v3.26.1
Fair Value and Interest Rate Risk
 6 Months Ended
Jun. 30, 2026
Fair Value Disclosures [Abstract]  
Fair Value and Interest Rate Risk Fair Value and Interest Rate Risk
Patriot measures the carrying value of certain financial assets and liabilities at fair value, as required by its policies as a financial institution and by US GAAP. The carrying values of certain assets and liabilities are measured at fair value on a recurring basis, such as available-for-sale securities; while other assets and liabilities are measured at fair value on a non-recurring basis due to external factors requiring management’s judgment to estimate potential losses of value resulting in asset impairments or the establishment of valuation reserves. Measuring assets and liabilities at fair value may result in fluctuations to carrying value that have a significant impact on the results of operations or other comprehensive income for the period and period over period.
Following is a detailed summary of the guidance provided by US GAAP regarding the application of fair value measurements and Patriot’s application thereof. Additionally, the following information includes detailed summaries of the effects fair value measurements have on the carrying amounts of asset and liabilities presented in the consolidated financial statements.
The objective of fair value measurement is to value an asset that may be sold or a liability that may be transferred at the estimated value which might be obtained in a transaction between unrelated parties under current market conditions. US GAAP establishes a framework for measuring assets and liabilities at fair value, as well as certain financial instruments classified in equity. The framework provides a fair value hierarchy, which prioritizes quoted prices in active markets for identical assets and liabilities and minimizes unobservable inputs, which are inputs for which market data are not available and that are developed by management using the best information available to develop assumptions about the value market participants might place on the asset to be sold or liability to be transferred.
The three levels of the fair value hierarchy consist of:
Level 1    Unadjusted quoted market prices for identical assets or liabilities in active markets that the entity has ability to access at the measurement date (such as active exchange-traded equity securities and certain U.S. and government agency debt securities).
Level 2    Observable inputs other than quoted prices included in Level 1, such as:
–Quoted prices for similar assets or liabilities in active markets (such as U.S. agency and government sponsored mortgage-backed securities)
–Quoted prices for identical or similar assets or liabilities in less active markets (such as certain U.S. and government agency debt securities, and corporate and municipal debt securities that trade infrequently)
–Other inputs that are observable for substantially the full term of the asset or liability (i.e. interest rates, yield curves, prepayment speeds, default rates, etc.).
Level 3    Valuation techniques that require unobservable inputs that are supported by little or no market activity and are significant to the fair value measurement of the asset or liability (such as pricing and discounted cash flow models that typically reflect management’s estimates of the assumptions a market participant would use in pricing the asset or liability).
A description of the valuation methodologies used for assets and liabilities recorded at fair value, and for estimating fair value for financial and non-financial instruments not recorded at fair value, is set forth below.
Cash and due from banks, restricted cash, and accrued interest receivable and payable
The carrying amount is a reasonable estimate of fair value and accordingly these are classified as Level 1. These financial instruments are not recorded at fair value on a recurring basis.
Available-for-sale securities
The fair value of securities available-for-sale (carried at fair value) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities, but rather by relying on the securities' relationship to other benchmark quoted prices, or using unobservable inputs employing various techniques and assumptions (Level 3).
Federal Reserve Bank Stock and Federal Home Loan Bank Stock
Shares in the FRB and FHLB are purchased and redeemed based upon their $100 par value. The stocks are non-marketable equity securities, and as such, are considered restricted securities that are carried at cost.
Loans
The fair value of loans is using an exit price approach by discounting expected future cash flows at market rates for loans with similar credit characteristics and remaining maturities. The valuation incorporates factors that market participants would consider, including credit risk, liquidity, transaction costs and current market conditions. The determination of fair value requires significant judgment. The determination of fair value requires the use of significant judgment.
Loans Held for Sale
The fair value of loans held for sale is generally estimated by using a market approach based on observable market prices and other market inputs. Such loans are classified within Level 2 of the fair value hierarchy.
Certain credit card receivables held for sale at June 30, 2026 were valued using an income approach based on discounted expected cash flows. Significant assumptions included expected collections, anticipated credit losses, timing of collections, costs and uncertainties associated with administering and resolving the portfolio, and a market participant discount rate. Because significant inputs to the valuation are unobservable, these receivables are classified within Level 3 of the fair value hierarchy.
