What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-03-14 compared with 2021-03-15 · 301 added, 239 removed, 1052 unchanged (34% of the section changed)

14 unchanged sentences

and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Our internal control over financial reporting is a process designed with the participation of our principal executive officer and principal financial officer or persons performing similar functions to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounted principles.

internal control over financial reporting is a process designed with the participation of our principal executive officer and principal financial officer or persons performing similar functions to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounted principles.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021.

1 unchanged sentence

Based on this assessment our management believes that, as of December 31, 2021, our internal control over financial reporting is effective under those criteria.

KPMG LLP, the independent registered public accounting firm that audited the Company’s financial statements included in this Annual Report, issued an audit report on the Company’s internal control over financial reporting.

KPMG’s audit report appears on page 41.

Grant Thornton LLP, the independent registered public accounting firm that audited the Company’s 2021 consolidated financial statements included in this Annual Report, issued an audit report on the Company’s internal control over financial reporting.

Grant Thornton’s audit report appears on page 41.

(d) Changes in internal control over financial reporting.

3 unchanged sentences

We have adopted a Standards of Ethical Conduct Policy (the “Code of Ethics”) that applies to all directors and employees including our Chief Executive Officer, President, and Chief Financial Officer.

The Code of Ethics is filed in Exhibit 14.1 and is also available on our website at www.willislease.com.

The Code of Ethics is available on our website at www.willislease.com.

If we make any substantive amendments to the Code of Ethics or grant any waiver from a provision of the code to our Chief Executive Officer, President and Chief Financial Officer, we will disclose the nature of the amendment or waiver on our investor relations page under the heading “Corporate Governance” on our website at www.willislease.com or in a report on Form 8-K.

The remainder of the information required by this item is incorporated by reference to our Proxy Statement.

27 unchanged sentences

4.6 Second Amended and Restated Certificate of Designations, Preferences, and Relative Rights and Limitations of Series A Cumulative Redeemable Preferred Stock dated as of September 25, 2017 (incorporated by reference to Exhibit 10.2 to our report on Form 8-K filed on September 28, 2017).

4.7 Description of Securities (incorporated by reference to Exhibit 4.7 to our report on F orm 10-K filed March 12, 2020) .

4.7 Description of Securities (incorporated by reference to Exhibit 4.7 to our report on Form 10-K filed March 12, 2020).

4.8 Certificate Eliminating Series I Junior Participating Preferred Stock of Willis Lease Finance Corporation dated as of October 7, 2016 (incorporated by reference to Exhibit 10.3 to our report on Form 8-K filed October 18, 2016).

86 unchanged sentences

1-2299982290 dated March 31, 2020 between General Electric Company and the Registrant (incorporated by reference to Exhibit 10.53 to our report on Form 10-Q filed May 6, 2020).

10.54* Used Engines Sales Agreement dated December 3, 2020 between Pratt & Whitney Engine Leasing, LLC and the Registrant.

10.55* Used Engine Sales Agreement dated December 3, 2020 between [*] Engine Leasing, LLC and the Registrant.

10.56* [*] Fixed Price Repair Agreement by and between the Registrant and Raytheon Technologies Corporation dated December 3, 2020.

10.57* [*] Fixed Price Repair Agreement by and between the Registrant and International Aero Engines, LLC dated December 3, 2020.

14.1 Code of Ethics (incorporated by reference to Exhibit 14.1 to our report on Form 10-K filed on March 11, 2016).

10.54* Used Engines Sales Agreement dated December 3, 2020 between Pratt & Whitney Engine Leasing, LLC and the Registrant (incorporated by reference to Exhibit 10.54 to our report on Form 10-K filed March 15, 2021).

10.55* Used Engine Sales Agreement dated December 3, 2020 between [*] Engine Leasing, LLC and the Registrant (incorporated by reference to Exhibit 10.55 to our report on Form 10-K filed March 15, 2021).

10.56* [*] Fixed Price Repair Agreement by and between the Registrant and Raytheon Technologies Corporation dated December 3, 2020 (incorporated by reference to Exhibit 10.56 to our report on Form 10-K filed March 15, 2021).

10.57* [*] Fixed Price Repair Agreement by and between the Registrant and International Aero Engines, LLC dated December 3, 2020 (incorporated by reference to Exhibit 10.57 to our report on Form 10-K filed March 15, 2021).

10.58# Amendment No.

2 to Fourth Amended and Restated Credit Agreement, dated as of June 23, 2021, among the Registrant, MUFG Union Bank, Ltd., as administrative agent, MUFG Union Bank, Inc., as security agent, and certain other lenders and financial institutions named therein (incorp orated by reference to Exhibit 10.58 to our report on F or m 10-Q filed Augus t 8, 2021) .

10.59# Administrative Agency Agreement, dated as of May 17, 2021, among Willis Engine Structured Trust VI, the Registrant, U.S.

Bank National Association, as trustee, and each Managed Group Member referred to therein and from time to time made a party thereto (incorporated by reference to Exhibit 10.59 to our report on Form 10-Q filed August 8, 2021).

10.60# Asset Purchase Agreement, dated as of May 17, 2021, between the Registrant and Willis Engine Structured Trust VI (incorporated by reference to Exhibit 10.60 to our report on Form 10-Q filed August 8, 2021).

10.61# Trust Indenture, dated as of May 17, 2021, among Willis Engine Structured Trust VI, U.S.

Bank National Association, as Trustee, the Registrant and Bank of America, N.A.

(incorporated by reference to Exhibit 10.61 to our report on Form 10-Q filed August 8, 2021).

10.62 Revolving Credit Agreement, dated as of May 17, 2021, among Willis Engine Structured Trust VI, Bank of America, N.A.

and the Registrant (incorporated by reference to Exhibit 10.62 to our report on Form 10-Q filed August 8, 2021).

10.63 Servicing Agreement, dated as of May 17, 2021, among Willis Engine Structured Trust VI, the Registrant and each Service Group Member referred to therein and from time to time made a party thereto (incorporated by reference to Exhibit 10.63 to our report on Form 10-Q filed August 8, 2021).

10.64# Security Trust Agreement, dated as of May 17, 2021, among Willis Engine Structured Trust VI, each Grantor referred to therein and from time to time made a party thereto and U.S.

Bank National Association, as security trustee and operating bank (incorporated by reference to Exhibit 10.64 to our report on Form 10-Q filed August 8, 2021).

16.1 Letter from KPMG to the Securities and Exchange Commission dated January 8, 2021 (incorporated by reference to Exhibit 16.1 to our report on Form 8-K filed January 8, 2021).

1 unchanged sentence

23.1 Consent of KPMG LLP.

23.2 Consent of Grant Thornton LLP.

31.1 Certification of Charles F.

10 unchanged sentences

* Certain portions of this exhibit have been redacted pursuant to an SEC order granting confidential treatment or constitute confidential information have been redacted in accordance with Regulation S-K, Item 601(b)(10).

# Portions of this exhibit have been omitted in accordance with Item 601(b)(10)(iv) of Regulation S-K.

† Indicates a management contract or compensatory plan or arrangement.

19 unchanged sentences

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm ( Grant Thornton LLP , Cincinnati, OH Auditor Firm ID Number 248 )

Report of Independent Registered Public Accounting Firm ( KPMG LLP , Fort Lauderdale, FL Auditor Firm ID Number 185 )

Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020

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Schedule II — Valuation Accounts

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Reports of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Willis Lease Finance Corporation

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Willis Lease Finance Corporation and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, redeemable preferred stock and shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2020, and the related notes and financial statement Schedule II, Valuation Accounts (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with U.S.

generally accepted accounting principles.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheet of Willis Lease Finance Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2021, the related consolidated statements of income, comprehensive income, redeemable preferred stock and shareholders’ equity, and cash flows for the year then ended, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 14, 2022 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relate.

Valuation of equipment held for operating lease

As described further in Notes 1(d) and 9 to the consolidated financial statements, the Company reviews its equipment held for operating lease (which is inclusive of certain failed sale-leaseback transactions classified as notes receivable), for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, and annually, for certain equipment held for operating lease.

With respect to the annual review, indicators of impairment are identified by review of independent appraisals.

If an indicator of impairment is identified, the Company performs an analysis of undiscounted forecasted cash flows over the life of the asset as compared to the asset book value.

When an asset’s undiscounted forecasted cash flows are less than the book value, an impairment charge is recorded for the difference between carrying value and fair value.

Fair value is determined by reference to independent appraisals, quoted market prices (e.g., an offer to purchase) and other factors considered relevant by the Company.

As a result of the annual impairment test, the Company recorded impairment charges of $3.5 million for the year ended December 31, 2021.

As of December 31, 2021, the balance of equipment held for operating lease and notes receivable was $2.0 billion and $115.5 million, respectively.

We identified the valuation of equipment held for operating lease as a critical audit matter.

