10-Q: First Busey Q3 2025: Acquisition Fuels Growth, Net Income Rises

First Busey Corporation reports significant growth in assets and loan portfolio for Q3 2025, driven by the CrossFirst acquisition, despite increased expenses and a decline in net income for the nine-month period.

Summary

• Net income for the three months ended September 30, 2025, was $57.098 million, an increase from $32.004 million in the comparable period of 2024.
• Net income for the nine months ended September 30, 2025, was $74.512 million, a decrease from $85.586 million in the comparable period of 2024.
• Total assets grew by 51.0% to $18.19 billion as of September 30, 2025, from $12.05 billion at December 31, 2024, primarily due to the CrossFirst acquisition.
• The total loan portfolio increased by 76.7% to $13.60 billion as of September 30, 2025, from $7.70 billion at December 31, 2024.
• Total deposits increased by 51.0% to $15.07 billion as of September 30, 2025, from $9.98 billion at December 31, 2024.
• Net interest income for Q3 2025 increased by 87.8% to $155.137 million, and for the nine months ended September 30, 2025, increased by 70.9% to $412.051 million.
• Provision for credit losses for the nine months ended September 30, 2025, was $50.308 million, significantly up from $6.677 million in 2024, including $42.4 million for non-PCD loans from the CrossFirst acquisition.
• Total noninterest expense for Q3 2025 increased by 58.9% to $120.018 million, and for the nine months ended September 30, 2025, increased by 61.5% to $359.881 million, largely due to acquisition and restructuring expenses.
• The adjusted efficiency ratio improved to 54.9% for the three months ended September 30, 2025, from 60.2% in the comparable period of 2024.
• Uninsured deposits were estimated at $6.45 billion, or 43% of total deposits, as of September 30, 2025.

Sentiment

Score: 6

Explanation: The company shows strong growth in assets, loans, and deposits driven by a major acquisition, and improved efficiency. However, nine-month net income declined, and non-performing assets increased, albeit largely due to acquired loans. Management acknowledges ongoing pressures in commercial real estate. The overall picture is one of significant expansion with some integration costs and credit quality considerations.

Positives

• Total assets grew significantly by 51.0% to $18.19 billion, driven by the CrossFirst acquisition, expanding market presence across 10 states.
• The loan portfolio increased substantially by 76.7% to $13.60 billion, and total deposits grew by 51.0% to $15.07 billion.
• Net interest income saw strong growth, increasing by 87.8% for Q3 2025 and 70.9% for the nine months ended September 30, 2025.
• Wealth management fees increased by 11.7% for Q3 and 9.6% for the nine-month period, reaching $17.184 million and $51.325 million, respectively.
• Treasury management services income more than doubled, increasing by 108.9% for Q3 and 101.6% for the nine-month period, due to the CrossFirst acquisition.
• Card services and ATM fees increased by 34.9% for Q3 and 34.6% for the nine-month period, primarily from CrossFirst corporate card services.
• The adjusted efficiency ratio improved to 54.9% for Q3 2025 from 60.2% in Q3 2024, indicating better operational efficiency.
• Capital ratios remain strong and well above regulatory 'well capitalized' levels, with Common Equity Tier 1 at 12.33% and Total Capital at 15.89% as of September 30, 2025.
• Annual pre-tax expense synergy estimates from the CrossFirst acquisition remain on track at $25.0 million, with 50% realization anticipated in 2025 and 100% in 2026.

