Based in Nebraska, Mutual of Omaha Bank offers a variety of financial solutions to individuals, businesses and groups in the US

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Mutual of Omaha Bank to be acquired by CIT Bank (Credit Pixabay)

CIT Group said its banking subsidiary CIT Bank has agreed to acquire Mutual of Omaha Bank, the savings bank subsidiary of Nebraska-based Mutual of Omaha, for $1bn (£830m) in a cash-cum-stock deal.

The purchase price will be primarily in cash and up to $150m (£124.41m) in shares.

Based in Delaware, CIT holds nearly $50bn (£41.47bn) in assets as of 30 June 2019. The company’s commercial banking business includes commercial financing, real estate financing, factoring, equipment financing, and railcar financing.

CIT’s consumer banking segment comprises CIT Bank — the group’s national online bank, and OneWest Bank — a Southern California branch bank.

Mutual of Omaha, established in 1909, provides a range of insurance and financial products for individuals, businesses and groups in the US.

The deal is expected to help CIT diversify and boost its funding profile with stable, lower-cost deposits from Mutual of Omaha Bank’s homeowner’s association (HOA) banking business. Apart from that, it will further CIT’s strategic plan, extend its commercial banking capabilities and improve profitability.

CIT said that the acquisition of Mutual of Omaha Bank also complements its focus on catering to small and midsized businesses with solutions, financing and deposit products.

What CIT gains from the acquisition of Mutual of Omaha Bank

Included in the transaction are $6.8bn (£5.64bn) in deposits, of which $4.5bn (£3.73bn) are HOA deposits from more than 31,000 community associations across the US, with the remaining $2.3bn (£1.91bn) from commercial and consumer financial centres in important markets.

Additionally, CIT will be adding $8.3bn (£6.88bn) of total assets, which includes $3.9bn (£3.23bn) of middle-market commercial loans through the transaction.

The deal excludes Synergy One Lending, the mortgage subsidiary of Mutual of Omaha.

CIT chairwoman and CEO Ellen 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.”

Post-acquisition, CIT will have nearly $42.1bn (£34.92bn) of total deposits and $58.9bn (£48.85bn) of total assets.

Mutual of Omaha chairman and CEO James Blackledge said: “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.

“This transaction allows Mutual of Omaha to focus on, and invest in, growth in its core insurance businesses.”

The deal, which is subject to regulatory approval and meeting of other customary closing conditions, is expected to be completed in the first quarter of 2020.