Pasadena, Calif.-based CIT Bank NA agreed to acquire Mutual of Omaha Bank for $1 billion.

The purchase price will be composed of cash and up to $150 million of CIT common shares. The deal includes $6.8 billion in deposits, which includes $4.5 billion of homeowner's association deposits, and $8.3 billion of total assets, which includes $3.9 billion of middle-market commercial loans. On a pro forma basis, New York-based CIT Group Inc. said it will have about $42.1 billion of deposits and $58.9 billion of total assets.

As of June 30, CIT Group had total assets of $50.56 billion, and Mutual of Omaha Bank had total assets of $8.52 billion, according to S&P Global Market Intelligence data.

The deal is expected to close in the first quarter of 2020, and it does not include Synergy One Lending Inc., also a unit of Mutual of Omaha Insurance Co.

S&P Global Market Intelligence calculates that the deal is 98.1% of common equity and 124.9% of tangible common equity and 10.9x earnings, on an aggregate basis. The deal value is 11.74% of assets, 14.72% of deposits, and the tangible book premium-to-core deposits ratio is 3.23%.

S&P Global Market Intelligence valuations for bank and thrift targets in the Midwest region between Aug. 13, 2018, and Aug. 13, 2019, averaged 155.19% of book and 156.61% of tangible book and had a median of 19.94x last-12-months earnings, on an aggregate basis.

CIT will enter Arizona with seven branches to be ranked No. 19 with a 0.40% share of approximately $131.67 billion in total market deposits and Nebraska with seven branches to be ranked second with an 8.18% share of approximately $64.42 billion in total market deposits. It will also enter Nevada with four branches to be ranked No. 16 with a 0.16% share of approximately $274.22 billion in total market deposits, Texas with three branches to be ranked No. 281 with a 0.02% share of approximately $881.90 billion in total market deposits and Florida with three branches to be ranked No. 124 with a 0.03% share of approximately $596.3 billion in total market deposits.

The company will also enter Colorado with one branch to be ranked No. 101 with a 0.04% share of approximately $137.65 billion in total market deposits and Kansas with one branch to be ranked No. 181 with a 0.07% share of approximately $74.62 billion in total market deposits. It will expand in California by one branch to be ranked 10th with a 2.26% share of approximately $1.42 trillion in total market deposits and enter Hawaii with one branch to be ranked No. 13 with approximately $44.84 billion in total market deposits.

CIT expects the deal to be accretive to 2020 EPS by 2%, based on CIT's consensus estimate with cost savings fully phased in, and EPS accretion is expected to grow to double digits over time. It also said the transaction will lower its deposit costs by about 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, which should increase to more than 100 basis points over two years.

CIT also said the deal will enhance its funding profile with lower-cost deposits coming from Mutual of Omaha Bank's homeowner's association banking business. The transaction is also anticipated to advance CIT's strategic plan, extend its commercial banking capabilities and enhance profitability.

J.P. Morgan Securities LLC is CIT Group's lead financial adviser and rendered a fairness opinion to the company's board, while Evercore also served as CIT Group's financial adviser. Sullivan and Cromwell LLP served as legal counsel to CIT. Keefe Bruyette & Woods is Mutual of Omaha's financial adviser, and Squire Patton Boggs is its legal counsel.

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