First Merchants Corporation and Level One Bancorp executed a definitive merger agreement by which Level One will merge with and into First Merchants in a stock and cash transaction currently valued at approximately $323.5 million. Upon completion of the merger, Level One Bank will merge with and into First Merchants Bank.

Headquartered in Farmington Hills, MI, Level One Bank operates 16 banking center locations in southeastern Michigan. Level One Bank has total assets of $2.5 billion, total loans of $1.7 billion and total deposits of $2.1 billion, earning a 1.5% return on average assets and a 16.3% return on tangible common equity for the quarter ended Sept. 30.

The merger agreement provides that the common shareholders of Level One will have the right to receive 0.7167 shares of First Merchants common stock in a tax-free exchange and $10.17 in cash for each share of Level One common stock owned, currently an approximate 75% stock/25% cash mix. Based on the closing price of First Merchants common stock on Nov. 3 of $43.50 per share, the implied merger consideration for each share of Level One common stock is $41.35 per share. In addition, each share of Level One’s 7.5% non-cumulative perpetual preferred stock, Series B, outstanding immediately prior to the effective time of the merger will be converted into the right to receive one share of a newly created series of preferred stock of First Merchants with voting powers, preferences and special rights that are substantially identical to the Level One Series B preferred stock. First Merchants anticipates earnings per share accretion of approximately 10.4% in 2023 (the first full year of combined operations) and a tangible book value earn-back of 2.9 years.

The transaction is expected to be completed in the first half of 2022, subject to the affirmative vote of a majority of Level One common shareholders, regulatory approvals and other customary conditions. The combined company, which will conduct its banking business as First Merchants Bank, expects to complete its system integration during Q3/22.

First Merchants and Level One will have combined assets of approximately $17.6 billion and the combined company will have 122 banking offices across Indiana, Michigan, Ohio and Illinois.

“Like First Merchants, Level One Bank has a strong customer-focused history and a deep-rooted commitment to community banking,” Mark Hardwick, CEO of First Merchants, said. “We are excited they have chosen to become the newest member of the First Merchants family.”

“The [Level One] franchise contiguously extends First Merchants further into southeastern Michigan,” Mike Stewart, president of First Merchants, said. “Our operating approach is focused on enhancing the financial wellness and prosperity of the communities we serve. Consistent with our brand reputation, our service model reflects a genuine relationship-oriented way of meeting the financial needs of businesses and consumers within the communities we serve.”

Executives from Level One Bank that will be part of the executive team of First Merchants’ newly acquired territory will include Timothy Mackay, president of Level One Bank; Gregory Wernette, chief lending officer and corporate secretary; Eva Scurlock, risk management officer. Patrick Fehring, chairman and CEO of Level One Bank; Lani Barrett, chief human resources officer; and David Walker, CFO, will retire after completion of the merger.

“We believe our partnership with First Merchants will provide tremendous benefits to our customers, shareholders and communities as we look forward to continuing the legacy of exceptional customer service, local responsiveness and strong community engagement that has defined Level One Bank since it was founded in 2007,” Fehring said.

“This partnership brings together two organizations with very similar cultures and a go-to-market strategy that allows us to build upon our strong commercial banking performance while also leveraging the momentum and growth we have developed in consumer banking and residential mortgage lending in recent years,” Mackay said.

Stephens served as the financial advisor to First Merchants and Dentons Bingham Greenebaum was its legal advisor. Piper Sandler served as financial advisor to Level One and Barack Ferrazzano served as its legal advisor.