Negatives

• Net income for the nine months ended September 30, 2025, decreased to $74.512 million from $85.586 million in the comparable period of 2024.
• Provision for credit losses for the nine months ended September 30, 2025, increased significantly to $50.308 million, largely due to the initial provision for non-PCD loans from the CrossFirst acquisition.
• Total noninterest expense increased substantially by 58.9% for Q3 and 61.5% for the nine-month period, driven by acquisition and restructuring expenses.
• Payment technology solutions income decreased by 3.3% for Q3 and 10.5% for the nine-month period, primarily due to lower online bill payments.
• Other service charges on deposit accounts declined by 32.3% for Q3 and 33.9% for the nine-month period, reflecting changes in fee structure.
• Net securities losses for the nine months ended September 30, 2025, were $10.059 million, including $15.5 million of realized losses from a strategic balance sheet repositioning.
• Non-performing loan balances increased to $47.5 million as of September 30, 2025, from $23.2 million at December 31, 2024, primarily due to PCD loans assumed in the CrossFirst acquisition.
• Non-performing assets increased to $57.7 million as of September 30, 2025, from $23.3 million at December 31, 2024, also primarily due to PCD loans from the acquisition.
• The company experienced elevated payoffs that outpaced new production momentum in the third quarter of 2025, with expectations of continued pressure from commercial real estate payoffs through the remainder of 2025.

Risks

• The strength of local, state, national, and international economies and financial markets, including effects of inflationary pressures, tariffs, and trade wars.
• The economic impact of future terrorist threats, widespread disease or pandemics, or other adverse external events such as the Russia-Ukraine war and the Middle East conflict.
• Unexpected results of acquisitions, including the failure to realize anticipated benefits and the possibility that transaction and integration costs may be greater than anticipated.
• Changes in, and the interpretation and prioritization of, local, state, and federal laws, regulations, and governmental policies.
• New or revised accounting policies and practices adopted by regulatory bodies.
• Changes in interest rates and prepayment rates of assets, including the impact of sustained elevated interest rates.
• Increased competition in the financial services sector from non-bank competitors such as credit unions, private credit, and fintech companies.
• Technological changes implemented by the company and third-party vendors, including the development and implementation of tools incorporating artificial intelligence, which may have unforeseen consequences.
• The loss of key executives or associates, talent shortages, and employee turnover.
• Unexpected outcomes and costs of existing or new litigation, investigations, or other legal proceedings, inquiries, and regulatory actions, specifically regarding Illinois franchise taxes.
• Fluctuations in the value of securities held in the company's securities portfolio, including as a result of changes in interest rates.
• Credit risk and risk from concentrations by type of borrower, geographic area, collateral, and industry within the loan portfolio, particularly commercial real estate loans.
• The concentration of large deposits from certain clients who have balances above current Federal Deposit Insurance Corporation insurance limits and may withdraw deposits.
• The level of non-performing assets on the company's balance sheets.
• Interruptions involving information technology and communications systems or third-party servicers, and cybersecurity-related incidents.
• The economic impact on the company and its customers of climate change, natural disasters, and exceptional weather occurrences.
• The ability to successfully manage liquidity risk, which may increase dependence on non-core funding sources such as brokered deposits, potentially impacting the cost of funds.
• The ability to maintain an adequate level of allowance for credit losses on loans.
• The effectiveness of the company's risk management framework.

Future Outlook

Management expects continued pressure from commercial real estate payoffs through the remainder of 2025. Annual pre-tax expense synergy estimates from the CrossFirst acquisition remain on track at $25.0 million, with 50% realization in 2025 and 100% in 2026. The company continues to monitor evolving federal and state tax legislation and its potential impact on operations.

Management Comments

• "Busey remains steadfast in its conservative approach to underwriting and disciplined approach to pricing."
• "Busey expects continued pressure, particularly from commercial real estate payoffs through the remainder of 2025."
• "Busey's operating mandate and focus remain on emphasizing credit quality over asset growth."
• "Annual pre-tax expense synergy estimates resulting from the CrossFirst acquisition remain on track at $25.0 million. Busey anticipates a 50% rate of synergy realization in 2025 and 100% in 2026."
• "Management believed the level of the ACL to be appropriate based upon the information available."
• "Management identified no other loans that represent or result from trends or uncertainties that would be expected to materially impact future operating results, liquidity, or capital resources."

