Amounts actually recognized could differ from these expectations due to changes in interest rates, hedge de-designations, and the addition of other hedges subsequent to June 30, 2026.
(dollars in thousands)As of
June 30, 2026
Unrealized losses expected to be reclassified from OCI to interest income$(444)
Changes in interest income recorded on these swap transactions is presented in the following table:
Three Months Ended June 30,Six Months Ended June 30,
(dollars in thousands)2026202520262025
Decrease in interest income on swap transactions$(1,387)$(2,265)$(2,790)$(4,325)
Net gains and losses relating to cash flow derivative instruments that were recorded in OCI on the Consolidated Statements of Income (Unaudited) are presented in the table below:
Three Months Ended June 30,Six Months Ended June 30,
(dollars in thousands)2026202520262025
Unrealized gains (losses) on cash flow hedges
Net gains (losses) recognized in OCI, net of tax$(5,664)$2,598 $(8,447)$7,239 
Losses reclassified from OCI to interest income, net of tax1,039 1,693 2,091 3,198 
Net change in unrealized gains (losses) on cash flow hedges, net of tax$(4,625)$4,291 $(6,356)$10,437 
Derivative Instruments Not Designated as Hedges
Interest Rate Swaps Not Designated as Hedges
Busey may offer interest rate swap contracts to its customers in connection with their risk management needs. Busey manages the risk associated with these contracts by entering into equal and offsetting derivative agreements with other financial institutions. These contracts supported variable rate, commercial loan relationships totaling $1.33 billion as of June 30, 2026, and $1.16 billion as of December 31, 2025. These derivatives generally worked together as an economic interest rate hedge, but Busey did not designate them for hedge accounting treatment. Consequently, changes in fair value of the corresponding derivative financial asset or liability were recorded as either a charge or credit to current earnings during the period in which the changes occurred.
Amounts and fair values of derivative assets and derivative liabilities related to customer interest rate swaps recorded on the Consolidated Balance Sheets (Unaudited) are summarized as follows:
As of June 30, 2026As of December 31, 2025
(dollars in thousands)LocationNotional
Amount		Fair
Value		Notional
Amount		Fair
Value
Derivative assets not designated as hedging instruments
Interest rate swaps: receive-fixed, pay-floatingOther assets$375,604 $3,236 $703,286 $11,542 
Interest rate swaps: receive-floating, pay-fixedOther assets953,930 21,432 456,973 15,998 
Derivative assets not designated as hedging instruments$1,329,534 $24,668 $1,160,259 $27,540 
 
Derivative liabilities not designated as hedging instruments
Interest rate swaps: receive-fixed, pay-floatingOther liabilities$953,930 $21,432 $456,973 $15,998 
Interest rate swaps: receive-floating, pay-fixedOther liabilities375,604 3,236 703,286 11,542 
Derivative liabilities not designated as hedging instruments$1,329,534 $24,668 $1,160,259 $27,540 
Changes in fair value of these derivative assets and derivative liabilities were as follows:
Three Months Ended June 30,Six Months Ended June 30,
(dollars in thousands)2026202520262025
Interest rate swaps
Receive-fixed, pay-floating$230 $(1,972)$(2,886)$1,062 
Receive-floating, pay-fixed(230)1,972 2,886 (1,062)
Net change in fair value of interest rate swaps$— $— $— $— 
Risk Participation Agreements
To manage the credit risk exposure related to customer-facing swaps, Busey entered into risk participation agreements that were not designated as hedging instruments in conjunction with loan participation arrangements with other financial institutions. Under these risk participation agreements, Busey purchased credit risk participation, paying an up-front fee to a counterparty to accept a portion of its credit exposure, and will receive a payment from the counterparty if the swap customer defaults on its obligations. Busey also acquired additional risk participation agreements entered into by CrossFirst, in which CrossFirst purchased credit risk participation, and Busey will receive a payment from the counterparty if the swap customer defaults on its obligations.
In connection with the CrossFirst acquisition, Busey assumed risk participation agreements entered into by CrossFirst, under which CrossFirst sold credit risk participation, receiving an up-front fee from a counterparty in exchange for accepting a portion of the counterparty’s credit exposure. Under these agreements, Busey will be required to make a payment to the counterparty if the swap customer defaults on its obligations.
