On April 14, 2023, KBRA affirmed the senior unsecured debt rating of BBB+, the subordinated debt rating of BBB, and the short-term debt rating of K2 for Champaign, Illinois based First Busey Corporation (NASDAQ: BUSE) (“the company”). In addition, KBRA affirmed the deposit and senior unsecured debt ratings of A-, the subordinated debt rating of BBB+, and the short-term deposit and debt ratings of K2 for its subsidiary, Busey Bank. The Outlook for all long-term ratings is Stable.

The ratings are underpinned by a conservatively managed balance sheet with limited loan concentration and leverage, strong funding capacity, and ample liquidity backstop. BUSE’s highly diverse earnings profile also reflects a rating strength, driven by strong levels of recurring fee revenues that are less correlated to lending activities. In that regard, combined with disciplined expense management, core and risk weighted earnings have demonstrated consistency over time despite the variability in NIM. Total noninterest income has averaged ~1.10% of average assets (or ~30% of total revenues) since YE18, meaningfully driven by scalable and relatively granular wealth management and payment solutions businesses. BUSE’s funding profile is comparatively strong, anchored by a durable, lower-cost core deposit base, granular deposit relationships, and low levels of uninsured deposits (27% of total deposits or ~$2.6 billion at 1Q23). On the latter, uninsured deposits are amply buffered by abundant levels of unpledged securities (~$2.4 billion), unused FHLB capacity ($1.4 billion), and ~$2 billion in other contingent sources. Asset quality measures remained solid as credit losses have been nominal, the NPA ratio has tracked better than peers, and classified loan levels are low. The current credit profile also reflects manageable investor CRE concentration (~200% of RBC), low C&D, and well-collateralized retail and non-medical office CRE, which collectively represent less than 60% of RBC. Regulatory capital protection, particularly as measured by the CET1 ratio (12.2% at 1Q23), has been prudently managed, tracking slightly above the peer average over time. Similar to peers, the TCE ratio has been adversely impacted by AOCL due to the rapid Fed rate hikes, although is adequate for the risk profile. Partly confining the ratings is a geographic footprint that is generally narrower than many higher rated peers and relatively limited earnings performance history operating above the $10 billion-asset Durbin Amendment threshold, particularly through a tightening rate cycle.

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About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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