10-Q: First Busey Corporation Reports Third Quarter 2024 Results, Announces Merger with CrossFirst Bankshares

First Busey Corporation's third quarter 2024 results show a slight increase in net income and the company announced a merger with CrossFirst Bankshares.

Summary

• First Busey Corporation reported a net income of $32 million for the third quarter of 2024, a slight increase from $30.7 million in the same period of 2023.
• For the nine months ended September 30, 2024, net income was $85.6 million, compared to $96.8 million for the same period in 2023.
• The company's total assets were $11.99 billion as of September 30, 2024, down from $12.28 billion at the end of 2023.
• Total deposits decreased to $9.94 billion as of September 30, 2024, from $10.29 billion at the end of 2023.
• The company's loan portfolio, net of allowance for credit losses, was $7.72 billion as of September 30, 2024, up from $7.56 billion at the end of 2023.
• First Busey announced a merger agreement with CrossFirst Bankshares, expected to close in the first or second quarter of 2025.
• The company completed the acquisition of Merchants and Manufacturers Bank Corporation (M&M) on April 1, 2024.

Sentiment

Score: 6

Explanation: The document presents a mixed picture with positive aspects like the merger and strong capital ratios, but also negative aspects like decreased deposits and net income for the nine months. The sentiment is neutral to slightly positive.

Positives

• The company's wealth management fees increased by 8.0% in Q3 2024 compared to Q3 2023.
• Payment technology solutions revenue increased by 0.7% in Q3 2024 compared to Q3 2023.
• Income on bank owned life insurance increased by 18.8% in Q3 2024 compared to Q3 2023.
• The company's core deposits represented 96.5% of total deposits as of September 30, 2024.
• The company's capital ratios exceeded well-capitalized levels under regulatory guidelines.

Negatives

• Total deposits decreased to $9.94 billion as of September 30, 2024, from $10.29 billion at the end of 2023.
• Net income for the nine months ended September 30, 2024, was $85.6 million, down from $96.8 million for the same period in 2023.
• The company experienced a net securities loss of $5.9 million for the nine months ended September 30, 2024.
• Non-operating expenses related to acquisitions and restructuring totaled $4.6 million for the nine months ended September 30, 2024.

Risks

• The merger with CrossFirst is subject to regulatory and shareholder approvals and may not be completed.
• Integration of CrossFirst may be more difficult, costly, or time-consuming than expected.
• The combined company may not realize the anticipated benefits of the merger.
• The company's loan portfolio is concentrated in commercial real estate loans.
• The company is subject to interest rate risk, which could impact net interest income.
• The company is under examination by the Florida Department of Revenue for its 2020 to 2022 corporate income tax filings.
• The company is subject to a franchise tax inquiry from the Illinois Secretary of State.

Future Outlook

The company expects to close the merger with CrossFirst in the first or second quarter of 2025. Loan growth is expected to remain modest over the next several quarters. The company expects to realize increased rates of M&M acquisition synergies during the final quarter of 2024.

Management Comments

• Busey remains substantially core deposit funded, with robust liquidity and significant market share in the communities we serve.
• Our credit performance reflects our highly diversified, conservatively underwritten loan portfolio.
• We strive to consistently maintain capital ratios well in excess of thresholds required to be designated as well capitalized by applicable regulatory guidelines.

Industry Context

The announcement of the merger with CrossFirst reflects a trend of consolidation in the banking industry. The company's focus on core deposits and conservative lending practices aligns with a cautious approach in the current economic environment.

Comparison to Industry Standards

• First Busey's capital ratios exceed the regulatory requirements for being considered well-capitalized, which is a positive sign compared to industry benchmarks.
• The company's efficiency ratio of 62.2% for the quarter is within the range of industry averages for regional banks, but there is room for improvement.
• The company's loan to deposit ratio of 78.5% indicates a strong funding base, which is favorable compared to some peers with higher loan-to-deposit ratios.
• The company's non-performing assets to total assets ratio of 0.07% is low, indicating strong asset quality compared to industry averages.
• The company's return on average tangible common equity of 12.80% for the quarter is a solid performance compared to industry averages.

Legal Proceedings

• Busey Bank is under examination by the Florida Department of Revenue for its 2020 to 2022 corporate income tax filings.
• Busey received an inquiry from the Illinois Secretary of State regarding certain franchise tax filings.

Stakeholder Impact

• Shareholders will be impacted by the merger with CrossFirst, including changes in ownership and potential stock price fluctuations.
• Employees may experience uncertainty about their future roles due to the merger.
• Customers may experience changes in services and products due to the merger and acquisitions.
• Creditors may be impacted by the company's increased debt levels due to the merger.

Next Steps

• The company will seek regulatory and shareholder approvals for the merger with CrossFirst.
• The company will continue to integrate M&M into its operations.
• The company will continue to monitor and manage its loan portfolio and credit risk.
• The company will continue to manage its liquidity and capital resources.

Key Dates

Keywords

merger, acquisition, financial results, banking, wealth management, payment technology, loans, deposits, net income, interest income, noninterest income, credit losses, capital, regulatory