425: First Busey to Acquire CrossFirst Bankshares in $916.8 Million Stock Deal, Creating $20 Billion Regional Banking Powerhouse

First Busey Corporation and CrossFirst Bankshares, Inc. have announced a definitive agreement for Busey to acquire CrossFirst in an all-stock transaction valued at approximately $916.8 million, aiming to create a diversified commercial banking franchise with $20 billion in assets.

Summary

• First Busey Corporation (Busey) and CrossFirst Bankshares, Inc. (CrossFirst) have entered into 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 of $27.39 on August 26, 2024.
• Upon completion, the combined company 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 CrossFirst share held.
• Busey's shareholders will own approximately 63.5% and CrossFirst's shareholders will own approximately 36.5% of the combined company.
• The combined company will trade on the Nasdaq under the BUSE ticker symbol.
• The merger is expected to close in the first or second quarter of 2025, pending shareholder and regulatory approvals.
• The headquarters of the combined holding company will move to Leawood, Kansas, while Busey Bank's headquarters will remain in Champaign, Illinois.
• Van Dukeman will serve as Executive Chairman and CEO of the combined company, and Mike Maddox will become President and Executive Vice Chairman, succeeding Dukeman as CEO on the earlier of the one-year anniversary of the bank merger or the 18-month anniversary of the holding company merger.
• Busey projects earnings per share accretion of approximately 20% in 2026, excluding one-time merger-related charges, and a tangible book value per share dilution of -0.6% with an earnback period of approximately six months.
• The transaction is expected to result in an internal rate of return of over 19%.

Sentiment

Score: 8

Explanation: The document presents a positive outlook on the merger, highlighting strategic benefits, financial improvements, and leadership continuity. The projected earnings accretion and strong capital ratios contribute to a favorable sentiment.

Positives

• The merger is expected to create a premier full-service commercial bank serving clients from 77 full-service locations across 10 states.
• The combined company will have a diversified client, loan, and deposit base, providing opportunities to augment business models through new customer and product channels.
• The combination is expected to significantly enhance key performance metrics with meaningful improvements in net interest margin and efficiency.
• The combined company will have a strong capital position with capital ratios significantly above well-capitalized thresholds.
• The transaction is expected to result in an internal rate of return of over 19%.
• The combined company will have a strong loan-to-deposit ratio of 86%, C&D concentration of 60% and CRE concentration of 250%, positioning it well for future growth.
• The combined company will have a strong commitment to and extensive skill set in commercial banking.
• The partnership will extend Busey's regional operating model in high-growth metro markets.
• CrossFirst's client base is well-suited for Busey's wealth management and payment technology solutions offerings.

Negatives

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

Risks

• The occurrence of any event, change, or other circumstances that could give rise to the right of one or both 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.

Future Outlook

The combined company anticipates significant economies of scale, an enhanced growth profile, and improved key performance metrics, driving increased profitability and returns to shareholders. The merger is expected to be completed in the first or second quarter of 2025.

Management Comments

• Van Dukeman stated that the partnership is a great fit from a strategic, financial, and cultural perspective and that it is expected to serve as a catalyst for additional commercial banking growth as well as expanded opportunities to grow existing wealth management and payments businesses.
• Mike Maddox stated that Busey is the right partner to continue CrossFirst's customerand community-focus and that the partnership will create significant benefits for teams, customers, communities, and shareholders.

Industry Context

This announcement reflects a broader trend of consolidation in the banking industry, as institutions seek to achieve greater scale, expand their geographic footprint, and enhance their service offerings to compete more effectively in a challenging environment.

Comparison to Industry Standards

• The pro forma company's capital ratios are expected to be significantly above well-capitalized thresholds with 9.6% leverage, 11.0% CET1 and 14.1% total risk-based capital, which is comparable to or better than many regional banks.
• The projected earnings per share accretion of approximately 20% in 2026 is a strong indicator of the potential financial benefits of the merger.
• The tangible book value per share dilution of -0.6% with a forecasted earnback period of approximately six months is relatively modest compared to other bank mergers.
• The combined loan-to-deposit ratio of 86%, C&D concentration of 60% and CRE concentration of 250% positions the pro forma company well for future growth.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders of CrossFirst will receive Busey common stock and will be eligible to receive Busey's ongoing dividends.
• Customers will have access to a broader range of products and services and an expanded branch network.
• Employees will have opportunities for career growth and development within the larger organization.
• Communities will benefit from the combined company's commitment to community development and charitable contributions.

Next Steps

• Busey and CrossFirst will prepare and file the Joint Proxy Statement and Busey will file the S-4 with the SEC.
• Busey and CrossFirst will seek shareholder approvals for the merger.
• Busey and CrossFirst will obtain necessary regulatory approvals.
• Busey will cause the shares of Busey Common Stock to be issued in the Merger to be approved for listing on NASDAQ.
• CrossFirst will cooperate with Busey to delist CrossFirst Common Stock from NASDAQ and deregister it under the Exchange Act.
• The parties expect to close the holding company merger in the first or second quarter of 2025.
• CrossFirst Bank will merge with and into Busey Bank in mid-2025.

Key Dates