The principal considerations for our determination that the valuation of equipment held for operating lease is a critical audit matter are that subjective auditor judgment was required to evaluate:

(i) the assumptions used by management engaged independent appraisers, including the accuracy of data provided to management’s specialist to determine the fair value;

and (ii) the assumptions used by management to calculate the undiscounted future cash flows, including assumptions of estimated lease rates, maintenance revenues, remaining lease periods and sales proceeds.

Our audit procedures related to the valuation of equipment held for operating lease included the following, among others:

• We evaluated the design and operating effectiveness of certain internal controls related to management’s review of the independent appraisers report, including the accuracy of data provided to management’s specialist and the review of assumptions used to determine undiscounted future cash flows.

• We evaluated management’s method for determining indicators of impairment, including the potential of management bias.

• We tested the annual impairment analysis as follows:

• Evaluated the completeness and accuracy of the population of assets included in the analysis;

• For a selection of assets, validated the relevant asset condition data that management provided to the independent appraisers;

• Evaluated the reasonableness of the following assumptions used in the undiscounted cash flows by comparing them to historical and Company specific data:

estimated lease rates, maintenance revenues, remaining lease periods and sales proceeds;

• With the assistance of valuation professionals with specialized skills and knowledge, we:

(i) evaluated the qualification of management engaged independent appraisers;

and (ii) assessed the reasonableness of the methodologies used and appraised values determined by comparing a selection of appraised values to published industry benchmark values of comparable assets.

/s/ Grant Thornton LLP

We have served as the Company’s auditor since 2021.

Cincinnati, Ohio

March 14, 2022

Board of Directors and Shareholders

Willis Lease Finance Corporation

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of Willis Lease Finance Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2021, and our report dated March 14, 2022 expressed an unqualified opinion on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting

5 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statement and (2) involved our especially challenging, subjective, or complex judgements.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of equipment held for operating lease

As discussed in Notes 1(d), 4 and 9 to the consolidated financial statements, the Company reviews its equipment held for operating lease for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The Company conducts a formal annual review of the carrying value of equipment held for operating lease and also evaluates assets during the year if a triggering event is identified.

Impairment is determined through the review of independent appraisals or by comparison of the forecasted undiscounted cash flows, including estimated sales proceeds, over the expected holding period of the asset to the assets' book value.

When undiscounted cash flows are insufficient to recover the carrying value of the asset, an impairment charge is recorded for the excess of the carrying value over fair value, which is determined per individual asset by reference to independent appraisals, quoted market prices (e.g.

an offer to purchase) and other factors considered relevant by the Company.

The equipment held for operating lease balance as of December 31, 2020 was $1.89 billion and the Company recorded impairment charges of approximately $20.54 million for the year ended December 31, 2020.

We identified the valuation of equipment held for operating lease as a critical audit matter.

The forecasted undiscounted cash flows used to estimate recoverability of asset carrying values were challenging to test as they represented subjective determinations of future market and economic conditions that are sensitive to variation.

Minor changes to certain assumptions, such as estimated lease rates, expected lease period and estimated sales proceeds, could have a significant effect on the Company's assessment of the carrying value of equipment held for operating lease.

Additionally, the audit effort associated with procedures related to the independent appraisals required specialized skills and knowledge.

The following are the primary procedures we performed to address the critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the critical audit matter.

This included controls related to the Company's assessment of equipment held for operating lease for impairment, including the controls over the:

– evaluation of independent appraisals, including considerations of the accuracy of data used by management's specialists

– determination of estimated lease rates, expected lease period, and estimated sales proceeds used in the forecasted undiscounted cash flows.

We assessed the reasonableness of forecasted undiscounted cash flows by comparing the Company's estimated lease rates, expected lease period and estimated sales proceeds to historical trends and Company specific market data.

We compared the Company's historical forecasted undiscounted cash flows to actual results to assess the Company's ability to accurately forecast.

For a selection of assets, we assessed the reasonableness of asset condition data used by the independent appraisers engaged by management.

We involved valuation professional with specialized skills and knowledge, who assisted in the:

– evaluation of the qualification of the independent appraisers used by management;

– assessment of the methodologies utilized and reasonableness of independent appraisal values by comparing a selection of appraised values from appraisers engaged by management and to published industry benchmark values of comparable assets.

/s/ Grant Thornton LLP

Cincinnati, Ohio

March 14, 2022

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Willis Lease Finance Corporation:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Willis Lease Finance Corporation and subsidiaries (the Company) as of December 31, 2020, the related consolidated statements of income, comprehensive income, redeemable preferred stock and shareholders’ equity, and cash flows for the year then ended, and the related notes and financial statement Schedule II, Valuation Accounts (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

We have not been able to determine the specific year that we began serving as the Company’s auditor;

however, we are aware that we have served as the Company’s auditor since at least 1991.

however, we are aware that we have served as the Company’s auditor since at least 1991 through 2021.

Fort Lauderdale, Florida

37 unchanged sentences

Retained earnings 355,388 355,370

Accumulated other comprehensive loss, net of income tax benefit of $ 1,428 and $ 896 at December 31, 2020 and 2019, respectively.

Accumulated other comprehensive income (loss), net of income tax expense (benefit) of $ 1,469 and $( 1,428 ) at December 31, 2021 and 2020, respectively.

5,031 ( 5,117 )

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(1) Total assets at December 31, 2021 and 2020 include the following assets of variable interest entity’s (“VIE’s”) that can only be used to settle the liabilities of the VIE’s:

Cash, $ 0 and $ 134 ;

Restricted Cash, $ 35,262 and $ 56,523 , Equipment, $ 1,037,684 and $ 1,004,851 ;

Restricted cash $ 81,312 and $ 35,262 ;

Equipment $ 1,226,395 and $ 1,037,684 ;

Maintenance rights $ 5,433 and $ 767 ;

Inventory $ 4,367 and $ 5,437 ;

and Other, $ 558 and $ 668 respectively.

(2) Total liabilities at December 31, 2020 and 2019 include the following liabilities of VIE’s for which the VIE’s creditors do not have recourse to Willis Lease Finance Corporation:

Notes receivable $ 90,868 and $ 26,392 ;

and Other assets $ 4,775 and $ 558 , respectively.

(2) Total liabilities at December 31, 2021 and 2020 include the following liabilities of VIEs for which the VIEs' creditors do not have recourse to Willis Lease Finance Corporation:

Debt obligations $ 1,197,922 and $ 907,550 , respectively.

9 unchanged sentences

Gain on sale of leased equipment 5,975 3,391

Gain on sale of financial assets 10,874 —

Asset transition fee 6,256 —

Other revenue 24,888 18,416

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Basic weighted average earnings per common share:

$ 1.07 $ 10.90

Diluted weighted average earnings per common share:

$ 1.05 $ 10.50

Basic weighted average common shares outstanding 6,112 5,963

7 unchanged sentences

Net income $ 3,352 $ 9,748

Other comprehensive loss:

Other comprehensive income (loss):

Currency translation adjustment 398 1,018

Unrealized loss on derivative instruments ( 2,298 ) ( 3,331 )

Unrealized loss on derivative instruments at joint venture ( 1,121 ) ( 774 )

Net loss recognized in other comprehensive income ( 2,401 ) ( 4,327 )

Tax benefit related to items of other comprehensive loss 532 977

Other comprehensive loss ( 1,869 ) ( 3,350 )

Unrealized gain (loss) on derivative instruments 11,250 ( 2,298 )

Unrealized gain (loss) on derivative instruments at joint venture 1,454 ( 1,121 )

Net gain (loss) recognized in other comprehensive income 13,102 ( 2,401 )

Tax (expense) benefit related to items of other comprehensive income (loss) ( 2,954 ) 532

Other comprehensive income (loss) 10,148 ( 1,869 )

Total comprehensive income $ 13,500 $ 7,879

8 unchanged sentences

Preferred Stock Common Stock Paid-in Capital in Retained Comprehensive Total Shareholders’

Shares Amount Shares Amount Excess of par Earnings Income/(Loss) Equity

Shares Amount Shares Amount Excess of par Earnings (Loss) Income Equity

Balances at December 31, 2019 2,500 $ 49,638 6,356 $ 64 $ 4,557 $ 348,965 $ ( 3,248 ) $ 350,338

Net income — — — — — 9,748 — 9,748

Net unrealized loss from currency translation adjustment, net of tax benefit of $ 50

Net unrealized gain from currency translation adjustment, net of tax expense of $ 225

— — — — — — 793 793

8 unchanged sentences

— — — — — ( 3,259 ) — ( 3,259 )

Adoption of ASU 2016-02 — — — — — 233 — 233

Balances at December 31, 2020 2,500 49,722 6,570 66 13,696 355,370 ( 5,117 ) 364,015

2 unchanged sentences

— — — — — — 309 309

Net unrealized loss from derivative instruments, net of tax benefit of $ 757

Net unrealized gain from derivative instruments, net of tax expense of $ 2,865

— — — — — — 9,839 9,839

23 unchanged sentences

Income from joint ventures ( 800 ) ( 2,642 )

