425: First Busey and CrossFirst Bankshares Announce Transformative Partnership

First Busey Corporation and CrossFirst Bankshares, Inc. have announced a merger expected to create a combined organization with over $20 billion in assets.

Summary

• First Busey Corporation and CrossFirst Bankshares, Inc. announced a transformative partnership on August 27, 2024.
• The combined organization is expected to have over $20 billion in assets.
• The merger is expected to result in minimal tangible book value (TBV) dilution of -0.6% with an earnback period of approximately 6 months.
• Earnings per share (EPS) accretion is projected to be 20%+ in 2026, excluding one-time merger charges.
• Pro forma capital ratios at closing are expected to be significantly above well-capitalized thresholds, with a 9.6% leverage ratio, 11.0% CET1 ratio, and 14.1% total risk-based capital ratio.
• The combined loan-to-deposit ratio is projected to be 86% at closing.
• Van Dukeman will continue as Executive Chairman and CEO of First Busey and Executive Chairman of Busey Bank.
• Mike Maddox, President & CEO of CrossFirst, will become Executive Vice Chairman & President of First Busey and CEO of Busey Bank at closing.
• Mike Maddox will succeed Van Dukeman as CEO of First Busey on the earlier of the 1-year anniversary of the bank merger or 18-month anniversary of the holding company merger.

Sentiment

Score: 8

Explanation: The announcement is generally positive, highlighting the strategic and financial benefits of the merger. The projected EPS accretion and strong capital ratios contribute to a favorable outlook.

Positives

• The combined organization will have over $20 billion in assets, benefiting from economies of scale.
• The merger expands Busey's regional operating model into attractive new markets.
• The deal is expected to result in minimal TBV dilution of -0.6% with an earnback period of approximately 6 months.
• EPS accretion is projected to be 20%+ in 2026, excluding one-time merger charges.
• The company will maintain a strong balance sheet with healthy capital ratios.

Negatives

• The merger will result in minimal TBV dilution of -0.6%.

Risks

• The announcement includes forward-looking statements that are subject to risks and uncertainties.
• The proposed transaction may not close when expected or at all.
• Anticipated benefits of the proposed transaction may not be realized.
• The integration of the two companies may be more difficult, time-consuming, or costly than expected.
• Revenue following the proposed transaction may be lower than expected.
• The companies may be unable to achieve expected synergies and operating efficiencies.
• The dilution caused by Busey's issuance of additional shares of its capital stock in connection with the proposed transaction.

Future Outlook

The combined organization is expected to benefit from significant economies of scale and an enhanced growth profile. The company will be well-positioned for future growth with strong capital ratios and a healthy loan-to-deposit ratio.

Management Comments

• Van Dukeman will continue as Executive Chairman and CEO of First Busey and Executive Chairman of Busey Bank.
• Mike Maddox will assume the role of Executive Vice Chairman & President of First Busey and CEO of Busey Bank at closing.
• Mike Maddox will succeed Van Dukeman as CEO of First Busey on the earlier of the 1-year anniversary of the bank merger or 18-month anniversary of the holding company merger.

Industry Context

This merger reflects a trend of consolidation in the banking industry, as institutions seek to achieve greater scale, expand their market presence, and improve efficiency. The combined entity will be better positioned to compete with larger regional and national banks.

Comparison to Industry Standards

• The pro forma capital ratios (9.6% leverage, 11.0% CET1, 14.1% total risk-based capital) are significantly above the 'well-capitalized' regulatory thresholds, indicating a strong financial position compared to industry peers.
• The projected EPS accretion of 20%+ in 2026 is a positive sign, suggesting the merger is expected to create significant value for shareholders, which is a key metric investors use to evaluate M&A deals.
• The TBV dilution of -0.6% with an expected earnback period of ~6 months is relatively low compared to other bank mergers, where TBV dilution can be more substantial and take longer to recover.

Management Changes

Stakeholder Impact

• Shareholders are expected to benefit from EPS accretion and potential long-term value creation.
• Customers will have access to a broader range of products and services.
• Employees will have opportunities within a larger, more diversified organization.

Next Steps

• Busey will file a registration statement on Form S-4 with the SEC.
• A joint proxy statement of Busey and CrossFirst will be sent to stockholders seeking approvals related to the proposed transaction.

Key Dates