Regions Financial : Bank to Acquire EnerBank USA - pdf, 652KB, opens in a new window

Regions Bank to Acquire EnerBank USA

a Point-of-Sale Home Improvement Loan Originator

June 8, 2021

EnerBank USA Acquisition

Company Overview

Portfolio Overview

• Headquartered in Salt Lake City, UT, EnerBank USA originates prime and super-prime home improvement point-of-sale loans through a national network of contractors
• A top 5 originator in the home improvement point-of-sale space, one of the fastest growing segments in consumer lending
• Experienced and tenured management team with nearly 20-yeartrack record operating in a regulated bank environment
• EnerBank is owned by CMS Energy, a Michigan- based energy company
• • Non-corebusiness for CMS

LTM Originations Heat Map(1)

~55% of LTM originations in Regions retail footprint

Top Home Improvement Projects Financed

Pools

HVAC

Solar

Roofing & Siding

Windows & Doors

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1. LTM as of March 31, 2021; (2) Loan size is on average $14,000 with weighted average life of ~3 years; (3) On average, 6-7% of the loan yield is paid by the consumer, 2-3% is paid by the contractor; (4) $2.7B of outstanding non-transaction deposits; WAL of deposits is ~2 years; Regions will replace EnerBank's funding base over time

EnerBank USA Acquisition

Home Improvement Point-of-Sale Financing Deepens Regions' Commitment to Being the

Premier Lender to Homeowners

Regions has been on a multi-year journey investing in products, services and omni-channel origination capabilities central to Mortgage Lending, Mortgage Servicing and Home Equity Lending. As a result of these investments, Regions has continued to gain share through customer growth and deepening existing relationships with over four million households

Home improvement point-of-sale finance complements these investments, extends our suite of home-centric lending products and accelerates our vision to be the premier lender to homeowners

Regions' extensive risk and product experience in home improvement point-of-sale finance, developed through a legacy partnership with a third-party home improvement loan originator, strengthened our interest in permanently adding this capability to the Regions franchise

Other Strategic Benefits

The business generates strong financial returns with proven performance through economic cycles

Fixed-rate loan portfolio diversifies Regions' balance sheet

Strong cultural fit with EnerBank's risk management-oriented leadership team and proven underwriting processes

Significant opportunity to deepen relationships with EnerBank's customers through our traditional banking product suite

Alignment with Inorganic Growth Strategy

The acquisition of EnerBank continues Regions'

strategy of acquiring businesses that help

deepen relationships with customers by serving more of their needs through new channels, products & capabilities

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EnerBank USA Acquisition

Proven Performance Through Cycles

Prime/Super-prime focus and well controlled underwriting processes have generated best in class credit metrics through economic cycles

	Historical NCOs as a % of Average Loans
		NCOs peaked at
4.00%		2.19% during the
	2008 Crisis
		Deferrals during
2.00%		COVID peaked
	around 2%

-%

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 (1)

Financial Upside

• Limited cost and no revenue synergies modeled
• Tangible potential for revenue synergies by deepening consumer and SMB relationships with RF full product set
• Opportunity to deploy current excess liquidity into high growth loan portfolio

Modeling Considerations

(1) 2021 is LTM as of March 31, 2021; (2) Merger of EnerBank into Regions Bank is structured as an asset purchase for tax purposes; Step-up

calculated based on current tax rates; (3) Balance as of 3/31/2021; (4) Estimated Fair Value based on current market conditions and excluding4 impact of Day 1 CECL double-count; (5) Estimated Day 1 CECL double-count is ~$115 million, after-tax; (6) Assumes provision equals charge-offs

over time and includes RF cost of funds; (7) PAA - "Purchase Accounting Adjustments"; No foregone share repurchase scenario for illustrative purposes only; (8) Includes CECL double-count and foregone share repurchases to fund transaction; (9) Excludes the impact of PAA

EnerBank USA Acquisition

		Preliminary Capital Impacts
▪	Regions has established a CET1 operating range of
	9.25-9.75% with the intent of operating at
	approximately the midpoint of that range over the
	near-term
▪	The EnerBank acquisition is not expected to impact
	this operating range or near-term expectations for
	capital
	◦	The operating range is informed by internal
		stress testing performance
	◦	This transaction is not expected to
		meaningfully impact stressed performance
▪	Acquisition redirects capital dollars currently	Capital
	earmarked for share repurchases to strategic
	investment, which is a higher priority for capital	edirecting
	•	As a result, CET1 forecast at year end does
	deployment
		not materially change due to the transaction	R

Capital Deployment Priorities

1.) Organic Growth

2.) Sustainable Growth of Dividends

3.) Targeted Strategic Investments

4.) Share Repurchases

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