Servicing Asset
Servicing assets do not trade in an active, open market with readily observable prices. The Company estimates the fair value of servicing assets using discounted cash flow models incorporating numerous assumptions from the perspective of a market participant including market discount rates and prepayment speeds. Due to the significant unobservable input related to the servicing rights, the servicing asset is classified within Level 3 of the valuation hierarchy.
Retained Beneficial Interest
The Company retained its rights to sold loans under a loss share agreement and did not transfer such rights to the loan purchasers. Accordingly, the Company has continuing involvement in the transferred financial assets. The retained interest is recognized as a separate asset and represents the present value of expected future reimbursements. The fair value of this asset is estimated using a discounted cash flow methodology that incorporates significant unobservable inputs, including expected credit losses, timing of cash flows, and appropriate discount rates. Due to the use of these unobservable inputs, the asset is classified as a Level 3 measurement within the fair value hierarchy in accordance with ASC 820.
The Company evaluates the retained interest on a recurring basis for changes in expected cash flows and records adjustments to fair value as necessary. Changes in the fair value of the retained interest are recognized in earnings in the period in which they occur.
Derivative asset (liability) - Interest Rate Swaps
The Company’s derivative assets and liabilities consist of transactions as part of management’s strategy to manage interest rate risk. The valuation of interest rate swap agreements does not contain any counterparty risk. The valuation of the Company’s interest rate swaps is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of each derivative. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves. The Company has determined that the inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy. See Note 7 for additional disclosures on derivatives.
Deposits
The fair value of demand deposits, regular savings and certain money market deposits is the amount payable on demand at the reporting date.
The fair value of certificates of deposit and other time deposits is estimated using a discounted cash flow calculation that applies interest rates currently being offered for deposits of similar remaining maturities, estimated using local market data, to a schedule of aggregated expected maturities on such deposits. Patriot does not record deposits at fair value on a recurring basis.
Subordinated Notes and Junior Subordinated Debt

Patriot does not record subordinated notes at fair value on a recurring basis. The fair value of the subordinated notes was estimated by discounting future cash flows at rates at which similar notes would be made. The carrying value is considered comparable to fair value.
Patriot does not record junior subordinated debt at fair value on a recurring basis. Junior subordinated debt reprices quarterly, as a result, the carrying amount is considered a reasonable estimate of fair value.
The Company considers its own credit worthiness in determining the fair value of its subordinated notes, notes and junior subordinated debt.
Federal Home Loan Bank, Federal Reserve Bank and Correspondent Bank Borrowings
The fair value of FHLB advances, FRB and other correspondent bank borrowings are estimated using a discounted cash flow calculation that applies current interest rates for advances of similar maturity to a schedule of maturities of such advances. Patriot does not record FHLB advances, FRB and other correspondent bank borrowings at fair value on a recurring basis.
Off-balance-sheet financial instruments
Off-balance-sheet financial instruments are based on interest rate changes and fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The off-balance-sheet financial instruments (i.e., commitments to extend credit) are insignificant and are not recorded on a recurring basis.