Notional amounts of the risk participation agreements reflect the participating banks’ pro-rata shares of the derivative instruments, consistent with their shares of the related participated loans. The risk participation agreements mature between August 2026 and October 2033, and are summarized as follows:
As of June 30, 2026As of December 31, 2025
(dollars in thousands)LocationNotional
Amount		Fair
Value		Notional
Amount		Fair
Value
Risk participation agreements
PurchasedOther assets$74,808 $12 $74,590 $30 
SoldOther liabilities95,783 29 108,743 65 
Changes in fair value of these derivative assets and derivative liabilities were recognized on the Consolidated Statements of Income (Unaudited) as follows:
Three Months Ended June 30,Six Months Ended June 30,
(dollars in thousands)Location2026202520262025
Risk participation agreements
Gains recognized in earningsOther noninterest expense$9 $5 $18 $7 
Gains (losses) recognized in earningsOther noninterest income— (3)— (14)
Net change in fair value of risk participation agreements$9 $2 $18 $(7)
Foreign Currency Exchange Contracts
From time to time, Busey enters into foreign currency exchange forward contracts that are not designated as hedging instruments to support its customers’ or its own business requirements. Foreign currency contracts, which involve the exchange of one currency for another on a specified date and at a specified rate, are used to manage fluctuations in foreign exchange rates. Foreign currency exchange contracts are carried at fair value. Amounts and fair values of foreign currency exchange derivative instruments included on the Consolidated Balance Sheets (Unaudited) are summarized as follows:
As of June 30, 2026As of December 31, 2025
(dollars in thousands)LocationNotional
Amount		Fair
Value		Notional
Amount		Fair
Value
Foreign currency exchange contractOther assets$3,226 $172 $— $— 
Gains and/or losses relating to foreign currency exchange derivative instruments are reported in noninterest income on the Consolidated Statements of Income (Unaudited), and are summarized as follows:
Three Months Ended June 30,Six Months Ended June 30,
(dollars in thousands)Location2026202520262025
Gains on foreign currency exchange contractsOther noninterest income$14 $— $25 $— 
Mortgage Banking Derivatives
Interest Rate Lock Commitments
Interest rate lock commitments that meet the definition of derivative financial instruments under ASC Topic 815 “Derivatives and Hedging” are carried at their fair values in other assets or other liabilities on the Consolidated Balance Sheets (Unaudited), with changes in the fair values of the corresponding derivative financial assets or liabilities recorded as either a charge or credit to current earnings during the period in which the changes occurred.
Forward Sales Commitments
Busey economically hedges mortgage loans held for sale and interest rate lock commitments issued to its residential loan customers related to loans that will be held for sale by obtaining corresponding forward sales commitments with an investor to sell the loans at an agreed-upon price at the time the interest rate locks are issued to the customers. Forward sales commitments that meet the definition of derivative financial instruments under ASC Topic 815 “Derivatives and Hedging” are carried at their fair values in other assets or other liabilities on the Consolidated Balance Sheets (Unaudited). While such forward sales commitments generally served as an economic hedge to mortgage loans held for sale and interest rate lock commitments, Busey did not designate them for hedge accounting treatment. Changes in fair value of the corresponding derivative financial asset or liability were recorded as either a charge or credit to current earnings during the period in which the changes occurred.
Amounts and fair values of mortgage banking derivatives included on the Consolidated Balance Sheets (Unaudited) are summarized as follows:
As of June 30, 2026As of December 31, 2025
(dollars in thousands)LocationNotional
Amount		Fair
Value		Notional
Amount		Fair
Value
Mortgage banking derivative assets
Interest rate lock commitmentsOther assets$2,240 $47 $6,159 $145 
Forward sales commitmentsOther assets6,731 85 1,520 2 
Mortgage banking derivative assets$8,971 $132 $7,679 $147 
 
Mortgage banking derivative liabilities
Forward sales commitments
Other liabilities$2,307 $6 $9,278 $26 
Mortgage banking derivative liabilities$2,307 $6 $9,278 $26 
Gains and losses relating to these derivative instruments are reported in noninterest income, and are summarized as follows:
Three Months Ended June 30,Six Months Ended June 30,
(dollars in thousands)Location2026202520262025
Net gains (losses) on mortgage banking derivatives
Gains (losses) on interest rate lock commitmentsOther noninterest income$58 $239 $102 $481 
Gains (losses) on forward sales commitmentsOther noninterest income27 26 123 (61)
Net gains (losses) on mortgage banking derivatives$85 $265 $225 $420