Capitol Federal Financial has reached an agreement to acquire Capital City Bancshares (CCB) as part of its strategy to foray into commercial banking business.

Capitol Federal is the parent company of Capitol Federal Savings Bank while CCB is the holding company of Capital City Bank, which offers commercial, personal, trust, and brokerage products and services.

Pursuant to the agreement, CCB and Capital City Bank will merge with and into Capitol Federal and Capitol Federal Savings Bank, respectively.

The joint company would have had pro-forma total assets of $9.5bn, gross loans of $7.5bn, deposits of $5.7bn and an equity position of about $1.4bn, as at 31 March 2018.

Capitol Federal chairman and president John Dicus said: “We are pleased to be merging with Capital City Bank to introduce a full commercial banking experience to our customer base and communities.

In addition, we are able to complete this merger and remain under $10bn in assets, allowing us to continue our current dividend policy of paying 100% of earnings, while providing a positive upside.”

“We are excited that Bob Kobbeman, Capital City Bank’s president and CEO, will be joining Capitol Federal Savings to run this new commercial banking division for our Company.”

For each of the outstanding shares of CCB common stock, its stockholders will receive 3.725 shares of Capitol Federal’s common stock. Capitol Federal will issue about three million shares of its common stock based on this fixed exchange ratio.

Based on Capitol Federal’s closing price of $12.64 as of 27 April 2018, this represents a value of $47.08 per CCB common share, and an aggregate deal value of $37.5m.

The merger is likely to close by the end of October 2018, subject to customary closing conditions, including receipt of required regulatory approvals.