Heartland BancCorp, the holding company for Heartland Bank of Ohio, and Victory Bancorp, the holding company for Victory Community Bank of Kentucky, have signed an agreement under which Victory Community Bank will merge into Heartland Bank.

Under the terms of the agreement, Victory will receive 58,934 shares of Heartland BancCorp common stock and $35.5m in cash, subject to adjustment, for Victory Community Bank common stock that Victory owns. This will result in a transaction worth $41.1m based on the closing price of Heartland common stock on 29 November 2019.

Boards of directors of both firms and the shareholders of Victory have unanimously approved the merger.

The merger, subject to the receipt of regulatory approvals and other customary closing conditions, is expected to be completed in the second quarter of 2020.

After completion of the transaction, Victory Community Bank president and CEO John G ‘Jack’ Kenkel, Jr, will join Heartland’s board of directors.

The transaction value is approximately 161.3% of Victory’s tangible book value as of 30 September 2019 and 13 times its net income for the last 12 months.

The merger is expected to be around 12.2% accretive to Heartland’s earnings per share (EPS) in 2020 and 19.4% accretive to EPS in 2021.

The combined company will have assets of around $1.32bn.

DA Davidson & Co is acting as financial advisor and Hunton Andrews Kurth as legal counsel for Heartland, while Boenning & Scattergood is serving as financial advisor and Dinsmore & Shohl as legal counsel for Victory.

Victory Community Bank serves the Northern Kentucky and Greater Cincinnati area, with focus on residential mortgage lending.

The bank, which has three locations in Boone, Kenton and Campbell counties, had assets of $179m, a loan portfolio of $154m and a deposit base of $137m at 30 September 2019.

Heartland chairman and CEO G Scott McComb said: “This transaction expands Heartland’s presence in the attractive Northern Kentucky and Cincinnati markets and represents a complementary fit, both strategically and culturally, with Heartland’s business model.

“Victory’s strong non-interest income generation complements our own strategies and its loan portfolio provides diversity to our balance sheet.”