Company: PNBK
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0001628280-25-052358
Chunk: 59

Company: PATRIOT NATIONAL BANCORP INC
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 1
Chunk 59
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 obtain is based on current appraised property value less estimated costs to sell. When fair value is based on unadjusted current appraised value, OREO is classified within Level 2 of the fair value hierarchy. Patriot classifies OREO within Level 3 of the fair value hierarchy when unobservable inputs are used to determine adjustments to appraised values. Patriot does not record OREO at fair value on a recurring basis, but rather initially records OREO at fair value on a non-recurring basis and then monitors property and market conditions that may indicate a change in value is warranted.Retained Beneficial InterestIn 2023, the Company entered into a loss sharing agreement with a third party seller in which the third party seller agreed to reimburse the Company for losses related to consumer loans that the Company had purchased from the seller.  In 2025, the Company sold a pool of those consumer loans to a third party.  The Company retained the rights under the loss sharing agreement for the loans sold.  Upon the sale of the loans, the retained interest in the loss sharing agreement was recognized at fair value as an asset on the balance sheet.  The fair value of the retained interest was estimated by discounting the expected future cash flows under the loss sharing agreement.

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Table of ContentsPATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited)

Derivative asset (liability) - Interest Rate SwapsThe 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.DepositsThe 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