FIRST BUSEY CORP /NV/BUSE
FIRST BUSEY CORP /NV/ Fair Value Disclosure
NOTE 20. FAIR VALUE MEASUREMENTS
The fair value of an asset or liability is the price that would be received by selling that asset or paid in transferring that liability (exit price) in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. ASC Topic 820 “Fair Value Measurement” establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
•Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
•Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatility, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.
•Level 3 Inputs – Unobservable inputs for determining the fair values of assets or liabilities that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to Busey’s assets and liabilities that are carried at fair value.
In general, fair value estimates are based upon quoted market prices, when available. If such quoted market prices are not available, fair values are estimated utilizing independent valuation techniques that consider identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable data. Valuation adjustments may be made to ensure that financial instruments are recorded at their estimated fair values. These adjustments may include amounts to reflect, among other things, counterparty credit quality and the company's creditworthiness as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. While management believes Busey's valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to estimate the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
Debt Securities Available for Sale
Debt securities classified as available for sale are reported at fair value, which is estimated using Level 2 inputs. Busey obtains fair value measurements from an independent pricing service. The independent pricing service utilizes evaluated pricing models that vary by asset class and incorporate available trade, bid, and other market information. Because many fixed income securities do not trade on a daily basis, the independent pricing service applies available information to prepare evaluations, with a focus on observable market data such as benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing.
The independent pricing service uses model processes, such as the Option Adjusted Spread model, to assess interest rate impact and develop prepayment scenarios. Models and processes take into account market conventions. For each asset class, a team of evaluators gathers information from market sources and integrates relevant credit information, perceived market movements, and sector news into the evaluated pricing applications and models.
Market inputs that the independent pricing service normally seeks for evaluations of securities, listed in approximate order of priority, include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. The independent pricing service also monitors market indicators, industry, and economic events. For certain security types, additional inputs may be used or some of the market inputs may not be applicable. Evaluators may prioritize inputs differently on any given day for any security based on market conditions, and not all inputs listed are available for use in the evaluation process for each security evaluation on a given day. Because the data utilized was observable, the securities have been classified as Level 2.
Equity Securities
Equity securities are reported at fair value, which is estimated using Level 1 or Level 2 inputs. Fair value measurements of mutual funds or stock in active markets are estimated using unadjusted quoted prices for identical assets at the measurement date and are classified as Level 1. Fair value measurements of stock that are not active use quoted prices for identical or similar assets in markets and are classified as Level 2.
Derivative Assets and Derivative Liabilities
Busey’s derivative assets and derivative liabilities are reported at fair value, which is measured using Level 2 or Level 3 inputs. Derivative balances are included in other assets or other liabilities on the Consolidated Balance Sheets, and consist of interest rate swaps and risk participation agreements where there is no significant deterioration in the counterparties (loan customers) credit risk since origination of the interest rate swap or risk participation agreement, as well as mortgage banking derivatives, including interest rate lock commitments and forward sales commitments.
Fair values of derivative assets and liabilities are estimated based on prices that are obtained from a third-party which uses observable market inputs and, with the exception of risk participation agreements, are classified as Level 2. For purposes of potential valuation adjustments to Busey’s derivative positions, Busey evaluates the credit risk of its counterparties as well as its own credit risk. Accordingly, Busey has considered factors such as the likelihood of default, expected loss given default, net exposures, and remaining contractual life, among other things, in determining if any estimated fair value adjustments related to credit risk are required. Busey reviews counterparty exposure quarterly, and when necessary, appropriate adjustments are made to reflect the exposure. No changes in counterparty credit were identified.
Due to the significance of unobservable inputs, derivative assets related to risk participation agreements are classified as Level 3.
