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CIT Group to buy OneWest Bank for $3.4 billion

July 22, 2014, 12:37 PM UTC
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Kyle Bean for Fortune

Business lender CIT Group agreed to pay $3.4 billion to acquire a Southern California regional bank that operates under the OneWest Bank brand, a deal that is expected to boost CIT’s profits by 20% in 2016.

Under the terms of the deal, shareholders of OneWest’s privately held parent company IMB Holdco LLC will receive $2 billion in cash and 31.3 million shares of CIT (CIT) which are currently valued at $1.4 billion, assuming a stock price of $44.33. The deal was approved by boards of directors at both companies and is expected to close in the first half of next year.

OneWest is a small regional player in the massive banking industry, with fewer than 100 branches mostly located around Los Angeles. But in L.A., the bank has the second-largest share of deposits among L.A.-based banks.

The acquisition will more than double CIT’s deposits, which will increase to $28 billion, and also significantly lift the company’s assets to about $67 billion on a pro forma basis. CIT reported net income of $643 million last year, while OneWest’s income totaled $243 million.

With the acquisition, CIT will also gain a small retail banking presence, as OneWest operates 73 branches. CIT doesn’t have any branches of its own.

CIT is notable in the financial world as it is steered by Chief Executive John Thain, who previously led Merrill Lynch during the financial crisis. Shortly after Merrill was acquired by Bank of America, Thain left the merged company and later joined CIT in 2010.