8-K: First Busey Highlights Strong Q2 Performance, CrossFirst Integration

First Busey Corporation reports robust second-quarter 2025 results, demonstrating strong capital, liquidity, and successful integration of CrossFirst Bankshares, with key profitability metrics on track for 2026 targets.

Summary

• Reported strong 2Q25 financial performance with total assets of $18.9 billion and total wealth assets under custody (AUC) of $14.1 billion.
• Successfully integrated CrossFirst Bankshares, completing the acquisition on March 1, 2025, one month ahead of schedule, and merging CrossFirst Bank into Busey Bank on June 20, 2025.
• Achieved 2Q25 Adjusted Return on Average Assets (ROAA) of 1.21% and Adjusted Return on Average Tangible Common Equity (ROATCE) of 13.61%, aligning with or exceeding fully-phased FY 2026 pro forma estimates.
• Realized approximately 70% of the expected $25 million in cost savings from the CrossFirst acquisition by the end of 2Q25, with 100% anticipated by exiting 4Q25.
• Maintained a robust capital foundation with a Total Capital Ratio of 15.8% and significant buffers over well-capitalized minimums.
• Returned $26.5 million to shareholders year-to-date through June 30, 2025, via an active share repurchase plan.
• Expanded presence into new high-growth markets including Dallas Fort-Worth, Phoenix, Denver, and Kansas City, opening two new branches in Oklahoma City and Denver during 2025, with a new Scottsdale location planned for January 2026.
• Demonstrated strong organic growth in wealth management, with new accounts representing approximately $50 million of AUC and a pipeline exceeding $100 million from legacy CrossFirst markets.

Sentiment

Score: 8

Explanation: The filing presents a very positive outlook, highlighting strong financial performance in 2Q25, successful and ahead-of-schedule integration of the CrossFirst acquisition, and robust capital and liquidity positions. Key profitability metrics are on track or exceeding future targets, and the company demonstrates effective cost management and strategic organic growth initiatives. Favorable comparisons to industry peers (KRX median) in several critical areas further bolster the positive sentiment. While there are inherent risks and a slight dip in noninterest income percentage, the overall picture is one of strong execution and strategic progress.

Positives

• Strong 2Q25 financial performance with key profitability metrics (Adj. ROAA 1.21%, Adj. ROATCE 13.61%, NIM 3.49%, Adj. Efficiency Ratio 55.3%) meeting or exceeding FY 2026 pro forma estimates.
• Successful and early completion of CrossFirst Bankshares acquisition (March 1, 2025) and bank merger (June 20, 2025).
• Significant progress on cost savings, with ~70% of the anticipated $25 million realized by 2Q25 and 100% expected by 4Q25.
• Robust capital position with a Total Capital Ratio of 15.8% and substantial excess capital over well-capitalized minimums.
• High-quality loan portfolio (80% commercial, 20% retail) with low NPAs/Assets (0.31%) and strong ACL/Loans (1.33%).
• Stable core deposit franchise (92.5% core deposits) with low average cost of total deposits (2.21%).
• Strong liquidity profile with $7.9 billion in available sources and a plan to reduce brokered deposits to <1% by 12/31/25.
• Positive net interest income impact (+2.8%) in a +100 bps rate shock scenario.
• Consistent 10-year CAGR of +6.3% in Tangible Common Book Value per Share (ex-AOCI), reaching $20.92 in 2Q25.
• Significant organic growth in Wealth AUC, with new accounts generating ~$50 million and a pipeline of over $100 million from legacy CrossFirst markets.
• Strategic expansion into high-growth MSAs and opening of new branches in Oklahoma City and Denver, with a Scottsdale location planned.
• Successful talent acquisition, including 5 new Managing Directors for wealth management and new leadership in Commercial and Real Estate Banking.
• Diversified revenue streams with ~70% of 2Q25 adjusted noninterest income from wealth, payment technology solutions, and treasury management.

Negatives

• Adjusted noninterest income as a percentage of operating revenue decreased to 20.2% in 2Q25, below the target of ~30%.
• Net interest income impact is negative (-2.1%) in a -100 bps rate shock scenario.
• The downward shift in Tangible Common Book Value per Share in 1Q25 was primarily due to securities repositioning and realized loss of embedded AOCI.
• Legacy CrossFirst markets experienced $69 million in payoffs of PCD loans that were risk-rated watch or worse, indicating some credit quality issues in the acquired portfolio.

