10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC  20549

FORM 10-Q

x  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended 6/30/2014

o  Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 0-15950

FIRST BUSEY CORPORATION

(Exact name of registrant as specified in its charter)

Nevada	37-1078406
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

100 W. University Ave. Champaign, Illinois	61820
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code:  (217) 365-4544

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x  No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at August 7, 2014
Common Stock, $.001 par value	86,831,027

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

2

FIRST BUSEY CORPORATION and Subsidiaries

CONSOLIDATED BALANCE SHEETS

June 30, 2014 and December 31, 2013

(Unaudited)

	June 30, 2014			December 31, 2013
	(dollars in thousands)
Assets
Cash and due from banks (interest-bearing 2014 $74,361; 2013 $118,228)	$	182,032		$	231,603
Securities available for sale, at fair value	840,112			841,310
Securities held to maturity, at amortized cost	1,850			834
Loans held for sale	20,286			13,840
Loans (net of allowance for loan losses 2014 $47,428; 2013 $47,567)	2,256,354			2,233,893
Premises and equipment	64,562			65,827
Goodwill	20,686			20,686
Other intangible assets	8,092			9,571
Cash surrender value of bank owned life insurance	40,752			40,674
Other real estate owned (OREO)	1,622			2,133
Deferred tax asset, net	26,157			35,642
Other assets	44,944			43,562
Total assets	$	3,507,449		$	3,539,575
Liabilities and Stockholders’ Equity
Liabilities
Deposits:
Noninterest-bearing	$	605,346		$	547,531
Interest-bearing	2,256,182			2,321,607
Total deposits	$	2,861,528		$	2,869,138
Securities sold under agreements to repurchase	140,563			172,348
Junior subordinated debt owed to unconsolidated trusts	55,000			55,000
Other liabilities	23,591			27,725
Total liabilities	$	3,080,682		$	3,124,211
Stockholders’ Equity
Series C Preferred stock, $.001 par value, 72,664 shares authorized, issued and outstanding, $1,000.00 liquidation value per share	$	72,664		$	72,664
Common stock, $.001 par value, authorized 200,000,000 shares; shares issued — 88,287,132	88			88
Additional paid-in capital	593,279			593,144
Accumulated deficit	(217,906		)	(225,722		)
Accumulated other comprehensive income	7,420			4,456
Total stockholders’ equity before treasury stock	$	455,545		$	444,630
Common stock shares held in treasury at cost — 2014 1,456,105; 2013 1,482,777	(28,778		)	(29,266		)
Total stockholders’ equity	$	426,767		$	415,364
Total liabilities and stockholders’ equity	$	3,507,449		$	3,539,575
Common shares outstanding at period end	86,831,027			86,804,355

See accompanying notes to unaudited consolidated financial statements.

3

FIRST BUSEY CORPORATION and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

For the Six Months Ended June 30, 2014 and 2013

(Unaudited)

	2014		2013
	(dollars in thousands, except per share amounts)
Interest income:
Interest and fees on loans	$	44,970	$	46,161
Interest and dividends on investment securities:
Taxable interest income	6,275		6,454
Non-taxable interest income	1,662		1,960
Total interest income	$	52,907	$	54,575
Interest expense:
Deposits	$	2,668	$	3,921
Securities sold under agreements to repurchase	74		84
Short-term borrowings	—		15
Long-term debt	—		125
Junior subordinated debt owed to unconsolidated trusts	587		602
Total interest expense	$	3,329	$	4,747
Net interest income	$	49,578	$	49,828
Provision for loan losses	2,000		4,000
Net interest income after provision for loan losses	$	47,578	$	45,828
Other income:
Trust fees	$	10,697	$	9,921
Commissions and brokers’ fees, net	1,347		1,109
Remittance processing	4,726		4,183
Service charges on deposit accounts	5,806		5,750
Other service charges and fees	3,106		2,966
Gain on sales of loans	2,215		6,260
Security gains, net	40		—
Other	2,061		2,235
Total other income	$	29,998	$	32,424
Other expense:
Salaries and wages	$	24,827	$	26,341
Employee benefits	5,279		6,174
Net occupancy expense of premises	4,298		4,285
Furniture and equipment expense	2,357		2,476
Data processing	5,499		5,207
Amortization of intangible assets	1,480		1,566
Regulatory expense	1,056		1,263
OREO expense	71		601
Other	8,574		9,455
Total other expense	$	53,441	$	57,368
Income before income taxes	$	24,135	$	20,884
Income taxes	8,063		7,011
Net income	$	16,072	$	13,873
Preferred stock dividends	363		1,816
Net income available to common stockholders	$	15,709	$	12,057
Basic earnings per common share	$	0.18	$	0.14
Diluted earnings per common share	$	0.18	$	0.14
Dividends declared per share of common stock	$	0.09	$	0.04

See accompanying notes to unaudited consolidated financial statements.

4

FIRST BUSEY CORPORATION and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

For the Three Months Ended June 30, 2014 and 2013

(Unaudited)

	2014			2013
	(dollars in thousands, except per share amounts)
Interest income:
Interest and fees on loans	$	22,437		$	23,200
Interest and dividends on investment securities:
Taxable interest income	3,395			3,283
Non-taxable interest income	824			977
Total interest income	$	26,656		$	27,460
Interest expense:
Deposits	$	1,306		$	1,824
Securities sold under agreements to repurchase	35			40
Short-term borrowings	—			6
Long-term debt	—			44
Junior subordinated debt owed to unconsolidated trusts	294			301
Total interest expense	$	1,635		$	2,215
Net interest income	$	25,021		$	25,245
Provision for loan losses	1,000			2,000
Net interest income after provision for loan losses	$	24,021		$	23,245
Other income:
Trust fees	$	5,080		$	4,713
Commissions and brokers’ fees, net	676			569
Remittance processing	2,376			2,085
Service charges on deposit accounts	3,111			3,023
Other service charges and fees	1,618			1,527
Gain on sales of loans	1,234			2,763
Security losses, net	(3		)	—
Other	920			1,103
Total other income	$	15,012		$	15,783
Other expense:
Salaries and wages	$	12,578		$	12,781
Employee benefits	2,386			2,947
Net occupancy expense of premises	2,055			2,103
Furniture and equipment expense	1,153			1,222
Data processing	2,687			2,568
Amortization of intangible assets	733			783
Regulatory expense	501			617
OREO expense	51			58
Other	4,679			4,722
Total other expense	$	26,823		$	27,801
Income before income taxes	$	12,210		$	11,227
Income taxes	4,025			3,787
Net income	$	8,185		$	7,440
Preferred stock dividends	181			908
Net income available to common stockholders	$	8,004		$	6,532
Basic earnings per common share	$	0.09		$	0.08
Diluted earnings per common share	$	0.09		$	0.08
Dividends declared per share of common stock	$	0.05		$	0.04

See accompanying notes to unaudited consolidated financial statements.

5

FIRST BUSEY CORPORATION and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three and Six Months Ended June 30, 2014 and 2013

(Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014			2013
	(dollars in thousands)
Net income	$	8,185	$	7,440		$	16,072		$	13,873
Other comprehensive income (loss), before tax:
Unrealized net gains (losses) on securities:
Unrealized net holding gains (losses) arising during period	$	4,222	$	(11,737	)	$	5,079		$	(13,217	)
Reclassification adjustment for losses (gains) included in net income	3		—			(40		)	—
Other comprehensive income (loss), before tax	$	4,225	$	(11,737	)	$	5,039		$	(13,217	)
Income tax expense (benefit) related to items of other comprehensive income	1,740		(4,833		)	2,075			(5,442		)
Other comprehensive income (loss), net of tax	$	2,485	$	(6,904	)	$	2,964		$	(7,775	)
Comprehensive income	$	10,670	$	536		$	19,036		$	6,098

See accompanying notes to unaudited consolidated financial statements.

6

FIRST BUSEY CORPORATION and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Six Months Ended June 30, 2014 and 2013

(Unaudited)

(dollars in thousands, except per share amounts)

											Accumulated
					Additional						Other
	Preferred		Common		Paid-in			Accumulated			Comprehensive			Treasury
	Stock		Stock		Capital			Deficit			Income			Stock			Total
Balance, December 31, 2012	$	72,664	$	88	$	594,411		$	(240,321	)	$	13,542		$	(31,587	)	$	408,797
Net income	—		—		—			13,873			—			—			13,873
Other comprehensive loss	—		—		—			—			(7,775		)	—			(7,775		)
Issuance of treasury stock for employee stock purchase plan	—		—		(167		)	—			—			222			55
Net issuance of treasury stock for restricted stock unit vesting and related tax benefit	—		—		(282		)	—			—			249			(33		)
Cash dividends common stock at $0.04 per share								(3,466		)							(3,466		)
Stock dividend equivalents restricted stock units at $0.04 per share					17			(17		)							—
Stock-based employee compensation	—		—		395			—			—			—			395
Preferred stock dividends	—		—		—			(1,816		)	—			—			(1,816		)
Balance, June 30, 2013	$	72,664	$	88	$	594,374		$	(231,747	)	$	5,767		$	(31,116	)	$	410,030
Balance, December 31, 2013	$	72,664	$	88	$	593,144		$	(225,722	)	$	4,456		$	(29,266	)	$	415,364
Net income	—		—		—			16,072			—			—			16,072
Other comprehensive income	—		—		—			—			2,964			—			2,964
Issuance of treasury stock for employee stock purchase plan	—		—		(195		)	—			—			280			85
Net issuance of treasury stock for restricted stock unit vesting and related tax benefit	—		—		(229		)	—			—			208			(21		)
Cash dividends common stock at $0.09 per share	—		—		—			(7,813		)	—			—			(7,813		)
Stock dividend equivalents restricted stock units at $0.09 per share	—		—		80			(80		)	—			—			—
Stock-based employee compensation	—		—		479			—			—			—			479
Preferred stock dividends	—		—		—			(363		)	—			—			(363		)
Balance, June 30, 2014	$	72,664	$	88	$	593,279		$	(217,906	)	$	7,420		$	(28,778	)	$	426,767

See accompanying notes to unaudited consolidated financial statements.

7

FIRST BUSEY CORPORATION and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2014 and 2013

(Unaudited)

	2014			2013
	(dollars in thousands)
Cash Flows from Operating Activities
Net income	$	16,072		$	13,873
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based and non-cash compensation	479			395
Depreciation and amortization	4,292			4,364
Provision for loan losses	2,000			4,000
Provision for deferred income taxes	7,415			4,636
Amortization of security premiums and discounts, net	3,697			4,737
Net security gains	(40		)	—
Gain on sales of loans, net	(2,215		)	(6,260		)
Net gain on disposition of premises and equipment	(7		)	—
Net (gains) loss on sales of OREO properties	(132		)	18
Increase in cash surrender value of bank owned life insurance	(78		)	(686		)
Change in assets and liabilities:
Decrease in other assets	123			8,465
Decrease in other liabilities	(3,943		)	(395		)
Decrease in interest payable	(107		)	(308		)
(Increase) decrease in income taxes receivable	(1,505		)	1,128
Net cash provided by operating activities before activities for loans originated for sale	$	26,051		$	33,967
Loans originated for sale	(107,686		)	(273,889		)
Proceeds from sales of loans	103,455			279,278
Net cash provided by operating activities	$	21,820		$	39,356
Cash Flows from Investing Activities
Proceeds from sales of securities classified available for sale	62,245			5,267
Proceeds from maturities of securities classified available for sale	105,049			99,224
Proceeds from maturities of securities classified held to maturity	3			—
Purchase of securities classified available for sale	(164,707		)	(42,513		)
Purchase of securities classified held to maturity	(1,026		)	—
Net increase in loans	(25,070		)	(89,301		)
Proceeds from disposition of premises and equipment	7			601
Proceeds from sale of OREO properties	1,252			1,479
Purchases of premises and equipment	(1,548		)	(1,710		)
Net cash used in investing activities	$	(23,795	)	$	(26,953	)

(continued on next page)

8

FIRST BUSEY CORPORATION and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

For the Six Months Ended June 30, 2014 and 2013

(Unaudited)

	2014			2013
	(dollars in thousands)
Cash Flows from Financing Activities
Net decrease in certificates of deposit	$	(44,246	)	$	(59,617	)
Net increase (decrease) in demand, money market and savings deposits	36,636			(49,739		)
Cash dividends paid	(8,176		)	(5,282		)
Value of shares surrendered upon vesting of restricted stock units to cover tax obligations	(25		)	(30		)
Principal payments on long-term debt	—			(7,000		)
Net (decrease) increase in securities sold under agreements to repurchase	(31,785		)	9,214
Net cash used in financing activities	$	(47,596	)	$	(112,454	)
Net decrease in cash and due from banks	$	(49,571	)	$	(100,051	)
Cash and due from banks, beginning	$	231,603		$	351,255
Cash and due from banks, ending	$	182,032		$	251,204
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest	$	3,436		$	5,056
Income taxes	$	2,563		$	1,110
Non-cash investing and financing activities:
Other real estate acquired in settlement of loans	$	609		$	663

See accompanying notes to unaudited consolidated financial statements.

9

FIRST BUSEY CORPORATION and Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1:  Basis of Presentation

The accompanying unaudited consolidated interim financial statements of First Busey Corporation (“First Busey” or the “Company”), a Nevada corporation, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for Quarterly Reports on Form 10-Q and do not include certain information and footnote disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete annual financial statements. Accordingly, these financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

The accompanying Consolidated Balance Sheet as of December 31, 2013, which has been derived from audited financial statements, and the unaudited consolidated interim financial statements have been prepared in accordance with U.S. GAAP and reflect all adjustments that are, in the opinion of management, necessary for the fair presentation of the financial position and results of operations as of the dates and for the periods presented. All such adjustments are of a normal recurring nature. The results of operations for the three and six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

The consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. Certain prior-year amounts have been reclassified to conform to the current presentation with no effect on net income or stockholders’ equity.

In preparing the accompanying consolidated financial statements, the Company’s management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses for the reporting period.  Actual results could differ from those estimates.  Material estimates which are particularly susceptible to significant change in the near term relate to the fair value of investment securities, the determination of the allowance for loan losses, and the valuation allowance on the deferred tax asset.

The Company has evaluated subsequent events for potential recognition and/or disclosure through the date the consolidated financial statements included in this Quarterly Report on Form 10-Q were issued.  There were no significant subsequent events for the quarter ended June 30, 2014 through the issuance date of these financial statements that warranted adjustment to or disclosure in the consolidated financial statements.

Note 2:  Recent Accounting Pronouncements

ASU 2014-04, “Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” ASU 2014-04 clarifies when an in-substance repossession or foreclosure occurs and requires interim and annual disclosures.  The new authoritative guidance will be for reporting periods after January 1, 2015 and is not expected to have a significant impact on the Company’s financial statements.

ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).”  ASU 2014-09 outlines a single model for companies to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract and will also require additional disclosures.  The new authoritative guidance will be for reporting periods after December 15, 2016, and the Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures.

10

Note 3:  Securities

Securities are classified as held to maturity when First Busey has the ability and management has the positive intent to hold those securities to maturity.  Accordingly, they are stated at cost, adjusted for amortization of premiums and accretion of discounts.  Securities are classified as available for sale when First Busey may decide to sell those securities due to changes in market interest rates, liquidity needs, changes in yields on alternative investments, and for other reasons.  They are carried at fair value with unrealized gains and losses, net of taxes, reported in other comprehensive income.

The amortized cost, unrealized gains and losses and fair values of securities classified available for sale and held to maturity are summarized as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(dollars in thousands)
June 30, 2014:
Available for sale
U.S. Treasury securities	$	50,402	$	416	$	(4	)	$	50,814
Obligations of U.S. government corporations and agencies	203,592		1,882		(111		)	205,363
Obligations of states and political subdivisions	240,458		3,682		(732		)	243,408
Residential mortgage-backed securities	254,387		5,325		(141		)	259,571
Corporate debt securities	73,968		599		(36		)	74,531
Total debt securities	822,807		11,904		(1,024		)	833,687
Mutual funds and other equity securities	4,691		1,734		—			6,425
Total	$	827,498	$	13,638	$	(1,024	)	$	840,112
Held to maturity
Obligations of states and political subdivisions	$	828	$	20	$	—		$	848
Commercial mortgage-backed securities	1,022		23		—			1,045
Total	$	1,850	$	43	$	—		$	1,893

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(dollars in thousands)
December 31, 2013:
Available for sale
U.S. Treasury securities	$	102,463	$	244	$	(67	)	$	102,640
Obligations of U.S. government corporations and agencies	254,998		2,741		(328		)	257,411
Obligations of states and political subdivisions	272,077		2,887		(2,812		)	272,152
Residential mortgage-backed securities	174,699		3,571		(535		)	177,735
Corporate debt securities	25,384		155		(33		)	25,506
Total debt securities	829,621		9,598		(3,775		)	835,444
Mutual funds and other equity securities	4,114		1,752		—			5,866
Total	$	833,735	$	11,350	$	(3,775	)	$	841,310
Held to maturity
Obligations of states and political subdivisions	$	834	$	1	$	(4	)	$	831
Total	$	834	$	1	$	(4	)	$	831

11

The amortized cost and fair value of debt securities available for sale and held to maturity as of June 30, 2014, by contractual maturity, are shown below.  Mutual funds and other equity securities do not have stated maturity dates and therefore are not included in the following maturity summary.  Mortgages underlying the residential mortgage-backed securities may be called or prepaid without penalties; therefore, actual maturities could differ from the contractual maturities. All residential mortgage-backed securities were issued by U.S. government agencies and corporations.

	Available for sale				Held to maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(dollars in thousands)
Due in one year or less	$	132,344	$	133,270	$	—	$	—
Due after one year through five years	360,784		363,964		317		321
Due after five years through ten years	165,306		169,573		1,533		1,572
Due after ten years	164,373		166,880		—		—
Total	$	822,807	$	833,687	$	1,850	$	1,893

Realized gains and losses related to sales of securities available for sale are summarized as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2014			2013		2014			2013
	(dollars in thousands)
Gross security gains	$	—		$	—	$	57		$	—
Gross security (losses)	(3		)	—		(17		)	—
Net security (losses) gains	$	(3	)	$	—	$	40		$	—

The tax provision for the net realized gains and losses was insignificant for the three and six months ended June 30, 2014 and there was no tax provision related to net realized gains and losses for the three and six months ended June 30, 2013.

Investment securities with carrying amounts of $401.2 million and $428.7 million on June 30, 2014 and December 31, 2013, respectively, were pledged as collateral for public deposits, securities sold under agreements to repurchase and for other purposes as required or permitted by law.

12

Information pertaining to securities with gross unrealized losses at June 30, 2014 and December 31, 2013 aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

	Continuous unrealized losses existing for less than 12 months, gross				Continuous unrealized  losses existing for greater than 12 months, gross				Total, gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
	(dollars in thousands)
June 30, 2014:
Available for sale
U.S. Treasury securities	$	—	$	—	$	364	$	4	$	364	$	4
Obligations of U.S. government corporations and agencies	55		1		25,149		110		25,204		111
Obligations of states and political subdivisions	11,951		24		47,155		708		59,106		732
Residential mortgage-backed securities	15,219		66		11,376		75		26,595		141
Corporate debt securities	5,724		31		215		5		5,939		36
Total temporarily impaired securities	$	32,949	$	122	$	84,259	$	902	$	117,208	$	1,024

	Continuous unrealized losses existing for less than 12 months, gross				Continuous unrealized  losses existing for greater than 12 months, gross				Total, gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
	(dollars in thousands)
December 31, 2013:
Available for sale
U.S. Treasury securities	$	25,830	$	67	$	—	$	—	$	25,830	$	67
Obligations of U.S. government corporations and agencies	25,946		328		—		—		25,946		328
Obligations of states and political subdivisions	92,703		2,518		8,492		294		101,195		2,812
Residential mortgage-backed securities	53,543		535		—		—		53,543		535
Corporate debt securities	1,614		33		—		—		1,614		33
Total temporarily impaired securities	$	199,636	$	3,481	$	8,492	$	294	$	208,128	$	3,775
Held to maturity
Obligations of states and political subdivisions	$	597	$	4	$	—	$	—	$	597	$	4
Total temporarily impaired securities	$	597	$	4	$	—	$	—	$	597	$	4

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.  Consideration is given to the length of time and extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and whether the Company has the intent to sell the security and it is more-likely-than-not it will have to sell the security before recovery of its cost basis.

13

The total number of securities in the investment portfolio in an unrealized loss position as of June 30, 2014 was 139, and represented a loss of 0.9% of the aggregate carrying value. Based upon a review of unrealized loss circumstances, the unrealized losses resulted from changes in market interest rates and liquidity, not from changes in the probability of receiving the contractual cash flows. The Company does not intend to sell the securities and it is more-likely-than-not that the Company will recover the amortized cost prior to being required to sell the securities.  Full collection of the amounts due according to the contractual terms of the securities is expected; therefore, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2014.

The Company had available for sale obligations of state and political subdivisions with a fair value of $243.4 million and $272.2 million as of June 30, 2014 and December 31, 2013, respectively.  In addition, the Company had held to maturity obligations of state and political subdivisions totaling $0.9 million and $0.8 million at June 30, 2014 and December 31, 2013, respectively.

As of June 30, 2014, the Company’s obligations of state and political subdivisions portfolios were comprised of $200.8 million of general obligation bonds and $43.5 million of revenue bonds issued by 248 issuers, primarily consisting of states, counties, cities, towns, villages and school districts.  The Company held investments in general obligation bonds in 24 states (including the District of Columbia), including seven states in which the aggregate fair value exceeded $5.0 million.  The Company held investments in revenue bonds in 19 states, including two states where the aggregate fair value exceeded $5.0 million.

As of December 31, 2013, the Company’s obligations of state and political subdivisions portfolio was comprised of $223.5 million of general obligation bonds and $49.5 million of revenue bonds issued by 267 issuers, primarily consisting of states, counties, cities, towns, villages and school districts.  The Company held investments in general obligation bonds in 25 states (including the District of Columbia), including seven states in which the aggregate fair value exceeded $5.0 million.  The Company held investments in revenue bonds in 21 states, including two states where the aggregate fair value exceeded $5.0 million.

The amortized cost and fair values of the Company’s portfolio of general obligation bonds are summarized in the following tables by the issuers’ state:

June 30, 2014:

						Average Exposure
	Number of	Amortized		Fair		Per Issuer
U.S. State	Issuers	Cost		Value		(Fair Value)
	(dollars in thousands)
Illinois	75	$	68,783	$	70,404	$	939
Wisconsin	41	39,080		39,420		961
Michigan	34	31,048		31,452		925
Pennsylvania	11	13,318		13,391		1,217
Ohio	10	10,953		10,935		1,094
Texas	7	7,438		7,400		1,057
Iowa	3	6,121		6,188		2,063
Other	25	20,946		21,568		863
Total general obligations bonds	206	$	197,687	$	200,758	$	975

14

December 31, 2013:

						Average Exposure
	Number of	Amortized		Fair		Per Issuer
U.S. State	Issuers	Cost		Value		(Fair Value)
	(dollars in thousands)
Illinois	82	$	82,884	$	83,804	$	1,022
Wisconsin	41	43,117		43,122		1,052
Michigan	37	35,350		35,365		956
Pennsylvania	11	14,132		14,133		1,285
Ohio	12	11,709		11,426		952
Texas	7	7,510		7,270		1,039
Iowa	3	6,126		6,060		2,020
Other	26	21,865		22,290		857
Total general obligations bonds	219	$	222,693	$	223,470	$	1,020

The general obligation bonds are diversified across many issuers, with $3.5 million and $5.0 million being the largest exposure to a single issuer at June 30, 2014 and December 31, 2013, respectively.  Accordingly, as of June 30, 2014 and December 31, 2013, the Company did not hold general obligation bonds of any single issuer, the aggregate book or market value of which exceeded 10% of the Company’s stockholders’ equity. Of the general obligation bonds in the Company’s portfolio, 97.0% had been rated by at least one nationally recognized statistical rating organization and 3.0% were unrated, based on the fair value as of June 30, 2014.  Of the general obligation bonds in the Company’s portfolio, 96.4% had been rated by at least one nationally recognized statistical rating organization and 3.6% were unrated, based on the fair value as of December 31, 2013.

The amortized cost and fair values of the Company’s portfolio of revenue bonds are summarized in the following tables by the issuers’ state:

June 30, 2014:

						Average Exposure
	Number of	Amortized		Fair		Per Issuer
U.S. State	Issuers	Cost		Value		(Fair Value)
	(dollars in thousands)
Illinois	4	$	7,002	$	6,920	$	1,730
Indiana	11	13,307		13,274		1,207
Other	27	23,290		23,304		863
Total revenue bonds	42	$	43,599	$	43,498	$	1,036

December 31, 2013:

						Average Exposure
	Number of	Amortized		Fair		Per Issuer
U.S. State	Issuers	Cost		Value		(Fair Value)
	(dollars in thousands)
Illinois	4	$	7,356	$	7,121	$	1,780
Indiana	14	14,740		14,481		1,034
Other	30	28,122		27,911		930
Total revenue bonds	48	$	50,218	$	49,513	$	1,032

The revenue bonds are diversified across many issuers and revenue sources with $3.0 million being the largest exposure to a single issuer at June 30, 2014 and December 31, 2013.  Accordingly, as of June 30, 2014 and December 31, 2013, the Company did not hold revenue bonds of any single issuer, the aggregate book or market value of which exceeded 10% of the Company’s stockholders’ equity.  All of the revenue bonds in the Company’s portfolio had been rated by at least one nationally recognized statistical rating organization as of June 30, 2014 and December 31, 2013.  Some of the primary types of revenue bonds owned in the Company’s portfolio include: primary education or government building lease rentals secured by ad valorem taxes, utility systems secured by utility system net revenues, housing authorities secured by mortgage loans or principal receipts on mortgage loans, secondary education secured by student fees/tuitions, contracts subject to annual state appropriation, and pooled issuances (i.e. bond bank) consisting of multiple underlying municipal obligors.

15

Substantially all of the Company’s obligations of state and political subdivision securities are owned by Busey Bank, whose investment policy requires that state and political subdivision securities purchased be investment grade.  Busey Bank’s investment policy also limits the amount of rated state and political subdivision securities to an aggregate 100% of the Bank’s Total Risk Based Capital at the time of purchase and an aggregate 15% of Total Risk Based Capital for unrated state and political subdivision securities issued by municipalities having taxing authority or located in counties/micropolitan statistical areas/metropolitan statistical areas in which an office of the Bank is located.  The investment policy states fixed income investments that are not Office of the Comptroller of the Currency Type 1 securities (U.S. Treasuries, agencies, municipal government general obligation and, for well-capitalized institutions, most municipal revenue bonds) should be analyzed prior to acquisition to determine that (1) the security has low risk of default by the obligor, and (2) the full and timely repayment of principal and interest is expected over the expected life of the investment.  All securities in the Bank’s obligations of state and political subdivision securities portfolio are subject to ongoing review.  Factors that may be considered as part of ongoing monitoring of state and political subdivision securities include credit rating changes by nationally recognized statistical rating organizations, market valuations, third-party municipal credit analysis, which may include indicative information regarding the issuer’s capacity to pay, market and economic data and such other factors as are available and relevant to the security or the issuer such as its budgetary position and sources, strength and stability of taxes and/or other revenue.

As of June 30, 2014, the Company’s regular monitoring of its obligations of state and political subdivisions portfolio had not uncovered any facts or circumstances resulting in significantly different credit ratings than those assigned by a nationally recognized statistical rating organization.

Note 4:  Loans

Geographic distributions of loans were as follows:

	June 30, 2014
	Illinois		Florida		Indiana		Total
	(dollars in thousands)
Commercial	$	510,576	$	21,429	$	21,585	$	553,590
Commercial real estate	826,098		165,622		110,005		1,101,725
Real estate construction	50,606		15,782		16,048		82,436
Retail real estate	462,173		101,466		12,987		576,626
Retail other	9,034		574		83		9,691
Total	$	1,858,487	$	304,873	$	160,708	$	2,324,068
Less held for sale(1)							20,286
							$	2,303,782
Less allowance for loan losses							47,428
Net loans							$	2,256,354

(1)Loans held for sale are included in retail real estate.

16

	December 31, 2013
	Illinois		Florida		Indiana		Total
	(dollars in thousands)
Commercial	$	530,174	$	20,536	$	29,902	$	580,612
Commercial real estate	800,568		160,255		131,450		1,092,273
Real estate construction	55,190		17,426		6,239		78,855
Retail real estate	419,801		103,104		11,588		534,493
Retail other	8,422		552		93		9,067
Total	$	1,814,155	$	301,873	$	179,272	$	2,295,300
Less held for sale(1)							13,840
							$	2,281,460
Less allowance for loan losses							47,567
Net loans							$	2,233,893

(1) Loans held for sale are included in retail real estate.

Net deferred loan origination costs included in the tables above were $0.4 million as of June 30, 2014 and insignificant as of December 31, 2013.

The Company believes that sound loans are a necessary and desirable means of employing funds available for investment. Recognizing the Company’s obligations to its stockholders, depositors, and to the communities it serves, authorized personnel are expected to seek to develop and make sound, profitable loans that resources permit and that opportunity affords. The Company maintains lending policies and procedures designed to focus lending efforts on the types, locations and duration of loans most appropriate for its business model and markets.  While not specifically limited, the Company attempts to focus its lending on short to intermediate-term (0-7 years) loans in geographies within 125 miles of its lending offices.  The Company attempts to utilize government-assisted lending programs, such as the Small Business Administration and United States Department of Agriculture lending programs, when prudent. Generally, loans are collateralized by assets, primarily real estate, of the borrowers and guaranteed by individuals.  The loans are expected to be repaid primarily from cash flows of the borrowers, or from proceeds from the sale of selected assets of the borrowers.

Management reviews and approves the Company’s lending policies and procedures on a routine basis.  Management routinely (at least quarterly) reviews the Company’s allowance for loan losses and reports related to loan production, loan quality, concentrations of credit, loan delinquencies and non-performing and potential problem loans. The Company’s underwriting standards are designed to encourage relationship banking rather than transactional banking.  Relationship banking implies a primary banking relationship with the borrower that includes, at a minimum, an active deposit banking relationship in addition to the lending relationship.  The integrity and character of the borrower are significant factors in the Company’s loan underwriting.  As a part of underwriting, tangible positive or negative evidence of the borrower’s integrity and character are sought out.  Additional significant underwriting factors beyond location, duration, a sound and profitable cash flow basis and the borrower’s character are the quality of the borrower’s financial history, the liquidity of the underlying collateral and the reliability of the valuation of the underlying collateral.

Total borrowing relationships, including direct and indirect debt, are generally limited to $20 million, which is significantly less than the Company’s regulatory lending limit.  Borrowing relationships exceeding $20 million are reviewed by the Company’s board of directors at least annually and more frequently by management.  At no time is a borrower’s total borrowing relationship permitted to exceed the Company’s regulatory lending limit.  Loans to related parties, including executive officers and the Company’s various directorates, are reviewed for compliance with regulatory guidelines by the Company’s board of directors at least annually.

17

The Company maintains an independent loan review department that reviews the loans for compliance with the Company’s loan policy on a periodic basis.  In addition to compliance with this policy, the loan review process reviews the risk assessments made by the Company’s credit department, lenders and loan committees. Results of these reviews are presented to management and the audit committee at least quarterly.

The Company’s lending can be summarized into five primary areas: commercial loans, commercial real estate loans, real estate construction loans, retail real estate loans, and other retail loans. A description of each of the lending areas can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.  The significant majority of the lending activity occurs in the Company’s Illinois and Indiana markets, with the remainder in the Florida market.  Due to the small scale of the Indiana loan portfolio and its geographical proximity to the Illinois portfolio, the Company believes that quantitative or qualitative segregation between Illinois and Indiana is not material or warranted.

The Company utilizes a loan grading scale to assign a risk grade to all of its loans.  Loans are graded on a scale of 1 through 10 with grades 2, 4 & 5 unused.  A description of the general characteristics of the grades is as follows:

·Grades 1, 3, 6- These grades include loans which are all considered strong credits, with grade 1 being investment  or near investment grade.  A grade 3 loan is comprised of borrowers that exhibit credit fundamentals that exceed industry standards and loan policy guidelines. A grade 6 loan is comprised of borrowers that exhibit acceptable credit fundamentals.

·Grade 7- This grade includes loans on management’s “Watch List” and is intended to be utilized on a temporary basis for a pass grade borrower where a significant risk-modifying action is anticipated in the near future.

·Grade 8- This grade is for “Other Assets Specially Mentioned” loans that have potential weaknesses which may, if not checked or corrected, weaken the asset or inadequately protect the Company’s credit position at some future date.

·Grade 9- This grade includes “Substandard” loans, in accordance with regulatory guidelines, for which the accrual of interest has not been stopped.  Assets so classified must have well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

·Grade 10- This grade includes “Doubtful” loans that have all the characteristics of a substandard loan with additional factors that make collection in full highly questionable and improbable. Such loans are placed on non-accrual status and may be dependent on collateral having a value that is difficult to determine.

All loans are graded at the inception of the loan.  All commercial and commercial real estate loans above $0.5 million with a grading of 7 are reviewed annually and grade changes are made as necessary.  All real estate construction loans above $0.5 million, regardless of the grade, are reviewed annually and grade changes are made as necessary.  Interim grade reviews may take place if circumstances of the borrower warrant a more timely review.  All loans above $0.5 million which are graded 8 are reviewed quarterly.  Further, all loans graded 9 or 10 are reviewed at least quarterly.

Loans in the highest grades, represented by grades 1, 3, 6 and 7, totaled $2.2 billion at June 30, 2014 compared to $2.1 billion at December 31, 2013.  Loans in the lowest grades, represented by grades 8, 9 and 10, totaled $142.0 million at June 30, 2014, a decline of $19.9 million from $161.9 million at December 31, 2013.

18

The following table presents weighted average risk grades segregated by category of loans (excluding held for sale, non-posted and clearings) and geography:

	June 30, 2014
	Weighted Avg. Risk Grade	Grades 1,3,6		Grade 7		Grade  8		Grade 9		Grade 10
	(dollars in thousands)
Illinois/Indiana
Commercial	4.75	$	465,289	$	42,331	$	10,147	$	12,883	$	1,511
Commercial real estate	5.59	812,923		72,414		27,484		21,186		2,096
Real estate construction	6.57	33,363		15,706		13,173		1,271		3,141
Retail real estate	3.38	433,426		9,965		4,781		3,866		1,290
Retail other	2.46	9,043		63		10		1		—
Total Illinois/Indiana		$	1,754,044	$	140,479	$	55,595	$	39,207	$	8,038
Florida
Commercial	5.94	$	17,627	$	49	$	3,142	$	611	$	—
Commercial real estate	6.02	116,555		27,898		4,834		13,732		2,603
Real estate construction	6.18	14,330		—		632		820		—
Retail real estate	3.81	76,708		11,963		9,704		2,500		591
Retail other	1.51	574		—		—		—		—
Total Florida		$	225,794	$	39,910	$	18,312	$	17,663	$	3,194
Total		$	1,979,838	$	180,389	$	73,907	$	56,870	$	11,232

	December 31, 2013
	Weighted Avg. Risk Grade	Grades 1,3,6		Grade 7		Grade  8		Grade 9		Grade 10
	(dollars in thousands)
Illinois/Indiana
Commercial	4.66	$	487,587	$	46,992	$	15,986	$	8,536	$	975
Commercial real estate	5.55	799,117		79,371		19,327		29,606		4,597
Real estate construction	7.11	21,585		16,376		11,920		7,686		3,862
Retail real estate	3.53	393,299		9,285		5,392		4,408		3,936
Retail other	2.64	8,451		60		—		4		—
Total Illinois/Indiana		$	1,710,039	$	152,084	$	52,625	$	50,240	$	13,370
Florida
Commercial	5.89	$	16,460	$	174	$	3,218	$	684	$	—
Commercial real estate	6.02	116,741		16,470		11,250		12,721		3,073
Real estate construction	6.64	7,886		7,961		743		836		—
Retail real estate	3.85	77,116		12,052		9,417		3,050		721
Retail other	1.72	552		—		—		—		—
Total Florida		$	218,755	$	36,657	$	24,628	$	17,291	$	3,794
Total		$	1,928,794	$	188,741	$	77,253	$	67,531	$	17,164

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due.  Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions.  Loans may be placed on non-accrual status regardless of whether or not such loans are considered past due.  When interest accrual is discontinued, all unpaid accrued interest is reversed.  Interest income is subsequently recognized only to the extent cash payments are received in excess of the principal due.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

19

An age analysis of past due loans still accruing and non-accrual loans is as follows:

	June 30, 2014
	Loans past due, still accruing						Non-accrual
	30-59 Days		60-89 Days		90+Days		Loans
	(dollars in thousands)
Illinois/Indiana
Commercial	$	468	$	10	$	235	$	1,511
Commercial real estate	184		—		—		2,096
Real estate construction	83		—		—		3,141
Retail real estate	842		9		—		1,290
Retail other	20		—		—		—
Total Illinois/Indiana	$	1,597	$	19	$	235	$	8,038
Florida
Commercial	$	—	$	—	$	—	$	—
Commercial real estate	—		—		—		2,603
Real estate construction	—		—		—		—
Retail real estate	150		—		—		591
Retail other	—		—		—		—
Total Florida	$	150	$	—	$	—	$	3,194
Total	$	1,747	$	19	$	235	$	11,232

	December 31, 2013
	Loans past due, still accruing						Non-accrual
	30-59 Days		60-89 Days		90+Days		Loans
	(dollars in thousands)
Illinois/Indiana
Commercial	$	906	$	279	$	92	$	975
Commercial real estate	567		3,736		—		4,597
Real estate construction	—		—		—		3,862
Retail real estate	483		123		103		3,936
Retail other	20		—		—		—
Total Illinois/Indiana	$	1,976	$	4,138	$	195	$	13,370
Florida
Commercial	$	—	$	—	$	—	$	—
Commercial real estate	—		—		—		3,073
Real estate construction	—		—		—		—
Retail real estate	—		—		—		721
Retail other	—		—		—		—
Total Florida	$	—	$	—	$	—	$	3,794
Total	$	1,976	$	4,138	$	195	$	17,164

20

A loan is impaired when, based on current information and events, it is probable the Company will be unable to collect scheduled principal and interest payments when due according to the terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  The following loans are assessed for impairment by the Company: loans 60 days or more past due and over $0.25 million, loans graded 8 over $0.5 million and loans graded 9 or 10.

Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of the expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent.  Large groups of smaller balance homogenous loans are collectively evaluated for impairment.  Accordingly, the Company does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement.

The gross interest income that would have been recorded in the three and six months ended June 30, 2014 if impaired loans had been current in accordance with their original terms was $0.3 million and $0.6 million, respectively.  The amount of interest collected on those loans and recognized on a cash basis that was included in interest income was insignificant for the three and six months ended June 30, 2014.

The Company’s loan portfolio includes certain loans that have been modified in a troubled debt restructuring (“TDR”), where concessions have been granted to borrowers who have experienced financial difficulties. The Company will restructure loans for its customers who appear to be able to meet the terms of their loan over the long term, but who may be unable to meet the terms of the loan in the near term due to individual circumstances.

The Company considers the customer’s past performance, previous and current credit history, the individual circumstances surrounding the current difficulties and the customer’s plan to meet the terms of the loan in the future prior to restructuring the terms of the loan.  Generally, all five primary areas of lending are restructured through short-term interest rate relief, short-term principal payment relief, short-term principal and interest payment relief, or forbearance (debt forgiveness).  Once a restructured loan has gone 90+ days past due or is placed on non-accrual status, it is included in the non-performing loan totals. A summary of restructured loans as of June 30, 2014 and December 31, 2013 is as follows:

	June 30, 2014		December 31, 2013
	(dollars in thousands)
Restructured loans:
In compliance with modified terms	$	11,270	$	11,511
30 – 89 days past due	—		380
Included in non-performing loans	2,882		5,919
Total	$	14,152	$	17,810

All TDRs are considered to be impaired for purposes of assessing the adequacy of the allowance for loan losses and for financial reporting purposes.  When the Company modifies a loan in a TDR, it evaluates any possible impairment similar to other impaired loans based on present value of the expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent.  If the Company determines that the value of the TDR is less than the recorded investment in the loan, impairment is recognized through an allowance estimate in the period of the modification and in periods subsequent to the modification.

Performing loans classified as TDRs during the three and six months ended June 30, 2014 were insignificant.

Performing loans classified as TDRs during the three and six months ended June 30, 2013 consisted of one commercial real estate modification in Florida for short-term interest rate relief, with a recorded investment of $0.1 million.

21

The gross interest income that would have been recorded in the three and six months ended June 30, 2014 and 2013 if performing TDRs had been in accordance with their original terms instead of modified terms was insignificant.

There were no TDRs that were classified as non-performing and had payment defaults (a default occurs when a loan is 90 days or more past due or transferred to non-accrual) during the three and six months ended June 30, 2014.

TDRs that were classified as non-performing and had payment defaults during the three months ended June 30, 2013 consisted of one Illinois/Indiana real estate construction modification totaling $0.3 million and four Illinois/Indiana retail real estate modifications totaling $1.1 million.  TDRs that were classified as non-performing and had payment defaults during the six months ended June 30, 2013 consisted of one Illinois/Indiana commercial real estate modification totaling $1.7 million, one Illinois/Indiana real estate construction modification totaling $0.3 million, four Illinois/Indiana retail real estate modifications totaling $1.1 million and one Florida retail real estate modification totaling $0.1 million.

The following tables provide details of impaired loans, segregated by category and geography. The unpaid contractual principal balance represents the recorded balance prior to any partial charge-offs.  The recorded investment represents customer balances net of any partial charge-offs recognized on the loan.  The average recorded investment is calculated using the most recent four quarters.

	June 30, 2014
	Unpaid Contractual Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(dollars in thousands)
Illinois/Indiana
Commercial	$	3,731	$	1,998	$	827	$	2,825	$	710	$	2,750
Commercial real estate	6,045		1,510		3,079		4,589		1,674		7,650
Real estate construction	3,142		1,609		1,533		3,142		465		4,164
Retail real estate	2,576		2,227		152		2,379		54		4,213
Retail other	—		—		—		—		—		—
Total Illinois/Indiana	$	15,494	$	7,344	$	5,591	$	12,935	$	2,903	$	18,777
Florida
Commercial	$	—	$	—	$	—	$	—	$	—	$	2
Commercial real estate	4,849		3,465		1,298		4,763		394		6,104
Real estate construction	410		410		—		410		—		420
Retail real estate	10,037		8,753		537		9,290		337		9,633
Retail other	9		9		—		9		—		2
Total Florida	$	15,305	$	12,637	$	1,835	$	14,472	$	731	$	16,161
Total	$	30,799	$	19,981	$	7,426	$	27,407	$	3,634	$	34,938

22

	December 31, 2013
	Unpaid Contractual Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(dollars in thousands)
Illinois/Indiana
Commercial	$	2,825	$	1,684	$	602	$	2,286	$	485	$	4,169
Commercial real estate	8,866		3,671		3,740		7,411		1,977		10,335
Real estate construction	4,932		2,292		1,570		3,862		468		5,889
Retail real estate	5,583		3,267		2,010		5,277		604		5,296
Retail other	—		—		—		—		—		—
Total Illinois/Indiana	$	22,206	$	10,914	$	7,922	$	18,836	$	3,534	$	25,689
Florida
Commercial	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate	7,108		3,946		1,319		5,265		416		6,662
Real estate construction	417		417		—		417		—		1,294
Retail real estate	10,346		9,005		537		9,542		337		11,079
Retail other	—		—		—		—		—		—
Total Florida	$	17,871	$	13,368	$	1,856	$	15,224	$	753	$	19,035
Total	$	40,077	$	24,282	$	9,778	$	34,060	$	4,287	$	44,724

Management’s opinion as to the ultimate collectability of loans is subject to estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral.  These estimates are affected by changing economic conditions and the economic prospects of borrowers.

Allowance for Loan Losses

The allowance for loan losses represents an estimate of the amount of losses believed inherent in the Company’s loan portfolio at the balance sheet date.  The allowance for loan losses is evaluated geographically, by class of loans.  The allowance calculation involves a high degree of estimation that management attempts to mitigate through the use of objective historical data where available. Loan losses are charged against the allowance for loan losses when management believes the uncollectibility of the loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.  Overall, the Company believes the allowance methodology is consistent with prior periods and the balance was adequate to cover the estimated losses in the Company’s loan portfolio at June 30, 2014 and December 31, 2013.

The general portion of the Company’s allowance contains two components: (i) a component for historical loss ratios, and (ii) a component for adversely graded loans.  The historical loss ratio component is an annualized loss rate calculated using a sum-of-years digits weighted 20-quarter historical average.

The Company’s component for adversely graded loans attempts to quantify the additional risk of loss inherent in the grade 8 and grade 9 portfolios.  The grade 9 portfolio has an additional allocation placed on those loans determined by a one-year charge-off percentage for the respective loan type/geography.  The minimum additional reserve on a grade 9 loan was 3.00% as of June 30, 2014 and December 31, 2013, which is an estimate of the additional loss inherent in these loan grades based upon a review of overall historical charge-offs.  As of June 30, 2014, the Company believed this minimum reserve remained adequate.

Grade 8 loans have an additional allocation placed on them determined by the trend difference of the respective loan type/geography’s rolling 12- and 20-quarter historical loss trends. If the rolling 12-quarter average is higher (more current information) than the rolling 20-quarter average, the Company adds the additional amount to the allocation.  The minimum additional amount for grade 8 loans was 1.00% as of June 30, 2014 and December 31, 2013, based upon a review of the differences between the rolling 12- and 20-quarter historical loss averages by region.  As of June 30, 2014, the Company believed this minimum additional amount remained adequate.

23

The specific portion of the Company’s allowance relates to loans that are impaired, which includes non-performing loans, TDRs and other loans determined to be impaired.  The impaired loans are subtracted from the general loans and are allocated specific reserves as discussed above.

Impaired loans are reported at the fair value of the underlying collateral, less estimated costs to sell, if repayment is expected solely from the collateral. Collateral values are estimated using a combination of observable inputs, including recent appraisals discounted for collateral specific changes and current market conditions, and unobservable inputs based on customized discounting criteria.

The general quantitative allocation based upon historical charge off rates is adjusted for qualitative factors based on current general economic conditions and other qualitative risk factors both internal and external to the Company. In general, such valuation allowances are determined by evaluating, among other things: (i) Management & Staff; (ii) Loan Underwriting, Policy and Procedures; (iii) Internal/External Audit & Loan Review; (iv) Valuation of Underlying Collateral; (v) Macro and Local Economic Factor; (vi) Impact of Competition, Legal & Regulatory Issues; (vii) Nature and Volume of Loan Portfolio; (viii) Concentrations of Credit; (ix) Net Charge-Off Trend; and (x) Non-Accrual, Past Due and Classified Trend.  Management evaluates the degree of risk that each one of these components has on the quality of the loan portfolio on a quarterly basis.  Based on each component’s risk factor, a qualitative adjustment to the reserve may be applied to the appropriate loan categories.

During the second quarter of 2014, the Company did not adjust any qualitative factors.  During the first quarter of 2014, the Company adjusted Illinois/Indiana and Florida qualitative factors relating to Net Charge-Off Trend.  Adjustments to increase this qualitative factor were made in the first quarter of 2014 to offset decreasing quantitative factors and represent management’s evaluation of risk.  The Company will continue to monitor its qualitative factors on a quarterly basis.

The following table details activity on the allowance for loan losses.  Allocation of a portion of the allowance to one category does not preclude its availability to absorb losses in other categories.

	As of and for the Three Months Ended June 30, 2014
	Commercial			Commercial Real Estate			Real Estate Construction			Retail Real Estate			Retail Other			Total
	(dollars in thousands)
Illinois/Indiana
Beginning balance	$	7,917		$	15,498		$	2,461		$	9,192		$	213		$	35,281
Provision for loan loss	(221		)	797			935			1,981			70			3,562
Charged-off	(30		)	(889		)	(657		)	(416		)	(91		)	(2,083		)
Recoveries	29			20			37			45			46			177
Ending Balance	$	7,695		$	15,426		$	2,776		$	10,802		$	238		$	36,937
Florida
Beginning balance	$	2,291		$	5,729		$	233		$	3,888		$	4		$	12,145
Provision for loan loss	(524		)	(753		)	(1,036		)	(242		)	(7		)	(2,562		)
Charged-off	—			—			—			(117		)	—			(117		)
Recoveries	15			—			978			25			7			1,025
Ending Balance	$	1,782		$	4,976		$	175		$	3,554		$	4		$	10,491

24

	As of and for the Six Months Ended June 30, 2014
	Commercial			Commercial Real Estate			Real Estate Construction			Retail Real Estate			Retail Other			Total
	(dollars in thousands)
Illinois/Indiana
Beginning balance	$	8,452		$	16,379		$	2,540		$	6,862		$	216		$	34,449
Provision for loan loss	(152		)	180			382			5,526			112			6,048
Charged-off	(704		)	(1,173		)	(657		)	(1,691		)	(192		)	(4,417		)
Recoveries	99			40			511			105			102			857
Ending Balance	$	7,695		$	15,426		$	2,776		$	10,802		$	238		$	36,937
Florida
Beginning balance	$	1,926		$	5,733		$	1,168		$	4,287		$	4		$	13,118
Provision for loan loss	(268		)	(1,028		)	(1,988		)	(751		)	(13		)	(4,048		)
Charged-off	(20		)	—			—			(137		)	—			(157		)
Recoveries	144			271			995			155			13			1,578
Ending Balance	$	1,782		$	4,976		$	175		$	3,554		$	4		$	10,491

	As of and for the Three Months Ended June 30, 2013
	Commercial			Commercial Real Estate			Real Estate Construction			Retail Real Estate			Retail Other			Total
	(dollars in thousands)
Illinois/Indiana
Beginning balance	$	6,667		$	14,791		$	3,446		$	7,462		$	358		$	32,724
Provision for loan loss	1,016			(1,177		)	62			972			(29		)	844
Charged-off	(239		)	(63		)	(1,071		)	(350		)	(151		)	(1,874		)
Recoveries	70			172			77			172			62			553
Ending Balance	$	7,514		$	13,723		$	2,514		$	8,256		$	240		$	32,247
Florida
Beginning balance	$	1,485		$	6,106		$	2,326		$	5,128		$	4		$	15,049
Provision for loan loss	12			1,582			329			(763		)	(4		)	1,156
Charged-off	—			—			(22		)	(381		)	(3		)	(406		)
Recoveries	8			(32		)	60			403			6			445
Ending Balance	$	1,505		$	7,656		$	2,693		$	4,387		$	3		$	16,244

	As of and for the Six Months Ended June 30, 2013
	Commercial			Commercial Real Estate			Real Estate Construction			Retail Real Estate			Retail Other			Total
	(dollars in thousands)
Illinois/Indiana
Beginning balance	$	6,597		$	15,023		$	2,527		$	8,110		$	322		$	32,579
Provision for loan loss	1,254			(687		)	799			568			(35		)	1,899
Charged-off	(422		)	(910		)	(1,071		)	(622		)	(287		)	(3,312		)
Recoveries	85			297			259			200			240			1,081
Ending Balance	$	7,514		$	13,723		$	2,514		$	8,256		$	240		$	32,247
Florida
Beginning balance	$	1,437		$	6,062		$	2,315		$	5,614		$	5		$	15,433
Provision for loan loss	35			1,852			358			(134		)	(10		)	2,101
Charged-off	—			(245		)	(57		)	(1,559		)	(5		)	(1,866		)
Recoveries	33			(13		)	77			466			13			576
Ending Balance	$	1,505		$	7,656		$	2,693		$	4,387		$	3		$	16,244

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The following table presents the allowance for loan losses and recorded investments in loans by category and geography:

	As of June 30, 2014
	Commercial		Commercial Real Estate		Real Estate Construction		Retail Real Estate		Retail Other		Total
	(dollars in thousands)
Illinois/Indiana
Amount allocated to:
Loans individually evaluated for impairment	$	710	$	1,674	$	465	$	54	$	—	$	2,903
Loans collectively evaluated for impairment	6,985		13,752		2,311		10,748		238		34,034
Ending Balance	$	7,695	$	15,426	$	2,776	$	10,802	$	238	$	36,937
Loans:
Loans individually evaluated for impairment	$	2,825	$	4,589	$	3,142	$	2,379	$	—	$	12,935
Loans collectively evaluated for impairment	529,336		931,514		63,512		452,495		9,117		1,985,974
Ending Balance	$	532,161	$	936,103	$	66,654	$	454,874	$	9,117	$	1,998,909
Florida
Amount allocated to:
Loans individually evaluated for impairment	$	—	$	394	$	—	$	337	$	—	$	731
Loans collectively evaluated for impairment	1,782		4,582		175		3,217		4		9,760
Ending Balance	$	1,782	$	4,976	$	175	$	3,554	$	4	$	10,491
Loans:
Loans individually evaluated for impairment	$	—	$	4,763	$	410	$	9,290	$	9	$	14,472
Loans collectively evaluated for impairment	21,429		160,859		15,372		92,176		565		290,401
Ending Balance	$	21,429	$	165,622	$	15,782	$	101,466	$	574	$	304,873

26

	As of December 31, 2013
	Commercial		Commercial Real Estate		Real Estate Construction		Retail Real Estate		Retail Other		Total
	(dollars in thousands)
Illinois/Indiana
Amount allocated to:
Loans individually evaluated for impairment	$	485	$	1,977	$	468	$	604	$	—	$	3,534
Loans collectively evaluated for impairment	7,967		14,402		2,072		6,258		216		30,915
Ending Balance	$	8,452	$	16,379	$	2,540	$	6,862	$	216	$	34,449
Loans:
Loans individually evaluated for impairment	$	2,286	$	7,411	$	3,862	$	5,277	$	—	$	18,836
Loans collectively evaluated for impairment	557,790		924,607		57,567		413,020		8,515		1,961,499
Ending Balance	$	560,076	$	932,018	$	61,429	$	418,297	$	8,515	$	1,980,335
Florida
Amount allocated to:
Loans individually evaluated for impairment	$	—	$	416	$	—	$	337	$	—	$	753
Loans collectively evaluated for impairment	1,926		5,317		1,168		3,950		4		12,365
Ending Balance	$	1,926	$	5,733	$	1,168	$	4,287	$	4	$	13,118
Loans:
Loans individually evaluated for impairment	$	—	$	5,265	$	417	$	9,542	$	—	$	15,224
Loans collectively evaluated for impairment	20,536		154,990		17,009		92,814		552		285,901
Ending Balance	$	20,536	$	160,255	$	17,426	$	102,356	$	552	$	301,125

Note 5: Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature either daily or within one year from the transaction date.  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 the fair value of the underlying securities.  The following table sets forth the distribution of securities sold under agreements to repurchase and weighted average interest rates:

	June 30,  2014			December 31, 2013
	(dollars in thousands)
Balance at end of period	$	140,563		$	172,348
Weighted average interest rate at end of period	0.10		%	0.13		%
Maximum outstanding at any month end in year-to-date period	$	141,642		$	172,348
Average daily balance for the year-to-date period	$	132,948		$	137,777
Weighted average interest rate during period (1)	0.11		%	0.14		%

(1)The weighted average interest rate is computed by dividing total interest for the year-to-date period by the average daily balance outstanding.

27

Note 6:  Earnings Per Common Share

Earnings per common share have been computed as follows:

	Three Months Ended June 30,				Six Months Ended  June 30,
	2014		2013		2014		2013
	(in thousands, except per share data)
Net income available to common stockholders	$	8,004	$	6,532	$	15,709	$	12,057
Shares:
Weighted average common shares outstanding	86,895		86,730		86,880		86,717
Dilutive effect of outstanding options, warrants and restricted stock units as determined by the application of the treasury stock method	368		—		365		—
Weighted average common shares outstanding, as adjusted for diluted earnings per share calculation	87,263		86,730		87,245		86,717
Basic earnings per common share	$	0.09	$	0.08	$	0.18	$	0.14
Diluted earnings per common share	$	0.09	$	0.08	$	0.18	$	0.14

Basic earnings per share are computed by dividing net income available to common stockholders for the period by the weighted average number of common shares outstanding.

Diluted earnings per share are determined by dividing net income available to common stockholders for the period by the weighted average number of shares of common stock and common stock equivalents outstanding. Common stock equivalents assume exercise of stock options, warrants and vesting of restricted stock units and use of proceeds to purchase treasury stock at the average market price for the period.  If the average market price for the period is less than the strike price of a stock option or warrant, that option or warrant is considered anti-dilutive and is excluded from the calculation of common stock equivalents.  If the total employee proceeds of a restricted stock unit exceed the average market price for the period, that restricted stock unit is considered anti-dilutive and is excluded from the calculation of common stock equivalents.  At June 30, 2014, 476,230 outstanding options, 573,833 warrants, and 353,976 restricted stock units were anti-dilutive and excluded from the calculation of common stock equivalents.  At June 30, 2013, 701,029 outstanding options, 573,833 warrants, and 713,450 restricted stock units were anti-dilutive and excluded from the calculation of common stock equivalents.

Note 7:  Stock-based Compensation

The Company grants share-based compensation awards to its employees and members of its board of directors as provided for under the Company’s 2010 Equity Incentive Plan. The Company currently grants share-based compensation in the form of restricted stock units (“RSUs”) and deferred stock units (“DSUs”).  The Company also has outstanding stock options granted prior to 2011.  Under the terms of the Company’s 2010 Equity Incentive Plan, the Company is allowed, but not required, to source stock option exercises and grants of RSUs and DSUs from its inventory of treasury stock.  As of June 30, 2014, the Company held 1,456,105 shares in treasury, with 895,655 additional shares authorized for repurchase under its stock repurchase plan.  The repurchase plan has no expiration date and expires when the Company has repurchased all of the remaining authorized shares.

A description of the 2010 Equity Incentive Plan can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.  The Company’s 2010 Equity Incentive Plan is designed to encourage ownership of its common stock by its employees and directors, to provide additional incentive for them to promote the success of its business, and to attract and retain talented personnel.  All of the Company’s employees and directors, and those of its subsidiaries, are eligible to receive awards under the plan.

28

A summary of the status of and changes in the Company’s stock option awards for the six months ended June 30, 2014 follows:

	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term
Outstanding at beginning of year	696,379	$	17.22
Granted	—	—
Exercised	—	—
Forfeited	167,649	19.72
Outstanding at end of period	528,730	$	16.43	2.18
Exercisable at end of period	528,730	$	16.43	2.18

The Company did not record any stock option compensation expense for the three and six months ended June 30, 2014 or 2013.

A summary of the changes in the Company’s stock unit awards for the six months ended June 30, 2014, is as follows:

			Director				Weighted-
	Restricted		Deferred				Average
	Stock		Stock				Grant Date
	Units		Units		Total		Fair Value
Non-vested at beginning of year	919,928		29,054		948,982		$	4.96
Granted	317,976		36,000		353,976		5.84
Dividend Equivalents Earned	14,745		437		15,182		5.53
Vested	(15,728	)	(29,491	)	(45,219	)	5.02
Forfeited	(44,109	)	—		(44,109	)	4.73
Non-vested at end of period	1,192,812		36,000		1,228,812		$	5.23
Outstanding at end of period	1,192,812		124,655		1,317,467		$	5.22

All recipients earn quarterly dividend equivalents on their respective units. These dividend equivalents are not paid out during the vesting period, but instead entitle the recipients to additional units. Therefore, dividends earned each quarter compound based upon the updated unit balances.  Upon vesting/delivery, shares are expected to be issued from treasury.

On June 23, 2014, under the terms of the 2010 Equity Incentive Plan, the Company granted 317,976 RSUs to members of management.  As the stock price on the grant date of June 23, 2014 was $5.84, total compensation cost to be recognized is $1.9 million.  This cost will be recognized over a period of two to five years.  Subsequent to each requisite service period, the awards will vest 100%.

Also, on June 23, 2014, under the terms of the 2010 Equity Incentive Plan, the Company granted 36,000 DSUs to directors.  As the stock price on the grant date of June 23, 2014 was $5.84, total compensation cost to be recognized is $0.2 million. This cost will be recognized over the requisite service period of one year from the date of grant or the next annual shareholders’ meeting; whichever is earlier. Subsequent to the requisite service period, the awards will vest 100%. These DSUs generally are subject to the same terms as RSUs under the Company’s 2010 Equity Incentive Plan, except that, following vesting, settlement occurs within 30 days following the earlier of separation from the Board or a change in control of the Company.  Subsequent to vesting and prior to delivery, these units will continue to earn dividend equivalents.

The Company recognized $0.3 million and $0.1 million of compensation expense related to non-vested stock units for the three months ended June 30, 2014 and 2013, respectively.  The Company recognized $0.5 million and $0.4 million of compensation expense related to non-vested stock units for the six months ended June 30, 2014 and 2013, respectively.  As of June 30, 2014, there was $4.3 million of total unrecognized compensation cost related to these non-vested stock units.  This cost is expected to be recognized over a period of 3.9 years.

29

Note 8:  Income Taxes

At June 30, 2014, the Company was under examination by the Illinois Department of Revenue for the Company’s 2011 income tax filing.

Note 9:  Outstanding Commitments and Contingent Liabilities

Legal Matters

The Company is a party to legal actions which arise in the normal course of its business activities.  In the opinion of management, the ultimate resolution of these matters is not expected to have a material effect on the financial position or the results of operations of the Company.

Credit Commitments and Contingencies

The Company is a party to credit related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit and standby letters of credit.  Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheets.

The Company’s exposure to credit loss is represented by the contractual amount of those commitments.  The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.  A summary of the contractual amount of the Company’s exposure to off-balance-sheet risk relating to the Company’s commitments to extend credit and standby letters of credit follows:

	June 30, 2014		December 31, 2013
	(dollars in thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	581,156	$	527,614
Standby letters of credit	19,566		10,155

Commitments to extend credit are agreements to lend to a customer as long as no condition established in the contract has been violated.  These commitments are generally at variable interest rates and generally have fixed expiration dates or other termination clauses and may require payment of a fee.  The commitments for equity lines of credit may expire without being drawn upon.  Therefore, the total commitment amounts do not necessarily represent future cash requirements.  The amount of collateral obtained, if it is deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the customer.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer’s obligation to a third party.  Those guarantees are primarily issued to support public and private borrowing arrangements, including bond financing and similar transactions and primarily have terms of one year or less.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  The Company holds collateral, which may include accounts receivable, inventory, property and equipment, and income producing properties, supporting those commitments if deemed necessary.  In the event the customer does not perform in accordance with the terms of the agreement with the third party, the Company would be required to fund the commitment.  The maximum potential amount of future payments the Company could be required to make is represented by the contractual amount shown in the summary above.  If the commitment is funded, the Company would be entitled to seek recovery from the customer.  As of June 30, 2014 and December 31, 2013, no amounts were recorded as liabilities for the Company’s potential obligations under these guarantees.

30

Note 10:  Reportable Segments and Related Information

The Company has three reportable segments, Busey Bank, FirsTech and Busey Wealth Management.  Busey Bank provides a full range of banking services to individual and corporate customers through its branch network in downstate Illinois, through its branch in Indianapolis, Indiana, and through its branch network in southwest Florida.  FirsTech provides remittance processing for online bill payments, lockbox and walk-in payments.  Busey Wealth Management is the parent company of Busey Trust Company, which provides a full range of asset management, investment and fiduciary services to individuals, businesses and foundations, tax preparation and philanthropic advisory services.

The Company’s three reportable segments are strategic business units that are separately managed as they offer different products and services and have different marketing strategies.

The segment financial information provided below has been derived from the internal accounting system used by management to monitor and manage the financial performance of the Company.  The accounting policies of the three segments are the same as those described in the summary of significant accounting policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

31

Following is a summary of selected financial information for the Company’s business segments:

	Goodwill				Total Assets
	June 30,		December 31,		June 30,		December 31,
	2014		2013		2014		2013
	(dollars in thousands)				(dollars in thousands)
Goodwill & Total Assets:
Busey Bank	$	—	$	—	$	3,427,699	$	3,456,555
FirsTech	8,992		8,992		27,885		27,253
Busey Wealth Management	11,694		11,694		29,896		28,548
All Other	—		—		21,969		27,219
Total	$	20,686	$	20,686	$	3,507,449	$	3,539,575

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	(dollars in thousands)						(dollars in thousands)
Interest Income:
Busey Bank	$	26,573		$	27,390		$	52,754		$	54,430
FirsTech	13			13			25			26
Busey Wealth Management	76			57			140			117
All Other	(6		)	—			(12		)	2
Total interest income	$	26,656		$	27,460		$	52,907		$	54,575
Interest Expense:
Busey Bank	$	1,350		$	1,917		$	2,760		$	4,149
FirsTech	—			—			—			—
Busey Wealth Management	—			—			—			—
All Other	285			298			569			598
Total interest expense	$	1,635		$	2,215		$	3,329		$	4,747
Other Income:
Busey Bank	$	8,252		$	9,598		$	16,788		$	20,095
FirsTech	2,409			2,149			4,796			4,278
Busey Wealth Management	5,110			4,643			9,651			8,746
All Other	(759		)	(607		)	(1,237		)	(695		)
Total other income	$	15,012		$	15,783		$	29,998		$	32,424
Net Income:
Busey Bank	$	7,436		$	6,487		$	14,715		$	12,280
FirsTech	326			286			635			548
Busey Wealth Management	1,401			1,133			2,403			1,953
All Other	(978		)	(466		)	(1,681		)	(908		)
Total net income	$	8,185		$	7,440		$	16,072		$	13,873

32

Note 11: Derivative Financial Instruments

Starting in the first quarter of 2014, the Company began entering into loan agreements that settled in non-U.S. dollar denominations.  The foreign loan balance, gross, translated into U.S. dollars as of June 30, 2014 was $1.5 million.

Foreign Currency Derivatives. The Company enters into foreign currency forward contracts that are not designated as hedging instruments to mitigate the economic effect of fluctuations in foreign currency exchange rates on certain non-U.S. dollar denominated loans.  Due to the foreign loan activity beginning in 2014, the Company implemented a new accounting policy based on existing accounting standards. Because the foreign currency forward contracts do not meet hedge accounting requirements, gains and losses due to changes in their fair values are recognized in other income.

The notional amount and fair values of open foreign currency forward contracts were as follows:

	June 30, 2014		December 31, 2013
	(dollars in thousands)
Forward contracts — foreign exchange:
Notional amount	$	4,439	$	—
Other assets — estimated fair value	5		—
Other liabilities — estimated fair value	22		—

The amount of gains and losses relating to foreign currency forward contracts included in other income for the three and six months ended June 30, 2014 was insignificant.

Foreign currency forward contracts involve the risk of dealing with counterparties and their ability to meet contractual terms.  We believe the risk of incurring losses due to nonperformance by our counterparties is manageable.

As of June 30, 2014, the Company had no other interest rate futures, forwards, swaps or option contracts, or other financial instruments with similar characteristics with the exception of rate lock commitments on mortgage loans to be held for sale.

Note 12: Fair Value Measurements

The fair value of an asset or liability is the price that would be received by selling that asset or paid in transferring that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. FASB ASC Topic 820 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 Inputs - Inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to those Company assets and liabilities that are carried at fair value.

33

There were no transfers between levels during the quarter ended June 30, 2014.

In general, fair value is based upon quoted market prices, when available. If such quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable data. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect, among other things, counterparty credit quality and the company’s creditworthiness as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.  Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates and, therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein.

Securities Available for Sale. Securities classified as available for sale are reported at fair value utilizing level 1 and level 2 measurements. For mutual funds and other equity securities, unadjusted quoted prices in active markets for identical assets are utilized to determine fair value at the measurement date and have been classified as level 1 in the ASC 820 fair value hierarchy.  For all other securities, the Company obtains fair value measurements from an independent pricing service. The independent pricing service evaluations are based on market data.  The independent pricing service utilizes evaluated pricing models that vary by asset class and incorporate available trade, bid and other market information.  Because many fixed income securities do not trade on a daily basis, the independent pricing service evaluated pricing applications apply available information as applicable through processes such as benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing, to prepare evaluations.  In addition, the independent pricing service uses model processes, such as the Option Adjusted Spread model, to assess interest rate impact and develop prepayment scenarios.  The models and processes take into account market convention.  For each asset class, a team of evaluators gathers information from market sources and integrates relevant credit information, perceived market movements and sector news into the evaluated pricing applications and models.

The market inputs that the independent pricing service normally seeks for evaluations of securities, listed in approximate order of priority, include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications.  The independent pricing service also monitors market indicators, industry and economic events.  Information of this nature is a trigger to acquire further market data.  For certain security types, additional inputs may be used or some of the market inputs may not be applicable.  Evaluators may prioritize inputs differently on any given day for any security based on market conditions, and not all inputs listed are available for use in the evaluation process for each security evaluation on a given day.  Because the data utilized was observable, the securities have been classified as level 2 in the ASC 820 fair value hierarchy.

Derivative Assets and Derivative Liabilities. Derivative assets and derivative liabilities are reported at fair value utilizing level 2 measurements.  Derivative instruments with positive fair values are reported as an asset and derivative instruments with negative fair value are reported as liabilities.  The fair value of derivative assets and liabilities is determined based on prices obtained from a third party.  Values of derivative assets and liabilities are primarily based on observable inputs and are classified as level 2 in the ASC 820 fair value hierarchy.

34

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of June 30, 2014 and December 31, 2013, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	Level 1		Level 2		Level 3		Total
	Inputs		Inputs		Inputs		Fair Value
	(dollars in thousands)
June 30, 2014
Securities available for sale
U.S. Treasury securities	$	—	$	50,814	$	—	$	50,814
Obligations of U.S. government corporations and agencies	—		205,363		—		205,363
Obligations of states and political subdivisions	—		243,408		—		243,408
Residential mortgage-backed securities	—		259,571		—		259,571
Corporate debt securities	—		74,531		—		74,531
Mutual funds and other equity securities	6,425		—		—		6,425
Derivative assets
Foreign currency forward contracts	—		5		—		5
Derivative liabilities
Foreign currency forward contracts	—		22		—		22
December 31, 2013
Securities available for sale
U.S. Treasury securities	$	—	$	102,640	$	—	$	102,640
Obligations of U.S. government corporations and agencies	—		257,411		—		257,411
Obligations of states and political subdivisions	—		272,152		—		272,152
Residential mortgage-backed securities	—		177,735		—		177,735
Corporate debt securities	—		25,506		—		25,506
Mutual funds and other equity securities	5,866		—		—		5,866

Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

Impaired Loans. The Company does not record loans at fair value on a recurring basis. However, periodically, a loan is considered impaired and is reported at the fair value of the underlying collateral, less estimated costs to sell, if repayment is expected solely from the collateral.  Impaired loans measured at fair value typically consist of loans on non-accrual status and restructured loans in compliance with modified terms.  Collateral values are estimated using a combination of observable inputs, including recent appraisals, and unobservable inputs based on customized discounting criteria. Due to the significance of the unobservable inputs, all impaired loan fair values have been classified as level 3 in the ASC 820 fair value hierarchy.

OREO.  Non-financial assets and non-financial liabilities measured at fair value include OREO (upon initial recognition or subsequent impairment). OREO properties are measured using a combination of observable inputs, including recent appraisals, and unobservable inputs based on customized discounting criteria. Due to the significance of the unobservable inputs, all OREO fair values have been classified as level 3 in the ASC 820 fair value hierarchy.

