8-K: First Busey and CrossFirst Bankshares Announce Transformative Merger, Creating $20 Billion Commercial Banking Powerhouse

First Busey Corporation and CrossFirst Bankshares, Inc. have agreed to merge in an all-stock transaction valued at approximately $916.8 million, creating a combined company with approximately $20 billion in assets.

Summary

• First Busey Corporation and CrossFirst Bankshares, Inc. have announced a definitive merger agreement where CrossFirst will merge into Busey in an all-stock transaction.
• The deal is valued at approximately $916.8 million based on Busey's closing stock price on August 26, 2024.
• The combined entity will have approximately $20 billion in total assets, $17 billion in total deposits, and $13 billion in wealth management assets under care.
• CrossFirst shareholders will receive 0.6675 shares of Busey common stock for each share of CrossFirst common stock they own.
• Busey shareholders will own approximately 63.5% and CrossFirst shareholders will own approximately 36.5% of the combined company.
• The merger is expected to close in the first or second quarter of 2025, pending shareholder and regulatory approvals.
• The combined company will operate under the Busey brand, with the holding company headquarters moving to Leawood, Kansas, and the bank headquarters remaining in Champaign, Illinois.
• Busey anticipates earnings per share accretion of approximately 20% in 2026, excluding one-time merger-related charges.
• Tangible book value per share dilution is projected to be modest at -0.6% with an earnback period of approximately six months.
• The combined company is expected to have strong capital ratios, with a 9.6% leverage ratio, 11.0% CET1 ratio, and 14.1% total risk-based capital ratio.

Sentiment

Score: 8

Explanation: The document presents a highly positive outlook on the merger, highlighting the strategic benefits, financial gains, and cultural compatibility of the two companies. The projected earnings accretion and strong capital ratios contribute to a favorable sentiment.

Positives

• The merger expands Busey's presence into high-growth markets such as Kansas City, Dallas/Fort Worth, Denver, and Phoenix.
• The combined company will have a diversified client, loan, and deposit base.
• The merger is expected to enhance key performance metrics, including net interest margin and efficiency.
• The combined company will have a strong capital position.
• Both Busey and CrossFirst have extensive experience in successfully integrating with merger partners.
• The combined company will have a strong commitment to community development.

Negatives

• The transaction is expected to result in a modest tangible book value per share dilution of -0.6%.
• The merger is subject to customary closing conditions, including shareholder and regulatory approvals, which could delay or prevent the transaction from closing.

Risks

• The merger may not close when expected or at all due to failure to obtain required approvals or satisfy closing conditions.
• The anticipated benefits of the merger may not be realized, including cost savings and synergies.
• Integration of the two companies may be more difficult, time-consuming, or costly than expected.
• The combined company may face challenges in retaining customers and key personnel.
• The combined company may be affected by changes in interest rates, economic conditions, and increased competition.
• The combined company may be affected by unexpected outcomes of existing or new litigation, investigations, or inquiries.

Future Outlook

The combined company expects to capitalize on growth opportunities in new markets, enhance key performance metrics, and drive increased profitability and returns to shareholders. The merger is expected to close in the first or second quarter of 2025.

Management Comments

• Van Dukeman, Busey Chairman and CEO, stated that the partnership is a great fit and will serve as a catalyst for additional commercial banking growth.
• Mike Maddox, CrossFirst CEO, President and Director, believes Busey is the right partner to continue CrossFirst's customerand community-focus.

Industry Context

This merger reflects a trend of consolidation in the banking industry, as institutions seek to gain scale, expand their geographic reach, and enhance their product offerings. The combination of Busey and CrossFirst creates a larger, more diversified commercial bank with a broader geographic footprint.

Comparison to Industry Standards

• The pro forma company is expected to have a loan-to-deposit ratio of 86%, a C&D concentration of 60%, and a CRE concentration of 250%, which are within industry norms for commercial banks.
• The combined company's capital ratios are expected to be significantly above well-capitalized thresholds, indicating a strong financial position.
• The projected earnings per share accretion of 20% in 2026 is a strong indicator of the potential financial benefits of the merger.
• The projected tangible book value per share dilution of -0.6% with an earnback period of approximately six months is considered modest compared to other bank mergers.
• The combined company's projected ROAA of 1.28% and ROATCE of 15.4% in 2025 are expected to be above the peer median.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders of both companies are expected to benefit from the enhanced financial performance and growth potential of the combined entity.
• Customers will have access to a broader range of products and services, as well as a larger network of locations.
• Employees will have opportunities for career growth and development within the larger organization.
• Communities served by both companies will benefit from the combined company's commitment to community development and charitable giving.

Next Steps

• Busey and CrossFirst will prepare and file the necessary documents with the SEC, including a joint proxy statement and a registration statement on Form S-4.
• Shareholder meetings will be held to obtain the required approvals for the merger.
• Regulatory approvals will be sought from the Federal Reserve and other relevant agencies.
• The companies will work towards integrating their operations and systems.
• The bank merger is anticipated to occur in mid-2025.

Key Dates

Keywords

merger, acquisition, bank, commercial banking, wealth management, financial services, Busey, CrossFirst, stock transaction, capital ratios, earnings accretion, integration