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 has been to grant RSAs. As of

June 30, 2020

and

December 31, 2019,

there were

options or phantom stock units outstanding, or that have been exercised during the period then ended.

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, 2020,

2,850,139

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.

The following is a summary of the status of the Company's restricted shares and changes for the

three

and

six

months ended

June 30, 2020

and

2019:

Three months ended June 30, 2020:	Number of Shares Awarded			Weighted Average Grant Date Fair Value
Unvested at March 31, 2020		19,298		$	12.73
Granted		12,484		$	6.12
Vested		(3,000	)	$	16.90
Forfeited		(2,185	)	$	15.92
Unvested at June 30, 2020		26,597		$	8.89

Six months ended June 30, 2020:
Unvested at December 31, 2019		21,470		$	12.91
Granted		12,484		$	6.12
Vested		(5,172	)	$	15.92
Forfeited		(2,185	)	$	15.92
Unvested at June 30, 2020		26,597		$	8.89

Three months ended June 30, 2019:	Number of Shares Awarded			Weighted Average Grant Date Fair Value
Unvested at March 31, 2019		22,854		$	13.66
Granted		9,675		$	15.52
Vested		(3,000	)	$	16.90
Unvested at June 30, 2019		29,529		$	13.94

Six months ended June 30, 2019:
Unvested at December 31, 2018		31,790		$	14.06
Granted		9,675		$	15.52
Vested		(11,936	)	$	15.53
Unvested at June 30, 2019		29,529		$	13.94

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, 2020,

the Company recognized total share-based compensation expense of

$38,000

and

$81,000,

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

$18,000

and

$43,000,

respectively. Included in share-based compensation expense were

$20,000

and

$38,000

attributable to Patriot's external directors, who received total compensation of

$138,000

and

$255,000

for each of those periods, respectively, which amounts are included in other operating expenses in the consolidated statements of operations.

For the

three

and

six

months ended

June 30, 2019,

the Company recognized total share-based compensation expense of

$55,000

and

$103,000,

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

$28,000

and

$56,000,

respectively. Included in share-based compensation expense were

$27,000

and

$47,000

attributable to Patriot's external directors, who received total compensation of

$151,000

and

$270,000

for each of those periods, respectively, which amounts are included in other operating expenses in the consolidated statements of operations.

Unrecognized compensation expense attributable to the unvested restricted shares outstanding as of

June 30, 2020

amounted to

$268,000,

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

2.15

years.

Dividends

The Company has

not

paid any dividends during

2020

and has temporarily suspended dividend payments pending resolution of the economic uncertainties associated with the Coronavirus pandemic.

For the

three

and

six

months ended

June 30, 2019,

the Company paid cash dividends of

$.01

per share of common stock, or an aggregate of

$38,000

and

$77,000,

respectively.

Retirement Plan

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 of an employee's annual compensation. During the

three

and

six

months ended

June 30, 2020,

compensation expense under the

401K

aggregated

$62,000

and

$151,000,

respectively. During the

three

and

six

months ended

June 30, 2019

compensation expense under the

401K

aggregated

$88,000

and

$142,000,

respectively.