Note

– Net Investment in Leases

The Company's net investment in leases consists of the following:

	June 30,
	2017			2016
	(in thousands)
Minimum lease payments receivable	$	200,516		$	248,527
Estimated residual value		6,226			10,871
Less unearned income		(14,001	)		(19,434	)
Net investment in leases before allowances		192,741			239,964
Less allowance for lease losses		(1,881	)		(2,228	)
Less valuation allowance for estimated residual value		(62	)		(62	)
Net investment in leases	$	190,798		$	237,674

The minimum lease payments receivable and estimated residual value are discounted using the internal rate of return method related to each specific lease. Unearned income and discounts include the offset of initial direct costs of

$2.5

million and

$2.6

million at

June 30, 2017

and

2016,

respectively.

June 30, 2017,

a summary of the installments due on minimum lease payments receivable, and the expected maturity of the Company's estimated residual value are as follows:

	Lease			Estimated
Years ending June 30,	Receivable			Residual Value			Total
	(in thousands)
2018	$	85,352		$	2,872		$	88,224
2019		61,458			1,730			63,188
2020		32,906			648			33,554
2021		13,293			263			13,556
2022		5,610			636			6,246
Thereafter		1,897			77			1,974
		200,516			6,226			206,742
Less unearned income		(13,407	)		(594	)		(14,001	)
Less allowances		(1,881	)		(62	)		(1,943	)
	$	185,228		$	5,570		$	190,798

Non-recourse debt, which relates to the discounting of lease receivables, bears interest at rates of

3.0%.

Maturities of such obligations at

June 30, 2017

are as follows:

	Non-recourse
Years ending June 30,	Debt
		(in thousands)
2018	$	276
Total non-recourse debt		276
Deferred interest expense		3
Discounted lease rentals assigned to lenders	$	279

Deferred interest expense of

$3,000

June 30, 2017

will be amortized against direct finance income related to the Company's discounted lease rentals assigned to lenders of

$279,000

using the effective yield method over the applicable lease term.