35

The following table summarizes assets and liabilities measured at fair value on a non-recurring basis as of June 30, 2014 and December 31, 2013, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	Level 1		Level 2		Level 3		Total
	Inputs		Inputs		Inputs		Fair Value
	(dollars in thousands)
June 30, 2014
Impaired loans	$	—	$	—	$	3,792	$	3,792
OREO	—		—		1,140		1,140
December 31, 2013
Impaired loans	$	—	$	—	$	5,491	$	5,491
OREO	—		—		1,134		1,134

The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis for which the Company has utilized level 3 inputs to determine fair value:

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value		Valuation	Unobservable	Range
	Estimate		Techniques	Input	(Weighted Average)
	(dollars in thousands)
June 30, 2014
Impaired loans	$	3,792	Appraisal of collateral	Appraisal adjustments	-2.6% to -100.0% (-44.7%)
OREO	1,140		Appraisal of collateral	Appraisal adjustments	-6.6% to -100.0% (-47.9%)
December 31, 2013
Impaired loans	$	5,491	Appraisal of collateral	Appraisal adjustments	-0.4% to -100.0% (-36.0%)
OREO	1,134		Appraisal of collateral	Appraisal adjustments	-6.6% to -100.0% (-47.9%)

36

The estimated fair values of financial instruments that are reported at amortized cost in the Company’s Consolidated Balance Sheets, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value, were as follows:

	June 30, 2014				December 31, 2013
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(dollars in thousands)
Financial assets:
Level 2 inputs:
Cash and due from banks	$	182,032	$	182,032	$	231,603	$	231,603
Securities held to maturity	1,850		1,893		834		831
Loans held for sale	20,286		20,672		13,840		14,103
Accrued interest receivable	11,031		11,031		11,148		11,148
Level 3 inputs:
Loans, net	2,256,354		2,257,618		2,233,893		2,236,841
Financial liabilities:
Level 2 inputs:
Deposits	$	2,861,528	$	2,862,772	$	2,869,138	$	2,870,870
Securities sold under agreements to repurchase	140,563		140,563		172,348		172,348
Junior subordinated debt owed to unconsolidated trusts	55,000		55,000		55,000		55,000
Accrued interest payable	566		566		673		673

The fair value of loans, net reflects general changes in the interest rate curve used to calculate fair values based on cash flows.

FASB ASC Topic 825 requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. A detailed description of the valuation methodologies used in estimating the fair value of financial instruments is set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

37

ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management’s discussion and analysis of the financial condition of First Busey Corporation and its subsidiaries (referred to herein as “First Busey,” “Company,” “we,” or “our”) at June 30, 2014 (unaudited), as compared with March 31, 2014 (unaudited), December 31, 2013 and June 30, 2013 (unaudited), and the results of operations for the three and six months ended June 30, 2014 and 2013 (unaudited), and the three months ended March 31, 2014 (unaudited) when applicable.  Management’s discussion and analysis should be read in conjunction with the Company’s consolidated financial statements and notes thereto appearing elsewhere in this quarterly report, as well as the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

EXECUTIVE SUMMARY

Operating Results

First Busey’s net income for the second quarter of 2014 was $8.2 million and net income available to common stockholders was $8.0 million, or $0.09 per fully-diluted common share.  Net income was higher than the second quarter of 2013, when the Company reported net income of $7.4 million and net income available to common stockholders of $6.5 million, or $0.08 per fully-diluted common share.  The Company reported net income of $7.9 million and net income available to common stockholders of $7.7 million, or $0.09 per fully-diluted common share, for the first quarter of 2014.

The Company’s year-to-date net income through June 30, 2014 was $16.1 million and net income available to common stockholders was $15.7 million, or $0.18 per fully-diluted common share, compared to net income of $13.9 million and net income available to common stockholders of $12.1 million, or $0.14 per fully-diluted common share, for the comparable period of 2013.  Continued strong financial performance enabled the Company to raise its dividend paid in July 2014 to common stockholders by 25% to $0.05 per common share from $0.04 per common share paid in July 2013.

Growth in quarterly and year-to-date net income available to common stockholders over the same periods in 2013 was led by a reduction in preferred dividends, improved credit costs, and lower operating expenses as the Company remains focused on cost control and productivity.  Robust loan growth during 2013 pushed Small Business Lending Fund (“SBLF”) qualified credits above certain thresholds required to meaningfully reduce costs of the preferred stock dividend beginning in 2014.  Dividends paid on the preferred stock totaled $0.4 million for the first six months of 2014 compared to $1.8 million for the comparable period of 2013.

Provision for loan loss of $1.0 million in the second quarter of 2014 was unchanged from the $1.0 million provision in the first quarter of 2014 but decreased from $2.0 million in the second quarter of 2013.  For the first six months of 2014, the provision for loan loss was $2.0 million, compared to $4.0 million for the same period of 2013, as the Company’s continued commitment to improving asset quality and building balance sheet strength continues to yield positive results.

Busey Wealth Management’s net income of $1.4 million for the second quarter of 2014 rose from $1.0 million for the first quarter of 2014 and $1.1 million for the second quarter of 2013.  Busey Wealth Management’s net income for the first six months of 2014 was $2.4 million as compared to $2.0 million for the first six months of 2013.  Assets under care increased to $5.1 billion as of June 30, 2014 compared to $4.5 billion at June 30, 2013.  FirsTech’s net income of $0.3 million for the second quarter of 2014 was comparable to the first quarter of 2014 and was up from the second quarter of 2013 by 14.0%.  FirsTech’s year-to-date net income of $0.6 million increased from $0.5 million for the comparable period of 2013, primarily on growth in electronic processing revenues, including online and mobile services.

38

Asset Quality

While much internal focus has been directed toward organic growth, the Company’s commitment to credit quality remains strong, as evidenced by another quarter of meaningful progress across a range of credit indicators.  As of June 30, 2014, the Company reported non-performing loans of $11.5 million, which reflected the lowest level in over five years.  Net charge-offs for the first six months of 2014 were $2.1 million compared to $3.5 million for the same period of 2013.  The Company expects these levels to remain relatively stable for the remainder of 2014; however, this remains dependent upon market-specific economic conditions, and specific measures may fluctuate from quarter to quarter.  The key metrics are as follows:

SELECTED  FINANCIAL HIGHLIGHTS

(dollars in thousands)

	As of and for the Three Months Ended
	June 30,			March 31,			December 31,			June 30,
	2014			2014			2013			2013
ASSET QUALITY
Gross loans(1)	$	2,324,068		$	2,232,632		$	2,295,300		$	2,159,098
Commercial loans(2)	1,737,751			1,683,557			1,751,740			1,580,351
Allowance for loan losses	47,428			47,426			47,567			48,491
Non-performing loans
Non-accrual loans	11,232			14,340			17,164			20,274
Loans 90+ days past due	235			—			195			771
Non-performing loans, segregated by geography
Illinois/ Indiana	8,273			11,175			13,565			16,030
Florida	3,194			3,165			3,794			5,015
Loans 30-89 days past due	1,766			4,005			6,114			3,683
Other non-performing assets	1,622			1,937			2,133			2,617
Non-performing assets to total loans and non-performing assets	0.6		%	0.7		%	0.9		%	1.1		%
Allowance as a percentage of non-performing loans	413.6		%	330.7		%	274.0		%	230.4		%
Allowance for loan losses to loans	2.0		%	2.1		%	2.1		%	2.3		%

(1)Includes loans held for sale.

(2)Includes loans categorized as commercial, commercial real estate and real estate construction.

Gross loans at June 30, 2014 increased $91.4 million from March 31, 2014 following seasonal slowness and extreme winter weather conditions that reduced loan demand in the first quarter of 2014. Gross loans increased to $2.3 billion at June 30, 2014 from $2.2 billion at each of March 31, 2014 and June 30, 2013.  Commercial loans increased to $1.7 billion as of June 30, 2014, which represents an increase of 3.2% from March 31, 2014 and 10.0% from June 30, 2013.

39

Economic Conditions of Markets

Our primary markets, which are in micro-urban communities in downstate Illinois, are distinct from the smaller rural populations of Illinois and have strong industrial, academic or healthcare employment bases.  Our primary downstate Illinois markets of Champaign, Macon, McLean and Peoria counties are anchored by several strong, familiar and stable organizations.

Champaign County is home to the University of Illinois — Urbana/Champaign (“U of I”), the University’s primary campus.  U of I has in excess of 43,000 students.  Additionally, Champaign County healthcare providers serve a significant area of downstate Illinois and western Indiana.  Macon County is home to the North American headquarters for Archer Daniels Midland (“ADM”), a Fortune 100 company and one of the largest agricultural processors in the world.  ADM’s presence in Macon County supports many derivative businesses in the agricultural processing arena.  Additionally, Macon County is home to Millikin University, and its healthcare providers serve a significant role in the market.  McLean County is home to State Farm, Country Financial, Illinois State University and Illinois Wesleyan University.  State Farm, a Fortune 100 company, is the largest employer in McLean County, and Country Financial and the universities provide additional stability to a growing area of downstate Illinois.  Peoria County is home to Caterpillar, a Fortune 100 company, and Bradley University, in addition to a large healthcare presence serving much of the western portion of downstate Illinois.  The institutions noted above, coupled with a large agricultural sector, anchor the communities in which they are located, and have provided a comparatively stable foundation for housing, employment and small business.

The State of Illinois, where the largest portion of the Company’s customer base is located, continues to be one of the most troubled of any state in the United States with pension under-funding, continued budget deficits and a declining credit outlook.  Additionally, the Company is located in markets with significant universities and healthcare companies, which rely heavily on state funding and contracts.  Payment lapses by the State of Illinois to its vendors and government sponsored entities may have negative effects on our primary market areas.

Southwest Florida has shown continuing signs of improvement in areas such as job growth and home sales over the last few years.  In addition, median sales prices of homes in Florida continue to be on the rise.  Although we have seen recent improvement in certain economic indicators, we expect it will take southwest Florida a number of years to return to peak economic strength.  In 2013, Hertz Global Holdings, a Fortune 500 company, announced its intent to move its headquarters from New Jersey to southwest Florida, building a new world headquarters in Lee County.  It is estimated that Hertz Global Holdings will spend $50.0 million to build the new headquarters and bring at least 700 jobs to the area.

40

OPERATING PERFORMANCE

NET INTEREST INCOME

Net interest income is the difference between interest income and fees earned on earning assets and interest expense incurred on interest-bearing liabilities.  Interest rate levels and volume fluctuations within earning assets and interest-bearing liabilities impact net interest income.  Net interest margin is tax-equivalent net interest income as a percent of average earning assets.

Certain assets with tax favorable treatment are evaluated on a tax-equivalent basis.  Tax-equivalent basis assumes a federal income tax rate of 35%.  Tax favorable assets generally have lower contractual pre-tax yields than fully taxable assets.  A tax-equivalent analysis is performed by adding the tax savings to the earnings on tax favorable assets.  After factoring in the tax favorable effects of these assets, the yields may be more appropriately evaluated against alternative earning assets.  In addition to yield, various other risks are factored into the evaluation process.

The following tables show the consolidated average balance sheets, detailing the major categories of assets and liabilities, the interest income earned on interest-earning assets, the interest expense paid for the interest-bearing liabilities, and the related interest rates for the periods shown.  The tables also show, for the periods indicated, a summary of the changes in interest earned and interest expense resulting from changes in volume and rates for the major components of interest-earning assets and interest-bearing liabilities.  All average information is provided on a daily average basis.

41

AVERAGE BALANCE SHEETS AND INTEREST RATES

THREE MONTHS ENDED JUNE 30, 2014 AND 2013

															Change in income/
	2014							2013							expense due to(1)
	Average			Income/		Yield/		Average			Income/		Yield/		Average			Average			Total
	Balance			Expense		Rate(3)		Balance			Expense		Rate(3)		Volume			Yield/Rate			Change
	(dollars in thousands)
Assets
Interest-bearing bank deposits	$	149,731		$	94	0.25	%	$	240,342		$	151	0.25	%	$	(57	)	$	—		$	(57	)
Investment securities
U.S. Government obligations	276,938			929		1.35	%	436,963			1,495		1.37	%	(537		)	(29		)	(566		)
Obligations of states and political subdivisions(1)	248,202			1,646		2.66	%	289,467			1,926		2.67	%	(274		)	(6		)	(280		)
Other securities	345,678			1,994		2.31	%	220,404			1,215		2.21	%	720			59			779
Loans(1) (2)	2,249,786			22,501		4.01	%	2,083,296			23,267		4.48	%	1,775			(2,541		)	(766		)
Total interest-earning assets(1)	$	3,270,335		$	27,164	3.33	%	$	3,270,472		$	28,054	3.44	%	$	1,627		$	(2,517	)	$	(890	)
Cash and due from banks	89,641							86,258
Premises and equipment	65,075							70,209
Allowance for loan losses	(47,891		)					(48,237		)
Other assets	146,268							166,000
Total Assets	$	3,523,428						$	3,544,702
Liabilities and Stockholders’ Equity
Interest-bearing transaction deposits	$	50,550		$	7	0.06	%	$	51,587		$	8	0.06	%	$	—		$	(1	)	$	(1	)
Savings deposits	216,061			11		0.02	%	213,122			16		0.03	%	—			(5		)	(5		)
Money market deposits	1,479,808			426		0.12	%	1,467,474			443		0.12	%	4			(21		)	(17		)
Time deposits	548,777			862		0.63	%	646,105			1,357		0.84	%	(185		)	(310		)	(495		)
Short-term borrowings:
Repurchase agreements	134,237			35		0.10	%	133,708			40		0.12	%	—			(5		)	(5		)
Other	—			—		—	%	—			6		—	%	—			(6		)	(6		)
Long-term debt	—			—		—	%	3,230			44		5.46	%	(22		)	(22		)	(44		)
Junior subordinated debt owed to unconsolidated trusts	55,000			294		2.14	%	55,000			301		2.20	%	—			(7		)	(7		)
Total interest-bearing liabilities	$	2,484,433		$	1,635	0.26	%	$	2,570,226		$	2,215	0.35	%	$	(203	)	$	(377	)	$	(580	)
Net interest spread(1)						3.07	%						3.09	%
Noninterest-bearing deposits	592,066							533,816
Other liabilities	24,855							27,714
Stockholders’ equity	422,074							412,946
Total Liabilities and Stockholders’ Equity	$	3,523,428						$	3,544,702
Interest income / earning assets(1)	$	3,270,335		$	27,164	3.33	%	$	3,270,472		$	28,054	3.44	%
Interest expense / earning assets	$	3,270,335		$	1,635	0.20	%	$	3,270,472		$	2,215	0.27	%
Net interest margin(1)				$	25,529	3.13	%				$	25,839	3.17	%	$	1,830		$	(2,140	)	$	(310	)

(1)       On a tax-equivalent basis assuming a federal income tax rate of 35%.

(2)       Non-accrual loans have been included in average loans.

(3)       Annualized.

42

AVERAGE BALANCE SHEETS AND INTEREST RATES

SIX MONTHS ENDED JUNE 30, 2014 AND 2013

															Change in income/
	2014							2013							expense due to(1)
	Average			Income/		Yield/		Average			Income/		Yield/		Average			Average			Total
	Balance			Expense		Rate(3)		Balance			Expense		Rate(3)		Volume			Yield/Rate			Change
	(dollars in thousands)
Assets
Interest-bearing bank deposits	$	168,390		$	215	0.26	%	$	256,188		$	313	0.25	%	$	(112	)	$	14		$	(98	)
Investment securities
U.S. Government obligations	305,172			1,983		1.31	%	448,820			3,117		1.40	%	(944		)	(190		)	(1,134		)
Obligations of states and political subdivisions(1)	254,878			3,361		2.66	%	284,842			3,811		2.70	%	(396		)	(54		)	(450		)
Other securities	286,598			3,273		2.30	%	229,374			2,229		1.96	%	613			431			1,044		)
Loans(1) (2)	2,242,590			45,097		4.06	%	2,060,332			46,295		4.53	%	3,899			(5,097		)	(1,198		)
Total interest-earning assets(1)	$	3,257,628		$	53,929	3.34	%	$	3,279,556		$	55,765	3.43	%	$	3,060		$	(4,896	)	$	(1,836	)
Cash and due from banks	92,854							80,544
Premises and equipment	65,412							70,573
Allowance for loan losses	(47,948		)					(48,487		)
Other assets	147,667							169,495
Total Assets	$	3,515,613						$	3,551,681
Liabilities and Stockholders’ Equity
Interest-bearing transaction deposits	$	49,249		$	13	0.05	%	$	49,620		$	17	0.07	%	$	—		$	(4	)	$	(4	)
Savings deposits	214,883			21		0.02	%	211,205			36		0.03	%	1			(16		)	(15		)
Money market deposits	1,478,424			846		0.12	%	1,470,337			928		0.13	%	5			(87		)	(82		)
Time deposits	559,075			1,788		0.64	%	661,144			2,940		0.90	%	(409		)	(743		)	(1,152		)
Short-term borrowings:
Repurchase agreements	132,948			74		0.11	%	131,911			84		0.13	%	1			(11		)	(10		)
Other	—			—		—	%	—			15		—	%	—			(15		)	(15		)
Long-term debt	—			—		—	%	4,619			125		5.46	%	(62		)	(63		)	(125		)
Junior subordinated debt owed to unconsolidated trusts	55,000			587		2.15	%	55,000			602		2.21	%	—			(15		)	(15		)
Total interest-bearing liabilities	$	2,489,579		$	3,329	0.27	%	$	2,583,836		$	4,747	0.37	%	$	(464	)	$	(954	)	$	(1,418	)
Net interest spread(1)						3.07	%						3.06	%
Noninterest-bearing deposits	580,171							528,068
Other liabilities	25,937							28,187
Stockholders’ equity	419,926							411,590
Total Liabilities and Stockholders’ Equity	$	3,515,613						$	3,551,681
Interest income / earning assets(1)	$	3,257,628		$	53,929	3.34	%	$	3,279,556		$	55,765	3.43	%
Interest expense / earning assets	$	3,257,628		$	3,329	0.21	%	$	3,279,556		$	4,747	0.29	%
Net interest margin(1)				$	50,600	3.13	%				$	51,018	3.14	%	$	3,524		$	(3,942	)	$	(418	)

(1)       On a tax-equivalent basis assuming a federal income tax rate of 35%.

(2)       Non-accrual loans have been included in average loans.

(3)       Annualized.

43

Total average earning assets decreased slightly for the three and six month periods ended June 30, 2014 as compared to the same periods of 2013.  Average loans increased $166.5 million and $182.3 million for the three and six month periods ended June 30, 2014 compared to the same periods of 2013, respectively.  Average interest-bearing bank deposits and investment securities both decreased for the three and six month periods ended June 30, 2014 as compared to the same periods of 2013.  Loans generally have notably higher yields compared to interest-bearing bank deposits and investment securities, leading to a positive effect on net interest margin.  Our increasing average loan balances positively influenced net interest margin while a highly competitive loan environment and a prolonged period of low interest rates, as well as lower balances of average interest-bearing bank deposits and investment securities, continued to put downward pressure on yields and margins.

Total average interest-bearing liability balances decreased for the three and six month periods ended June 30, 2014 as compared to the same periods of 2013.  Core deposits are an important low cost source of funding and maintaining adequate levels has allowed the Company to reduce more expensive non-core funding.

Interest income, on a tax-equivalent basis, decreased $0.9 million and $1.8 million for the three and six month periods ended June 30, 2014 as compared to the same periods of 2013, respectively. The interest income decline related to lower yields earned on assets in a low interest rate environment.  Interest expense decreased $0.6 million and $1.4 million for the three and six month periods ended June 30, 2014 as compared to the same periods of 2013, respectively. The interest expense decline was a result of decreases in interest rates offered by the Company on certain deposit products as the interest rate environment remains low, along with lower average balances on time deposits and no long-term debt outstanding in 2014.

Net interest margin

Net interest margin, our net interest income expressed as a percentage of average earning assets stated on a tax-equivalent basis, decreased to 3.13% for the three month period ended June 30, 2014 from 3.17% for the same period in 2013 and decreased slightly to 3.13% for the six month period ended June 30, 2014 from 3.14% for the same period in 2013.

Quarterly net interest margins for 2014 and 2013 are as follows:

	2014		2013
First Quarter	3.13	%	3.10	%
Second Quarter	3.13	%	3.17	%
Third Quarter	—		3.20	%
Fourth Quarter	—		3.12	%

The net interest spread, which represents the difference between the average rate earned on earning assets and the average rate paid on interest-bearing liabilities, also on a tax-equivalent basis, was 3.07% for the three month period ended June 30, 2014, compared to 3.09% for the same period in 2013 and was 3.07% for the six month period ended June 30, 2014 compared to 3.06% for the same period in 2013.

We continue to experience downward pressure on our yield in interest-earning assets resulting from a protracted period of historically low rates and heightened competition for assets, which has been experienced throughout the banking industry.  The development of a stronger asset mix from increased loan balances, while actively bringing down interest expense and optimizing funding costs, remains a focus.  We believe improvements in margin will be achieved through continued deployment of our liquid funds at higher yields as we expect to redeploy cash and securities into our loan portfolio at improved yields as the economy continues to strengthen.

Management attempts to mitigate the effects of an unpredictable interest-rate environment through effective portfolio management, prudent loan underwriting and operational efficiencies.  Please refer to the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 for accounting policies underlying the recognition of interest income and expense.

44

OTHER INCOME

	Three Months Ended June 30,							Six Months Ended June 30,
	2014			2013		% Change		2014		2013		% Change
	(dollars in thousands)
Trust fees	$	5,080		$	4,713	7.8	%	$	10,697	$	9,921	7.8	%
Commissions and brokers’ fees, net	676			569		18.8	%	1,347		1,109		21.5	%
Remittance processing	2,376			2,085		14.0	%	4,726		4,183		13.0	%
Service charges on deposit accounts	3,111			3,023		2.9	%	5,806		5,750		1.0	%
Other service charges and fees	1,618			1,527		6.0	%	3,106		2,966		4.7	%
Gain on sales of loans	1,234			2,763		(55.3	)%	2,215		6,260		(64.6	)%
Security (losses) gains, net	(3		)	—		NM		40		—		NM
Other	920			1,103		(16.6	)%	2,061		2,235		(7.8	)%
Total other income	$	15,012		$	15,783	(4.9	)%	$	29,998	$	32,424	(7.5	)%

NM = percentage change in line item between periods is not meaningful.

Total other income decreased $0.8 million and $2.4 million for the three and six month periods ended June 30, 2014 as compared to the same periods in 2013, respectively, primarily from decreased gains on sales of loans as the industry is experiencing a general slowdown in mortgage production, partially offset by increased trust and commissions and brokers’ fees, net and remittance processing.

Combined wealth management revenue, trust and commissions and brokers’ fees, net, increased for the three and six month periods ended June 30, 2014 as compared to the same periods in 2013.  The increase was led by organic growth, which increased assets under care (“AUC”), and positive market trends.  AUC increased to $5.1 billion as of June 30, 2014 compared to $4.5 billion at June 30, 2013.  Continued growth in new AUC driven by our wealth management teams suggest future income will also be positively impacted as wealth management revenues are typically highly correlated to AUC.  Furthermore, the Company believes the boutique services offered by Trevett Capital Partners within its suite of wealth services broadens its business base and enhances its ability to further develop revenue sources.

Remittance processing revenue relates to our payment processing company, FirsTech.  FirsTech’s revenue increased $0.3 million for the three month period ended June 30, 2014 as compared to the same period in 2013 and $0.5 million for the six month period ended June 30, 2014 as compared to the same period in 2013, primarily on growth in electronic processing revenues, including online and mobile services.  FirsTech adds important diversity to our revenue stream while widening our array of service offerings to larger commercial clients within our footprint and nationally.

Overall, service charges on deposit accounts combined with other service charges and fees increased for the three and six month periods ended June 30, 2014 as compared to the same periods in 2013.  Evolving regulation, product changes and changing behaviors by our client base may impact the revenue derived from charges on deposit accounts going forward.

Gain on sales of loans decreased for the three and six month periods ended June 30, 2014 as compared to the same periods in 2013 due to lower refinance volume as a result of market-based influences and higher interest rates.  Challenging conditions across the mortgage industry began to moderate during the second quarter of 2014, as reflected by increases in gains on sales of loans and mortgage portfolio balances relative to the first quarter of 2014.

Other income decreased for the three and six month periods ended June 30, 2014 as compared to the same periods in 2013.  The decrease was primarily due to the income fluctuation in the Company’s private equity investment funds.

45

OTHER EXPENSE

	Three Months EndedJune 30								Six Months EndedJune 30
	2014			2013			% Change		2014			2013			% Change
	(dollars in thousands)
Compensation expense:
Salaries and wages	$	12,578		$	12,781		(1.6	)%	$	24,827		$	26,341		(5.7	)%
Employee benefits	2,386			2,947			(19.0	)%	5,279			6,174			(14.5	)%
Total compensation expense	$	14,964		$	15,728		(4.9	)%	$	30,106		$	32,515		(7.4	)%
Net occupancy expense of premises	2,055			2,103			(2.3	)%	4,298			4,285			0.3	%
Furniture and equipment expenses	1,153			1,222			(5.6	)%	2,357			2,476			(4.8	)%
Data processing	2,687			2,568			4.6	%	5,499			5,207			5.6	%
Amortization of intangible assets	733			783			(6.4	)%	1,480			1,566			(5.5	)%
Regulatory expense	501			617			(18.8	)%	1,056			1,263			(16.4	)%
OREO expense	51			58			(12.1	)%	71			601			(88.2	)%
Other	4,679			4,722			(0.9	)%	8,574			9,455			(9.3	)%
Total other expense	$	26,823		$	27,801		(3.5	)%	$	53,441		$	57,368		(6.8	)%
Income taxes	$	4,025		$	3,787		6.3	%	$	8,063		$	7,011		15.0	%
Effective rate on income taxes	33.0		%	33.7		%			33.4		%	33.6		%
Efficiency ratio	64.4		%	64.9		%			64.5		%	66.9		%

Total other expense decreased $1.0 million and $3.9 million for the three and six month periods ended June 30, 2014 as compared to the same periods in 2013, respectively, as the Company remains focused on cost control and productivity, which broadly reduced operating expenses.

Total compensation expense decreased $0.8 million for the three month period ended June 30, 2014 as compared to the same period in 2013 and $2.4 million for the six month period ended June 30, 2014 compared to the same period in 2013.  Full-time equivalent employees decreased to 813 at June 30, 2014 from 875 at June 30, 2013.  An ongoing commitment to seek sensible opportunities to reduce cost and enhance productivity resulted in personnel reductions and other cost containment efforts that have contributed to positive expense trends.

Combined occupancy expenses and furniture and equipment expenses decreased for the three and six month periods ended June 30, 2014 as compared to the same period in 2013.  We continue to evaluate our operations for appropriate cost control measures while seeking improvements in service delivery to our customers.

Data processing expense increased for the three and six month periods ended June 30, 2014 as compared to the same periods in 2013.  As the Company manages data processing expense, it continues to enhance its mobile and internet banking services and prioritize strategies to mitigate the risk from cybercriminals through the use of new technology, industry best practices and customer education.  A portion of the increase in data processing expense was also related to supporting new sources of revenue growth at FirsTech.

Amortization of intangible assets expense decreased as we are now in the seventh year of amortization arising from our merger with Main Street Trust, Inc.  The amortization is on an accelerated basis; thus, exclusive of any further acquisitions in the future, we expect amortization expense to continue to gradually decline.

Regulatory expense decreased for the three and six month periods ended June 30, 2014 as compared to the same periods in 2013.  We anticipate that our regulatory expenses will remain close to current levels for the near future.

46

Our costs associated with OREO, such as collateral preservation and legal fees, decreased for the three and six months ended June 30, 2014 as compared to the same periods in 2013.  This expense fluctuates based on the management of commercial properties and the operating activity associated with the properties that we hold throughout the year.  The OREO balance at June 30, 2014 was $1.6 million compared to $2.6 million at June 30, 2013.

Other expense decreased for the three and six months ended June 30, 2014 as compared to the same periods in 2013 primarily as a result of a widespread reduction in expenses due to an enhanced emphasis on cost control.

The effective rate on income taxes, or income taxes divided by income before taxes, of 33.0% and 33.4% for the three and six months ended June 30, 2014, respectively, was lower than the combined federal and state statutory rate of approximately 41% due to fairly stable amounts of tax preferred interest income, such as municipal bond interest and bank owned life insurance income, accounting for a portion of our taxable income.  As taxable income increases, we expect our effective tax rate to increase.  Under current law, Illinois net operating loss carryover limitations expired in 2014 and the corporate income tax rate is scheduled for reduction effective January 1, 2015.  The Company continues to monitor evolving state tax legislation and its potential impact on operations on an ongoing basis.

The efficiency ratio represents total other expense, less amortization charges, as a percentage of tax-equivalent net interest income plus other income, less security gains and losses.  The efficiency ratio, which is a non-GAAP financial measure commonly used by management and the investment community in the banking industry, measures the amount of expense that is incurred to generate a dollar of revenue. The efficiency ratio of 64.4% for the three month period ended June 30, 2014 improved from 64.9% in the comparable period in 2013.  The efficiency ratio for the first six months of 2014 was 64.5%, an improvement from 66.9% for the same period of 2013.  The process of examining appropriate avenues to improve efficiency is expected to continue as a focus in future periods with an emphasis on revenue growth.

FINANCIAL CONDITION

SIGNIFICANT BALANCE SHEET ITEMS

	June 30, 2014		December 31, 2013		% Change
	(dollars in thousands)
Assets
Securities available for sale	$	840,112	$	841,310	(0.1	)%
Securities held to maturity	1,850		834		121.8	%
Loans, net, including loans held for sale	2,276,640		2,247,733		1.3	%
Total assets	$	3,507,449	$	3,539,575	(0.9	)%
Liabilities
Deposits:
Noninterest-bearing	$	605,346	$	547,531	10.6	%
Interest-bearing	2,256,182		2,321,607		(2.8	)%
Total deposits	$	2,861,528	$	2,869,138	(0.3	)%
Securities sold under agreements to repurchase	$	140,563	$	172,348	(18.4	)%
Total liabilities	$	3,080,682	$	3,124,211	(1.4	)%
Stockholders’ equity	$	426,767	$	415,364	2.7	%

First Busey’s balance sheet at June 30, 2014 decreased as compared with its balance sheet at December 31, 2013.

Total securities held steady at June 30, 2014 compared to December 31, 2013. Net loans, including loans held for sale, increased by $28.9 million, or 1.3%, during the same period.  Loan demand was reduced in the first quarter of 2014 due to seasonal slowness and extreme winter weather conditions, but improved significantly in the second quarter.

47

Total liabilities decreased by $43.5 million, or 1.4%, at June 30, 2014 compared to December 31, 2013.  Noninterest-bearing deposits increased by $57.8 million, or 10.6%, at June 30, 2014 compared to December 31, 2013, while interest-bearing deposits decreased by $65.4 million, or 2.8%, at June 30, 2014 compared to December 31, 2013.  Securities sold under agreements to repurchase decreased by $31.8 million, or 18.4%, due to changing customer preferences and normal fluctuations in balances.  The Company remained strongly core deposit funded at 77.3% of total assets as of June 30, 2014, with solid liquidity and significant market share in the communities it serves.

Stockholders’ equity increased to $426.8 million at June 30, 2014 as compared to $415.4 million at December 31, 2013.  This increase was primarily the result of earnings in the first half of 2014 and increases in the market value of our securities portfolio, partially offset by dividends paid on preferred and common stock.

ASSET QUALITY

Loan Portfolio

Geographic distributions of loans by category were as follows:

	June 30, 2014
	Illinois		Florida		Indiana		Total
	(dollars in thousands)
Commercial	$	510,576	$	21,429	$	21,585	$	553,590
Commercial real estate	826,098		165,622		110,005		1,101,725
Real estate construction	50,606		15,782		16,048		82,436
Retail real estate	462,173		101,466		12,987		576,626
Retail other	9,034		574		83		9,691
Total	$	1,858,487	$	304,873	$	160,708	$	2,324,068
Less held for sale(1)							20,286
							$	2,303,782
Less allowance for loan losses							47,428
Net loans							$	2,256,354

(1) Loans held for sale are included in retail real estate.

	December 31, 2013
	Illinois		Florida		Indiana		Total
	(dollars in thousands)
Commercial	$	530,174	$	20,536	$	29,902	$	580,612
Commercial real estate	800,568		160,255		131,450		1,092,273
Real estate construction	55,190		17,426		6,239		78,855
Retail real estate	419,801		103,104		11,588		534,493
Retail other	8,422		552		93		9,067
Total	$	1,814,155	$	301,873	$	179,272	$	2,295,300
Less held for sale(1)							13,840
							$	2,281,460
Less allowance for loan losses							47,567
Net loans							$	2,233,893

(1) Loans held for sale are included in retail real estate.

48

The total loan portfolio, gross, as of June 30, 2014 increased $28.8 million from December 31, 2013; gross commercial balances (consisting of commercial, commercial real estate and real estate construction loans) decreased $14.0 million from December 31, 2013.  Loans held for sale increased $6.5 million as of June 30, 2014 from December 31, 2013.   Retail real estate and retail other, less loans held for sale, increased $36.3 million as of June 30, 2014 from December 31, 2013 as challenging conditions across the mortgage industry began to moderate during the second quarter of 2014. Achieving meaningful organic growth remains a focus for us, and our commitment to credit quality remains strong, as evidenced by another quarter of meaningful progress across a range of credit indicators as discussed further below.

Allowance for loan losses

Our allowance for loan losses was $47.4 million, or 2.0% of loans, at June 30, 2014, compared to $47.6 million, or 2.1% of loans, at December 31, 2013.

Typically, when we move loans into nonaccrual status, the loans are collateral dependent and charged down to the fair value of our interest in the underlying collateral less estimated costs to sell.  Our loan portfolio is collateralized primarily by real estate.

We continue to attempt to identify problem loan situations on a proactive basis.  Once problem loans are identified, adjustments to the provision for loan losses are made based upon all information available at that time.  The provision reflects management’s analysis of additional allowance for loan losses necessary to cover probable losses in our loan portfolio.

As of June 30, 2014, management believed the level of the allowance and coverage of non-performing loans to be appropriate based upon the information available.   However, additional losses may be identified in our loan portfolio as new information is obtained.  We may need to provide for additional loan losses in the future as management continues to identify potential problem loans and gains further information concerning existing problem loans.

First Busey does not originate or hold any Alt-A or subprime loans or investments.

Provision for Loan Losses

The provision for loan losses is a current charge against income and represents an amount which management believes is sufficient to maintain an appropriate allowance for known and probable losses in the loan portfolio.  In assessing the appropriateness of the allowance for loan losses, management considers the size and quality of the loan portfolio measured against prevailing economic conditions, regulatory guidelines, historical loan loss experience and credit quality of the portfolio.  When a determination is made by management to charge-off a loan balance, such write-off is charged against the allowance for loan losses.

Our provision for loan losses was $1.0 million during the second quarter of 2014 compared to $2.0 million in the same period of 2013.  Our provision for loan losses was $2.0 million during the first six months of 2014 and $4.0 million in the same period of 2013. The relative provision expenses during 2014 and 2013 were reflective of management’s assessment of the lower level of risk in the portfolio in 2014.

Sensitive assets include non-accrual loans, loans on our classified loan reports and other loans identified as having more than reasonable potential for loss.  Management reviews sensitive assets on at least a quarterly basis for changes in the customers’ ability to pay and changes in valuation of underlying collateral in order to estimate probable losses.  The majority of these loans are being repaid in conformance with their contracts.

Non-performing Loans

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due.  Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions.  Loans may be placed on non-accrual status regardless of whether or not such loans are considered past due.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

49

The following table sets forth information concerning non-performing loans as of each of the dates indicated:

	June 30,  2014			March  31, 2014			December  31, 2013			September 30, 2013
	(dollars in thousands)
Non-accrual loans	$	11,232		$	14,340		$	17,164		$	18,489
Loans 90+ days past due and still accruing	235			—			195			199
Total non-performing loans	$	11,467		$	14,340		$	17,359		$	18,688
OREO	$	1,622		$	1,937		$	2,133		$	2,156
Total non-performing assets	$	13,089		$	16,277		$	19,492		$	20,844
Allowance for loan losses	$	47,428		$	47,426		$	47,567		$	47,964
Allowance for loan losses to loans	2.0		%	2.1		%	2.1		%	2.1		%
Allowance for loan losses to non-performing loans	413.6		%	330.7		%	274.0		%	256.7		%
Non-performing loans to loans, before allowance for loan losses	0.5		%	0.6		%	0.8		%	0.8		%
Non-performing loans and OREO to loans, before allowance for loan losses	0.6		%	0.7		%	0.9		%	0.9		%

We continue to drive positive trends across a range of credit indicators and expect these levels to generally stabilize in 2014.  Total non-performing assets were $13.1 million at June 30, 2014, compared to $19.5 million at December 31, 2013.  Despite strong growth in loans for the quarter, the balance in the allowance for loan losses held steady, consistent with existing methodologies and management’s assessment of overall stability in general asset quality trends.

