Employee Benefits

6 Months Ended

Jun. 30, 2021

Note 7:

Employee Benefits

401(k) Savings Plan

The Company has a retirement savings 401(k) plan covering substantially all employees. Employees may contribute up to the maximum legal limit with the Bank matching up to 5% of the employee’s salary. Employer contributions charged to expense for the three months ended June 30, 2021 and 2020 totaled $75,000 and $69,000, respectively. Employer contributions charged to expense for the six months ended June 30, 2021 and 2020 totaled $140,000 and $114,000, respectively.

Stock-Based Compensation

The Company adopted a nonqualified incentive stock option plan (the “Bank7 Corp. 2018 Equity Incentive Plan”) in September 2018. The Bank7 Corp. 2018 Equity Incentive Plan will terminate in September 2028, if not extended. Compensation expense related to the Plan for the three months ended June 30, 2021 and 2020 totaled $171,000 and $191,000, respectively. Employer contributions charged to expense for the six months ended June 30, 2021 and 2020 totaled $473,000 and $371,000, respectively. There were 689,050 shares available for future grants as of June 30, 2021.

The Company grants to employees and directors restricted stock units (RSUs) which vest ratably over either three or five years and stock options which vest ratably over four years. All RSUs and stock options are granted at the fair value of the common stock at the time of the award. The RSUs are considered fixed awards as the number of shares and fair value are known at the date of grant and the fair value at the grant date is amortized over the vesting and/or service period.

The Company uses newly issued shares for granting RSUs and stock options.

The following table is a summary of the stock option activity under the Bank7 Corp. 2018 Equity Incentive Plan (dollar amounts in thousands, except per share data):

	Options		Wgtd. Avg. Exercise Price		Wgtd. Avg. Remaining Contractual Term		Aggregate Intrinsic Value
Six Months Ended June 30, 2021
Outstanding at December 31, 2020		185,250	$	18.73
Options Granted		80,500		14.31
Options Exercised		-		-
Options Forfeited		-		-
Outstanding at June 30, 2021		265,750		17.39		8.08	$	243,720
Exercisable at June 30, 2021		86,307		18.75		7.37	$	3,525

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model and is based on certain assumptions including risk-free rate of return, dividend yield, stock price volatility and the expected term. The fair value of each option is expensed over its vesting period.

The following table shows the assumptions used for computing stock-based compensation expense under the fair value method on options granted during the period presented:

	Six Months Ended
	June 30, 2021			June 30, 2020
Risk-free interest rate		0.52	%		1.71	%
Dividend yield		2.89	%		2.20	%
Stock price volatility		66.67	%		41.27	%
Expected term		6.41			7.51

The following table summarizes share information about RSUs for the six months ended June 30, 2021:

Six Months Ended June 30, 2021	Number of Shares			Wgtd. Avg. Grant Date Fair Value
Outstanding at December 31, 2020		118,000		$	18.09
Shares granted		25,200			14.31
Shares vested		(7,582	)		18.02
Shares forfeited		-			-
End of the period balance		135,618		$	17.39

As of June 30, 2021, there was approximately $1.9 million of unrecognized compensation expense related to 135,618 unvested RSUs and $756,000 of unrecognized compensation expense related to 265,750 unvested and/or unexercised stock options. The stock option expense is expected to be recognized over a weighted average period of 2.88 years, and the RSU expense is expected to be recognized over a weighted average period of 2.76 years.