First Busey (BUSE) Q3 2026 earnings review
First Busey gathers more deposits, but bad loans cut profit
First Busey, a Midwest and Texas regional bank, gathered deposits rapidly while its loan book shrank and credit costs jumped. Profit per share excluding one-offs fell 9% from last quarter to $0.63 because one troubled commercial borrower forced the bank to set aside $9.6 million for bad loans. Chief executive Van Dukeman said underlying trends stayed solid, as customer deposits rose at an 11% annual pace and wealth management fees grew 15% from a year ago.
| Operating revenue, excluding one-offs | $194.3M -1.2% from a year ago |
|---|---|
| Profit per share, excluding one-offs | $0.63 $0.69 last quarter |
| Portfolio loans | $12.82B -2.8% from last quarter |
| Q4 operating cost outlook, excluding one-offs | New $113–114M (+2.9% vs Q3) |
⚖️ Verdict: 🔴 Bearish
The story got worse because loan balances shrank at their fastest pace since last year's CrossFirst merger while problem loans climbed. Lending margins also contracted for a second straight quarter as higher deposit rates and idle cash weighed on spreads, and the bank expects operating costs to rise about 3% next quarter by our math. The good news: strong deposit inflows let the company pay off wholesale funding and keep buying back shares.
The question now is whether the shrinking loan book and the big third-quarter loan write-off are just the final cleanup of acquired CrossFirst accounts or signs of weaker customer demand and wider credit trouble. If it is cleanup, payoffs and bad loans will settle down; if it is broader weakness, shrinking loan balances and higher credit reserves will cut into next year's earnings. Fourth-quarter loan balances and classified asset totals will show which view is right.
🐂 Bull Case
Deposits Grew 11% Annualized and Cut Wholesale Funding
First Busey is a Midwest regional bank that expanded into Texas and the West by buying CrossFirst last year. Chairman and chief executive Van Dukeman said "Deposit growth remained a highlight, increasing at an annualized rate of 11% for the second consecutive quarter." Total deposits rose by $408.8 million from last quarter to $15.54 billion, driven by "seasonal public funds inflows and strategic efforts to grow core customer deposits".
This customer cash allowed the lender to pay off $50.0 million of brokered deposits, which are higher-cost funds raised through middlemen. Brokered funding now makes up just 0.1% of total deposits, and the ratio of loans to deposits dropped from 87.2% to 82.5%. Because the bank also holds $1.84 billion of accounts paying 0.01% interest, it has plenty of low-cost cash to fund future lending.
What to watch: fourth-quarter deposit balances after seasonal public money leaves. Holding the loan-to-deposit ratio near 83% without raising deposit rates further would show the new customer accounts are sticky.
Wealth Management Fees Rose 15% on New Western Teams
Busey's wealth management division manages investments, trusts, and tax planning for individuals and foundations. While the banking side struggled to grow revenue, wealth management fees climbed 15.5% from a year ago to $19.8 million. Assets under care — the customer money the division oversees — rose 11.8% from last year to $16.72 billion as market gains joined new client money.
Over the past year, the company built new wealth teams in former CrossFirst cities including Dallas, Denver, Phoenix, and Kansas City. Those new Western markets now oversee $231 million in client assets, helping lift the division's pre-tax profit margin to 50.3% from 43.0% a year ago. Because wealth fees require no loan capital, this cross-selling cushions the bank while commercial lending shrinks.
What to watch: assets under care in the new Western markets next quarter. Continued net inflows there would confirm that CrossFirst commercial clients are adopting Busey's wealth services.
Buybacks Cut the Share Count by 7% From Last Year
With the loan book shrinking, Busey is returning its extra capital to shareholders rather than keeping it on the balance sheet. The holding company bought back 1.97 million common shares for $59.6 million this quarter, reducing its average diluted share count by 7.2% from a year ago to 83.7 million. That lower share count kept earnings per share excluding one-offs at $0.63, down just one cent from a year ago despite a 8.5% drop in comparable net profit.
Combined with the $0.26 quarterly dividend, total capital returned to common stockholders reached 155% of quarterly profit excluding one-offs. Even after spending $188.4 million on buybacks so far this year, its Common Equity Tier 1 ratio — core bank capital divided by risk-weighted assets — held steady at 12.47%.
What to watch: the pace of share repurchases against the remaining 1.93 million share authorization. Slowing buybacks while $215.2 million of 8.25% preferred stock stays outstanding would leave that expensive funding in place.
🐻 Bear Case
A Single Bad Loan Drove Credit Costs Up Fourfold
"Results were impacted by a single commercial relationship in the Central region that incurred a partial charge-off and moved to non-accrual this quarter," Dukeman wrote. He added that "Excluding this relationship, underlying trends for the quarter remained solid," and the release stated that "asset quality remains strong". Because of this $37.6 million troubled loan, the provision for credit losses jumped from $2.2 million last quarter to $9.6 million, taking 3.8 percentage points more of operating revenue by our math.
- Classified assets (troubled or substandard loans): $244.9 million, up 8.3% from last quarter and up 52.0% from a year ago by our math
- Non-performing loans (loans no longer paying interest): $81.6 million, or 0.64% of total loans versus 0.35% a year ago
- Allowance coverage of non-performing loans: fell to 2.01 times from 2.44 times last quarter and 3.67 times a year ago
- Early-stage delinquencies (loans 30 to 89 days past due): $16.9 million, more than double last quarter's $8.1 million
Those broader numbers cut against the claim that credit trouble is isolated to one borrower. Problem loans have climbed for three straight quarters while the reserve cushion relative to bad loans has thinned. If more substandard commercial loans default, quarterly credit provisions will stay elevated and eat into the cost savings from the CrossFirst merger.
