NOTE 15 – STOCK BASED COMPENSATION

Effective April 8, 2008, the Company adopted the Lakeland Financial Corporation 2008 Equity Incentive Plan (the "2008 Plan"), which was approved by the Company's stockholders. At its inception there were 1,125,000 shares of common stock reserved for grants of stock options, stock appreciation rights, stock awards and cash incentive awards to employees of the Company, its subsidiaries and Board of Directors. Effective April 9, 2013, the Company adopted the Lakeland Financial Corporation 2013 Equity Incentive Plan (the "2013 Plan"), which was also approved by the Company's stockholders. At its inception the remaining shares of common stock available to grant under the 2008 Plan of 435,867 were transferred to the 2013 Plan and reserved for grants of stock options, stock appreciation rights, stock awards and cash incentive awards to employees of the Company, its subsidiaries and Board of Directors. Nonvested shares from the 2008 Plan that are unused at vesting are added to the shares available to grant of the 2013 Plan. As of December 31, 2016, 100,121 were available for future grants. Certain stock awards provide for accelerated vesting if there is a change in control. The Company has a policy of issuing new shares to satisfy exercises of stock awards.

Included in net income for the years ended December 31, 2016, 2015 and 2014 was employee stock compensation expense of $4.2 million, $2.5 million and $2.8 million, and a related tax benefit of $1.7 million, $1.0 million and $1.1 million, respectively.

Stock Options

The equity incentive plan requires that the exercise price for options be the market price on the date the options are granted. The maximum option term is ten years and the awards usually vest over three years. The fair value of each stock option is estimated with the Black Scholes pricing model, using the following weighted-average assumptions as of the grant date for stock options granted during the years presented. Expected volatilities are based on historical volatility of the Company's stock over the immediately preceding expected life period, as well as other factors known on the grant date that would have a significant effect on the stock price during the expected life period. The expected stock option life used is the historical option life of the similar employee base or Board of Directors. The turnover rate is based on historical data of the similar employee base as a group and the Board of Directors as a group. The risk-free interest rate is the Treasury rate on the date of grant corresponding to the expected life period of the stock option.

There were no stock option grants in 2016, 2015 or 2014.

A summary of the activity in the stock option plan as of December 31, 2016 and changes during the period then ended follows:

					Weighted-
			Weighted-		Average
			Average		Remaining		Aggregate
			Exercise		Contractual		Intrinsic
	Shares		Price		Term (years)		Value
							(in thousands)
Outstanding at beginning of the year		48,000	$	16.03
Granted		0		0.00
Exercised		(39,000)		16.03
Forfeited		0		0
Outstanding at end of the year.		9,000	$	16.03	1.4	$	281
Options exercisable at end of the year		9,000	$	16.03	1.4	$	281

The following table presents information on stock awards exercised for the years ended December 31, 2016, 2015 and 2014.

(dollars in thousands)	2016		2015		2014
Total intrinsic value	$	755	$	577	$	204
Cash received		625		559		291
Cash received net of tax		(56)		(135)		7
Actual tax benefit realized for tax deductions		669		148		50

There were no modifications of stock option awards during the years ended December 31, 2016, 2015 and 2014.

As of December 31, 2016, there was no unrecognized compensation cost related to nonvested stock options granted under the plan.

Restricted Stock Awards and Units

The fair value of restricted stock awards and units is the closing price of the Company's common stock on the date of grant adjusted for the present value of expected dividends. The restricted stock awards fully vest on the third anniversary of the grant date, with the exception of 21,551 shares included as vested below, which vested on the grant date.

A summary of the changes in the Company's nonvested shares for the year follows:

			Weighted-Average
			Grant-Date
Nonvested Shares	Shares		Fair Value
Nonvested at January 1, 2016		5,250	$	24.29
Granted		21,551		30.80
Vested		(22,301)		30.73
Forfeited		0		0.00
Nonvested at December 31, 2016		4,500	$	23.57

As of December 31, 2016, there was $10,000 of total unrecognized compensation cost related to nonvested shares granted under the plan. The cost is expected to be recognized over a weighted period of .29 years. The total fair value of shares vested during the years ended December 31, 2016, 2015 and 2014 was $1.1 million, $944,000 and $598,000.

Performance Stock Units

The fair value of stock awards is the closing price of the Company's common stock on the date of grant adjusted for the present value of expected dividends. The expected dividend rate is assumed to be the most recent dividend rate declared by the Board of Directors on the grant date. The grant date fair value of stock awards is assumed at the target payout rate. The stock awards fully vest on the third anniversary of the grant date. The 2016-2018, 2015-2017 and 2014-2016 Long-Term Incentive Plans must be paid in stock and have performance conditions which include revenue growth, diluted earnings per share growth and average return on beginning equity growth. Shares granted below include the number of shares assumed granted based on meeting the performance criteria of the 2016-2018, 2015-2017 and 2014-2016 Long-Term Incentive Plans at December 31, 2016.

			Weighted-Average
			Grant-Date
Nonvested Shares	Shares		Fair Value
Nonvested at January 1, 2016		288,855	$	22.53
Granted		154,265		23.20
Vested		(95,600)		16.23
Forfeited		0		0.00
Nonvested at December 31, 2016		347,520	$	16.90

As of December 31, 2016 and 2015, there was $3.4 million and $2.5 million of total unrecognized compensation cost related to nonvested shares granted under the Plan. The cost is expected to be recognized over a weighted period of 1.51 years and 1.47 years, respectively. The total fair value of shares vested during the year ended December 31, 2016 was $4.1 million. At December 31, 2016, 2015 and 2014, 95,600, 94,968 and 83,301 shares vested, respectively.