Investment in Equipment and Leases, Net

6 Months Ended

Jun. 30, 2023

Investment in Equipment and Leases, Net [Abstract]

Investment in Equipment and Leases, Net

3. Investment in equipment and leases, net:

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

	Balance		Additions/		Depreciation/		Balance
		December 31,	Dispositions/		Amortization			June 30,
	2022		Reclassifications		Expense		2023
Equipment under operating leases, net	$	6,543	$	-	$	(682)	$	5,861
Initial direct costs, net		46		-		(11)		35
Total	$	6,589	$	-	$	(693)	$	5,896

Impairment of equipment:

As a result of impairment reviews, management determined that no impairment losses existed for the three- and six- month periods ended June 30, 2023 and 2022.

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 $341 thousand and $342 thousand for the respective three months ended June 30, 2023 and 2022; and was $682 thousand and $686 thousand for the respective six months ended June 30, 2023 and 2022. Total depreciation for the prior year quarter included $7 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. Such 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. There was no such adjustment recorded for the current quarter.

IDC amortization expense related to the Company’s operating leases totaled $6 thousand and $8 thousand for the three months ended June 30, 2023 and 2022, respectively, and was $11 thousand and $15 thousand for of the six months ended June 30, 2023 and 2022, respectively.

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

Operating leases:

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

	Balance						Balance
	December 31,				Reclassifications		June 30,
	2022		Additions		or Dispositions		2023
Construction	$	3,218	$	-	$	-	$	3,218
Mining		2,749		-		-		2,749
Aviation		2,327		-		-		2,327
Transportation, rail		1,723		-		-		1,723
Materials handling		1,249		-		-		1,249
Paper processing		1,058		-		-		1,058
Transportation, other		215		-		-		215
		12,539		-		-		12,539
Less accumulated depreciation		(5,996)		(682)		-		(6,678)
Total	$	6,543	$	(682)	$	-	$	5,861

The average estimated residual value for assets on operating leases was 27% of the assets’ original cost at June 30, 2023 and December 31, 2022. There were no operating leases in non-accrual status at June 30, 2023 and December 31, 2022.

At June 30, 2023, the aggregate amounts of future minimum lease payments receivable are as follows (in thousands):

	Operating
	Leases
Six months ending December 31, 2023	$	812
Year ending December 31, 2024		1,191
2025		536
2026		301
2027		233
Thereafter		78
	$	3,151

The useful lives for each category of leases is reviewed at a minimum of once per quarter. As of June 30, 2023, 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
Construction	7 - 10
Materials handling	7 - 10
Transportation, other	7 - 10