Risks

• Strength of local, state, national, and international economies and financial markets, including effects of inflationary pressures, tariffs, trade wars, and changes to immigration policy.
• Changes in, and the interpretation and prioritization of, local, state, and federal laws, regulations, and governmental policies.
• Economic impact of any future terrorist threats or attacks, widespread disease or pandemics, or other adverse external events (e.g., Russia's invasion of Ukraine, Middle East conflict).
• Unexpected results of acquisitions, including the acquisition of CrossFirst Bankshares, which may include the failure to realize anticipated benefits and the possibility that transaction and integration costs may be greater than anticipated.
• Imposition of tariffs or other governmental policies impacting the value of products produced by commercial borrowers.
• New or revised accounting policies and practices.
• Changes in interest rates and prepayment rates of assets, including the impact of sustained elevated interest rates.
• 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.
• Technological changes implemented by the company and third-party vendors, which may have unforeseen consequences, including the development and implementation of tools incorporating artificial intelligence.
• Loss of key executives or associates, talent shortages, and employee turnover.
• Unexpected outcomes and costs of existing or new litigation, investigations, or other legal proceedings, inquiries, and regulatory actions, including with respect to Illinois franchise taxes.
• Fluctuations in the value of securities held in the securities portfolio, including as a result of changes in interest rates.
• Credit risk and risk from concentrations (by type of borrower, geographic area, collateral, and industry) within the loan portfolio and large loans to certain borrowers (including commercial real estate loans).
• Concentration of large deposits from certain clients who have balances above current Federal Deposit Insurance Corporation insurance limits and may withdraw deposits to diversify their exposure.
• Level of non-performing assets on balance sheets.
• Interruptions involving information technology and communications systems or third-party servicers.
• Breaches or failures of information security controls or cybersecurity-related incidents.
• Economic impact on the company and its customers of climate change, natural disasters, and exceptional weather occurrences.
• Ability to successfully manage liquidity risk, which may increase dependence on non-core funding sources such as brokered deposits, and may negatively impact the cost of funds.
• Ability to maintain an adequate level of allowance for credit losses on loans.
• Effectiveness of the risk management framework.
• Ability to manage the risks associated with the foregoing.

Future Outlook

First Busey Corporation anticipates achieving its fully-phased FY 2026 pro forma profitability estimates, including an Adjusted PPNR ROAA of 1.7%+, Adjusted ROAA of 1.2%+, Adjusted ROATCE of 13%+, Net Interest Margin of 3.50%+, and an Adjusted Efficiency Ratio of ~55%. The company expects to fully implement the remaining cost savings from the CrossFirst acquisition by the end of 4Q25 and plans to reduce brokered deposits to less than 1% by December 31, 2025. Future organic growth is targeted through expanding services with existing clients, leveraging commercial and wealth management synergies, and selective branch density in new high-growth markets, including a new Scottsdale location opening in January 2026. The company aims to build noninterest income back to historical levels of approximately 30% of total operating revenue.

Management Comments

• Our go-to-market focus on well-capitalized individuals and their businesses deftly complements our high-quality credit culture.
• Fully-phased pro forma profitability metrics are on pace to be achieved.
• Expected cost saves of ~$25 million remain on track; exited 2Q25 with ~70% of savings realized in expense run rate and anticipate 100% implemented in run rate when exiting 4Q25.
• The legacy CrossFirst client base was particularly well-suited for Busey's wealth management and payments offerings.
• Experiencing early success with new assets generated from new wealth management hires in legacy CrossFirst markets.
• Our growth story is resonating with top-tier talent, leading to an ongoing strong talent pipeline.
• Target building noninterest income back to historical levels of ~30% of total operating revenue via expansion of services with clients and deployment in new markets.
• Our regionally-focused plan broadens the view for each line of business and increases collaboration, with incentives fully aligned to promote a cohesive sales structure.
• Built to deliver the client experience of a community bank with all the efficiencies, products, technology, and resources of the nation's largest banks.

Industry Context

First Busey Corporation's strategic focus on expanding its commercial banking and wealth management services, particularly through the successful integration of CrossFirst Bankshares, aligns with a broader industry trend among regional banks to diversify revenue streams beyond traditional lending and enhance fee-based income. The emphasis on high-growth MSAs and attracting top-tier talent reflects the competitive landscape for talent and market share in attractive banking regions. The company's strong capital and liquidity positions are critical in the current environment of sustained elevated interest rates and economic uncertainties, where financial institutions are closely scrutinized for balance sheet resilience. The proactive management of brokered deposits also indicates a focus on stable, lower-cost funding, a key differentiator in a rising rate environment.

