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 60,248 service time based shares and 64,993 performance based shares granted under the 2017 Plan during the nine month period ended September 30, 2017, 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.

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 were no additional shares granted under the Plan during the nine month period ended September 30, 2017 as detailed in the table below. 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 for both Plans was $791 thousand and $1.4 million for the three and nine month periods ended September 30, 2017, respectively. During the prior periods, the expense recognized was $201 thousand and $602 thousand for the three and nine month periods ended September 30, 2016, respectively. As of September 30, 2017, there was $2.4 million of total unrecognized compensation expense related to the nonvested shares granted under the Plans. The remaining cost is expected to be recognized over 2.25 years.

The following is the activity under the Plans during the nine month period ended September 30, 2017.

	Nine Months Ended September 30, 2017
	2017 Incentive Plan					2012 Incentive Plan
	Maximum Awarded Units			Weighted Average Grant Date Fair Value		Maximum Awarded Units			Weighted Average Grant Date Fair Value
Beginning unvested units		0			0		499,390		$	8.30
Granted		125,241		$	13.65		0			0
Vested		0			0		(21,928	)		7.19
Forfeited		(3,623	)		13.49		(12,234	)		8.28
Ending unvested units		121,618		$	13.66		465,228		$	8.35