Note 9 - Share-based Compensation and Employee Benefit Plan

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

Note 9.    Share-Based Compensation and Employee Benefit Plan

In 2011, the Company adopted the Patriot National Bancorp, Inc. 2012 Stock Plan (the “2012 Plan”). The 2012 Plan was amended in 2020 and renamed as the Patriot National Bancorp, Inc. 2020 Stock Plan (the “2020 Plan”). A copy of the 2020 Plan was filed as Exhibit 10.1 to the Company’s Amendment No. 1 on Form 10-K/A filed on April 30, 2021. The 2020 Plan provides an incentive to directors and employees of the Company by the grant of restricted stock awards (“RSA”).

The 2020 Plan authorizes 3,000,000 shares of the Company’s Common Stock for issuance. As of June 30, 2021, 2,830,031 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 or 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, 2021 and 2020:

Three months ended June 30, 2021:	Number of Shares Awarded			Weighted Average Grant Date Fair Value
Unvested at March 31, 2021		17,798		$	6.88
Granted		20,476		$	10.48
Vested		(3,004	)	$	16.90
Unvested at June 30, 2021		35,270		$	8.12
Six months ended June 30, 2020:
Unvested at December 31, 2020		18,498		$	7.29
Granted		20,476		$	10.48
Vested		(3,704	)	$	17.08
Unvested at June 30, 2021		35,270		$	8.12

Three months ended June 30, 2020:	Number of Shares Awarded			Weighted Average Grant Date Fair Value
Unvested at March, 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

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, 2021, the Company recognized total share-based compensation expense of $46,000 and $80,000, respectively. The share-based compensation attributable to employees of Patriot amounted to $25,000 and $40,000, respectively. Included in share-based compensation expense were $21,000 and $40,000 attributable to Patriot’s external directors, who received total compensation of $90,000 and $184,000 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, 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.

Unrecognized compensation expense attributable to the unvested restricted shares outstanding as of June 30, 2021 amounted to $320,000, which amount is expected to be recognized over the weighted average remaining life of the awards of 3.23 years.

Dividends

The Company has not paid any dividends since 2020 and has temporarily suspended dividend payments pending resolution of the economic uncertainties associated with the Coronavirus pandemic.

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, 2021, compensation expense under the 401K aggregated $63,000 and $111,000, respectively. During the three and six months ended June 30, 2020, compensation expense under the 401K aggregated $62,000 and $151,000, respectively.