LCNB Corp (LCNB) Enters Deal to Acquire Cincinnati Bancorp
LCNB Corp. LCNB has entered an agreement to acquire Cincinnati Bancorp, Inc. CNNB in a stock-and-cash transaction. Closing of the deal, subject to regulatory approval, CNNB shareholder approval and other customary conditions, is expected in the fourth quarter of 2023. The approval of LCNB shareholders is not required.
Terms of the Deal & Financial Impact
The total deal value is calculated at $43.7 million.
Per the terms of the transaction, CNNB shareholders will have the opportunity to elect to receive either 0.9274 shares of the LCNB stock or $17.21 per share in cash for each share of the CNNB common stock owned, subject to 80% of all CNNB shares being exchanged for LCNB common stock.
The deal is expected to significantly increase LCNB’s existing presence in the Cincinnati market and expand LCNB’s community banking franchise across the Ohio River into the compelling Northern Kentucky market.
Excluding one-time transaction costs, LCNB expects the transaction to be 18.2% and 26.2% accretive to 2024 and 2025 fully diluted earnings per share, respectively.
The after-tax one-time transaction costs estimated to be incurred by LCNB are $7.3 million.
The merger is expected to result in a tangible book value per share dilution of 6.6% at closing, with an expected tangible book value earn-back of 2.3 years using the crossover method.
Post the merger, LCNB is estimated to have consolidated assets of $2.3 billion, with 33 banking offices in Ohio and one branch office in Northern Kentucky. Also, Cincinnati Federal branches will become branches of LCNB National Bank.
Management Comments
Eric Meilstrup, the president and CEO of LCNB, stated, “We are excited to announce this transaction. Cincinnati Federal, its Board of Directors and 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.”
He added, “We share the same goals and culture that the executive management team has established at Cincinnati Federal. 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.”
Robert Bedinghaus, the chairman and CEO of CNNB, said, “We are very pleased to join forces with LCNB and continue our growth in the Cincinnati market. We greatly admire the community-focused approach that LCNB brings to banking, as well as their long history of success. 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.”
Bedinghaus added, “We also believe that our employees will continue to grow and thrive as part of a larger community bank with such an outstanding reputation. Based on the consideration mix of 80% stock/20% cash, LCNB’s closing price of $15.65 on May 17, 2023, and the special dividend declared by CNNB on April 20, 2022, the transaction represents a 162.3% total return to our original shareholders and a 60.5% total return for those shareholders that invested in our second-step offering in January 2020. Our shareholders will also benefit from having the opportunity to elect to receive a more liquid stock that offers a very attractive dividend yield. On a per-share-equivalent basis, CNNB shareholders would receive a pro forma annual dividend of $0.78 per share based on LCNB’s current quarterly dividend.”
Post the merger, Bedinghaus and Gregory Meyers, the senior vice president and chief lending officer of CNNB and Cincinnati Federal, will join LCNB in a consulting capacity to assist with employee and customer integration.
Also, LCNB’s board of directors intends to appoint Bedinghaus to the boards of LCNB and LCNB National Bank immediately after closing.
Over the past six months, shares of LCNB have lost 15% compared with the industry’s decline of 29.8%.
Image Source: Zacks Investment Research
Currently, LCNB carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Inorganic Expansion Efforts by Other Banks
Amid a challenging operating backdrop due to expectations of economic slowdown, banks are undertaking expansion moves through acquisitions. Recently, Bank of Montreal BMO announced the closure of its acquisition of Bank of the West from BNP Paribas BNPQY.
With this deal, BMO expanded its presence across more than 500 additional branches and commercial and wealth offices in major U.S. growth markets. For BNPQY, the sale is part of its efforts to streamline operations and enhance operating efficiency.
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