CIT Group and Mutual of Omaha signed a definitive agreement for CIT’s banking subsidiary CIT Bank to acquire Mutual’s savings bank subsidiary, Mutual of Omaha Bank, for a purchase price of $1 billion. The purchase price will be comprised primarily of cash and up to $150 million of CIT common stock, the amount of which will be determined by CIT.

The transaction will diversify and enhance CIT’s funding profile with stable, lower-cost deposits from Mutual of Omaha Bank’s market-leading homeowner’s association (HOA) banking business. In addition, it will advance CIT’s strategic plan, extend its commercial banking capabilities and enhance profitability.

The transaction includes $6.8 billion in deposits, $4.5 billion of which are HOA deposits from more than 31,000 community associations nationwide, and $2.3 billion of which are from commercial and consumer financial centers in key markets. In addition, $8.3 billion of total assets, including $3.9 billion of middle-market commercial loans, are part of the transaction, which adds to CIT’s growing franchise. On a pro forma basis, CIT will have approximately $42.1 billion of total deposits and $58.9 billion of total assets.

CIT Chairwoman and Chief Executive Officer Ellen R. Alemany said, “Following our multi-year strategic transformation, we entered the next phase of our plan focused on thoughtful growth and value creation. This transaction squarely aligns to those goals by immediately enhancing our deposit and commercial banking capabilities and improving our profitability. This is a unique opportunity to accelerate our strategic plan through the addition of a market-leading HOA deposit franchise, a broader set of product and technology solutions and an expanded business footprint that complements CIT’s existing franchise.”

“Mutual of Omaha Bank has a talented and dedicated team that built a successful, vibrant institution. The integration of Mutual of Omaha Bank into CIT creates great opportunity to leverage the strengths of both institutions,” said Mutual of Omaha Chairman and CEO James Blackledge. “This transaction allows Mutual of Omaha to focus on, and invest in, growth in its core insurance businesses.”

The transaction is expected to improve CIT’s deposit costs by approximately 20 basis points upon closing. The company’s return on tangible common equity ratio is expected to be enhanced by 80 basis points in 2020 and increase to more than 100 basis points over two years. The transaction is expected to be accretive to 2020 estimated earnings per share (EPS) by 2 percent, based on CIT’s consensus estimate with cost savings fully phased in, and EPS accretion is expected to grow to double-digits over time.

The transaction is expected to close in the first quarter of 2020, subject to regulatory approval and satisfaction of other customary closing conditions. The agreement excludes Mutual’s mortgage subsidiary, Synergy One Lending.

J.P. Morgan Securities served as lead financial advisor to CIT and rendered a fairness opinion to the CIT Board of Directors. Evercore also served as a financial advisor, and Sullivan and Cromwell served as legal advisor to CIT. Keefe, Bruyette & Woods served as financial advisor and Squire Patton Boggs served as legal advisor for Mutual of Omaha.

CIT Group is a financial holding company with over a century of experience and approximately $50 billion in assets as of June 30, 2019. The company’s commercial banking segment includes commercial financing, real estate financing, equipment financing, factoring and railcar financing.

Founded in 1909, Mutual of Omaha is a Fortune 500 organization offering a variety of insurance and financial products for individuals, businesses and groups throughout the United States.