Regions Bank places $1B bet on home renovation market

Specialty lender EnerBank USA works with network of 10,000 contractors

Regions Bank is looking to make a big dent in the home improvement lending space, striking a deal to acquire EnerBank USA for $960 million in cash.

EnerBank, a Utah-based subsidiary of publicly traded CMS Energy, has loan balances totaling $2.8 billion as of March 31, 2021 and is one of America’s largest specialized home improvement lenders.

The Salt Lake City-based lender says it’s worked with over 1 million homeowners since its founding in 2002 and funded $11.6 billion in home improvement projects. EnerBank says it works with 10,000 contractors and develops personalized loan programs for their clients. EnerBank funds most of its loans on its balance sheet through FDIC-insured brokered CDs; it also charges fees to the contractors.

Regions, a retail lender with a footprint of over 1,300 physical offices, has dipped into specialty finance sectors before. In 2020 it acquired equipment finance lender Ascentium Capital and a year prior picked up institutional investment firm Highland Associates.

“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,” said Scott Peters, Regions’ head of consumer banking. “EnerBank’s platform and skilled financial professionals, combined with the reach and experience of Regions’ consumer banking teams, will help us deepen relationships with clients while reaching new customers with convenient home improvement lending options.”

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The EnerBank team, led by Charlie Knadler, will join Regions as part of its consumer banking group reporting to Peters. It will maintain its headquarters in Salt Lake City. Regions’ acquisition of EnerBank from CMS is expected to close in the fourth quarter of 2021.

According to data from Polygon Research, Regions originated about $15 billion in loans in 2020, doing the majority of its business in the Southeast and Texas. It mostly originated cash-out refis and purchase mortgages in 2020, according to HMDA statistics in Polygon’s database.

Per a study from Harvard University’s Joint Center for Housing Studies, renovation financing is expected to increase 3.3% in 2021 to $433 billion.

The space remains dominated by depository banks. The top lender for home improvement loans in 2020 was PNC Bank, which issued 17,464 loans, worth $1.74 billion in volume in 2020. Bank of America followed closely with 17,056 home improvement loans worth $2.39 billion.

Given the growing interest to convert rooms into home offices and a lack of new inventory, non-depository banks are taking notice. Finance of America in May also announced the launch of Finance of America Home Improvement, a new business division that includes its acquisition of benji.

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