First Busey (BUSE) Risk Analysis

Busey's financial performance is impacted by accounting principles, policies, and guidelines. Some of these policies require the use of estimates and assumptions that may affect the value of assets or liabilities and financial results. Certain accounting policies are critical and require management to make subjective and complex judgments about matters that are inherently uncertain, and materially different amounts could be reported under different conditions or using different assumptions. If such estimates or assumptions underlying Busey's Consolidated Financial Statements are incorrect, the Company may experience material losses. One such assumption and estimate is the valuation analysis of Busey's goodwill and other intangible assets. Although Busey's analysis does not indicate impairments exist, the Company is required to perform additional impairment assessments on at least an annual basis, which could result in future impairment charges. Any future impairment of goodwill or other intangible assets, whether based on the current balances or future balances arising out of acquisitions, could have a material adverse effect on the results of operations by reducing net income or increasing net losses.

Busey's commercial loans are primarily underwritten based on the identified cash flow of the borrower, with collateral serving as secondary support. Credit enhancements often include pledged collateral and personal guarantees, which enhance the likelihood of repayment. However, the availability of funds for repayment-particularly for loans secured by accounts receivable-may depend significantly on the borrower's ability to collect from their customers. In periods of economic recession, this capacity could decline, increasing repayment risks. Collateral securing loans may depreciate over time, be difficult to appraise, or fluctuate in value based on the borrower's business performance. With larger commercial loans and the less readily marketable nature of collateral, even a small number of loan loss incidents could materially impact Busey's financial condition and operational results.

Acquisitions remain a cornerstone of Busey's growth strategy, exemplified by the planned CrossFirst acquisition. While acquisitions provide opportunities for earnings enhancement and market expansion, they also involve significant risks: - Integration Risks: Aligning systems, procedures, and personnel as well as harmonizing organizational cultures can be complex and disruptive, potentially negatively impacting customers. To realize anticipated benefits from a merger, Busey must successfully integrate an acquired company into its existing businesses, risk management framework, compliance systems, and corporate culture, in a manner that permits the anticipated benefits to be realized and that does not materially disrupt existing client relationships or result in decreased revenues due to the loss of clients. - Credit Quality and Unknown Liabilities: Acquired assets may carry hidden risks that adversely affect financial performance. Insufficient or inadequate due diligence, beyond credit quality, could exacerbate these challenges. - Market Conditions: The price of acquisitions fluctuates with market conditions. Busey has experienced times during which acquisitions could not be made in specific markets at prices that Busey's management considered acceptable, and Busey expects that it will experience this condition in the future in one or more markets. - Employee Attrition: The integration process can lead to employee turnover, particularly among key personnel. The success of a merger is dependent, in part, on Busey's ability to retain the talents and dedication of key employees. During an acquisition, it is possible that key employees may decide not to remain with the acquired company while the merger is pending or with Busey after the merger. If Busey is unable to retain key employees, including management, who are critical to the successful integration and future operations of the combined company, Busey could face disruptions in its operations, loss of key information, expertise, or know-how, and unanticipated additional recruitment costs. In addition, following a merger, if key employees terminate their employment, Busey's business activities may be adversely affected, and management's attention may be diverted from successfully hiring suitable replacements, all of which may cause Busey's business to suffer. - Financing Challenges: Acquisitions often require incurring debt or issuing new shares, thereby increasing Busey's leverage and diminishing its liquidity. Issuing capital stock to the sellers in an acquisition or to third-parties to raise capital could dilute the interests of Busey's existing stockholders. Issuance of new shares of Busey common stock may result in fluctuations in the market price of Busey common stock, including a stock price decrease. - Substantial acquisition costs: With any acquisition, Busey may incur a number of non-recurring costs associated with the merger and integration. These costs include legal, financial advisory, accounting, consulting and other advisory fees, severance/employee benefit-related costs, public company filing fees and other regulatory fees, printing costs, system conversion costs, added facilities costs, and other related costs. Further, Busey could incur due diligence expenses which may not result in an acquisition. - Delayed or unrealized benefits: The time period in which anticipated benefits of a merger are fully realized may take longer than anticipated, or Busey may be unsuccessful in realizing the anticipated benefits from mergers and future acquisitions.