NEW YORK (The Deal) -- CIT Group (CIT - Get Report) said Tuesday it would acquire southern California regional lender OneWest Bank in a $3.4 billion deal that would combine two lenders battered by the 2008 recession.

Terms of the deal call for New York-based CIT to pay $2 billion in cash and 31.3 million of its common shares for IMB Holdco, parent of OneWest. CIT said that it intends to combine OneWest with its own banking unit, creating a subsidiary with $67 billion of assets and $28 billion of deposits.

Pasadena, Calif.-based OneWest has $23 billion of assets and operates 73 retail branches in southern California. The bank, formerly IndyMac Bancorp, was seized by the Federal Deposit Insurance Corp. in 2009 and sold for $1.55 billion to a private consortium that included IMB Holdco chairman Steve Mnuchin as well as investments from J. Christopher Flowers, John Paulson and George Soros, among others.

For CIT, which itself fell into bankruptcy in 2009 after suffering losses during the financial crisis, the deal continues a turnaround being orchestrated by one time Merrill Lynch and NYSE Group CEO John A. Thain. The CEO in a statement said buying OneWest would lower CIT's cost of deposits and broaden the menu of products his firm can offer middle market clients.

"This transformational transaction will combine CIT's national middle market lending platform with OneWest's wholesale lending and branch banking franchise to create a unique provider of retail and institutional financial services," Thain said. "We look forward to welcoming OneWest Bank's talented employees to CIT as we build our franchise and meet the financing needs of our customers."

The deal also reunites two Goldman Sachs (GS - Get Report) alums. Post-deal Thain, head of Goldman's mortgage securities business from 1985 to 1990, will continue as chairman and CEO, with one time Goldman partner Mnuchin expected to join the board as vice chairman and current OneWest director Alan Frank also added to CIT's expanded board.

Mnuchin in a statement said "I look forward to joining the CIT board, and to ensuring a smooth integration of CIT Bank and OneWest for the benefit of both companies' stakeholders."

JPMorgan Securities (JPM - Get Report) is serving as financial adviser to CIT, with a Wachtell Lipton Rosen & Katz team including partners Edward D. Herlihy, David C. Karp, Richard K. Kim, Jeannemarie O'Brien and Joshua M. Holmes serving as CIT's legal counsel.

IMB Holdco took financial advice from Goldman Sachs and Bank of America Merrill Lynch (BAC - Get Report) with Christopher Austin, Benet O'Reilly, Arthur Kohn, Yaron Reich and Katherine Carroll of Cleary Gottlieb Steen & Hamilton acting as legal counsel.

A Sullivan & Cromwell team of H. Rodgin Cohen, Mitchell S. Eitel and Camille L. Orme is serving as joint regulatory counsel for CIT and IMB Holdco.