STOCK-BASED COMPENSATION

The Company follows the provisions of ASC 718, Compensation – Stock Compensation, to account for its stock-based compensation plans. ASC 718 requires that the compensation cost relating to share-based payment transactions be recognized in the financial statements and that the cost be measured on the fair value of the equity or liability instruments issued.

Equity Incentive Plan

In May 2004, the stockholders of the Company approved the EastGroup Properties, Inc. 2004 Equity Incentive Plan (the “2004 Plan”) that authorized the issuance of up to 1,900,000 shares of common stock to employees in the form of options, stock appreciation rights, restricted stock, deferred stock units, performance shares, bonus stock or stock in lieu of cash compensation. The 2004 Plan was further amended by the Board of Directors in September 2005 and December 2006.

In April 2013, the Board of Directors adopted the EastGroup Properties, Inc. 2013 Equity Incentive Plan (the “2013 Equity Plan”) upon the recommendation of the Compensation Committee; the 2013 Equity Plan was approved by the Company's stockholders and became effective May 29, 2013. The 2013 Equity Plan replaced the 2004 Plan and the 2005 Directors Equity Incentive Plan. The 2013 Equity Plan permits the grant of awards to employees and directors with respect to 2,000,000 shares of common stock.

There were 1,900,800 and 1,971,164 total shares available for grant under the 2013 Equity Plan as of December 31, 2014 and 2013, respectively. Under the 2004 Plan, total shares available for grant were 1,330,619 at December 31, 2012. Typically, the Company issues new shares to fulfill stock grants.

Stock-based compensation cost was $6,071,000, $5,087,000 and $4,087,000 for 2014, 2013 and 2012, respectively, of which $1,415,000, $1,253,000 and $920,000 were capitalized as part of the Company’s development costs for the respective years.

Employee Equity Awards

The Company's restricted stock program is designed to provide incentives for management to achieve goals established by the Compensation Committee. The awards act as a retention device, as they vest over time, allowing participants to benefit from dividends on shares as well as potential stock appreciation. Equity awards align management's interests with the long-term interests of shareholders. The vesting periods of the Company’s restricted stock plans vary, as determined by the Compensation Committee. Restricted stock is granted to executive officers subject to both continued service and the satisfaction of certain annual performance goals and multi-year market conditions as determined by the Compensation Committee. Restricted stock is granted to non-executive officers subject only to continued service. The cost for market-based awards and awards that only require service is amortized on a straight-line basis over the requisite service periods.

The total compensation expense for service and performance based awards is based upon the fair market value of the shares on the grant date, adjusted for estimated forfeitures. The grant date fair value for awards that have been granted and are subject to a future market condition (total shareholder return) is determined using a simulation pricing model developed to specifically accommodate the unique features of the awards.

In March 2014, the Compensation Committee of the Company's Board of Directors (the Committee) evaluated the Company's performance compared to certain annual performance goals for the year ended December 31, 2013. Based on the evaluation, 39,211 shares were awarded to the Company’s executive officers at a grant date fair value of $61.96 per share. These shares vested 20% on the dates shares were determined and awarded and will vest 20% per year on January 1 in years 2015, 2016, 2017 and 2018. The shares will be expensed on a straight-line basis over the remaining service period.

Also in March 2014, the Committee evaluated the Company’s total return, both on an absolute basis for 2013 as well as on a relative basis compared to the NAREIT Equity Index, NAREIT Industrial Index and Russell 2000 Index for the five-year period ended December 31, 2013. Based on the evaluation, 32,431 shares were awarded to the Company’s executive officers at a grant date fair value of $61.96 per share. These shares vested 25% on the dates shares were determined and awarded and will vest 25% per year on January 1 in years 2015, 2016 and 2017. The shares will be expensed on a straight-line basis over the remaining service period.

In the second quarter of 2014, the Company’s Board of Directors approved an equity compensation plan for its executive officers based upon the attainment of certain annual performance measures (primarily funds from operations (FFO) per share and total shareholder return). Any shares issued pursuant to this compensation plan will be determined by the Compensation Committee in its discretion and issued in the first quarter of 2015. The number of shares to be issued on the grant date could range from zero to 44,524. These shares will vest 20% on the date shares are determined and awarded and generally will vest 20% per year on each January 1 for the subsequent four years.

Also in the second quarter of 2014, EastGroup’s Board of Directors approved a long-term equity compensation plan for the Company’s executive officers. The awards will be based on the results of the Company's total shareholder return, both on an absolute basis for 2014 as well as on a relative basis compared to the NAREIT Equity Index, NAREIT Industrial Index and Russell 2000 Index over the five-year period ended December 31, 2014. Any shares issued pursuant to this equity compensation plan will be determined by the Compensation Committee and issued in the first quarter of 2015. The number of shares to be issued on the grant date could range from zero to 46,719. These shares will vest 25% on the date shares are determined and awarded and generally will vest 25% per year on each January 1 for the subsequent three years.