Industry Context

The company's significant growth is primarily driven by the CrossFirst acquisition, expanding its footprint across 10 states and creating a premier commercial bank in the Midwest, Southwest, and Florida. This expansion positions the company to capitalize on diverse regional economies. The filing acknowledges the impact of general economic conditions and interest rate volatility on mortgage revenue and the broader credit environment. The enactment of the 'One Big Beautiful Bill Act' (OBBBA) is noted for its potential influence on the banking sector through tax provisions and incentives for rural/agricultural lending. The company also highlights increasing competition from non-bank entities (credit unions, private credit, fintech) and the evolving landscape of technological changes, including artificial intelligence, as key industry trends.

Management Changes

Corporate Governance

Legal Proceedings

• Illinois Franchise Tax Matter: The Illinois Secretary of State requested Busey resubmit forms using a disputed methodology, preliminarily estimating over $28 million due (including $17.4 million in interest and $0.3 million in penalties). Busey disagrees with this estimate and intends to vigorously defend itself, having filed a special appearance contesting jurisdiction. The loss cannot be reasonably estimated but could be material.
• Florida Department of Revenue Examination: Busey Bank is under examination by the Florida Department of Revenue for its 2020 to 2022 corporate income tax filings, with $0.1 million accrued related to potential assessment adjustments and interest.
• Illinois Department of Revenue Examination: Busey is under examination by the Illinois Department of Revenue for M&M's tax filings for the tax years ended December 31, 2022, and 2023.

Stakeholder Impact

• Shareholders: Impacted by significant growth in assets, loans, and deposits due to the acquisition, but also by a decline in nine-month net income, increased expenses, and potential liabilities from the Illinois franchise tax dispute. Diluted EPS for the nine months ended September 30, 2025, decreased. Preferred stock dividends commenced.
• Employees: The workforce expanded by 412 full-time equivalent associates due to the CrossFirst acquisition, and equity awards were modified or converted to align with the new corporate structure.
• Customers: Benefit from an expanded banking center network (79 locations across 10 states) and broader service capabilities resulting from the acquisition.
• Regulatory Authorities: The company maintains capital ratios well above 'well capitalized' levels, but is subject to ongoing tax examinations and a significant, material legal dispute regarding Illinois franchise taxes.

Next Steps

• Continue evaluating the impact of the 'One Big Beautiful Bill Act' for future reporting periods.
• Vigorously defend against the Illinois Secretary of State's notice regarding franchise taxes, including through appropriate judicial relief.
• Monitor the performance of loans modified for borrowers experiencing financial difficulty.
• Manage liquidity risk and asset/liability strategies in an unpredictable interest-rate environment.
• Realize remaining expense synergies from the CrossFirst acquisition (50% in 2025, 100% in 2026).
• Monitor market-specific economic conditions for asset quality metrics.
• Continue to focus on deepening customer relationships to maintain the core deposit franchise.
• Manage commercial real estate payoffs through the remainder of 2025.

Key Dates

Recommendation

First Busey Corporation demonstrates significant growth in its balance sheet driven by the CrossFirst acquisition, expanding its market footprint and increasing net interest income. The improved adjusted efficiency ratio is a positive sign of integration efforts. However, the decline in nine-month net income, substantial increase in noninterest expenses, and a significant rise in provision for credit losses (even if acquisition-related) warrant caution. The ongoing, material legal dispute regarding Illinois franchise taxes adds an element of uncertainty. While the company maintains strong capital ratios, the mixed financial performance and pending legal matter suggest a 'Hold' recommendation until the full impact of the acquisition is realized and the legal risks are clarified.

Keywords

Banking, Wealth Management, Payment Technology, Financial Services, SEC Filing, 10-Q, Acquisition, CrossFirst, Loan Growth, Deposit Growth, Net Interest Income, Noninterest Expense, Credit Quality, Capital Ratios, Regional Bank, Illinois, Kansas, Missouri, Florida, Indiana, Texas, Arizona, Colorado, New Mexico, Oklahoma