As of June 30, 2014, the Bank had charged-off $3.4 million of principal balance on loans that were on non-accrual status at June 30, 2014.  Partial charge-offs reduce the reported principal of the balance of the loan, whereas, a specific allocation of allowance for loan losses does not reduce the reported principal balance of the loan.  Non-accrual loans are reported net of charge-offs, but include related specific allocations of the allowance for loan losses.  In summary, if we had not charged-off $3.4 million in loans, our non-accrual loans would have been that amount greater than the $11.2 million reported.

Potential Problem Loans

Potential problem loans are those loans which are not categorized as impaired, restructured, non-accrual or 90+ days past due, but where current information indicates that the borrower may not be able to comply with present loan repayment terms.  Management assesses the potential for loss on such loans as it would with other problem loans and has considered the effect of any potential loss in determining its provision for probable loan losses.  Potential problem loans of $40.7 million at June 30, 2014 were less than the $50.1 million reported at December 31, 2013.  The balance of potential problem loans is a reflection of continued economic challenges; however, we do not believe the potential losses will be as great as seen in the past.  Management continues to monitor these credits and anticipates that restructurings, guarantees, additional collateral or other planned actions will result in full repayment of the debts.  As of June 30, 2014, management identified no other loans that represent or result from trends or uncertainties which management reasonably expected to materially impact future operating results, liquidity or capital resources.  As of June 30, 2014, management was not aware of any information about any other credits which caused management to have serious doubts as to the ability of such borrower(s) to comply with the loan repayment terms.

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LIQUIDITY

Liquidity management is the process by which we ensure that adequate liquid funds are available to meet the present and future cash flow obligations arising in the daily operations of our business.  These financial obligations consist of needs for funds to meet commitments to borrowers for extensions of credit, fund capital expenditures, honor withdrawals by customers, pay dividends to stockholders and pay operating expenses.  Our most liquid assets are cash and due from banks, interest-bearing bank deposits, and, if needed, federal funds sold.  The balances of these assets are dependent on the Company’s operating, investing, lending, and financing activities during any given period.

First Busey’s primary sources of funds consist of deposits, investment maturities and sales, loan principal repayments, and capital funds.  Additional liquidity is provided by repurchase agreements, the ability to borrow from the Federal Reserve and the Federal Home Loan Bank, and brokered deposits.  Management intends to satisfy long-term liquidity needs primarily through retention of capital funds.

Based upon the level of investment securities that reprice within 30 days and 90 days, as of June 30, 2014, management believed that adequate liquidity existed to meet all projected cash flow obligations.  We seek to achieve a satisfactory degree of liquidity by actively managing both assets and liabilities.  Asset management guides the proportion of liquid assets to total assets, while liability management monitors future funding requirements and prices liabilities accordingly.

OFF-BALANCE-SHEET ARRANGEMENTS

At June 30, 2014, the Company had outstanding standby letters of credit of $19.6 million and commitments to extend credit of $581.2 million to its customers.  Since these commitments generally have fixed expiration dates and many will expire without being drawn upon, the total commitment level does not necessarily represent future cash requirements.  These commitments are made in the ordinary course of business.  As of June 30, 2014, no amounts were recorded as liabilities for the Company’s potential obligations under these commitments.

CAPITAL RESOURCES

The ability of the Company to pay cash dividends to its stockholders and to service its debt historically was dependent on the receipt of cash dividends from its subsidiaries.  However, Busey Bank sustained significant losses during 2008 and 2009 resulting in pressure on capital, which was relieved through injections of capital from the Company.  State chartered banks have certain statutory and regulatory restrictions on the amount of cash dividends they may pay.  Due to the significant losses in the past and the Company’s desire to maintain a strong capital position at Busey Bank, no dividends have been paid from Busey Bank since 2009.  Until such time as retained earnings have been restored, Busey Bank will not be permitted to pay dividends, and we will need to request permission from Busey Bank’s primary regulator to distribute any capital out of Busey Bank.  On January 22, 2013, with the approval of its primary regulator, Busey Bank transferred $50.0 million to the Company representing a return of capital and associated surplus as a result of an amendment to Busey Bank’s charter.

The Company and Busey Bank are subject to regulatory capital requirements administered by federal and state banking agencies that involve the quantitative measure of their assets, liabilities, and certain off-balance-sheet items, as calculated under regulatory accounting practices.  Quantitative measures established by regulations to ensure capital adequacy require the Company and Busey Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined in the regulations), and, for the Bank, Tier 1 capital (as defined in the regulations) to average assets (as defined in the regulations).  Failure to meet minimum capital requirements may cause regulatory bodies to initiate certain discretionary and/or mandatory actions that, if undertaken, may have a direct material effect on our financial statements.  The Company, as a financial holding company, is required to be “well capitalized” in the two capital categories based on risk-weighted assets, as shown in the table below.  As of June 30, 2014, the Company and Busey Bank met all capital adequacy requirements to which they were subject, including the guidelines to be considered “well capitalized.”

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					Minimum				Minimum To Be
	Actual				Capital Requirement				Well Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(dollars in thousands)
As of June 30, 2014:
Total Capital (to Risk Weighted Assets)
Consolidated	$	473,655	18.49	%	$	204,962	8.00	%	$	256,202	10.00	%
Busey Bank	$	427,147	16.79	%	$	203,521	8.00	%	$	254,401	10.00	%
Tier I Capital (to Risk Weighted Assets)
Consolidated	$	440,660	17.20	%	$	102,481	4.00	%	$	153,721	6.00	%
Busey Bank	$	394,374	15.50	%	$	101,761	4.00	%	$	152,641	6.00	%
Tier I Capital (to Average Assets)
Consolidated	$	440,660	12.66	%	$	139,170	4.00	%	N/A		N/A
Busey Bank	$	394,374	11.48	%	$	137,434	4.00	%	$	171,793	5.00	%

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) required the Board of Governors of the Federal Reserve System to establish minimum capital levels for bank holding companies on a consolidated basis that are as stringent as those required for insured depository institutions.  The components of Tier 1 capital will be restricted to capital instruments that are currently considered to be Tier 1 capital for insured depository institutions.  As a result, the proceeds of trust preferred securities will be excluded from Tier 1 capital unless such securities were issued prior to May 19, 2010 by bank holding companies with less than $15 billion of assets. As the Company has assets of less than $15 billion, it will be able to maintain its trust preferred proceeds as Tier 1 capital but it will have to comply with new capital mandates in other respects, and it will not be able to raise Tier 1 capital in the future through the issuance of trust preferred securities.

In July 2013, the U.S. federal banking authorities approved the implementation of the Basel III regulatory capital reforms and issued rules effecting certain changes required by the Dodd-Frank Act (the “Basel III Rules”).  The Basel III Rules are applicable to all U.S. banks that are subject to minimum capital requirements, as well as to bank and savings and loan holding companies other than “small bank holding companies” (generally bank holding companies with consolidated assets of less than $500 million).  The Basel III Rules not only increase most of the required minimum regulatory capital ratios, but they also introduce a new Common Equity Tier 1 Capital ratio and the concept of a capital conservation buffer.  The Basel III Rules also expand the definition of capital as in effect currently by establishing criteria that instruments must meet to be considered Additional Tier 1 Capital (Tier 1 Capital in addition to Common Equity) and Tier 2 Capital.  A number of instruments that now generally qualify as Tier 1 Capital will not qualify, or their qualifications will change when the Basel III Rules are fully implemented.  The Basel III Rules also permit banking organizations with less than $15.0 billion in assets to retain, through a one-time election, the existing treatment for accumulated other comprehensive income, which currently does not affect regulatory capital.  The Basel III Rules have maintained the general structure of the current prompt corrective action framework, while incorporating the increased requirements. The prompt corrective action guidelines were also revised to add the Common Equity Tier 1 Capital ratio.  In order to be a “well-capitalized” depository institution under the new regime, a bank and holding company must maintain a Common Equity Tier 1 Capital ratio of 6.5% or more; a Tier 1 Capital ratio of 8% or more; a Total Capital ratio of 10% or more; and a leverage ratio of 5% or more.  Generally, financial institutions become subject to the new Basel III Rules on January 1, 2015, with phase-in periods for many of the changes.  Management continues to review the effects of the Basel III Rules on the Company’s and the Bank’s capital positions and is working to position the Company to satisfy the new requirements.

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FORWARD LOOKING STATEMENTS

Statements made in this report, other than those concerning historical financial information, may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of First Busey.  Forward-looking statements, which may be based upon beliefs, expectations and assumptions of First Busey’s management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” or other similar expressions.  Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and we undertake no obligation to update any statement in light of new information or future events.  A number of factors, many of which are beyond our ability to control or predict, could cause actual results to differ materially from those in our forward-looking statements.  These factors include, among others, the following: (i) the strength of the local and national economy; (ii) the economic impact of any future terrorist threats or attacks; (iii) changes in state and federal laws, regulations and governmental policies concerning First Busey’s general business (including the impact of the Dodd-Frank Act and the extensive regulations to be promulgated thereunder, as well as the rules adopted by the federal bank regulatory agencies to implement Basel III); (iv) changes in interest rates and prepayment rates of First Busey’s assets; (v) increased competition in the financial services sector and the inability to attract new customers; (vi) changes in technology and the ability to develop and maintain secure and reliable electronic systems; (vii) the loss of key executives or employees; (viii) changes in consumer spending; (ix) unexpected results of acquisitions; (x) unexpected outcomes of existing or new litigation involving First Busey;  (xi) changes in accounting policies and practices; and (xii) the economic impact of exceptional weather occurrences such as tornadoes, hurricanes, floods, and blizzards.  These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  Additional information concerning First Busey and its business, including additional factors that could materially affect its financial results, is included in First Busey’s filings with the Securities and Exchange Commission.

Critical Accounting Estimates

Critical accounting estimates are those that are critical to the portrayal and understanding of First Busey’s financial condition and results of operations and require management to make assumptions that are difficult, subjective or complex.  These estimates involve judgments, estimates and uncertainties that are susceptible to change.  In the event that different assumptions or conditions were to prevail, and depending on the severity of such changes, the possibility of a materially different financial condition or materially different results of operations is a reasonable likelihood.

Our significant accounting policies are described in Note 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.  The majority of these accounting policies do not require management to make difficult, subjective or complex judgments or estimates or the variability of the estimates is not material.  However, the following policies could be deemed critical:

Fair Value of Investment Securities. Securities are classified as held to maturity when First Busey has the ability and management has the positive intent to hold those securities to maturity.  Accordingly, they are stated at cost, adjusted for amortization of premiums and accretion of discounts. First Busey had $1.9 million of securities classified as held to maturity at June 30, 2014.  First Busey had no securities classified as trading at June 30, 2014.  Securities are classified as available for sale when First Busey may decide to sell those securities due to changes in market interest rates, liquidity needs, changes in yields on alternative investments, and for other reasons.  They are carried at fair value with unrealized gains and losses, net of taxes, reported in other comprehensive income.  As of June 30, 2014, First Busey had $840.1 million of securities classified as available for sale.  For equity securities, unadjusted quoted prices in active markets for identical assets are utilized to determine fair value at the measurement date.  For all other securities, we obtain fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things.   Due to the limited nature of the market for certain securities, the fair value and potential sale proceeds could be materially different in the event of a sale.

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Realized securities gains or losses are reported in security gains (losses), net in the Consolidated Statements of Income. The cost of securities sold is based on the specific identification method. Declines in the fair value of available for sale securities below their amortized cost are evaluated to determine whether the loss is temporary or other-than-temporary.  If the Company (a) has the intent to sell a debt security or (b) will more-likely-than-not be required to sell the debt security before its anticipated recovery, then the Company recognizes the entire unrealized loss in earnings as an other-than-temporary loss.  If neither of these conditions are met, the Company evaluates whether a credit loss exists.  The impairment is separated into the amount of the total impairment related to the credit loss and the amount of total impairment related to all other factors.  The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings, and the amount related to all other factors is recognized in other comprehensive income.

The Company also evaluates whether the decline in fair value of an equity security is temporary or other-than-temporary.  In determining whether an unrealized loss on an equity security is temporary or other-than-temporary, management considers various factors including the magnitude and duration of the impairment, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to hold the equity security to forecasted recovery.

Allowance for Loan Losses. First Busey has established an allowance for loan losses which represents its estimate of the probable losses inherent in the loan portfolio as of the date of the financial statements and reduces the total loans outstanding by an estimate of uncollectible loans.  Loans deemed uncollectible are charged against and reduce the allowance.  A provision for loan losses is charged to current expense.  This provision acts to replenish the allowance for loan losses and to maintain the allowance at a level that management deems adequate.

To determine the adequacy of the allowance for loan losses, a formal analysis is completed quarterly to assess the risk within the loan portfolio.  This assessment is reviewed by senior management of Busey Bank and the Company.  The analysis includes a review of historical performance, dollar amount and trends of past due loans, dollar amount and trends in non-performing loans, certain impaired loans, and loans identified as sensitive assets.  Sensitive assets include non-accrual loans, past-due loans, loans on First Busey’s watch loan reports and other loans identified as having probable potential for loss.

The allowance consists of specific and general components.  The specific component considers loans that are classified as impaired.  For such loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying amount of that loan.  The general component covers non-classified loans and classified loans not considered impaired, and is based on historical loss experience adjusted for qualitative factors.  Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss experience.

A loan is considered to be impaired when, based on current information and events, it is probable First Busey will not be able to collect all principal and interest amounts due according to the contractual terms of the loan agreement.  When a loan becomes impaired, management generally calculates the impairment based on the present value of expected future cash flows discounted at the loan’s effective interest rate.  If the loan is collateral dependent, the fair value of the collateral is used to measure the amount of impairment.  The amount of impairment and any subsequent changes are recorded through a charge to the provision for loan losses.  For collateral dependent loans, First Busey has determined the required allowance on these loans based upon the estimated fair value, net of selling costs, of the respective collateral.  The required allowance or actual losses on these impaired loans could differ significantly if the ultimate fair value of the collateral is significantly different from the fair value estimates used by First Busey in estimating such potential losses.

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Deferred Taxes.  We have maintained significant net deferred tax assets for deductible temporary differences, the largest of which relates to the net operating loss carryforward and the allowance for loan losses. For income tax return purposes, only actual charge-offs are deductible, not the provision for loan losses. Under generally accepted accounting principles, a valuation allowance is required to be recognized if it is “more-likely-than-not” that the deferred tax asset will not be realized. The determination of the recoverability of the deferred tax assets is highly subjective and dependent upon judgment concerning management’s evaluation of both positive and negative evidence, the forecasts of future income, applicable tax planning strategies, and assessments of the current and future economic and business conditions. We consider both positive and negative evidence regarding the ultimate recoverability of our deferred tax assets. Positive evidence includes available tax planning strategies and the probability that taxable income will continue to be generated in future periods, as it was in periods since March 31, 2010, while negative evidence includes a cumulative loss in 2009 and 2008 and certain business and economic trends. We evaluated the recoverability of our net deferred tax assets and established a valuation allowance for certain state net operating loss and credit carryforwards that are not expected to be fully realized. Management believes that it is more-likely-than-not that the other deferred tax assets included in the accompanying consolidated financial statements will be fully realized. We determined that no valuation allowance was required for any other deferred tax assets as of June 30, 2014, although there is no guarantee that those assets will be recognizable in future periods.

We assess the likelihood that any deferred tax assets will be realized through the reduction of taxes in future periods and establish a valuation allowance for those assets for which recovery is not more-likely-than-not. In making this assessment, we must make judgments and estimates regarding the ability to realize the asset through the future reversal of existing taxable temporary differences, future taxable income, and the possible application of future tax planning strategies.  The Company’s evaluation gave consideration to the fact that all net operating loss carrybacks have been utilized.  Therefore, utilization of net operating loss carryforwards are dependent on implementation of tax strategies and continued profitability.

ITEM 3.  QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of changes in asset values due to movements in underlying market rates and prices.  Interest rate risk is the risk to earnings and capital arising from movements in interest rates.  Interest rate risk is the most significant market risk affecting First Busey as other types of market risk, such as foreign currency exchange rate risk and commodity price risk, have minimal impact or do not arise in the normal course of First Busey’s business activities.

The Bank has an asset-liability committee which meets at least quarterly to review current market conditions and attempts to structure the Bank’s balance sheet to ensure stable net interest income despite potential changes in interest rates with all other variables constant.

As interest rate changes do not impact all categories of assets and liabilities equally or simultaneously, the asset-liability committee primarily relies on balance sheet and income simulation analysis to determine the potential impact of changes in market interest rates on net interest income.  In these standard simulation models, the balance sheet is projected over a year-one time horizon and a year-two time horizon, and net interest income is calculated under current market rates and then assuming permanent instantaneous shifts of +/-100, +/-200, +/-300 and +/-400 basis points.  Management measures such changes assuming immediate and sustained shifts in the federal funds rate and other market rate indices and the corresponding shifts in other non-market rate indices based on their historical changes relative to changes in the federal funds rate and other market indices.  The model assumes assets and liabilities remain constant at the measurement date balances.  The model uses repricing frequency on all variable-rate assets and liabilities.  Prepayment speeds on loans have been adjusted to incorporate expected prepayment speeds in both a declining and rising rate environment.  As of June 30, 2014 and December 31, 2013, due to the current low interest rate environment, a downward adjustment in federal fund rates was not possible.

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Utilizing this measurement concept, the interest rate risk of First Busey due to an immediate and sustained change in interest rates, expressed as a change in net interest income as a percentage of the net interest income calculated in the constant base model, was as follows:

	Year-One: Basis Point Changes
	-400	-300	-200	-100	+100		+200		+300		+400
June 30, 2014	NA	NA	NA	NA	(3.57	)%	(7.13	)%	(11.12	)%	(15.35	)%
December 31, 2013	NA	NA	NA	NA	(3.55	)%	(6.91	)%	(10.62	)%	(14.60	)%

	Year-Two: Basis Point Changes
	-400	-300	-200	-100	+100		+200		+300		+400
June 30, 2014	NA	NA	NA	NA	0.30	%	0.17	%	(0.51	)%	(1.69	)%
December 31, 2013	NA	NA	NA	NA	0.54	%	0.63	%	0.15	%	(0.88	)%

The risk is monitored and managed within approved policy limits.  The calculation of potential effects of hypothetical interest rate changes was based on numerous assumptions and should not be relied upon as indicative of actual results.  Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and management strategies.  The above results do not take into account any management action to mitigate potential risk.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) was carried out as of June 30, 2014, under the supervision and with the participation of our Chief Executive Officer, Chief Financial Officer and several other members of our senior management. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2014, our disclosure controls and procedures were effective in ensuring that the information we are required to disclose in the reports we file or submit under the Exchange Act is (i) accumulated and communicated to our management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure, and (ii) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Controls over Financial Reporting

During the quarter ended June 30, 2014, First Busey did not make any changes in its internal control over financial reporting or other factors that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

On May 14, 2013, the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) issued an updated version of its Internal Control - Integrated Framework (“2013 Framework”).  Originally issued in 1992 (“1992 Framework”), the framework helps organizations design, implement and evaluate the effectiveness of internal control concepts and simplify their use and application.  The 1992 Framework will remain effective during the transition, which extends to December 15, 2014, after which time COSO will consider it as superseded by the 2013 Framework.  As of June 30, 2014, First Busey continues to utilize the 1992 Framework and will transition to the 2013 Framework by the end of 2014.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

As part of the ordinary course of business, First Busey and its subsidiaries are parties to litigation that is incidental to their regular business activities.

There is no material pending litigation, other than ordinary routine litigation incidental to its business, in which First Busey or any of its subsidiaries is involved or of which any of their property is the subject.  Furthermore, there is no pending legal proceeding that is adverse to First Busey in which any director, officer or affiliate of First Busey, or any associate of any such director or officer, is a party or has a material interest.

ITEM 1A.  RISK FACTORS

There have been no material changes to the risk factors disclosed in Item 1A of Part I of the Company’s 2013 Annual Report on Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Repurchases

There were no purchases made by or on behalf of First Busey of shares of its common stock during the quarter ended June 30, 2014.

On January 22, 2008, First Busey announced that its board of directors had authorized the repurchase of 1,000,000 shares of common stock.  First Busey’s repurchase plan has no expiration date and is active until all the shares are repurchased or action is taken by the board of directors to discontinue the plan.  As of June 30, 2014, under the Company’s stock repurchase plan, 895,655 shares remained authorized for repurchase.

ITEM 3. DEFAULTS UPON SENIOR SECURITES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

(a)None.

(b)None.

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ITEM 6. EXHIBITS

10.1	Employment Agreement by and among First Busey Corporation, Busey Bank and Robin Elliott, effective February 1, 2014 (filed as Exhibit 10.1 to First Busey’s Form 8-K dated May 27, 2014 and incorporated herein by reference).
31.1	Certification of Principal Executive Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a).
31.2	Certification of Principal Financial Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a).
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, from the Company’s Chief Executive Officer.
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, from the Company’s Chief Financial Officer.
101	Interactive Data File
	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets at June 30, 2014 and December 31, 2013; (ii) Consolidated Statements of Income for the three and six months ended June 30, 2014 and 2013; (iii) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2014 and 2013; (iv) Consolidated Statements of Stockholders’ Equity for the six months ended June 30, 2014 and 2013; (v) Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013; and (vi) Notes to Unaudited Consolidated Financial Statements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FIRST BUSEY CORPORATION

(Registrant)

By:	/s/ VAN A. DUKEMAN
	Van A. Dukeman
	President and Chief Executive Officer
	(Principal executive officer)
By:	/s/ ROBIN N. ELLIOTT
	Robin N. Elliott
	Chief Financial Officer
	(Principal financial and accounting officer)

Date:  August 7, 2014

59

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Van A. Dukeman, President and Chief Executive Officer of First Busey Corporation, certify that:

1)I have reviewed this Quarterly Report on Form 10-Q of First Busey Corporation;

2)Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;

3)Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report;

4)The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Quarterly Report based on such evaluation; and

d)disclosed in this Quarterly Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5)The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ VAN A. DUKEMAN

Van A. Dukeman

President and Chief Executive Officer

Date: August 7, 2014

1

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Robin N. Elliott, Chief Financial Officer of First Busey Corporation, certify that:

1)I have reviewed this Quarterly Report on Form 10-Q of First Busey Corporation;

2)Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;

3)Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report;

4)The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Quarterly Report based on such evaluation; and

d)disclosed in this Quarterly Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5)The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ ROBIN N. ELLIOTT

Robin N. Elliott

Chief Financial Officer

Date: August 7, 2014

1

EX-32.1

EXHIBIT 32.1

The following certification is provided by the undersigned Chief Executive Officer of First Busey Corporation on the basis of such officer’s knowledge and belief for the sole purpose of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

CERTIFICATION

I hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the accompanying Quarterly Report of First Busey Corporation on Form 10-Q for the quarter ended June 30, 2014, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in such Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of First Busey Corporation as of and for the periods covered by the Quarterly Report.

/s/ VAN A. DUKEMAN

Van A. Dukeman

President and Chief Executive Officer

Date:  August 7, 2014

1

EX-32.2

EXHIBIT 32.2

The following certification is provided by the undersigned Chief Financial Officer of First Busey Corporation on the basis of such officer’s knowledge and belief for the sole purpose of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

CERTIFICATION

I hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the accompanying Quarterly Report of First Busey Corporation on Form 10-Q for the quarter ended June 30, 2014, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in such Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of First Busey Corporation as of and for the periods covered by the Quarterly Report.

/s/ ROBIN N. ELLIOTT

Robin N. Elliott

Chief Financial Officer

Date:  August 7, 2014

1

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Securities Sold Under Agreements to Repurchase (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Securities Sold Under Agreements to Repurchase
Maximum maturity period of securities sold under agreements to repurchase	1 year
Balance at end of period	$ 140,563	$ 172,348
Weighted average interest rate at end of period (as a percent)	0.10%	0.13%
Maximum outstanding at any month end in year-to-date period	141,642	172,348
Average daily balance for the year-to-date period	$ 132,948	$ 137,777
Weighted average interest rate during period (as a percent)	0.11%	0.14%

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Loans (Details) (USD $)	6 Months Ended
	Jun. 30, 2014 item mi	Dec. 31, 2013	Jun. 30, 2014 Illinois	Dec. 31, 2013 Illinois	Jun. 30, 2014 Florida	Mar. 31, 2014 Florida	Dec. 31, 2013 Florida	Jun. 30, 2013 Florida	Mar. 31, 2013 Florida	Dec. 31, 2012 Florida	Jun. 30, 2014 Indiana	Dec. 31, 2013 Indiana	Jun. 30, 2014 Commercial	Dec. 31, 2013 Commercial	Jun. 30, 2014 Commercial Illinois	Dec. 31, 2013 Commercial Illinois	Jun. 30, 2014 Commercial Florida	Mar. 31, 2014 Commercial Florida	Dec. 31, 2013 Commercial Florida	Jun. 30, 2013 Commercial Florida	Mar. 31, 2013 Commercial Florida	Dec. 31, 2012 Commercial Florida	Jun. 30, 2014 Commercial Indiana	Dec. 31, 2013 Commercial Indiana	Jun. 30, 2014 Commercial real estate	Dec. 31, 2013 Commercial real estate	Jun. 30, 2014 Commercial real estate Illinois	Dec. 31, 2013 Commercial real estate Illinois	Jun. 30, 2014 Commercial real estate Florida	Mar. 31, 2014 Commercial real estate Florida	Dec. 31, 2013 Commercial real estate Florida	Jun. 30, 2013 Commercial real estate Florida	Mar. 31, 2013 Commercial real estate Florida	Dec. 31, 2012 Commercial real estate Florida	Jun. 30, 2014 Commercial real estate Indiana	Dec. 31, 2013 Commercial real estate Indiana	Jun. 30, 2014 Real estate construction	Dec. 31, 2013 Real estate construction	Jun. 30, 2014 Real estate construction Illinois	Dec. 31, 2013 Real estate construction Illinois	Jun. 30, 2014 Real estate construction Florida	Mar. 31, 2014 Real estate construction Florida	Dec. 31, 2013 Real estate construction Florida	Jun. 30, 2013 Real estate construction Florida	Mar. 31, 2013 Real estate construction Florida	Dec. 31, 2012 Real estate construction Florida	Jun. 30, 2014 Real estate construction Indiana	Dec. 31, 2013 Real estate construction Indiana	Jun. 30, 2014 Retail real estate	Dec. 31, 2013 Retail real estate	Jun. 30, 2014 Retail real estate Illinois	Dec. 31, 2013 Retail real estate Illinois	Jun. 30, 2014 Retail real estate Florida	Mar. 31, 2014 Retail real estate Florida	Dec. 31, 2013 Retail real estate Florida	Jun. 30, 2013 Retail real estate Florida	Mar. 31, 2013 Retail real estate Florida	Dec. 31, 2012 Retail real estate Florida	Jun. 30, 2014 Retail real estate Indiana	Dec. 31, 2013 Retail real estate Indiana	Jun. 30, 2014 Retail other	Dec. 31, 2013 Retail other	Jun. 30, 2014 Retail other Illinois	Dec. 31, 2013 Retail other Illinois	Jun. 30, 2014 Retail other Florida	Mar. 31, 2014 Retail other Florida	Dec. 31, 2013 Retail other Florida	Jun. 30, 2013 Retail other Florida	Mar. 31, 2013 Retail other Florida	Dec. 31, 2012 Retail other Florida	Jun. 30, 2014 Retail other Indiana	Dec. 31, 2013 Retail other Indiana
Loans
Total	$ 2,324,068,000	$ 2,295,300,000	$ 1,858,487,000	$ 1,814,155,000	$ 304,873,000		$ 301,873,000				$ 160,708,000	$ 179,272,000	$ 553,590,000	$ 580,612,000	$ 510,576,000	$ 530,174,000	$ 21,429,000		$ 20,536,000				$ 21,585,000	$ 29,902,000	$ 1,101,725,000	$ 1,092,273,000	$ 826,098,000	$ 800,568,000	$ 165,622,000		$ 160,255,000				$ 110,005,000	$ 131,450,000	$ 82,436,000	$ 78,855,000	$ 50,606,000	$ 55,190,000	$ 15,782,000		$ 17,426,000				$ 16,048,000	$ 6,239,000	$ 576,626,000	$ 534,493,000	$ 462,173,000	$ 419,801,000	$ 101,466,000		$ 103,104,000				$ 12,987,000	$ 11,588,000	$ 9,691,000	$ 9,067,000	$ 9,034,000	$ 8,422,000	$ 574,000		$ 552,000				$ 83,000	$ 93,000
Less held for sale	20,286,000	13,840,000
Total loans before allowance for loan losses	2,303,782,000	2,281,460,000			304,873,000		301,125,000										21,429,000		20,536,000										165,622,000		160,255,000										15,782,000		17,426,000										101,466,000		102,356,000										574,000		552,000
Less allowance for loan losses	47,428,000	47,567,000			10,491,000	12,145,000	13,118,000	16,244,000	15,049,000	15,433,000							1,782,000	2,291,000	1,926,000	1,505,000	1,485,000	1,437,000							4,976,000	5,729,000	5,733,000	7,656,000	6,106,000	6,062,000							175,000	233,000	1,168,000	2,693,000	2,326,000	2,315,000							3,554,000	3,888,000	4,287,000	4,387,000	5,128,000	5,614,000							4,000	4,000	4,000	3,000	4,000	5,000
Net loans	2,256,354,000	2,233,893,000
Net deferred loan origination costs	400,000
Minimum target period for lending via intermediate term loans	0 years
Maximum target period for lending via intermediate term loans	7 years
Geographical area from lending offices which attempt is made to lend short and intermediate term loans (in miles)	125
Direct and indirect maximum total borrowing relationship limit	20,000,000
Borrowing relationships, threshold above Which board of directors will review annually	$ 20,000,000
Number of primary areas for lending loan	5

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Stock-based Compensation (Tables)

6 Months Ended

Jun. 30, 2014

Stock-based Compensation

Schedule of status and changes in stock option plans

	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term
Outstanding at beginning of year	696,379	$	17.22
Granted	—	—
Exercised	—	—
Forfeited	167,649	19.72
Outstanding at end of period	528,730	$	16.43	2.18
Exercisable at end of period	528,730	$	16.43	2.18

Summary of the changes in the company's stock unit awards

			Director				Weighted-
	Restricted		Deferred				Average
	Stock		Stock				Grant Date
	Units		Units		Total		Fair Value
Non-vested at beginning of year	919,928		29,054		948,982		$	4.96
Granted	317,976		36,000		353,976		5.84
Dividend Equivalents Earned	14,745		437		15,182		5.53
Vested	(15,728	)	(29,491	)	(45,219	)	5.02
Forfeited	(44,109	)	—		(44,109	)	4.73
Non-vested at end of period	1,192,812		36,000		1,228,812		$	5.23
Outstanding at end of period	1,192,812		124,655		1,317,467		$	5.22

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Outstanding Commitments and Contingent Liabilities (Details) (USD $) In Thousands, unless otherwise specified			6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2014 Maximum	Jun. 30, 2014 Commitments to extend credit	Dec. 31, 2013 Commitments to extend credit	Jun. 30, 2014 Standby letters of credit	Dec. 31, 2013 Standby letters of credit
Credit Commitments and Contingencies
Financial instruments whose contract amounts represent credit risk				$ 581,156	$ 527,614	$ 19,566	$ 10,155
Term for guarantee			1 year
Liabilities for potential obligations under guarantees	$ 0	$ 0

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Loans (Details 5)	6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Loans
The number of components in the general portion of the Company's allowance	2
Number of quarters whose historical average is used to calculate the historical loss ratio	20
Grade 9
Loans
Period of charge-off percentage based on which additional allocation is determined	1 year
Minimum additional reserve (as a percent)	3.00%	3.00%
Grade 8
Loans
Number of quarters in more current measure of historical losses in adversely graded loans	12
Number of quarters in less current measure of historical losses in adversely graded loans	20
Minimum additional amount for loans (as a percent)	1.00%	1.00%

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Fair Value Measurements (Details 3) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Financial assets:
Cash and due from banks	$ 182,032	$ 231,603
Securities held to maturity	1,893	831
Loans, net	2,256,354	2,233,893
Financial liabilities:
Junior subordinated debt owed to unconsolidated trusts	55,000	55,000
Carrying Amount | Level 2 Inputs
Financial assets:
Cash and due from banks	182,032	231,603
Securities held to maturity	1,850	834
Loans held for sale	20,286	13,840
Accrued interest receivable	11,031	11,148
Financial liabilities:
Deposits	2,861,528	2,869,138
Securities sold under agreements to repurchase	140,563	172,348
Junior subordinated debt owed to unconsolidated trusts	55,000	55,000
Accrued interest payable	566	673
Carrying Amount | Level 3 Inputs
Financial assets:
Loans, net	2,256,354	2,233,893
Fair Value | Level 2 Inputs
Financial assets:
Cash and due from banks	182,032	231,603
Securities held to maturity	1,893	831
Loans held for sale	20,672	14,103
Accrued interest receivable	11,031	11,148
Financial liabilities:
Deposits	2,862,772	2,870,870
Securities sold under agreements to repurchase	140,563	172,348
Junior subordinated debt owed to unconsolidated trusts	55,000	55,000
Accrued interest payable	566	673
Fair Value | Level 3 Inputs
Financial assets:
Loans, net	$ 2,257,618	$ 2,236,841

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Basis of Presentation

6 Months Ended

Jun. 30, 2014

Basis of Presentation

Basis of Presentation

Note 1:  Basis of Presentation

The accompanying unaudited consolidated interim financial statements of First Busey Corporation (“First Busey” or the “Company”), a Nevada corporation, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for Quarterly Reports on Form 10-Q and do not include certain information and footnote disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete annual financial statements. Accordingly, these financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

The accompanying Consolidated Balance Sheet as of December 31, 2013, which has been derived from audited financial statements, and the unaudited consolidated interim financial statements have been prepared in accordance with U.S. GAAP and reflect all adjustments that are, in the opinion of management, necessary for the fair presentation of the financial position and results of operations as of the dates and for the periods presented. All such adjustments are of a normal recurring nature. The results of operations for the three and six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

The consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. Certain prior-year amounts have been reclassified to conform to the current presentation with no effect on net income or stockholders’ equity.

In preparing the accompanying consolidated financial statements, the Company’s management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses for the reporting period.  Actual results could differ from those estimates.  Material estimates which are particularly susceptible to significant change in the near term relate to the fair value of investment securities, the determination of the allowance for loan losses, and the valuation allowance on the deferred tax asset.

The Company has evaluated subsequent events for potential recognition and/or disclosure through the date the consolidated financial statements included in this Quarterly Report on Form 10-Q were issued.  There were no significant subsequent events for the quarter ended June 30, 2014 through the issuance date of these financial statements that warranted adjustment to or disclosure in the consolidated financial statements.