Notwithstanding the foregoing, shares issued to the Company’s Chief Executive Officer, David H. Hoster II, and Chief Financial Officer, N. Keith McKey, will become fully vested no later than January 1, 2016 and April 6, 2016, respectively.

During the restricted period for awards no longer subject to contingencies, the Company accrues dividends and holds the certificates for the shares; however, the employee can vote the shares. For shares subject to contingencies, dividends are accrued based upon the number of shares expected to be awarded. Share certificates and dividends are delivered to the employee as they vest. As of December 31, 2014, there was $6,833,000 of unrecognized compensation cost related to unvested restricted stock compensation that is expected to be recognized over a weighted average period of 2.26 years.

Following is a summary of the total restricted shares granted, forfeited and delivered (vested) to employees with the related weighted average grant date fair value share prices for 2014, 2013 and 2012. Of the shares that vested in 2014, 2013 and 2012, 31,673 shares, 9,412 shares and 36,195 shares, respectively, were withheld by the Company to satisfy the tax obligations for those employees who elected this option as permitted under the applicable equity plan. The fair value of shares that were granted during 2014, 2013 and 2012 was $4,439,000, $6,364,000 and $5,451,000, respectively. As of the vesting date, the fair value of shares that vested during 2014, 2013 and 2012 was $5,712,000, $1,700,000 and $6,630,000, respectively.



Restricted Stock Activity:	Years Ended December 31,
	2014				2013				2012
	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Unvested at beginning of year	293,989		$	47.17	212,206		$	42.84	235,929		$	38.90
Granted	71,642		61.96		112,099		56.77		111,732		48.79
Forfeited	(2,375	)	52.72		—		—		—		—
Vested	(97,345	)	50.76		(30,316	)	52.32		(135,455	)	40.88
Unvested at end of year	265,911		49.79		293,989		47.17		212,206		42.84

Following is a vesting schedule of the total unvested shares as of December 31, 2014:



Unvested Shares Vesting Schedule		Number of Shares
2015		88,678
2016		93,320
2017		28,918
2018		18,995
2019		16,200
2020		19,800
Total Unvested Shares		265,911

Employee Stock Options

The Company has not granted stock options to employees since 2002. Outstanding employee stock options vested equally over a two-year period; accordingly, all options are now vested. There were no employee stock option exercises during 2014, 2013 or 2012.

Directors Equity Awards

The Company previously had a directors equity plan that was approved by stockholders and adopted in 2005 (the "2005 Plan"), which authorized the issuance of up to 50,000 shares of common stock through awards of shares and restricted shares granted to non-employee directors of the Company. The 2005 Plan was further amended by the Board of Directors in May 2006, May 2008, May 2011 and May 2012. The 2005 Plan was replaced by the 2013 Equity Plan effective May 29, 2013, and the Board of Directors has adopted a policy under the 2013 Equity Plan pursuant to which awards will be made to non-employee Directors. The current policy provides that the Company shall automatically award an annual retainer share award to each non-employee Director who has been elected or reelected as a member of the Board of Directors at the Annual Meeting. The number of shares shall be equal to $70,000 divided by the fair market value of a share on the date of such election. If a non-employee Director is elected or appointed to the Board of Directors other than at an Annual Meeting of the Company, the annual retainer share award shall be pro rated. The policy also provides that each new non-employee Director appointed or elected will receive an automatic award of restricted shares of Common Stock on the effective date of election or appointment equal to $25,000 divided by the fair market value of the Company's Common Stock on such date. These restricted shares will vest over a four-year period upon the performance of future service as a Director, subject to certain exceptions.

Directors were issued 7,742 shares, 7,469 shares and 7,326 shares of common stock as annual retainer awards for 2014, 2013 and 2012, respectively. In addition, during 2013, 417 shares were granted to a newly elected non-employee Director subject only to continued service as of the vesting date. The shares, which have a grant date fair value of $59.97 per share, vested 25% on December 6, 2014 and will vest 25% per year on December 6 in years 2015, 2016 and 2017. As of the vesting date, the fair value of shares that vested during 2014 was $7,000. Stock-based compensation expense for directors was $490,000, $395,000 and $330,000 for 2014, 2013 and 2012, respectively.

There were no director stock options exercised in 2014. The intrinsic value realized by directors from the exercise of options was $172,000 and $116,000 for 2013 and 2012, respectively. There were no director stock options granted or expired during the years presented below. Following is a summary of the total director stock options exercised with related weighted average exercise share prices for 2014, 2013 and 2012.



Stock Option Activity:	Years Ended December 31,
	2014			2013				2012
	Shares	Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Outstanding at beginning of year	—	$	—	4,500		$	26.60	9,000		$	25.31
Exercised	—	—		(4,500	)	26.60		(4,500	)	24.02
Outstanding at end of year	—	—		—		—		4,500		26.60
Exercisable at end of year	—	$	—	—		$	—	4,500		$	26.60