Note

Share-Based Compensation and Employee Benefit Plan

The Company maintains the Patriot National Bancorp, Inc.

2012

Stock Plan (the “Plan”) to provide an incentive to directors and employees of the Company by the grant of restricted stock awards (“RSA”), options, or phantom stock units.

Since

2013,

the Company’s practice is to grant RSAs; as of

June 30, 2017

and

December 31, 2016,

there were

options or phantom stock units outstanding or that have been exercised.

The Plan provides for the issuance of up to

3,000,000

shares of the Company’s common stock subject to certain limitations. As of

June 30, 2017,

2,886,432

shares of stock are available for issuance under the Plan. In accordance with the terms of the Plan, the vesting of RSAs and options

may

be accelerated at the discretion of the Compensation Committee of the Board of Directors. The Compensation Committee sets the terms and conditions applicable to the vesting of RSAs and stock option grants. RSAs granted to directors and employees generally vest in quarterly or annual installments over a three,

four

five

year period from the date of grant. During the

three

and

six

months ended

June 30, 2017,

the Company granted

5,084

RSAs to directors and

zero

RSA to employees. During the

six

months ended

June 30, 2016,

the Company granted

52,200

restricted shares to employees and

5,884

restricted shares to directors, respectively. During the

three

and

six

months ended

June 30, 2017,

and

2,231

shares of restricted stock became vested,

6,000

and

6,000

shares of restricted stock forfeited, respectively. All RSAs are non- participating grants.

The Company recognizes compensation expense for all director and employee share-based compensation awards on a straight-line basis over the requisite service period, which is equal to the vesting schedule of each award, for each vesting portion of an award equal to its grant date fair value. For the

three

and

six

months ended

June 30, 2017,

the Company recognized share-based compensation expense of

$25,000

and

$68,000,

respectively. The share-based compensation attributable to employees of Patriot amounted to

$4,000

and

$32,000,

respectively.

For the

three

and

six

months ended

June 30, 2016,

the Company recognized share-based compensation expense of

$154,000

and

$308,000,

respectively. The share-based compensation attributable to employees of Patriot amounted to

$139,000

and

$279,000,

respectively.

Included in share-based compensation expense for the

three

and

six

months ended

June 30, 2017

were

$21,000

and

$36,000

attributable to Patriot’s external Directors, who received total compensation of

$77,000

and

$146,000

for each of those periods, respectively, which amounts are included in Other Operating Expenses in the Consolidated Statements of Operations.

The share-based compensation expense for the

three

and

six

months ended

June 30, 2016

were

$15,000

and

$29,000

attributable to Patriot’s external Directors, who received total compensation of

$80,000

and

$152,000

for each of those periods, respectively, which amounts are included in Other Operating Expenses in the Consolidated Statements of Operations.

The following is a summary of the status of the Company’s restricted shares as of

June 30, 2017

and

2016

and changes therein during the periods indicated:

Three months ended June 30, 2017:	Number of Shares Awarded			Weighted Average Grant Date Fair Value
Unvested at March 31, 2017		33,033		$	12.55
Granted		5,084		$	15.05
Forfeited		(6,000	)	$	15.50
Unvested at June 30, 2017		32,117		$	12.39

Six months ended June 30, 2017:
Unvested at December 31, 2016		35,264		$	12.84
Granted		5,084		$	15.05
Vested		(2,231	)	$	13.05
Forfeited		(6,000	)	$	15.50
Unvested at June 30, 2017		32,117		$	12.39

Three months ended June 30, 2016:	Number of Shares Awarded			Weighted Average Grant Date Fair Value
Unvested at March 31, 2016		113,938		$	14.06
Vested		(2,526	)	$	14.72
Forfeited		(4,213	)	$	11.31
Unvested at June 30, 2016		107,199		$	14.16

Six months ended June 30, 2016:
Unvested at December 31, 2015		55,854		$	12.83
Granted		58,084		$	15.25
Vested		(2,526	)	$	14.72
Forfeited		(4,213	)	$	11.31
Unvested at June 30, 2016		107,199		$	14.16

Compensation expense attributable to the unvested restricted shares outstanding as of

June 30, 2017

amounts to

$367,000,

which amount is expected to be recognized over the weighted average remaining life of the awards of

2.56

years.

RSA Grant - Non-executive Employees

January 4, 2016,

the Company granted

100

restricted shares of common stock to each of

eighty-seven

full- and part-time non-executive employees as of

December 31, 2015.

The total number of shares granted was

8,700

at a grant date fair value of

$15.50

per share, resulting in expected future employee compensation of

$135,000.

The shares granted vest in

three

-years on

January 2, 2019

and are non-participating during the vesting period.

During the

three

and

six

months ended

June 30, 2017,

none

of the shares granted were forfeited. The remaining

6,900

shares continue to vest and

$54,000

of compensation expense is expected to be recognized through the

January 2019

vesting date.

The Company offers a

401K

retirement plan (the

“401K”

), which provides for tax-deferred salary deductions for eligible employees. Employees

may

choose to make voluntary contributions to the

401K,

limited to an annual maximum amount as set forth periodically by the Internal Revenue Service. The Company matches

50%

of such contributions, up to a maximum of

six

percent. During the

three

and

six

months ended

June 30, 2017,

compensation expense under the

401K

aggregated

$60,000

and

$94,000,

respectively. During the

three

and

six

months ended

June 30, 2016,

compensation expense under the

401K

aggregated

$38,000

and

$81,000,

respectively.