First Busey’s Strategic Capital Maneuver: A Masterclass in Balancing Growth and Dividend Resilience

In a move that underscores its strategic foresight, First Busey Corporation has executed a $207.5 million depositary share offering, transforming its capital structure while positioning itself to capitalize on a historic merger and rising rate environment. This transaction isn’t merely a financing event—it’s a blueprint for how banks can optimize balance sheets, secure dividends, and outpace peers in an era of economic uncertainty. Here’s why income investors should take notice.

Capital Structure Optimization: A Balancing Act for Growth

The heart of First Busey’s strategy lies in its decision to issue 8.25% Fixed Rate Series B Non-Cumulative Perpetual Preferred Stock via depositary shares (symbol: BUSEP). By replacing its existing 5.25% subordinated notes due 2030 with this preferred offering, the bank achieves two critical objectives:

1. Debt Refinancing at Strategic Rates: While the preferred stock’s 8.25% coupon appears higher than the existing 5.25% notes, this move locks in a fixed rate ahead of the notes’ potential reset to a floating rate post-2030. This removes future refinancing risk in a rising rate environment, a critical advantage for banks.
2. Enhanced Regulatory Capital: Preferred stock is treated as Tier 1 capital under banking regulations, bolstering First Busey’s capital adequacy ratios. This is vital for absorbing the CrossFirst Bank merger, which adds $7.45 billion in assets and 78 banking centers to its footprint.

The offering also provides flexibility to redeploy $207.5 million toward organic growth, including expanding its $13.68 billion wealth management division and scaling its fintech subsidiary, FirsTech. This dual focus on debt reduction and strategic reinvestment is a masterstroke for sustaining long-term profitability.

Dividend Resilience: A Steady Hand Amid Volatility

Income investors often face a dilemma: high yields come with risk, while safety offers meager returns. First Busey’s offering cleverly bridges this divide:

• Preferred Share Dividends: The 8.25% annual yield on BUSEP is fixed and non-cumulative, meaning dividends are paid only if declared. While this introduces some risk, First Busey’s Forbes-ranked balance sheet ($19.46 billion in assets as of Q1 2025) and merger-driven growth create a strong foundation for consistent payouts.
• Common Stock Stability: The capital raise reduces reliance on volatile debt markets, freeing cash flow to support common stock dividends. With insiders buying over $1.2 million in shares and institutions like BlackRock increasing stakes, confidence in the company’s dividend-paying ability is undeniable.

The non-cumulative feature is a calculated trade-off: it allows the bank to prioritize capital preservation during downturns while rewarding investors who trust its leadership. For income seekers, this is a risk-reward ratio worth embracing.

Why Income Investors Should Act Now

First Busey’s move isn’t just about surviving—it’s about thriving. Consider these catalysts:

1. CrossFirst Merger Synergies: Closing on June 20, 2025, this merger expands Busey’s presence in high-growth markets like Texas and Kansas, while reducing redundant costs. The combined entity’s $19.46 billion in assets positions it to compete with larger regional banks.
2. Institutional Momentum: Q1 2025 saw BlackRock and Vanguard increase holdings by 15% and 10%, respectively. Such moves signal institutional validation of Busey’s strategy.
3. Rate-Proof Income: While peers face margin compression due to rising rates, Busey’s fixed-rate preferred offering and merger-fueled efficiency gains create a buffer against volatility.

Implications for the Banking Sector

First Busey’s playbook offers a template for regional banks: use preferred equity to fortify balance sheets, reduce refinancing risk, and fund acquisitions. Competitors like Cathedral Bancorp (BANC) and Independent Bank (IBCA) could follow suit, but Busey’s early execution and strong institutional support give it a decisive edge.

Final Call to Action

First Busey’s depositary share offering is more than a financing event—it’s a strategic masterclass in capital management. For income investors, BUSEP offers a rare blend of high yield, strategic stability, and growth tailwinds from the CrossFirst merger. With insiders and institutions already voting with their wallets, the time to act is now.

The next dividend payment on BUSEP arrives September 1, 2025—don’t miss the train.