What to watch: classified assets and commercial charge-offs in the fourth quarter. Another rise in substandard loans would show that commercial credit stress is spreading across the acquired regions.
Loan Balances Shrank Faster as Payoffs Continued
Portfolio loans — the loans Busey intends to keep on its books — fell by $372.7 million from last quarter to $12.82 billion. That 2.8% quarterly drop is the steepest decline since the CrossFirst merger closed, leaving the loan book down 5.7% from a year ago by our math. Dukeman pointed to the "repositioning of approximately $65 million of lender finance loans to held for sale as part of our ongoing portfolio management efforts", which the bank sold in early October.
Even without that $65.1 million transfer, portfolio loans shrank by more than $307 million because customer payoffs and amortization of $735 million swamped $407 million of new loan production. Texas loans fell by $221 million and Chicago-area loans dropped by $116 million, while commercial and industrial balances are down 14.2% from a year ago by our math. Because presentation slides note "payoff headwinds that are expected to continue into 4Q26", the bank's main interest-earning engine is still contracting.
What to watch: fourth-quarter net loan change after the October loan sale closes. A sixth straight quarterly contraction would make it hard to grow net interest income next year.
Higher Deposit Costs and Extra Cash Squeezed Lending Margins
Expanding lending spreads had been a primary post-merger driver, but net interest margin — the profit spread between what the bank earns on loans and pays on deposits — fell for a second straight quarter. The margin dropped 0.14 percentage points from last quarter to 3.58%, and excluding acquisition accounting boosts, it fell 0.16 percentage points to 3.46%. The company blamed "repricing impacts from the late quarter Federal Open Market Committee rate hike" and deposit gathering campaigns.
Those campaigns pushed average deposit funding costs up 0.13 percentage points to 1.93%, and the rate at the end of September reached 1.97%. Because deposits came in while loans paid off, average cash sitting at other banks jumped more than fivefold to $688.7 million, earning 3.68% instead of the 5.99% portfolio loans earn. Busey says in its presentation that it will "Expect NIM to modestly improve in 4Q26", but rising deposit rates and shrinking loan balances work against a full rebound.
What to watch: fourth-quarter net interest margin excluding acquisition accounting. Failure to rebound above 3.50% as cash is deployed would confirm that higher deposit competition has capped the bank's spread.
Risks this quarter didn't answer
Four standing concerns from prior periods cannot be checked until Busey files its full quarterly report with regulators.
- Traditional office real estate: commercial real estate is 41.0% of total loans ($5.26 billion), and the quarterly filing will show how much of the office book is criticised.
- Unfunded loan commitments: credit lines waiting to be drawn fell 14.7% in the first half of the year, and the filing's footnote will show if the lending pipeline shrank again.
- Executive succession: former president Michael Maddox left in the first quarter, and the board has not named a successor under chief executive Van Dukeman.
- Illinois franchise tax dispute: the state claimed over $28 million in back taxes and interest, and the legal footnote will show if the bank has set aside a reserve.
💲 Other KPIs
Down 2.2% from a year ago and up 0.7% from last quarter. Merger cost cuts lowered employee pay and benefits by 1.0 percentage point of operating revenue from a year ago by our math, while one-time merger and restructuring charges dropped to $1.1 million from $3.1 million last quarter.
Fell 5.0% from $20.40 last quarter and 1.6% from $19.69 a year ago. Tangible book value — net worth per share after stripping out goodwill — dropped because unrealized bond losses in accumulated other comprehensive income widened by $100.8 million and share buybacks were executed at $30.21, above book value.
🔮 Guidance
New. The presentation forecasts fourth-quarter operating expenses excluding merger and restructuring charges to rise about 2.9% at the middle of the range from $110.3 million in Q3, by our math. That step-up still leaves quarterly costs 1.7% below the $115.5 million recorded in the fourth quarter of last year as CrossFirst savings hold.
Raised. Busey lifted its fourth-quarter projection for loan purchase-accounting accretion — extra interest income recognized as discounted CrossFirst loans pay off — by $0.27 million from last quarter's schedule. Even after the raise, the schedule has loan accretion falling 17.1% from Q3's $5.56 million, and dropping further to $14.36 million across all of 2027.
Unchanged. The scheduled non-cash charge for writing down customer relationships acquired in past mergers stays at $4.08 million for the fourth quarter, down slightly from $4.15 million in Q3. For full-year 2027, the schedule remains unchanged at $15.34 million.
❓ Key Questions
What caused the $37.6 million Central region loan to fail?
Management said emerging circumstances forced a $10.0 million write-off and a $17.8 million reserve on one commercial borrower. Investors need to know the borrower's industry, whether it came from CrossFirst, and why classified assets rose by $18.8 million overall.
How much of the $592 million in payoffs was voluntary?
Portfolio loans fell by $372.7 million in Q3, and the presentation warns that payoff headwinds will continue into Q4. Management has not split how much of that runoff was deliberate pruning of risky loans versus good borrowers leaving for cheaper lenders.
Did unfunded commercial credit lines shrink again in Q3?
Unfunded loan commitments dropped 14.7% in the first six months of 2026, and the Q3 earnings release does not include the off-balance-sheet table. That figure shows whether future commercial loan demand is stabilizing or still drying up.
Why buy back stock at $30 while keeping 8.25% preferreds?
Busey spent $59.6 million buying common shares at 1.56 times tangible book value while paying $4.6 million a quarter in dividends on $215.2 million of preferred stock. Retiring the preferred stock when callable would save guaranteed funding costs.