On January 1, 2020, CIT Bank acquired MOB, the savings bank subsidiary of Mutual of Omaha Insurance Company and OFHI, for approximately $1 billion in exchange for 100% of all outstanding shares of MOB common stock. The consideration was comprised of approximately $850 million in cash and approximately 3.1 million shares of CIT Group Inc. common stock (valued at approximately $141 million based on the closing market price on December 31, 2019, the last trading price before the acquisition).

The acquisition enhances CIT’s deposit and commercial banking capabilities, by adding a new channel of deposits related to homeowners’ associations (“HOA”) and enhances CIT’s middle-market commercial banking business through the addition of relationship banking teams and expanded product and technology solutions. The acquisition was accounted for as a business combination.

Assets acquired totaled approximately $8.6 billion, including $121.6 million of goodwill and $102.6 million of intangible assets and included $7.6 billion of assumed liabilities and 25 bank branches. The assets acquired, liabilities assumed and consideration exchanged were recorded at their preliminary estimated fair value on the acquisition date.

Purchase price	$	993.1
Recognized amounts of identifiable assets acquired and liabilities assumed, at fair value
Assets
Cash and interest-bearing cash	$	123.1
Investment securities		1,717.6
Loans		6,297.9
Other assets		199.5
Total assets	$	8,338.1
Liabilities
Deposits	$	6,992.9
Securities sold under agreements to repurchase		193.2
Other liabilities		93.1
Borrowings		290.0
Total liabilities	$	7,569.2
Total fair value of identifiable net assets		768.9
Intangible assets		102.6
Goodwill	$	121.6

The determination of estimated fair values required management to make certain estimates about discount rates, future expected cash flows (that may reflect collateral values), market conditions at the time of the acquisition and other future events that are highly subjective in nature and may require adjustments. As of March 31, 2020, the final purchase price remains subject to true up adjustments pursuant to the Agreement and Plan of Merger which provides CIT the opportunity to review the seller’s final consolidated balance sheet as of the closing date, and the purchase price allocation and fair value measurements remain preliminary due to the timing of the acquisition. CIT continues to review information relating to events or circumstances existing at the acquisition date and expects to finalize its analysis of the acquired assets and assumed liabilities over the next few months, within one year of the acquisition. Management anticipates that this review could result in adjustments to the acquisition date valuation amounts presented herein but does not anticipate that these adjustments would be material.

The Company acquired cash and interest-bearing cash of $123.1 million, which includes cash on deposit with the FRB and other banks, deposits in transit, vault cash and highly liquid money market investments with original maturities of three months or less. Given the short-term nature and insignificant risk of changes in value because of changes in interest rates, the carrying amount of the acquired cash and interest-bearing cash was determined to equal the fair value.

The Company acquired a portfolio of debt securities and other equity investments valued at approximately $1.7 billion as of the acquisition date. The debt securities portfolio contains U.S. Government guaranteed / sponsored agency commercial and residential mortgage-backed securities, private label asset-backed securities and state and municipal bonds. These securities are classified as AFS debt securities. The acquisition date fair value of the securities was based on third-party dealer quotes which reflect exit prices pursuant to the guidance on fair value measurement.

The acquired loan portfolio, with an aggregate unpaid principal balance (“UPB”) and a fair value of approximately $6.3 billion at the acquisition date, is comprised of various types of loan products. The loan portfolio has been bucketed considering similar risk characteristics and product types and was further segmented into a commercial loan portfolio and a consumer loan portfolio to align with CIT’s business segmentation. The following table presents the loan valuations by division in each segment.

Loans (dollars in millions)	UPB		Fair Value
Commercial Banking
Commercial Finance	$	2,316.4	$	2,249.4
Real Estate Finance		2,107.3		2,106.4
Consumer Banking
Consumer and Community Banking		1,926.7		1,942.1
Total loans	$	6,350.4	$	6,297.9

The acquired loan portfolios above were valued using the direct method under the income approach. The income approach derives an estimate of value based on the present value of the projected future cash flows of each loan using a discount rate that incorporates the relevant risks associated with the asset and time value of money. To perform the valuation, the loan portfolio was divided into approximately twenty cohorts based on risk characteristics, nature and collateral of the underlying loans and product type. The loan cohorts were further bifurcated for fixed and adjustable rate loans and then stratified based on credit risk rating for commercial loans and FICO scores for consumer loans. The key cash flow assumptions related to the above acquired loan portfolios were: prepayment rate, default rate, severity rate and discount rate, as applicable.

