Under the agreement, Ashikaga would rename itself under a new holding company, in which Joyo shareholders would receive 1.170 shares for each Joyo share they own.
The share swap is expected to be carried out on Oct. 1 next year, the two companies said, after flagging the merger talks last week. Joyo Bank would delist on Sept. 28, 2016, they said.
Ashikaga, a little over one-third owned by Nomura Holdings Co 8604.T, is based in Tochigi Prefecture, about 130 km (80 miles) north of the capital, Tokyo. Joyo Bank is headquartered in neighboring Ibaraki Prefecture.
The combined bank would have 15.2 trillion yen ($126.3 billion) in assets.
Reporting by Taiga Uranaka; Editing by Clarence Fernandez
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