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, risk participation agreements, and foreign currency exchange contracts with customers and other third parties. See “Note 13: Fair Value Measurements” for further discussion of the fair value measurement of such derivatives.

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 with notional amounts totaling $500.0 million as of both March 31, 2025, and December 31, 2024, were designated as cash flow hedges. Busey entered into a $300.0 million receive-fixed, pay-floating interest rate swap to reduce Busey’s asset sensitivity (Prime Loan Swap). Duration was added to Busey’s loan portfolio by fixing a portion of floating prime-based loans. Interest rates had risen above their historical lows allowing Busey to lock in a portion of its loan portfolio to reduce asset sensitivity while creating a more stable margin in a volatile rate market. These hedges were determined to be highly effective during the period, and Busey expects its hedges to remain highly effective during the remaining terms of the swaps. Further, Busey entered into forward-starting SOFR-based receive-fixed pay-floating interest rate swaps totaling $200.0 million to reduce Busey’s asset sensitivity (SOFR Loan Swaps). These hedges were determined to be highly effective during the period, and Busey expects its hedges to remain highly effective during the remaining terms of the swaps. Changes in the fair value of these interest rate swaps were recorded net of tax in OCI.


		As of
(dollars in thousands)	Location	March 31, 2025			December 31, 2024
Prime Loan Swap
Notional amount		$	300,000		$	300,000
Weighted average rate: receive-fixed		4.81		%	4.81		%
Weighted average variable Prime pay rates		7.50		%	7.62		%
Weighted average maturity		3.85 years			4.10 years

SOFR Loan Swaps
Notional amount		$	200,000		$	200,000
Weighted average rate: receive-fixed		3.78		%	3.78		%
Weighted average variable 1-month CME Term SOFR pay rates		4.47		%	—
Weighted average maturity		4.52 years			4.76 years

Gross aggregate fair value of the swaps
Gross aggregate fair value of swap assets	Other assets	$	1,480		$	—
Gross aggregate fair value of swap liabilities	Other liabilities	21,106			27,770

Balances carried in AOCI
Unrealized gains (losses) on cash flow hedges, net of tax	AOCI	$	(13,659)		$	(19,805)

During the next 12 months, Busey expects to reclassify unrealized gains and losses from OCI to interest income and interest expense 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 March 31, 2025.


	Three Months Ended March 31,
(dollars in thousands)		2025		2024
Interest on swap transactions
Increase (decrease) in interest income on swap transactions		$	(2,060)	$	(2,796)
(Increase) decrease in interest expense on swap transactions		—		483
Net increase (decrease) in net interest income on swap transactions		$	(2,060)	$	(2,313)


	Three Months Ended March 31,
(dollars in thousands)		2025		2024
Unrealized gains (losses) on cash flow hedges
Net gain (loss) recognized in OCI, net of tax		$	4,641	$	(5,232)
(Gain) loss reclassified from OCI to interest income, net of tax		1,508		1,999
(Gain) loss reclassified from OCI to interest expense, net of tax		(3)		(345)
Net change in unrealized gains (losses) on cash flow hedges, net of tax		$	6,146	$	(3,578)

Busey may offer derivative contracts to its customers in connection with their risk management needs. Busey manages the risk associated with these contracts by entering into equal and offsetting derivative agreements with third-party dealers. These contracts supported variable rate, commercial loan relationships totaling $928.5 million as of March 31, 2025, and $719.2 million as of December 31, 2024. These derivatives generally worked together as an economic interest rate hedge, but Busey did not designate them for hedge accounting treatment. Consequently, changes in fair value of the corresponding derivative financial asset or liability were recorded as either a charge or credit to current earnings during the period in which the changes occurred.


		As of March 31, 2025				As of December 31, 2024
(dollars in thousands)	Location	Notional Amount		Fair Value		Notional Amount		Fair Value
Derivative assets not designated as hedging instruments
Interest rate swaps: receive-fixed, pay-floating	Other assets	$	330,406	$	6,327	$	156,539	$	1,465
Interest rate swaps: receive-floating, pay-fixed	Other assets	598,075		27,061		562,697		28,854
Derivative assets not designated as hedging instruments		$	928,481	$	33,388	$	719,236	$	30,319

Derivative liabilities not designated as hedging instruments
Interest rate swaps: receive-fixed, pay-floating	Other liabilities	$	598,075	$	27,061	$	562,697	$	28,854
Interest rate swaps: receive-floating, pay-fixed	Other liabilities	330,406		6,327		156,539		1,465
Derivative liabilities not designated as hedging instruments		$	928,481	$	33,388	$	719,236	$	30,319


		Three Months Ended March 31,
(dollars in thousands)	Location		2025		2024
Interest rate swaps
Receive-fixed, pay-floating	Noninterest expense		$	3,034	$	5,480
Receive-floating, pay-fixed	Noninterest expense		(3,034)		(5,480)
Net change in fair value of interest rate swaps			$	—	$	—

To manage the credit risk exposure related to customer-facing swaps, Busey entered into risk participation agreements in conjunction with loan participation arrangements with other financial institutions. Under these risk participation agreements, Busey purchased credit risk participation, paying an up-front fee to a counterparty to accept a portion of its credit exposure, and will receive a payment from the counterparty if the swap customer defaults on its obligations. In addition to these agreements Busey entered into, in connection with the CrossFirst acquisition, Busey assumed additional risk participation agreements entered into by CrossFirst, in which CrossFirst purchased credit risk participation, and Busey will receive a payment from the counterparty if the swap customer defaults on its obligations.

In connection with the CrossFirst acquisition, Busey assumed risk participation agreements entered into by CrossFirst, under which CrossFirst sold credit risk participation, receiving an up-front fee from a counterparty in exchange for accepting a portion of the counterparty’s credit exposure. Under these agreements, Busey will be required to make a payment to the counterparty if the swap customer defaults on its obligations.

Notional amounts of the risk participation agreements reflect the participating banks’ pro-rata shares of the derivative instruments, consistent with their shares of the related participated loans. The risk participation agreements mature between October 2025 and October 2029, and are summarized as follows:


	As of
(dollars in thousands)	March 31, 2025		December 31, 2024
Risk participation agreements purchased
Number of risk participation agreements	10		5
Notional amount	$	59,267	$	40,092
Fair value	28		5

Risk participation agreements sold
Number of risk participation agreements	12		—
Notional amount	$	106,163	$	—
Fair value	67		—

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.

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.


		As of March 31, 2025				As of December 31, 2024
(dollars in thousands)	Location	Notional Amount		Fair Value		Notional Amount		Fair Value
Mortgage banking derivative assets
Interest rate lock commitments	Other assets	$	8,206	$	165	$	2,430	$	28
Forward sales commitments	Other assets	1,389		1		3,457		21
Mortgage banking derivative assets		$	9,595	$	166	$	5,887	$	49

Mortgage banking derivative liabilities
Interest rate lock commitments	Other liabilities	$	—	$	—	$	436	$	4
Forward sales commitments	Other liabilities	11,813		73		1,955		6
Mortgage banking derivative liabilities		$	11,813	$	73	$	2,391	$	10


	Three Months Ended March 31,
(dollars in thousands)		2025		2024
Net gains (losses) on mortgage banking derivatives
Gains (losses) on interest rate lock commitments		$	242	$	262
Gains (losses) on forward sales commitments		(87)		(42)


Net gains (losses) on mortgage banking derivatives		$	155	$	220