Stock Based Compensation:

During 2017, the Company, with the approval of shareholders, created the 2017 Equity Incentive Plan (the “2017 Plan”). The 2017 Plan permits the award of up to 800 thousand shares to the Company’s directors and employees to attract and retain exceptional personnel, motivate performance and most importantly to help align the interests of Farmers’ executives with those of the Company’s shareholders. There were 17,729 service time based shares and 62,919 performance based shares granted under the 2017 Plan during the three month period ended March 31, 2018, as shown in the table below. The actual number of performance based stock awards issued will depend on certain performance conditions which are mainly average return on equity compared to a group of peer companies over a three year vesting period. There are 594,734 shares that are remaining and available for future awards at March 31, 2018.

During 2012, the Company, with the approval of shareholders, created the 2012 Equity Incentive Plan (the “2012 Plan”). The 2012 Plan permitted the award of up to 500 thousand shares to the Company’s directors and employees to promote the Company’s long-term financial success by motivating performance through long-term incentive compensation and to better align the interests of its employees with those of its shareholders. There are no additional shares available to be granted under the Plan. Any new restricted stock awards will be issued under the 2017 Plan described above.

The restricted stock awards were granted with a fair value price equal to the market price of the Company’s common stock at the date of the grant. Expense recognized was $397 thousand for the three month period ended March 31, 2018. During the prior period, the expense recognized was $180 thousand for the three month period ended March 31, 2017. As of March 31, 2018, there was $2.5 million of total unrecognized compensation expense related to the nonvested shares granted under the Plans. The remaining cost is expected to be recognized over 3 years.

The following is the activity under the Plans during the three month period ended March 31, 2018.

	Three Months Ended March 31, 2018
	Maximum Awarded Service Units			Weighted Average Grant Date Fair Value		Maximum Awarded Performance Units			Weighted Average Grant Date Fair Value
Beginning balance - nonvested shares		323,331		$	9.20		266,515		$	9.43
Granted		17,729			14.35		62,919			14.31
Vested		(33,000	)		7.88		(63,873	)		7.76
Forfeited		0			0		(61,733	)		7.76
Ending balance - nonvested shares		308,060		$	9.64		203,828		$	11.96