Note

19.

Regulatory and Operational Matters

November 2018,

the Bank entered into a formal written agreement (the “Agreement”) with the OCC. Pursuant to the terms of the Agreement, the Bank has appointed a Compliance Committee of

three

independent outside directors and

one

member of management responsible for monitoring adherence to the Agreement and has appointed a Lead Independent Director.

The Agreement states the Board and Bank would develop, implement and revise written documents and policies related to executive compensation, conflict of interest, internal audit, liquidity and asset/liability management, commercial loan administration, leveraged lending, practices relating to the allowance for loan and lease losses, and assumptions used in the Bank's interest rate risk model. Under the Agreement the Bank agreed to provide a revised written

-year strategic and capital plan for the Bank. The Bank provided the documents and policies requested in the Agreement. To date, the Bank has addressed each of the items identified in the Agreement and is currently working collaboratively with the OCC to bring all matters to full resolution. Further details pertaining to the Agreement were provided in Part II Item

9B:

Other information included on the Annual Report on Form

-K for the year ended

December 31, 2018.

Federal and state regulatory authorities have adopted standards requiring financial institutions to maintain increased levels of capital. Effective

January 1, 2015,

federal banking agencies imposed

four

minimum capital requirements on a community bank's risk-based capital ratios consisting of Total Capital, Tier

Capital, Common Equity Tier

(

“CET1”

) Capital, and a Tier

Leverage Capital ratio. The risk-based capital ratios measure the adequacy of a bank's capital against the riskiness of its on- and off-balance sheet assets and activities. Failure to maintain adequate capital is a basis for "prompt corrective action" or other regulatory enforcement action. In assessing a bank's capital adequacy, regulators also consider other factors such as interest rate risk exposure, liquidity, funding and market risks, quality and level of earnings, concentrations of credit, quality of loans and investments, nontraditional activity risk, policy effectiveness, and management's overall ability to monitor and control risk.

September 2019,

the community bank leverage ratio (CBLR) framework was jointly issued by the FDIC, OCC and FRB. The final rule gives qualifying community banks the option to use a simplified measure of capital adequacy instead of risk based capital, beginning with their

March 31, 2020

Call Report. Under the final rule a community bank

may

qualify for the CBLR framework if it has a Tier

leverage ratio of greater than

9%,

less than

$10

billion in total consolidated assets, and limited amounts of off-balance sheet exposures and trading assets and liabilities. The Bank did

not

adopt the CBLR framework at

December 31, 2020

but retains the option to adopt the framework in a future period.

Capital adequacy is

one

of the most important factors used to determine the safety and soundness of individual banks and the banking system. Under the instituted regulatory framework, to be considered “well capitalized”, a financial institution must generally have a Total Capital ratio of at least

10%,

a Tier

Capital ratio of at least

8.0%,

CET1

Capital ratio at least

6.5%,

and a Tier

Leverage Capital ratio of at least

9.0%.

However, regardless of a financial institution's ratios, the OCC

may

require increased capital ratios or impose dividend restrictions based on the other factors it considers in assessing a bank's capital adequacy.

Management continuously assesses the adequacy of the Bank's capital in order to maintain its “well capitalized” status.

The Company's and the Bank's regulatory capital amounts and ratios at

December

31,

2020

and

2019

are summarized as follows:

(In thousands)	Patriot National Bancorp, Inc.								Patriot Bank, N.A.
	December 31, 2020				December 31, 2019				December 31, 2020				December 31, 2019
	Amount ($)		Ratio (%)		Amount ($)		Ratio (%)		Amount ($)		Ratio (%)		Amount ($)		Ratio (%)
Total Capital (to risk weighted assets):
Actual	$	87,428		11.132	$	90,083		10.510	$	97,226		12.392	$	100,953		11.826
To be Well Capitalized (1)		-		-		-		-		78,461		10.000		85,362		10.000
For capital adequacy with Capital Buffer (2)		-		-		-		-		82,384		10.500		89,630		10.500
For capital adequacy		62,827		8.000		68,573		8.000		62,769		8.000		68,290		8.000

