425: First Busey Corp to Merge with CrossFirst Bankshares in $20 Billion Deal

First Busey Corporation and CrossFirst Bankshares have announced a definitive agreement to merge, creating a combined organization with approximately $20 billion in pro forma assets.

Summary

• First Busey Corporation and CrossFirst Bankshares have entered into a definitive agreement for a merger.
• The combined entity will have approximately $20 billion in pro forma assets.
• CrossFirst Bankshares has $7.6 billion in assets and 15 full-service banking locations across seven states.
• Busey's shareholders will own approximately 63.5% of the combined franchise, while CrossFirst shareholders will retain approximately 36.5% ownership on a fully-diluted basis.
• The merger is expected to close in the first or second quarter of 2025, with bank integration in mid-2025.
• Busey Bank's headquarters will remain in Champaign, Illinois, while First Busey's corporate headquarters will move to Leawood, Kansas.
• The combined company will operate 77 full-service locations across 10 states.
• The merger is expected to result in approximately 20% earnings accretion in 2026, excluding one-time merger charges and fully phased-in cost savings.

Sentiment

Score: 8

Explanation: The document expresses a positive outlook on the merger, highlighting the strategic benefits, financial attractiveness, and cultural compatibility of the two organizations. The emphasis on growth, enhanced performance, and shareholder value contributes to the positive sentiment.

Positives

• The merger creates a larger, more competitive commercial bank with an expanded footprint.
• The combined company is expected to benefit from economies of scale and an enhanced growth profile.
• The merger is expected to improve efficiency, profitability, and returns for shareholders.
• The combined company will have a diversified client base and business mix.
• The merger is expected to provide additional balance sheet capacity.
• The merger is expected to create significant cross-sell and upsell opportunities.
• Both companies have like-minded cultures that prioritize investing in associates and providing extraordinary service.
• The merger is expected to enhance the ability to better serve clients through an expanded geographical footprint, a larger capital base, and enhanced products and services.
• The merger is expected to drive increased trading liquidity for shareholders.
• The merger is expected to bolster dividend capacity with enhanced earnings and a strong pro forma capital base.

Negatives

• The merger is subject to regulatory and shareholder approvals, and there is a risk that these approvals may not be obtained.
• There is a risk that the anticipated benefits of the merger may not be realized when expected or at all.
• The integration of the two companies may be more difficult, time-consuming, or costly than expected.
• Revenues following the merger may be lower than expected.
• The merger could result in the loss of key executives or associates.
• The merger could be more expensive to complete than anticipated.
• The merger could divert management's attention from ongoing business operations and opportunities.
• There is a risk of dilution caused by Busey's issuance of additional shares of its capital stock in connection with the merger.
• The announcement, pendency, or completion of the merger could have adverse effects on the ability of Busey and CrossFirst to retain customers and retain and hire key personnel and maintain relationships with their suppliers, and on their operating results and businesses generally.
• There is a slight dilution to tangible book value (-0.6%) with an earnback period of approximately six months.

