OMAHA, Neb. -- CIT Group is buying Mutual of Omaha Bank for $1 billion to expand its commercial banking operations.
The deal would mean the end to the Mutual of Omaha's foray into the banking sector, which began in 2007.
About $4.5 billion of Mutual of Omaha's $6.8 billion in deposits come from homeowners' associations and other community groups nationwide, giving CIT Group more exposure to those loose knit networks.
CIT Chairwoman and CEO Ellen Alemany said the deal creates a new growth opportunity with the bank vying to serve more of the roughly 350,000 homeowners' associations nationwide.
Mutual of Omaha CEO James Blackledge said Tuesday that the deal will allow the bank to grow while Mutual invests in its main business.
"This transaction allows Mutual of Omaha to focus on, and invest in, growth in its core insurance businesses," Blackledge said
Citi research analyst Arren Cyganovich said the deal is attractive because of Mutual of Omaha's deposits, which carry a lower cost than CIT's.
CIT plans to pay mostly cash for Mutual of Omaha Bank, but it has the option to include up to $150 million of CIT shares in the $1 billion price.
CIT said it expects to cut about $54 million in expenses after it acquires the bank early next year. Those cuts will be made over the first three years after the deal.
Mutual of Omaha Bank, based in Omaha, Nebraska, has 26 branches mostly across Western and Plains states. Their locations complement CIT's existing network with the only overlap coming in Houston, Dallas and Los Angeles.