Loss on sale of note receivable 79 —

(Gain) Loss on disposal of property, equipment and furnishings ( 9 ) 42

(Gain) Loss on sale of note receivable ( 10,874 ) 79

Loss (Gain) on disposal of property, equipment and furnishings 44 ( 9 )

Loss on debt extinguishment — 4,688

15 unchanged sentences

Payments received on notes receivable 8,404 7,630

Capital contributions to joint ventures — ( 5,713 )

Purchase of equipment held for operating lease ( 409,250 ) ( 289,385 )

Purchase of equipment held for operating lease and for sale ( 205,779 ) ( 409,250 )

Purchase of property, equipment and furnishings ( 2,165 ) ( 2,976 )

4 unchanged sentences

Principal payments on debt obligations ( 416,966 ) ( 530,783 )

Interest bearing security deposits — ( 2,092 )

Debt prepayment costs — ( 2,373 )

3 unchanged sentences

Cancellation of restricted stock units in satisfaction of withholding tax ( 4,974 ) ( 1,155 )

Net cash provided by (used in) financing activities 428,483 ( 101,152 )

Increase/(Decrease) in cash, cash equivalents and restricted cash 15,257 ( 18,281 )

Net cash provided by financing activities 74,053 428,483

Increase in cash, cash equivalents and restricted cash 16,716 15,257

Cash, cash equivalents and restricted cash at beginning of period 78,925 63,668

8 unchanged sentences

Transfers from Equipment held for operating lease to Spare parts inventory $ 4,467 $ 24,702

Transfers from Equipment held for sale to Spare parts inventory $ — $ 422

Transfers from Spare parts inventory to Equipment held for operating lease $ 1,555 $ —

Transfers from Notes receivable to Equipment held for operating lease $ 27,804 $ —

Accretion of preferred stock issuance costs $ 83 $ 84

4 unchanged sentences

Organization and Summary of Significant Accounting Policies

Unless the context requires otherwise, references to the “Company”, “WLFC”, “we”, “us” or “our” in this Annual Report on Form 10-K refer to Willis Lease Finance Corporation and its subsidiaries.

Unless the context requires otherwise, references to the “Company”, “WLFC”, “we”, “us” or “our” in these consolidated financial statements on Form 10-K refer to Willis Lease Finance Corporation and its subsidiaries.

(a) Organization

4 unchanged sentences

Willis Asset Management Limited (“Willis Asset Management”) is a wholly-owned subsidiary whose primary focus is the engine management and consulting business.

Willis Engine Securitization Trust II (“WEST II” or the “WEST II Notes”) is a bankruptcy remote special purpose vehicle which was established for the purpose of financing aircraft engines through an asset-backed securitization (“ABS”), of which the Company is the sole beneficiary.

WEST II is a variable interest entity (“VIE”) which the Company owns 100 % of the interest and consolidates in its financial statements.

Willis Engine Securitization Trust III (“WEST III” or the “WEST III Notes”) is a bankruptcy remote special purpose vehicle which was established for the purpose of financing aircraft engines through an ABS, of which the Company is the sole beneficiary.

WEST III is a VIE which the Company owns 100 % of the interest and consolidates in its financial statements.

WEST III is a variable interest entity (“VIE”) which the Company owns 100 % of the interest and consolidates in its financial statements.

Willis Engine Securitization Trust IV (“WEST IV” or the “WEST IV Notes”) is a bankruptcy remote special purpose vehicle which was established for the purpose of financing aircraft engines through an ABS, of which the Company is the sole beneficiary.

WEST IV is a VIE which the Company owns 100 % of the interest and consolidates in its financial statements.

In March 2020, the Company and its direct, consolidated VIE Willis Engine Structured Trust V (“WEST V”) (formerly WEST II), closed its offering of $ 366.2 million aggregate principal amount of fixed rate notes (the “WEST V Notes”).

In March 2020, the Company and its direct, consolidated VIE Willis Engine Structured Trust V (“WEST V”) (formerly Willis Engine Securitization Trust II), closed its offering of $ 366.2 million aggregate principal amount of fixed rate notes (the “WEST V Notes”).

The WEST V Notes were issued in three series, with the Series A Notes issued in an aggregate principal amount of $ 303.0 million, the Series B Notes issued in an aggregate principal amount of $ 42.1 million and the Series C Notes issued in an aggregate principal amount of $ 21.1 million.

Principal and interest on the WEST III, IV and V Notes are payable monthly to the extent of available cash in accordance with a priority of payments included in the respective indenture agreements.

The WEST III, IV and V Notes are secured by, among other things, the respective ABS’s direct and indirect interests in a portfolio of assets.

The WEST III, WEST IV and WEST V Notes have scheduled amortizations and are payable solely from revenue received from the engines and the engine leases, after payment of certain expenses of the respective ABS.

The assets of WEST III, WEST IV and WEST V are not available to satisfy the Company’s obligations other than the obligations specific to the respective ABS.

WEST III, WEST IV and WEST V are consolidated for financial statement presentation purposes, with the respective assets and liabilities on the Company’s balance sheet.

In May 2021, the Company and its direct, consolidated VIE Willis Engine Structured Trust VI (“WEST VI”), closed its offering of $ 336.7 million aggregate principal amount of fixed rate notes (the “WEST VI Notes”).

The WEST VI Notes were issued in three series, with the Series A Notes issued in an aggregate principal amount of $ 278.6 million, the Series B Notes issued in an aggregate principal amount of $ 38.7 million and the Series C Notes issued in an aggregate principal amount of $ 19.4 million.

Principal and interest on the WEST III, WEST IV, WEST V and WEST VI Notes are payable monthly to the extent of available cash in accordance with a priority of payments included in the respective indenture agreements.

The WEST III, WEST IV, WEST V and WEST VI Notes are secured by, among other things, the respective ABS’s direct and indirect interests in a portfolio of assets.

The WEST III, WEST IV, WEST V and WEST VI Notes have scheduled amortizations and are payable solely from revenue received from the engines and the engine leases, after payment of certain expenses of the respective ABS.

The assets of WEST III, WEST IV, WEST V and WEST VI are not available to satisfy the Company’s obligations other than the obligations specific to the respective ABS.

WEST III, WEST IV, WEST V and WEST VI are consolidated for financial statement presentation purposes, with the respective assets and liabilities on the Company’s balance sheet.

The ABS’ ability to make distributions and pay dividends to the Company is subject to the prior payments of its debt and other obligations and maintenance of adequate reserves and capital.

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Additionally, a portion of the maintenance reserve payments and lease security deposits are formulaically accumulated in restricted accounts and are available to fund future maintenance events and to secure lease payments, respectively.

Additionally, in connection with WEST III, WEST IV and WEST V, the Company entered into servicing agreements and administrative agency agreements to provide certain engine, lease management and reporting functions in return for fees based on a percentage of collected lease revenues and asset sales.

Because WEST III, WEST IV and WEST V are consolidated for financial statement reporting purposes, all fees eliminate upon consolidation.

Additionally, in connection with WEST III, WEST IV, WEST V and WEST VI, the Company entered into servicing agreements and administrative agency agreements to provide certain engine, lease management and reporting functions in return for fees based on a percentage of collected lease revenues and asset sales.

Because WEST III, WEST IV, WEST V and WEST VI are consolidated for financial statement reporting purposes, all fees eliminate upon consolidation.

(b) Basis of Presentation and Principles of Consolidation

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and (2) a general reserve for estimated losses based on historical experience.

One customer accounted for 11.4 % of total lease rent revenue during the year ended December 31, 2020.

No customer accounted for more than 10% of total lease rent revenue during the year ended December 31, 2019.

One customer accounted for more than 10 % of total lease rent revenue during the year ended December 31, 2021 and 2020, respectively.

Gain on sale of leased equipment

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Amounts owed for managed services are typically billed upon contract completion.

At December 31, 2020, unbilled revenue was $ 0.8 million and the Company expects it to be fully recognized by June 30, 2021.

At December 31, 2021, unbilled revenue was $ 0.9 million and the Company expects the remaining revenue to be fully recognized by June 30, 2022.

Additionally, managed services are presented within the Other revenue line in the Consolidated Statements of Income.

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The Company reviews the useful life and residual values of all engines periodically as demand changes to accurately depreciate the cost of equipment over the useful life of the engines.

The aircraft and airframes owned by the Company are depreciated on a straight-line basis over an estimated useful life of 13 to 20 years to a 15 % to 17 % residual value.

The aircraft and airframes owned by the Company are generally depreciated on a straight-line basis over an estimated useful life of 13 to 20 years to a 15 % to 17 % residual value.

The marine vessel owned by the Company is depreciated on a straight-line basis over an estimated useful life of 18 years to a 15 % residual value.

