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

March 31, 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

March 31, 2020,

2,860,438

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 as of

March 31, 2020

and

2019

and changes therein during the periods indicated:

	Number of Shares Awarded			Weighted Average Grant Date Fair Value
Three months ended March 31, 2020:
Unvested at December 31, 2019		21,470		$	12.91
Vested		(2,172	)	$	14.56
Unvested at March 31, 2020		19,298		$	12.73

Three months ended March 31, 2019:
Unvested at December 31, 2018		31,790		$	14.06
Vested		(8,936	)	$	15.07
Unvested at March 31, 2019		22,854		$	13.66

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

months ended

March 31, 2020

and

2019,

the Company recognized total share-based compensation expense of

$43,000

and

$48,000,

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

$25,000

and

$28,000,

for the

three

months ended

March 31, 2020

and

2019,

respectively. Included in share-based compensation expense were

$18,000

and

$20,000

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

$117,000

and

$119,000

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

March 31, 2020

amounted to

$264,000,

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

1.91

years.

Dividends

March 26, 2020,

the Company received a notice of rejection from the Federal Reserve Bank of New York regarding the Company’s request to make a quarterly dividend to its shareholders in

March 2020.

The response related to a pending request submitted by the Bank to the Office of the Comptroller of the Currency (the “OCC”) requesting approval to have the Bank pay a dividend to the Company. As a result, the Company did

not

pay the dividend that would normally have been paid during the

first

quarter of

2020.

For the

three

months ended

March 31, 2019,

the Company paid cash dividends of

$.01

per share of common stock, or an aggregate of

$39,000.

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

months ended

March 31, 2020

and

2019,

compensation expense under the

401K

aggregated

$89,000

and

$54,000,

respectively.