First Busey's Margin Cools as Deposits Surge, Buybacks Widen
First Busey's adjusted net interest margin slipped 2 basis points to 3.62% in the second quarter even as deposits grew at an 11% annualized clip and the bank leaned harder into share repurchases.
First Busey (BUSE), the Illinois-based regional bank built around commercial and retail lending alongside a growing wealth-management arm, saw its margin expansion run stall in the second quarter. Adjusted net interest margin eased 2 basis points quarter over quarter to 3.62%, with GAAP NIM slipping to 3.72% from 3.77% in the first quarter. That marks a reversal from the trend of the prior two quarters, when the margin expanded 6 basis points sequentially in the first quarter and 76 basis points year over year in the fourth quarter of 2024 to 3.71%. Net interest income fell $1.6 million quarter over quarter, weighed down by $1.2 million in lower purchase-accounting accretion and a shrinking base of average earning assets tied to declining loan balances.
The loan book contracted for a second straight quarter. Average portfolio loans fell to $13.33 billion from $13.52 billion in the first quarter, with period-end balances down to $13.20 billion from $13.46 billion in the first quarter and $13.81 billion a year earlier. Commercial-and-industrial loans declined to $3.96 billion from $4.12 billion, and commercial real estate slipped to $5.45 billion from $5.57 billion. Retail lending was the lone bright spot, growing to $2.76 billion from $2.72 billion, but not enough to offset the broader runoff.
Deposits told the opposite story. Average deposits rose 11% annualized, or 2.7% quarter over quarter, adding $392.7 million and lifting the period-end balance to $15.13 billion. That reverses the fourth-quarter 2024 decline of $164.2 million, which reflected an intentional runoff of $180 million in brokered and high-cost funding. Total cost of deposits edged down to 1.80% from 1.81%, extending the deposit-cost-peaking narrative that first surfaced in the fourth quarter's "continued strong deposit cost control". The combination of shrinking loans and swelling deposits pushed the loan-to-deposit ratio down sharply to 87.2% at quarter-end from 91.3% in the first quarter.
Capital continued to build. The CET1 ratio rose to 12.53% from 12.31% in the first quarter and 12.44% in the fourth quarter of 2024, itself up 11 basis points sequentially — a steady three-quarter climb even as the bank stepped up buybacks. Busey repurchased $63.1 million of stock in the second quarter, or 2.34 million shares at an average price of $26.98, close to the $65.6 million bought back in the first quarter and well above the $29.8 million repurchased in the fourth quarter of 2024. The board added 4,000,000 shares to the repurchase authorization on May 20, 2025, bringing year-to-date 2025 buybacks to $128.8 million.
Credit quality sent a mixed signal. The net charge-off ratio fell to 0.19% from 0.22% in the first quarter and 0.37% a year earlier, with dollar charge-offs down to $6.4 million from $7.4 million and $12.9 million, respectively. Non-performing assets moved the other way, rising 11 basis points quarter over quarter to 0.39% of total assets, or $70.3 million, up from $49.9 million in the first quarter. The increase traced to a single commercial credit that took a partial charge-off alongside a specific reserve, reversing the 14% sequential drop in non-performers logged in the first quarter.
Wealth management delivered its third consecutive record quarter, a counterweight to the softer lending and margin trends. Assets under care grew to $16.51 billion from $15.65 billion in the first quarter, up 5.5% quarter over quarter and 17.1% year over year from $14.10 billion. Wealth fee income rose 3.2% quarter over quarter and 19.1% year over year to $19.98 million, building on the record $15.66 billion in assets under care posted in the fourth quarter of 2024.
Expense discipline reinforced the quarter's efficiency story. The efficiency ratio improved to 54.0%, a 134-basis-point improvement year over year and down from 54.8% in the first quarter, which itself had improved 390 basis points year over year. The gains reflect lower salaries and benefits expense as CrossFirst-related restructuring and acquisition costs — $14.1 million in the first quarter and $9.5 million a year earlier — rolled off the income statement.
Taken together, the quarter showed a bank trading margin momentum for balance-sheet flexibility: loan runoff and lighter accretion income pressured NII, but a resurgent deposit base, record wealth fees and fading merger costs let management push capital return further even as one commercial credit put a dent in non-performing assets.