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Reportable Segments and Related Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 item	Jun. 30, 2013	Dec. 31, 2013
Reportable Segments and Related Information
Number of reportable segments			3
Reportable Segments and Related Information
Goodwill	$ 20,686		$ 20,686		$ 20,686
Total Assets	3,507,449		3,507,449		3,539,575
Interest Income	26,656	27,460	52,907	54,575
Interest Expense	1,635	2,215	3,329	4,747
Other Income	15,012	15,783	29,998	32,424
Net Income	8,185	7,440	16,072	13,873
Operating segments | Busey Bank
Reportable Segments and Related Information
Total Assets	3,427,699		3,427,699		3,456,555
Interest Income	26,573	27,390	52,754	54,430
Interest Expense	1,350	1,917	2,760	4,149
Other Income	8,252	9,598	16,788	20,095
Net Income	7,436	6,487	14,715	12,280
Operating segments | FirsTech
Reportable Segments and Related Information
Goodwill	8,992		8,992		8,992
Total Assets	27,885		27,885		27,253
Interest Income	13	13	25	26
Other Income	2,409	2,149	4,796	4,278
Net Income	326	286	635	548
Operating segments | Busey Wealth Management
Reportable Segments and Related Information
Goodwill	11,694		11,694		11,694
Total Assets	29,896		29,896		28,548
Interest Income	76	57	140	117
Other Income	5,110	4,643	9,651	8,746
Net Income	1,401	1,133	2,403	1,953
All other
Reportable Segments and Related Information
Total Assets	21,969		21,969		27,219
Interest Income	(6)		(12)	2
Interest Expense	285	298	569	598
Other Income	(759)	(607)	(1,237)	(695)
Net Income	$ (978)	$ (466)	$ (1,681)	$ (908)

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Measurements

Schedule of financial assets and financial liabilities measured at fair value on a recurring basis

	Level 1		Level 2		Level 3		Total
	Inputs		Inputs		Inputs		Fair Value
	(dollars in thousands)
June 30, 2014
Securities available for sale
U.S. Treasury securities	$	—	$	50,814	$	—	$	50,814
Obligations of U.S. government corporations and agencies	—		205,363		—		205,363
Obligations of states and political subdivisions	—		243,408		—		243,408
Residential mortgage-backed securities	—		259,571		—		259,571
Corporate debt securities	—		74,531		—		74,531
Mutual funds and other equity securities	6,425		—		—		6,425
Derivative assets
Foreign currency forward contracts	—		5		—		5
Derivative liabilities
Foreign currency forward contracts	—		22		—		22
December 31, 2013
Securities available for sale
U.S. Treasury securities	$	—	$	102,640	$	—	$	102,640
Obligations of U.S. government corporations and agencies	—		257,411		—		257,411
Obligations of states and political subdivisions	—		272,152		—		272,152
Residential mortgage-backed securities	—		177,735		—		177,735
Corporate debt securities	—		25,506		—		25,506
Mutual funds and other equity securities	5,866		—		—		5,866

Schedule of assets and liabilities measured at fair value on a non-recurring basis

	Level 1		Level 2		Level 3		Total
	Inputs		Inputs		Inputs		Fair Value
	(dollars in thousands)
June 30, 2014
Impaired loans	$	—	$	—	$	3,792	$	3,792
OREO	—		—		1,140		1,140
December 31, 2013
Impaired loans	$	—	$	—	$	5,491	$	5,491
OREO	—		—		1,134		1,134

Schedule of quantitative information about Level 3 fair value measurements

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value		Valuation	Unobservable	Range
	Estimate		Techniques	Input	(Weighted Average)
	(dollars in thousands)
June 30, 2014
Impaired loans	$	3,792	Appraisal of collateral	Appraisal adjustments	-2.6% to -100.0% (-44.7%)
OREO	1,140		Appraisal of collateral	Appraisal adjustments	-6.6% to -100.0% (-47.9%)
December 31, 2013
Impaired loans	$	5,491	Appraisal of collateral	Appraisal adjustments	-0.4% to -100.0% (-36.0%)
OREO	1,134		Appraisal of collateral	Appraisal adjustments	-6.6% to -100.0% (-47.9%)

Schedule of estimated fair values of financial instruments

	June 30, 2014				December 31, 2013
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(dollars in thousands)
Financial assets:
Level 2 inputs:
Cash and due from banks	$	182,032	$	182,032	$	231,603	$	231,603
Securities held to maturity	1,850		1,893		834		831
Loans held for sale	20,286		20,672		13,840		14,103
Accrued interest receivable	11,031		11,031		11,148		11,148
Level 3 inputs:
Loans, net	2,256,354		2,257,618		2,233,893		2,236,841
Financial liabilities:
Level 2 inputs:
Deposits	$	2,861,528	$	2,862,772	$	2,869,138	$	2,870,870
Securities sold under agreements to repurchase	140,563		140,563		172,348		172,348
Junior subordinated debt owed to unconsolidated trusts	55,000		55,000		55,000		55,000
Accrued interest payable	566		566		673		673

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Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Derivative Financial Instruments

Schedule of notional amount and fair values of open foreign currency forward contracts

	June 30, 2014		December 31, 2013
	(dollars in thousands)
Forward contracts — foreign exchange:
Notional amount	$	4,439	$	—
Other assets — estimated fair value	5		—
Other liabilities — estimated fair value	22		—

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Derivative Financial Instruments (Details) (USD $)	Jun. 30, 2014 item
Derivative Financial Instruments
Number of other interest rate futures, forwards, swaps or option contracts, or other financial instruments	0
Foreign loan balance, gross	$ 1,500,000
Foreign currency forward contracts | Not designated as hedging
Derivative Financial Instruments
Notional amount	4,439,000
Foreign currency forward contracts | Not designated as hedging | Other assets
Derivative Financial Instruments
Estimated fair value	5,000
Foreign currency forward contracts | Not designated as hedging | Other liabilities
Derivative Financial Instruments
Estimated fair value	$ 22,000

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Basis of Presentation (Details)	6 Months Ended
	Jun. 30, 2014 item
Basis of Presentation
Number of significant subsequent events	0

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Securities (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014 item	Jun. 30, 2013	Jun. 30, 2014 item	Jun. 30, 2013	Dec. 31, 2013
Available for sale
Amortized Cost	$ 827,498,000		$ 827,498,000		$ 833,735,000
Gross Unrealized Gains			13,638,000		11,350,000
Gross Unrealized Losses			(1,024,000)		(3,775,000)
Fair Value	840,112,000		840,112,000		841,310,000
Held to maturity
Amortized Cost	1,850,000		1,850,000		834,000
Gross Unrealized Gains			43,000		1,000
Gross Unrealized Losses					(4,000)
Fair Value	1,893,000		1,893,000		831,000
Available for sale, Amortized Cost
Due in one year or less	132,344,000		132,344,000
Due after one year through five years	360,784,000		360,784,000
Due after five years through ten years	165,306,000		165,306,000
Due after ten years	164,373,000		164,373,000
Amortized Cost	822,807,000		822,807,000
Available for sale, Fair Value
Due in one year or less	133,270,000		133,270,000
Due after one year through five years	363,964,000		363,964,000
Due after five years through ten years	169,573,000		169,573,000
Due after ten years	166,880,000		166,880,000
Fair Value	833,687,000		833,687,000
Held to maturity, Amortized Cost
Due after one year through five years	317,000		317,000
Due after five years through ten years	1,533,000		1,533,000
Amortized Cost	1,850,000		1,850,000		834,000
Held to maturity, Fair Value
Due after one year through five years	321,000		321,000
Due after five years through ten years	1,572,000		1,572,000
Fair Value	1,893,000		1,893,000		831,000
Realized gains and losses related to sales of securities available for sale
Gross security gains			57,000
Gross security (losses)	(3,000)		(17,000)
Net security (losses) gains	(3,000)		40,000
Tax provision related to net realized gains (losses)		0		0
Carrying amount of investment securities pledged as collateral	401,200,000		401,200,000		428,700,000
Available for sale, Fair Value
Continuous unrealized losses existing for less than 12 months, gross	32,949,000		32,949,000		199,636,000
Continuous unrealized losses existing greater than 12 months, gross	84,259,000		84,259,000		8,492,000
Total	117,208,000		117,208,000		208,128,000
Available for sale, Unrealized Losses
Continuous unrealized losses existing for less than 12 months, gross	122,000		122,000		3,481,000
Continuous unrealized losses existing greater than 12 months, gross	902,000		902,000		294,000
Total	1,024,000		1,024,000		3,775,000
Held to maturity, Fair Value
Continuous unrealized losses existing for less than 12 months, gross					597,000
Total					597,000
Held to maturity, Unrealized Losses
Continuous unrealized losses existing for less than 12 months, gross					4,000
Total					4,000
Number of securities in unrealized loss position	139		139
Securities in unrealized loss position as a percentage of aggregate carrying value of investments	0.90%		0.90%
Debt securities
Available for sale
Amortized Cost	822,807,000		822,807,000		829,621,000
Gross Unrealized Gains			11,904,000		9,598,000
Gross Unrealized Losses			(1,024,000)		(3,775,000)
Fair Value	833,687,000		833,687,000		835,444,000
U.S. Treasury securities
Available for sale
Amortized Cost	50,402,000		50,402,000		102,463,000
Gross Unrealized Gains			416,000		244,000
Gross Unrealized Losses			(4,000)		(67,000)
Fair Value	50,814,000		50,814,000		102,640,000
Available for sale, Fair Value
Continuous unrealized losses existing for less than 12 months, gross					25,830,000
Continuous unrealized losses existing greater than 12 months, gross	364,000		364,000
Total	364,000		364,000		25,830,000
Available for sale, Unrealized Losses
Continuous unrealized losses existing for less than 12 months, gross					67,000
Continuous unrealized losses existing greater than 12 months, gross	4,000		4,000
Total	4,000		4,000		67,000
Obligations of U.S. government corporations and agencies
Available for sale
Amortized Cost	203,592,000		203,592,000		254,998,000
Gross Unrealized Gains			1,882,000		2,741,000
Gross Unrealized Losses			(111,000)		(328,000)
Fair Value	205,363,000		205,363,000		257,411,000
Available for sale, Fair Value
Continuous unrealized losses existing for less than 12 months, gross	55,000		55,000		25,946,000
Continuous unrealized losses existing greater than 12 months, gross	25,149,000		25,149,000
Total	25,204,000		25,204,000		25,946,000
Available for sale, Unrealized Losses
Continuous unrealized losses existing for less than 12 months, gross	1,000		1,000		328,000
Continuous unrealized losses existing greater than 12 months, gross	110,000		110,000
Total	111,000		111,000		328,000
Obligations of states and political subdivisions
Available for sale
Amortized Cost	240,458,000		240,458,000		272,077,000
Gross Unrealized Gains			3,682,000		2,887,000
Gross Unrealized Losses			(732,000)		(2,812,000)
Fair Value	243,408,000		243,408,000		272,152,000
Held to maturity
Amortized Cost	828,000		828,000		834,000
Gross Unrealized Gains			20,000		1,000
Gross Unrealized Losses					(4,000)
Fair Value	848,000		848,000		831,000
Held to maturity, Amortized Cost
Amortized Cost	828,000		828,000		834,000
Held to maturity, Fair Value
Fair Value	848,000		848,000		831,000
Available for sale, Fair Value
Continuous unrealized losses existing for less than 12 months, gross	11,951,000		11,951,000		92,703,000
Continuous unrealized losses existing greater than 12 months, gross	47,155,000		47,155,000		8,492,000
Total	59,106,000		59,106,000		101,195,000
Available for sale, Unrealized Losses
Continuous unrealized losses existing for less than 12 months, gross	24,000		24,000		2,518,000
Continuous unrealized losses existing greater than 12 months, gross	708,000		708,000		294,000
Total	732,000		732,000		2,812,000
Held to maturity, Fair Value
Continuous unrealized losses existing for less than 12 months, gross					597,000
Total					597,000
Held to maturity, Unrealized Losses
Continuous unrealized losses existing for less than 12 months, gross					4,000
Total					4,000
Obligations of states and political subdivisions | Maximum
Held to maturity, Unrealized Losses
Total					1,000
Residential mortgage-backed securities
Available for sale
Amortized Cost	254,387,000		254,387,000		174,699,000
Gross Unrealized Gains			5,325,000		3,571,000
Gross Unrealized Losses			(141,000)		(535,000)
Fair Value	259,571,000		259,571,000		177,735,000
Available for sale, Fair Value
Continuous unrealized losses existing for less than 12 months, gross	15,219,000		15,219,000		53,543,000
Continuous unrealized losses existing greater than 12 months, gross	11,376,000		11,376,000
Total	26,595,000		26,595,000		53,543,000
Available for sale, Unrealized Losses
Continuous unrealized losses existing for less than 12 months, gross	66,000		66,000		535,000
Continuous unrealized losses existing greater than 12 months, gross	75,000		75,000
Total	141,000		141,000		535,000
Corporate debt securities
Available for sale
Amortized Cost	73,968,000		73,968,000		25,384,000
Gross Unrealized Gains			599,000		155,000
Gross Unrealized Losses			(36,000)		(33,000)
Fair Value	74,531,000		74,531,000		25,506,000
Available for sale, Fair Value
Continuous unrealized losses existing for less than 12 months, gross	5,724,000		5,724,000		1,614,000
Continuous unrealized losses existing greater than 12 months, gross	215,000		215,000
Total	5,939,000		5,939,000		1,614,000
Available for sale, Unrealized Losses
Continuous unrealized losses existing for less than 12 months, gross	31,000		31,000		33,000
Continuous unrealized losses existing greater than 12 months, gross	5,000		5,000
Total	36,000		36,000		33,000
Mutual funds and other equity securities
Available for sale
Amortized Cost	4,691,000		4,691,000		4,114,000
Gross Unrealized Gains			1,734,000		1,752,000
Fair Value	6,425,000		6,425,000		5,866,000
Commercial mortgage-backed securities
Held to maturity
Amortized Cost	1,022,000		1,022,000
Gross Unrealized Gains			23,000
Fair Value	1,045,000		1,045,000
Held to maturity, Amortized Cost
Amortized Cost	1,022,000		1,022,000
Held to maturity, Fair Value
Fair Value	$ 1,045,000		$ 1,045,000

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash Flows from Operating Activities
Net income	$ 16,072	$ 13,873
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based and non-cash compensation	479	395
Depreciation and amortization	4,292	4,364
Provision for loan losses	2,000	4,000
Provision for deferred income taxes	7,415	4,636
Amortization of security premiums and discounts, net	3,697	4,737
Net security gains	(40)
Gain on sales of loans, net	(2,215)	(6,260)
Net gain on disposition of premises and equipment	(7)
Net (gains) loss on sales of OREO properties	(132)	18
Increase in cash surrender value of bank owned life insurance	(78)	(686)
Change in assets and liabilities:
Decrease in other assets	123	8,465
Decrease in other liabilities	(3,943)	(395)
Decrease in interest payable	(107)	(308)
(Increase) decrease in income taxes receivable	(1,505)	1,128
Net cash provided by operating activities before activities for loans originated for sale	26,051	33,967
Loans originated for sale	(107,686)	(273,889)
Proceeds from sales of loans	103,455	279,278
Net cash provided by operating activities	21,820	39,356
Cash Flows from Investing Activities
Proceeds from sales of securities classified available for sale	62,245	5,267
Proceeds from maturities of securities classified available for sale	105,049	99,224
Proceeds from maturities of securities classified held to maturity	3
Purchase of securities classified available for sale	(164,707)	(42,513)
Purchase of securities classified held to maturity	(1,026)
Net increase in loans	(25,070)	(89,301)
Proceeds from disposition of premises and equipment	7	601
Proceeds from sale of OREO properties	1,252	1,479
Purchases of premises and equipment	(1,548)	(1,710)
Net cash used in investing activities	(23,795)	(26,953)
Cash Flows from Financing Activities
Net decrease in certificates of deposit	(44,246)	(59,617)
Net increase (decrease) in demand, money market and savings deposits	36,636	(49,739)
Cash dividends paid	(8,176)	(5,282)
Value of shares surrendered upon vesting of restricted stock units to cover tax obligations	(25)	(30)
Principal payments on long-term debt		(7,000)
Net (decrease) increase in securities sold under agreements to repurchase	(31,785)	9,214
Net cash used in financing activities	(47,596)	(112,454)
Net decrease in cash and due from banks	(49,571)	(100,051)
Cash and due from banks, beginning	231,603	351,255
Cash and due from banks, ending	182,032	251,204
Cash payments for:
Interest	3,436	5,056
Income taxes	2,563	1,110
Non-cash investing and financing activities:
Other real estate acquired in settlement of loans	$ 609	$ 663

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Securities (Details 2) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2014 item	Dec. 31, 2013 item
Securities
Available for sale, fair value	$ 840,112,000	$ 841,310,000
Held to maturity, fair value	1,893,000	831,000
General obligation bonds
Securities
Number of issuers	206	219
Amortized Cost	197,687,000	222,693,000
Fair Value	200,758,000	223,470,000
Average Exposure Per Issuer (Fair Value)	975,000	1,020,000
Amount of largest exposure to a single issuer	3,500,000	5,000,000
Percentage of the entity's stockholders equity in excess of aggregate book or market value	10.00%	10.00%
Percentage of underlying asset rated by at least a specified nationally recognized statistical rating organization	97.00%	96.40%
Minimum number of nationally recognized statistical rating organizations	1	1
Percentage of underlying asset unrated	3.00%	3.60%
General obligation bonds | Illinois
Securities
Number of issuers	75	82
Amortized Cost	68,783,000	82,884,000
Fair Value	70,404,000	83,804,000
Average Exposure Per Issuer (Fair Value)	939,000	1,022,000
General obligation bonds | Wisconsin
Securities
Number of issuers	41	41
Amortized Cost	39,080,000	43,117,000
Fair Value	39,420,000	43,122,000
Average Exposure Per Issuer (Fair Value)	961,000	1,052,000
General obligation bonds | Michigan
Securities
Number of issuers	34	37
Amortized Cost	31,048,000	35,350,000
Fair Value	31,452,000	35,365,000
Average Exposure Per Issuer (Fair Value)	925,000	956,000
General obligation bonds | Pennsylvania
Securities
Number of issuers	11	11
Amortized Cost	13,318,000	14,132,000
Fair Value	13,391,000	14,133,000
Average Exposure Per Issuer (Fair Value)	1,217,000	1,285,000
General obligation bonds | Ohio
Securities
Number of issuers	10	12
Amortized Cost	10,953,000	11,709,000
Fair Value	10,935,000	11,426,000
Average Exposure Per Issuer (Fair Value)	1,094,000	952,000
General obligation bonds | Texas
Securities
Number of issuers	7	7
Amortized Cost	7,438,000	7,510,000
Fair Value	7,400,000	7,270,000
Average Exposure Per Issuer (Fair Value)	1,057,000	1,039,000
General obligation bonds | Iowa
Securities
Number of issuers	3	3
Amortized Cost	6,121,000	6,126,000
Fair Value	6,188,000	6,060,000
Average Exposure Per Issuer (Fair Value)	2,063,000	2,020,000
General obligation bonds | Other
Securities
Number of issuers	25	26
Amortized Cost	20,946,000	21,865,000
Fair Value	21,568,000	22,290,000
Average Exposure Per Issuer (Fair Value)	863,000	857,000
Revenue bonds
Securities
Number of issuers	42	48
Amortized Cost	43,599,000	50,218,000
Fair Value	43,498,000	49,513,000
Average Exposure Per Issuer (Fair Value)	1,036,000	1,032,000
Amount of largest exposure to a single issuer	3,000,000	3,000,000
Percentage of the entity's stockholders equity in excess of aggregate book or market value	10.00%	10.00%
Minimum number of nationally recognized statistical rating organizations	1	1
Revenue bonds | Illinois
Securities
Number of issuers	4	4
Amortized Cost	7,002,000	7,356,000
Fair Value	6,920,000	7,121,000
Average Exposure Per Issuer (Fair Value)	1,730,000	1,780,000
Revenue bonds | Indiana
Securities
Number of issuers	11	14
Amortized Cost	13,307,000	14,740,000
Fair Value	13,274,000	14,481,000
Average Exposure Per Issuer (Fair Value)	1,207,000	1,034,000
Revenue bonds | Other
Securities
Number of issuers	27	30
Amortized Cost	23,290,000	28,122,000
Fair Value	23,304,000	27,911,000
Average Exposure Per Issuer (Fair Value)	863,000	930,000
Obligations of states and political subdivisions
Securities
Available for sale, fair value	243,408,000	272,152,000
Held to maturity, fair value	848,000	831,000
Number of issuers	248	267
Total Risk Based Capital for rated securities (as a percent)	100.00%
Total Risk Based Capital for unrated securities (as a percent)	15.00%
Obligations of states and political subdivisions | General obligation bonds
Securities
Fair Value	200,800,000	223,500,000
Number of states in which investment is held	24	25
Number of states in which investment is held in excess of aggregate fair value	7	7
Aggregate fair value	5,000,000	5,000,000
Obligations of states and political subdivisions | Revenue bonds
Securities
Fair Value	43,500,000	49,500,000
Number of states in which investment is held	19	21
Number of states in which investment is held in excess of aggregate fair value	2	2
Aggregate fair value	$ 5,000,000	$ 5,000,000

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Earnings Per Common Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Net income per share calculations for basic and diluted methods
Net income available to common stockholders (in dollars)	$ 8,004	$ 6,532	$ 15,709	$ 12,057
Shares:
Weighted average common shares outstanding	86,895,000	86,730,000	86,880,000	86,717,000
Dilutive effect of outstanding options, warrants and restricted stock units as determined by the application of the treasury stock method (in shares)	368,000		365,000
Weighted average common shares outstanding, as adjusted for diluted earnings per share calculation	87,263,000	86,730,000	87,245,000	86,717,000
Basic earnings per common share (in dollars per share)	$ 0.09	$ 0.08	$ 0.18	$ 0.14
Diluted earnings per common share (in dollars per share)	$ 0.09	$ 0.08	$ 0.18	$ 0.14
Stock options
Anti-dilutive securities excluded from the calculation of common stock equivalents
Number of anti-dilutive securities (in shares)			476,230	701,029
Warrants
Anti-dilutive securities excluded from the calculation of common stock equivalents
Number of anti-dilutive securities (in shares)			573,833	573,833
Restricted stock units
Anti-dilutive securities excluded from the calculation of common stock equivalents
Number of anti-dilutive securities (in shares)			353,976	713,450

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Assets
Cash and due from banks (interest-bearing 2014 $74,361; 2013 $118,228)	$ 182,032	$ 231,603
Securities available for sale, at fair value	840,112	841,310
Securities held to maturity, at amortized cost	1,850	834
Loans held for sale	20,286	13,840
Loans (net of allowance for loan losses 2014 $47,428; 2013 $47,567)	2,256,354	2,233,893
Premises and equipment	64,562	65,827
Goodwill	20,686	20,686
Other intangible assets	8,092	9,571
Cash surrender value of bank owned life insurance	40,752	40,674
Other real estate owned (OREO)	1,622	2,133
Deferred tax asset, net	26,157	35,642
Other assets	44,944	43,562
Total assets	3,507,449	3,539,575
Deposits:
Noninterest-bearing	605,346	547,531
Interest-bearing	2,256,182	2,321,607
Total deposits	2,861,528	2,869,138
Securities sold under agreements to repurchase	140,563	172,348
Junior subordinated debt owed to unconsolidated trusts	55,000	55,000
Other liabilities	23,591	27,725
Total liabilities	3,080,682	3,124,211
Stockholders' Equity
Series C Preferred stock, $.001 par value, 72,664 shares authorized, issued and outstanding, $1,000.00 liquidation value per share	72,664	72,664
Common stock, $.001 par value, authorized 200,000,000 shares; shares issued - 88,287,132	88	88
Additional paid-in capital	593,279	593,144
Accumulated deficit	(217,906)	(225,722)
Accumulated other comprehensive income	7,420	4,456
Total stockholders' equity before treasury stock	455,545	444,630
Common stock shares held in treasury at cost - 2014 1,456,105; 2013 1482777	(28,778)	(29,266)
Total stockholders' equity	426,767	415,364
Total liabilities and stockholders' equity	$ 3,507,449	$ 3,539,575
Common shares outstanding at period end	86,831,027	86,804,355

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Fair Value Measurements
Transfers between levels of fair value hierarchy	$ 0
Financial assets and financial liabilities measured at fair value
Securities available for sale	840,112	841,310
Impaired loans	27,407	34,060
OREO	1,622	2,133
U.S. Treasury securities
Financial assets and financial liabilities measured at fair value
Securities available for sale	50,814	102,640
Obligations of U.S. government corporations and agencies
Financial assets and financial liabilities measured at fair value
Securities available for sale	205,363	257,411
Obligations of states and political subdivisions
Financial assets and financial liabilities measured at fair value
Securities available for sale	243,408	272,152
Residential mortgage-backed securities
Financial assets and financial liabilities measured at fair value
Securities available for sale	259,571	177,735
Corporate debt securities
Financial assets and financial liabilities measured at fair value
Securities available for sale	74,531	25,506
Mutual funds and other equity securities
Financial assets and financial liabilities measured at fair value
Securities available for sale	6,425	5,866
Recurring basis | Level 1 Inputs | Mutual funds and other equity securities
Financial assets and financial liabilities measured at fair value
Securities available for sale	6,425	5,866
Recurring basis | Level 2 Inputs | Foreign currency forward contracts
Financial assets and financial liabilities measured at fair value
Derivative assets	5
Derivative liabilities	22
Recurring basis | Level 2 Inputs | U.S. Treasury securities
Financial assets and financial liabilities measured at fair value
Securities available for sale	50,814	102,640
Recurring basis | Level 2 Inputs | Obligations of U.S. government corporations and agencies
Financial assets and financial liabilities measured at fair value
Securities available for sale	205,363	257,411
Recurring basis | Level 2 Inputs | Obligations of states and political subdivisions
Financial assets and financial liabilities measured at fair value
Securities available for sale	243,408	272,152
Recurring basis | Level 2 Inputs | Residential mortgage-backed securities
Financial assets and financial liabilities measured at fair value
Securities available for sale	259,571	177,735
Recurring basis | Level 2 Inputs | Corporate debt securities
Financial assets and financial liabilities measured at fair value
Securities available for sale	74,531	25,506
Recurring basis | Total Fair Value | Foreign currency forward contracts
Financial assets and financial liabilities measured at fair value
Derivative assets	5
Derivative liabilities	22
Recurring basis | Total Fair Value | U.S. Treasury securities
Financial assets and financial liabilities measured at fair value
Securities available for sale	50,814	102,640
Recurring basis | Total Fair Value | Obligations of U.S. government corporations and agencies
Financial assets and financial liabilities measured at fair value
Securities available for sale	205,363	257,411
Recurring basis | Total Fair Value | Obligations of states and political subdivisions
Financial assets and financial liabilities measured at fair value
Securities available for sale	243,408	272,152
Recurring basis | Total Fair Value | Residential mortgage-backed securities
Financial assets and financial liabilities measured at fair value
Securities available for sale	259,571	177,735
Recurring basis | Total Fair Value | Corporate debt securities
Financial assets and financial liabilities measured at fair value
Securities available for sale	74,531	25,506
Recurring basis | Total Fair Value | Mutual funds and other equity securities
Financial assets and financial liabilities measured at fair value
Securities available for sale	6,425	5,866
Non-recurring basis | Level 3 Inputs
Financial assets and financial liabilities measured at fair value
Impaired loans	3,792	5,491
OREO	1,140	1,134
Non-recurring basis | Total Fair Value
Financial assets and financial liabilities measured at fair value
Impaired loans	3,792	5,491
OREO	$ 1,140	$ 1,134

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $) In Thousands, unless otherwise specified	Total	Preferred Stock	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Income	Treasury Stock
Balance at Dec. 31, 2012	$ 408,797	$ 72,664	$ 88	$ 594,411	$ (240,321)	$ 13,542	$ (31,587)
Increase (decrease) in shareholders' equity
Net income	13,873				13,873
Other comprehensive income (loss)	(7,775)					(7,775)
Issuance of treasury stock for employee stock purchase plan	55			(167)			222
Net issuance of treasury stock for restricted stock unit vesting and related tax benefit	(33)			(282)			249
Cash dividends common stock at $0.04 and $0.09 per share for the period of six months ended 30, June 2013 and 2014, respectively	(3,466)				(3,466)
Stock dividend equivalents restricted stock units at $0.04 and $0.09 per share for the period of six months ended 30, June 2013 and 2014, respectively				17	(17)
Stock based employee compensation	395			395
Preferred stock dividends	(1,816)				(1,816)
Balance at Jun. 30, 2013	410,030	72,664	88	594,374	(231,747)	5,767	(31,116)
Balance at Dec. 31, 2013	415,364	72,664	88	593,144	(225,722)	4,456	(29,266)
Increase (decrease) in shareholders' equity
Net income	16,072				16,072
Other comprehensive income (loss)	2,964					2,964
Issuance of treasury stock for employee stock purchase plan	85			(195)			280
Net issuance of treasury stock for restricted stock unit vesting and related tax benefit	(21)			(229)			208
Cash dividends common stock at $0.04 and $0.09 per share for the period of six months ended 30, June 2013 and 2014, respectively	(7,813)				(7,813)
Stock dividend equivalents restricted stock units at $0.04 and $0.09 per share for the period of six months ended 30, June 2013 and 2014, respectively				80	(80)
Stock based employee compensation	479			479
Preferred stock dividends	(363)				(363)
Balance at Jun. 30, 2014	$ 426,767	$ 72,664	$ 88	$ 593,279	$ (217,906)	$ 7,420	$ (28,778)

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Loans (Details 3) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Dec. 31, 2013
Loans past due, still accruing
30-59 Days	$ 1,747,000	$ 1,747,000	$ 1,976,000
60-89 Days	19,000	19,000	4,138,000
90+Days	235,000	235,000	195,000
Non-accrual Loans	11,232,000	11,232,000	17,164,000
Minimum period past due as criterion for assessing impairment of loans		60 days
Minimum amount criterion for assessing impairment of loans		250,000
Loans assessed for impairment if loans are above a particular limit and are of eighth grade		500,000
Gross interest income that would have been recorded if impaired loans had been current	300,000	600,000
Minimum period past due after which restructured loan is included in the non-performing loan		90 days
Restructured loans
Total loans	14,152,000	14,152,000	17,810,000
Illinois/Indiana
Loans past due, still accruing
30-59 Days	1,597,000	1,597,000	1,976,000
60-89 Days	19,000	19,000	4,138,000
90+Days	235,000	235,000	195,000
Non-accrual Loans	8,038,000	8,038,000	13,370,000
Florida
Loans past due, still accruing
30-59 Days	150,000	150,000
Non-accrual Loans	3,194,000	3,194,000	3,794,000
In compliance with modified terms
Restructured loans
Total loans	11,270,000	11,270,000	11,511,000
30-89 days past due
Restructured loans
Total loans			380,000
Included in non-performing loans
Restructured loans
Total loans	2,882,000	2,882,000	5,919,000
Commercial | Illinois/Indiana
Loans past due, still accruing
30-59 Days	468,000	468,000	906,000
60-89 Days	10,000	10,000	279,000
90+Days	235,000	235,000	92,000
Non-accrual Loans	1,511,000	1,511,000	975,000
Commercial real estate | Illinois/Indiana
Loans past due, still accruing
30-59 Days	184,000	184,000	567,000
60-89 Days			3,736,000
Non-accrual Loans	2,096,000	2,096,000	4,597,000
Commercial real estate | Florida
Loans past due, still accruing
Non-accrual Loans	2,603,000	2,603,000	3,073,000
Real estate construction | Illinois/Indiana
Loans past due, still accruing
30-59 Days	83,000	83,000
Non-accrual Loans	3,141,000	3,141,000	3,862,000
Retail real estate | Illinois/Indiana
Loans past due, still accruing
30-59 Days	842,000	842,000	483,000
60-89 Days	9,000	9,000	123,000
90+Days			103,000
Non-accrual Loans	1,290,000	1,290,000	3,936,000
Retail real estate | Florida
Loans past due, still accruing
30-59 Days	150,000	150,000
Non-accrual Loans	591,000	591,000	721,000
Retail other | Illinois/Indiana
Loans past due, still accruing
30-59 Days	$ 20,000	$ 20,000	$ 20,000

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Loans (Tables)

6 Months Ended

Jun. 30, 2014

Loans

Schedule of geographic distributions of loans

	June 30, 2014
	Illinois		Florida		Indiana		Total
	(dollars in thousands)
Commercial	$	510,576	$	21,429	$	21,585	$	553,590
Commercial real estate	826,098		165,622		110,005		1,101,725
Real estate construction	50,606		15,782		16,048		82,436
Retail real estate	462,173		101,466		12,987		576,626
Retail other	9,034		574		83		9,691
Total	$	1,858,487	$	304,873	$	160,708	$	2,324,068
Less held for sale(1)							20,286
							$	2,303,782
Less allowance for loan losses							47,428
Net loans							$	2,256,354

(1)Loans held for sale are included in retail real estate.

	December 31, 2013
	Illinois		Florida		Indiana		Total
	(dollars in thousands)
Commercial	$	530,174	$	20,536	$	29,902	$	580,612
Commercial real estate	800,568		160,255		131,450		1,092,273
Real estate construction	55,190		17,426		6,239		78,855
Retail real estate	419,801		103,104		11,588		534,493
Retail other	8,422		552		93		9,067
Total	$	1,814,155	$	301,873	$	179,272	$	2,295,300
Less held for sale(1)							13,840
							$	2,281,460
Less allowance for loan losses							47,567
Net loans							$	2,233,893

(1) Loans held for sale are included in retail real estate.