The following table provides a comparison of the carrying amounts and estimated fair values of Patriot’s financial assets and liabilities as of June 30, 2026 and December 31, 2025:
(In thousands)June 30, 2026December 31, 2025
Fair Value
Hierarchy 		Carrying
Amount 		Estimated
Fair Value 		Carrying
Amount 		Estimated
Fair Value
Financial Assets:
Cash and noninterest bearing balances due from banksLevel 1$2,533 $2,533 $2,411 $2,411 
Interest-bearing deposits due from banksLevel 1114,359 114,359 183,980 183,980 
Restricted cashLevel 14,617 4,617 20,736 20,736 
Available-for-sale securitiesLevel 2228,942 228,942 212,950 212,950 
Available-for-sale securitiesLevel 311,403 11,403 11,727 11,727 
Federal Reserve Bank stockLevel 23,031 3,031 2,961 2,961 
Federal Home Loan Bank stockLevel 2742 742 679 679 
Loans receivable, netLevel 3877,440 857,856 585,723 571,015 
Loans held for saleLevel 29,105 9,105 24,513 24,513 
Loans held for saleLevel 314,592 14,592 — — 
Servicing assetsLevel 3638 626 660 652 
Accrued interest receivableLevel 26,534 6,534 4,869 4,869 
Retained beneficial interestLevel 3348 348 518 518 
Interest rate swap receivableLevel 252 52 39 39 
Financial assets, total$1,274,336 $1,254,740 $1,051,675 $1,037,050 
Financial Liabilities:
Demand depositsLevel 2$150,464 $150,464 $106,766 $106,766 
Savings depositsLevel 283,030 83,030 38,036 38,036 
Interest bearing DDALevel 2497,349 497,349 291,728 285,663 
Money market depositsLevel 2196,762 196,762 191,177 191,177 
Time depositsLevel 2241,435 240,643 283,395 283,401 
Brokered depositsLevel 131,907 31,907 54,683 54,800 
Subordinated debtLevel 28,301 8,054 8,289 8,102 
Junior subordinated debt owed to unconsolidated trustLevel 28,163 8,163 8,157 8,157 
Accrued interest payableLevel 2298 298 615 615 
Interest rate swap liabilityLevel 252 52 39 39 
Financial liabilities, total$1,217,761 $1,216,722 $982,885 $976,756 
The carrying amount of cash and non-interest-bearing balances due from banks, interest-bearing deposits due from banks, and demand deposits approximates fair value, due to the short-term nature and high turnover of these balances. These amounts are included in the table above for informational purposes.
In the normal course of its operations, Patriot assumes interest rate risk (i.e., the risk that general interest rate levels will fluctuate). As a result, the fair value of Patriot’s financial assets and liabilities are affected when interest market rates change, which change may be either favorable or unfavorable. Management attempts to mitigate interest rate risk by matching the maturities of its financial assets and liabilities. However, borrowers with fixed rate obligations are less likely to prepay their obligations in a rising interest rate environment and more likely to prepay their obligations in a falling interest rate environment. Conversely, depositors receiving fixed rates are more likely to withdraw funds before maturity in a rising interest rate environment and less likely to do so in a falling interest rate environment. Management monitors market rates of interest and the maturities of its financial assets and financial liabilities, adjusting the terms of new loans and deposits in an attempt to minimize interest rate risk. Additionally, management mitigates its overall interest rate risk through its available funds investment strategy.
The following tables detail the financial assets measured at fair value on a recurring basis and the valuation techniques utilized relative to the fair value hierarchy, as of June 30, 2026 and December 31, 2025:
(In thousands)Quoted Prices in
Active Markets for
Identical Assets
(Level 1) 		Significant
Observable Inputs
(Level 2) 		Significant
Unobservable Inputs
(Level 3) 		Total
June 30, 2026
U. S. Government agency and MBS$— $220,106 $— $220,106 
Corporate bonds— 1,750 11,403 13,153 
Subordinated notes— 3,861 — 3,861 
SBA loan pools— 3,226 — 3,226 
Available-for-sale securities$— $228,942 $11,403 $240,345 
Loans held for sale$— $— $14,592 $14,592 
Retained beneficial interest$— $— $348 $348 
Interest rate swap receivable$— $52 $— $52 
Interest rate swap liability$— $52 $— $52 
December 31, 2025:
U. S. Government agency and MBS$— $204,068 $— $204,068 
Corporate bonds— 1,737 11,727 13,464 
Subordinated notes— 3,752 — 3,752 
SBA loan pools— 3,393 — 3,393 
Available-for-sale securities$— $212,950 $11,727 $224,677 
Retained beneficial interest$— $— $518 $518 
Interest rate swap receivable$— $39 $— $39 
Interest rate swap liability$— $39 $— $39 

Patriot measures certain financial assets and financial liabilities at fair value. When circumstances dictate (e.g., impairment of long-lived assets, other than temporary impairment of collateral value), the carrying values of such financial assets and financial liabilities are adjusted to fair value or fair value less costs to sell, as may be appropriate. At June 30, 2026, such measurements included certain loans held for sale, individually evaluated loans, servicing assets and retained beneficial interests.
