The 2007 Stock Incentive Plan ("the 2007 Plan"), which was approved by the Company's shareholders in January 2007, permits the grant of incentive stock options, nonqualified stock options, rights and restricted share awards, as well as the conversion of outstanding optioans of acquired companies to Wintrust options. The 2007 Plan initially provided for the issuance of up to 500,000 shares of common stock. In May 2009 and May 2011, the Company's shareholders approved an additional 325,000 shares and 2,860,000 shares, respectively, of common stock that may be offered under the 2007 Plan. All grants made after 2006 were made pursuant to the 2007 Plan, and as of September 30, 2011, 2,480,879 shares were available for future grant. The 2007 Plan replaced the Wintrust Financial Corporation 1997 Stock Incentive Plan ("the 1997 Plan") which had substantially similar terms. The 2007 Plan and the 1997 Plan are collectively referred to as "the Plans." The Plans cover substantially all employees of Wintrust.

The Company typically awards stock-based compensation in the form of stock options and restricted share awards. Stock options provide the holder of the option the right to purchase shares of Wintrust's common stock at the fair market value of the stock on the date the options are granted. Options generally vest ratably over a five-year period and expire at such time as the Compensation Committee determines at the time of grant. The 2007 Plan provides for a maximum term of seven years from the date of grant while the 1997 Plan provided for a maximum term of ten years. Restricted share awards entitle the holders to receive, at no cost, shares of the Company's common stock. Restricted share awards generally vest over periods of one to five years from the date of grant. Holders of the restricted share awards 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. Except in limited circumstances, these awards are canceled upon termination of employment without any payment of consideration by the Company.

Stock-based compensation cost is measured as the fair value of an award on the date of grant and is recognized on a straight-line basis over the vesting period. The fair value of restricted share awards is determined based on the average of the high and low trading prices on the grant date. The fair value of stock options is estimated at the date of grant using a Black-Scholes option-pricing model that utilizes the assumptions outlined in the following table. 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. Expected life is based on historical exercise and termination behavior as well as the term of the option, and expected stock price volatility is based on historical volatility of the Company's common stock, which correlates with the expected term of the options. The risk-free interest rate is based on comparable U.S. Treasury rates. Management reviews and adjusts the assumptions used to calculate the fair value of an option on a periodic basis to better reflect expected trends.

The following table presents the weighted average assumptions used to determine the fair value of options granted in the nine months ending September 30, 2011 and 2010.

Stock based compensation is recognized based upon the number of awards that are ultimately expected to vest. As a result, compensation expense recognized for stock options and restricted share awards was reduced for estimated forfeitures prior to vesting. Forfeiture rates are estimated for each type of award based on historical forfeiture experience. Estimated forfeitures will be reassessed in subsequent periods and may change based on new facts and circumstances.

Compensation cost charged to income for stock options was $192,000 and $349,000 in the third quarters of 2011 and 2010, respectively, and $567,000 and $1.3 million for the 2011 and 2010 year-to-date periods, respectively. Compensation cost charged to income for restricted share awards was $828,000 and $672,000 in the third quarters of 2011 and 2010, respectively, and $2.4 million and $2.0 million for the nine months ended September 30, 2011 and 2010, respectively.

A summary of stock option activity under the Plans for the nine months ended September 30, 2011 and September 30, 2010 is presented below:


*Stock Options*	Common Shares			Weighted Average Strike Price		Remaining Contractual Term ⁽¹⁾		Intrinsic Value ⁽²⁾ ($000)
Outstanding at January 1, 2011		2,040,701		$	38.92
Granted		10,000			31.00
Exercised		(48,883	)		15.90
Forfeited or canceled		(103,149	)		46.30

Outstanding at September 30, 2011		1,898,669		$	39.07		2.6	$	3,028

Exercisable at September 30, 2011		1,717,762		$	39.85		2.3	$	2,818


*Stock Options*	Common Shares			Weighted Average Strike Price		Remaining Contractual Term ⁽¹⁾		Intrinsic Value ⁽²⁾ ($000)
Outstanding at January 1, 2010		2,156,209		$	37.61
Granted		66,365			34.63
Exercised		(141,362	)		15.23
Forfeited or canceled		(42,736	)		51.46

Outstanding at September 30, 2010		2,038,476		$	38.78		3.4	$	7,884

Exercisable at September 30, 2010		1,792,223		$	39.41		3.2	$	7,290

⁽¹⁾

Represents the weighted average contractual life remaining in years.

⁽²⁾

Aggregate intrinsic value represents the total pre-tax intrinsic value (i.e., the difference between the Company's average of the high and low 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. This amount will change based on the fair market value of the Company's stock.

The weighted average grant date fair value per share of options granted during the nine months ended September 30, 2011 and 2010 was $14.24 and $16.39, respectively. The aggregate intrinsic value of options exercised during the nine months ended September 30, 2011 and 2010, was $823,000 and $2.8 million, respectively.

A summary of restricted share award activity under the Plans for the nine months ended September 30, 2011 and September 30, 2010 is presented below:

From the third quarter of 2009 to the first quarter of 2011, the Company began paying a portion of the base pay of two senior executives in the Company's stock. The number of shares granted as of each payroll date was based on the compensation earned during the period and the average of the high and low price of the Company's common stock on such date. In the first quarter of 2011, 446 shares were granted under this arrangement at an average stock price of $32.59 per share.

As of September 30, 2011, there was $7.3 million of total unrecognized compensation cost related to non-vested share based arrangements under the Plans. That cost is expected to be recognized over a weighted average period of approximately two years.

The Company issues new shares to satisfy option exercises, vesting of restricted shares and issuance of base pay salary shares.

The Long-Term Incentive Program

In August 2011, the Compensation Committee of the Board of Directors awarded grants to key employees under a Long-Term Incentive Program ("LTIP"), designed in part to align the interests of management with the interests of shareholders, foster retention and create a long-term focus based on sustainable results. The LTIP was designed to provide participants a target long-term incentive opportunity, expressed as a percentage of base salary, set by the Compensation Committee. The target awards include three components – time vested stock option, performance-vested stock award and a performance-vested cash award. The stock options have a 7-year term and will generally vest equally over three years based on continued service, and the performance stock awards and performance cash awards are measured based on the achievement of pre-established targets at the end of the performance period. The actual performance-based award payouts will vary based on the achievement of the pre-established targets and can range from 0% to 200% of the target award. The first grant of these awards has a final vesting date and a performance measurement date of December 31, 2013, resulting in an initial period of less than three years. It is anticipated that awards will be granted annually.

The awards granted in August 2011 were weighted as follows: 25% time-vested stock options, 25% performance-vested stock award and 50% performance-vested cash award. The weighting of future awards between cash and shares can change each performance cycle depending in part on the availability of shares.

A summary of the August 2011 grants is as follows. These grants are not included in the previous tables and disclosures in this note.


	Time vested stock options			Performance- vested Stock Units		Performance- vested Cash		Total
Target # of shares / units granted		211,000			101,000
Target value	$	3,359,000		$	3,359,000	$	6,718,000	$	13,436,000

Maximum # of shares / units granted		211,000			202,000
Maximum value	$	3,359,000		$	6,718,000	$	13,436,000	$	23,513,000

Weighted average stock price at grant	$	33.28		$	33.28
Weighted average fair value at grant	$	15.93		$	33.28

Compensation cost charged to income in 2011	$	181,000		$	181,000	$	362,000	$	724,000

Weighted average assumptions to determine the fair value of options granted:
Expected dividend yield		0.5	%
Expected volatility		62.3	%
Risk-free rate		1.1	%
Expected option life (in years)		4.4

An estimate of the number of shares expected to vest as a result of actual performance against the performance criteria is made at the time of grant to determine total compensation expense to be recognized. The estimate will be reevaluated annually and total compensation expense will adjusted for any changes in the estimate, with a cumulative catch up adjustment (i.e., the cumulative effect of applying the change in estimate retrospectively) recognized in the period of change. Compensation expense is recognized for these awards over the applicable vesting period, generally three years. As of September 30, 2011, there was $12.7 million of unrecognized compensation expense related to the LTIP awards, which is expected to be recognized over a weighted average period of 2.2 years.