The following tables summarize financial assets and financial liabilities measured at estimated fair value on a recurring basis:
| As of December 31, 2025 | |||||||||||||||||||||||
| (dollars in thousands) | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Total Fair Value | |||||||||||||||||||
| Debt securities available for sale: | |||||||||||||||||||||||
| Obligations of U.S. government corporations and agencies | $ | — | $ | 112,046 | $ | — | $ | 112,046 | |||||||||||||||
| Obligations of states and political subdivisions | — | 263,873 | — | 263,873 | |||||||||||||||||||
| Asset-backed securities | — | 265,580 | — | 265,580 | |||||||||||||||||||
| Commercial mortgage-backed securities | — | 132,942 | — | 132,942 | |||||||||||||||||||
| Residential mortgage-backed securities | — | 1,344,416 | — | 1,344,416 | |||||||||||||||||||
| Corporate debt securities | — | 43,691 | — | 43,691 | |||||||||||||||||||
| Equity securities | 155 | 14,761 | — | 14,916 | |||||||||||||||||||
| Derivative assets | — | 30,902 | 30 | 30,932 | |||||||||||||||||||
| Derivative liabilities | — | 42,155 | 65 | 42,220 | |||||||||||||||||||
| As of December 31, 2024 | |||||||||||||||||||||||
| (dollars in thousands) | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Total Fair Value | |||||||||||||||||||
| Debt securities available for sale: | |||||||||||||||||||||||
| Obligations of U.S. government corporations and agencies | $ | — | $ | 1,400 | $ | — | $ | 1,400 | |||||||||||||||
| Obligations of states and political subdivisions | — | 139,829 | — | 139,829 | |||||||||||||||||||
| Asset-backed securities | — | 336,557 | — | 336,557 | |||||||||||||||||||
| Commercial mortgage-backed securities | — | 92,174 | — | 92,174 | |||||||||||||||||||
| Residential mortgage-backed securities | — | 1,087,210 | — | 1,087,210 | |||||||||||||||||||
| Corporate debt securities | — | 153,051 | — | 153,051 | |||||||||||||||||||
| Equity securities | 5,567 | 10,295 | — | 15,862 | |||||||||||||||||||
| Derivative assets | — | 30,368 | 5 | 30,373 | |||||||||||||||||||
| Derivative liabilities | — | 58,099 | — | 58,099 | |||||||||||||||||||
Activity for risk participation agreements, which are financial assets measured at estimated fair value on a recurring basis using Level 3, is summarized in the tables below:
| Years Ended December 31, | |||||||||||||||||
| (dollars in thousands) | Location | 2025 | 2024 | ||||||||||||||
| Beginning Balance | $ | 5 | $ | 15 | |||||||||||||
| Gains (losses) recognized in earnings | 117 | (26) | |||||||||||||||
| Purchases | (171) | 16 | |||||||||||||||
| Sales | 55 | — | |||||||||||||||
Assumed in acquisition | (41) | — | |||||||||||||||
| Ending Balance | $ | (35) | $ | 5 | |||||||||||||
For additional information about Busey’s accounting policies related to the fair value of financial instruments, see “Fair Value of Financial Instruments” in “Note 1. Significant Accounting Policies.”
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain financial assets and financial liabilities are measured at estimated fair value on a non-recurring basis; that is, the instruments are not measured at estimated fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).
Loans Evaluated Individually
Busey does not record portfolio loans at estimated fair value on a recurring basis. However, periodically, a loan is evaluated individually and is reported at the estimated fair value of the underlying collateral, less estimated costs to sell, if repayment is expected solely from the collateral. If the estimated collateral value is not sufficient, a specific reserve is recorded. Collateral values are estimated using a combination of observable inputs, including recent appraisals, and unobservable inputs based on customized discounting criteria. Due to the significance of unobservable inputs, fair values of individually evaluated collateral dependent loans have been classified as Level 3.
OREO and Other Repossessed Assets
Non-financial assets measured at fair value, upon initial recognition or subsequent impairment, include OREO and other repossessed assets. OREO properties and other repossessed assets are measured using a combination of observable inputs, including recent appraisals, and unobservable inputs. Due to the significance of unobservable inputs, the estimated fair values of all OREO and other repossessed assets have been classified as Level 3.
Bank Property Held for Sale
Bank property held for sale represents certain banking center office buildings which Busey has closed and consolidated with other existing banking centers. Bank property held for sale is measured at the lower of amortized cost or estimated fair value less estimated costs to sell, and is included in premises and equipment, net on the Consolidated Balance Sheets. Fair values were based upon discounted appraisals or real estate listing prices. Due to the significance of unobservable inputs, fair values of all bank property held for sale have been classified as Level 3.
