First Busey's Q2 Earnings: Can Expansion Outpace the Bears?

The regional banking sector in 2025 is a study in contrasts. While consolidation and scale have become the new normal, companies like First Busey Corporation (BUSE) are betting big on aggressive mergers to drive growth. The question now is whether BUSE's recent acquisition of CrossFirst Bankshares—completed in March 2025—can offset the bearish sentiment that has clouded its stock price and analyst expectations.

The Acquisition-Driven Growth Play

First Busey's acquisition of CrossFirst Bank has transformed the company into a $19.46 billion-asset institution with 78 branches across 10 states, including high-growth markets like Kansas City and Dallas/Fort Worth. The merger added $17 billion in deposits and $15 billion in loans, immediately boosting the company's net interest margin to 3.49% in Q2 2025. Management has also outlined a path to $25 million in annual pre-tax synergies by 2026, with 50% expected to materialize by year-end.

However, the cost of this growth is evident. Integration expenses, restructuring charges, and elevated deposit costs—driven by CrossFirst's indexed and managed rate products—have pressured margins. In Q1 2025, BUSE reported a net loss of $30 million, or $0.44 per share, due to $26 million in acquisition-related costs and $15.8 million in securities losses. Adjusted earnings, at $0.57 per share, still exceeded expectations, but the gap between reported and adjusted metrics has raised concerns about sustainability.

Bearish Indicators and Analyst Sentiment

Analysts have grown cautious. The Zacks Earnings ESP (Expected Surprise Prediction) for BUSE is -4.49%, signaling a downward revision in expectations. A Zacks Rank of #4 (Sell) further complicates the outlook, as it suggests a low probability of an earnings beat. This bearishness is reflected in the consensus price target of $26, a 7.2% upside from its July 21 closing price of $24.14, but far below the stock's peak of $28 in early 2025.

The bear case hinges on integration risks and margin compression. CrossFirst's deposit costs are 15% higher than BUSE's historical average, and the company's efficiency ratio of 55.3% in Q2 2025 remains elevated compared to peers like Regions Financial (RF), which reported an efficiency ratio of 52.1% in the same period. Additionally, BUSE's dividend payout ratio of 93.46% leaves little room for reinvestment, raising questions about its ability to fund future growth.

Historical Outperformance vs. Current Realities

First Busey has a track record of beating earnings estimates, having exceeded expectations in four of the last four quarters. In Q1 2025, it delivered a 7.55% earnings surprise despite the CrossFirst integration costs. However, the broader trend over the past year tells a different story: earnings growth has contracted by 48.7%, and net profit margins have halved to 13.4%. A one-time $30.9 million loss in the last 12 months further eroded investor confidence.

The key question is whether this historical outperformance is a function of disciplined operations or a product of the CrossFirst merger's accounting benefits. For now, the jury is out. BUSE's adjusted EPS for Q2 2025 was $0.63, matching the consensus estimate, but actual EPS fell to $0.52 due to non-recurring costs. If integration expenses continue to weigh on the top line, the company's ability to outperform could diminish.

A Compelling Investment Opportunity?

Despite the bearish noise, BUSE offers a compelling risk-reward profile. The company's Tier 1 capital ratio of 13.7% and leverage ratio of 11.3% provide a strong buffer against economic volatility. Institutional ownership has also increased, with entities like Jane Street Group LLC and Goldman Sachs raising their stakes in Q1 2025. These moves suggest confidence in the long-term value of the CrossFirst merger, even if short-term pain persists.

For investors, the decision hinges on timing. BUSE's forward P/E of 9.34 is attractive compared to its trailing P/E of 22.78, and the market's average price target of $27 implies a 10% upside. However, the stock remains vulnerable to margin compression and integration delays. A positive earnings surprise in Q2 2025 could re-ignite momentum, but a miss would likely reinforce the bearish narrative.

Conclusion

First Busey's acquisition-driven growth strategy has positioned it as a formidable player in the regional banking sector. The CrossFirst merger has expanded its footprint and diversified its revenue streams, but the path to profitability is not without hurdles. While the bearish sentiment is justified—given integration costs and margin pressures—BUSE's historical resilience and strong capital position make it a speculative buy for investors with a medium-term horizon.

In a sector where scale and efficiency are paramount, First Busey has taken a bold step. Whether it can convert that ambition into consistent earnings outperformance will determine its place in the next chapter of regional banking.