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Leases

9 Months Ended

Sep. 30, 2020

At the inception of a contract, an entity should determine whether the contract contains a lease. Topic 842 defines a lease as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. Control over the use of an identified asset means that the customer has both (1) the right to obtain substantially all of the economic benefits from the use of the asset and (2) the right to direct the use of the asset.

German American has finance leases for branch offices as well as operating leases for branch offices, ATM locations and certain office equipment. The right-of-use asset is included in the 'Premises, Furniture and Equipment, Net' line of the consolidated balance sheet. The lease liability is included in the 'Accrued Interest Payable and Other Liabilities' line of the consolidated balance sheet.

The Company used the implicit lease rate when determining the present value of lease payments for finance leases. The present value of lease payments for operating leases was determined using the incremental borrowing rate as of the date the Company adopted this standard.

The components of lease expense for the three months ended September 30, were as follows:


	Three Months Ended		Three Months Ended
	September 30, 2020		September 30, 2019

Finance Lease Cost:
Amortization of Right-of -Use Assets	$	52	$	83
Interest on Lease Liabilities	91		188
Operating Lease Cost	446		514
Short-term Lease Cost	—		15
Total Lease Cost	$	589	$	800

The components of lease expense for the nine months ended September 30, were as follows:


	Nine Months Ended		Nine Months Ended
	September 30, 2020		September 30, 2019

Finance Lease Cost:
Amortization of Right-of -Use Assets	$	157	$	187
Interest on Lease Liabilities	274		379
Operating Lease Cost	1,352		1,234
Short-term Lease Cost	34		45
Total Lease Cost	$	1,817	$	1,845

The weighted average lease term and discount rates were as follows:


	September 30, 2020		September 30, 2019

Weighted Average Remaining Lease Term:
Finance Leases	11 years		12 years
Operating Leases	8 years		8 years

Weighted Average Discount Rate:
Finance Leases	11.48	%	11.49	%
Operating Leases	3.18	%	3.39	%

Supplemental balance sheet information related to leases was as follows:


	September 30, 2020		September 30, 2019

Finance Leases
Premises, Furniture and Equipment, Net	$	2,330	$	2,540
Other Borrowings	3,265		3,418

Operating Leases
Operating Lease Right-of-Use Assets	$	8,579	$	9,802
Operating Lease Liabilities	8,675		9,900

Supplemental cash flow information related to leases was as follows:


	Nine Months Ended		Nine Months Ended
	September 30, 2020		September 30, 2019

Cash paid for amounts in the measurement of lease liabilities:
Operating Cash Flows from Finance Leases	$	274	$	285
Operating Cash Flows from Operating Leases	1,292		1,181
Financing Cash Flows from Finance Leases	92		81

The following table presents a maturity analysis of Finance and Operating Lease Liabilities:


	September 30, 2020
	Finance Leases		Operating Leases

Year 1	$	519	$	1,594
Year 2	519		1,385
Year 3	519		1,275
Year 4	519		1,115
Year 5	519		964
Thereafter	3,083		3,631
Total Lease Payments	5,678		9,964
Less Imputed Interest	(2,413)		(1,289)
Total	$	3,265	$	8,675

Leases