BUSE — Q2 2026 Financial Report Analysis

Profit up a third, but mostly because last year's merger costs are gone

First Busey, a Midwest bank holding company with $18.19 billion of assets (now headquartered in Leawood, Kansas, with its bank still based in Champaign, Illinois), earned $63.2 million, or $0.69 per diluted share, in the second quarter of 2026. That's up from $47.4 million, or $0.52, a year earlier. The 33% jump in GAAP profit mostly reflects how messy Q2 2025 was: Busey was still absorbing its March 2025 acquisition of CrossFirst Bankshares and booked $16.6 million of acquisition expenses that quarter, against $3.1 million of acquisition and restructuring costs this quarter. On the company's own adjusted basis, which strips those costs out along with securities gains and losses, earnings per share rose a more modest 9.5%, from $0.63 to $0.69. Most of that 9.5% came from Busey buying back its own shares, not from the bank earning more.

At a glance

• Revenue of $196.7 million, down 0.7%. Revenue here means net interest income plus fee income. The bank's top line didn't grow over the year. Profits rose because costs fell.
• Total loans of $13.20 billion, down 4.4% (−$613 million). The loan book is shrinking. Most of the drop is in commercial and industrial (C&I) lending to businesses, which fell 11.5%. A bank makes most of its money on loans, so a smaller loan book limits how much it can earn later.
• Diluted share count down 6.0%. Busey bought back $128.8 million of stock in the first half, $63.1 million of it this quarter. That spreads roughly flat underlying earnings over fewer shares.

Key figures

A few terms used throughout:

• Net interest margin (NIM): the spread a bank earns between what its loans and securities yield and what it pays for deposits and borrowings, as a share of its interest-earning assets.
• Efficiency ratio: how many cents of operating cost the bank spends to produce each dollar of revenue. Lower is better.
• CET1 ratio: the bank's core loss-absorbing capital as a share of its risk-weighted assets.
• ROTCE: annual profit to common shareholders as a percentage of their equity, after excluding goodwill and other intangible assets.

What actually drove the quarter

Margin up, balances down: they cancelled out. NIM widened 23 basis points over the year, to 3.72%. (A basis point is one-hundredth of a percentage point.) The cause was mostly cheaper funding: total interest expense fell from $94.3 million to $72.0 million. Interest income fell almost as much, though, from $247.4 million to $224.4 million, because the bank is smaller. Average interest-earning assets dropped from $17.70 billion to $16.51 billion. Net interest income ended down $0.8 million.

Part of the margin also comes from accounting rather than lending. When Busey bought CrossFirst, it marked the acquired loans down to fair value, and that discount is booked back as interest income over time ("purchase accounting accretion"). Accretion was $4.2 million this quarter, down from $7.1 million a year ago and $5.4 million in Q1. Without it, NIM was 3.62% and net interest income was $149.1 million, up 1.5% on the year. That is the underlying number. The accretion will keep shrinking.

Against the first quarter, net interest income slipped $1.6 million. Management attributes that "largely" to $1.2 million less accretion, plus lower average loan balances. Deposit costs barely moved: total deposit cost of funds went from 1.81% to 1.80%.

Expenses did the work. Noninterest expense fell $15.2 million year on year. About $13.5 million of that is lower acquisition and restructuring cost ($16.6M → $3.1M). On the adjusted basis, which excludes those costs, expense fell 1.5% ($111.2M → $109.5M). Data processing showed the clearest integration saving: adjusted cost fell from $10.1 million to $8.9 million. Q1 2026 had $16.7 million of one-off costs of its own. Busey booked restructuring charges that quarter to capture more CrossFirst cost savings and in connection with the departure of Mr. Maddox. That makes Q2 look cleaner against Q1 as well.

Fees: wealth management carried them. Wealth management fees rose 19.1% to $20.0 million, mainly from trust fees. Assets under care reached $16.51 billion, up from $14.10 billion a year ago, and the company says this was its third straight record quarter for wealth fees. Total fee income still fell 1.2%, for two reasons. Securities gains were smaller ($2.4M vs $6.0M), and "other" income fell 24.3% because of lower private-equity income, mortgage revenue and commercial loan sale gains. Excluding securities gains, fee income rose 7.7% ($38.9M → $41.9M).