The other leased parts and related equipment owned by the Company are depreciated on a straight-line basis over an estimated useful life of 14 to 15 years to a 25 % residual value.

The other leased parts and related equipment owned by the Company are generally depreciated on a straight-line basis over an estimated useful life of 14 to 15 years to a 25 % residual value.

The following table disaggregates equipment held for operating lease by asset class (in thousands):

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an offer to purchase) and other factors considered relevant by the Company.

The Company conducts a formal annual review of the carrying value of long-lived assets and also evaluates assets during the year if a triggering event is identified indicating impairment is possible.

Such annual review resulted in an impairment charge of $ 4.9 million and $ 6.4 million in 2020 and 2019, respectively (included in “Write-down of equipment” in the Consolidated Statements of Income).

The Company evaluates assets during the year if a triggering event is identified indicating impairment is possible and also conducts a formal annual review of the carrying value of long-lived assets.

The formal annual review resulted in an impairment charge of $ 3.5 million and $ 4.9 million in 2021 and 2020, respectively.

Additionally, the Company recorded an impairment charge of $ 4.2 million and $ 15.6 million in 2021 and 2020, respectively, as a result of triggering events occurring during the year.

These write-downs are included in “Write-down of equipment” in the Consolidated Statements of Income.

(e) Equipment Held for Sale

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The Company uses the asset and liability method of accounting for income taxes.

Under the asset and liability method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to

future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities.

Under the asset and liability method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities.

The effect on deferred taxes of a change in the tax rates is recognized in income in the period that includes the enactment date.

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(k) Restricted Cash

The Company has certain bank accounts that are subject to restrictions in connection with its WEST III, WEST IV and WEST V notes payable.

The Company has certain bank accounts that are subject to restrictions in connection with its WEST III, WEST IV, WEST V and WEST VI notes payable.

Under these borrowings cash is collected in restricted accounts, which are used to service the debt and any remaining amounts, after debt service and defined expenses, are distributed to the Company.

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Under WEST V, cash equal to a portion of the projected maintenance obligations for the subsequent twelve months is held in a restricted account and is subject to a minimum balance of $ 5.0 million.

Under WEST VI, cash equal to a portion of the projected maintenance obligations for the subsequent twelve months is held in a restricted account and is subject to a minimum balance of $ 1.0 million.

Under WEST III, WEST IV and WEST V, security deposits are held in restricted accounts equal to a portion of the security deposits for leases scheduled to terminate over the subsequent four months , in each case, subject to a minimum balance of $ 1.0 million.

Under WEST VI, all security deposits for leases scheduled to terminate before the expected maturity date of the notes are held in a restricted account, subject to a minimum balance of $ 1.0 million.

Provided lease return conditions have been met, these deposits will be returned to the lessee.

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Customer relationships are amortized on a straight line basis over their estimated useful life of five years .

The Company has no intangible assets with indefinite useful lives.

Aside from goodwill, the Company has no intangible assets with indefinite useful lives.

Goodwill is assessed for impairment annually.

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The amortization of these costs is recorded under general and administrative expenses in the Consolidated Statements of Income.

The amounts amortized were $ 1.5 million and $ 2.0 million for the years ended December 31, 2020 and 2019, respectively.

The amounts amortized were $ 1.5 million for the years ended December 31, 2021 and 2020, respectively.

(t) Maintenance Rights

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When a capital event is performed on the equipment by the lessee, which satisfies their maintenance right obligation, the maintenance rights are added to the equipment basis and depreciated to the next capital event.

When equipment is sold before the end of the pre-existing lease, the maintenance rights are applied against any accumulated maintenance reserves, if paid by the lessee, and the remaining balance is applied to the disposition gain or loss.

When equipment is sold before the end of the pre-existing lease, the maintenance rights are applied against any accumulated maintenance reserves, if paid by the lessee, and

the remaining balance is applied to the disposition gain or loss.

When a lease terminates, an end of lease true-up is performed and the maintenance right is applied against the accumulated maintenance reserves or, for non-reserve lessees the final settlement payment, and any remaining net maintenance right is recorded in the income statement.

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Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash deposits, lease receivables and interest rate swaps.

The Company places its cash deposits with financial institutions and other credit-worthy institutions, such as money market funds, and limits the amount of credit exposure to any one party.

The Company places its cash deposits, which exceed federally insured limits, with financial institutions and other credit-worthy institutions, such as money market funds, and limits the amount of credit exposure to any one party.

Management opts for security of principal as opposed to yield.

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(w) Risks and Uncertainties

As a result of the COVID-19 pandemic, the Company has temporarily closed its headquarters and other offices, required its employees and contractors to predominately work remotely, and implemented travel restrictions, all of which represent a significant disruption in how the Company operates its business.

In addition, during 2020, 9 % of our employees have been either furloughed, or subject to a form of reduced compensation.

As a result of the COVID-19 pandemic, the Company has continued to temporarily close its headquarters and other offices, require its employees and contractors to predominately work remotely, and implement travel restrictions, all of which represent a significant disruption in how the Company operates its business.

The Company has also taken various proactive actions in an attempt to mitigate the financial impact of the COVID-19 pandemic.

During 2020, 9 % of our employees were either furloughed, or subject to a form of reduced compensation which was subsequently reversed in 2021.

The operations of the Company’s partners and customers have likewise been disrupted.

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In particular, the ongoing COVID-19 pandemic has caused significant disruptions to the airline industry and has resulted in a dramatic reduction in demand for air travel domestically and abroad, which is likely to continue for the foreseeable future.

In addition to the impacts described below, dramatically lower demand for air travel in turn presents significant risks to the Company, not all of which the Company is able to fully evaluate or even to foresee at the current time, and could negatively impact collections of accounts receivable, cause the Company’s lessee customers to not enter into new leases, reduce spending from new and existing customers for leases or spare parts or equipment, lower usage fees, cause some of the Company’s customers to go out of business, and limit the ability of the Company’s personnel to travel to customers and potential customers, all of which could adversely affect the Company’s business, results of operations, and financial condition.

While significant uncertainty exists as to the full impact of the COVID-19 pandemic on our liquidity and capital resources, as of the date of this report, we believe our cash liquidity, equity base, internally generated funds and existing debt facilities are sufficient to maintain our level of operations through the next twelve months.

Due to the impact of recent events, including challenges from declines in market conditions, the Company performed quarterly interim impairment analysis during 2020.

The results of the analysis indicated $ 0.5 million additional impairment in 2020 for two engines having net book values in excess of their respective fair value.

During 2020, we experienced declining average utilization and a corresponding decrease in revenue, as well as a significant decline in spare parts and equipment sales, in each case as compared to the prior year.

Lower demand for air travel in turn presents significant risks to the Company, resulting in impacts which have adversely affected the Company’s business, results of operation, and financial condition.

Lower demand for spare parts and engine and airframe leasing has negatively impacted collections of accounts receivable, caused the Company’s lessee customers to not enter into new leases, resulted in reduced spending by new and existing customers for leases or spare parts or equipment, resulted in lower usage fees, caused some of the Company’s customers to go out of business, and limited the ability of the Company’s personnel to travel to customers and potential customers.

The Company is not able to evaluate or foresee the full extent of these impacts at the current time.

During the year ended December 31, 2021, the Company experienced declining lease rent revenue and maintenance reserve revenue as compared to the prior year.

Additionally, as of December 31, 2021, the Company has, in certain situations, agreed to rent concessions which resulted in a total reduction to rent revenues of $ 0.5 million for the year ended December 31, 2021.

Rent concessions for the year ended December 31, 2020 resulted in a total reduction of rent revenue of $ 6.5 million.

The rent concessions provide lessees with payment deferral options or reduced rent, where the revised cash flows are substantially the same or less (i.e., the rights of the lessor and obligations of the lessee have not substantially increased) as the original lease agreements.

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Recent Accounting Pronouncements Adopted by the Company

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-03, “Codification Improvements to Financial Instruments” (“ASU 2020-03”).

The ASU improves a variety of codification topics by eliminating inconsistencies and providing clarifications making the codification easier to apply.

The conforming amendments are effective upon issuance and did not materially impact our consolidated financial statements.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12,

“Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes” (“ASU 2019-12”).

ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

ASU 2019-12 also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

The Company adopted this guidance effective January 1, 2021 and it did not impact our consolidated financial statements and related disclosures.

In March 2021, the FASB issued ASU No.

2020-04, "Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting", which provides temporary optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

Among other things, for all types of hedging relationships, the guidance allows an entity to change

the reference rate and other critical terms related to reference rate reform without having to remeasure the value or reassess a previous accounting determination.

The amendments in this guidance should be applied on a prospective basis and, for companies with a fiscal year ending December 31, are effective from January 1, 2020 through December 31, 2022.

The Company adopted this guidance effective January 1, 2020.

