Investment in Equipment and Leases, Net

9 Months Ended

Sep. 30, 2022

Investment in Equipment and Leases, Net [Abstract]

Investment in Equipment and Leases, Net

3. Investment in equipment and leases, net:

The Company’s investments in equipment and leases, net consists of the following (in thousands):

	Balance		Additions/		Depreciation/		Balance
		December 31,	Dispositions/		Amortization			September 30,
	2021		Reclassifications		Expense		2022
Equipment under operating leases, net	$	8,003	$	(85)	$	(1,034)	$	6,884
Assets held for sale or lease, net		—		—		—		—
Initial direct costs, net		73		—		(21)		52
Total	$	8,076	$	(85)	$	(1,055)	$	6,936

As a result of impairment reviews, management determined that no impairment losses existed for the periods ended September 30, 2022 and 2021.

The Company utilizes a straight-line depreciation method over the term of the equipment lease for equipment under operating leases currently in its portfolio. Depreciation expense on the Company’s equipment totaled $348 thousand and $423 thousand for the respective three months ended September 30, 2022 and 2021; and was $1.0 million and $1.2 million for the respective nine months ended September 30, 2022 and 2021. Total depreciation for the three months ended September 30, 2022 and 2021 include $7 thousand and $102 thousand of additional depreciation recorded to reflect quarter-to-date changes in estimated residual values of certain equipment generating revenue under month-to-month extensions. For the respective nine months ended September 30, 2022 and 2021, such additional depreciation totaled $14 thousand and $167 thousand. The estimated residual values of equipment associated with leases on month-to-month extensions are evaluated at least semi-annually, and depreciation recorded for the change in the estimated reduction in value.

IDC amortization expense related to the Company’s operating leases totaled $6 thousand and $9 thousand for the three months ended September 30, 2022 and 2021, respectively, and was $21 thousand and $24 thousand for the nine months ended September 30, 2022 and 2021.

All of the Company’s lease asset purchases and capital improvements were made during the years from 2016 through 2022.

Operating leases:

Property on operating leases consists of the following (in thousands):

	Balance						Balance
	December 31,				Reclassifications		September 30,
	2021		Additions		or Dispositions		2022
Transportation, rail	$	1,723	$	—	$	—	$	1,723
Mining		2,749		—		—		2,749
Construction		3,725		—		(507)		3,218
Aviation		2,327		—		—		2,327
Paper processing		1,058		—		—		1,058
Agriculture		742		16		(742)		16
Materials handling		1,315		118		(82)		1,351
Transportation, other		97		—		—		97
		13,736		134		(1,331)		12,539
Less accumulated depreciation		(5,733)		(1,034)		1,112		(5,655)
Total	$	8,003	$	(900)	$	(219)	$	6,884

The average estimated residual value for assets on operating leases was 27% and 28% of the assets’ original cost at September 30, 2022 and December 31, 2021, respectively. There were no operating leases in non-accrual status at September 30, 2022 and December 31, 2021.

At September 30, 2022, the aggregate amounts of future minimum lease payments receivable are as follows (in thousands):

	Operating
	Leases
Three months ending December 31, 2022	$	427
Year ending December 31, 2023		1,652
2024		1,191
2025		536
2026		301
Thereafter		311
	$	4,418

The useful lives for each category of leases is reviewed at a minimum of once per quarter. As of September 30, 2022, the respective useful lives of each category of lease assets in the Company’s portfolio are as follows (in years):

Equipment category	Useful Life
Transportation, rail	35 - 50
Aviation	15 - 20
Mining	10 - 15
Paper processing	10 - 15
Agriculture	7 - 10
Construction	7 - 10
Materials handling	7 - 10
Transportation, other	7 - 10