First Busey's Strategic Merger and Earnings Surge: A High-Conviction Buy Opportunity in Regional Banking

In the evolving landscape of U.S. regional banking, First Busey Corporation (BUSE) has emerged as a standout performer through its strategic acquisition of CrossFirst Bankshares, Inc. and the subsequent integration of its operations. This transformative merger, completed on March 1, 2025, and fully consolidated by June 20, 2025, has not only expanded BUSE's geographic reach but also delivered a sharp rebound in profitability metrics. For investors seeking a high-conviction play in the post-deregulation banking sector, BUSE offers a compelling case study of disciplined growth, operational efficiency, and regulatory alignment.

The CrossFirst Integration: A Blueprint for Synergy

The acquisition of CrossFirst Bank was not merely a transaction but a calculated move to unlock cross-state synergies. By merging CrossFirst's 78 locations across 10 states—Arizona, Colorado, Florida, Illinois, Indiana, Kansas, Missouri, New Mexico, Oklahoma, and Texas—into its existing network, BUSE created a $20 billion-asset powerhouse with $17 billion in deposits and $15 billion in loans. The integration, now complete, has already delivered $25 million in annual pre-tax expense synergies, with 50% realized in 2025 and full realization expected by 2026.

The efficiency gains are evident in BUSE's second-quarter 2025 results. Its adjusted efficiency ratio plummeted to 55.3%, down from 58.7% in Q1 2025 and 60.9% in Q2 2024. This improvement, driven by cost rationalization and streamlined operations, underscores the success of the integration. Meanwhile, the net interest margin (NIM) surged to 3.49% in Q2 2025, up from 3.16% in Q1 2025, fueled by higher loan yields and reduced borrowing costs. Excluding purchase accounting, the adjusted NIM still stood at 3.33%, reflecting strong organic performance.

Profitability Surge and Diversified Revenue Streams

The CrossFirst merger has turbocharged BUSE's earnings power. Second-quarter 2025 net income reached $47.4 million, or $0.52 per diluted share, a stark turnaround from the $30 million loss in Q1 2025. Adjusted net income soared to $57.4 million, or $0.63 per share, with adjusted ROATCE hitting 13.61%, a testament to robust capital efficiency. These metrics outperform peers in the regional banking sector, where average ROATCE typically hovers around 8-10%.

BUSE's revenue diversification further strengthens its resilience. Noninterest income, now 20% of operating revenue, is driven by fee-based businesses like wealth management and payment technology solutions. This contrasts with the volatile securities gains that skewed Q1 2025 results. The shift toward recurring revenue streams reduces exposure to market volatility and aligns with the broader industry trend of de-risking income sources.

Post-Deregulation Tailwinds: A Strategic Advantage

The U.S. banking sector is entering a new era of regulatory leniency, with the Trump administration signaling a rollback of Dodd-Frank-era constraints. For BUSE, this environment is a tailwind. The merger was structured to comply with pre-deregulation rules, but the easing of capital and compliance burdens now amplifies its profitability. Lower compliance costs and streamlined approval processes for future M&A activity position BUSE to capitalize on consolidation opportunities in the Midwest and Southwest.

The regulatory shift also aligns with BUSE's long-term strategy. By expanding into high-growth metro markets like Dallas/Fort Worth and Phoenix, the bank is leveraging deregulation to scale operations without overextending risk management frameworks. Its asset quality remains pristine, with non-performing loans at 0.40% of the portfolio and an allowance for credit losses covering 3.36 times non-performing loans. This conservative approach, combined with a diversified geographic footprint, insulates BUSE from regional economic shocks.

Valuation and Investment Case: A Buy for the Long Term

Despite its post-merger momentum, BUSE trades at a discount to its intrinsic value. With a price-to-tangible-book ratio of 1.2x and a forward ROATCE of 11.24%, the stock is undervalued relative to its historical multiples and peers. The company's guidance for 20% accretion in 2026, excluding merger costs, further supports a re-rating.

Investors should also consider the structural catalysts ahead. The integration of CrossFirst's wealth management and payment technology platforms with BUSE's FirsTech subsidiary creates a $14 billion wealth assets-under-care business. This vertical integration enhances cross-selling opportunities and deepens customer relationships, a critical differentiator in an increasingly digital banking landscape.

Risks and Mitigants

While the case for BUSE is strong, risks remain. The success of the CrossFirst integration hinges on maintaining customer retention and employee morale. However, BUSE's leadership has prioritized cultural alignment, with key CrossFirst executives assuming roles like Randy Rapp (President of Busey Bank) and Amy Fauss (CIO). Additionally, the post-deregulation environment could attract aggressive fintech competitors; BUSE's focus on regional specialization and relationship banking mitigates this risk.

Conclusion: A High-Conviction Buy

First Busey's strategic merger with CrossFirst Bank has transformed it into a regional banking leader with superior profitability, operational efficiency, and regulatory alignment. In a post-deregulation environment where scale and agility are paramount, BUSE's disciplined expansion and diversified revenue model position it for sustained shareholder value creation. For investors seeking a high-conviction play in the sector, BUSE offers a rare combination of growth, resilience, and undervaluation.