NOTE 19 – STOCK-BASED COMPENSATION

Our Amended and Restated 2008 Incentive Compensation Plan (the “ICP”), which was shareholder-approved, permits the grant of share-based awards to its employees. At December 31, 2016, 4.9 million shares were available for issuance. The granting of awards to key employees is typically in the form of restricted stock awards or units. We believe that such awards better align the interests of our employees with those of our shareholders. Total compensation cost that has been charged against income for the ICPs was $7.3 million in 2016, $4.3 million in 2015, and $4.2 million in 2014. The total income tax benefit was $2.8 million in 2016 and $1.6 million in 2015 and 2014.

Restricted Stock Awards

Restricted stock awards require certain service requirements and commonly have vesting periods of 3 years. Compensation expense is recognized on a straight-line basis over the vesting period. Shares are subject to certain restrictions and risk of forfeiture by the participants.

A summary of changes in our nonvested shares for the year follows:


(shares in thousands)	Shares			Weighted Average Grant-Date Fair Value
Nonvested balance at January 1, 2016		346		$	13.90
Granted during the year (1)		348			12.77
Vested during the year		(289	)		13.36
Forfeited during the year		(4	)		13.26

Nonvested balance at December 31, 2016		401		$	13.31

(1)	Includes 173 thousand shares assumed in conjunction with the acquisition of Anchor in May 2016.

As of December 31, 2016, there was $3.4 million of total unrecognized compensation cost related to nonvested shares granted under the ICP. The cost is expected to be recognized over a weighted-average period of 1.9 years. The total fair value of the shares vested was $3.8 million in 2016, $1.6 million in 2015, and $1.3 million in 2014.

Restricted Stock Units

Restricted stock units require certain performance requirements and have vesting periods of 3 years. Compensation expense is recognized on a straight-line basis over the vesting period. Shares are subject to certain restrictions and risk of forfeiture by the participants.

A summary of changes in our nonvested shares for the year follows:


(shares in thousands)	Shares			Weighted Average Grant-Date Fair Value
Nonvested balance at January 1, 2016		840		$	12.56
Granted during the year		279			10.17
Vested during the year		(16	)		13.04
Forfeited during the year		(295	)		11.84
Dividend equivalents adjustment		13			11.05

Nonvested balance at December 31, 2016		821		$	12.02

As of December 31, 2016, there was $2.7 million of total unrecognized compensation cost related to nonvested shares granted under the ICP. The cost is expected to be recognized over a weighted-average period of 1.7 years.

Stock Options

Option awards are generally granted with an exercise price equal to the market price of our 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, Old National did acquire stock options through prior year acquisitions. Old National recorded no incremental expense associated with the conversion of these options.

A summary of the activity in the stock option plan in 2016 follows:

(shares in thousands)

Shares

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term in Years

Aggregate
Intrinsic
Value
(in thousands)

Outstanding at January 1, 2016

1,043

16.16

Exercised

(191

)

12.83

Forfeited/expired

(158

)

24.09

Outstanding at December 31, 2015

694

15.27

1.33

2,460.1

Options exercisable at end of year

694

15.27

1.33

2,460.1

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


(dollars in thousands)	2016		2015		2014
Intrinsic value of options exercised	$	660	$	458	$	432
Cash received from option exercises		2,349		997		1,002
Tax benefit realized from option exercises		264		159		97

As of December 31, 2016, all options were fully vested and all compensation costs had been expensed.

Stock Appreciation Rights

Old National has never granted stock appreciation rights. However, Old National did acquire stock appreciation rights through a prior year acquisition. Old National recorded no incremental expense associated with the conversion of these stock appreciation rights. At December 31, 2016, 0.1 million stock appreciation rights remained outstanding.

Outside Director Stock Compensation Program

Old National maintains a director stock compensation program covering all outside directors. Compensation shares are earned semi-annually. Beginning in 2017, any shares awarded to directors should be issued from the Amended and Restated 2008 Incentive Compensation Plan. Approximately 35,000 shares will be issued to directors in 2017.