2021-01, “Reference Rate Reform (Topic 848), Scope”, which clarifies certain optional expedients to all derivatives affected by the discounting transition, regardless of whether the derivatives reference the London Interbank Offered Rate (“LIBOR”) or another rate expected to be discounted or whether the modification replaces or has the potential to replace the reference rate expected to be discounted.

The amendments in this guidance are effective upon issuance through December 31, 2022.

The Company adopted this guidance upon issuance.

When the transition occurs, the Company expects to apply this expedient to its existing debt instruments and interest rate swaps that reference LIBOR, and to any other new transactions that reference LIBOR or another reference rate that is discontinued, through December 31, 2022.

The adoption of this ASU did not impact the Company’s consolidated financial statements.

In October 2020, the FASB issued ASU 2020-10, “Codification Improvements” (“ASU 2020-10”).

The ASU improves a variety of codification topics by improving the consistency of the codification and providing clarifications.

The Company adopted this guidance effective October 1, 2020 and it did not materially impact our consolidated financial statements.

Recent Accounting Pronouncements To Be Adopted by the Company

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The Company is evaluating the potential effects on the consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes” (“ASU 2019-12”).

ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

ASU 2019-12 also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

This ASU is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted.

The Company plans to adopt this guidance effective January 1, 2021 and is currently evaluating the potential impact adoption will have on the consolidated financial statements and related disclosures.

In July 2021, the FASB issued ASU 2021-05, “Lease (Topic 842):

Lessors – Certain Leases with Variable Lease Payments” related to accounting for sales-type leases or direct financing leases with variable lease payments.

This ASU is effective for interim and annual years beginning after December 15, 2021, with early adoption permitted.

The Company plans to adopt this guidance effective January 1, 2022 on a prospective basis for sales-type leases entered into after the effective date and is currently evaluating the potential impact adoption will have on the consolidated financial statements and related disclosures.

In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance” related to disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy.

This ASU is effective for annual periods beginning after December 15, 2021, with early application permitted.

The Company plans to adopt this guidance effective January 1, 2022 on a prospective basis and is currently evaluating the potential impact adoption will have on the consolidated financial statements and related disclosures.

As lessor, and as of December 31, 2021, the majority of our leases were operating leases with the exception of certain failed sale-leaseback transactions classified as notes receivable under the guidance provided by ASC 842.

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fixed rent, common-area maintenance costs, vehicle protection plans and other service fees) as elected under the practical expedient package provided by ASC 842.

The Company’s leases have remaining lease terms of one to six years , some of which include options to renew or extend the lease term from one to five years .

The Company’s leases have remaining lease terms of one to eight years , some of which include options to renew or extend the lease term from one to five years .

Our automobile leases include an option to purchase the vehicle at lease termination.

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Gain on sale of leased equipment 5,975 — — 5,975

Gain on sale of financial assets (1) 10,874 — — 10,874

Asset transition fee (2) 6,256 — — 6,256

Managed services 11,434 — — 11,434

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________________________________________________________

(1) Represents revenue generated between our reportable segments.

(1) Gain on sale of financial assets reflects the sales of two notes receivable during 2021.

(2) Asset transition fee reflects the settlement received from the close out of an engine transition program.

Equipment Held for Operating Lease

As of December 31, 2021, the Company’s $ 1,991.4 million equipment held for operating lease portfolio and $ 115.5 million notes receivable represented 304 engines, twelve aircraft, one marine vessel and other leased parts and equipment.

As of December 31, 2020, the Company’s $ 1,886.6 million equipment held for operating lease portfolio and $ 158.7 million notes receivable represented 291 engines, eight aircraft, one marine vessel and other leased parts and equipment.

As of December 31, 2019, the Company’s $ 1,650.9 million equipment held for operating lease portfolio and $ 38.1 million notes receivable represented 263 engines, 12 aircraft, one marine vessel and other leased parts and equipment.

A majority of the equipment is leased and operated internationally.

Substantially all leases relating to this equipment are denominated and payable in U.S.

The Company leases equipment to lessees domiciled in eight geographic regions.

The Company leases equipment to lessees domiciled in seven geographic regions.

The tables below set forth geographic information about the leased equipment grouped by domicile of the lessee (which is not necessarily indicative of the asset’s actual location):

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Region (in thousands)

Europe $ 57,972 $ 84,335

United States $ 61,947 $ 33,291

Europe 30,299 57,972

Asia 26,587 32,198

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Mexico 2,461 3,670

Middle East 2,067 4,117

Canada 1,245 2,011

Africa — 2,340

Middle East 954 2,067

Totals $ 134,831 $ 142,895

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South America 111,941 104,671

Middle East 47,899 26,732

Canada 55,109 8,500

Africa — 2,597

Middle East 22,320 47,899

Off-lease and other 366,898 408,869

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Earnings from joint ventures 1,552 1,090 2,642

Contribution 5,713 — 5,713

Distribution ( 7,200 ) — ( 7,200 )

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Earnings from joint ventures 250 550 800

Contribution — — —

Distribution ( 7,200 ) — ( 7,200 )

Foreign currency translation adjustment — 398 398

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“Other revenue” on the Consolidated Statements of Income includes management fees earned of $ 2.1 million and $ 1.6 million during the years ended December 31, 2021 and 2020, respectively, related to the servicing of engines for the WMES lease portfolio.

During 2021, the Company sold two engines to WMES for $ 25.0 million.

During 2020, the Company sold one note receivable to WMES for $ 8.4 million.

There were no aircraft or engine sales to CASC Willis during 2021 or 2020.

Unaudited summarized financial information for 100% of WMES is presented in the following table:

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Total WMES net equity $ 84,343 $ 84,050

The difference between the Company’s investment in WMES and 50 % of total WMES net equity is primarily attributable to the recognition of deferred gains related to engines sold by the Company to WMES.

The difference between the Company’s investment in WMES and 50 % of total WMES net equity is primarily attributable to the recognition of deferred gains, prior to the adoption of ASU 2017-05, related to engines sold by the Company to WMES.

Debt Obligations

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$ 590,000 $ 777,000

WEST VI Series A 2021 term notes payable at a fixed rate of interest of 3.10 %, maturing in May 2046, secured by engines

WEST VI Series B 2021 term notes payable at a fixed rate of interest of 5.44 %, maturing in May 2046, secured by engines

WEST VI Series C 2021 term notes payable at a fixed rate of interest of 7.39 %, maturing in May 2046, secured by engines

WEST V Series A 2020 term notes payable at a fixed rate of interest of 3.23 %, maturing in March 2045, secured by engines

272,909 286,863

WEST V Series B 2020 term notes payable at a fixed rate of interest of 4.21 %, maturing in March 2045, secured by engines

38,004 39,855

WEST V Series C 2020 term notes payable at a fixed rate of interest of 6.66 %, maturing in March 2045, secured by engines

16,342 19,043

WEST IV Series A 2018 term notes payable at a fixed rate of interest of 4.75 %, maturing in September 2043, secured by engines

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32,195 32,481

WEST II Series A 2012 term notes payable at a fixed rate of interest of 5.50 %, repaid in March 2020, secured by engines

Note payable at three-month LIBOR plus a margin ranging from 1.85 % to 2.50 % at December 31, 2020, maturing in July 2022, secured by engines

Note payable at three-month LIBOR plus a margin ranging from 1.85 % to 2.50 %, repaid in May 2021, secured by engines

Note payable at a fixed rate of interest of 3.18 %, maturing in July 2024, secured by an aircraft

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Total debt obligations $ 1,790,264 $ 1,693,753

One-month LIBOR was 0.14% and 1.76% as of December 31, 2020 and December 31, 2019, respectively.

Three-month LIBOR was 0.24% and 1.91% as of December 31, 2020 and December 31, 2019, respectively.

One-month LIBOR was 0.10% and 0.14% as of December 31, 2021 and 2020, respectively.

Principal outstanding at December 31, 2021, is expected to be repayable as follows:

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At December 31, 2021, the Company had a revolving credit facility to finance the acquisition of equipment for lease as well as for general working capital purposes, with the amounts drawn under the facility not to exceed that which is allowed under the borrowing base as defined by the credit agreement.

In June 2019, the Company entered into the Fourth Amended and Restated Credit Agreement (“Amended Credit Agreement”) which increased the revolving credit facility from $ 890.0 million to $ 1.0 billion.

The Amended Credit Agreement incorporates an accordion feature that can expand the credit facility up to $ 1.3 billion, extends the maturity of the credit facility to June 2024 and provides for certain other amendments to covenants, interest rates and commitment fees.

In connection with entering into the Amended Credit Agreement in June 2019, the Company incurred and deferred an additional $ 2.8 million of debt issuance costs, and recognized a loss on debt extinguishment of $ 0.2 million.

Unamortized debt issuance costs are included as a reduction to “Debt Obligations” in the consolidated balance sheets and are amortized to “Interest expense” on a straight-line basis through the maturity date of the Amended Credit Agreement.