Tier 1 Capital (to risk weighted assets):
Actual		67,602		8.608		69,957		8.161		87,700		11.177		90,827		10.640
To be Well Capitalized (1)		-		-		-		-		62,769		8.000		68,290		8.000
For capital adequacy with Capital Buffer (2)		-		-		-		-		66,692		8.500		72,558		8.500
For capital adequacy		47,120		6.000		51,430		6.000		47,077		6.000		51,217		6.000

Common Equity Tier 1 Capital (to risk weighted assets):
Actual		59,602		7.589		61,957		7.228		87,700		11.177		90,827		10.640
To be Well Capitalized (1)		-		-		-		-		51,000		6.500		55,485		6.500
For capital adequacy with Capital Buffer (2)		-		-		-		-		54,923		7.000		59,753		7.000
For capital adequacy		35,340		4.500		38,572		4.500		35,308		4.500		38,413		4.500

Tier 1 Leverage Capital (to average assets):
Actual		67,602		7.539		69,957		7.148		87,700		9.802		90,827		9.279
To be Well Capitalized (1)		-		-		-		-		44,736		5.000		48,944		5.000
For capital adequacy		35,868		4.000		39,148		4.000		35,789		4.000		39,155		4.000

( 1 )	Designation as "Well Capitalized" does not apply to bank holding companies - the Company. Such categorization of capital adequacy only applies to insured depository institutions - the Bank.
( 2 )	The Capital Conservation Buffer implemented by the FDIC began to be phased in beginning January 1, 2016. It was not applicable to periods prior to that date and does not apply to bank holding companies - the Company.

Under the final capital rules that became effective on

January 1, 2015,

there was a requirement for a

CET1

capital conservation buffer of

2.5%

of risk-weighted assets, which is in addition to the other minimum risk-based capital standards in the rule. Institutions that do

not

maintain this required capital buffer become subject to progressively more stringent limitations on the percentage of earnings that

may

be distributed to shareholders or used for stock repurchases and on the payment of discretionary bonuses to senior executive management. The capital conversation buffer of

2.5%

has been included in the minimum capital adequacy ratios in the

2020

and

2019

column above.

The capital buffer requirement effectively raises the minimum required Total Capital ratio to

10.5%,

the Tier

capital ratio to

8.5%

and the

CET1

capital ratio to

7.0%

on a fully phased-in basis, which was effective on

January 1, 2019.

As of

December 31, 2020,

Patriot satisfies all regulatory capital adequacy requirements on a fully phased-in basis.

January 22, 2019,

based on its supervisory profile, the Bank was notified by the OCC that it established individual minimum capital ratios for the Bank. Specifically, the Bank is required to maintain a Tier

leverage ratio of

9.0%

and a total risk-based capital to risk-weighted assets of

11.0%.

December 31, 2020,

the Bank exceeded all of its regulatory capital requirements with a Tier

leverage capital level of

$87.7

million, or

9.8%

of adjusted total assets, which is above the well-capitalized required level of

9.0%;

total risk-based capital of

$97.2

million, or

12.4%

of risk-weighted assets, which is above the well-capitalized required level of

11.0%

of risk-weighted assets; At

December 31, 2019,

the Bank exceeded all of its regulatory capital requirements with a Tier

leverage capital level of

9.3%

of adjusted total assets of

$90.8

million, which is above the well-capitalized required level of

9.0%;

and total risk-based capital of

$101.0

million, or

11.8%

of risk-weighted assets, which is above the well-capitalized required level of

11.0%

of risk weighted assets. Accordingly, the Bank was categorized as well capitalized as of

December 31, 2020

and

2019.

Management is

not

aware of any conditions or events since the most recent notification that would change the Bank's category.