The Company applied the recovery approach to value the commercial loans identified as individually impaired loans. The fair value of the loans was estimated by discounting the estimated recovery amount to be collected at the selected discount rate through the expected liquidation timeline of each loan. The discount rate and liquidation timeline were selected based on market observations for these types of assets.

The table below summarizes the key valuation input assumptions by division for the acquired loans, excluding the individually impaired loans:

	Discount Rate		Severity Rate		Prepayment Rate		Default Rate
Loan portfolio	Range	Weighted Avg.	Range	Weighted Avg.	Range	Weighted Avg.	Range	Weighted Avg.
Commercial Banking
Commercial Finance	3.25% -15.50%	4.33%	15.00% - 60.00%	18.59%	1.25% - 26.75%	17.99%	0.25% - 7.00%	1.90%
Real Estate Finance	3.25% - 5.50%	3.86%	15.00% - 30.00%	18.37%	0.50% - 26.75%	17.77%	0.10% - 7.00%	2.67%
Consumer Banking
Consumer and Community Banking	2.50% - 6.75%	3.42%	5.00% - 35.00%	9.95%	1.50% - 30.0%	21.93%	0.05% - 7.00%	0.33%

The goodwill recorded is attributable to advancing CIT’s bank deposit strategy by establishing a leading market share in HOA banking, improving CIT’s competitive position in the financial services industry, and the related synergies that are expected to result from the acquisition. The $121.6 million of preliminary goodwill recorded represents the excess of the purchase price over the estimated fair value of the net assets acquired by CIT, including intangible assets. See Note 18 – Goodwill and intangible assets for a description of goodwill recognized. Goodwill related to this transaction is deductible for income tax purposes.

The following table presents the intangible assets recorded in conjunction with the MOB Transaction related to the valuation of core deposits, customer relationships and trade name.

Intangible Assets (dollars in millions)	Fair Value		Estimated Useful Life	Amortization Method
Core deposit intangibles	$	96.1	10 years	Straight line
Customer relationships		3.5	10 years	Accelerated
Trade name		3.0	10 years	Straight line
Total intangible assets	$	102.6

See Note 18 – Goodwill and Intangible assets for further discussion of the accounting for goodwill and other intangible assets.

Other assets of $199.5 million include $45.5 million of Right of Use (“ROU”) assets related to the application of ASC 842, $23.9 million of equity investments, $19.9 million of fair value on derivative instruments, $16.0 million of accrued interest receivable on loans, $14.9 million of property, furniture and fixtures, $12.5 million of technology assets, $10.3 million of Mortgage Servicing Rights (“MSR”) and $56.6 million of other assets.

As of the acquisition date, MOB held investments in certain restricted equity, low income housing tax credits (“LIHTC”), equity equivalents in not for profits, limited partner interests in CRA funds and FHLB Stock. The fair value of the LIHTC investments considered the ongoing equity installments that are regularly allocated to each of the underlying tax credit funds comprising the LIHTC Investments, along with changes to projected tax benefits and the impact this has on future capital contributions, and an appropriately determined discount rate. At acquisition, MOB also held equity interests in four limited partnerships, which have been valued using the net asset value (“NAV”) published by each fund.

The acquisition included various property, furniture and fixtures inclusive of leasehold improvements. CIT considered the income, market and cost approaches in estimating the fair value of the property, furniture and fixtures. Leasehold improvements, machinery and equipment and computer software were valued under the cost approach. Computer hardware was valued using

the percent of cost method under the market approach. Office furniture and equipment were valued under market and cost approaches. The fair value of the property, furniture and fixtures was estimated at $14.9 million. In addition, certain acquired technologies used to carry out day-to-day business activities were valued using the cost replacement method resulting in an assessed value of $12.5 million.

The Company acquired MSRs, which represent a contract for the right to receive future revenue associated with the servicing of financial assets and thus are considered a non-financial asset. The estimated fair value of the MSRs was valued under the income approach using the discounted cash flow model which utilizes certain key assumptions including prepayment speed, discount rates and cost to service.

