First Busey Navigates Merger Challenges in Q1 2025, Eyes Long-Term Gains

First Busey Corporation’s first quarter 2025 earnings report underscores the complexities of its transformative merger with CrossFirst Bankshares, Inc., completed on March 1, 2025. While one-time costs and integration hurdles led to a reported net loss, the merger’s strategic benefits began to materialize, positioning the combined entity as a regional banking leader with enhanced scale and diversified revenue streams.

The CrossFirst Merger: A Watershed Moment

The acquisition created a banking powerhouse with $19.46 billion in total assets, up from $12.05 billion at year-end 2024, and expanded its footprint to 10 states through 78 branches. . The merger’s accretive impact on tangible book value—rising to $18.62 per share—suggests shareholders will benefit long-term.

However, the immediate financial toll of integration was stark. One-time expenses, including $26 million in merger-related costs, $4.6 million in deferred tax adjustments, and $3.1 million for CrossFirst’s unfunded commitments, contributed to a GAAP net loss of $30 million ($0.44 per share). Excluding these items, adjusted net income rose 29% to $39.9 million ($0.57 per share), outperforming the $0.54 consensus estimate and Q4 2024’s $0.53.

Financial Highlights: Adjusted Growth Amid Headwinds

• Net Interest Margin (NIM): The GAAP NIM expanded to 3.16%, driven by higher loan yields (+36 basis points) and lower borrowing costs. Adjusted NIM of 3.08% reflected deposit cost pressures (+17 basis points) as the bank absorbs CrossFirst’s legacy balance sheet.
• Noninterest Income: Total noninterest income fell 39.7% to $21.2 million due to $15.8 million in net securities losses from strategic portfolio shifts. Excluding these losses, adjusted noninterest income grew 4.4%, fueled by wealth management fees (+11.7% year-over-year) and payment solutions tied to CrossFirst’s integration.
• Efficiency Ratio: The reported ratio spiked to 79.3%, but adjusted efficiency improved to 58.7%, signaling operational discipline post-merger.

Asset Quality and Balance Sheet Strength

While CrossFirst’s legacy loans added $47.9 million to nonperforming loans (NPLs), the combined allowance for credit losses totaled $195.2 million—3.57x coverage of NPLs. Total deposits rose to $16.46 billion, with 89.7% classified as core deposits, though 32% remain uninsured/unsecured, requiring liquidity management.

Strategic Priorities and Risks

Opportunities:
- Cross-Selling Synergies: Busey’s $13.68 billion in wealth management assets and payment technology (via subsidiary FirsTech, Inc.) can be leveraged to boost fee income from CrossFirst’s commercial clients.
- Cost Savings: The $25 million annual pre-tax synergy target is on track, with 50% expected in 2025. Excess cash from CrossFirst’s securities liquidation will reduce reliance on wholesale funding.

Risks:
- Deposit Costs: Core deposit beta is projected to normalize at 45–50%, but rising rates could pressure margins further.
- Integration Execution: Managing CrossFirst’s $109.3 million in classified assets and aligning underwriting standards remains critical.

Market Valuation and Investor Outlook

. The stock closed at $19.89 on April 21, 2025—64.7% below its $56.50 fair value estimate—despite analyst projections for a 35.7% price rise. The trailing P/E of 10.4x and forward P/E of 7.9x suggest undervaluation relative to peers.

Conclusion: A Transformative Quarter with Clear Pathways Ahead

First Busey’s Q1 2025 results reveal both the short-term costs and long-term potential of its merger. While the GAAP net loss and elevated NPLs are cause for caution, the 29% rise in adjusted net income and $0.57 per share beat highlight core operational strength. With synergies on track, a robust allowance for credit losses, and a dividend yield of 5.03%, the stock appears attractively priced for investors willing to endure integration hiccups.

Crucially, the merger’s $960 million valuation and the bank’s 8.05% annual earnings growth forecast ($2.82 EPS by 2025) suggest the combined entity is well-positioned to capitalize on regional banking opportunities. Execution will hinge on deposit cost management, cross-selling success, and the resolution of CrossFirst’s legacy issues. For now, First Busey’s Q1 results are a solid first step toward its goal of becoming a $20 billion asset regional powerhouse—a milestone that could unlock significant shareholder value in the years ahead.