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 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 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 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.
• The transaction is expected to result in a modest tangible book value per share dilution of -0.6% with a forecasted 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: 9

Explanation: The document expresses a highly positive sentiment, emphasizing the strategic benefits, financial gains, and cultural fit of the merger. The language used is optimistic and confident, suggesting a strong belief in the success of the combined entity.

Positives

• The merger is expected to create a premier full-service commercial bank with a diversified client, loan, and deposit base.
• The partnership is expected to enhance key performance metrics with improvements in net interest margin and efficiency.
• The combined company will have a strong capital position and is expected to be well-positioned for future growth.
• The merger will extend Busey's regional operating model into high-growth metro markets.
• The combined company will have a strong commitment to commercial banking and wealth management.
• Both companies have extensive experience in successfully integrating with merger partners.
• The transaction is expected to result in an internal rate of return of over 19%.

Negatives

• The transaction is expected to result in a modest tangible book value per share dilution of -0.6%.
• There are one-time merger-related charges of $75.3 million, of which $42.1 million will be recognized at closing/conversion.

Risks

• The merger is subject to customary closing conditions, including shareholder and regulatory approvals.
• 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.
• There are risks related to changes in interest rates, economic conditions, and competition.
• The transaction may be more expensive to complete than anticipated.
• There is a risk of diversion of management's attention from ongoing business operations.
• There is a risk of dilution caused by Busey's issuance of additional shares of its capital stock.

Future Outlook

The combined company expects to capitalize on opportunities for commercial banking growth, expand its wealth management and payments businesses, and achieve significant improvements in net interest margin and efficiency, driving increased profitability and returns to shareholders.

Management Comments

• Van Dukeman, Busey Chairman and CEO, stated that the partnership is a great fit strategically, financially, and culturally.
• Mike Maddox, CrossFirst CEO, President and Director, stated that 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 competitor in the commercial banking space.

Comparison to Industry Standards

• The pro forma company is expected to have a 9.6% leverage ratio, 11.0% CET1 ratio, and 14.1% total risk-based capital ratio, which are significantly above well-capitalized thresholds.
• The combined 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.
• The projected earnings per share accretion of 20% in 2026 is a strong indicator of the potential financial benefits of the merger.
• The modest tangible book value per share dilution of -0.6% with a forecasted earnback period of approximately six months is favorable compared to some other bank mergers.
• The combined company will have a diversified client, loan, and deposit base, which is a positive attribute in the current economic environment.
• The combined company will have a strong commitment to commercial banking and wealth management, which are key areas of focus for many banks.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders of both companies are expected to benefit from the increased scale, profitability, and growth potential of the combined company.
• Customers will have access to a broader range of products and services, as well as an expanded branch network.
• Employees will have opportunities for career growth and development within the larger organization.
• Communities served by both banks will benefit from the combined company's commitment to community development and charitable giving.

Next Steps

• Busey and CrossFirst will seek shareholder and regulatory approvals for the merger.
• The companies will work to complete the merger in the first or second quarter of 2025.
• CrossFirst Bank will merge into Busey Bank in mid-2025.
• The combined company will begin operating under the Busey brand.
• The holding company headquarters will move to Leawood, Kansas.

Key Dates

Keywords

merger, acquisition, bank, commercial banking, wealth management, financial services, Busey, CrossFirst, capital, deposits, loans, shareholders, integration