Notes Receivable

12 Months Ended

Dec. 31, 2018

Accounts, Notes, Loans and Financing Receivable [Line Items]

Notes Receivable

Notes Receivable

Presented in the following table are details of CMS Energy’s and Consumers’ current and non‑current notes receivable:

In Millions
December 31	2018			2017
CMS Energy, including Consumers
Current
EnerBank notes receivable, net of allowance for loan losses		$	233		$	178
EnerBank notes receivable held for sale		—			2
Michigan tax settlement		—			20
Non-current
EnerBank notes receivable		1,624			1,171
Total notes receivable		$	1,857		$	1,371
Consumers
Current
Michigan tax settlement		$	—		$	17
DB SERP note receivable – related party		7			—
Non-current
DB SERP note receivable – related party		99			—
Total notes receivable		$	106		$	17

EnerBank notes receivable are primarily unsecured consumer installment loans for financing home improvements. EnerBank records its notes receivable at cost, less an allowance for loan losses. During 2017, EnerBank completed sales of notes receivable, receiving proceeds of $52 million and recording immaterial gains.

During 2018, EnerBank purchased a portfolio of secured and unsecured consumer retail installment contracts with a principal value of $205 million at December 31, 2018.

Authorized contractors pay fees to EnerBank to provide borrowers with same-as-cash, zero interest, or reduced interest loans. Unearned income associated with the loan fees, which is recorded as a reduction to notes receivable on CMS Energy’s consolidated balance sheets, was $102 million at December 31, 2018 and $84 million at December 31, 2017.

The allowance for loan losses is a valuation allowance to reflect estimated credit losses. The allowance is increased by the provision for loan losses and decreased by loan charge-offs net of recoveries. Management estimates the allowance balance required by taking into consideration historical loan loss experience, the nature and volume of the portfolio, economic conditions, and other factors. Loan losses are charged against the allowance when the loss is confirmed, but no later than the point at which a loan becomes 120 days past due.

Presented in the following table are the changes in the allowance for loan losses:

In Millions
Years Ended December 31	2018				2017
Balance at beginning of period		$	20			$	16
Charge-offs		(24		)		(19		)
Recoveries		3				3
Provision for loan losses		25				20
Balance at end of period		$	24			$	20

Loans that are 30 days or more past due are considered delinquent. The balance of EnerBank’s delinquent consumer loans was $21 million at December 31, 2018 and $14 million at December 31, 2017.

At December 31, 2018 and December 31, 2017, $1 million of EnerBank’s loans had been modified as troubled debt restructurings.

For additional details about the DB SERP note receivable – related party, see Note 7, Financial Instruments.

Consumers Energy Company

Accounts, Notes, Loans and Financing Receivable [Line Items]

Notes Receivable

Notes Receivable

Presented in the following table are details of CMS Energy’s and Consumers’ current and non‑current notes receivable:

In Millions
December 31	2018			2017
CMS Energy, including Consumers
Current
EnerBank notes receivable, net of allowance for loan losses		$	233		$	178
EnerBank notes receivable held for sale		—			2
Michigan tax settlement		—			20
Non-current
EnerBank notes receivable		1,624			1,171
Total notes receivable		$	1,857		$	1,371
Consumers
Current
Michigan tax settlement		$	—		$	17
DB SERP note receivable – related party		7			—
Non-current
DB SERP note receivable – related party		99			—
Total notes receivable		$	106		$	17

EnerBank notes receivable are primarily unsecured consumer installment loans for financing home improvements. EnerBank records its notes receivable at cost, less an allowance for loan losses. During 2017, EnerBank completed sales of notes receivable, receiving proceeds of $52 million and recording immaterial gains.

During 2018, EnerBank purchased a portfolio of secured and unsecured consumer retail installment contracts with a principal value of $205 million at December 31, 2018.

Authorized contractors pay fees to EnerBank to provide borrowers with same-as-cash, zero interest, or reduced interest loans. Unearned income associated with the loan fees, which is recorded as a reduction to notes receivable on CMS Energy’s consolidated balance sheets, was $102 million at December 31, 2018 and $84 million at December 31, 2017.

The allowance for loan losses is a valuation allowance to reflect estimated credit losses. The allowance is increased by the provision for loan losses and decreased by loan charge-offs net of recoveries. Management estimates the allowance balance required by taking into consideration historical loan loss experience, the nature and volume of the portfolio, economic conditions, and other factors. Loan losses are charged against the allowance when the loss is confirmed, but no later than the point at which a loan becomes 120 days past due.

Presented in the following table are the changes in the allowance for loan losses:

In Millions
Years Ended December 31	2018				2017
Balance at beginning of period		$	20			$	16
Charge-offs		(24		)		(19		)
Recoveries		3				3
Provision for loan losses		25				20
Balance at end of period		$	24			$	20

Loans that are 30 days or more past due are considered delinquent. The balance of EnerBank’s delinquent consumer loans was $21 million at December 31, 2018 and $14 million at December 31, 2017.

At December 31, 2018 and December 31, 2017, $1 million of EnerBank’s loans had been modified as troubled debt restructurings.

For additional details about the DB SERP note receivable – related party, see Note 7, Financial Instruments.