Note

Business Combination, Goodwill and Other Intangible Assets

Acquisition of Prime Bank

The Company's acquisitions are accounted for under the acquisition method of accounting in accordance with ASC

805,

Business Combinations. Both the purchased assets and liabilities assumed are recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities, especially the loan portfolio, is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. At date of acquisition fair values are generally preliminary and subject to refinement for up to

one

year after the closing date of the acquisition as additional information regarding fair values becomes available.

May 10, 2018,

the Company completed its acquisition of Prime Bank, a Connecticut bank headquartered in Orange, CT. The closing of the transaction added a new Patriot branch located in the Town of Orange, New Haven County, Connecticut.

The assets acquired and liabilities assumed from Prime Bank were recorded at their estimated fair value as of the closing date of the acquisition. Goodwill of

$2.1

million was recorded at the time of the acquisition, and was adjusted to

$1.7

million as of

December 31, 2018,

primarily due to updating of fair value of the core deposit intangibles and adjustment of cash and contingent considerations. The goodwill was further adjusted to

$1.1

million as a result of reducing the estimated amount to be paid pursuant to certain problem loans pending resolution by

$621,000

as of

May 10, 2019.

For the year ended

December 31, 2020,

a purchase price adjustment of

$556,000

was recognized to project expenses on the consolidated statements of operations. The charge represented an adjustment to the earlier estimate of the final purchase price upon final settlement of the litigation related to a dispute over the final purchase price. There were

income statement effects resulting from the recorded measurement period adjustments for the year ended

December 31, 2019.

The goodwill is all deductible for income taxes over

years.

Information on goodwill for the year ended

December

31,

2020,

2019

and

2018

is as follows:

	Year Ended December 31,
(In thousands)	2020		2019			2018
Balance, beginning of period	$	1,107	$	1,728		$	1,728
Mesurement period adjustments		-		(621	)		-
Balance, end of period	$	1,107	$	1,107		$	1,728

Goodwill is evaluated for impairment annually or whenever we identify certain triggering events or circumstances that would more likely than

not

reduce the fair value of a reporting unit below its carrying amount. Events or circumstances that might indicate an interim evaluation is warranted include, among other things, unexpected adverse business conditions, macro and reporting unit specific economic factors, supply costs, unanticipated competitive activities, and acts by governments and courts.

Management estimates the fair value of the reporting unit by considering multiple valuation techniques, which include subjective assumptions about the future cash flows of the Company, assumptions within the capitalization rate, valuation multiples, and market data used. The fair value of each reporting unit is compared to the carrying amount of such reporting unit in order to determine if impairment is indicated.

The Company identified the COVID-

pandemic and related reported losses as a triggering event in the

first

quarter of

2020.

Due to this triggering event, the Company performed a quantitative assessment of the goodwill, and concluded it was more likely than

not

that the fair value of the reporting unit exceeded its carrying value, and goodwill was

not

impaired. The Company performed a quantitative assessment as of

October 31, 2020,

the Company's annual goodwill impairment measurement date, and concluded that the goodwill was

not

impaired as of

December

31,

2020.

CDI was recorded as part of the Prime Bank business combination in

May 2018.

The CDI is amortized over a

-year period using the straight-line method. For the year ended

December

31,

2020,

2019

and

2018,

the amortization was

$74,000,

$75,000

and

$50,000,

respectively. The CDI was evaluated for impairment as of

October 31, 2020,

and an impairment charge of

$206,000

was recorded for the year ended

December 31, 2020.

The amortization expense and impairment charge were included in the other operating expenses on the consolidated statements of operations.

The table below provides information regarding the carrying amounts and accumulated amortization of amortized intangible assets as of the dates set forth below.

	Year Ended December 31,
(In thousands)	2020			2019			2018
Gross Intangible asset	$	748		$	748		$	748
Accumulated amortization		(199	)		(125	)		(50	)
Impairment		(206	)		-			-
Core deposit intangible, net	$	343		$	623		$	698

Acquisition of Hana Small Business Lending and Subsequent Termination

February 6, 2018,

the Company, Hana Small Business Lending, Inc. (“Hana SBL”), a wholly-owned subsidiary of Hana Financial, Inc. (“Hana Financial”), and

three

wholly-owned subsidiaries of Hana SBL entered into a definitive purchase agreement pursuant to which Patriot would acquire Hana SBL's small business administration (“SBA”) lending business.

August 2, 2018,

the Company, Hana SBL and

three

wholly-owned subsidiaries of Hana SBL, entered into an amendment to the purchase agreement, pursuant to which, the closing date of the above referenced transaction had been extended from

August 2, 2018

August 1, 2019.

October 29, 2018

the Company withdrew its initial application to the OCC requesting approval of the acquisition of Hana SBL. As of

March 30, 2019,

the Company did

not

receive regulatory non-objection.

March 30, 2019

the Company and Hana SBL mutually agreed to terminate the purchase agreement as amended between the parties. The termination agreement provided for the release of escrowed funds back to the Company.

For the year ended

December 31, 2018,

the Company incurred

$1.15

million of merger and acquisition expenses related to the Hana SBL acquisition.