First Busey Corporation (NASDAQ: BUSE) is a $11.97 billion financial holding company headquartered in Champaign, Illinois. The company operates through three main segments: Banking, Wealth Management, and FirsTech, providing a comprehensive suite of financial services to individuals and businesses across its footprint.

Business Overview

The Banking segment is the core of First Busey's operations, offering a full range of banking services through its network of 62 banking centers in Illinois, Missouri, Florida, and Indiana. The Wealth Management segment provides asset management, investment, brokerage, fiduciary, and other related services, managing $13.02 billion in assets as of June 30, 2024. The FirsTech segment specializes in innovative payment technology solutions for small and medium-sized businesses, highly regulated industries, and financial institutions.

Financial Performance

First Busey has demonstrated consistent financial performance, reporting annual net income of $122.57 million and annual revenue of $508.23 million in the most recent fiscal year. The company's annual operating cash flow was $173.79 million, and its annual free cash flow was $164.17 million, showcasing the strength of its business model.

In the second quarter of 2024, the company reported net income of $27.4 million, or $0.47 per diluted share. Adjusted net income, which excludes the impact of acquisition and restructuring expenses, was $29.0 million, or $0.50 per diluted share. This compares to net income of $29.4 million, or $0.52 per diluted share, in the second quarter of 2023.

Quarterly revenue was $116.24 million, up 9% from the same period last year. The company's fee-based businesses, including Wealth Management and FirsTech, continued to contribute to revenue diversification, accounting for 29.1% of operating revenue in the second quarter of 2024.

Geographical Breakdown

First Busey's banking centers are primarily located in Illinois, with 21 centers in the central Illinois market, 17 in the suburban Chicago area, and 20 in the St. Louis metropolitan area. The company also has three banking centers in southwest Florida and one in Indianapolis, Indiana.

Segment Performance

The Banking segment generated net income of $26.7 million in the second quarter of 2024, compared to $30.7 million in the same period last year. The Wealth Management segment reported net income of $5.6 million, up from $4.9 million in the second quarter of 2023. The FirsTech segment contributed a modest $0.03 million in net income, compared to $0.2 million in the year-ago quarter.

Wealth Management and FirsTech Driving Growth

First Busey's fee-based businesses continue to be a key driver of growth. Wealth Management fees were $15.9 million in the second quarter of 2024, up from $14.6 million in the same period last year. The Wealth Management division ended the quarter with $13.02 billion in assets under care, compared to $11.48 billion a year ago.

Payment technology solutions revenue from the FirsTech segment was $5.9 million in the second quarter of 2024, up from $5.2 million in the year-ago quarter. FirsTech's revenue has grown for three consecutive quarters, reaching a new record high in the most recent period.

Acquisition of Merchants and Manufacturers Bank Corporation

In April 2024, First Busey completed its acquisition of Merchants and Manufacturers Bank Corporation (M&M) and its wholly-owned subsidiary, Merchants & Manufacturers Bank. The transaction added $418.7 million in loans and $392.8 million in deposits to First Busey's balance sheet. The company incurred $2.1 million in one-time acquisition-related expenses in the second quarter of 2024.

The integration of M&M Bank into Busey Bank was completed in June 2024. This partnership expands First Busey's presence in the suburban Chicago market and adds M&M's Life Equity Loan® products to the company's suite of services.

Asset Quality and Capital Strength

First Busey's asset quality remains strong, with non-performing assets at 0.08% of total assets as of June 30, 2024, down from 0.15% in the previous quarter and 0.13% a year ago. The allowance for credit losses was 1.07% of total portfolio loans, and the ratio of the allowance to non-performing loans was 936.0%.

The company's capital ratios continue to exceed regulatory well-capitalized thresholds, with a Common Equity Tier 1 ratio estimated at 13.19% and a Total Capital to Risk Weighted Assets ratio estimated at 17.49% as of June 30, 2024. Tangible common equity represented 8.36% of tangible assets, and tangible book value per common share increased to $16.97, up from $15.25 a year earlier.

Liquidity and Funding

First Busey maintains a strong liquidity position, with $6.16 billion in available on- and off-balance sheet liquidity as of June 30, 2024. Core deposits represented 96.4% of total deposits, providing a stable funding base. The company's cost of deposits was 1.75% in the second quarter of 2024, down 1 basis point from the previous quarter.

Outlook and Guidance

First Busey has not provided specific financial guidance for the remainder of 2024. However, the company's management has expressed confidence in the company's ability to navigate the current economic environment and continue delivering consistent financial performance. The successful integration of the M&M acquisition and the ongoing growth of the Wealth Management and FirsTech segments are expected to contribute to the company's future success.

Risks and Challenges

As with any financial institution, First Busey faces various risks, including interest rate risk, credit risk, operational risk, and regulatory risk. The company's exposure to commercial real estate loans, particularly in the Central Business District areas of its markets, could be a source of concern if economic conditions deteriorate. Additionally, the company's reliance on a large deposit base from certain clients could pose liquidity challenges if those clients choose to withdraw funds.

Conclusion

First Busey Corporation is a well-diversified financial services provider with a strong presence in its core markets. The company's consistent financial performance, robust capital position, and strategic focus on fee-based businesses position it well for continued growth and success. While the company faces various risks, its conservative approach to banking and prudent risk management practices suggest it is well-equipped to navigate the challenges ahead.