10-Q: First Busey Corporation Reports Q1 2025 Results, Impacted by CrossFirst Acquisition

First Busey Corporation's Q1 2025 results reflect the impact of the CrossFirst Bankshares acquisition, with a net loss driven by acquisition-related expenses and a provision for credit losses on acquired loans.

Summary

• First Busey Corporation reported a net loss of $29.99 million for the three months ended March 31, 2025.
• The results were significantly impacted by the acquisition of CrossFirst Bankshares, which closed on March 1, 2025.
• CrossFirst's revenue after the acquisition was $24.2 million, but it incurred a net loss of $34.5 million due to acquisition expenses and provision for credit losses.
• The company's total assets increased to $19.46 billion, largely due to the acquisition.
• Portfolio loans increased to $13.87 billion, including $6.04 billion from CrossFirst.
• The provision for credit losses was $42.45 million, including an initial ACL for non-PCD loans from CrossFirst.
• Noninterest expense increased to $115.17 million, driven by acquisition-related costs.
• The company's net interest margin was 3.16%.
• First Busey issued a conditional notice of full redemption of its 5.25% fixed-to-floating rate subordinated notes, which it intends to redeem on June 1, 2025.
• The aggregate principal amount of the Subordinated Notes, plus accrued and unpaid interest thereon up to, but excluding, June 1, 2025, is $128.3 million.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While the company reported a net loss, it is primarily attributed to acquisition-related expenses. The company's capital ratios remain strong, and management expects the acquisition to be accretive in the future.

Positives

• The acquisition of CrossFirst Bankshares is expected to be accretive to tangible book value, exceeding initial projections of a six-month earn back period.
• Wealth management fees increased by 11.7% to $17.36 million.
• The company's capital ratios remain well above regulatory requirements.
• Busey's loan to deposit ratio was 84.3% and core deposits represented 90.3% of total deposits.
• Annual pre-tax expense synergy estimates resulting from the CrossFirst acquisition remain on track at an estimated $25.0 million when fully realized.

Negatives

• The company reported a net loss of $29.99 million for Q1 2025.
• Noninterest expense increased significantly due to acquisition-related costs.
• Payment technology solutions income decreased by 11.1% to $5.07 million.
• Net securities losses of $15.8 million were realized during the quarter.
• Non-performing loan balances increased to $54.7 million.
• The effective income tax rate was 8.2% due to a non-recurring deferred tax valuation expense.

Risks

• The company faces risks related to integrating CrossFirst Bankshares and realizing the anticipated benefits of the acquisition.
• Economic conditions and interest rate volatility may impact future mortgage revenue.
• The company is subject to market risk, including interest rate risk, which could affect its earnings and capital.
• The company is subject to legal proceedings and regulatory actions, including an inquiry from the Illinois Secretary of State regarding franchise tax filings.
• The company faces risks related to credit quality, concentrations of credit, and non-performing assets.

Future Outlook

Management expects the CrossFirst acquisition to be accretive to tangible book value and anticipates expense synergies of $25.0 million when fully realized, with a 50% rate of synergy realization in 2025 and 100% in 2026.

Management Comments

• Busey's financial strength is built on a long-term conservative operating approach.
• Busey remains substantially core deposit funded, with robust liquidity and significant market share in the communities it serves.
• Busey's credit performance reflects its highly diversified, conservatively underwritten loan portfolio.
• Busey's approach to lending and its underwriting standards are designed to emphasize relationship banking rather than transactional banking.

Industry Context

The acquisition of CrossFirst Bankshares reflects a trend of consolidation in the banking industry, as companies seek to expand their geographic footprint and service offerings. The results also highlight the challenges of integrating acquisitions, including managing expenses and credit risk.

Comparison to Industry Standards

• Comparing First Busey's Q1 2025 results to peers requires considering the impact of the CrossFirst acquisition, which significantly altered the company's balance sheet and income statement.
• Companies like Commerce Bancshares, Inc. and UMB Financial Corporation, which operate in similar markets, could be used as benchmarks for evaluating First Busey's performance.
• Assessing First Busey's net interest margin, efficiency ratio, and asset quality metrics against industry averages will provide insights into its relative performance.
• The company's capital ratios should be compared to regulatory requirements and peer performance to assess its financial strength.

Management Changes

Legal Proceedings

• Busey Bank is under examination by the Florida Department of Revenue for its 2020 to 2022 corporate income tax filings.
• Busey is also under examination by the Illinois Department of Revenue for M&Ms tax filings for the tax years 2022 and 2023.

Stakeholder Impact

• Shareholders: The net loss may negatively impact shareholder returns in the short term, but the acquisition is expected to be accretive in the long term.
• Employees: The integration of CrossFirst Bankshares may result in changes to employee roles and responsibilities.
• Customers: The acquisition is expected to expand the company's service offerings and geographic footprint, benefiting customers.
• Suppliers: The acquisition may result in changes to supplier relationships.
• Creditors: The company's strong capital ratios provide assurance to creditors.

Next Steps

• Merge CrossFirst Bank into Busey Bank, expected on June 20, 2025.
• Redeem the 5.25% fixed-to-floating rate subordinated notes, intended on June 1, 2025.
• Continue to integrate CrossFirst Bankshares and realize expense synergies.
• Monitor and manage credit risk and asset quality.
• Evaluate and execute off-balance sheet hedging and balance sheet repositioning strategies.

Key Dates

Keywords

First Busey Corporation, CrossFirst Bankshares, acquisition, financial results, net income, provision for credit losses, noninterest expense, net interest margin, capital ratios, loan portfolio, deposits, wealth management, FirsTech, regulatory capital, subordinated notes