7:Notes Receivable

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



EnerBank notes receivable are unsecured consumer installment loans for financing home improvements. EnerBank records its notes receivable at cost, less an allowance for loan losses. At September 30, 2016, $41 million of notes receivable were classified as held for sale; the fair value of notes receivable held for sale exceeded their carrying value. These notes are expected to be sold in 2016.

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 $82 million at September 30, 2016 and December 31, 2015. Unearned income associated with the loan fees for notes receivable held for sale was $8 million at September 30, 2016 and $3 million at December 31, 2015.

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.

Loans that are 30 days or more past due are considered delinquent. The balance of EnerBank’s delinquent consumer loans was $10 million at September 30, 2016 and $8 million at December 31, 2015.

At September 30, 2016 and December 31, 2015, $1 million of EnerBank’s loans had been modified as troubled debt restructurings.

7:Notes Receivable

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



EnerBank notes receivable are unsecured consumer installment loans for financing home improvements. EnerBank records its notes receivable at cost, less an allowance for loan losses. At September 30, 2016, $41 million of notes receivable were classified as held for sale; the fair value of notes receivable held for sale exceeded their carrying value. These notes are expected to be sold in 2016.

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 $82 million at September 30, 2016 and December 31, 2015. Unearned income associated with the loan fees for notes receivable held for sale was $8 million at September 30, 2016 and $3 million at December 31, 2015.

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.

Loans that are 30 days or more past due are considered delinquent. The balance of EnerBank’s delinquent consumer loans was $10 million at September 30, 2016 and $8 million at December 31, 2015.

At September 30, 2016 and December 31, 2015, $1 million of EnerBank’s loans had been modified as troubled debt restructurings.