As of June 30, 2026 and December 31, 2025, four corporate bonds were classified as Level 3 instruments. The fair values of these securities were determined using a present value approach. The discount rate assumed was determined based on unobservable inputs in a pricing model. During the three and six months ended June 30, 2026, the Company had loans held for sale transfer into Level 3.

At June 30, 2026, certain credit card receivables held for sale with a carrying value of approximately $14.6 million were measured at fair value using a discounted cash flow approach. Significant unobservable inputs included assumptions regarding expected collections, credit losses, timing of collections, costs associated with administering and resolving the portfolio, and the market participant discount rate.
For the three and six months ended June 30, 2025, the Company had no transfers into or out of Levels 1, 2 or 3.
The reconciliation of the beginning and ending balances during the three and six months ended June 30, 2026 and 2025 for Level 3 assets is as follows:
Three Months Ended June 30,Six Months Ended June 30,
(In thousands)2026202520262025
Level 3 fair value, beginning of period$12,028 $10,968 $12,245 $11,123 
Unrealized (loss)/gain(277)509 (494)354 
Transfers in and /or out of Level 314,592 — 14,592 — 
Level 3 fair value, end of period$26,343 $11,477 $26,343 $11,477 
The table below presents the valuation methodology and unobservable inputs for level 3 assets measured at fair value as of June 30, 2026 and December 31, 2025:
(In thousands)Fair Value Valuation
Methodology 		Unobservable Inputs Range of Inputs
June 30, 2026
Individually evaluated loans, net$23,096 Real Estate AppraisalsDiscount for appraisal type4 %-11%
Loans held for sale 14,592 Discounted Cash FlowsMarket discount rates3 %14%
Servicing assets635 Discounted Cash FlowsMarket discount rates12.75 %-12.75%
Retained beneficial interest348 Discounted Cash FlowsMarket discount rates10 %-15%
Loss projections (% exposure)10 %-20%
Claim timing (months)9 months-18 months
December 31, 2025:
Individually evaluated loans, net$10,394 Real Estate AppraisalsDiscount for appraisal type8 %-14%
Servicing assets652 Discounted Cash FlowsMarket discount rates10 %-15%
Retained beneficial interest518 Discounted Cash FlowsMarket discount rates10 %-15%
Loss projections (% exposure)10 %-20%
Claim timing (months)9 months-18 months

Patriot discloses fair value information about financial instruments, whether or not recognized in the consolidated balance sheet, for which it is practicable to estimate that value. Certain financial instruments are excluded from disclosure requirements and, accordingly, the aggregate fair value amounts presented do not necessarily represent the complete underlying value of financial instruments included in the Consolidated Financial Statements.
The estimated fair value amounts have been measured as of June 30, 2026 and December 31, 2025, and have not been reevaluated or updated for purposes of these Consolidated Financial Statements subsequent to those respective dates. As such, the estimated fair values of the financial instruments measured may be different than if they had been subsequently valued.
The information presented should not be interpreted as an estimate of the total fair value of Patriot’s assets and liabilities, since only a portion of Patriot’s assets and liabilities are required to be measured at fair value for financial reporting purposes. Due to the wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between Patriot’s fair value disclosures and those of other bank holding companies may not be meaningful.
In the normal course of its operations, Patriot assumes interest rate risk (i.e., the risk that general interest rate levels will fluctuate). As a result, the fair value of Patriot’s financial assets and liabilities are affected when interest market rates change, which change may be either favorable or unfavorable. Management attempts to mitigate interest rate risk by matching the maturities of its financial assets and liabilities. However, borrowers with fixed rate obligations are less likely to prepay their obligations in a rising interest rate environment and more likely to prepay their obligations in a falling interest rate environment. Conversely, depositors receiving fixed rates are more likely to withdraw funds before maturity in a rising interest rate environment and less likely to do so in a falling interest rate environment. Management monitors market rates of interest and the maturities of its financial assets and financial liabilities, adjusting the terms of new loans and deposits in an attempt to minimize interest rate risk. Additionally, management mitigates its overall interest rate risk through its available funds investment strategy.