Stock-Based Compensation Plans

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement, Noncash Expense [Abstract]

In May 2015, the Company’s shareholders approved the 2015 Stock Incentive Plan (“the 2015 Plan”) which provides for the issuance of up to 5,485,000 shares of common stock. The 2015 Plan replaced the 2007 Stock Incentive Plan (“the 2007 Plan”) which replaced the 1997 Stock Incentive Plan (“the 1997 Plan”). The 2015 Plan, the 2007 Plan and the 1997 Plan are collectively referred to as “the Plans.” The 2015 Plan has substantially similar terms to the 2007 Plan and the 1997 Plan. Awards granted under the Plans for which common shares are not issued by reason of cancellation, forfeiture, lapse of such award or settlement of such award in cash, are again available under the 2015 Plan. All grants made after the approval of the 2015 Plan are made pursuant to the 2015 Plan. As of September 30, 2020, approximately 2.1 million shares were available for future grants assuming the maximum number of shares are issued for the performance awards outstanding. The Plans cover substantially all employees of Wintrust. The Compensation Committee of the Board of Directors administers all stock-based compensation programs and authorizes all awards granted pursuant to the Plans.

The Plans permit the grant of incentive stock options, non-qualified stock options, stock appreciation rights, stock awards, restricted share or unit awards, performance awards and other incentive awards valued in whole or in part by reference to the Company’s common stock, all on a stand alone, combination or tandem basis. The Company historically awarded stock-based compensation in the form of time-vested non-qualified stock options and time-vested restricted share unit awards (“restricted shares”). The grants of options provide for the purchase of shares of the Company’s common stock at the fair market value of the stock on the date the options are granted. Stock options generally vest ratably over periods of three to five years and have a maximum term of seven years from the date of grant. Restricted shares entitle the holders to receive, at no cost, shares of the Company’s common stock. Restricted shares generally vest over periods of one to five years from the date of grant.

Beginning in 2011, the Company has awarded annual grants under the Long-Term Incentive Program (“LTIP”), which is administered under the Plans. The LTIP is designed in part to align the interests of management with the interests of shareholders, foster retention, create a long-term focus based on sustainable results and provide participants with a target long-term incentive opportunity. LTIP grants in 2020 consisted of a combination of performance-based stock awards, performance-based cash awards and time vested restricted shares. LTIP grants from 2017 through 2019 consisted of a combination of performance-based stock awards and performance-based cash awards, and prior to 2017, nonqualified stock options were in the mix of award types. Stock options granted under the LTIP have a term of seven years and generally vested equally over three years based on continued service. Performance-based stock and cash awards granted under the LTIP are contingent upon the achievement of pre-established long-term performance goals set in advance by the Compensation Committee over a three-year period starting at the beginning of each calendar year. These performance awards are granted at a target level, and based on the Company’s achievement of the pre-established long-term goals, the actual payouts can range from 0% to a maximum of 150% of the target award. The awards typically vest in the quarter after the end of the performance period upon certification of the payout by the Compensation Committee of the Board of Directors. Holders of performance-based stock awards are entitled to receive, at no cost, the shares earned based on the achievement of the pre-established long-term goals.

Holders of restricted share awards and performance-based stock awards received under the Plans are not entitled to vote or receive cash dividends (or cash payments equal to the cash dividends) on the underlying common shares until the awards are vested and shares are issued. Shares that are vested but not issuable pursuant to deferred compensation arrangements accrue additional shares based on the value of dividends otherwise paid. Except in limited circumstances, these awards are canceled upon termination of employment without any payment of consideration by the Company.

Stock-based compensation is measured as the fair value of an award on the date of grant, and the measured cost is recognized over the period which the recipient is required to provide service in exchange for the award. The fair value of restricted share and performance-based stock awards is determined based on the average of the high and low trading prices on the grant date, and the fair value of stock options is estimated using a Black-Scholes option-pricing model that utilizes various assumptions. Option-pricing models require the input of highly subjective assumptions and are sensitive to changes in the option's expected life and the price volatility of the underlying stock, which can materially affect the fair value estimate. Management periodically reviews and adjusts the assumptions used to calculate the fair value of an option in periods when options are granted. No options were granted since 2016.