In June 2019, the Company entered into the Fourth Amended and Restated Credit Agreement (“Amended Credit Agreement”) which incorporates an accordion feature that can expand the $ 1.0 billion credit facility up to $ 1.3 billion.

Pursuant to the Amended Credit Agreement, all obligations under the revolving credit facility are collateralized by the title and interest of the Company and certain of its subsidiaries, and to substantially all of its assets and properties.

On October 30, 2020, the Company entered into a Limited Waiver (the “Waiver”) to its Amended Credit Agreement.

In October 2020, the Company entered into a Limited Waiver (the “Waiver”) to its Amended Credit Agreement.

The Waiver provides for the partial exclusion for specified periods of certain asset book values in the calculation of customer concentration limits, as such limits are defined in the Amended Credit Agreement.

In June 2021, the Company entered into Amendment No.

2 to the Amended Credit Agreement, which updates the provisions relating to the future discontinuance of LIBOR and sets forth the mechanics for establishing the Secured Overnight Financing Rate (“SOFR”) as a benchmark replacement rate.

As of December 31, 2021 and 2020, $ 410.0 million and $ 223.0 million were available under this facility, respectively.

On a quarterly basis, the interest rate is adjusted based on the Company’s leverage ratio, as calculated under the terms of the revolving credit facility.

Under the revolving credit facility, all subsidiaries except WEST III, WEST IV, and WEST V jointly and severally guarantee payment and performance of the terms of the loan agreement.

Under the revolving credit facility, all subsidiaries except WEST III, WEST IV, WEST V and WEST VI jointly and severally guarantee payment and performance of the terms of the loan agreement.

The guarantee would be triggered by a default under the agreement.

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The WEST V Notes are secured by, among other things, WEST V’s direct and indirect ownership interests in a portfolio of 54 aircraft engines and three airframes, including 25 aircraft engines and three airframes which WEST V acquired from WLFC pursuant to an asset purchase agreement.

The Series A Notes have a fixed coupon of 3.228 %, an expected maturity of approximately eight years and a final maturity date of March 15, 2045, the Series B Notes have a fixed coupon of 4.212 %, an expected maturity of approximately eight years and a final maturity date of March 15, 2045 and the Series C Notes have a fixed coupon of 6.657 %, an expected maturity of approximately eight years and a final maturity date of March 15, 2045.

The WEST V Notes are secured by, among other things, WEST V’s direct and indirect ownership interests in a portfolio of aircraft engines and airframes.

The Series A Notes have a fixed coupon of 3.228 %, an expected maturity of approximately eight years and a final maturity date in March 2045, the Series B Notes have a fixed coupon of 4.212 %, an expected maturity of approximately eight years and a final maturity date in March 2045 and the Series C Notes have a fixed coupon of 6.657 %, an expected maturity of approximately eight years and a final maturity date in March 2045.

The Series A Notes were issued at a price of 99.99859 % of par, the Series B Notes were issued at a price of 99.99493 % of par and the Series C Notes were issued at a price of 99.99918 % of par.

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The Company recognized a $ 4.7 million loss on debt extinguishment upon the repayment of the WEST II Series A 2012 term notes in March 2020.

The assets of WEST III, WEST IV and WEST V are not available to satisfy the Company’s obligations other than the obligations specific to that WEST entity.

WEST III, WEST IV and WEST V are consolidated for financial statement presentation purposes.

WEST III, WEST IV and WEST V’s ability to make distributions and pay dividends to the Company is subject to the prior payments of their debt and other obligations and their maintenance of adequate reserves and capital.

Under WEST III, WEST IV and WEST V, cash is collected in a restricted account, which is used to service the debt and any remaining amounts, after debt service and defined expenses, are distributed to the Company.

Additionally, a portion of maintenance reserve payments and lease security deposits are

formulaically accumulated in restricted accounts and are available to fund future maintenance events and to secure lease payments, respectively.

The WEST III, WEST IV, and WEST V indentures require that a minimum threshold of maintenance reserve and security deposit balances be held in restricted cash accounts.

In July 2019, the Company’s note payable secured by a corporate aircraft was repriced at a fixed interest rate of 3.18 % and will continue to mature in July 2024.

The balance outstanding on this loan was $ 7.2 million and $ 9.1 million as of December 31, 2020 and December 31, 2019, respectively.

In February 2019, the Company entered into a new $ 8.1 million loan with a financial institution and has a maturity date of July 2022.

Interest is payable at three-month LIBOR plus a margin ranging from 1.85 % to 2.50 % and principal and interest are paid quarterly.

The loan is secured by two engines.

In May 2021, WLFC and its direct, wholly-owned subsidiary WEST VI, closed its offering of $ 336.7 million aggregate principal amount of fixed rate notes.

The WEST VI Notes are secured by, among other things, WEST VI’s direct and indirect ownership interests in a portfolio of aircraft engines and an airframe.

The Series A Notes have a fixed coupon of 3.104 %, an expected maturity of approximately eight years and a final maturity date in May 2046, the Series B Notes have a fixed coupon of 5.438 %, an expected maturity of approximately eight years and a final maturity date in May 2046 and the Series C Notes have a fixed coupon of 7.385 %, an expected maturity of approximately eight years and a final maturity date in May 2046.

The Series A Notes were issued at a price of 99.99481 % of par, the Series B Notes were issued at a price of 99.99996 % of par and the Series C Notes were issued at a price of 99.99869 % of par.

Principal on the WEST VI Notes is payable monthly to the extent of available cash in accordance with a priority of payments included in the indenture.

In May 2021, WLFC repaid an existing note payable that was secured by two engines.

The assets of WEST III, WEST IV, WEST V and WEST VI are not available to satisfy the Company’s obligations other than the obligations specific to that WEST entity.

WEST III, WEST IV, WEST V and WEST VI are consolidated for financial statement presentation purposes.

WEST III, WEST IV, WEST V and WEST VI’s ability to make distributions and pay dividends to the Company is subject to the prior payments of their debt and other obligations and their maintenance of adequate reserves and capital.

Under WEST III, WEST IV, WEST V and WEST VI, cash is collected in restricted accounts, which are used to service the debt and any remaining amounts, after debt service and defined expenses, are distributed to the Company.

Additionally, a portion of maintenance reserve payments and lease security deposits are formulaically accumulated in restricted accounts and are available to fund future maintenance events and to secure lease payments, respectively.

The WEST III, WEST IV, WEST V and WEST VI indentures require that a minimum threshold of maintenance reserve and security deposit balances be held in restricted cash accounts.

Virtually all of the above debt requires ongoing compliance with the covenants of each financing, including debt/equity ratios, minimum tangible net worth and minimum interest coverage ratios, and other eligibility criteria including customer and geographic concentration restrictions.

The Company also has certain negative financial covenants such as liens, advances, change in business, sales of assets, dividends and stock repurchases.

The Company also has certain negative financial covenants such as liens, advances, change in business,

sales of assets, dividends and stock repurchases.

These covenants are tested either monthly or quarterly and the Company was in full compliance with all financial covenant requirements at December 31, 2021.

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As a matter of policy, management does not use derivatives for speculative purposes.

As of December 31, 2020, the Company has two interest rate swap agreements.

One interest rate swap agreement was entered into during 2016 which has notional outstanding amount of $ 100.0 million, with remaining terms of four months as of December 31, 2020.

During October 2019, the Company entered into one additional fixed-rate interest swap agreement which has a notional outstanding amount of $ 100.0 million, with remaining terms of 42 months as of December 31, 2020.

The derivative instruments were designated as a cash flow hedge and recorded at fair value.

As of December 31, 2021, the Company has five interest rate swap agreements.

During the first quarter of 2021, the Company entered into four fixed-rate interest swap agreements, each having notional amounts of $ 100.0 million, two with remaining terms of 25 months and two with remaining terms of 49 months as of December 31, 2021.

One interest rate swap agreement was entered into during 2019 which has a notional outstanding amount of $ 100.0 million with a remaining term of 30 months as of December 31, 2021.

One interest rate swap agreement which the Company entered into in 2016 expired in April 2021.

The derivative instruments were designated as cash flow hedges at inception and recorded at fair value.

The Company evaluated the effectiveness of the swaps to hedge the interest rate risk associated with its variable rate debt and concluded at the swap inception date that the swaps were highly effective in hedging that risk.

The Company evaluates the effectiveness of the hedging relationship on an ongoing basis.

The Company evaluates the effectiveness of the hedging relationship on an ongoing basis and concluded there was no ineffectiveness in the hedges for the year ended December 31, 2021.

The Company estimates the fair value of derivative instruments using a discounted cash flow technique and has used creditworthiness inputs that corroborate observable market data evaluating the Company’s and counterparties’ risk of non-performance.

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The Company applies hedge accounting and accounts for the change in fair value of its cash flow hedges through other comprehensive income for all derivative instruments.

The net fair value of the interest rate swaps were net liabilities of $ 4.0 million and $ 1.7 million at December 31, 2020 and 2019, respectively.

