Note

: Leases

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On

January 1, 2019,

the Company adopted ASU

No.

2016

“Leases” (Topic

842

) and all subsequent ASUs that modified Topic

842.

For the Company, Topic

842

primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee.

Patriot has

eight

non-cancelable operating leases, including

four

Bank branch locations and

three

for administrative and operational space, and

one

equipment lease. The leases expire on various dates through

2032

and some include renewal options. Most of the leases contain rent escalation provisions, as well as renewal options for

one

or more periods. The last potential year the leases can be extended through

2037.

Substantially all of our leases are classified as operating leases, and therefore, were previously

not

recognized on the Company’s consolidated balance sheets. With the adoption of Topic

842,

operating lease agreements are required to be recognized on the consolidated balance sheets as a right-of-use (“ROU”) asset and a corresponding lease liability. The Company has

finance leases (previously referred to as a capital lease).

The cumulative-effect adjustment was an increase to the opening balance of accumulated deficit at the time of adoption on

January 1, 2019.

The Company recognized

$3.4

million of right-of-use (“ROU”) assets and

$3.4

million lease liabilities for operating leases on its Consolidated Balance Sheets. The standard did

not

have an impact on its Consolidated Income Statements.

Operating leases are recorded as a ROU lease assets and are included in other assets on the consolidated balance sheet. The Company’s corresponding lease obligations are included in accrued expenses and other liabilities on the consolidated balance sheet. ROU lease assets represent the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligation to make lease payments arising from the lease. Operating ROU lease assets and obligations are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do

not

provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company’s lease terms

may

include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Lease expense for lease payments is recognized on a straight-line basis over the lease term. Short-term leases are leases having a term of

twelve

months or less. The Company recognizes short-term leases on a straight-line basis and does

not

record a related lease asset or liability for such leases, as allowed as practical expedient of the standard. The following is a maturity analysis of the operating lease liabilities as of

June 30, 2019:

	June 30, 2019
(in thousands)	Operating lease
Years ending December 31,	Obligation
2019	$	255
2020		521
2021		532
2022		498
2023		465
Thereafter		1,875
Total undiscounted lease payments		4,146
Less imputed interest		(722	)
Present value of operating lease liabilities	$	3,424
Operating lease right-of-use asset	$	3,342

	Three Months Ended		Six Monthes Ended
	June 30, 2019		June 30, 2019
Lease cost
Operating lease cost	$	131		253
Short-term lease cost		21		46

Other information
Operating cash flows from operating leases	$	109		218

	June 30, 2019
Weighted -average remaining lease term - operating leases (in years)		10
Weighted -average discount rate - operating leases		3.55	%