Regions buying industrial loan company EnerBank USA

Regions Financial in Birmingham, Alabama, has agreed to buy a Salt Lake City home improvement lender as part of a broader effort to beef up its home lending business.

The $153 billion-asset Regions said Tuesday that it will pay $960 million for EnerBank USA, an industrial loan company. The deal is expected to close in the fourth quarter.

EnerBank offers digital and phone-based point-of-sale lending capabilities, which Regions said would complement its own recent investments in mortgage and home equity lending.

“We have thoughtfully evaluated the home improvement point-of-sale lending space for a number of years, and we believe this is the right partner at the right time to deliver on our vision,” Scott Peters, Regions’ head of consumer banking, said in a press release.

If approved by regulators, the deal would be the latest in a series of bolt-on acquisitions for Regions. Early in 2020, it acquired Ascentium Capital, an equipment finance firm based in Texas. And in 2019, it bought Highland Associates, a Birmingham-based asset management firm focused on the health care industry.

That same year, Regions also exited its relationship with the point-of-sale home improvement lender GreenSky, saying that it wanted to pursue more direct relationships with consumers. The deal for EnerBank could allow it to do that.

Home Depot had applied to buy EnerBank in 2006, but dropped its application in 2008 amid debate over whether retailers should be allowed to own ILCs such as EnerBank.

Currently owned by CMS Energy, a Michigan energy company, EnerBank had approximately $2.8 billion in loans as of March 31. It lends in all 50 states and has worked with over 1 million homeowners and 10,000 contractors since it was founded 20 years ago. President and CEO Charlie Knadler, along with EnerBank’s approximately 450 employees, would join Regions.

In an investor presentation, Regions also noted that EnerBank's portfolio is made up of primarily prime and super-prime consumers; borrowers have an average FICO score of 763.

Stephens Inc. served as financial advisor to Regions in connection with the transaction, and Sullivan & Cromwell served as Regions’ legal counsel. Goldman Sachs served as financial advisor to CMS Energy, and Skadden, Arps, Slate, Meagher & Flom served as legal counsel to CMS Energy.