Schedule of weighted average risk grades segregated by category of loans (excluding held-for-sale, non posted and clearings)

	June 30, 2014
	Weighted Avg. Risk Grade	Grades 1,3,6		Grade 7		Grade  8		Grade 9		Grade 10
	(dollars in thousands)
Illinois/Indiana
Commercial	4.75	$	465,289	$	42,331	$	10,147	$	12,883	$	1,511
Commercial real estate	5.59	812,923		72,414		27,484		21,186		2,096
Real estate construction	6.57	33,363		15,706		13,173		1,271		3,141
Retail real estate	3.38	433,426		9,965		4,781		3,866		1,290
Retail other	2.46	9,043		63		10		1		—
Total Illinois/Indiana		$	1,754,044	$	140,479	$	55,595	$	39,207	$	8,038
Florida
Commercial	5.94	$	17,627	$	49	$	3,142	$	611	$	—
Commercial real estate	6.02	116,555		27,898		4,834		13,732		2,603
Real estate construction	6.18	14,330		—		632		820		—
Retail real estate	3.81	76,708		11,963		9,704		2,500		591
Retail other	1.51	574		—		—		—		—
Total Florida		$	225,794	$	39,910	$	18,312	$	17,663	$	3,194
Total		$	1,979,838	$	180,389	$	73,907	$	56,870	$	11,232

	December 31, 2013
	Weighted Avg. Risk Grade	Grades 1,3,6		Grade 7		Grade  8		Grade 9		Grade 10
	(dollars in thousands)
Illinois/Indiana
Commercial	4.66	$	487,587	$	46,992	$	15,986	$	8,536	$	975
Commercial real estate	5.55	799,117		79,371		19,327		29,606		4,597
Real estate construction	7.11	21,585		16,376		11,920		7,686		3,862
Retail real estate	3.53	393,299		9,285		5,392		4,408		3,936
Retail other	2.64	8,451		60		—		4		—
Total Illinois/Indiana		$	1,710,039	$	152,084	$	52,625	$	50,240	$	13,370
Florida
Commercial	5.89	$	16,460	$	174	$	3,218	$	684	$	—
Commercial real estate	6.02	116,741		16,470		11,250		12,721		3,073
Real estate construction	6.64	7,886		7,961		743		836		—
Retail real estate	3.85	77,116		12,052		9,417		3,050		721
Retail other	1.72	552		—		—		—		—
Total Florida		$	218,755	$	36,657	$	24,628	$	17,291	$	3,794
Total		$	1,928,794	$	188,741	$	77,253	$	67,531	$	17,164

Schedule of age analysis of past due loans still accruing and non-accrual loans

	June 30, 2014
	Loans past due, still accruing						Non-accrual
	30-59 Days		60-89 Days		90+Days		Loans
	(dollars in thousands)
Illinois/Indiana
Commercial	$	468	$	10	$	235	$	1,511
Commercial real estate	184		—		—		2,096
Real estate construction	83		—		—		3,141
Retail real estate	842		9		—		1,290
Retail other	20		—		—		—
Total Illinois/Indiana	$	1,597	$	19	$	235	$	8,038
Florida
Commercial	$	—	$	—	$	—	$	—
Commercial real estate	—		—		—		2,603
Real estate construction	—		—		—		—
Retail real estate	150		—		—		591
Retail other	—		—		—		—
Total Florida	$	150	$	—	$	—	$	3,194
Total	$	1,747	$	19	$	235	$	11,232

	December 31, 2013
	Loans past due, still accruing						Non-accrual
	30-59 Days		60-89 Days		90+Days		Loans
	(dollars in thousands)
Illinois/Indiana
Commercial	$	906	$	279	$	92	$	975
Commercial real estate	567		3,736		—		4,597
Real estate construction	—		—		—		3,862
Retail real estate	483		123		103		3,936
Retail other	20		—		—		—
Total Illinois/Indiana	$	1,976	$	4,138	$	195	$	13,370
Florida
Commercial	$	—	$	—	$	—	$	—
Commercial real estate	—		—		—		3,073
Real estate construction	—		—		—		—
Retail real estate	—		—		—		721
Retail other	—		—		—		—
Total Florida	$	—	$	—	$	—	$	3,794
Total	$	1,976	$	4,138	$	195	$	17,164

Schedule of restructured loans

	June 30, 2014		December 31, 2013
	(dollars in thousands)
Restructured loans:
In compliance with modified terms	$	11,270	$	11,511
30 – 89 days past due	—		380
Included in non-performing loans	2,882		5,919
Total	$	14,152	$	17,810

Schedule of details of impaired loans, segregated by category and geography

	June 30, 2014
	Unpaid Contractual Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(dollars in thousands)
Illinois/Indiana
Commercial	$	3,731	$	1,998	$	827	$	2,825	$	710	$	2,750
Commercial real estate	6,045		1,510		3,079		4,589		1,674		7,650
Real estate construction	3,142		1,609		1,533		3,142		465		4,164
Retail real estate	2,576		2,227		152		2,379		54		4,213
Retail other	—		—		—		—		—		—
Total Illinois/Indiana	$	15,494	$	7,344	$	5,591	$	12,935	$	2,903	$	18,777
Florida
Commercial	$	—	$	—	$	—	$	—	$	—	$	2
Commercial real estate	4,849		3,465		1,298		4,763		394		6,104
Real estate construction	410		410		—		410		—		420
Retail real estate	10,037		8,753		537		9,290		337		9,633
Retail other	9		9		—		9		—		2
Total Florida	$	15,305	$	12,637	$	1,835	$	14,472	$	731	$	16,161
Total	$	30,799	$	19,981	$	7,426	$	27,407	$	3,634	$	34,938

	December 31, 2013
	Unpaid Contractual Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(dollars in thousands)
Illinois/Indiana
Commercial	$	2,825	$	1,684	$	602	$	2,286	$	485	$	4,169
Commercial real estate	8,866		3,671		3,740		7,411		1,977		10,335
Real estate construction	4,932		2,292		1,570		3,862		468		5,889
Retail real estate	5,583		3,267		2,010		5,277		604		5,296
Retail other	—		—		—		—		—		—
Total Illinois/Indiana	$	22,206	$	10,914	$	7,922	$	18,836	$	3,534	$	25,689
Florida
Commercial	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate	7,108		3,946		1,319		5,265		416		6,662
Real estate construction	417		417		—		417		—		1,294
Retail real estate	10,346		9,005		537		9,542		337		11,079
Retail other	—		—		—		—		—		—
Total Florida	$	17,871	$	13,368	$	1,856	$	15,224	$	753	$	19,035
Total	$	40,077	$	24,282	$	9,778	$	34,060	$	4,287	$	44,724

Schedule of activity on the allowance for loan losses

	As of and for the Three Months Ended June 30, 2014
	Commercial			Commercial Real Estate			Real Estate Construction			Retail Real Estate			Retail Other			Total
	(dollars in thousands)
Illinois/Indiana
Beginning balance	$	7,917		$	15,498		$	2,461		$	9,192		$	213		$	35,281
Provision for loan loss	(221		)	797			935			1,981			70			3,562
Charged-off	(30		)	(889		)	(657		)	(416		)	(91		)	(2,083		)
Recoveries	29			20			37			45			46			177
Ending Balance	$	7,695		$	15,426		$	2,776		$	10,802		$	238		$	36,937
Florida
Beginning balance	$	2,291		$	5,729		$	233		$	3,888		$	4		$	12,145
Provision for loan loss	(524		)	(753		)	(1,036		)	(242		)	(7		)	(2,562		)
Charged-off	—			—			—			(117		)	—			(117		)
Recoveries	15			—			978			25			7			1,025
Ending Balance	$	1,782		$	4,976		$	175		$	3,554		$	4		$	10,491

	As of and for the Six Months Ended June 30, 2014
	Commercial			Commercial Real Estate			Real Estate Construction			Retail Real Estate			Retail Other			Total
	(dollars in thousands)
Illinois/Indiana
Beginning balance	$	8,452		$	16,379		$	2,540		$	6,862		$	216		$	34,449
Provision for loan loss	(152		)	180			382			5,526			112			6,048
Charged-off	(704		)	(1,173		)	(657		)	(1,691		)	(192		)	(4,417		)
Recoveries	99			40			511			105			102			857
Ending Balance	$	7,695		$	15,426		$	2,776		$	10,802		$	238		$	36,937
Florida
Beginning balance	$	1,926		$	5,733		$	1,168		$	4,287		$	4		$	13,118
Provision for loan loss	(268		)	(1,028		)	(1,988		)	(751		)	(13		)	(4,048		)
Charged-off	(20		)	—			—			(137		)	—			(157		)
Recoveries	144			271			995			155			13			1,578
Ending Balance	$	1,782		$	4,976		$	175		$	3,554		$	4		$	10,491

	As of and for the Three Months Ended June 30, 2013
	Commercial			Commercial Real Estate			Real Estate Construction			Retail Real Estate			Retail Other			Total
	(dollars in thousands)
Illinois/Indiana
Beginning balance	$	6,667		$	14,791		$	3,446		$	7,462		$	358		$	32,724
Provision for loan loss	1,016			(1,177		)	62			972			(29		)	844
Charged-off	(239		)	(63		)	(1,071		)	(350		)	(151		)	(1,874		)
Recoveries	70			172			77			172			62			553
Ending Balance	$	7,514		$	13,723		$	2,514		$	8,256		$	240		$	32,247
Florida
Beginning balance	$	1,485		$	6,106		$	2,326		$	5,128		$	4		$	15,049
Provision for loan loss	12			1,582			329			(763		)	(4		)	1,156
Charged-off	—			—			(22		)	(381		)	(3		)	(406		)
Recoveries	8			(32		)	60			403			6			445
Ending Balance	$	1,505		$	7,656		$	2,693		$	4,387		$	3		$	16,244

	As of and for the Six Months Ended June 30, 2013
	Commercial			Commercial Real Estate			Real Estate Construction			Retail Real Estate			Retail Other			Total
	(dollars in thousands)
Illinois/Indiana
Beginning balance	$	6,597		$	15,023		$	2,527		$	8,110		$	322		$	32,579
Provision for loan loss	1,254			(687		)	799			568			(35		)	1,899
Charged-off	(422		)	(910		)	(1,071		)	(622		)	(287		)	(3,312		)
Recoveries	85			297			259			200			240			1,081
Ending Balance	$	7,514		$	13,723		$	2,514		$	8,256		$	240		$	32,247
Florida
Beginning balance	$	1,437		$	6,062		$	2,315		$	5,614		$	5		$	15,433
Provision for loan loss	35			1,852			358			(134		)	(10		)	2,101
Charged-off	—			(245		)	(57		)	(1,559		)	(5		)	(1,866		)
Recoveries	33			(13		)	77			466			13			576
Ending Balance	$	1,505		$	7,656		$	2,693		$	4,387		$	3		$	16,244

Schedule of allowance for loan losses and recorded investments

	As of June 30, 2014
	Commercial		Commercial Real Estate		Real Estate Construction		Retail Real Estate		Retail Other		Total
	(dollars in thousands)
Illinois/Indiana
Amount allocated to:
Loans individually evaluated for impairment	$	710	$	1,674	$	465	$	54	$	—	$	2,903
Loans collectively evaluated for impairment	6,985		13,752		2,311		10,748		238		34,034
Ending Balance	$	7,695	$	15,426	$	2,776	$	10,802	$	238	$	36,937
Loans:
Loans individually evaluated for impairment	$	2,825	$	4,589	$	3,142	$	2,379	$	—	$	12,935
Loans collectively evaluated for impairment	529,336		931,514		63,512		452,495		9,117		1,985,974
Ending Balance	$	532,161	$	936,103	$	66,654	$	454,874	$	9,117	$	1,998,909
Florida
Amount allocated to:
Loans individually evaluated for impairment	$	—	$	394	$	—	$	337	$	—	$	731
Loans collectively evaluated for impairment	1,782		4,582		175		3,217		4		9,760
Ending Balance	$	1,782	$	4,976	$	175	$	3,554	$	4	$	10,491
Loans:
Loans individually evaluated for impairment	$	—	$	4,763	$	410	$	9,290	$	9	$	14,472
Loans collectively evaluated for impairment	21,429		160,859		15,372		92,176		565		290,401
Ending Balance	$	21,429	$	165,622	$	15,782	$	101,466	$	574	$	304,873

	As of December 31, 2013
	Commercial		Commercial Real Estate		Real Estate Construction		Retail Real Estate		Retail Other		Total
	(dollars in thousands)
Illinois/Indiana
Amount allocated to:
Loans individually evaluated for impairment	$	485	$	1,977	$	468	$	604	$	—	$	3,534
Loans collectively evaluated for impairment	7,967		14,402		2,072		6,258		216		30,915
Ending Balance	$	8,452	$	16,379	$	2,540	$	6,862	$	216	$	34,449
Loans:
Loans individually evaluated for impairment	$	2,286	$	7,411	$	3,862	$	5,277	$	—	$	18,836
Loans collectively evaluated for impairment	557,790		924,607		57,567		413,020		8,515		1,961,499
Ending Balance	$	560,076	$	932,018	$	61,429	$	418,297	$	8,515	$	1,980,335
Florida
Amount allocated to:
Loans individually evaluated for impairment	$	—	$	416	$	—	$	337	$	—	$	753
Loans collectively evaluated for impairment	1,926		5,317		1,168		3,950		4		12,365
Ending Balance	$	1,926	$	5,733	$	1,168	$	4,287	$	4	$	13,118
Loans:
Loans individually evaluated for impairment	$	—	$	5,265	$	417	$	9,542	$	—	$	15,224
Loans collectively evaluated for impairment	20,536		154,990		17,009		92,814		552		285,901
Ending Balance	$	20,536	$	160,255	$	17,426	$	102,356	$	552	$	301,125

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Loans (Details 4) (USD $)	6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended	3 Months Ended	6 Months Ended		12 Months Ended	6 Months Ended		12 Months Ended	6 Months Ended	12 Months Ended	3 Months Ended	6 Months Ended			12 Months Ended	6 Months Ended	12 Months Ended	3 Months Ended	6 Months Ended		12 Months Ended	6 Months Ended	12 Months Ended	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2014 Illinois/Indiana	Dec. 31, 2013 Illinois/Indiana	Jun. 30, 2014 Florida	Dec. 31, 2013 Florida	Jun. 30, 2014 Included in non-performing loans item	Jun. 30, 2014 Included in non-performing loans item	Jun. 30, 2014 Commercial Illinois/Indiana	Dec. 31, 2013 Commercial Illinois/Indiana	Jun. 30, 2014 Commercial Florida	Jun. 30, 2014 Commercial real estate Illinois/Indiana	Dec. 31, 2013 Commercial real estate Illinois/Indiana	Jun. 30, 2014 Commercial real estate Florida	Dec. 31, 2013 Commercial real estate Florida	Jun. 30, 2013 Commercial real estate In compliance with modified terms Florida item	Jun. 30, 2013 Commercial real estate In compliance with modified terms Florida item	Jun. 30, 2013 Commercial real estate Included in non-performing loans Illinois/Indiana item	Jun. 30, 2014 Real estate construction Illinois/Indiana	Dec. 31, 2013 Real estate construction Illinois/Indiana	Jun. 30, 2014 Real estate construction Florida	Dec. 31, 2013 Real estate construction Florida	Jun. 30, 2013 Real estate construction Included in non-performing loans Illinois/Indiana item	Jun. 30, 2013 Real estate construction Included in non-performing loans Illinois/Indiana item	Jun. 30, 2014 Retail real estate Illinois/Indiana	Dec. 31, 2013 Retail real estate Illinois/Indiana	Jun. 30, 2014 Retail real estate Florida	Dec. 31, 2013 Retail real estate Florida	Jun. 30, 2013 Retail real estate Included in non-performing loans Illinois/Indiana item	Jun. 30, 2013 Retail real estate Included in non-performing loans Illinois/Indiana item	Jun. 30, 2013 Retail real estate Included in non-performing loans Florida item	Jun. 30, 2014 Retail other Florida
Loans
Number of modifications for short-term interest-rate relief																1	1
Recorded investment for short-term interest-rate relief																$ 100,000	$ 100,000
Number of contracts							0	0										1					1	1					4	4	1
Recorded Investment																		1,700,000					300,000	300,000					1,100,000	1,100,000	100,000
Unpaid Contractual Principal Balance	30,799,000	40,077,000	15,494,000	22,206,000	15,305,000	17,871,000			3,731,000	2,825,000		6,045,000	8,866,000	4,849,000	7,108,000				3,142,000	4,932,000	410,000	417,000			2,576,000	5,583,000	10,037,000	10,346,000				9,000
Recorded Investment with No Allowance	19,981,000	24,282,000	7,344,000	10,914,000	12,637,000	13,368,000			1,998,000	1,684,000		1,510,000	3,671,000	3,465,000	3,946,000				1,609,000	2,292,000	410,000	417,000			2,227,000	3,267,000	8,753,000	9,005,000				9,000
Recorded Investment with Allowance	7,426,000	9,778,000	5,591,000	7,922,000	1,835,000	1,856,000			827,000	602,000		3,079,000	3,740,000	1,298,000	1,319,000				1,533,000	1,570,000					152,000	2,010,000	537,000	537,000
Total Recorded Investment	27,407,000	34,060,000	12,935,000	18,836,000	14,472,000	15,224,000			2,825,000	2,286,000		4,589,000	7,411,000	4,763,000	5,265,000				3,142,000	3,862,000	410,000	417,000			2,379,000	5,277,000	9,290,000	9,542,000				9,000
Related Allowance	3,634,000	4,287,000	2,903,000	3,534,000	731,000	753,000			710,000	485,000		1,674,000	1,977,000	394,000	416,000				465,000	468,000					54,000	604,000	337,000	337,000
Average Recorded Investment	$ 34,938,000	$ 44,724,000	$ 18,777,000	$ 25,689,000	$ 16,161,000	$ 19,035,000			$ 2,750,000	$ 4,169,000	$ 2,000	$ 7,650,000	$ 10,335,000	$ 6,104,000	$ 6,662,000				$ 4,164,000	$ 5,889,000	$ 420,000	$ 1,294,000			$ 4,213,000	$ 5,296,000	$ 9,633,000	$ 11,079,000				$ 2,000
Minimum days past due for TDR loans to be classified as non-performing	90 days

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Earnings Per Common Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Common Share

Schedule of net income per share calculations for basic and diluted methods

	Three Months Ended June 30,				Six Months Ended  June 30,
	2014		2013		2014		2013
	(in thousands, except per share data)
Net income available to common stockholders	$	8,004	$	6,532	$	15,709	$	12,057
Shares:
Weighted average common shares outstanding	86,895		86,730		86,880		86,717
Dilutive effect of outstanding options, warrants and restricted stock units as determined by the application of the treasury stock method	368		—		365		—
Weighted average common shares outstanding, as adjusted for diluted earnings per share calculation	87,263		86,730		87,245		86,717
Basic earnings per common share	$	0.09	$	0.08	$	0.18	$	0.14
Diluted earnings per common share	$	0.09	$	0.08	$	0.18	$	0.14

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Cash dividends, common stock (in dollars per share)	$ 0.09	$ 0.04
Stock dividends, restricted stock units (in dollars per share)	$ 0.09	$ 0.04

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
CONSOLIDATED BALANCE SHEETS
Cash and due from banks, interest-bearing (in dollars)	$ 74,361	$ 118,228
Loans, allowance for loan losses (in dollars)	$ 47,428	$ 47,567
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	72,664	72,664
Preferred stock, shares issued	72,664	72,664
Preferred stock, shares outstanding	72,664	72,664
Preferred stock, liquidation value (in dollars per share)	$ 1,000	$ 1,000
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	88,287,132	88,287,132
Common stock shares held in treasury	1,456,105	1,482,777

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Outstanding Commitments and Contingent Liabilities

6 Months Ended

Jun. 30, 2014

Outstanding Commitments and Contingent Liabilities

Outstanding Commitments and Contingent Liabilities

Note 9:  Outstanding Commitments and Contingent Liabilities

Legal Matters

The Company is a party to legal actions which arise in the normal course of its business activities.  In the opinion of management, the ultimate resolution of these matters is not expected to have a material effect on the financial position or the results of operations of the Company.

Credit Commitments and Contingencies

The Company is a party to credit related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit and standby letters of credit.  Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheets.

The Company’s exposure to credit loss is represented by the contractual amount of those commitments.  The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.  A summary of the contractual amount of the Company’s exposure to off-balance-sheet risk relating to the Company’s commitments to extend credit and standby letters of credit follows:

	June 30, 2014		December 31, 2013
	(dollars in thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	581,156	$	527,614
Standby letters of credit	19,566		10,155

Commitments to extend credit are agreements to lend to a customer as long as no condition established in the contract has been violated.  These commitments are generally at variable interest rates and generally have fixed expiration dates or other termination clauses and may require payment of a fee.  The commitments for equity lines of credit may expire without being drawn upon.  Therefore, the total commitment amounts do not necessarily represent future cash requirements.  The amount of collateral obtained, if it is deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the customer.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer’s obligation to a third party.  Those guarantees are primarily issued to support public and private borrowing arrangements, including bond financing and similar transactions and primarily have terms of one year or less.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  The Company holds collateral, which may include accounts receivable, inventory, property and equipment, and income producing properties, supporting those commitments if deemed necessary.  In the event the customer does not perform in accordance with the terms of the agreement with the third party, the Company would be required to fund the commitment.  The maximum potential amount of future payments the Company could be required to make is represented by the contractual amount shown in the summary above.  If the commitment is funded, the Company would be entitled to seek recovery from the customer.  As of June 30, 2014 and December 31, 2013, no amounts were recorded as liabilities for the Company’s potential obligations under these guarantees.

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 07, 2014
Document and Entity Information
Entity Registrant Name	FIRST BUSEY CORP /NV/
Entity Central Index Key	0000314489
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		86,831,027
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

XML

Reportable Segments and Related Information

6 Months Ended

Jun. 30, 2014

Reportable Segments and Related Information

Reportable Segments and Related Information

Note 10:  Reportable Segments and Related Information

The Company has three reportable segments, Busey Bank, FirsTech and Busey Wealth Management.  Busey Bank provides a full range of banking services to individual and corporate customers through its branch network in downstate Illinois, through its branch in Indianapolis, Indiana, and through its branch network in southwest Florida.  FirsTech provides remittance processing for online bill payments, lockbox and walk-in payments.  Busey Wealth Management is the parent company of Busey Trust Company, which provides a full range of asset management, investment and fiduciary services to individuals, businesses and foundations, tax preparation and philanthropic advisory services.

The Company’s three reportable segments are strategic business units that are separately managed as they offer different products and services and have different marketing strategies.

The segment financial information provided below has been derived from the internal accounting system used by management to monitor and manage the financial performance of the Company.  The accounting policies of the three segments are the same as those described in the summary of significant accounting policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Following is a summary of selected financial information for the Company’s business segments:

	Goodwill				Total Assets
	June 30,		December 31,		June 30,		December 31,
	2014		2013		2014		2013
	(dollars in thousands)				(dollars in thousands)
Goodwill & Total Assets:
Busey Bank	$	—	$	—	$	3,427,699	$	3,456,555
FirsTech	8,992		8,992		27,885		27,253
Busey Wealth Management	11,694		11,694		29,896		28,548
All Other	—		—		21,969		27,219
Total	$	20,686	$	20,686	$	3,507,449	$	3,539,575

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	(dollars in thousands)						(dollars in thousands)
Interest Income:
Busey Bank	$	26,573		$	27,390		$	52,754		$	54,430
FirsTech	13			13			25			26
Busey Wealth Management	76			57			140			117
All Other	(6		)	—			(12		)	2
Total interest income	$	26,656		$	27,460		$	52,907		$	54,575
Interest Expense:
Busey Bank	$	1,350		$	1,917		$	2,760		$	4,149
FirsTech	—			—			—			—
Busey Wealth Management	—			—			—			—
All Other	285			298			569			598
Total interest expense	$	1,635		$	2,215		$	3,329		$	4,747
Other Income:
Busey Bank	$	8,252		$	9,598		$	16,788		$	20,095
FirsTech	2,409			2,149			4,796			4,278
Busey Wealth Management	5,110			4,643			9,651			8,746
All Other	(759		)	(607		)	(1,237		)	(695		)
Total other income	$	15,012		$	15,783		$	29,998		$	32,424
Net Income:
Busey Bank	$	7,436		$	6,487		$	14,715		$	12,280
FirsTech	326			286			635			548
Busey Wealth Management	1,401			1,133			2,403			1,953
All Other	(978		)	(466		)	(1,681		)	(908		)
Total net income	$	8,185		$	7,440		$	16,072		$	13,873

XML

CONSOLIDATED STATEMENTS OF INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Interest income:
Interest and fees on loans	$ 22,437	$ 23,200	$ 44,970	$ 46,161
Interest and dividends on investment securities:
Taxable interest income	3,395	3,283	6,275	6,454
Non-taxable interest income	824	977	1,662	1,960
Total interest income	26,656	27,460	52,907	54,575
Interest expense:
Deposits	1,306	1,824	2,668	3,921
Securities sold under agreements to repurchase	35	40	74	84
Short-term borrowings		6		15
Long-term debt		44		125
Junior subordinated debt owed to unconsolidated trusts	294	301	587	602
Total interest expense	1,635	2,215	3,329	4,747
Net interest income	25,021	25,245	49,578	49,828
Provision for loan losses	1,000	2,000	2,000	4,000
Net interest income after provision for loan losses	24,021	23,245	47,578	45,828
Other income:
Trust fees	5,080	4,713	10,697	9,921
Commissions and brokers' fees, net	676	569	1,347	1,109
Remittance processing	2,376	2,085	4,726	4,183
Service charges on deposit accounts	3,111	3,023	5,806	5,750
Other service charges and fees	1,618	1,527	3,106	2,966
Gain on sales of loans	1,234	2,763	2,215	6,260
Security gains (losses), net	(3)		40
Other	920	1,103	2,061	2,235
Total other income	15,012	15,783	29,998	32,424
Other expense:
Salaries and wages	12,578	12,781	24,827	26,341
Employee benefits	2,386	2,947	5,279	6,174
Net occupancy expense of premises	2,055	2,103	4,298	4,285
Furniture and equipment expense	1,153	1,222	2,357	2,476
Data processing	2,687	2,568	5,499	5,207
Amortization of intangible assets	733	783	1,480	1,566
Regulatory expense	501	617	1,056	1,263
OREO expense	51	58	71	601
Other	4,679	4,722	8,574	9,455
Total other expense	26,823	27,801	53,441	57,368
Income before income taxes	12,210	11,227	24,135	20,884
Income taxes	4,025	3,787	8,063	7,011
Net income	8,185	7,440	16,072	13,873
Preferred stock dividends	181	908	363	1,816
Net income available to common stockholders	$ 8,004	$ 6,532	$ 15,709	$ 12,057
Basic earnings per common share (in dollars per share)	$ 0.09	$ 0.08	$ 0.18	$ 0.14
Diluted earnings per common share (in dollars per share)	$ 0.09	$ 0.08	$ 0.18	$ 0.14
Dividends declared per share of common stock (in dollars per share)	$ 0.05	$ 0.04	$ 0.09	$ 0.04

XML

Loans

6 Months Ended

Jun. 30, 2014

Loans

Loans

Note 4:  Loans

Geographic distributions of loans were as follows:

	June 30, 2014
	Illinois		Florida		Indiana		Total
	(dollars in thousands)
Commercial	$	510,576	$	21,429	$	21,585	$	553,590
Commercial real estate	826,098		165,622		110,005		1,101,725
Real estate construction	50,606		15,782		16,048		82,436
Retail real estate	462,173		101,466		12,987		576,626
Retail other	9,034		574		83		9,691
Total	$	1,858,487	$	304,873	$	160,708	$	2,324,068
Less held for sale(1)							20,286
							$	2,303,782
Less allowance for loan losses							47,428
Net loans							$	2,256,354

(1)Loans held for sale are included in retail real estate.

	December 31, 2013
	Illinois		Florida		Indiana		Total
	(dollars in thousands)
Commercial	$	530,174	$	20,536	$	29,902	$	580,612
Commercial real estate	800,568		160,255		131,450		1,092,273
Real estate construction	55,190		17,426		6,239		78,855
Retail real estate	419,801		103,104		11,588		534,493
Retail other	8,422		552		93		9,067
Total	$	1,814,155	$	301,873	$	179,272	$	2,295,300
Less held for sale(1)							13,840
							$	2,281,460
Less allowance for loan losses							47,567
Net loans							$	2,233,893

(1) Loans held for sale are included in retail real estate.

Net deferred loan origination costs included in the tables above were $0.4 million as of June 30, 2014 and insignificant as of December 31, 2013.

The Company believes that sound loans are a necessary and desirable means of employing funds available for investment. Recognizing the Company’s obligations to its stockholders, depositors, and to the communities it serves, authorized personnel are expected to seek to develop and make sound, profitable loans that resources permit and that opportunity affords. The Company maintains lending policies and procedures designed to focus lending efforts on the types, locations and duration of loans most appropriate for its business model and markets.  While not specifically limited, the Company attempts to focus its lending on short to intermediate-term (0-7 years) loans in geographies within 125 miles of its lending offices.  The Company attempts to utilize government-assisted lending programs, such as the Small Business Administration and United States Department of Agriculture lending programs, when prudent. Generally, loans are collateralized by assets, primarily real estate, of the borrowers and guaranteed by individuals.  The loans are expected to be repaid primarily from cash flows of the borrowers, or from proceeds from the sale of selected assets of the borrowers.

Management reviews and approves the Company’s lending policies and procedures on a routine basis.  Management routinely (at least quarterly) reviews the Company’s allowance for loan losses and reports related to loan production, loan quality, concentrations of credit, loan delinquencies and non-performing and potential problem loans. The Company’s underwriting standards are designed to encourage relationship banking rather than transactional banking.  Relationship banking implies a primary banking relationship with the borrower that includes, at a minimum, an active deposit banking relationship in addition to the lending relationship.  The integrity and character of the borrower are significant factors in the Company’s loan underwriting.  As a part of underwriting, tangible positive or negative evidence of the borrower’s integrity and character are sought out.  Additional significant underwriting factors beyond location, duration, a sound and profitable cash flow basis and the borrower’s character are the quality of the borrower’s financial history, the liquidity of the underlying collateral and the reliability of the valuation of the underlying collateral.

Total borrowing relationships, including direct and indirect debt, are generally limited to $20 million, which is significantly less than the Company’s regulatory lending limit.  Borrowing relationships exceeding $20 million are reviewed by the Company’s board of directors at least annually and more frequently by management.  At no time is a borrower’s total borrowing relationship permitted to exceed the Company’s regulatory lending limit.  Loans to related parties, including executive officers and the Company’s various directorates, are reviewed for compliance with regulatory guidelines by the Company’s board of directors at least annually.

The Company maintains an independent loan review department that reviews the loans for compliance with the Company’s loan policy on a periodic basis.  In addition to compliance with this policy, the loan review process reviews the risk assessments made by the Company’s credit department, lenders and loan committees. Results of these reviews are presented to management and the audit committee at least quarterly.

The Company’s lending can be summarized into five primary areas: commercial loans, commercial real estate loans, real estate construction loans, retail real estate loans, and other retail loans. A description of each of the lending areas can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.  The significant majority of the lending activity occurs in the Company’s Illinois and Indiana markets, with the remainder in the Florida market.  Due to the small scale of the Indiana loan portfolio and its geographical proximity to the Illinois portfolio, the Company believes that quantitative or qualitative segregation between Illinois and Indiana is not material or warranted.

The Company utilizes a loan grading scale to assign a risk grade to all of its loans.  Loans are graded on a scale of 1 through 10 with grades 2, 4 & 5 unused.  A description of the general characteristics of the grades is as follows:

· Grades 1, 3, 6- These grades include loans which are all considered strong credits, with grade 1 being investment  or near investment grade.  A grade 3 loan is comprised of borrowers that exhibit credit fundamentals that exceed industry standards and loan policy guidelines. A grade 6 loan is comprised of borrowers that exhibit acceptable credit fundamentals.

· Grade 7- This grade includes loans on management’s “Watch List” and is intended to be utilized on a temporary basis for a pass grade borrower where a significant risk-modifying action is anticipated in the near future.

· Grade 8- This grade is for “Other Assets Specially Mentioned” loans that have potential weaknesses which may, if not checked or corrected, weaken the asset or inadequately protect the Company’s credit position at some future date.

· Grade 9- This grade includes “Substandard” loans, in accordance with regulatory guidelines, for which the accrual of interest has not been stopped.  Assets so classified must have well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

· Grade 10- This grade includes “Doubtful” loans that have all the characteristics of a substandard loan with additional factors that make collection in full highly questionable and improbable. Such loans are placed on non-accrual status and may be dependent on collateral having a value that is difficult to determine.

All loans are graded at the inception of the loan.  All commercial and commercial real estate loans above $0.5 million with a grading of 7 are reviewed annually and grade changes are made as necessary.  All real estate construction loans above $0.5 million, regardless of the grade, are reviewed annually and grade changes are made as necessary.  Interim grade reviews may take place if circumstances of the borrower warrant a more timely review.  All loans above $0.5 million which are graded 8 are reviewed quarterly.  Further, all loans graded 9 or 10 are reviewed at least quarterly.

Loans in the highest grades, represented by grades 1, 3, 6 and 7, totaled $2.2 billion at June 30, 2014 compared to $2.1 billion at December 31, 2013.  Loans in the lowest grades, represented by grades 8, 9 and 10, totaled $142.0 million at June 30, 2014, a decline of $19.9 million from $161.9 million at December 31, 2013.

The following table presents weighted average risk grades segregated by category of loans (excluding held for sale, non-posted and clearings) and geography:

	June 30, 2014
	Weighted Avg. Risk Grade	Grades 1,3,6		Grade 7		Grade  8		Grade 9		Grade 10
	(dollars in thousands)
Illinois/Indiana
Commercial	4.75	$	465,289	$	42,331	$	10,147	$	12,883	$	1,511
Commercial real estate	5.59	812,923		72,414		27,484		21,186		2,096
Real estate construction	6.57	33,363		15,706		13,173		1,271		3,141
Retail real estate	3.38	433,426		9,965		4,781		3,866		1,290
Retail other	2.46	9,043		63		10		1		—
Total Illinois/Indiana		$	1,754,044	$	140,479	$	55,595	$	39,207	$	8,038
Florida
Commercial	5.94	$	17,627	$	49	$	3,142	$	611	$	—
Commercial real estate	6.02	116,555		27,898		4,834		13,732		2,603
Real estate construction	6.18	14,330		—		632		820		—
Retail real estate	3.81	76,708		11,963		9,704		2,500		591
Retail other	1.51	574		—		—		—		—
Total Florida		$	225,794	$	39,910	$	18,312	$	17,663	$	3,194
Total		$	1,979,838	$	180,389	$	73,907	$	56,870	$	11,232

	December 31, 2013
	Weighted Avg. Risk Grade	Grades 1,3,6		Grade 7		Grade  8		Grade 9		Grade 10
	(dollars in thousands)
Illinois/Indiana
Commercial	4.66	$	487,587	$	46,992	$	15,986	$	8,536	$	975
Commercial real estate	5.55	799,117		79,371		19,327		29,606		4,597
Real estate construction	7.11	21,585		16,376		11,920		7,686		3,862
Retail real estate	3.53	393,299		9,285		5,392		4,408		3,936
Retail other	2.64	8,451		60		—		4		—
Total Illinois/Indiana		$	1,710,039	$	152,084	$	52,625	$	50,240	$	13,370
Florida
Commercial	5.89	$	16,460	$	174	$	3,218	$	684	$	—
Commercial real estate	6.02	116,741		16,470		11,250		12,721		3,073
Real estate construction	6.64	7,886		7,961		743		836		—
Retail real estate	3.85	77,116		12,052		9,417		3,050		721
Retail other	1.72	552		—		—		—		—
Total Florida		$	218,755	$	36,657	$	24,628	$	17,291	$	3,794
Total		$	1,928,794	$	188,741	$	77,253	$	67,531	$	17,164

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due.  Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions.  Loans may be placed on non-accrual status regardless of whether or not such loans are considered past due.  When interest accrual is discontinued, all unpaid accrued interest is reversed.  Interest income is subsequently recognized only to the extent cash payments are received in excess of the principal due.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

An age analysis of past due loans still accruing and non-accrual loans is as follows:

	June 30, 2014
	Loans past due, still accruing						Non-accrual
	30-59 Days		60-89 Days		90+Days		Loans
	(dollars in thousands)
Illinois/Indiana
Commercial	$	468	$	10	$	235	$	1,511
Commercial real estate	184		—		—		2,096
Real estate construction	83		—		—		3,141
Retail real estate	842		9		—		1,290
Retail other	20		—		—		—
Total Illinois/Indiana	$	1,597	$	19	$	235	$	8,038
Florida
Commercial	$	—	$	—	$	—	$	—
Commercial real estate	—		—		—		2,603
Real estate construction	—		—		—		—
Retail real estate	150		—		—		591
Retail other	—		—		—		—
Total Florida	$	150	$	—	$	—	$	3,194
Total	$	1,747	$	19	$	235	$	11,232

	December 31, 2013
	Loans past due, still accruing						Non-accrual
	30-59 Days		60-89 Days		90+Days		Loans
	(dollars in thousands)
Illinois/Indiana
Commercial	$	906	$	279	$	92	$	975
Commercial real estate	567		3,736		—		4,597
Real estate construction	—		—		—		3,862
Retail real estate	483		123		103		3,936
Retail other	20		—		—		—
Total Illinois/Indiana	$	1,976	$	4,138	$	195	$	13,370
Florida
Commercial	$	—	$	—	$	—	$	—
Commercial real estate	—		—		—		3,073
Real estate construction	—		—		—		—
Retail real estate	—		—		—		721
Retail other	—		—		—		—
Total Florida	$	—	$	—	$	—	$	3,794
Total	$	1,976	$	4,138	$	195	$	17,164

A loan is impaired when, based on current information and events, it is probable the Company will be unable to collect scheduled principal and interest payments when due according to the terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  The following loans are assessed for impairment by the Company: loans 60 days or more past due and over $0.25 million, loans graded 8 over $0.5 million and loans graded 9 or 10.

Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of the expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent.  Large groups of smaller balance homogenous loans are collectively evaluated for impairment.  Accordingly, the Company does not separately identify individual consumer and residential loans for impairment disclosures unless such loans are the subject of a restructuring agreement.

The gross interest income that would have been recorded in the three and six months ended June 30, 2014 if impaired loans had been current in accordance with their original terms was $0.3 million and $0.6 million, respectively.  The amount of interest collected on those loans and recognized on a cash basis that was included in interest income was insignificant for the three and six months ended June 30, 2014.

The Company’s loan portfolio includes certain loans that have been modified in a troubled debt restructuring (“TDR”), where concessions have been granted to borrowers who have experienced financial difficulties. The Company will restructure loans for its customers who appear to be able to meet the terms of their loan over the long term, but who may be unable to meet the terms of the loan in the near term due to individual circumstances.

The Company considers the customer’s past performance, previous and current credit history, the individual circumstances surrounding the current difficulties and the customer’s plan to meet the terms of the loan in the future prior to restructuring the terms of the loan.  Generally, all five primary areas of lending are restructured through short-term interest rate relief, short-term principal payment relief, short-term principal and interest payment relief, or forbearance (debt forgiveness).  Once a restructured loan has gone 90+ days past due or is placed on non-accrual status, it is included in the non-performing loan totals. A summary of restructured loans as of June 30, 2014 and December 31, 2013 is as follows:

	June 30, 2014		December 31, 2013
	(dollars in thousands)
Restructured loans:
In compliance with modified terms	$	11,270	$	11,511
30 – 89 days past due	—		380
Included in non-performing loans	2,882		5,919
Total	$	14,152	$	17,810

All TDRs are considered to be impaired for purposes of assessing the adequacy of the allowance for loan losses and for financial reporting purposes.  When the Company modifies a loan in a TDR, it evaluates any possible impairment similar to other impaired loans based on present value of the expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent.  If the Company determines that the value of the TDR is less than the recorded investment in the loan, impairment is recognized through an allowance estimate in the period of the modification and in periods subsequent to the modification.