Stock based compensation is recognized based upon the number of awards that are ultimately expected to vest, taking into account expected forfeitures. In addition, for performance-based awards, an estimate is made of the number of shares expected to vest as a result of actual performance against the performance criteria in the award to determine the amount of compensation expense to recognize. The estimate is re-evaluated quarterly and total compensation expense is adjusted for any change in estimate in the current period. Stock-based compensation expense recognized in the Consolidated Statements of Income was $1.3 million in the third quarter of 2020 and $2.0 million in the third quarter of 2019, and $(1.0) million and $8.3 million in the 2020 and 2019 year-to-date periods, respectively.

A summary of the Company's stock option activity for the nine months ended September 30, 2020 and September 30, 2019 is presented below:



Stock Options	Common Shares		Weighted Average Strike Price		Remaining Contractual Term⁽¹⁾	Intrinsic Value ⁽²⁾ ($000)
Outstanding at January 1, 2020	755,332		$	42.43
Granted	—		—
Exercised	(104,703	)	38.71
Forfeited or canceled	(5,608	)	44.34
Outstanding at September 30, 2020	645,021		$	43.02	1.9	$	52
Exercisable at September 30, 2020	637,120		$	43.01	1.8	$	52



Stock Options	Common Shares		Weighted Average Strike Price		Remaining Contractual Term ⁽¹⁾	Intrinsic Value ⁽²⁾ ($000)
Outstanding at January 1, 2019	795,014		$	42.26
Granted	—		—
Exercised	(112,230	)	38.64
Forfeited or canceled	—		—
Outstanding at September 30, 2019	682,784		$	42.85	2.4	$	14,873
Exercisable at September 30, 2019	667,664		$	42.81	2.4	$	14,565


(1)	Represents the remaining weighted average contractual life in years.

(2)

Aggregate intrinsic value represents the total pre-tax intrinsic value (i.e., the difference between the Company's stock price on the last trading day of the quarter and the option exercise price, multiplied by the number of shares) that would have been received by the option holders if they had exercised their options on the last day of the quarter. Options with exercise prices above the stock price on the last trading day of the quarter are excluded from the calculation of intrinsic value. The intrinsic value will change based on the fair market value of the Company's stock.

The aggregate intrinsic value of options exercised during the nine months ended September 30, 2020 and September 30, 2019, was $2.7 million and $3.8 million, respectively. Cash received from option exercises under the Plans for the nine months ended September 30, 2020 and September 30, 2019 was $4.1 million and $4.3 million, respectively.

A summary of the Plans' restricted share activity for the nine months ended September 30, 2020 and September 30, 2019 is presented below:



	Nine months ended September 30, 2020				Nine months ended September 30, 2019
Restricted Shares	Common Shares		Weighted Average Grant-Date Fair Value		Common Shares		Weighted Average Grant-Date Fair Value
Outstanding at January 1	144,328		$	60.37	143,263		$	60.80
Granted	113,156		61.32		13,099		71.66
Vested and issued	(13,917	)	77.77		(15,257	)	76.69
Forfeited or canceled	(6,547	)	73.71		(1,691	)	79.50
Outstanding at September 30	237,020		$	59.43	139,414		$	59.85
Vested, but not issuable at September 30	93,514		$	52.08	91,505		$	52.13

A summary of the Plans' performance-based stock award activity, based on the target level of the awards, for the nine months ended September 30, 2020 and September 30, 2019 is presented below:



	Nine months ended September 30, 2020				Nine months ended September 30, 2019
Performance-based Stock	Common Shares		Weighted Average Grant-Date Fair Value		Common Shares		Weighted Average Grant-Date Fair Value
Outstanding at January 1	465,515		$	74.37	396,855		$	67.71
Granted	169,864		63.62		175,696		71.57
Added by performance factor at vesting	48,831		72.59		33,950		40.99
Vested and issued	(180,789	)	72.59		(128,238	)	41.00
Expired, canceled or forfeited	(18,727	)	72.66		(10,430	)	74.70
Outstanding at September 30	484,694		$	71.15	467,833		$	74.38
Vested, but deferred at September 30	34,441		$	43.07	33,701		$	42.92