Capitol Federal Financial in Topeka, Kan., has agreed to buy Capital City Bancshares in Topeka.

The $9.1 billion-asset Capitol Federal said in a press release Monday that it will pay $37.5 million for the $434 million-asset parent of Capital City Bank. The deal, which is expected to close by the end of October, priced Capital City at 141% of its tangible book value.

Capital City, which is owned by the Sabatini family, has 11 branches in several Kansas communities.

With the acquisition, Capitol Federal will enter commercial banking for the first time in its 125-year history. The company said it will introduce commercial loans and deposits in its own branches after the deal closes.

“We are pleased to be merging with Capital City … to introduce a full commercial banking experience to our customer base and communities,” John Dicus, Capitol Federal’s chairman and president, said in the release. “We are able to complete this merger and remain under $10 billion in assets, allowing us to continue our current dividend policy of paying 100% of earnings, while providing a positive upside."

The deal is expected to be 3% accretive to Capitol Federal’s 2019 earnings per share, increasing to the “mid-single digits” in 2020. It should take less than three years to earn back the expected 0.8% dilution to Capitol Federal’s tangible book value.

Bob Kobbeman, Capital City’s president and CEO, will join Capitol Federal to run the new commercial banking division.

Sandler O'Neill and Silver, Freedman, Taff & Tiernan advised Capitol Federal. The Capital Corp. and Stinson Leonard Street advised Capital City.

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