The following tables summarize assets and liabilities measured at estimated fair value on a non-recurring basis:
| As of December 31, 2025 | |||||||||||||||||||||||
| (dollars in thousands) | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Total Fair Value | |||||||||||||||||||
| Loans evaluated individually, net of related allowance | $ | — | $ | — | $ | 19,604 | $ | 19,604 | |||||||||||||||
| OREO and other repossessed assets with subsequent impairment | — | — | 4,409 | 4,409 | |||||||||||||||||||
| Bank property held for sale with impairment | — | — | 1,855 | 1,855 | |||||||||||||||||||
| As of December 31, 2024 | |||||||||||||||||||||||
| (dollars in thousands) | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Total Fair Value | |||||||||||||||||||
| Loans evaluated individually, net of related allowance | $ | — | $ | — | $ | 616 | $ | 616 | |||||||||||||||
| Bank property held for sale with impairment | — | — | 2,841 | 2,841 | |||||||||||||||||||
The following tables present additional quantitative information about assets measured at estimated fair value on a non-recurring basis using Level 3 inputs:
| As of December 31, 2025 | |||||||||||||||||||||||
| (dollars in thousands) | Fair Value | Valuation Techniques | Unobservable Input | Range (Weighted Average) | |||||||||||||||||||
| Loans evaluated individually, net of related allowance | $ | 19,604 | Appraisal of collateral | Appraisal adjustments | -1.6% to -100.0% (-44.6) | ||||||||||||||||||
| OREO and other repossessed assets with subsequent impairment | 4,409 | Appraisal of collateral | Appraisal adjustments | -2.8% to -24.1% (-4.5)% | |||||||||||||||||||
| Bank property held for sale with impairment | 1,855 | Appraisal of collateral or real estate listing price | Appraisal adjustments | -9.0% to -58.0% (-39.4) | |||||||||||||||||||
| As of December 31, 2024 | |||||||||||||||||||||||
| (dollars in thousands) | Fair Value | Valuation Techniques | Unobservable Input | Range (Weighted Average) | |||||||||||||||||||
| Loans evaluated individually, net of related allowance | $ | 616 | Appraisal of collateral | Appraisal adjustments | -25.0% to -100.0% (-74.9)% | ||||||||||||||||||
| Bank property held for sale with impairment | 2,841 | Appraisal of collateral or real estate listing price | Appraisal adjustments | -9.0% to -76.7% (-51.8)% | |||||||||||||||||||
Financial Assets and Financial Liabilities That Are Not Carried at Fair Value
Fair values of financial instruments that are not carried at fair value on Busey’s Consolidated Balance Sheets were estimated as follows:
| As of December 31, 2025 | As of December 31, 2024 | ||||||||||||||||||||||
| (dollars in thousands) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||
| Financial assets | |||||||||||||||||||||||
| Level 1 inputs: | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 294,052 | $ | 294,052 | $ | 697,659 | $ | 697,659 | |||||||||||||||
| Level 2 inputs: | |||||||||||||||||||||||
| Debt securities held to maturity | 746,385 | 625,957 | 826,630 | 675,053 | |||||||||||||||||||
| Loans held for sale | 5,752 | 5,886 | 3,657 | 3,726 | |||||||||||||||||||
| Restricted bank stock | 77,006 | 77,006 | 49,930 | 49,930 | |||||||||||||||||||
| Accrued interest receivable | 71,788 | 71,788 | 45,141 | 45,141 | |||||||||||||||||||
| Level 3 inputs: | |||||||||||||||||||||||
| Portfolio loans, net | 13,393,776 | 13,472,907 | 7,613,683 | 7,426,158 | |||||||||||||||||||
| Mortgage servicing rights | 1,459 | 5,176 | 1,304 | 5,627 | |||||||||||||||||||
| Other servicing rights | 2,086 | 2,193 | 1,482 | 1,591 | |||||||||||||||||||
| Financial liabilities | |||||||||||||||||||||||
| Level 2 inputs: | |||||||||||||||||||||||
| Time deposits | $ | 2,429,890 | $ | 2,425,290 | $ | 1,490,635 | $ | 1,481,591 | |||||||||||||||
| Securities sold under agreements to repurchase | 166,929 | 166,929 | 155,610 | 155,610 | |||||||||||||||||||
| Long-term borrowings | 113,806 | 113,853 | — | — | |||||||||||||||||||
| Junior subordinated debt owed to unconsolidated trusts | 77,328 | 71,407 | 74,815 | 67,314 | |||||||||||||||||||
| Accrued interest payable | 25,372 | 25,372 | 21,129 | 21,129 | |||||||||||||||||||
| Level 3 inputs: | |||||||||||||||||||||||
| Subordinated notes, net of unamortized issuance costs | 99,395 | 94,500 | 227,723 | 219,043 | |||||||||||||||||||
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.