Performing loans classified as TDRs during the three and six months ended June 30, 2014 were insignificant.

Performing loans classified as TDRs during the three and six months ended June 30, 2013 consisted of one commercial real estate modification in Florida for short-term interest rate relief, with a recorded investment of $0.1 million.

The gross interest income that would have been recorded in the three and six months ended June 30, 2014 and 2013 if performing TDRs had been in accordance with their original terms instead of modified terms was insignificant.

There were no TDRs that were classified as non-performing and had payment defaults (a default occurs when a loan is 90 days or more past due or transferred to non-accrual) during the three and six months ended June 30, 2014.

TDRs that were classified as non-performing and had payment defaults during the three months ended June 30, 2013 consisted of one Illinois/Indiana real estate construction modification totaling $0.3 million and four Illinois/Indiana retail real estate modifications totaling $1.1 million.  TDRs that were classified as non-performing and had payment defaults during the six months ended June 30, 2013 consisted of one Illinois/Indiana commercial real estate modification totaling $1.7 million, one Illinois/Indiana real estate construction modification totaling $0.3 million, four Illinois/Indiana retail real estate modifications totaling $1.1 million and one Florida retail real estate modification totaling $0.1 million.

The following tables provide details of impaired loans, segregated by category and geography. The unpaid contractual principal balance represents the recorded balance prior to any partial charge-offs.  The recorded investment represents customer balances net of any partial charge-offs recognized on the loan.  The average recorded investment is calculated using the most recent four quarters.

	June 30, 2014
	Unpaid Contractual Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(dollars in thousands)
Illinois/Indiana
Commercial	$	3,731	$	1,998	$	827	$	2,825	$	710	$	2,750
Commercial real estate	6,045		1,510		3,079		4,589		1,674		7,650
Real estate construction	3,142		1,609		1,533		3,142		465		4,164
Retail real estate	2,576		2,227		152		2,379		54		4,213
Retail other	—		—		—		—		—		—
Total Illinois/Indiana	$	15,494	$	7,344	$	5,591	$	12,935	$	2,903	$	18,777
Florida
Commercial	$	—	$	—	$	—	$	—	$	—	$	2
Commercial real estate	4,849		3,465		1,298		4,763		394		6,104
Real estate construction	410		410		—		410		—		420
Retail real estate	10,037		8,753		537		9,290		337		9,633
Retail other	9		9		—		9		—		2
Total Florida	$	15,305	$	12,637	$	1,835	$	14,472	$	731	$	16,161
Total	$	30,799	$	19,981	$	7,426	$	27,407	$	3,634	$	34,938

	December 31, 2013
	Unpaid Contractual Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(dollars in thousands)
Illinois/Indiana
Commercial	$	2,825	$	1,684	$	602	$	2,286	$	485	$	4,169
Commercial real estate	8,866		3,671		3,740		7,411		1,977		10,335
Real estate construction	4,932		2,292		1,570		3,862		468		5,889
Retail real estate	5,583		3,267		2,010		5,277		604		5,296
Retail other	—		—		—		—		—		—
Total Illinois/Indiana	$	22,206	$	10,914	$	7,922	$	18,836	$	3,534	$	25,689
Florida
Commercial	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate	7,108		3,946		1,319		5,265		416		6,662
Real estate construction	417		417		—		417		—		1,294
Retail real estate	10,346		9,005		537		9,542		337		11,079
Retail other	—		—		—		—		—		—
Total Florida	$	17,871	$	13,368	$	1,856	$	15,224	$	753	$	19,035
Total	$	40,077	$	24,282	$	9,778	$	34,060	$	4,287	$	44,724

Management’s opinion as to the ultimate collectability of loans is subject to estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral.  These estimates are affected by changing economic conditions and the economic prospects of borrowers.

Allowance for Loan Losses

The allowance for loan losses represents an estimate of the amount of losses believed inherent in the Company’s loan portfolio at the balance sheet date.  The allowance for loan losses is evaluated geographically, by class of loans.  The allowance calculation involves a high degree of estimation that management attempts to mitigate through the use of objective historical data where available. Loan losses are charged against the allowance for loan losses when management believes the uncollectibility of the loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.  Overall, the Company believes the allowance methodology is consistent with prior periods and the balance was adequate to cover the estimated losses in the Company’s loan portfolio at June 30, 2014 and December 31, 2013.

The general portion of the Company’s allowance contains two components: (i) a component for historical loss ratios, and (ii) a component for adversely graded loans.  The historical loss ratio component is an annualized loss rate calculated using a sum-of-years digits weighted 20-quarter historical average.

The Company’s component for adversely graded loans attempts to quantify the additional risk of loss inherent in the grade 8 and grade 9 portfolios.  The grade 9 portfolio has an additional allocation placed on those loans determined by a one-year charge-off percentage for the respective loan type/geography.  The minimum additional reserve on a grade 9 loan was 3.00% as of June 30, 2014 and December 31, 2013, which is an estimate of the additional loss inherent in these loan grades based upon a review of overall historical charge-offs.  As of June 30, 2014, the Company believed this minimum reserve remained adequate.

Grade 8 loans have an additional allocation placed on them determined by the trend difference of the respective loan type/geography’s rolling 12- and 20-quarter historical loss trends. If the rolling 12-quarter average is higher (more current information) than the rolling 20-quarter average, the Company adds the additional amount to the allocation.  The minimum additional amount for grade 8 loans was 1.00% as of June 30, 2014 and December 31, 2013, based upon a review of the differences between the rolling 12- and 20-quarter historical loss averages by region.  As of June 30, 2014, the Company believed this minimum additional amount remained adequate.

The specific portion of the Company’s allowance relates to loans that are impaired, which includes non-performing loans, TDRs and other loans determined to be impaired.  The impaired loans are subtracted from the general loans and are allocated specific reserves as discussed above.

Impaired loans are reported at the fair value of the underlying collateral, less estimated costs to sell, if repayment is expected solely from the collateral. Collateral values are estimated using a combination of observable inputs, including recent appraisals discounted for collateral specific changes and current market conditions, and unobservable inputs based on customized discounting criteria.

The general quantitative allocation based upon historical charge off rates is adjusted for qualitative factors based on current general economic conditions and other qualitative risk factors both internal and external to the Company. In general, such valuation allowances are determined by evaluating, among other things: (i) Management & Staff; (ii) Loan Underwriting, Policy and Procedures; (iii) Internal/External Audit & Loan Review; (iv) Valuation of Underlying Collateral; (v) Macro and Local Economic Factor; (vi) Impact of Competition, Legal & Regulatory Issues; (vii) Nature and Volume of Loan Portfolio; (viii) Concentrations of Credit; (ix) Net Charge-Off Trend; and (x) Non-Accrual, Past Due and Classified Trend.  Management evaluates the degree of risk that each one of these components has on the quality of the loan portfolio on a quarterly basis.  Based on each component’s risk factor, a qualitative adjustment to the reserve may be applied to the appropriate loan categories.

During the second quarter of 2014, the Company did not adjust any qualitative factors.  During the first quarter of 2014, the Company adjusted Illinois/Indiana and Florida qualitative factors relating to Net Charge-Off Trend.  Adjustments to increase this qualitative factor were made in the first quarter of 2014 to offset decreasing quantitative factors and represent management’s evaluation of risk.  The Company will continue to monitor its qualitative factors on a quarterly basis.

The following table details activity on the allowance for loan losses.  Allocation of a portion of the allowance to one category does not preclude its availability to absorb losses in other categories.

	As of and for the Three Months Ended June 30, 2014
	Commercial			Commercial Real Estate			Real Estate Construction			Retail Real Estate			Retail Other			Total
	(dollars in thousands)
Illinois/Indiana
Beginning balance	$	7,917		$	15,498		$	2,461		$	9,192		$	213		$	35,281
Provision for loan loss	(221		)	797			935			1,981			70			3,562
Charged-off	(30		)	(889		)	(657		)	(416		)	(91		)	(2,083		)
Recoveries	29			20			37			45			46			177
Ending Balance	$	7,695		$	15,426		$	2,776		$	10,802		$	238		$	36,937
Florida
Beginning balance	$	2,291		$	5,729		$	233		$	3,888		$	4		$	12,145
Provision for loan loss	(524		)	(753		)	(1,036		)	(242		)	(7		)	(2,562		)
Charged-off	—			—			—			(117		)	—			(117		)
Recoveries	15			—			978			25			7			1,025
Ending Balance	$	1,782		$	4,976		$	175		$	3,554		$	4		$	10,491

	As of and for the Six Months Ended June 30, 2014
	Commercial			Commercial Real Estate			Real Estate Construction			Retail Real Estate			Retail Other			Total
	(dollars in thousands)
Illinois/Indiana
Beginning balance	$	8,452		$	16,379		$	2,540		$	6,862		$	216		$	34,449
Provision for loan loss	(152		)	180			382			5,526			112			6,048
Charged-off	(704		)	(1,173		)	(657		)	(1,691		)	(192		)	(4,417		)
Recoveries	99			40			511			105			102			857
Ending Balance	$	7,695		$	15,426		$	2,776		$	10,802		$	238		$	36,937
Florida
Beginning balance	$	1,926		$	5,733		$	1,168		$	4,287		$	4		$	13,118
Provision for loan loss	(268		)	(1,028		)	(1,988		)	(751		)	(13		)	(4,048		)
Charged-off	(20		)	—			—			(137		)	—			(157		)
Recoveries	144			271			995			155			13			1,578
Ending Balance	$	1,782		$	4,976		$	175		$	3,554		$	4		$	10,491

	As of and for the Three Months Ended June 30, 2013
	Commercial			Commercial Real Estate			Real Estate Construction			Retail Real Estate			Retail Other			Total
	(dollars in thousands)
Illinois/Indiana
Beginning balance	$	6,667		$	14,791		$	3,446		$	7,462		$	358		$	32,724
Provision for loan loss	1,016			(1,177		)	62			972			(29		)	844
Charged-off	(239		)	(63		)	(1,071		)	(350		)	(151		)	(1,874		)
Recoveries	70			172			77			172			62			553
Ending Balance	$	7,514		$	13,723		$	2,514		$	8,256		$	240		$	32,247
Florida
Beginning balance	$	1,485		$	6,106		$	2,326		$	5,128		$	4		$	15,049
Provision for loan loss	12			1,582			329			(763		)	(4		)	1,156
Charged-off	—			—			(22		)	(381		)	(3		)	(406		)
Recoveries	8			(32		)	60			403			6			445
Ending Balance	$	1,505		$	7,656		$	2,693		$	4,387		$	3		$	16,244

	As of and for the Six Months Ended June 30, 2013
	Commercial			Commercial Real Estate			Real Estate Construction			Retail Real Estate			Retail Other			Total
	(dollars in thousands)
Illinois/Indiana
Beginning balance	$	6,597		$	15,023		$	2,527		$	8,110		$	322		$	32,579
Provision for loan loss	1,254			(687		)	799			568			(35		)	1,899
Charged-off	(422		)	(910		)	(1,071		)	(622		)	(287		)	(3,312		)
Recoveries	85			297			259			200			240			1,081
Ending Balance	$	7,514		$	13,723		$	2,514		$	8,256		$	240		$	32,247
Florida
Beginning balance	$	1,437		$	6,062		$	2,315		$	5,614		$	5		$	15,433
Provision for loan loss	35			1,852			358			(134		)	(10		)	2,101
Charged-off	—			(245		)	(57		)	(1,559		)	(5		)	(1,866		)
Recoveries	33			(13		)	77			466			13			576
Ending Balance	$	1,505		$	7,656		$	2,693		$	4,387		$	3		$	16,244

The following table presents the allowance for loan losses and recorded investments in loans by category and geography:

	As of June 30, 2014
	Commercial		Commercial Real Estate		Real Estate Construction		Retail Real Estate		Retail Other		Total
	(dollars in thousands)
Illinois/Indiana
Amount allocated to:
Loans individually evaluated for impairment	$	710	$	1,674	$	465	$	54	$	—	$	2,903
Loans collectively evaluated for impairment	6,985		13,752		2,311		10,748		238		34,034
Ending Balance	$	7,695	$	15,426	$	2,776	$	10,802	$	238	$	36,937
Loans:
Loans individually evaluated for impairment	$	2,825	$	4,589	$	3,142	$	2,379	$	—	$	12,935
Loans collectively evaluated for impairment	529,336		931,514		63,512		452,495		9,117		1,985,974
Ending Balance	$	532,161	$	936,103	$	66,654	$	454,874	$	9,117	$	1,998,909
Florida
Amount allocated to:
Loans individually evaluated for impairment	$	—	$	394	$	—	$	337	$	—	$	731
Loans collectively evaluated for impairment	1,782		4,582		175		3,217		4		9,760
Ending Balance	$	1,782	$	4,976	$	175	$	3,554	$	4	$	10,491
Loans:
Loans individually evaluated for impairment	$	—	$	4,763	$	410	$	9,290	$	9	$	14,472
Loans collectively evaluated for impairment	21,429		160,859		15,372		92,176		565		290,401
Ending Balance	$	21,429	$	165,622	$	15,782	$	101,466	$	574	$	304,873

	As of December 31, 2013
	Commercial		Commercial Real Estate		Real Estate Construction		Retail Real Estate		Retail Other		Total
	(dollars in thousands)
Illinois/Indiana
Amount allocated to:
Loans individually evaluated for impairment	$	485	$	1,977	$	468	$	604	$	—	$	3,534
Loans collectively evaluated for impairment	7,967		14,402		2,072		6,258		216		30,915
Ending Balance	$	8,452	$	16,379	$	2,540	$	6,862	$	216	$	34,449
Loans:
Loans individually evaluated for impairment	$	2,286	$	7,411	$	3,862	$	5,277	$	—	$	18,836
Loans collectively evaluated for impairment	557,790		924,607		57,567		413,020		8,515		1,961,499
Ending Balance	$	560,076	$	932,018	$	61,429	$	418,297	$	8,515	$	1,980,335
Florida
Amount allocated to:
Loans individually evaluated for impairment	$	—	$	416	$	—	$	337	$	—	$	753
Loans collectively evaluated for impairment	1,926		5,317		1,168		3,950		4		12,365
Ending Balance	$	1,926	$	5,733	$	1,168	$	4,287	$	4	$	13,118
Loans:
Loans individually evaluated for impairment	$	—	$	5,265	$	417	$	9,542	$	—	$	15,224
Loans collectively evaluated for impairment	20,536		154,990		17,009		92,814		552		285,901
Ending Balance	$	20,536	$	160,255	$	17,426	$	102,356	$	552	$	301,125

XML

Securities

6 Months Ended

Jun. 30, 2014

Securities

Securities

Note 3:  Securities

Securities are classified as held to maturity when First Busey has the ability and management has the positive intent to hold those securities to maturity.  Accordingly, they are stated at cost, adjusted for amortization of premiums and accretion of discounts.  Securities are classified as available for sale when First Busey may decide to sell those securities due to changes in market interest rates, liquidity needs, changes in yields on alternative investments, and for other reasons.  They are carried at fair value with unrealized gains and losses, net of taxes, reported in other comprehensive income.

The amortized cost, unrealized gains and losses and fair values of securities classified available for sale and held to maturity are summarized as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(dollars in thousands)
June 30, 2014:
Available for sale
U.S. Treasury securities	$	50,402	$	416	$	(4	)	$	50,814
Obligations of U.S. government corporations and agencies	203,592		1,882		(111		)	205,363
Obligations of states and political subdivisions	240,458		3,682		(732		)	243,408
Residential mortgage-backed securities	254,387		5,325		(141		)	259,571
Corporate debt securities	73,968		599		(36		)	74,531
Total debt securities	822,807		11,904		(1,024		)	833,687
Mutual funds and other equity securities	4,691		1,734		—			6,425
Total	$	827,498	$	13,638	$	(1,024	)	$	840,112
Held to maturity
Obligations of states and political subdivisions	$	828	$	20	$	—		$	848
Commercial mortgage-backed securities	1,022		23		—			1,045
Total	$	1,850	$	43	$	—		$	1,893

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(dollars in thousands)
December 31, 2013:
Available for sale
U.S. Treasury securities	$	102,463	$	244	$	(67	)	$	102,640
Obligations of U.S. government corporations and agencies	254,998		2,741		(328		)	257,411
Obligations of states and political subdivisions	272,077		2,887		(2,812		)	272,152
Residential mortgage-backed securities	174,699		3,571		(535		)	177,735
Corporate debt securities	25,384		155		(33		)	25,506
Total debt securities	829,621		9,598		(3,775		)	835,444
Mutual funds and other equity securities	4,114		1,752		—			5,866
Total	$	833,735	$	11,350	$	(3,775	)	$	841,310
Held to maturity
Obligations of states and political subdivisions	$	834	$	1	$	(4	)	$	831
Total	$	834	$	1	$	(4	)	$	831

The amortized cost and fair value of debt securities available for sale and held to maturity as of June 30, 2014, by contractual maturity, are shown below.  Mutual funds and other equity securities do not have stated maturity dates and therefore are not included in the following maturity summary.  Mortgages underlying the residential mortgage-backed securities may be called or prepaid without penalties; therefore, actual maturities could differ from the contractual maturities. All residential mortgage-backed securities were issued by U.S. government agencies and corporations.

	Available for sale				Held to maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(dollars in thousands)
Due in one year or less	$	132,344	$	133,270	$	—	$	—
Due after one year through five years	360,784		363,964		317		321
Due after five years through ten years	165,306		169,573		1,533		1,572
Due after ten years	164,373		166,880		—		—
Total	$	822,807	$	833,687	$	1,850	$	1,893

Realized gains and losses related to sales of securities available for sale are summarized as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2014			2013		2014			2013
	(dollars in thousands)
Gross security gains	$	—		$	—	$	57		$	—
Gross security (losses)	(3		)	—		(17		)	—
Net security (losses) gains	$	(3	)	$	—	$	40		$	—

The tax provision for the net realized gains and losses was insignificant for the three and six months ended June 30, 2014 and there was no tax provision related to net realized gains and losses for the three and six months ended June 30, 2013.

Investment securities with carrying amounts of $401.2 million and $428.7 million on June 30, 2014 and December 31, 2013, respectively, were pledged as collateral for public deposits, securities sold under agreements to repurchase and for other purposes as required or permitted by law.

Information pertaining to securities with gross unrealized losses at June 30, 2014 and December 31, 2013 aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

	Continuous unrealized losses existing for less than 12 months, gross				Continuous unrealized  losses existing for greater than 12 months, gross				Total, gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
	(dollars in thousands)
June 30, 2014:
Available for sale
U.S. Treasury securities	$	—	$	—	$	364	$	4	$	364	$	4
Obligations of U.S. government corporations and agencies	55		1		25,149		110		25,204		111
Obligations of states and political subdivisions	11,951		24		47,155		708		59,106		732
Residential mortgage-backed securities	15,219		66		11,376		75		26,595		141
Corporate debt securities	5,724		31		215		5		5,939		36
Total temporarily impaired securities	$	32,949	$	122	$	84,259	$	902	$	117,208	$	1,024

	Continuous unrealized losses existing for less than 12 months, gross				Continuous unrealized  losses existing for greater than 12 months, gross				Total, gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
	(dollars in thousands)
December 31, 2013:
Available for sale
U.S. Treasury securities	$	25,830	$	67	$	—	$	—	$	25,830	$	67
Obligations of U.S. government corporations and agencies	25,946		328		—		—		25,946		328
Obligations of states and political subdivisions	92,703		2,518		8,492		294		101,195		2,812
Residential mortgage-backed securities	53,543		535		—		—		53,543		535
Corporate debt securities	1,614		33		—		—		1,614		33
Total temporarily impaired securities	$	199,636	$	3,481	$	8,492	$	294	$	208,128	$	3,775
Held to maturity
Obligations of states and political subdivisions	$	597	$	4	$	—	$	—	$	597	$	4
Total temporarily impaired securities	$	597	$	4	$	—	$	—	$	597	$	4

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.  Consideration is given to the length of time and extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and whether the Company has the intent to sell the security and it is more-likely-than-not it will have to sell the security before recovery of its cost basis.

The total number of securities in the investment portfolio in an unrealized loss position as of June 30, 2014 was 139, and represented a loss of 0.9% of the aggregate carrying value. Based upon a review of unrealized loss circumstances, the unrealized losses resulted from changes in market interest rates and liquidity, not from changes in the probability of receiving the contractual cash flows. The Company does not intend to sell the securities and it is more-likely-than-not that the Company will recover the amortized cost prior to being required to sell the securities.  Full collection of the amounts due according to the contractual terms of the securities is expected; therefore, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2014.

The Company had available for sale obligations of state and political subdivisions with a fair value of $243.4 million and $272.2 million as of June 30, 2014 and December 31, 2013, respectively.  In addition, the Company had held to maturity obligations of state and political subdivisions totaling $0.9 million and $0.8 million at June 30, 2014 and December 31, 2013, respectively.

As of June 30, 2014, the Company’s obligations of state and political subdivisions portfolios were comprised of $200.8 million of general obligation bonds and $43.5 million of revenue bonds issued by 248 issuers, primarily consisting of states, counties, cities, towns, villages and school districts.  The Company held investments in general obligation bonds in 24 states (including the District of Columbia), including seven states in which the aggregate fair value exceeded $5.0 million.  The Company held investments in revenue bonds in 19 states, including two states where the aggregate fair value exceeded $5.0 million.

As of December 31, 2013, the Company’s obligations of state and political subdivisions portfolio was comprised of $223.5 million of general obligation bonds and $49.5 million of revenue bonds issued by 267 issuers, primarily consisting of states, counties, cities, towns, villages and school districts.  The Company held investments in general obligation bonds in 25 states (including the District of Columbia), including seven states in which the aggregate fair value exceeded $5.0 million.  The Company held investments in revenue bonds in 21 states, including two states where the aggregate fair value exceeded $5.0 million.

The amortized cost and fair values of the Company’s portfolio of general obligation bonds are summarized in the following tables by the issuers’ state:

June 30, 2014:

						Average Exposure
	Number of	Amortized		Fair		Per Issuer
U.S. State	Issuers	Cost		Value		(Fair Value)
	(dollars in thousands)
Illinois	75	$	68,783	$	70,404	$	939
Wisconsin	41	39,080		39,420		961
Michigan	34	31,048		31,452		925
Pennsylvania	11	13,318		13,391		1,217
Ohio	10	10,953		10,935		1,094
Texas	7	7,438		7,400		1,057
Iowa	3	6,121		6,188		2,063
Other	25	20,946		21,568		863
Total general obligations bonds	206	$	197,687	$	200,758	$	975

December 31, 2013:

						Average Exposure
	Number of	Amortized		Fair		Per Issuer
U.S. State	Issuers	Cost		Value		(Fair Value)
	(dollars in thousands)
Illinois	82	$	82,884	$	83,804	$	1,022
Wisconsin	41	43,117		43,122		1,052
Michigan	37	35,350		35,365		956
Pennsylvania	11	14,132		14,133		1,285
Ohio	12	11,709		11,426		952
Texas	7	7,510		7,270		1,039
Iowa	3	6,126		6,060		2,020
Other	26	21,865		22,290		857
Total general obligations bonds	219	$	222,693	$	223,470	$	1,020

The general obligation bonds are diversified across many issuers, with $3.5 million and $5.0 million being the largest exposure to a single issuer at June 30, 2014 and December 31, 2013, respectively.  Accordingly, as of June 30, 2014 and December 31, 2013, the Company did not hold general obligation bonds of any single issuer, the aggregate book or market value of which exceeded 10% of the Company’s stockholders’ equity. Of the general obligation bonds in the Company’s portfolio, 97.0% had been rated by at least one nationally recognized statistical rating organization and 3.0% were unrated, based on the fair value as of June 30, 2014.  Of the general obligation bonds in the Company’s portfolio, 96.4% had been rated by at least one nationally recognized statistical rating organization and 3.6% were unrated, based on the fair value as of December 31, 2013.

The amortized cost and fair values of the Company’s portfolio of revenue bonds are summarized in the following tables by the issuers’ state:

June 30, 2014:

						Average Exposure
	Number of	Amortized		Fair		Per Issuer
U.S. State	Issuers	Cost		Value		(Fair Value)
	(dollars in thousands)
Illinois	4	$	7,002	$	6,920	$	1,730
Indiana	11	13,307		13,274		1,207
Other	27	23,290		23,304		863
Total revenue bonds	42	$	43,599	$	43,498	$	1,036

December 31, 2013:

						Average Exposure
	Number of	Amortized		Fair		Per Issuer
U.S. State	Issuers	Cost		Value		(Fair Value)
	(dollars in thousands)
Illinois	4	$	7,356	$	7,121	$	1,780
Indiana	14	14,740		14,481		1,034
Other	30	28,122		27,911		930
Total revenue bonds	48	$	50,218	$	49,513	$	1,032

The revenue bonds are diversified across many issuers and revenue sources with $3.0 million being the largest exposure to a single issuer at June 30, 2014 and December 31, 2013.  Accordingly, as of June 30, 2014 and December 31, 2013, the Company did not hold revenue bonds of any single issuer, the aggregate book or market value of which exceeded 10% of the Company’s stockholders’ equity.  All of the revenue bonds in the Company’s portfolio had been rated by at least one nationally recognized statistical rating organization as of June 30, 2014 and December 31, 2013.  Some of the primary types of revenue bonds owned in the Company’s portfolio include: primary education or government building lease rentals secured by ad valorem taxes, utility systems secured by utility system net revenues, housing authorities secured by mortgage loans or principal receipts on mortgage loans, secondary education secured by student fees/tuitions, contracts subject to annual state appropriation, and pooled issuances (i.e. bond bank) consisting of multiple underlying municipal obligors.

Substantially all of the Company’s obligations of state and political subdivision securities are owned by Busey Bank, whose investment policy requires that state and political subdivision securities purchased be investment grade.  Busey Bank’s investment policy also limits the amount of rated state and political subdivision securities to an aggregate 100% of the Bank’s Total Risk Based Capital at the time of purchase and an aggregate 15% of Total Risk Based Capital for unrated state and political subdivision securities issued by municipalities having taxing authority or located in counties/micropolitan statistical areas/metropolitan statistical areas in which an office of the Bank is located.  The investment policy states fixed income investments that are not Office of the Comptroller of the Currency Type 1 securities (U.S. Treasuries, agencies, municipal government general obligation and, for well-capitalized institutions, most municipal revenue bonds) should be analyzed prior to acquisition to determine that (1) the security has low risk of default by the obligor, and (2) the full and timely repayment of principal and interest is expected over the expected life of the investment.  All securities in the Bank’s obligations of state and political subdivision securities portfolio are subject to ongoing review.  Factors that may be considered as part of ongoing monitoring of state and political subdivision securities include credit rating changes by nationally recognized statistical rating organizations, market valuations, third-party municipal credit analysis, which may include indicative information regarding the issuer’s capacity to pay, market and economic data and such other factors as are available and relevant to the security or the issuer such as its budgetary position and sources, strength and stability of taxes and/or other revenue.

As of June 30, 2014, the Company’s regular monitoring of its obligations of state and political subdivisions portfolio had not uncovered any facts or circumstances resulting in significantly different credit ratings than those assigned by a nationally recognized statistical rating organization.

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Securities Sold Under Agreements to Repurchase (Tables)

6 Months Ended

Jun. 30, 2014

Securities Sold Under Agreements to Repurchase

Schedule of distribution of securities sold under agreements to repurchase and weighted average interest rates

	June 30,  2014			December 31, 2013
	(dollars in thousands)
Balance at end of period	$	140,563		$	172,348
Weighted average interest rate at end of period	0.10		%	0.13		%
Maximum outstanding at any month end in year-to-date period	$	141,642		$	172,348
Average daily balance for the year-to-date period	$	132,948		$	137,777
Weighted average interest rate during period (1)	0.11		%	0.14		%

(1) The weighted average interest rate is computed by dividing total interest for the year-to-date period by the average daily balance outstanding.

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Derivative Financial Instruments

6 Months Ended

Jun. 30, 2014

Derivative Financial Instruments

Derivative Financial Instruments

Note 11:  Derivative Financial Instruments

Starting in the first quarter of 2014, the Company began entering into loan agreements that settled in non-U.S. dollar denominations.  The foreign loan balance, gross, translated into U.S. dollars as of June 30, 2014 was $1.5 million.

Foreign Currency Derivatives. The Company enters into foreign currency forward contracts that are not designated as hedging instruments to mitigate the economic effect of fluctuations in foreign currency exchange rates on certain non-U.S. dollar denominated loans.  Due to the foreign loan activity beginning in 2014, the Company implemented a new accounting policy based on existing accounting standards. Because the foreign currency forward contracts do not meet hedge accounting requirements, gains and losses due to changes in their fair values are recognized in other income.

The notional amount and fair values of open foreign currency forward contracts were as follows:

	June 30, 2014		December 31, 2013
	(dollars in thousands)
Forward contracts — foreign exchange:
Notional amount	$	4,439	$	—
Other assets — estimated fair value	5		—
Other liabilities — estimated fair value	22		—

The amount of gains and losses relating to foreign currency forward contracts included in other income for the three and six months ended June 30, 2014 was insignificant.

Foreign currency forward contracts involve the risk of dealing with counterparties and their ability to meet contractual terms.  We believe the risk of incurring losses due to nonperformance by our counterparties is manageable.

As of June 30, 2014, the Company had no other interest rate futures, forwards, swaps or option contracts, or other financial instruments with similar characteristics with the exception of rate lock commitments on mortgage loans to be held for sale.

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Stock-based Compensation

6 Months Ended

Jun. 30, 2014

Stock-based Compensation

Stock-based Compensation

Note 7:  Stock-based Compensation

The Company grants share-based compensation awards to its employees and members of its board of directors as provided for under the Company’s 2010 Equity Incentive Plan. The Company currently grants share-based compensation in the form of restricted stock units (“RSUs”) and deferred stock units (“DSUs”).  The Company also has outstanding stock options granted prior to 2011.  Under the terms of the Company’s 2010 Equity Incentive Plan, the Company is allowed, but not required, to source stock option exercises and grants of RSUs and DSUs from its inventory of treasury stock.  As of June 30, 2014, the Company held 1,456,105 shares in treasury, with 895,655 additional shares authorized for repurchase under its stock repurchase plan.  The repurchase plan has no expiration date and expires when the Company has repurchased all of the remaining authorized shares.

A description of the 2010 Equity Incentive Plan can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.  The Company’s 2010 Equity Incentive Plan is designed to encourage ownership of its common stock by its employees and directors, to provide additional incentive for them to promote the success of its business, and to attract and retain talented personnel.  All of the Company’s employees and directors, and those of its subsidiaries, are eligible to receive awards under the plan.

A summary of the status of and changes in the Company’s stock option awards for the six months ended June 30, 2014 follows:

	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term
Outstanding at beginning of year	696,379	$	17.22
Granted	—	—
Exercised	—	—
Forfeited	167,649	19.72
Outstanding at end of period	528,730	$	16.43	2.18
Exercisable at end of period	528,730	$	16.43	2.18

The Company did not record any stock option compensation expense for the three and six months ended June 30, 2014 or 2013.

A summary of the changes in the Company’s stock unit awards for the six months ended June 30, 2014, is as follows:

			Director				Weighted-
	Restricted		Deferred				Average
	Stock		Stock				Grant Date
	Units		Units		Total		Fair Value
Non-vested at beginning of year	919,928		29,054		948,982		$	4.96
Granted	317,976		36,000		353,976		5.84
Dividend Equivalents Earned	14,745		437		15,182		5.53
Vested	(15,728	)	(29,491	)	(45,219	)	5.02
Forfeited	(44,109	)	—		(44,109	)	4.73
Non-vested at end of period	1,192,812		36,000		1,228,812		$	5.23
Outstanding at end of period	1,192,812		124,655		1,317,467		$	5.22

All recipients earn quarterly dividend equivalents on their respective units. These dividend equivalents are not paid out during the vesting period, but instead entitle the recipients to additional units. Therefore, dividends earned each quarter compound based upon the updated unit balances.  Upon vesting/delivery, shares are expected to be issued from treasury.

On June 23, 2014, under the terms of the 2010 Equity Incentive Plan, the Company granted 317,976 RSUs to members of management.  As the stock price on the grant date of June 23, 2014 was $5.84, total compensation cost to be recognized is $1.9 million.  This cost will be recognized over a period of two to five years.  Subsequent to each requisite service period, the awards will vest 100%.

Also, on June 23, 2014, under the terms of the 2010 Equity Incentive Plan, the Company granted 36,000 DSUs to directors.  As the stock price on the grant date of June 23, 2014 was $5.84, total compensation cost to be recognized is $0.2 million. This cost will be recognized over the requisite service period of one year from the date of grant or the next annual shareholders’ meeting; whichever is earlier. Subsequent to the requisite service period, the awards will vest 100%. These DSUs generally are subject to the same terms as RSUs under the Company’s 2010 Equity Incentive Plan, except that, following vesting, settlement occurs within 30 days following the earlier of separation from the Board or a change in control of the Company.  Subsequent to vesting and prior to delivery, these units will continue to earn dividend equivalents.

The Company recognized $0.3 million and $0.1 million of compensation expense related to non-vested stock units for the three months ended June 30, 2014 and 2013, respectively.  The Company recognized $0.5 million and $0.4 million of compensation expense related to non-vested stock units for the six months ended June 30, 2014 and 2013, respectively.  As of June 30, 2014, there was $4.3 million of total unrecognized compensation cost related to these non-vested stock units.  This cost is expected to be recognized over a period of 3.9 years.

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Securities Sold Under Agreements to Repurchase

6 Months Ended

Jun. 30, 2014

Securities Sold Under Agreements to Repurchase

Securities Sold Under Agreements to Repurchase

Note 5:  Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature either daily or within one year from the transaction date.  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 the fair value of the underlying securities.  The following table sets forth the distribution of securities sold under agreements to repurchase and weighted average interest rates:

	June 30,  2014			December 31, 2013
	(dollars in thousands)
Balance at end of period	$	140,563		$	172,348
Weighted average interest rate at end of period	0.10		%	0.13		%
Maximum outstanding at any month end in year-to-date period	$	141,642		$	172,348
Average daily balance for the year-to-date period	$	132,948		$	137,777
Weighted average interest rate during period (1)	0.11		%	0.14		%

(1) The weighted average interest rate is computed by dividing total interest for the year-to-date period by the average daily balance outstanding.

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Earnings Per Common Share

6 Months Ended

Jun. 30, 2014

Earnings Per Common Share

Earnings Per Common Share

Note 6:  Earnings Per Common Share

Earnings per common share have been computed as follows:

	Three Months Ended June 30,				Six Months Ended  June 30,
	2014		2013		2014		2013
	(in thousands, except per share data)
Net income available to common stockholders	$	8,004	$	6,532	$	15,709	$	12,057
Shares:
Weighted average common shares outstanding	86,895		86,730		86,880		86,717
Dilutive effect of outstanding options, warrants and restricted stock units as determined by the application of the treasury stock method	368		—		365		—
Weighted average common shares outstanding, as adjusted for diluted earnings per share calculation	87,263		86,730		87,245		86,717
Basic earnings per common share	$	0.09	$	0.08	$	0.18	$	0.14
Diluted earnings per common share	$	0.09	$	0.08	$	0.18	$	0.14

Basic earnings per share are computed by dividing net income available to common stockholders for the period by the weighted average number of common shares outstanding.

