Level One Bancorp Inc. and Ann Arbor Bancorp Inc., the privately-owned parent company of Ann Arbor State Bank, have agreed to a merger.

Under the terms of the agreement, AAB shareholders will receive $38.50 per share in an all-cash transaction valued at $67.8 million.

Upon completion of the merger, the combined company will operate under the Level One name and have over $1.8 billion in assets, $1.4 billion in loans and $1.5 billion in deposits, based upon financials as of June 30.

“We are pleased to welcome the customers and team members of Ann Arbor State Bank to the Level One family. This merger aligns with our strategic growth goals and affords us an opportunity to accelerate our expansion in the very attractive Ann Arbor market," said Level One Bank President and CEO Patrick J. Fehring said in a statement. “Further, this transaction allows us to productively deploy the capital we raised during our 2018 initial public offering.”

Established in January 2009, Ann Arbor State Bank operates three banking locations in Michigan serving Washtenaw County with two offices and Jackson County with one office. As of June 30, it reported assets of $321 million, total loans of $230 million, total deposits of $262 million, and tangible common equity of approximately $40 million, or approximately 12.2% of assets.

Peter Schork, CEO at Ann Arbor State Bank, will join Farmington Hills-based Level One following completion of the merger.

“We are excited about partnering with a high-performing company that shares our values and entrepreneurial community banking culture. We find the business fit of the two organizations to be especially compelling, and we think our customers will benefit from the broader array of products and services and larger lending limit,” said Schork. “We are thrilled about being able to do even more in our markets with considerably greater scale.”

The merger agreement has been unanimously approved by the boards of directors of each company. The transaction is expected to close in the last quarter of 2019 or the first quarter of 2020 and is subject to closing conditions, including customary regulatory approvals and AAB shareholder approval. One current board member of AAB will be appointed to join the Level One and Level One Bank boards of directors.

Performance Trust Capital Partners LLC served as financial adviser, and Barack Ferrazzano Kirschbaum & Nagelberg LLP provided legal counsel to Level One. Sandler O’Neill + Partners, L.P. served as financial adviser and Varnum LLP served as legal counsel to AAB.