Deposits of $7.0 billion includes $1.2 billion of certificate of deposits (“CDs”), which allow depositors to lock in interest rates for varying periods of time, and $5.8 billion of deposits with no stated maturities. CDs had contractual maturities ranging from 30 days to 5 years. These deposits were valued using the indirect method of the income approach, which is based on discounting the cash flows associated with the CDs. Value under the indirect method was a function of the projected contractual cash flows of the CDs and a credit adjusted discount rate, as observed from similar risk instruments. In order to best capture the features and risks of the CDs, they were grouped along two dimensions; maturity groups, based on the remaining fixed term of the deposits (e.g., 0 to 1 year, 1 to 2 years, etc.), and balance (e.g., less than $100,000 and greater than or equal to $100,000).

The valuation of term deposits resulted in a purchase accounting adjustment (“PAA”) premium of $14.3 million. For non-maturity deposits (primarily checking, savings and money market deposits), the fair value was assumed to equal the carrying value, therefore no PAA was recorded.

Securities sold under agreements to repurchase (“Repos”) of $193.2 million were accounted for as collateralized financing transactions as the terms of sale agreements do not qualify for sale accounting and are therefore recorded at the amount of cash received. Accrued interest payables are recorded in Other liabilities. Interest incurred is recorded in Interest expense. Repos are collateralized by securities reported as assets on the condensed Consolidated Balance Sheets. The fair value of collateral is monitored daily and additional collateral is provided or excess collateral is returned for margin maintenance purposes. All Repos were overnight and collateralized by securities issued or guaranteed by U.S. government/sponsored agencies. Given that the Repos mature each business day, the carrying values were assumed to approximate the fair value.

Borrowings reflects the Federal Home Loan Bank (“FHLB”) advances of $290.0 million. The fair value is assumed to be equal to the outstanding balance since these advances mature the next day with the interest rate set to the overnight market rate.

Other liabilities of $93.1 million includes lease liabilities related to the application of ASC 842 Leases, various amounts accrued for compensation related costs and other payables.

The amount of MOB interest income, non-interest income and net loss of $74.7 million, $14.1 million and $92.6 million, respectively, were included in CIT’s Consolidated Income Statement for the quarter ended March 31, 2020.The MOB net loss includes $44.8 million of MOB Day 1 provision for credit losses related to the non-PCD loans. Upon integrating MOB, complete separate records for MOB as a stand-alone business will not be maintained as the operations will be fully integrated into CIT. MOB’s interest income, non-interest income and net income noted above reflect management’s best estimates, based on information available at the reporting date.

The following table presents certain unaudited pro forma financial information for illustrative purposes only, for the quarters ended March 31, 2020 and 2019 as if MOB had been acquired on January 1, 2019. The unaudited estimated pro forma information combines the historical results of MOB with the Company’s consolidated historical results and includes certain adjustments for the respective periods. The key adjustments made to reflect the pro forma results as if the acquisition occurred on January 1, 2019 are the (a) removal of the MOB Day 1 provision for credit losses noted above; (b) transfer of $17.1 million of merger and integration costs from 2020 to 2019; and (c) inclusion of estimated PAA on interest income and interest expense and the recording of intangible asset amortization in 2019. CIT expects to achieve operating cost savings and other business synergies as a result of the acquisition that are not reflected in the pro forma amounts that follow. The pro forma information is not indicative of what would have occurred had the acquisition taken place on January 1, 2019. Therefore, actual results may differ from the unaudited pro forma information presented and the differences could be significant.

Selected Unaudited Pro Forma Financial Information for Consolidated CIT (dollars in millions)

	Quarters Ended March 31,
	2020			2019
Interest income	$	513.6		$	601.1
Non-interest income		340.4			318.9
Net (loss) income	$	(577.1	)	$	127.0

There were no discontinued operations as of March 31, 2020 and December 31, 2019. Loss from discontinued operations of $0.3 million reflects the activities of the Business Air and Financial Freedom businesses for the quarter ended March 31, 2019. Net cash flows used in operations totaled $5.1 million and net cash provided by investing activities totaled $23.4 million for the quarter ended March 31, 2019. See the Company’s 2019 Form 10-K, Note 2 – Discontinued Operations, for further information.