Stock-Based Compensation

12 Months Ended

Dec. 31, 2012

Stock-Based Compensation [Abstract]

Stock-Based Compensation

NOTE 14 – STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

The Company's Amended and Restated 2008 Incentive Compensation Plan, which was shareholder-approved, permits the grant of share-based awards to its employees. At December 31, 2012, 3.5 million shares were available for issuance. The granting of awards to key employees is typically in the form of restricted stock or options to purchase common shares of stock. The Company believes that such awards better align the interests of its employees with those of its shareholders. Total compensation cost that has been charged against income for these plans was $3.3 million, $3.4 million, and $2.4 million for 2012, 2011, and 2010, respectively. The total income tax benefit was $1.3 million, $1.4 million, and $0.9 million, respectively.

Restricted Stock Awards

Restricted stock awards require certain service-based or performance requirements and commonly have vesting periods of 3 years. Compensation expense is recognized over the vesting period of the award based on the fair value of the stock at the date of issue adjusted for various performance conditions.

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

				Weighted Average
	Number			Grant-Date
(shares in thousands)	Outstanding			Fair Value
Nonvested balance at January 1, 2012	262		$	12.88
Granted during the year	104			9.21
Vested during the year	(154	)		10.98
Forfeited during the year	(23	)		17.62
Nonvested balance at December 31, 2012	189		$	11.79

As of December 31, 2012, there was $1.2 million of total unrecognized compensation cost related to nonvested shares granted under the Plan. The cost is expected to be recognized over a weighted-average period of 1.73 years The total fair value of the shares vested during the years ended December 31, 2012, 2011 and 2010 was $1.9 million, $1.0 million and $1.3 million, respectively. Included in 2012 is the reversal of $0.4 million of expense associated with certain performance based restricted stock grants.

During the third quarter of 2011, the Company modified the vesting eligibility of 10 thousand shares of restricted stock issued to an employee. As a result of the modification, the Company reversed $0.1 million of expense for the year ended December 31, 2011. There were no restricted stock modifications during 2012 or 2010.

In connection with the acquisition of Indiana Community Bancorp on September 15, 2012, 15 thousand unvested Indiana Community Bancorp restricted stock awards were converted to 29 thousand unvested Old National restricted stock awards. These restricted stock awards vested December 31, 2012 upon the retirement of the participant with the remaining expense of $23 thousand accelerated into the fourth quarter.

Restricted Stock Units

Restricted stock units require certain performance requirements and have vesting periods of 3 years. Compensation expense is recognized over the vesting period of the award based on the fair value of the stock at the date of issue adjusted for various performance conditions.

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

				Weighted Average
	Number			Grant-Date
(shares in thousands)	Outstanding			Fair Value
Nonvested balance at January 1, 2012	410		$	12.58
Granted during the year	218			11.77
Vested during the year	(40	)		12.74
Forfeited during the year	(69	)		12.44
Reinvested dividend equivalents	17			11.95
Nonvested balance at December 31, 2012	536		$	12.24

As of December 31, 2012, 2011 and 2010, there was $2.9 million, $2.4 million and $1.8 million, respectively, of total unrecognized compensation cost related to nonvested shares granted under the Plan. The cost is expected to be recognized over a weighted-average period of 1.7 years. Included in 2012 is a net increase to expense of $0.2 million related to our future vesting expectations of certain performance based restricted stock grants.

Stock Options

Option awards are generally granted with an exercise price equal to the market price of the Company's common stock at the date of grant; these option awards have vesting periods ranging from 3 to 5 years and have 10-year contractual terms.

Old National has not granted stock options since 2009. However, in connection with the acquisition of Indiana Community Bancorp on September 15, 2012, 0.2 million options for shares of Indiana Community Bancorp stock were converted to 0.3 million options for shares of Old National Bancorp stock. Old National recorded no incremental expense associated with the conversion of these options. In connection with the acquisition of Monroe Bancorp on January 1, 2011, 0.3 million options for shares of Monroe Bancorp stock were converted to 0.3 million options for shares of Old National Bancorp stock. Old National recorded no incremental expense associated with the conversion of these options.

A summary of the activity in the stock option plan for 2012 follows:

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic
				Exercise		Contractual		Value
(shares in thousands)	Shares			Price		Term in Years		(in thousands)
Outstanding, January 1	4,664		$	19.69
Granted	0			0
Acquired	306			12.60
Exercised	(74	)		(9.69	)
Forfeited/expired	(1,525	)		20.48
Outstanding, December 31	3,371		$	18.91		1.63	$	73.8
Options exercisable at end of year	3,264		$	18.85		1.63	$	73.8

Information related to the stock option plan during each year follows:

(dollars in thousands)		2012		2011		2010
Intrinsic value of options exercised	$	256	$	175	$	13
Cash received from option exercises		716		140		12
Tax benefit realized from option exercises		72		0		0

As of December 31, 2012, all options were fully vested and all compensation costs had been expensed.