First Busey's Strategic Integration of CrossFirst Bank and Its Impact on Earnings Resilience

The recent integration of CrossFirst Bank into First Busey Corporation has positioned the combined entity as a formidable player in the commercial banking sector. With the merger finalized on March 1, 2025, and the full absorption of CrossFirst Bank into Busey Bank expected by June 20, 2025, the company has demonstrated a disciplined approach to operational efficiency, asset quality, and interest rate risk management. For investors, the key question is whether these strategic moves will translate into sustainable earnings resilience amid a challenging macroeconomic landscape. The answer, based on the latest financial and operational metrics, appears to be a resounding yes.

Operational Synergies: The Engine of Cost Efficiency

The merger has unlocked significant operational synergies, with annual pre-tax expense savings estimated at $25 million. By June 2025, 50% of these synergies were realized, driven by the consolidation of back-office functions, technology integration, and workforce optimization. The combined entity added 501 full-time equivalent associates, including 437 from CrossFirst Bank, but has prioritized leveraging scale to reduce per-unit costs. For example, the efficiency ratio in Q2 2025 dropped to 63.9%, a marked improvement from 77.1% in Q1 2025, reflecting progress in absorbing integration costs and streamlining operations.

This trend is critical for earnings resilience. In a low-growth, high-uncertainty environment, banks that can reduce overhead while maintaining asset quality will outperform peers. First Busey's focus on technology investments—such as FirsTech, Inc.'s payment solutions—further enhances its ability to deliver cost-competitive services, reinforcing long-term profitability.

Asset Quality: A Conservative but Expansive Portfolio

The combined loan portfolio now exceeds $13.8 billion, with CrossFirst's $6.04 billion addition contributing to a diversified, high-quality asset base. As of March 31, 2025, non-performing loans stood at 0.39% of total portfolio loans, and the allowance for credit losses (ACL) was 1.41%, providing 3.57 times coverage for non-performing loans. By June 30, 2025, these metrics remained stable, with non-performing loans at 0.40% and ACL coverage at 3.36 times.

This conservative credit management is a hallmark of Busey's strategy. While CrossFirst's acquired loan portfolio initially brought a higher proportion of non-performing assets, the company's disciplined underwriting standards have mitigated risks. The ACL's robustness ensures that even in a downturn, the bank is well-positioned to absorb losses without compromising capital ratios.

Interest Rate Risk Management: Navigating the Rate Cycle

Perhaps the most compelling aspect of First Busey's post-merger strategy is its proactive approach to interest rate risk. The net interest margin (NIM) in Q2 2025 reached 3.49%, up 33 basis points from Q1 2025, driven by higher loan yields, securities repositioning, and reduced borrowing costs. The ALCO model projects a 2.8% increase in net interest income under a +100 basis point parallel rate shock, underscoring the bank's resilience to rate volatility.

The company has also reduced reliance on high-cost funding. Brokered deposit balances fell by $368.6 million in Q2 2025, leaving just 2.2% of total deposits in non-core funding. This shift, combined with a deposit beta expected to normalize to 45–50%, suggests that Busey's cost of funds will remain stable even as rates stabilize or decline. Investors should note that the bank's ability to redeploy excess liquidity—such as the $302.3 million in securities maturities expected in 2025—will further bolster NIM expansion.

Investment Implications: A Buy for Long-Term Value

For long-term investors, First Busey's strategic integration of CrossFirst Bank offers a compelling case. The company's focus on operational efficiency, asset quality, and interest rate risk mitigation creates a durable earnings model. While the first quarter of 2025 saw a net loss due to one-time merger costs, adjusted net income of $39.9 million in Q1 and $57.4 million in Q2 highlights the underlying strength of the business.

The stock, trading under the ticker symbol “BUSE,” has a forward P/E ratio that reflects its earnings potential and growth trajectory. With a tangible book value of $12.50 per share as of March 31, 2025, and a projected 50% realization of cost synergies in 2025, the valuation appears attractive relative to its risk-adjusted returns.

Conclusion

First Busey's integration of CrossFirst Bank is more than a transactional milestone—it is a strategic recalibration that enhances the company's ability to thrive in a challenging rate environment. By leveraging operational efficiencies, maintaining conservative credit standards, and proactively managing interest rate risk, the bank is well-positioned to deliver consistent earnings growth. For investors seeking a high-conviction, long-term holding in the financial sector, Busey represents a compelling opportunity.

Investment Thesis: Buy for its disciplined integration, strong asset quality, and NIM resilience. Target price: $14.50 (12-month outlook).