What the headline numbers hide

• The GAAP vs adjusted gap is small this quarter but large in the comparison. This quarter, adjusted net income ($63.7M) and GAAP net income ($63.2M) were nearly the same. The adjustments were $3.1M of acquisition and restructuring costs, offset by a $2.4M securities gain. The 33% GAAP growth comes from a messy base period, so treat the 9.5% adjusted EPS growth as the honest number.

• Buybacks did most of the per-share work. Adjusted net income available to common shareholders rose just 3.2% ($57.2M → $59.1M). The diluted share count fell 6.0% (90.9M → 85.4M), and that turned 3.2% earnings growth into 9.5% EPS growth. Busey paid a weighted average of $26.98 a share in Q2, about 1.3 times its $20.40 tangible book value per share. Separately, preferred dividends now cost $4.6 million a quarter, versus $0.2 million in Q2 2025. That money comes out before common shareholders are paid.

• Lower tax rate. The effective tax rate fell from 26.52% to 22.85%. The 2025 rate included deferred-tax write-offs tied to the acquisition. At last year's rate, this quarter's net income would have been about $3 million lower.

• Reserves released while bad loans rose. Net charge-offs (loans written off as uncollectable, net of recoveries) were $6.4 million, but the provision (the amount set aside for future losses) was only $2.2 million. The allowance therefore shrank to $164.2 million, or 1.24% of loans, from 1.26% in Q1 and 1.33% a year ago. Problem loans moved the other way:

  • Non-performing loans rose to $67.4 million (0.51% of loans), from $46.6 million in March. Busey says one commercial credit drove the increase; it took a partial charge-off on that loan and set a specific reserve against it.
  • The allowance now covers non-performing loans 2.44 times, down from 3.63 times a quarter earlier.
  • Classified assets reached $226.0 million, up from $175.7 million a year ago. Classified assets are loans the bank grades as weak, plus foreclosed property.
  • Potential problem loans were $155.7 million, versus $116.4 million at year-end 2025.

  None of this is large against 12.53% CET1 capital. But a thinner reserve flattered earnings slightly in a quarter when credit quality got worse.

• The shrinking balance sheet is partly deliberate. Of the $673 million drop in deposits, about $294 million was brokered deposits being run off: these are wholesale funds that are more expensive and less loyal than customer deposits, and they fell from $353.6 million to $60.0 million. Core deposits fell 3.1%. The loan decline gets no explanation in the filing beyond "lower average loan balances." It is concentrated in C&I loans (−$517M year on year), and non-owner-occupied commercial real estate also fell $106 million over the quarter. The "retail other" consumer loan category was the only growing part of the book, up 30% to $639 million.

• Cash conversion is fine for a bank. Operating cash flow in the first half was $93.0 million against $113.2 million of net income. That's an unremarkable gap: a bank's operating cash flow mostly reflects timing items rather than the quality of its lending profits.

Takeaway: Busey's integration of CrossFirst is largely finished. Costs are down, the margin is up, and capital is strong. But the bank isn't growing: loans fell 4.4% and net interest income excluding acquisition accounting rose only 1.5%. Adjusted EPS grew 9.5%, but roughly two-thirds of that came from buying back 6% of its shares, not from the banking business itself.

Outlook

Busey gave no numeric guidance for net interest income, loans or expenses in its earnings release or 10-Q. Its rate disclosure says a sudden, lasting 1-percentage-point rise in interest rates would lift net interest income by 1.8% over the next twelve months. That is close to neutral, so Fed moves shouldn't swing results much either way. Securities portfolio cash flows of about $171.9 million are expected over the rest of 2026, with a current book yield of 3.04%. Reinvesting that money at today's rates gives a modest lift to income. The board added 4 million shares to the buyback authorization in May, and 3.9 million shares remained available at June 30. With CET1 at 12.53%, buybacks can keep supporting EPS for a while.

Our view: watch three things in the third quarter.

1. Whether loan balances stop falling. A smaller loan book with flat margins means flat revenue.
2. How quickly accretion keeps fading. It was $7.1M in Q2 2025, $5.4M in Q1 2026 and $4.2M in Q2 2026, and each dollar lost comes straight out of the headline margin.
3. Whether the non-performing loan increase stays limited to the one commercial credit.

If loans stabilise and credit holds, the 14–15% ROTCE looks sustainable. If loans keep shrinking, EPS growth will depend more and more on buybacks.

This is our first published analysis of First Busey, so there's no earlier outlook to check against. Busey released Q2 results on July 28, 2026, and filed the 10-Q on August 6, 2026. Third-quarter results would normally follow in late October.