LCNB, the holding company for LCNB National Bank, has signed a definitive agreement to acquire Cincinnati Bancorp (CNNB), the parent organisation of Cincinnati Federal, for up to $43.7m.

Under the terms of the merger agreement, CNNB shareholders can elect to receive either 0.9274 shares of LCNB stock or $17.21 per share in cash for each CNNB share held.

Only 80% of all CNNB shares are allowed to be exchanged for LCNB common stock.

CNNB had 2,884,171 outstanding shares in its common stock, along with 296,350 options with a weighted average strike price of $10.65 per share, as of 31 March 2023.

The unexercised stock options will be cancelled, in exchange for a cash payment of $17.21 per share over the exercise price.

The transaction is valued at $15.05 for each CNNB share or a total consideration of around $43.7m, based on the LCNB’s closing share price as of 17 May 2023.

The consideration will be dollar-for-dollar downward adjusted if CNNB’s adjusted shareholders’ equity is less than $36.8m, during three business days before the closing date.

The acquisition has been approved by the Board of Directors of both companies.

It is expected to be completed in the fourth quarter of this year, subject to regulatory approval, CNNB shareholder approval and other customary conditions.

LCNB president and CEO Eric Meilstrup said: “Cincinnati Federal, its Board of Directors and its staff have a great reputation throughout Greater Cincinnati as a ‘service first’ organization with a focus on being a leading residential mortgage lender and commercial real estate lender in the market supported by dedicated and experienced personnel.

“LCNB National Bank is a 146-year-old community bank that was founded in Lebanon, Ohio and serves 10 southwestern and south-central Ohio counties with 29 bank offices.

“The combining of our two institutions will provide more benefits, financial products and opportunities for CNNB customers, and create the premier community banking institution in the Cincinnati / Northern Kentucky market.”

As part of the deal, CNNB senior vice president Robert Bedinghaus, and Cincinnati Federal chief lending officer Gregory Meyers will be appointed to a consulting post in LCNB.

Also, the LCNB board of directors will appoint Robert Bedinghaus to the boards of LCNB and LCNB National Bank immediately after closing.

CNNB operates five full-service branch offices in Cincinnati, Ohio and Northern Kentucky.

The company had about $304.7m in assets, $262.9m in loans, $223.6m of deposits and $40.3m in consolidated stockholders’ equity, as of 31 March 2023.

Upon completion, LCNB is expected to have consolidated assets of around $2.3bn with 33 banking offices in Ohio and one branch office in Northern Kentucky.

The acquisition is expected to expand LCNB’s community banking franchise across the Ohio River into the Northern Kentucky market, along with its existing presence in the Cincinnati market.

Janney Montgomery Scott and Dinsmore & Shohl served as advisor to LCNB, while Piper Sandler & Co. and Luse Gorman served as advisor to CNNB, on this transaction.

CNNB chairman and CEO Robert Bedinghaus said: “We believe that our organizations will be very compatible, and we look forward to expanding our products and capacity to better serve our customers through this partnership with LCNB.

“The Cincinnati Federal team has tremendous customer relationships in our market. At times, we have been constrained by our lending limit and our funding base, and we have not been able to fully meet the needs of some of our customers.

“This will all change as we become part of a larger community bank in LCNB. In addition, LCNB has a broader array of products and services, including trust and wealth management, which will be helpful to our customers.”