Risks

• The occurrence of any event, change, or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement.
• The outcome of any legal proceedings that may be instituted against Busey or CrossFirst.
• The possibility that the proposed transaction will not close when expected or at all because required regulatory, stockholder or other approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all, or are obtained subject to conditions that are not anticipated.
• The ability of Busey and CrossFirst to meet expectations regarding the timing, completion and accounting and tax treatments of the proposed transaction.
• The risk that any announcements relating to the proposed transaction could have adverse effects on the market price of the common stock of either or both parties to the proposed transaction.
• The possibility that the anticipated benefits of the proposed transaction will not be realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where Busey and CrossFirst do business.
• Certain restrictions during the pendency of the proposed transaction that may impact the parties' ability to pursue certain business opportunities or strategic transactions.
• The possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events.
• Diversion of management's attention from ongoing business operations and opportunities.
• The possibility that the parties may be unable to achieve expected synergies and operating efficiencies in the merger within the expected timeframes or at all and to successfully integrate CrossFirst's operations and those of Busey.
• Such integration may be more difficult, time consuming or costly than expected.
• Revenues following the proposed transaction may be lower than expected.
• Busey's and CrossFirst's success in executing their respective business plans and strategies and managing the risks involved in the foregoing.
• The dilution caused by Busey's issuance of additional shares of its capital stock in connection with the proposed transaction.
• Effects of the announcement, pendency or completion of the proposed transaction on the ability of Busey and CrossFirst to retain customers and retain and hire key personnel and maintain relationships with their suppliers, and on their operating results and businesses generally.
• Changes in interest rates and prepayment rates of Busey's or CrossFirst's assets fluctuations in the value of securities held in Busey's or CrossFirst's securities portfolio.
• Concentrations within Busey's or CrossFirst's loan portfolio (including commercial real estate loans), large loans to certain borrowers, and large deposits from certain clients.
• The concentration of large deposits from certain clients who have balances above current FDIC insurance limits and may withdraw deposits to diversify their exposure.
• The level of non-performing assets on Busey's or CrossFirst's balance sheets.
• The strength of the local, state, national, and international economy.
• Risks related to the potential impact of general economic, political and market factors or of exceptional weather occurrences such as tornadoes, hurricanes, floods, blizzards, droughts on the companies or the proposed transaction.
• The economic impact of any future terrorist threats or attacks, widespread disease or pandemics or other adverse external events that could cause economic deterioration or instability in credit markets.
• Changes in state and federal laws, regulations, and governmental policies concerning Busey's or CrossFirst's general business.
• Changes in accounting policies and practices.
• Increased competition in the financial services sector (including from non-bank competitors such as credit unions and fintech companies) and the inability to attract new customers.
• Breaches or failures of information security controls or cybersecurity-related incidents.
• Changes in technology and the ability to develop and maintain secure and reliable electronic systems.
• The loss of key executives or associates.
• Changes in consumer spending.
• Unexpected outcomes of existing or new litigation, investigations, or inquiries involving Busey (including with respect to Busey's Illinois franchise taxes) or CrossFirst.
• Other factors that may affect future results of Busey and CrossFirst and the other factors discussed in the 'Risk Factors' section of each of Busey's and CrossFirst's Annual Report on Form 10-K for the year ended December 31, 2023, in the 'Risk Factors' and 'Management's Discussion and Analysis of Financial Condition and Results of Operations' sections of each of Busey's and CrossFirst's Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, and other reports Busey and CrossFirst file with the U.S. Securities and Exchange Commission (the 'SEC').

Future Outlook

The combined organization anticipates enhanced performance, profitability, and returns, with significant improvements in net interest margin and efficiency, and expects to create shareholder value and increase profitability through combined capital strength, added scale, complementary business models, compatible banking philosophies and cultures.

Management Comments

• Van Dukeman will continue as Executive Chairman and CEO of First Busey and Executive Chairman of Busey Bank until the 1-year anniversary of the bank merger or 18-month anniversary of the holding company merger, whichever occurs first, after which he will continue to serve as Executive Chairman of First Busey and Busey Bank.
• Mike Maddox will become President and Executive Vice Chairman of First Busey and CEO of Busey Bank.
• Mike Maddox will succeed Van Dukeman as CEO of First Busey on the 1-year anniversary of the bank merger or 18-month anniversary of the holding company merger, whichever occurs first.

Industry Context

This merger reflects a trend of consolidation in the banking industry, as institutions seek to achieve greater scale, improve efficiency, and expand their geographic footprint to better compete in a challenging environment.

Comparison to Industry Standards

• The combined entity aims to compete with other regional banks such as Commerce Bancshares, UMB Financial Corporation, and Wintrust Financial Corporation.
• The merger seeks to achieve similar economies of scale and market presence as these established regional players.
• The pro forma capital ratios are expected to be significantly above well-capitalized thresholds: 9.6% leverage, 11.0% CET1, 14.1% TRBC.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders will benefit from enhanced earnings, dividend capacity, and trading liquidity.
• Associates can expect opportunities for professional growth as part of a larger organization.
• Customers will have access to an expanded range of products and services, increased lending limits, and an expanded service center network.
• Communities will benefit from the combined company's commitment to making a positive impact.
• There are no immediate job impacts prior to the bank merger are anticipated, with minimal staffing impacts overall.

Next Steps

• Obtain regulatory and shareholder approvals.
• Complete integration planning for the formal partnership.
• Maintain a strong focus on connecting with and communicating to associates.
• Connect with key customers to safeguard and continue these valued relationships.
• Merge the holding companies in the first or second quarter of 2025.
• Merge the banks in mid-2025.

Key Dates