Level One Bancorp Inc.'s $67.8 million tie-up with Ann Arbor Bancorp Inc. will provide a "great lift to earnings" after the deal closes, Level One CFO David Walker said.
Walker, speaking on a call with analysts, said the deal should provide about 25% accretion to earnings in the first year, and about 30% after that.
"The payback is a little bit on the longer side at 4.7 years, but I think that's somewhat mitigated by the fact that we had done the equity raise and last year at a higher price," Walker said.
The all-cash transaction allows Level One to establish a larger footprint in the Ann Arbor market, which, according to Walker, is one of the fastest-growing and most attractive markets in the state.
Walker said the bank has had the market in its sights for some time.
"We think we are deploying our capital in a very responsible way, and we have been patient to find perhaps one of the most attractive opportunities in the state of Michigan, and the one that is continuous with us," Walker said.
Ann Arbor State Bank has more than $320 million in assets and growing, Level One Chairman, President and CEO Patrick Fehring Jr. said during the call. The combined bank will have more than $1.8 billion in assets.
"It's clearly a very attractive a market that we were already moving into," Walker said. Overall, the acquisition will "provide some good core deposit funding, above-average loan growth, very clean asset quality, [and] conservative assumptions in our analysis," Walker added.
Shares of Level One were trading up 2.59% as of 12:45 p.m., while the broader S&P 500 was up 1.62%.