STOCK BASED COMPENSATION

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements [Abstract]

NOTE 17 – STOCK BASED COMPENSATION

Effective December 9, 1997, the Company adopted the Lakeland Financial Corporation 1997 Share Incentive Plan, which was stockholder approved. At its inception there were 1,200,000 shares of common stock reserved for grants of stock options to employees of Lakeland Financial Corporation, its subsidiaries and Board of Directors. The plan expired on December 8, 2007 and therefore there were no options available for future grants as of December 31, 2007. Effective April 8, 2008, the Company adopted the Lakeland Financial Corporation 2008 Equity Incentive Plan, which is stockholder approved. At its inception there were 750,000 shares of common stock reserved for grants of stock options, stock appreciation rights, stock awards and cash incentive awards to employees of Lakeland Financial Corporation, its subsidiaries and Board of Directors. As of December 31, 2011, 469,410 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, 2011, 2010 and 2009 was employee stock compensation expense of $1.3 million, $739,000 and $411,000, and a related tax benefit of $544,000, $300,000 and $167,000 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 awards 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 award life used was 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 award.

There were no stock option grants in 2011, 2010 or 2009.

A summary of the activity in the stock option plan as of December 31, 2011 and changes during the period then ended follows:

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Term (years)		Value

Outstanding at beginning of the year		232,498		$	18.56
Granted		0			0.00
Exercised		(36,900	)		9.43
Forfeited		(3,100	)		19.40
Outstanding at end of the year		192,498		$	20.29		3.8	$	1,073,630

Options exercisable at end of the year		128,498		$	18.40		2.6	$	959,570

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NOTE 17 - STOCK BASED COMPENSATION (continued)

The total intrinsic value of stock options exercised during the periods ended December 31, 2011, 2010 and 2009 was $489,000, $1.1 million and $886,000, respectively.

There were no modifications of awards during the years ended December 31, 2011, 2010 and 2009.

Cash received from stock option exercise for the years ending December 31, 2011, 2010 and 2009 was $330,000, $640,000 and $605,000, respectively. The actual tax benefit realized for the tax deductions from stock award exercise totaled $138,000, $371,000 and $191,000, respectively, for the years ended December 31, 2011, 2010 and 2009.

As of December 31, 2011 and 2010, there was $103,000 and $190,000 of total unrecognized compensation cost related to nonvested stock options granted under the plan. That cost is expected to be recognized over a weighted-average period of 1.34 years and 2.26 years.

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 the shares 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, 2011		43,799		$	17.52
Granted		11,000			21.94
Vested		(11,000	)		21.94
Forfeited		(1,000	)		16.93

Nonvested at December 31, 2011		42,799		$	17.52

As of December 31, 2011, 2010 and 2009, there was $14,000, $69,000 and $135,000 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 .14 years, 1.11 years and 2.31 years. The total fair value of shares vested during the year ended December 31, 2011, 2010 and 2009 was $241,000, $93,000 and $89,000.

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NOTE 17 - STOCK BASED COMPENSATION (continued)

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 stock awards fully vest on the third anniversary of the grant date. The 2011, 2010 and 2009 Long-Term Incentive Plans must be paid in stock and have performance conditions which include revenue growth, diluted EPS growth and average return on equity growth. Shares granted below include the number of shares assumed granted based on meeting the performance criteria of the 2011, 2010 and 2009 Long-Term Incentive Plans at December 31, 2011. During 2010, certain plans that previously could be paid out in cash and were accounted for as liabilities were modified to be paid out only in stock units and were accounted for at fair value at the time of the modification.

			Weighted-Average
			Grant-Date
Nonvested Shares	Shares		Fair Value

Nonvested at January 1, 2011		88,780	$	15.22
Granted		61,080		18.72
Vested		0		0.00
Forfeited		0		0.00

Nonvested at December 31, 2011		149,860	$	16.65

As of December 31, 2011, 2010 and 2009, there was $911,000, $742,000 and $429,000 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 1.49 years, 1.61 years and 2.00 years. No shares vested during the years ended December 31, 2011, 2010 and 2009.

During 2011, the Company modified the number of shares of performance stock units that could vest to an employee under the 2011 and 2010 Long-Term Incentive Plans. The Company did not recognize any additional compensation expense for the year ended December 31, 2011 as a result of the modifications.