It is in the middle of what was once dairy, timber and citrus country and is now more significantly a feeder town for the nearby mining industry in the Upper Hunter and the city of Newcastle.

[8] Old Banks, in an area first surveyed by Henry Dangar in 1822–23, was the true genesis of rural settlement outside of the Sydney basin.

This fledgling farming community subsisted under the oversight of the locality's military station and lock-up established at the river's crossing point.

Even so, the military outpost at Old Banks (along with a similar facility 14 kilometres to the east at Seaham on the Williams River) continued to provide for the interception of escaped convicts from Port Macquarie, the imposition of law and order for the Paterson region and the oversight of a most important centre for transportation of goods, chattels and people.

In 1823, Morrisett's Government Cottage and associated infrastructure was made available to Timothy Nowlan as the base for his Government-sponsored sheep breeding 'experiment', and family home.

The present township of Paterson, situated six kilometres to the north of the original military station at Old Banks, was the third to be surveyed in the Hunter Valley after Newcastle and Maitland, but was not proclaimed until 1833.

With the continuing settlement of the district, Paterson soon became an important tidal river port and service centre to the surrounding community.

In its heyday Paterson had four stores, five hotels, two shipyards, a sawmill, a tannery, four blacksmiths, two butchers, a bakery and a boarding school for girls.

Shipbuilding also commenced with the development of the river trade and considerable supplies of tobacco were grown, as well as grains, grapes, wine, citrus fruits and cotton were transported by steamboats to Morpeth, Newcastle and Sydney.

During March, Paterson holds an annual festival at Tucker Park, with market stalls and local produce.