By Arasu Kannagi Basil

(Reuters) – Regional lender First Busey (NASDAQ: BUSE) has agreed to buy smaller rival CrossFirst Bankshares (NASDAQ: CFB) in a $916.8 million all-stock deal, marking another consolidation in the banking industry following the March 2023 turmoil after three bank collapses last year.

U.S. regional lenders are facing intense pressure as high interest rates dampen borrowing and increase competition for deposits, compeling banks to scale up and diversify.

The deal will create a combined bank with $20 billion in total assets and expand Busey’s presence into markets including Kansas City, Wichita, Dallas/Fort Worth, Denver, and Phoenix, the banks announced on Tuesday.

On the same day, Old Second Bancorp (NASDAQ: OSBC) announced its acquisition of five Illinois branches from First Merchants (NASDAQ: FRME), enhancing its Southeast Chicago presence.

CrossFirst shareholders will receive 0.6675 shares of Busey for each stock held, valuing the lender at $18.28 each, which represents a 0.3% discount to the closing price. Shares of both Busey and CrossFirst fell over 1% in early trading.

This deal, expected to close in the first or second quarter of 2025, is projected to boost Busey’s earnings by 20% in 2026, according to the bank.

CrossFirst is regarded as a natural fit alongside Busey’s established commercial and wealth management offerings and payment technology solutions, says Busey CEO Van Dukeman.

Busey’s wealth management division, providing asset management, investment, and brokerage services, manages about $13 billion in assets.

Analyst Terry McEvoy of Stephens notes that Busey’s low-cost deposits will facilitate commercial growth in CrossFirst’s markets, leveraging Busey’s established wealth management platform for potential revenue increases.

As of June 30, Illinois-based Busey had $11.97 billion in assets, while Kansas-based CrossFirst possessed $7.6 billion.

The companies have arranged a $36.7 million termination fee if the deal collapses under certain conditions.