Diluted earnings per share are determined by dividing net income available to common stockholders for the period by the weighted average number of shares of common stock and common stock equivalents outstanding. Common stock equivalents assume exercise of stock options, warrants and vesting of restricted stock units and use of proceeds to purchase treasury stock at the average market price for the period.  If the average market price for the period is less than the strike price of a stock option or warrant, that option or warrant is considered anti-dilutive and is excluded from the calculation of common stock equivalents.  If the total employee proceeds of a restricted stock unit exceed the average market price for the period, that restricted stock unit is considered anti-dilutive and is excluded from the calculation of common stock equivalents.  At June 30, 2014, 476,230 outstanding options, 573,833 warrants, and 353,976 restricted stock units were anti-dilutive and excluded from the calculation of common stock equivalents.  At June 30, 2013, 701,029 outstanding options, 573,833 warrants, and 713,450 restricted stock units were anti-dilutive and excluded from the calculation of common stock equivalents.

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Income Taxes

6 Months Ended

Jun. 30, 2014

Income Taxes

Income Taxes

Note 8:  Income Taxes

At June 30, 2014, the Company was under examination by the Illinois Department of Revenue for the Company’s 2011 income tax filing.

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Loans (Details 2) (USD $)	6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Grades 1, 3, 6 and 7
Loans
Loans receivable	$ 2,200,000,000	$ 2,100,000,000
Grades 8, 9, and 10
Loans
Loans receivable	142,000,000	161,900,000
Increase or decrease in loans receivable	19,900,000
Grades 1,3,6
Loans
Loans receivable	1,979,838,000	1,928,794,000
Grades 1,3,6 | Illinois/Indiana
Loans
Loans receivable	1,754,044,000	1,710,039,000
Grades 1,3,6 | Florida
Loans
Loans receivable	225,794,000	218,755,000
Grade 7
Loans
Loans receivable	180,389,000	188,741,000
Grade 7 | Illinois/Indiana
Loans
Loans receivable	140,479,000	152,084,000
Grade 7 | Florida
Loans
Loans receivable	39,910,000	36,657,000
Grade 8
Loans
Limit above which loans are quarterly reviewed	500,000
Loans receivable	73,907,000	77,253,000
Grade 8 | Illinois/Indiana
Loans
Loans receivable	55,595,000	52,625,000
Grade 8 | Florida
Loans
Loans receivable	18,312,000	24,628,000
Grade 9
Loans
Loans receivable	56,870,000	67,531,000
Grade 9 | Illinois/Indiana
Loans
Loans receivable	39,207,000	50,240,000
Grade 9 | Florida
Loans
Loans receivable	17,663,000	17,291,000
Grade 10
Loans
Loans receivable	11,232,000	17,164,000
Grade 10 | Illinois/Indiana
Loans
Loans receivable	8,038,000	13,370,000
Grade 10 | Florida
Loans
Loans receivable	3,194,000	3,794,000
Commercial | Illinois/Indiana
Loans
Weighted Avg. Risk Grade	4.75	4.66
Commercial | Florida
Loans
Weighted Avg. Risk Grade	5.94	5.89
Commercial | Grades 1,3,6 | Illinois/Indiana
Loans
Loans receivable	465,289,000	487,587,000
Commercial | Grades 1,3,6 | Florida
Loans
Loans receivable	17,627,000	16,460,000
Commercial | Grade 7
Loans
Limit above which loans are annually reviewed	500,000
Commercial | Grade 7 | Illinois/Indiana
Loans
Loans receivable	42,331,000	46,992,000
Commercial | Grade 7 | Florida
Loans
Loans receivable	49,000	174,000
Commercial | Grade 8 | Illinois/Indiana
Loans
Loans receivable	10,147,000	15,986,000
Commercial | Grade 8 | Florida
Loans
Loans receivable	3,142,000	3,218,000
Commercial | Grade 9 | Illinois/Indiana
Loans
Loans receivable	12,883,000	8,536,000
Commercial | Grade 9 | Florida
Loans
Loans receivable	611,000	684,000
Commercial | Grade 10 | Illinois/Indiana
Loans
Loans receivable	1,511,000	975,000
Commercial real estate | Illinois/Indiana
Loans
Weighted Avg. Risk Grade	5.59	5.55
Commercial real estate | Florida
Loans
Weighted Avg. Risk Grade	6.02	6.02
Commercial real estate | Grades 1,3,6 | Illinois/Indiana
Loans
Loans receivable	812,923,000	799,117,000
Commercial real estate | Grades 1,3,6 | Florida
Loans
Loans receivable	116,555,000	116,741,000
Commercial real estate | Grade 7
Loans
Limit above which loans are annually reviewed	500,000
Commercial real estate | Grade 7 | Illinois/Indiana
Loans
Loans receivable	72,414,000	79,371,000
Commercial real estate | Grade 7 | Florida
Loans
Loans receivable	27,898,000	16,470,000
Commercial real estate | Grade 8 | Illinois/Indiana
Loans
Loans receivable	27,484,000	19,327,000
Commercial real estate | Grade 8 | Florida
Loans
Loans receivable	4,834,000	11,250,000
Commercial real estate | Grade 9 | Illinois/Indiana
Loans
Loans receivable	21,186,000	29,606,000
Commercial real estate | Grade 9 | Florida
Loans
Loans receivable	13,732,000	12,721,000
Commercial real estate | Grade 10 | Illinois/Indiana
Loans
Loans receivable	2,096,000	4,597,000
Commercial real estate | Grade 10 | Florida
Loans
Loans receivable	2,603,000	3,073,000
Real estate construction
Loans
Limit above which loans are quarterly reviewed	500,000
Real estate construction | Illinois/Indiana
Loans
Weighted Avg. Risk Grade	6.57	7.11
Real estate construction | Florida
Loans
Weighted Avg. Risk Grade	6.18	6.64
Real estate construction | Grades 1,3,6 | Illinois/Indiana
Loans
Loans receivable	33,363,000	21,585,000
Real estate construction | Grades 1,3,6 | Florida
Loans
Loans receivable	14,330,000	7,886,000
Real estate construction | Grade 7 | Illinois/Indiana
Loans
Loans receivable	15,706,000	16,376,000
Real estate construction | Grade 7 | Florida
Loans
Loans receivable		7,961,000
Real estate construction | Grade 8 | Illinois/Indiana
Loans
Loans receivable	13,173,000	11,920,000
Real estate construction | Grade 8 | Florida
Loans
Loans receivable	632,000	743,000
Real estate construction | Grade 9 | Illinois/Indiana
Loans
Loans receivable	1,271,000	7,686,000
Real estate construction | Grade 9 | Florida
Loans
Loans receivable	820,000	836,000
Real estate construction | Grade 10 | Illinois/Indiana
Loans
Loans receivable	3,141,000	3,862,000
Retail real estate | Illinois/Indiana
Loans
Weighted Avg. Risk Grade	3.38	3.53
Retail real estate | Florida
Loans
Weighted Avg. Risk Grade	3.81	3.85
Retail real estate | Grades 1,3,6 | Illinois/Indiana
Loans
Loans receivable	433,426,000	393,299,000
Retail real estate | Grades 1,3,6 | Florida
Loans
Loans receivable	76,708,000	77,116,000
Retail real estate | Grade 7 | Illinois/Indiana
Loans
Loans receivable	9,965,000	9,285,000
Retail real estate | Grade 7 | Florida
Loans
Loans receivable	11,963,000	12,052,000
Retail real estate | Grade 8 | Illinois/Indiana
Loans
Loans receivable	4,781,000	5,392,000
Retail real estate | Grade 8 | Florida
Loans
Loans receivable	9,704,000	9,417,000
Retail real estate | Grade 9 | Illinois/Indiana
Loans
Loans receivable	3,866,000	4,408,000
Retail real estate | Grade 9 | Florida
Loans
Loans receivable	2,500,000	3,050,000
Retail real estate | Grade 10 | Illinois/Indiana
Loans
Loans receivable	1,290,000	3,936,000
Retail real estate | Grade 10 | Florida
Loans
Loans receivable	591,000	721,000
Retail other | Illinois/Indiana
Loans
Weighted Avg. Risk Grade	2.46	2.64
Retail other | Florida
Loans
Weighted Avg. Risk Grade	1.51	1.72
Retail other | Grades 1,3,6 | Illinois/Indiana
Loans
Loans receivable	9,043,000	8,451,000
Retail other | Grades 1,3,6 | Florida
Loans
Loans receivable	574,000	552,000
Retail other | Grade 7 | Illinois/Indiana
Loans
Loans receivable	63,000	60,000
Retail other | Grade 8 | Illinois/Indiana
Loans
Loans receivable	10,000
Retail other | Grade 9 | Illinois/Indiana
Loans
Loans receivable	$ 1,000	$ 4,000

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Securities (Tables)

6 Months Ended

Jun. 30, 2014

Securities

Schedule of amortized cost, unrealized gains and losses and fair values of securities classified available for sale and held to maturity

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(dollars in thousands)
June 30, 2014:
Available for sale
U.S. Treasury securities	$	50,402	$	416	$	(4	)	$	50,814
Obligations of U.S. government corporations and agencies	203,592		1,882		(111		)	205,363
Obligations of states and political subdivisions	240,458		3,682		(732		)	243,408
Residential mortgage-backed securities	254,387		5,325		(141		)	259,571
Corporate debt securities	73,968		599		(36		)	74,531
Total debt securities	822,807		11,904		(1,024		)	833,687
Mutual funds and other equity securities	4,691		1,734		—			6,425
Total	$	827,498	$	13,638	$	(1,024	)	$	840,112
Held to maturity
Obligations of states and political subdivisions	$	828	$	20	$	—		$	848
Commercial mortgage-backed securities	1,022		23		—			1,045
Total	$	1,850	$	43	$	—		$	1,893

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(dollars in thousands)
December 31, 2013:
Available for sale
U.S. Treasury securities	$	102,463	$	244	$	(67	)	$	102,640
Obligations of U.S. government corporations and agencies	254,998		2,741		(328		)	257,411
Obligations of states and political subdivisions	272,077		2,887		(2,812		)	272,152
Residential mortgage-backed securities	174,699		3,571		(535		)	177,735
Corporate debt securities	25,384		155		(33		)	25,506
Total debt securities	829,621		9,598		(3,775		)	835,444
Mutual funds and other equity securities	4,114		1,752		—			5,866
Total	$	833,735	$	11,350	$	(3,775	)	$	841,310
Held to maturity
Obligations of states and political subdivisions	$	834	$	1	$	(4	)	$	831
Total	$	834	$	1	$	(4	)	$	831

Schedule of amortized cost and fair value of debt securities available for sale and held to maturity by contractual maturity

	Available for sale				Held to maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(dollars in thousands)
Due in one year or less	$	132,344	$	133,270	$	—	$	—
Due after one year through five years	360,784		363,964		317		321
Due after five years through ten years	165,306		169,573		1,533		1,572
Due after ten years	164,373		166,880		—		—
Total	$	822,807	$	833,687	$	1,850	$	1,893

Schedule of realized gains and losses related to sales of securities available for sale

	Three Months Ended June 30,					Six Months Ended June 30,
	2014			2013		2014			2013
	(dollars in thousands)
Gross security gains	$	—		$	—	$	57		$	—
Gross security (losses)	(3		)	—		(17		)	—
Net security (losses) gains	$	(3	)	$	—	$	40		$	—

Schedule of securities with gross unrealized losses aggregated by investment category and length of time that individual securities have been in continuous loss position

	Continuous unrealized losses existing for less than 12 months, gross				Continuous unrealized  losses existing for greater than 12 months, gross				Total, gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
	(dollars in thousands)
June 30, 2014:
Available for sale
U.S. Treasury securities	$	—	$	—	$	364	$	4	$	364	$	4
Obligations of U.S. government corporations and agencies	55		1		25,149		110		25,204		111
Obligations of states and political subdivisions	11,951		24		47,155		708		59,106		732
Residential mortgage-backed securities	15,219		66		11,376		75		26,595		141
Corporate debt securities	5,724		31		215		5		5,939		36
Total temporarily impaired securities	$	32,949	$	122	$	84,259	$	902	$	117,208	$	1,024

	Continuous unrealized losses existing for less than 12 months, gross				Continuous unrealized  losses existing for greater than 12 months, gross				Total, gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
	(dollars in thousands)
December 31, 2013:
Available for sale
U.S. Treasury securities	$	25,830	$	67	$	—	$	—	$	25,830	$	67
Obligations of U.S. government corporations and agencies	25,946		328		—		—		25,946		328
Obligations of states and political subdivisions	92,703		2,518		8,492		294		101,195		2,812
Residential mortgage-backed securities	53,543		535		—		—		53,543		535
Corporate debt securities	1,614		33		—		—		1,614		33
Total temporarily impaired securities	$	199,636	$	3,481	$	8,492	$	294	$	208,128	$	3,775
Held to maturity
Obligations of states and political subdivisions	$	597	$	4	$	—	$	—	$	597	$	4
Total temporarily impaired securities	$	597	$	4	$	—	$	—	$	597	$	4

General obligation bonds

Securities

Summary of amortized cost and fair values of the Company's portfolio of municipal bonds by issuer state

June 30, 2014:

						Average Exposure
	Number of	Amortized		Fair		Per Issuer
U.S. State	Issuers	Cost		Value		(Fair Value)
	(dollars in thousands)
Illinois	75	$	68,783	$	70,404	$	939
Wisconsin	41	39,080		39,420		961
Michigan	34	31,048		31,452		925
Pennsylvania	11	13,318		13,391		1,217
Ohio	10	10,953		10,935		1,094
Texas	7	7,438		7,400		1,057
Iowa	3	6,121		6,188		2,063
Other	25	20,946		21,568		863
Total general obligations bonds	206	$	197,687	$	200,758	$	975

December 31, 2013:

						Average Exposure
	Number of	Amortized		Fair		Per Issuer
U.S. State	Issuers	Cost		Value		(Fair Value)
	(dollars in thousands)
Illinois	82	$	82,884	$	83,804	$	1,022
Wisconsin	41	43,117		43,122		1,052
Michigan	37	35,350		35,365		956
Pennsylvania	11	14,132		14,133		1,285
Ohio	12	11,709		11,426		952
Texas	7	7,510		7,270		1,039
Iowa	3	6,126		6,060		2,020
Other	26	21,865		22,290		857
Total general obligations bonds	219	$	222,693	$	223,470	$	1,020

Revenue bonds

Securities

Summary of amortized cost and fair values of the Company's portfolio of municipal bonds by issuer state

June 30, 2014:

						Average Exposure
	Number of	Amortized		Fair		Per Issuer
U.S. State	Issuers	Cost		Value		(Fair Value)
	(dollars in thousands)
Illinois	4	$	7,002	$	6,920	$	1,730
Indiana	11	13,307		13,274		1,207
Other	27	23,290		23,304		863
Total revenue bonds	42	$	43,599	$	43,498	$	1,036

December 31, 2013:

						Average Exposure
	Number of	Amortized		Fair		Per Issuer
U.S. State	Issuers	Cost		Value		(Fair Value)
	(dollars in thousands)
Illinois	4	$	7,356	$	7,121	$	1,780
Indiana	14	14,740		14,481		1,034
Other	30	28,122		27,911		930
Total revenue bonds	48	$	50,218	$	49,513	$	1,032

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Outstanding Commitments and Contingent Liabilities (Tables)

6 Months Ended

Jun. 30, 2014

Outstanding Commitments and Contingent Liabilities

Schedule of contractual amount of exposure to off-balance-sheet risk

	June 30, 2014		December 31, 2013
	(dollars in thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	581,156	$	527,614
Standby letters of credit	19,566		10,155

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Stock-based Compensation (Details) (USD $) In Millions, except Share data, unless otherwise specified	6 Months Ended		6 Months Ended	3 Months Ended		6 Months Ended		0 Months Ended				6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2014 Stock option awards	Jun. 30, 2014 Restricted stock units	Jun. 30, 2013 Restricted stock units	Jun. 30, 2014 Restricted stock units	Jun. 30, 2013 Restricted stock units	Jun. 23, 2014 Restricted stock units Members of management	Jun. 23, 2014 Restricted stock units Members of management Minimum	Jun. 23, 2014 Restricted stock units Members of management Maximum	Jun. 23, 2014 DSUs Directors	Jun. 30, 2014 DSUs Directors
Stock-based Compensation
Number of shares held in treasury	1,456,105	1,482,777
Shares authorized for repurchase under stock repurchase plan	895,655
Shares
Outstanding at beginning of year (in shares)			696,379
Forfeited (in shares)			167,649
Outstanding at end of period (in shares)			528,730
Exercisable at end of period (in shares)			528,730
Weighted-Average Exercise Price
Outstanding at beginning of year (in dollars per share)			$ 17.22
Forfeited (in dollars per share)			$ 19.72
Outstanding at end of period (in dollars per share)			$ 16.43
Exercisable at end of period (in dollars per share)			$ 16.43
Weighted-Average Remaining Contractual Term
Outstanding at end of period			2 years 2 months 5 days
Exercisable at end of period			2 years 2 months 5 days
Shares
Non-vested at beginning of year (in shares)	948,982					919,928						29,054
Granted (in shares)	353,976					317,976		317,976			36,000	36,000
Dividend Equivalents Earned (in shares)	15,182					14,745						437
Vested (in shares)	(45,219)					(15,728)						(29,491)
Forfeited (in shares)	(44,109)					(44,109)
Non-vested at end of period (in shares)	1,228,812			1,192,812		1,192,812						36,000
Outstanding at end of period (in shares)	1,317,467			1,192,812		1,192,812						124,655
Weighted-Average Grant Date Fair Value
Non-vested at beginning of year (in dollars per share)	$ 4.96
Granted (in dollars per share)	$ 5.84
Dividend Equivalents Earned (in dollars per share)	$ 5.53
Vested (in dollars per share)	$ 5.02
Forfeited (in dollars per share)	$ 4.73
Non-vested at end of period (in dollars per share)	$ 5.23
Outstanding at end of period (in dollars per share)	$ 5.22
Additional disclosures
Compensation expense recognized				$ 0.3	$ 0.1	$ 0.5	$ 0.4
Amount of compensation cost to be recognized				$ 4.3		$ 4.3		$ 1.9			$ 0.2
Period over which cost will be recognized						3 years 10 months 24 days			2 years	5 years
Stock price (in dollars per share)								$ 5.84			$ 5.84
Vesting rights of shares granted (as a percent)								100.00%			100.00%
Requisite service period											1 year
Settlement period												30 days

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income	$ 8,185	$ 7,440	$ 16,072	$ 13,873
Unrealized net gains (losses) on securities:
Unrealized net holding gains (losses) arising during period	4,222	(11,737)	5,079	(13,217)
Reclassification adjustment for losses (gains) included in net income	3		(40)
Other comprehensive income (loss), before tax	4,225	(11,737)	5,039	(13,217)
Income tax expense (benefit) related to items of other comprehensive income	1,740	(4,833)	2,075	(5,442)
Other comprehensive income (loss), net of tax	2,485	(6,904)	2,964	(7,775)
Comprehensive income	$ 10,670	$ 536	$ 19,036	$ 6,098

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2014

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Note 2:  Recent Accounting Pronouncements

ASU 2014-04, “Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” ASU 2014-04 clarifies when an in-substance repossession or foreclosure occurs and requires interim and annual disclosures.  The new authoritative guidance will be for reporting periods after January 1, 2015 and is not expected to have a significant impact on the Company’s financial statements.

ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).”  ASU 2014-09 outlines a single model for companies to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract and will also require additional disclosures.  The new authoritative guidance will be for reporting periods after December 15, 2016, and the Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures.

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Reportable Segments and Related Information (Tables)

6 Months Ended

Jun. 30, 2014

Reportable Segments and Related Information

Summary of information relating to reportable segments

	Goodwill				Total Assets
	June 30,		December 31,		June 30,		December 31,
	2014		2013		2014		2013
	(dollars in thousands)				(dollars in thousands)
Goodwill & Total Assets:
Busey Bank	$	—	$	—	$	3,427,699	$	3,456,555
FirsTech	8,992		8,992		27,885		27,253
Busey Wealth Management	11,694		11,694		29,896		28,548
All Other	—		—		21,969		27,219
Total	$	20,686	$	20,686	$	3,507,449	$	3,539,575

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	(dollars in thousands)						(dollars in thousands)
Interest Income:
Busey Bank	$	26,573		$	27,390		$	52,754		$	54,430
FirsTech	13			13			25			26
Busey Wealth Management	76			57			140			117
All Other	(6		)	—			(12		)	2
Total interest income	$	26,656		$	27,460		$	52,907		$	54,575
Interest Expense:
Busey Bank	$	1,350		$	1,917		$	2,760		$	4,149
FirsTech	—			—			—			—
Busey Wealth Management	—			—			—			—
All Other	285			298			569			598
Total interest expense	$	1,635		$	2,215		$	3,329		$	4,747
Other Income:
Busey Bank	$	8,252		$	9,598		$	16,788		$	20,095
FirsTech	2,409			2,149			4,796			4,278
Busey Wealth Management	5,110			4,643			9,651			8,746
All Other	(759		)	(607		)	(1,237		)	(695		)
Total other income	$	15,012		$	15,783		$	29,998		$	32,424
Net Income:
Busey Bank	$	7,436		$	6,487		$	14,715		$	12,280
FirsTech	326			286			635			548
Busey Wealth Management	1,401			1,133			2,403			1,953
All Other	(978		)	(466		)	(1,681		)	(908		)
Total net income	$	8,185		$	7,440		$	16,072		$	13,873

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Loans (Details 6) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Changes in allowance for loan losses
Beginning balance			$ 47,567
Provision for loan loss			2,000	4,000
Ending Balance	47,428		47,428
Amount allocated to:
Ending Balance	47,428		47,428
Loans:
Ending Balance	2,303,782		2,303,782		2,281,460
Illinois/Indiana
Changes in allowance for loan losses
Beginning balance	35,281	32,724	34,449	32,579
Provision for loan loss	3,562	844	6,048	1,899
Charged-off	(2,083)	(1,874)	(4,417)	(3,312)
Recoveries	177	553	857	1,081
Ending Balance	36,937	32,247	36,937	32,247
Amount allocated to:
Loans individually evaluated for impairment	2,903		2,903		3,534
Loans collectively evaluated for impairment	34,034		34,034		30,915
Ending Balance	36,937	32,247	36,937	32,247
Loans:
Loans individually evaluated for impairment	12,935		12,935		18,836
Loans collectively evaluated for impairment	1,985,974		1,985,974		1,961,499
Ending Balance	1,998,909		1,998,909		1,980,335
Florida
Changes in allowance for loan losses
Beginning balance	12,145	15,049	13,118	15,433
Provision for loan loss	(2,562)	1,156	(4,048)	2,101
Charged-off	(117)	(406)	(157)	(1,866)
Recoveries	1,025	445	1,578	576
Ending Balance	10,491	16,244	10,491	16,244
Amount allocated to:
Loans individually evaluated for impairment	731		731		753
Loans collectively evaluated for impairment	9,760		9,760		12,365
Ending Balance	10,491	16,244	10,491	16,244
Loans:
Loans individually evaluated for impairment	14,472		14,472		15,224
Loans collectively evaluated for impairment	290,401		290,401		285,901
Ending Balance	304,873		304,873		301,125
Commercial | Illinois/Indiana
Changes in allowance for loan losses
Beginning balance	7,917	6,667	8,452	6,597
Provision for loan loss	(221)	1,016	(152)	1,254
Charged-off	(30)	(239)	(704)	(422)
Recoveries	29	70	99	85
Ending Balance	7,695	7,514	7,695	7,514
Amount allocated to:
Loans individually evaluated for impairment	710		710		485
Loans collectively evaluated for impairment	6,985		6,985		7,967
Ending Balance	7,695	7,514	7,695	7,514
Loans:
Loans individually evaluated for impairment	2,825		2,825		2,286
Loans collectively evaluated for impairment	529,336		529,336		557,790
Ending Balance	532,161		532,161		560,076
Commercial | Florida
Changes in allowance for loan losses
Beginning balance	2,291	1,485	1,926	1,437
Provision for loan loss	(524)	12	(268)	35
Charged-off			(20)
Recoveries	15	8	144	33
Ending Balance	1,782	1,505	1,782	1,505
Amount allocated to:
Loans collectively evaluated for impairment	1,782		1,782		1,926
Ending Balance	1,782	1,505	1,782	1,505
Loans:
Loans collectively evaluated for impairment	21,429		21,429		20,536
Ending Balance	21,429		21,429		20,536
Commercial Real Estate | Illinois/Indiana
Changes in allowance for loan losses
Beginning balance	15,498	14,791	16,379	15,023
Provision for loan loss	797	(1,177)	180	(687)
Charged-off	(889)	(63)	(1,173)	(910)
Recoveries	20	172	40	297
Ending Balance	15,426	13,723	15,426	13,723
Amount allocated to:
Loans individually evaluated for impairment	1,674		1,674		1,977
Loans collectively evaluated for impairment	13,752		13,752		14,402
Ending Balance	15,426	13,723	15,426	13,723
Loans:
Loans individually evaluated for impairment	4,589		4,589		7,411
Loans collectively evaluated for impairment	931,514		931,514		924,607
Ending Balance	936,103		936,103		932,018
Commercial Real Estate | Florida
Changes in allowance for loan losses
Beginning balance	5,729	6,106	5,733	6,062
Provision for loan loss	(753)	1,582	(1,028)	1,852
Charged-off				(245)
Recoveries		(32)	271	(13)
Ending Balance	4,976	7,656	4,976	7,656
Amount allocated to:
Loans individually evaluated for impairment	394		394		416
Loans collectively evaluated for impairment	4,582		4,582		5,317
Ending Balance	4,976	7,656	4,976	7,656
Loans:
Loans individually evaluated for impairment	4,763		4,763		5,265
Loans collectively evaluated for impairment	160,859		160,859		154,990
Ending Balance	165,622		165,622		160,255
Real Estate Construction | Illinois/Indiana
Changes in allowance for loan losses
Beginning balance	2,461	3,446	2,540	2,527
Provision for loan loss	935	62	382	799
Charged-off	(657)	(1,071)	(657)	(1,071)
Recoveries	37	77	511	259
Ending Balance	2,776	2,514	2,776	2,514
Amount allocated to:
Loans individually evaluated for impairment	465		465		468
Loans collectively evaluated for impairment	2,311		2,311		2,072
Ending Balance	2,776	2,514	2,776	2,514
Loans:
Loans individually evaluated for impairment	3,142		3,142		3,862
Loans collectively evaluated for impairment	63,512		63,512		57,567
Ending Balance	66,654		66,654		61,429
Real Estate Construction | Florida
Changes in allowance for loan losses
Beginning balance	233	2,326	1,168	2,315
Provision for loan loss	(1,036)	329	(1,988)	358
Charged-off		(22)		(57)
Recoveries	978	60	995	77
Ending Balance	175	2,693	175	2,693
Amount allocated to:
Loans collectively evaluated for impairment	175		175		1,168
Ending Balance	175	2,693	175	2,693
Loans:
Loans individually evaluated for impairment	410		410		417
Loans collectively evaluated for impairment	15,372		15,372		17,009
Ending Balance	15,782		15,782		17,426
Retail Real Estate | Illinois/Indiana
Changes in allowance for loan losses
Beginning balance	9,192	7,462	6,862	8,110
Provision for loan loss	1,981	972	5,526	568
Charged-off	(416)	(350)	(1,691)	(622)
Recoveries	45	172	105	200
Ending Balance	10,802	8,256	10,802	8,256
Amount allocated to:
Loans individually evaluated for impairment	54		54		604
Loans collectively evaluated for impairment	10,748		10,748		6,258
Ending Balance	10,802	8,256	10,802	8,256
Loans:
Loans individually evaluated for impairment	2,379		2,379		5,277
Loans collectively evaluated for impairment	452,495		452,495		413,020
Ending Balance	454,874		454,874		418,297
Retail Real Estate | Florida
Changes in allowance for loan losses
Beginning balance	3,888	5,128	4,287	5,614
Provision for loan loss	(242)	(763)	(751)	(134)
Charged-off	(117)	(381)	(137)	(1,559)
Recoveries	25	403	155	466
Ending Balance	3,554	4,387	3,554	4,387
Amount allocated to:
Loans individually evaluated for impairment	337		337		337
Loans collectively evaluated for impairment	3,217		3,217		3,950
Ending Balance	3,554	4,387	3,554	4,387
Loans:
Loans individually evaluated for impairment	9,290		9,290		9,542
Loans collectively evaluated for impairment	92,176		92,176		92,814
Ending Balance	101,466		101,466		102,356
Retail Other | Illinois/Indiana
Changes in allowance for loan losses
Beginning balance	213	358	216	322
Provision for loan loss	70	(29)	112	(35)
Charged-off	(91)	(151)	(192)	(287)
Recoveries	46	62	102	240
Ending Balance	238	240	238	240
Amount allocated to:
Loans collectively evaluated for impairment	238		238		216
Ending Balance	238	240	238	240
Loans:
Loans collectively evaluated for impairment	9,117		9,117		8,515
Ending Balance	9,117		9,117		8,515
Retail Other | Florida
Changes in allowance for loan losses
Beginning balance	4	4	4	5
Provision for loan loss	(7)	(4)	(13)	(10)
Charged-off		(3)		(5)
Recoveries	7	6	13	13
Ending Balance	4	3	4	3
Amount allocated to:
Loans collectively evaluated for impairment	4		4		4
Ending Balance	4	3	4	3
Loans:
Loans individually evaluated for impairment	9		9
Loans collectively evaluated for impairment	565		565		552
Ending Balance	$ 574		$ 574		$ 552

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Fair Value Measurements

6 Months Ended

Jun. 30, 2014

Fair Value Measurements

Fair Value Measurements

Note 12:  Fair Value Measurements

The fair value of an asset or liability is the price that would be received by selling that asset or paid in transferring that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. FASB ASC Topic 820 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 Inputs - Inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to those Company assets and liabilities that are carried at fair value.

There were no transfers between levels during the quarter ended June 30, 2014.

In general, fair value is based upon quoted market prices, when available. If such quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable data. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect, among other things, counterparty credit quality and the company’s creditworthiness as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.  Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates and, therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein.

Securities Available for Sale. Securities classified as available for sale are reported at fair value utilizing level 1 and level 2 measurements. For mutual funds and other equity securities, unadjusted quoted prices in active markets for identical assets are utilized to determine fair value at the measurement date and have been classified as level 1 in the ASC 820 fair value hierarchy.  For all other securities, the Company obtains fair value measurements from an independent pricing service. The independent pricing service evaluations are based on market data.  The independent pricing service utilizes evaluated pricing models that vary by asset class and incorporate available trade, bid and other market information.  Because many fixed income securities do not trade on a daily basis, the independent pricing service evaluated pricing applications apply available information as applicable through processes such as benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing, to prepare evaluations.  In addition, the independent pricing service uses model processes, such as the Option Adjusted Spread model, to assess interest rate impact and develop prepayment scenarios.  The models and processes take into account market convention.  For each asset class, a team of evaluators gathers information from market sources and integrates relevant credit information, perceived market movements and sector news into the evaluated pricing applications and models.

The market inputs that the independent pricing service normally seeks for evaluations of securities, listed in approximate order of priority, include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications.  The independent pricing service also monitors market indicators, industry and economic events.  Information of this nature is a trigger to acquire further market data.  For certain security types, additional inputs may be used or some of the market inputs may not be applicable.  Evaluators may prioritize inputs differently on any given day for any security based on market conditions, and not all inputs listed are available for use in the evaluation process for each security evaluation on a given day.  Because the data utilized was observable, the securities have been classified as level 2 in the ASC 820 fair value hierarchy.

Derivative Assets and Derivative Liabilities. Derivative assets and derivative liabilities are reported at fair value utilizing level 2 measurements.  Derivative instruments with positive fair values are reported as an asset and derivative instruments with negative fair value are reported as liabilities.  The fair value of derivative assets and liabilities is determined based on prices obtained from a third party.  Values of derivative assets and liabilities are primarily based on observable inputs and are classified as level 2 in the ASC 820 fair value hierarchy.

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of June 30, 2014 and December 31, 2013, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	Level 1		Level 2		Level 3		Total
	Inputs		Inputs		Inputs		Fair Value
	(dollars in thousands)
June 30, 2014
Securities available for sale
U.S. Treasury securities	$	—	$	50,814	$	—	$	50,814
Obligations of U.S. government corporations and agencies	—		205,363		—		205,363
Obligations of states and political subdivisions	—		243,408		—		243,408
Residential mortgage-backed securities	—		259,571		—		259,571
Corporate debt securities	—		74,531		—		74,531
Mutual funds and other equity securities	6,425		—		—		6,425
Derivative assets
Foreign currency forward contracts	—		5		—		5
Derivative liabilities
Foreign currency forward contracts	—		22		—		22
December 31, 2013
Securities available for sale
U.S. Treasury securities	$	—	$	102,640	$	—	$	102,640
Obligations of U.S. government corporations and agencies	—		257,411		—		257,411
Obligations of states and political subdivisions	—		272,152		—		272,152
Residential mortgage-backed securities	—		177,735		—		177,735
Corporate debt securities	—		25,506		—		25,506
Mutual funds and other equity securities	5,866		—		—		5,866

Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

Impaired Loans. The Company does not record loans at fair value on a recurring basis. However, periodically, a loan is considered impaired and is reported at the fair value of the underlying collateral, less estimated costs to sell, if repayment is expected solely from the collateral.  Impaired loans measured at fair value typically consist of loans on non-accrual status and restructured loans in compliance with modified terms.  Collateral values are estimated using a combination of observable inputs, including recent appraisals, and unobservable inputs based on customized discounting criteria. Due to the significance of the unobservable inputs, all impaired loan fair values have been classified as level 3 in the ASC 820 fair value hierarchy.

OREO.  Non-financial assets and non-financial liabilities measured at fair value include OREO (upon initial recognition or subsequent impairment). OREO properties are measured using a combination of observable inputs, including recent appraisals, and unobservable inputs based on customized discounting criteria. Due to the significance of the unobservable inputs, all OREO fair values have been classified as level 3 in the ASC 820 fair value hierarchy.

The following table summarizes assets and liabilities measured at fair value on a non-recurring basis as of June 30, 2014 and December 31, 2013, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	Level 1		Level 2		Level 3		Total
	Inputs		Inputs		Inputs		Fair Value
	(dollars in thousands)
June 30, 2014
Impaired loans	$	—	$	—	$	3,792	$	3,792
OREO	—		—		1,140		1,140
December 31, 2013
Impaired loans	$	—	$	—	$	5,491	$	5,491
OREO	—		—		1,134		1,134

The following table presents additional quantitative information about assets measured at fair value on a non-recurring basis for which the Company has utilized level 3 inputs to determine fair value:

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value		Valuation	Unobservable	Range
	Estimate		Techniques	Input	(Weighted Average)
	(dollars in thousands)
June 30, 2014
Impaired loans	$	3,792	Appraisal of collateral	Appraisal adjustments	-2.6% to -100.0% (-44.7%)
OREO	1,140		Appraisal of collateral	Appraisal adjustments	-6.6% to -100.0% (-47.9%)
December 31, 2013
Impaired loans	$	5,491	Appraisal of collateral	Appraisal adjustments	-0.4% to -100.0% (-36.0%)
OREO	1,134		Appraisal of collateral	Appraisal adjustments	-6.6% to -100.0% (-47.9%)

The estimated fair values of financial instruments that are reported at amortized cost in the Company’s Consolidated Balance Sheets, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value, were as follows:

	June 30, 2014				December 31, 2013
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(dollars in thousands)
Financial assets:
Level 2 inputs:
Cash and due from banks	$	182,032	$	182,032	$	231,603	$	231,603
Securities held to maturity	1,850		1,893		834		831
Loans held for sale	20,286		20,672		13,840		14,103
Accrued interest receivable	11,031		11,031		11,148		11,148
Level 3 inputs:
Loans, net	2,256,354		2,257,618		2,233,893		2,236,841
Financial liabilities:
Level 2 inputs:
Deposits	$	2,861,528	$	2,862,772	$	2,869,138	$	2,870,870
Securities sold under agreements to repurchase	140,563		140,563		172,348		172,348
Junior subordinated debt owed to unconsolidated trusts	55,000		55,000		55,000		55,000
Accrued interest payable	566		566		673		673

The fair value of loans, net reflects general changes in the interest rate curve used to calculate fair values based on cash flows.

FASB ASC Topic 825 requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. A detailed description of the valuation methodologies used in estimating the fair value of financial instruments is set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.