Comparison to Industry Standards

• Total Capital Ratio of 15.8% is higher than the KRX Median of 14.7%, indicating a stronger capital position.
• NPA/Assets of 0.31% is lower than the KRX Median of 0.41%, suggesting better asset quality.
• Net Interest Margin (NIM) of 3.49% is higher than the KRX Median of 3.37%, indicating superior interest income generation.
• Adjusted Noninterest Income as a percentage of Operating Revenue at 20.2% is higher than the KRX Median of 17.9%, showing a greater reliance on diversified fee income.
• Adjusted ROAA of 1.2% is in line with the KRX Median of 1.2%.
• Adjusted ROATCE of 13.6% is in line with the KRX Median of 13.6%.
• Adjusted Efficiency Ratio of 55.3% is better (lower) than the KRX Median of 55.9%, indicating more efficient operations.
• Dividend Yield of 4.1% is significantly higher than the KRX Median of 3.1%, offering attractive shareholder returns.
• Price / TBV of 1.3x is lower than the KRX Median of 1.6x, suggesting a potentially undervalued stock relative to its tangible book value.
• Price / 2026E of 9.1x is lower than the KRX Median of 10.6x, indicating a more attractive valuation based on future earnings estimates.

Management Changes

Corporate Governance

Legal Proceedings

• Risks include unexpected outcomes and costs of existing or new litigation, investigations, or other legal proceedings, inquiries, and regulatory actions involving Busey, including with respect to Busey's Illinois franchise taxes.

Stakeholder Impact

• Shareholders: Positive impact from strong financial performance, successful acquisition integration, share repurchase plan ($26.5 million YTD), attractive dividend yield (4.1%), and favorable valuation metrics (Price/TBV 1.3x, Price/2026E 9.1x) compared to peers. Executive compensation is aligned with long-term shareholder value.
• Employees: Opportunities for growth and new initiatives, strong talent pipeline, high retention rate for key legacy CrossFirst relationship managers, and comprehensive product offerings. Potential for changes in roles due to integration.
• Customers: Expanded product suite (wealth management, payments, treasury management) and banking services, particularly for legacy CrossFirst clients. Access to a full array of banking services for wealth management clients. New branch locations in high-growth markets.
• Communities: Expansion into new MSAs and opening of new branches in Oklahoma City, Denver, and planned Scottsdale location, indicating increased local presence and potential economic contribution.

Next Steps

• Fully implement remaining cost savings from CrossFirst acquisition by exiting 4Q25.
• Reduce brokered deposits to less than 1% by December 31, 2025.
• Continue expanding services with existing clients and deploying in new markets to build noninterest income back to ~30% of total operating revenue.
• Selectively build branch density in newly added high-growth markets, including the opening of a new main market location in Scottsdale in January 2026.
• Continue attracting and retaining high-level talent, including new Managing Directors in wealth management and commercial banking.
• Leverage the combined strengths of Busey's low-cost funding base, high-quality commercial portfolio, and wealth management expertise with CrossFirst's attractive growth markets and commercial and treasury management teams.

Key Dates

Recommendation

First Busey Corporation demonstrates exceptional performance and strategic execution, making it a strong buy. The company has successfully integrated the CrossFirst acquisition ahead of schedule, realizing significant cost savings and achieving or exceeding key profitability targets for 2Q25, including robust ROAA, ROATCE, and NIM. Its capital and liquidity positions are strong, surpassing industry benchmarks (KRX median) in several critical areas like Total Capital Ratio, NPA/Assets, and Efficiency Ratio. The attractive dividend yield of 4.1% and favorable valuation multiples (Price/TBV 1.3x, Price/2026E 9.1x) relative to peers suggest the stock may be undervalued. Furthermore, the clear strategy for organic growth in high-growth markets, talent acquisition, and diversification of noninterest income streams provides a compelling long-term investment thesis. The proactive risk management and balance sheet optimization further enhance its appeal.

Keywords

First Busey Corporation, BUSE, Banking, Financial Services, Wealth Management, Commercial Banking, Acquisition, CrossFirst Bankshares, SEC Filing, 8-K, Investor Presentation, Financial Performance, Capital Ratios, Net Interest Margin, Efficiency Ratio, Loan Growth, Deposit Growth, Risk Management, Share Repurchase, Organic Growth, Talent Acquisition, Payment Technology Solutions, Treasury Management