The Company recorded interest expense of $ 2.0 million and a reduction to interest expense of $ 0.7 million during the years ended December 31, 2020 and 2019, respectively, from derivative investments.

The net fair value of the swaps as of December 31, 2021 was $ 7.3 million, representing an asset of $ 8.0 million and a liability of $ 0.7 million.

The net fair value of the interest rate swaps as of December 31, 2020 was $ 4.0 million, representing a liability.

The Company recorded interest expense of $ 2.4 million and $ 2.0 million during the years ended December 31, 2021 and 2020, respectively, from derivative investments.

As of December 31, 2021 the accumulative derivative gain was $ 7.3 million and as of December 31, 2020 the accumulative derivative loss was $ 3.8 million.

Effect of Derivative Instruments on Earnings in the Statements of Income and of Comprehensive Income

The following table provides additional information about the financial statement effects related to the cash flow hedges for the years ended December 31, 2021 and 2020:

Derivatives in Cash Flow Hedging Relationships Amount of Loss Recognized in OCI on Derivatives

Derivatives in Cash Flow Hedging Relationships Amount of Gain (Loss) Recognized in OCI on Derivatives

(Effective Portion)

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The Company evaluates the creditworthiness of the counterparties under its hedging agreements.

The counterparties for both interest rate swaps are large financial institutions that possessed an investment grade credit rating.

The counterparties for the interest rate swaps are large financial institutions that possessed an investment grade credit rating.

Based on this rating, the Company believes that the counterparties were credit-worthy and that their continuing performance under the hedging agreement was probable and did not require the counterparties to provide collateral or other security to the Company.

Subsequent Event

In January 2021, the Company entered into four additional fixed-rate interest swap agreements to mitigate the exposure on the variable rate borrowings.

All four of the swaps have notional amounts of $ 100.0 million, two of which mature in January 2024 and the other two maturing in January 2026.

The components of income before income taxes are as follows:

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Effective income tax expense $ 5,788 $ 7,588

Permanent differences and other includes Subpart F income of $ 1.4 million from foreign operations for the year-ended December 31, 2021.

The Company records tax expense or benefit for unusual or infrequent items discretely in the period in which they occur.

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Balance as of December 31, 2020 330

Increases related to current year tax positions 66

Decreases related to current year tax positions —

Decreases due to tax positions expired ( 317 )

Balance as of December 31, 2021 $ 13

A $ 0.3 million and $ 0.2 million reserve was established as of December 31, 2020 and 2019, respectively, for the exposure in Europe.

If the Company is able to eventually recognize these uncertain tax positions, all of the unrecognized benefit would reduce the Company’s effective tax rate.

A $ 0.0 and $ 0.3 million reserve was established as of December 31, 2021 and 2020, respectively, for the exposure in Europe.

Due to law changes in the United Kingdom, the Company believes that it is at a more likely than not position and has released the 2020 $ 0.3 million reserve.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below:

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Right of use liability ( 139 ) ( 184 )

Other deferred tax assets (liabilities) ( 4,616 ) ( 4,198 )

Other deferred tax liabilities ( 4,595 ) ( 4,616 )

Net deferred tax liabilities ( 203,776 ) ( 202,999 )

Other comprehensive loss deferred tax liability 1,481 949

Other comprehensive (income) loss deferred tax liability ( 1,448 ) 1,481

Net deferred tax liabilities $ ( 124,332 ) $ ( 116,838 )

As of December 31, 2021, the Company had net operating loss carry forwards of approximately $ 316.3 million for federal tax purposes and $ 2.2 million (tax effected) for state tax purposes.

The majority of the federal net operating loss carry forwards were generated this year and can be carried forward indefinitely, the remainder will expire at various times from 2032 to 2037, and the state net operating loss carry forwards will expire at various times from 2026 to 2042.

The majority of the federal net operating loss carry forwards were generated in 2020 and can be carried forward indefinitely, the remainder will expire at various times from 2032 to 2037, and the state net operating loss carry forwards will expire at various times from 2026 to 2042.

There is a $ 0.5 million valuation allowance for net operating losses in California that expire between 2034 and 2042 and a $ 0.1 million valuation allowance for net operating losses in Georgia that expire between 2032 and 2040.

The Company’s ability to utilize the net operating loss and tax credit carry forwards in

the future may be subject to restriction in the event of past or future ownership changes as defined in Section 382 of the Internal Revenue Code and similar state tax law.

The Company’s ability to utilize the net operating loss and tax credit carry forwards in the future may be subject to restriction in the event of past or future ownership changes as defined in Section 382 of the Internal Revenue Code and similar state tax law.

Management believes that no valuation allowance is required on deferred tax assets related to federal net operating loss carry forwards, as it is more likely than not that all amounts are recoverable through future taxable income.

The open tax years for federal and state tax purposes are from 2003-2020, respectively.

The open tax years for federal and state tax purposes are from 2004 to 2021, respectively.

It is the Company's intention to reinvest undistributed earnings of their wholly owned foreign operations and thereby indefinitely postpone their remittance.

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The interest rate swaps had a net fair value of $ 4.0 million and $ 1.7 million representing a net liability as of December 31, 2020 and 2019, respectively.

The net fair value of the interest rate swaps as of December 31, 2021 was $ 7.3 million, representing an asset of $ 8.0 million and a liability of $ 0.7 million.

The net fair value of the interest rate swaps as of December 31, 2020 was $ 4.0 million, representing a liability.

The Company recorded interest expense of $ 2.4 million and $ 2.0 million during the years ended December 31, 2021 and 2020, respectively, from derivative investments.

Assets Measured and Recorded at Fair Value on a Nonrecurring Basis

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Total $ 7,715 $ 20,540

Write-downs of equipment to their estimated fair values totaled $ 7.7 million for the year ended December 31, 2021 which included write-downs of $ 3.9 million due to a management decision to monetize three engines and one airframe either by sale to a third party or for part-out and $ 3.8 million for the adjustment of the carrying value of seven impaired engines.

As of December 31, 2021, included within equipment held for lease and equipment held for sale was $ 36.0 million in remaining book value of 22 assets which were previously written down.

Write-downs of equipment to their estimated fair values totaled $ 20.5 million for the year ended December 31, 2020 which included write-downs of $ 15.2 million due to a management decision to monetize 10 engines and two airframes either by sale to a third party or for part-out and $ 5.3 million for the adjustment of the carrying value of seven impaired engines.

Write-downs of equipment to their estimated fair values totaled $ 18.2 million for the year ended December 31, 2019 which included write-downs of $ 11.8 million due to a management decision to monetize 11 engines either by sale to a third party or for part-out and $ 6.4 million for the adjustment of the carrying value of seven impaired engines.

As of December 31, 2020, $ 37.6 million book value for 21 of these engines remains within equipment held for operating lease, equipment held for sale and spare parts inventory.

Earnings Per Share

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These funding commitments could potentially require the Company’s performance in the event of demands by third parties or contingent events.

As of December 31, 2020, the Company had $ 471.0 million in purchase commitments of equipment that will be satisfied within three fiscal years.

As of December 31, 2021, the Company had $ 439.9 million in purchase commitments of equipment that will be satisfied within four fiscal years.

The purchase obligations are subject to escalation based on the closing date of each transaction.

In May 2021, the Company entered into a commitment for future maintenance services which are anticipated to cost $ 24.0 million by 2024.

In December 2020, the Company entered into definitive agreements for the purchase of 25 modern technology aircraft engines.

As part of the purchase, the Company has committed to certain future overhaul and maintenance services which is anticipated to range between $ 67.1 million and $ 112.0 million.

As part of the purchase, the Company has committed to certain future overhaul and maintenance services which are anticipated to range between $ 73.8 million and $ 112.0 million by 2030.

Common Stock Repurchase

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During 2020, the Company repurchased 55,426 shares of common stock for approximately $ 1.5 million under the plan, at a weighted average price of $ 27.24 per share.

As of July 2, 2020, the Company terminated its 10b-18 plan.

At December 31, 2021, approximately $ 44.8 million was available to purchase shares under the plan.

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Under this 2007 Plan, a total of 2,800,000 shares were authorized for stock-based compensation available in the form of either restricted stock awards (“RSAs”) or stock options.

The RSAs are subject to service-based vesting, typically between one and four years , where a specific period of continued employment must pass before an award vests.

RSAs are subject to service-based vesting, typically between one and four years , where a specific period of continued employment must pass before an award vests.

The expense associated with these awards is recognized on a straight-line basis over the respective vesting period, with forfeitures accounted for as they occur.

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The 2018 Stock Incentive Plan (the “2018 Plan”) was adopted in May 2018.

Under this 2018 Plan, a total of 800,000 shares were authorized for stock-based compensation, plus the number of shares remaining under the 2007 Plan and any future forfeited awards under the 2007 Plan, in the form of RSAs.

