Borrowings

6 Months Ended

Jun. 30, 2022

Borrowings

Borrowings

Note 6:  Borrowings

Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature daily.  Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction.  The underlying securities are held by the Company’s safekeeping agent.  The Company may be required to provide additional collateral based on fluctuations in the fair value of the underlying securities.  Securities sold under agreements to repurchase were as follows (dollars in thousands):

	As of
	June 30,			December 31,
	2022			2021
Securities sold under agreements to repurchase	$	228,383		$	270,139
Weighted average rate for securities sold under agreements to repurchase		0.55	%		0.08	%

Term Loan

On May 28, 2021, the Company entered into a Second Amended and Restated Credit Agreement, pursuant to which the Company has access to (i) a $40.0 million revolving line of credit with a termination date of April 30, 2022, and (ii) a $60.0 million term loan with a maturity date of May 31, 2026.  The loans had an annual interest rate of 1.75% plus the one-month LIBOR rate.  On April 30, 2022, the agreement was amended, effecting an extension of the termination date for the revolving line of credit to April 30, 2023, and providing for the transition from a LIBOR-indexed interest rate to a SOFR-indexed interest rate.  Under the terms of the amendment, the loans now have an annual interest rate of 1.80% plus the one-month forward-looking term rate based on SOFR.

Proceeds of the term loan were used to fund a part of the cash portion of the merger consideration related to the acquisition of CAC in the second quarter of 2021, and for general corporate purposes.  As of June 30, 2022, there was no balance outstanding on the revolving credit facility and a total of $48.0 million outstanding on the term loan, of which $12.0 million was short-term and $36.0 million was long-term.  The revolving credit facility incurs a non-usage fee based on any undrawn amounts.  Quarterly payments on the term loan reduce the outstanding principal balance by $3.0 million each quarter.

Short-term Borrowings

First Busey’s short-term borrowings include loans maturing within one year of the loan origination date, as well as the current portion of long-term debt that is due within 12 months.  Short-term borrowings are summarized as follows (dollars in thousands):

	As of
	June 30,		December 31,
	2022		2021
Short-term borrowings
FHLB advances maturing in less than one year from date of origination, and the current portion of long-term FHLB advances due within 12 months	$	4,396	$	5,678
Term Loan, current portion due within 12 months		12,000		12,000
Total short-term debt	$	16,396	$	17,678

Federal funds purchased are short-term borrowings that generally mature between one and 90 days.  The Company had no federal funds purchased as of June 30, 2022, or December 31, 2021.

Long-term Debt

First Busey’s long-term debt consists of loans maturing more than one year from the loan origination date, excluding the current portion that is due within 12 months.  Long-term debt is summarized as follows (dollars in thousands):

	As of
	June 30,		December 31,
	2022		2021
Long-term debt
Notes payable, FHLB, original maturity of 5 years, collateralized by FHLB deposits, residential and commercial real estate loans and FHLB stock	$	—	$	4,056
Term Loan		36,000		42,000
Total long-term debt	$	36,000	$	46,056

As of December 31, 2021, funds borrowed from the FHLB, listed above, consisted of one variable-rate note maturing May 2023, with an interest rate of 3.04%.  This note became due within 12 months during the second quarter of 2022, and the balance is now fully reflected in short-term borrowings.

Senior and Subordinated Notes

On May 25, 2017, the Company issued $40.0 million of 3.75% senior notes that matured and were redeemed on May 25, 2022.  Additionally, on May 25, 2017, the Company issued $60.0 million of fixed-to-floating rate subordinated notes that mature on May 25, 2027.  The subordinated notes bore interest at an annual rate of 4.75% for the first five years after issuance and thereafter bear interest at a floating rate equal to the three-month LIBOR plus a spread of 2.919%, as calculated on each applicable determination date.  The subordinated notes were payable semi-annually on each May 25 and November 25, commencing on November 25, 2017, during the five-year fixed-term, and thereafter are payable on February 25, May 25, August 25, and November 25 of each year, commencing on August 25, 2022.  The subordinated notes have an optional redemption in whole or in part on any interest payment date on or after May 25, 2022, and the Company anticipates redeeming $60.0 million during the third quarter of 2022.  The full balance of the subordinated notes qualified as Tier 2 Capital for First Busey for the first five years, with a phase out beginning in the second quarter of 2022.  The senior notes were, and the subordinated notes are, unsecured obligations of the Company.

On June 1, 2020, the Company issued $125.0 million of fixed-to-floating rate subordinated notes that mature on June 1, 2030.  The subordinated notes, which qualify as Tier 2 capital for First Busey, bear interest at an annual rate of 5.25% for the first five years after issuance and thereafter bear interest at a floating rate equal to a three-month benchmark rate plus a spread of 5.11%, as calculated on each applicable determination date.  The subordinated notes are payable semi-annually on each June 1 and December 1 during the five-year fixed-term, and thereafter on March 1, June 1, September 1, and December 1 of each year, commencing on September 1, 2025.  The subordinated notes have an optional redemption in whole or in part on any interest payment date on or after June 1, 2025.  The subordinated notes are unsecured obligations of the Company.

On June 2, 2022, the Company issued $100.0 million aggregate principal amount of 5.000% fixed-to-floating rate subordinated notes due 2032, which qualify as Tier 2 Capital for regulatory purposes.  The price to the public for the subordinated notes was 100% of the principal amount of the subordinated notes.  Interest on the subordinated notes will accrue at a rate equal to (i) 5.000% per annum from the original issue date to, but excluding, June 15, 2027, payable semiannually in arrears, and (ii) a floating rate per annum equal to a benchmark rate, which is expected to be Three-Month Term SOFR (as defined in the subordinated notes), plus a spread of 252 basis points from and including, June 15, 2027, payable quarterly in arrears.  The subordinated notes have an optional redemption in whole or in part on any interest payment date on or after June 15, 2027.

Unamortized debt issuance costs related to senior notes and subordinated notes are presented in the following table (dollars in thousands):

	As of
	June 30,		December 31,
	2022		2021
Unamortized debt issuance costs
Senior notes issued in 2017	$	—	$	56
Subordinated notes issued in 2017		338		549
Subordinated notes issued in 2020		1,452		1,678
Subordinated notes issued in 2022		1,906		—
Total unamortized debt issuance costs	$	3,696	$	2,283