(16) Stock-Based Compensation Plans

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 stock, as well as the conversion of outstanding options 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 have been made pursuant to the 2007 Plan, and as of March 31, 2012, assuming all performance-based shares will be exercised at the maximum levels, 1,339,702 shares were available for future grants. 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 historically awarded stock-based compensation in the form of nonqualified stock options and time-vested restricted share awards ("restricted shares".) In general, the grants of options provide for the purchase shares of Wintrust's common stock at the fair market value of the stock on the date the options are granted. Options under the 2007 Plan generally vest ratably periods over periods of three to five years and have a maximum term of seven years from the date of grant. Stock options granted under the 1997 Plan provided for a maximum term of ten years. 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.

In August 2011, awards were granted to key employees under a Long-Term Incentive Program ("LTIP") administered under the 2007 Plan. The LTIP was 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 a target long-term incentive opportunity. The target awards include three components – time vested nonqualified stock options, performance-vested stock awards and performance-vested cash awards. The first grant of these awards was made in August 2011 and a second grant was made in January 2012. It is anticipated that awards will be granted annually. Stock options granted under the LTIP have a term of seven years and will generally vest equally over three years based on continued service. 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, which will generally be three years from the date of grant. 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, made in August 2011, has a final performance measurement date of December 31, 2013, resulting in an initial period of less than three years. The performance-based awards granted in January 2012 have a final performance measurement date of December 31, 2014.

Holders of restricted share awards and performance-vested stock 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.

The Compensation Committee of the Board of Directors administers all stock-based compensation programs and authorizes all awards granted pursuant to the Plans.

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. Performance-vested stock awards are measured based on the expected achievement of pre-established targets at the end of the performance period. The fair values of restricted shares and performance-vested stock awards are 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 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 has been based on historical exercise and termination behavior as well as the term of the option, but the expected life of the options granted pursuant to the LTIP awards was based on the safe harbor rule of the SEC Staff Accounting Bulletin No. 107 "Share-Based Payment" as the Company believes historical exercise data may not provide a reasonable basis to estimate the expected term of these options. Expected stock price volatility is based on historical volatility of the Company's common stock, which correlates with the expected life of the options, and 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 three month period ending March 31, 2012. No options were granted in the three months ending March 31, 2011.


	Three Months Ended March 31,
	2012
Expected dividend yield		0.6	%
Expected volatility		62.7	%
Risk-free rate		0.7	%
Expected option life (in years)		4.5

Stock based compensation is recognized based upon the number of awards that are ultimately expected to vest. Forfeitures are estimated based on historical forfeiture experience. For performance-vested awards, an estimate is made of the number of shares expected to vest as a result of actual performance against the performance criteria to determine the amount of compensation expense to be recognized. The estimate is reevaluated periodically 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 $2.3 million and $1.1 million, in the first quarters of 2012 and 2011, respectively.

A summary of stock option activity under the Plans for the three months ended March 31, 2012 and March 31, 2011 is presented below:


*Stock Options*	Common Shares			Weighted Average Strike Price		Remaining Contractual Term ⁽¹⁾		Intrinsic Value ⁽²⁾ ($000)
Outstanding at January 1, 2012		2,064,534		$	38.83
Granted		243,116			30.98
Exercised		(388,390	)		19.74
Forfeited or canceled		(14,250	)		33.64

Outstanding at March 31, 2012		1,905,010		$	41.75		3.5	$	4,059

Exercisable at March 31, 2012		1,407,357		$	45.38		2.6	$	1,889


*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		—			—
Exercised		(32,748	)		13.87
Forfeited or canceled		(87,899	)		47.34

Outstanding at March 31, 2011		1,920,054		$	38.97		3.0	$	10,297

Exercisable at March 31, 2011		1,731,514		$	39.72		2.8	$	9,218

⁽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 three months ended March 31, 2012 and 2011 was $14.91 and $16.34, respectively. The aggregate intrinsic value of options exercised during the three months ended March 31, 2012 and 2011, was $4.5 million and $625,000, respectively.

A summary of restricted share and performance-vested stock award activity under the Plans for the three months ended March 31, 2012 and March 31, 2011 is presented below:


	Three Months Ended March 31, 2012					Three Months Ended March 31, 2011
*Restricted Shares*	Common Shares			Weighted Average Grant-Date Fair Value		Common Shares			Weighted Average Grant-Date Fair Value
Outstanding at January 1		336,709		$	38.29		299,040		$	39.44

Granted		84,851			30.98		63,385			33.51
Vested and issued		(93,825	)		34.94		(11,248	)		34.53
Forfeited		(959	)		30.98		—			—

Outstanding at March 31		326,776		$	37.38		351,177		$	38.53

Vested, but not issuable at March 31		85,000		$	51.88		85,000		$	51.88


	Three Months Ended March 31, 2012					Three Months Ended March 31, 2011
*Performance Shares*	Common Shares			Weighted Average Grant-Date Fair Value		Common Shares			Weighted Average Grant-Date Fair Value
Outstanding at January 1		72,158		$	33.25		—		$	—
Granted		116,939			30.98		—			—
Vested and issued		—			—		—			—
Net change due to estimated performance		—			—		—			—
Forfeited		(3,481	)		31.91		—			—

Outstanding at March 31		185,616		$	31.85		—		$	—

The number of performance-vested shares outstanding in the above table reflects the estimated number of shares to be issued based on management's current assessment of attaining the pre-established performance measures. At March 31, 2012, the maximum number of performance-vested shares that could be issued based on the grants made to date was 426,262 shares.

The Company issues new shares to satisfy option exercises and vesting of restricted shares.