Under this 2018 Plan total of 800,000 shares were authorized for stock-based compensation, plus the number of shares remaining under the 2007 Plan and any future forfeited awards under the 2007 Plan, in the form of RSAs.

In November 2021, the 2018 Plan was amended and restated as the 2021 Stock Incentive Plan (the “2021 Plan”) to increase the number of shares reserved for issuance under the 2021 Plan by 1,000,000 shares.

The RSAs are subject to service-based vesting, typically between one and four years , where a specific period of continued employment must pass before an award vests.

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Number Outstanding Weighted Average

Grant Date Fair Value Aggregate Grant

Date Fair Value

(in thousands)

Grant Date Fair Value

Balance as of December 31, 2019 505,467 $ 37.70

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At December 31, 2021, the intrinsic value of unvested RSAs was $ 21.1 million.

Under the Employee Stock Purchase Plan (“ESPP”), as amended and restated effective April 1, 2018, 325,000 shares of common stock have been reserved for issuance.

Under the Employee Stock Purchase Plan (“ESPP”), as amended and restated effective November 10, 2021, 425,000 shares of common stock have been reserved for issuance.

Eligible employees may designate no more than 10 % of their base cash compensation to be deducted each pay period for the purchase of common stock under the Purchase Plan.

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The Company match totaled $ 0.7 million and $ 0.8 million for the years ended December 31, 2021 and 2020, respectively.

Quarterly Consolidated Financial Information (Unaudited)

The following is a summary of the unaudited quarterly results of operations for the years ended December 31, 2020 and 2019 (in thousands, except per share data):

2020 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Full Year

Total revenue $ 81,609 $ 74,983 $ 70,613 $ 61,487 $ 288,692

Net income (loss) attributable to common shareholders $ 3,455 $ 4,540 $ 2,144 $ ( 3,734 ) $ 6,405

Basic earnings (loss) per common share $ 0.59 $ 0.75 $ 0.36 $ ( 0.62 ) $ 1.07

Diluted earnings (loss) per common share $ 0.56 $ 0.74 $ 0.35 $ ( 0.62 ) $ 1.05

Basic weighted average common shares outstanding 5,860 6,016 5,985 5,988 5,963

Diluted weighted average common shares outstanding 6,124 6,103 6,084 5,988 6,128

2019 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Full Year

Total revenue $ 103,769 $ 95,797 $ 120,366 $ 89,228 $ 409,160

Net income attributable to common shareholders $ 20,056 $ 16,144 $ 23,232 $ 4,156 $ 63,588

Basic earnings per common share $ 3.47 $ 2.75 $ 3.97 $ 0.71 $ 10.90

Diluted earnings per common share $ 3.35 $ 2.66 $ 3.81 $ 0.68 $ 10.50

Basic weighted average common shares outstanding 5,779 5,866 5,847 5,850 5,836

Diluted weighted average common shares outstanding 5,978 6,061 6,094 6,099 6,058

Related Party Transactions

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“Other revenue” on the Consolidated Statement of Income includes management fees earned of $ 2.1 million and $ 1.6 million during the years ended December 31, 2021 and 2020, respectively, related to the servicing of engines for the WMES lease portfolio.

During 2021, the Company sold two engines to WMES for $ 25.0 million.

During 2020, the Company sold one note receivable to WMES for $ 8.4 million.

During 2019, the Company sold five aircraft and other equipment to WMES for $ 76.4 million.

Additionally, during 2019, WMES sold one engine to Willis Aeronautical Services, Inc., a wholly-owned subsidiary of the Company, for $ 2.6 million.

There were no aircraft or engine sales to CASC Willis during 2021 or 2020.

During 2019, the Special Committee of the Board of Directors approved a transaction in which the Company’s Chief Executive Officer (“CEO”), Charles F.

Willis, purchased a car at its market value of $ 0.1 million from the Company.

During 2019, the Company’s CEO was charged $ 0.2 million for usage of the Company’s marine vessel in the Company’s lease portfolio.

During 2019, the Company paid approximately $ 36,000 of expenses payable to Mikchalk Lake, LLC, an entity in which our CEO retains an ownership interest.

On December 2, 2021, in a transaction approved by an independent committee, as well as the Audit Committee, of the Board of Directors, the Company purchased 60,000 shares of its common stock directly from the Company’s Chief Executive Officer (“CEO”), Charles F.

The agreed and paid price per share was $ 35.43 , the discounted volume weighted average price on December 2, 2021.

On October 1, 2021, the Board’s Independent Directors approved the payment of $ 0.2 million to the Company’s CEO, Charles F.

Willis, for reimbursement of a golf club membership fee, as well as future payments of reasonable annual golf club dues.

During 2021, the Company paid approximately $ 27,000 of expenses payable to Mikchalk Lake, LLC, an entity in which our Chief Executive Officer (“CEO”) retains an ownership interest.

These expenses were for lodging and other business related services.

These transactions were approved by the Board’s Independent Directors.

During 2020, the Board's independent directors approved the Company’s agreement to a lease with our CEO in support of the Company’s vessel leasing business.

That lease provides for a payment to our CEO of $ 500 per day for the use of his tender in support

of our vessel lease to a third-party lessee.

In addition, the Company has purchased a hull insurance policy, for our CEO’s tender, at a rate of $ 6,800 per annum, plus a one-time subscriber fee of $ 695 to insure his tender while in the service of the Company’s vessel leasing business.

The lease agreement was subsequently amended and approved by the Board’s independent directors to increase the daily rate to $ 750 per day.

The Company has paid a total of $ 9,750 for usage of the tender.

Additionally, our CEO was charged $ 4,000 for personal expenses while onboard the Company’s marine vessel.

During 2020, the Board’s Independent Directors approved the Company’s agreement to a lease with our CEO in support of the Company’s marine vessel leasing business.

That lease provides for a payment to our CEO of $ 750 per day for the use of his tender in support of our vessel lease to a third-party lessee.

In addition, the Company purchased a hull insurance policy, for our CEO’s tender, at a rate of $ 6,800 per annum, plus a one-time subscriber fee of $ 695 to insure his tender while in the service of the Company’s vessel leasing business.

The Company has paid a total of $ 41,250 and $ 9,750 during the years ended December 31, 2021 and 2020, respectively, for usage of the tender.

On November 11, 2021, in a transaction approved by the Independent Compensation Committee, the Company purchased the tender for $ 0.5 million.

Additionally, during 2020, our CEO was charged $ 4,000 for personal expenses while onboard the Company’s marine vessel.

During 2020, the Company’s CEO was charged $ 9,100 for the purchase of artwork.

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Gain on sale of leased equipment 5,975 — — 5,975

Gain on sale of financial assets (1) 10,874 — — 10,874

Asset transition fee (2) 6,256 — — 6,256

Other revenue 24,522 523 ( 157 ) 24,888

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Interest expense 67,985 — — 67,985

Loss on debt extinguishment 4,688 — — 4,688

Total finance costs 67,985 — — 67,985

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Total expenses 253,376 20,219 403 273,998

Earnings from operations $ 77,001 $ 3,540 $ ( 238 ) $ 80,303

Earnings (loss) from operations $ 18,193 $ ( 2,378 ) $ ( 1,121 ) $ 14,694

________________________

(1) Represents revenue generated between our operating segments.

(1) Gain on sale of financial assets reflects the sales of two notes receivable during 2021.

(2) Asset transition fee reflects the settlement received from the close out of an engine transition program.

Leasing and Related Operations Spare Parts Sales Eliminations Total

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Total assets as of December 31, 2020 $ 2,312,172 $ 52,776 $ — $ 2,364,948

Subsequent Event

On March 3, 2022, the Board appointed Austin C.

Willis, currently a member of the Board and the Company’s Senior Vice President, Corporate Development, as the Company’s Chief Executive Officer, effective April 1, 2022.

In connection with the appointment of Austin C.

Willis, Charles F.

Willis, IV, the Chairman and Chief Executive Officer of the Company, notified the Board of his decision to step down as Chief Executive Officer, effective April 1, 2022.

Willis, IV will continue to serve as the Chairman of the Board and will assume the role of Executive Chairman on April 1, 2022.

On March 3, 2022, the Company entered into an employment agreement with Charles F.

Willis IV in connection with his assumption of the role of Executive Chairman of the Board, effective as of April 1, 2022.

The agreement provides that Charles F.

Willis IV is entitled to an initial annual base salary of $ 1,097,000 and establishes his target annual bonus opportunity at 100 % of his annual base salary.

In addition, the agreement provides for a $ 1,000,000 signing bonus.

Also, on March 3, 2022, the Company entered into an employment agreement with Austin C.

Willis in connection with his appointment as Chief Executive Officer of the Company, effective as of April 1, 2022.

The agreement provides that Austin C.

Willis is entitled to an initial annual base salary of $ 640,000 and establishes his target annual bonus opportunity at 90 % of his annual base salary.

WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures