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, 2020 and 2019 totaled $69,000 and $55,000, respectively. Employer contributions charged to expense for the six months ended June 30, 2020 and 2019 totaled $114,000 and $121,000, 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, 2020 and 2019 totaled $191,000 and $158,000, respectively. Employer contributions charged to expense for the six months ended June 30, 2020 and 2019 totaled $371,000 and $329,000, respectively. There were 702,500 shares available for future grants as of June 30, 2020.

On September 5, 2019, our largest shareholders, the Haines Family Trusts, contributed approximately 6.5% of their shares (656,925 shares) to the Company. Subsequently, the Company immediately issued those shares to certain executive officers, which was charged as compensation expense of $11.8 million, including payroll taxes, through the income statement of the Company. Additionally, at the discretion of the employees receiving shares to assist in paying tax withholdings, 149,425 shares were withheld and subsequently canceled, resulting in a charge to retained earnings of $2.6 million.

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, 2020
Outstanding at December 31, 2019		163,000		$	18.75
Options Granted		26,500			18.49
Options Exercised		-			-
Options Forfeited		(3,000	)		17.42
Outstanding at June 30, 2020		186,500			18.73		8.45	$	0
Exercisable at June 30, 2020		40,000			18.77		8.28	$	0

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, 2020			June 30, 2019
Risk-free interest rate		1.71	%		2.48	%
Dividend yield		2.20	%		2.20	%
Stock price volatility		41.27	%		31.14	%
Expected term		7.51			7.01

The following table summarizes share information about RSUs for the six months ended June 30, 2020:

	Number of Shares		Wgtd. Avg. Grant Date Fair Value
Outstanding at December 31, 2019		104,000	$	19.09
Shares granted		31,000		18.49
Shares settled		-		-
Shares forfeited		-		-
End of the period balance		135,000	$	18.95

As of June 30, 2020, there was approximately $2.1 million of unrecognized compensation expense related to 135,000 unvested RSUs and $457,000 of unrecognized compensation expense related to 186,500 unvested and/or unexercised stock options. The stock option expense is expected to be recognized over a weighted average period of 2.71 years, and the RSU expense is expected to be recognized over a weighted average period of 3.50 years.